annual report - eles · sovereign holding (recommendations of sdh) are pub-licly available on the...

ANNUAL REPORT

Each moment energy is materialized. Transmitted by light, felt through touch, it is visible in the traces of an ordinary day. We convey it all around Slovenia and across its borders. It is a task we perform with great responsibility towards the natural and social environments. That is why, as the principal partner of the 24th Biennial of Design – BIO 50, our company sponsored and co-developed the “Transmitting Energy – BIO 50” International Photo Contest for Best Instagram Photo. In support of young Slovene photographers, we selected seven photographs by Slovene authors to include in our Annual Report.

VIRTUALLY EVERYTHING IS A TRANSMISSION OF ENERGY

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TABLE OF CONTENT

STATEMENT ON CORPORATE GOVERNANCE FOR 2015 6

1 COMPANY ELES IN 2015 121.1 Highlights from operations of ELES, d.o.o. 13

1.2 Operating data in 2015 15

1.3 Significant business events in 2015 17

1.4 Economic and regulatory environment in 2015 21

2 CHIEF EXECUTIVE OFFICER’S ADDRESS 24

3 SUPERVISORY BOARD REPORT 30

4 PRESENTATION OF ELES 344.1 Company Profile 34

4.2 Mission, Vision and Values 35

4.3 Strategic ELES' Policies 37

4.3.1 Objectives and strategic

management policies 37

4.3.2 Priority strategic investments and

reconstructions of transmission connections 38

4.4 Business Model 39

4.4.1 Compliance with regulatory requirements 39

4.5 ELES Transmission Network and Integration

in the European Electric Power System 41

4.6 Company Management 44

4.6.1 Management System 45

4.6.2 Risk Management 47

4.6.3 Corporate Integrity 49

4.6.4 Internal Audit 50

4.7 ELES Group 50

5 BUSINESS ACTIVITIES OF THE COMPANY 525.1 System Operation 52

5.1.1 Grid input and grid offtake 52

5.1.2 Transmission network loads 55

5.1.3 Ancillary services 55

5.1.4 Inter-system balancing 55

5.1.5 Cross-border transmission capacities 56

5.2 Transmission Network Maintenance 57

5.2.1 Takeover of 110 kV network 57

5.3 Research and Development 58

5.3.1 Projects of common interest 58

5.3.2 Studies in 2015 59

5.3.3 International projects 59

5.4 Investments 60

5.4.1 Investments in the construction

of transmission lines 61

5.4.2 Investments in substations 62

5.4.3 Investments in the field of system operation 62

5.4.4 Investments in the field of information

technology and telecommunications 63

6 PERFORMANCE ANALYSIS 666.1 Financial Performance Analysis 66

6.2 Impact of Regulations on the Performance 75

6.3 Performance criteria (Indicators) 77

6.3.1 Performance ratios 77

6.3.2 Economic and technical indicators 79

6.3.3 Technical indicators 79

7 SUSTAINABLE DEVELOPMENT 827.1 ELES’ Stakeholders 82

7.1.1 Cooperation with local communities 83

7.1.2 Relations with our business partners 83

7.1.3 Communication with the media 84

7.2 Responsibility Towards the Employees 84

7.2.1 Number and structure of employees 84

7.2.2 Education and training of employees 85

7.2.3 Annual appraisal interviews 86

7.2.4 Employees absence 87

7.2.5 Care for the satisfaction of employees 87

7.2.6 Communication with employees 89

7.2.7 Occupational health and safety 89

7.3 Environmental Care 90

7.3.1 Environmental policy 90

7.3.2 Achievements in the field

of environmental protection 90

7.4 Responsibility Towards the Social Environment 93

8 SIGNIFICANT POST REPORTING EVENTS 96

9 ENDORSEMENT OF THE ANNUAL REPORT 98

10 FINANCIAL REPORT 10210.1 Statement on the Management's

Responsibility and Corporate Governance 102

10.2 Financial Statements 103

10.3 Notes to the Financial Statements 109

10.3.1 Disclosure of Balance Sheet Item 113

10.3.2 Disclosures of Income Statement Items 131

10.3.3 Other Disclosures 136

11 LIST OF ABBREVIATIONS 156

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Pursuant to the Paragraph 5 of Article 70 the Companies Act (CA-1) public enterprise ELES, d.o.o., Hajdrihova 2, Lju-bljana (henceforth referred to as ELES) for the period from 1 January 2015 to 31 December 2015 declares as follows.

The Chief Executive Officer and the Supervisory Board of ELES declare that the management of the Company in 2015 was in line with the acts, with the Act on the Estab-lishment of the Public Enterprise ELES, d. o. o. of 3 Sep-tember 2014 (henceforth referred to the Act on the Es-tablishment of ELES), the Corporate Governance Code of Companies with Capital Investment of the State adopted by the Slovenian Sovereign Holding (SDH) 19 December 2014 and the recommendations and prospects of Slove-nian Sovereign Holding of December 2014. The Chief Ex-ecutive Officer and the Supervisory Board of ELES declare that the Annual Report with all components, including the Statement on Corporate Governance, is prepared and published in accordance with the CA-1 and the Slovenian Accounting Standards.

The Statement on Corporate Governance is an integral part of the Annual Report 2015 and is accessible on the Company’s web http://www.eles.si.

DECLARATION OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE OF COMPANIES WITH CAPITAL INVESTMENT OF THE STATE ADOPTED BY SLOVENIAN SOVEREIGN HOLDING AND THE RECOM-MENDATIONS AND EXPECTATIONS OF THE SLOVENI-AN SOVEREIGN HOLDING

In accordance with item 3.4.1 of the Code of Corporate Governance of Companies with Capital Investment of the State adopted by the Slovenian Sovereign Holding (the

Code) ELES decided to apply the Code voluntarily. The Code, recommendations and expectations of Slovenian Sovereign Holding (Recommendations of SDH) are pub-licly available on the web page of SDH.The Company took into consideration the Code in its operations taking into consideration the activities of the Company and other special features.

In 2015 the Company failed to realize the following rec-ommendations (from the Code):

• Recommendation 3.2, partially: Eles is implementing the management policy in accordance with the Act of es-tablishment of Eles, Rules of Procedure of Management system and Rules on the operations of the Supervisory Board.

In 2015 the Company failed to realize entirely the follow-ing Recommendations and expectations of the Slovenian Sovereign Holding (Recommendations of SDH):

• Recommendation no. 4.2.2, item 1: Under the Decree on the division of the 110 kV network into the distribution and transmission system (Official Journal of the Republic of Slovenia, no. 35/2015) the Company started to take over parts of the 110 kV network and thus the number of employees increased. The final number of employees in 2015 in comparison to the preceding year is higher by 14 employees, which is considered an exceptional case under item 1 of the recommendation 4.2.2.;

• Recommendation no. 5 (entirely for the Eles Group): In the business year 2015 ELES carried out the 3rd self-assessment of Excellency under the EFQM model, how-ever, it has no coordinated approach to achieve quality and excellence of operations in the level of Eles Group, and for this reason Eles is implementing the recommen-

STATEMENT ON CORPORATE GOVERNANCE FOR 2015

6

dation of SDH under item 5 for 2015 only partially. In 2016 the commencement of a common approach to achieve quality and excellence of operations on the level of the Eles Group is envisaged;

• Recommendation no. 6.3.: The docu-ments, considered at the general meeting, are trade secret and are not published on the web pages of the company.

ELES has a modern management and con-trol system, in which the activities and re-sponsibilities are divided between the hold-ers of the three defence lines. Director of the Company, who is directly accountable to the Supervisory Board, provides adequate inter-nal environment, regional directors in the framework of the first line of defense, based on risk assessment of operations, design and implement internal control measures to ensure the achievement of the objec-tives and the compliance of the operations. In doing so they rely on the second line of defence, which is a framework for identify-ing and monitoring operations, composed of: management systems, risk management system, corporate integrity system (intro-duced in 2015), security and civil defence and controlling (introduced in 2015). Inter-nal audit as the third line of defence, the success and efficiency of which is assessed by the audit committee of the Supervisory Board, subsequently establishes in particu-lar the compliance and performance. ELES cooperates also with external supervisory-inspection authorities, among which, in ad-dition to the external auditor of the finan-cial statements, the most important is the Energy Agency of the Republic of Slovenia, which fully regulates the activities of ELES, as provided in the Energy Policy Act - (EZ-1) and the regulatory framework and thus pro-vide performance of the Company in terms of business and result. ELES is managed by

the General Meeting, Supervisory Board and Director of the Company.

Under the Energy Policy Act 1 (EZ-1) the Re-public of Slovenia is the sole partner of Eles. Under the Energy Policy Act 1 (EZ-1) and Articles of Association Eles is exercising its founder’s rights through the Government of the Republic of Slovenia.

In accordance with the Articles of Associa-tion, the Supervisory Board consists of six members. The founder appoints four mem-bers; two members are representatives of workers and are appointed by the Works Council of ELES. Members of the Superviso-ry Board are appointed for a period of four years and may be reappointed.

In 2015 the Supervisory Board had the fol-lowing: auditing committee of the Supervi-sory Board, Commission for development, strategy and investment projects of ELES, Commission for supervision over the opera-tions of TALUM, d.d.. Tasks and responsibili-ties of the Supervisory Board are provided in the Companies Act 1 (ZGD-1), Articles of Association of ELES and Rules on the op-erations of the Supervisory Board of ELES. Composition and operations of the supervi-sory Board and its commissions in 2015 are presented in the Report on the work of the Supervisory Board of ELES, d.o.o. for 2015, which is a part of the Annual report of ELES for 2015.

In accordance with the articles of Associa-tion of ELES, the Director of the Company manages its operations and work of the Company, represents the company and is responsible for the legality of its operations. The Director of the Company adopted the Rules on the manner of operations of ELES, d.o.o. (PO K 5.5.6) Director of the Company

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cooperates with the following working bodies: College of the Director of the Company, technical-development col-lege of the director of the Company, College of depart-ment directors, professional Council of the Director of the Company composed of: Council for the management systems, Council for coordination of international activi-ties, Council for the development of transmission network, telecommunication and information technology and project council of the strategic projects. In regular time periods the director consults also the Council of Workers and representatives of the representative trade unions. In management, planning, implementation, monitoring, analyzing and control of operations of the Company the principle of four or more eyes is implemented as much as possible. Activities that have marked ELES in 2015 are presented in the address of the Director of the Company, which forms an integral part of the Annual report of ELES for 2015.

ELES has a series of policies for all segments of integrated management system, which is through the management review regularly reviewed and relevantly complemented. The management policies consist of the following: qual-ity policy and business excellence according to the EFQM model (which is among other things listed as a strategic goal in the new SBP 2016–2020), policy of risk manage-ment, policy of assets management, environmental man-agement policy, information protection policy, safety and health at work policy, human resources policy, commu-nication and other business policies. Integrated assess-ments are carried out (internal and external) of certified management systems according to the international standards of quality management systems ISO 9001, ISO 14001 for environmental management system, ISO 27001 for information protection policy system, OHSAS 18001 for safety and health at work system, ISO 17020 for establishing compliance system and ISO 31000 for Risk Management, which are one of the fundamental sources of opportunity of constant improvement and thus achieving the set vision of ELES, which lies in acquiring the leading role in the Slovene electricity system.

In 2015, ELES appointed an authorised person for cor-porate integrity and adopted the Rules on Corporate In-tegrity of the Company and the Rules on Controlling and Ensuring Corporate Integrity, thus formally introducing a comprehensive system of corporate integrity in their operation. The system of corporate integrity was also

introduced in the companies in the ELES Group, namely: TALUM, BSP and Stelkom. The purpose of the Rules on Corporate Integrity is to ensure zero tolerance to fraud, illegal and unethical acts. The Rules on Controlling and Ensuring Corporate Integrity determine the procedures for appointment and operations of the person authorised for corporate integrity, regular monitoring to ensure cor-porate integrity, processing of notifications of violations of corporate integrity, protection of identity of persons reporting violations of corporate integrity, compulsory reporting and internal communication on the state of corporate integrity. This provides an opportunity to com-municate the deficiencies and irregularities (violations) in operations via e-mail or anonymously through classical mail to the address of the person authorised for corporate integrity, and for creation of a detailed plan of corporate integrity, which represents a key preventive tool through which the violations of corporate integrity can be con-trolled and prevented. This way, we wanted to addition-ally emphasize that the prevention of corruption, respect for the rules of competition and other business rules are among the priority objectives and values of the Company. The values of the Company that were renewed in 2015 along with the Code of Ethics are the following: responsi-bility, enthusiasm, knowledge, reliability, cooperation and commitment.

Risk management in ELES is based on compliance with the requirements of the standard ISO 31000:2009 Risk Management-Principles and Guidelines and on Company policies on risk management. The operation, monitoring and development of risk management system is entrust-ed to the Management Systems Council. The Manage-ment Systems Council is managed by the Chief Executive Officer. Next to the Chief Executive Officer, the Manage-ment Systems Council also has the following members: CEO’s coordinator for: risk management, auditing (solely in the context of the possibilities provided for in the inter-national standards for the Professional Practice of Inter-nal Auditing), management systems, corporate integrity and a person from the Management Systems department responsible for the preparation, sending and archiving of minutes. The Management Systems Council monitors the operation and development of the risk management system and adopts the guidelines for its operation, iden-tifies the main groups and risk areas of the Company, determines the scope and the depth of the treatment of risks and the acceptable level of risk, defines the risks

8

at the Company level, considers and adopts the risks catalogue and progress reports. The competences, powers and rules for the op-eration of the Management Systems Council are defined in the Rules of Operation of the Management Systems Council. The Manage-ment Systems Council can also appoint the Risk Team. Members of the Risk Team are the representatives of individual fields and independent departments of the Company Management, and the Team is managed by the CEO’s coordinator for risk management. The tasks of the Risk Team are the following: coordinating the activities for promotion and implementation of the risk management system in individual areas and management departments, and the products of the risk management system within its organiza-tional units according to the guidelines of the Management Systems Council. A detailed organizational risk management framework is defined by the Rules of Procedure of the Management System and by other internal Company regulations, instructions and man-datory forms. ELES ensures an established system of risk management with elaborated and regularly updated risks catalogue, as-sessment of the importance of risks, criteria for the evaluation of risks, analysing and re-porting on strategic and procedural risks.

The Internal Audit is carried out for the pur-pose of managing and detection of risks and in order to suggest improvements. It is in-tended to increase the benefits and improve the operation of the Company by promoting sound, regulated mode of operation in the ar-eas of management, risk management and risk control. The Internal Audit provides inde-pendent and impartial information and ad-vice to the Chief Executive Officer regarding the state and the functioning of the internal control system - risk control measures. The Internal Audit operates as an independent unit in the company management. Organiza-tionally it is directly subordinated to the Chief Executive Officer, and by function it answers to the Audit Committee of the Supervisory

Board. The operation of the Internal Audit is based on the fundamental charter confirmed by the Supervisory Board and on internal reg-ulation that defines the internal auditing in the Company while taking into account the international standards of professional ac-tivity. In order to achieve greater efficiency in internal auditing, it cooperates with the Company management and the Audit Com-mittee of the Supervisory Board, to whom it regularly reports on its work, findings and recommendations. The operation of the In-ternal Audit does not resolve the Chief Execu-tive Officer and the sector directors from the responsibility for the establishment and func-tioning of the measures (internal controls) for managing risks that threaten the operation of the Company.

ELES has established a system of internal controls, which consists of the rules and pro-cedures set out in the internal regulations of the Company, adopted by the Manage-ment Systems Council, and of other written guidelines of the Chief Executive Officer, the Rules on the Organisation of ELES, d.o.o., the system of competences (responsibilities) and powers specified in the Collective Agreement of ELES d.o.o. and the powers issued by the Chief Executive Officer. The established sys-tem of internal control ensures the accuracy, reliability and completeness of data and in-formation for correct and fair preparation of financial statements, prevents and detects errors in the system and ensures respect for the legislation in force. In their operation in 2015, ELES considered all the legal bases that apply to the activity of the system operator of the electric power transmission network. There were no significant changes in legisla-tion that would affect the operation of the Company in 2015.

Ljubljana, 6 May 2016

ELES, d.o.o.Chief Executive Officer

Aleksander Mervar, M. Sc.

9

Energy awakens the day and sets the morning in motion. We are always on the go, for with us energy runs through the transmission network every second, twenty-four hours a day, every day of the year.

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Photograph by: Neža Oblak

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COMPANY ELES IN 2015

MANAGEMENT

Supervisory Board

(3 changes)6 members

CEO

(no changes)Management

Republic of Slovenia

(no changes)100 % owner

Energy Agency

(no changes)Market regulator

Lenght of transmission lines

(+0.6 %)2,859 km

Substations

(+12.9 %)35

Power Transformers

(+0.0 %)27

Lenght of optical network

(+0.2 %)1,622 km

Grid Offtake

(+4.0 %)12,720 GWh

Grid Input

(-14.7 %)12,985 GWh

Peak loads

(+3.2 %)2,052 MW

Tertiary

(-2.0 %)10,666 MWh

Operating revenues

(+8.3 %)152.7 million euros

Operating profit (EBIT)


Net profit


Equity


Employees

(+2.6 %)546 workers

Female employment

(+1.0 %)21%

Family-Friendly Company Certificate

(no changes)Full certificate

Supplementary pension insurance

(+0.0 %)98 % included

Satisfaction of emplyees

(-2.6 %)4.55 points from total 6.0

Expenditure on environment

(+48.8 %)531.4 thousand EUR

Mixed trade waste per employee

(-8.9 %)138.6 kg/employee

Water consumption per employee

(-17.5 %)11.8 m³/employee

TRANSMISSION NETWORK OPERATION FINANCIAL DATA CORPORATE SOCIAL

RESPONSIBILTY

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1.1 Highlights from operations of ELES, d.o.o.

INDICATORS Year2012

Year2013

Year2014

Year2015

Annual plan2015

Annual plan2016

FROM INCOME STATEMENT (in million euros)

Operating revenues 139.8 138.9 140.9 152.7 154.6 166.2

Operating expenses 130.7 130.7 133.3 140.9 134.4 149.0

Net profit or loss for the period 5.1 8.4 8.7 10.0 17.3 16.8

Operating profit (EBIT) 9.2 8.2 7.7 11.8 20.2 17.2

Earnings before interest, tax, depreciation and amortisation (EBITDA)

37.5 36.2 37.9 41.1 50.2 47.5

FROM BALANCE SHEET (in million euros)

Assets 611.3 623.9 656.3 674.1 683.5 690.3

Equity 381.5 381.7 379.8 380.4 390.0 389.9

RATIO

Return on equity (ROE) % 1.3 2.2 2.3 2.7 4.5 4.8

Return on equity (ROE) % (not in line with article 120 of the EA-1)

10.5 7.7 7.0 4.6 6.8 4.6

Return on assets (ROA) % 0.9 1.4 1.4 1.5 2.6 2.7

Return on assets (ROA) % (not in line with article 120 of the EA-1)

7.7 5.7 5.3 3.5 4.1 2.9

Operating efficiency ratio 1.070 1.062 1.058 1.084 1.150 1.115

Operating efficiency ratio (not in line with article 120 of the EA-1)

1.431 1.306 1.281 1.192 1.227 1.121

Value added per employee (in thousand euros)

118.4 122.8 124.0 129.9 137.2 136.3

OTHER RELEVANT INFORMATION

Investments (in million euros) 67.9 46.2 37.3 37.3 80.2 99.2

NUMBER OF EMPLOYEES AS AT 31 December 530 538 532 546 603 556

Notes:• ratios are calculated pursuant to the items by way of applying Article 120 of the EA-1 unless otherwise specified; • in calculation of planned ratios ROE in ROA for the year 2016 is taken into account the loss of net income due to unforeseen surpluses before

the 1st of January 2010 in amount of 1.358 thousand euros;• in financial statements for the year 2014 is taken into accounts the decrease in revenues for 2.539 thousand euros in accordance with decision of

the Energy Agency for the year 2014.

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O1 COMPANY ELES IN 2015

Operating revenues in million euros

Operating efficiency ratio

EBITDA and EBIT in million euros ROE and ROA in percentage

Net profit of the year in million euros

Equity in million euros

* Not recorded surpluses taken into consideration in the correction of AP2016.

8.4

5.1

8.7

17.3

10.0

16.8

18.1

2012 2013 2014 2015 AP2015 AP2016 Corr.AP2016

139.

8

138.

9

152.

7

140.

9

154.

6

166.

22012 2013 2014 2015 AP2015 AP2016

1.07

0

1.06

2

1.08

4

1.05

8

1.15

0

1.11

5

2012 2013 2014 2015 AP2015 AP2016

381.

5

381.

7

380.

4

379.

8

390.

0

389.

92012 2013 2014 2015 AP2015 AP2016

60.0

50.0

40.0

30.0

20.0

10.0

0.0

EBITDA

2012 2013 2014 2015 AP2015 AP2016

EBIT

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

ROE

2012 2013 2014 2015 AP2015 AP2016

ROA

14

ROE and ROA in line with article 120 of EA-1 in percentage

Number of employees, employees with higher education and Analysis of employees satisfaction

1.2 Operating data in 2015

AP2015 AP2016 AP2017 AP2018

6.8%

4.1%

2.9%2.1%

4.6%

3.0% 2.8%

1.7%

ROE

ROA

Number of employees Employees with higher education Analysis of employee satisfaction (rank 1 to 6)

800

600

400

200

0

6.00

4.00

2.00

0.00

2014 2015

532

268

546

277

4.63 4.55

Investments in million euros

Structure of grid input in 2015 as per month

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec.

1,400

1,200

1,000

800

600

400

200

0

Nuclear power plant* Thermal power plant** Hydro power plant

Note: * 100-percent share of KNPP has been considered** generation of RES and CPTEP has been considered

Ener

gy in

GW

h

Investments Reconstructions Small investments

2012 2013 2014 2015 AP2015 AP2016

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

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Structure of grid offtake in 2015 as per month

The highest and the lowest daily grid offtatake in 2015

The lowest daily offtake The highest daily offtake

Time (h)

Ener

gy in

GW

h

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec.

Direct consumers Distribution PSHPP (pumping)

1,400

1,200

1,000

800

600

400

200

0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

2,100

1,800

1,500

1,200

900

600

300

Ener

gy in

MW

h16

Physical cross-border power flows with the neighbouring EPS in 2015

1.3 Significant business events in 2015

ELES Received Concession for Carrying Out the Tasks of System Operator of the Electric Power Transmis-sion Network The most important event for the company ELES in 2015 was the receipt of concession for carrying out the tasks of system operator of the electric power transmission network for a period of 50 years.

Renewed Vision, Mission and Values of the Company In 2015, we renewed the vision, mission and values of the company, as the existing ones no longer reflected what we do and what we want to do.

The employees actively participated in designing the fundamental postulates that will lead our future work. In order to make it easier to remember the new values, we sought out value ambassadors among the athletes that ELES supports and considers as great role models. For this purpose, we also designed the slogan “Transmitting Values by Transmitting Energy”.

JANUARY

ELES and Iskra Zaščite Signed the Contract on Mar-keting of SUMO Software On 12 January, ELES signed a contract with the company Iskra Zaščite for the marketing and distribution of SUMO software. We

developed the software within the smart grids projects together with experts from Milan Vidmar Electric Power Research Institute and Faculty of Electrical Engineering of the University of Ljubljana.

SUMO is a modern information system for support of real-time deci-sions in the operation of electric power transmission system. Among other things, it allows for better utilization of the existing network and its secure operation, while it also provides the operator with in-formation about the network load for three hours in advance. Mar-keting of SUMO software, which was developed for the needs of ELES, will bring additional resources to the Company and those will be devoted to further development of smart grids.

Received operating license for Beričevo - Krško trans-mission line On 19 January, ELES acquired the operating license for the greatest investment in the history of the Company, the 80 km long transmis-sion line 2x400 kV Beričevo - Krško, thereby formally concluding the investment.

The transmission line that took more than 10 years to build and that was officially opened on 21 May 2014 represents the shortest and the most optimal transmission path of electricity from Posavje Re-gion to central Slovenia. Its construction concluded the long-await-ed 400 kV loop in Slovenia.

* Input abroad: 8,975.5 GWh* Offtake from abroad: 9,044.9 GWhNOTE: Calculated boarder virtual points are taken into consideration.

A

I CRO

H

Kamnik

Trbovlje

Krško

Novo mesto

Kočevje

Postojna

LJUBLJANA

Pivka

Koper

Kranj

Nova Gorica

Velenje

Ptuj

Celje

Maribor

Murska Sobota

Slovenj Gradec

Jesenice

6,223.0 GWh*

57.6 GWh*

2,694.9 GWh*80.8 GWh**

4,228.2 GWh**

4,735.9 GWh**

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Participation in the Discussion on Slovenian Energy Concept A discussion on Slovenian Energy Concept took place in the hall of the National Assembly on 21 January. ELES’ opinion regarding the draft was presented by the director of the Company Aleksander Mervar, M. Sc. He pointed out that since 1991, we have no consist-ent national energy strategy, but we do have local initiatives and interests, which is leading the Slovenian energy supply to a com-pletely wrong direction. He highlighted the problems of production units required to cover the electricity consumption, the issue of elec-tricity prices and the need for definition of import dependency and policies of Slovenia on renewable energy sources.

FEBRUARY

Slovenian Electricity Market Made a Big Step toward the Connection with EU MarketsAt the end of February, an important new step toward the integra-tion of the European electricity market took place. On 24 February, the Italian-Austrian, Italian-French and Italian-Slovenian border were coupled with MRC (Multi Regional Coupling) for the first time, which created a link that connects most of the electricity markets in the EU: from Finland in the north, Great Britain in the west, Portugal in the south to Slovenia in the east.

ELES Acquired New Grants within EU Horizon 2020ELES as a member of an international consortium successfully ap-plied to the call of the European program for research and develop-ment Horizon 2020. ELES will thus receive 110 thousand euros for carrying out the BioEnergyTrain project. Partners in the BioEnergy Train project come from six countries, including Slovenia. The focus of the project will be on connecting the higher education institu-tions, research centres, professional associations and industry rep-resentatives, who are dealing with renewable energy sources (RES) and their integration into the energy systems of buildings, villages and regions.

MARCH

Partial solar eclipseA partial solar eclipse took place in the morning of 20 March in the broader European area, which had a direct impact on the difference

between production and consumption of electric power in Slovenia and in the whole of Europe. To ensure the stability of the system, the European transmission system operators including ELES prepared measures to prevent the unacceptable effects of solar eclipse on the transmission system operation. The eclipse caused a decline in the production of solar power plants throughout Europe, which was approximately halved and the power decreased by 30 GW. In com-parison with Europe (80 GW), Slovenia’s installed capacity of solar power is considerably lower, i.e. 266 MW. The decline in production from solar power in Slovenia was substantial, as the power dropped by almost 100 MW.

APRIL

End of the Expedition To Row the Eastern Mediterra-neanThe expedition To Row the Eastern Mediterranean that was spon-sored by ELES successfully ended on 1 April. The international row-ing expedition of Marin Medak and Dimitris Kokkoris completed the 1,750 km long trail from Hammamet in Tunisia to Çesme in the west of Turkey. Due to extremely difficult weather conditions and the resulting intermediate stops in Malta and the Peloponnese, the expedition lasted for almost two months.

Head of the expedition Marin Medak is also the ambassador of the value of “Enthusiasm”, one of the six values that ELES adopted in 2015. His expedition was also followed by ELES employees on the Intranet where we published news about the expedition and Ma-rin’s reflections on the importance of the said value.

ELES Strategic WorkshopOn 13 and 14 April, Strategic Workshop of the company ELES took place in Bled, representing one of the fundamental steps toward the creation of the new Strategic Business Plan (SBP) 2016-2020. Almost 50 ELES’ experts presented 11 strategic objectives of the Company. The workshop confirmed the suitability of the prepared strategic management policies set out at the strategic confer-ence of the Company at the end of the year 2014 in Bohinj. Ma-jor changes have only been made on two strategic management policies. In Bled, the experts, holders of objectives and activities thus thoroughly reviewed the activities and harmonised the objectives. All the proposed amendments were adopted, so a big consensus has been achieved regarding the content of the SBP 2016–2020.

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MAY

ELES hosted the 13th International Workshop on Elec-tric Power Control Centres - EPCC 13ELES has been the main sponsor and organizer of the 13th Interna-tional Workshop on Electric Power Control Centres. EPCC Workshop represents a particular platform for the exchange of information be-tween the experts who participate in the technical, financial, regula-tory and financial field of providing a stable electricity supply as well as the operation of the electricity market.

Start of Regular Operation of the Management Sys-tem SCADA/EMSOn 19 May, the existing, technologically less appropriate man-agement system was replaced with a new management system SCADA/EMS manufactured by the Swedish company ABB. ELES thus acquired a modern system for management of operation of the electric power system, which will make the work of the operators in the national and regional control centres easier and provide for better quality. The new system uses the latest achievements from the field of telecommunications and information technology and includes modern tools which help users to ensure reliable operation of the electric power system in Slovenia and participation in the Eu-ropean Interconnection.

ELES Received the First Part of the European Grants - CEFIn May 2015, ELES and the European Commission signed a con-tract on receiving a grant in the amount of 200,000 euros for con-ducting a study within the successful application of activities in the project for the one-way connection Slovenia-Italy in the so-called CEF. In the context of the priority corridor “Electricity Connections between North and South in Central Eastern and South-Eastern Eu-rope”, the European Commission confirmed the One-Way Connec-tion between Slovenia and Italy as a project of common interest. Projects of common interest are eligible for financial support of the Union in the form of grants for the conduct of the study.

JUNE

Introduction of the ERP SystemAt the beginning of June, a modern information system ERP for inte-grated management of operations was introduced. ELES decided to introduce the ERP system in order to modernise the existing system with a modern information system, to overhaul the business pro-cesses and reduce the costs of maintenance.

Corporate Integrity in ELESELES established a comprehensive system of corporate integrity in 2015. This way, we wanted to additionally emphasize that the pre-vention of corruption, respect for the rules of competition and other business rules are among the strategic objectives and values of the Company. With the adoption of the Rules on Corporate Integrity of the Company and the Rules on Controlling and Ensuring Corporate Integrity, ELES committed to respect and enhance corporate integ-rity and spread awareness on the importance of operation in ac-cordance with the legislation of socially responsible operation in the Slovenian economy in general. By signing the Slovenian Corporate Integrity Guidelines in June 2015, the Company joined the 27 re-nowned companies that represent the circle of ambassadors of cor-porate integrity. ELES also signed the Declaration on Fair Business of the United Nations Global Compact Slovenia and is a member of the European Institute of Compliance and Ethics.

SEPTEMBER

Establishment of Joint Allocation Office JAOAssemblies of two regional auction offices for the allocation of cross-border transmission capacities, CAO and CASC.EU, approved the merger of both offices to a Joint Allocation Office (JAO) on 24 June 2015. Joint Allocation Office (JAO) was established on 1 Sep-tember. This is an important milestone in the creation of a single internal market for electricity in the European Union. JAO will be the joint undertaking of 20 system operators of transmission net-works from 17 countries. Joint allocation office will mostly carry out the services related to the allocation of yearly, monthly and daily cross-border transmission capacities on 27 European borders. At the same time, it will also carry out alternative procedures in the event of problems in the implementation of European Market Coupling.

Successful Registration of European Projects MI-GRATE and FutureFlowOn 7 September, the Company was informed that the application for funding of two European research programs within the program Horizon 2020 was successful. The project MIGRATE is addressing the new dynamic phenomena in the transmission network, which occurred due to an increased share of renewable sources, while the project FutureFlow is exploring new solutions for the integration of consumers and diffused sources into the most demanding services in the electric power system such as secondary regulation and redis-tribution of production.

FutureFlow is also important for ELES because this is the first time that the Company assumed the role of coordinator of a European research project.

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OCTOBER

ELES Successfully Passed the Assessment of Compli-ance with the ENTSO-E StandardsAs a member of ENTSO-E Network, ELES is required to meet the standards of the “Continental Europe Operation Handbook”. In 2015, ELES was selected for the review of standards in the field of operator training. In October, we hosted the international audit commission of the ENTSO-E Network whose main objective was to verify whether the operator training processes take place in accord-ance with the requirements of Operational Handbook - Policy 8. The audit committee affirmed our excellence in compliance with all the standards on operator training and also our excellent organisation of processes, documentation and functioning of computerised sys-tem for operator training.

The Committee on Infrastructure, Environment and Spatial Planning of the Republic of Slovenia Visited ELESOn 14 October, the members of the Committee on Infrastructure, Environment and Spatial Planning of the Republic of Slovenia re-sponded to the invitation of the director Aleksandr Mervar M. Sc., and visited the premises of the company ELES. The Director pre-sented the safe, reliable and efficient operation and maintenance of the electricity transmission system of the Republic of Slovenia that the Company carries out. Great emphasis was also placed on the presentation of the organization of the electricity market in the Republic of Slovenia and on the draft of Slovenian Energy Concept.

NOVEMBER

6th Strategic ConferenceAt the 6th Strategic Conference held in November in Rogaška Slati-na, almost 80 heads of fields and departments in the Company first listened to a debate with athletes who are the ambassadors of new values of the Company. Emphasis was placed on the presentation of the realization of 11 strategic objectives of the Strategic Business

Plan 2011–2015. This was followed by the presentation of results of self-assessment according to the EFQM Excellence Model in 2015 and by an excellent overview of the European and Slovenian elec-tricity market today and future challenges.

On the second day of the Conference, the Director of the Com-pany, Aleksander Mervar, M.Sc., presented the new strategic plan SBP 2016–2020. The results of measurement of the organizational climate and challenges of the security system in the Company were also presented.

Inclusion of the Project SINCRO.GRID on the List of Projects of Common European InterestOn 19 November 2015, the European Commission adopted a regulation that officially confirmed the list of projects of common European interest. For the first time, the project SINCRO.GRID was included on the list. This Slovenian-Croatian project on smart grids is being prepared by ELES in cooperation with the Slovenian company SODO and Croatian companies HOPS and HEP-ODS. The project deals with smart infrastructure investments in the field of storage facilities, reactive power and systems for the increase in transmis-sion capacities of electricity networks. The inclusion of the project on this list is an important step to ensure the appropriate funding scheme for the project and ELES also counts on the acquisition of funds from the Connecting Europe Facility (CEF).

DECEMBER

110/20 kV Podvelka Substation Solemnly Handed Over to Its Purpose

110/20 kV Podvelka substation was officially handed over to its pur-pose in December. This is an important investment that will ensure a reliable supply of electricity in the Drava Valley and the Northern Pohorje and Kozjak. The investment amounted to more than 6.2 million euros. Of this, the company Elektro Maribor invested 3.6 mil-lion euros, ELES 1.9 million and SODO 732 thousand euros.

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In its operations in 2015 ELES complied with all statutory basis, which regulate the activity of the transmission system operator.

1.4 Economic and regulatory environment in 2015

Indicators for the Republic of Slovenia 2015 Forecast 2016 Forecast 2017

GDP (real growth, %) 2.9 1.7 2.4

Employment (growth, %) 1.4 0.9 0.9

Unemployment (rate, %) 12.3 11.7 11.0

Inflation (%) -0.5 -0.3 1.3

Average gross salary in the RS (nominal growth, %) 0.7 1.7 2.0

Average gross salary in the RS (real growth, %) 1.2 2.0 0.7

Labour productivity-GDP per employee (real growth, %) 1.4 0.8 1.5

Gross fixed-capital formation 0.5 -0.3 6.0

Source: Spring forecast of economic trends 2016, www.umar.gov.si

There were no significant changes in legislation in 2015 which would affect the functioning of the Company.

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We manage the Slovene electric power network, in which transmission lines connect power plants as electricity generators with their consumers at a high-voltage level.

22

Photograph by: Lea Jambrošič

23

O2NAGOVOR DIREKTORJA

In 2015, ELES received a new tool to manage the Slove-nian power system

The year of 2015 was an important year for ELES because we finalized two important investments. By updating the SCADA/EMS management system in the National Control Centre of the Sloveni-an electric power system, ELES will more easily manage all processes and activi-ties expected by the European Network of Transmission System Operators (ENT-SO-E) from its members. As the operator of the Slovenian electricity transmission network and a member of the ENTSO-E association, ELES significantly contrib-utes to the development of the trans-European electric power network. With the modern ERP information system, which was first used on 1 June 2015, we made a big step forward in terms of business excellence with high objectives still ahead of us. In 2015, we were very active in the field of smart networks, where we have already proven in the past that we ensure implementation of new technologies with own knowledge. This is reflected in a number of imple-mented and ongoing projects.

After two months of trial operation of the new SCADA/EMS control system, the new control system of the National Con-trol Centre came into use in September 2015. With this, ELES obtained a modern electric power control system, which will enable operators in the National Control Centre and in regional control centres

to perform their work more easily and with more quality. The new system uses the latest achievements in the field of telecommunications and information technology and includes advanced tools that help users ensure reliable operation of the Slovenian electric power system and participation in the European inter-connection.

In 2015, ELES has been making efforts to update the existing information sys-tem, refresh business processes and decrease operation costs. With this, the company made a big step towards business excellence because on 1 June 2015, the modern ERP information sys-tem (integrated business management) was launched. The primary objectives that introduction and use of new soft-ware will bring to the ELES operations include efficiency improvement of ELES business processes and their integration, oversight improvement over purchase prices and the purchasing process, more efficient inventory management, sim-pler analyses and reports, partial pro-cess optimization and transparency.

At the 6th company strategic confer-ence in November 2015, we reviewed implementation of 11 objectives from the first strategic business plan for the 2011–2015 period and set out guide-lines for preparation of the new strate-

CHIEF EXECUTIVE OFFICER’S ADDRESS

24

gic business plan for the 2016–2020 pe-riod. We included the items below in the strategic guidelines of the new strategic plan, which we have already prepared and delivered to decision makers at the end of November 2015:

• compliance with target values, opera-tion of employments in accordance with the code of ethics and corporate integrity guidelines with the aim of achieving an appropriate level of busi-ness excellence;

• effective management of physical as-sets and introduction of effective hu-man resources management;

• in addition to comprehensive control over the operation of 400 and 220 kV transmission network, assuming comprehensive control over the entire looped 110 kV network in Slovenia;

• purchase of system services at compa-rable prices to neighbouring TSOs ac-cording to new technology, transition to the greatest possible autonomy based on technical and economic cri-teria;

• investments in cross-border transmis-sion capacities, justifying the amount of NTCs towards neighbouring TSOs – according to the national interest of the Republic of Slovenia;

• operation in the regulatory framework, providing profit to the owner with re-gard to regulatory methodology.

In 2015, ELES continued activities of long-term acquisition of parts of the 110

kV transmission network owned by oth-er legal persons, which is required from us by the new Energy Act (EZ-1). Due to limited financial assets and capabilities, acquisition of the 110 kV transmission network will be included in development plans in accordance with priorities. Re-alization of acquisition of the 110 kV network means that ELES will have to use funds intended for investments and will cause additional operating and maintenance costs, amortisation, recon-struction of acquired network parts and additional human resources.

In 2015, ELES has actively participat-ed in international associations in the field of transmission system operators for electricity networks. Among other things, the company prepared the 13th international workshop on control cen-tres in the energy industry. The work-shop represented a special platform for information exchange between experts in technical, business, regulatory and financial fields that ensure a stable electricity supply and functioning of the electricity market.

On 24 February last year, the Slovenian electricity market has become a part of the interregional electricity market cou-pling. This mechanism brings together markets of 19 countries where 4 TWh of electrical energy in total value of €150 million is sold or bought daily.

ELES is also actively participating in all appropriate invitations to tenders for

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O2

acquisition of EU funds. By constructing new infrastruc-ture, ELES is improving Slovenian access to European production centres and thus indirectly reducing the price of electrical energy in Slovenia. Within this framework, two programmes are very important for ELES. The Ho-rizon 2020 programme focuses on development, while the Connecting Europe programme has a more invest-ment character. ELES is successfully participating in two projects of the 7th Framework Programme for the 2014–2020 period (EU Programme for Research and Development Horizon 2020). It has also successfully joined international consortiums Umbrella, eBadge, Bio-EnergyTrain and Reliance. In the first half of 2015, ELES has submitted an application for two projects, in which ELES has the leading role. The first project is SINCRO.GRID, where we are establishing advanced systems for management of network voltage and battery energy res-ervoirs in cooperation with partners from Slovenia and Croatia. The second project is FutureFlow, where we are including consumers in the most demanding balancing processes in cooperation with 12 European partners. In the future, ELES is planning to submit new applications for invitations to tenders of the Horizon 2020 and CEF programmes (the latter is intended exclusively for pro-jects of common interest – PCI).

In 2015, we have successfully completed the reconstruc-tion of the 110 kV transmission line Brestanica–Krško NPP, which ensured a more reliable connection for the Krško Nuclear Power Plant. At the end of the year, the DTS 110/20 kV Podvelka was also officially opened. The investment that was co-financed by ELES was important for the company, especially because of acquisition of a part of the 110 kV network.

Changes in the business environment have prompted us to reflect on the commitments given to our stakeholders. One of the steps in 2015 was refreshment of shared val-ues, vision, and mission of the company, which guide our work. We all believe that the following is needed for com-pany success: responsibility, commitment, knowledge, reliability, cooperation and perseverance.

In 2015, ELES has formally implemented a comprehen-sive system of corporate integrity in its operations. By doing so, ELES further notes that prevention of corrup-tion, respect for rules of competition and other business rules are among the priority objectives and values of the company.

This of course does not represent all activities of ELES in 2015. I have listed only the activities that most marked the past year. I believe that in 2016, we will also take the path of excellence, while respecting target values and acting in accordance with the code of ethics and corpo-rate integrity guidelines. With own knowledge, we will meet the new challenges that force the energy industry to introduce technological innovations. All this will fur-ther strengthen the position of ELES as one of the most successful transmission system operators in Europe. Above all and in accordance with the new vision, we will strive towards the leading role in the Slovenian electric power system, so that we will be the key element of en-ergy stability in the region with one of the most techno-logically advanced networks.

In Ljubljana, on 6 May 2016

ELES, d.o.o.Aleksander Mervar, M. Sc.

Chief Executive Officer

26

We constantly maintain the balance between electricity production and consumption to guarantee the stability and reliability of the Slovene electric power system.

28

Photograph by: Irena Herak

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In 2015, the Supervisory Board of ELES, d.o.o., included six members.The representatives of the company founder were Marjan Ravnikar, MSc, President of the Supervisory Board, Igor Maher, Vice-President of the Supervisory Board, Matevž Marc, MSc, and Milan Krajnik, member of the Supervisory Board. In 2015, employee representa-tives in the Supervisory Board were Jože Senčar and Marko Goršek. By order of the Government of the Republic of Slovenia, Marjan Ravnikar, MSc, and Igor Maher were dismissed as members of the Supervisory Board on 30 July 2015. On 31 July 2015, new members of the Supervisory Board were named: Andrej Prebil and Gorazd Skubin. At its 208th meeting on 13 August 2015, the newly formed Supervisory Board named Andrej Prebil as President of the Supervi-sory Board and Gorazd Skubin as Vice-President of the Supervisory Board. The members of the Supervisory Board disclosed that they are members in Management and Supervisory Boards of related or unrelated companies. Matevž Marc, MSc, disclosed that he is a mem-ber of the Supervisory Board of SAVA, d.d., and temporarily a mem-ber of the Management Board of SAVA, d.d. Andrej Prebil disclosed that he is the President of the Management Board of Sava Turizem, d.d., President of the Tourism and Hospitality Chamber of Slovenia, Vice-President of the Slovenian Tourist Board Council, and Honorary Consul of Sri Lanka. Other members of the Supervisory Board are not members in Management and Supervisory Boards of related or unrelated companies. Members of the Supervisory Board performed self-evaluation.

In 2015, the Supervisory Board had:

• The Audit Committee of the Supervisory Board, which was chaired by Igor Maher until 30 July 2015, with Marjan Ravnikar, MSc, as a member and Darinka Virant as an external member until 30 July 2015. At its 208th meeting on 13 August 2015, the newly formed Supervisory Board named new members of this Committee, name-ly Milan Krajnik as the President of the Committee and Matevž Marc, MSc, as a member of the Committee. The Audit Committee of the Supervisory Board held five (5) regular meetings and two (2) correspondence meetings in 2015, with all members present.

• The Committee for Development, Strategy and Investment pro-jects of ELES, chaired by Matevž Marc, MSc, and with members Jože Senčar and Gorazd Skubin since 13 August 2015 and an ex-ternal member Bogdan Trop since 9 February 2015. This Commit-tee met in five (5) regular meetings with all members present.

• The Committee for Supervision of operations of TALUM, d.d., chaired by Milan Krajnik, with Igor Maher as a member until 30 July 2015, Gorazd Skubin as a member since 13 August 2015 and Marko Goršek as a member since 9 February 2015. This Commit-tee met in two (2) regular meetings with all members present.

The Supervisory Board of ELES, d.o.o., met in six (6) regular meetings and three (3) correspondence meetings in 2015, adopting eighty-three (83) decisions. ELES, d.o.o., (hereinafter referred to as the Com-pany) has been carrying out its tasks and contents currently, while the Supervisory Board ensured conditions and directed the Compa-ny towards achievement of business and strategic goals.

In 2015, the Supervisory Board:

• discussed current business decisions of the Company, monthly, quarterly, half-year and nine-month operation results;

• participated in the preparation of the annual report for 2014, which it then discussed in detail at its 205th meeting and gave posi-tive opinion;

• discussed the Director’s proposal on the distribution of profit;

• discussed the proposal of the Audit Committee to name Constan-tia plus, d.o.o., from Ljubljana for auditing of financial statements of the Company and the Group for the 2015 financial year;

• discussed proposed resolutions for the annual general meeting;

• discussed the Director’s proposal for borrowing in order to finance the acquisition of elements of 110 kV network in the 2015–2017 period;

SUPERVISORY BOARD REPORT

30

• discussed the merger of auction offices, in which the Company has an ownership share;

• discussed the management system, the risk management system and the corporate integrity system of the Company;

• discussed the proposal of the Audit Committee regarding the new head of internal auditing and confirmed it;

• discussed the draft of the internal audit annual plan and agreed with it;

• discussed the 2016–2020 Strategic Business Plan of ELES, d.o.o., transmission system operator of the electric power network, and gave positive opinion;

• discussed the 2016 Annual Plan of ELES, d.o.o., and the 2017–2018 medium-term plan and agreed with it.

Based on the current Act Regulating Public Procurement in the Wa-ter, Energy, Transport and Postal Services Sectors, the Supervisory Board was regularly informed about changes in contracts and pro-cedures where all bids were rejected or a particular procurement was abandoned.

The Supervisory Board regularly checked the implementation of the annual plan of the Company and marked the Company operations in 2015 as good.

Through the Committee for Development, Strategy and Investment projects of ELES, the Supervisory Board monitored the course of preparing the ten-year plan for transmission network development 2015–2024, the course of preparations to acquire the 110 kV net-work, which has to be implemented based on the Energy Act, the list of largest suppliers for the Company, and quarterly procurement release plans and their realization. The Supervisory Board also moni-tored the largest projects of the Company in detail in each meeting.

Through the Audit Committee, the Supervisory Board monitored the course of financial statement auditing, findings of the external audi-tor given in a letter to the management and a response report of the

Company to this letter. The Supervisory Board was also informed in detail about the catalogue of risks and its updates in the Company. In 2015, the Audit Committee monitored the work of internal audit-ing and discussed the annual plan of internal auditing for 2016 and its long-term auditing plan.

Through the Committee for Supervision of Operations of TALUM, d.d., the Supervisory Board monitored the course of guarantee uti-lization in TALUM, d.d., given by the Company, and the conversion process of these receivables into ownership share. In 2012, the Company received a decision from the Capital Assets Manage-ment Agency of the Republic of Slovenia (hereinafter referred to as CAMA), which is the basis for the Company issuing guarantee for TA-LUM, d.d., or its electrical energy supplier between 2013 and 2015. With this decision, consent was given for the Company to turn its re-ceivables based on issued and redeemed guarantees to a long-term loan with the option of conversion into share capital. The increase of share capital was carried out at the general meeting of TALUM, d.d., on 15 July 2015 and 22 December 2015. The Committee also monitored the issue of the impact of the level of contribution for re-newable energy sources on operation of TALUM, d.d.

The Supervisory Board has taken note on the 2014 Annual Report, with the auditor’s opinion and 2014 Consolidated Annual Report of the ELES Group. Based on reading the report of the Audit Commit-tee of the Supervisory Board, the Supervisory Board agreed with the 2014 Annual Report, with the auditor’s opinion and 2014 Consoli-dated Annual Report of the ELES Group.

The Supervisory Board reviewed and confirmed the 2016 Annual Plan and the business plan for the 2017–2018 period and took note on the Medium-Term Plan of the ELES Group 2016–2018.

Ljubljana, 6 May 2016

Andrej PrebilPresident of the Supervisory

Board of ELES, d.o.o.

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The transmission network is a system of routes and intersections through which electricity travels. We see to its development, planning, construction and maintenance.

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Photograph by: Eva Erżen

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As the system operator of this electricity transmission network, ELES d.o.o, ensures the safe, reliable and uninterrupted transmission of electricity. ELES is the guardian of the Slovenia’s electric power sys-tem, which is closely connected with the transmission networks of the neighbouring countries and integrated into the European energy system. As experts in the field of electric power engineering, ELES uses its knowledge and the application of advanced technology to provide both suppliers and consumers with quality energy transmis-sion, and thus quality of life.

ELES is an important and solid backbone of the Slovenian electricity industry. As the system operator of Slovenia’s transmission network, ELES preserves the balance between generation and consumption of electricity within the transmission network 24 hours a day. ELES has a responsible task which it carries out responsibly.

PRESENTATION OF ELES

4.1 Company Profile

Transmission System Operator ELES, d.o.o.

Registered Office Hajdrihova ulica 2, Ljubljana

E-mail address [email protected]

Website http://www.eles.si

Code of Main Business Activity 35,120 transmission of electric power

Founded November 1990

Registered at The District Court of Ljubljana, Entry No. 1/09227/00

Tax Identification Number (VAT) SI20874731

Company Registration Number 5427223

Share Capital 177,469,515.00 euros

Business Bank Account Numbers Nova Ljubljanska banka: 02924-0017900956Unicredit Banka Slovenija: 29000-0052003012Abanka Vipa: 05100-8012150406Sberbank: 3000 0001 0104 138

Founder and Owner The Republic of Slovenia, 100 % Owner

Chief Executive Officer Aleksander Mervar, M. Sc.

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4.2 Mission, Vision and Values

MISSION

By providing reliable transmission of electric power ELES provides for quality of life, stability of organisations’ operations and develop-ment of society in Slovenia and in the region.

VISION

ELES shall obtain a leading role in the Slovenian electric power sys-tem and shall represent a key element of the energy stability in the region with one of the most technologically advanced networks.

VALUES

ResponsibilityThrough prudent development, planning and construction of mod-ern transmission system as well as through permanent mainte-nance, ELES co-creates energy-efficient and friendly environment with respect to all the involved stakeholders: its employees, consum-ers, the nature and the environment, local communities and the society as a whole.

EnthusiasmWith positive attitude towards work, which ELES successfully per-forms together with its colleagues on the basis of experience, pro-fessionalism and diligence, and with positive attitude towards the colleagues and the Company, ELES helps co-create an atmosphere conducive to proactive endeavour and achievement of the tasks and looks forward to joint achievements.

KnowledgeThrough consideration of best practice, together with the ongo-ing acquisition and sharing of knowledge and expertise acquired through years of experience, and with the strive to innovate, ELES builds expertise, improves its performance and remains committed to finding the best solutions for continuous improvement of the quality of electric power transmission.

ReliabilityELES is aware of its essential function and responsibilities in provid-ing the safe uninterrupted supply of quality electrical energy so as to contribute to the achievement of individuals’, companies’, insti-tutions’ objectives and the society as a whole. Hence, ELES keeps to the agreements in its daily work and all the Company’s processes. Reliable, safe and uninterrupted transmission of electricity also means safe and quality lives of all the Company’s stakeholders.

CooperationAt any given moment, ELES is in favour of openness, integration, team spirit and seeks the best solutions for the common good of the ELES’ colleagues and for active involvement of external stakehold-ers. Only then can ELES effectively fulfil its mission and act for the benefit of all, for a better today and tomorrow.

CommitmentPatiently and uncompromisingly, ELES is committed to achiev-ing the best results, fulfilling its mission and striving for long-term development and maintenance of the electric power transmission system of the Republic of Slovenia. This system represents the back-bone of organisations in all sectors and is therefore a prerequisite for the economic progress of Slovenia.

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O4PRESENTATION OF ELESO4PREDSTAVITEV DRUŽBE ELES

Vrednote družbe ELES

Ambasadorji vrednot družbe ELES

zanesljivost

zavzetost

vztrajnost

znanje

sodelovanje

odgovornost

Atletska zveza Slovenije Benjamin Savšek Marin Medak

Jakov Fak Kolesarska ekipa BTC City Miha Podgornik

PRESENTATION OF ELES

ELES’ Values

The Ambassadors of ELES’ Values

Reliability

Enthusiasm

Commitment

Knowledge

Cooperation

Responsibility

Slovenian Athletic Association Benjamin Savšek Marin Medak

Jakov Fak BTC City Cycling Team Miha Podgornik

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4.3 Strategic ELES' Policies

4.3.1 Objectives and strategic management policies

ELES set out its long-term strategic objectives in the first ELES Strategic Business Plan (henceforth referred as the SBP) for the 2011–2015 period. At the end of 2015, ELES assessed the realiza-tion of the 2011–2015 SBP and prepared a new ELES’ SBP for the

2016–2020 period, in which the Company set out the key strategic management policies and objectives to be realized by 2020. Priority strategic investments and reconstructions of transmission connec-tions were also determined.

Meeting targets in 2015

Final implementation of the first ELES' SBP for 2011–2015 period

Elaboration of SBP for the 2016–2020 period

Elaboration of SP for the 2016–2018 period

Elaboration of 10-year plan of the development of transmission network for the 2015–2024 period

Objectives for 2016

Realization of the priority strategic investments and reconstructions within the set deadlines, while ensuring adequate sources of financing

Creating a new Plan of development of the transmission network in the Republic of Slovenia for the 2017–2026 period

Operations within the framework as set by the Energy Agency for the 2016–2018 regulatory period

Active participation in international organizations in the field of operation of the transmission system operators of energy networks

Effective management of equity investments of the Company

Key strategic guidelines until 2020

Respect the target values, operation of employees in accordance with the Code of Ethics and guidelines of corporate integrity, with the aim of achieving an appropriate level of business excellence.

Investment and maintenance activities on the basis of the philosophy of Assets Management, the introduction also in the field of human resource management.

In addition to a comprehensive supervision over the operation of 400 and 220 kV transmission network also assume complete control of the whole, looped 110 kV network in RS .

Lease of ancillary services at comparable prices of the neighboring TSOs. According to the new technology, based on technical and economic criteria, the transition to greater autonomy.

Investments in cross-border transmission capacities, justifying the amount of NTC's to the neighboring TSOs - according to the national interest of the Republic of Slovenia.

Operations in the set regulatory framework, providing the owner with profit with regard to regulatory methodology.

Key strategic objectives until 2020

SO 1 Achieving business excellence – 600 points.

SO 2 Achieving net profit in accordance with the methodology of the Energy Agency of the Republic of Slovenia.

SO 3 Visibility and reputation in the public.

SO 4 Comprehensive human resource management.

SO 5 Effective management of the physical assets of the Company.

SO 6 Effective management of ICT services.

SO 7 Optimisation of implementing investment – maintenance processes.

SO 8 Implementation of comprehensive control over the transmission network by taking over the existing network, enforcing uniform criteria, connecting and entering in investments/reconstructions of transmission and distribution networks.

SO 9 Providing flexibility of ancillary services.

SO 10 Maximizing the NTC within the existing network.

SO 11 Investments in smart grids.

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O4PRESENTATION OF ELES

4.3.2 Priority strategic investments and reconstructions of transmission connections

400 and 220 kV connections

2 x 400 kV Cirkovce–Pince transmission line

2 x 400 kV Beričevo–Divača transmission line (transfer from 220 kV to 400 kV)

Connecting 2 x 220 kV transmission line for 220/110 kV Ravne substation

2 x 400 kV Podlog–Šoštanj transmission line

Installation of regulating compensation

Smart grids (SUMO, WAMPAC, Energy storage systems, …)

400 and 220 kV substations and transformers

400 kV Cirkovce substation (connected to 400 kV Cirkovce–Pince investment) and transformation 400/110 kV Cirkovce

400/110 kV Divača substation, second TR 300 MVA

400/110 kV Maribor substation, replacement TR42

220/110 kV Ravne substation

Introduction of direct transformation 400/110 kV (Cirkovce, Kleče, Beričevo, and Podlog substations)

110 kV connections

Takeover of 110 kV network in line with Decree on the division of the 110 kV network into the distribution and transmission systems

2 x 110 kV Divača–Sežana–Vrtojba–Nova Gorica transmission line

2 x 110 kV Brestanica–Hudo transmission line

110 kV Koper–Izola–Lucija transmission line/cable line

2 x 110 kV Divača–Pivka–Ilirska Bistrica transmission line

2 x 110 kV Divača–Koper transmission line

2 x 110 kV Maribor–Cirkovce transmission line

2 x 110 kV Ormož–Ljutomer transmission line

Connecting lines Brežice HPP and Mokrice HPP

110 kV substations and TR

110/20 kV Tolmin, Slovenska Bistrica, Plave substations

110 kV Hudo substation

110/20 (35) kV Pekre substation

Substation at Trbovlje TPP

38

4.4 Business Model

The main tasks of ELES as the system operator of the transmission network of the Republic of Slovenia are the following:• transmission services,• operation,• ancillary services,• ensuring the stability of the electricity market and• construction and maintenance of the network.

Transmission services

ELES is responsible for ensuring continuous supply of electricity in a cost-effective way and for providing access to the network in a non-discriminatory manner.

Operation

ELES is also entrusted by the law to carry out another professionally responsible task, namely the coordinated management of the op-eration of all electrical devices and components. With the modern national control centre in Ljubljana and three regional control cen-tres in Maribor, Beričevo and Divača, ELES connects, monitors and remotely manages Slovenia’s transmission network, which is closely integrated into the European network through the networks of Aus-tria, Italy and Croatia.

Ancillary services

ELES operates in a high-voltage electric power system. Because the electricity cannot be stored, supply and demand must be balanced 24 hours a day, 7 days a week and 365 days a year. Therefore the

system operator must constantly carry out the netting of imbal-ances resulting from differences between consumption and gen-eration of electricity in Slovenia and from deviations in commercial exchange and physical flows with neighbouring countries. System operator carries out the netting of said imbalances with the use of ancillary services and tools, such as the mechanism to prevent im-balances in the network (Imbalance Netting). In the case of major and longer imbalances, the system operator must intervene in the market by buying or selling a certain quantity of energy or engage ancillary services in order to restore the balance between generation and consumption, by way of which it replaces the missing active power reserve in the control area.

Ensuring the stability of the electricity market

The next task of ELES is to ensure maximum availability of cross-border transmission paths with a view to ensuring free access to the joint European electricity market, taking into account the criteria of safe and reliable operation of the transmission network in Slovenia.

Construction and maintenance of the network

The transmission network must be regularly maintained, updated and developed. Planning of the transmission network is a challeng-ing task carried out by ELES experts with specialised expertise and experience. An important factor in deciding about the development and expansion of the network are the forecasts on planned produc-tion capacities and on the needs of consumers and power flows in the international transmission lines.

The activity of the company ELES is fully regulated by the national regulator, the Energy Agency of the Republic of Slovenia (hereinaf-ter: AGEN RS), as defined in the EA-1 and the implementing regu-lations. The Ministry of Infrastructure is in charge of regulation of the management aspect of the company ELES. It is therefore our constant concern to ensure the compliance of Company operation with legislative and regulatory frameworks.

Allowed revenues

Allowed regulated revenues (network charge) are set forth by AGEN

RS for the current 3-year regulatory period and intended to cover the costs of energy, operation and maintenance, return on assets and depreciation. Regulated revenues of the current period are reduced by the surplus of revenues from previous years and other revenues.

Network charge for which the network users pay the electricity bills is the most important regulated revenue.

The second most important one are the revenues arising from auctions. The latter are created at auctions, where cross-border transmission capacities for electricity trading are allocated. Our net-

4.4.1 Compliance with regulatory requirements

39


Method of calculation of regulated revenues

work does not only serve as a network to provide electricity supply to domestic consumers, but also as a transit network of traders, who buy and/or sell electricity abroad. These revenues are regulated with European legislation.

The network charge, which is charged to electricity consumers, has

decreased in the last period, while the portion of revenues arising

from the sale of cross-border capacities at auctions continues to

grow compared to the network charge.

NETWORK CHARGE

ENERGY COSTS

COSTS OF OPERATION

AND MAINTENANCE

REGULATED RETURN

DEPRECIATION

SURPLUS OF REVENUES

FROM PREVIOUS

YEARS

OTHER REVENUE

25 %

30 %

7 %

38 %

Regulated revenues in 2015 (in %)

Revenues from transmission network Revenues from the network charge for ancillary services Auction revenues Other incomes

Share in revenues from allocated CBTC on auctions in renvenues from network (in %)

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

100.090.080.070.060.050.040.030.020.010.00.0

44.854.4

2007 2008 2009 2010 2011 2012 2013 2014 2015

58.048.4

57.2

92.7

76.7

85.579.6

Revenues from transmission network Revenues from allocated CBTC on auctions Share in revenues from the use of the transmission network

40

Energy costs

Eligible energy costs include the costs of lease of ancillary services and the costs of purchasing electricity to cover losses in the trans-mission network. The company ELES realises the objectives of en-suring maximum transparency and competitiveness in all the pro-cedures tied to the lease of ancillary services and the coverage of losses in the transmission network. Realization of these objectives is the basis for recognition of costs by the AGEN RS.

Costs of operation and maintenance

The main eligible cost is the cost of operation and maintenance of the network, because only with regular maintenance the network can be maintained in good condition. These costs are divided into controlled and uncontrolled costs. The uncontrolled costs of opera-tion and maintenance are the costs that the company ELES can-not influence and are fully covered by the regulated revenues. Con-trolled costs of operation and maintenance are the costs that the Company can influence. These costs are set forth by AGEN RS on the basis of past trends and corrected by the efficiency factor and inflation. Their limited amount is fixed for the regulatory period.

Regulated return on assets

This is an eligible cost, because the return is used to cover the inter-est from the contracted loans, corporate income tax and regulated profit at the owner’s disposal. It is determined based on the regula-tory base of funds and the level of the weighted average cost of equity.

Depreciation

This covers the depreciation of assets that are defined as necessary for the implementation of system operator activities by the AGEN RS and the depreciation of which is rightly charged to the final con-sumer.

Surplus of revenues from previous years

AGEN RS considers the surplus of revenues over eligible costs from previous years as a source for coverage of eligible costs in the cur-rent and subsequent years. Surplus of revenues from previous years reduces the price of services of the system operator ELES for the electricity consumers.

Other revenues

Other revenues include the revenues that are not linked to the use of the transmission network.

4.5 ELES Transmission Network and Integration in the European Elec-tric Power System

The total system length of ELES’ transmission lines amounts to 2,859 km, of which 16.2 km are underground power cables. The Company operates 35 facilities across the transmission network; 32 of these are transmission system substations, one is a switch-

ing substation, one is a transformer station and one power supply station. Including the 1,200 MVA capacity phase-shift transformer at Divača, ELES’ 27 power system transformers have an aggregate power of 5,804.5 MW. ELES’ optical network is 1,622 km long.

YEAR 2015

Transmission line 110 kV

Length of transmission lines (km) 1862

Number of power system transformers 6







Total ELES, d.o.o.



Basic Data on Transmission Network

41


The role of ELES in the Slovenian electric power system

Physical flows of electricity in Slovenia’s electric power system

ELES ensures uninterrupted power supply by interconnecting the four main participants in the Slovenia’s power transmission net-work. Our transmission network connects the power plants that input their generated electricity into the transmission network; inter-national cross-border connections or countries with which Slovenia exchanges electricity (i.e. Austria, Italy and Croatia), five distribution

companies within SODO (electricity distribution system operator), five of the largest industrial consumers, i.e. direct consumers, which offtake electricity from the transmission network, and four large consumers (steel-works and Talum) with the status of the closed distribution system.

Generation DistributionTRANSMISSION NETWORK ELES

SUBSTATION SUBSTATION

DIRECT OFFTAKE FROM THE TRANSMIS-SION NETWORK

Final consumers

Transmission grids of neighbouring countries

EL CE RUŠEEL MB VRTOJBA TR3EL GOR DEKANI

Dispersed generation

Dispersed generation

EL PR SEŽANA OP

ELES, Electricity Transmission System Operator

EL LJ DIVAČA

HSE

SODO (Slovenia’s electricity distribution system operator) Offtake from the transmission network

DEM TEŠSENG Energetika Ljubljana,

unit TE-TOLTET

GEN-ENERGIJA

HESS TEBSEL 50 % NEK

RAVNEKIDRIČEVO JESENICEŠTORE

CDS (Closed Distribution System)

42

Connection to the transmission networks of the neighbouring countries

2x400 kV and 220 kV transmission lines connect Slovenia with Aus-tria, 400 kV and 220 kV transmission lines with Italy and two 400 kV, two 220 kV and three 110 kV transmission lines with Croatia. These connections also integrate Slovenia into the European elec-tric power system. Such integration allows us to access the markets with lower prices of electricity than the current prices in neighbour-ing Austria and Germany and also occasionally to access the cheap-est surplus of water energy in the Balkans. Transmission line con-nections with Italy enable a transmission of electric power from the above mentioned cheapest possible markets to the Italian market with the highest price of electricity, which is important in view of revenues. The future new transmission line connection with the neighbouring Hungary that is not interconnected with Slovenia yet will enable an alternative transmission path of electricity from the north of Europe, because the existing transmission path through

Austrian network is severely limited due to transmission blockages around Vienna.

An extremely good geostrategic position of the Slovene transmis-sion network at the crossroads of three central European regions currently provides us with access to those electricity markets. How-ever, we must be aware that the access does not only depend on our capacity, but we must also consider the limited permeability of neighbouring networks. With further reduction of electricity produc-tion in our country and in the entire region of south-eastern Europe, we are bound to hit the limits of the neighbouring networks. This could raise the price of electricity on our market and reduce the in-come of ELES from the transit of electricity whose extent will thus be reduced.

Source: Control over the balance of exchange of electricity between Slovenian and neighbouring countries as provided by the new management system of the company ELES.

43


4.6 Company Management

Public enterprise ELES d.o.o. is managed by the General Meeting, the Supervisory Board and the Chief Executive Officer.

General Meeting

Pending the adoption of the new EA-1 (22 March 2014), the Repub-lic of Slovenia as the sole shareholder, has administered its founder’s rights through Slovenska odškodninska družba d.o.o. (SOD). After this date, the management rights, held by the Republic of Slovenia as the sole owner, passed from the SOD to the Government of the RS and the competent ministry in part which refers to the energy.

Director

Chief Executive Officer of a public enterprise is responsible for man-aging operations and activities of the public enterprise, represents it

Other Committees

Supervisory Board from 31st of July 2015 onwards ELES, d.o.o.

Chairman Andrej Prebil

Deputy Gorazd Skubin

Members Milan KrajnikMatevž Marc, M. Sc.

Representatives of Employees Jože SenčarMarko Goršek

Supervisory Board Audit Committee till 30th July 2015

Chairman Igor Maher

Member Marjan Ravnikar, M. Sc.

External member Darinka Virant

Supervisory Board Audit Committee from 31st July 2015 onwards

Chairman Milan Krajnik

Member Matevž Marc, M. Sc.

External member Darinka Virant

Supervisory Board till 30th of July 2015 ELES, d.o.o.

Chairman Marjan Ravnikar, M. Sc.

Deputy Igor Maher

MembersMilan KrajnikMatevž Marc, M. Sc.

Representatives of Employees Jože SenčarBogdan Trop

and is responsible for the legality of its operations. Chief Executive Officer abides by the Rules on the method of management of the company ELES.

Supervisory Board

Pursuant to the Act on the Establishment of the Public Enterprise ELES, d. o. o., the Supervisory Board is comprised of six members. Four members are appointed by the founder. Two members are rep-resentatives of employees, who are appointed by the ELES’ Works Council. The members of the Supervisory Board are appointed for a term of four years and may be re-appointed. The Supervisory Board is obliged to report on its work to the founder at least once a year.

44

Openness of operations

Chief Executive Officer and Supervisory Board are responsible for

the implementation of the principle of public activities of a public

enterprise in a way that the general public are timely and fully in-

formed of the operation, business, development and other circum-

stances and events that affect the safety of supply of consumers

with electricity.

4.6.1 Management System

ELES has established policies for all the segments of the integrated

management system that are constantly improved and updated as

necessary. For many years, we carry out integrated assessment of

certified management systems, which are one of the major sources

of opportunities for continuous improvements. In recent years, we

draw on proposals for improvements from the project of business

excellence according to the PRSPO/EFQM (European Foundation for

Quality Management) 2013 model.

In 2015, we carried out the following activities in individual man-agement systems in the Company:

• Quality system: ELES continued with ongoing improvement of management and overhauling of business processes, paying special attention to the assessment and searching for the right indicators of process effectiveness and efficiency. Integration of management systems into a uniform system has contributed to reduction in the volume of system documentation.

• Environmental Management System: With the refurbishment of outdoor lighting in order to decrease the light pollution we par-tially achieved the set objective in 2015, since we practically com-pleted the renovation of outdoor lighting facilities. Comprehen-sive reconstruction and renovation of the few remaining facilities will be carried out in the following years. Until then, the existing lighting is adapted to the regulatory requirements within the ex-isting plants to the greatest possible extent.

Committee for the development, strategy and investment projects till 30th of July 2015

Chairman Matevž Marc, M. Sc.


Committee for the development, strategy and investment projects from 31st of July 2015 onwards

Chairman Matevž Marc, M. Sc.

Member Gorazd Skubin


The Committee for the supervision of TALUM’s operations till 30th of July 2015


Member Igor Maher

Representative of Employees Marko Goršek

The Committee for the supervision of TALUM’s operations from 31st of July 2015 onwards


Member Gorazd Skubin

Representative of Employees Marko Goršek

International Standards

Quality Management System - Requirements SIST EN ISO 9001:2008

Environmental Management System - Requirements with guidance for use

SIST EN ISO 14001:2004

Information Security Management Systems - Requirements BS ISO/IEC 27001:2013

Occupational Health and Safety Management System SIST-TS BS OHSAS 18001:2007

Conformity assessment - Requirements for the operation of various types of bodies performing inspection

SIST EN ISO /IEC 17020:2012

Risk Management - Principles and Guidelines ISO 31001:2009

45


• Information Security Management System: Upon reassess-ment, we upgraded the Information Security Management Sys-tem to the new edition of ISO/IEC 27001:2013 Standard. For the first time, we carried out an innovative approach towards training of employees in the field of information security. In cooperation with the employees from all fields, we recorded 9 short films in which we illustrate the real life circumstances on the topic of online fraud with instructions on how to avoid them. We also published a booklet titled Instructions on Information Security, in which we presented the bases of information security in a comprehensive and non-technical manner.

• Occupational Health and Safety Management System: Within the framework of Occupational Health and Safety Man-agement System, we discussed and mostly also implemented the recommendations that we received from the assessment of the integrated management systems (both external and internal). The otherwise necessary renovation of the processes of the “Man-agement of occupational health and safety” did not take place yet, but it is planned in 2016 along with the renewal of the cata-logue of risks in occupational health and safety.

• Crisis Management System: In the context of the Crisis Man-

agement System, we participated in the preparation of project documentation for the implementation of the project of video surveillance and technical security at the Company’s premises. We carried out a comprehensive renovation of warning tables in the areas endangered by the Golica HPP dam, namely in the municipalities of Muta, Vuzenica, Radlje ob Dravi and Podvelka. We updated and rationalized the defence plan. We cooperated with the Ministry of Infrastructure in the shielding of critical infra-structure.

• Integrated Management System and Business Excellence: In 2015 we prepared the manager document for the third time as an internal application for recognition of excellence and self-assessment. Business excellence with achieved 450 (from poten-tial 1,000) points for the year 2015 was set as an objective within the strategic objective 1 in the SBP 2011–2015. Because we have already made it above 400 points, we expect that on the basis of the next assessment in the first half of 2016, the strategic objec-tive will be achieved. Business excellence also remains an objective in SBP 2016–2020. We plan to obtain 600 points by 2020. The re-sults achieved by individual criteria according to the EFQM model are shown in the diagram.

Strategic Business Plan and Strategic Conference

The year 2015 was the last year of the realisation of the first Stra-tegic Business Plan of ELES, so in addition to the monitoring of its realisation, great attention was also paid to the preparation of new Strategic Business Plan for the period 2016–2020 (hereinafter: SBP 2016–2020). We carried out a number of activities: first we ana-lysed the external and internal environment and conducted a SWOT analysis. We carried out field workshops and in April also a strategic workshop for all the holders of strategic objectives and sub-objec-

tives. At the workshop, we reached a consensus on the strategic objectives, responsibilities and deadlines. After that, we started to write down the SBP 2016–2020 including the strategy, indicators and risks. In November, we organized the 6th Strategic Conference, where the management team signed a commitment to achieving the SBP 2016–2020. In December, the Supervisory Board of ELES delivered a favourable opinion on the draft of SBP 2016–2020, which was then sent for confirmation to the Government of the Re-public of Slovenia.

Assessment criteria (%)

60

50

40

30

20

10

0

1 Laedeship

2 Strategy9 Operating

results

3 Employees8 Results - company

4 Partnerships and Resources

5 Process, products and services

6 Results - clients

7 Results - emplyees

Self-assessment 2015 Self-assessment 2014 Self-assessment 2012

46

4.6.2 Risk Management

ELES considers that for efficient and effective achievement of set

business objectives while taking into consideration all the legal, ethi-

cal and moral requirements of modern society, a comprehensive

risk management system is an integral and indispensable part of an

integrated management system.

Using this system, the company ELES manages the risks that threat-

en the fulfilment of the long-term strategic, short-term business ob-

jectives and the expectations of all the stakeholders (internal and

external) involved; therefore of everyone in any way related to the

activity of the system operator of the electric power transmission

network.

We established organization, process and methodology of risk

management for this purpose. Integration of the risk management

system in the management system ensures risk management in

the entire organizational structure. Risk Management System is in-

tegrated in all the company processes, so that every ELES employee

can actively respond to the risks, recognize them, analyse and man-

age them by proposing measures for their reduction or by avoiding

them and by consistently implementing the measures.

Management Systems Council chaired by the Director of the com-

pany adopts the guidelines for the operation of the Risk Manage-

ment System, monitors its performance, approves the measures for

improvement and development of the system, adopts the frame-

work structure of the risks, the acceptable level of risks, proposes or

requires additional measures or the adoption of risks in manage-

ment, deals with products of the Risk Management System (mainly

with the risks catalogue), monitors the formation of risk manage-

ment measures and proposes updates of the structure of risks and

measures.

On the level of the organization, the responsibility for risk manage-

ment is linked to responsibility for achieving the objectives, which

means that the persons responsible for achieving the objectives also

establish and maintain the measures of risk management. Organi-

zational rule “Risk Management” specifies the roles and responsi-

bilities in relation to the risks, identification of measures, periodical

updating of structure of risks and measurement and monitoring of

progress of risk management. Risk assessment and ranking ensures

that we are dealing with the key risks, and the remaining risks are

analysed upon the updating of structure according to the status

of objectives and specific business circumstances. “Methodology

of risk management” sets out the assessment methodology, treat-

ment, monitoring and review of risks for different types of risks.

EELS classifies risks into strategic and process risks and places them

into groups according to where they arise. Therefore, the company

ELES defined 19 groups of risks in six business fields in 2015. Strate-

gic risks that have a significant impact on the objectives of the basic

activity of the system operator and on the business performance

are kept as a special group of risks in the field of the Company man-

agement. All other process/operational risks that represent the risks

of losses due to inadequate or failed internal procedures, processes,

people and systems or due to external events and are directly linked

to the business (working) processes, are sorted as per areas in the

rest of the groups of the structure of risks.

The most important risks are associated with the basic activity of

the system operator – ensuring stability and quality of electricity

transmission. These include the risks associated with a change in

the competencies of national system operators due to further devel-

opment of the European common market and the risks associated

with renewable energy sources that connect to the transmission

system and affect the stability of the system.

In 2015, there was no need to change the structure of risks. Only

the renamed group of Risks of Fraud and Illegal Acts in the group

of Corporate Integrity Risks has additional corporate integrity risks.

Risk management measures have been defined for 55% of all iden-

tified risks and their implementation reduced the exposure to risks,

so the risk exposure was reduced to the lowest possible level. The

causes of certain risks come from outside of the Company environ-

ment and we cannot influence them, but we are closely monitoring

those risks.

Below is a presentation of the main groups of risks, the methods of

their management and level of exposure to these risks.

47


Management risks Group of risks Method of management Exposure

Strategic risks Measures in the area of processes, monitoring in the hierarchy of management and verification at the annual Strategic Conference.

Moderate

Human resources risks

Introduction of different tools for effective human resource manage-ment and professional and personal development of our personnel (e.g. introduction of competence model, system of skill manage-ment, etc.).

Moderate

Public relations risks Established system of internal reporting, introduction of sustainabil-ity reporting, proactive guided communication with external public, corporate communication, crisis communication measures, digital communication.

Moderate

Corporate integrity risks

Zero tolerance to fraud and illegal acts, Company’s Code of Ethics, Rules for the Management Systems with a system for risk manage-ment, appointed an authorised representative for corporate integrity, adopted the Rules on the Management of Corporate Integrity, manufactured a detailed integrity plan, measures for management of corporate integrity in subsidiaries.

Moderate

Management systems risks

Adopted business model, set process objectives, analysed, measured and reported process objectives and ongoing updating and improve-ment of processes, monitoring of processes with assessments, auditing, implementation of corrective and preventive measures, delivering the statement on process controlling by the responsible parties.

Moderate

Assets and projects management risks

Group of risks Method of management Exposure

Regulatory risks for the sustainable development of the Company

Membership and active participation in the working and manage-ment bodies of national and international organizations and asso-ciations, procedures and rules embedded in internal regulations.

Moderate

Risks of planning, development, selection of technology and methods

Introduction of appropriate tools for the management of assets, adoption of development program, maintenance program, prepara-tion of backup scenarios.

Moderate

Project management risks

Constant improvement of project management procedures and rules through organizational rules, renovation of business informatics system, which supports the project management system.

Moderate

Analytics, diagnos-tics and assets ap-propriation risks

Ongoing improvement of methodological approaches and informa-tion support.

Moderate

Property risks Analysis of costs and effects, internal measures for efficient opera-tion, insurance with the insurance company.

Moderate

System operation risks


Operation and man-agement risks

Start of regular operation of the new management system SCADA/EMS.

Moderate

Allocation of cross-border transmission capacities

Establishment of alternative procedures in the event of failure of platforms for the allocation of CTBC.

Moderate

Project management risks

Constant improvement of project management procedures and rules through organizational rules, renovation of business informatics system, which supports the project management system.

Moderate

Ancillary services provision

Active approach to domestic providers, exchange of energy surpluses between neighbouring system operators, conclusion of agreements on ensuring mutual assistance in emergency situations.

Moderate

48

Risks of supporting activities


Financial risks Annual, monthly and daily cash flow planning, insuring as large share of receivables as possible, regular monitoring of the banks’ and business partners' credit rating, taking into consideration the principle of dispersion of funds deposited, use of instruments for management of interest rate risks.

Moderate

Procurement of goods and services risks

Adopted organizational rule "Management of Public Procurement" with specified procedures and clearly lined responsibilities.

Moderate

General risks of supporting activities

Adopted rules and procedures in the form of organizational rules (mail management, provision of services for the vehi-cle fleet, building management, etc.).

Moderate

IT and telecommuni-cations risks


IT risks in business processes

Duplication of critical systems, preventive replacement of the old hardware and software, management of the disaster recovery centre, introduction of IT operations ac-cording to ITIL recommendations, maintenance of single communication point for IT service users (reporting errors and requests), anti-virus protection, firewall, the system for recognition and prevention of intrusion, mechanisms for comprehensive system monitoring.

Moderate

Telecommunica-tions risks for system operation

Adopted a three-year strategic plan, organised a joint ser-vice centre for IT and telecommunications for maintenance management and troubleshooting process.

Moderate

Transmission network infrastructure risks


Construction of transmission network risks

Active participation in the preparation of legislation, proactive action with all the stakeholders building a network, introduc-tion of integrated project management with analytical sup-port for project management.

Moderate

Maintenance of transmission network risks

Active human resources policy, improving the system of occupational health and safety, participation of legal and communications experts, transition from time-oriented maintenance mode to the reliability-oriented maintenance.

Moderate

ELES enlists the prevention of corruption, respect for the rules of competition and other business rules among the strategic objec-tives and values of the Company.

A System of Corporate Integrity established in 2015 ensures compli-ance with these values in the daily operations and relations in the Company. The objectives we wish to achieve by this are to ensure zero tolerance to fraud, illegal and unethical acts, maximum trans-parency of operations, enforcement and respect of good business practices and current recommendations, reduction of risks of cor-ruption and promotion of business ethics.

Therefore the company ELES committed to respect and strengthen corporate integrity in their operation and spread awareness on the importance of operation in accordance with the legislation and ethical standards as one of the fundamental principles of a so-cially responsible operation in the Slovenian economy in general, also among their business partners and the companies within ELES Group. So doing the right thing is our duty as well as our legal obli-gation.

4.6.3 Corporate Integrity

49


The Internal Audit operates as an independent unit in the Compa-ny Management. Organizationally it is directly subordinated to the Director of the Company, and by function it answers to the Audit Committee of the Supervisory Board. It carries out its mission by forming objective opinions, providing assurances as to the exist-ence and functioning of internal controls – measures for manage-ment of important risks that may jeopardise the achievement of the objectives of the company, and suggests improvements. The operation of the Internal Audit is based on the fundamental charter confirmed by the Supervisory Board and on organizational rule that defines the internal auditing in the Company while taking into ac-count the international standards of professional activity. In order to achieve greater efficiency in internal auditing, it cooperates with

the Company Management and the Audit Committee of the Super-visory Board, to whom it regularly reports on its work, findings and recommendations. In accordance with the order of the Company Director, the emphasis of the Internal Audit operation in 2015 was on the implementation of the requirements of corporate integrity with the aim to establish measures to ensure consistency and ef-ficiency of operation in advance to the greatest possible extent, which strongly engaged its resources. This resulted in organizational changes in the Internal Audit at the end of 2015, with the objective that this third line of defence in the modern operation control sys-tem should again focus on its basic mission in 2016 in accordance with the professional standards.

4.6.4 Internal Audit

4.7 ELES Group

The ELES Group of companies comprises of the parent company ELES, d.o.o. (henceforth referred to as ELES) and its subsidiaries TA-LUM d.d., Kidričevo and Stelkom d.o.o..

BSP d.o.o. is presented as a jointly-controlled company, but ELES does not perform full consolidation (in consolidation the said com-pany is regarded as an affiliated company), because ELES does not have a controlling influence neither in the ownership nor in its man-agement.

SubsidiariesAffiliated company

Jointly-controlled company

Talum, d. d.,Kidričevo

(85.61 %)

Stelkom d.o.o., Trzin

(56.26 %)

BSP Regionalna Energetska

Borza, d.o.o.,Ljubljana(50 %)

JAO(5 %)

CAO SEE(10 %)

TSC NET (8.33 %)

ELDOM, d.o.o., Maribor(25 %)

Informatika d.d. (4.5 %)

CAO(12.5 %)

The Republic

of Slovenia(100 %)

Other equity investments

ELES Group

50

Parent company ELES d.o.o.

Founder and Owner The Republic of Slovenia

Ownership stake 100%

Subsidiaries

Company Talum d.d., Kidričevo

Registered Office Tovarniška cesta 10, Kidričevo

Main Business Activity Production of aluminum, aluminum alloys and aluminum products

Ownership stake 85.61%

Company Stelkom d.o.o.

Registered Office Špruha 19, Trzin

Main Business Activity Provision of electronic communication services

Ownership stake 56.26%

Jointly-controlled company

Company BSP Regionalna Energetska Borza, d.o.o.

Registered Office Dunajska cesta 156, Ljubljana

Main Business Activity Auctions and brokerage services for the Slovenian electricity market

Ownership stake 50%

Affiliated company

Company Eldom d.o.o.

Registered Office Vetrinjska ulica 2, Maribor

Main Business Activity Janitorial services and tourism facility management, cleaning services and upkeep of premises, food and catering services, tourism and reception services.

Ownership stake 25%

Significant equity connections of ELES, d.o.o., as at 31st December 2015

51

5.1 System Operation

BUSINESS ACTIVITIES OF THE COMPANY

In 2015, several important events took place in the field of opera-tion of the electric power system of Slovenia. The most important among them was the update of National Control Centre, where a new SCADA/EMS management system began operating in Sep-tember.

Solar eclipse in March was also an important incidence in the field of system operation, as it strongly affected the production of solar power plants in Slovenia as well as in the broader European area. A partial solar eclipse took place in the morning of 20 March 2015 in the broader European area. Weather conditions were favourable for production of solar energy, so the eclipse had a direct impact on the production of solar power plants. Most European transmis-sion system operators faced negative effects of the solar eclipse, but they were able to fully cope with the situation and preserve the sta-bility of the system. Upon the occurrence of the eclipse, the entire ENTSO-E system experienced a production deficit in the amount of 17 GW, and at the end of the eclipse, the power of solar energy (SE) increased by a total of 25 GW. The most visible and preventa-tive measure was carried out by the Italian TSO who cooperated with the electricity distribution system operator and turned off 5 GW of installed SE power from 8h to 14h, thus alleviating the con-sequences. TSOs in other countries mostly balanced the system by using conventional power plants and also gas turbines in reserve. The fact that the system remained stable and that the solar eclipse didn't cause any problems is certainly not to be taken for granted.

The European TSOs have prepared for this occurrence coordinately and carried out several preventive measures. Teams in control cen-tres were reinforced, forecasts were prepared with even greater care and generators were alerted about the necessity of providing re-serve supplies. The company ELES also carried out the appropriate measures and thus maintained the entire SHB block directly on the nominal 50 Hz frequency at all times, without additional actuation of tertiary reserve.

We consider the coupling of Slovenian market with electricity at Italian borders as the key achievement in the field of cross-border transmission capacity in 2015. On 24 February 2015, the Slovenian electricity market became a part of multi-regional coupling, which combines the daily markets of 19 European countries. Good results were recorded in the field of inter-system netting of current imbal-ances between Slovenia and Austria in 2015 despite the change in the methodology for calculation of ad hoc price of secondary con-trol on the Austrian side.

In October 2015, the International Auditing Commission of ENT-SO-E Network, which carries out annual assessments of compliance with standards, verified the compliance of operator training pro-cesses in the company ELES with applicable standards. As we are well aware of the importance of quality training of operators, we passed the assessment with best grades.

In 2015, the total grid input amounted to 12,985 GWh, which is 2,236 GWh less than in 2014. Input of hydro power plants was sig-nificantly lower in comparison with the previous year, when hydro-logical conditions were particularly favourable. Grid input of hydro power plants totalled 3,708 GWh, which is 2,086 GWh less than in

2014. Input of thermal power plants totalled 3,915 GWh, which is 548 GWh more than in the previous year, and input of the nuclear power plant totalled 5,362 GWh, which is 699 GWh less than in the previous year.

5.1.1 Grid input and grid offtake

52

In the last decade, the structure of grid input has slightly changed. Over the years, hydro power plant grid input has increased due to the construction of additional power plants on the lower Sava River

and favourable hydrological conditions, while the grid input of ther-mal power plants decreased significantly in the past year.

Grid input from 2006 to 2015 (in GWh)

The structure of grid input in 2015 and 2014 (in %)

Nuclear power plant * Thermal power plants ** Hydro power plants

Ener

gy in

GW

h

Note:* 100-percent share of KNPP has been considered** Generation of RES and CPTEP has been considered.

Year 2015 Year 2014

41 %

29 %

30 %

Nuclear power plant Thermal power plants Hydro power plants

Nuclear power plant Thermal power plants Hydro power plants

22 %

40 %

38 %

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

53

O5BUSINESS ACTIVITIES OF THE COMPANY

As usual, also in 2015 the largest portion of the total grid input was contributed by Krško Nuclear Power Plant, namely approximately 41 percent. KNPP is followed by thermal power plants with input of ap-proximately 30 percent and hydro power plants with approximately 29 percent of the total grid input.

In 2015, the total grid offtake without losses amounted to 12,720 GWh, of which direct consumers offtook 2,159 GWh, distribution 10,180 GWh and pumped storage hydropower plant (PSHPP) for the purpose of pumping 380 GWh. Compared to 2014, the offtake was higher by about 4 percent.

The ten-year average indicates that the amount of the grid offtake varied with no apparent downward or upward trend, and in 2015 decreased by about three percent in comparison with 2006, from 13,140 GWh to 12,720 GWh.

In 2009, the grid offtake decreased sharply compared to 2008, which can be attributed to the adverse conditions in the economy, while an upward trend was evident in 2010 and 2011. The PSHPP, which began with commercial operation in early 2010, and signifi-cantly higher offtake of direct consumers significantly contributed to the increase in offtake.

Grid Offtake from 2006 to 2015 (in GWh)

The structure of grid offtake in 2015 and 2014 (in %)

Direct consumers Distribution PSHPP (pumping)

Ener

gy in

GW

h

Year 2015 Year 2014

Direct consumers Distribution * PSHPP (pumping) and losses

Direct consumers Distribution * PSHPP (pumping) and losses

78 %

5 % 17 %

78 %

5 % 17 %

Note: Distribution*: Elektro Celje, d.d., Elektro Gorenjska, d.d., Elektro Ljubljana, d.d., Elektro Maribor, d.d., Elektro Primorska, d.d.Direct consumers: Kidričevo, Ruše, Štore, Ravne, Jesenice.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

54

In the last five years, the trend of grid offtake has not changed sig-nificantly.

Transmission network peak loads from 2006 to 2015 (in MW)

Peak load consists of maximum hourly average of loads, which oc-curs in the relevant year. In the last ten years, the value of the peak demand has not changed significantly. In the 2007–2009 period and in 2013, a negative trend of peak load was recorded, where-as a positive trend was determined in the 2010–2012 and in the 2014–2015 period.

Peak loads occur in the winter months, while the hours of peak peri-ods moved from afternoon to evening hours after 1997.

In 2015, the peak load increased by 3 percent in relation to the pre-ceding year.

5.1.2 Transmission network loads

5.1.3 Ancillary services

In 2015, two public auctions were carried out in the field of ancil-lary services for implementation of tertiary reserve in the year 2016. ELES carried out a long-term lease of the greater part of reserve for tertiary frequency control in years 2013 and 2014, namely for the 2014–2019 or 2015–2018 period. In November, the company ELES carried out an auction for the purchase of electricity by man-aging the consumption and distributed generation in the amount of 20 MW. In accordance with the rules, the full quantity from auc-tion was awarded in two tenders; the first one for 5 MW and the other one for 15 MW. The second auction was carried out in De-cember and also applied to tertiary frequency control, but for the first time the company ELES also organized an auction for negative reserve for implementation of tertiary frequency control for 2016. Both auctions were unsuccessful, since the prices quoted were above the price caps within which the company ELES was still willing to conclude the contracts. As a result of negotiations with qualified providers, the company ELES managed to conclude an agreement and allocate the entire amount tendered, namely positive tertiary reserve of 134 MW and negative tertiary reserve of 185 MW.

In 2015, ELES also revaluated the amounts in contracts for ancillary services in accordance with the provisions in contracts and regard-ing level of inflation in 2014.

5.1.4 Inter-system balancing

Good results were recorded in the field of inter-system netting of current imbalances (INC) between Slovenia and Austrian system operator APG in 2015 despite the change in the methodology for calculation of ad hoc price of secondary control on the Austrian side and a consequent reduction in financial benefits from this title. Irrespective of this, by way of applying this mechanism that takes place in real-time and exclusively in the context of free cross-border transmission capacities, ELES managed to reduce the costs of bal-ancing the Slovenia’s EPS by 4.6 million euros. These savings also had a positive influence on the electricity prices for end consumers, since the costs of electricity suppliers were thus reduced. Beside the financial benefits, the technical aspect of such a cooperation might be even more important for ELES, as on one hand, the mechanism enables the reduction in the activated secondary power reserve, so there are more reserves available in case of unexpected operational events in the electric power system. On the other hand, the control units that are leased by the system operator to provide these servic-es are less burdened by constant changes in active power, which ex-tends their existence and improves the efficiency of their operation. Through the INC mechanism ELES significantly relieved the extent of the activated secondary control in Slovenia in 2015, namely, by 23 percent in positive and 33 percent in negative direction.

2,07

5

2,06

0

1,96

3

1,91

2

1,94

0

1,95

0

2,06

8

1,94

4

1,98

8

2,05

2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

2,100

1,800

1,500

1,200

900

600

300

0

P (M

W)

Peak load

55


5.1.5 Cross-border transmission capacities

In terms of cross-border trade, the increased generation of renew-able energy resources throughout Europe still represents a major challenge. If the neighbouring system operators are faced with these issues directly, the impact on ELES and Slovenian electricity market is more indirect and is reflected in the reduction of transmis-sion paths mainly in the direction Austria-Slovenia. ELES made great efforts in 2015 to minimize this influence as much as possible by even closer cooperation with the neighbouring system operators at both the bilateral and the (inter)regional level. The results indicate that these limitations were slightly lesser in 2015 in comparison to 2014. Thus the amount of NTC in the Austria-Slovenia direction in-creased by 78 MW and on average amounted to 763 MW, which is approximately 80 percent of the theoretically planned value. Better conditions were also detected in the Slovenia-Italy direction, where the average increase in NTC in comparison to 2014 was 44 MW and amounted to 532 MW. The most significant increase in NTC has been achieved in cooperation with the Croatian system opera-tor HOPS. Thus, the NTC values increased by 231 MW to 1,465 MW in the Croatia-Slovenia direction and by 76 MW to 1,465 MW in the Slovenia-Croatia direction.

We consider the coupling of Slovenian market with electricity at Ital-ian borders with MRC (Multi-regional coupling) as the key achieve-

ment in the field of cross-border transmission capacity in 2015. MRC uses a uniform solution for calculation of prices on the daily market - the so-called PRC (Price Coupling of Regions). This solution was recognized by the European Commission as a target solution for allocation of day-ahead cross-border transmission capacity. On 24 February 2015, the Slovenian electricity market became a part of the MRC, which combines the daily markets of Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Great Britain, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland (via connection SwePol), Portugal, Slovenia, Spain and Sweden. Daily electricity markets in the context of MRC thus combine 19 countries with a total annual consumption of 2,800 TWh. The daily amount of electricity that is traded between these countries amounts to 4 TWh in average daily value of 150 million euros.

In practice, this allows simultaneous calculation of day-ahead electricity prices and commercial cross-border flows for all those markets. This is a direct benefit for final consumers, since a better coordination between electricity markets enables a more efficient use of the transmission network and in particular of cross-border connections between countries, which is of significant importance in times of major operational uncertainties and pressures to limit the cross-border trade.

The figure below shows the outline of financial benefits and volume of system balancing as per week in 2015, which were achieved by applying the INC mechanism and secondary control. As we can see, the INC mechanism largely complemented the system balancing through the activation of secondary control, which proved to be more distinctive in the negative direction due to long positions of balancing groups for the most part of the year. At the same time

the transmission capacities for exports from Slovenia to Austria were rarely occupied in those moments. The scope of financial ben-efit, which assesses the value of savings at the cost of activation of secondary control of domestic providers, coincided with energy prices on the market and was higher in the first half of the year, while in the second half of the year it fluctuated around a relatively constant value.

2015

Quantities/ GWh Surplus / in thousand €

8

6

4

2

0

- 2

- 4

- 6

- 8

400

350

300

250

200

150

100

50

01 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53

SR - Qunatities (MWh) INC - Exchange (MW) Surplus

56

5.2 Transmission Network Maintenance

Next to planning and construction, one of the main activities of the company ELES is also regular maintenance of the existing electric power transmission network. The maintenance comprises 2,859 kilometres of transmission lines (out of which 16.2 kilometres are cable lines) and 35 substations with pertaining transformers and other high voltage transmission devices. Maintenance is carried out in operational centres for transmission network infrastructure in Maribor, Podlog, Ljubljana and Divača. Eliminating the consequenc-es of extraordinary events such as defects and natural disasters is also carried out in the context of maintenance.

In 2015, all the maintenance work possible in relation to the elec-tricity situation was carried out. Corrective maintenance was carried out mainly due to identified deficiencies. To this end, we:

• replaced the 110 kV instrument transformers;

• repaired the damaged console on pylon location (PL) 8 on 110 kV Trbovlje–Beričevo transmission line;

• repaired the protective conductor on PL 44 on 220 kV Beričevo–Podlog transmission line;

• repaired the optical ground wire cable (OPGW) on the 110 kV Slovenj Gradec–Velenje transmission line and the 400 kV Mari-bor–Krško transmission line;

• erected two prefabricated pylons for the duration of repairs of damage caused by hurricane-force bora that tore down transmis-sion line pylons on the 110 kV Gorica–Ajdovščina transmission line.

In addition to the routine and extraordinary maintenance, several electrical installation works within the framework of reconstructions and new constructions were carried out, such as:

• regulation of outdoor lighting on switchyards;

• repair of cooling cabinets and replacement of isolating switches 10,5 kV on tertiary transformer (TR) at Podlog substation;

• renovation of remote control system on Cirkovce substation;

• electrical installation works on transformer (TR) T 412 after repairs at Okroglo substation;

• adjustment of prescribed distances to earthed parts on 110 kV Laško–Trbovlje transmission line and 110 kV Trbovlje-–Hrastnik transmission line;

• replacement of conductors of suspension equipment and insula-tion on 110 kV Brestanica–Krško KNPP transmission line.

5.2.1 Takeover of 110 kV network

In accordance with Article 512 of the Energy Act (Official Gazette of the Republic of Slovenia, No. 17/14, 81/15 EA-1) and on the ba-sis of the Decree on the Division of the 110 Kv Network into the Distribution and Transmission Systems (Official Gazette of the Re-public of Slovenia, No. 35/2015), the companies that own the 110 kV transmission network are obliged to contractually transfer the property and other obligation rights or rights in rem on the network determined in the Decree from paragraph 4 of Article 35 of this Act to ELES in return for repayment within three years after this Act be-comes effective.

For more efficient takeover of the said network, the management of ELES appointed a project team on 20 May 2014 for implemen-tation of Article 35 of the EA-1 on 110 kV network. By the end of 2015, the project team concluded the preparation of technical re-ports and harmonized the methods of takeover for 80 percent of facilities, prepared 50 percent of valuation reports and acquired sample evaluations for individual types of takeover items. For this purpose, 136 meetings were held in all the companies and at ELES, where 1,144 people attended, including 545 attendants from ELES.

In the regulatory area, the Company management strived to in-crease the eligible costs of maintenance and operation, which will incur to ELES as a result of the increased network due to the takeo-ver of 110 kV network. The increase in recognized costs was taken into consideration in the new Network Charge Act adopted in 2015 and by fixing the norm for maintenance costs of the 110 kV network taken over, which was established by the Energy Agency on the ba-sis of the proposals of ELES and SODO.

Harmonized calculation of day-ahead cross-border transmission capacities at the Northern Italian borders

In 2012, the system operators of the northern Italian border (APG, ELES, RTE, Swissgrid and TERNA) launched a joint project for prepa-ration of procedure for a harmonized calculation of day-ahead cross-border transmission capacities at the northern borders of Italy (FR-IT, CH-IT, AT-IT, SI-IT), which is in line with the EU guidelines on capacity allocation and management of congestion in the electric power system.

The objective of this project is the implementation of coordinated calculation of NTC at the northern Italian borders on network mod-els for two days ahead (D-2CF), which are based on the most recent information available from the electric power system in order to op-timize the cross-border transmission capacity on the daily market. In 2015, we brought the project to the stage where the new meth-od of NTC calculation is being tested with the participants in the market. In comparison with the annual process of calculation, the expected benefits of the established calculation of NTC in D-1 are better assessment of system reliability and optimized cross-border transmission capacity. The transition from test to normal operation under the new method of calculation is scheduled for the first quar-ter of 2016.

57


5.3 Research and Development

ELES developed a methodology for multi-scenario processing of scenarios or network statuses for the purpose of preparing the next plan for the development of the transmission system of the Republic of Slovenia and preparing the development analyses. In the future, this methodology will enable to define and quantify the necessary strengthening of the transmission network in the Republic of Slove-nia. Full application of functionality of the tool is planned in 2016, along with the planned upgrade of the tool with implementation of so-called market analyses of the energy system that will largely rely on similar calculations carried out within the framework of ENTSO-E.

In 2015, the company ELES also actively participated in the prepa-ration of future network models for preparation of new develop-ment plan ENTSO-E 2016 which will be issued in the autumn of 2016. The experts at ELES also participated in the preparation of two important documents of the working group Asset Implementa-tion Management (AIM) in the context of ENTSO-E:

• Strategic Asset Management Tools for TSOs and

• ENTSO-E Asset Management Roadmap 2016–2018.

These two documents give an overview of the situation in the field of strategic tools of the European TSOs and outline the direction and scope of work in the field of development of asset manage-ment at the ENTSO-E.

The focus of research work in new approaches to asset manage-ment at the company ELES is described in the Business Strategy of the Asset and Project Management Department for the period 2016–2020, which was elaborated in 2015 for the purpose of di-recting the work, determination of strategic issues and strategic ob-jectives of development of management and projects, which is also integrated in the Strategic Business Plan of the company. Develop-ment is focused on the following areas or strategic themes:

• introduction of own assets model, fund operator, service providers;

• management of assets during their existence while taking the risks into account;

• management of support tools;

• development of competences in the field of asset management.

5.3.1 Projects of common interest

Projects of common interest (PCI) are the energy infrastructure projects of European interest, which in addition to the great im-portance from the standpoint of the national economy represent the key projects for the development of European energy network, establishment of the internal electricity market and pursuit of the objectives of European energy policy. The European Commission amends the list of PCI every two years. The new list of PCI was con-firmed by the European Commission on 3 November 2015 and it also includes five projects of the company ELES:

• 2x400 kV Cirkovce–Pince transmission line,

• transition from 220 kV to 400 kV at Beričevo–Divača transmission line,

• transition from 220 kV to 400 kV at Beričevo–Podlog transmission line,

• transition from 220 kV to 400 kV at Podlog–Cirkovce transmission line, and

• one-way Slovenia–Italy connection.

The first priority is the construction of Cirkovce–Pince transmission line, while other projects are in the study phase. A proposal of the project from the field of smart grid (SINCRO.GRID) was also includ-ed in the list of projects of common interest in 2015.

On 18 November 2015, the Commission adopted a new delegated Regulation on the Introduction of the Second List of PCI projects, which amends the Regulation (EU) No. 347/2013. All the projects that were approved by the European Commission and inserted in the PCI list are eligible for EU financial assistance in the form of grants for studies, works and development of smart grids and are available to the proposers of projects of common interest as a part of the Connecting Europe Facility (CEF). The instrument allows for the preparation and implementation of projects of common inter-est within the trans-European energy networks policy. This instru-ment provides financing to the projects aimed at establishing the missing connections in Europe’s energy networks, which shall con-tribute to the completion of the EU single market. The objective is the provision of cost-effective and timely implementation of priority

The management of the company also actively sought to reduce the regulatory risk resulting from non-harmonized purchase price of 110 kV network and regulatory recognized value of takeover. To this end, the company ELES submitted several appeals to the Min-istry of Infrastructure to take care of the necessary harmonisation of legislation in that field, because it increases the operating risk of the company ELES. The management also examined the risks that could arise due to possible delays in compliance with legal time lim-

its of the takeover timeline.

By 1 January 2016, 110 kV transmission equipment for transmis-sion lines, coupling and measuring bays was taken over in: TTPP (in 2014) and in Avče PSHPP, Vrhovo HPP, Boštanj HPP, Arto–Blanca HPP and 2 x 110 kV Avče–Nova Gorica transmission line 1, 2, 110 kV Avče–Doblar transmission line and 110 kV Avče–Tolmin trans-mission line.

58

energy networks, increasing the security and reliability of supply, in-creasing the market integration, ensuring greater competition and flexibility of the system and facilitating the transmission of energy from renewable resources to warehouses and consumers.

Within the CFE programme, ELES cooperates with the project of common interest “One-way Slovenia-Italy connection”, namely with a study titled “Examining and validating the optimal technologies for SI-IT underwater and ground HVDC cableline”. The project of the new inter-state one-way connection between the Republic of Slovenia and Italy is expected to increase transmission capacities between the two countries and also enable a higher integration of both the electricity market between Italy and Slovenia as well as the wider region. The project shall contribute to the elimination of re-strictions on the Slovenian-Italian border and an increase in the reli-ability and safety of electricity supply in both countries. An increase in energy transmission across the Slovenian transmission network is also expected.

5.3.2 Studies in 2015

In 2015, ELES carried out numerous activities in the field of opera-tion of the electric power transmission system and its expansion. A total of 21 studies were commissioned to resolve the pressing prob-lems of development and operation of the individual areas and the system as a whole.

The Asset and Project Management Department directed the stud-ies towards the production of methodology for evaluation of eco-nomic benefits of investments and reconstructions, development of a solution for optimization of electric power system design process, which will enable easier processing and decision-making when deal-ing with a number of scenarios in network planning, and introduc-tion of status index in asset and project management at ELES. The methodology developed for the classification of investments ac-cording to business factors and taking into consideration the risks was used for the preparation of the investment plan that was sub-mitted to the Energy Agency.

We obtained the results of a comparative study of system opera-tors ITAMS (International Transmission Asset Management Study), which compares the process of asset management and economic and technical efficiency. Contact with the best in the industry ena-bles ELES to transfer best practices from the world into the Company and to develop new approaches. Results were used in the develop-ment of the strategy.

The focus of studies in the field of infrastructure of the transmission network was to justify the solutions for own power supply on substa-tion 110/xx from voltage measuring transformers. System operation department commissioned the largest number of studies, mostly for the needs of SUMO, WAMPAC and SINCRO.GRID projects. In addition, in 2015 we commissioned further studies on foreign influ-ence modelling for appropriate determination of maximum power flows, study on analysis of operation in TALUM and a study on the protection of transmission network in case of high-ohmic defects. We also commissioned an analysis of surge transfer from 110 kV voltage level to lower voltage levels (low and medium voltage), and an application study on the implementation of INC with HOPS and development of tools for monitoring the operation of INC.

5.3.3 International projects

In 2015, ELES launched a project of common interest “One-way Slovenia-Italy connection” within the Connecting Europe Facility. For this purpose, the European Commission granted ELES 200,000 euros of non-refundable funds.

On 1 May 2015, ELES began working on the BioEnergyTrain Project, where ELES participates as a member of the consortium of interna-tional partners within the EU program for research and development, Horizon 2020. The European Commission granted ELES 110,000 eu-ros of non-refundable funds for the implementation of this project.

In 2015, ELES with partners successfully applied for EU funding with-in the Horizon 2020 Program with two more four-year-long research projects – FutureFlow and Migrate projects. The aim of the Future-Flow Project, which brings together 12 partners from eight European countries and is coordinated by ELES, is planning and pilot testing ad-vanced technical-economic models for open and competitive cross-border exchange of secondary reserve, with simultaneous inclusion of consumers of electric energy in provision of this service by setting up a so-called regional platform. ELES shall receive 1.87 million euros for the implementation of the FutureFlow Project the total value of which is slightly less than 13 million euros.

The Migrate Project, in which ELES participates as a project partner in the 24-member international consortium, is seeking innovative solu-tions and answers to the questions related to new concepts of op-eration, protection and ensuring the quality of electricity in changed conditions of supply of the trans-European transmission system. ELES shall receive 294,000 euros for the implementation of Migrate Project.

Project BioEnergyTrain

Project FutureFlow

Project Migrate

Projects are funded under the Horizon 2020 Programme

59


5.4 Investments

The basis for development of the electric power transmission network of the Republic of Slovenia is the Transmission System Development Plan produced for a ten-year period. In 2014, ELES prepared the Development Plan of Transmission System of the Re-public of Slovenia for the 2015–2024 period, which was approved by the Ministry of Infrastructure in September 2015. The document comprises an overview of the current status and the necessary in-terventions in the transmission network of the Republic of Slovenia. The necessary operations are determined according to projected construction of generation units, growth in electricity demand, ex-pansion of distribution network and projection of development of the electric power system. Their implementation will ensure reliable operation of the Slovenia’s EPS and the wider region and ensure that the users will be guaranteed a reliable and quality supply of electricity.

Since ELES is the transmission system operator and must thus dem-onstrate the cost-effectiveness and transparency of its operations, the Development Plan is prepared on the basis of the policy of ef-ficient assets management, which we adopted and implemented in 2013. The principles of efficient assets management pursuant to ISO 55000 and British Standard PAS 55 were integrated into ISO 9001 quality system.

In 2015, ELES appropriated 37.3 million euros for investments,

which is 53 percent less than planned. The reasons behind the de-viations in realisation from the 2015 Annual Plan were primarily of statutory nature, while other disadvantages were also the lengthy coordination procedures with local communities and inconsisten-cies in the land register. The largest deviations occurred in the im-plementation of takeover of 110 kV network, as the takeover was 16.3 million euros lower than planned due to the adoption of the Decree on the Division of the 110 Kv Network into the Distribution and Transmission Systems. In the plan for 2016–2018 it is foreseen that the takeover in the total value of 67.2 million euros will be completed in 2017. The realisation of the take-over in 2014–2015 amounted to 13.6 million euros. The realisation was also lower at the 2x400 kV Cirkovce–Pince transmission line because of difficul-ties in acquisition of the right to build and environmental approval (2.1 million euros), at the technological building in Beričevo due to the lengthy procedure of the public procurement and the audit (2.1 million euros), at the smart networks mainly due to delays and prob-lems in the implementation of the public procurement (2.5 million euros), at the upgrade of IP MPLS network because of the change in the concept of public procurement (3.5 million euros) and at other small investments in the transmission network.

ELES appropriated 24.4 million euros for new investments, 11.3 million euros for the renovations or reconstructions and 1.6 mil-lion euros for minor investments.

Investments as per groups

Investments and reconstructions 2014 2015Annual

Plan 2015Index

r15/r14Index

r15/AP15Annual

Plan 2016

in million euros 1 2 3 4(2/1) 5(2/3)

1. Transmission lines400 kV DV220 kV DV110 kV DV

21.48.70.2

12.5

9.43.20.16.0

14.75.00.69.1

44376348

64652267

10.32.40.57.4

2. Substations400/x kV220/x kV110/x kV

6.83.20.03.5

18.12.70.0

15.4

38.63.10.0

35.5

26684

433

4788

43

63.43.70.0

59.7

3. Major operational investments 1.5 3.4 7.0 227 49 6.1

4. Secondary equipment 3.0 1.1 2.8 37 39 0.6

5. Telecommunications 1.6 1.6 8.0 100 20 4.4

6. Computer equipment 0.8 1.9 4.0 238 48 4.2

7. Business buildings 0.2 0.3 2.5 179 13 7.0

8. Development of new technologies 0.7 0.2 0.5 31 46 1.4

9. Minor investments 1.9 1.2 2.2 63 54 1.9

10. TOTAL 37.9 37.3 80.2 98 47 99.2

60

5.4.1 Investments in the construction of transmission lines

In 2015, ELES carried out six projects for construction of new lines and upgrades in existing lines. We also eliminated the consequenc-es of natural disaster on the 2x110 kV Gorica–Ajdovščina transmis-sion line.

• 2x400 kV Beričevo–Krško transmission line: In 2015, we re-paired the corrosion protection and settled outstanding issues regarding ownership. The project was fully completed with the activation of the remaining assets.

• 2x400 kV Cirkovce–Pince transmission line: We prepared a re-newal of the Environmental Impact Assessment from the point of view of EMS. We acquired the right to build on 83 percent of agri-cultural and wooded land and on 67 percent of construction land.

• Transition from 220 kV to 400 kV Beričevo–Divača trans-mission line: On the basis of civil society initiatives and spatial planning authorities’ initiatives, we discussed and optimized 14 sections with a total length of 50 km for both variants. We also completed the entire documentation for the unveiling of the study of variants, which takes the optimizations into account. The environmental report was submitted for review to the spatial plan-ning authorities, who asked for changes and supplements to the documentation. We presented the northern and southern variant to civil society initiatives, members of the parliament, representa-tives of municipalities and other stakeholders. Several regulations further restricting the implementation of spatial planning were

adopted, which requires additional modifications to documenta-tion.

• 2x110 kV Dravograd–Ravne transmission line: In 2015, we prepared design documents and all the necessary documentation for a public contract for works and supply of equipment. We have obtained all easements and thus satisfied the conditions for carry-ing out the works in accordance with the regulations.

• 2x110 kV Maribor–Cirkovce transmission line: We prepared project documents and carried out a public procurement for works and supply of steel structures. Public procurement for the supply of equipment is currently being prepared.

• 2x110 kV Brestanica–Hudo transmission line: The activities within this project are divided into two sections. National Spatial Plan for one section of the transmission line was approved, so we applied for a building permit for this section, and we are also ac-quiring the rights to build. We are currently acquiring the right to build for the second section where we will carry out the reconstruc-tion of TN on the same route.

• Elimination of consequences of the natural disaster on 2x110 kV Gorica–Ajdovščina transmission line: In February 2015, an extremely strong bora caused the collapse of two pylons and damaged a third one. The consequences were repaired by erecting three new pylons and the transmission line teams of the company ELES also carried out all the electrical installation works. During the repairs, a by-pass connection was established on the route with prefabricated pylons.

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5.4.2 Investments in substations

In 2015, ELES continued with works on the Okroglo substation and started the works for modernisation and upgrading of seven substa-tions in Slovenia.

• 400/110–220/110 kV Cirkovce substation with transmission line unravelling: ELES obtained all the easement rights for the project of construction of the 2x400 kV Cirkovce–Pince substation and also took care of 99 percent of purchases for the needs of the switchyard. We are concluding the acquisition of the right to build. We prepared all the documentation for the building permit and in August we re-applied for the environmental approval.

• 400/110 kV Okroglo substation: We carried out a comprehen-sive energy rehabilitation of command and working building with replacement of windows, renovation of the façade and complete renovation of electrical and mechanical installations in the build-ing. The renovation extended the service life of the building and reduced the costs of heating and cooling.

• Divača substation - completion of 400/110 kV transfor-mation and reconstruction of 110 kV switchyard: In Divača substation, the switchyard is being completed and reconstructed. Within the completion, a 400/110 kV 300 MVA transformer shall be installed. The contract for the supply of the said transformer was already signed. Within the installation of the transformer, we will also build a new 400 kV and 110 kV bay and a 110 kV cable system. Within the reconstruction, we will replace the high voltage equipment in the 110 kV switchyard, fully renovate the secondary equipment in 400, 220 and 110 kV switchyards and renovate own power supply system (35 kV switchyard).

• 110/20 kV Hudo substation: In 2015, most of the required high-voltage equipment was supplied to us. We carried out all the tenders for works and for the purchase of the necessary equip-ment and the public procurement for construction works is in the final phase.

• 110/20 kV Plave substation: For Plave substation, we carried out public procurements for the supply and installation of GIS com-ponents and 110 kV cable system, for the construction works, for own supply and for secondary systems. Signing of contracts for construction works and supply of secondary systems is in progress, and an annex for preparation of design and investment docu-mentation was already concluded.

• 110/20 kV Pekre substation: In 2015, we prepared the project documentation for supply of equipment and implementation of

works. Public procurements are currently being held for the imple-mentation of construction works and craft works and supply of steel constructions, supply and installation of GIS switchyard, 110 kV cable system, secondary equipment and electrical installation works.

• 110/20 kV Slovenska Bistrica substation: We carried out a public procurement for supply and installation of GIS switchyard and 110 kV cable system. A repeated procurement procedure for construction works and craft works is currently in progress. We filed an application for the building permit.

• 110/20 kV Podvelka substation: We completed the construc-tion of looping of the existing 110+20 kV Vuhred–Ožbalt trans-mission line through 110 kV cable at Podvelka substation. After successful professional and technical inspections, the facility was completed and put into service for implementation of startup and functional testing until the acquisition of operating license.

5.4.3 Investments in the field of system op-eration

The most important investment in the field of system operation that was closed in 2015 was the purchase of the new management system SCADA/EMS, which represents the core management centre together with regional centres in Beričevo, Nova Gorica and Mari-bor. The new system used for management of operation of the elec-tric power system in Republic of Slovenia is a new tool in the hands of ELES’operators, which enables a better control over the home network as well as the neighbouring networks and the use of more precise data. It also enables the use of several management func-tions, including the exchange of ancillary services with neighbouring operators, preparation of prognoses, automatic voltage regulation etc. Next to the above stated qualities, the new system also has all the necessary elements for smart grids support, i.e. monitoring and control of conventional and dispersed renewable resources, energy storage and big and small consumers adapted for smart grids. It enables the capture and processing of all the data necessary for the full implementation of the processes of the system operator in the field of smart grids and has all the necessary tools for storage, processing, analysis and advanced visualisation of processes and applications.

In addition to remote monitoring and control of energy facilities of the transmission network, the system currently also enables imple-mentation of secondary control, support for cross-border coopera-

62

tion in the field of secondary control, implementation of reliability analyses on the current network status and also on the planned network status, advanced regulation of phase-shifting transformer in Divača, forecasting of network loads with the use of advanced algorithms and samples from the past and regulation of voltage profile of the network and optimization of losses in the network. In the future, we plan for this system to also support the processes for the implementation of tertiary control, the processes for discharg-ing the network on the load side and the required functionalities for the purposes of cross-border cooperation in projects from the field of smart grids.

After a bit more than two months of trial, the new SCADA/EMS sys-tem is fully functional since September 2015. It will make it easier for the company ELES to manage all the processes and activities that the ENTSO-E Network expects from its members.

5.4.4 Investments in the field of information technology and telecommunications

In the field of information technology and telecommunications, we introduced a new business information system ERP “Microsoft Dynamics AX” in 2015. The system was successfully integrated with the asset and process management system, the measure-ment and protection processes support system and the system for management of working time and access. The project for integra-tion of the asset and operational processes management system “IBM Maximo” into a single platform was also extremely important. The platform combines the processes of asset management of the transmission network, their maintenance and assets and processes of ITC. Both systems, “Microsoft Dynamics AX” and “IBM Maximo” are also integrated with each other and constitute the information basis for all the integrations and the basis for operation of all the other systems in the company.

In 2015, we completed an investment in the technological data centre in Kleče, because we estimated that due to the growing im-portance of ICT services in operation and also in the operation of EPS, it is necessary to ensure a suitable technological area for ICT services, which will ensure sufficient availability and appropriate en-vironment for the operation of the ITC assets and services.

In parallel with the implementation of the most important pro-jects at the level of information services and infrastructure, we also carried out other investments and projects that have a significant impact on the stable and high-quality operation of the primary IT services:

• unification of all databases to a single platform, by which we opti-mized the operation and management of databases and reduced the operating costs;

• update of the platform for virtualization of IT infrastructure and disk system;

• upgrade of backend systems for communication, provision of se-curity and management of IT environment;

• introduction of the integrated “EMFIP” system for informing, com-munication and reporting on the ENTSO-E platform;

• upgrade of portable telecommunication system to SDH-NG tech-nology (synchronous digital hierarchy - next generation).

In 2015, we carried out several substantive workshops where we set out the scope and the needs for introduction and upgrading of new ICT services, DWDM network (Dense Wavelength Division Mul-tiplexing) and IP/MPLS network (IP Multiprotocol Label Switching), which the company ELES will need in the future mostly in order to ensure the necessary telecommunications services and capacities to support the projects introducing the services of “smart grids”. The introduction and the upgrading of new networks and technologies will start in 2016.

63

With technical expertise and state-of-the-art technology we regulate the electricity needs throughout Slovenia and beyond its borders, joining in a common electricity ring with our neighbouring countries.

64

Photograph by: Marin Mešter

65

6.1 Financial Performance Analysis

Key achievements from ELES’ operations (in million euros)

2012 2013 2014 2015 AP2015

AP2016

Net sales revenues 136.7 135.2 136.9 148.7 149.1 163.0

Operating profit - EBIT 9.2 8.2 7.7 11.8 20.2 17.2

Financial result -4.2 -1.2 -0.8 -1.6 -3.0 -2.4

Net profit or loss for the period 5.1 8.4 8.7 10.0 17.3 16.8

PERFORMANCE ANALYSIS

2015 was a difficult year because it was marked by the transition to the new IT system. Performance analysis and financial state-ments comprise the value data for the company ELES. They have been compiled in accordance with Article 120 of the EA-1, therefore the surplus of revenue over eligible costs is deferred in the accrued

costs and deferred revenue. In accordance with the EU legislation, the deferred revenue from the cross-border transmission capacities will be taken into account in the calculation of future prices/tariffs for the use of network in the following years and/or for the purposes of investing in cross-border transmission capacities.

Financial Statements for the year 2014 are corrected in accordance with the notice of the Energy Agency for 2014 regarding the dis-crepancies from the regulatory framework for the year 2014 in the amount of 2,539 thousand euros. Reduction in the company rev-enue for the above stated sum reduces the result of the company for the year 2014 from 11,229.3 thousand euros to 8,690.3 thou-sand euros in the balance sheet, and as at 31 December 2014, we recorded a reduction in equity and an increase in long-term accrued costs and deferred revenue.

Total revenues and expenses of the Company

In 2015, ELES recorded 153.5 million euros of total revenues, of which 99.5 percent arose from operating revenues. Total revenues were 6 percent higher than the previous year and one percent lower than planned. Financial revenues arose primarily from interests on deposits and loans, dividends and value adjustments on invest-ments, while other revenues mostly arose from the compensation received for property insurance.

66

Total expenses in 2015 amounted to 143.3 million euros. The op-erating expenses accounted for 98.4 percent in the structure of to-tal expenses, while the financial expenses accounted only for 1.6 percent. Financial expenses were primarily incurred in connection with the long-term EIB loan and interests from average balance of surplus.

Net profit or loss

Profit or loss before taxes as the difference between total revenues and total expenses amounted to 10.2 million euros, and after de-ferred taxes the net profit or loss of the company amounted to 10.0 million euros, which is 15 percent higher than last year, or higher by 1.3 million euros.

Structure of total revenues and expenses in 2015 and in 2014

Total revenue structure

Year 2015

Total expenses structure

Year 2015

Total revenues and expenses and net profit or loss(in million euros)

67

Operating revenues Financial revenues Other revenues

Operating expenses Financial expenses Other expenses

2014 2015

8.7 10.0

Total expenses Total revenues Net profit or loss for the period

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

99.5 %

0.4 %

0.1 %

98.4 %

0.0 %

1.6 %

O6 PERFORMANCE ANALYSIS

If the deferrals pursuant to Article 102 of the EA-1 would not be taken into consideration, the total revenues achieved would amount

The majority of ELES’ operating revenues recorded (96.1 percent) arose from the use of transmission network or operations with elec-tricity. Other revenues were obtained from the sale of services, pri-marily from the sale of telecommunications services.

The net profit for 2015 was 42 percent lower than planned due to increase in deferred revenue from cross-border transmission capaci-ties. Planned deferred revenue was lower because higher eligible operating and maintenance costs were planned in accordance with the methodology of their determination depending on the extent of the network. Such methodology applied to the system operator of the gas pipeline network and is also applicable to ELES in the pe-riod from 2016 to 2018.

The net profit for 2014 is lower in this annual report in comparison to the annual report from 2014 due to revision of regulatory frame-work for 2014 in the amount of 2.5 million euros.

In 2015, 16.6 million euros of revenues from CBTC were deferred and recorded on long-term accrued costs and deferred revenues in accordance with Article 102 of the EA-1.

Structure of operating revenues and expenses in 2015

Total revenue structureYear 2015

Total revenues and expenses and net profit or loss without applying Article 120 of the EA-1

(in million euros)

Operating revenues and expenses (in million euros) and operating efficiency (in %)

Total expenses structureYear 2015

to 168.8 million euros. Taking into consideration all revenues from CBTC, the net profit in 2015 would amount to 23.2 million euros and would thus be 31 percent lower than in the preceding year.

Revenues and expenses from company operations

Operating efficiency ratio as the ratio of operating revenues and expenses was 108.4 percent in 2015, meaning that we exceeded the last year’s result by 2.6 percentage points. Higher operating ef-ficiency ratio is the result of the higher revenue in 2015 (impact of smaller deferred revenues from cross-border transmission capaci-ties), which increased more than the operating expenses in 2015 (in particular the impact of higher expenses of ancillary services).

68

Revenues from the use of transmission network Capitalised own services Other operating revenues Sale oof ELES' services

Expenses from the use of transmission network Costs of operation and maintenance with depreciation/amortisation Other operating expenses

Total revenues Total expenses Net profit or loss for the period

200.0180.0160.0140.0120.0100.0

80.060.040.020.0

0.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

2014 2015

33.6

23.2

2014 2015

105.8 %

108.4 %

Operating revenues Operating expenses Operating efficiency

180.0160.0140.0120.0100.0

80.060.040.020.0

0.0

110.0%

108.0%

106.0%

104.0%

102.0%

100.0%

96.1 %

1.3 %

1.2 %

1.3 %

50.4 %

0.7 %

48.9 %

In the structure of the operating expenses, the expenses arising from the use of the transmission network accounted for 50.4 per-cent, while the operation and maintenance costs including depre-ciation/amortisation accounted for the other half. The aforemen-tioned together with other operating expenses were recorded in the amount of 69.9 million euros, of which the costs of material, services and other operating expenses totalled 13.4 million euros, the depreciation/amortisation costs amounted to 29.3 million eu-ros, and the labour costs to 27.2 million euros.

Revenues and expenses from the use of the transmis-sion network

As the system operator of the transmission network, the company ELES provides a secure, reliable and smooth transmission of elec-tricity and maintains the balance between the consumed and pro-duced electricity. ELES generates the majority of its operating rev-enues from network charge for the transmission network and from the cross-border transmission capacities (CBTC). The revenues aris-ing from the network charge may be used to cover costs of purchas-

ing electricity to cover losses in the network and to cover operation and maintenance costs, which also include a regulated return. The costs of ancillary services and system balancing costs are offset and are covered in the incurred amount from the revenues arising from ancillary services and revenues from balancing the system.

The revenues from the use of the transmission network were recorded in the amount of 146.7 million euros. They increased by 9 percent in comparison with the preceding year and were also at the planned level. In comparison with last year, we recorded higher revenues from balancing the system and higher revenues from al-located right to use CBTC.

The expenses arising from the use of the transmission net-work in the amount of 71.0 million euros were 12 percent higher than the preceding year and also 9 percent higher than planned.

In 2015, the generated difference between the revenues and ex-penses from the use of the transmission network amounted to 75.7 million euros.

Structure of revenues from the use of transmission network in 2015 and 2014 as per type (in %)

Structure of expenses from the use of transmission network in 2015 and 2014 as per type (in %)

We receive revenues from the network charge for the trans-mission network based on the transmitted volume of electricity from direct consumers (steelworks) and end consumers (from SODO or electricity distributors). In 2015, these revenues were 2 percent lower than last year, due to reduction of tariffs and despite greater consumption. In 2015, the offtake of electricity of distribution com-panies and direct consumers increased and amounted to 12,795.0 GWh, which was 3 percent or 383.5 GWh more than in 2014.

In addition to covering the costs of operation and maintenance, the revenues from the network charge for the transmission network are appropriated to cover the costs of purchasing electricity to cover losses. In 2015, the latter amounted to 16.1 million euros, which was 9 percent more than in the preceding year. Losses in the transmission network depend on the technical parameters of sys-tem elements (impedance of transmission lines, losses in the wind-ings and core transformers) and on the load of the system and the state of the environment in which the transmission line is placed.

69

Network charge for the transmission network Ancillary services and reactive energy Revenues from the ITC transit Revenues from balancing the system Revenues from allocated CBTC (auctions) Other revenues

39 %

24 %

4 %

11 %

20 %

2 %

44 %

26 %

3 %

11 %

14 %2 %

Year2014

Year 2015

Costs of ancillary services Costs of purchase of electricity to cover losses Costs of balancing the system Costs of CBTC allocation Other costs

51 %

Year2014

23 %

23 %

1 %2 %

51 %23 %

21 %

3 % 2 %Year 2015


The costs of lease of ancillary services are fixed costs charged by the providers in accordance with the concluded contracts. In 2015, they amounted to 36.2 million euros and were 11 percent higher than the preceding year. They are covered with the revenues from the network charge for ancillary services. In the regulatory field these services are necessary for the normal functioning of the elec-tric power system, namely for the frequency control, voltage control, maintenance of balance between the generation and consump-tion, system management, setting up the system after an outage, discharging congested lines, providing power to cover losses and start-up of the selected aggregates with no external power supply.

The revenues from the ITC compensation are set forth with the ITC mechanism on the basis of an agreement between Euro-pean transmission system operators. They are designed to cover the costs of the transmission network caused by external causes (“wild” flows). In 2015, they were 23 percent higher than in 2014 and 47 percent higher than planned.

Revenues are equal to the costs of balancing the system and amounted to 15.2 million euros in 2015, which is 6 percent higher

Revenues from the use of transmission network structure as per type (in million euros)

than in the preceding year. Pursuant to the legislation (the Energy Act), ELES is obliged to balance the Slovenia’s electric power system in the event of imbalance between consumption and generation of electricity in Slovenia and in the event of unforeseen events such as outages. The company purchases electricity and at the same time sells the surplus of balancing energy, and the market operator re-pays the difference between revenues and expenses from balanc-ing energy to the system operator.

Revenues from the cross-border transmission capacities are revenues generated by allocating CBTC at annual, monthly, daily and intraday auctions. They account for a large portion of operat-ing revenues of the company. Revenues from the interventions in cross-border exchanges of electricity amounted to 45.7 million eu-ros in 2015. Pursuant to Article 120 of the EA-1, 16.6 million euros of these revenues were deferred to cover the future expenses and to be taken into account in the calculation of future prices/tariffs for the use of network. 29.1 million euros of these revenues were recorded in financial statements of the current accounting period.

70

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

Network charge for the transmission

network

Ancillary services and reactive energy

Revenues from the ITC transit

Revenues from balancing the system

Revenues from allocated CBTC

(auctions)

Other revenues

4.8 5.92.2 3.4

58.7

57.4

35.3

35.6

14.4

15.2

19.2

29.1

2014 2015

Structure of assets from 2012 to 2015 (in million euros)

In connection with the operation of the auction houses (CAO, CASC, which merged into JAO on 1 September 2015, and also BSP, GME and TSC) and the allocation of CBTC, the costs in the amount

Prevailing among assets are long-term assets (84.6 percent), of which fixed assets increased the most (by 5.2 million euros) and amounted to 475.1 million euros. The reason for this increase are the investments in EE facilities, the takeover of a part of 110 kV network from distribution companies and property and easement rights. Long-term financial investments amounted to 88.9 million euros and are at the same level as last year. The investment in stake of the company Talum in the amount of 85.1 million euros accounts for the largest portion of the investments. In 2015, it increased by 6.6 million euros in comparison to 2014, because the long-term loan due from Talum was converted into a long-term financial in-vestment. The company ELES thus gained 85.61 percent ownership

Revenues from allocated CBTC (auction) in 2015 (in million euros)

stake in the company Talum. In the off-balance-sheet accounts, the company ELES recognizes the liability arising from guarantees to the subsidiary company Talum for the purchase of electricity in the period from 2016 to 2018 in the amount of 10 million euros. The decision on the guarantee was adopted by the Supervisory Board of ELES in 2014, which also set that the total guarantee may amount to a maximum of 24.5 million euros, and until 31 December 2015, the signed agreements on guarantee totalled 10 million euros.

At the end of 2015, short-term assets amounted to 103.1 million euros and were higher than last year, primarily because of cash and cash equivalents, which increased by 101 percent in comparison to

of 2 million euros were incurred in 2015, which is 48 percent more than last year.

Other revenues consist primarily of extraordinary revenues from ancillary services (penalties), revenues from the sale of electricity due to the state in the MEAS system and imbalances of the ELES’ balancing group. Other expenses are related to the costs of imbal-ances from the balancing group schedules, the costs of membership in the BSP Exchange and the costs of the MEAS system, and were recorded in the amount of 1.5 million euros in 2015.

Analysis of company's financial position The balance sheet shows the financial situation of the company ELES as at 31 December 2015. It shows the assets (owned by the company) and liabilities (owed by the company).

The balance sheet of the company as at 31 December 2015 amounted to 674.1 million euros and increased by 17.8 million eu-ros or 3 percent in comparison to 2014.

71

deferred;16.6

included in result;29.1

Long-term fixed assets Short-term assets Deferred costs and accrued revenues

Total assets

559

566

570

525

624

656

674

61184 64 80 103

2 1 10 1

31 December 2012 31 December 2013 31 December 2014 31 December 2015


the preceding year, namely from 23.6 million euros to 47.5 million euros. In the structure of short-term assets, short-term operating receivables accounted for 24.5 percent, or 25.3 million euros. With regard to last year, they decreased by 19 percent, because the out-standing dividends of the company Talum from the year 2007 were transferred from the item of short-term receivables under the item of long-term receivables in 2015 (decision of the General Meeting of the company Talum from 2015 plans for the dividends to be paid until 30 June 2017), and because of lower short-term accounts receivables as well as receivables due by others. Among the short-term receivables are also receivables totalling 3.2 million euros (off-setting entry are the short-term liabilities arising from guarantees in the same amount) arising from the Decision on Guarantees by Cap-ital Assets Management Company (CAMA)(2012), which were re-

In the structure of liabilities, equity accounted for the largest por-tion. It amounted to 380.4 million euros at the end of 2015. Com-pared to 2014, equity increased by 0.6 million euros. The increase in equity in 2015 compared to 2014 was influenced by the profit generated in the current year (10 million euros), and the reduction in 2015 was influenced by the Decision of the Government of the Republic Of Slovenia on distribution of profits for the year 2014 in the amount of 9.6 million euros and by reconciliation of AE for the year 2014 in the amount of 2.5 million euros, which affected the income statement for the year 2014. Therefore, the income state-ment as well as the balance sheet recognized in the annual report from 2014 were corrected for the year 2014. Provisions and long-term accrued costs and deferred revenues increased by 9 per-cent in comparison to the end of 2014 and amounted to 191.8 million euros. Long-term accrued costs and deferred revenues are mainly the amounts of long-term deferred revenues from allocated CBTC. In 2015, they increased due to deferred revenue from CBTC in

corded under long-term receivables in 2014 in accordance with this decision. Liabilities were paid in January 2016 and the long-term loan given to the company Talum was recorded arising from this title. The balance of short-term financial investments amounted to 25 million euros (deposits redeemable at banks). In comparison with the balance as at 31 December 2014, the deposits increased by 2 million euros. The rest represents the stocks of material. Short-term deferred costs and accrued revenues amounted to 0.8 million euros, and thus decreased by 9.6 million euros compared to last year mainly due to the transfer of receivables from short-term accrued revenues for the connected load for Avče PSHPP-Soške ele-ktrarne under the item of long-term loan given and due to smaller short-term accrued revenues for the ITC mechanism.

Structure of liabilities from 2012 to 2015 (in million euros)

the amount of 17.2 million euros (deferred revenue in the amount of 16.6 million euros and deferred revenue from interests from aver-age balance of surplus in the amount of 0.6 million euros). Long-term liabilities amounted to 57.2 million euros, which is 6 percent less than in 2014. Prevailing (99.1 percent) are the long-term finan-cial liabilities that amounted to 56.7 million euros, of which the loan obtained at the EIB amounted to 51 million euros, and derivative financial instruments to hedge against the variability in cash flows due to a variable interest rate of long-term loan (interest rate collar and swap) amounted to 5.7 million euros. Short-term liabilities at the end of 2015 amounted to 42.5 million euros and were thus by 13 percent higher than at the end of 2014. This was mainly due to higher short-term operating liabilities to domestic suppliers for fixed assets. Short-term accrued costs and deferred revenues amounted to 2.3 million euros and mostly comprise the short-term deferred revenues in the amount of 1.8 million euros for cross-bor-der transmission capacity.

72

31 December 2012 31 December 2013 31 December 2014 31 December 2015

Equity Provisions and long-term accrued costs and deferred

revenues

Long-term financial and operating liabilities

Short-term financial and operating liabilities

Total liabilities

382

380

380

382

624

656

674

611

132

176

192 4540425057616881

99

The structure of balance sheet at the end of 2015 did not change significantly compared to the preceding year. Prevailing among as-sets are long-term assets (84.6 percent), of which fixed assets ac-

In the structure of liabilities, equity accounted for 56.4 percent and provisions and long-term accrued costs and deferred revenues ac-counted for 28.4 percent (the increase resulted mostly from the de-

Balance sheet structure

Assets structure

Liabilities structure

count for 70.5 percent and long-term financial investments for 13.2 percent.

ferred revenues from the allocated CBTC in accordance with Article 120 of the EA-1).

73

Long-term fixed assets Short-term assets Deferred costs (expenses) and accrued revenues

Long-term fixed assets Short-term assets Deferred costs (expenses) and accrued revenues

0.1 %

15.3 %

84.6 % 1.6 %

12.2 %

86.2 %

31 December 2015 31 December 2014

0.3 %

6.3 %

8.5 %28.4 %

56.4 %

31 December 2015

0.3 %

5.7 %

9.3 %26.8 %

57.9 %

31 December 2014

Equity Provisions and long-term accrued costs and deferred revenues Long-term financial and operating liabilities Short-term financial and operating liabilities Accrued costs (expenses) and deferred revenues

Equity Provisions and long-term accrued costs and deferred revenues Long-term financial and operating liabilities Short-term financial and operating liabilities Accrued costs (expenses) and deferred revenues

2012 2013 2014 2015

62.4

%

72.6

%

66.7

%

56.4

%

67.1

%

57.9

%

68.3

%

61.2

%

Share of capital in total liabilities Coverage of long-term assets with capital

Financing indicator


Equity financing ratio indicates the share of equity in the Com-pany liabilities or the financial independence of the Company. A high value of this indicator means that the company has a lot of own resources or equity and few debts, which is favourable from the point of view of operating risk, while on the other hand it reduces the return on equity. The movement of the indicator shows that the equity financing ratio is high (above 50 percent), but is slightly decreasing with passing years. In 2015, when this ratio was 56.4 percent, we recorded a drop by 1.4 percentage points in compari-son to the year 2014. The decrease in this indicator was caused by increased liabilities (the biggest increase are the accrued costs and deferred revenues for deferred revenues from cross-border transmis-sion capacity) and low capital growth due to annual distribution of profits to the owner.

Equity to long-term assets ratio shows the share of equity in the long-term assets. It is an important indicator of the company cred-itworthiness. If the value is 100 percent, this means that all of the long-term assets were financed by own resources. In 2015, this ratio was 66.7 percent, or 0.4 percentage points less than in 2014. The movement of this indicator shows that the coverage rate of long-term assets with equity is slightly dropping, which means a gradual increase in funding with long-term resources from others (long-term loans and long-term accrued costs and deferred revenues for de-ferred revenues from cross-border transmission capacity).

Long-term coverage of long-term assets is the indicator of long-term liquidity position of the company. It shows the finan-cial discipline of the company and the extent to which the company covers their long-term assets with long-term sources. If the value of this indicator is less than 1, it means that the long-term assets are also financed in the short term, and if it is greater than 1, the short-term assets are also financed in the long term. The indicator of the company ELES is greater than 1 and shows the trend of growth, with the exception of the year 2013, mainly due to the impact of the long-term loan to Talum and due to new investments in the transmission network.

Indicator of long-term coverage of fixed assets

Cash-flow statement

Cash flow statement (in millon euros) 1 Jan to 31 Dec 2014 1 Jan to 31 Dec 2015 Index

1 2 3(2/1)

1. Net cash flow from operating activities 73.6 66.7 91

2. Net cash outflow used in investment activities -52.9 -24.0 45

3. Net cash used in financing activities -20.4 -18.8 92

Financial result in the period (1-2-3) 0.3 23.9 6850

CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 23.6 47.5 201

74

2012 2013 2014 2015

1.10

4

1.09

1

1.06

9

1.04

1

Financial result in the period amounted to 23.9 million euros. Net cash from operating activities amounted to 66.7 million euros. The company spent the cash outflow mostly on acquisition of tangible and intangible assets in the amount of 22.8 million euros, on acqui-sition of short-term financial investments in the amount of 2 million euros (deposits with banks), 1.6 million euros for interest (hedging

in euros

RF Item RF Agency** Reached 2015 Difference RF - Reached

Controlled and uncontrolled operation and mainentance costs without costs of balancing the system*

34,200 40,351 -6,151

Depreciation/amortisation 28,039 29,082 -1,043

Costs of ancillary services 44,100 36,193 7,907

Costs of loss in transmission network 17,567 16,074 1,493

Total: 123,906 121,700 2,206

of interest rate for the EIB loan), 2.8 million euros for repayment of long-term financial liabilities (EIB loan), 4.8 million euros for the re-payment of short-term financial liabilities (from redeemed guaran-tee for the company TALUM) and 9.6 million euros for distribution of profits to the owner. Closing balance of cash amounted to 47.5 million euros.

6.2 Impact of Regulations on the Performance

The following applies in terms of comparison of corrected regulated return and achieved total profit before tax:

• if the incurred costs exceed the eligible costs, the difference shall be offset against the regulated return on assets;

• regulated return is higher if eligible cost savings result from the operator’s endeavours;

• the method of determining eligible costs influences the attain-ment of regulated return.

In 2015, ELES generated the costs that were for 2.2 million euros lower than the amount of RF set by the Energy Agency (EA). The EA does not recognize savings and controlled operation costs are recognized only to the extent specified by the RF.

* - additional revenues from capatalized own services and 10% effect on unregulated activities** - Enery Agency decision from 12/2012

The principle from Article 119 of EA-1 was not applied in 2015: “The method of establishing and specifying eligible costs shall encourage the cost-effective operations of the electricity system operator and enable it to attain a return higher than that set out in the regulatory framework if the eligible costs savings result from the operator’s en-deavours to increase its cost-effectiveness. If the electricity system operator incurs costs exceeding the eligible costs, the difference shall be offset against the regulated return on assets«.

The incentives from savings as set out in the above mentioned arti-cle of the EA-1 were not recognized.

Operating and maintenance costs for 2015 were set at a very low level for ELES, which is evident if we compare them to the costs ac-cording to the methodology that applied to the transmission sys-tem operator of the gas pipeline network.

75


Controlled and uncontrolled operation and maintenance costs without costs of balancing the system, new tasts nad Agency in thousand €

RF 2015Methodology for ELES*

Planned in ELES 2015** RF 2015Methodology for Pilinovodi***

RF 2016New RF for ELES****

34,200 3,058 40,538 40,397

RF 2016 - RF 2015 6,197

On the basis of the elaborated comparisons, external legal and economic report, comments to the draft of RF 2016–2018 and the meetings with the management of the Energy Agency, we man-aged to come to an agreement that the methodologies for the sys-tem operator of the gas and electricity transmission network should be approximately the same.

Thus the comparable operating and maintenance costs recognized at ELES for the year 2016 increased by 6.2 million euros in compari-son with the year 2015.

* - Energy Agency decision from 12/2012: RF 2013–2015,** - Medium-term business plan ELES 2015–2017, page 42,*** - Medium-term business plan ELES 2015–2017, page 45,**** - Energy Agency decision 11/2015: RF 2016–2018, increased by capatalized own services, by impact of unregulated activities, reduced by new ELES' tasks and Agency payments

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6.3 Performance criteria (Indicators)

6.3.1 Performance ratios

RACIOS As at 31 Dec 2014

As at 31 Dec 2015

Financing ratiosthe basis in thousand euros

Ratiothe basis in thousand euros

Ratio

1. Equity financing ratio in % equity / 379,786.0 57.9 380,434.0 56.4liabilities 656,320.5 674,103.8

2. Debt financing ratio in % debts/ 98,582.8 15.0 99,637.4 14.8liabilities 656,320.5 674,103.8

3. Long-term financing ratio in %

total equity, long-term debt and provisions/

616,801.7 94.0 629,373.3 93.4

liabilities 656,320.5 674,103.8Investment ratios

1. Fixed assets investment ratio in %

fixed assets (at net book value)/

469,877.2 71.6 475,108.8 70.5

assets 656,320.5 674,103.82. Long-term investment

ratio in %fixed assets (net book value) + long-term financial invest-ments + long-term operating receivables/

562,253.1 85.7 567,089.8 84.1

assets 656,320.5 674,103.8Horizontal financial structure ratios

1. Equity to fixed assets ratio equity / 379,786.0 0.808 380,434.0 0.801fixed assets (at net book value) 469,877.2 475,108.8

2. Short-term ratio short-term assets / 80,330.2 2.137 103,089.5 2.427 short-term liabilities 37,595.0 42,473.2

3. Quick ratio liquid assets + short-term receivables/

77,820.3 2.070 100,938.0 2.377

short-term liabilities 37,595.0 42,473.24. Acid test ratio liquid assets/ 46,570.0 1.239 75,658.3 1.781

short-term liabilities 37,595.0 42,473.2Efficiency ratios

1. Operating efficiency ratio operating revenues/ 140,940.4 1.058 152,697.8 1.084operating expenses 133,256.6 140,921.1

Profitability ratios1. Net return on equity (ROE)

in %net profit or loss in the financial year /

8,690.3 2.3 10,004.9 2.7

average equity 376,395.0 375,107.52. Net return on assets (ROA)

in %net profit or loss in the financial year /

8,690.3 1.4 10,004.9 1.5

average assets 640,120.6 665,212.11.A. Net return on equity (ROE)

in % without applying Article 120 of the EA-1

net profit or loss in the financial year /

33,559.3 7.0 23,249.0 4.6

average equity 479,420.3 502,671.12.A. Net return on assets (ROA)

in % without applying Arti-cle 120 of the EA-1

net profit or loss in the financial year/

33,559.3 5.3 23,249.0 3.5

average assets 638,559.1 664,130.93. Dividends to share capital

ratiototal dividends paid for the financial year/

9,063.0 0.024 9,573.0 0.026

average share capital 376,395.0 375,107.5Investment activity ratio

1. Realized to planned investments ratio in %

realized investements and reconstructions/

37,944.2 61.2 37,345.2 46.5

planned investements and reconstructions

62,014.9 80,237.8

Note: ratios are calculated pursuant to the items by way of applying Article 120 of the EA-1

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In 2015, the equity financing ratio decreased to 56.4 %, the debt financing ratio also decreased and stood at 14.8 % due to higher long-term accrued costs and deferred revenues (as a result of de-ferred revenues from the CBTC). Lower long-term liabilities influ-enced on slightly lower long-term financing ratio, which stood at 93.4 %. Fixed asset investment ratio was slightly lower than in 2014 (71.6 %) mainly due to lower investments in fixed assets. With the exception of equity to fixed assets ratio the horizontal financial structure ratios were higher compared to the preceding year due to an increase in short-term operating receivables due by Talum or the conversion thereof into Talum’s share capital and higher liquid assets.

The operating efficiency ratio (1.084) slightly increased since oper-ating revenues increased more than the increase in operating ex-penses compared to 2014. The profitability ratios, ROE and ROA, were higher compared to the preceding year due to higher net profit recorded in 2015, while taking into consideration all revenues from the CBTC (not in line with Article 120 of the EA-1), ROE and ROA were lower due to lower net profit.

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6.3.3 Technical indicators

2014 2015 Indicator Formula Value Calculation Value CalculationENS (energy which would be supplied from the system if there was no interruption)

(Pk - power at which the electricity supply was interrupted, expressed in MWh) X

MWh 52,400.7 68.5

(Dk - the period of time during which the electricity supply was interrupted, expressed in hours)

AIT (Average interruption time on the transmission network reflects the time period when the supply of electricity was interrupted per user and year) = 60*Sum i ENSi/PT

(ENSi, volume of unsupplied electricity at »i« interruption in MWh) X

min 2,252.7 2.8

(PT - average power of the electric power system in MWh, which derives from transmitted electricity in one year / 8,760 hours)

MW 1,395.7 1,452.0

h 8,760 8,760

Transmitted electricity per normalised length of transmission network

(transmitted electricity in the unit of time)/

MWh 22,171,890 24,316.62 21,695,334 23,760.61

(normalised length) km 911.8 913.1

Portion of losses per transmitted electricity

(losses)/ MWh 303,496 0.01 334,350 0.02

(transmitted electricity in MWh) MWh 22,171,890 21,695,334

LF (average transmitted power)/ MW 2,531.0 0.74 2,476.6 0.72

(peak power in a time interval) 3,406.8 3,439.2

6.3.2 Economic and technical indicators

OPEX= operating expenses= operating costs Transmitted electricity in the unit of time is electricity offtaken by domestic consumers and transmission over the Slovenian border to Italy, Austria and Croatia.

For calculation of AIT the transmitted electricity offtaken by domestic consumers is taken into consideration so as to determine the average power of the electric power system.Transmitted electricity in the unit of time is electricity offtaken by domestic consumers and transmission over the Slovenian border to Italy, Austria and Croatia.

2014 2015 Indicators Formula Value Calculation Value Calculation

Normalised length of transmis-sion network per employee

(normalised length of network in km) /

911.8 1.763704592 913.1 1.736619879

(number of employees) 517.0 525.8

OPEX per transmitted electricity (operating costs*(in million euros)) /

133.3 0.000006010 140.9 0.000006495

(transmitted electricity (in the unit of time) in MWh)

22,171,890 21,695,334

OPEX per the length of transmission network

(operating costs* (in million euros))/ 133.3 0.146146724 140.9 0.154336034

(normalised length of network in km) 911.8 913.08

Investments per normalised length of transmission network

(investments (in million euros)/ 37.9 0.041614604 37.3 0.040900295

(normalised length of network in km) 911.8 913.08

Investments per transmitted electricity

(investments (in million euros))/ 37.9 0.000001711 37.3 0.000001721


22,171,890 21,695,334

Operating revenues per transmitted electricity

(operating revenues Art. 120 of the EA-1 applied (in million euros))/

140.9 0.000006357 152.7 0.000007038


22,171,890 21,695,334

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Our planning and engineering of the transmission network is based on carefully set sustainable development and nature preservation strategies. We strive for minimal interference with the current of life.

80

Photograph by: Karmen Mlinar

81

7.1 ELES’ Stakeholders

SUSTAINABLE DEVELOPMENT

Responsibility is one of the fundamental values of the company ELES. This term covers environmental responsibility, responsibility towards employees, local community and the equipment in the workplace. The employees of the company ELES consider respon-sibility as co-creating of energy-efficient and friendly environment with prudent development, design and construction of modern transmission system and with permanent maintenance. In doing so, we respect all the stakeholders: employees, consumers, nature and environment, local community and society as a whole.

In 2015 we ensured sustainable development by exercising respon-sibility towards the owner, by achieving business excellence, taking care of the environment and responsibility toward the social envi-ronment.

ELES devotes special attention to responsible relationships with stakeholders. Next to the employees, our most important stakehold-ers are the company owner and the regulators in Slovenia and the European Union, consumers and suppliers, partner organizations, professional associations and educational institutions. We aim to ensure open and proactive communication with key stakeholders in accordance with the adopted communication strategy.

Pillars of sustainable development at ELES

OWNERS AND REGULATORS

CLIENTS

PROFESSIONAL ASSOCIATIONS AND EDUCATIONAL INSTITUTIONS

PARTNER ORGANIZATIONS

SUPPLIERS

Business excellence

Responsibility to-ward the employ-ees and the social

environment

Environmental care

SD

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7.1.1 Cooperation with local communities

ELES directly and indirectly intervenes with the environment with its electric power transmission network. Our activities require cer-tain infrastructure. This infrastructure consists of transmission lines, substations and optical network. We realize that by placing and maintaining this infrastructure, we intervene with the life of local communities. Their understanding and acceptance of our activities and electric facilities is of key importance for successful operation of ELES. That’s why we consider the local communities as one of the key stakeholders and partners in the procedures of construction of new electric power plants and their maintenance. Our understand-ing of the term local community applies to the representatives and residents of municipalities and district communities and to mem-bers of civil society initiatives where those exist.

Placement of new installations in area falls within the com-petence of the relevant ministries. It is carried out by the pro-cedure prescribed in the legislation and also involves cooperation with the local community. Local communities may submit their comments and proposals at the time of publication of the initiative on the website of the competent ministry, at the time of public un-veiling of study of variants and expert groundwork and at the time of public unveiling of national spatial plan (DPN) draft and expert groundwork. All received proposals and comments are considered by experts and addressed under the answers to questions and com-ments.

Any further questions relating to the construction and maintenance of transmission lines can be sent to us by e-mail to [email protected] or by mail to the address ELES, PIPO, Hajdrihova 2, 1000 Ljubljana.

Cooperation with local communities takes place through various forms of pro-active and reactive communication. In 2015, the most intensive communication with local community took place in the area in which the Beričevo–Divača transmission line is being up-graded. We presented the project to the mayors of the municipali-ties through which the route passes as well as to the local communi-ties, we sent direct mail with information regarding the project to all the inhabitants along the route and we also held meetings with civil society initiatives.

7.1.2 Relations with our business partners

Electricity generators that provide us with ancillary services and en-ergy to cover losses on the transmission system are an important supplier of ELES. Other business partners that supply construction services, construction or office supplies and other products and ser-vices for our operation are also considered as our suppliers. Suppliers also participate in the policies of ELES management systems and must sign a declaration that they are familiar with our environment policy and the policy of our occupational health and safety man-agement system.

Consumers of ELES are the companies that generate electricity, the companies that sell electricity and direct consumers that offtake the electricity from the transmission network. The success of their activ-ity and performance is highly dependent on the reliability of ELES’ network.

Regular communication with business partners takes place through personal meetings, printed editions of the magazine “Naš stik”, by e-mail ([email protected]) and through web site www.eles.si, where the users are provided with information on the operations of the Com-pany and all the latest news. We also publish our annual reports on the Company website, as these documents are the key source of information and communication with the business public.

Operation of the company ELES is not limited to the Slovenian space. International cross-border connections connect the ELES net-work with transmission networks of neighbouring countries, there-fore the transmission system operators of neighbouring countries and all other transmission system operators involved in ENTSO-E are also an important business partner of the company ELES. Com-munication with these stakeholders takes place through personal meetings, meetings within the ENTSO-E Network and other inter-national associations and organizations, through e-mail ([email protected]) and through website www.eles.si, where the users can access key information about the Company operation, current news and an-nual reports in Slovenian and English language.

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O7SUSTAINABLE DEVELOPMENT

7.1.3 Communication with the media

When it comes to communication with the media, ELES uses a wide palette of tools: press releases, press conferences, round tables on

energy topics, different consultations and other events related to energy. Our communication with the media is open and proactive.

7.2.1 Number and structure of employees

At the end of 2015, the Company employed 546 workers, which is 14 or 2.63 percent more than at the end of 2014. Due to the takeover of the 110 kV network, an increase in the number of em-ployees was planned in 2015 and it was estimated that at the end of 2015, the company will have 603 employees. Optimisation of human resources in the takeover of 110 kV network enabled us to only employ 20 percent of all planned new employees.

The average age of the employees is 46 years and this has not changed in the last year. The same holds true for the average length of service, which is 22 years. In the last year, the share of male em-ployees dropped from 80 to 79 percent. Of the 7 percent of em-ployees who are employed in top management positions (sector directors, heads of services, heads of centres), there are 2 percent of women. At the end of the year, 99.4 percent of all employees were employed for an indefinite period of time and 99.8 percent were employed full time. In 2015, four employees took parental leave, among them also one man.

7.2 Responsibility Towards the Employees

At ELES, we realize that our employees are important for the suc-cessful operation of the company. That is why we strive in many ways to create favourable working conditions and maintain a low level of fluctuation of employees. All the employees follow the prin-ciples of business ethics and entrepreneurial culture in their daily work. These principles are summed up in ELES code of ethics that was written in 2013.

Human Resource Management follows the strategic goal adopted in 2011: “Comprehensive Human Resource Management” (herein-after: CHRM), which is aimed at:

• developing a healthy work environment,

• facilitating development and well-being of the employees,

• increasing efficiency and motivation of the employees,

• developing appropriate relationships between the employees and the Company,

• ensuring efficient tools for managing personnel and

• increasing the satisfaction and positive energy in the Company.

Share of male and female employment

Level of employee satisfaction

Portion of employed disabled people

22years

Average lenght of service

Number of employees with a permanent employment

3.7% 60.4%

4.55

Portion of employees with more than 10 years of service in ELES

Number of employees

Number of men and women appointed to management

positions

Average age

79 %men

21 %women

46years

:76% 24%

31men

10women

546

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Data of employees 2014 2015

Number of employees as at 31 December 532 546Average number of employees in a year 530 540Employees with permanent employment 528 543Employees with temporary employment 4 3Employees with full-time employment 530 545Employees with part-time employment 2 1The number of employees on paternity leave

7 4

Average age 46 years 46 yearsAverage years of employment 22 years 22 yearsShare of male employment 80% 79%Share of female employment 20% 21%Portion of disabled employees 3.8% 3.7%Share of employees with at least higher professional education

50.4% 50.7%

Employees by age groups

Arrivals Departures New employees

up to 20 years 0 0 0

from 21 to 30 years 6 1 5




from 61 to 70 years 0 5 -5

from 71 years onwards 0 0 0

Total 26 12 14

Educational title 2014 2015

Doctor's degree 7 8

Master's degree 37 37

University degree 156 162

3-year higher pro-fessional education

68 70

2-year higher pro-fessional education

102 104

Secondary school 102 105

Other 60 60

Total employees 532 546

Employees by gender Arrivals Departures New employees

women 6 1 5

men 20 11 9

Total 26 12 14

ELES has a very low level of employee turnover. In 2015, the Com-pany employed 26 new employees, of which 22 were employed for an indefinite period of time and 4 for a definite period of time or for the period of their apprenticeship. 12 workers terminated their employment relationship in 2015, of which 6 retired.

New and leaving employees by age groups

Rapid changes in the field of energy supply require continuous ed-ucation and training of employees. ELES is aware that in order to successfully carry out its core operations, the Company needs pro-fessionally educated and trained personnel who are able to quickly adapt to the new technological and legislative requirements of the business environment in which they operate. For this reason, we spend a considerable part of the financial resources on the educa-tion and training of employees.

New and leaving employees by gender

Educational structure

As of 31 December 2015, ELES employed 18 disabled persons of the third category and 2 disabled persons of the second category. Most of the disabled persons work in the transmission network in-frastructure centres (TNIC). The Company managed to provide suitable job positions for all the employees who had received the

decision stating the category of their disability from the Pension and Disability Insurance Institute of the Republic of Slovenia. In ac-cordance with the 6 percent quota for employing disabled persons as prescribed by law, ELES ought to have employed in average 33 disabled persons in 2015. Because this quota was not achieved, the Company had to pay a contribution in the amount of 83,026.56 euros to encourage employment of disabled persons in accordance with the applicable law.

7.2.2 Education and training of employees

The educational structure is improving every year. At the end of 2015, more than half of the employees had at least a third-level education.

Year 2014 = 532 employees Year 2015 = 546 employees

Other Secondary school

2-year higher

professional education

3-year higher

professional education

University degree

Master's degree

Doctor's degree

11.3

%11

.0%

19.2

%19

.2%

19.2

%19

.2%

12.8

%12

.8%

29.3

%29

.6% 7.

0%

1.3%

6.8%

1.5%

85


Hours and costs of training 2014 2015

Number of training hours 6,756 4,799

Total costs of training/education (in euros)

238,244 226,951

Hours of training per employee 13 9

Costs of training per employee (in euros) 448 416

Sabbatical leave 2014 2015

Hours of sabbatical leave 1,604 992

Used sabbatical leave per employee, who studies (in hours)

100 55

In 2015, 4,799 hours of training for the employees were performed, which is 28.97 percent less than in the previous year. In most cases, an external form of training was organised.

In average, each of the employees received 9 hours of training. Training took place in different forms – from seminars, courses and conferences to legally prescribed training in the field of carrying out professional tasks (e.g. for those who handle energy devices). In 2015, the cost of training amounted to 226,951 euros, which was 3 percent more than the planned amount.

Part-time study

In 2015, 18 employees studied part-time, as the Company con-tinues to allow the employees to pursue higher formal education. The Company paid study fees for all of its employees who decided for studying while working and enabled them to take sabbatical leave to prepare for the exams. Three employees started to pursue higher education in 2015. Three employees successfully completed the studies in accordance with the study contract. One employee stopped studying due to an emergency situation.

Training

ELES is closely connected to the European electricity system. Fre-quent communication with foreign business partners requires good knowledge of foreign languages from the Company’s employees. In 2015, 63 employees (or 96 percent more than in 2014) attend-ed different courses of foreign languages; the English courses were the most popular, followed by courses in German, French and Ital-ian. The participants attended 2,515 course hours (or 18 percent more than in 2014), which on average means 40 course hours per employee (or 40 percent less than in 2014).

In 2015, refresher trainings for validity of Certificate of Competen-cy for Use of Products and Equipment Containing Ozone Deplet-ing Substances or Fluorinated Greenhouse Gases were carried out. 292 trainings for work at a height and use of work equipment were carried out. These trainings fall within the theoretical and practical training in the field of occupational health and safety.

Connecting with young potential employees

ELES endeavours to connect with perspective young people. We are aware that it is necessary to connect theoretical knowledge and practical experience, therefore we allow young people to carry out professional practice in the field of electric power and other fields. This way we also ensure a database of candidates which repre-sents a potential selection for employing future experts. In 2015, the Company enabled 25 persons to carry out the compulsory pro-fessional practice, of which 17 were secondary school pupils and 8 were students. In 2015, three students received scholarships from ELES, which preserved the number of scholarship-holders on the same level as in the preceding year.

Last year we continued to enable summer work for children of the Company’s employees. These children, as pupils and students, help within the Company during the summer months when the employ-ees take their annual leave. This kind of work opportunity was used by 51 children of the Company’s employees.

7.2.3 Annual appraisal interviews

The director, sector directors, assistants of sector directors and heads of services of the company management carried out annual appraisal interviews in the period from February to the end of April 2015. They carried out a total of 510 annual appraisal interviews, which meant 98 percent realisation, which is 3 percent higher than in 2014. With the introduction of annual appraisal interviews, we established regular monitoring of employee satisfaction with the company, monitoring of realisation or non-realisation of the ob-jectives and systematic planning of personnel development in the professional and personal sense. The effectiveness of realisation of the set objectives for each employee was examined for the first time in 2015. In 2015, 3,081 different objectives were set in the fields of

Success of employees in their part-time study

Total no. of employees studying part-time Newly included in part-time study Concluded part-time study

2014 2015

16 3 6 18 3 3

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Y E A R / working hours

Sickness compensa-tion charge-able to the company

Sickness compensation chargeable to Health Insur-ance Institute of Slovenia

Total sickness compensa-tion

Proportion of sickness com-pensation in the working hours fund (in %)

2009 22,795 13,728 36,523 3.1

2010 22,435 18,575 41,010 3.6

2011 22,599 14,810 37,409 3.4

2012 20,764 13,763 34,527 3.1

2013 23,586 23,114 46,700 4.3

2014 22,159 21,630 43,789 4.0

average from 2009 to 2014

22,390 17,603 39,993 3.6

2015 22,159 21,630 43,789 4.0

Parental leave and gifts at birth 2014 2015

No. of women on maternity leave (105 days) 2 5

No. of women on child nursing and care leave (up to 260 days)

5 3

No. of men on child nursing and care leave (up to 260 days)

2 1

The number of men on paternity leave (15 days + up to 75 days)

16 15

Hours of paternity leave 1,372 1,440

Gifts at birth (in euros) 9,000 8,500

Supplementary pension insurance (SPI) 2014 2015

Number of employees included in SPI at the end of the year

521 537

Portion of employees included in SPI 98% 98%

Total premium paid by ELES (in euros) 922,142 971,318

Total premium paid by employees (in euros) 42,765 41,707

7.2.5 Care for the satisfaction of employees

In 2010, ELES obtained the basic Family-Friendly Company Cer-tificate (hereinafter: FFC), and 2013, we obtained the full FFC Cer-tificate. The adopted measures for harmonising professional and private lives of the employees are used in accordance with the ELES guidelines for operating like a FFC company. In 2015, the Company continued to implement the established measures, such as fixed core working time, providing gifts for new-borns and participation of relatives of the employees in occasional work activities in the Company.

The company implements 18 measures, among the most popular

work or in the field of professional development of individuals. 51 percent of the set objectives were fully realised, 18 percent of the objectives were realized partially and 16 percent were not realized within the agreed period.

7.2.4 Employees absence

Due to sick leave, 43,789 working hours were lost in 2015, which represents 4.0 percent of the total annual working hours (i.e. of reg-ular work). This is the same as in 2014 and 10 percent more than the average in the period between 2009 and 2014.

ones is the “Child Time Bonus”, which enables the parents of first-graders to take a day off on their first day of school. Parents can therefore devote their full attention to the child entering a new pe-riod of life. Parents who were introducing their children to kindergar-ten could use a bonus of 16 additional free hours.

For the first time, we also co-financed the weekly holiday care for parents of children aged from 6 to 11 years. 27 percent of the em-ployees benefited from this measure. 367 children of the employees rejoiced upon the visit of Father Frost and received presents in the pre-New Year period.

Additional benefits for employees

In December 2001, ELES joined the voluntary supplementary pen-sion insurance scheme for employees in order to ensure greater so-cial security after their retirement. In accordance with the applica-ble pension plan of voluntary supplementary pension insurance, the Company pays from 60–100 percent of the maximum amount of premium, which in 2015 represented 5.844 percent of the monthly salary per employee. The amount of payment depends on the age group of the employee and whether the employee pays the differ-ence to the maximum amount of premium on their own. The Com-pany pays 100 percent of the premium for workers above 45 years of age.

Using parental leave

ELES provides social security to young families by allowing the Com-pany’s employees to use all available forms of parental leave. After the end of maternity leave, young mothers can, as a rule, continue their career path at the same job position they held before going on maternity leave. ELES is also helping young families by providing financial aid in the

amount of 500 euros for each new-born of the Company’s employ-

ees.

Care for the employees outside working time

The holiday capacities of the Company are aimed at ensuring conditions for relaxation and recreation, as well as maintenance of psycho-physical abilities of the employees. If the holiday capacities are not occupied by the Company’s employees, they may also be rented by third parties who would like to spend their holidays there. The holiday capacities of the Company are located in the Republic of Slovenia and the Republic of Croatia at the following locations: Čatež Thermal Spa, Banovci Thermal Spa, Golte, Portorož, Krk, Bar-bariga, Mali Lošinj, Stinica, Pag, Poreč and Rab.

The Company’s employees are also active in ELES’ Sports Associ-ation established on 29 October 2002. At the beginning, the Sports Association had 68 members, but until 2015 their number rose to 345 (63 percent of all employees). The Sports Association includes the Company’s employees and retired employees. The basic pur-pose of the Association is to enable socialising of its members whilst engaging in sports and recreational activities on amateur level. It also develops the character traits of its members, popularises sports and recreational activities, takes care of especially talented sports-men and helps the less enthusiastic members to achieve better re-

87


sults. The Sports Association encourages the employees to engage in sports and recreational activities, organises competitions of its members, participates in competitions within the framework of the Slovenian electro power industry, participates in competitions abroad with similar associations and organises trips to important sports events. For easier and better operation, the Sports Associa-tion has organised sections which operate in accordance with the expressed interest of their members. The Association had the fol-lowing sections in 2015: badminton, bowling, ninepins, cycling, basketball, table tennis, football, volleyball, darts, swimming, moun-taineering, fishing, skiing, shooting, chess, cross-country skiing and tennis.

ELES Sports Association organised the following events in 2015:

• competition in skiing on Mt. Krvavec,

• visit of ski jumping competition in Planica,

• skiing in the Dolomites in Italy at the beginning and the end of skiing season,

• sports weekend in Poreč,

• 6 hikes (Čemšeniška planina, Blegoš, Kukova špica, Krasji vrh, Krn lake and Karst Edge),

• sports competition Elesijada in Kleče,

• visit of the European Championship in basketball in Zagreb,

• meeting with the Mavir Sports Association from Hungary in Cirko-vce,

• three meetings with Sports Association EIMV in Ljubljana,

• running and cycling marathons,

• activities in sports halls (badminton, tennis, bowling, ninepins, swimming, fitness).

Measurement of employee satisfaction

The survey on employee satisfaction included 396 or 72.53 percent of all employees in 2015, which means 17 employees less than in 2014. The results of the survey showed that in general the employ-ees are very satisfied with job stability, working time and work itself. The lowest marks were given to opportunities for promotion within the Company.

The total average including all aspects of satisfaction of employees amounted to 4.55 (2.57 percent less than last year), which is a very high figure that exceeds the Slovenian average.

The employees chose the highest marks for their satisfaction with job stability or employment security, followed by satisfaction with working hours and work itself. The lowest marks were given to op-portunities for promotion within the company ELES.

0 1 2 3 4 5 6

Satisfaction with job stability

Satisfaction with working time

Satisfaction with working conditions (equipment, facilities)

Job satisfaction

Satisfaction with colleagues

Satisfaction with training opportunities

Satisfaction with the Chief Executive Officer

Satisfaction with the measures taken for »Family Friendly Company«

Satisfaction with the atmosphere in my working group

Satisfaction with line manager

Satisfaction with status in our company

Satisfaction with interpersonal relations

Satisfaction with director of the field

Satisfaction with the overall atmosphere among employees

Satisfaction with salary

Satisfaction with opportunities for promotion

5.55 5.48

5.27

5.00

4.94

4.89

4.87

4.84

4.77

4.74

4.64

4.52

4.41

4.25

4.17

4.09

3.78

5.12

4.87

4.89

4.77

4.71

4.60

4.40

4.62

4.54

4.43

4.30

4.25

4.03

4.13

3.70

Measurement of employee satisfaction in 2015 in comparison with the measurement in 2014

Average 2015 Average 2014

88

7.2.6 Communication with employees

The company ELES has its units throughout Slovenia, so effective communication with the employees is extremely important. We have our own intranet, where the employees can access various important documents (acts of the company, management systems documents, minutes on the operation of the Works Council and trade unions) and other contents that facilitate their work (propos-als for presentations, dictionaries, telephone directory of employ-ees). Intranet also has a news section, which was divided into two parts in 2015: Business Information, where we are publishing news in connection with the operation of the company, and News, where we are publishing news about the performances of our experts at conferences, success of athletes sponsored by the Company, invita-tions to events, etc.

Once a month, all the employees receive an electronic newslet-ter E-omrežje (E-network) with the most important news from the previous month about the events in the Company and other events that might affect the operation of the Company. We also use e-mails to send important information that needs to reach all the employees as soon as possible.

Because we renewed our vision, mission and values in 2015, many activities are now focused on the communication of modified fun-damental postulates of the Company. In autumn, the employees received the brochure “Transmitting values by Transmitting energy”, in which we introduced the renewed vision, mission and values and used employees in different job roles to demonstrate how individual values are reflected through work. We printed the renewed values on mouse pads to be reminded of them every day. The internal maga-zine “Naše omrežje” (Our network) that the employees received in November promoted the renewed values, vision and mission.

Also this year the Company’s employees attended the social sports event Day of the Company intended to strengthen the Com-pany’s team spirit and loyalty. Social events are also important because they give the employees from different units throughout Slovenia the chance to meet and to connect.

The employees can access information on the operations of ELES and other electric power companies in the online and printed form of the magazine “Naš stik” (Our Connection).

Regular meetings of the Chief Executive Officer with the repre-sentatives of the Works Council and the representative trade unions ensure better flow of information and inclusion of repre-sentatives of the employees into the Company’s operations and direct solving of matters they are competent for.

ELES also maintains contact with the Company’s retired employ-ees by inviting them to different events and by organizing a New Year gathering especially for them. They also remain active in our Sports Association.

7.2.7 Occupational health and safety

ELES fulfils all obligations prescribed by the law related to occupa-tional health and safety of its employees. The Company is bound

to this by the certificate obtained for the Occupational Health and Safety Management System (BS OHSAS 18001).

In April 2015, the ELES’ Chief Executive Officer adopted the Safety Statement with Risk Assessment, Revision no.: 3 for the compa-ny ELES d.o.o. By adopting this Statement, the Company adopted the proposed programme for fulfilling the requirements on occu-pational health and safety and to reduce risks and harmful effects established in the assessment to the lowest possible level. To suc-cessfully implement the programme, the Company ensured all of the required professional assistance, as well as appropriate funds.

Obligations related to protecting health and lives of the Company’s employees are realised with consistent implementation of activities in the field of theoretical and practical training of employees for safe work, preventive medical examinations, arranging and adapting the working environment and training, as well as encouraging the em-ployees to take care of their health. Despite the implementation of all the measures throughout the year, six injuries at work were re-corded. Five injuries were minor and of mechanical nature (bruises, scratches, cuts, sprains and suchlike), while one injury was serious (broken leg due to a fall on icy surface) and resulted in a longer last-ing absence from work. Due to these injuries in 2015, workers were absent from the work process for 1,448 working hours.

YEAR INJURIES AT WORK

Number of injuries

Number of lost working hours

2009 16 3,267

2010 7 984

2011 10 1,592

2012 11 2,240

2013 10 2,632

2014 5 2,522 (464*)

average from 2009 to 2014 10 2,206

2015 6 1,448 (3,536**)

The data on the number of injuries at work for 2015 in compari-son with the average number of injuries in the 2010–2014 period deviates in terms of the reduced number. In 2015, the Company recorded 30 percent less injuries at work in comparison with the aforementioned average in the period. The data on the number of lost working hours as a result of injuries at work in 2015 is also posi-tive, as it is lower from the aforementioned average in the period by 27 percent.

A positive trend related to injuries at work in 2015 is a consequence of increased activities in the field of health and safety training and informing the employees of the importance of ensuring the imple-mentation of health and safety measures at their work place.

* Note: 2,522 is the number of working hours lost in 2014 and is the sum of working hours lost due to injuries at work in 2014 and lost working hours as a result of injuries at work in 2013; 464 lost working hours is a consequence of the injuries that occurred in 2014.

** Note: 3,536 is the number of working hours lost in 2015 and is the sum of working hours lost due to injuries at work in 2015 and lost working hours as a result of injuries at work in 2013; 1,448 lost working hours is a consequence of the injuries that occurred in 2015.

89


7.3.1 Environmental policy

ELES employs a comprehensive approach to the environment, which is part of the business and developmental company policy. We are aware that an efficient and successful system for environ-mental management brings advantages, such as fewer burdens on the environment, reduced material costs, improved working condi-tions, increased level of customer trust and greater respect for the Company in the society.

Therefore we strive to reduce the impacts on the environment when placing new installations in area as well as when managing poten-tial emissions. The areas included in the Natura 2000 site are par-ticularly sensitive. The company ELES has 410.7 km of transmission lines in this areas as shown on the map. We consistently follow the strictest environmental regulations both in the existing facilities as well as in the construction of new facilities.

Transmission lines in the Natura 2000 areas

All of the Company’s employees participate in the implementation of the environmental policy, as well as all of the Company’s suppli-ers of equipment and contractors who provide services in the con-struction and renovation of electric power facilities.

7.3.2 Achievements in the field of environ-mental protection

In our environmental programs we pursue the objective of reduc-ing the consumption of drinking water. The movement of con-sumption of drinking water and its costs through years are shown on the following diagram. In comparison with the year 2014, the amount of water consumed per employee was reduced by 2.67 m3 in 2015. Despite the reduction of water consumption, the cost of water consumption per employee has increased. The reason for this is the increase in the price of water supply services.

Water usage from year 2011 to 2015

7.3 Environmental Care

We are aware that the pursuit of our activities has an influence on the natural environment. However, we also strive to minimize any negative effects on the environment, as the responsibility towards the environment is one of the most important values that guide us in our everyday work.

2011 2012 2013 2014 2015

1,500.0

1,000.0

500.0

0.0

Environmental protection investment Current expenditure for environmental protection

Environmental Investments from 2011 to 2015 (in thousands of euros)

The amount of water consumption per employee in m3

Cost of water consumption per employee in euro

2011 2012 2013 2014 2015

30.0

25.0

20.0

15.0

10.0

5.0

0.0

90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

90

We are gradually carrying out energy-efficient refurbishment of the facilities. In 2015, we obtained energy performance certificates for most of the buildings. We replace old vehicles in the fleet with energy-saving vehicles. In 2015, we purchased four hybrid vehi-cles.

In the field of waste management, we take into account the waste management hierarchy. The waste is consistently sorted and we also strive to reduce its quantities. In 2015, we managed to main-tain the trend of reducing the quantity of trade waste. As shown in the diagram, the quantity of mixed trade waste per employee decreased by 15.86 kg in comparison with 2014.

Mixed trade waste for the period from 2011 to 2015

The proportions between collected hazardous and non-hazardous waste as well as between different categories of waste for the year 2015 are shown below. Total waste contained 77 percent of non-hazardous and 33 percent of hazardous waste.

No hazardous waste Hazardous waste (*)

Fluorescent tubes and other waste containing mercury, paper and cardboard, cleaning products, electrical and electronic equipment, wood, mixed municipal waste, bulky waste (68 %)

Sludge and oily water from oil jam and oil traps (15 %)

Wood (1 %)

Aluminum, iron and steel, and insulation materials containing asbestos (7 %)

Discarded equipment and waste gas SF6 discarded organic chemicals, lead-acid and alkaline batteries (6 %)

Paper, cardboard, plastic, metal, glass packaging, packaging contaminated with hazardous substances and absorbents, wiping cloths (3 %)

Waste paints and varnishes, printing toner, adhesives and sealants (0 %)

Quantities by category of waste in 2015

Hazardous and non-hazardous waste in 2015

Quantity of mixed trade waste per employee in kg Cost of mixed trade waste management per employee

in euros

77 %

23 %

68%

15%

1%

7%

6%

3%

2011 2012 2013 2014 2015

400.0

300.0

200.0

100.0

0.0

38.5

38.0

37.5

37.0

36.5

36.0

35.5

35.0

34.5

0%

91


Industrial and trade waste waters generated at our locations are processed in compliance with the legislation.

Direct CO2 emissions are caused due to the use of fuels and dis-

charges of ozone depleting substances from electricity and cooling devices (electricity equipment - SF6, air conditioning - refrigerant gases). The equipment that could cause discharges is thoroughly controlled and maintained. Indirect CO

2 emissions are produced

with the use of electric energy from the grid, produced from fossil fu-els. In 2016, we plan to establish energy accounting so that we can control the consumption of natural resources and energy (including vehicle fuels) and introduce the system of energy management. At the same time, we will also obtain an orderly collection of data that we will need for regular reporting.

Noise caused by our devices is fully mastered with the appropri-ate technical measures (use of suitable equipment, noise barriers, monitoring). The operational monitoring of noise sources was car-ried out at four substations, namely at 110/20 kV Tolmin substa-tion, 400/110 kV Okroglo substation, 400/110 kV Krško substation and 400/220/110 kV Podlog substation. The measurements have shown that noise indicator values were below the statutory limits

laid down by the Decree on Limit Values for Environment Noise In-dicators. Within the scope of operational monitoring, electromag-netic radiation monitoring was conducted on 24 transmission lines in 2015. Measured values of electric and magnetic fields were below the prescribed limits set by the Decree on Electromagnetic Radiation in the Natural and Living Environment.

Pursuant to the applicable legislation, the Company also completed the refurbishment of outdoor lighting of the Company’s facilities in 2015 in order to reduce light pollution. If necessary, we will also refurbish the outdoor lighting on electric power facilities with 110 kV voltage level, which we will take over from distribution companies in accordance with the provisions of the Energy Act.

One of the segments of the environmental management system is also environmental communication within the company and also with external stakeholders. When placing new installations in areas, we intensively communicate with the interested public (more on this in section 7.1.1). We periodically update the e-learning pro-grams for all employees and we actively participate in the prepara-tion of environmental legislation.

92

7.4 Responsibility Towards the Social Environment

ELES is realising the expectations of the general public and of its owners – the Company remains socially responsible and actively cares for the social and natural environment in which the Company operates. ELES manages the Company in a responsible manner in order to achieve its strategic objectives and at the same time intro-duce social responsibility through sustainable operations.

Sponsorship and donation funds

ELES’ responsibility towards the social and natural environment is also reflected through sponsorship of various (local) societies, in-stitutions and organizations. In the selection of the recipients of sponsorships and donations, ELES takes into consideration the prin-ciple of balance, economic benefit and appropriate dispersion. In 2015, ELES sponsored different organisations in the fields of culture, sports, science and education, and donations were assigned to indi-viduals, organizations and projects from the fields of humanitarian activities and environment protection. We believe that our support contributed not only to a better operation of the recipients of spon-sorships and donations, but also to a better quality of life for the community in which they operate.

In 2015, our sponsored athletes were actively included in the com-munication activities of the Company as the ambassadors of val-ues to support the new values of ELES. Thus, the biathlete Jakov Fak represents the value of reliability, women’s cycling team BTC City represents cooperation, ultramaraton athlete Miha Podgornik is the ambassador of determination, Athletic Federation of Slovenia and their athlete Snežana Rodić is the ambassador of knowledge, ca-noeist Benjamin Savšek is a role model for responsibility and Marin Medak stands for enthusiasm.

The Company published all of our sponsorship and donated funds on the ELES company website www.eles.si under the Public Informa-tion section in accordance with the Public Information Access Act.

Sponsorships and donations by purpose

62%

7%

1%

10%

20%

Sports and Recreation Education and Science Humanitarian Action Culture Environmental Protection

93


Promoting energy literacy

The importance of resources, extraction and conservation of en-ergy and its costs are becoming increasingly important. More and more questions require an answer. The company ELES is aware that energy is a major public issue that should be discussed with different audiences and with different thematic emphases, so the energy literacy is extremely important. Only a high rate of energy literacy among people can contribute to rational discussions based on facts and figures regarding the energy future of Slovenia.

The company initiated the campaign on energy literacy awareness already years ago. Because the future depends on youth, ELES gives prime attention to raising the energy literacy of children and youth. Understanding the importance of activities performed by ELES is of key importance for greater social acceptance and support of our operations, hence our commitment to keep promoting the energy literacy of children and youth through formal and informal forms of education. An example of this is the Elektrofest science festival, organized by ELES and other established electric power companies and institutions. It took place in September 2015 and almost 500 pupils attended. At the event, we were busting the myths on elec-tromagnetic radiation and we also organized an entertainment program with young talents - acrobats and “guerrilla” Birko”.

We supported the implementation of Summer Camp of Innova-tive Technologies, which is traditionally organized by the Faculty of Electrical Engineering. The camp took place between 17 and 21 Au-gust. The team of researchers and students of electrical engineer-ing was joined by 73 pupils that finished 8th or 9th grade of primary school and by 64 pupils from 1st to 3rd year of secondary school. The participants of the summer camp were able to choose between a number of workshops, which were based on common active learn-ing, offered practical examples following the “hands-on” approach and a lot of autonomous work with state-of-the-art technical equip-ment. Within one week, the participants created real products that

Impressions from Elektrofest 2015.

In 2015, we were once again the main supporter of the interna-tional project EN-LITE, which aims to increase the interest for en-ergy themes and their understanding among the pupils, students, researchers, teachers and professors (mentors), representatives of non-governmental organisation and the media. The aim of the project is to promote constructive, knowledge-based effective inclu-sion in creation of energy future through implementation of energy concepts, strategies, policies and projects. In the long-term, this project wishes to support creators of policies in the preparation and adoption of realistic national low carbon energy strategy. In Janu-ary 2015, we organized a round table titled “Why is energy literacy important and how can we enhance it?” in our facilities within the framework of the EN-LITE project. The round table was attended by more than 80 representatives from the fields of education, energy, decision-makers, development agencies, non-governmental and professional organizations.

Impressions from Elektrofest 2015.

94

Professional inclusion in debates on energy future

As the Slovenian system operator of the transmission network, we are striving to regularly and efficiently share our knowledge and experience. For this reason, the experts from ELES are regularly in-volved in public debates on energy future and energy challenges of Slovenia:

• In 2015, we actively participated in the drafting of Slovenian En-ergy Concept;

• In 2015, we continued to actively participate in the domestic and foreign professional energy events and conferences as initiators, lecturers and commentators (12th Conference of Slovenian Power Engineers CIGRÉ-CIRED 2015, 13th International Workshop on Electric Power Control Centres, 3rd Green forum, 17th Days of Pow-er Engineers, En.odmev 015, En.grids 015, Innovation in Energy 2015, Conference on Reliability of Electricity Supply).

Awards ceremony in Celje for the best participants of the Ecoquiz for Secondary Schools.

can be used at home, in school or to have fun with friends. They were guided through a program by experienced mentors and young experts from the fields, who introduced them to the world of con-temporary electrical engineering and multimedia through relaxed, dynamic and creative cooperation.

In the pursuit of our effort to spread energy literacy, the Company also sponsors the international programme of Eco Schools – Eco Quiz for Secondary Schools on the theme of “Energy reserve”. Young people competed in knowledge of the topics of energy gen-eration and energy efficiency. We also enabled the production of the brochure Energy Reserve, which helped the pupils to prepare for the quiz.

95

SIGNIFICANT POST REPORTING EVENTS

From the date of the financial statements until the date of preparation of this report no events have been identified that would affect the truthfulness and fairness of the financial statements presented for 2015.

96

ENDORSEMENT OF THE ANNUAL REPORT

Pursuant to Article 60 of the Companies Act the Management guarantees that the Annual Report of ELES, d.o.o. is compiled and shall be published in accor-dance with the Slovenian Accounting Standards and the Companies Act, safe for that part which pertains to the acknowledgement of revenues, where the Management respected the provisions of Article 120 of the EA-1.




98

As the national electric power system operator, we anchor our worldview in the responsibility of transmitting the energy that supplies the world in which we live and help create a better tomorrow.

100

Photograph by: Petra Venta

101

10.1 Statement on the Management's Responsibility and Corporate Gov-ernance

Statement on the Management's Responsibility

In endorsing the financial statements for the year ended 31 December 2015 and the pertaining notes to the financial statements, the Management of ELES, d.o.o. confirms that they have been compiled in accordance with the appropri-ate accounting guidelines, the accounting estimates were drawn up pursuant to such principles as prudence and due diligence and the financial statements present a true and fair reflection of the results of the financial situation as well as the operations of ELES, d.o.o. in 2015.

The Management is responsible for the appropriate management of account-ancy, for adopting appropriate measures to protect the Company’s property and other assets and for preventing and detecting any misuse and other irregu-larities, and confirms that the financial statements and pertaining notes are pre-sented on the basis of accounting assumption, which takes into consideration the principle of going concern and in line with the applicable legislation and Slovenian Accounting Standards, safe for the part pertaining to the acknowl-edgement of revenues whereat the Management respected the provisions of Article 120 of the EA-1 and the opinions issued by the Institute of Public Admin-istration and the Tax Administration of the Republic of Slovenia.


FINANCIAL REPORT



102

10.2 Financial Statements

BALANCE SHEET in euros

ASSETS 31 DEC 2015 31 DEC 2014

A. LONG-TERM FIXED ASSETS 570,197,986 565,606,964

I.Intangible fixed assets and long-term deferred costs and ac-crued revenues

54,528,828 48,113,999

1. Long-term property rights 54,528,828 48,113,999II. Tangible fixed assets 420,580,010 421,763,200

1. Land and buildings 199,143,692 200,317,914a) Land 15,042,781 14,909,472b) Buildings 184,100,911 185,408,442

2. Equipment and spare parts 190,161,838 193,693,9183. Other tangible fixed assets 112,540 76,2354. Tangible fixed assets being acquired 31,161,939 27,675,133

a) Tangible assets under construction or in production 30,883,390 25,241,981b) Advances for acquisition of fixed assets 278,549 2,433,152

III. Investment properties 0 0IV. Long-term financial investments 88,944,479 92,167,923

1. Long-term financial investments save loans 87,144,464 80,720,261a) Shares and equity interests in the Group 85,614,194 79,024,063b) Shares and equity interests in associates 450,000 450,000c) Other shares and equity interests 1,080,270 1,246,198

2. Long-term loans 1,800,015 11,447,662a) Long-term loans given to companies in the Group 1,800,015 11,447,662

V. Long-term operating receivables 3,036,499 207,9911. Long-term operating receivables due by companies in the Group 2,651,649 02. Long-term operating receivables due by others 384,850 207,991

VI. Deferred tax assets 3,108,170 3,353,851

B. SHORT-TERM ASSETS 103,089,512 80,330,207 II. Inventories 2,151,534 2,509,875

1. Materials 2,151,534 2,509,875III. Short-term financial investments 28,207,165 23,000,000

1. Short-term loans to companies in the Group 3,207,165 02. Other short-term loans 25,000,000 23,000,000

IV. Short-term operating receivables 25,279,669 31,250,3481. Short-term operating receivables due by companies in the Group 828,964 3,792,0692. Short-term accounts receivables 21,503,380 22,615,9533. Short-term operating receivables due by others 2,947,325 4,842,326

V. Cash and cash equivalents 47,451,144 23,569,984

C. DEFERRED COSTS(EXPENSES) AND ACCRUED REVENUES 816,301 10,383,284ASSETS 674,103,799 656,320,455Off-balance assets 24,731,780 24,667,269

103

1O FINANCIAL REPORT


LIABILITIES 31 DEC 2015 31 DEC 2014

A. EQUITY 380,433,983 379,785,978

I. Called-up capital 177,469,516 177,469,516

1. Share capital 177,469,516 177,469,516

II. Capital reserves 156,936,162 156,936,162

III. Revenue reserves 43,818,036 43,317,791

1. Legal reserves 8,518,911 8,018,666

2. Other revenue reserves 35,299,125 35,299,125

IV. Revaluation adjustment surplus -4,755,425 -4,971,860

V. Retained earnings 0 0

VI. Net profit (or loss) for financial year 6,965,694 7,034,369

B.PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES

191,775,247 176,027,885

1. Provisions for pensions and similar liabilities 5,202,252 4,811,363

2. Other provisions 1,581,976 1,883,253

3. Long-term accrued costs and deferred revenues 184,991,019 169,333,269

C. LONG-TERM FINANCIAL AND OPERATING LIABILITIES 57,164,104 60,987,799

I. Long-term financial liabilities 56,662,653 60,164,469

1. Long-term financial liabilities to companies in the Group 0 777,647

2. Long-term financial liabilities to banks 50,992,823 53,210,966

3. Other long-term financial liabilities 5,669,830 6,175,856

II. Long-term operating liabilities 428,246 749,713

1. Long-term operating liabilities to companies in the Group 0 0

2. Long-term operating liabilities arising from advances 428,246 749,713

III. Deferred tax liabilities 73,205 73,617

D. SHORT-TERM FINANCIAL AND OPERATING LIABILITIES 42,473,249 37,595,002

II. Short-term financial liabilities 8,214,342 12,659,034

1. Short-term financial liabilities to companies in the Group 3,207,165 7,070,000

2. Short-term financial liabilities to banks 5,007,177 5,589,034

III. Short-term operating liabilities 34,258,907 24,935,968

1. Short-term operating liabilities to companies in the Group 634 32,175

2. Short-term accounts payable 29,889,694 18,163,964

3. Short-term operating liabilities arising from advances 178,318 211,228

4. Other short-term operating liabilities 4,190,261 6,528,601

E. ACCRUED COSTS (EXPENSES) AND DEFERRED REVENUES 2,257,216 1,923,791

LIABILITIES 674,103,799 656,320,455

Off-balance liabilities 24,731,780 24,667,269

104

INCOME STATEMENT in euros

Item 2015 2014

1. Net sales revenues 148,681,658 136,926,519

a. On domestic market 115,758,701 120,916,019

b. On foreign market 32,922,957 16,010,500

2. Changes in inventories and work-in-progress 0 0

3. Capitalised own products and services 1,988,924 2,383,795

4. Other operating revenues 2,027,228 1,630,056

OPERATING REVENUES (1+2+3+4) 152,697,810 140,940,370

5. Costs of goods, materials and services (a + b) 83,439,883 76,073,337

a. Costs of goods, materials sold and costs of materials used 33,768,896 30,609,031

b. Costs of services 49,670,987 45,464,306

6. Labour costs (a + b + c + d) 27,189,622 26,210,922

a. Costs of wages and salaries 20,788,378 19,789,685

b. Costs of pension insurance contributions 2,738,144 2,594,315

c. Costs of contributions and other taxes on wages and salaries 1,524,651 1,434,764

d. Other labour costs 2,138,449 2,392,158

7. Write-downs (a + b + c) 29,333,120 30,202,965

a. Depreciation and amortisation expenses 29,089,570 29,206,517

b. Revaluated operating expenses for intangible and tangible fixed assets 154,109 996,373

c. Revaluated operating expenses associated with current assets 89,441 75

8. Other operating expenses 958,520 769,358

OPERATING PROFIT (1+2+3+4-5-6-7-8) 11,776,665 7,683,788

9. Financial revenues from equity interests 372,017 43,082

a. Fianancial revenues from equity in companies in the Group 2,138 0

b. Fianancial revenues from equity in other companies 369,879 43,082

c. Financial revenues from other investments 0 0

10. Financial revenues from loans 265,268 637,693

a. Financial revenues from loans given to copmanies in the Group 110,704 153,517

b. Financial revenues from loans given to others 154,564 484,176

11. Financial revenues from operating receivables 25,600 532,606

a. Financial revenues from operating receivables due by others 25,600 532,606

12. Financial expenses arising from impairment and investment write-offs 0 34,413

13 Financial expenses arising from financial liabilities 1,616,869 2,013,814

a. Financial expenses arising from received bank loans 260,267 418,408

b. Financial expenses arising from other financial liabilities 1,356,602 1,595,406

14. Financial expenses arising from operating liabilities 647,308 4,657

a. Financial expenses for interest on the average balance surplus 642,070 0

b. Financial expenses arising from other operating liabilities 5,238 4,657

15. Other revenues 102,981 2,599,260

16. Other expenses 72,507 7,569

17. Corporate Income Tax 0 0

18. Deferred taxes -200,922 -745,700

19. NET PROFIT FOR THE FINANCIAL YEAR 10,004,925 8,690,276

(1+2+3+4-5-6-7-8+9+10+11-12-13-14+15-16-17-+18)

105

1O FINANCIAL REPORT

OTHER COMPREHENSIVE INCOME STATEMENT in euros

Item 2015 2014

Profit or loss for the financial year 10,004,925 8,690,276

Changes in revaluation surplus of intangible and tangible fixed assets 0 0

Net change in fair value of available-for-sale financial assets 417,987 -1,296,535

Foreign currency translation differences for foreign operations 0 0

Other comprehensive income -201,552 -239,100

TOTAL COMPREHENSIVE INCOME 10,221,360 7,154,641

STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM JANUARY TO DECEMBER 2014 in euros

CHANGES OF PARTICULAR TYPE OF EQUITY

SHARE CAPITAL

CAPITAL RESERVES

LEGAL RESERVES

OTHER REVENUE RESERVES

EQUITY RE-VALUATION

ADJUST-MENT

PROFIT BROUGHT FORWARD

NET PROFIT (OR LOSS)

FOR FINAN-CIAL YEAR

TOTAL EQUITY

I/1 II III/1 III/5 IV V/1 VI/1 VII

A. Opening balance as at 31 Dec 2013 177,469,516 156,936,162 7,457,202 35,299,125 -3,436,225 0 9,062,990 382,788,770

b) Value adjustments -1,094,443 -1,094,443

A.2 Opening balance in the reporting period as at 1st January 2014

177,469,516 156,936,162 7,457,202 35,299,125 -3,436,225 0 7,968,547 381,694,327

B.1. Changes in equity

a) Dividends paid -9,062,990 -9,062,990

Total B.1. 0 -9,062,990 -9,062,990

B.2. Total comprehensive income for the financial year

a) Entry of net profit/loss for the financial year 11,229,261

b) Revaluation surplus of financial investments -1,296,535

c) Other comprehensive inco-me of the reporting period -239,100

Total B.2. -1,535,635 11,229,261 9,693,626


a) Distribution of net profit for the period to other equity components

b) Distribution of net profit for the priod to other equity components based on a de-cision of the Management and Supervisory Board

561,463 9,062,990 -9,624,453 0

Total B.3. 561,463 0 0 9,062,990 -9,624,453 0

C. Closing balance as at 31 Dec 2014 177,469,516 156,936,162 8,018,665 35,299,125 -4,971,860 0 9,573,354 382,324,963

Accumulated profit 0 9,573,354 9,573,354

106

STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM JANUARY TO DECEMBER 2015 in euros

CHANGES OF PARTICULAR TYPE OF EQUITY

SHARE CAPITAL

CAPITAL RESERVES

LEGAL RESERVES

OTHER REVENUE RESERVES

EQUITY RE-VALUATION

ADJUST-MENT

PROFIT BROUGHT FORWARD

NET PROFIT (OR LOSS)

FOR FINAN-CIAL YEAR

TOTAL EQUITY

I/1 II III/1 III/5 IV V/1 VI/1 VII

A. Opening balance as at 31 Dec 2014

177,469,516 156,936,162 8,018,665 35,299,125 -4,971,860 0 9,573,354 382,324,963

b) Value adjustments -2,538,985 -2,538,985

A.2 Opening balance in the reporting period as at 1st January 2014

177,469,516 156,936,162 8,018,665 35,299,125 -4,971,860 0 7,034,369 379,785,978


a) Dividends paid -9,573,355 -9,573,355 -19,146,710

Total B.1. 0 -9,573,355 -9,573,355 -19,146,710

B.2. Total comprehensive income for the financial year

a) Entry of net profit/loss for the financial year

10,004,925

b) Revaluation surplus of financial investments

417,987

c) Other comprehensive income of the reporting period

-201,552

Total B.2. 216,435 10,004,925 10,221,360


a) Distribution of net profit for the period to other equity components

b) Distribution of net profit for the priod to other equity components based on a de-cision of the Management and Supervisory Board

500,245 9,573,355 -500,245 9,573,355

Total B.3. 500,245 0 0 9,573,355 -500,245 9,573,355

C. Closing balance as at 31 Dec 2015

177,469,516 156,936,162 8,518,910 35,299,125 -4,755,425 0 6,965,694 380,433,983

Accumulated profit 0 6,965,694 6,965,694

CASH FLOW in euros

Item 1 Jan-31 Dec 2015 1 Jan-31 Dec 2014

A. CASH FLOW FROM OPERATING ACTIVITIES

a. Items of operating activities 40,641,813 38,615,638

Operating revenues and financial revenues from operating receivables 152,795,544 141,725,076

Operating expenses save amortization (depreciation) and financial expens-es

-112,153,731 -103,109,438

Corporate Income Tax and other taxes not included in operating expenses 0 0

b. Changes to net current assets as in items of balance sheet 26,025,655 34,995,458

Opening less closing operating receivables 3,142,171 3,223,347

Opening less closing deferred costs and accrued revenues 9,566,983 -652,413

Opening less closing deferred tax receivables 0 438,950

Opening less closing assets held for sale 0 0

Opening less closing inventories 358,341 39,586

Closing less opening operating liabilities -2,522,627 -3,080,776

Closing less opening accrued costs and deferred revenues and provisions 15,480,787 35,026,764

Closing less opening deferred tax liabilities 0 0

c. Net cash flow operating revenues/liabilities (a+b) 66,667,468 73,611,096

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1O FINANCIAL REPORT

CASH FLOW in euros

1 Jan-31 Dec 2015 1 Jan-31 Dec 2014

B. CASH FLOW FROM INVESTMENT ACTIVITIES

a. Inflows from investment activities 797,664 569,001

Revenues from investments activities 637,285 524,451

Revenues from disposal of intangible assets 0 0

Revenues from disposal of tangible fixed assets 160,379 44,550

Revenues from disposal of investment property 0

Revenues from disposal of long-term financial investments 0 0

Revenues from disposal of short-term financial investments 0 0

b. Outflows pertaining to investment activities -24,793,748 -53,474,492

Acquisition of intangible assets -8,461,285 -7,758,002

Acquisition of tangible fixed assets -14,295,463 -30,578,990

Acquisition of investment property 0 0

Acquisition of long-term financial investments -37,000 -137,500

Acquisition of short-term financial investments -2,000,000 -15,000,000

c. Net cash (inflows and outflows) used in investment activities (a+b) -23,996,084 -52,905,491

C. CASH FLOW FROM FINANCING ACTIVITIES

a. Inflows from financing activities 0 0

Inflows from paid-in capital 0 0

Inflows from an increase in long-term financial liabilities 0 0

Inflows from an increase in short-term financial liabilities 0 0

b. Outflows pertaining to financing activities -18,790,224 -20,356,990

Outflows from interests pertaining to financing activities -1,616,869 -1,894,000

Repayment of capital 0 0

Repayment of long-term financial liabilities -2,800,000 -2,800,000

Repayment of short-term financial liabilities -4,800,000 -6,600,000

Dividends paid -9,573,355 -9,062,990

c. Net cash used in financing activities (a+b) -18,790,224 -20,356,990

D. CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 47,451,144 23,569,984

Financial result in the period (sum of Ac, Bc and Cc) 23,881,160 348,615

Opening balance of cash and cash equivalents 23,569,984 23,221,369

108

10.3 Notes to the Financial Statements

Reporting Entity

ELES d.o.o. Ljubljana has its registered office at Hajdrihova 2 in Lju-bljana.

The financial year corresponds to the calendar from 1 January 2015 to 31 December 2015.

The annual reports of the companies in the Group and the consoli-dated financial statements are available for inspection at the reg-istered office of the parent company ELES d.o.o., Ljubljana, Hajdri-hova 2.

Statement on Conformity

The Company compiles its financial statements pursuant to the Slovenian Accounting Standards (SAS) and the Companies Act-1. The provisions of the Slovenian Accounting Standards are directly applied when items are presented and evaluated, safe for the part pertaining to the acknowledgement of revenues whereat the Man-agement Board respected the provisions of Article 120 of the EA-1. The accounting guidelines and bases for evaluation are presented with notes to individual items of the financial statements.

Basis for the preparation of the financial statements

The financial statements are presented on the basis of fundamental accounting assumptions which take into consideration the princi-ples of accrual (safe for the acknowledgement of revenues) and go-ing concern. The criteria of understandability, relevance, reliability and comparability were applied when the accounting guidelines and financial statements were complied and when the accounting was performed. Sufficient assurance is thus made for the financial

statements to be accurate and to comply with all legal require-ments. The principle of prudence is taken into consideration thus indicating that the disclosed profits recorded as at 31 December 2015 have already been realised, and that all foreseeable risks ad losses recorded in the 2015 financial year or in previous financial years have already been taken into consideration.

Correction of material prior period error

The correction of revenues from the sale of cross-border trans-mission capacities deferred in 2014

In preparing the financial statements for 2015 the Company made a correction in accordance with the IAS 8 arising from the deferred revenues and the creation of long-term accrued costs and deferred revenues as at 31 December 2014. The Company executed the correction with the adjustment of comparable data in the 2014 financial statements. Against the net profit in 2014 the Company deferred the revenues arising from the sale of cross-border transmis-sion capacities at auctions in the amount of 2,538,985 euros and in the same amount increased long-term accrued costs and deferred revenues. Correction stems from an error which the Company made in the calculation of the deviations from the 2014 regulatory frame-work. The error was found by the Energy Agency in the process of supervision of the implementation of the regulatory framework af-ter the completion of the audit of financial statements and annual report for 2014.

In accordance with the aforementioned, the Company made a cor-responding conversion of accounting data for 2014 as shown in the table below.

in euros

EFFECT ON PROFIT AND LOSSREPORTING IN 2014 AFTER

CORRECTIONCORRECTION REPORTING IN 2014

Operating revenues 140,940,370 -2,538,985 143,479,355

Net profit for financial year 8,690,276 -2,538,985 11,229,261

in euros

EFFECT ON BALANCE SHEETREPORTING IN 2014 AFTER

CORRECTIONCORRECTION REPORTING IN 2014

Equity 379,785,978 -2,538,985 382,324,963

Net profit for financial year 7,034,369 -2,538,985 9,573,354

Provisions and long-term accrued costs and deferred revenues

176,027,885 2,538,985 173,488,900

Long-term accrued costs and deferred revenues 169,333,269 2,538,985 166,794,284

Summary of Significant Accounting Guidelines

a.) Functional and presentation currency The financial statements and tables are presented in euros without cents.

b.) Conversion of foreign currencies Transactions in foreign currencies are converted into euros at the exchange rate on the transaction date. Cash and cash equivalents and liabilities denominated in foreign currencies at the end of the financial year are converted into euros at the then applicable ECB

109

1O FINANCIAL REPORT

exchange rate. Exchange differences are acknowledged in the in-come statement.

c.) Intangible and tangible assetsUpon initial acknowledgement, the intangible and tangible assets are recorded at their procurement value. The procurement value is composed of costs, which may be directly attributed to the acquisi-tion of the individual asset.

Upon initial acknowledgement, the Company revaluates the intan-gible and tangible assets at cost model less accumulated deprecia-tion/amortisation adjustment and accumulated losses due to im-pairment.

The Company estimates that the book values are recorded at least at the level of recoverable value and therefore no impairments were

required.

Any subsequent expenses in relation with the intangible assets and expenses of replacing a particular part of fixed asset are acknowl-edged at the assets’ book value when it is probable that future economic benefits associated with the operation of this part shall inflow. All other expenses (e.g., routine maintenance) are acknowl-edged in the income statement as expenses when incurred.

Depreciation/amortisation and useful life The method of straight-line depreciation is applied. Deprecia-tion/amortisation is calculated individually per particular tangible fixed assets and intangible assets by way of applying the adopted straight-line depreciation rates. The applied depreciation/amortisa-tion rates of tangible fixed assets and long-term intangible assets are based on the estimated useful life of assets.

The useful life of each tangible fixed asset or an intangible asset depends on the expected physical wear, the expected technical ob-solescence, the expected economic obsolescence and the expected statutory and other restrictions of use. As the useful life of tangible assets the Company takes into consideration a period which would be the shortest for each of the aforementioned factors.

The useful lives and residual values are reviewed (measured) at least once a year, i.e. on the balance sheet date. The useful life of tangible fixed assets is longer than one year.

d.) Long-term financial investmentsLong-term financial investments in shares and stakes in subsidiaries, affiliated companies and jointly-controlled entity are valued at their procurement value.

Long-term financial investments in shares and stakes in other com-panies are classified under financial assets available for sale. The Company measures and valuates them as follows:

• long-term investments in shares and stakes of companies not listed on a stock exchange, and their fair value may not be reli-

ably evaluated since the range of reasonable fair value estimates is significant and the probability of the various estimates may be hard to assess, are valued at procurement value;

• equity investments in companies listed on the stock exchange are valued at fair value through equity.

At the end of each financial year, the Company examine the need for impairment of long-term financial investments.

If there is evidence of impairment of financial investment, it needs to be revalued due to impairment. Impairment of investment in subsidiary is equal to the amount by which the carrying amount of the investment exceeds the recoverable amount of the investment.

The recoverable amount is:

• fair value less costs to sell or

• value in use (the present value of estimated future surplus of in-flows over expenditure, which is expected to occur in the continu-ing use of the asset and from its disposal at the end of its useful life), depending on which is greater.

CLASSES OF TANGIBLE FIXED ASSETS DEPRECIATION RATE

Easements 1 %

Construction structures 1.3 % - 8 %

Equipment 2 % - 25 %

Computer equipment 10 % - 33.33 %

Mobile phones 50 %

Small inventories 20 % - 50 %

110

Derivative financial instruments and hedge accounting

ELES uses derivative financial instruments to hedge against the variability in cash flows due to changes in interest rates of long-term loan.

The company fulfils the terms and conditions for hedge account-ing. With the introduction of hedge accounting relevant documents on hedging were prepared by setting the hedging relationship, the nature of risk, hedged item, instruments to hedge against risks and method of assessing hedge effectiveness. The effectiveness of hedging, actual and preliminary, is checked once a year.

Derivative financial instruments are valued at their fair value. When revaluated, a part of the profit or loss deriving from the instrument of cash flow hedge, which is determined to be an effective hedge, is acknowledged in other comprehensive income and directly in eq-uity as a revaluation surplus. Any ineffective portion of the profit or loss is acknowledged immediately in the income statement as financial revenue or expense.

When a hedging instrument expires, when it is sold or when the hedging no longer meets the conditions for a hedge accounting, any cumulative profit or loss arising from the hedging instrument is acknowledged separately, directly in other comprehensive income and accumulates in equity until the announced transaction is ac-knowledged in profit or loss. If it is no longer expected that the an-nounced transaction shall occur, the related cumulative profit or loss that was acknowledged directly in other comprehensive income, is immediately transferred to the income statement.

Loans are valued at settlement value taking into consideration the applicable interest rates.

e.) ReceivablesUpon just expectation that receivables shall be paid, all receivables are recorded at the outset in the amount that proceed from the per-tinent documentation.

Those receivables for which it is presumed that settlement shall not be accomplished in due time or in the entire amount, are listed as doubtful receivables. Furthermore, if legal proceedings have been instigated in relation to their collection, they are shown as disputed receivables.

The value adjustment of receivables is performed on the basis of the evaluation of recoverability of individual receivable. When the write–off of receivable is justified by a corresponding document, it is charged against such established value adjustment of receivables. Subsequent increases in receivables increase operating (other) rev-

enues or financial revenues, while the reductions increase (other) expenses.

Once a year, before the completion of the annual financial state-ment, the Company reviews receivables and adjust their value due to impairment if necessary.

For the accounts receivables which remained unpaid on due date, adjustments are made to their value chargeable to revaluated oper-ating expenses, namely according to the following rules:

• at the end of the financial year a value adjustment is made to receivables of small values which remain unpaid within 60 days after the due date. If they remain unpaid, such receivables are removed from the books after three years. Receivables of smaller values are those, whose value is lower than the court fee charged for proposal and decision on execution pursuant to the Court Fees Act,

• value adjustment is made to other receivables of higher values on the individual basis as to the (payment assessment of) receivable,

• immediately after the proceedings have been instigated value ad-justment is made for the entire value of receivables for which ex-ecution, compulsory settlement or bankruptcy proceedings have been instigated.

Deferred tax assets are acknowledged for amounts of corporate in-come tax, which shall be recoverable in future periods, and which are a result of deductible temporary differences, and unused tax losses and unused tax credits brought forward to future periods. They are acknowledged only when it is probable that taxable profits shall be available against which deductible temporary differences, unused tax losses and tax credits may be utilized and are not discounted.

f.) Inventories Purchases of materials are recorded as inventories and valued at the procurement value with other accompanying costs. The value of stocks of materials are recorded at the procurement value of in-ventories. Material consumption value is recognized using the FIFO (First In First Out). As of 1 January 2015 the company introduced a change in the valuation of inventories of materials in warehouses. Until 31 December 2014, the method applied was the weighted av-erage prices; however, as of 1 January 2015, the FIFO method was envisaged.

Based on the provisions of the second paragraph of the Introduc-tion to SAS a company using a new guideline for the back (as if it has always used it). In the application of accounting guideline retrospectively comparative amounts of each affected item of eq-uity (retained earnings) are recalculated for the comparative period presented and the other comparative amounts as if the account-

111

1O FINANCIAL REPORT

ing policy is applied from the outset. The Company establishes that the recalculation of inventories using both methods, as laid down in the second paragraph of Item 9 of the Introduction to SAS, is not feasible, and taking into consideration the SAS 28.45 – the principle of economy, which requires that by controlling the effects achieved should not be lower than the cost which arise in this connection. At the same time the Company applies also the provisions of IAS 8, paragraph 39: “If a company because of the impracticality of as-sessment does not disclose the amount of the effect in future peri-ods, it shall disclose that fact.”

The difference in material consumption is insignificant in value, and thus the Company justifies and evaluates that the difference in value due to changes in inventory valuation is minimum – differ-ence in value of inventories used and the value differential balance of inventories at 31 December 2015 is minimum. The differences represent insignificant amounts.

At the end of the financial year the value of inventories is verified, which should not exceed the value calculated according to the most recent purchase prices. Last purchase price is the price for individual materials purchased in the last quarter of the financial year.

Inventories are revalued due to impairment if their book value sub-stantially exceeds their net realizable value.

g.) Short-term financial investmentsShort-term financial investments relate to loans and, upon initial acknowledgement, these loans are valued at settlement value ap-plying the effective interest method.

h.) Cash and cash equivalentsUpon initial acknowledgement, an item of cash is recorded in an amount that proceeds from the pertinent documentation, after ex-amining that it has such a nature. Cash and cash equivalents consist of deposits up to three months held at banks, cash in hand and cash for specific purposes.

i.) Short-term accrued and deferred itemsShort-term deferred costs and accrued revenues include costs de-ferred in short-term and accrued revenues, while the short-term ac-crued costs and deferred revenues include short-term accrued costs and revenues deferred in short-term.

j.) EquityThe Company’s equity comprises share capital, capital reserves, which are created on the basis of general equity revaluation ad-justment, profit reserves, revaluation surplus and net profit or loss recorded in 2015.

k.) ProvisionsProvisions are acknowledged when the Company has legal or indi-rect obligations arising from past events, and which may be valued reliably and it is probable that an outflow of sources, which enable

economic benefits, shall be necessary when the liability is settled.

In compliance with legal regulations, collective agreement and internal rules the Company is required to pay jubilee awards to its employees and severance payments upon their retirement. The long-term provisions are created for that purpose. There are no other pension liabilities. The value of long-term provisions the pre-sent value of the expenses required for settling the long-term liabili-ties identified as at the balance sheet date based on an actuarial calculation taking into account the risks and uncertainties and the amount of provisions for potential liabilities from lawsuits.

l.) Long-term accrued costs and deferred revenuesThe Company acknowledges long-term accrued costs and deferred revenues for long-term deferred revenues in the event the latter shall cover the estimated expenses in a period longer than one year.

Under the said item the Company includes also appropriated assets acquired free of charged to finance investments, which the Com-pany reduces with the depreciation of fixed assets from this source.

m.) LiabilitiesLong-term liabilities are separated into the financial and operating liabilities. Long-term and short-term liabilities are measured at set-tlement cost using the effective interest method.

The fair value of debts is reviewed at least once a year. Accrued in-terests of long-term debts, intended for investments are recorded pursuant to the provisions of the SAS so that the interests on the loan during construction is attributed to the investment in progress.

Liabilities for deferred tax are acknowledged when the assets are revaluated, while no adjustments are made in the calculation of cor-porate income tax. Should the revaluation surplus from the revalua-tion increase, the calculated liability for deferred tax is recorded di-rectly against the revaluation surplus and does not affect the profit or loss of the Company. Deferred tax liabilities are not discounted.

n.) Acknowledgement of revenuesRevenues are acknowledged when an increase in economic benefits in the accounting period is connected to an increase in assets or a reduction in debt and the increase may be measured reliably. Rev-enues and increases in assets or reduction in liabilities are acknowl-edged simultaneously.

Article 120 of the Energy Act (EA-1 Official Gazette 17/2014) sets forth as follows:

(1) The electricity system operator shall identify deviations from the regulatory framework for particular years shown as a surplus or deficit from network charges and shall disclose the established deviations in the notes to the accounts.

(2) A surplus of regulated annual revenue over the actual annual eligible costs of the electricity system operator shall be deemed the surplus from network charges. It shall be disclosed as the sur-

112

plus of the total annual amount of the charged network charges (minus the deficit from the network charges from the previous years, or plus the surplus from network charges from the previ-ous years) plus the amount of other annual revenue from elec-tricity system operator activity over the amount of actual annual eligible costs.

(4) The electricity system operator shall use the network charges surplus as the payment for the electricity system operator ser-vice of general economic interest for the following year or years; therefore, the surplus of the network charges shall be disclosed as overpaid amounts in the year of the regulatory period in which the surplus is established. In setting the network charges for the subsequent regulatory period, the Agency shall take the surplus from network charges into account as network charges already charged in previous periods.

Considering the foregoing, ELES in 2010 decreased (deferred) reve-nues from the cross-border transmission capacities (CBTC) allocated at auctions (the surplus of network charges) and recorded the latter under long-term accrued costs and deferred revenues.

Operating revenues are revenues from sales and other revenue as-sociated with products and services. Capitalized own services rep-resent services for the Company’s own investments which ELES performed by itself, instead of an external contractor. Other oper-ating revenues consist of revenues from the reversal of provisions and revenues from the sales of fixed assets, or revaluated operat-ing revenues arising from the disposal of tangible fixed assets and intangible assets as surpluses of sales value over their book value.

o.) Financial revenuesFinancial revenues are revenues from investment activity. They arise in relation to long- and short-term financial investments as well as in connection with operating receivables. They break down into fi-nancial revenues which do not depend on profit or loss (interests received) and financial revenues which depend on profit or loss (divi-dends received).

p.) Acknowledgement of expensesExpenses are acknowledged when the decrease in the commercial or economic benefits during the accounting period is related to a decrease in assets or an increase in liabilities, and when said de-crease may be measured reliably.

r.) Operating expenses Operating expenses equal the accrued costs in the accounting pe-riod.

Revaluated operating expenses are acknowledged when appropri-ate revaluation is carried out.

Revaluated operating expenses of intangible and tangible fixed as-sets represent loss due to impairment where the recoverable value of these assets is lower than their book value and their book value is reduced to the recoverable value.

s.) Financial expensesFinancial expenses are expenses arising from financial investments write-downs and write-offs, financial liabilities and operating liabili-ties.

t.) Deferred tax formationDeferred tax assets are recorded using the balance sheet liability method for temporary differences arising between the tax bases of assets and liabilities as well as their book values. Deferred tax is determined using tax rate applicable as at the balance sheet date, and which is expected to be used when the deferred tax assets are realized or the deferred tax liability is settled.

A deferred tax asset is acknowledged in the extent for which it is probable that the availability of future taxable profits against which the deferred tax asset can be utilized in the future.

u.) Cash flow statementThe cash flow statement is prepared using the indirect method, Format II. The data on the non-cash transactions are not included in the cash flow statement. The cash and cash equivalents include cash in bank accounts and short-term bank deposits redeemable at notice of up to 90 days.

in euros

INTANGIBLE ASSETS AND LONG-TERM DEFERRED COSTS AND ACCRUED REVENUES

31 DEC 2015 31 DEC 2014

Long-term property rights 54,528,828 48,113,999

Total intangible assets 54,528,828 48,113,999

Intangible assets include investments in acquired long-term prop-erty rights; easements in the amount of 22,302,100 euros, and an investment in Golica HPP (7,008,365 euros) represent the greater

part and the rest software. 20 percent of material rights of the Goli-ca PSHPP(Austria) appertain to ELES.

10.3.1 Disclosure of Balance Sheet Item

Intangible Assets and Long-Term Deferred Costs and Accrued Revenues

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1O FINANCIAL REPORT

in euros

INTANGIBLE FIXED ASSETS AND LONG-TERM DEFERRED COSTS AND ACCRUED REVENUES

LONG-TERM PROPERTY RIGHTS

EASEMENTSINTANGIBLE FIXED

ASSTES BEING AQUIRED

TOTAL

PROCURMENT VALUE

31 Dec 2014 41,526,494 23,296,786 13,614,912 78,438,192

Increase 5,534,015 336,472 9,720,598 15,591,085

Direct increase 5,514,457 336,472 8,220,414 14,071,343

Transfer of the entry 19,558 0 1,500,184 1,519,742

Decrease 211,869 600,000 5,923,842 6,735,712

Direct decrease 211,869 600,000 0 811,869

Transfer of the investments activation 0 0 4,423,659 4,423,659

Transfer of the entry 0 0 1,500,184 1,500,184

31 Dec 2015 46,848,639 23,033,259 17,411,668 87,293,565

VALUE ADJUSTMENT

31 Dec 2014 29,813,523 510,671 0 30,324,194

Increase 18,457 0 0 18,457

Direct increase 0 0 0 0

Transfer of the entry 18,457 0 0 18,457

Decrease 211,869 12,500 0 224,369

Direct decrease 211,869 12,500 0 224,369

Transfer of the entry 0 0 0 0

Depreciation/amortization 2,413,468 232,988 0 2,646,456

31 Dec 2015 32,033,579 731,158 0 32,764,737

NET BOOK VALUE

31 Dec 2014 11,712,971 22,786,116 13,614,912 48,113,999

31 Dec 2015 14,815,060 22,302,100 17,411,668 54,528,828

Increase in the procurement value of property rights resulted from the capitalised information system, namely investments in a stand-ardized information system ERP (1,512,053 euros), construction of the new National Control Centre of the EPS (3,344,370 euros) and easement rights on transmission lines of 2x400 kV Beričevo–Krško (324,473 euros) and other software activation (software packages). A reduction in the procurement value and accumulated deprecia-tion of property rights arose from the write-offs of software. The re-duction in the procurement value and accumulated depreciation of easement rights resulted from the write-off of activating invest-ment 2x400 kV Beričevo–Krško in 2013. The initial value of the acti-vation included the estimated value of the easement for one of the easement beneficiaries, for which legal proceeding were in progress at the time of activation. At the conclusion of the legal proceedings the value of the compensation was aligned which was lower than estimated.

Increase in intangible assets under construction or in production arose from an increase in the value of the software and easement rights from investments not yet completed, while the decrease was a result of the capitalisation of the software and easement rights.

114

Tangible fixed assets comprise land, buildings, equipment and small inventories, spare parts, assets under construction or in production and advances.

Transfers of entry refer to fixed assets which have been divided from one larger fixed asset into several component parts.

The actual increase in the procurement value arises mainly from the capitalisation of new investments and reconstructions of transmis-sion lines and substations.

BuildingsThe increase in the procurement value of the building was influ-enced by significant capitalisation of the buildings from the invest-ments and reconstructions, namely the 2x400 kV Beričevo–Krško transmission line (286,882 euros), 110/20 kV Podvelka substation (453,672 euros), implementation of Article 35 of the EA-1 on the 110 kV network (3,727,588 euros), elimination of consequences of the natural disaster which occurred on the 110 kV Ptuj–Breg trans-mission line (609,986 euros), the elimination of the natural disaster which on the 110 kV Gorica–Ajdovščina transmission line (206,370

Tangible Fixed Assets

Changes in the value of tangible fixed assetsin euros

TANGLIBLE FIXED ASSETS LAND BUILDINGSEQUIPMENT

AND SPARE PARTS

OTHER TAN-GLIBLE FIXED

ASSETS

TANGLIBLE FIXED ASSETS UNDER

CONSTRUCTION OR IN PRODUCTION

ADVANCES FOR ACQUISITION

OF FIXED ASSETS

TOTAL

PROCURMENT VALUE

31 Dec 2014 14,909,472 421,922,617 513,064,793 1,110,527 25,241,981 2,433,152 978,682,542

Increase: 133,309 7,288,277 17,017,079 59,388 43,947,157 275,949 68,721,159

Direct increase 133,309 6,878,756 14,928,502 59,388 29,045,526 275,949 51,321,430

Transfer of the entry 0 409,521 2,088,577 0 14,901,632 0 17,399,730

Decrease: 0 1,010,152 12,250,067 65,774 38,305,749 2,430,552 54,062,293

Direct decrease 0 606,964 10,149,572 65,774 56,194 2,430,552 13,309,056

Transfer of the investments activation

0 0 0 0 23,347,923 0 23,347,923

Transfer of the entry 0 403,188 2,100,495 0 14,901,632 0 17,405,315

31 Dec 2015 15,042,781 428,200,742 517,831,805 1,104,141 30,883,390 278,549 993,341,408

VALUE ADJUSTMENT

31 Dec 2014 0 236,514,175 319,370,874 1,034,292 0 0 556,919,342

Increase: 0 370,744 2,008,247 -35 0 0 2,378,956

Direct increase 0 0 11 -35 0 0 -24

Transfer of the entry 0 370,744 2,008,236 0 0 0 2,378,980

Decrease: 0 968,326 11,946,508 65,180 0 0 12,980,014

Direct decrease 0 603,451 9,913,947 65,180 0 0 10,582,578

Transfer of the entry 0 364,875 2,032,561 0 0 0 2,397,436

Depreciation/amortization 0 8,183,238 18,237,353 22,523 0 0 26,443,114

31 Dec 2015 0 244,099,831 327,669,966 991,600 0 0 572,761,398

NET BOOK VALUE

31 Dec 2014 14,909,472 185,408,442 193,693,918 76,235 25,241,981 2,433,152 421,763,200

31 Dec 2015 15,042,781 184,100,912 190,161,838 112,541 30,883,390 278,549 420,580,010

in euros

TANGIBLE FIXED ASSETS 31 DEC 2015 31 DEC 2014

Land 15,042,781 14,909,472

Buildings 184,100,911 185,408,442

Equipment and spare parts 190,161,838 193,693,918

Other tangible fixed assets 112,540 76,235

Tangible assets under construction or in production 30,883,390 25,241,981

Advances for acquisition of fixed assets 278,549 2,433,152

Total tangible fixed assets 420,580,010 421,763,200

115

1O FINANCIAL REPORT

euros), corrosion protection (393,441 euros), climbing systems for transmission lines (366,922 euros), Kleče data center (325,156 eu-ros) and others.

The decrease in the procurement value and value adjustment re-sulted from the write-downs due to capitalisation of the upgraded fixed assets (reconstructions of transmission lines, natural disaster, buildings, bays, etc...).

Equipment The increase in the procurement value of primary and secondary equipment and spare parts were mainly influenced by the increase in the 2x400 kV Beričevo–Krško (222,300 euros), Krško substation (867.687 euros), implementation of Article 35 of the EA-1 on the 110 kV network (7,728,500 euros), 110/20 kV Podvelka substation (1,501,594 euros), construction of a new National Control Centre of the EPS (924,118 euros), telecommunications network for EMS (840,929 euros), NPP 400 kV switchyard (467,354 euros), Kleče data center (343,516 euros), the establishment of diagnostic and analysis centre (333,656 euros), the elimination of the consequenc-

es of the natural disaster, which occurred on the 110 kV Ptuj–Breg transmission line (133,851 euros) and other capitalisations.

The decrease in the procurement value of the equipment and value adjustment resulted from the write-offs upon the capitalisation of upgraded fixed assets (TC software components, high-voltage equipment, computer equipment, etc...) as well as inventory write-offs (obsolete technology, usability and wear of equipment).

From the acquisition of intangible and tangible fixed assets, ELES recorded as at 31 December 2015 contractual obligations in the years ahead in the amount of 23,763,055.49 euros from the al-ready signed contracts for investment and reconstruction, which are partly unrealized.

Receivables for advances given for fixed assets in the amount of 3,549 euros are secured with bank guarantees, guarantees in the amount of 275,000 are secured with bills.

Fixed assets of the Company are free of any encumbrances.

The carrying value of intangible and tangible fixed assets as at 31 December 2015 compared to the balance as at 31 December 2014 increased by 5,231,639 euros. Guarantees in the amount

of 275,000 euros, which will be returned in 2016 are not included among the advances for tangible assets.

Increase in intangible and tangible fixed assets in 2015in euros

NEW INVESTMENTS IN 2015 FINANCIAL YEAR 37,359,215

Decrease with write-offs -883,403

Advances for tangible fixed assets -2,154,603

Depreciation/amortisation in the financial year -29,089,570

Total increase in long-term intangible and tangible fixed assets 5,231,639

116

Shares and stakes in the companies in the Group

• TALUM, d.d.The investment in Talum accounts for the largest portion of the in-vestments. ELES holds an 85.61 percent ownership stake. In 2015, an increase in the share capital of the company Talum was made by ELES in the amount of 6.6 million euros. An increase in stake of ELES from 84.71 percent to 85.61 percent ownership stake was thus made.

The business vision of Talum for the next medium-term period from 2016 to 2018, with the guidelines until 2020 is that with the energy-efficient and environmentally friendly production and pro-cessing of aluminum the company continues to rank among the most efficient producers of electrolytic aluminum and aluminum alloys in the world. In the field of slugs for tube and dose program, the company will become the largest and technologically most ad-vanced manufacturer in the world. An important cornerstone of its growth, the development of manufacturing castings, which will be in addition to the segment of low pressure and gravity die casting the company will enter the field of high-pressure cast iron-casting. A key focus is the company’s own development, production and mar-keting of technological equipment based on the company’s own

knowledge and experience. In the context of their own research and innovation center the company builds its own development of new materials, products and technology solutions. It will create new programs, which are based on the technological applications of alu-minum and industrial design.

For the purpose of determining the recoverable value, as defined by the International Accounting Standards the management of ELES d.o.o. prepared an estimate of the market value of the financial investment, less costs to sell by the method of the net asset value from the asset-based mode, on the assumption of continued opera-tion and on the assumption of liquidation pursuant to the balance as at 31 December 2015.

The market value of the investment, less costs to sell by the method of the net asset value is higher than the carrying value of the invest-ment, so there is no need for impairment of financial investment in the equity of TALUM d.d.

• Stelkom, d.o.o.: Since 2013 ELES holds a majority 56.26-percent stake in Stelkom d.o.o.. As at 31 December 2015 the total value of ELES’ investment amounted to 495,020 euros.

Long-term Financial Investmentsin euros

LONG-TERM FINANCIAL INVESTMENTS OWNERSHIP STAKE (IN %)

31 DEC 2015 INCREASE DECREASE 31 DEC 2014

1. STAKES AND SHARES IN THE GROUP 85,614,194 6,600,000 9,870 79,024,063

Talum, d.d. 85.61 85,119,174 6,600,000 78,519,174

Trgel, d.o.o. 100.0 0 9,870 9,870

Stelkom, d.o.o. 56.26 495,020 495,020

2. STAKES AND SHARES IN AFFILIATED COMPANIES 50,000 0 0 50,000

ELDOM, d.o.o. 25.0 50,000 50,000

3. JOINT VENTURE 400,000 0 0 400,000

BSP SouthPool 50.0 400,000 400,000

4. OTHER LONG-TERM INVESTMENTS 1,080,270 184,000 349,928 1,246,198

Allocation office (CAO) 12.5 0 62,500 62,500

Allocation office (CASC) 8.33 0 285,000 285,000

Allocation office (CAO SEE) 10.0 27,808 27,808

Allocation office (TSC NET) 8.33 174,500 37,000 137,500

Allocation office (JAO) 5.00 147,000 147,000 0

Holiday facilities 66,365 66,365

Informatika d.d. 4.5 90,008 90,008

Shares in banks and insurance companies 574,589 2,428 577,017

5. LONG-TERM LOANS GIVEN TO COMPANIES IN THE GROUP 1,800,015 0 9,647,647 11,447,662

Long-term loan (Talum) 1,800,015 9,647,647 11,447,662

Total long-term financial investments 88,944,479 6,784,000 10,007,445 92,167,923

117

1O FINANCIAL REPORT

• Trgel, d.o.o. was regularly liquidated in 2015 under the simplified procedure of liquidation and removed from the register on 8 July 2015.

Other long-term financial investments

• TSCNET Services GMBH I.G.: TSCNET was founded in 2014 by the system operators in Central and Eastern Europe with a view to coordinated operation in the field of strengthening the security of the entire transmission system, ensuring reliability and safe operation of the power supply in the region and control of the activities of transmission systems and their control centers. The share of ELES in the company’s share capital amounts to 2,500 euros. As at 31 December 2015 the company has 13 shareholders with equivalent shares. Based on the approved annual plans and resolutions of the TSCNET shareholders’ general meeting ELES also conducts payments to capital reserves; 135,000 euros in 2014 and 37,000 euros in 2015.

• Auction office JAO (CAO, CASC): Creation of the European auction offices is the substantive imple-mentation of the requirements of Regulation (EU) No. 1228/2003 as regards the regional coordination between the European system operators, mainly in the field of allocation of cross-border capacities and mechanisms of the management of cross-border congestions.Originally two auction companies – CAO and CASC – were set up in

2008. In 2015, they merged into the new joint venture JAO, which includes 20 European system operators.

Result of the merger is the payment of shares in profit and repay-ment of a part of the share capital and the exchange of shares into the shares of the new company JAO. In 2015, CAO paid out a share in profit in the amount of 84,123 euros. The share of ELES in the amount of 62,500 euros was transferred to the newly estab-lished auction office JAO. CASC has paid ELES a share in profit in the amount of 220,191euros. The share of ELES in the amount of 285,000 euros was transferred to the joint auction office JAO. From the shares transferred from CAO (62,500 euros) and CASC (285,000 euros), ELES received a return of investment in the amount of 200,500 euros, while the remaing amount of ELES’ initial invest-ment in the amount of 147,000 euros has been turned into an in-vestment in a newly established auction office JAO.

Long-term loans to the companies in the Group

Long-term loan in the amount of 1,800,014 euros was given to subsidiary Talum with repayment deadline of 28 February 2017 and fixed interest rate of 2.64 % per annum. The loan is apparent from Item 7 of the decision of the ELES’ General Meeting number 4-28/2012-226 of 28 November 2012 adopted by AUKN on behalf of the ELES’ founder – the Government of the RS.

Data on subsidiaries, affiliated company and jointly-controlled company in euros

EQUITY 31 DEC 2015

2015 PROFITOR LOSS

ELES’ INVESTMENT

OWNERSHIPSTAKE (IN %)

1. SUBSIDIARIES

Talum Group, Kidričevo, Tovarniška cesta 10 112,600,786 470,144 85,119,174 85.61

Stelkom, d.o.o., Špruha, Trzin 2,251,244 17,577 495,020 56.26

2. JOINTLY-CONTROLLED COMPANY

BSP - Regionalna energetska borza, Dunajska c.156, Ljubljana 2,266,221 685,718 400,000 50.00

3. AFFILIATED COMPANY

ELDOM, d.o.o., Vetrinjska 2, Maribor 268,915 12,613 50,000 25.00

118

Taking into consideration the available data on the operations of subsidiaries, affiliated company and jointly-controlled company for

2015, ELES estimates that for each individual investment there are no signs which would require impairment of the investments.

The value of shares of Triglav Insurance Company decreased by 2,428 euros (taking into consideration the quoted share price as at

31 December 2015), which was recorded as a decrease in revalua-tion surplus.

Long-term Operating Receivables

Deferred Tax Assets

Shares and stakes other companiesin euros

SHARES IN BANKS AND INSURANCE COMPANIES 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

1. Shares in Banka Koper 4,103 0 0 4,103

2. Shares in Triglav Insurance Company 572,914 0 2,428 570,486

Total shares in banks and insurance companies 577,016 0 2,428 579,444

in euros

LONG-TERM OPERATING RECEIVABLES 31 DEC 2014 DECREASE INCREASE 31 DEC 2015

Guarantees given for investments, judicial deposits 207,991 0 176,859 384,850

Receivables for dividends (Talum, d.d.) 0 0 2,651,649 2,651,649

Total long-term operating receivables 207,991 0 2,828,508 3,036,499

Long-term receivables arise from the receivables for the guarantees and judicial deposits, which ELES paid to owners of real estate under transmission lines for the purposes of compensation payments dur-ing the construction or reconstruction of transmission lines. In 2015, the guarantees increased.

In 2015, the unpaid dividends of the company Talum from 2007 were transferred to short-term receivables. Following the decision of the Talum’s general meeting these dividends will be paid by 30 June 2017.

in euros

DEFERRED TAXESDERIVATIVE FINAN-CIAL INSTRUMENTS

JUBILEE AWARDS AND SEVERANCE PAYMENTS

UPON RETIREMENT

REVALUATION OF FINAN-CIAL INVESTMENTS AND

RECEIVABLES

UNUSED INVEST-MENT ALLOWANCE

TOTAL

OPENING BALANCE AS AT 1 JAN 2015

1,050,098 470,150 655,810 1,177,793 3,353,851

In debit (credit) of profit or loss

0 -23,079 15,188 -193,031 -200,922

acknowledged receiv-ables for deferred tax

0 0 15,188 0 15,188

reversal of receivalbe for deferred tax

0 -23,079 0 -193,031 -216,110

change due to change in tax rate

0 0 0 0 0

In debit (credit) of equity

-86,024 41,265 0 0 -44,759

acknowledged receiv-ables for deferred tax

0 41,265 0 0 41,265

reversal of receivalbe for deferred tax

-86,024 0 0 0 -86,024

change due to change in tax rate

0 0 0 0 0

Closing balance as at 31 Dec 2015

964,074 488,336 670,998 984,762 3,108,170

119

1O FINANCIAL REPORT

In 2015, deferred tax assets from derivative financial instruments decreased as a result of a decrease in the negative surplus from revaluation in accordance with their fair value as at 31 December 2015.

Deferred tax assets arising from undrawn investment allowances reduced due to the correction of the value of undrawn allowances in 2014 (wrongly taken into account allowance for investments for damages which appertain to investments in construction).

The changes in 2015 were also from the provisions for severance payments and jubilee awards, which affect profit and equity.

Deferred tax assets increased also due to increase of valuation ad-justments of receivables.

Deferred tax assets are formed at 17 % tax rate.

The Company records the inventory of the material intended for the maintenance of fixed assets and small inventories. The Com-pany estimates that the book value of inventories is at least equal to the amount of their net realizable value. ELES has no inventories pledged.

With effect from 1 January 2015, the Company introduced the change of valuation of inventories of materials in warehouses. Un-til 31 December 2014, the method of weighted average price had

been applied, while FIFO method is used since as of 1 January 2015. The conversion of the used inventories pursuant the weighted aver-age price method compared with the FIFO method has not been made, as explained in the section of the summary of significant ac-counting policies under Item f.) Inventories.

At the regular annual inventorying material in the amount of 2,771 euros was written off. Surplus of material inventory is irrelevant.

Inventoriesin euro

INVENTORIES 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

Materials 2,469,667 0 392,768 2,076,899

Small inventories 40,207 34,427 0 74,634

Total inventories 2,509,875 34,427 392,768 2,151,534

120

Short-term financial investments are primarily comprised of de-posits held at banks over 91 days at an interest rate of 0.20 % to 0.28 % per annum.

Item short-term loans to companies in the Group relates to the subsidiary Talum and represents the value of guarantees from elec-tricity, which are disclosed in the long-term received in the amount

of 3,207,165 euros. A part of that value derives from the nominal value of unrealized guarantees for future payments of electricity resulting from Item 7 of the decision of the ELES’ General Meeting number 4-28/2012-226 of 28 November 2012 adopted by AUKN on behalf of the ELES’ founder – the Government of the RS. Unreal-ized guarantee is recorded at nominal value and was called after the balance sheet date, in January 2016.

Short-term receivables due by the companies in the Group are the receivables arising from the operations with electricity. Short-term accounts receivables represent the receivables from the operations

with electricity on the domestic and foreign markets. Other short-term receivables are mostly receivables for input VAT.

Short-term Financial Investments

Short-term Operating Receivables

in euros

SHORT-TERM FINANCIAL INVESTMENTS 31 DEC 2015 31 DEC 2014

1. Short-term loans to companies in the Group 3,207,165 0

2. Other short-term loans 25,000,000 23,000,000

Total short-term financial investments 28,207,165 23,000,000

in euros

SHORT-TERM OPERATING RECEIVABLES 31 DEC 2015 31 DEC 2014

1. Short-term operating receivables due by companies in the Group 828,964 3,792,069

2. Short-term accounts receivables 21,503,380 22,615,953

3. Receivables arising from the overpaid income tax 2,947,325 4,842,326

Total short-term operating receivables 25,279,669 31,250,348

in euros

SHORT-TERM ACCOUNTS RECEIVABLESGROSSVALUE

REVALUATION ADJUSTMENTS

NET VALUE31 DEC 2015

1. Companies in the Group 828,964 0 828,964

2. Receivables from use of transmmission network at home 15,444,176 -2,032,895 13,411,281

3. Receivables from use of transmmission network abroad 8,092,099 0 8,092,099

Total short-term accounts receivables 24,365,239 -2,032,895 22,332,344

in euros

REVALUATION ADJUSTMENT OF ACCOUNTS RECEIVABLES 2015 2014

Opening balance as at 1 January 1,943,554 2,184,748

Revaluation adjustment in financial year 89,441 75

Settlement of receivables, final write-off of receivables 100 241,269

Closing balance as at 31 December 2,032,895 1,943,554

in euros

SHORT-TERM OPERATING RECEIVABLES DUE BY OTHERSGROSSVALUE

REVALUATION ADJUSTMENT

NET VALUE 31 DEC 2054

Other receivables from companies in the Group 288,852 0 288,852

Receivables for input VAT 2,362,884 0 2,362,884

Reimbursement for contributions on salaries 69,712 0 69,712

Receivables from operations for the account of third parties 104,911 0 104,911

Other receivables 4,424 0 4,424

Advance payments associated with current assets 116,542 0 116,542

Total short-term operating receivables due by others 2,947,325 0 2,947,325

121

1O FINANCIAL REPORT

in euros

SHORT-TERM ACCOUNTS RECEIVABLES 31 DEC 2015 SECURED UNSECURED

1. Companies in the Group 828,964 395,093 433,871

2. Receivables from the use of transmmission network at home 13,411,281 10,350,977 3,060,304

3. Receivables from the use of transmmission network abroad 8,092,099 0 8,092,099

Total short-term accounts receivables 22,332,344 10,746,070 11,586,274

Portion of secured receivables 100.00% 48.12% 51.88%

The Company has 48.12 % of receivables secured. Out of 51.88 % of the unsecured receivables the majority appertains to the receiva-bles arising from the use of network abroad, while the lower por-tion appertains to the receivables arising from the domestic use of network. The Company has secured receivables from the use of the transmission network (network charge) with blank bills of exchange. Based on experience from the preceding years, the individual groups

of receivables that were not secured were collected and paid.

As at 31 December 2015 ELES recorded 436,417 euros of receiva-bles due, which were settled in January 2016.

The receivables are not pledged.

Cash and Cash Equivalents in euros

CASH AND CASH EQUIVALENTS 31 DEC 2015 31 DEC 2014

Cash in hand 0 0

Bank balance of bank account 42,767,392 478,656

Deposits redeemable at notice 4,683,752 23,091,328

Cash for specific purposes 0 0

Total cash and cash equivalents 47,451,144 23,569,984

in euros

CASH AND CASH EQUIVALENTS 31 DEC 2015 31 DEC 2014

Bank balance of bank account 42,767,392 478,656

Deposits redeemable at notice 4,683,752 23,091,328

Total cash and cash equivalents 47,451,144 23,569,984

Most of cash and cash equivalents are bank balances in bank ac-counts and deposits redeemable at notice. The interest rate of bank balances with banks and deposits redeemable at notice range from 0.001 % to 0.01 %.

In 2015, ELES had no agreed bank overdraft on its transaction ac-count at the bank. As at 31 December 2015 ELES had no obliga-tions arising from the aforementioned.

Short-term deferred costs include costs of obligations entered into in 2015; these costs will be incurred in 2016 and include the costs of membership fees, subscriptions, etc.

Short-term accrued revenues include mainly accrued revenues aris-ing from ITC mechanism for 2015.

Short-term Deferred Costs and Accrued Revenuesin euros

DEFERRED COSTS (EXPENSES) AND ACCRUED REVENUES 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

Short-term deferred costs 217,133 0 37,844 179,289

Short-term accrued revenues 10,166,151 0 9,529,139 637,012

Total deferred costs and accrued revenues 10,383,284 0 9,566,983 816,301

122

Equityin euros

EQUITY 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

1. Share capital 177,469,516 0 0 177,469,516

2. Capital reserves 156,936,162 0 0 156,936,162

3. Revenue reserves 43,317,791 500,245 0 43,818,036

4. Revaluation adjustment surplus -4,971,860 417,987 201,552 -4,755,425

5. Retained earnings 9,573,354 0 9,573,354 0

6. Net profit (or loss) the financial year 0 9,504,679 2,538,985 6,965,694

Total equity 382,324,963 10,422,911 12,313,891 380,433,983

As at 31 December 2015, the equity amounted to 380,433,983 eu-ros. Changes in equity in 2015 were as follows:

• Equity - undistributed profit decreased on the basis of a decision of the Assembly of the Republic of Slovenia for the distribution of profits to the owner in the amount of 9,573,354 euros.

• Profit for 2015 amounted to 10,004,925 euros and decreased by already mentioned 5-percent legal reserves and adjustments for the past.

• Legal reserves increased by 5 percent of the profit in 2015, i.e. 500,246 euros.

• Opening balance of net profit in 2014 decreased by 2,538,985 euros for the corrections of accrued revenues from the sale of cross-border transmission capacities, as explained in the correc-tion of error from the previous periods.

Distributable (acumulated) profit in 2015 amounted to 6,965,694 euros.

Capital reserves arise from revaluation of equity accounted in pre-ceding years and in 2015 did not change.

Change in revaluation surplus arose from:

• the reduction in the negative revaluation surplus in the amount of 420,002 euros from derivative financial instruments (interest rate swap and interest rate collar) to hedge against the variability in cash flows due to changes in interest rates of the long-term loan (EIB). The valuation was carried out on the basis of performed evaluations of the value as at 31 December 2015 and

• the decrease in the value of shares of Triglav Insurance Company in the conversion to the market price as at 31 January 2015 in the amount of 2,015 euros taking into consideration the surplus adjustment from revaluation of deferred tax assets;

• the reduction in the revaluation surplus arising from the actuarial deficit in the amount of 201,552 euros taking into account de-ferred tax assets.

in euros

REVALUATION SURPLUS 31 DEC 2014 CHANGES 31 DEC 2015

Revaluation surplus of long-term financial investments -4,659,144 417,574 -4,241,570

Revaluation surplus of long-term financial investments 467,801 -2,428 465,373

Derivative financial instruments -5,126,945 420,002 -4,706,943

Actuarial deficit -261,311 -255,702 -517,013

Value adjustment of revaluation surpluses for deferred tax -51,405 54,563 3,158

Value adjustment of revaluation surpluses for financial investments -73,616 413 -73,203

Value adjustment of actuarial deficit 22,211 54,150 76,361

Total -4,971,860 216,435 -4,755,425

Profit/loss account, recorded based on consumer price indexin euros

EQUITY AS AT 1 JANUARY 2015 379,785,978

Elimination of the profit for the payment to the owner 9,573,354

The basis for revaluation 370,212,624

Revaluation:

-0.5% Growth indices -1,870,210

Net profit after revaluation 11,875,135

123

1O FINANCIAL REPORT

Provisions and Long-Term Accrued Costs and Deferred Revenues

1. Provisions for pensions and similar liabilities

Provisions for severance payments upon retirement decreased by their use and increased by the provisions pursuant to actuarial cal-culation. The provisions for jubilee awards increased on the basis of actuarial calculation as at 31 December 2015 and decreased by the payments.

Provisions amount to estimated future payments for severance pay-ments and jubilee awards discounted at the balance sheet date. The calculation was made for every employee by taking into ac-count the cost of severance payments upon retirement and the cost

of all expected jubilee awards until retirement. The discount rate amounts to 1.7 % per annum. To the extent that the discount rate fell by 0.5 %, the provisions for severance payments would increase by 195,335 euros and the provisions for jubilee awards by 48,170 euros. To the extent that the discount rate increased by 0.5 %, the provisions for severance payments would decrease by 179,719 eu-ros and the provisions for jubilee awards by 44,792 euros. Future long-term wage growth is set at 1 % per annum. To the extent that future wage growth increased by 0.5 % per annum, the provisions for severance payments would increase by 201,008 euros, while the provisions for jubilee awards would remain unchanged. To the ex-tent that future wage growth decreased by 0.5 %, the provisions for

in euros

PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

1. PROVISIONS FOR PENSIONS AND SIMILAR LIABILITIES 4,811,363 653,151 262,262 5,202,252

Provisions for severance payments 3,558,045 638,391 127,163 4,069,273

Provisions for jubilee awards 1,253,317 14,760 135,099 1,132,979

2. OTHER PROVISIONS 1,883,253 353,309 654,586 1,581,976

Provisions for eventual liabilities arising from claims (lawsuits) 1,883,253 353,309 654,586 1,581,976

3. LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES 169,333,269 27,081,481 11,423,731 184,991,019

3.a Long-term accrued costs and deferred revenues - EA-1 154,572,933 20,113,641 4,138,655 170,547,919

Long-term deferred revenues from CBTC - for investments 55,597,526 2,910,734 4,138,655 54,369,605

Long-term deferred revenues from CBTC - for tariffs* 98,975,407 17,202,907 0 116,178,314

3.b Long-term accrued costs and deferred revenues - SAS 14,760,336 6,967,840 7,285,076 14,443,100

Long-term deferred revenue - collection network SENG 6,967,840 0 6,967,840 0

Commitment FA SENG 6,967,840 6,967,840

Other accrued costs and deferred revenues 7,792,496 0 317,236 7,475,260

Total provisions and long-term accrued costs and deferred revenues 176,027,885 28,087,941 12,340,579 191,775,247

* Error correction for 2014 amounting to 2,538,985 euros.

in euros

LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES UNDER THE EA REGULATIONS

31 DEC 2014 INCREASE DECREASE 31 DEC 2015

1. PROVISIONS FOR REALIZED INVESTMENTS - SOURCE CBTC 55,597,524 2,910,734 4,138,655 54,369,603

1.a Separate account for planned investments CBTC 5,646,500 0 2,910,734 2,735,766

1.b Provisions for investments in cross-border capacities 49,951,024 2,910,734 1,227,921 51,633,837

2. PROVISION FOR REALIZED INVESTMENTS - SOURCE GRANTS 5,054,088 0 160,374 4,893,714

3. PROVISIONS FOR INVESTMENTS - OF CONNECTION 6,967,840 0 0 6,967,840

4. PROVISIONS FOR INVESTMENTS - OTHER 2,738,409 0 156,862 2,581,547

5. THE NETWORK CHARGE SURPLUSES 98,975,408 17,202,907 0 116,178,315

5.a ACDR - network charges surpluses from previous years 97,525,605 0 0 97,525,605

5.b ACDR - network charges surplus of the current year 0 16,560,836 0 16,560,836

5.c ACDR - remuneration of the network charge surpluses 1,449,803 642,071 0 2,091,874

Total long-term passive accruals arising from regulations 169,333,269 20,113,641 4,455,891 184,991,019

* Note: Items 1, 2 and 5 of the bookkeeping pursuant the EA-1 and the rest by SAS.

124

severance payments would decrease by 185,309 euros, while the provisions for jubilee awards would remain unchanged. The calcula-tion uses projections prepared by a certified actuary.

Estimated cash flows from expected payments of jubilee awards in 2016 amount to 124,628 euros and from the expected severance payments upon retirement in 2016 533,584 euros.

2. Other provisions

Provisions for potential liabilities for claims (lawsuits) rose by the ex-isting claims and interests on the existing claims in the amount of 353,309 euros and decreased by settled claims in the amount of 654,586 euros (of which the claim for damages for Beričevo–Krško transmission line in the amount of 600,000 euros, was completed, namely utilized in the amount of 306,356 euros, while the remain-der was eliminated).

3. Long-term accrued costs and deferred revenues

In 2015, long-term accrued costs and deferred revenues:

• In 2014 increased by the assets appropriated for connected load of the Avče PSHPP in the amount of 6,967,840 euros, which shall be used for the purchase of switchyard (provision of the EA-1). In 2015, the purchase of a switchyard was made with these as-sets. These long-term accrued costs and deferred revenues shall reduce in the amount of depreciation/amortisation costs.

• Increased by the long-term deferred revenues from cross-border transmission capacities (CBTC) which shall be used to finance investments into cross-border capacities and/or to cover future costs, if so set forth by the AGEN-RS with the tariffs for the next regulatory periods. In 2015, they were newly created in the amount 17,202,907 euros in accordance with Article 120 of the Energy Act of which interests on the average balance of the sur-plus amounted to 642,070 euros.

• Decreased by 1,227,921 euros of accrued amortisation/depre-ciation of capitalised fixed assets, which were financed from the revenues from cross-border transmission capacities and 317,236 euros of accrued amortisation/depreciation of fixed assets, which were acquired free of charge and financed from EU grants.

3.a Regulatory framework Pursuant to the Act determining the methodology for charging for the network charge, the methodology for setting the network charge, and the criteria for establishing eligible costs for electricity networks (Official Gazette of RS, Nos.: 81/2012112/2013, hence-forth referred to as the Act), the Energy Agency of the Republic of Slovenia (AGEN-RS) set forth a regulatory frameworkfor the 2013-2015 regulatory period. The regulatory framework is a value de-termination of the planned eligible costs (which include the costs of equity in the form of a regulated return on assets), planned revenues from network charge and other sources of financing as per individual year of the regulatory period as well as surpluses or deficits arising from network charge from the preceding years.

The AGEN-RS supervises the implementation of the regulatory framework. In the context of supervision, the transmission system operator (ELES) is obliged to identify deviations from the regula-

tory framework for each financial year. Such deviations reflect in the surplus or deficit of the network charge.

Deviations from the regulatory framework are established as fol-lows:

1. between the actual and planned sources for covering eligible costs, namely for:a) network charge, andb) other revenues;

2. between the actual and planned eligible costs, namely for:a) controlled costs of operation and maintenance,b) uncontrolled costs of operation and maintenance,c) costs of electricity for covering losses,d) depreciation/amortisation costs,e) costs of ancillary services, andf) regulated return on assets.

The actual eligible costs and actually realized sources for covering eligible costs are established on the basis of implementing criteria and parameters as set forth in Appendix 1of the Act.

Surplus (or deficit) is determined by way of deducting the actual eligible costs, referred to in Item 2 of the preceding paragraph, from the actual sources for covering eligible costs, referred to in Item 1 of the preceding paragraph. In calculating the surplus (deficit), the deviations between the actual and planned costs are deducted from the deviations between the actual and planned sources for covering eligible costs, whereat the planned surplus/deficit of network charge in the regulatory period or balancing of network charge in the regulatory period and surpluses from the preceding years as sources for covering costs need to be taken into consideration.

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1O FINANCIAL REPORT

in euros

2015 PLANNED RF ACTUAL DEVIATIONS FROM RF

1 2 3

1. ELIGIBLE COSTS OF TSO (FROM 1.1. TO 1.6) 151,521,921 133,124,324 -18,397,597

1 Controlled operation and maintenance costs 30,484,108 29,609,908 -874,200

2 Uncontrolled operation and maintenance costs 1,479,397 4,281,198 2,801,801

3 Costs of electricity for network losses 17,721,133 15,596,098 -2,125,035

4 Depreciation/amortisation 28,038,992 28,768,539 729,547

5 Regulated return on assets 29,698,291 18,675,412 -11,022,879

6 Costs of ancillary services 44,100,000 36,193,169 -7,906,831

2. SOURCES FOR COVERING ELIGIBLE COSTS (2.1-2.2+2.3) 131,302,416 167,546,762 36,244,346

1 Other revenues 16,448,580 55,344,394 38,895,814

2 Surplus of network charge from the 2010–2011 period* -17,861,602 -17,861,602 0

3 Network charge (1-2.1+2.2-3), of which: 96,992,234 94,340,766 -2,651,468

- network charge for the transmission network 60,791,400 57,400,644 -3,390,756

- network charge for ancillary services 36,200,834 36,940,122 739,288

3. SURPLUS / DEFICIT OF NETWORK CHARGE (BALANCING) (2-1) 20,219,505 34,422,438 54,641,943

3a. Planned surplus / deficit of network charge (balancing) -20,219,505

3b. Surplus / deficit of network charge save for interests 20,219,505 34,422,438 -34,422,438

4. INTERESTS (4.A + 4.B) 0 642,071 -642,071

4.a Surplus of network charge 516,337 -516,337

4.b Assets on a separate internal account 125,734 -125,734

5. SURPLUS / DEFICIT ARISING FROM NETWORK CHARGE (BALANCING) (3B + 4)

20,219,505 35,064,509 -35,064,509

Recording in ELES' books:

6. SURPLUS WITHOUT SURPLUS OF NETWORK CHARGE 2010–2011 AND INTEREST-FREE SURPLUS (3+2.2)

16,560,836

7. SURPLUS WITHOUT SURPLUS OF NETWORK CHARGE 2010–2011 (5+2.2)

17,202,907

* Note: Surplus in network charge in the 2010–2011 period is covered by ELES' surpluses balance; hence, it was not considered when calculating the surplus of 2015.

126

Pursuant to the provisions of Article 120 of the Energy Act (Official Gazette of RS, No.: 17/2014), the surplus is regarded as an overpay-ment of network charge. Surplus represents ELES’ liability to con-sumers of electricity. ELES thus defers revenues of the current year for the amount of the surplus of revenues over eligible costs and records it on a long-term accrued costs and deferred revenues. Such a method of recording was also delivered by the Institute of Public Administration in its legal opinion.

Pursuant to the Regulation (EC) No.: 714/2009 on conditions for access to the network for cross-border exchanges in electricity (EU Official Journal, 14 August 2009) ELES needs to defer from its net profit/loss also a part of revenues arising from the allocated cross-border transmission capacities (CBTC), namely the amount of rev-enues with which the investments in the CBTC were financed. Pursu-ant to the Regulation the revenues from the allocated CBTC need to be spent for:

a. ensuring actual availability of allocated capacity, and/or

b. maintaining and increasing the interconnection capacities through the investments into the network, in particularly, with new interconnection transmission lines.

In the event the revenues may not be used efficiently for the afore-mentioned purposes, such revenues – with an approval of the AGEN-RS – may be used as revenue, which the regulators take into consideration when approving the methodology for charging the network tariffs and/or setting of the network tariffs. The remnant revenues are transferred onto a separate internal account until they may be used for the purposes set forth under the aforementioned Items a and b.

Pursuant to the provisions of the EA-1 and EC Regulation No.: 714/2009 as well as Article 85 of the Act, ELES deferred the rev-enues arising from the CBTC allocated in 2015 in the amount of 16,560.80 thousand euros. The said amount is deferred in the long-term to accrued costs and deferred revenues, with which obligations to consumers of electricity will be settled or investments in cross-bor-der capacities will be financed in the following periods. Interest on surplus balance (642.1 thousand euros) are recorded in a separate account of accrued costs and deferred revenues and are charged to financial expenses.

Notes to the use of revenues arising from the CBTC

Surplus of revenues arising from the CBTC shall be used in the future regulatory years for investments into the CBTC, to reduce tariffs for

network charge or to cover higher regulated expenses, which shall not be covered by the annual revenues arising from network charge.

ELES has applied the principle for determining surplus of revenues arising from the CBTC since the enforcement of Article 46 (a) of the Energy Act in 2010. Before that these surpluses had not been re-corded under the accrued costs and deferred revenues since there was no legal basis for any such recording. The auditing profession (the Slovenian Institute of Auditors) delivered its opinionin relation to Article 46 (a) of theEA and actions taken by auditors. The audit-ing profession believes that Article 46 (a) of EA or Article 120 of the EA-1 are contrary to the SAS, or that a decrease in revenues record-ed in the current year for the identified surpluses over the eligible costs and the regulated return prescribed by the regulation is incon-sistent with the SAS; hence, the auditors deliver a qualified opinion on the financial statements in accordance with the SAS yet they do not express any opinion on the regulatory framework.

Notes to the Table below:

• Costs arising from revenues from the CBTC (seq. no.: 2) comprise the costs of implementation of auctions and the estimated op-eration and maintenance costs as well as depreciation/amortisa-tion relating to the CBTC. The latter were set forth by AGEN-RS and they are covered with the revenues from the CBTC, while they do not encumber network charge or are not charged to domestic consumers.

• Revenues from the tariffs or network charge (seq. no.: 6) is the dif-ference between the regulated amount of all costs, increased by the return, and the realized network charge revenues from liable persons in the Republic of Slovenia, and are covered against the revenues from CBTC in the current year.

• AGEN-RS, unlike ELES, maintains in its official records also the bal-ance of network charge surpluses recorded prior to 2010. Pursuant to the AGEN-RS’ records the balance of surplus as at 31 December 2009 amounted to 19,881,911 euros (seq. no. 9). It is important to emphasise that the entire surpluses from revenues arise from revenues from the CBTC.

• AGEN-RS included a surplus of revenues from 2010 and 2011 into the 2013-2015 regulatory framework as a source to cover eligible costs with a regulated return and deems that the remainder of the assets is spent. The surplus from 2012, 2013 and 2014 has also been used as a resource to cover eligible costs with regulated return in the period from 2016 to 2018; however, the Company retained as evidence in the presentation for comparison purposes.

127

1O FINANCIAL REPORT

in euros

USE OF ASSETS FROM REVENUES ARISING FROM CBTC ALLOCATED AT THE AUCTIONS FROM 2006 TO 2015

Item / YearREALIZATION TOTAL

2006– 2015

TOTAL2010– 20152006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1. Revenues from the sale of CBTC at auctions 12,871,421 25,203,619 32,545,017 32,953,584 28,505,212 37,117,647 61,172,903 48,325,403 50,079,119 45,708,241 374,482,166 270,908,525

2. Costs sustained from the revenus arising from CBTC 0 1,742,528 2,813,674 3,730,993 4,602,510 5,583,261 6,854,740 25,327,706 17,040,511

a. Costs of operation and maintenance of CBTC 1,237,793 1,123,931 2,063,203 3,603,623 4,584,374 5,855,853 18,468,777 14,043,850

b.Depreciation/amortization 504,735 1,689,743 1,667,790 998,887 998,887 998,887 6,858,929 2,996,661

3. Avilable revenues from the allocated CBTC (1-2) 12,871,421 23,461,091 29,731,343 29,222,591 23,902,702 31,534,386 54,318,163 48,325,403 50,079,119 45,708,241 349,154,460 253,868,014

4. Redispaching 5,040

5. Investments in cross-border transmission capacities 0 37,852,962 2,884,652 6,974,301 5,980,741 2,434,820 17,530,941 29,373,735 2,248,292 0 105,280,442 57,568,528

a. Phase-shifting transformer station on the Slovenia-Italy border 31,235,090 95,445 755,976 2,505,689 34,592,200 2,505,689

b. 2x400 kV Beričevo–Krško transmission line 6,518,907 2,224,314 2,005,218 415,149 11,813,316 9,131,155 1,532,859 416,823 34,057,741 23,309,302

c. 2x400 kV Cirkovce–Pince transmission line and 400/110 kV Cirkovce substation

35,555 317,400 88,016 130,436 516,954 309,172 3,817,272 4,871,737 1,580,085 11,666,627 11,225,656

d. 2x400 kV Okroglo (Slovenia)–Udine (Italy) transmission line 13,588 78,939 67,657 1,468 9,117 275,755 826 447,350 287,166

e. 2x400 kV Divača–Beričevo–Podlog transmission line (conversion from 220 kV to 400 kV)

280 31,960 25,743 28,662 19,032 55,414 518,338 342,068 325,187 1,346,684 1,288,701

f. 400/110 kV Krško subtation, second TR 49,542 136,594 1,585,302 195,984 2,077,283 317,208 271,808 166,029 4,799,750 3,028,312

g. 400/110 kV Okroglo substation, phase-shifting transformer station 0 0

h. Beričevo substation - completion of transmission line bays at 400 kV Krško I+II

815,547 347,876 442,692 123,324 47,279 1,776,718 961,171

i. 400/110 kV Cirkovce substation (primary and secondary equipment)

16,975 154,612 1,594,292 91,571 1,857,450 1,840,475

j. 400 kV Divača–Redipuglia transmission line 433,423 1,474,130 88,499 1,996,052 1,562,629

k. Beričevo substation (replacement of high-voltage equipment) 993,088 881,347 1,874,435 881,347

l. 220 kV Kleče–Divača transmission line, SM 68 - 69, SM replacement 187,356 187,356 0

m. 400 kV KNPP switchyard 1,330,222 3,000,001 3,130,999 121,750 331,038 7,914,010 7,914,010

n. 400 kV Beričevo–Divača transmission line, replacement of temporary OPGW

28,304 28,304 28,304

Separate internal account for planned investments into the CBTC 12,180,000 -180,000 5,466,500 12,000,000 12,000,000

Internal account utilisation -6,533,500 -2,910,734 -9,444,234 -9,444,234

6. Revenues arising from tariffs or network charge 6,213,554 -1,659,516 16,272,827 6,865,754 6,546,246 2,856,200 6,839,478 16,161,521 19,207,353 28,505,334 107,808,751 80,116,132

7. Residual assets in the current year (3-4-6-5-8) 6,657,867 -12,732,354 10,573,864 15,382,536 11,375,715 26,243,366 29,947,744 2,785,107 28,623,475 17,202,907 136,060,227 116,178,314

8. Comulative of the residual assets -6,074,487 4,499,377 19,881,913 31,257,628 57,500,994 87,448,738 90,233,845 118,857,319 136,060,226

9. Difference between the balance recorded and bookkeeping balance of ELES

19,881,912

10. Residual assets pursuant to AGEN-RS records 36,409,411 18,431,579 46,152,724 35,064,509 136,058,223

Appropriation of assets arising from the CBTC revenues from 2006 to 2015

128

Long-term Liabilitiesin euros

LONG-TERM LIABILITIES 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

Long-term financial liabilities 60,164,469 0 3,501,816 56,662,653

Long-term operating liabilities 749,713 -321,467 0 428,246

Deferred tax liabilities 73,617 -412 0 73,205

Total long-term liabilities 60,987,799 -321,879 3,501,816 57,164,104

in euros

LONG-TERM FINANCIAL LIABILITIESBALANCE AS AT MATURITY

31 DEC 2015 up to 1 year from 1 to 2 years from 2 to 5 years over 5 years

Long-term financial liabilities to banks (EIB loan) 50,992,823 2,800,000 2,800,000 7,400,000 37,992,823

Other long-term liabilities (interest rate collar and swap)

5,669,830 0 0 0 5,669,830

Total long-term liabilities 56,662,653 2,800,000 2,800,000 7,400,000 43,662,653

Long-term financial liabilities

• Liabilities from long-term loan, which ELES received in 2010 from the European Investment Bank (EIB) in the amount of 63,000,000 euros for financing investments. As at 31 December 2015, the bal-ance of long-term portion of the loan amounted to 50,992,823 euros. The maturity of the loan is 25 years with the included two-and-a-half-year moratorium and a 6M EURIBOR+0.35 % inter-est rate. The loan is not secured since ELES is 100% state-owned company; hence, the state is subsidiary liable for the Company’s liabilities in accordance with the Energy Act (EA).

• Liabilities arising from derivative financial instruments to hedge against the variability in cash flows of two-thirds of long-term loan obtained at the EIB decreased by 506,026 euros and amounted to 5,669,830 euros. Liabilities are intended to hedge against the risk of changes in cash flow related with a variable interest rate. They are valued at fair value and internal value of interest rate swap and interest rate collar as the present discounted value of net cash flows (rational and unbiased estimate of the market val-ue of the measured instrument) as at 31 December 2015.

• Long-term liabilities from guarantees to subsidiary Talum, which as at 31 December 2014 amounted to 777,647 euros (they re-sult from the founder’s decision of 28 November 2012, where

the founder agrees with the issue of the ELES’ guarantee for the supply of electricity to ELES’ subsidiary Talum), were transferred to short-term liabilities arising fom guarantees given. They were transferred in nominal value and were settled in January 2016, which is also indicated among the events after the balance sheet date.

Long-term operating liabilities arise from advances received. Said li-abilities include also the guarantees for the elimination of defects within the warranty period as well as supplier’s assets withheld pur-suant to the contracts.

The long-term deferred tax liabilities arise from the revaluation of investment value, namely the shares in Triglav Insurance Company at fair value. The investment is recorded under long-term financial investments, available-for-sale assets. Shares are quoted on the stock exchange, so they are revaluated at quoted market price as at 31 December 2015. The valuation effect reflects in an increase in the revaluation surplus. Upon an eventual sale, the revenues shall be classified as taxable revenues. The revaluation surplus increased by the recorded deferred tax. Deferred tax liabilities amount to 73,205 euros and compared to last year decreased in the amount of 412 euros.

in euros

DEFERRED TAX LIABILITIES 2015

Opening balance as at 1 Jan 2015 73,617

In debit (credit) of profit or loss 0

In debit (credit) of equity -412

Reversal of acknowledged liabilities for deferred tax -412

Closing balance as at 31 Dec 2015 73,205

129

1O FINANCIAL REPORT

in euros

SHORT-TERM LIABILITIES 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

Short-term financial liabilities 12,659,034 0 4,444,692 8,214,342

Short-term operating liabilities 24,935,968 9,322,939 0 34,258,907

Total short-term liabilities 37,595,002 9,322,939 4,444,692 42,473,249

Short-term Liabilities

in euros

SHORT-TERM OPERATING LIABILITIES 31 DEC 2015 31 DEC 2014

Short-term liabilities to the companies in the Group 634 32,175

Short-term operating liabilities to suppliers: 29,889,695 18,163,964

Electricity suppliers - domestic 7,259,432 8,111,750

Electricity suppliers - aborad 3,138,572 1,863,229

Suppliers of fixed assets - domestic 16,918,632 5,465,632

Suppliers of current assets - domestic 1,901,014 2,071,067

Suppliers of current assets-affiliated companies 24,469 54,592

Suppliers of current assets - abroad 6,332 0

Suppliers of services - abroad 45,489 28,670

Electricity exchanges in kind 595,755 569,024

Short-term liabilities for advances 178,318 211,228

Other short-term operating liabilities 4,190,261 6,528,601

To employees 3,433,513 3,241,543

To the State 678,664 2,606,741

From operations on third party account 2,317 2,317

Other liabilities 75,767 678,001

Total short-term operating liabilities 34,258,907 24,935,969

Short-term financial liabilities consist of:

• short-term portion of the long-term loan from the EIB, which is due in 2016, and amounts to 5,007,177 euros,

• liabilities arising from guarantees to subsidiary Talum pursuant to the founder’s decision of 28 November 2012, where the founder agrees with the issue of the ELES’ guarantee for the supply of electricity to ELES’ subsidiary Talum. The short-term liabilities are recorded in the amount of the nominal value of the guarantees envisaged for payment within one year from the balance sheet date in the amount of 3,207,165 euros. The off-setting entry of the liability is the increase in long-term financial investment in subsidiary Talum d.d..

To hedge its guarantee obligations pursuant to the Guarantee Agreement, concluded between companies ELES, Talum and HSE, ELES submitted to HSE 8 blank bills of exchange with an irrevocable and unconditional mandate to fill out and redeem bills of exchange in accordance with the provisions of the signed Agreement.

The guarantee given in the amount of 10 million euros (8.5 million euros HSE, d.o.o. and 1.5 million euros Petrol d.d.) is secured with a mortgage with statutory default interest and maturity on 28 April 2019 (guarantee 2016–2018). ELES has guarantees secured with a mortgage on immovable property of the company Talum.

The largest portion of short-term operating liabilities appertain to accounts payable, namely the liabilities arising from the use of the transmission network and operating liabilities towards the domestic suppliers, especially for fixed assets and current assets.

As at 31 December 2015 ELES records outstanding liabilities in the amount of 167,758 euros, which were settled in January 2016.

ELES’ suppliers, both for energy as well as fixed and current assets did not require any financial collateral. To insure proper perfor-mance of contractual obligations, ELES received blank bills of ex-change with bill of exchange declaration and bank guarantees as a part of contracts on the provision of ancillary services and to cover losses of electricity sustained during the transmission through the transmission network (GEN energija, TE-TOL Energetika Ljubljana and Elektro Energija).

130

Short-term accrued costs and deferred revenues comprise:

• accrued costs of consulting and financial expenses to hedge against the change in interest rate,

• short-term deferred revenues from the invoices issued by ELES for allocated cross-border transmission capacities in 2015, while a small portion appertains to deferred revenues from the EU pro-jects,

• VAT on paid advances for fixed assets.

Short-term Accrued Costs and Deferred Revenues

Off-Balance Sheet Total

in euros

SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUES 31 DEC 2014 INCREASE DECREASE 31 DEC 2015

Accured costs 344,782 8,357 336,425

Deferred revenues 1,521,659 399,132 0 1,920,791

VAT od paid advances 57,350 0 57,350 0

Total short-term accrued costs and deferred revenues 1,923,791 399,132 65,707 2,257,216

in euros

OFF-BALANCE SHEET ITEMS 31 DEC 2015 31 DEC 2014

Received guarantees for elimination of defects 13,473,478 13,384,045

Loan guarantee (BSP Regional Electricity Exchange) 1,250,000 1,250,000

Construction land write-off 4,162 4,162

Obligation to pay for the right to build 4,140 4,140

Charges for the use of construction land 0 24,921

Guarantee's Talum 10,000,000 10,000,000

Off-balance sheet total 24,731,780 24,667,269

As at 31 December 2015 ELES records in the off-balance sheet to-tal:

• guarantees received from suppliers for the elimination of defects;

• obligations arising from the guarantee to BSP regionalni ener-getski borzi d.o.o. (BSP Regional Energy Exchange, d.o.o.) for a short-term (framework) loan in the amount of 1,250,000 euros. BSP has successfully carried out the project of establishing mar-ket coupling on the Slovenian-Italian border in the segment of trading for the day ahead and assumeed the central role of the counterpary in the financial settlement on the Slovenian side. So as to ensure a sufficient amount of sources to provide for VAT BSP, d.o.o. had to raise a framework loan in the amount of 2,500,000 euros at UniCredit Bank, whereat ELES together with the com-

pany Borzen d.o.o. acted as a joint and several guarantor for re-payment of the loan; each in the amount of 1,250,000 euros. To hedge its guarantee obligations under the agreement, ELES sub-mitted the bank 4 blank bills of exchange with the bill of exchange declaration and authorisation to redeem the guarantees; liability arising from guarantees the subsidiary Talum for the purchase of electricity in the period from 2016 to 2018 in the amount of 10,000,000 euros. The decision on the guarantee was adopted by the Supervisory Board of ELES in 2014, which also set that the total guarantee may amount to a maximum of 24,500,000 euros. Until 31 December 2015 the signed agreements on guarantee totalled 10,000,000 euros and are secured with a mortgage on immovable property.

In 2015, total revenues were recorded in the amount of 153,463,676 euros.

In 2015, the amount of deferred revenues from the allocated CBTC amounted to 16,560,837 euros. ELES recorded the latter in total

under the long-term accrued costs and deferred revenues in the form of long-term deferred revenues for the purposes of financing investments into cross-border transmission capacities. At the same time, revenues increased for depreciation/amortisation of fixed as-sets financed with long-term deferred revenues in the amount of

10.3.2 Disclosures of Income Statement Items

Total Revenuesin euros

REVENUES 2015 2014

Operating revenues 152,697,810 140,940,370

Financial revenues 662,885 1,213,381

Other revenues 102,981 2,599,260

Total revenues 153,463,676 144,753,011

131

1O FINANCIAL REPORT

Operating Revenues

Financial Revenues

Other Revenues

Other revenues were recorded in the amount of 102,981 euros and thus decreased in comparison with the preceding year. Other rev-enues consist of revenues arising from the compensations received

from insurance companies, subsidies, penalty payments and other revenues.

in euros

OPERATING REVENUES 2015 2014

Net sales revenues 148,681,658 136,926,519

a. on domestic market 115,758,701 120,916,019

arising from the use of transmission network 113,186,463 118,343,781

other revenues 2,572,238 2,572,238

b. on foreign market 32,922,957 16,010,500

arising from the use of transmission network 32,922,957 16,010,500

Changes in inventories and work-in-progress 0 0

Capitalised own products and services 1,988,924 2,383,795

Other operating revenues 2,027,228 1,630,056

Total operating revenues 152,697,810 140,940,370

Operating revenues were recorded in the amount of 152,697,810 euros and were 8 % higher than those recorded in 2014. The ma-jority of the operating revenues (96 %) arose from the use of the

transmission network on the domestic and foreign markets, while other revenues arose from ELES’ other activities.

In 2015, the financial revenues were recorded in the amount of 662,885 euros and were lower than those recorded in 2014. Finan-cial revenues consist of financial revenues arising from shares in

profits of others (dividends of the Insurance Company), revenues from granted loans (deposits held at banks) and default interests due by customers.

in euros

OTHER OPERATING REVENUES 2015 2014

Revenues from reversal of provisions and long-term accrued costs and deferred revenues 574,589 293,722

Use of deferred revenues for investements (depreciation/amortisation expenses) 1,227,921 1,164,687

Depreciation/amortisation of fixed assets acquired free of charge 156,861

Revenues connected to products and services 37,010 127,097

Revaluated operating expenses 30,847 44,550

Total other operating revenues 2,027,228 1,630,056

in euros

FINANCIAL REVENUES 2015 2014

Financial revenues from equity interests 372,017 43,082

Financial revenues from loans 265,268 637,693

Financial revenues from operating receivables 25,600 532,606

Total financial revenues 662,885 1,213,381

in euros

OTHER REVENUES 2015 2014

Other revenues 102,981 2,599,260

1,227,921 euros. Without observing Article 120 of the Energy Act, the operating revenues of 2015 would amount to 168,030,726 eu-ros.

132

Total Expenses

Operating Expenses

In 2015, total expenses amounted to 143,257,829 euros and were up 5 % primarily due to higher expenses from the use of the trans-

mission network and higher operating expenses.

In 2015, operating expenses amounted to 140,921,145 euros and were thus 5 % higher in comparison with 2014 due to higher ex-penses from the use of the transmission network (the cost of pur-

chasing electricity to cover losses and costs of balancing the system).

The costs of goods, materials and services were recorded in the amount of 83,439,883 euros and were thus higher due to higher costs from the use of the transmission network. The procurement value of goods sold includes the purchase of electricity to cover losses in the system and was 11 % higher compared to the previous year. The costs of material were lower than in 2014 primarily due to the costs of material for routine maintenance. The costs of services in the amount of 49,670,987 euros include the costs of electricity

transmission (costs of lease of ancillary services on domestic and foreign markets and the costs of allocation of cross-border trans-mission capacities and the commission for trading), amounting to 38,221,276 euros, and the rest are other costs of services, which amount to 11,449,711 euros. The costs of services were higher due to higher costs of routine and investment maintenance of fixed as-sets, and other services.

in euros

EXPENSES 2015 2014

Operating expenses 140,921,145 133,256,582

Financial expenses 2,264,177 2,052,884

Other expenses 72,507 7,569

Total expenses 143,257,829 135,317,035

in euros

OPERATING EXPENSES 2015 2014

Costs of goods, materials and services 83,439,883 76,073,337

Labour costs 27,189,622 26,210,922

Write-downs 29,333,120 30,202,965

Other operating expenses 958,520 769,358

Total operating expenses 140,921,145 133,256,582

in euros

STRUCTURE OF COSTS AS PER FUNCTION GROUPS 2015 2014

Production costs of goods sold 92,692,453 85,586,501

Sales costs 33,854,763 34,316,991

Administration expenses 14,373,929 13,353,090

Total costs as per function groups 140,921,145 133,256,582

in euros

COSTS OF GOODS, MATERIAL AND SERVICES 2015 2014

Procurement value of material sold 32,794,500 29,500,697

Costs of material 974,396 1,108,334

Costs of services 49,670,987 45,464,306

Total costs of goods, material and services 83,439,883 76,073,337

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1O FINANCIAL REPORT

in euros

LABOUR COSTS 2015 2014

Costs of wages and salaries 16,950,211 16,285,778

Costs of contributions and other taxes on wages and salaries 3,838,167 3,503,907

Costs of supplementary pension insurance 971,318 922,142

Other labour costs 1,801,276 1,773,936

Employer's contributions arising from salaries and wages, allowances, fringe benefits 3,291,477 3,106,937

Provisions for severance payments upon retirement and jubilee awards 337,174 618,222

Total labour costs 27,189,623 26,210,922

In 2015, labour costs amounted to 27,189,623 euros and were thus 3.7 % higher than those recorded in 2014.

In 2015, the write-downs (depreciation/amortisation costs and op-erating expenses from revaluation) amounted to 29,333,120 euros

and were thus 2.9 % lower than those recorded in 2014.

Other operating expenses were recorded in the amount of 958,520 euros and were thus 24 % higher than those recorded in 2014. In 2015, 197,736 euros of long-term provisions from legal actions (lawsuits) were further formed. Other operating expenses consist of

also other operating expenses such as compensations for clearing of routes, charges for the use of construction land, contributions for promoting employment of the people with disabilities, court costs and other costs.

in euros

WRITE-DOWNS 2015 2014

Depreciation and amortisation expenses 29,089,570 29,206,517

Revaluated operating expenses for intangible and tangible fixed assets 154,109 996,373

Revaluated operating expenses associated with current assets 89,441 75

Total write-downs 29,333,120 30,202,965

in euros

DEPRECIATION AND AMORTISATION EXPENSES 2015 2014

Depreciation/amortisation of intangible fixed assets 2,646,456 2,501,391

Depreciation/amortisation of buildings and transmission lines 8,183,238 7,993,881

Depreciation/amortisation of equipment and spare parts 18,237,354 18,642,722

Depreciation/amortisation of small inventories 22,522 68,523

Total depreciation and amortisation expenses 29,089,570 29,206,517

Other Operating Expensesin euros

OTHER OPERATING EXPENSES 2015 2014

Long-term provisions 344,823 147,087

Other operating expenses 613,697 622,271

Total other operating expenses 958,520 769,358

134

In 2015, financial expenses amounted to 2,264,177 euros. Finan-cial expenses from financial liabilities consist of interests on the EIB loan in the amount of 260,267 euros, financial expenses aris-ing from interest rate hedging instruments of long-term EIB loan in the amount of 1,278,896 euros (interest rate collar and swap), interests arising from actuarial calculation in the amount of 73,161

euros and default interest in the amount of 4,545 euros. Financial expenses from operating liabilities arise from interests on the aver-age balance surplus in the amount of 642,070 euros and other fi-nancial expenses (costs of managing bank guarantees 3,479 euros and negative currency exchange 1,759 euros).

The decrease in revenues in the amount of 69,982 euros represents mainly the revenues from dividends.

Decrease in expenses in the amount of 1,916,359 euros represent the costs arising from the employment (1,131,919 euros), the costs of provisions for jubilee awards and severance payments received upon retirement (161,206 euros), the costs of donations (228,319 euros), the entertainment and representation costs (113,264 eu-ros), the costs of the Supervisory Board (61,011 euros), the costs of receivables write-offs (89,441 euros), the costs of losses in holiday activities (95,608 euros) and other costs (35,609 euros).

Increase in expenses in the amount of 116,320 euros represent the previously tax non-deductible depreciation/amortization costs (52,593 euros) and previously tax non-deductible provisions (63,726 euros).

Changes in the tax base result from the correction of the error from the preceding years (2,538,985 euros), from provisions for sever-ance payments received upon retirement (247,735 euros) and other (2,437 euros).

Tax reliefs in the amount of 9,153,893 euros represent a relief for supplementary pension insurance of employees (971,317 euros),

Other expenses amounted to 72,507 euros and consist of expenses for reimbursement to tenders for the filed revisions of public pro-curement.

Financial Expenses

Relation between Tax Expense and Accounting Profit or Loss

Other Expenses

in euros

FINANCIAL EXPENSES 2015 2014

Financial expenses arising from impairment and investment write-offs 0 34,413

Financial expenses arising from financial liabilities 1,616,869 2,013,814

Financial expenses arising from operating liabilities 647,308 4,657

Total financial expenses 2,264,177 2,052,884

in euros

TAX EXPENSE 2015 2014

Gross profit before taxes 10,205,847 11,974,961

Decrease in revenues -69,382 -169,533

Decrease in expenses 1,916,359 1,955,948

Increase in expenses -116,320 -121,141

Changes in the tax base -2,782,611

Reliefs -9,153,893 -13,640,235

Tax base 0 0

Tax rate 17% 17%

Corporate income tax 0 0

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1O FINANCIAL REPORT

Computation of Net Profit

Computation of Accumulated Profit

in euros

NET PROFIT REVENUES EXPENSES DIFFERENCE

Operating profit 152,697,810 140,921,145 11,776,665

Financial profit / loss 662,885 2,264,177 -1,601,292

Other profit / loss 102,981 72,507 30,474

Total gross profit 10,205,847

Corporate Income Tax 0

Deferred taxes -200,922 -200,922

Net profit 153,262,754 143,257,829 10,004,925

In 2015, the net profit for the accounting period was recorded in the amount of 10,004,925 euros.

In 2015, the accumulated profit amounted to 6,965,394 euros, which is down 1 % on 2014. In accordance with Article 230 of the Companies Act, ELES created legal reserves in the amount of 500,246 euros and covered the correction from current profit in the amount of 2,538,985 euros for the past from the correction of de-viations from the regulatory framework for 2014, established by the

Agency in the process of supervision over the regulatory framework.

The Management proposes to the General Meeting an allocation of the total accumulated profit in the amount of 6,965,694 euros in other profit reserves.

in euros

ACCUMULATED PROFIT 2015 2014

Net profit for the financial year 10,004,925 8,690,276

Profit / loss from previous periods -2,538,985 -1,094,443

Change in legal reserves 500,246 561,464

Total accumulated profit 6,965,694 7,034,369

10.3.3 Other Disclosures

Financial Statements as per Activities

1. General

Beside the regulated activity of electricity transmission within its or-ganizational units, ELES performs five separate unregulated activi-ties, hence it records separate financial statements for the regulated and each of the non-regulated activities in accordance with the Slo-venian Accounting Standards, the Transparency of Financial Rela-tions and Maintenance of Separate Accounts for Different Activities Act and Energy Act.

In 2015, the Rules on the criteria for allocation of revenues, costs, expenses, assets and liabilities to different non-regulated activities of ELES was prepared and revised.

Unregulated activities carried out by ELES are as follows:

• Holiday activity (activity 1) includes rental of holiday units owned by the Company for the holidays, priority employees. These are units: apartments, caravans in camps and containers.

• Management of long-term financial investments in stocks and shares (activity 2); the activity includes investments in stokes and shares of subsidiaries, affiliated companies and other long-term financial investments, except those that fall within the regulated activity or other non-regulated activities.

• Rental of flats and business premises (activity 3) covers rental of the Company’s own housing and business premises to employ-

investment allowances (7,764,749 euros), relief for disabled em-ployees (193,086 euros), tax relief for donations (212,920 euros) and other reliefs (11,820 euros).

136

ees and any other natural or legal persons.

• Issue of the magazine »Naš Stik« (activity 4); ELES edits and publishes the magazine »Naš Stik«. The magazine is published in the printed version and the online version.

• Marketing of telecommunications (TC) services (activity 5) comprises marketing of free optical fibers (telecommunication capacities on the Company’s own telecommunications network, principally through subsidiary Stelkom d.o.o).

2. Basis and criteria for preparing financial statements as per activity

Revenues from the sale are the basis for determining the individual activities. Revenues from sale relate to the regulated activity, which are covered by the EA-1, while the remaining sales revenues are un-regulated and generated by other Company’s market activities. The costs and expenses and assets and liabilities are appropriately al-located to the regulated and unregulated activities. A profit and loss account is prepared for each activity.

Criteria for preparing separate profit and loss account and balance sheet for unregulated activities are as follows:

• revenues of individual activities are recorded in separate accounts of revenue as per their content,

• costs, expenses, assets and liabilities are recorded on separate in-dividual accounts or cost units (CU). Each of the non-regulated activities is recorded on its CU, while TC marketing is recorded on seven CU (seven products). CU include direct costs that can be directly attributed to the activity. For items that can not be directly attributed, relevant criteria are prepared. Overhead costs are cal-culated with specific criteria only for TC marketing activity.

Criteria for the separate recording of costs, expenses, assets and li-abilities for unregulated activities apply in cases where it is not pos-sible to directly classify on the basis of the individual accounting documents or data on individual accounts or cost units. The criteria are as follows:

Criteria 1: labour costs for activities 1, 3 and 4It includes the share of the working time by individual employees working on certain non-regulated activities and on this basis actual labour costs of each activity are calculated.

Critera 2: labour costs for activity 5The average annual salary of two employees PITK, SM 993 (wage bill PITK/number of employees at PITK). The two average annual salaries cover all labour costs, which are also relevant to TC market-ing, maintenance and other work in relation to the total TC infra-structure and equipment, administration, invoicing, billing, etc.

Criteria 3: indirect costs of materials, services, depreciation and a part of the whole Company, which relate to the activ-ity 5:The ratio between the direct costs of activity 5 and direct costs of the whole Company is used for calculation. From the resulting ratio a share of the associated overheads of the whole Company, which refers to the activity of 5 is calculated. Standard display of the costs of the whole Company, divided into functional groups (production, sales and management) is applied for calculation.

TC direct costs (materials and services + depreciation/amortisation + work)/costs of production and sales. Management costs are mul-tiplied with the obtained %.

The resulting amount is distributed by nature of costs within activ-ity 5 in proportion to the share of the direct costs of materials and services, depreciation and labor.

Criteria 4: Direct costs of materials, services and depreciation/amortisation of fixed assets for the activity 5The portion of the use of an asset, which is also used for the provi-sion of TC activity, is used as the basis for calculation. On the basis of the portions the amount of depreciation/amortisation, materials and services related to the activity of 5 is calculated. The amount of such costs, recorded in the following CU or products of TC represents the base: TC premises (in 2015, the share is 2 %), antenna towers (in 2015, 15 %), optical fibers (in 2015, 10 % share), UPS 48 V (in 2015, 2.7 % share), UPS 230 V (in 2015, 1.32 % share), the SDH network (in 2015, 5 %) and IP/MPLS network (in 2015, 40 % share). The shares, if necessary, depending on the actual realization, are set for each financial year at the end of the financial year and are accounted for in the annual financial statements.

Individual items of revenues, expenses, assets and liabilities, and the cash flow, which relate to the regulated activity are calculated as the difference between the value of the items of the whole ELES and the total value of items of non-regulated activities.

The balance sheet includes receivables and liabilities between the various activities relating to mutual assets or losses financing.

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1O FINANCIAL REPORT

3. Notes to the financial statements as per activity

Income Statement as per separate activity for 2015in euros

ITEMREGULATED BUSINESS

ACTIVITIESNON-REGULATED

BUSINESS ACTIVITIESTOTAL

1 2 3(1+2)

1. Net sales revenues 146,859,706 1,821,952 148,681,658

a. On domestic market 113,936,749 1,821,952 115,758,701

b. On foreign market 32,922,957 0 32,922,957

2. Changes in inventories and work-in-progress 0 0 0

3. Capitalised own products and services 1,988,924 0 1,988,924

4. Other operating revenues 2,027,228 0 2,027,228

I OPERATING REVENUES 150,875,858 1,821,952 152,697,810

5. Costs of goods, materials and services (a + b) 83,114,069 325,814 83,439,883

a. Costs of goods, materials sold and costs of materials used 33,762,666 6,230 33,768,896

b. Costs of services 49,351,403 319,584 49,670,987

6. Labour costs (a + b + c + d) 26,915,845 273,777 27,189,622

a. Costs of wages and salaries 20,579,056 209,322 20,788,378

b. Costs of pension insurance contributions 2,710,573 27,571 2,738,144

c. Costs of contributions and other taxes on wages and salaries 1,509,299 15,352 1,524,651

d. Other labour costs 2,116,917 21,532 2,138,449

7. Write-downs (a + b + c) 29,040,793 292,327 29,333,120

a. Depreciation and amortisation expenses 28,797,243 292,327 29,089,570

b. Revaluated operating expenses for intangible and tangible fixed assets

154,109 0 154,109

c. Revaluated operating expenses associated with current assets 89,441 0 89,441

8. Other operating expenses 957,936 584 958,520

III OPERATING PROFIT (I-II) 10,847,215 929,450 11,776,665

9. Financial revenues from equity interests 304,419 67,598 372,017

a. Fianancial revenues from equity in companies in the Group 0 2,138 2,138

b. Fianancial revenues from equity in associated companies 0 0 0

c. Fianancial revenues from equity in other companies 304,419 65,460 369,879

d. Financial revenues from other investments 0 0 0

10. Financial revenues from loans 154,564 110,704 265,268

a. Financial revenues from loans given to copmanies in the Group 0 110,704 110,704

b. Financial revenues from loans given to others 154,564 0 154,564

11. Financial revenues from operating receivables 25,600 0 25,600

a. Financial revenues from operating receivables due by others 25,600 0 25,600

12. Financial expenses arising from impairment and investment write-offs

0 0 0

13. Financial expenses arising from financial liabilities 1,616,869 0 1,616,869

a. Financial expenses arising from received bank loans 260,267 0 260,267

b. Financial expenses arising from other financial liabilities 1,356,602 0 1,356,602

14. Financial expenses arising from operating liabilities 647,251 57 647,308

a. Financial expenses for interest on the average balance surplus 642,070 0 642,070

b. Financial expenses arising from other operating liabilities 5,181 57 5,238

15. Other revenues 102,981 0 102,981

16. Other expenses 72,507 0 72,507

IV PROFIT BEFORE TAX (III+9+10+11-12-13-14+15-16) 9,098,152 1,107,695 10,205,847

9. Corporate Income Tax 0 0 0

10. Deferred taxes -200,922 0 -200,922

V NET PROFIT FOR THE FINANCIAL YEAR (IV-9+10) 8,897,230 1,107,695 10,004,925

138

ELES concluded the 2015 financial year with a profit of 10,004,925 euros, of which non-regulated activities generated a profit of 1,107,695 euros, or 11 % of the total profit of the Company.

Total revenues of unregulated activities

In 2015, revenues from non-regulated activities amounted to 1,821,952 euros and account for 1.2 % of the total revenues of the Company. Most of these revenues are generated by the marketing of TC services activity (85.2 %). Compared to 2014, revenues from unregulated activities decreased by 11.3 %.

In 2015, financial revenues amounted 110,704 euros and relate to the interest charged on loan given to the subsidiary Talum and revenues from shares and liquidation of investment in Trgel 65,460 euros.

Total expenses of unregulated activities

In 2015, costs of materials and services in unregulated activities amounted to 325,814 euros, or 0.39 % of the cost of the entire

Company and in comparison with 2014 decreased by 12.3 %. The largest share of the costs was incurred in the marketing of telecom-munications services (48 %) and holiday activity (33 %).

In 2015, labour costs for unregulated activities amount to 273,777 euros, or 1 % of the total costs of ELES. Compared with 2014, they decreased by 14 %. The largest share of the costs was incurred in the marketing of telecommunications services (40 %) and »Naš Stik« magazine publishing activities (51 %).

Depreciation costs in unregulated activities amount to 292,327 eu-ros or 1.0 % of the total costs of depreciation of Eles and decreased by 23 % in 2015. The largest share of these costs are incurred in the marketing of TC activity (90%).

Net profit of unregulated activities

The profits of unregulated activities in 2015 amounted to 1,107,695 euros, of which the activitiy of marketing TC services generated a profit of 1,021,911 euros.

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1O FINANCIAL REPORT


ITEMRegulated business

activitiesNon-regulated

business activitiesTOTAL

ASSETS

A. LONG-TERM FIXED ASSETS 568,960,010 93,585,642 570,197,986

I. Intangible fixed assets and long-term deferred costs and accrued revenues

54,514,948 13,880 54,528,828

1. Long-term property rights 54,514,948 13,880 54,528,828

II. Tangible fixed assets 418,283,309 2,296,701 420,580,010

1. Land and buildings 198,615,778 527,914 199,143,692

a) Land 15,042,781 0 15,042,781

b) Buildings 183,572,997 527,914 184,100,911

2. Equipment and spare parts 188,393,052 1,768,787 190,161,839

3. Other tangible fixed assets 112,540 0 112,540

4. Tangible fixed assets being acquired 31,161,939 0 31,161,939

a) Tangible assets under construction or in production 30,883,390 0 30,883,390

b) Advances for acquisition of fixed assets 278,549 0 278,549

III. Investment properties 0 0 0

IV. Long-term financial investments 749,308 88,195,171 88,944,479

1. Long-term financial investments save loans 749,308 86,395,156 87,144,464

a) Shares and equity interests in the Group 0 85,614,194 85,614,194

b) Shares and equity interests in associates 400,000 50,000 450,000

c) Other shares and equity interests 349,308 730,962 1,080,270

2. Long-term loans 0 1,800,015 1,800,015

a) Long-term loans given to companies in the Group 0 1,800,015 1,800,015

V. Long-term operating receivables 92,732,516 2,651,649 3,036,499

1. Long-term operating receivables due by companies in the Group 0 2,651,649 2,651,649

2. Long-term operating receivables due by others 384,850 0 384,850

3. Long-term internal receivables due by unregulated activities 92,347,666 0 0

VI. Deferred tax assets 2,679,929 428,241 3,108,170

B. SHORT-TERM ASSETS 99,444,180 3,645,332 103,089,512

II. Inventories 2,151,534 0 2,151,534

1. Materials 2,151,534 0 2,151,534

III. Short-term financial investments 25,000,000 3,207,165 28,207,165

1. Short-term loans to companies in the Group 0 3,207,165 3,207,165

2. Other short-term loans 25,000,000 0 25,000,000

IV. Short-term operating receivables 24,841,502 438,167 25,279,669

1. Short-term operating receivables due by companies in the Group 426,008 402,956 828,964

2. Short-term accounts receivables 21,491,999 11,381 21,503,380

3. Short-term operating receivables due by others 2,923,495 23,830 2,947,325

4. Short-term internal receivables between unregulated activities 0 0 0

V. Cash and cash equivalents 47,451,144 0 47,451,144

C. DEFERRED COSTS(EXPENSES) AND ACCRUED REVENUES 816,301 0 816,301

ASSETS 669,220,491 97,230,974 674,103,799

Off-balance assets 14,731,780 10,000,000 24,731,780

Balance Sheet as per separate activity as at 31 December 2015

140

Balance sheet as at 31 December 2015 shows 14 % of total assets Eles’ balance sheet at the unregulated activities.





LIABILITIES

A. EQUITY 378,934,119 1,499,864 380,433,983

I. Called-up capital 177,469,516 0 177,469,516

1. Share capital 177,469,516 0 177,469,516

II. Capital reserves 156,936,162 0 156,936,162


1. Legal reserves 8,518,911 0 8,518,911

2. Other revenue reserves 35,299,125 0 35,299,125

IV. Revaluation adjustment surplus -5,147,594 392,169 -4,755,425

V. Retained earnings 0 0 0

VI. Net profit (or loss) for financial year 5,857,999 1,107,695 6,965,694

B. PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES

191,775,247 191,775,247

1. Provisions for pensions and similar liabilities 5,202,252 0 5,202,252

2. Other provisions 1,581,976 0 1,581,976

3. Long-term accrued costs and deferred revenues 184,991,019 0 184,991,019

C. LONG-TERM FINANCIAL AND OPERATING LIABILITIES 57,090,899 92,420,871 57,164,104


1. Long-term financial liabilities to companies in the Group 0 0 0

2. Long-term financial liabilities to banks 50,992,823 0 50,992,823

3. Other long-term financial liabilities 5,669,830 0 5,669,830

II. Long-term operating liabilities 428,246 92,347,666 428,246

1. Long-term operating liabilities to companies in the Group 0 0 0

2. Long-term operating liabilities arising from advances 428,246 0 428,246

3. Internal liabilities unregulated activities to regulated activities 0 92,347,666 0

III. Deferred tax liabilities 0 73,205 73,205

D. SHORT-TERM FINANCIAL AND OPERATING LIABILITIES 39,163,011 3,310,238 42,473,249

II. Short-term financial liabilities 5,007,177 3,207,165 8,214,342

1. Short-term financial liabilities to companies in the Group 0 3,207,165 3,207,165

2. Short-term financial liabilities to banks 5,007,177 0 5,007,177

III. Short-term operating liabilities 34,155,834 103,073 34,258,907

1. Short-term operating liabilities to companies in the Group 634 0 634

2. Short-term accounts payable 29,807,750 81,944 29,889,694

3. Short-term operating liabilities arising from advances 178,318 0 178,318

4. Other short-term operating liabilities 4,169,132 21,129 4,190,261

5. Internal liabilities between unregulated activities 0 0 0

E. ACCRUED COSTS (EXPENSES) AND DEFERRED REVENUES 2,257,216 0 2,257,216

LIABILITIES 669,220,491 97,230,973 674,103,799

Off-balance liabilities 14,731,780 10,000,000 24,731,780

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1O FINANCIAL REPORT

Assets of unregulated activities

Unregulated activity has on intangible and tangible fixed assets 0.48 % Eles’ assets, the majority of these refers to the activity of TC marketing. In addition to these, there are also flats, business prem-ises and holiday facilities.

Long-term investments are considered in the unregulated activity of management long-term investments in stocks and shares, and ac-tivity of TC marketing (Stelkom d.o.o.) and account for 99 % of the total ELES’ long-term financial investments. The major part of this amount relates to the investment in a subsidiary Talum d.d. Of all the ELES’ long-term financial investments only investments that are directly related to the business of electricity transmission; i.e. BSP, JAO, CAO SEE are not included.

Deferred tax assets in the amount of 428,241 euros arise from the activities of investment management and relate to unpaid divi-dends of the subsidiary Talum in 2007, which are recorded under long-term operating receivables.

Short-term financial investments relate to the subsidiary Talum and represent value of unrealized guarantees which are recorded as long-term financial liabilities.

Short-term receivables are actually outstanding receivables, which unregulated activities record towards customers; the largest portion of these (96 %) refers to the activity of TC marketing. Regulated ac-tivity recorded in the balance sheet internal receivables from unreg-ulated activities in the amount of 92,347,666 euros from financing long-term financial investments and other assets and from covering liabilities in previous years for the activities which recorded losses.

Liabilities of unregulated activities

On item equity unregulated activities recorded only profits and loss-es of 2015 in the total amount of 1,107,695 euros and the revalu-ation surplus in the amount of 392,169 euros, which relates to the valuation of investments in Triglav Insurance Company (investment management activity). From this title also deferred tax liabilities amount to 73,205 euros.

Unregulated activities recorded under the long-term operating li-abilities internal liabilities towards regulated activitiy in the amount of 92,347,666 euros from financing long-term financial invest-ments (investment management activity and marketing TC activ-ity) and other assets and from covering past losses.

Short-term operating liabilities of unregulated activities are the ac-tual liabilities towards suppliers and employees as at 31 December 2015.

Short-term financial liabilities of non-regulated activities arise from guarantees given to subsidiary Talum (investment management activity).

Off balance sheet items include liabilities arising from contracts signed for guarantees for subsidiary Talum (investment manage-ment activity).

142

Cash flow Statement as per separate activity for 2015

CASH FLOW in euros




A. CASH FLOW FROM OPERATING ACTIVITIES

a. Items of operating activities 39,420,093 1,221,720 40,641,813

Operating revenues and financial revenues from operating receivables 150,973,592 1,821,952 152,795,544

Operating expenses save amortization (depreciation) and financial expenses

-111,553,499 -600,232 -112,153,731

Corporate Income Tax and other taxes not included in operating expenses 0 0 0

b. Changes to net current assets as in items of balance sheet 22,581,834 3,443,821 26,025,655

Opening less closing operating receivables 3,109,704 32,467 3,142,171

Opening less closing internal operating receivables -3,552,119

Opening less closing deferred costs and accrued revenues 9,566,983 0 9,566,983

Opening less closing deferred tax receivables 0 0

Opening less closing assets held for sale 0 0

Opening less closing inventories 358,341 0 358,341

Closing less opening operating liabilities -2,381,862 -140,765 -2,522,627

Closing less opening internal operating liabilities 3,552,119

Closing less opening accrued costs and deferred revenues and provisions 15,480,787 0 15,480,787

Closing less opening deferred tax liabilities 0 0

c. Net cash flow operating revenues/liabilities (a+b) 62,001,927 4,665,541 66,667,468

B. CASH FLOW FROM INVESTMENT ACTIVITIES

a. Inflows from investment activities 619,362 178,302 797,664

Revenues from investments activities 458,983 178,302 637,285

Revenues from disposal of intangible assets 0 0 0

Revenues from disposal of tangible fixed assets 160,379 0 160,379

Revenues from disposal of investment property 0 0 0

Revenues from disposal of long-term financial investments 0 0 0

Revenues from disposal of short-term financial investments 0 0 0

b. Outflows pertaining to investment activities -24,749,905 -43,843 -24,793,748

Acquisition of intangible assets -8,447,708 -13,577 -8,461,285

Acquisition of tangible fixed assets -14,265,197 -30,266 -14,295,463

Acquisition of investment property 0 0 0

Acquisition of long-term financial investments -37,000 0 -37,000

Acquisition of short-term financial investments -2,000,000 0 -2,000,000

c. Net cash (inflows and outflows) used in investment activities (a+b) -24,130,543 134,459 -23,996,084

C. CASH FLOW FROM FINANCING ACTIVITIES

a. Inflows from financing activities 0 0 0

Inflows from paid-in capital 0 0 0

Inflows from an increase in long-term financial liabilities 0 0 0

Inflows from an increase in short-term financial liabilities 0 0 0

b. Outflows pertaining to financing activities -13,990,224 -4,800,000 -18,790,224

Outflows from interests pertaining to financing activities -1,616,869 0 -1,616,869

Repayment of capital 0 0 0

Repayment of long-term financial liabilities -2,800,000 0 -2,800,000

Repayment of short-term financial liabilities 0 -4,800,000 -4,800,000

Dividends paid -9,573,355 0 -9,573,355

c. Net cash used in financing activities (a+b) -13,990,224 -4,800,000 -18,790,224

D. CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 47,451,144 0 47,451,144

Financial result in the period (sum of Ac, Bc and Cc) 23,881,160 0 23,881,160

Opening balance of cash and cash equivalents 23,569,984 0 23,569,984

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1O FINANCIAL REPORT

For non-regulated activities, the cash flow statement is prepared only for 2015, whereas in 2015 the new Rules on the criteria, which changed compared to the previous years, were adopted.

Items of cash flow are prepared using the indirect method.

Inflows and outflows from operating activities include revenues and expenses from operations and changes in receivables and liabilities and record a total net cash in the amount of 4,665,541 euros.

Regulated activity increased receivables due by unregulated activi-ties in the amount of 3,552,119 euros. The same amount increased internal liabilities of unregulated activities to regulated activity.

Financing shows negative net cash flow in the amount of 4.8 million euros and relates to payment of TALUM’s obligations from guaran-tees for the purchase of electricity.

Unregulated activities do not record cash and cash equivalents.

Notes to the Law on Financial Transactions

ELES fulfils the criteria of financial adequacy. In 2015, the Company had no accounts frozen. In the context of financial functions and pursuant to the Financial Transactions Act as well as operating poli-cies, ELES monitors and manages the financial risks, which the Com-pany is exposed to during its operations.

The table shows the income paid in 2015.

The amounts paid to the Members of the Supervisory Board, the ELES’ employees represent salaries and other employment benefits and income from membership in the Supervisory Board.

The Company has no receivables arising from advances, guaran-tees and loans given to the member of the Management Board, members of the Supervisory Board and members of the Audit Com-mittee of the Supervisory Board.

The table shows the payments to the Chief Executive Officer in 2015. In 2015, the Chief Executive Officer received the variable

part of remuneration for performance (variable remuneration) in the amount of 7,309 euros.

in euros

REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD AND MANAGEMENT BOARD 2015

Member of the Management Board - Chief Executive Officer 112,299

Employees employed under individual contracts 3,505,182

Members of the Supervisory Board - external members and members of auditors commission 91,490

Members of the Supervisory Board - ELES' employees 202,899

Total remuneration of Members of the Supervisory Board and Management Board 3,911,871

Remuneration of the Members of the Supervisory Board and Management Board

Remuneration of Members of the Management Board of ELESin euros

NAME AND SURNAME

Salary Work performanceHoliday bonus

Training MembershipsSupplementary

pension insuranceBenefits

Aleksander Mervar gross 101,797 0 0 0 0 2,819 7,683

net 49,072 0 0

144

Remuneration of Auditors

In 2015, the contractual value of auditing services amounted to 13,000 euros, namely 11,500 euros for the annual report and 1,500 euros for the consolidated annual report. In 2014, the amount to-talled 13,000 euros.

Disclosure of transactions with related companies

In accordance with Article 110 of the EA-1 (Item 4) ELES as the elec-

tric power company discloses transactions conducted with related companies. Affected companies are subsidiaries Talum (Eles has a 85.61 % stake) and Stelkom (Eles has a 56.26 % stake), a joint ven-ture company BSP (Eles has a 50 % stake) and affiliated company Eldom (Eles has a 25 % stake).

Transactions are disclosed with the balance sheet items as at 31 December 2015 and income statement items for 2015, namely an-nual revenues, costs and expenses.

The table shows the remuneration in 2015.

Remuneration of Members of the Supervisory Board and Audit Committee of ELES in euros

NAME AND SURNAME GROSS NET EDUCATION MEMBERSHIPS INSURANCE

EXTERNAL MEMBERS:

Andrej Prebil 4,917 3,576

Gorazd Skubin 5,805 4,222

Marjan Ravnikar 15,339 11,156 0 0 7

Igor Maher 16,307 11,860 0 0 7

Milan Krajnik 19,001 13,819 198 0 7

Matevž Marc 17,925 13,037 0 0 7

Darinka Virant 7,166 5,212

INTERNAL MEMBERS:

Jože Senčar 15,461 11,245 0 120 0

Marko Goršek 12,172 8,853 595 120

Bogdan Trop 2,788 2,027 0 0

Total remuneration 116,880 85,007 793 240 27

in euros

TRANSACTIONS WITH RELATED COMPANIES

BALANCE SHEET TALUM STELKOM BSP ELDOM TOTAL

LONG-TERM FIXED ASSETS

Long-term financial investments 86,919,189 495,020 400,000 50,000 87,864,209

Shares and equity interests in related companies 85,119,174 495,020 400,000 50,000 86,064,194

- of turnover in 2015 6,600,000 6,600,000

Long-term loans given to related companies 1,800,015 0 0 0 1,800,015

- of turnover in 2015 4,800,000 4,800,000

Long-term operating receivables 2,651,650 0 0 0 2,651,650

Long-term operating receivables due by related companies - dividends

2,651,650 0 0 0 2,651,650

TOTAL 89,570,839 495,020 400,000 50,000 90,515,859

SHORT-TERM ASSETS

Short-term financial investments 3,207,166 0 0 0 3,207,166

Short-term loans to related companies 3,207,166 0 0 0 3,207,166

Short-term operating receivables 1,444,790 747,192 0 0 2,191,982

Short-term operating receivables due by related companies

722,395 373,596 0 0 1,095,991

1. Accounts receivable 455,367 373,596 0 0 828,963

2. Interest receivable 267,028 0 0 0 267,028

TOTAL 4,651,956 747,192 0 0 5,399,148

SHORT-TERM FINANCIAL AND OPERATING LIABILITIES

Other short-term operating liabilities 3,207,166 0 0 24,470 3,231,636

Short-term operating liabilities to related companies

3,207,166 0 0 24,470 3,231,636

TOTAL 3,207,166 0 0 24,470 3,231,636

145

1O FINANCIAL REPORT

Long-term assets Talum: Items of the increase in ownership stake in the amount of 6,600,000 euros result primarily from a decision of the General Meeting of ELES number 4-28/2012-226 of 28 November 2012 adopted by AUKN on behalf of the Government of the RS, the founder of the company ELES. On the basis of that decision ELES was paying TALUM’s electricity suppliers. Contracts on a loan given were then signed with Talum, which had been converted into equity. The conversion to equity in 2015 results from the payment of guar-antees in the amount of 3,600,000 euros in 2014 and 3,000,000 euros in 2015.

Long-term loan in the amount of 1,800,015 euros was paid on the basis of the decision referred to in the previous paragraph.

Guarantee for the supply of electricity in the amount of 4,800,000 euros was paid on the basis of the same decision, of which 3,000,000 euros were converted into equity (referred to in the pre-vious paragraph), while a part of this payment in the amount of 1,800,015 euros is the balance of long-term loans.

Long-term operating receivables from unpaid dividends in the amount of 2,651,650 euros arise from the decision of the Talum’s general meeting for 2007. Following the decision of the general meeting of 2015 these will be settled by 30 June 2017.

Other related companies: For other related companies ELES re-cords only ownership stakes under Company’s long-term assets, but these did not change in 2015.

Current assetsThey include data on short-term loans and unpaid receivables from related companies.

Talum: Receivables of short-term loan from operations in the amount of 3,207,165 euros is opened towards Talum, this is the unpaid portion of the guarantee for the purchase of electricity by decision of AUKN of 2012 (referred to in the first paragraph). Coun-ter item is short-term liability of the same title is explained in the chapter on short-term investments of this report.

Short-term receivablesTalum: Receivables arise from undue receivables as at 31 Decem-ber 2015 and derive from the contract on the use of the transmis-sion system for 2015, of 22 December 2014.

Interest receivables arise from contracts of long-term loans.

Stelkom: Receivables arise from the contract on business coopera-tion in marketing of ITC services of 18 May 2004 and the annex to that contract in 2009. The contract is concluded between ELES and Stelkom and other electricity distribution companies. HSE ap-proached the cooperation with the said annex in 2009. The basic contract defines the services of rental lines and other telecommu-nications equipment, in which the proportion of ELES capacity is higher than the ELES needs for carring out its core activities.

BSP: Assets and liabilities relating to the business of trading in the balancing market. In the balancing market system operator ELES buys and sells electricity, intended for balancing the electricity sys-tem. For those transactions ELES concluded appropriate contracts with BSP, which define the content and the terms of trading.

ELDOM: Obligations arise from the contract number 886/2002 - Contract on takeover of workers and for the provision of services in units of Maribor, Nova Gorica, Podlog, Divača and Kleče and from contract number 854/2002 - Contract for the management and maintenance of apartment no. 10 Beli križ- Portorož.

146

Talum: Values listed in the table above are the revenues from the contracts indicated under receivables and include the network charge for the transmission network and the network charge for an-cillary services. The second part of the contract already referred to relates to transactions on behalf of a trhird party: the contribution of RES + CHP, allowance for the Energy Agency and the allowance for operation of the organized electricity market.

Stelkom: Revenues listed in the table, arise from the contract and annex to the agreement referred to in interpretation of the receiva-bles. They consist of the rental of telecommunications lines (optical fibers) and other telecommunications equipment, where ELES has higher capacity than it needs to carry out its core business of elec-tricity transmission.

BSP: All revenue and expenditure transactions and the operations on behalf of a third party are identified in the joint mutual contracts between the ELES and BSP. Operations include balancing electricity market, purchase and sale for losses in the electric power system.

ELDOM: Maintenance costs arise from the contract number 886/2002 - Contract on takeover of workers and for the provision of services in units of Maribor, Nova Gorica, Podlog, Divača and Kleče and from contract number 854/2002 - Contract for the manage-ment and maintenance of apartment no. 10 Beli križ- Portorož.

in euros

TRANSACTIONS WITH RELATED COMPANIES

INCOME STATEMENT TALUM STELKOM BSP ELDOM TOTAL

REVENUES

Revenue of Transmission of Electricity 3,210,804 0 7,475,175 0 10,685,980

Revenue from services activities 0 1,348,060 0 0 1,348,060

Interest income 111,206 0 0 0 111,206

TOTAL 3,322,010 1,348,060 7,475,175 0 12,145,246

Market in electricity (on behalf of foreign account) gross

4,945,879 0 0 0 4,945,879

EXPENSES

Expenses and costs arising from electricity 0 0 14,556,020 0 14,556,020

Maintance costs 0 0 0 207,437 207,437

TOTAL 0 0 14,556,020 207,437 14,763,457

147

1O FINANCIAL REPORT

Other Notes to Article 70 of the Companies Act-1

Exposure to Financial Risks

Liquidity Riskin euros

BALANCE SHEET ITEM BOOK VALUE CONTRACTUAL

CASH FLOWS Due in 2016 Due in 2017

Due in 2018–2037

Received loans 58,800,000 60,954,697 5,007,177 2,800,000 50,992,823

Other long-term operating liabilities 428,246 428,246 - - 428,246

Other long-term financial liabilities 5,669,830 5,669,830 - - 5,669,830

Short-term accounts payable 29,890,329 29,890,329 29,890,329 - -

Other short-term operating liabilities 7,575,744 7,575,744 7,575,744 - -

Total 96,694,319 98,849,016 42,473,250 2,800,000 51,421,069

The book value of the EIB loan received in 2010 amounts to 56,000,000 euros, of which a short-term portion 5,589,033 euros. The maturity of the loan is 25 years with the included two-and-a-half-year moratorium and a 6M EURIBOR + 0.35 %. The loan is not secured since ELES is 100 % state-owned company; hence, the state is subsidiary liable for the Company’s liabilities in accordance with the Energy Act (EA). The amounts due under the loan in addi-tion to the principal also include interests.

ELES settles its liabilities as they arise and the Company had no out-standing liabilities as at 31 December 2015.

So as to insure a proper performance of contractual obligations, ELES received blank bills of exchange with bill of exchange declara-tion and bank guarantees as a part of contracts on the provision of ancillary services and to cover losses of electricity sustained during the transmission through the transmission network (GEN energija, TE-TOL Energetika Ljubljana, Petrol and Elektro Energija).

Long-term loans arise from guarantees provided to the subsidiary Talum following the decision of the founder of 28 November 2012 where the founder agrees to ELES to issue guarantees for electric-ity supply to Talum. A part of the loan is realised in the amount of 1,800,015 euros and will be converted into equity of the company ELES in Talum at the beginning of 2016. Unrealized part of the loan in the amount of 3,207,165 euros was recorded in the financial statements as short-term liabilities, which was at the beginning of 2016, transformed into a long-term loan with repayment terms in 2017 for the purpose of conversion into ELES’ investment in Talum. To secure its guarantee obligations under the Guarantee Agreement contract of guarantee concluded between the ELES, Talum and HSE, ELES submitted to HSE 8 blank bills of exchange with an irrevocable and unconditional mandate to fill out and redeem bills of exchange in accordance with the provisions of the signed Agreement.

Deposits held at banks represent short-term loans.

Accounts receivables are secured in the amount of 47.21 % with blank bills of exchange.

Other short-term operating receivables are receivables arising from taxes and receivables towards other institutions and do not pose any major risks.

Receivables arising form Talum`s dividends, which are not secured, are also recorded under long-term receivables.

Credit Riskin euros

ITEM Book value as at 31 DEC 2015

Long-term loans 1,800,015

Short-term loans 25,000,000

Accounts receivables 22,332,344

Other short-term receivables 2,947,325

Other long-term operating receivables 3,036,499

Total 55,116,183

148

The Company holds all financial assets (loans given and deposits) at a fixed rate and are not exposed to major risks. These are: the loan granted to the subsidiary company Talum and short-term deposits held at banks.

Financial liabilities to Talum from the guarantees have a fixed inter-est rate, while the obligations arising from the received long-term loan from EIB and liabilities arising from derivative financial instru-ments (interest rate collars and interest rate swaps), intended for hedging against interest rate risk, have a variable interest rate.

A Sensitivity Analysis with Respect to Financial Risks

Analysis was based on long-term loan given by the EIB and the loan-related derivative financial instruments to hedge against the changes in interest rates. Hedging is established in the amount of two thirds of the loan value.

Notes to the Deviations from the Accounting Standards

In its income statement for 2014 and 2015 the Company did not acknowledge all the revenues from the cross-border transmission capacities (CBTC), yet applied the provision of Article 120 of the Energy Act. Since Article 120 is inconsistent with the Slovenian

Accounting Standards (SAS) as regards the acknowledgement of revenues, the deferral of revenues deviates from the provisions of the SAS.

Interest Rate Risk

Deviation from the accounting standards

in euros

FINANCIAL INSTRUMENTS AT FIXED INTEREST RATE

Financial assets 30,007,180

Financial liabilities 3,207,165

FINANCIAL INSTRUMENTS AT VARIABLE INTEREST RATE 61,669,830

Financial assets

Financial liabilities 61,669,830

in euros

ITEMCompany's expenses

Decrease by 100 b.p. Increase by 100 b. p.

Instruments at variable interest rate 309,539 -387,826

Interests for long-term loan -56,658 581,739

Total 252,881 193,913

in euros

INFLUENCE OF DEFERRED REVENUES ARISING FROM CBTC 2015 2014

Deferred revenues - Articles of the EA (decrease in sales revenues) 16,560,837 28,332,781

Financial expenses for interest on the average balance of the surplus - increase 642,070

Transfer to revenues in the financial year -1,227,921 -1,164,687

Corporate income tax reduction due to deferred revenues from CBTC -2,923,909 -5,605,410

Deferred tax change due to deferred revenues from CBTC 193,031 767,340

Sum of lower net profit and equity 13,244,108 22,330,024

149

1O FINANCIAL REPORT

Income Statement and Balance Sheet (without applying Article 120 of the EA-1)

INCOME STATEMENT in euros

ITEM 2015 2014

1. Net sales revenues 165,242,495 167,798,285

a. On domestic market 115,795,709 132,532,459

b. On foreign market 49,446,786 35,265,826

2. Changes in inventories and work-in-progress 0 0

3. Capitalised own products and services 1,988,924 2,383,795

4. Other operating revenues 799,307 465,369

OPERATING REVENUES (1+2+3+4) 168,030,726 170,647,449

5. Costs of goods, materials and services (a + b) 83,439,883 76,073,337

a. Costs of goods, materials sold and costs of materials used 33,768,896 30,609,031

b. Costs of services 49,670,987 45,464,306

6. Labour costs (a + b + c + d) 27,189,622 26,210,922

a. Costs of wages and salaries 20,788,378 19,789,685

b. Costs of pension insurance contributions 2,738,144 2,594,315

c. Costs of contributions and other taxes on wages and salaries 1,524,651 1,434,764

d. Other labour costs 2,138,449 2,392,158

7. Write-downs (a + b + c) 29,333,120 30,202,965

a. Depreciation and amortisation expenses 29,089,570 29,206,517

b. Revaluated operating expenses for intangible and tangible fixed assets 154,109 996,373

c. Revaluated operating expenses associated with current assets 89,441 75

8. Other operating expenses 958,520 769,358

OPERATING PROFIT (1+2+3+4-5-6-7-8) 27,109,581 37,390,867

9. Financial revenues from equity interests 372,017 43,082

a. Fianancial revenues from equity in companies in the Group 2,138 0

b. Fianancial revenues from equity in other companies 369,879 43,082

c. Financial revenues from other investments 0 0

10. Financial revenues from loans 265,268 637,693

a. Financial revenues from loans given to copmanies in the Group 110,704 153,517

b. Financial revenues from loans given to others 154,564 484,176

11. Financial revenues from operating receivables 25,600 532,606

a. Financial revenues from operating receivables due by others 25,600 532,606

12. Financial expenses arising from impairment and investment write-offs 0 34,413

13 Financial expenses arising from financial liabilities 1,616,869 2,013,814

a. Financial expenses arising from received bank loans 260,267 418,408

b. Financial expenses arising from other financial liabilities 1,356,602 1,595,406

14. Financial expenses arising from operating liabilities 5,238 4,657

c. Financial expenses arising from other operating liabilities 5,238 4,657

15. Other revenues 102,981 2,599,260

16. Other expenses 72,507 7,569

17. Corporate Income Tax 2,923,909 5,605,410

18. Deferred taxes -7,891 21,640

19. NET PROFIT FOR THE FINANCIAL YEAR 23,249,033 33,559,285

(1+2+3+4-5-6-7-8+9+10+11-12-13-14+15-16-17-+18)

150


ASSETS 31 DEC 2015 31 DEC 2014

A. LONG-TERM FIXED ASSETS 569,213,225 564,429,172

I.Intangible fixed assets and long-term deferred costs and accrued revenues

54,528,828 48,113,999

1. Long-term property rights 54,528,828 48,113,999

II. Tangible fixed assets 420,580,010 421,763,200

1. Land and buildings 199,143,692 200,317,914

a) Land 15,042,781 14,909,472

b) Buildings 184,100,911 185,408,442

2. Equipment and spare parts 190,161,838 193,693,918

3. Other tangible fixed assets 112,540 76,235

4. Tangible fixed assets being acquired 31,161,939 27,675,133

a) Tangible assets under construction or in production 30,883,390 25,241,981

b) Advances for acquisition of fixed assets 278,549 2,433,152

III. Investment properties 0 0

IV. Long-term financial investments 88,944,479 92,167,923

1. Long-term financial investments save loans 87,144,464 80,720,261

a) Shares and equity interests in the Group 85,614,194 79,024,063

b) Shares and equity interests in associates 450,000 450,000

c) Other shares and equity interests 1,080,270 1,246,198

d) Other long-term investments 0 0

2. Long-term loans 1,800,015 11,447,662

a) Long-term loans given to companies in the Group 1,800,015 11,447,662

V. Long-term operating receivables 3,036,499 207,991

1. Long-term operating receivables due by companies in the Group 2,651,649 0

2. Long-term operating receivables due by others 384,850 207,991

VI. Deferred tax assets 2,123,409 2,176,059

B. SHORT-TERM ASSETS 103,089,512 80,330,207

II. Inventories 2,151,534 2,509,875

1. Materials 2,151,534 2,509,875

III. Short-term financial investments 28,207,165 23,000,000

1. Short-term loans to companies in the Group 3,207,165 0

2. Other short-term loans 25,000,000 23,000,000

IV. Short-term operating receivables 25,279,669 31,250,348

1. Short-term operating receivables due by companies in the Group 828,964 3,792,069

2. Short-term accounts receivables 21,503,380 22,615,953

3. Short-term operating receivables due by others 2,947,325 4,842,326

V. Cash and cash equivalents 47,451,144 23,569,984

C. DEFERRED COSTS(EXPENSES) AND ACCRUED REVENUES 816,301 10,383,284

ASSETS 673,119,038 655,142,663

Off-balance assets 24,731,780 24,667,269

151

1O FINANCIAL REPORT


LIABILITIES 31 DEC 2015 31 DEC 2014

A. EQUITY 520,911,073 507,680,233

I. Called-up capital 177,469,516 177,469,516

1. Share capital 177,469,516 177,469,516

II. Capital reserves 156,936,162 156,936,162


1. Legal reserves 8,507,813 8,507,813

2. Other revenue reserves 32,826,325 32,826,325

IV. Revaluation adjustment surplus -4,755,425 -4,971,860

V. Retained earnings 126,677,649 103,352,992

VI. Net profit (or loss) for financial year 23,249,033 33,559,285

B. PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES 21,227,329 21,454,953

1. Provisions for pensions and similar liabilities 5,202,252 4,811,363

2. Other provisions 1,581,976 1,883,253

3. Long-term accrued costs and deferred revenues 14,443,101 14,760,337

C. LONG-TERM FINANCIAL AND OPERATING LIABILITIES 57,164,104 60,987,799


1. Long-term financial liabilities to companies in the Group 0 777,647

2. Long-term financial liabilities to banks 50,992,823 53,210,966

3. Other long-term financial liabilities 5,669,830 6,175,856

II. Long-term operating liabilities 428,246 749,713

1. Long-term operating liabilities to companies in the Group 0 0

2. Long-term operating liabilities arising from advances 428,246 749,713

III. Deferred tax liabilities 73,205 73,617

D. SHORT-TERM FINANCIAL AND OPERATING LIABILITIES 71,559,316 63,095,887

II. Short-term financial liabilities 8,214,342 12,659,034

1. Short-term financial liabilities to companies in the Group 3,207,165 7,070,000

2. Short-term financial liabilities to banks 5,007,177 5,589,034

III. Short-term operating liabilities 63,344,974 50,436,853

1. Short-term operating liabilities to companies in the Group 634 32,175

2. Short-term accounts payable 29,889,694 18,163,964

3. Short-term operating liabilities arising from advances 178,318 211,228

4. Other short-term operating liabilities 33,276,328 32,029,486

E. ACCRUED COSTS (EXPENSES) AND DEFERRED REVENUES 2,257,216 1,923,791

LIABILITIES 673,119,038 655,142,663

Off-balance liabilities 24,731,780 24,667,269

Note: Equity (retained earnings) was reduced in 2015 by 661,274 euros and liabilities increased by 661,274 euros due to the corrections of errors in the calculation of corporate income tax for the purposes of compiling the financial statements without applying the EA-1.

152

Post Balance Sheet Events

From the date the financial statements were complied until the date of preparation of this report no events were identified, which would affect the truthfulness and fairness of the financial statements pre-sented for 2015.

Significant events after the balance sheet date were as follows:

• In January 2016, it was paid a guarantee Talum for the purchase of electricity in the amount of 3,207,165.67 euros and signed an agreement on long-term credit.

• In January 2016, the company Talum and ELES concluded a con-tract for the conversion of receivables into share capital of Talum

in the amount of 1,800,007.86 euros for which has increased Eles long-term investment in Talum. The capital increase was entered in the register of 2/15/2016.

• In 2016 it received payment execution to the company TES, Ltd., which was recorded under revaluation adjustments of of receiva-bles in the amount of 615,296 euros.

• In March 2016, extrajudicial settlement with the company Dale-kovod, d.d. was concluded for default interests on the overpay-ments in the construction of the 2x400 kV Beričevo–Krško trans-mission line in the amount of 263,496 euros.

Contingent Liabilities

ELES has no contingent liabilities that would not be properly cov-ered and reported in the balance sheet as at 31 December 2015.

153

1O FINANCIAL REPORT

Independent Auditor’s Report

Page 181

Annual Report 2015 ELES, d.o.o.

Independent Auditor's Report

154

Annual Report 2015 ELES, d.o.o.

155

LIST OF ABBREVIATIONS

AGEN-RS Energy Agency of the Republic of Slovenia

AP Annual plan

BIO Biennial of Design

BS Balance Sheet

BSP South Pool Regional Energy Exchange

CA Companies Act

CAMA Capital Assets Management Company

CAO Central Allocation Office

CAO SEE Coordinated Auction Office in South East Europe

CASC Capacity Allocating Service Company

CBTC Cross-border transmission capacitates

CHRM Comprehensive Human Resource Management

DCAR Deferred costs and accrued revenues

DTR Dynamic Thermal Rating

EA Energy Act

EBIT Earnings before Interest and Taxes

EBITDA Earnings before Interest, Taxes, Depreciation and Amortizati-

on

EFQM European Foundation for Quality Management

EIB the European Investment Bank

EMS Energy Management System

ENTSO-E European Network of Transmission System Operators for

Electricity

EP Electric power

EPS Electric power system

ERP Enterprise Resource Planning

ES Energy system

ESS Energy supply station

EU European Union

EUR Euro

EURIBOR Euro Interbank Offered Rate

FA Fixed asset

GDP Gross Domestic Product

GIS Gas Insulated System

GPS Global Positioning System

GWh Gigawatt hour

HOPS Croatian TSO

HPP Hydro power plant

HRD Human Resource Development

HSE Slovenian Power Plants Holding

HSW Health and safety at work

HVDC High-voltage, direct current

IAS International Accounting Standards

IDC Intrusion Prevention Systems

INC Imbalance Netting Cooperation

ISO International Organization for Standardization

IT Information technology

ITAMS International Transmission Asset Management Study

ITC International Transmission Capacity

ITIL Information Technology Infrastructure Library

ITTC Information Technology and Telecommunications

KNPP Krško Nuclear Power Plant

KNSS Confederation of New Trade Unions of Slovenia

kV Kilovolt

LC Local community

MEAS Mutual emergency assistance services

MEUR Million euros

MH Man-hour

MVA VA (volt-ampere), M (mega), measurement unit of nominal

capacity

Mvar M (mega), var, measurement unit of reactive power

MW Megawatt

MWA WA (watt ampere), M (mega), measurement unit of electric

power

MZI Ministry of Infrastructure

NA National Assembly

NCC National Control Centre

NKBM Nova kreditnabanka Maribor

NLB Nova Ljubljanska banka

NOS-BiH Bosnian TSO

NPP Nuclear power plant

NTC Net Transfer Capacity

OECD The Organisation for Economic Co-operation and Deve-

lopment

OPEX Operating expenses

OPGW Optical Ground Wire Cable

PC Public procurement

PCI Project of Common Interest

156

PIPO Transmission Network Infrastructure Department

PITK IT and Telecommunications Department

POS System Operation Department

PPD Support Services Department

PUSP Assets and Project Management Department

RCC Regional Control Centre

ROA Return on assets

ROE Return on equity

PSA Power Service Assistant

RTP Substation

SB Supervisory Board

SBP Strategic business plan

SBR Silver Bullet Risk

SCADA Supervisory control and data acquisition

SCOM System Center Operations Manager

SDE Trade Union of Workers in Energy in Slovenia

SDH Synchronous Digital Hierarchy

SEA Slovenian Environment Agency

SFBE Slovenian Foundation for Business Excellence

SHB Slovenia, Croatia and Bosnia and Herzegovina

SI Slovenia

SOD Slovenska odškodninska družba

(Slovenian Compensation Company)

SODO Electricity Distribution System Operator

ŠTPP Šoštanj Thermal Power Plant

PSHPP Pumped storage hydro power plant

SAS Slovenian Accounting Standards

SAQE Slovenian Association for Quality and Excellence

SM Transmission network bay

SUMO System for the Determination of Operating Limits

RES Renewable energy sources

RS The Republic of Slovenia

TC Telecommunications

TL Transmission line

TN Transmission network

TNIC Transmission Network Infrastructure Centre

TPP Thermal power plant

TS Transformer station

TR Transformer

TSC Transmission System Operator Security Cooperation

TSO Transmission System Operator

TTPP Trbovlje Thermal Power Plant

TWh Terawatt hour

TYNDP Ten Years Network Development Plan

VAT Value added tax

VD Virtual devices

WAMPAC Wide Area Monitoring Protection & Control

ZPFOLERD Transparency of Financial Relations and Maintenance of

Separate Accounts for Different Activities Act

ZUJF Fiscal Balance Act

157

2015

ANNUAL REPORT

annual report - eles · sovereign holding (recommendations of sdh) are pub-licly available on the...

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