Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697752661556.pdf (Georgia)
JSC GEORGIAN RENEWABLE POWER COMPANY Consolidated financial statements for the year ended 31 December 2018 with independent auditor’s report JSC GEORGIAN RENEWABLE POWER COMPANY 2018 consolidated financial statements CONTENTS INDEPENDENT AUDITOR’S REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................................................................... 1 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................................... 2 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................................................................. 3 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................................................ 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CORPORATE INFORMATION ..................................................................................................................................................... 5 1.
OPERATING ENVIRONMENT ..................................................................................................................................................... 5 2.

BASIS OF PREPARATION ............................................................................................................................................................. 6 3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................................................................... 6 4.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES .................................................................................. 16 5.

PROPERTY, PLANT AND EQUIPMENT ................................................................................................................................. 17 6.

OTHER NON-CURRENT ASSETS............................................................................................................................................ 18 7.
OTHER CURRENT ASSETS ........................................................................................................................................................ 18 8.

EQUITY ............................................................................................................................................................................................ 18 9.
BORROWINGS .............................................................................................................................................................................. 20 10.

DEFERRED INCOME.................................................................................................................................................................... 22 11.
TRADE AND OTHER PAYABLES ............................................................................................................................................. 22 12.

PROVISIONS FOR LIABILITIES AND CHARGES ................................................................................................................ 22 13.

14.

SALARIES AND OTHER EMPLOYEE BENEFITS .................................................................................................................. 23 15.
OTHER GENERAL AND ADMINISTRATIVE EXPENSES ................................................................................................... 23 16.

OTHER OPERATING EXPENSES .............................................................................................................................................. 24 NON-RECURRING ITEMS ......................................................................................................................................................... 24 17.
COMMITMENTS AND CONTINGENCIES ........................................................................................................................... 24 18.

FINANCIAL INSTRUMENTS ..................................................................................................................................................... 25 19.
RELATED PARTIES DISCLOSURE ............................................................................................................................................ 27 20.

EVENTS AFTER THE END OF REPORTING PERIOD......................................................................................................... 29 21.
EY LLC Kote Abkhazi Street, 44 Tbilisi, 0105, Georgia Tel: +995 (32) 215 8811 Fax: +995 (32) 215 8822 www.ey.com/ge შპს იუაი საქართველო, 0105 თბილისი კოტე აფხაზის ქუჩა 44 ტელ: +995 (32) 215 8811 ფაქსი: +995 (32) 215 8822 Independent auditor’s report To the Management and Shareholders of Georgian Renewable Power Company JSC Opinion We have audited the consolidated financial statements of Georgian Renewable Power Company JSC and its subsidiaries (hereinafter, the “Group”), which comprise the consolidated statement of financial position as at 31 December 2018, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2018 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs).
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of management and Shareholders for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The Shareholders are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit.
We also: ► ► ► ► ► ► Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion.

Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.

However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with the Shareholders regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Marchello Gelashvili For and on behalf of EY LLC 11 April 2019 Tbilisi, Georgia JSC GEORGIAN RENEWABLE POWER COMPANY 2018 consolidated financial statements CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 31 December 2018 (Amounts expressed in thousands of Georgian Lari) Salaries and other employee benefits Other general and administrative expenses Other operating expenses EBITDA Depreciation and amortization Finance income Finance costs Net foreign exchange losses Non-recurring items Loss before income tax Income tax expense Loss for the year Attributable to: Owners of the parent Non-controlling interests Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent periods (net of tax) Gain from currency translation differences Net other comprehensive income not to be reclassified to profit or loss in subsequent periods Other comprehensive income for the year, net of tax Total comprehensive income/(loss) for the year, net of tax Attributable to: Owners of the parent Non-controlling interests Note 2018 2017 14 15 16 6, 7 17 (302) (324) (143) (769) (769) (352) 149 (19) (479) 579 (891) – (891) (887) (4) 1,696 1,696 1,696 805 809 (4) (205) (1,175) (330) (1,710) (1,710) (274) 93 (24) (60) (129) (2,104) – (2,104) (1,941) (163) 609 609 609 (1,495) (1,035) (460) The accompanying notes on pages 5 to 29 are an integral part of these consolidated financial statements.
2 JSC GEORGIAN RENEWABLE POWER COMPANY 2018 consolidated financial statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2018 (Amounts expressed in thousands of Georgian Lari) Attributable to the owners of the parent Share capital Share discount Accumulated deficit Other reserves 8,068 (588) Balance as at 31 December 2016 Loss for the year Foreign currency translation reserve Total comprehensive loss for the year Issue of share capital of Parent (Note 9) Increase in share capital of subsidiaries by non-controlling interests (Note 9) Acquisition of non-controlling interests in existing subsidiaries (Note 9) Balance as at 31 December 2017 Loss for the year Foreign currency translation reserve Total comprehensive income for the year Issue of share capital of Parent (Note 9) Conversion of loan (Note 9) Balance as at 31 December 2018 – – – 13,076 – 7,740 28,884 – – – 7,641 59,068 95,593 – – – – – (1,869) (2,457) – – – – – (218) (1,941) – (1,941) – – – (2,159) (887) – (887) – – 957 – 906 906 – – 506 2,369 – 1,696 1,696 – – (2,457) (3,046) 4,065 Non- controlling interests Total equity 3,188 11,407 (163) (297) (460) (2,104) 609 (1,495) – 13,076 Total 8,219 (1,941) 906 (1,035) 13,076 – 1,560 1,560 6,377 26,637 (887) 1,696 809 7,641 59,068 94,155 (4,257) 31 (4) – (4) – – 27 2,120 26,668 (891) 1,696 805 7,641 59,068 94,182 The accompanying notes on pages 5 to 29 are an integral part of these consolidated financial statements.
3 JSC GEORGIAN RENEWABLE POWER COMPANY 2018 consolidated financial statements CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2018 (Amounts expressed in thousands of Georgian Lari) Cash flows from operating activities Loss before income tax Adjustments for: Depreciation and amortisation Net foreign exchange losses Non-recurring items Finance income Finance costs Operating cash flows before working capital changes Change in trade and other receivables Change in prepaid taxes other than income tax Change in pre-payments Change in trade and other payables Interest received Other finance costs paid Net cash from/(used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment and intangible assets Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Loans issued Increase in share capital Increase in share capital of subsidiaries by non-controlling interests Acquisition of non-controlling interests Net cash from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year Note 2018 2017 (891) (2,104) 6, 7 17 8 8 12 10 10 8 9 9 9 352 478 (579) (149) 19 (770) (5) 936 (775) 572 149 (19) 88 274 60 129 (93) 24 (1,710) (15) (853) (27) 6 93 (24) (2,530) (60,517) (60,517) (68,863) (68,863) 63,743 (8,606) (149) 7,733 – – 62,721 (2,202) 90 8,298 8,388 61,768 (4,500) – 13,076 1,560 2,120 74,024 800 3,431 4,867 8,298 The accompanying notes on pages 5 to 29 are an integral part of these consolidated financial statements.
4 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 1.

CORPORATE INFORMATION JSC Georgian Renewable Power Company (the “Company” or “GRPC”) was founded in 2015 as a joint stock company in accordance with Georgian regulations.
The Company is a holding parent company and consolides the following subsidiaries in its financial statements: Name JSC Svaneti Hydro JSC Geo Hydro JSC Zoti Hydro JSC Caucasian Wind Company JSC Caucasus Solar Company Country of operation Georgia Georgia Georgia Georgia Georgia Proportion of ownership interest 2018 100% 85% 100% 100% 100% 2017 100% 85% 100% 100% 100% The Company together with its subsidiaries makes up a group of companies (the “Group”).
The Group is engaged in development of renewable energy projects in Georgia.

In 2017, the Group commenced construction of 50MW Mestiachala hydro power plants (“HPPs”) in the north-western part of Georgia and 46.0 MW Zoti HPPs in the western part of Georgia.

As at 31 December 2018, 65% of the Company’s shares were owned by JSC Georgia Capital, the ultimate parent of which is Georgia Capital PLC (“GCAP”).
As at 31 December 2018, 35% of the Company’s shares were owned by RP Global Investments GmbH (“RP Global”), which is ultimately controlled by Dr. Gerhard Matzinger and the family.

As at 31 December 2017, 65% of the Company’s shares were owned by JSC BGEO Investments, the ultimate parent of which was BGEO Group PLC (“BGEO”).

As at 31 December 2017, 35% of the Company’s shares were owned by RP Global , which was ultimately controlled by Dr. Gerhard Matzinger and family.
On 29 May 2018, BGEO completed demerger of its business activities into a London-listed banking business, Bank of Georgia Group PLC, and a London-listed investment business, Georgia Capital PLC.

As a result, Georgia Capital PLC became the ultimate parent of the Group.

No individual shareholder owns more than 8% of GCAP shares as at 31 December 2018.

The Company’s legal address is N 79, Agmashenebeli Ave., Tbilisi, Georgia.

2.

OPERATING ENVIRONMENT The Group’s business is concentrated in Georgia.
As an emerging market, Georgia does not possess a well- developed business and regulatory infrastructure that would generally exist in a more mature market economy.

Operations in Georgia may involve risks that are not typically associated with those in developed markets, including the risk that the Georgian Lari is not freely convertible outside the country, there are currency exchange fluctuation risks, debt and equity markets are not well developed.
However, over the last few years the Georgian government has made a number of developments that positively affect the overall investment climate of the country, specifically implementing the reforms necessary to enhance banking, judicial, taxation and regulatory systems.

This includes the adoption of a new body of legislation, including new Tax Code and procedural laws.

In the view of the Management, these steps contribute to mitigation of the risks of doing business in Georgia.
5 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 2.

OPERATING ENVIRONMENT (continued) The existing tendency aimed at the overall improvement of the business environment is expected to persist.

The future stability of the Georgian economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the Government.
However, the Georgian economy is vulnerable to market downturns and economic slowdowns elsewhere in the developed countries.

3.
3.

BASIS OF PREPARATION These consolidated financial statements of the Group for the year ended 31 December 2018 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations issued by the International Accounting Standards Board (“IASB”) effective for 2018 reporting.
The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments that have been measured at fair value.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

These policies have been consistently applied to all the periods presented apart for adoption of IFRS 9, Financial Instruments (Note 4).
The consolidated financial statements are presented in Georgian Lari (the “GEL”) and all values are rounded to the nearest thousands, unless otherwise indicated.

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2018.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has: · · · Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee; The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights results in control.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
6 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of consolidation (continued) Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.

When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.

When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual instalments.

Financial assets Initial recognition and measurement All of the Group’s financial assets including trade and other receivables, loans issued and cash in bank fall into loans and receivables measurement category.
Loans and receivables are unquoted non-derivative financial assets with fixed or determinable payments other than those that the Group intends to sell in the near term.

They are included in current assets, except for maturities greater than 12 months after the end of the reporting period.

These are classified as non-current assets.

Loans and receivables are initially recognized at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest method.
This calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts.

Gains and losses are recognized in the profit or loss when the receivables are derecognized or impaired, as well as through the amortization process.
Derecognition of assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when: · · · The rights to receive cash flows from the asset have expired; or The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and The Group either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
7 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial assets (continued) Derivative financial instruments The Group uses currency swap contracts, to mitigate its foreign currency risks.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value.

The fair values are estimated based on standard derivative pricing models that take into account observable and non-observable information about spot and forward exchange rates and interest rates.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Gains and losses resulting from these instruments are included in the consolidated statement of profit or loss and other comprehensive income in net foreign exchange losses.

Impairment of financial assets The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired.
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred.
Evidence of impairment may include: · · · · Significant financial difficulty of the counterparty; A breach of agreement, such as a default or past due event; It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; There is adverse change in the payment status of the counterparty as a result of changes in the national or local economic conditions that impact the counterparty.
Financial liabilities The Group’s financial liabilities, including derivatives and payables for non-current assets, are held at fair value.

The Group’s borrowings are carried at amortised cost.

Borrowings Initial recognition Borrowings are initially recognised at fair value of the consideration received less directly attributable transaction costs.
Transaction costs include fees and commissions paid to technical and legal advisors, insurance brokers and fees paid to the lender during the initial financial assessment process.

Transaction costs do not include debt premiums or discounts.

After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in the consolidated income statement when borrowings are derecognised as well as through the amortisation process.
Effective interest rate (“EIR”) includes the transaction related costs such as bank commission, due diligence and insurance costs related to obtaining the loan.

Initially transaction costs are recognized as Pre-payments when the costs are incurred.

When the loan is obtained, the transaction related costs are included in EIR calculation.

8 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Borrowings (continued) Derecognition The Group’s borrowings comprise of loans from Georgian financial institutions and parent companies.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the profit or loss (Note 4).
Modification When the existing debt terms and conditions are modified the Group performs analysis on whether the original debt has been replaced by another debt with “substantially” different terms.

The Group performs quantitative and qualitative tests.

Under the quantitative test, the Group calculates if the net present value of the cash flows under the new terms discounted at the original effective interest rate is at least 10% different from the carrying amount of the original debt.
If the change is less than 10% the change is not substantial under the quantitative test.

The Group also performs qualitative test, which includes the analysis of whether the change in terms and conditions is so fundamental, that immediate de-recognition is required.

Fundamental changes can include the following: if the interest rate has been changed from/to fixed to/from floating rate, if collateral amounts or items are different, etc.
A “substantial” debt modification or a debt exchange with “substantially” different terms is accounted for as an extinguishment of the original financial liability.

This results in de-recognition of the original loan and the recognition of a new financial liability at its fair value.
This results in a direct impact on profit or loss due to the difference between the carrying amount of the original financial liability and the fair value of the new financial liability (taking also into account any cash consideration paid or non-cash assets transferred).

If the change is not substantial, the Group presents the existing loan with the new terms and conditions at the reporting date at amortized value.
Property, plant and equipment Items of property, plant and equipment are initially recognised at cost.

As well as the purchase price, cost of property, plant and equipment, including assets under construction, includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items.

Directly attributable costs include professional services provided by technical, environmental and other relevant experts.
Additionally, directly attributable costs consider pre-permission expenditures, which include studies and services provided during the project assessment period, such as measurement studies, design expenditure, technical and environmental expertise, geological surveys.

Contributions to the local governing bodies incurred for obtaining building permissions of power plants are also part of directly attributable costs.

The liability for dismantling and removing items is recognised within provisions.
After initial recognition, property, plant and equipment are recorded at historical cost less accumulated depreciation and recognized impairment loss, if any.

9 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Property, plant and equipment (continued) The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognised net within other income / other expenses in profit or loss.

Depreciation Depreciation of an asset commences from the date the asset is ready and available for use.
In case of power plants commencement date of operations means finalization of testing period and obtaining of the generation license.

Assets under construction and land are not depreciated.

Assets under construction are put into exploitation and depreciation charges start once it is brought to the condition of target use.
Depreciation is calculated on a straight-line basis over the following estimated useful lives: Infrastructure assets Fixtures and fittings Vehicles Useful lives in years 5 years 5 years 5 years Infrastructure assets include wind and solar measurement masts, automatic hydrological stations and other instruments and structures as at 31 December 2018 and 2017.
Contingencies Contingent liabilities are not recognised in the statement of financial position but are disclosed unless the possibility of any outflow in settlement is remote.

A contingent asset is not recognised in the statement of financial position but disclosed when an inflow of economic benefits is probable.

Impairment of non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount and determines if the assest should be considered impaired and written down.

Operating leases Where the Group is a lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments are charged to profit or loss for the year on a straight-line basis over the lease term.
The lease term is the non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.

10 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Operating leases (continued) On 1 January 2019 the Group adopted IFRS 16 Leases, under which the leases are capitalised at the commencement of the lease at the inception date fair value of the leased agreement (Note 4).

Lease payments are apportioned between finance charges and reduction of the lease liability.

Finance charges are recognized in finance costs in the statement of profit or loss.

A leased asset is depreciated over the lease term.

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When assets are leased out under an operating lease, the lease payments receivable are recognised as rental income on a straight-line basis over the lease term.

Intangible assets Intangible assets, which are acquired by the Group and which have finite useful lives, are stated at cost less accumulated amortisation.
Intangible assets primarily include licenses and permits required for construction of HPPs and are amortised on a straight-line basis over their estimated useful lives (36 months) from the date the asset is available for use.

If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair value less costs to sell.
Taxation The annual profit earned by entities other than banks, insurance companies and microfinance organizations is not taxed in Georgia starting from 1 January 2017.

Corporate income tax is levied on profit distributed as dividends to the shareholders that are individuals or non-residents of Georgia at the rate of 15/85 of net distribution.
The corporate income tax arising from the payment of dividends is accounted for as a liability and expense in the period in which dividends are declared, regardless of the actual payment date or the period for which the dividends are paid.

In certain circumstances, deductions from income tax charge payable are available that are accounted as reduction of income tax expense related to respective distribution.
Due to the nature of the Georgian taxation system, no deferred tax assets and liabilities arise for the entities registered in Georgia.

Georgian tax legislation also provides for charging corporate income tax on certain transactions that are considered deemed profit distributions (for example, transactions at non-market prices, non-business related expenses or supply of goods and services free of charge).
Taxation of such transactions is accounted similar to operating taxes and is reported as Taxes other than income tax within General and administrative expenses in consolidated income statement.

Value added tax Value added tax (“VAT”) related to sales is payable to tax authorities when goods are shipped or services are rendered.

Input VAT is recognised upon the receipt of a tax invoice from a supplier but is reclaimable against sales VAT only upon a payment of such invoice.
11 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Pre-payments Pre-payments are carried at cost less provision for impairment.
A prepayment is classified as non-current when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current upon initial recognition.

Pre-payments to acquire assets are transferred to the carrying amount of the asset once the Group has obtained control of the asset and it is probable that future economic benefits associated with the asset will flow to the Group.
Other Pre-payments are written off to profit or loss when the goods or services relating to the Pre-payments are received.

If there is an indication that the assets, goods or services relating to a prepayment will not be received, the carrying value of the prepayment is written down accordingly and a corresponding impairment loss is recognised in profit or loss for the year.
Cash and cash equivalents Cash and cash equivalents comprise of cash at bank that includes deposits held at call with banks with original maturities of three months or less and are subject to insignificant risk of change in value.

Cash at bank are carried at amortised cost using the effective interest method.

Share capital The amount of Company’s authorised share capital is defined by the Company’s Charter.
The difference between par value and actual contribution received is recognized in share discount/premium in the consolidated statement of changes in equity.

Borrowing costs Borrowing costs comprise interest expense calculated using the effective interest method, exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, the due diligence fees and insurance costs related to acquiring the loans.
Transaction costs are recognized as Pre-payments when the costs are incurred.

These costs are incurred during the selection/approval process of the lender.

The costs are the ‘lender shopping costs’ and are included in EIR when the final decision is made in relation to financing.
Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets.

All other borrowing costs are expensed in the period in which they occur.

The amount of borrowing costs eligible for capitalisation is determined as the actual borrowing costs incurred on that borrowing during the period of respective property development phase.
Provisions for liabilities and charges Provisions for liabilities and charges are non-financial liabilities of uncertain timing or amount.

They are accrued when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
12 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Provisions for liabilities and charges (continued) Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole.
Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

EBITDA The Group separately presents EBITDA on the face of statement of profit or loss and other comprehensive income.

EBITDA is not defined in IFRS and is defined by the Group as earnings before interest, taxes, depreciation and amortisation, net foreign exchange losses or gains and net non-recurring items.
Non-recurring items The Group separately classifies and discloses those income and expenses that are non-recurring by nature.

Any type of income or expense may be non-recurring by nature.
The Group defines non-recurring income or expense as income or expense triggered by or originated from an unusual economic, business or financial event that is not inherent to the regular and ordinary business course of the Group and is caused by uncertain or unpredictable external factors that cannot be reasonably expected to occur in the future and thus they should not be taken into account when making projections of the future results.
Offsetting Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
Functional currencies and foreign currency translation The functional currency of the Group’s subsidiaries and the parent is US dollars (“USD”) considering the following circumstances: · · · · The electricity tariff is set in USD in Georgia, hence the Group’s revenue will be denominated in USD; Currently the Group is in a stage of constructing HPPs and majority of construction costs of the Group are denominated in USD; Capital contributions from the shareholders were in USD; The Group’s financing structure is planned to be USD denominated.
Transactions in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated into functional currency at functional currency rate of exchange ruling at the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
13 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Functional currencies and foreign currency translation (continued) Gains and losses from the translation of foreign currency transactions are recognised in the profit or loss within net foreign exchange losses.
Differences between the contractual exchange rate of a certain transaction and the National Bank of Georgia (“NBG”) exchange rate on the date of the transaction are included in foreign exchange losses less gains.

The official NBG exchange rates as at 31 December 2018 and 2017 were GEL 2.6766 and GEL 2.5922 to 1 USD, respectively.

In accordance with statutory requirement the Group’s presentation currency is GEL.
Items in the consolidated financial statements are translated to presentation currency based on following principles: assets and liabilities are translated into GEL at the rate of exchange ruling at the reporting date, income and expenses are translated at the exchange rates at the dates of the transactions (or at the average rate for the period when this is a reasonable approximation) and equity components are maintained at the rate of exchange ruling at the date of change in functional currency.
The exchange differences arising on the translation are taken to other comprehensive income.

Included in Effect of exchange rate changes on cash and cash equivalents in consolidated statement of cash flow are net foreign exchange gain/loss on cash and cash equivalents and effect of foreign currency translation done in order to prepare consolidated statement of cash flow in GEL.
Employee benefits Wages, salaries, annual leave and sick leave, cash bonuses and other benefits are accrued in the period in which the associated services are rendered by the employees of the Group.
Adoption of new or revised standards and interpretations The following standards/interpretations that became effective on 1 January 2018 did not have any impact on the Group’s financial statements: · · · · IFRS 9 Financial Instruments; IFRIC Interpretation 22 Foreign Currency Transactions and Advance Considerations; Amendments to IAS 40 Transfers of Investment Property; IFRS 2 Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2.
IFRS 9 Financial Instruments The Group adopted IFRS 9 Financial Instruments as at 1 January 2018 which did not have material impact on the financial position and performance of the Group in the consolidated financial statements.

Cash and cash equivalent Due to short-term and highly liquid nature of these financial assets, the Group has assessed corresponding expected credit losses to be immaterial.

Therefore, no impairment will be recognized for cash and cash equivalents under IFRS 9.
14 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Adoption of new or revised standards and interpretations (continued) Trade and other receivables Due to the nature of existing trade and other receivables, the Group hass assessed the expected credit losses to be immaterial.

Therefore, no impairment will be recognized for trade and other receivables under IFRS 9.
Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s consolidated financial statements are disclosed below.

The Group intends to adopt these standards, if applicable, when they become effective.
IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces lAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under lAS 17.

The standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less).
At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).

Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments).

The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under IFRS 16 is substantially unchanged from accounting under lAS 17.
Lessors will continue to classify all leases using the same classification principle as in lAS 17 and distinguish between two types of leases: operating and finance leases.

IFRS 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to make more extensive disclosures than under IAS 17.

Transition to IFRS 16 The Group adopted IFRS 16 using modified retrospective approach, i.e.
the Group recognized cumulative catch- up adjustment on 1 January 2019 balance sheet without the restatement of prior period comparatives.

At transition the Group recognised a lease liability for leases previously classified as an operating lease applying IAS 17.

Lease liability will be measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.
The Group recognised a right-of-use asset for such leases at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of initial application.

The impact of IFRS 16 adoption is expected to be GEL 364 increase in assets and liabilities of the Group as at 1 January 2019.
15 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Standards issued but not yet effective (continued) IAS 23 Borrowing Costs – borrowing costs eligible for capitalisation The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.
An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments.

An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019.

Earlier application is permitted.

The Group assessed the impact of IAS 23 Borrowing Costs amendments on its consolidated financial statements as immaterial.
Annual improvements to IFRSs 2015-2017 cycle IAS 12 Income Taxes – income tax consequences of payments on financial instruments classified as equity The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners.
Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019.

Earlier application is permitted.


When an entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.

The Group is currently assessing the impact of IAS 12 Income Taxes amendments on its consolidated financial statements.

5.
5.

SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The Group makes estimates and assumptions that affect the amounts recognised in the consolidated financial statements and the carrying amounts of assets and liabilities within the next financial year.

Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies.
Judgements that have the most significant effect on the amounts recognised in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: Value of assets under construction Assets under construction is stated at cost, net of accumulated impairment losses, if any.

The Group capitalises construction related costs directly attributable to the construction process.
Initial capitalisation of costs is based on management’s judgement during the construction process.

Operating leases, construction related taxes, borrowing costs and other costs directly attributable to the construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the asset.

16 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 6.
PROPERTY, PLANT AND EQUIPMENT The movements in property, plant and equipment during the year ended 31 December 2018 were as follows: Infrastruc- ture assets Fixtures and fittings Assets under construction Vehicles Land Total Historical cost 31 December 2017 Additions Disposals Translation Historical cost 31 December 2018 Accumulated depreciation and impairment 31 December 2017 Depreciation charge Disposals Translation Accumulated depreciation and impairment 31 December 2018 Net book value 31 December 2017 31 December 2018 1,828 1,066 (188) 89 2,795 (910) (286) 48 62 33 92 – 21 146 (8) (13) – (1) 47,150 59,127 – 6,304 112,581 (536) – – (3) (1,086) (22) (539) 918 1,709 25 46,614 124 112,042 95 99 – 6 200 (15) (28) – 2 (41) 80 159 388 20 – 15 423 – – – – – 49,494 60,404 (188) 6,435 116,145 (1,469) (327) 48 60 (1,688) 388 423 48,025 114,457 The movements in property, plant and equipment during the year ended 31 December 2017 were as follows: Infrastruc- ture assets Fixtures and fittings Assets under construction Vehicles Land Total Historical cost 31 December 2016 Additions Transfers to (from) other account Translation Historical cost 31 December 2017 267 184 1,352 25 1,828 Accumulated depreciation and impairment 31 December 2016 Depreciation charge Impairment (Note 13) Translation Accumulated depreciation 31 December 2017 Net book value 31 December 2016 31 December 2017 (130) (200) (579) (1) (910) 137 918 17 16 – – 33 (3) (5) – – (8) 14 25 5,463 42,020 (1,352) 1,019 47,150 – – (536) – 29 64 – 2 95 (6) (9) – – (536) (15) 120 263 – 5 388 – – – – – 5,896 42,547 – 1,051 49,494 (139) (214) (1,115) (1) (1,469) 5,463 46,614 23 80 120 388 5,757 48,025 Infrastructure assets mainly comprise of measurement masts required for wind projects and water − flow measurement stations.
Assets under construction are mainly related to civil works carried out on Mestiachala HPPs.

The Group pledged the property, plant and equipment of Svaneti Hydro JSC, a subsidiary, as collateral for its borrowings with carrying amount of GEL 108,332 as at 2018 (2017: GEL 42,258).

17 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 7.
OTHER NON-CURRENT ASSETS Pre-payments for non-current assets Intangible assets Other non-current assets Total other non-current assets 31 December 2018 31 December 2017 42,092 45 23 42,160 33,245 107 1,538 34,890 As at 31 December 2018 and 2017, Pre-payments for non-current assets mainly comprise payments to civil works contractor and suppliers of hydro-mechanical equipment and generators in relation to construction of Mestiachala HPPs, which is anticipated to be finished in 2019.
As at 31 December 2017, other non-current assets mainly include prepaid fees for due diligence services in relation to borrowings to fund Mestiachala HPPs which was recognised as borrowing related transaction cost and included in the effective interest rate as at 31 December 2018.

Gross carrying amount of intangible assets and accumulated amortisation as at 31 December 2018 amounted to GEL 248 and GEL 203, respectively (2017: GEL 190 and GEL 83).
Amortisation charge on intangible assets was GEL 25 in 2018 (2017: GEL 65).

The Group pledged the intangible assets of Svaneti Hydro JSC, a subsidiary, as collateral for its borrowings with carrying amount of GEL 45 as at 31 December 2018 (2017: GEL 107).

8.
8.

OTHER CURRENT ASSETS Pre-payments Derivative financial assets Loans issued Trade and other receivables Receivables on insurance contracts (Note 13) Total current assets 31 December 2018 31 December 2017 802 645 149 19 – 1,615 27 – – 15 3,867 3,909 Pre-payments as at 31 December 2018 relate to construction of Bakhvi HPP.

9.

EQUITY Share capital Authorized share capital of the Company comprised of 38,000 thousand and 20,000 thousand ordinary shares as of 31 December 2018 and 2017, respectively.
Each share has a nominal value of 1 (one) USD.

37,273 and 11,982 thousand shares were issued and fully paid as of 31 December 2018 and 2017, respectively.

18 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 9.

EQUITY (continued) Share capital (continued) As at 31 December 2018 and 2017 the Company had fully contributed share capital of GEL 95,592 and GEL 28,884, respectively.
Issued and fully paid shares in thousands 31 December 2018 31 December 2017 Number Amount Number Amount Georgia Capital JSC BGEO Investments JSC RP Global Total 24,228 – 13,045 37,273 62,136 – 33,457 95,593 – 7,788 4,194 11,982 – 18,724 10,160 28,884 On 25 December 2018, borrowings from the parent companies of GEL 59,068 were converted into share capital of the Company.
In 2018, the Company also issued the shares with the nominal amount of GEL 7,641 increasing the total share capital with amount of GEL 66,709.

In 2018, the Company issued 3,100,000 shares with the nominal amount of GEL 7,641 for cash consideration of GEL 7,733.
In 2017, the Company issued 5,320,000 shares with the nominal amount of GEL 13,076 for cash consideration of GEL 13,076 except of the shares issued for the transaction related to acquisition of additional interests in Svaneti Hydro JSC and Zoti Hydro JSC, as described below.

In order to purchase 35% of the shares in Svaneti Hydro JSC and Zoti Hydro JSC, the Company issued 3,213,642 shares with nominal value of GEL 7,740 (see non-controlling interests below).
Management of capital The Group’s objectives when managing its capital are: · · To safeguard the Group’s ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders; To maintain sufficient size to make the operation of the Group cost-efficient.

The Group is not subject to any externally imposed capital requirements.
The Group defines capital for capital management purposes in the same way as it is presented in the consolidated financial statements.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2018 and 2017.

Other reserves comprise of unrealised gains/(losses) from dilution or sale/acquisition of shares in existing subsidiaries, and foreign currency translation reserve.
19 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 9.

EQUITY (continued) Non-controlling interests Acquisition of additional interest in Svaneti Hydro JSC and Zoti Hydro JSC In 2017, the Group acquired an additional 35% interest of issued shares of Svaneti Hydro JSC and Zoti Hydro JSC, hence the Company increased its ownership interest to 100% in both subsidiaries.
The shares were purchased in exchange to participation in the Company.

The newly issued shares were allocated in order to attribute RP Global Investments GmbH 35% in GRPC.

3,213,642 shares were issued, with a par value of GEL 7,740 and value determined for legal purposes of GEL 5,871.

The difference of GEL 1,869 was recognized in share discount.

As part of the transaction RP Global Investments GmbH contributed also cash consideration of USD 880 (GEL 2,120).
The carrying value of the non-controlling interests in Svaneti Hydro JSC and Zoti Hydro JSC were GEL 3,634 and GEL 623 at the date of transaction, respectively.
Following is a schedule of the respective transactions: Cash consideration received Carrying value of Svaneti Hydro JSC 35% Carrying value of Zoti Hydro JSC 35% Nominal value of the shares issued Share discount Difference recognized in other reserves Other non-controlling interests 2,120 3,634 623 (7,740) 1,869 (506) As of 31 December 2018 and 2017, Georgian Energy Development Fund (“GEDF“) holds 15% of the Group’s subsidiary Geohydro JSC.
GEDF does not have significant share in the Group’s activities and cash flows.

Increase in share capital by non-controlling interests In 2017, GEL 1,560 was contributed to share capital of subsidiaries by owners of respective non-controlling interests.

10.
10.

BORROWINGS 31 December 2018 31 December 2017 Current liabilities Non-current liabilities Current liabilities Non-current liabilities Loans from Georgian financial institutions Loans from parent companies Total borrowings 4,254 – 4,254 66,552 – 66,552 2,491 – 2,491 9,795 52,562 62,357 20 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 10.
BORROWINGS (continued) As at 31 December 2018 borrowings include: · · USD denominated loan from Georgian financial institution with a floating interest rate of 5.3% plus 6m LIBOR.

The loan matures on 1 November 2029.

As at 31 December 2018, the Group has available GEL 18,428 undrawn facility.

GEL denominated loan from Georgian financial institution with a floating interest rate of NBG refinancing rate plus 4.5%.

The loan matures on 1 November 2019.


As at 31 December 2018, the Group has available GEL 1,195 undrawn facility.

As at 31 December 2018 the Group has converted the loans from parent companies into share capital (Note 9).

As at 31 December 2017 borrowings included: · · · USD denominated loan from Georgian financial institution with a floating interest rate of 8% plus 3m LIBOR.

The loan matures on 1 November 2029.

As at 31 December 2017, the Group has available GEL 77,714 undrawn facility.
GEL denominated loan from Georgian financial institution with a floating interest rate of NBG refinancing rate plus 5.25%.

The loan matures on 1 November 2019.

As at 31 December 2017, the Group has available GEL 4,771 undrawn facility.

USD denominated loans from the parent companiess with a fixed interest rate of 10.5%.

Loans from the parent companies were maturing on average in 5 years.
Refer to Notes 6 and 7 for the carrying amount of property, plant and equipment and intangible assets pledged as collateral for borrowings.
Material non-cash transactions Changes in liabilities arising from financial activities Carrying amount at 31 December 2016 Foreign currency translation Cash proceeds Cash repayments Interest accrued Interest paid Borrowings related transactions costs Carrying amount at 31 December 2017 Foreign currency translation Cash proceeds Cash repayments Interest accrued Interest paid Conversion of loan into share capital Other non-cash changes in carrying value Net foreign exchange losses Carrying amount at 31 December 2018 Borrowings − 3,215 63,736 (4,500) 3,219 (196) (626) 64,848 4,490 63,743 (8,606) 8,419 (1,074) (59,068) (2,143) 197 70,806 21 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 10.
BORROWINGS (continued) Material non-cash transactions (continued) In 2018, interest accrued on borrowings in amount of GEL 8,606 was capitalized (2017: GEL 3,219).

Interest paid in 2018 in amount of GEL 1,074 (2017: GEL 196) was presented as purchase of property, plant and equipment and intangible assets in the consolidated statement of cash flow.
Proceeds from borrowings presented in the consolidated statement of cash flows for the year ended 31 December 2017 include “cash proceeds”, “borrowings related transactions costs” in amount of GEL 626 presented in the table above and borrowing related costs of GEL 1,342, which were born for borrowings not obtained as at 31 December 2017 and these fees are presented under other non-current assets.

11.
11.

DEFERRED INCOME On 27 of December 2017, the Group received a grant from Oesterreichische Entwicklungsbank AG (“OEEB”), an Austrian government agency.

The grant amounted to EUR 416 thousand (GEL 1,279 at 31 December 2018 exchange rate) and after meeting certain contractual conditions, reimbursed for amounts paid in relation to technical design of Mestiachala HPPs.
Amount was recorded as deferred income and will be recognised as income in equal amounts over the expected useful life of the related asset.

12.

TRADE AND OTHER PAYABLES Payables to employees Payables for non-current assets Other payables Total trade and other payables 13.

PROVISIONS FOR LIABILITIES AND CHARGES Provision due to natural disasters 31 December 2018 31 December 2017 1,049 670 – 1,719 470 732 7 1,209 In 2017 the Group started construction of the Mestiachala HPPs with a 50 MW capacity.
Mestiachala HPPs are run-of-the-river plants located in a mountainous region of Georgia.

In September 2017, a heavy flood event occurred at the Mestiachala river and damaged the construction.

As the result, the Group wrote off the damaged items of property, plant and equipment of GEL 495 and incurred expense for settling flood related charges of third parties in amount of GEL 160.
In addition, the Group recognized provision for additional cost towards Group’s contactors for reinstating the works and elimination of the possible delay in amount of GEL 2,686 as at 31 December 2017.

Considering that the project has the relevant insurance policy in place, the Group recorded receivables on insurance contracts for the flood event in amount of GEL 3,222 as at 31 December 2017 (Note 8).
The receivables on insurance contracts was estimated based on additional costs that the Group incurs in relation to the flood event and considering the insurance policy in place and analysis carried by the Group and external consultants, The Group believes that insurance reimbursement is virtually certain.
The difference of GEL 119 between total of property impairment, provision and other expenses incurred in relation to the flood event and the amount of respective recovery asset was recognized as non-recurring expense in the consolidated statement of profit or loss and other comprehensive income of 2017.

22 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 13.
PROVISIONS FOR LIABILITIES AND CHARGES (continued) Provision due to natural disasters (continued) In 2018, the Group received the insurance reimbursement of GEL 3,605.

The Group recognized the gain of GEL 1,355 as non-recurring income in the consolidated statement of profit or loss and other comprehensive income (Note 17).

In 2018, the Group covered all liabilities related to the flood event.

The Group is in a pre-construction stage of its wind energy projects.
Currently relevant measurement studies are conducted, for which the Group maintains special equipment.

In December 2017, part of the equipment was damaged by heavy wind and ice.

The Group wrote off the damaged assets with the carrying amount of GEL 620 and incurred damage related expenses in amount of GEL 35.

The Group has valid insurance policy, covering the above described events, and recognized receivables on insurance contracts in amount of GEL 645 as at 31 December 2017 (Note 8).
The receivables on insurance contracts was estimated based on damage incurred in relation to the measurement masts and considering the insurance policy in place, the Group believes that insurance reimbursement is virtually certain.
The difference of GEL 10 between total of property impairment and other expenses incurred in relation to the above event and the amount of respective recovery asset was recognized as non-recurring expense in the consolidated statement of profit or loss and other comprehensive income.

In 2018, the Group received the insurance reimbursement of GEL 304.

The Group recognized the loss of GEL 464 as non-recurring expense in the consolidated statement of profit or loss and other comprehensive income (Note 17).
14.

SALARIES AND OTHER EMPLOYEE BENEFITS Salaries Bonuses Total salaries and other employee benefits 15.
OTHER GENERAL AND ADMINISTRATIVE EXPENSES Professional fees Taxes other than income tax Business trip expenses Representation expenses Communication expenses Advertising expenses Office supplies Total general and administrative expenses 2018 2017 191 111 302 122 83 205 2018 2017 149 48 41 33 29 22 2 324 448 543 53 118 9 – 4 1,175 23 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 16.
OTHER OPERATING EXPENSES Rent expenses Transport maintenance expenses Charity expenses Custom and registration fees Other expenses Total other operating expenses 17.
NON-RECURRING ITEMS Gain on insurance reimbursement on flood event (Note 13) Loss on reimbursement of insurance on damaged measurement masts (Note 13) Accelerated employee share based compensation Other non-recurring expenses Total non-recurring items 2018 2017 59 39 34 – 11 143 177 17 104 21 11 330 2018 2017 1,355 (464) (244) (68) 579 – (129) – – (129) Non-recurring employee share based compensation expenses relate to the demerger of BGEO Group, which triggered recognition of fees for services received in connection with the demerger and acceleration of share- based compensation expenses.
18.

COMMITMENTS AND CONTINGENCIES Commitments In 2014 JSC Svaneti Hydro signed the Memorandum of Understanding with the Government of Georgia, JSC Georgian State Electrosystem, JSC United Energy System Sakrusenergo, JSC Electricity System Commercial Operator and LLC Energotrans in regards to construction of Mestiachala HPPs, with a total installed capacity of 50MW.
Based on the document, JSC Svaneti Hydro commited to finish the construction of the Mestiachala 2 HPP and Mestiachala 1 HPP and commence the operations in 2019 and 2020, respectively.

In 2015, JSC Zoti Hydro signed the Memorandum of Understanding with the Government of Georgia, JSC Georgian State Electrosystem, JSC United Energy System Sakrusenergo, JSC Electricity System Commercial Operator and LLC Energotrans in regards to construction of 46 MW Zoti HPPs.
Based on the document, JSC Zoti Hydro commited to finish the construction of the HPPs and commence the operations in 2021.

In 2017, JSC Caucasian Wind Company has signed Memorandum of Understanding for several sites.

Based on the documents, the Group commited to conduct necessary studies on the identified locations and submit the decision on the construction of wind and solar power plants to the Ministry of Economy and Sustainable Development of Georgia.
As at 31 December 2018, capital expenditure commitment for purchase of property, plant and equipment equals to GEL 5,803.

24 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 18.

COMMITMENTS AND CONTINGENCIES (continued) Environmental matters The enforcement of environmental regulation in Georgia is evolving and the enforcement position of government authorities is continually being reconsidered.
The Group periodically evaluates its obligations under environmental regulations.

As obligations are determined, they are recognised immediately.

Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot be estimated but could be material.

In the current enforcement climate under existing legislation, management believes that there are no significant liabilities for environmental damage.

19.
19.

FINANCIAL INSTRUMENTS Fair value measurement Fair value of all financial instruments held by the Group as at 31 December 2018 and 2017, are measured at fair value using a valuation technique with market observable and unobservable inputs.

The Management assessed that the fair values of cash and cash equivalents, other current assets, trade payables approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of payables for non-current assets was estimated to be equal to their carrying amount.

The fair value of floating interest rate borrowings was estimated based on the estimated future cash flows expected to be paid discounted at current interest rates for new instruments with similar credit risk and remaining maturity.

Risk arising from financial instruments In the course of its ordinary activity the Group is exposed to currency, interest rate, credit and liquidity risks.
The Group’s management oversees the management of these risks.

Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

As at 31 December 2018 and 2017 currency risk arises from the EUR and GEL denominated cash and cash equivalents, trade payables and trade receivables and GEL denominated borrowings.
The effect of reasonably possible change is disclosed in below table: Currency EUR EUR GEL GEL Increase/ decrease in % 2018 Effect on profit 2018 +11.00% -7.00% +11.00% -11.00% (11) 7 (123) 123 25 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 19.
FINANCIAL INSTRUMENTS (continued) Risk arising from financial instruments (continued) Currency EUR EUR Interest rate risk Increase/ decrease in % 2017 Effect on profit 2017 +12.5% -7.5% 154 (93) Interest rate risk arises from the possibility that changes in interest rates will affect the fair value of the financial instruments or the future cash flows on the financial instruments.
As at 31 December 2018 the Group has floating interest rate borrowings linked to LIBOR and NBG refinancing rates and is therefore exposed to interest rate risk.

The following table demonstrates sensitivity to a reasonable possible change: LIBOR USD USD NBG GEL GEL Increase/ decrease in % 2018 Effect on profit 2018 0.50% -0.15% (345) 104 Increase/ decrease in % 2018 Effect on profit 2018 0.75% -0.75% (14) 14 As at 31 December 2017 80% of the Group’s outstanding borrowings were at a fixed rate.
As the interest expense is fully capitalized to the construction in progress, fluctuation in LIBOR or NBG refinancing rates would not have any material impact on profit before tax and would have minor effect on the cash flow.

Credit risk Credit risk is the risk that the Group will incur a loss because counterparties failed to discharge their contractual obligations.
The Group manages and controls credit risk it undertakes by setting limits on the amount of risk accepted in relation to counterparties or groups of counterparties.

Such risks are monitored on a continuous basis and subject to an annual or more frequent review.
As at 31 December 2018 and 2017 the Group has no other significant financial assets subject to credit risk except for: · · Cash and cash equivalents: as at 31 December 2018 total cash and cash equivalents of GEL 5,603 (2017: GEL 8,298) was kept with Georgian banks having rating of “BB-/bb-” from Fitch Ratings.

Receivables on insurance contracts with the estimated recoverable amount of GEL 3,222 being virtually certain as at 31 December 2017 (Note 13).
26 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 19.

FINANCIAL INSTRUMENTS (continued) Risk arising from financial instruments (continued) All cash and cash equivalents balances are classified as current and not impaired.

Due to short-term and highly liquid nature of these financial assets, the Group has assessed corresponding expected credit losses to be immaterial.
Therefore, no impairment will be recognized for cash and cash equivalents under IFRS 9.

The credit quality of all financial assets that are neither past due nor impaired is appropriate and is constantly monitored in order to identify any potential adverse changes in the credit quality.

There are no financial assets that have had renegotiated terms that would otherwise, without that renegotiation, have been past due or impaired.
As at 31 December 2018 and 2017 carrying values of financial instruments best represent their maximum exposure to the credit risk.

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting its payment obligations associated when they fall due under normal or stress circumstances.

Management monitors rolling forecasts of the Group’s cash flows on a monthly basis.
The Group seeks to maintain a stable funding base primarily consisting of borrowings and trade and other payables.

The table below shows financial liabilities as at 31 December 2018 and 2017 based on contractual undiscounted repayment obligations.

As at 31 December 2018 Long-term and short-term borrowings Trade and other payables Total future payments As at 31 December 2017 Long-term and short-term borrowings Trade and other payables Total future payments 20.
RELATED PARTIES DISCLOSURE Less than 1 year Over 1 year 11,953 1,719 13,672 3,466 1,209 4,675 99,207 – 99,207 88,188 – 88,188 Total 111,160 1,719 112,879 91,654 1,209 92,863 In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.
In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.

All transactions with related parties disclosed below have been conducted on an arm’s- length basis.
27 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 20.

RELATED PARTIES DISCLOSURE (continued) BGEO Group entities as at 31 December 2017 are represented by members of BGEO Group (Note 1).

Subsequent to demerger (Note 1) Bank of Georgia Group entities are not considered to be related parties.

GCAP Group entities as at 31 December 2018 are represented by members of GCAP.
RP Global entities are represented by RP Global Holding and RP GLOBAL Investments GmbH.
The volumes of related party transactions, outstanding balances at the year end, and related expense and income for the year are as follows: GCAP Group entities 31 December 2018 BGEO Group entities 31 December 2017 RP Global entities 31 December 2018 31 December 2017 Cash and cash equivalents Other current assets Other non-current assets Property, plant and equipment Total assets Borrowings as at 1 January Proceeds from borrowings Interest accrued and translation during the year Conversion of loan into share capital Borrowings as at 31 December Total liabilities – – – 5,397 5,397 34,221 – 4,173 (38,394) – – 4,788 3,867 446 1,965 11,066 – 32,237 1,984 – 34,221 34,221 – – – 2,835 2,835 18,341 – 2,333 (20,674) – – – – – 987 987 – 17,273 1,068 – 18,341 18,341 GCAP Group entities 2018 BGEO Group entities 20181 BGEO Group entities 2017 Income and expenses Finance income Other general and administrative expenses (140) – (140) 37 41 (4) (19) 40 (59) 1 Included in 2018 under BGEO Group entities are income and expenses generated before demerger (Note 1) by the companies not included in GCAP Group entities.
Other general and administrative expense in amount of GEL 140 in 2018 represents rent and other consulting expenses.

Other current assets in amount of GEL 3,867 as at 31 December 2017 represent receivables on insurance contract (Note 8).

28 JSC GEORGIAN RENEWABLE POWER COMPANY Notes to 2018 consolidated financial statements (Amounts expressed in thousands of Georgian Lari) 20.
RELATED PARTIES DISCLOSURE (continued) Other non-current assets in amount of GEL 446 as of 31 December 2017 represent insurance fee paid in relation to borrowing to be obtained.

The insurance fees were considered as transaction related costs for borrowings and transferred to the borrowings balance as at 31 December 2018.

Property, plant and equipment balance addition from related parties is in regards to capitalized interest expense incurred during 2017 in amount of GEL 1,965.
Directors’ compensation The Group’s key management personnel in 2018 and 2017 include three members of the Supervisory Board and members of management board.

The members of the Supervisory Board do not get compensation from the Group.
Compensation paid to key executive management personnel (includes the director of the Group and 4 members of management board) for their services in full time executive management positions is made up of salary, performance bonus depending on the performance of the Group other compensation in form of reimbursement of housing, business trips, communication and other costs.
Total compensation paid to key management amounted to GEL 1,292 and GEL 1,016 in 2018 and 2017, respectively, as follows: Salaries Bonuses Total management compensation 2018 2017 584 708 1,292 430 586 1,016 21.

EVENTS AFTER THE END OF REPORTING PERIOD In January 2019, existing credit line for funding construction of Mestiachala HPPs of GEL 88,327 (USD 33,000 thousand) was increased up to GEL 107,064 (USD 40,000 thousand) and maturity was prolonged from 1 November 2029 to 25 January 2034.
On 21 February 2019, the Company issued 900,000 shares with the nominal value of USD 1 each.

The shares were purchased by RP Global and GCAP proportionally to their shareholdings (Note 1).

In April 2019, the Group commissioned the first phase (30MW) of Mestiachala hydro power plant, while also remaining on track to launch the second phase (20MW HPP) in June 2019.

The 50MW cascade of Mestiachala HPPs is located in Svaneti region, in the north-western part of Georgia.
The construction of the run-of-the- river type plant commenced in May 2017.

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