Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697753437816.pdf (Georgia)
Engurhesi LLC Standalone Financial Statements and Independent Auditor’s Report 31 December 2021 CONTENTS INDEPENDENT AUDITOR’S REPORT STANDALONE FINANCIAL STATMENTS iii-iv Standalone statement of financial position Standalone statement of comprehensive income Standalone statement of changes in equity Standalone statement of cash flow 5 6 7 8 Notes to the standalone financial statements 9-26 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) NOTES TO THE STANDALONE FINANCIAL STATEMENTS 1.
PRINCIPAL ACTIVITIES “Engurhesi” LLC (the Company) was established and registered on 2 October 1999 as a Limited Liability Company (ID: 251716371) under laws of Georgia.

The Company is a legal entity operating on the territory of Georgia.
As at 31 December 2021 and 31 December 2020 the founder and 100% owner of the Company is Government of Georgia, Ministry of Finance of Georgia (MoF) has the ownership over the Company, while privatization rights of the Company are delegated to the Ministry of Economy and Sustainable Development of Georgia.

The Company’s main activity is the production and sell of electricity throughout Georgia and abroad.
The Company’s factual and registered address is: 8 Politkovskaia Street, Tbilisi, Georgia The head office of the Company is located in Saberio, Gali region.

The Director of the Company is Levan Mebonia.

The Company’s assets with net book value amounted to GEL 140,379 thousands (2020: GEL136,894 thousands) are located in Abkhazia territory, which is conflict region since 1992.
Only the dam of the Company is located in Georgia, other main assets which generated electricity of the Group are located in Abkhazia region that is not controlled currently by Georgian government.

That’s why the significant part of generated electricity is used to supply to the territory of Abkhazia without fee.
In accordance with the Decree No.77 of the Energy Commission of Georgia on “Electricity Market Rules”, the Group decreases its annual generated electricity to provide Abkhazia region with electricity, thus revenue and corresponding receivables from supply of electricity to Abkhazia are not recognized (for the additional information refer to note 12).

2.
2.

BASIS OF PREPARATION Accounting principles These standalone financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (“IFRSs”), being standards and interpretations issued by the International Accounting Standards Board (“IASB”), in force at 31 December 2021.

The standalone financial statements have been prepared under the historical cost convention.
The Company also issued consolidated financial statements for the year ended 31 December 2021 in October 19, 2022.

The standalone financial statements comprise a standalone statement of profit or loss and other comprehensive income, a standalone statement of financial position, a standalone statement of changes in equity, a standalone statement of cash flows, and notes to the standalone financial statements.
Income and expenses excluding the components of other comprehensive income, are recognized in the statement of profit or loss.

Transactions with the owners of the Company in their capacity as owners are recognized in the standalone statement of changes in equity.

The Company’s statement of profit or loss and other comprehensive income using the classification by Function of expenses.
The Company believes this method provides more useful information to the readers of the standalone financial statements as it better reflects the way operations are run from a business point of view.
Financial assets and financial liabilities are offset and the net amount reported in the standalone statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settled the liability simultaneously.

These standalone financial statements are presented in Georgian Lari (GEL) rounded to the nearest thousands if otherwise stated.

3.
3.

SIGNIFICANT ACCOUNTING POLICIES Application of New or Revised Standards and Pronouncements New or amended Accounting Standards and Interpretations adopted.

The Company has adopted all of the new or amended Accounting Standards and Interpretations issued by the International Accounting Standards Board ('IASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
9 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) IBOR Reform phase-2: Changes were made to requirements in IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition and Measurement, IFRS 7, Financial Instruments: Disclosures, IFRS 4, Insurance Contracts and IFRS 16, Leases relating to: changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities; hedge accounting; and disclosures.
The Phase 2 amendments apply only to changes required by the interest rate benchmark reform to financial instruments and hedging relationships.

COVID related rent concessions to IFRS-16: As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees.

Such concessions might take a variety of forms, including payment holidays and deferral of lease payments.
On 28 May 2020, the IASB published an amendment to IFRS 16 that provides an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification.

Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications.

In many cases, this will result in accounting for the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs.
All mentioned above amendments didn’t have impact on financial statement New Accounting Standards and Interpretations not yet mandatory or early adopted Accounting Standards that have recently been issued or amended but are not yet mandatory, have not been early adopted by the company for the annual reporting period ended 31 December 2021.

The company has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.
Property, plant and equipment At initial recognition property, plant and equipment are stated at cost, less accumulated depreciation and provision for impairment, where required.

Costs of minor repairs and maintenance are expensed when incurred.

Cost of replacing major parts or components of property, plant and equipment items are capitalised and the replaced part is retired.

Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or loss.
Depreciation on other items of property, plant and equipment is calculated to allocate their cost to their residual values over their estimated useful lives: Buildings Machinery and equipment Vehicles, computers, furniture and other Land and construction in progress Group of PPE Useful life 40 -80 years 10– 40 years 5 – 10 years Not depreciated The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Property, plant and equipment or its unit is derecognized when it is disposed, or when future economic benefits are not expected to receive by using the asset.

Any gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and is recognised net within other income/other expenses in profit or loss.

Construction in progress Construction in progress is stated at cost.
The Company periodically carries out rehabilitation works on its property and plant that needs certain time these long-term assets to bring to the location and condition necessary for it to be capable of operating in the manner intended by management.
Until the construction progress is not bringing in a such condition, the Company accounts it on this group of property, plant and equipment and after completion of construction workings the Company transfer it to the appropriate group of property, plant and equipment.
Financial Assets Classification and subsequent measurement Company classifies its financial assets in the following measurement categories: Fair value through profit or loss (FVPL); 10 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Fair value through other comprehensive income (FVOCI), or; Amortized cost.

In the periods presented the Company does not have any financial assets categorized as FVOCI or FVTPL.
The classification requirements for debt and equity instruments are described below: Debt Instruments Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.
Classification and subsequent measurement of debt instruments depend on: • • the Company 's business model for managing the asset, and the cash flow characteristics of the asset.

Based on these factors, the Company classifies its debt instruments into one of the following three measurement categories: Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (SPPI), and that are not designated at FVPL.
are measured at amortized cost.

The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 3.1.2 Interest income from these financial assets is included in ‘’Interest and similar income’’ using the effective interest rate method.
Fair value through other comprehensive income (FVOCl): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI), Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortized cost which are recognized in profit or loss.
When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in 'Net Investment income’.

Interest income from these financial assets is included in 'Interest income using the effective interest rate method.

Fair value through profit or loss (FVPL): Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss.
A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within Net trading income in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented ly in 'Net investment income.
Interest income from these financial assets is included in "Interest income using the effective interest rate method.

Business model: the business model reflects how the Company manages the assets in order to generate cash flows.

That is, whether the Company’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets.
If neither of these is applicable (e g. financial assets are held for trading purposes), then the financial assets are classified as part of other business model and measured at FVPL Factors considered by the Company in determining the business model for a Company of assets include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated.
SPPI: Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Company assesses whether the financial instruments cash flows represent solely payments of principal and interest (the SPPI test).

In making this assessment, the Company considers whether the contractual cash flows are consistent with a basic lending arrangement i.e.
interest includes only consideration for the time value of money, credit risk other basic lending risks and a profit margin that is consistent with a basic lending arrangement.

Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.
The Company reclassifies debt investments when and only when its business model for assets changes the reclassification takes place from the start of the first reporting period following the change Such changes are expected to be very infrequent and none occurred during the period.
11 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Equity instruments Equity instruments are instruments that meet the definition of equity from the issuer's perspective, that is instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets.

Examples of equity instruments include basic ordinary shares.
Impairment of financial assets The Company recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income.
The measurement of the loss allowance depends upon the Company 's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.

Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated.
This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months.

Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses.
The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.

For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss.
In all other cases, the loss allowance reduces the asset’s carrying value with a corresponding expense through profit or loss.

Impairment of trade and other receivables The Company makes use of a simplified approach in accounting for trade and other receivables and records the loss allowance as lifetime expected credit losses.

These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument.
In calculating, the Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

The Company assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due.

Derecognition of financial assets.
The Company derecognizes financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired, or (b) the entity has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all the risks and rewards of ownership of the assets or ii) neither transferring nor retaining substantially all risks and rewards of ownership but not retaining control.
Financial liabilities Classification and subsequent measurement In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for: a) Financial liabilities that are carried at fair value through profit or loss.
Such liabilities, including derivative financial instruments that are liabilities, should be subsequently measured at fair value by the entity; b) Financial liabilities that arise when the transfer of a financial asset does not meet the criteria for derecognition, or when the asset retention approach is used; c) Financial guarantee agreement.

In the periods presented the Company does not have any financial liabilities categorized as FVOCI or FVTPL.
Borrowings Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial time to get ready for intended use or sale (qualifying assets) are capitalised as part of the costs of those assets.

All other borrowing costs are expensed in the period when they are incurred.

Borrowing costs consist of interest and other costs that are incurred from borrowed funds.

The Company has borrowings from its owner to finance its principal activities.
12 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Derecognition Financial liability is derecognised (or part of a financial liability) from its statement of financial position only when they are extinguished – i.e.

When the contractual obligation is repaid, cancelled or expired.
The exchange between the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 % different from the discounted present value of the remaining cash flows of the original financial lability.
In addition, other qualitative factors, such as the currency that the instrument is denominated in changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration.

If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment.
If the exchange or modification is not accounted for as an extinguishment any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

Cash and cash equivalents Cash and cash equivalents comprise of cash on hand and cash at banks that have minimal risk of changes in value.

The Company also has short-term deposits placed in bank.
Investment in subsidiary and affiliate Standalone financial statements the Company accounts investment in subsidiary company at a cost, that represents equity of subsidiary.

Standalone financial statements account for investment is affiliates that are accounted using equity method.

Revenue recognition To determine whether to recognize revenue, the Company follows a 5-step process: 1.

Identifying the contract with a customer; 2.

Identifying the performance obligations; 3.


Determining the transaction price; 4.

Allocating the transaction price to the performance obligations; 5.

Recognizing revenue when/as performance obligation(s) are satisfied.

Revenue is recognized either at a point in time or over time, when (or as) the Company satisfies performance obligations by transferring the promised goods or services to its customers.

An asset is transferred when (or as) the customer obtains control of that asset.
Control of an asset refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

Revenue from sale of electricity The Company derives revenue from production and sale of electricity over the entire territory of Georgia.
Revenue is recognized on a monthly basis based on the amount of electricity delivered, which is approved and accepted by customers, as evidence by the invoices and power receipt-delivery acts signed by the Company and the customers, and approved by JSC Electricity System Commercial Operator (ESCO).

The Company is forced to provide Abkhazia region with electricity without charges.

This part of electricity is not recognized as a revenue.
Taxation In June 2016, amendments to the Georgian tax law in respect of corporate income tax became enacted.

The amendments become effective from 1 January 2017 for all Georgian companies except the banks, insurance companies and microfinance organization.

Under the new regulation, corporate income tax will be levied on profit distributed as dividends to the shareholders that are individuals or non-residents of Georgia, rather than on profit earned as under the current regulation.
The amount of tax payable on a dividend distribution will be calculated as 15/85 of the amount of net distribution.

The companies will be able to offset corporate income tax liability arising from dividend distributions out of profits earned in 2008-2016 by the amount of corporate income tax paid for the respective period under the current regulation.
Dividends distributions between Georgian resident companies will 13 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) not be subject to corporate income tax.

There have been no dividend distribution for the year ended 31 December 2021.

The amendments to the Georgian tax law described above also provide for charging corporate income tax on certain transactions that are considered deemed profit distributions, e.g.
some transactions at non-market prices, non-business-related expenses or supply of goods and services free of charge.

Taxation of such transaction is outside scope of IAS 12 Income Taxes and will be accounted similar to operating taxes starting from 1 January 2017.

Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.
Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of net selling price and value in use.
If the recoverable amount of an asset or cash- generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

Impairment losses are recognized as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss recognized for the asset or cash-generating unit in prior years.
A reversal of an impairment loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in which case any reversal of impairment loss is treated as a revaluation increase.

Inventory Inventories are recorded at the lower of cost and net realisable value.

Cost of inventory is determined on the weighted average basis.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling expenses.
Inventory is recorded using weighted average method and includes costs related to purchase and placement in working condition of the asset.

Prepayments Prepayments 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.
Prepayments to acquire assets are transferred to the carrying amount of the asset once the Company has obtained control of the asset and it is probable that future economic benefits associated with the asset will flow to the Company.

Other prepayments are written off to profit or loss when the goods or services relating to the prepayments 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 recognized in profit or loss for the year.

Equity Charter capital is recognized in the statement of changes in equity and is defined by the owner.
In case, when the contribution to the Group's charter capital includes non-cash assets, the difference between the amount defined by the owner and the net fair value of contributed assets is recognized as Additional Paid in Capital.

Dividends are recognized as liability immediately when they are declared.

Grants Grants are recognized where there is reasonable assurance that they will be received and all attached conditions will be complied with.
Where the grant relates to an asset, it is recognized as deferred income in the statement of financial position, and is transferred to statement of profit or loss in equal amounts over the expected useful life of the related asset.

Other grants are recognized as income on a systematic basis over the periods that the costs, which it is intended to be compensated, are expensed.
14 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Foreign currency transaction The standalone financial statements are presented in Georgian Lari, which is the Company’s functional and presentation currency.

Transactions in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date.

Gains and losses resulting from the translation of foreign currency transactions are recognized in the standalone statement of profit or loss as gains and losses from foreign currencies – translation differences.
The Natioanl Bank of Georgia official exchange rate use by the Company in the preparation of the standalone financial statements is following: 1 USD/GEL 1 EUR/GEL Average exchange rate for the year 1 USD/GEL 1 EUR/GEL 31 December 2021 31 December 2020 3.0976 3.5040 2021 3.2209 3.8140 3.2766 4.0233 2020 3.1097 3.5519 15 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) 4.
PROPERTY, PLANT AND EQUIPMENT Cost 1 January 2020 Additions Transfers Capital contribution Disposal 31 December 2020 Additions Transfers Capital contribution Disposal 31 December 2021 Accumulated Depreciation and impairment 1 January 2020 Depreciation charge Depreciation elimination 31 December 2020 Depreciation charge Depreciation elimination 31 December 2021 Net book value 1 January 2020 31 December 2020 31 December 2021 Land Buildings Machinery and Equipment Vehicles, computers, furniture and others Construction in progress Total 180,949 4 20,409 - (3) 201,359 96 69,269 - - 270,724 (65,640) (2,012) 2 (67,650) (2,853) - (70,503) 115,309 133,709 200,221 172,701 293 16,668 - (35) 189,627 16,755 13,681 - (90) 219,973 (55,919) (4,598) 25 (60,492) (5,332) 90 (65,734) 116,782 129,135 154,239 3,218 87 - 25 (32) 3,298 376 - 32 (140) 3,566 (1,979) (271) 31 (2,219) (271) 140 (2,350) 1,239 1,079 1,216 1,057 38,685 (37,077) - (54) 2,611 83,961 (82,950) - (2,569) 1,053 - - - - - - - 1,057 2,611 1,053 357,925 39,069 - 25 (124) 396,895 101,188 - 32 (2,799) 495,316 (123,538) (6,881) 58 (130,361) (8,456) 230 (138,587) 234,387 266,534 356,729 The Company’s property and equipment include items that were added as a result of the merger with Kodori HPP LLC on April 4, 2010.
The Company is unable to gain economic benefit from these assets at carrying amounts of GEL 3,868 thousands as of 31 December 2021 (31 December 2020: GEL 3,951 thousands).
16 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Depreciation expense has been charged in cost of sale amounted to GEL 8,192 thousands (2020: GEL 11,027 thousands), in general and administrative expenses GEL 89 thousands (2020: GEL 101 thousands) and in other expenses GEL 175 thousands (2020: GEL 135 thousands).

The additions of 2021 include PPE of GEL 1,134 thousands (2020: GEL 558 thousands) that capitalized as borrowing costs to the qualified assets.
The Company holds property, plant and equipment that are fully depreciated, the historical cost of them approximates to GEL 7,208 thousands (2020: GEL 6,175 thousands).

Contractual commitments to carry out rehabilitation workings approximates GEL 489 thousands (2020: GEL 2,226 thousands).

Property, plant and equipment was not pledged as security under liabilities.
Construction in progress can be detailed as follows: Construction in progress 1 January 2020 Addition: Road rehabilitation Consulting services Construction and tunnel works Dredging works Hydro/electric mechanical works Borrowing Costs Dam Other Transfer to assets: Road rehabilitation Consulting services Construction and tunnel works Dredging works Hydro/electric mechanical works Borrowing Costs Dam Other Disposal 31 December 2021 Buildings - 69,341 7,428 3,916 54,281 2,412 - 1,131 173 - - 20,254 674 24,352 2,828 - 1,131 27,654 - - - Machinery and Equipment - 14,620 - - - - 11,570 - - 3,050 - - - - - 4,779 - - 1,278 - - Construction in progress 2,611 83,961 7,428 3,916 54,281 2,412 11,570 1,131 173 3,050 (82,950) (20,254) (674) (24,352) (2,828) (4,779) (1,131) (27,654) (1,278) (2,569) 1,053 17 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) 5.
INVESTMENTS IN SUBSIDIARY AND ASSOSIATE The Company has following investments as at 31 December 2021 and 31 December 2020: Company “Vardnilhesebis Kaskadi LLC” “Enguri Hydroaccumulative Power Plant” LLC Ownership % Country Cost Date of incorporation Operation segment Purchase date 100 Georgia 116,335 29 November, 1999 Energy 40 Georgia 817 13 June, 2018 Energy 29 November, 1999 13 June, 2018 The Company owned subsidiaries 100% shares and accounts it using cost model.
The Company holds 40% of associate and accounts it using capital-method.

During the year there were not distribution of dividends.

The table below shows the figures of the audited financial statements of Vardnili HPP Cascade LLC.

Total assets Total payables Equity Accumulated loss Loss for the year 6.
INVENTORIES 31 December 2021 115,575 10,825 104,750 (11,585) (4,167) 31 December 2020 118,692 9,775 108,917 (7,418) (7,864) Inventory of the Company as at 31 December 2021 and 31 December 2020 consists of following: Materials and supplies Fuel and lubricants Inventories were not pledged as security under liabilities.

7.
7.

CASH AND CASH EQUIVALENTS 31 December 2021 1,813 26 1,839 31 December 2020 1,680 18 1,698 Cash and cash equivalents of the Company as at 31 December 2021 and 31 December 2020 consist of following: Cash at bank in national currency Cash at bank in foreign currency 31 December 2021 270 222 492 31 December 2020 270 13 283 Cash and cash equivalents are placed on current accounts in reputable commercial banks.

The Company does not anticipate that these balances can be impaired.
There is no material difference between the carrying amount of cash and cash equivalents and its fair value.

Refer to note 17 for the currencies in which the cash and cash equivalents are denominated.

18 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) 8.

EQUITY The Company’s charter amounted to GEL 208,344 thousands as at 2021(2020: GEL 208,312 thousands).
Mainly the Company’s charter was injected in previous years, the Company’s charter capital was injected with cash amounted to GEL34,627 thousands and with property, plant and equipment amounted to GEL 173,717 thousands.

9.
BORROWINGS Ministry of Finance #1 Ministry of Finance (EBRD) #4 Ministry of Finance (EIB)#1 Ministry of Finance (EIB)#2 Ministry of Finance (EIB)#3 JSC "Bank of Georgia" Ministry of finance #1 Short-Term Borrowings Long-Term Borrowings 31 December 2021 4,770 545 397 7 3,435 6,507 15,661 31 December 2020 - - - - 520 9,000 9,520 31 December 2021 26,408 60,805 65,630 12,257 109,250 - 274,350 31 December 2020 35,075 70,443 75,349 14,082 68,725 - 263,674 The agreement was signed on August 17, 2009 with the Ministry of Finance of Georgia .
The mature date is October, 25 2026.

The interest rate equals to 3.5% per annum.

The purpose of the loan is rehabilitation of hydro power station of Engurhesi.

The Company pays principal and interest two times in a year.

Ministry of finance (through EBRD) #3 On August 27, 2010, a sub-loan agreement was signed between the Company and the Ministry of Finance of Georgia for the amount of Euro 20,000 Thousands.
The initial lender of loan is European Bank for Reconstruction and Development by an agreement with the Ministry of Finance of Georgia.

The purpose of the loan is to finance rehabilitation works of first and fifth Enguri hydro power plants.

The Company shall pay its duties to Ministry of Finance of Georgia, principal and interest shall be paid two times in a year.

The maturity date of the loan is November, 25 2033.

Interest rate of the loan is 6-month Euribor +1% .


The purpose of loan is rehabilitation of hydro power station of Engurhesi.

Ministry of finance (through EIB) #1 On July 10, 2011 a sub-loan agreement was signed between the Company, the Ministry of Energy and Natural Recourses and the Ministry of Finance of Georgia for the amount of Euro 20,000 thousands.

The initial lender of loan is European Industrial Bank-under by an agreement with the Ministry of Finance of Georgia.
The Company shall pay its duties to Ministry of Finance of Georgia, principal and interest shall be paid two times in a year.

The maturity date of the loan is November, 25 2033.

Interest rate of the loan is 6-month Euribor +0.81%.

The purpose of loan is rehabilitation of hydro power station.

Ministry of finance (through EIB) #2 In July 2017, the agreement was made among parent company, Ministry of Economics and Ministry of Finance on 3,500 Euro.

The initial lender of loans is European Industrial Bank.
The Company shall pay its duties to Ministry of Finance of Georgia, principal and interest shall be paid two times in a year.

The maturity date of the loan is October, 20 2034.

Interest rate of the loan is 6-month Euribor +0.81%.

The purpose of loan is rehabilitation of hydro power station.

Ministry of finance (through EBRD) #4 In January 2018 agreement was made between Ministry of Economic and Sustainable Development of Georgia and Ministry of Finance of Georgia on EUR 28,000 thousands.
In July 2020 the parties concluded the amendment of the main contract and the loan amount was increased by EUR 10,000 thousands.

The amount from amended of 2018 year’s contracts were received in 2021.

The first source of issuance of loan is European Bank for Reconstruction and Development.

The Company shall pay its duties to Ministry of Finance of Georgia, principal and interest shall be paid two times in a year.

The maturity date of the loan is November, 27 2034.
Interest rate of the loan is 6-month Euribor +1%.

The purpose of the loan is rehabilitation of Enguri hydropower station - Improving resilience to climate 19 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) conditions.

Fair value of loans and borrowings approximates their carrying amounts.

Refer to note 17 for the currencies in which the loans and borrowings are denominated.

10.
10.

GRANTS RELATED TO ASSET Changes of Grants Related to assets Principal Amortization (Note 13) Balance as of 31 December 2021 31 December 2021 6,038 (208) 5,830 31 December 2020 17,883 (11,845) 6,038 Balances include grant received from the Ministry of Finance for rehabilitation of the Company’s number 4 aggregate.

The useful life of the asset financed by the grant is 40 years.

There were not any significant commitments in relation to this grant.

11.
11.

TRADE AND OTHER PAYABLES Trade and other payables of the Company as at 31 December 2020 and 31 December 2021 consist of following: Trade payables Other payables 31 December 2021 15,244 246 15,490 31 December 2020 11,681 269 11,950 The majority part of trade payables represents the liabilities for the rehabilitation works on the Company’s hydro power station.

The contractors are JSC Enregoni and DCN DIVING B.V.

The payments shall be made during 2022 year.


Trade and other payables are non-interest bearing.

There is no material difference between the carrying amount of trade and other payables and its fair value.

Refer to note 17 for the currencies in which the trade payables are denominated.

12.
12.

REVENUE Revenue from sale of electricity on local market Revenue from sale of electricity on export 2021 38,585 10,327 48,912 2020 11,133 - 11,133 Hydro power station dam of Company is located in Samgerolo, other main assets of the Company are located in Abkhazia region that is not controlled currently by Georgian government.

That’s why the significant part of generated electricity is used to supply to the territory of Abkhazia without fee.
This supply is not recorded as revenue of the Company according to IFRS.

The market price of provided electricity to Abkhazia amounted to GEL 47,166 for the year ended 2021 (2020: GEL 28,035).

13.

COST OF ELECTRICITY SOLD Salaries Depreciation Professional service expense Materials 20 2021 12,577 8,192 2,079 1,016 2020 11,744 6,661 1,775 916 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Repair and maintenance Other 14.
OTHER INCOME Amortization of grant (refer to note 11) Other 15.
GENERAL AND ADMINISTRATIVE EXPENSES Employee benefits The cost of electricity to be transferred to Abkhazia in exchange for the electricity provided by ESCO Taxes and duties Security expenses Utility expenses Bank fee Depreciation and amortization Services and other consulting expenses Membership fees Communication expenses Office expenses Business trip Fuel expenses Representative expenses Other 1,202 319 25,385 2021 208 182 390 2021 3,833 3,356 1,834 765 690 172 89 24 150 46 42 10 5 28 251 11,295 Service and other consulting expenses consist audit fees that is GEL 24 thousands (2020: GEL 25 thousands).
16.

FINANCE INCOME, FINANCE COSTS Interest expenses on borrowings Commission expenses Total interest expenses Interest income from bank deposits Total interest income 17.
GAIN/(LOSS) FROM EXCHANGE RATE DIFFERENCES Financial assets and financial liabilities Including: Cash and cash equivalents Other financial assets at amortized cost Financial liabilities at amortized cost 21 2021 3,764 - 3,764 166 166 2021 (26) (364) 38,626 38,236 642 500 22,238 2020 12,080 25 12,105 2020 3,514 2,316 1,275 743 - 88 85 78 74 46 37 14 4 4 154 8,432 2020 2,780 402 3,182 226 226 2020 (6) 32 (42,076) (42,050) ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) 18.
INCOME TAX EXPENSE On 13 May 2016 the Parliament of Georgia approved significant changes in Georgian Tax code related to the bill on corporate income tax reform (also known as the Estonian Model of Corporate Taxation) which mainly moves the moment of taxation from the moment when taxable profit are earned to the moment when they are distributed.

The law is effective from tax periods starting after 1 January 2017.
Considering that the change in the Georgian Tax Code was enacted before the reporting date, deferred tax assets and liabilities will not be recognized after the law is valid.

19.
FINANCIAL RISK MANAGEMENT The Company is exposed to various risks in relation to financial instruments, such as: Credit risk: the possibility that a debtor will not repay all or a portion of a loan or will not repay in a timely manner Liquidity risk: the risk that the Company may not have, or may not be able to raise, cash funds when needed and • and therefore will cause a loss to the Company; • therefore encounter difficulty in meeting obligations associated with financial liabilities; • Market risk: the risk that the value of a financial instrument will fluctuate in terms of fair value or future cash flows as a result of a fluctuation in market prices.
Basically, the Company is exposed to three market risk components: - Interest rate risk; - Currency risk.

The Company is exposed to various risks in relation to financial instruments.

The main types of risks are currency risk, credit risk and liquidity risk.

The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options.

The most significant financial risks to which the Company is exposed are described below.
Credit risk Credit Risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

The Company is exposed to the risk from its operating activities (accounts receivable) and its financing activities (bank balances).
The maximum exposure to credit risk is represented by the carrying amounts of the following financial instruments: Trade receivables Cash and cash equivalents Total credit risk 31 December 31 2021 182 492 674 31 December 2020 33 283 316 At the moment of issuance of standalone financial statements there was no significant risk in relation to trade receivables.

Credit risk in relation to cash and cash equivalents and deposits is minimal, as funds are placed in reputable banks.
Foreign currency risk Several transactions of the Company are in foreign currency, therefore FX gain and losses are created.

The significant part of operations of the Company are in GEL.

The difficulty is when the transactions of the Company (purchases) are in foreign currency mainly in EURO.

The Company also has significant amount of borrowings in USD and EURO.
31 December 2021 Financial assets Trade receivables Cash and cash equivalents Financial liabilities Borrowings GEL USD EUR 182 270 452 - 86 86 - 136 136 37,677 - 252,334 22 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Open currency position 31 December 2020 Financial assets Accounts receivable Cash and cash equivalents Bank deposits Total Financial liabilities Borrowings Open currency position Interest rate risks 37,677 (37,225) GEL 32 270 - 302 - 86 252,334 (252,198) EUR Rubles - - - - - 12 - 12 - - 12 44,075 44,075 (43,773) 229,120 229,120 (229,120) The Company has borrowings in foreign currency both in fixed and floating rates, therefore the company is exposed to interest rate risk.
The interest rate risk of the Company is mitigated by balance between fixed rate and floating rate borrowings.

Variable interest rate 2021 Ministry of finance (EBRD) #3 Ministry of finance (EIB) #1 Ministry of finance (EIB) #2 Ministry of finance (EBRD) #4 Variable interest rate 2020 Ministry of finance (EBRD) #3 Ministry of finance (EIB) #1 Ministry of finance (EIB) #2 Ministry of finance (EBRD) #4 Interest Balance 61,350 65,623 12,264 112,686 251,923 Euribor +1%.

Euribor+0.81% Euribor+0.81%.


Euribor+0.81%.

- rate Currency EUR EUR EUR EUR - Balance Interest rate 70,443 Euribor +1% 75,349 Euribor+0.81% 14,082 Euribor+0.81% 67,920 Euribor+0.81% 227,794 - Currency EUR EUR EUR EUR - If interest rate will increase or decrease with 1% and all other variables will be unchanged, the finance results of the Company will increase or decrease by GEL 337 thousands in 2021 (2020: GEL 1,376 thousands).
Liquidity risk Liquidity risk is the risk that the Company will be unable to meet its obligations.

The Company’s policy is to run a prudent liquidity management policy by means of holding sufficient cash and bank balances, as well as highly liquid assets for making all operational and debt service related to payments when those become due.

The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.
The table has drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay.

The table includes both interest and principal cash flows.
23 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) 31 December 2021 Financial Assets Cash and cash equivalents Trade receivables Total financial assets Financial liabilities Trade payables Borrowings Total financial liabilities Liquidity position Financial Assets Cash and cash equivalents Trade receivables Total financial assets Financial liabilities Trade payables Borrowings Total financial liabilities Liquidity position Less than 1 year 1 - 5 years More than 5 years TOTAL 492 153 645 15,490 15,661 31,151 (30,506) - - - - - - - 115,019 115,019 (115,019) - 159,331 159,331 (159,331) 492 153 645 15,490 290,011 305,501 (304,856) Less than 1 year 1 - 5 years More than 5 years TOTAL 283 - 283 - 9,520 9,520 (9,237) - - - - 30,731 30,731 (30,731) - - - 283 - 283 - 232,943 232,943 (232,943) - 273,194 273,194 (272,911) For managing liquidity risk the Company uses its own financial assets, such as cash and cash equivalents and accounts receivable.
Cash and cash equivalents of the Company are less than the need of cash outflows.

The Company’s material negative gap is caused by long-term loan.

As mentioned in note 2, since 2021 the Company is profitable and the management believes that upcoming years shall be profitable as well.

Hence, the Company shall be able to cover its liabilities in due time.

20.
20.

SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the Company’s standalone financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amount of income and expenses during the year ended.

Management evaluates its estimates and judgments on an ongoing basis.
Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

The following estimates and judgments are considered important to the Company’s financial condition.
Useful lives of property, plant and equipment - the Company makes assessment of useful lives of items of property, plant and equipment, for the purpose if which different factors are considered, like technical features, commercial purposes, period of use, capacity and physical condition of an item.

Despite the fact that management tries to assess useful lives of items of property, plant and equipment in a most efficient way they still can vary from actual results, that can affect the financial statements.
21.

COMMITMENTS AND CONTINGENCIES Taxes The taxation system in Georgia is relatively new and is characterized by frequently changing legislation, which is often subject to interpretation.

Often differing interpretations exist among various taxation authorities and jurisdictions.

Taxes are subject to review and investigations by tax authorities, which are enabled by law to impose severe fines and penalties.

These facts may create tax risks in Georgia substantially more than in other developed countries.
Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation.

However, the relevant authorities may have differing interpretations and the effects could be significant.

24 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Bank guarantees The Company periodically imports fixed assets from foreign suppliers, suppliers demand the Company to issue bank guarantees.
For the reporting period, the Company has been issued a bank guarantee for suppliers in the amount of GEL 2,472 thousands.

Rehabilitation works on PPE Contractual commitments to carry out rehabilitation workings approximates GEL 489 thousands (2020: GEL 2,226 thousands).

22.

CAPITAL RISK MANAGEMENT The company does not have a formal capital management policy, but management seeks to maintain sufficient capital to accomplish the company’s operational and strategic goals.
This is mainly achieved through effective cash management and long-term investment plans, which are mainly financed by long- term loans and implemented with the support of the ultimate controlling party of the company.

The company has not made any changes to its capital management method during the year.

The Company is not subject to external capital requirements.
Total equity Less: Cash and cash equivalents Equity Total equity Borrowings Overall financing 31 December 2021 165,803 (492) 165,311 165,803 290,011 455,814 31 December 2020 122,924 (283) 122,641 273,194 263,674 536,868 Capital to overall financing ratio 36% 23% 23.

FAIT VALUE MEASUREMENT The Company provides an analysis of its assets and liabilities that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
These Levels are described below: • Level 1 - fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2 - fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.

as prices) or indirectly (i.e.


derived from prices); and • Level 3 - fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Management believes that fair values of financial assets and financial liabilities measured at amortized cost approximate their carrying amounts.
Fair value has been determined by discounting the relevant cash flows using market interest rates for similar instruments.

As a result of this exercise, most significant input is the discount rate.

Estimated fair values of the above financial assets and financial liabilities are classified within Level 3 of the fair value hierarchy.

24.

RELATED PARTY Related partied of the Company are its owners, key management, and other government owned companies.
During the reporting year the Company had the following transactions with related parties: 25 ENGURHESI LLC STANDALONE FINANCIAL STATEMENTS 31 DECEMBER 2021 (In Thousands of GEL) Income from grants Interest expense Management salaries and benefits Balances with related parties: Borrowings Grants related to asset 2021 208 (2,899) (2,691) 2021 385 385 2020 12,080 (3,182) 8,898 2020 (299) (299) 31 December 2021 283,504 5,830 289,334 31 December 2020 273,194 6,038 279,232 25.
EVENTS AFTER THE REPORTING PERIOD After the reporting period, the Company received an additional loan in the amount of GEL 11,500 thousands.

The Company also acquired property, plant and equipment amounted to GEL 11,482 thousands.

26