NEPAL ELECTRICITY AUTHORITY (Nepal Governwient's Undertaking) Head Office Ratna Pari, Katlimandu Phone # 977-14153007 977-14153116 977-14153117 977-14153119 Fax 4 977-14153118 Ref. No $ Date: 17 Aprl 2019 S ountiry Director. The World Bank Yak & Yeti lotel Complex , < Ka,thiiiandu. Nepal. Subject - Submission of Anproved Financial Statements for the FY 2017/18. Dear Sir. Please 1lnd enelosed herewith ihe approved Financial Staemens el Noepal E(lectriciI v Aitoriti\ iogeilier vith Audit Report for tlie year ended 2017/18 for vour kind infbrmaion and iiecdltil actlions. Than king You. Sinccrely Yours, (Lekhanath Koirala) Deputy Managing Director Finnce Directorate CC : Managing Director. NEA Phone : 4258174 4266034 Office of to1r4255707 A.G. Fax : 977-1-4268309 Indepen eport Fax: 977-1-4262798 4~-..4 C('XPost Box., 13328 iX.r't C qt TlFqla -trm To, Babar Mahal, Kathmandu, Nepal The Chairperson Date: April 11st, 2019 Board of Directors Nepal Electricity Authority, Darbar Marg, Kathmandu. 1. Report on the Financial Statements We have audited the accompanying Financial Statements of Nepal Electricity Authority (NEA), which comprise Statement of Financial Position as at 32nd Ashad 2075 (July 16, 2018), Statement of Profit or Loss, Statement of Cash Flow sand Statement of Changes in Equity for the year then ended, and Significant Accounting Policies and Explanatory Notes. 2. Management's Responsibility for the Financial Statements NEA management is responsible for the preparation and fair presentation of these financial statements, in accordance with Nepal Financial Reporting Standards (NFRS) and for such internal control as NEA management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. 3. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Nepal Standards on Auditing, "Directives to the Auditors for the Audit of Public Sector Enterprises" and international Organization of Supreme Audit Institution (INTOSAI) Standards. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we considered the internal control relevant to NEA's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on NEA's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by NEA management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Page Iof11 em6//: agi7ep@ntc. net np, info@oag gov. n Web Page: www oagnep.gov np 4. Basis for Qualified Opinion 4.1. Legality of Subsidiaries/Associates Companies NEA has incorporated public limited subsidiaries companies having single ownership or promoters having less than seven. As per the requirement of Companies Act, 2063 (Including Amendments), minimum number of promoters to incorporate a public company is seven. Provision of the Companies Act, 2063 has not been fulfilled at the time of incorporation of such subsidiary companies and legality of such companies has not been verified during the fiscal year 2074/75 by NEA. 4.2. Functions of Board of Directors Standard operating procedures of Board of Directors meeting have not been formulated as delegated by Section 15 (5) of the Nepal Electricity Authority Act, 2041. Similarly, some of the decisions to be made by Board of Directors have been decided by Managing Director and only the ratification was made by Board of Directors. 4.3. Financial Statements not prepared according to applicable Reporting Framework The accompanying financial statements have not been prepared based on provisions of Nepal Financial Reporting Standards (NFRSs) and provisions of 16 different applicable NFRSs and Nepal Accounting Standards (NASs) have not been fully complied with while recognizing, measuring and disclosing financial transactions in the financial statements, including preparation of Consolidated Financial Statements. 4.4. Property Plant and Equipment (PPE) i) Status and Carrying Amount of PPE Physical verification of PPE has not been conducted since long. NEA has not maintained and updated consolidated statements of assets owned by it detailing cost, location and condition.! Further, various assets under Hydraulic Plant and Machinery of NPR. 49,304.95 Million has capitalized cumulatively since fiscal year 2060/61 without further details and various damaged assets including vehicles were not derecognized. Various items capitalized earlier under distribution or transmission lines were replaced and costs of replacement were charged off to revenue based on budget allocation without assessing the life or capacity of such items and costs of replaced items were not decapitalized. Also, NEA has incurred expenses for various repairs/maintenance activities to rectify damages caused by the massive earthquake of 2072 and has booked such expenses as revenue expenses. A comprehensive assessment of damages caused by the earthquake and cost estimate to rebuild/repair of damaged assets has not been done. Land records are updated only up-to fiscal year 2069/70. Status of land acquired/disposed/encroached etc. after fiscal year 2069/70 is not verifiable. Out of 31,707- a of 11 - 11-03-00 Ropanies of land recorded in NEA central records, 1,881-15-2-2 land area (almost 6%) does not have ownership document in the name of NEA./Similarly, land of 1,474-3-1-0 has been encroached by government organizations, public roads, semi government organizations, private organizations and general public. NEA has made a provision of NPR.479.02 Million against loss on fixed assets in earlier years without details available and re-assessment of adequacy of provisions made has not been done based on current status. Credit balance of the carrying amount of NPR 583.71 Million observed in distribution line. Status of the said assets under distribution line and reason for the credit balance unidentified. Ii) Comprehensive Insurance of PPE NEA has owned gross PPE of NPR. 168,233.83 Million against which an insurance reserve fund of NPR. 400 Million has been created; however, there was no separate insurance made for PPE and only vehicles were insured for third party liability. iii) Depreciation of PPE NEA has a policy to charge depreciation on assets procured during the year at a flat 50% of the rate of the specified assets prescribed in its Accounts Manual, irrespective of the date of capitalization. Also, same rate of depreciation as fixed has been charged without assessing the remaining useful life of assets. Further, the categories of assets specified by NEA have various separable items that are significant to the total assets and may have variable useful life-span, but depreciated as one single item, for example, Hydel Power Plant, Transmission and Distribution Lines, Sub-stations, Vehicles, Heavy Equipment, Solar Power Plant. There is an unexplained difference in depreciation amount accounted for in the statement of profit or loss and difference between provision for depreciation of current and previous year shown in Schedule 1 of the Financial Statements by NPR. 345.92 Million (short charged in the statement of profit or loss). 4.5. Capital Work in Progress (CWIP) 1) Status and Carrying Amount of PPE NEA has not carried out physical verification of CWIP to identify the existence, location, /condition as per the Financial Administration Bylaws, 2068 (Including Amendments). Further, no impairment testing for old, damaged and obsolete CWIP has been performed and accounted. NEA has made a provision of NPR. 287.91 Million against obsolescence on CWIP in fiscal year 2070/71 without details of items against which such provision was made and re- assessment of adequacy of provisions made has not been done based on current status. Further, schedule 2 of Financial Statements of NEA shows opening balance of CWIP, T Page 3 of 11 addition and capitalized during the year; however, individual details of CWIP has not been provided. ii) Completed Projects Capitalization NEA has capitalized CWIP of NPR. 27,199.54 Million as PPE during the fiscal year 2074/75; however, there is no details maintained at central office showing individual projects/items capitalized.'Further, there are various sub projects with total CWIP of NPR. 975.73 Million which have been completed but pending for capitalization. This has resulted in under reporting of fixed assets and under charging of depreciation to Statement of Profit or Loss. Also, Hetauda Diesel Plant Rehabilitation Project that started in fiscal year 2066/67 and completed in fiscal year 2068/69; however, it has not yet capitalized. CWIP of NPR 1,623.13 Million have been carried over since long period of time. No progress has been made on such capital works during fiscal year 2074/75. iii) Excess Interest included in CWIP In various projects, interest on total loans outstanding from Asian Development Bank (ADB) and Government of Nepal (GoN) is being charged to CWIP although sub-projects have purchased such funded fixed assets of NPR. 2,403.86 Million and put to use for project implementation. This has inflated CWIP and short charging of interest expenses on statement of profit or loss, the amount of which is not quantifiable on want of detailed information. iv) Capitalization of Administrative and General Expenses to CWIP NEA has continued to book administrative and other general expenses in CWIP, without segregating expenses that are directly attributable to qualifying assets against the provision of NAS16: "Property, Plant and Equipment". Total of such amount as at the reporting date Is NPR. 574.47 Million, net of interest during construction (IDC), depreciation and miscellaneous income. Further, NEA has stopped charging off head-office expenses to CWIP from fiscal year 2072/73; however, such expenses charged to CWIP till fiscal year 2072/73 were not reversed. Total expenses of head office charged to CWIP till fiscal year 2074/75 is NPR. 5.18 Million. v) Interest Charged on Government of Nepal Loan and Booked under IDC The loan principal and interest on Government of Nepal loan is not accounted for by projects based on actual amount received by the projects for use in project activities but on the basis of allocation made by NEA head office. This has resulted in receivable balance from central office implying that such funds are held and used by NEA for other purposes. vi) Interest Booking Interest payable to Government of Nepal and Asian Development Bank combined worth of NPR 72.43 Million has not been booked by 6 Sub-Project under Energy Access and Efficiency Improvement Project (EAEIP) Funded by Asian Development Bank (ADB). 4 of 11 vii) CWIP with Credit Balance CWIP with credit balance of NPR. 27.87 Million has been noticed under various Distribution - and Consumer Services (DCSs) and the same has been netted off from debit balance of CWIP and understated CWIP balance. 4.6. Investment i) Approval from Government of Nepal for Investment Section SA of Nepal Electricity Authority Act, 2041 states that NEA may purchase share of industries connected with electricity in accordance with the approval of Government of Nepal. NEA has neither obtained prior approval from Government of Nepal nor obtained ratification of investment made in associates/subsidiaries companies from Government of Nepal. Further, Section 24 of Nepal Electricity Authority Act, 2041 states that NEA shall not sell or otherwise transfer any immovable assets and any movable assets worth more than NPR. 100,000 to any other person without the prior approval of Government of Nepal. NEA has incorporated associates/subsidiaries companies and transferred NEA assets to various associates/subsidiaries companies without prior approval of Government of Nepal indicating legal ownership of assets in the name of NEA despite possession of the assets in the name of associates/subsidiaries companies incorporated by NEA. ii) Valuation of Investment NEA Investment includes investment in shares of subsidiaries, associates and other corporate bodies, loans to subsidiary and Joint Venture Companies and loans/deposits for special purpose. Although, accounting policies on investment states that all investments in the form of shares and long-term loans are carried at cost and write downs are made for impairment. However, there was no evidence of assessing impairment of the investments in shares (e.g. calculation of net assets from audited financial statements of investee) and calculation of amortized costs for debt instruments. Amount lent to its subsidiaries as loan payable in fixed installments (NPR. 17,778.97 Million) and in the nature of deposits (NPR. 1,815.84 Million) are also included in investment, iii) Loans Provided to Subsidiaries against Bank and Financial Institutions Act, 2073 NEA has provided loan of NPR. 14,535.73 Million to Upper Tamakoshi Hydropower Co. Ltd. and NPR.956.96Million in Power Transmission Company Nepal Ltd. against the provision of Section 31 of Banking and Financial Institutions Act, 2073 which states that "no one other than a bank or financial institution shall carry on the financial transactions." iv) Share Certificates Share certificates from 18 investee companies worth NPR.994.04 Million have not been obtained. Page 5 of 11 - 4.7. Inventory I) Valuation of Inventory NEA has valued its inventory at cost and none of the offices has carried out assessment of net realizable value of its inventory, on account of obsolescence and usefulness. NEA has made a provision of NPR. 331.38 Million (4.21 %of total inventory) against provision for loss and obsolescence many years ago, without details available. Inventories shortage pending inquiry of NPR. 19.72 Million has been observed, no any effort has been made to settle pending inquiry and make provision for such items of inventories. 4.8. Trade Receivables i) Recoverability Status Against total receivables of NPR, 16,113.99 Million, NEA has made a provision for doubtful debts of NPR. 567 Million few years ago without further details. Although there has been increase in debtors outstanding, NEA has not assessed the recoverability status and adequacy of the provision made. ii) Reconciliation and Confirmation There are huge differences in balances of debtors between accounting software (CAIS) and Revenue Software (M-Power). Differences could not be quantified as the figures in M-Power kept on changing due to adjustment made in subsequent period. There was excess balance in M-power in some units and vice versa. Also, advance collected from customer of NPR. 124.86 Million has been netted off against receivables. The accuracy of debtor's balance as recognized in financial statements could not be commented upon.Net credit balance of NPR. 15.57 Million reported under rechargeable works have been carried forward since long period of time and due to absence of adequate supporting documents, the given account balances could not be verified. 4.9. Cash and Cash Equivalents i) Exact Cash/Bank Balance Balance of NPR. 34,530.02 Million under cash and cash equivalents as at the reporting date includes cash in transit balance of NPR.262.43Million being carried forward since long period of time detail of which was not available. In the absence of bank confirmation certificate/bank statement and timely reconciliation, bank balance of NPR. 112.05 Million could not be verified and reconciled. Unknown deposit of NPR 18.84 Million was noted in bank reconciliation statement as at year end, adjustment of which has not been made It was not possible to comment on the accuracy of the balances reported. Furthermore, a provision for loss in lieu of shortage of NPR. 35.39 Million has provided in earlier years without details. There were also instances where bank reconciliation page 6 of 11 statements were not prepared and bank confirmations were not obtained. It was not possible to comment on the accuracy of the balances reported. 4.10. Prepaid Advance, Loan and Deposits i) Balance under Payroll and Account Reconciliation There is a huge difference of NPR. 270.89 Million in staff loan balance as per accounting software (CAIS) and payroll software and such huge differences has not been verified and reconciled till 32nd Ashad 2075. Il) Recoverability Status Recovery of "Index Loan" of outstanding balance of NPR.60 Million is not assessed. Advance to staff in the various budget center of NPR. 42.44 Million has been remained unsettled. Further, NPR. 281.12 Million under other claim receivable and NPR. 344.52 Million under Claim Recoverable from GON are pending since long period. Claim Recoverable from other included Shortage on collection NPR. 5.71 Million. There is no confirmation of balances from the parties with respect to deposits and receivables. NEA has not prepared aging analysis of loan and advances to determine recover ability status and adequacy of the provision made in earlier year of NPR. 88.65 Million. iii) Disclosure of Outstanding Balances In the absence of adequate details of reasonable judgments based on the latest available reliable information, the reasonableness and adequacy of the accounting estimate for the provision so made could not be confirmed. Term loan provided to staffs are not segregated to current and non-current portion but included in current liability. 4.11. Share Capital i) Balances under Share Capital The government confirmation for amount of Share Capital of NPR. 102,437.63 Million which includes share allotment of NPR. 65,072.72 Million has been transferred to Share Capital during the Fiscal Year 2074/75. Neither confirmation nor reconciliation of the share capital amount of GoN has been made. ii) Updated Share Capital Status as per Financial Comptroller General Office (FCGO) Share amount provided by GoN during the year is NPR. 20,342.83 Million and the additional share capital as per financial statements is NPR 19, 182.39 Million (including share suspense allotment and grant in ad-reserve). Share amount of NPR. 1,160.44 Million is not reconciled with GoN. Page 7 of 11 4.12. Reserves and Accumulated Profit: Capital Reserve i) Adjustment in Consumer Contribution Consumer contribution balances have been increased by NPR, 106.46 Million. However, there has no details regarding the adjustment made. As per NEA accounting policy, contributions received from consumers for installation/commissioning of PPE are to be shown as Capital Reserve and subsequently adjusted to income in the same proportion as the depreciation charged on the assets acquired out of said grants/consumer contribution. However, details of assets acquired out of grant/consumer contribution and depreciation thereof are not available to comment on the accuracy of the capital reserve and compliance with its own policy. ii) Adjustment in Grant-in-Aid Reserve Account There was a balance of NPR. 1.67 Million carried over in grant-in-aid reserve account since fiscal year 2068/69 without further details. Further, documents relating to Grant-in-Aid- Reserve amounting to NPR. 4,328.28 Million appearing in financial statements were not verifiable. 4.13. Non-current Liabilities i) Loans Obtained by NEA - NEA has obtained loans from Government/Funding Agencies for construction of hydroelectricity projects against the provision of Section 7 of Nepal Electricity Authority Act, 2041, that states that NEA may obtain necessary loans in cash or in kind or accept grants for use as working capital with the approval of Government of Nepal. ii) Confirmation of Long-Term Borrowings NEA has not reconciled and obtained conformation for long term borrowings (loans) from GoN of NPR, 12Q,261.15 Million outstanding as at 32 nd A5had 2075 u nd-er the subsidiary loan agreement for various projects financed by funding agencies. ill) Presentation of Current and Non-Current Portion of Loans The loan deeds (Tamasukha) with GoN loans for the projects have repayment schedule with bi-annual payment of principal and interest for 20 years and also for other loans after the commencement of projects. However, NEA has not prepared a statement with the loans and interest payable within 12 months and/or overdue amounts and whole of the loans and interest amounts are shown under non-current borrowings and current liabilities/Provisions/lDCP respectively. Page 8Sofl11 iv) Calculation of Deferred Tax Assets/Liabilities Balance in deferred tax liabilities of NPR. 693.2 Million has been carried forward since fiscal year 2065/66 and re-calculation of deferred tax assets/liabilities not done on account of losses during the periods without assessing certainty of realization of unused tax losses in future. 4.14. Sundry Creditor and Other Payable I) Ulability to be Booked NEA has not booked liability for claims made by Independent Power Producers (IPPs) for posted rate on account that they have not received amount from GoN related to this claim made by NEA, There is balance of NPR. 1,116.14 Million payables to various IPPs by NEA. ii) Assessment of Payable Status There was no practice of preparing ageing analysis of payables and initiate the process of adjusting the balances. There were long pending payables outstanding of NPR. 143.10 Million in respect of employees as at the reporting date. ili) Reconciliation of Inter-Unit Account There were huge balances remain unreconciled for previous years. Out of net debit balance of NPR. 791.115 Million, NPR,56,532.14 Million in Debit balances and NPR. 55,741.02 Million in Credit balances remained unreconciled. In the absence of reconciliation, it is not possible to ascertain impact on assets, liabilities, income and expenses reported in the financial statements. 4.15. Provisions i) Provision for Employee Benefits NEA has made provisions for retirement benefit plans such as gratuity, pension, leave encashment and medical benefits based on actuary valuation. However, actuary valuation for last four fiscal years has not been done and NPR. 2,500 Million has been provisioned on ad-hoc basis during this fiscal year. ii) Late Submission of Income Tax Returns NEA has reported net Profit of NPR. 2,848.11 Million for fiscal year 2074/75. Since, NEA has accumulated losses of NPR. 26,334.85 Million up to fiscal year 2073/74, there is no income tax liability under Section 3 of income Tax Act, 2058 and hence provision for income tax is not required. However, NEA has not calculated fee of NPR. 31.39 Mil ion under Section 117 for late submission of income tax returns as per income Tax Act 2058 up to Chaitra end 2075. This has resulted in overstatement of profit for the year. Page 9 of 11 4.16. Revenue I) Netting off of Cost Against Revenue Sale of electricity goods of NPR. 166.34 Million has been accounted on net basis i.e. sale price less cost, resulting understatement of revenue and cost. Complete lists of cost price and selling price of electricity goods are not provided by NEA management and hence impact on Statement of Profit or Loss is not quantifiable. ii) VAT on Sale of Taxable Transactions Under group 11 of schedule 1, Value Added Tax Act, 2052 has provided exemption for electricity supply only. However, NEA has not collected VAT on sale of electricity goods, rental income, meter sales, rechargeable works, consultancy service, feasibility study, tender of other inventories etc. iii) Reconciliation of incomes In most of the Distribution and Consumer Services (DCSs) visited, income recorded in revenue software (M-Power) and accounting software (CAIS) were not reconciled and huge differences were noted. It was not possible to assess the impact of reconciliation on revenue recognized, iv) Accrual of Rental Income The entity shall present its financial statements using the accrual basis of accounting except cash flow information whereas NEA has booked rental income from pole rent on cash basis in all Distribution Consumer Services (DCSs). Further, joint verification of pole used by cable network provider has not been done to date. 4.17. Expenses i) Confirmation of Interest Expenses Interest expenses are calculated on the loan outstanding stated in NEA record which is pending reconciliation and confirmation with GON. Thus, appropriateness of interest expenses booked cannot be confirmed. ii) Property Tax Majority offices have not paid/made provision for property taxes since fiscal year 2065/66 and only few offices have paid/made provision for this fiscal year. NPR. 46.81 Million provision made till fiscal year 2065/66 has not been deposited till the end of fiscal year 2073/2074. Further, additional provision made by few offices of NPR. 15.66 Million made during fiscal year 2073/74 which has been increased in fiscal year 2074/75 by NPR. 0.97 Million whereas same has also not been deposited. Page 10 of 11 iii) Prior Period Income/Expenses income/expenses related to previous year (Expenses of NPR. 570.30 Million and income of NPR. 66.42 Million) were booked in current year and adjusted directly with Accumulated Profits/(Losses) under Reserve and Accumulated Profits. Previous year figures in the statement of profit or loss are not restated. iv) Other In the absence of complete details from the units not visited during the audit, it is not possible to ensure that the information in respect of these units, included in the financial statements, are complete and accurate. Information in respect of such is incorporated in the financial statements on the basis of management representation. 5. Qualified Opinion In our opinion, except for the possible effects of the matter described in Basis for Qualified Opinion, the financial statements present fairly, in all material respects, the financial position of Nepal Electricity Authority (NEA) as at 32ndAshad 2075{Corresponding July 16, 2018) and financial performance and its cash flows for the year then ended are in accordance with Nepal Financial Reporting Standards. 6. Management Letter A separate management letter consisting of detailed audit observations and recommendations on issues related to financial statements, internal control and compliances with applicable laws and regulations has been issued to the management along with this report for improving financial management of NEA. Deputy Auditor General Office of Auditor General Page 11 of 11 NEPAL ELECT AUTHORITY (NEPAL GOVERN DERTAKING) (Incorporated under Nepal Electricity Act, 2041) FINANCIAL STATEMENTS 32 ASHADHI, 2075 (16 JL Y, 2018) STATEMENT OF FINANCIAL POSITION STATEMENT OF PROFIT OR LOSS STATEMENT OF CASH FLOWS STATEMENT OF CHANGES IN EQUITY SIGNIFICANT ACCOUNTIG POLICIES AND EXPLANATORY NOTES KATHMANDU, NEPAL .1....... Nepal uthority (incorporated under Wct uthority Act, 2041) state P4titro ocsitionn As at July 8 32, 2075) (Figures in Rupees) Schedule Ashad 32, 2075 Ashad 31 2074 Assets Non- Current Assets Property, Plant & Equipment 1 1 12,984,543,96922 90,341.198,724.27 Capital Work in Progress 2 77,606,999,86058 80,272,328,483.95 Investments 3 29,9-41,547,75,1.69 25,845,365.719.02 Total Non-Current Assets 220,533,091,54.49 196,458,892,927.24 Current Assets Inventories 4 7,543,716,426.80 4,217,986,601.14 Trade Receivables 5 15,546,987,223.13 13,585,859,450.95 Cash and Cash Equivalents 6 34,494,627,718.43 24,823,792,106.59 Prepaid, Advances, Loans and Deposits 7 6.453,627,270.14 5,875,852,425.92 Total Current Assets 64,038,958,638.50 48,503,490,584.60 Total Assets 284,572,050,222.99 244,962,383,511.84 Equ it and Liabilities Capital and Reserves Share Capital 8 102,437,628,037.65 82,411,252,28645 Reserves and Accumulated Profits 9 (23,597,932,760.73) (26.334.845491.33) Total Equity 78,839,695,276.92 56,076,406,795.12 Non-Current Liabilities Long- term Borrowings 10 120,261,147,787.53 110,681.686,497.71 Deferred Tax Liabilities 693,204,887,00 693,204.887,00 Total Non-Current Liabilities 120,954,352,674.53 111,374,891,384.71 L Current Liabilities Sundry Creditors and Other Payables 11 58,833,274,054 19 54,085,279.896.56 Provisions 12 25,944,734,217.35 23 425805,43545 Total Current Liabilities 84,778,002,271.54 7 10,085,332.01 Total Liabilities 205,732,354,946.07 188A5,016,716.72 Total Equity & Liabilities 284,572,050,222.99 4 ,3511.84 Schedule I to 12 Form an integral part of this statemen 7¶'5F0rC@qjLt\ven date, CA m K ar Katie AGyarienda Bahadur 8hari CA Anup Kumar Shresth Mr. lswar Ic al ioin Audi oAr Joint Ai Joit Auditor Deputy Auditor General Oiee of the Auditor General Board of Directors Mr. Uk hanath KoiraTa Mr Ba Man Pun 'Aranta Mr. Dinesh Kumar Ghirnire r al S n - himirc Deputy Managing Director Honourable Minister Secretary Sc (Revenue) Finance Directorate Ministry of Energy,Water Minl istry of Energy,Water Resource & Irrigation Resource & Irrigation Ministry offinance Chairmian Member Member Mr Rajan Raj Bista Mr 'rasRd Tham Mr Bhakta Bahl n unMr U Ra Director Merber Member Membr Accounts Departient Mr !ow PVraash GUITI Mr. Kul Man Ghisin- Member Managing Director Place. Kathmntandu Member Secretary Board of Directors Nepal E Authority (incorporated Unde Authority Act, 204 l) sta 0" l r LOSS For the year e Ulv 4. Ashad 32, 2075) (Figures in Rupees) Schedule This Year Previous Year Gross Sales Revenue 13 56,173,096,326.72 47,754,953,459.67 Rebate on Sales (814,877,039.18) X959,177,749,08) Net Sales Revenue 55,358,219,287,54 46,795.775,710.59 Cost of Sales 14 (39, 121,137,357.1 1) (32,586,973,221.58) Gross profit 16,237,081,930.43 14,208,802,489.01 Other Ineome 15 6,615,516,687.10 4,907.3 34,36(1.5 7 bution Expenses 16 (7,645,024,487.79) (7,041, 78, 35688) Administrative Expenses 17 2,042,954,668.54) (1,601,569.603.05) Finance Cost (3,221,782,989.32) (3,546,149,277.56) Depreciation (4,210,275,18147) (3,755,223.738.80) Gain/Loss) on Foreign Exchange (277,535,52 L63) 410,702,344.51 Provision under Employees' Benefits Plan (2,500,000,00000) (2,050,000.000.00) Provision for Employces' Bonus (57,94 1,681.70) (30,045,45j.27) Net Profit/(Loss) before Tax 2,897,084,085.08 1,502,272,763,53 Provisions for Incone Tax - Net Profit (Loss) for the Year 2,897,084,085.08 1,502,272,763.53 Appropriations Corporate Social Responsibility Fund 28,970,840,85 15,022,727.64 Insurance Furd 20,000,000.00 20,000,000.00 Net Profit transferred to Statemeng of Financial Position 2,848,113,244 ,23 .ý W 1,467,250,035.89 f even date, Sciduls 13 to 17 form an Integral pari of ils Statenent of Profit & L ss CA Il 2 Ku Kafle Gyaiendra Bahadur Bhari CA. Anup Kumar Shrestha Mr lswar Nepa1 Joint Audnior Jomn Auditor Joint Auditor Deputy Auditor General Office of the Auditor General Board of Directors Mr Lekhanath KoirAla Mr Barria Man Pun 'Ananta' Mr, Dinesi Kunar Ghimire er Ghimire Depul Managmg Direclor Honourable Minister Secretary See tar" evenue) Fmance Dreetorate Ministry of Energy,Water Minisiry of Energy,Water Resource & Irrigation Resource & Irrigation Ministry of Finance Chairman Metmr Meniber Mr Rajan Raj hi sd Thi MrBhakla aAdur Pun mr. C Raj DiecorMemnber MemnberMrnr Mernher Accouns Deparmei Mrå. , Wh< rakash auta Mr Kul Man Glising Menber Managing Direcor Date1 loard of Directors Place: Kathmandu Nepal Electricit Authority (Incorporated under Ne Authority Act, 2041) Stat ws, IbF For the year ende Ashad 32, 2075) [L N c~ wo (Figures in Rupees) This Year Previous Year A. Cash Flows from Operating Activities 1. Net Profit/(Loss) Before Taxes 2,897,084,085.08 1,502,272,763.53 Add: Adjustment for: Interest on Loans 3,221,782,989.32 3,546,149,277.56 Depreciation on Property, Plant & Equipment 4,210,275,183.47 3,755,223,738.80 Prior Year's incomel(Expense) (311,629,424.57) (274,484,624.62) I Staff Loan and Property, Plant & Equipment Written off 30,662,23 60 2,739,824.46 Loss on Stock 444,933.58 Prior Year's Administrative Expenses 45,100,310.62 43,039,808.86 Loss/(Gain) on Foreign Exchange 277,535,521.63 (410,702,344 51) Provision for Gratuity 31,806,781.90 26t910,599,45 Provision for Pension 2,077,779,000,00 1,703,779,000.00 - Provision for Accumulated Leave & Medical Facilities 409,343,000.00 335,661,00000 Provision for Employee Bonus 57,941,681.70 30,045,455,27 Interest on Loan & Deposits (3,220,729,184.37) (2,273,990,580.43) Dividend Income (209,278,107.52) (162,278,834.92) 2.Cash Flows from Operation before Working Capital Changes 9,517,67406886 7,824,810,017.03 Adjustment for Working Capital Changes Decrease(Increase) in Inventories (3,325,729,825.66) (842,017,462.00) Decrease/(Increase) in Accounts Receivable (1,961,127,772.18) (2,399,022,236.92) Decreasei(lncrease) in Loan & Advances (608,437,075.82) (2,074,309,516.29) (Decreasc)/Increasc in Current liabilities 4,678,979,96622 3,876,584,223.00 Cash Generated from Operation 8,301,359,361.42 6,386,045,024.82 Payment of Interest on Loans (3,210,716,479.61) (1,745,681,048.92) Net Cash Flows from Operating Activities 5,090,642,881.81 4,640,363,975.90 5,9,42818 Nepal Electricity Authority (I ncorporated under Ne ricity Authority Act, 2041) St a If"a lows For the year en , t 6j54t (Ashad 32, 2075) (Figures in Rupees) This Year Previous Year B. Cash Flows from Investing Activities Interest on Loan & Deposits 3,220,729,184.37 2,273,990,580.43 Dividend Income 209,278,107-52 162,278,834.92 Net Addition to Property, Plant & Equipment (26,853,718,291.66) (5,577,975,487.41) Net Addition/ (transfer) to Capital Work in Progress 2,665,328,623.37 (13,588,233,773.32) Addition to Investment (4,096,182,035.67) (4,090,311,888.10) Net Cash Flows from Investing Activities (24,854,564,412.07) (20,820,251,733.48) C. Cash Flows from Financing Activities Increase in Share Capital 20,026,375,751.20 5,941,621,247.08 lnerease/(Decrease) in Consumer Contribution 106,455,622.71 (290,984,822.93) Increase/(Decrease) in Long- Term Borrowing 10,320,929,925.16 21,828,753,516.53 U Repayment of Long-Term Loan (1,019,004,156,97) (1,837,314,003.57) Net Cash Flows from Financing Activities 29,434,757,142.10 25,642,075,937.11 Net Change in Cash (A+B+C) 9,670,835,611.84 9,462,188,179.53 Cash and Cash Equivalent at the Beginning of the Year 24,823,792,1* 9 15,361,601927.06 Cash and Cash Equivalent at the End of the Year 34,494,627,0 24,823,792,106.59 rourireport oI'cvein date, CA. em K mar Kaile CA,Gyanendra Bahadur Bbari p Kumar Shrestha Mr lar Nepal Join Au tor Joint Auditor Joint Auditor Deputy Auditor General Join/ Office of the Auditor General Board of Directotrs Mr- Lekhanath Koirala Mr Mr Barsha Man Pun 'Ananta Mr. Dinesh Kumar Ghirnire Mr 1 Ghimire Deputy Managing Director Honourable Minister Secretary . Secre ry (R nue) Finance Directorate Ministry of Energy,Water Ministry of Energy,Water Resource & Imiation Resource & Irrigation Chairman Member Member Mr. Rajan Rai Bista Mr Umesh Prasad Thani Mr Bhakta Bahadur Pun Mr. Chet Raj oshi Director Member Member Member Accounts Department Mr Vish6w Prakash Gautain Mr. Kul Man GhiSing Member Managing Director Member Secretary Date: a.-C-/21 Board of Directors I Place: Kathmandu 111 � �,.�ь yJ�.Y 1 � � / " . . . �f � Я�fiд � i. ._... � � , Р � � г � � ` � "�+�7к '�� �� i � f Q �i+. . ; �' I ��•� �] �.1 �К �1 L'в� t©� ' - ��х��`� ; � �[31а , рΡ , � т. А ч йм v. ел � й �°~.. а' fl орΡ 4,. ё -i � j� � д •� q � а � � � � �g q � � .. _.-.. Vy вг �G С ® Q К, N G""А ,,. � тв н �а � +J У i+ � ✓I W � о ® � � � ?� wi[н� а�� с. с ач м т� и F � _ й Е V Q�4' �q $ "� а _ 'с� у� С Р 4 агя. � �� G �О � .i°.. у� ы G О Н � iR 4О � у � н н ю �� ц а? 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Nepal Ele uthority (Incorporated under L c uthority Act, 2041) Schedules formin of-ti t' cial statements For the year ende shad 32, 2075) 4" (Figures in Rupees) Ashid 32,207i Ashad 31, 207 Schedule 2- Capital Work in Progress Opening Balance 80,560,240,134.16 66,972,006,360.84 Additions during the Year 21,796,902,958.32 16,577,373,134.11 Advance to contractor for Capital Works 654,583,977,80 6$0,096,828,57 Advance to Suppliers 1,986,497.11 2,246,760.27 Advance for Import 503,356,686.39 2- 1,206,105.20 Advance Payments 1,100,803,205.73 1,008,475,518.67 Project Stocks 476,582,038.35 742,091,239,63 Less: Capitali2ed during the Year 27,199,543,987.07) 77,894,911,510.79 5,673,255,813.13) 80,56U40.134- 1 Less: Provision for Obsolescence (287,,911,650.21) (287,911.650.2 1) Total 77,606,999,$M53 80,272,328,483,95 1 9 1 y Nepal E y hority (Incorporated tinder tonti u Act, 2041) Schedules formi a/o,th A cial statements For the yhar ende shad 32 2075) (Figures in Rupees) Ashad 32, 2075 Ashad 31, 2074 Schedule 3: Investments Shares in Unlisted Companies - () Nepal Engineering Consultancy Services Pvt. Ltd. 2,277,000.00 2,277,000.00 (ii) Khumbu Bijuliec Co. Pvt. Ltd. 20,649,000.00 20,649,000.00 p (iii) Salleri Chyalsa Hydro Electric Co. Ltd. 29,006,000.00 29,006,000.00 (iv) Upper Tamakoshi Hydro Power Ltd (NEA's Subsidiary) 4,341,900,000.00 4,341,900,000.00 (v) Nepal Hydro Lab Pvt. Ltd- 1,000,000,00 1,000,000.00 m vi) Power Transmission Company Nepal Ltd. 200,000.000.00 200,000,000.00 vii) Sanjen Hydro Power Company Ltd, 378,143,000.00 378,143,000.00 viii) Rashuwagadhi Hydro Power Company Limited 1,231,578,000.00 1,231,578,000.00 ix) Trishuli Jal Bidhyut Co. Limited 440,000,000.00 284,993,542.51 x) Middle Bhotekoshi Hydropower Co. Limited 600,000,00000 600,000,000.00 xi) Tanahun Hydropower Limited (NEA's Subsidiary) 1,710,000,000.00 1,340,000,000.00 xii) Cross Boarder Power Transmission Co. Limited 78,206,336.04 78,206,336.04 xiii) Electricity Generation Co, Ltd. 330,000,0000 190,000,000.00 - xiv) Betan Karnali Sanchayakarta HEP Co. Ltd. 70,000,000.00 20,000,000. 00 xv) NEA Engineering Co. Ltd. 5l.000,000.00 7650.000 00 m xvi) Nepal Power Trading Co. Ltd. 7,650,000.00 7,650.000 00 xvii) Tamor Power Co. Ltd. I1,000,000.00 xviii) Andhikhola Power Co. Ltd. 1 1,000,000.00 - xix) Tamakoshi Jalvidyut Co. Ltd. I 1,000,000.00 xx) Dudhkoshi Jalvidy(t Co. Ltd. 11,000.000.00 xxi) Modi Jalvidyut Co. Ltd. I1,000,000.00 xxii) Uttarganga Power Co. Ltd. 11,000,000.00 xxiii) National Transmission Grid Co. Ltd. 20,000,000.00 xxiv) Tower Taila Pole Utpadan Co. Ltd. 11,000,000.00 xxv) Raghuganga Hydropower Co. Ltd. 244,000,000.00 xxvi) Upper Arun Hydro Electric Co. Ltd. I1,000,000,00 Share in Listed Companies (i) Chilime Hydropower Company Ltd (NEA's Subsidiary) 489,600,000.00 489,600,000.00 (ii) RUtwalD Power Company Ltd. 16,010,500.00 16,010,500.00 L Other Investment (i) Loan Investment in Upper Tamakoshi Hydropower Co. Ltd. 14,535,726,456.4 11 12,724,808,117.22 (ii) Loan Investment in Power Transmission Company Nepal Ltd, 56,962,367.89 873,818,836.21 L (iii) Loan Investment in Tanahu Hydropower Co. Ltd. 2,286,277,936.28 1,305,588,360.46 (iv) Deposits in Citizen Investment Trust for Gratuity and Pension 1,805,838,15807 1,694,764,026.58 (vi Retirement Fund 10.000,000.00 10,000,000.00 Sub-otal 29,943.824,754.69 25,847,642,719.02 LessL Provision for Diminution in the Value of Shares (29 2 0 (2,277,000.00) Total 29,941,547,754.69 25,845,365,719 .02 I__ 11Nepal n ority (Incorporated uidr 4, i thori ty Act 2041) Schedules forni cial staterints For thie year ende shad 32, 2075) (Figures in Rupees) Ashad 32, 2075 Ashnd 3c1,2074 $vhedule 4: Inventories Stores, Spres and Consunables 7,875,092,321.35 4,549,362,495.69 Less: Provision for Loss and Obsolescence (331,375,894.55) (331,375,89455) u Total 7,543,716,426.80 4,217,986,601.14 Schedule 5: Trade Receivables Sundry Debtors - Unsecured 15.294,234,832.57 I 3,423,657,928.30 Rechargeable Works 819,752,390.56 729,201,522.65 Total 16,113,987,223.13 14,152,859,450.95 Less: Provision for Doubtful Debts (567,000,000.00) (567,000,000.00) Total 15,546,987,223.13 13,585,859,450.95 .mei s pa thority (Incorporated under Iec Authority Act, 2041) Schedules formi A%ktL.vf 5i IiQ ancial statements For the year ende t170 fr2 IS (Ashad 32, 2075) (Figures in Rupees) Ashad 32, 2075 Ashad 31, 2074 Schedule 6- Cash and Cash Equivalents Cash/cheques in Hand 428,831.58 2,447,59360 Cash-in-Transit 262,423,736.92 601,374,047.89 Cash at Bank Current Accounts 9,332,656,550,10 8,308,282,054.06 U FD/Call Deposit Account 24,934,509,053.83 34,267,165,603.93 15,947,078,865.04 24,255,360,919.10 Sub -Total 34,530,018,172.43 24,859,182,560.59 Less: Provision for Loss in Lieu of Shortage (35,390,454.00) (35,390,454.00) Total 34,494,627,718.43 24,823,792,10659 Uj Schedule 7: Prepaid, Advances, Loans and Deposits Loans and Advances Staff Loans 1,195,144,320.4 I 690,514,402.95 Advance to Staffs 42,971,213.54 1,238,115,533.95 53,619.116.72 744,133,519.67 Trade/ Security Deposits 651,602,315.79 285,283,02639 Advance to Suppliers and Others 1,984,810,946.48 2,524,611,224,66 Advance Income Tax 1,909,202,522.25 1,611,357,141.47 Interest Accrued 72,894,969.38 82,067,572.23 Claims Recoverable From Nepal Govt. 344,526,158.18 279,652,394.00 From Others 281, 27,393.41 625,653,551.59 265,914,266.37 545,566,660.37 Interest Accrued Index Loan 60,000,000.00 171,485,850.03 Sub -Total 6,542,279,839.44 5,964,504,995.22 Less: Provision for Doubtful Advances (88,652,569.30) (8,652,569.30) Total 6,453,627,270.14 5,875,852,425.92 Nepal El r hority (Incorporated under d ' ZIÉikN hority Act, 204 1) Schedules formin mm.r f - a cial statements For the year cade 6201 A ad 32, 2075) (Figures in Rupees) Ashad 32 2075 Ashad 31 2074 Sc hedule 8: Share Capital Authorized (1,250,000,000 Ordinary Shares) 125,000,000,000.00 125,000,000,000106 u Issued nd pgid ap Opening Paid-up Capial 37,364,905,655,71 37,364,905,655.1 Addition during the Vear 65,072,722,381.94 L Total 102,437,628,037,65 37,364,905,655.71 Sub -Total 102,437,628,037.65 37,364,905,655.71 I Sare Allotient Suspense Balance as at Ist Shrawan, 2074 45,046,346,630.74 21,162,949,523,70 L eAddition during the Year 20,026,375,75120 23,883,397,10704 Less: -Trans,fer ta lssued & Paid Up Share Capital (65,072,722,381.94) (Refier Note2I l0) f Sub -To2.t 45,046,346,630,74 Total 102,437,628,037.65 82,411,252,286.45 Schedule 9: Reserve and Accumulatod Pröfits UReserv es Capital reserve Consumer Contribution 1,288,0 17,875.59 1,181,562,252.88 Capital Gain 159,222,592.80 1,447,240,468,39 159,222,592.80 1,340,784,845,68 General Reserve 97,471,457.21 97,471,457,21 Insurance Fund 400,000,000.00 380,000,000.00 Corporate Social Respontsibility Fund 43,993,568.49 15,022,727.64 Sub-Total 1,988,705,494.09 1,833,279,030.53 Accumulaåted ProtlLoasss L Ralance as at Shrawan 1, 2074 28,168,124,521.86) (34,608,473,601L74) Adjustmerit For Change in Accounting Policy (266,626,977.19) (234,084,401,01) and Fundamental Errors Adjustiment as per FRP-Ii 5,207,183,445.00 Profiri(Loss) as Per IncoIe Statement 2,848,113,244.23 1,467,250,035.89 Sub-Total (25,586,638.254.82) (28,168.124,52186) Total (23,597,932,760.73) (26,334,845,491.33) i Nepal E uthority (Incorporated under Elq r Authority Act, 2041) Schedules forming financial statements For the year ended July 16, 2018 (Ashad 32, 2075) (Figures in Rupees' Schedule 10 Borrowings Ashad 32, 2075 Ashad 31, 2074 Non- Current Long- term Borrowings under the Subsidiary Loan Agreement with Government of Nepal Asian Development Bank 25,321,801,213.79 19,673, 17,806.67 Kfw German Loan 437,780,337.29 29,607,751.50 L Nepal Government Loan - Local Source 50,272,351,893.13 47,672,709,218.97 World Bank Multilateral 2,429,861,609.68 2,918,307,249.57 IDA 16,206,014,253.19 15,907,219,986.94 JBIC - Japan Loan 12,232,104,512,78 11,969,397,808.06 Nordic Development Fund Loan 809,930,559.29 862,690,544 96 OPEC Loan 460,370,725.14 460,370,725.14 Exim Banks Li Korean Government 3,592,533,125.40 3,589,528,034.36 China Government 5,668,270,741. 14 5,557,727,285.96 Indian Government 2,830,128,816.70 2,041,010,085.59 Total 120,261,147,787.53 110,681,686,497.71 IA Nepal El ty Authority (Incorporated under city Authority Act, 2041) Schedules formi eft financial statements For the year ende AT 018 (Ashad 32, 2075) (Figures in Rupees) Ashad 32, 2075 Ashad 31, 2074 Schedule 11: Sundry Creditors and Other Payables Creditors for Power Purchase 4,014,032,898.17 3,598,548,644.24 U Deposit from Customers 1,610,325,637.48 1,213,461,133.97 Other Deposits 4,585,806,996.33 3,616,800,166.55 U Creditors for Goods 588,888,221.49 403,351,026.66 Other Creditors 869,459,347.92 790,013,777.45 Interest During Construction Period 8,305,119,282.86 6,197,338,463.59 Liabilities to Employees 143,098,524.86 114,804,870.96 Audit Fee Payable 3,850,001.50 4,682,437.50 Property Tax Payable 63,440,052.00 62,473,884.56 Royalty Payable 1,093,586.11 Interest Payable to Government of Nepal 37,392,652,343.57 37,381,585,833.86 Inter Unit Transactions (791,115,455.04) (739,382,270.35) Li Provision for Employees Bonus 87,987,136.97 30,045,455.27 Other Payables 1,958,635,479.97 1,411,556,472.30 Ll Total 58,833,274,054.19 54,085,279,896.56 Schedule 12: Provisions Gratuity 158,892,466.35 127,085,684.45 Pension 21,995,584,307.00 19,917,805,307.00 Medical 1,939,205,794.00 1,701,813,794.00 - Accumulative Leave 1,851,051,650.00 1,679,100.650.00 Total 25,944,734,217.35 23,425,805,435.45 WI /12 All/ Nepal E Authority (Incorporated under R ty Authority Act, 2041) LM Schedules forming p e financial statements For the year ended July 16, 2018 (Ashad 32, 2075) C (Figures in Rupees) This Year Previous Year L Schedule 13: Sales Revenue Revenue From Sale of Electricity Domestic 22,867,621,782.65 20,320,637,235.92 aw Non- Domestic 1,418,598,666.63 654,528,138.30 Commercial 5,883,476,145.91 5,114,292,687.15 Non-commercial 2,593,741,528.59 2,478,239,477.95 L Entertainment Business 49,798,873.18 16,964,029.41 Industrial 20,896,550,416.35 16,964,523,127.42 Temples 51,104,328,61 39,101,072.57 Street Lights 702,350,322.53 665,621,367.05 Water Supply & Irrigation 865,439,253.07 727,507,827.54 Transport 37,602,943.35 43,873,142.38 Temporary Supply 61,478,949.28 53,270,452.89 Exports to India 29,073,087.62 45,742,451.94 Community 716,260,028.95 630,652,449.15 Gross Revenue 56,173,096,326.72 47,754,953,459.67 R94 U Nepal El ' thority (Incorporated under N tr uthority Act, 2041) Schedules forming p i ancial statements For the year ended July 16 -18 (Ashad 32, 2075) (Figures in Rupees) IJ This Year Previous Year Schedule 14: Cost of Sales A Generation I Staff Cost 649,735,478.35 647,889,580.55 Staff Welfare 24,235,129.33 23,641,530.57 Terminal Benefits 121,154,441.69 117,436,237.49 Fuel - Generation 5,179,705.63 13,359,600.41 Mobil-Generation 4,561,533.61 3,002,354.02 Spare Parts- Operations 167,479,488.52 92,099,785.17 Loose Tools 1,059,727.70 612,146,68 Water & Electricity 3,978,819.43 6,244,765 73 Consultancy Expenses 944,921.80 2,836,970.00 Other Services 42,086,520.61 35102.944.45 Repairs & Maintenance 568,033,896.58 445.011.111.57 Vehicle Expenses 52,881,795.36 44.577.579.82 Administrative Expenses 37,191,967.06 32,125.054.75 Sub - Total 1,678,523,425.67 1,463,939,661.21 B Power Purchase Independent Power Producers (From Nepal) 14,270,136,216.55 12,280,906,752.36 Import from India 19,860,599,499.47 16,051,931,171.26 Sub- Total 34,130,735,716.02 28,332,837,923.62 C Royalty to Government of Nepal 1,428,788,882.83 967,372,429.48 D Transmission Staff Cost 483,451,765.18 445,484,312.47 Staff Welfare 13,865,672.61 17,096,744.65 Terminal Benefits 50,914,831.67 48,102,158.47 Stores & Services 30,294,865.31 24,600,236.19 Repairs & Maintenance 219,813,439.63 202,820,465.26 Vehicle Expenses 21,390,603.65 18,691,179.84 Administrative Expenses 27,855,262.08 48,614,176.48 Sub - Total 847,586,440.13 805,409,273.36 E Transmission Service Charges 1,035,502,892.46 1,017,413,933.91 Total (A+B+C+D+E) 39,121,137,357.11 32,586,973,221.58 1171# Nepal A y Authority (Incorporated unde TNpiEJc ity Authority Act, 2041) Schedules formin -'rs e financial statements For the year ended July 16, 2018 (Ashad 32, 2075) (Figures in Rupees) This Year Previous Year Schedule 15: Other Income Sale of Electricity Goods 166,336,114.09 121,789,174.81 Surcharge for Delayed Payment 1,675,144,271.58 1,276,052,917.40 Penalty on Power Purchase 285,090,039.30 151,905,435 65 Income from Lease Rent 7,501,278.20 6,628,827.55 Interest Income 3,220,729,184.37 2,273,990,580.43 Dividend Income 209,278,107.52 162,278,834.92 Income from Other Services 233,780,687.07 183,610,867.69 Miscellaneous Income 817,657,004.97 731,077,723.12 Total 6,615,516,687.10 4,907,334,361.57 Schedule 16 : Distribution Expenses Staff Cost 3,966,288,563.45 3,548,397.646.21 Staff Welfare 165,799,766.57 147,1 8 1,489.54 I Terminal Benefits 755,253,789.51 709,419,988.14 Stores & Services 331,891,746.74 317,056,103.53 Repairs & Maintenance 1,58 1,778,290.22 1,587,721,465.67 Vehicle Expenses 331,694,104.42 278,285,525.02 Administrative Expenses 512,318,226.88 453,516,138.77 Total 7,645,024,487.79 7,041,578,356.88 I Schedule 17 - General Administrative Expenses A. Engineering Staff Cost 150,815,624.41 139,003,678.42 Staff Welfare 7,442,821.30 7,191,707.00 Terminal Benefits 19,392,566.89 16,363,017.84 Stores & Services 6,780,031.00 6,392,207.72 Repairs & Maintenance 40,422,712.14 32,591,846.12 Vehicle Expenses 10,134,888.33 10,240,942.56 Administrative Expenses 13,474,471.03 13,292,844.04 Sub- Total 248,463,115.10 225,076,243.70 Ii Nepal vide. uthority (Incorporated under 4 F Authority Act, 2041) Schedules forming Ci e financial statements For the year ended July 16, 2018 (Ashad 32, 2075) (Figures in Rupees) This Year Previous Year B. Training Center Staff Cost 15,523,694.44 15,494,680.76 Staff Welfare 595,629.00 709,040.50 Terminal Benefits 1,272,976.92 1,353,982.32 Stores & Services 3,322,363.91 2,558,566.67 Repairs & Maintenance 5,936,658.44 6,128,833.16 Vehicle Expenses 2,351,307.60 2,383,940.31 Administrative Expenses 251563,173.16 13,951,176.66 Sub- Total 54,565,803.47 42,580,220.38 C. Project Management Staff Cost 19,799,825.87 1 1,190.647.19 Staff Welfare 820,396.00 502.451.00 Terminal Benefits 1,875,518.94 1.219.251 .26 Stores & Services 562,555.20 481.795,43 Repairs & Maintenance 9,360.00 152,955.77 Vehicle Expenses 1,638,940.72 1,135,354.62 Administrative Expenses 2,003,754.89 1,708,054.34 Sub- Total 26,710,351.62 16,390,509.61 r AlB Nepal it uthority (Incorporated under Ele ty Authority Act, 2041) Schedules forming partiot he financial statements For the year ended July 16, 2018 (Ashad 32, 2075) (Figures in Rupees) This Year Previous Year D. General Administrative Expenses Salaries, Wages, Insurance and Other Employee Costs 1,262,381,546.63 1,000,253,116.10 Contribution to Provident Fund, Gratuity Fund/Leave 36,313,864.30 36,271,846.60 Plant Repair & Maintenance 17,049,695.64 11,248,262.52 - Rent 1,053,172.00 1,187,268.58 Travelling Expenses 36,404,763,91 40,795,716.85 - Vehicle Repair and Maintenance 28,054,018.56 24,687,122.24 Hospitality & Public Relation Expenses 9,041,388.03 6,916,334.38 Statutory Audit Fees 2,090,500.00 2,398,424.50 Tax Audit Fees 1,356,000.00 904,000.00 Audit Expenses 3,065,539.05 1,523,354.91 Legal Fee and Expenses 3,426,271.91 4,681,173.76 Board Meeting Allowance 1,401,630.00 1,203,950.00 Rates and Taxes (Postage,Telegram,Telephone) 4,344,404.63 4,369,230.15 Bank Charges 60,849,738.62 58,865,230.79 Examination Expenses 44,326,053.00 29,788,264.98 License Fees 5,744,887.66 4,493,330.80 Consultancy Expenses 5,812,114.40 2,595,945,00 Printing & Stationeries 6,914,800.38 6,321,054.98 Advertisement 1,442,407.00 1,345,565.09 Training 13,276,361.92 23,867,094.07 Charity and Donation 14,975.00 Books & Periodicals 1,698,06316 1,409,515.30 Property Tax 109,965.50 177,372.97 Income Tax 79,417,845.04 Organizational Development 9,363,872.34 4,074,03 .24 g Stores & Supplies 17,973,661.55 16,073,627.07 Staff Loan & Property, Plant & Equipment Written Off 30,662,23 1.60 2,739,824.46 Obsolete/Loss Stock Written Off 444,933 - 444,93358 Miscellaneous Expenses 29,625,626.52 28,887,038,44 Sub- Total 1,713,215,398.35 1,317,522,629.36 Total (A+ +D) 2,042,954,668.54 6 0 rF NEPAL ELEC I e UTHORITY Fiscal Year 5 7/2018) Significant Accounting Policies and Explanatory Notes For the year ended Ashad 32, 2075 (July 16, 2018) 1 Constitution and Ownership Nepal Electricity Authority ('NEA') was incorporated on Bhadra 1, 2042 (16 August, 1985) under the Nepal Electricity Authority Act, 1984, through the merger of the Department of Electricity of Ministry of Water Resources, Nepal Electricity Corporation and related Development Boards. The merger was necessitated to remedy the inherent weaknesses associated with these fragmented electricity organizations with overlapping and duplication of works, and became necessary to achieve efficiency and reliable service. The principal objectives of NEA include generation, transmission and distribution of adequate, reliable and affordable electric power by planning, constructing, operating such facilities in Nepal's power system both interconnected and isolated. 2 Significant Accounting Policies 2.1 Basis of preparation of Financial Statements a. The Financial Statements have been prepared in accordance with Nepal Accounting Standards (NAS) and Generally Accepted Accounting Principles (GAAP) and practices following historical cost conventions. These NAS, GAAP and practices are substantially in line with the principles set out in NFRS, Convergence of NFRS is in progress. The preparation of financial statements requires NEA's management to make estimates and assumptions that affect the reported balance of assets and liabilities, revenues and expenses and disclosures relating to the contingent liabilities. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable and management is aware that future results could differ from these estimates. Any revision to accounting estimates is recognised -- prospectively in the current and future periods. Examples of such estimates include provision for employee benefits, net realisable value of inventory, diminution in value of long-term investments and non-recoverability of receivable balances etc. b. The figures for the previous year are rearranged and reclassified wherever necessary for the purpose of comparison. c. Appropriate disclosures are made for the effect of any change in accounting policy, accounting estimate and adjustment of error, d. The financial statements are prepared, generally, on accrual basis. However, some income and expenses are accounted on a cash basis, for practical reasons. Management believes that the impact of recognising those revenues on cash basis will not be materially different from the current practice. e. Management has applied estimation while preparing and presenting financial statements, Such specific estimates are disclosed in individual section wherever they have been applied. f The NEA's management has made an assessment of NEA's ability to continue as a going concern and is satisfied that NEA has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt upon the NEA's ability to continue as a going concern. Page 1 of 15 li / Notes 2074/'75 (2017/18) 2.2 Functional and Presentation Currenc 5 Items included in the financial statements of the Authority are measured and presented using the currency of tihe primary economic environment in which the Authority operates (the functional currency), which is the Nepalese Rupees (indicated as Rs. in short). 2.3 Property, Plant and Equipment Property, Plant and Equipment are stated at cost of acquisition andlor cost of construction less accumulated depreciation. The cost of property, plant and Equipment include cost of acquisition or construction/erection together with other incidental costs and charges attributable to bringing the asset to its working condition for its Intended use. Borrowing costs are capitalized as part of the asset's cost, if they are incurred directly in connection with the acquisition or production of a 'Qualified Assets'. What characterises a qualified asset is that a considerable period of time is required to prepare it for use or sale. Write-downs are made for impairment, if any, in the value of such Property, plant and Equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use, 2.4 Depreciation/Amortisation Depreciation is provided on property, plant and equipment, except land, on straight-line method. based on the estimated useful lives of those assets. The rates of depreciation applied on property, plant and Equipment arc as follows: Assets Category Depreciation Rate (er annuml- (a) Land I____________ (b) Buildings _ 2% (c) Hydro Electric Structures 2%-3% (d) ydro Electric Plant & Machinery 3 X -- (e) Internal Combustion on plant & machinery 5% (f) Transmission lines (66 KV, 132 KV and above) 3% g) Transmission lines (33 KV) 3% (h) Transmission Substations 3% (i) Distribution system (including belowl 1 KV Transmission 3%a% lines) Solar Power% (k Meter & metering uIment10% (1) Consumer Services an) Public itn mL) _ 3% (n) Vehicles, tools and instruments, furniture and fixtures. 20% (P) {Miscellaneous properties t (5dditio0%s duonf tpe pear Carrying amount of property, plant and equipment is kept at minimum value of I Rupee and is not depreciated I further. 2.5 Capital Work in Progress (CWIP) All expenditures in developing property, plant and equipment not yet completed or not ready to use are categorised as CWIP. The value of capital works-in-progress includes stock of equipment lying in store or in transit for the purpose of use in the construction or development. It also incl udes the balances with contractors and suppliers for the value yet to be received. These are capitalized upon commissioning or identified as being ready to use. Provisions a made for impairment and obsolescence, if any, in the value of such C P. Page 2 of I5 rf Notes 2074/75 (2017/18) 2.6 Investments in Shares All investments in the form of shares and long-feWm loans are carried at cost. Provision for diminution in the values are made for impairment, if any, in the value of such investments. Bonus shares issued by investee companies have not been accounted in books. However, total number of bonus shares received have been disclosed with initial investment. 2.7 Inventories a. Inventories include goods in hand being held for use, sale or as spares. b. Inventories are valued at lower of cost or net realisable value, using the weighted average method. c. Net realizable value is the sale price as estimated by the management in the ordinary course of business, less estimated costs, if any, necessary to make the sale. Further, provision for losses and obsolescence are made for those inventories identified by management as obsolete or otherwise. - 2.8 Trade Receivables Trade receivable are stated at carrying values except forthose identified by the management as being doubtful on recovery. Such estimations for doubtful recovery are reviewed by the management regularly. Provisions for doubtful debts are made for doubtful trade receivables, if any, in the value of such receivables. 2.9 Cash and Cash equivalents Cash and cash equivalents are carried at cost. They include cash-in-hand, cash-in-transit (bank transfers and cheques in collection which are collected in the subsequent period), and short- term deposits with banks in the various forms of deposit accounts which may or may not bear interest, but which arc not of the nature of - investments. Provision for loss in lieu of shortage of cash and cash equivalents are made for, if any, in the value of such cash and cash equivalents. - 2.10 Share Capital Share capital amount received in the form of cash and cash equivalent from Government of Nepal are accounted as and when received. Such amount includes initial contribution made by Government of Nepal. Eligible amounts are capitalised as share capital such as interest during construction period, grant amount received from Government ofNepal and on behalf of Government of'Nepal as per the decision ofGovernment of Nepal (Council of Ministers). Amount reflected under share allotment suspense has been transferred to Issued and Paid up share capital, 2.11 Reserves Non-revenue nature incomes are presented under reserves and surplus which includes capital reserve, general reserve, insurance fund, corporate social responsibility fund and accumulated profit or losses balance. Assets created by utilizing consumer contribution are recognised at gross value corresponding amount is recognised as consumer contribution as reserve. 2.12 Corporate Social Responsibility Fund Corporate Social Responsibility Fund is created by setting aside one percent of net profits as per the provision of Industrial Enterprises Act. 2.13 Insurance Fund Insurance fund is created by setting aside a sum of Rs. 20 million every year, in case of profit for the year, to cover any loss of prope , plant and equipment, for any eventuality. Page 3 of 15 Notes 2074/75 (2017/18) 2.14 Provision for Employees" Bonus Provision for employees' bonus is made at the Tate of 2% of net profits as per the provision of Electricity Regulations, 2050. 2.15 Borrowings Borrowings that are due after 12 months from the date of the financial position are classified as non-current liabilities and those less than 12 months are classified as current liabilities. 2.16 Foreign Currency Loans Liabilities on foreign currency loans at the year-end are converted into Nepali Rupees by applying prevailing year-end exchange rate. The gain /losses arising there from such transactions are recognised in Statement of Profit or Loss. 2.17 Sundry Creditors and Other Payables Liabilities for creditors and other payables are carried at cost which is the fair value of the consideration to be paid in the future for the goods/services received, whether or not billed to the NEA. 2.18 Provisions Provisions are recognised when the NEA 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 the reliable estimate of the amount can be made. Recognition of Provisions involves substantial degree of estimation in measurement. Provisions are reviewed at each statement of financial position date and are adjusted to reflect the current best estimate. 2.19 Employee Benefits a. Employee benefits, other than retirement benefits, are accounted for in the period during which the services have been rendered on accrual basis. b. For Retirement Benefits Plans * Defined Contribution Plans (such as Provident Fund, Retirement Fund and Insurance Schemes) expenses are charged to income statement on the basis of the liability recognised for the period. * Defined Benefit Plans (such as Gratuity, Pension, Leave Encashment and Medical Benefits) expenses are charged to the income statement on the basis of actuarial valuation/management estimation, 2.20 Grant-in-Aid and Contribution from Customer/Local Authority Grants-in-Aid received from the GoN or other agencies towards capital expenditure as well as consumers' contribution to capital work are treated initially as Capital Reserve and subsequently adjusted as income in the same proportion as depreciation is charged on such assets. 2.21 Contingent Assets and Liabilities Contingent assets and liabilities are disclosed in respect of possible present obligations that have arose from past events but their existence can only be confirmed on occurrence or non-occurrence of one or more uncertain future events not wholly within the control of NEA and possibility of outflow of resources is not determinable 2.22 Revenue from Sale of Electricity Revenue from sale of electricity is recognised at the time of raising bills to the customers as per the billing le. Revenue from the billing cycle date up to Ashad End (Mid-July) has been recognised on stimated Rc%fnue from sale electicity is shown at gross amount. -2b 1, t2Yt M pv N Page 4 of 154TI /,I QFx / Notes 2074/75 (2017/18) 2.23 Rebate NEA allows rebate in order to motivate consumers to pay their electricity bi Is earlier than given credit period and accounted for on cash basis. 2.24 Other Income a. Interest on loan investments and rental income are recognised on accrual basis. b. Dividend on investment in shares is recognized when right to receive has been established. c. Revenue from other services, including services provided by Engineering Services, is recognised on cash basis. d. Penalty chargeable on late commercial operation date (COD) under power purchase agreement (PPA) are accounted for on cash basis. e. Surcharge on delayed payment etc. are accounted for on cash basis. 2.25 Cost of Sales Cost of Sales includes cost of generation, power purchase, royalties to Government of Nepal, transmission and transmission service charges. Cost of generation includes cost directly attributable to generation of Ij electricity of NEA's power plants. Power purchase cost comprises power purchase from independent power producers and power imports. Royalties to Government of Nepal accounted as per the provisions of Electric ity Act and Regulations. Transmission and transmission service charge involves cost that are directly attributable to transmission of power within NEA transmission networks and transmission service charges for cross boarder power transmission. t 1 2.26 Distribution Expenses Distribution expenses includes cost that are directly attributable to distribution of power & expenses relating consumer services and expenses of community rural electrification expenses. Distribution expenses includes maintenance of low voltage transmission lines and system operation costs also. 2.27 Taxes a. Current tax Current Tax is determined as the amount of tax payable in respect of taxable income for the year considering the applicable provisions of Income Tax Act. b. Deferred tax Deferred tax is recognised on temporary difference, being the difference between tax base of assets and liability and carrying amount thereto. Where there is carry forward losses, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. 2.28 Finance Costs Finance costs includes borrowing cost and other interest expenses & charges on borrowings. Borrowing costs that are directly attributable to the construction of a qualifying asset are included in the cost of that asset. Other interest & charges on borrowing are treated as an expense in the period in which it occurs. .29 Foreign Currency Transactions The transactions in foreign currency are recognised at the prevailing rate on transaction date. The balances of monetary assets and liabili s in foreign currencies are translated at closing rate. The resulting gain or loss due to the translation is tak7 Sta ment of Profit or Loss. ? PagSof 15 e / Notes 2074/75 (2017/18) 3. Explanatory Notes to Accounts 3.1 Property, Plant & Equipment (PPE) During the FY 2074/75, Capital projects work in progress Rs 27,199.54 million was transferred to property, plant & equipment based upon the certificate of completion issued by the concerned projects and budget centres. The balance represents the value of the capital works in progress, not yet completed or yet to be transferred to Property, Plant & Equipment. NEA has [eased out some isolated small hydro power units to outside parties, which have been recorded under property, plant and equipment. The carrying amount of item of property, plant and equipment is derecognised from PPE upon disposal of such assets. Lands are also recorded at tie financial statement without having title deeds of such land transferred in the name of NEA. Some title deeds of land property, which had not been in NEA's name, were taken during the year and recorded accordingly Management is in the process of implementing the detailed system for asset management including identification of impairment of PPE. However, as an interim measure, based on the information available, management had in the previous period(s) written down PPE by Rs. 479.02 million as impairment provision. This represents the value of assets lost/destroyed/damaged completely or partially and whose economic value has therefore reduced. No additional write down has been recognised in the current reporting period. 3.2 Capital Work in Progress Management had in the previous period(s) provided Rs. 287.91 million in the value of CWIP for possible impairment due to obsolescence or otherwise. No additional write down has been recognised in the current reporting period. 3.3 Share Investments Details of NEA's investments in share capital as at the end of FY 2074/75 are listed below: Particulars No. of Shares Proportion of Rs. in Million Ownership 0I "4 I!_-- Current Previous Current Previous Year Year Year Year Subsidiaryg________________ Ch i i-me 20,222,077 (Including 15,326,077 Tydropower Bonus shares) Equity Shares of Rs 1 Company Ltd. 100 each fully paid up Market price 51.00% 51.00% 489,60 489,60 Rs. 790 per share Upper Tamakoshi 43,419,000 equity shares of Rs 100 each 5467/ 54,67% 4,341.90 4,341 M Hydro Power Limited fully paid up $4 67% 56% 310 44_ Tanahun Hydro 17.100,000 equity shares @ Rs, 100 100% 100/ 1,710.00 1,340.00 Power Lunited each NEA Engineering 510,000 equity shares @ Rs. 100 Co. Ltd. each 51% 51% 51 765 Nepal Power 76,500 equity shares ® Rs. 100 each Tradin Co. Ltd. 51% 51% 7.65 7.65 Tamor Power 110,000 equity shares@l00 each Company Ltd.100% - 11.00 Andhikhola Power I 10,000 equity shares@l 00 each Co. Ltd. 100% 11.00 Tamakoshi 110,000 equity shares@l00 each , Jalvidyut Co. Ltd. 100% 11.00 Dudhkoshi 110,000 equity shares® 100 each Jalvidyut Co. Ltd. 100% - 11.00 r Q~vAl T ~ Page 6ofl 15~ Notes 2074/75 (2017/18) NortifularreNo.7of Sha Proportion of Rs. in Million Ownership Current Previous Current Previous ____ ____Year Year Year Year Modi Jalvidyut Co. 110,000 equity shares@l00 each Y00% Y 11.00 Ltd. 100% I I.00 Uttarganga Power I 10,000 equity shares@ 100 each 100% 11.00 - Co. Ltd. Tower Tatha Pole 110,000 equity shares@l00 each 100% 1100 Utpadan Co. Ltd. _0% - _._ Raghuganga 24,400,000 equity shares@100 each Hydropower Co. 100% - 244.00 Ltd. Upper Arun Hydro 110,000 equity shares@100 each 00% 11.00 Electric Co. Ltd. 100% - 11.00 Associates Sanjen Hydro 3,781,430 equity shares of Rs 100 T Power Company each fully paid up 10% 10% 378.14 37814 Ltd. Salleri Chyalsa 28,756 Pref. shares of Rs 1,000 each Electricity Co. Ltd. and 25,000 equity shares of Rs 10 25% 25% 29.01 29.01 each GMR Upper 405,000 equity shares @ Rs. 100 Karnali each issued free of cost Hydropower (Rs. 10 paid up value each share) 27% 27% - Limited (Refer Note: 1 below) Rashuwagadhi 12,315,780 equity shares @ Rs. 100 Hydro Power Co. each 18% 18% 1,231.58 1,231.58 Ltd. Middle Bliotekooshi 6,000,000 equity shares @ Rs. 100 Hydro Power Co. each 10% 10% 600.00 600.00 Limited. Trishuli Jal Bidhyut 440,000 equity shares @ Rs. 100 Company Limited. each 50% 56.22% 440-00 284,99 Power Transmission 2,250,000 (including 250,000 Bonus Company Nepal Ltd. Share) equity shares of Rs 100 each fully 50% 50% 200.00 200,00 - ________ ____ aid up_____ Others aid up Khumbu Bijuli Co. 2,064,900 equity shares of Rs 10 Pvt. Ltd. each fully ad15% 20.65 20.65 Nepal Engineering 24,993 equity shares of Rs 100 each Consultancy P. Ltd. fully paid up - - 2.28 2.28 (Refer Note2 _2)_ _ Nepal Hydro Lab. 10,000 equity shares of Rs 100 fully Pvit. Ltd. paid 10% 0% 1.00 .00 Butwal Power 210,348 equity shares (including Company Ltd. 50,243 bonus and 71,486 right 1% 1% 16.0 16.01 shares) of Rs 100 each fully paid up (Market price Rs. 457 per share) Cross Boarder 7,820,634 equity shares @ Rs. 10 Power Transmission each 10% 10% 78.21 78.21 Co. Limited Electricity 3,300,000 equity shares @ Rs. 100 Generation Co. Ltd. each 10% 10% 330.00 90.00 Page oFl5S Notes 2074/75 (2017/18) Particulars No. of Shares W Proportion of Rs. in Million Ownership Current Previous Current Previous Year Year Year Year Betan Karnali 700,000 equity shares @ Rs. 100 Sanchayakarta HE? each 10% 10% 70.00 20.00 Co. Ltd. _ _ _ _ _ __ _ _ _ _ _ National 200,000 equity shares® 100 each Transmission Grid 48% - 20.00 - L Cgo. Ltd _ E Note: I Pursuant to Memorandum of Understanding (MoU) between Government of Nepal and GMR, 405,000 equity shares of Rs.100/- each(27% of the total share capital) has been allotted to NEA as L free equity. Note: 2 As on the date of the financial position, Nepal Engineering Consultancy Pvt. Ltd. is under liquidation. Therefore, management has provided for the diminution in the value of investment made to nil value. 3.4 Investment in Loan NEA has maintained significant amount of loan investment in Upper Tamakoshi Hydropower Company Limited, Power Transmission Company Nepal Ltd and Tanahu Hydropower Co Ltd. At the end of FY 2074/75, total loan investment balance in such companies stands Rs. 17,778.97 million. 3.5 Inventory Since NRV of most of the inventories are above the cost, the value of inventories is measured at cost. Management has provided Rs. 331,38 million up to FY 2074/75 towards the possibility of reduction in Net Realisable value of the inventory due to obsolescence or otherwise. 3.6 Trade Receivables Receivables shown under the heading sundry debtors are subject to reconciliation andlor confirmation, In some collection centres, reconciliation of control accounts balances and customer accounts balances are under progress. The billing, collection and maintenance of consumers' accounts are being maintained in M-power software system. Street light dues from various Municipalities and Village Municipalities amounting to Rs. 4,451.41 million is yet to be received. As on the reporting date, management has estimated Rs. 567 Million to be doubtful of recovery and the Trade Receivables have been written down by the same amount. No additional provisions have been estimated by the management in the current reporting period. Claims recoverable include Rs. 344.38 mil ion from Government of Nepal which is subject to confirmation. The recoverable represents rate concessions and other subsidies provided to consumers on behalf of Government of Nepal. J 3.7 Cash in Transit Cash in transit at the year-end stands at Rs 262.42 million (previous year Rs. 601.37 million) is yet to be settled. "3.8 Sare Allotment Suspense The cumulative amount of Rs 65,072.72 Million of Share capital received from Government of Nepal under budgetary provision was initially shown under share allotment suspense account ha been trans red to Issued & Paid up share c I as at Ashad end 2075. Page o 15 Notes 2074/75 (2017/18) 3.9 Borrowings The borrowings held under non-current liabilities are unsecured and are under subsidiary loan agreement with Government of Nepal, 3.10 NEA Financial Restructuring Proposal (FRP- II) Council of ministers, GoN, via its cabinet decision (cabinet meeting no. 11/074) dated 2074/02/09 had endorsed the New Financial Restructuring Proposal of NEA. Major decisions included increasing authorized share capital to Rs. 125 billion from Rs. 50 billion, converting foreign grants into share capital, reversal of I Interest Payable during the construction period into share capital for loan received from GoN, converting the power import cost payable to GoN from Tanakpur point into share capital, reducing interest rate from 8% to 5% for GoN funded loans and allowing NEA to reverse share capital into operating income which was g previously reimbursed for loss on import of power from India. Accordingly, necessary accounting adjustments was made in the books of accounts in fiscal year 2073.74 3.11 Power Import Losses NEA has made request to GoN, as per Rastriya Urja Sankat Nibaran Tatha Bidyut Bikas Karya Yojana, 2072. for reimbursement of power import losses from India amounting to Rs. 1,596.70 million for the FY 2072/73 and Rs. 1,667.06 million for the FY 2073/74 which under consideration of CGoN. On receipt of such amount, the accumulated loss will reduce by Rs. 3,263,76 million. 3.12 Deferred Taxes NEA had provided for Deferred Tax Liability of Rs. 693.20 million in the year 2065/66 which is being carried forward since. Furthermore NEA has been carrying forward unused tax losses that can be set off against future profit (if any) for which NEA will have to recognise deferred tax assets in the current financial year. Considering tle trend of taxable losses that NEA has been bearing year on and year on, it is not probable that future taxable profit will be available against which unused tax losses can be utilised. Therefore no deferred tax income has been recognised for the period. 3.13 Index Loan to community Danish government had invested for rural electrification at Kailaili and Kanchanpur districts in the last few years. After completion of the project, assets created were transferred to the local community through NEA. As per the agreement with GoN, the cost of the project should be recovered from the community by making an index loan. Accordingly, Consumers shall have to pay instalment along with their monthly electricity bill. The recoverable amount of index loan from the community as of 32/03/2075 is as under: (Rs. in Million) Community under NEA Distribution Centre Amount Mahendra 42 Ti kapur 25.82 Dhangadhi 11.76 Total 60.00 3.14 Inter Unit Account Inter unit transactions (IUT) represents Rs. 56,532.14 million debit and Rs. 55,741.02 million credit outstanding as at the date of financial position leaving a net debit balance of Rs. 791.12 million (previous year net credit Rs. 739.38 million) 3.15 Employee Benefits In respect of the employees' retirement benefits, NEA is liable to pay two types of benefits namely deflued contribution plan in the for of Employees' Provident Fund (EPF), insurance and defined beiefitsAlal in the form of pension, gratuity aumul ed leave eneashment and medical expenses scheme. ) . Page4f 15 Notes 2074/75(2017/18) L Defined Contribution Plan The expense during the year pertaining to Provident und, Retirement Fund (employer's contribution) and insurance schemes amounted to Rs. 802.96 million, Retirement Benefits Plan Fund NEA has established retirement benefits fund to the employees who appointed on or after 2063 Shrawan I (17"'July, 2006) under defined contribution plan scheme. This fund has been approved by the Inland Revenue Department. A sum of Rs. 10 million has been deposited to setup the fund as NEA's investment as per the requirement of prevailing Income Tax Act. Defined Benefit Plan NEA has made actuarial valuation up to the fiscal year 2070/71 for all defined benefit plans. Current year's entire liabilities of Rs. 2,518.93 million have been provided in the statement of profit & loss based on the management estimates. The movement of Defined Benefit Plan Liabilities during the Financial Year 2074/75 is as under: -s r s-- ----(Rs. in M illion) Benefit Plan Descri tion Pension Gratuitv Leave Medical Total 0Oenin Liabilities 19,97.81 127.09 1,679.10 1.70181 23,425.81 Addition fortheYear 2,077.78 31.81 171.95 237.39 2,518.93 L lsing Liabilities 21,995.58 158.89 1,851.05 1,939.21 ___ 25,944.74 An amount of Rs. 1,805.84 million has been deposited with CIT as benefit plan assets. The description of L which is under: Defined Benefit Plan Assets (Rs. in Million) Opening Assets 1,694.76 [Addiion d uri ng the year:! Investment _________Returns_____ 111.08 Paymens during the year.00 Closing Assets 1,805.84 3.16 Contingent liabilities Claims against NEA not acknowledged as debt NE s75Mudwari & Joh Udr High Court, NEA Company Pvt I td Patan NEA Rs 7,31 Mudwari & Joshi Under High Court, ly~C icRs3] 1 m d t Ltd Patan Prolectan II 4doeet s38 0Sno Hydro C-or paranIon Under Supreme Court -NEA Rs 342.68 Global Construction Under Arbitrationl NEA 220 KV Transmission USD 1,46 fO MTl t ni line Pro'ect, Makwan ur Under Supreme Court age 10 of 15 vs-#, ' otes 2074/75 (2017/18) Name of the Project Amount (mid filed by Status NEA RS 635.81 Dupcheshwor Under Arbitration I lydropower Pvt Ltd Total Rs 1,311.41 USD 1.46 3.17 Tax Assessment During the year current tax expense is nil due to taxable loss. NBA has filed income tax return under self- assessment procedure up to Income year 2073/074. The Tax assessment up to Income Year 2070/71 has been completed by Large Tax Payers Office but is pending finalisation due to appeals. The status is as follows: Particulars Income Year Status Remarks Carry forward loss allowed R5, 1,645 Under Administrative 061/62 Not Concluded million instead of Rs 5,247 million and Review TDS disp ute Rs. 716 milion, Carry Forward loss allowed Rs. 1,109 million instead of Rs. 4,640 million and Revenue Tribunal has TDS dispute Rs. 761 million Pending Revised 062/63 finalised the appeal but Assessment by LTO revised assessment by Tax Authority still not completed. ,Carry forward loss allowed Rs. 1,909 Revenue Tribunal has instead of Ks. 2,167 million and TDS Pending Revised 063/64 finalised the appeal but dispute Rs. 927 million Assessment by LTO revised assessment by Tax Atithority still not comnpeted. Carry forward loss allowed Rs. 1,692 Under Administrative mil ion instead of Rs 2,167 million. . 064/65 Not Concluded. Review Reassessment issued 065/66 Concluded Carry forward loss allowed Rs. 5,046 million instead of Rs. 5,417 million. Under administrative 066/67 Review Pending Carry forward loss allowed Rs, 5,699 review million instead of Rs. 5,992 million. Under administrative 067/68 Review Pending Carry forward loss allowed Rs. 5,030 review million instead of Rs. 5,369 million, Under adm nistrative Total carry forward losses allowed review 068/69 Review Pending Rs.10,562 million instead of Rs. 38,034 million. Under administratve Total carry forward losses allowed revie n s069/70 Review Pending Rs.12,493.70 million instead of Rs. ________________ 34,77' 18 mnillion. r P~c-1V---1 ~Page4u 15 V 'IQI Notes 2074/75 (2017/18) Particulars Income Year atus Remarks Under administrative Total carry forward losses allowed review 070/71 Review Pending Rs.1 5,076. 18 million instead of Rs. 51,526,27 million. Self-assessment return 071/72 to filed 73/74 Assessmen Pending Large Taxpayer Ofice, Lalitpur Note: In addition to deposits for filing appeal, reviews etc., NEA has deposited Rs. 1,909.20 million as advance income tax which is yet to he settled. 3.18 Rebate During the year, NEA has provided Rs.814.88 Million worth of rebate to consumers. Rebate of 2% on bill amount is provided and accounted for on cash basis. 3.19 Prior Period Adjustment During the year a total of Rs 266.63 million has been recognised as prior period expenses by giving equity treatment (previous year Rs. 234.08 million as prior period expenses) due to errors and/or omission in preparation of financial statements on account of various income/expenses as stated under: Amount (Rs.) Particulars 2074/75 2073/74 Salaries & Wages 21,109,326.3 52,100,283.19 Administrative Expenses 45,100,310.62 43,039,808.86 Interest & Other Income Adjustments 95,158,999.88 130,334,756.05 Excess/Short Booking of Revenue (66,420,475.00) (38,025,576-82) Prior Year Excess Expense Written Back (237,254,665.19) Repairs & Maintenance 15,213,607.96 4,427,99043 Depreciation 97,863 24 2,639,585.25 Stores 85,779,3 78.47 Other Expenses 307,842,630.91 39,567,554 05 Fl:_________ 266,626,977.19 234,084,401.01 - 3.20 Related Party Disclosures Following is the list of the related partiesas identified in accordance with Provisions of the Nepal Accounting Standard- 24 on Related Party Disclosures; A. Subsidiaries, Associates etc., Name of the related Party Amount (Rs Nature of Relationship during the year Million) Chilime Hydropower Power purchase 1,131.02 Subsidiary (NEA holds 5 1% of equity mpany Ltd. share Capital) Pac of1 _Notes 2074/75 (2017/18) Name of the related Party Nature of TransactV A during the year 8tn Trishuli Jal Bidyut Co. Equity contribution 155.01 Subsidiary (INEA holds 50% of paid up Lt. share capital) Upper Tamakoshi Hydro Loan provided with Subsidiary (NEA holds 54.67% of Power Ltd. Interest Capitalization 1810.92 upshared cap ital) la Power Transmission Loan provided 83.14 Joint vcnture company (NEA hol ds Company Nepal Ltd. 50% of equity) Tanahau Hydro Power Co. Equity Contribution 370.00 Ltd. Loan provided with 370.6 ly Owned interest capitalization 9 80 .6 9 Electricity Generation Co. Subsidiary (NEA holds 10 % of paid up Ltd. Equity contribution 140.00 share capital) Betan karnal Ika Subsidiary (NEA holds 10 %/ of paid up Sanchayakarta HEP Co. Equity contribution 50.00 sary (NEA h 0 p Ltd. share capital) NEA Engineering Co. Ltd. Equity contribution 43.35 Subsidiary (NEA hods 5] %oofpaid up Tamor Power Co. Ltd. | Equity contribution I 00 Fully Owned Andhikhola Power Co. Ltd& Equity contribution I 00G Full Owned anhkohilavioyur Co. Equity contribution 1.00 FolIly Owned Ltd. Tamakoshi Jalvidyut Co. Ltd. Equity contribution 1 00 Fully Owned I- Dudhikoshi Jalvidyut Co. Ltd. Equity contribution I I .00 Fully Owned Modi Jalvidyut Co. Ltd. Equity contribution I1.00 Fully Owned Uttarganga Power Co. Ltd. Equity contribution 11.00 Fully Owned Tower Tatha Pole Utpadan Equit contribution 11.00 FullI Owned Co. [Ltd. Raguganga Hydropower Equ ity contribution 244.00 Fully Owned EletArun ydro Equity contribution 11.00 Fully Owned National Transmission Equity contribution 2000 Associates Grid Co. Ltd. Page 13 of 15 L JNotes 2074/75 (2017/18) B. Key Management Personnelle 7 Name 1)esilunation Mr. Barsha Man Pun 'Ananta' Chairman, Board of Directors Mr. Dinesh Kumar Ghimire Member, Board of Directors Mr. Lal Shanker Ghimire Member, Board of Directors Mr. Umesh Prasad Thani Member, Board of Directors Mr. Bhakta Bahadur Pun Member, Board of Directors Mr. Chet Raj Joshi Member, Board of Directors Mr. Vishow Prakash Gautam Member, Board of Directors Managing Director and Member Secretary, Board of Mr. Kul Man GhisingDirectors Mr. Sunil Kumar Dhungel Deputy Managing Director, Generation Directorate . aDeputy Managing Director, Planning, Monitoring & IT Mr. Jagedish war Man SinghDieort Directorate Deputy Managing Director, NEA Enginieering Mr. Hitendra Dev ShakyaCopn Company Mr. Lekha Nath Koirala Deputy Managing Director, Finance Directorate Ms. Shanti Laxmi Shakya Deputy Managing Director, Administration Directorate Deputy Managing Director, Distribution & Consumer Mr. Hara Raj Neupane Services Directorate Officiating Deputy Managing Director, NEA Mr. Om Prakash Rathi Mr.__Om_Prakash_Rathi_Subsidiaries Company Monitoring Directorate Officiating Deputy Managing Director, Transmission Mr. Braj Bhusan ChaudharyDietre Directorate Officiating Deputy Managing Director, Project Management Directorate 3.21 Quantitative Details The quantitative details of electricity generation, purchase, sales, losses etc. are as follows: Particulars FY 2074/75 FI 273/74 NEA Generation (GWh) 2,308.24 2.305.45 IPP (G-h) 2,167.76 1,777.24 Import (GWh) 2,581.80 2,175.04 Available Energy (GWh)707.36273 7,057.93 6,257.73 Sales (GWh) 5,560.24 4,776.53 Adjustment for Sales/Utilization (GWh) 54.35 48.19 Total Energy Utilized (GWh) 5,614.59 4,824.72 Loss (GWh) 1,443 5 1,433.01 Net System Los5eS (20.45% 22.90% 3,551,226 3,257,812 LNumber of Employees 9,123 8, 259 Pag ofI5 Notes 2074/75 (2017/18) 3.22 Subsequent Events Electricity Regulatory Commission Act and Regulation came into effect having powers of regulation of electricity generation, transmission, distribution and power trading. The proposed functions of the commission is to monitor and maintain the quality and security standards of the national grid system, formulate necessary policy and work plan for making generation, transmission, distribution and supply of electricity reliable and effective, to approve the grid codes, distribution codes and regulate the supply and demand. NEA board have been reformed during the year 2075.76 and the line Ministry of Energy has been restructured as Ministry of Energy, Water Resources and Irrigation. Accordingly, the Minister of Ministry of Energy, Water Resources and Irrigation has been chairing the NEA Board Meetings. Third Financial Restructuring Proposal of NEA has been submitted to Government of Nepal and which is under consideration of GoN. CA. m mar Kafle C . Gyanendra Bahadur Bhari CA. Anup Kumar Shrestha Mr. Iswar Nepal Joit Aud or Joint Auditor Joint Auditor Deputy Auditor General Office of the Auditor General Board of Directors Mr. Lekhanath Koirala Mr. Barsa"an Pun 'Ananta' Mr. Dinesh Kumar Ghimire M La nker Ghimire Deputy Managing Director Honourable Minister Secretary ec (Revenue) Finance Directorate Ministry of Energy, Water Ministry of Energy, Water Ministry of Finance Resource & Irrigation Resource & Irrigation Chairman Member Mr.Rajan Raj Bista Mr. mesh Prasad Thani Mr Bhakta Bahadur Pun Mr. Cliet aj Joshi Director Member Member Member Accounts Department Mr. Vs1ow Prakash Gautam Mr. Kul Man Ghising Member Managing Director Member Secretary Board of Directors Date: .2a ?- 12.- I2.. Place: Kathmandu Page 15 of 15