POWER SECTOR FINANCIAL RECOVERY PROGRAM IBRD LOAN NUMBER 8615-AM SPECIAL PURPOSE FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT For the year ended 31 December 2017 YEREVAN February 2018 POWER SECTOR FINANCIAL RECOVERY PROGRAM IBRD LOAN NUMBER 8615-AM TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND PRESENTATION OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS 3 INDEPENDENT AUDITOR'S REPORT 4-5 SPECIAL PURPOSE FINANCIAL STATEMENTS For the year ended 31 December 2017: Statement of program expenditures by implementing entities 6 Statement of funds received under categories 7 Statement of funds received under program activities 9 Summary of funds received under each DLI 11 Statement of Segregated Accounts 12 Notes to the special purpose financial statements 13 -5I STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND PRESENTATION OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS The Program is implemented through the Ministry of Energy Infrastructure and Natural Recourses of the Republic of Armenia ("MEINR") with the assistance of "Armenian Nuclear Power Plant" CJSC ("ANPP"), "Yerevan Thermal Power Centre" CJSC ("YTPC") and Public Services Regulator Commission of the Republic of Armenia ("PSRC"). The Program management is responsible for the preparation of the special purpose financial statements of "Power Sector Financial Recovery Program" (hereafter: the Program) financed by Loan Agreement IBRD Loan Number 8615-AM that present fairly the Program's expenditures by implementing entities, cash flows, Funds received, and movement of segregated accounts for the year ended 31 December 2017, in accordance with the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" (IPSAS-Cash Basis) issued by the International Public Sector Accounting Standards Board (IPSASB) within the International Federation of Accountants (IFAC) and the Financial Management Manual for World Bank Financed Investment Operations (WB Guidelines). In preparing the special purpose financial statements, the Program management is responsible for: * Properly selecting and applying accounting policies; * Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; * Providing additional required disclosures for the year ended 31 December 2017. Program management is also responsible for: * Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Program; * Maintaining adequate accounting records that are sufficient to show and explain the Program's transactions, and which enable them to ensure that the special purpose financial statements of the Program comply with IPSAS - Cash Basis and the WB Guidelines; * Taking such steps that are reasonably available to them to safeguard the assets of the Program and to affirm that funds received have been used in accordance with the Loan Agreement IBRD Loan Number 8615-AM signed on 12 May 2016, and World Bank related guidelines, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; and * Preventing and detecting fraud and other errors. The special purpose financial statements for the year ended 31 December 2017 were authorized for issue on 26 February 2018 by the rogram management. Boris lumyan Head of Financial Ec o E'ep ment of MEINIf, Sasur Khachatryan Movs an,n dederal Director @YeTPC Gener ^ reh:4 c A PF BDO INDEPENDENT AUDITOR'S REPORT To the Ministry of Energy Infrastructure and Natural Recourses of the Republic of Armenia ("MEINR") Opinion We have audited the special purpose financial statements of "Power Sector Financial Recovery Program" ("Program") financed by Loan Agreement IBRD Loan Number 8615-AM signed on 12 May 2016 ("Loan Agreement"), and implemented by MEINR, with the assistance of "Armenian Nuclear Power Plant" CJSC ("ANPP"), "Yerevan Thermal Power Centre" CJSC ("YTPC") and Public Services Regulator Commission of the Republic of Armenia ("PSRC"), which comprise the statement of program expenditures by implementing entities, statement of fund received under categories, statement of funds received under program activities, Summary of Funds received under each DLI, and the statement of segregated accounts for the year ended 31 December 2017, and notes to the special purpose financial statements, including a summary of significant accounting policies. In our opinion, 1. the accompanying financial statements present fairly, in all material respects, the cash flows for the year ended 31 December 2017 in accordance with International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting, (IPSAS-Cash Basis); 2. funds have been used in accordance with the conditions of the Loan Agreement concluded between the International Bank for Reconstruction and Development (IBRD) and the Republic of Armenia, and WB Guidelines, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; 3. supporting documents, records and accounts have been kept in respect of all Program ventures. Respective reports issued during the period were in agreement with the underlying books of account; 4. The Segregated accounts used has been maintained in accordance with the provision of the Loan Agreement, and World Bank related guidelines; Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as issued by International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Program, of the MEINR, of the ANPP, of the YTPC and of the PSRC in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical requirements in accordance with IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Management for the Financial Statements Management of the Program is responsible for the preparation and fair presentation of the special purpose financial statements in accordance with IPSAS-Cash Basis issued by the International Public Sector Accounting Standards Board (IPSASB) of the IFAC and Financial Management Manual for World Bank Financed Investment Operations ("WB Guidelines"), and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility for the Audit of the Special Purpose Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is high level of assurance, but is not a guaranty that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements arise from fraud and error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the special purpose financial statements, including the disclosures, and whether the special purpose financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. "BDO Armenia" CJSC 26 February 2018 Va n Sahakyan, FCCA Gnel Khachatryan, FCCA Managing Partner Engagement Partner BDO �` -� � � ,� �. � � �, � ду � k� `- � � � �� L�- О �6, • ё� О е ё О О � �� ь..л � � ы С О н� О� oN0 о0 �,i -�� s `� � � C � й �а ..� � ...:�° s ; 3� �.�р а � 1 ,� �' ё С,� , � � � L � � � � й � v� � r°. .. � ы�' viй м �мg� ё 7' W�� й Ч� � oNO � м 10 Н м С�7� д с. оо" ор �р ^� � м, гV С ° � ы � Сэ У 'z � ^ а ° w а � и R •, о tрΡ м°+ ао а+ � !с � � оr� � 01 [� Q h� Q+ 00 � � С LQ ..t�. ..ч �G И О� ьD 00 ¢' N vi й г� �о -r - о� � а� , ,,. � _ � � � a�i '''� йr' о°оой�й � � � '�R � s. ._ ы 00 00 оСг Й 7 00 t+ `� � � ёб � 0 Н М ....,..�-.. �.� й � _ ° �f �Е . � � с� д U ,а� . О �..,�` � � � г�'� О д С i , i�' С и!V'+ цГVУ '�,� �'г� !`" У. м гNл � � ы � Q ° � n� t�, r.� � с �- а °' � е е � Ci, � � г� �. _ ° :✓ к � � .� ы �, �а Ci G � у рр 'л у � а а ё ° � С � ы р � о w � Е С. л Е L о � . � � .~ а О � � '���. � �в а о � Е � к°; _ � а� ° �' _ � � � �+N� � �С7° � � G� Q � QEj а У�! � ��� о ° � � О+ (,� О ы t- с� � � д f1j � � ia L a�i ° ы=s � � U е- � @ .� ы у. л я.ы � � р„ N '�t °�° � О � �рΡрΡ Ё �• � � � Ё 7 ° � yF„ � _ � � С�] � О и -ч i° � ед � 3 с. Е � ' �. "� Е �а ;с ч '� ,� ' г+• � � ��fi � � � ��� ы 4» � а `:�чi �`►- � � L� а с и ° о е й'� .5 о� 5 .. � о � �а �.�, z О � � [ ё и U � о с т � �°°° � � � � G1 R +r l4 �6 �с� г� ы д ci �ci ° �. V ь_. sП О а�, � и R �'� '2 �� г� G Е сс ы s � � I� � � � ь,. J � Ф� С� � U а�''i '° � Е� v с � � � ;si о а а t о а. ,х а. с� _¢ � О х w w ы � v �_ 0 О� �`а� ё ° а � ° �дs а°0 и� Q � � ::, и t7 с�а F- � � � � 1 1 � � � � I I 1 /�в .� i1 1 1 I 1 . I n б о�о � � .+ 'г!' N .✓ � v ._. � tS =q з , а Е гл � U т 'i р i 1 1 1 � 1 1 1 1 1 � 1 1 � 1 1 1 1 1 1 1 r � � � у • а с qq С�О N qрΡ О О S b Ф рΡрΡ С О S О О СΡO С р СΡO м� � г� Q а0 •--� 4 д д С�гt И О И И О Т - С vl v'' G- а0 а N гN+1 N О С� � О��П � О Й ��'•и� � р� Й ONO �� оо о оо р t� гу р� м и о� м�л r� о N r� �D �о о� и�т д _� ric� �.: "= .�� пм �ч-° �м - s , « �м �й 7 Я Аа � i � 5� С С О О Q О i � � � i � � � � °0 S°о °а � й й � Ои й °- о о ��л а оо" -� о" оо" = ��� �� N �м��'ь �мй у .в rв - ri .--. �i а � 01 И Ч'S $ 00 N С О Q О о 4 4 О О О� "'. ОО О И е0 О Г�1 О � n и и.� иt �г'� СС и и И�О Q^ С �--� а�о � J gN � Oм00oooOt�N О;,мй О;,мйг�i�Оn�$�� о�,,,й� • ia S�+ N и м ri cv ., ., .-• .. •- е� м г- га ^- � м-- г� з , � �м 3 Gy й а О tV N � � � О О О С д � � � � � � � � � о v т GO S О О О ё_ Ооо DO дС ии ии �� N � N �С О и Ои0 4 V'i '? С И� �. у N!, �� 00 О h N С1 м�Г1 О^ г' � И а л cv v �а -� .: = -. - 0. а о а а �, L ьу. � � ы � о е с 'i. �g +.�+ � к. О О 0. а v Г � а, w .. .. F `_ � N-. � W С С � 4 ° у Е Е О ; д � у о � •� •= а � � , �� 'С Е а � W й �W т ы с' с, >' Ф Q w Ф са а s, � � е. 'й 'й Q � т 'аг�� т� д 6 О й о й й •� � � С1 СО 47 �•� r у'� � ь. С С С С G Q4 t�0 Ф � м � д � т U �" с П с с о о о _'д � R�1 р �i �`' U� � у д й й й [i Е � ��С у �, �' � ,.а � n с с .ё 'v vo и N о w о t_14 о V4 о UC- a,Uc г+Jс yUc OZ ���i � о >AдU,�..a�y0.z y4,Z G-°-CC�R-CGadac.� � С � г�с т `r �� � �..F-2 � � F-Z FZ F-z Fz 41 !0 С С1 И � W � 'с� � �С �^' Q � � � � � � � У• Q � ?� Q � �-' Q � У� Q .� � J Е т т с а� с б С G С а С oV, О О С О� цоЕ с' �� ь° F: .. ..Z ..Е. .. .. .. ат и�Q о и�?ut- :.. � �в ��- � :° � !，〕〕〔斗－ � � � � � � 1 .��j � i . i � � . � � � � � � � т .N. ... �, � W �� О ti µ as GGGф � , = й� � � > 1 1 1 1 1 1 1 � 1 1 1 1 1 � � i � � � � 1 � � т О� ZQ � б rJ а Ф О О аО � G О О G� YJ G�ООр �СΡ? ООООорΡ� ри"^� �н � ьм0 ^ � д N r��v +�i' � оьOа °�+ �7ab �} Oг��idOr�+t �N� W � е+ ь°` -г +, .: �о а` - а м гs - «.' .� .." .., - а , �м � � с ас _ а � СΡCO C СΡ СΡ O OСΡ OOСΡ � О С О О О О д 1 1 1 1 1 1 4 4 д С о д б С и� 5��...' ="' $ S `°=$�°^ °� G r оо оо аа га м к оо ро � е°� � n cv w е с� -- �т гv - г; г�, е V м гV '� -� - у � Q Sё5�`�S2S25 +�'r� - °�а„ S =о�о25 � �25Sо25Sй� � гч` га � _ vi а+ о+ ev гй а+ с �ё ������N� �������g��$���� У � [� �О � � т+ V � ^' 7 г"'i - �.j .+ - �.. - ..в - � . 'Э` - ' м 3 U 1в а � �����в$ , , . . , ,� � °sв�в°в°��.Q о6 o6 г� �i и и рΡ �с т �о �� о о �� адаQ� д� n n�i аоо � r�v-�N-nnм{,�v У V м пi �., г+ .--� а � v � и � � О � О у,•р � �- у 6= ¢' � 9 7 G1 � й � � га CS �_ __ с с и r � � ц С дС Е �'�+ � k� � � � nn � � � '� � ° СΡ� �уΡуΡ � д ы т � �% У�' V] L О% Я ь=в � �О_ � �3 � >" g 3 �, о у 'О N� �' 2 ' �° ° � � � � 3 ё � Q ы Е а ��. � а[�, � ы� �_ а 1 w � и } � t р � т ♦� т= �.� �м � С лr 00 С 16 �р ы� � а� и � и ь' И ,. � �V Q.7 � г у ь� � Q ZQ �p х 4 �� у м � о е � г л� � f:7 � � аУд С`�' С v О �°УΡ о � и� V �° � � L2в � ` С �: � р о � .. Ф � ° ° н f�.? С у С�О � ?�' 4' Z 3 4� а 4�° с 4' Z р�3 �� ё у� х °� � Z т ev � т и w°� е с� е .4 � е�� � е � Е� ь, '� � fП � а� 7, С М М х_ � � � Е � Q�' oG а . т� 6��i � b а y--Ej в Q � tt а � 4`о G � а т V] li Q д 4 +Я Ci С7 А �i , � , ,� _ ,а ао � Ф � .�. � � � � о .. .-. .. ; �; < б у м ' � U > ы � о о о Е � � � � � � � � ��У �:, �, � . ,I: О � О1 О� д1 ` �'} � '� аб ,., ,.. � �. ,#� >,у.� � � .� � S�� �' �� � ;� � ,. �З 1... .,. '�,� и и III , � $N��� � д � � F �С м vs и �* .� -�м = �� Йм-=�О�О � ,��'3F � [�Ч±N 00 00 С _ �' V1 Й N � Сз рΡ=м S V е s Р, � � � � N N N � v ё � ° о Ф ^ � � Гм�, N Й � д' "" С а� "'i iG ' С сн.. о с ы СΡpи и rr е� � ës С�м ий и с� .�З � О [� и N И`.М 1� . л �.... � >^� �� �а �� ❑ Е �� � - 9 ���" а' � - � � � , �� - .. � ., � _ и � �. 'w �j � � � т а и •v а � � � �� �� �Д � � ё оо °° � °° г� � � ьо �О 1� � �� � � � �_ tt е е � �г. +.., С D .о i4 а`�i •�i = 4- а� ы � ы 'а ._ «. � � и о � а Е � а � °д � о � О.1� a�i о. � ё � � �N� . с � с а� со `� о а�� � �� 'fl �� U о �а _ �и � � '� � � � �,,_� � N` С м L t�1 С и iЪ� `�" .� Ф и ° � д �., С д � Ф О `о � ���., � � �+ О � � LL Е д 't7 �С ,уΡ ь. 7 4+ С И �д ' :: z! ёб О � Q о г � � � аа. °° U .� �i � С � с�С � W � � � G � � � Q � О О V1 }+ ь. _ ..rR� � _ N у� ё о� = g� " � aAi с т� ::� д » � � �� � с ts, а° а? й�i � а w с� Е" й С7 r`°i Ё- ���� � � � о�°?� � д 3 � i � `� � "рΡ�� ^� N О О � F И ����.,,а Е ���� � �, _.. м vr � ., b+ ''�� � о'nм� л b о � � � �: F � г +. r � а 1 �` .. С �"' � � Ф С v k. � � ' °� 'Су �г • м С Сьв ч рΡ О G 7' : г- r.+ О а� р,� .с�. «R � rh О� � � 5..� � л � # � � с н ev А� й д g г{ а N N '4� '� `�i' ,�r�.'� ш Е � �`а � �д,�, �� � �� � � '�'�� � °- � � а=��� � ��Е°��� н � � � � С� „_� с ��$ � � � � � � �•.А�е��`� �� � � д � � у� ода Wa ы � � •° д 8 `� о е7+. � •�•• � `� ч.. о о � � � с й � о � о о . � С ..7 � 7 � � ~ '� � C С � - � .__ , ��� а� о н , � ,, с q 6) � � д -'� � � о, о � �_� � � � � � р� о t� о� а ,ri �, О-.-,..�,: и � al LL � О ,w � 'и' С Sj' � г� ор � г О+ V1 С sб �� а�_а v� а •�, v 'V е а, � Гs] � 5� Q � �. �3ой �-V � й� дS � G С й �= � У � °L �' `� ,Q ...,� о о� q��j» й v � � С С' !� И аг �� � _ ¢ а, � � �, _�, 1 1 $ �_ Q S•ii п_ ы о У� b`о аа'.. й$ " � 3 aroi .a�i �.❑ г� д ¢� д _ И � W м � о = �С �. L •'Z� й п � � 'G "'� С4 и Q Q Q5� U ы �� о 2S. 2S. � ZS �5 E-r О � � $ � �- ., �о�=�, �Н _ � � � J � х Q � вw -� ы 1 1 1 1 � � 1i ^� Г � И_ _� � н ы ' г ыN� с_г�, i� $i °� " ,� Ф •О � �i7 � С� � � ~ � С � С Ф г0 � � � � �� аЁ° в д °RR° � $ •3 Ф Q у Ф� � �_� о о: ое у� � � •67 �� �О д 7,� о � й� =� Ф т � �.} � � � с ' бI � � � ❑ � � ,� � � н � � •� � [�t. � tr Q Q с. гч и , }, �ь с .� о � 3 � .а " _�. � � о � ё = Ф � � и n n са J i. oI! � � i? с Й � т о о л�' � � �' О С С. у �Z ^� гч и о о � а у;�д о !у й С ° `т ro с � � � � � ., д � 3 , c.�i ,°-' � с at � � � -i � ы �- � '�са с й!о �л� � � г�vг`'�чг`Oiг'°v L =о s ,�А :: �J я у� ,^ �=�N - � .tг О ФG �� О д .r е Г� � а 3 ;� а� N п О� � О � � а° � ¢Y�Q о � �А � `е� � �ps 4т г!�l1.� т С8а и�гь�vдF�Uм iи�7 сц(- Power Sector Financial Recovery Program IBRD Loan Number 8615-AM Statement of Segregated Accounts For the year ended 31 December 2017 (Amounts are shown In US dollars) Entity YTPC ANPP Segregated account (SA) bank number 900000902438 900000902453 Bank Central Treasury of the Republic of Armenia Bank location Meliq Adamyan Street 1, Yerevan, Republic of Armenia, 00 10 Account currency USD USD YTPC ANPP Total For the period from I Jan 2017 to 31 Dec 2017 USD USD USD 1. Opening balance as at I.Jan.2017 0.71 0.71 2. Add. opening discrepancy - - 3. WB advancetreplenishment 1,745,315.00 695,685.00 2,441,000.00 4. Less: Refund to WB from SA - 5. Present outstanding amount advanced to SA 1,745,315.00 695,685.71 2,441,000.71 6. SA closing balance as at 3 I.Dcc.2017 0.71 0.71 7. Add: Amount of eligible expenditures paid 1,745,315.00 695,685.00 2,441,000.00 8. Less. interest earned (if credited to SA) - 9. Total advance accounted for 1,745,315.00 695,685.71 2,441,000.71 10. Closing discrepancy (5)-(9) Boris hm ? io p ent Head of Financial Econo iq f ME[ ppfrn Sasun-K hachatryan es V ard General Director of YTPG t eral Diredld OAAPO 26 February 2018 The notes on pages 13-20 form an integral part of these special purpose finanA*,6*w00%, 12 Power Sector Financial Recovery Program IBRD Loan Number 8615-AM Notes to the special purpose financial statements For the year ended 31 December 2017 (Amounts are shown in US dollars) 1. General information 1.1. The Program The Power Sector Financial Recovery Program ("Program") is implemented in accordance with the Republic of Armenia Government resolution N 6 dated February 18, 2016. The Program objective is to maintain adequate and reliable electricity supply through improvement of the financial standing of the state-owned power generation companies and the private power distribution company. The Program carries out through the Ministry of Energy and Natural Resource of the Republic of Armenia (MENR), with the assistance of "Armenian Nuclear Power Plant" CJSC (ANPP), "Yerevan Thermal Power Centre" CJSC (YTPC) and Public Services Regulator Commission (PSRC). The total cost of the Program is assessed 43,224,690 United States dollars (USD), of which USD 30,000,000 million is financed under the Loan Agreement 8615-AM signed on May 12, 2016 between the Republic of Armenia and International Bank for Reconstruction and Development ("IBRD" or "WB"). The payment currency of IBRD Loan Number 8615-AM is United States dollars (USD). The Closing date of IBRD Loan Number 8615-AM is set 30 July 2021. The Grace Period for submitting withdrawal application for expenditures incurred before the Closing date is six months following the Closing date: 31 January 2022. 1.2. Subsidiary agreements According to the Loan Agreement, the ANPP receives 28.5% of the Loan proceeds and the YTPC receives 71.5% of the Loan proceeds subject to the achievement of the Disbursement Linked Results ("DLRs") and/or Disbursement Linked Indicators ("DLIs") set forth in the table IV.A.2. of Schedule 2 of the Loan Agreement and corresponding verification process. For this purpose a subsidiary agreements were concluded between the Ministry of Finance of the Republic of Armenia (MoF) and the ANPP, and the MoF and the YTPC both on 14 June 2016, according to which they will receive sub-loans in the amount of 8,550,000 USD and 21,450,000 USD, respectively, as the terms of the Loan agreements are achieved. 1.3. The Program objectives The Program consists of the following activities: A. Elimination of cash outflows of state-owned power companies for non-core business related reasons through: (i) establishment of a prohibition of non-core business related expenditures, lending, and borrowing for ANPP and YTPC; and (ii) liquidation of Haigasard state-owned CJSC. B. Reduction of expensive commercial loans and recovery of receivables through: (i) refinancing of the principal amounts of commercial loans of ANPP and YTPC listed in Supplemental Letter; and (ii) recovery of receivables of ANPP and YTPC for electricity supplied to Electric Networks of Armenia (ENA). C. Repayment of the payable of YTPC with Yerevan GGM branch of Gazprom Armenia CJSC under a contract referred to in Supplemental Letter No. 3. D. Modification of tariffs to fully reflect the cost of electricity supply through: (i) amendment of ENA's license to allow adjusting the tariff margin by the full size of loss (profit) incurred due to 13 Power Sector Financial Recovery Program IBRD Loan Number 8615-AM Notes to the special purpose financial statements For the year ended 31 December 2017 (Amounts are shown in US dollars) mismatch between actual and forecast cost of electricity purchased by ENA; and (ii) revision of tariff- setting methodology to allow adjusting the tariff by the full size of natural gas purchase related loss (profit) incurred due to fluctuation of AMD/US$ exchange rate. E. Maintenance of the generation capacity of the gas turbine at YTPC's Combined Cycle Gas Turbine plant (CCGT), through replacement of some components of the gas turbine. 1.4. The Program Budget The Program is financed by: * IBRD Loan Number 8615-AM * YTPC internally generated funds. IBRD Loan YTPC Number 8615- Category AM USD Total USD equivalent USD equivalent (1) DLI#l: Decision at shareholder meetings 2,832,000 - 2,832,000 (2) DLI#2: Liquidation of Haigasard 2,000,000 - 2,000,000 (3) DLI#3: No new non-core business expenditure of ANPP 2.500,000 - 2,500,000 (4) DLI#4: No new non-core business expenditure of YTPC 2,500,000 - 2,500,000 (5) DLI#5: Reduce of principal amount of loan of ANPP 4,260,000 - 4,260,000 (6) DLI#6: Reduce of principal amount of loan of YTPC 2.300,000 - 2,300,000 (7) DLI#7: Reduce of gas payable of YTPC 4,982,000 - 4,982,000 (8) DLI#8: ENAs tariff margin for each period 2.000,000 - 2.000,000 (9) DLI#9: Tariffs for YTPC and Hrazdan TPP 2,000,000 - 2,000,000 (10) DLI#10: Electricity supplied by YTPC is maintained 4.551,000 - 4,551,000 Renovation of gas-turbine of the YTPC - 13,224,690 13,224,690 Front-end fee 75,000 - 75,000 Total Total _30,000,000 13,224,690 43,224,690 1.5. Program Implementation The Program is implemented through the Ministry of Energy Infrastructure and Natural Recourses of the Republic of Armenia ("MEINR") with the assistance of "Armenian Nuclear Power Plant" CJSC ("ANPP"), "Yerevan Thermal Power Centre" CJSC ("YTPC") and Public Services Regulator Commission of the Republic of Armenia ("PSRC") (all together "Program management"). The MEINR address is: 2, Pavstos Buzand Street, Yerevan, Republic of Armenia, 0010; The YTPC address is: Building 3, Arin-Berd street 3, Yerevan, Republic of Armenia, 0053; The ANPP address is: Town Metsamor, Armavir marz, Republic of Armenia, 0910; The PSRC address is: Building 22, Saryan street, Yerevan, Republic of Armenia, 0002. 1-1 Power Sector Financial Recovery Program IBRD Loan Number 8615-AM Notes to the special purpose financial statements For the year ended 31 December 2017 (Amounts are shown in US dollars) 2. Summary of significant accounting policies 2.1. Preparation and presentation offinancial statements The special purpose financial statements are prepared in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting (IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards Board (IPSASB) within the International Federation of Accountants (IFAC), and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations (March 2010): RM 3 Financial Reporting and Auditing. The principal accounting policies applied in the preparation of these special purpose financial statements are set out below. These policies have been consistently applied to all the periods presented. 2.2 Cash basis of accounting Program financing is recognised as a source of Program funds when the cash is received, Program expenditures are recognised as a use of Program funds when the payments are made. 2.3 Reporting currency The reporting currency of these special purpose financial statements is United States dollars (USD). The cofinancing received and expenditures made in local currency, Armenian Drams (AMD), or Euro (EUR) are translated into USD based at the exchange rate prevailing at the date of the transaction as issued by the Central Bank of the Republic of Armenia ("CBRA"). However, for the purpose of presenting Statement of Program Expenditures by Implementing Entities, the exchange rate of non-USD expenditures are translated applying CBRA issued exchanged rates prevailing at the baseline year, 1 February 2016, as that exchange rate is applied to assess the compliance of results achieved, as measured to DLls (Note 1.2) that has results monetary thresholds determined in USD underlying currency. The exchange rate defined by the CBRA on USD/EUR rate on AMD is as follows: Date USD EUR I February 2016 489.16 531.03 31 December 2016 483.94 512.20 31 December 2017 484.10 580.10 Power Sector Financial Recovery Program IBRD Loan Number 8615-AM Notes to the special purpose financial statements For the year ended 31 December 2017 (Amounts are shown in US dollars) 3. Progress of Loan proceeds withdrawal Cumulative Cumulative Withdrawal total budget as at 31 Dec 2017 of the Project Execution Category USD USD % (1) DLI#1: Decision at shareholder meetings 2,832,000 2,832,000 100% (2) DLI#2: Liquidation of Haigasard 1,000,000 2,000,000 50% (3) DLI#3: No new non-core business expenditure of ANPP 1,900,000 2.500,000 76% (4) DLI#4: No new non-core business expenditure of YTPC 1,900,000 2,500,000 76% (5) DLI#5: Reduce of principal amount of loan ofANPP 4,259,595 4.260,000 100% (6) DLI#6: Reduce of principal amount of loan ofYTPC 2,300,000 2,300.000 100% (7) DLI#7: Reduce of gas payable of YTPC 4,982,000 4.982.000 100% (8) DLI#8: ENAs tariff margin for each period 1,400,000 2,000,000 70% (9) DLI#9: Tariffs for YTPC and Hrazdan TPP 1,400,000 2,000,000 70% (10) DLI#10: Electricity supplied by YTPC is maintained 1,721,000 4,551,000 38% Renovation of gas-turbine of the YTPC 5,253,557 13,224,690 40% Front-end fee 75,000 75,000 100% Total 29,023,152 43,224,690 67% 4. Financing 4.1. IBRD Loan Number 8615-AM Reporting Cumulative as year at 31 Dec 2017 USD USD DLI advance/ (advance recovery) (4,880,000.00) 2,340,000.00 DLI payment 7,321,000.00 23,694,595.49 Front-end fee - 75,000.00 Total 2,441,000.00 26,109,595.49 Total financing budget 30,000,000 Percentage of finance provided as at 31 Dec 2017 87% 4.2. YTPC co-financing Reporting Cumulative as year at 31 Dec 2017 USD USD In-cash 4,426,842 5,253,557 Total financing budget 13,224,690 Percentage of finance provided as at 31 Dec 2017 40% lI iЯ � Q 1 � р� 1 1 1 р Q 1 1 � р • , д ы° м о Sд$ о •vSig• о ,-GTgL л. т � � д оо о а� а� о� а� и � N .: .. r, г. ., � L Э д � оо" Ем Q U а � $� 5� Q ё а � о о 3 о о о $ S о о og' �а S ц� N О р О д С О О О Q Q О 4 G 4 О гh О б С] д О О b С д С О О О д �,,,, � 00 О И V1 д ST N N N 1Г� Q� N N N ц� О Q� N N^� N^� N � д ... Е F О ..а �д � о a�i�o e�in а4�,"оо �e,n е�iг� О W 6! � N� lц р N � N � N Q. �J о С �0 С fц � G h С[� q�� L. О� О� О Ф О Ф о� t, ь р� ы�D с� ьD и� ы� о.-. ь и �����N �- �q- v' 3 о3 о3 о 3 о 3 о • а � ° •°- Ф � .в .в � .д у � V •b 'О 'О 'Ci •Ci ` С д ны�_D ны�L7 цl_� ��b ��О а� и О ы О и О ы О ы О �дм Ery Ery Ery Ery Ery О. у ы �А ы N_ и N_ ы N_ ы N_ � о Е а Е•-+ Е� Е� Е� � Р'1 � М � f"У � Pi � !''1 С С О О •а � =' °: v � � м а � а � а�, е > `� cs h h h es т е гr � С � уу � н i: i» ь: н � i» r_ ы f/1 t/� уΡ уΡ уΡ уΡ{ b •и " 'О 61 Q� � 61 С! � 4l 61 � •V '9 и х'�., F G С С G С С Е 61 у ь. 'О у ..ы.. •с •а •а •а •д •а •д •7 � и с� а � � .D � � � � � � .� �� т О � Q О О О О О О О Е_ Е ы С tii U G V U U U U о � С С ьD С[� С 00 С 4� С вD С t� С о0 С О� у С..^. � О� О� о-� О•�-• О•-• о•-� О-� О-� С � С G С О С О С О С О С О С О С О , ^д �•О ы N N г N fЧ N N N N � v с ✓' � a3i �•• ь3i >• а� >- c3i >- е3т >•• а� >- c3i 7- v>- V•� д С.F а С и„ е г:, с ra. с ц, с cz с ri• с г.г. С ri С• а о ЕрΡ л� л�- л� л� л� л� л� л� Q � у,� ,р -рГ1' С1 С3 �"" G7 t"" G7 И"' C3 1"" 'Г�' с"' G7 t"" 'г�' 6"' г7 И" C иG д С Ч •С С.С с.С G.С G .С G•С G•С G•Е G cS и _ о •С � 'С � 'О т) � 'R � 'Я � '� � 'R � •b � и О С1 С� с=� С ы С и С и С ы С=� С :�в С OQ'� •и � йъ„ .у .п ы._ '� � ё� � и t s+ L`' и � е+ С и L`' ад � т� С� Z С�� Е � ai cCi •о й� й•о c�i •о с=i •о й� c�i •о й•о � 4�� � Е 'Е _. с с с с Е •С С с с С = с г.. ы и о g« _°д •_ г� � а•_ � ех • сс •_ г� • а � � и coi у L С� С о С° С о С о С ° с о С° С С с и W С с..» с.«. с.� С.� с.«. С.., �° и й ;� о о �v а ��3 � 3� 3Q� 3 � 3� 3Q� 3�•3Q О й � о с s�•а о°и ы г� г � s С г � г� s С r' t s С t� Q � �.� ы;:, С и г.д0 � 0. � а� а� С. � 6. д 0. � б. � 0. � �, = С � �`а �•� �? л�ы. 'h .� Z z z z F Е- Е- F = N и^ а F vs С �` х; Q� Q ё� v@ а ���- а У• й �•• v � гs н i. е.. е.. i. ы i � � С7 ro О � _ � N Q п ° •-: у C.j ы гл ~ � « � w N ~ г� � � � С� Я�� � +✓ �•�гч асч �c�i., «м°v м�ам°аг'��а ��� ��о�=а�� � М Е д ��t at и� и oat e�t Cat s� С о� С� _� _� = о � Q О QI � " 0.� .С R� � 0.� и СС '� L'L 1i � в: CL � в: С� �ц� �•�И у � D� С�с`�� а� д-� re-� x-i у;-� х�� к� к� xJ х� �� �n� £ 0 ❑_❑ о❑хи❑ ы❑ ыГ� ы❑ ыи© ыГ� ыС е,❑ ии •,� д tк. � •� т � Ф !� сИ С С' _ ° ё у �� 1L Е �� � � и � •° G � � � �з и�и � �с ,� 3� 3�. О Z т .1 и •� й '� ё х ё к ' 41 С $ Ф Ф � ,~,� ❑ Е .а •Z ы Z`л 01 l4 Ф И и л ь, � `� �Л р О л +.. �.., • • и СΡ] L -] й G1 � ,.а � о � � � •� д. � � д, �о �� о С � � о� a.cz А� � � � „R • ,.�а ..е� ат г�i� ui �� �т �� о W й о G � � д и с с �г, о с ^- с .. ,-. .-. .-. ._ _ а� о о с о о о о о о с о с о о " j� �и и о о и Ф о о о о о о о о о с о о ,,,,, � ы� �л с о а+ о о о о" о с о о о с о гч rv о�> r оо --• т и о о о о оо rv а о о о о оо s+o w, •,-, о � г � г� и оа о г►� r �о а� cv �а и - о^ С �= О - - - 'у' N - tГ 3 � N � � й д VA м с^ о о о О О о О с Ф о О о о О о о с я G Ф Ф о о О О О О О Ф о р О О О о О О!1] О О О Q О С7 о о О Ф о о О О О О О � �С � О О О О О О G О О О О О 4 Г1 N `' оо - tiD �D Ф О Ф Ф оо N о О О Ф о оо а0 °'п О � t± ri и оо О г� Г� - �D С� N 10 �О ^ С� s, _ � ^ 'а - гЧ � � и � о Е = а� � �� �� �о ё ° ,�� ,_�� _�� о � о � С � С С ,С � и р О � О у О и�' ai U U v.: -+ �.^. � ь о L�1 С7 о CS �' [°>>а 3о 3о 3о G_ с _ _- _ � '� CS CS Ci и ri Сд QI и С,! С'У r и и'� е и и �' С и и о[� � � о� сс �J р cs га cS и О и О � р '� � '� � � д О С� С� у С� С� у С� С� с ~ и R3 о а� Ф б] О v о у О у О д�С �N Ем � Ery Е1`! ау; �ri �rv, � и � а+ и g1 �о у w и v оо у ад и а� 1n о см С.о а,о и ао ао и а,о �,о д Е� Е�= Ео � �-� �о м �_ �о � � о � о о о о ra ri ri ri и ✓!] 0 .^.!1 г1 �1! G) а ^р �� Gi - - С_ . С_ . С_ С_ . С . С 'О � 'G м 'G 'fl � 'L7 М 'L3 �'с �`д � �-� у.� � � � С] О О L1 С1 ❑ = о�о �г- �о уо �r 5 5 5 5 5 i 5 5 огi ori оо оГi аГi оо Q � � С С < С G у N v И у N р� � С� 1` у N О О О О О О О О О о О О .�.+ - в�.+ .�+ } '..�'.. - н - '..�.. i' 'G 'О 'D 'О 'О У1 'О 'G '-- о'-- N 4- t� 4- о �- Ф'�- Ч. ¢� а, а, а, а� а а� а О О О С о о � и и � у и и у С С С > > п � � G .С G .С � .° � .° с .С с .с -rэ -а � -а b �с v •о � n' С ь' а i' 7 �' � i' 7 �' � � ь.у. ty. i � i � О С О С О С О 7 О С О С Е� Е� �� �� �� Е� v v й i й г� i i cso гsо �со ссо ho г�о � �° � � � � о о о о о о с3 О гS О ёа О r.f О с3 О rJ О С С С С С G С С Q'[`1 .Q'ОО .а0 а'О а'О .n'О О О Q О О О О О U t� U f�1 U N �U Q�V О U fV U [� и у U t� V U у� С- С о0 С и С о С V С V1 и и и и и_ и и и С •� N •а гv �� м �� = �0. - �Q м .� .� г s - .� � - �, уо у� у� у� у� у� У � � rи уи�и .rи �и�и �� �� �' v � °' ° ы �о �v � ,о �v � � � а оо ^с � 7о о � ,4: .D �.9 �.D � ,о �� � а � � Ф � Ф С.--, С.-. С.--, С.--, с.--, с гу т ry гч Са Со Со Со �о Со i � ryj � Cuj сид (yj � (yj ги3 r�yj ги3 V с'и3 у И у�Cj у Т`1 у[`1 у N у г1 у N у N � � с., ,а r.i ,а а., ,D С1 „�3 С1 ,� С) ,д о,д о,а N р�О ,А Г'�l ,р г! .р N,р N О Ф с� и и сэ и е� � r i � о �- rs о r- rr - r- rs - L � ь. � �� s� � L r L� L� i� - в. �.� i. _ i. ,� i. _ i. i. � в а •С г ��� i�>. � ��>� � С' С n См См С� С`� �м � м � � N--� .� р L А.С д t�_'д t д и и и иу и г3 и г3 и гJ и cJ и с7 и с� � � Ф� С. сС7 0. сСд 'С.. сС7 с rCS с с•С� � сСа U_ Dп с DO �� с `� с�� � с �" с' О С�•�� Z-° z-°z-° F-? F--° Е--° !-�F-� F-� F'� F'� F'O�°F-� �'7 � Q О � � ¢ � ¢ � Q � >- � >- � >- � У• _ >- _ � оо У• оо }• оо }• оо i• оо i• оо � ц� �. ci ц} � �L cv, 'i м '` � � '` гv, '` м '` � � � ni � м � � � �'ri � �д � r �_ оо й n � �� �л у_ +r, у ч- и `: �`:. и �. � 1� " г� ",1� г- , г� i� � г� � а�о � � .� С r>~ С д�С � сС, "' с � .- � .. � .. ` � о�о сС � х .д cL � гх .д гх � г� ,fl а, � .. ��j � ...] � о� о� а�� о� о� о ��о�о��д�-��д�-�-�оо � R С1 �� ❑ С] уС] у❑ vи� и� ыQ ииQ--Q....❑а�❑ооС]й❑й❑�Qг�гЛ С � �U lL � �ц, � -� � з гл с и �� �_ �� +о. г С� � � � � cG".. 'о � cU. .� о U � у fц fU а д Z � а h �� � � � и и о о�. � ,;; �, � �: �, � � я д J а � � � •� � � �ы ° � с ...._."_ О � О р � ,:а � � � � � б � =° F ат г�в д v�.� vww �w о о о о ..о7- � � о � � � � � ,д о ы и� g'о о о о°о а о еей opL„ �� о $ $ о $ $ n � �л в+ +� � н тв М �о н � лн о � и Q U � � м .р рΡрΡ орΡ qрΡ орΡ орΡ рΡq рΡрΡ орΡ о оo о рΡрΡ о о о о оO ы G О С О орΡ 4рΡ СрΡ С О С О С О О G О О О О S рΡ рΡ рΡ Q рΡ S � fV N N С Оо o�f N N N С � � � � �� л О р� � N N Q м О G а � р V1 ¢а? � � а•о � n тs .�i r и оо •� д � а � Q ��О ал г+ G С с рΡ С О �р{ц �pN Cpe.ov �N oN*р N {. t� и v�О V^ с.1 о л Q л� V� оi. о LO"07'" Гд� Гд^ т�ССN q и>а 3о3о 3о 3о 3о3о г � � о о гч и � о о � л л °м с л е � д д л л д ё� N °.3 �D � 1� v й т � r у а а a=i р a=i р � = С a=i о д ЕО Е<`! Ery � � � �сч aw иг� гr и ы �гч �� Q Ем ЕФ Ё £ � �м г и '� 'O '° о о о о `л � и � � � ¢ � л �� �� �'g� �� 3 3 3 3 � 4` � �� � �� �рΡ� �� в в � � � 0 р,п � .ё .� .ё «+ н ..+ �д t� о0 О� О N � уΡ уΡ уΡ q� � � � � � L1. F+� Р. Р. n г� т � ё7 N N N N N О� � � � � `D � � N � л � � � � � о а о о о о д� 3 л > g '- � � 3 3 3 3 3 а м м м м �� � � � G ы ё ё с ё х д д ._ .д � д д.п аи. ,$ а � а л о_ о о о_ с_ ь а ы ы rsi � t. ь г� •vvi •и •и •и� e�i о�. ди.� ди, о�,. с �� а а�. а а � .� .� .� ,� л л 'S � � и � Г � � д д ддл �, � а � .43 v � .: ё i Э =д � � � : "� а � � � � � � � � � � � � � � n. �. $. gi. Ф о°fl 'о 'v � � х е� и � � л гV ,гл и и и � L? � С а ё � '� � � � �^ � �д д е� а о о о о о О% •а� .: С •� '� ,С и L" CJ U U U 'О 'О � � '7 с. а. а. А. ,� �л пд е� .w оо ._ а. ._ � О ;� �. ё`'� � �� ��� �� r_�., оо а� о е, ^ с, о с� о а о а а д �О u.n Е Е � � •� � �о `4�о�о �N �N �N}, �N а'�'� г CN у 'у у и и и и у ь?�г?N ',�бN ``бN и� и� `^ „f�. и� '"� � и� U U� CJ С� U °g й �b w � ш ш ш ш � � �"'�"1F''s �м �_n'�.а' �,����9 � Q � v ^ _ iv м � +'гь • `° д д д . .д � ni � м � 3i �� т� оо �= оо оо оо оо й о� � г°�t, а+ дUG а� а о� � о: �.. о.� �.� �_ .� о.� о.� « � пс ._ д� �t х at а о^. л �W Q.�.c � х а гххх�� ��а��аа����5�������5�а Сд v� 3 R � Ё С О❑�П. йА �мRдАдС.с Од й 0 й � й С йG мА�ааi+лZ �уΡ�� �� у С и и г ;� с� т°'� ` � '= ° г � г ` �Q ,л а � t� С �[4 й �у С F�� 0 й и. ��+ т т v V1 О О 7+ � х�� б; V F � л� ы a�-f �� ° � Ё G �°' � а'�а G L р ° � д_5�.� "� 4� Z1iQ А х? й а,ох °-�' лiд - о ..шдs�^F 6. Program Expenditures in underlying currencies Program Expenditure Actual Reporting year ended Cumulative as at 31.12.2017 31.12.2017 ANPP Refinancing of commercial loans EUR 2,000,000.00 USD 6,354,000.00 YTPC Repayment or the payable for natural gas (the payable under the contract with Yerevan GGM of Gazprom Armenia CJSC for supply ofgas to generate po%%er for domestic needs) AMD 9,199,959,708.00 Overhaul orlhe as turbine L1 R 3,896,86:.00 LUR -.1,676,240 UU Refinancing ot'commercial loans USD 650,000.00 - L L- R 3,647,307.45 Program audits and IVA AMD 15.705,520 00 AMD 20,275.440 00 7. Use of Loan proceeds by YTPC and ANPP VTPC Total Nature of proceeds used -t- - -1 - I T ', 14PP 1. USD USD USD Use of 1, oan Proceeds Cumulative as at 01.01.2017 Payin.g for enS input supply 12,179,3 10 4,8 4,690 17,0341000 Rep jment of commercial loan balance 4,690,111 4,690,11 16,869,421 4,854,690 21.724,111 _pRr!ingyear ended 31.12.2017 + RF P iijLfqr ener 1,745,315 2,127,979 3873294 _L input suppI2 + 4- --- Maintenance and operai ion of Plant 4 - 168.963 1 368,963 1,745,315 2,496,942 4,242257 Cumulative as at 31.12.2017 + Pa ing for energy input suppl 13.924.625 6,982,669 20,907,294 Rej?avment of commercial loan balance 4,690,111 - 4,690,111 + Maintenance and operation of Plant - 4 368,963+ 368,963 18,614,736 7,351,632 25,966,368 Proceeds Received Cumu - lative as at 01.01.2017 16..869,421 6,724,175, 23,593,596 t 1,4411,000 Year ended 31.12.2017 1,745,315 695,685 4 18,614,736 7,419,860 26,034,596 Unused amount outstanding As at 01.01.2017 - 1,869,485 1,869,485 1 As at 31.12.2017 68,228 68,228 8. Event after reporting date After the reporting date, the following conformation of results achieved was approved b) the WB against the DLI Advance outstanding. %PP ILJ 11 1) Xd% DI (A&BUILL idation It.Lin it) SUPPILed b) DoWnlLntid rLLOVLr ) gasard N is maimained DLI Advance recove 6 Feb 2018 (500,000 500,000 - 500,000 DLI Advance recover 6 Feb 2018 1,630,000 1,630,000 1,630,000 'I'otal (2,130,000) 500,000 1,630,000 2,130,000 9. Litigations here are n,- pending litigations related to the Pro ram as at reportin date and as at a roval date of these financial statement, - 20