Chartered Accountants Report of the Independent Auditors To The Shareholders of Hydroelectricity Investment and Development Company Limited We have audited the Consolidated financial statements of Hydroelectricity Investment and Development Company Limited, which comprise the consolidated statements of financial position as at Ashad 32, 2075 [July 16, 2018], the Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement for the year ended on that date and a summary of significant accounting policies and other explanatory notes. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Nepal Financial Reporting Standards. These responsibilities includes: designing, implementing and maintaining internal control relevant to the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Nepal standards on Auditing. Those standards require that we comply with ethical requirements and plan aid perform the audit to obtain reasonable assurance about whether the consolidated 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 judgments, 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 consider the internal control relevant to the Bank'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 the expressing an opinion on the effectiveness of Bank's internal control. An audit also includes evaluating the appropriateness of the accounting polices used and the reasonableness of accounting estimates made by the 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 audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view, in all material respect of the consolidated financial position of Hydroelectricity Investment and Development Company Limited as at Asahd 32, 2075 (July 16. 2018) and of its consolidated financ:al performance, consolidated Sratement of Changes in Equity and its coinsolidated statement of Cash flows for the year then ended in accordance with Nepal Financial Reporting Standards and the Companies Act, 2063 Report on other legal and Regulatory Requirements On the basis of our examination, we would like to further report that: i. We have obtained all the information and explanations, which were considered necessary for the purpose for our audit, ii. Financial statements are in agreement with the books of account maintained by the Bank, iii. So far as it appears front our examination, books of accounts are properly maintained in accordance with the prevailing laws, iv. So far as it appears froni our examination, we have not come across cases where the Board of Directors or any member thereof or any representative or any office holder or any employee of the Bank has acted contrary to the provisions of law or caused loss or damage to the Bank, v. We have not come across any fraudulence itt the accounts, so far as it appeared from our examination of time book of accuniit. For N.A.R.S. Associates Chartered Accoiuntants CA.Rajan Adhikari Date : Poush 6, 2075 Partner Place . Kathmandu, Nepal do Head Office: Branch Office: Eanch Office: 3"' Floor, Pashupati Vision Plaza, Pinglasthan-8, Birendra Campus Road, Bharatpur- 10, Shivapath, Siddharthanagar-8 Gaushala, Kathmandu Chitwon (Near Kanchbi Bazar), Bha;rchiaw Tel: +977-1-4464127 Tel: +977-56-534080 Tel: +977-71-525584 E-mail: info@ncars.com.np I Web: wwwnars.comnp HIDCL Financial Statements 17-18 Hydroelectricity Investment and Development Company Limited Consolidated Statement of Profit or Loss For the year ended 16 July 2018 (2017-18) NRs. Restated Restated Restated Restated 2017-18 2016-17 201516 2017-18 2016-17 2015-16 Note HIOCI (Group) HIDCL Revenue Revenue from Contract with Customers 11.1 7,517,907 18,866,263 3,849,675 7,510,907 18,866,263 3,849,675 Finance income 11.2 1,311,019,891 794,714,568 510,998,903 1,300,957,288 782,522,148 507,714,492 Dividend Income 11.3 11,620,000 - - 11,620,000 - - Other income 11.4 92,979 25,775 23,700 2,489,694 145,775 143,700 Employee Benefits 9 (118,660,071) (75,171,561) (17,066,214) (117,570,119) (74,570,186) (16,319,169) Finance Costs 12 - - (36,208) - - (36,208) Operating and Administrative Expenses 13 (29,216,988) (18,677,490) (17,090,748) (23,292,452) (16,573,148) (15,239,893) Depreciation and Amortisation 14 (3,532,171) (3,668,703) (3,562,174) (3,111,759) (3,668,703) (3,562,174) Impairments 15 (6,226,836) (6,056,445) (1,569,869) (6,226,836) (6,056,445) (1,569,869) Share Issue Expenses - - - - Profit Before Tax 1,172,614,711 710,032,407 475,547,064 1,172,376,723 700,665,704 474,980,552 Income Taxes 5.2 (365,036,331) (212,090,442)1 (110,249,440) (364,276,108) (210,182,504) (110,249,440) Net Profit 807,578,380 497,935,965 365,297,624 808,100,615 490,483,200 364,731,112 Earning Per Share 16 Basic EPS 8.08 4.98 4.06 8.08 4.90 4.05 Diluted EPS 8,03 4.98 4.06 8.04 4.90 4.05 Ass ort of EvenNDate Charter d kPaudel mesh Paneru Mukti Bodh Neupane Chhabi aj Pokhrel j Adhikari Account Officer Senior Account Officer DGM-Finance Chief Executive Officer S. Associates 'Thartered Accountan Meg Baha.r Bishwakarma Parakram Sharma Raman Nepal Lila Devi Gadtaula Udaya apkota Dr. Sanjay Sharma Director Director Director Director irector Chairman Date 2075/09/06 Place Kathmandu,/, 2 HIDCL Financial Statements 17-18 Hydroelectricity Investment and Development Company Limited Consolidated Statement of Changes in Equity For the year ended 16 July 2018 (2017-18) NRs. Capital Retained General Loan Loss Deferred Sha Share Capia Capx Shrhode' I premium earnings Reserve Reserve Reserve Fund At 15 July 2015 (previously reported 8,000,000,000 - 435,510,385 308,996,416 - 475,281 8,744,982,082 Adjustments NFRS Adjustments (op adjustments) Restated 8,000,000,000 435,510,385 3 6475,281 8,744,982,082 Profit for the year and OCI (net of tax) - 365,297,624 - - 365,297,624 Share issue 2,000,000,000 (112,177,599) - - 1,887,822,401 NFRS Adjustments 2,740,990 - - 2,740,990 General Reserve Transfer (72,946,222) 72,946,222 - - - Deferred Tax Reserve 475,281 - - (475,281) - At 16 Jul 2016 ___10,000,000,000 618,900,458 381,942,639 - - 11,000,843,097 NRls. Capital Retained General Loan Loss Deferrd ol Share Capital I .Tax Shareholder's premium earnings Reserve Reserve Reserve Fund At 15 July 2016 (previously reported) 10,000,000,000 618,900,458 381,942,639 - 11,000,843,097 Adjustments - - NFRS Adjustments (op adjustments) (1,266,767) - - (1,266,767) Restated 10,000,000, 000 617,633,691 381,942,639 - 10,999,576,330 Profit for the year and OCI (net of tax) 497,935,905 - - 490,483,200 Share Issue I NFRS Adjustments -1,266,767 1,266,767 Dividend (500,000,000) (500,000,000) Generai Reserve Trinsfer (98,096,640) 98,095,640 Loan Reserve Fund (3,832,005) - 3,832,005 Deferred Tax Reserve 1295,173) - 295,173 At 16 Jul 2017 10,000,000,000 - 514,612,605 1 480,039,279 3,832,005 295,173 10,991,326,297 NRs. Deferred Total Share Capital Retained General Loan Loss Tax Shareholder's premium earnings Reserve Reserve Tax Sah d ________________________ _________ _________Reserve Fund At 15 July 2017 (previously reported) 10,000,000,000 514,612,005 480,039,279 3,832,005 295,173 10,991,326,297 Adjustments - - - - NFRS Adjustments (op adjustments) - | - (766,630) - - - (706,630) Restated 10,000,000,000 - 513,845,976 480,039,279 3,832,005 295,173 10,990,559,607 Profit for the year and Other comprehensive income (net of tax) - 812,478,380 - - 813,000,615 Dividend - (500 000,000) - - (500,000,000) NFRS Adjustments (568,948) - - (568,948) General Reserve Transfer (161,620,123) 161,620,123 - Loan Reserve Fund (11,711,560) - 11,711,560 - Deferred Tax Reserve 295,173 - (295,173) At 16 Jul 2018 0010,0 00,000 - 652,718,898 641,659,402 15,543,564 - 11302,9,334J SC, s Per our of Even Date 1Z Chart ed U1 Accou ta D3 kaudel Pmesh Paneru Mukti Bodh Neupane Chh bi Raj Pokhrel Account Officer Senior Account Officer DGM-Finance Chief Executive Officer MIT.1.Associateo hartered Accounta\ Meg Bahadur Bishwakarma Parakram Sharma Re Lila Devi Gadtaulaa kota Dr. Sanjay Sharma Director Director Director Director Director Chairman Date 2075/09/069' -2s Place Kathmandu 4 HIDCL Financial Statements 17-18 Hydroelectricity Investment and Development Company Limited Consolidated Statement of Cash Flows For the year ended 15 July 2018 (2017-18) ____---_ ___-- __ __ ___ __NRs. Restated Restated 2017-18 2016-17 2017-18 2016-17 HIDCL (Group) HIDCL Cash flows from operating activities Loss / (profit) before taxation 1,172,614,711 710,032,407 1,172,376,723 700,665,704 Adjustments for non-cash items and non operating adjustments Depreciation 3,339,571 3,470,197 2,919,159 3,470,197 Loss (Gain) on disposal of assets - (1,500,720) Dividend income (11,620,000) - (11,620,000) Defined benefit plan net charge 1,103,513 - 969,312 Changes in Operating assets and Liabilities Change in operating assets 113,164,193 705,695,834 276,305,041 705,600,462 Change in operating liabilities 646,184,864 315,437,331 640,654,457 320,900,460 Taxes paid (382,615,030) (225,637,006); (379,019,588) (229,551,770) Net cash from operating activities 1,542,171,822 1,508,998,763 1,701,084,383 1,501,085,053 Cash flows from investing activities Purchase of property, plant and equipment (31,818,290.44) (53,949,642) (9,932,296.46) (2,190,614) Disposal of property, plant and equipment - 2,836,300 Software Development (633,083) (633,083) Investment in subsidiaries, associates & joint - - ventures Dividend Income 11,620,000 11,620,000 Purchase of investment securities (1,218,171,234) (863,494,658) (1,218,171,234) (863,494,658) Disposal and maturity of investment securities Net cash used in investing activities (1,239,002,607) (917,444,300) (1,214,280,313) (865,685,272) Cash flows from financing activities Issue of ordinary and preference share capital, net of expenses Advance Capital Received 5,000,000,000 - 5,000,000,000 Dividends paid to ordinary shareholders (481,691,984) (433,670,506) (481,691,984) (433,670,506) Net cash (used in)/from financing activities 4,518,308,016 (433,670,506) 4,518,308,016 (433,670,506) Net increase/(decrease) in cash and cash 4,821,477,231 157,883,957 5,005,112,086 201,729,275 equivalents Cash and cash equivalents at beginning of year 439,679,438 331,795,481 294,343,204 92,613,929 Effect of exchange rate changes on cash & cash equivalents Cash and cash equivalents at end of year 5,311,156,669 489,679,438 5,299,455,290 294,343,204 As P tof Even Date ak Paudl R mesh Paneru Mukti Bodh Neupane Chha i aj Pokhrel k\ R A an Account Officer Senior Account Officer DGM-Finance Chief Executive Officer N..RS t nta 'lndu 7 Meg Bah.ur Bishwakarma Para am Sharma Ra n Nepal Lila Devi Gadtaula Udaya ota Or. Sanjay Sharma Director Director Director Director Director Chairman Date 2075/09/06 Place Kathmandu 6 HIDCL Financial Statements 17-18 vi. Current and Non-Current distinction Assets and liabilities, wherever applicable, are bifurcated in current and non current based on their respective maturity. Such information has been disclosed in respective notes as applicable. vii. Discounting When the realisation of assets and settlement of obligation is for more than one year, the company considers the discounting of such assets and liabilities where the impact is material, Various internal and external factors have been considered for determining the discount rate to be applied to the cash flows of company. viii. Accounting polices, critical accounting estimates and judgements Accounting Policies IFRS requires the company to adopt accounting policies that are most appropriate to the company's circumstances. In determining and applying accounting policies, management is required to make judgements in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the company's reported financial position, results or cash flows. These accounting policies are consistently applied by the Company. Specific accounting policies have been included in the specific section of the notes for each items of financial statements which requires disclosures of accounting policies or changes in accounting policies. Effect and nature of the changes, if any, have been disclosed, Accounting estimates and judgements The preparation of the financial statements in accordance with IFRS requires the management to make judgements, estimates and assumptionslin applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses, including contingencies and commitments. Due to the inherent uncertainty in making estimates, actual results reported in future periods may differ from those estimates. The estimates and the underlying assumptions are reviewed on on-going basis based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revision to accounting estimates are recognised in the period in which the estimates is revised, if the revision affects only that period; they are recognised in the period of revision and the future periods If the revision affects both current and future periods. The significant judgements made by management in applying the company's accounting policies and the key sources of estimation uncertainty in these financial statements, which together are deemed critical to the company's results and financial position, are given in the respective sections of the notes wherever they have been appliec ix. Going Concern The management consider that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. x. Consolidation The company controls and consequently consolidates an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Control is initially assessed based on consideration of all facts and circumstances, and is subsequently reassessed when there are significant changes to the initial setup. Where an entity is governed by voting rights, the group would consolidate when it holds, directly or indirectly, the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power over the relevant activities or holding the power as agent or principal, Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the consideration, including contingent consideration, given at the date of exchange. Acquisition-related costs are recognised as an expense in the income statement in the period in which they are incurred. The acquired identifiable assets, liabilities and contingent liabilities are generally measured at their fair values at the date of acquisition. Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of non-controlling interest and the fair value of the group's previously held equity interest, if any, over the net of the amounts of the identifiable assets acquired and the liabilities assumed. The amount of non-controlling interest is measured either at fair value or at the non-controiing interest's proportionate share of the acquiree's identifiable net assets For acquisitions achieved in stages, the previously held equity intere t is remeasured at the acquisition-date fair value with the resulting gain or loss recognised in the income staterment. All intra-group transactions are eliminated on consolidation, 'Chartered u =ccUntantS 4=Untant Q, ibli HIDCL Financial Statements 17-18 C. Notes 1 Intangible Assets Accountmg Policies Identifiable intangible assets are recognised when the company controls the asset, it is probable that future economic benefits attributed to the asset will flow to the company and the cost of the asset can be reliably measured. Intangible assets with finite useful lives are stated at acquisition cost less accumulated amortisation and accumulated impairment losses. The useful lives and the amortisation methods of the assets are reviewed at least annually. Changes in the estimated useful life or the expected pattern of consumption of future economic benefit embodied in the assets are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates in accordance with NAS 8. Amortisation is charged to Statement of Profit or Loss on a straight-line basis over the useful life of license. Intangible assets having infinite useful life are assessed for impairment at each reporting date. Explonotory Notes .-- -- --- ---- 16-Jui-2018 15-jul-2017 15-Jul-2016 16-Jul-2018 15-Jui-2017 15-jui-2016 HIDCL(Group) HIDCL Software (cost) 996,900 963,000 963,000 963,000 963,000 963,000 Amortisation (software) (643,765) (449,400) (256,800) (642,000) (449,400) (256,800) SoftwareWork in Progress 633,083 - - 633,083 - - Website Development 88,592 88,592 88,592 88,592 88,592 88,592 Amortisation (website) (88,592) (88,592) (82,686) (88,592) (88,592) (82,686) 986,218 513,600 712,106 954,083 513,600 712,10 Software and website development has been separately recognised in the financial statement. Until previous year under previous GAAP software were clubbed with the property plant and equipment. 2 Property Plant and Equipment Accounting Policies Property, plant and equipment are stated in the statement of financial position at their cost and are inclusive of all expenses necessary to bring the assets to working condition for its intended use less any subsequent accumulated depreciation and subsequent accumulated impairment losses, if applicable. Property, plant and equipment are recognised as an asset, if and only if it is probable that future economic benefits associated with the item will flow to the company; and the cost of the item can be measured reliably.in addition to the purchase price and cost directly attributable to bringing the asset to the location and conditions necessary for it to be capable of operating in the manner intended by management if an item of property, plant and equipment consists of several components with different estimated useful lives, those components that are significant are depreciated over their individual useful lives. Subsequent costs that do not qualify the recognition criteria under NAS 16 are expensed as and when incurred. The depreciation period is based on the expected useful life of an asset. Items of property plant and equipment are depreciated on pro rata basis in the year of acquisition. The residual values, useful lives and the depreciation methods of assets are reviewed at least at each financial year end and, if expectations differ from previous estimates are accounted for as a change in accounting estimates in accordance with NAS 8. Explanatory Notes Useful life of property plant and equipment has been depreciated under the management's estimate of useful life of the particular class of assets. Assets are categorised in different class of assets according to their similar nature and characteristics. Useful life estimated by the management is as follows. Asset Class Useful life Furniture and Fixtures 7 Leasehold Improvements 9 Office Equipment- other office equipment 5 Office Equipment - computers 5 Office Equipment- Machinery and equipment 5 Other Fixed Assets 5 Vehicles 7 '-'7' 1 3 HIDCL Financial Statements 17-18 HIDCL Leasehold Furniture Offic Vehicies ~thers- TOTAL -mprovemnents and Fixtures Equipment Original Cost (Rs.) As at 17 July 2017 2,184,584 1,857,084 5,419,152 15,419,540 261,183 25,141,542 Additions 4,091,879 1,866,704 2,930,657 177,062 9,066,301 Adjustment (disposals and transfers) (2,184,584) (93,439) (869,535) - (3,147,558) As at 16 July 2018 4,091,879 3,630,348 7,480,273 15,419,540 438,245 31,060,285 Depreciation (Rs.) As at 17 July 20;17 999,045 1,181,451 3,427,872 7,174,733 142,278 12,925,380 Charge for the year 88,454 315,337 720,670 2,202,791 61,492 3,388,744 Attributable to (disposals and transfers) (999,045) (69,814) (743,118) (1,811,978) As at 16 July 2018 88,454 1,426,973 3,405,424 9,377,525 203,770 14,502,146 Impairment Charge Capital Work in Progress As at 15 July 2018 4,003,426 2,203,375 4,074,849 6,042,015 234,475 16,558,139 As at 16 July 2017 1,185,539 675,633 1,991,279 8,244,807 118,905 12,216,163 HIDCL Leasehold Furniture Office Vehicies Others TOIAL Improvemernts and Fixtures Equipment Original Cost (Rs.) As at 16 July 2016 2,184,584 1,682,487 4,356,520 14,479,940 247,397 22,950,928 Additions 174,597 1,062,632 939,600 13,786 2,190,614 Adjustment (disposals and transfers) - As at 15 July 2017 2,184,584 1,857,084 5,419,152 15,419,540 261,183 25,141,542 Depreciation (Rs.) As at 16 July2Q6 756,314 931,070 2,573,697 5,102,861 91,241 9,455,183 Charge for the year 242,732 250,380 854,175 2,071,873 51,037 3,470,197 Attribdtable to (disposals and transfers)- As at 15 July 2017 999,045 1,181,451 3,427,872 7,174,733 142,278 12,925,380 Impairment Charge Capital Work in Progress As at 15 July 2017 1,185,539 675,633 1,991,279 8,244,807 118,905 12,216,163 As at 16 July 2016 1,428,271 751,417 1,782,822 9,377,079 156,156 13,495,745 HIDCL Leasehold Furniture Office Vehicies Others TOTAL Improvements and Fixtures Equipment Original Cost (Rs.) As at 15 July 2015 1,896,648 1,657,514 3,881,063 14,101,940 213,609 21,750,774 Additions 287,936 24,973 475,457 378,000 33,788 1,200,154 Adjustment (disposais and transfers) - - - - As at 16 July 2016 2,184,584 1,682,487 4,356,520 14,479,940 247,397 22,950,928 Depreciation (Rs.) As at 15 July 2015 529,009 693,876 1,749,867 3,084,155 46,420 6,103,327 Charge for the year 227,305 237,194 823,830 2,018,705 44,821 3,351,856 Attributable to (disposals and transfers) - -- As at 16 July 2016 756,314 931,070 2,573,697 5,102,861 91,241 9,455,183 Impairment Charge Capital Work in Progress As at 16 July 2016 1,428,271 751,417 1,782,822 9,377,079 156,156 13,495,745 As at 15 July 2015 1,367,639 963,638 2,131,195 11,017,785 167,189 15,647,446 SOq., Chartered AcCountants HIDCL FInancial Statements 17-18 5.3 Deferred Taxes Accounting Policies Deferred tax is provided in full, using the liability method, on temporary differences arising from the differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates and legislation enacted or substantively enacted by the statement of financial position date, which are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are only offset when there is both a legal right to set-off and an intention to settle on a net basis. Explanatory Notes HIDCL NRs. Particulars 2017-18 Carrying Amount Tax Base Temporary Diff Assets Property, Plant & Equipment 16,558,139 18,078,460 (1,520,321) Others 7,000,000 7,000,000 ,Liability and Provisions Defined Benefit Plan Prov 1,573,642 (1,573,642) Total 3,906,037 Tax Rate @ 30% 1,171,811 Deferred Tax Liability/ (Asset) - 16.07.2017 (295,173) Deferred Tax Expense / (income) - 2017-18 1,466,984 Deferred Tax liability/ (Asset) - 15.07.2018 1,171,811 Deferred Tax Expense / (Income) - 2017-18 P&L (633,016) Deferred Tax Expense/ (Income) - 2017-18 OCI 2,100,000 HIDCL NRs. Particulars 2016-17 Carrying Amnount Tax Base Temporary Diff Assets Property, Plant & Equipment 12,216,163 12,645,192 (429,030) Liability and Provisions Defined Benefit Plan Prov 554,880 - (554,880) Total (983,910) Tax Rate @ 30% (295,173) Deferred Tax Liability / (Asset) - 15,07,2016 159,572 Deferred Tax Expense /(Income) - 2016-17 (454,745) Deferred Tax liability / (Asset) - 15.07.2017 (295,173) Deferred Tax Expense / (Income)- 2016-17 P&L (454,745) Deferred Tax Expense / (Income) - 2016-17 OCI HIDCL NRs. Particulars 2015-16 Carrying Amount Tax Base Temporary Dff Assets Property, Plant & Equipment 13,495,745 12,483,283 1,012,462 Liability and Provisions Defined Benefit Plan Prov 480,555 (480,555) Total 531,907 Tax Rate @ 30% 159,572 Deferred Tax Liability! (Asset) - 16.07.2015 (475,281) Deferred Tax Expense/ (Income) - 2015:16 634,853 Deferred Tax Liability! (Asset) - 15.07.2016 159,572 Deferred Tax Expense (Income) - 2015-16 P&L 634,853 Deferred Tax Expense (Income) - 2015-16 OCII DT Asset Liability NRs. 16-Jul-2018 15-Jul-2017 15-Jul-2016 16-Jul-2018 15-Jul-2017 15-Jul-2016 HIDCL (Group) HIDCL Deferred Tax Assets 295,173 - 295,173 Deferred Tax Liabilities 1,217,900 - 1595572 1,171,811 - 9,57 SSO ,r Chared~ s "dOT¶fI~- N-c ntant HIDCL Financial Statements 17-18 Investments in Equity (AFS) 16-Jul-2018 15-Jui-2017 15-JuI-2016 16-Jul-2018 15Ju-2017 15Jui-2016 HIDCL (Group) HIDCL AT Cost: Companies Power Transmission Company Limited 56,000,000 56,000,000 42,000,000 56,000,000 56,000,000 42,000,000 VidhyutUtpadan Compa6y Limited 132,000,000 20,000,000 - 132,000,000 20,000,000 - Nepal Power Trading Company Limited 2,250,000 2,250,000 - 2,250,000 2,250,000 - NEA'Engineering Company Ltd 15,000,000 2,250,000 15,000,000 2,250,000 - 205,250,000 80,500,000 42,000,000 205,250,000 80,500,000 42,000,000 Investments in Equity (AFS) NRs, 16-Jul-2018 15-Jul-2017 15-Jul-2016 16-Jul-2018 15-Jul-2017 15-Jul-2016 HIOCL (Group) HIDCL No of Shares: Companies Power Transmission Company Limited 630,000 560,000 420,000 630,000 560,000 420,000 Vidhyut Utpadan Company Limited 1,320,000 200,000 - 1,320,000 200,000 Nepal Power Trading Company Limited 22,500 22,500 - 22,500 22,500 - NEA Engineering Company Ltd 150,000 22,500 - 150,000 22,500 These are strategic investments by HIDCL not for trading in the foreseeable future. These investments have been classified as available for sale financial instruments in accordance with NAS 39. Any changes in the fair value of shares has been recognised through other comprehensive income These companies are not traded in the stock exchange as they are in the process of operation or construction The par value of the share investments is assumed to represent the fair value. Level Ill valuation consideration has been taken into account to assess the fair value of these instruments due to absence of quoted and similar traded investments. HIOCL management considers the future cash flow of those companies will exceed the cost. During 2017-18 bonus shares 70,000 were received from Power Transmission Company Limited. The shares have been valued at recognised at fair value, the par quoted value are assumed to represent the fair value in absence of quoted market price. The difference between par value and the cost is represented as the fair value changes and has been recognised through other comprehensive income. 6.1.2 Debt Investments All debt investments are recognised at amortised cost using effective interest rate. Since there are no incremental cost of these instrument the coupon rate represents the effective interest rate and the cost represents the amortised as below.Management considers that the investment in corporate bond (debenture) has very insignificant risks therefore no impairment has been provided. 6.1.2a Investment In Corporate Bonds NRs. 16-Jui-2018 15-Jul-2017 15-Jul-2016 16-Jul-2018 15-Jul-2017 15-Jul-2016 HIDCL (Group) HIDCL Corporate Bond (debenture) 80,000,000 - - 80,000,000 80,000,000 - 80,000,000 6.1.2b Loan to Power Projects 16-Ju-2018 15-Jul-2017 15-Jul-2016 16-Jui-2018 15-Jul-2017 15-Jul-2016 HIDCL (Group) HIDCL Himalayan Power Partner Limited 152,342,349 92,498,048 33,633,122 152,342,349 92,498,048 33,633,122 Arun Kabeli Power Limited 199,470,688 132,573,210 60,995,231 199,470,688 132,573,210 60,995,231 Mountain Hydro Nepal P. Ltd. 145,135,228 . 99,474,370 31,921,596 145,135,228 99,474,370 31,921,596 Upper Solu Hydroelectric Co. Ltd. 135,2S2,589 77,687,552 30,436,990 135,252,589 77,687,552 30,436,990 Solu Hydropower Private Limited 263,975,000 160,725,000 263,975,000 160,725,000 - Mandu Hydropower Ltd. 155,686,854 29,494,767 - 155,686,854 29,494,767 Robust Energy Ltd. 242,107,966 136,586,811 - 242,107,966 136,586,811 Nyadi Hydropower Limited 91,344,364 33,591,728 . 91,344,364 33,591,728 - Gross Debt 1,385,315,038 762,631,486 156,986,939 1,385,315,038 762,631,486 156,986,939 Less: Portfolio impairment (13,853,150) (7,626,315) (1,569,869) (13,853,150) (7,626,315) (1,569,869) Less: Specific Impairment 1,371,461,888 755,005,171 155,417,069 1,371,461,888 755,005,171 155,417,069 J II HIDCL Financial Statements 17-18 6.1.6 Term Deposits with Banks Term Deposits with Bns1NRs 16 Jul-2018 15-Jul-2017 1S-Jul-2016 16-Jul-2018 15-Jul-2017 1S-Jul-2016 HIDCL (Group) HIDCL Term Deposits with Banks 9,390,000,000 9,629,800,000 10,430,000,000 9,230,000,000 9,629,800,000 10,430,000,000 9,390,000,000 9,629,800,000 10,430,000,000 9,230,000,000 9,629,800,000 10,430,000,000 Banks are tightly regulated by the central bank and term deposits with banks are considered to have insignificant risks. 6.1.7 Cash and Cash Equivalents Cash and Cash Equivalents NRs. 16-Jul-2018 15-Jul-2017 15-Jul-2016 16-Jul-2018 15-Jul-2017 15-Jul-2016 HIDCL (Group) HIDCL Interest Bearing call deposits 5,311,156,669 489,679,438 331,795,481 5,299,455,290 294,343,204 92,613,929 5,311,156,669 489,679,438 331,795,481 5,299,455,290 294,343,204 92,613,929 Cash and cash equivalent comprises of balances with banks. These balances are interest-bearing deposits available on call. These can be converted in cash on demand without significant risk. 6.2 Financial Liabilities A financial liability is any liability that is: (a) contractual obligation: (i) to deliver cash or another financial asset to another entity; or (ii) to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or (b) a contract that will or may be settled in the entity's own equity instruments and is: (i) a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity's own equity instruments; or (ii) a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments. 6.2.1 Loans and Borrowings There are no loans and borrowings of the company 6.2.2 Trade and Other Payables Trade and Other Payables NRs. 16-Jul-2018 15-Jul-2017 15-Jut-2016 16-Jul-2018 15-Jul-20117 15-Jul-2016 HIDCL (Group) HIDCL Staff Bonus Payable 149,917,348 56,127,210 - 149,917,348 56,127,210 - Salary Payable 40,771 - - 40,771 - Account Payable 1,647,082 14,114 567,767 1,647,082 14,114 567,767 Dividends Payable (Public Shareholder) 84,637,510 66,329,494 - 84,637,510 66,329,494 - TDS Payable 1,1o,02 512,917 1S,475,689 775,192 491,111 15,458,739 Retention Money Deduction 208,754 96,300 96,300 208,754 96,300 96,300 Bid Bond Guarantee 32,000 - - 599,260 - - Expenses Payable 4,07S,680 996,098 101,050 813,687 534,330 241,689,172 124,076,133 16,240,806 238,639,604 123,592,S60 16,122,806 6.2.3 Deferred Income There are no deferred incomes of the company. SS0 AC= ntnt 18 fe~~ HIDCL Financial Statements 17-18 6.3.2 Fair Value of Assets and Liabilities Carried at Amortised Costs Assets and liabilities carried at amortised costs using effective interest rate as below, do not have the active market quoted price nor they have observable similar value inputs. Management considers that the cost and / recognised value of these instruments represent the fair value and these assets and liabilities will be recovered or settled at the recognised amount without significant risk in normal course of the business. HIOCL Carrying amount Fair Value QuotedM Observable Unobservable prices Inputs inputs Assets and Liabilities 17-18 (Level 1) (Level 2) (Level 3) Assets Investment in Corporate Bonds 80,000,000 80,000,000 - 80,000,000 Loan to Power Projects 1,371,461,888 1,371,461,888 . - 1,371,461,888 On-lending 785,621,073 785,621,073 - - 785,621,073 Accrued Income 21,462,136 21,462,136 - - 21,462,136 Staff Advances'and Loans 3,300,121 3,300,121 - 3,300,121 Term Deposits with Banks 9,230,000,000 9,230,000,000 - - 9,230,000,000 Cash and Bank Balances 5,299,45S,290 5,299,455,290 - - 5,299,455,290 Liabilities On-lending 787,752,018 787,752,018 - - 787,752,018 Trade and other payables 238,639,604 238,639,604 - - 238,639,604 Assets and Liabilities 16-17 Assets Loan to Power Projects 755,005,171 755,005,171 - - 755,005,171 On-lending 263,906,556 263,906,556 - - 263,906,556 Accrued Income 39,005,327 39,005,327 - - 39,005,327 Staff Advances ano Loans 2,524,550 2,524,550 - - 2,524,550 Term Deposits with Banks 9,629,800,000 9,629,800,000 - - 9,629,800,000 Cash and Bank Balances 294,343,204 294,343,204 - - 294,343,204 Liabilities On-lending . 263,906,556 263,906,556 - - 263,906,556 Trade and other payables 123,592,560 123,592,560 - 123,592,560 Assets and Liabilities 15-16 Assets Loan to Power Projects 155,417,069 155,417,069 - - 155,417,069 Accrued Income 29,707,057 29,707,057 - 29,707,057 Staff Advances and Loans 2,779,078 2,779,078 - . 2,779,078 Term Deposits with Banks 10,430,000,000 10,430,000,000 - - 10,430,000,000 Cash and Bank Balances 92,613,929 92,613,929 - 92,613,929 Liabilities Trade and other payables 16,122,806 16,122,806 16,122,806 7 Share Capital Accounting Policies Equity Instruments are: Any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities meeting both of the following condition (i) No contractual obligation to deliver cash / another financial instrument (ii) Wil or may be settled in the company's own equity HIDCL applies NAS 32, Financial Instruments: Presentation, to determine whether funding is either a financial liability (debt) or equity. issued financial instruments or their components are classified as liabilities if the contractual arrangement results in the company having a present obligation to either deliver cash or another financial asset, or a variable number of equity shares, to the holder of the instrument. if this is not the case, the instrument is generally an equity instrument and the proceeds included in equity, net of transaction costs Dividends and other returns to equity holders are recognised when paid or declared by the members at the AGM and treated as a deduction from equity. i ' Chaftered SAc=ourtantS 77an,J HIDCL Financial Statements 17-18 Loan Guard Fund Company for possible loss of the investments made sets aside certain amount as Loan Guard Fund under company's internal policy namely, Loan Loss Provision Guidelines. General Reserve There is a regulatory requirement by the central bank for banks and financial institution to set aside 20% of the net profit after tax every year as general reserve to build up the capital. HIOCL though not legally or not regulatory obligation to create such general reserve has decided to follow the similar norm to build up its capital base for risk management. Deferred Tax Reserve It is company's policy to appropriate the equivalent portion of the deferred tax assets when a net deferred tax asset arises. In event where deferred tax liability arises such amounts are reclassified within the equity to retained earning. 9 Employee Benefit 9.1 Current Employee Benefits Accounting Policies Short-term employee benefits, such as salaries, paid absences, performance-based cash awards and social security costs are recognised over the period in which the employees provide the related services. Explanatory Notes Employee Benefit Expenses NRs 2017-18 2016-17 2015-16 2017-18 2016-17 2015-16 HIDCL (Group) HIDCL Short Term Employee Benefits Salary 10,491,662 9,064,286 7,366,520 9,451,448 8,462,911 6,619,476 Allowance 4,776,035 4,756,962 4,660,746 4,776,035 4,756,962 4,660,746 Staff Training 3,041,767 520,392 1,551,158 3,041,767 520,392 1,551.158 Dress Allowance 315,000 292,500 262,500 315,000 292,500 262,500 Incentives - 304,800 - - 304,800 - 'Leave tncashment 230,738 308,740, 207,037 230,738 308,740 207,037 Group Accidental Insurance 43,145 44,025 16,274 43,145 44,025 16,274 Health Insurance 49,573 43,865 13,933 49,573 43,865 13,933 Group Life Insurance 1,803,342 1,253,993 729,131 1,803,342 1,253,993 729,131 Staff Welfare Expenses 1,141,674 1,020,388 1,819,658 1,141,674 1,020,388 1,819,658 Vehicle Facilities 1,275,000 825,000 - 1,275,000 825,000 - 23,167,936 18,434,952 16,626,957 22,127,722 17,833,577 15,879,913 Staff Bonus 93,839,875 56,127,210 - 93,790,138 56,127,210 117,007,812 74,562,162 16,626,957 115,917,860 73,960,787 15,879,913 Post Employment Benefits Defined Contribution Expenses 766,053 609,399 439,257 682,947 609,399 439,257 Defined Benefit Plan Expenses 1,103,513 - 969,312 - - 1,652,259 609,399 439,257 1,652,259 609,399 439,257 118,660,071 75,171,561 17,066,214 117,570,119 74,570,186 16,319,169 9.2 Retirement Benefits Accounting Policies Company applies NAS 19 Employee benefits for accounting most of the components of staff costs. Short-term employee benefits Salaries, allowances, socials security expenses, performance bonuses as provided in the law and other employee related expenses are recognised over the period in which the employees provide services to which the payments relate. chartered A Unta2tS HIDCL Financial Statenents 17-18 11.2 Finance Income Finance Income ¯ ¯NRs 2017-18 2016-17 2015-16 2017-18 2016-17 2015-16 HIDCL (Group) HIDCL Interest From Fixed Deposits 1,160,601,846 724,828,559 490,430,215 1,155,570,545 718,732,350 488,788,009 Interest From Call Deposits 29,508,544 31,524,392 14,321,451 24,477,242 25,428,182 12,679,245 Interest from Bond 3,732,603 Interest From Loan to Projects 117,115,597 38,320,046 6,227,861 117,115,597 38,320,046 6,227,861 Interest from oan to Staff 61,301 41,57Y 19,376 6i,301 41,571 19,376 1,311,019,891 794,714,568 510,998,903 1,300,957,288 782,522,148 507,714,492 11.3 Dividend Income Dividend, NRs. 278 2016-17 2015-16 2017 18 2016-17 2015-16 HIDCL (Group) HIDCL Dividend from corporates 11,620,000 11,620,000 - 11,620,000,- 11,620,000 . 11.4 Other Income Other Incorne 1NRs 2017-18 2016-17 20151616 HIDCL (Group) HIDCL Rent Income - - 30,000 120,000 120,000 Tender & Application Fees 92,979 25,775 23,700 92,979 25,775 23,700 Other Income 865,995 Gain on sale of PPE - - 1,500,719 - - 92,979 25,775 23,700 2,489,694 145,775 143,700 12 Finance Costs NRs. 2017-18 2016-17 2015-16 2017-18 2016-17 2015 16 H1WC D Group) HIDCL Finance Costs - - 36,208 36,208 - 36,208 - 36,208 2 C0 24 HIDCL Financial Statements 17-18 16 Earning Per Share Accounting Policies The calculation of basic earnings per share is based on the profit attributable to equity holders of the company and the basic weighted average number of shares. When calculating the diluted earnings per share, the weighted average number of shares in issue is adjusted for the effects of all dilutive potential ordinary shares held in respect of the company. Explanatory Notes NRs. 2017-18 2016-17 2015-16 2017-18 2016-17 2015-16 HIDCL (Group) HIDCL Earning attributable to equity SHs 807,578,380 497,935,965 365,297,624 808,100,615 490,483,200 364,731,112 Weighted average shares for the period 100,000,000 100,000,000 90,082,192 100,000,000 100,000,000 90,082,192 Weighted average shares for -dilutive 100,547,945 100,000,000 90,082,192 100,547,945 100,000,000 90,082,192 Basic Earning per share (NPR) 8.08 4.98 4.06 8.08 4.90 4.05 Diluted Eaning per share (NPR) 8.03 4.98 4.06 8.04 4.90 4.05 The advance capital received from government of Nepal amounting to NRs. 5 Billion on 2018 July 11 has impacted the diluted earning per share. 17 Distribution to shareholders NRs. 2017-18 2016-17 2015-16 Cash Dividends Proposed 500,000,000 500,000,000 Bonus Shares Total 500,000,000 500,000,000 % of Dividend to share capital 5.00 5.00 18 Related Parties Disclosures Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions, or one other party controls both. The definition includes subsidiaries, associates, directors, key management personnel and employees' retirement benefit fund. 18.1 Identification of Related Parties Following have been identified as related parties i. Government of Nepal (controlling interest) ii. Remit Hydro (subsidiary) iii. Board Chair and Directors 2017-18 2016-17 2015-16 Mr. Anup K Upadhyaya (Chair) Mr. Suman P Sharma Mr. Anup K Upadhyaya (Chair) Mr. Suman PSharma (Ex-Chair) Mr. Rajendra K Chettri (Ex-Chair) Mr. Udaya Raj Sapkota Mr. Laxman Aryal Mr. Ram S Pudasaini Mrs. Lila Devi Gadtaula Mrs. Lila Devi Gadtaula Mr. Jagannath Devkota Mr. Ram Krishna Polkhre) Mr. Ashwini K Thakur Mr. Krishna P Acharya Mr. Parakram Sharma Mr. Parakram Sharma Mr. Parakram Sharma Mr. Megh B Bishwakarma Mr. Megh B Bishwakarma Mr. Megh B Bishwakarma Mr. Manoj K Gyawali Mr. Manoj K Gyawali Mr. Yogendra Gauchan (Ex-BoD) Mr. Mahesh Rimal(Ex-BoD) Mr. Ram S Pudasaini (Ex-BoD) Mr. Ramkrishna Pokharel (Ex-BoD) Mr. Jagannath Devkota (Ex-BoD) Mr. Krishna P Acharya (Ex-BoD) Iv, Key Managerial Personnel ZTlChartered ~2 C> riACOOUntantS HIDCL Financial Statements 17-18 changes to the initial setup. Where an entity is governed by voting rights, the group would consolidate when it holds, directly or indirectly, the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power over the relevant activities or holding the power as agent or principal. Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the consideration, including contingent consideration, given at the date of exchange. Acquisition-related costs are recognised as an expense in the income statement in the period in which they are incurred. The acquired identifiable assets, liabilities and contingent liabilities are generally measured at their fair values at the date of acquisition, Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of non-controlling interest and the fair value of the group's previously held equity interest, if any, over the net of the amounts of the identifiable assets acquired and the liabilities assumed. The amount of non-controlling interest is measured either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. For acquisitions achieved in stages, the previously held equity interest is re-measured at the acquisition-date fair value with the resulting gain or loss recognised in the income statement. All intra-group transactions are eliminated on consolidation. Explanatory Notes Investment In Subsidiary NRs. 1G-Jul-2018 15-Jul-2017 15-Jul-2016 116-Uk2018 15-Jul-2017 15-Jul-2016 HIDCL (Group) HIDCL Remit Hydro Limited (at cost) - - - 255,000,000 255,000,000 255,000,000 255,000,000 255,000,000 255,000,00 21 Interest In Other Entities Accounting Policies The company follows NFRS 12 Disclosure of interest in Other Entities for disclosing the extent of the investment, control and influence. Explanatory Notes NRs. 16-Jul-2018 15-Jul-2017 15-Jul-2016 Subsidiary Remit HydroLimited 100% 100% 100% Trade Invetrmerits Power Transmission Company Limited 14% 14% 14% Vidhyut Utpadan Company Limited 2% 2% - Nepal Power Trading Company Limited 15% 15% - NEA Engineering Company Ltd 15% 15% . - - . . . . . . .. ......-. 22 Events After Reporting Period Accounting Policies The company follows NAS 10 Events After Reporting Period for accounting and report for the events that occur after the reporting period. c.assifies those events as adjusting and non-adjusting in Explanations There are no material events both adjusting or non-adjusting for the reporting periods. haTtered OJP AcoOuntants HIDCL Financial Statements 17-18 25 Restatement of prior period balances Previously reported financial statements and financial statements for the current financial year as reported in the regulatory financial statements has been restated in compliances with the requirements of NFRS. Exceptional items wherever they occur are disclosed separately. 26 First Time Adoption of NFRS - Reconciliations Accounting Policies The Company has applied NFRS 1 First Time Adoption ofNFRS in converting the previously reported financial statements to NFRS. 26.1 Profit or Loss Reconciliation N - NRs. 2017- 18 2O16-17 2015-16 2017-18 2016-17 2015-16 HIDCL (Group) HIDCL NFRS Profit 807,578,380 497,935,965 365,297,624 808,100,615 490,483,200 364,731,112 Adjustments Additional Depreciation 167,516 924,421 148,939 167,516 924,421 148,939 Share Issue expense to equity - - (112,177,599) - - (112,177,599) Deferred Tax (1,282,517) (424,284) 1,325,284 (1,282,517) (424,284) 1,325,284 Bonus share recognised reversed 7,000,000 - - 7,000,000 - Intra Group Profit 1,500,719 Total Adjustments 7,385,719 500,137 (110,703,376) 5,885,000 500,137 (110,703,376) Previous GAAP Profit 814,964,099 498,436,102 254,594,247 813,985,615 490,983,337 254,027,736 26.2 Equity Reconciliation HIDCL NRS, 2017-18 2016-17 2015-16 Opening Adjustment Property Plant and Equipment (1,667,630) ' (2,592,051) - Deferred Taxes 901,000 1,325,284 - (766,630) (1,266,767) - NFRS Adjustments Property Plant and Equipment 332,052 2,592,051 2,740,990 Deferred Taxes (901,000) (1,325,284) - (568,948) 1,266,767 2,740,990 30