I I l1tes!Y5~ ELECTRICITY COMPANY OF GHANA LIMITED I I [ [ I I I I I I I FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2017 I I I CFY Partners I 134 Robinson Crescent, Swanlake Rd PMB2 North Kaneshie, Accra I [ 'I ELECTRICITY COMPANY OF GHANA LIMITED [ t TABLE OF CONTENTS [ Page I Corporate information 1 I Report of the directors 2 I Statement of directors' responsibilities 3 I Report of the independent auditor 4 I Statement of comprehensive income 10 I 11 Statement of financial position I Statement of changes in equity 12 I Statement of cash flows 13 I I Notes to the financial statements 14-47 I I I I I I ELECTRICITY COMPANY OF GHANA LIMITED : I•': • '' I ,.. ' • i I "''" 1-.! ,, Mr,; ' ' !\~,..,~I'"¥,,,,.,,,,, n·" _,,,r ""' -.''" ~) ! 1:}it~'!'"-p•,....,'../ I ;, :fr ·r, i: (1,:.1;, ·~=tt;J.!J~l:;1 .:):J!jW&.4.1~ l:l.:\iJ :{.!l!i:"J CORPORATE INFORMATION . Appointed Mandate I Directors: Mr. Keli Gadzekpo Chairman On 15/08/2017 expired on Chairman(Ag) I Daasebre Kwebu Ewusi VII Ing.Samuel Boakye-Appiah ( Managing Director) (Ag) Member 15/08/2017 1/7/2017 Mr. Robert Dwamena (Managing Director) Member 1/7/2017 I Ing. (Mrs) Carlien Dorcas Bou-Chedid Mr. John Kojo Arkoful Member Member 15/08/2017 15/08/2017 Mr. Odeneho Kwaku Appiah Member 15/08/2017 I Alhaji Amadu Kaleem Hon. Matthew Nyindam Member Member 15/08/2017 15/08/2017 Mad. Maataa Opare Member 15/08/2017 I Mr. Samuel M Codjoe Dr Kwasi A Apea-Kubi Member Member 1/7/2017 1/7/2017 I Hon John Jinapor Dr Alfred Ofosu Ahenkorah Mr. Clement Abavana Member Member Member 1/7/2017 1/7/2017 1/7/2017 I Ms Eunice Comnashar Dr. Deborah Brigette Cubagee Member Member 1/7/2017 1/7/2017 I Secretary: Mr Lawrence Osei Kuffour Postal Electro-Volta House I Address: PO Box GP 521 Accra I Auditor: CFY Partners 134 Robinson Crescent, Swanlake Rd I PMB 2, North Kaneshie Bankers: Ghana Commercial Bank Limited I Local: Merchant Bank (Ghana} Limited Ecobank Ghana Limited Societe Generale Ghana I Foreign: Ghana International Bank Pie London I 1 I I I I ELECTRICITY COMPANY OF GHANA LIMITED I REPORT OF THE DIRECTORS The directors have the pleasure in presenting the financial statements of the company for the year ended I 31st December 2017 and report as follows: (a) Ownership I The company is wholly owned by the Government of Ghana. (b) Nature of Business I The company is authorised to carry on the following business: i. To purchase, take-over or otherwise acquire the undertaking and business previously carried on I by the Electricity Corporation of Ghana, as well as its goodwill, assets, properties, rights, debts, liabilities and obligations. ii. To transmit, supply and distribute electricity. I iii. To purchase electricity in bulk from the Volta River Authority or any other supplier for distribution. I iv. To construct, reconstruct, install, assemble, repair, maintain, operate or remove sub-transmission lines, distribution lines, transformer stations, electrical appliances, fittings and installations. I V. To carry out any other activities incidental or conducive to the attainment of the objects specified in items (i) to (iv} above. I vi On the 5th of August 2014, Ghana Government signed Compact II with the US Government for a grant of USD 498.2 million. Power Distribution Services, Gh Ltd a special purpose vehicle company, made up of 51% Ghanaian ownership consortium and 49% Meralco was formed to take over the operations and management of ECG from 1st February 2019 for a period of twenty years. The I agreements were signed on 3rd July, 2018 at the Jubilee House. (c) Results of operations and dividend I The operations for the year resulted in a net loss of GHS642.12 million before tax. The directors do not propose the payment of any dividend for the year. I (d) Names of directors Names of directors who have held office during the year are as listed on page 1. (e) Auditor I In accordance with Section 134 (5) of the Companies Act 1963 (Act 179) CFY Partners shall ~;;;z continue in office as auditor of the company. I I Name: CHAIRPERSON lLf,L-t 01t:iY'Uf4PD I Date: 'Julul\ 1;\ Date: 2 I I ELECTRICITY COMPANY OF GHANA LIMITED I I I STATEMENT OF DIRECTORS' RESPONSIBILITIES The Board of Directors is responsible for preparing the financial statements for each financial year I which give a true and fair view of the financial position of the company at the end of the financial year and of the comprehensive income of the company for that period. In preparing those financial, statements the Board of Directors is required to: I (a) Select suitable accounting policies and apply them consistently; I (b) Make judgements and estimates that are reasonable and prudent; I (c) Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the company will continue in business. I The Board of Directors is responsible for ensuring that the company keeps accounting records which disclose with reasonable accuracy the financial position of the company and which enable them to ensure that the financial statements comply with International Financial Reporting Standards. They I are responsible for taking such steps as are reasonably open to them to safeguard the assets of the company, and to prevent and detect fraud I The above statement should be read in conjunction with the statement of the auditor's responsibility set out on page 4 which is made with a view to distinguishing for members the respective responsibi- lities of the directors and the auditor in relation to the financial statements. I Going Concern The company's management has made an assessment of its ability to continue as a going concern and I is satisfied that it has the resources to continue in business for the forseeable future. However, management is aware of the company's liquidity challenges and will therefore depend on the continuous support it receives from its shareholders. Therefore the financial statement continues to be prepared on the I going concern basis. I I I 3 I [ I I INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF I Opinion ELECTRICITY COMPANY OF GHANA LIMITED I We have audited the financial statements of Electricity Company of Ghana Limited, which comprise the statement of financial position as at December 31, 2017, statement of I comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. I In our opinion, the accompanying financial statements give a true and fair view of the financial position of Electricity Company of Ghana Limited as at December 31, 2017, and its I financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and in a manner required by the I Companies Act, 1963 (Act 179). Basis for Opinion I We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the I company in accordance with International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) as adopted by the Institute of Chartered I Accountants Ghana (ICAG) and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion I Emphasis of Matter Without modifying our opinion, we draw attention to note 36 of the financial statements, I which indicate that the company's non derivative financial liabilities (note 36b) exceeded its financial assets (note 36a} by GH¢ 2,591,231,000. These events or conditions indicates that an uncertainty exist and the company will be dependent on the continued support it I receives from its shareholders. Key Audit Matters I Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters I were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. I Recognition of revenue (Postpaid and Prepaid) GHC 5,827,041,000 Our audit work included the following: Judgement is involved in the We developed an expectation of total revenue with I valuation of revenue which relates to estimated energy usage regards to tariff pricing information and external settlements data for energy volumes and compared between customers' most recent with the actual total revenue recognised, including I meter reading and the period end. the year end accrual I I The estimate is based on the We performed testing of the controls over pricing I volume of electricity expected to calculations, billing from the have been used, based on previous Management System {CMS), interfaces with the Customer usage. general ledger. I f-=----=------------------ Reven u e is calculated based on We compared the prior periods' estimates with these estimated volumes actual volumes billed from the CMS in order to ! multiplied by the tariff price set by assess the accuracy of estimation and reviewed the the Public Utility Regulation validity of the current year assumption. Commission {PURC). I Payment received from customers in advance of service to be I provided are recorded as deposit from customers. We compared the volume data with the external settlements systems. We reviewed the company's assumptions I The level of estimation will be relating to volume and price used in determining the level of estimated revenue, lower for customers subject to I more frequent meter readings and invoicing customers (industrial, as follows: i. Underlying assumption on volume Compared the estimated volume commercial and household I customers) determined by the company with benchmarks that the company has developed based on historical E experience which we performed analysis, then sought and assessed explanations for variances from I ii. expected benchmarks. Underlying assumptions on price We reviewed the assumptions of price per unit I by comparing the price applied with current estimated billing internal trends and data. I Assessed the overall consistency period on period of the assumptions and of the inputs to the calculation of estimated value of I revenue We developed an expectation with regards to prepayments made by customers and prepaid I meter recorded usage amount and balance outstanding recorded as deposit from customers. We reviewed and analysed the prepaid non I purchase rerun report We conducted an IT audit on the prepayment system I I [ I I Trade receivable GHC 3,983,281,000 Our audit work included the following: I The trade reported in receivables a are summarized We agreed the opening balances of the total customers balances to the signed financial I accounts receivable aging report. statements for the year ended 31 December 2016. We analysed and reviewed the total customers The business carries significant balances for the year ended 31 December 2017 I exposure recoverability over of the customer We agreed the Customer Management System (CMS) balances to the general ledger balances receivables. An allowance for We confirmed some selected customers balances I doubtful debt is provided based on an estimate of future cash We reviewed the aging analysis report for the total customers balances flows. In arriving at this I estimate, the current aging profile of debt, historical We assessed the appropriateness of the company's provisioning methods, we reviewed management's assumptions comparing them to historical data on I collections experience and an assessment of current economic cash collections and write-offs We evaluated the company's controls over the debt conditions are considered. collection processes and the estimation of the bad I debt provision, including the process for reconciling sales, cash receipts and the general ledger We checked whether the provision has been I accurately and consistently calculated in line with company policy, tested the accuracy of the I ledger aging information by verifying a sample of underlying invoicing transactions and evaluate the level of cash collected subsequent I to period end. We assessed the adequacy of the company's disclosures about the degree of estimation involved I in arriving at the debt provision. Material losses - non-technical revenue losses I As disclosed in note 36 to the financial statements, material electricity losses of 24.32% (2016: 23.74%) were incurred as against the Public Utility Regulatory Commission's (PURC) I approved system losses of 21% (2016: 20%). These arise mainly from transmission losses, meter tampering and bypasses, illegal connections to the electricity network and illegal I vending of electricity. Other information I The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and the Directors' Report, as required by the I Companies Act, 1963 (Act 179}, but does not include the financial statements and our auditor's report thereon. E I Our opinion on the financial statements does not cover the other information and we do I not express any form of assurance conclusions thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially I inconsistent with the financial statements and our knowledge obtained in the audit, or otherwise appears to be materially misstated. I If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. I Responsibilities of the Board of Directors for the Financial Statements I The Board of Directors is responsible for the preparation and fair representation of the financial statements in accordance with International Financial Reporting Standards {IFRS) I and as required by the Companies Act,1963 (Act 179) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. I In preparing the financial statements, the Board of Directors is responsible for assessing the company's ability to continue as a going concern disclosing as applicable, matters related to I going concern and using the going concern basis of accounting unless the Board of Directors either intend to liquidate the company or to cease operations, or has no realistic alternative I but to do so. The Board of Directors is responsible for overseeing the company's financial reporting I process. Auditors Responsibilities for the Audit of the Financial Statements I Our objectives are to obtain reasonable assurance about whether the financial statements I are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in accordance with ISAs will I always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of I these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: I • Identify and assess the risk of financial misstatement of the I 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 I basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one I I resulting from error, as fraud may involve collusion, forgery, I intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the I 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 company's internal control. I • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related I • disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit I evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we I conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are I inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's I report. However, future events or conditions may cause the company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the I financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in I • a manner that achieves the fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entity or business activities within I the company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the company audit. I We remain solely responsible for our audit opinion I We communicate with the Board of Directors, 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. I Report on other legal requirements The Companies Act, 1963 (Act 179) requires that in carrying out our audit we I consider and report on the following matters. We confirm that: i.) we have obtained all the information and explanations which to E the best of our knowledge and belief were necessary for the purposes of our audit; ii.) in our opinion proper books of account have been kept by the [ company, so far as appears from our examination of those books; and p I I iii) the companys statement of financial position and statement of I comprehensive income are in agreement with the books of account. I ........................................... I Signed by: Nii Akwei Tetteh (ICAG/P/1381) For and on behalf of: CFY Partners (ICAG/F/2019/073) I 134 Robinson Crescent, Swanlake Road PMB 2 North Kaneshie Accra, Ghana I I I I I I I I I I I I E I ELECTRICITY COMPANY OF GHANA LIMITED I ~!i':..,,'\1~31~l.:h'tr .:J~ !L:'h·,1;.J;1;J~l~~'J-jA'.'.(~!JxJ~!h~il:'/1J!J.i.I,:;!,:\ 6,530,840 ' 97,020 109,010 5,990,133 I Borrowings - due within one year Total liabilities 28 (b) ,}38,486 '1159"053 ,-I , ·-· I iiJ!foo1 , I . I 294,158 6,490,321 10,230,080 I Total equity and liabilities - 19;Z45~783 The financial statements and accompanying notes on pages 14 to 47 were 18,295,726 approved by the Board of Directors on ........ J ..C!.±i........_........ January 2019 and I signed on its behalf by: , ~ C h a i r p e r s ~ Managing Director: ' -~ I Name: l~L-1 41tiJ1Jz{ftVDName: -~~WG-\- ~"{e--kf~\h4- I Date: 11 0 \ u t \ ~ ( I ~ Date: 'Sc; /' U l / 1 S 11 I I ELECTRICITY COMPANY OF GHANA LIMITED I 1::~"~,~.1·,1~~~· j; ('.;;J~j,'l£1:it h', ~l~Jffll'/ ~~J,;, ·i;t; , ' , 1;1,:1;,),i,: :.3).' •. D' ;JlJsl!Jls!)..:J:l.,~,\'.)J,:J,-3,i' -~~/ • •> , : . ·, •~ '. : , ,' :, ,, ~ ~ ',, i ', . · ' . , ·, · I Stated Gov't Other components Capital Income Total capital equity surplus surplus I GHS'OOO GHS'OOO of equity GHS'OOO GHS'OOO GHS'OOO GHS'OOO I Balance at 1st January 2017 Loss for the year 5 8,064 7,093,650 . 659,558 .(497,4'2.3) Development finance I Share of associate in previous years Net revaluation surplus after tax Transfer of depreciation charge on ppe out of I revaluation surplus net of tax Transfer to deferred tax I Share of other comprehensive loss from associate company Balance at 31st December 2017 I Balance at 1st January 2016 Profit for the year 5 8,064 239,930 4,301,070 179,030 20~605 4,728,099 20~605 I Development finance Share of associate in previous years Net revaluation surplus after tax 64,439 3,088,149 64,439 3,088,149 I Transfer of depreciation charge on ppe out of revaluation surplus net of tax Transfer to deferred tax (271,923) (23,646) 271,923 (23,646) I Share of other comprehensive profit from associate company Balance at 31st December 2016 5 8,064 304,369 7,093,650 659,558 8,065,646 I The notes on pages 14 to 47 form an integral part of these financial statements and should therefore be read in conjunction therewith. I I I I 12 I [ . I ELECTRICITY COMPANY OF GHANA LIMITED I I 2017 2016 I Operating activities Net cash inflow from operating activities Note 31(a) GHS' 000 .569;Q40, GHS'OOO 844,764 I Investing activities Interest paid/cancelled . (9;820), (28,302) I Interest received Payments to acquire property, plant & 7 :~i;6~9 11,151 (99S,2&0)'· I equipment and towards capital work in progress Proceeds from sale of property, plant & equipment Government/Customer contribution to property, 13a ~ts (1,068,414) 2,471 I plant & equipment Net cash outflow towards investing activities 159,874 (923,220) I Financing activities Long term loan drawdowns/capitalization 28a 239,500 297,111 (20,849) (73,499) I Long term loan repayments/transfers Development finance drawdown Net cash inflow from financing activities 28a 23 2,052 220,703 64,439 288,051 I Increase (Decrease) in cash and cash equivalents in the year (132,261) 209,595 I Cash and cash equivalents at 1st January 386~297 176,702 1 •· I 036. Cash and cash equivalents at 31st December 32(b) 25'1 386,297 I I I I I 13 I [ I I ELECTRICITY CCJVIPANY OF GHANA LIMITED I l•' t,J~::\.." -.,....,..,.. -~_., l!l!'l' ._.: ·~~·"f ;~•j,li.pt..i(,(,\j[ C F , ~,~,"~'*1' (.~.#·~·~tii:i.~i;.~ :.;. J#..fl:'.,.,~Jj~!:~ .. ,. ' :· :·· ;· :1·::, ~,· , '<, .:·~' ~ ' •i:·, · ' ' :~2!t ·~.. 1:: ,'f,,.S;,Jic ..:h'J!l~!! ;,.~'r 1!J. :·,,_:·,, "i.:1~U1J,t (1,~ \t,i&,1_~::1.;J'.} ' ' ,, " ' ' I 1.0 REPORTING ENTITY I Electricity Company of Ghana Limited is a wholly state owned private limited liability company incorporated and domiciled in Ghana. The address of its registered office is Electro-Volta House, P 0 Box 521 Accra. The company is primarily involved in distribution of electricity to the southern I part of Ghana. The company is not registered on any stock exchange. I The financial statements of Electricity Company of Ghana Limited for the year ended 31st December 2017 were authorized for issue in accordance with a resolution ofthe Board of Directors on ........ January 2019. I 1.2 BASIS OF PREPARATION I The company's financial statements are prepared in Ghana cedis, which is the company's functional currency. The Ghana cedi (GHC) is the currency of the primary economic environment in which the company operates. I The financial statements of Electricity Company of Ghana Limited have been prepared in I accordance with International Financial Reporting Standards (IFRS) and their interpretation as adopted by the International Accounting Standards Board. The financial statements have been I prepared under the historical cost convention, as modified by the revaluation of property, plant and equipment, assets available-for-sale, and financial assets and financial liabilities at fair value through profit or loss. I 1.3 USE OF ESTIMATES AND JUDGEMENT I The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a higher degree of judgement or I complexity, or areas of assumptions and estimates which are significant to the financial statements. I 1.4.3 STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE The company has elected not to early adopt the following standards, amendments and I interpretations to existing standards that were issued but not yet effective, for the accounting periods beginning ist January 2017. Their application will however not have significant impacts on I the company's financial statements. I 14 I I ELECTRIC ITV COVIPANY OF GHANA LIMITED I I I Standard/ Interpretation Content Applicable for financial years beginning on/after IFRS 9 Financial Instruments ist January 2018 I IFRS 15 Revenue from Contract with Customers ist January 2018 IFRS 16 Leases-Replacement of IAS 17 Leases ist January 2019 I If RS 9 Financial Instruments: Classification and Measurement I IFRS 9 addresses the initial measurement and classification of financial assets and will replace the relevant sections of IAS 39. I Under IFRS 9 there are two options in respect of the classification of financial assets, namely, financial assets measured at amortized cost or at fair value. Financial assets are measured at amortized cost when the business model is to hold assets in order to collect contractual cash flows I and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value. Embedded derivatives I are no longer separated from hybrid contracts that have a financial asset host. The amendment will not have any significant impact on the company's financial statements. I IFRS 15 Revenue from Contracts with Customers I This standard will replace the existing revenue standards and their related interpretations. The standard sets out the requirements for recognizing revenue that applies to all contracts with I customers (except for contracts that are within the scope of the standards on leases, insurance contracts or financial instruments) I The core principles of the standard is that revenue recognized reflects the consideration to which the company expects to be entitled in exchange for the transfer of promised goods or services to I the customer. The standard incorporates a five step analysis to determine the amount and timing of revenue I recognition. The standard will be applied retrospectively. The standard does not apply to revenue associated I with financial instrument, and therefore does not impact majority of the company's revenue. The I 15 I I ELECTRICITY COVIPANY OF GHANA LIMITED I '-~~~~ 'K!J ,~;1_; ;· -w~~~t.c.H ,:,',( -;1v;~\lr!,;l11RPts ·· · ·~~;, 1 ~,,di ;}H.? •. } t .: :r~ !'.. ?{: : ,'~.·w~J..tJ~iJ,;.L,' ,. '· ".·, . ' . . . E 2.12 OFFSEITING OF FINANCIAL INSTRUMENTS I Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position if, and only if, there is currently enforceable legal right to offset the recognized I amounts and there is an intention to settle on a net basis. I 2.13 EMPLOYEE BENEFITS Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognized for the amount expected I to be paid under short term cash bonus if the company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the I obligation can be estimated reliably. The company has a provident fund scheme for all permanent employees. Employees contribute between 7.5% and 10% of their basic salary to the fund whilst the company contributes 4%. The I obligation under the plan is limited to the relevant contribution and these are settled on due dates to the fund manager. I Under a 3 Tier National Contributory Benefit Pension Scheme, the company contributes 23% of employee's basic salary, whilst the employee contributes 10.5%. The first tier of 13.5% is paid I to and managed by Social Security and National Insurance Trust (SSNIT). I The second tier of 5% and the third tier of 15% are paid to and managed by trustees of ECG Pension Scheme. The obligation under these plans are limited to the relevant contributions I and these are settled on due dates to the trustees. 2.14 ASSOCIATE ENTITY I Associate is an entity over which the company has significant influence but not control, accompanying a shareholding of 20% of shares. Investment in the associate entity is accounted E for using the equity method of accounting and is initially recognized at cost. The company's share of associate's post-acquisition profits and losses is recognized in the income statement, and its share of post-acquisition movements is adjusted against the carrying amount of the I investment. When the company's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the company does not recognize I further losses, unless it has incurred obligations or made payments on behalf of the associate. l 20 I I ELECTRICITY COVIPANY OF GHANA LIMITED I \1 ... ,~~-: 1f!'A\ ~ ' .,r.,0 ,-..;.,:..; 1":1; ••• ;t11,1~.1.1t;.i[,,.i·t ,~'"·~';i:,r,r:..,,·.11,.... ··. .i.1,L.~,~ "-~ -.~,, '"'~ ,Jt.;...u1J.:,~JIJ ~ · · · ,,. '.: ~ · · -;_~$1.:,:,.1,11;J.: }'.fi;~!J;i ~(~r -~~ ;~:.I W~,;l'~~;' •:~( L,~.µl,g!~L';l,!Jti .. . .. . . . ., . I 2.15 INVENTORIES I Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method. Net realizable value is the estimated selling price in the ordinary I course of business, less applicable variable selling expenses. I 2.16 BORROWING COSTS Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are I capitalized as part of the cost of the respective assets. I 2.17 REVENUE RECOGNITION Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of business of the company's activities. Revenue is I shown net of value-added tax, returns, rebates and discounts. The company recognizes revenue when the amount of revenue can be reliably measured; it is probable that future I economic benefits will flow to the entity and when specific criteria have been met. The criteria met when electricity power that is distributed to customers through post-paid and prepaid I meters and actual power used by each customer for a particular period is determined and the applicable tariff applied. t 2.18 FINANCE INCOME AND EXPENSES Finance income comprises interest income on funds invested and is recognized in the income I statement using the effective interest method. Finance expenses comprise interest expense on borrowings. All borrowing costs are recognized in the income statement using the effective interest method. I 2.19 INCOME TAX I Income Tax on the profit for the year consists of current and deferred tax. Income tax is recognized in the Statement of Comprehensive Income, except to the extent that it relates to items recognized directly in equity. Current tax is provided at current rates and is calculated on I the basis of results for the period, taking account of manufacturing relief, where appropriate. E Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting I 21 I I ELECTRICITY COVIPANY OF GHANA LIMITED I I purposes and the amounts used for taxation purposes. Deferred tax assets are recognized only to the extent that the Board considers that it is more likely than not that there will be suitable I taxable profits from which the future reversal of the underlying temporary differences can be deducted. I Deferred tax is measured at the tax rates that are expected to apply in the periods in which I timing differences reverse, based on tax rates and laws enacted or substantively enacted at the Balance Sheet date. Deferred tax is charged or credited to the Income Statement, except where it relates to items charged or credited directly to equity, in which case the deferred tax is also I dealt with in equity. I 2.20 EARNING PER SHARE The company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the I number of ordinary shares outstanding during the period. The company has no convertible notes and share options, which could potentially dilute its EPS and therefore the company's I Basic and diluted EPS are essentially the same. I 2.21 COMPARATIVES Except when a standard or an interpretation permits or requires otherwise, all amounts are I reported or disclosed with comparative information. Comparative figures have been adjusted to conform to I changes in presentation in the current year. 3.0 RISK MANAGEMENT I Risk is an active element in the business environment within which the company operates. The company is committed to successfully managing its exposure to risk and to minimizing its I impact on the achievement of corporate objectives. The following identify the components that the company has established as procedures to risk management process: I • Processes for identifying and prioritizing the company's risks for Management and Board; • Monitoring mechanisms to ensure proper execution of mitigation plans; l • Ongoing assessments to highlight trends and to identify new and emerging risks areas; E 22 I I ELECTRICITY COVIPANY OF GHANA LIMITED I I • Maintenance of a company's perspective on risk through a process of consolidating and I aligning the various views of risk across the company. The risk management framework outlined above is based on an enterprise risk management I model, which ECG adopted in 2009. This risk management process provides an integrated approach to risk and become an established best practice model for risk management. The I enterprise approach provides ongoing assessment of the consolidated risk position for the company. The combined risk plans of each Business Unit are reviewed to highlight trends and to identify common and interdependent risks across the company. I • HEALTH AND SAFETY RISK I The company is committed to the highest possible safety standards to protect against the risk of injury to staff, contractors and the general public. Safety is a core value of ECG. There is I continuing drive to maintain awareness among all staff concerning the importance of safety. A health and safety culture is strongly fostered throughout the company. I • REGULATORY RISK ECG regulatory risk relates to compliance with operational regulatory obligation and the impact I of price reviews and the ongoing unbundling and deregulation of the electricity generation market in the country. The company manages these risks through a team with representation from Finance, Legal, Engineering and Customer Services Directorates, and coordinated by the I Divisional Managers in charge of Corporate Planning and Regulatory and Governmental Affairs. The team provides inputs for tariff proposals to PURC and the ongoing deregulation of the I market for power generation and distribution. • BUSINESS PERFORMANCE RISK I Business performance risk is the risk that the company's business may not perform as expected either due to internal factors or due to competitive pressures in the markets in which it I operates. Performance risks are identified and mitigation actions are planned and assigned. At Corporate level, the overall business performance risk is managed through a number of I measures including but not limited to ensuring appropriate management team in place, rigorous budget and business planning, monthly and quarterly reporting and variance analysis, financial controls, key performance indicators and regular forecasting. E t 23 I I ELECTRIC ITV COVIPANY OF GHANA LIMITED I •,1 ei]:i;<.:·, ""' --1~ -~11; •W '~"I: ~ ':''h'~•h~ "'" 1r:J!,•J: ·:;1P•\1.i:,,,1~,11 1.'~"' _J.~.;,_,~,.,,._. .,_-, .;,,.,u,.;.,...11... ::.I "",~Fl• >r.-" : · ·. . ' . . .,;,t,~;; '1,a: ' ./JEL!.l~· .~_{j!JE!.!J ~\~.r 1 !L. . ;J :,-\!~JV -U~~t~iJ!J.;{i!:') . I I • KNOWLEDGE/SKILLS RISKS The company is mindful of its high dependency on the technical competence and credibility of I its management and staff. ECG is strongly aware of the need to be in tune with technology direction within the industry, if it is to maintain high standard of competence, effectiveness and I competitiveness. Accordingly, ECG continues to invest in staff training and development as well as ongoing performance improvement. ECG has introduced a balance scorecard methodology as a strategic management system. Corporate strategies are linked to individual work plans I against which staff are monitored continuously. I • FINANCIAL/TREASURY RISKS The main treasury risks faced by the company relate to foreign exchange, interest rate and liquidity. Policies to protect ECG from these risks are regularly reviewed, revised and approved I by the Board as appropriate. The Treasury Division at Head office is responsible for the day to day treasury activities of the company. For a more detailed description of the Treasury Division I activities and the management of related financial risks, see Notes 36 I I I I I I [ [ 24 I ELECTRICITY COMPANY OF GHANA LIMITED I I 2017 2016 REVENUE AND COST STRUCTURE GHS'OOO GHS'OOO I 1 Revenue Sale of electricity I Public lighting levy Govt. and cust. contribution amortisation 5,347,241 142,188 19,276 I Street lighting shortfall recovery Reconnection and meter maintenance fee 171,770 14,596 6,218,990 5,695,070 I 2 Direct costs I Power purchases Transmission cost 4,498,201 554,674 3,154,311 517,774 Operations 91,914 76,592 I Maintenance Transport 157;997 29,693 145,456 23,108 Depreciation . · . .,. 1·.'"2' 6 48ig' 477,968 I 3 Distribution costs , ,.,, .. ,,. 0 I. 5822I 205 "' ,.. ,., . . I . , 4,395,209 I Direct distribution costs Transport 16:1.)495 10,012 119,287 7,349 Depreciation ,9:lj~44 68,025 I 4 Administrative expenses 194,660 Overhead expenses 402,914 I Loss on sale of damaged and obsolete stock Loss on disposal of fixed assets 18 4,867 354,484 299 7,242 I Transport Depreciation 26,285 21,684, 22,404 15,781 455;768 400,210 I 5 Other income Hiring/charging of company transport 19 5 Rent income 42 I Other non-operating income ,13,296 38 17,256 17,299 I [ 25 [ I ELECTRICITY COMPANY OF GHANA LIMITED I 1, t • " 1:": ""'.~: ·~i~J~ ~lh'r:.1~l'H!.'L ·.:~;:. ·1Ji1·d3(~ (fd1!H, 1 H~Ji "I'::.,;. :!.~lE.t~~- _;;:~;:,)' EJ:1S1.?l~L1&3;: :1.!l!lr ~~•Mlt:i!J.;!!t' I Note 2017 GHS'OOO 2016 GHS'OOO 6 Other Gains I Financial assets revaluation gain through profit & loss 3,263 7 Finance income I Interest on short term investment & Loans 11,151 Foreign exchange gain(/loss): Sundries - I 11,151 8 Finance costs I Interest on long-term borrowing 75,881 I Foreign exchange loss: Long-term loans 58,265 Exchange loss capitalized (18,115) I Long-term interest creditors 40,150 25,435 Others 233,187 I 298,772 I 9 Share of (loss} profit of associate company 374,653 24% share of (loss) profit of Nexans Kabelmetal Gh. Ltd. - I Share of company tax - - 10 Tax on profit on ordinary activities I Deferred tax expense Provision of 25% tax on profit 90,513 I (lncrease)/Reduction in deferred tax assets in ti Origination/reversal of temporary differences 27(a)iii 27(b) 109,680 (46,747) I 11 Loss/Profit for the year The loss for the year is stated after charging: 153,446 Depreciation of fixed assets in service 561,774 I Salaries and wages Auditor's remuneration 354,705 - I Board remuneration 554 [ 26 l I ELECTRICITY COMPANY OF GHANA LIMITED I I 12 PROPERTY, PLANT AND EQUIPMENT SCHEDULE-- 2017 I VALUATION Balance at Revaluation Additions .• 'if Deletions/Transfers ;,: ai''"'''~ anc 1a. "t' ,, ·;: .· 01/01/2017 uplift During the year During the year .·n1i:2no11, ,-. ·~-·· ~ '- ' I GHS'OOO GHS'OOO GHS'OOO GHS'OOO ... .ttt: ·····.· ·'f:1Ptto,r.·.• · ·.·.· ·.,G S, ,.,,,... . ' ,~ ii:~~:, .. I Subtransmission Distribution 4,644,491 9,414,808 446,701 889,960 215,288 117,735 6,012 - s 3'c)g{astr I 10,41t;49f , I, . '"' Land and Building 414,427 85,825 94,159 - ,s9i}ait; I General tools Fixtures and Fittings 43,214 53,737 4,398 5,462 7,157 8,792 - - ·••. cc: .. •• ·,··,~tf' ,)i '&1iJ!roi ,.. t L, :. jj ,t,, I .. 1,s1~jsoo: I Meters Computer Equipt/Software Transport 1,278,264 89,877 145,033 125,128 8,448 14,419 108,742 16,722 - 1,534 - - . .. gti'i~:zf . •'"·•·• , I ·. ,;,;i1,lf1t3:, ,. ,. 1sin1i2aL I 16,083,851 1,580,341 568,595 Revaluation Depreciation ChargE Deletions/Transfer 7,546 ,... . "ifil!;}:1j}7S; I Net book value NET 11,008,644 ' '', J~ft?:::-: . " .f;t:tfffl~l:~ , ,-,.., ,.-.,; .. - '," , 1\l,'.&:c;'.: .. I Capital works in progress Note 13(a) 2,606,401 13,615,045 ,,.~;o:~13Z!i :··.a:sram,io I I 27 E [ I ELECTRICITY COMPANY OF GHANA LIMITED I , l'l:·r.~: ·dr; ·~•I.: :lh'Y!'h'LS1.:.l: ':Jf,;'U.fot~WJ!'!;li~,n~jJJ}' ', ·, ,,.' ,, , -· ' · , I -(;,,;1;,·,i~J.tl;lJ\!l,,i,;1~11:.l:!•tW,':~L. ....:,., " -· . . . . . , 12 PROPERTY, PLANT AND EQUIPMENT SCHEDULE -- 2016 I VALUATION Balance at Revaluation Additions Deletions/Transfers .., Balarice a(;::, 01/01/2016 uplift During the year During the year ~i../12/'1.0fG ( I GHS'OOO GHS'OOO GHS'OOO GHS'OOO ,; ',:;,})::g, -,=;,,,Hi:,, .,. ; ,~..-S'.o, I Land and Building General Tools 119,077 22,923 (32,517) 9,019 11,785 1,349 (977) - }Jt:,'369'', . ~3:291 Fixtures and Fittings 86,875 (80,614) 12,404 - ........;:l'*)G~S. I Meters Computer Equipt/Softwa 313,413 47,983 (60,999) 21,270 53,098 4,817 {3,540) .,,_ " ,·3(jf;972 (165) , ' , ,;zj;gos: ,,, Transport 235,117 (163,902) 18,022 (34,686) ' ' .:,~tsso I Net book value 6,296,450 6,538,129 (1,741,952) 561,774 (41,064) sot~2os , , I """" I 1:rot:Hf6'M , , , ' ,"'' ., ,.'Ji' ' I NET 6,538,129 .,,,1,i;QO: J;6~ ''"", ' ,?':;,: ,J.t'r,\ ,,.• Capital works in progresi 2,444,343 ·.,,.:'if~l ~~o:t' I I,,,., , 8,982,472 ;;,1~161!'(045' ECG appointed KPMG to act as independent advisor to carry out the valuation of its tangible fixed assets I on a continuing basis as at 31st December 2016. This valuation report was used by ECG as the basis for the revaluation of its scope in its financial statements as at the valuation date. I E 28 £ I ELECTRICITY COMPANY OF GHANA LIMITED I \'l~ 1 r~-.·,.~.1'hl; ::!h'J;,~~·191!\' ~)~!'H.=.i.1'J!=h ~'·'1~.~~~:iJ;l:: 1 . · · ·:: . · ';~,::~1, 1;!1'._l!,8!; :)~, t!)3,_~;!"'J~1),1s:,i'Ji~(~llli' I;_; ,, , ,.'I', _ _ " , , • . " , I 13a Capital work in progress 2017 GHS'OOO 2016 GHS'OOO I Balance at 1st January Additions during the year less exchange loss capitalised 2,606,401 ~95,260 2,444,343 1,068,414 Exchange loss capitalized 3i'M~ , " 18,115 .... (s&sfsgs') I Transfers to PPE in service during the year Balance at 31st December .. _3,066;3?,~. (924,471) 2,606,401 13b Capital work-in-progress by category I Development jobs Inventories reclassified project materials under cwip 21 i65758 6si:,u 1,683,642 748,527 Civil Works 20'§;321 167,934 I Rechargeable Jobs . ... ,,:c3i,s1s.. . . 3,066;3ZS: 6,298 2,606,401 14 Investment ~-·. I Associate company equity investment Balance at 1st January ·. ir· 2,9 6 2,966 Understated share of equity interest as at Dec. 2009 I Dividend received Share of loss/(profit) less company tax Share of other comprehensive loss-associate co. - ·- ,,'"\' ·~ ' I Balance at 31st December This represents 24% equity interest in Nexans Kabelmetal . . 2;966, 2,966 as at 2016 year end. In the year 2017, the investment I was diluted to 11% 15 Advances & loans I Opening/transfer from capital work-in-progress Revaluation gain 28,878 i,482 25,614 3,264 30,360 28,878 I 16 This represents IDA .. Loan to GoG sub-lent to ECG and the latter subsequently sub-lent part to GRIDCO Inventories I Electrica I materia Is Mechanical materials Materials-in-transit and others 31;889 43':i1g s:H9 29,567 2,979 . .. I 33,420 I Provision for damaged, slow moving and obsolete stocks 8~;147 i.,,(3,24'3) S,7_9~90~ 65,966 (2,357) 63,609 '., I ' ··~: 17 Trade and Other receivables Customer balances - Private 1AOtos'7 1,781,637 - MDA's & GWCL ,i,±~353 817,725 I Total Customer Balances Street lighting shortfall recovery - GoG Government subsidies 2,273,420 1,M3;ss1 645,9'/4 2,599,362 858,249 573,807 Other trade debtors ,;~3,020 t Staff loans and advances* C, . ..,.,. .s'· 31;1 8 4;024,059 6,359 36,193 4,073,970 t 29 I ELECTRICITY COMPANY OF GHANA LIMITED I E 2017 GHS'OOO 2016 GHS'OOO 18 Prepayments I Advanced mobilization to suppliers/contractors ...~2,992 27,941 I 19 Cash and cash equivalents Bank balances 358,031 Cash on hand 1 I Treasury bills Fixed deposits 6,699 118,586 I 20 Bank overdraft 483,317 Merchant Bank Ghana Limited .j2,757 27,634 I GCB Bank Ghana Limited Ecobank Ghana Limited 73,605. 11,838 6,323 13,805 Unibank Ghana Limited 4;42'2 - I Energy Bank Fidelity Bank 38,300 39,653 5,053 - I 1st Atlantic Bank Other overdrawn accounts 5,192 9,550 - 9,605 180,717 97,020 I 21 Stated capital Authorised number of ordinary shares of no par value: 500,000,000. I Shares issued and fully paid for consideration I other than cash is 50,000,000 shares. There is no unpaid liability on any share and there 5 5 are no shares in arrears I 22 Government equity Government equity represents surplus arising from conversion from corporation to limited liability .. . ,.:·,;: I company status 23 Other components of equity 8,064 8,064 I Balance at 1st January Additions during the year - development finance 304,369 2,051 239,930 64,439 Share of other comprehensive income . - - I Balance at 31st December .. 30_6,420 • 304,369 I 30 [ E [ ELECTRICITY COMPANY OF GHANA LIMITED l 2017 2016 I 24 Capital surplus GHS'OOO GHS'OOO Balance at 1st January t<>93,650 4,301,070 I Surplus on revaluation of fixed assets in the year Transfer to deferred tax on recognised surplus in the year t:'0'§1,·iiti) _:.}f~~t?J 4,117,532 (1,029,383) ":ZJ9ll,f4~2 7,389,219 I Transfer to income surplus account re-depreciation charge +\l~~J~,g) Transfer to deferred tax re-depreciation charge .J ·· · (271,923) (23,646) I Balance at 31st December 7,093,650 I 25 Income surplus Balance at 1st Jan 659,558 179,030 I {Deficit}/surplus for the year after tax Direct transfer from capital surplus net of tax Balance at 31st December (497,423) .316,646 208,605 271,923 . .418,781 659,558 I 26 Deferred credit (a) Government contribution I Balance at 1st Jan Additions during the year 3'84;402 4:z°,~85 275,528 119,895 I Amount transferred to income statement 395,423 (11,021) Balance at 31st December 384,402 I (b) Customer contributions Balance at 1st Jan 2fs,,2'bcf 206,360 I Additions during the year : ·' .~/;';·:...;~/~•It,;./;:' ,,:~;;;:~0;335. 268t535 40,094 246,454 · (9;s":ts) I Amount transferred to income statement Balance at 31st December .2S9;'007 {8,254) 238,200 I Total 670;418 622,602 I I 31 [ E ELECTRICITY COMPANY OF GHANA LIMITED I I I 27 Deferred tax liabilities 2017 GHS'OOO 2016 GHS'OOO I 27(a): (i) Property, plant and equipment Balance at 1st January 1,375,108 I Recognised in income during the year Balance at 31st December 982,636 2,357,744 I (ii) Direct transfer from capital surplus Balance at 1st January 85,602 61,956 Transfer during the year 23,645 I Balance at 31st December ' ,85,602 ', 85,601 I (iii) Deferred tax assets Balance at 1st January (109,680) (lncrease)/Reduction in deferred tax assets in th .____._..:,_~ (100,453) 109,680 I Balance at 31st December (100,453) - Total 2 .. ··''815 512 2,443,345 I ' ...,.,,,., ' '' .. " ' 27(b) Movement related to revaluation, origination I and reversal of temporary differences. Deferred tax liability due to mismatch of bases 2,357,744 I Opening deferred tax Deferred tax for the year 22·9;923 (1,375,108) 982,636 Deferred tax attributable to revaluation (:Z74J67) (1,029,383) I Deferred tax income/(expense) related to the I origination/reversal of temporary differences (44,244} (46,747) I I 32 I [ E f ECTRICITY COMPANY OF GHANA LIMITED Taxation payable Income tax Balance Payments Charged to Balance at I 1/1/2017 during P&L 31/12/2017 the year account I GHS'OOO GHS'OOO GHS'OOO GHS'OOO GHS'OOO 2008 (5,655} (5,655). (5,655} I 2009 2010 (5,655) (18,497) (5,655} (18,497) 2011 (18,497) (18,497) I 2012 (18,497) (18,497} 2013 (18,497) (18,497) I 2014 2015 (18,497} (18,497) (18,497} (18,497) 2016 (18,497) {90,513) (109,010} I 2017 (109,010) (109,010) I Tax liabilities up to and including the 2006 assessment have been agreed with the tax authorities. The remaining liabilities are however subject to agreement Wilh the tax authorities. 17(d) Reconciliation with effective tax rate 2017 2016 GHS'OOO GHS'OOO I (Loss)/Profit before taxation (642,120) 362,051 I Income tax using domestic tax rate (25%} Deferred tax (144,697). 90,513 I Current tax charge (144,697) 90,513 I I 33 E [ , I I ELECTRICITY COMPANY OF GHANA LIMITED 1·1r>r:,; V~) 'r~I.? ~h·,:.,~1 1.0,:.'L ;n ~)"·* 1!~1.'~r..: 1 :i.~;,nJH.;; .,.~ ~,:, : , l!t::t!J :5!.~1U '&~J;J.~;, ~P.1'l Jf,.~J1ljb~ 1 . . BORROWINGS I · 28(a): Due after one year Balance as at 01/01/17 Drawdown Repayment Exchange difference I GHS'OOO GHS'OOO GHS'OOO GHS'OOO IDA 2467 82,377 10,935 I IDA 2682-1-GH DSUP IDA 4356-GH 246,446 32,715 . IDA 4730 250,919 16,168 33,309 I NDF 80 2ND BULK SUPPLY POINT /SIDA 21,785 444 2,892 . 71 I KFW NO. 9866070GH CGH101201A(CFD-INV) 17,492 8,083 3,387 1,565 CHIRANO LOAN 1,755 (295) 90 I WESTERN DIAMOND LOAN AfDB LOAN 7,354 84,500 (1,547} 377 4,335 ADFLOAN 28,691 I IDA CR NO. 56290 CAL BANK LOAN 17,925 176,716 12,910 . I BXC 246,815 967,970 239,500 {19,007) {20,849} 102,586 Less: I Due within one year {294,158) Due after one year 673,812 I 28{b): Due within one year Loan Balance at Balance }! • Mt ;. ·· ... ;; I IDA 2467 1/1/2017 82,376 31/li/20~~ 93,312 ,j . IDA 2682 I 1.oaj:io~; ; IDA 4356-GH IDA 4730 KFW NO. 9866070GH 95,522 80,567 6,664 · ~.1~t I NDF 80 2ND BULK SUPPLY POINT 21,785 444 ':i I AfDB Loan CGH 1012 01A {CFD-INV) 2,110 4,409 CHIRANO LOAN 281 [ 294,158 34 [ I ELECTRICITY COMPANY OF GHANA LIMITED I . . 1t":l:J~ :v-: · r:!, •m* :1 ll'L!.h'l~hi! ~ii r,:.',1 ~ .;l~l.=l~JH~): ~!J;11 ~,;1;- 1 I '(;1.:.1.:, ·.=W~l :5:£1 r --E)~l~i1 :A!J.!]/tJ~.t\3l,fi!l,,a1!t} .. . .. ··" I 2017 GHS'OOO 2016 GHS'OOO 28(c): Interest on long-term borrowings I (i) (ii) IDA 2467 IDA 2682-1-GH 6;723 6,088 4,489 14'033. I (iii) (iv) IDA 4356-GH IDA 4730 . I . 14;287 • 12,543 10,727 (v) KFW NO. 9866070GH S94 508 I (vi) (vii) CGH 101201A (CFD-INV) AfDB loan 2S2 880 i 220 794 (viii) Chirano loan 44 46 I ix) X) Western Diamond BXC 553 9,223 ; 612 3,313 I 46,589 39,340 I I I I I I I I I 35 [ I tECTRICITY COMPANY OF GHANA LIMITED .1'1:" ·: ·r-r> 'r,;,J: ·::lh'.1:.1(lSIJ.:.'L <111 1:.'il~M:h'h~::;tQJifUW.E : ~,; ~ 1' JPL=i..!1 ~~ r !J.5.sl=tDJ.:J3.i:.~/ \~.~.!.UUl • · , ,. . . . . , " . r te 28 (d) IDA 2467 The IDA 2467 credit facility is a loan from the International Development Association {IDA) of I SDRSS,200,000 granted to the Government of Ghana in 1993 and relent to ECG and Volta River Authority. ECG's portion of SDR29,135,000 which has been increased to SDR29,400,000 is to finance the National Electrification Project. The loan is repayable in equal semi-annual instalments I from June 1998 to December 2013. Interest is at the rate of 7.6% per annum on the outstanding loan balance payable 15th June and 15th December each year. I Under the HIPC arrangement, the portion of the loan due but not paid and accrued interest at 31st December 2008 were cancelled. I I IDA 4356-GH IDA 4356-GH credit facility was a loan from International Development Association of SDR59,100,000 granted the Government of Ghana. I ECG'S portion of SDR24,740,000 a subsidiary loan agreement dated 9th November 2007 was for Energy Development and Access Project. I ECG shall pay to the Government of Ghana a commitment charge on the principal amount of the subsidiary loan not withdrawn from time to time at the rate of 0.5% on 1st February and 1st August I each year. The loan attracts an interest of 5.3% per annum payable semi annually on 1st March and 1st September each year and the Principal amount withdrawn and outstanding from time to time. The Principal amount is also repayable semi-annually on 15th March and 15th September, I and ending September 15, 2024. I NDF80 The NDF80 loan from the Nordic Development Fund of SDR4 million was granted to the Govern- ment of Ghana on 5th July 1994 and re-lent to ECG on the 25th March 1996. The proceeds of I the loan shall be used exclusively for the purpose of financing the extension of electricity from the national power grid to small urban centres and rural areas of Ghana. ECG shall repay to the Government, the principal amount of the loan within thirty years (from the date of the agreement) I in semi-annual instalments commencing after a grace period of ten years from the date ofthe loan without any interest. I I 36 E I I ELECTRICITY COMPANY OF GHANA LIMITED ~,,,·-~·: ·rr-'""* ;th'.r;.)~'lSf:)! ,)fAs'f=~M31~9!Fl ;(!'J;i:1.W}'' ·, I r_;_~1; ~1'.l!'l.~ ~~J !J3~L:J.a~l~lJl/ •J,ij/.t.LIJ· • C· . ,; . . .. ,.. . ·. ·. , " . . , Note 28 (d) (continued): Under the HIPC arrangement, the portion of the loan due but not paid and accrued interest at 31st December, 2008 were cancelled. SIDA LOAN The loan was a facility granted to ECG and VRA in 1997 of which ECG's portion represents SEK16.5 million. This was to finance the construction of the second bulk supply point. Under I the agreement the repayment shall be eighteen {18) equal semi-annual consecutive instal- ments, falling due on the earlier of (i) the date falling eighteen months after the commissioning I of the project or (ii) 30th June 2001 with zero interest rate in each case. Under the HIPC arrangement, the portion of the loan due but not paid and accrued interest at 31st December, 2008 were cancelled. I V KFW NO. 9866070GH The KFW No. 9866070GH was a loan of DMlO million granted to the government of Ghana in I 1999 under the German Financial Co-operation with Ghana. The loan is to be used for the importation of spare parts and components for the substitution of about sixty 33 KW Circuit I breakers and the replacement of 11 KV-Switchboards with vacuum breakers. Under a subsi- diary loan agreement, an interest of 3 per cent per annum is charged on the amount withdrawn and outstanding. The loan is repayable over 30 years in 60 semi-annual instalments with 9 I years grace period. The first instalment is due 1st June 2008. Under the HIPC arrangement, the portion of the loan due but not paid and accrued interest at 31st December, 2008 were cancelled. CGH 101201A (CFD-INV) The CGH 101201A (CFD-INV) is a credit facility on preferential conditions of 30.5 million French Francs granted by Caisse Francaise De Development directly to ECG. The loan is for the par- tial financing of investments required for implementing a support programme for the commercial I management of ECG. Interest on the loan is at the rate of 2.75% per annum. The loan will be repaid in 40 equal semi-annual instalments due on 30 April and 31 October each year. The first I instalment shall be due on 30th April 1998. A guarantee for this loan which was provided by Ghana Commercial Bank Limited is secured by an Escrow account at GCB. I Under the HIPC arrangement, the portion of the loan due but not paid and accrued interest at 31st December 2008 were cancelled. I I I 37 I r·1cTRICITY COMPANY OF GHANA LIMITED Note 28 (d) (continued): VII I CHIRANO LOAN This was an Investment in the construction of 31km of 33kv overhead line and upgrading the ECG I Primary Sub-station at Asawinso by Chirano Gold Mine Company Limited {CGMCL} amounting to $1,002,105.00 I Under an agreement dated 25th April 2008, ECG agreed to repay Chirano Gold Mine Company Limited {CGMCL), the amount invested over 15 years at an interest rate of 2.5% commencing April viii I 2008. WESTERN DIAMOND CEMENT LOAN ECG received a loan of 2.1 million from Western Diamond Cement to construct a 2*60MVA Double I Circuit Tower Line from Main C to Western Diamond Factory at Takoradi. The works also include the expansion of the existing primary substation at Apowa ( Substation C}. ECG is expected to repay ix I the loan over a period of 6 years starting from January 2016 at an interest rate of 8% per annum AFDB LOAN I The Government on lent an amount of UA12,190,000 to ECG on 27th April 2009 for the execution of Power System Reinforcement Project. Under the loan arrangement, ECG shall pay to the Government of Ghana the principal amount over 40 semi-annual equal instalment after a 10 year I grace period. The interest rate for the loan is 10% per annum from the 11th {2018} to the 20th year {2028} X I inclusive, and at the rate of 3% per annum thereafter. BXC LOAN I ECG's indebtedness to BXC after an audit of the materials used and the corresponding funds invested in Teshie, Bortianor and Nungua Districts of the ECG Operational Area. The total indebtedness to BXC on the investments in the three (3) districts, ie. Teshie, Bortianor and I Nungua is Eighty-five Million, Nine Hundred and Twenty-Eight Thousand, One Hundred and One USD and Ninety-Four US Cents. ( USD85,928,151.94). This was derived from a total validated material and operation and maintenance costs of USO 49,532,401.56 , interest of I USDll,66,663.02 and a repayment plan of 12 years monthly instalment at an interest of 6% per annum. I 38 I t [ I ELECTRICITY COMPANY OF GHANA LIMITED I I Xi IDA 4730 I This is additional IDA loan that the Government of Ghana on-lent to Electricity Company of Ghana Ltd to finance activities relating to the Energy Development and Access Project Project. The rate of interest for the loan is 5.3% per annum. The loan shall be repaid I over a period of 17 years I xii IDA 56290 This facility is a loan from the International Development Association of SOR 42,700,000 which was made available to the Government of Ghana for the purpose of providing I additional financing for activities related to the Energy Development and Access Project ECG, the state institution implementing the Project is a beneficiary of the loan in the I amount of SOR 42,700,000 (equivalent to $60 million) ECG shall repay the principal of the loan over a period of 17 years in 34 equal consecutive I instalments, from 15th June 2020 to 15th December 2039 I xiii ADF LOAN This is a loan facility that the Government of Ghana on lent to ECG from the African Deve lopment Fund to carry out a Project amounting to UA28.6 million (equivalent of $42.9 million) I ECG shall repay to the Government the principal amount of the On lent loan over a period of 40 years in equal semi-annual instalments payable semi annually on each 1st April and 1st October commencing from 1st October 2046 to 1st April 2065 I 2017 2016 GHS'OOO GHS'OOO I 29 Trade and other payables Power purchases & transmission charges 4,635";891 • 4,065,753 I Trade creditors Other creditors 11s;sj2 ' 1;480/i:69 . 384,798 1,352,296 I Interest creditors Emergency power producers 233~631. 5,386 · 181,900 5,386 6,53(),840 5,990,133 I 30 Capital commitments I At the statement of financial position date, there were capital commmitments totalling GHS694 million which have not been provided for in the financial statements. [ [ . 39 I ELECTRICITY COMPANY OF GHANA LIMITED I I 2017 2016 31{a) Reconciliation of net loss before tax to net cas~ GHS'OOO GHS'OOO I inflow {outflow) from operating activities Net loss /profitfor the year I Depreciation 362,051 561,774 Customer contributions amortisation {8,254) I Gov't contributions amortisation Other gains on advances & loans (11,021) (3,614) Exchange (gain) loss on long-term loans I and interest creditors (lncrease)/Decrease in inventory . j6}124 (16,294) 65,585 4,919 I Decrease/( Increase) in trade and other debtors {Increase) decrease in prepayments Increase in trade and other payables 49,911 (1S;OS1) 540,707 {1,537,883) {1,170) 1,400,212 I (Profit)/ loss on disposal of assets Share of associate loss/ (profit) 4,867 7,242 Interest expense 46,588 75,881 I Interest income (13,659) 569,040. (11,151) 844,764 I 32{b) Analysis of changes in cash and cash equivalents I Balance at 1st January Net cash inflow (outflow) . isG/l97 (.:i32J26:i). 176,701 209,596 I Balance at 31st December 254,036·. 386,297 I 33{c) Analysis of cash and cash equivalents as shown in the statement of financial position Change in the year I 2017 GHS'OOO 2016 GHS'OOO 2017 GHS'OOO GHS'OOO 2016 I Cash at bank and on hand Short-term investments 322,455 112,297 358,032 125,285 (35,578) {12,988) 205,095 26,034 I Cash & Cash Equivalent Bank overdraft 434,753 {180,717) 254,036 483,317 - 48,565 {97,020) 386,297 {83,697) {132,261) 231,129 {21,533) 209,596 [ 40 [ I I ELECTRICITY COMPANY OF GHANA LIMITED I ~~~ ~ \'r ~~~ .~,.~\' r r.]~~ ;I; ~t:~,~,r~ t/\l :fr.~ ff ~l:,1~~~ft! 1 ' \ \. • • ~': • " I ; I, : .. r ',;; ; ;.· ,·U'f:r·, '', I :,JI n: l:,~.::!l'}_!~j~,~\ '.41,d I J~~•,!fl,l,Jf,m;1•t· ' ' 34 Regulatory risk I A significant regulatory risk identified is delayed review of tariff rates in line with changes in macroeconomic indicators. This is more pronounced with United States dollar denominated Power Purchase Agreements where generation cost, a pass- I through cost could not be fully recovered through the tariff rates set by the regulator. Intervention to reduce generation cost under recovery is being discussed with the I regulator to include such shortfalls in subsequent tariff rates adjustments. Generation cost under recovery currently recorded is as follows: I 2017 GHS 2016 GHS m m I Opening balance 908 1,078 I Additions Closing balance (473) 435 l1lQl 908 I 35 Business performance risk The main business performance risk identified is high unaccounted for power I purchases, dubbed systems losses. The source of the systems losses is technical and commercial and between them, each contributes about 50% of the total losses. Technical loss is power lost through transmission and distribution due to over-aged and I obsolete equipment whilst commercial loss is primarily through power theft, faulty meters and unmetered premises. Measures being carried out to reduce the systems losses include metering of all I substations to accurately determine the percentage losses between technical and commercial losses. Thereafter interventions will be intensified in areas identified with high losses. In addition, introduction of split meters and installation of meters outside I facial boards of premises are being carried out to prevent by-pass of the meters leading to power loss. Unmetered premises are also systematically being eliminated from the system. I System losses currently recorded are as follows: 2017 2016 I Power purchased GWhs 9,999 GWhs 9,344 I I, Power sold 7,567 7,126 System losses 2,432 2,218 [ System losses % ~ __n I I I ELECTRICITY COMPANY OF GHANA LIMITED I t~t:_11~! 1::·,;,, ··r r~1 '!\~f~ ~( ~1 L~ t ~( ';1 1 ~~!- .':(' L ~, thY;!;;~t\1t~t~: ~·::1;, n 1,:: '1 ;:',1:;.- J! i:f, 1·~ ;~', ·_ "f ~: ~'J .:· _1:~!i'Jl~t~1;· ;,\!)1n J~1cn~1,·1!(.:;!t, I ~ ~ ' • ' ~ ~ • "' f, ,. 36 Financial instruments and financial risks I Overview of Financial Risk Management The company is exposed to the following main risks from its use of financial instruments: I • Credit risk; • Liquidity risk; • Market risk, I Policies to protect the company from the stated risks and others are regularly reviewed, I revised and approved by the Board as appropriate. Corporate treasury is responsible for the day to day treasury activities of the company through Director of Finance to Managing Director. I Through the Managing Director, the Board of Directors has delegated the broader responsibility of managing the company's risks in a manner consistent with risk tolerances I and business strategies. The Corporate Audit Directorate reports to Board sub-committee on Finance on assurance I in relation to the effectiveness of internal control and risk management from: summary information in relation to management of identified risks; detailed review of the I effectiveness of management of selected key risks; results of management's self assessment process over internal control. 36(a) Credit risk I Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the I company's receivables from customers. • Trade receivables I The company's exposure to credit risk is influenced mainly by the characteristic of each category of customer classification. The credit risk relating to customers is managed through the ongoing monitoring of debtors days and collection policy based on the I credit worthiness, size and duration of debt. Debt collection policy comprises a combination of internal debt follow up and the use of debt collection agencies. [ [ I I I ELECTRICITY COMPANY OF GHANA LIMITED I t,/' " , ;I:=~. , ;-i~ ,. '-_ , ~-,• '• I j~,~·::.> [~·1;-;:J\1\;·~i>;Lf'">/"!~. 1 ;/r ~·rj~)\~,;~~;~r~~- ~' r-' '•r ".,•,' ,, " ' I , , ,~"' ,rr=1~' "" [' ,t,," ,, "' . , . Ir •+: , ·. ,j,, ,··.1\'Jt;i:;,t:.. .;"1'~ :r '.~:.I,l'-R';J~k~J~li~' ,. I I • Allowance for impairment The company establishes an allowance for impairment losses that represents its estimate of incurred losses in respect of trade and other receivables. The main I components of this allowance are specific loss component that relates to individually significant exposures, and a collective loan loss allowance established for homogeneous I assets in respect of losses that have been incurred but have not yet been identified. The collective loss allowance is determined based on historical data of payment for similar financial assets. I • Exposure to credit risks The carrying amount of financial assets represents the maximum credit exposure. The I maximum exposure to credit risk at the reporting date was: 20171--2016] I Trade & other receivables Description GHSm 4,024 GHSm \ 4,074 I Cash & cash equivalents Total 254 4,278 386 4,460 I • Impairment losses The aging of trade receivables at the reporting date was: I Gross 2017 Impair Net Gross 2016 Impair Net I Description amount receivable -ment amount receivabl amount receivabl -ment amount receivab e e le I GHSm GHSm - GHSm GHSm GHSm GHSm Not past due 1,129 1,129 1,152 0.00 1,152 I Past due <30 days Past due 30-120 days 82 237 2 12 82 224 99 278 2 14 97 264 Past due >120 days 446 44 401 1,384 58 524 E Past due by more than one year 514 77 437 399 99 562 ( Total 2,408 135 2,273 2,772 173 2,599 I I E ELECTRICITY COMPANY OF GHANA LIMITED r ~ 1:~ --h ! :',1~~( 'j '....\J I ~ : ~ :ii1~r_ 1t'd r';· 1 i\ 1, : ; ~r: (' '!~ - 1 , I ~ , t, /;,{' ~ , ,1r-i· ,, ". 1.,~l:.-~!.i:) J\';. 1 ·r , .. ~ ,1~; - ~1 - 1, 1),::-(j'"'iJ)~tjlc\:t . . 1 I .:,~, 1 ;f~,- , ~..t'"'11ft,b~1.~F~,.,~1/ ,.• 1 I The movement in impairment allowance in respect of trade receivables during the year was as follows: I Impairment 2017 GHSm 2016 GHSm I Balance at 1st January Impairment (loss)/gain recognized 173 (38) 137 34 Balance at 31st December 135 173 I 36(b) liquidity risk Liquidity risk is the risk that the company either does not have sufficient financial resources I available to meet all its obligations and commitments as they fall due, or can access them only at excessive cost. The company's approach to managing liquidity is to ensure that it I will maintain adequate liquidity to meet its liabilities when due. The following are contractual maturities of financial liabilities: I December 2017 Non-derivative financial liability 2017 2016 I . GHSm GHSm Trade and other payables I Current portion of long-term borrowing 6,530 338 5,990 294 Balance at 31st December 6,868 6,284 I December 2016 I Non-derivative financial liability 2016 GHSm 2015 GHSm I Trade and other payables Current portion of long-term borrowing 5,990 294 4,577 265 I Balance at 31st December 6,284 4,842 [ [ 44 p I I I ELECTRICITY COMPANY OF GHANA LIMITED I I I 36(c) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the company's income or the value of its holdings of financial I instruments. The objective of the market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. I • Currency risk The company's exposure to foreign currency risk was as follows based on notional I amounts. 2017 I I Description Cash & cash equivalents USD'M 21.72 GBP'M 0.88 EUR'M 2.24 XDR'M - JPY'M - SEK'M - I Trade receivables 2.58 - - - - - I Long term borrovvings Other trade creditors (122.84) (425.33) (94.28) - (5.76) {9.40) (109.89) - - - (0.96) - I Gross exposure (523.87) {93.40) (12.92) {109.98) - (0.96) I 2016 Description USD'M GBP'M EUR'M XDR'M JPY'M SEK'M I Cash & cash equivalents 45.53 0.95 7.11 - - - Trade Receivables 9.60 I Long term borrowings (81.90) - (7.11) (134.61) - (0.96) I Other trade creditors Gross exposure (571.13) {597.90) (40.19) (39.24) (9.85) {9.85) (134.61) (3.76) (3.76) (0.96) I - [ [ I I I ELECTRICITY COMPANY OF GHANA LIMITED I I I The following significant exchange rates applied during the year: Currency Average rate Reporting rate I Year USD 1 2017 4.3501 2016 3.9996 2017 4.4179 2016 4.2023 I GBP 1 EUR 1 5.6339 4.9217 5.4103 4.2864 5.9708 5.2989 5.2003 4.4394 XDR 1 6.1195 5.5008 6.5108 5.7478 I JPY 1 SEK 1 0.0388 0.5107 0.0338 0.4577 0.0393 0.5386 0.0360 0.4642 I I • Sensitivity analysis on currency risk The following table shows the effect of strengthening or weakening of GHS against all I other currencies on the company's income statement. This sensitivity analysis indicates the potential impact on the income statement based upon the foreign currency exposures recorded at 31st December (see "currency risk above"). It does not however I represent actual or future gains or losses. The sensitivity analysis is based on the percentage difference between the highest daily exchange rate and the average exchange rate per currency recorded in the course of the respective financial year. I A strengthening/ weakening of GHS, by the rates shown in the table, against the following currencies at 31st December have increased/decreased equity and income I statement by the amounts shown below. I I [ [ I E E ELECTRICITY COMPANY OF GHANA LIMITED I I This analysis assumes that all other variables, in particular interest rates, remain constant. I 31-Dec 2017 2016 Income Income Income Income I statement impact: statement impact: statement impact: statement impact: % strengthening weakening % strengtheni weakening I In GHS Change GHS'm GHS'm change ng GHS'm GHS'm I USD 1.53 8.02 (8.02) 5.07 30.30 (30.30) GBP 5.64 5.27 (5.27) (3.88) (1.52) 1.52 I EUR 7.12 0.92 (0.92) 3.57 0.35 (0.35) I XOR 6.01 6.61 - (6.61) - 4.49 6.04 (6.04) JPY 1.27 6.51 0.24 (0.24) I SEK 5.18 0.05 (0.05) 1.43 0.01 (0.01) I -:---. I Chairperso~~ . Managing . Director.. ~.~ . I .--- . Name ...lCJU,.t .... 4.t'd) J!i!/:rf}C) ~~~j~-~Mf- I '.;0(c1 ! l\ Name.£.Jw..M.~ .... 30 ( (J ( / t l Date .................................................... . Date ........................................ . I I [ [