MINISTRY OF TREASURY AND NANCE 80ARD OF TRFASURY CONTROLLERS RE W E hRGY I Tý RATIbN TE'H-ICAL A SIS ANCE dmplelnented by TURKISELECTRCT YT$NSMISSO CQýPANY in ned U q rld Bank G jnt Agreemrent Nu b re TE-A 619 Between 01january2018 arid 3 july 20i9 Prepared by gehaR KMEN ustaf JS$mre BA KAL Se ior Trbasury Cåntrol-er 're iahry Co troller IRepor s unïher 124(33 7/6 INUEPENDffNT AUDITQWS R~-PøRT Septembe "i,21O4 kl PU3LIC 01 IX RK1 Y MINIS 1 RY 01 1 RI AS RY AND 1 INANCI Board o11 redsury Controllrs CONTENTS EXECUTIVE SU M MARY.. A. Project Summrary-. 3 B. Objectives of A udit.4 C. Scope of A udit.....4 Df. Audit Res ut..---4 E. Management Recommenddatio. 5 INDEPENDENT AU DIT REPORTS & F NANCIAL STATEMENTS OF THE PROJECT . 6 INDEPENDENTAUDITOR'S REPORT. 7 O pinion.. ...... . . . . . . . . . ..77 Basis for upiino-.7 Emphasis of Marter in the Financial Statement .. 7 Going Con cerne---........,.... Responsihilities of Managenient and Those Charged with Governance or other appropriate rerms Fnr the Financial Statements ....... ..ames.8....... ... -.........r_._ ..... -... _. Auditr's Responsibilitjes for the Audit of the Financial Statementstat.n..nt.... B 1 EXECUTIVE SUMMARY REPUBLIC Or URKI Y MINIS I RY OF IREASURY AND INANCI Board of fresur% Controllers EXECUTIVE SUMMARY A. Project Summary The Grant Agreement for "Renewable Energy Integration Technical Assistance Project No TF-A1619" has been signed between the International Bank for Reconstruction and Development, acting as administrator of grant funds provided by various donors under the Clean Technology Fund (CTF) and Turkish Electricity Transmission Company on 22 August 2016. The objective of the Project is to enhance capacity for generation planning, transmission planning, and grid management in the Republic of Turkey in anticipation of increased share of renewable energy in the generation mix. The project consists of the following parts: 1- Capacity enhancement for generation and transmission planning (a) Reviewing the methodology, available planning tools, data requirements and training needs for comprehensive development of the Recipient's generation and transmission planning capacity. (b) Providing a training workshop on available generation and transmission planning tools to select staff of the Recipient. (c) Purchasing a planning tool corresponding to the Recipient's requirements. (d) Providing training to select staff of the Recipient on operating the new planning tools to strengthen their capability to address complex planning related to the introduction of greater amounts of renewable energy sources, and private sector led capacity increase. (e) Implementing a model for planning and designing studies through: (i) the development of planning datasets; (ii) the specification of planning problem and scenarios; (in] the analysis pertaining to the following planning studies: (A) Base Generation Planning Requirements; (B) Renewable Energy Integration for 20 GW Wind Scenario; (C) Long Term Generation Augmentation in Turkey. 2- Capacity enhancement for SCADA based Smartgrid System (a) Strengthening the Recipient's staff capacity for operation of the SCADA based Smartgrid System through the provision of hardware and software training for, inter alia: (i) the SCADA based Smartgrid System ongoing operation; (ii) the preparation of databases and displays for the addition of new substations and power plants for the extended system; (iii) 3 REIPUBI C OF VURKI Y MINIS! RY OF FRFASURY AND I INANCI Board of I reasur% Controllers the modification of databases and displays for continual improvements; and (iv) the modification of the power system management rules and policies. Through the Grant Agreement dated 22 August 2016, a grant of 1.000.000 USD is envisaged to be used by Turkish Electricity Transmission Company within the framework of the "Renewable Energy Integration Technical Assistance Project". As of 31.07.2019, Turkish Electricity Transmission Company has used an amount of 991.074,40 USD and an amount of 8.925,60 USD has not been used. Turkish Electricity Transmission Company has used an amount of 496.882,86 USD from World Bank sources between 01.01.2018 and 31.07.2019. B. Objectives of Audit The objectives of our audit are; a) To give an opinion on whether the financial statements, prepared between 01 January 2018 and 31 July 2019, present fairly in all material respects the financial position of the Project in accordance with the cash receipts and disbursements basis of accounting, b) To determine, as of July 31, 2019, whether the Turkish Electricity Transmission Company has complied, in all material respects, with the rules and procedures of the Grant Agreement, c) To examine whether adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred with respect to Statement of Expenditures and evaluate eligibility of these expenditures for financing under the World Bank Grant Agreement. C. Scope of Audit We have performed an audit of financial statements of the project as of July 31, 2019 and for the period then ended in accordance with the cash receipts and disbursements basis of accounting. We have also performed a compliance audit on whether Project activities are in line with the Grant Agreement and related World Bank Guidelines. Our audit was conducted in accordance with the International Standards on Auditing published by International Federation of Accountants and related World Bank guidelines. There was no limitation in our scope for the Project's audit. D. Audit Results For the financial statements of the project; our audit resulted with an unqualified opinion. 4 RIPUBLIC 01: FURKI Y MINIS I RY OF 1RLASURY AND FINANCI Board of I reasur Controllers In addition, as of July 31, 2019, Turkish Electricity Transmission Company has complied in all material respects with the rules and procedures of the Grant Agreement. In our audit period, there was not any disbursement under the Statement of Expenditures (SOE). E. Management Recommendation Since we have not identified any findings during our audit, we have not issued a Management Letter. 5 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT RIPUIILIC OF I L RKE Y MINISI RY OF I RIASI RY AND I INANCI Board of I reasur% Controllers INDEPENDENT AUDITOR'S REPORT TO TURKISH ELECTRICITY TRANSMISSION COMPANY Opinion We have audited the Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Statement of Special Account of the Renewable Energy Integration Technical Assistance Project between 01 January 2018 and 31 July 2019, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by Turkish Electricity Transmission Company based on financial reporting provisions of the Grant Agreement Numbered TF-A1619. In our opinion; a) The accompanying Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Statement of Special Account present fairly, in all material respects, the financial position and cash flows of the Renewable Energy Integration Technical Assistance Project between 01 January 2018 and 31 July 2019 in accordance with the provisions of the Grant Agreement Numbered TF-A1619. b) Turkish Electricity Transmission Company, as of July 31, 2019 has complied with, in all material respects, the requirements of the Grant Agreement Numbered TF-A1619. Basis for Opinion 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 this report. We are independent of the Turkish Electricity Transmission Company within the meaning of "IFAC Code of Ethics for Professional Accountants" ethical requirements and have fulfilled our other responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter in the Financial Statement Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describe the basis of accounting. The financial statements are prepared to assist Turkish Electricity Transmission Company to comply with the financial reporting 7 RIUBLICOF URKEY MINIS I RY OF FREASURY AND FINANCI Board ol Freasur Controllers provisions of the contract referred to above. As a result, the financial statements may not be suitable for another purpose. Going Concern The Projects financial statements have not been prepared using the going concern basis of accounting. The project finished on July 31, 2019. Responsibilities of Management and Those Charged with Governance or other appropriate terms for the Financial Statements Turkish Electricity Transmission Company is responsible for the preparation and fair presentation of these financial statements in accordance with Grant Agreement Numbered TF-A1619, 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. Those charged with governance are responsible for overseeing the Turkish Electricity Transmission Company's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will 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 these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the planning and performance of the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 8 RHIUlBLICOF FURKI Y MINIS I RY OF TREASURY AND I IN XNCI Board ol'Trcasur: Controlers * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We are also required to provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 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TFA1619 (RENEWABLE ENERGY INTEGRATION TECHNICAL ASSISTANCE PROJECT) STATEMENT OF CUMULATIVE INVESTMENTS 01.0 1.2018-31.07.2019 and For The Year Then Ended (USD) Actual PAD Planned Variance I- DIRECT PROJECT COSTS YTV cumulative YTD Cumulative YTD Cumulative A-Goods and Non-consulting Services Contrac 768.376,27 1.195.231,86 0.00 1.028.307,64 0,00 -166 924,22 Al-SCADA/EMS Training 352.051,46 512.828.85 0,00 450.000,00 0,00 -62-828,85 A2-Long Term Development Planning Consui 416.324.81 416.324.81 0,00 352.817,64 0100 -63507,17 A2-Long Term Development Planning Opt.To 0.00 266.078.20 0,00 225.490.00 0,00 -40-588.20 Sub-Total 768.376,27 1.196.231,86 0.00 1,028.307,64 0,00 .166.924,22 TOTAL DIRECT PROJECT COSTS 788.376,27 1.196.231,86 0.00 1.028.307,64 0,00 .166.924,22 11-INDIRECT PROJECT COSTS A-Commission Expenses 4.00 15.15 0,00 0100 0,00 -15,15 B-Foreign Exchange Loses (net) 0100 0,00 0,00 0,00 0,00 0,00 TOTAL INDIRECT PROJECT COSTS 4,D0 15,15 0.00 0,00 0,00 -15,16 TOTAL PROJECT INVESMENTS 768.380.27 1.196.247,01 0.00 1.028.307.64 0100 -166.939,37 TEIAS RENEWABLE ENERGY INTEGRATION PROJECT TFA1619 SPECIAL ACCOUNT STATEMENT ACC.NO: 53001693 AT HALK BANK For The Year Ended 01.01.2018-31.07.2019 (USD) Notes Opening Balance 139.992,00 Reimbursement to SA 55.000,00 a) Advance 0,00 b) SOE Procedure 0.00 c) Summary Sheet 55.000,00 Refunds to SA 0,00 Intrest Income (net) 6 134,81 Available Funds 195.126,81 Payments made for Expenditures 194,988,00 Commisions 4,00 Transfer to the general budget 6 134,81 Service charges for the account 0,00 Total Project Investments 195.126,81 Closing Balance 4 0,00 Uuar,A rK zI ;t' eA$d GENERAL MANAGEMENT OF TURKISH ELECTRICITY TRANSMISSION COMPANY "RENEWABLE ENERGY INTEGRATION TECHNICAL ASSISTANCE PROJECT GRANT NO TFA1619" NOTES TO PROJECT FINANCIAL STATEMENTS AS OF THE END OF THE FISCAL YEAR 01.01.2018-31.07.2019 1. THE OBJECTIVES AND DESCRIPTION OF THE PROJECT The Grant Agreement for "Renewable Energy Integration Technical Assistance Project No TFAI619" has been signed between the International Bank for Reconstruction and Development, acting as administrator of grant funds provided by various donors under the Clean Technology Fund (CTF) and Tlrkiye Elektrik Iletim A.$. (TEIA$) on 22 August 2016. The objective of the Project is to enhance capacity for generation planning, transmission planning, and grid management in the Republic of Turkey in anticipation of increased share of renewable energy in the generation mix. The project consists of the following parts: I- Capacity enhancement for generation and transmission planning (a) Reviewing the methodology, available planning tools, data requirements and training needs for comprehensive development of the Recipient's generation and transmission planning capacity. (b) Providing a training workshop on available generation and transmission planning tools to select staff of the Recipient. (c) Purchasing a planning tool corresponding to the Recipient's requirements. (d) Providing training to select staff of the Recipient on operating the new planning tools to strengthen their capability to address complex planning related to the introduction of greater amounts of renewable energy sources, and private sector led capacity increase. (e) Implementing a model for planning and designing studies through: (i) the development of planning datasets; (ii) the specification of planning problem and scenarios; (iii) the analysis pertaining to the following planning studies: (A) Base Generation Planning Requirements; (B) Renewable Energy Integration for 20 GW Wind Scenario; (C) Long Term Generation Augmentation in Turkey. 2- Capacity enhancement for SCADA based Smartgrid System (a) Strengthening the Recipient's staff capacity for operation of the SCADA based Smartgrid System through the provision of hardware and software training for, infer alia: (i) the SCADA based Smartgrid System ongoing operation; (ii) the preparation of databases and displays for the addition of new substations and power plants for the extended system; (iii) the modification of databases and displays for continual improvements; and (iv) the modification of the power system management rules and policies. Through the Grant Agreement dated 22 August 2016, a grant of 1.000.000 USD is envisaged to be used by TEIAS within the framework of the "Renewable Energy Integration Technical Assistance Project". As of 31.07.2019, TEIAS has used an amount of 991.074,40 USD and an amount of 8.925,60 USD has not been used. TEIAS has used an amount of 496.882,86 USD from World Bank sources between 01.01.2018 and 31.07.2019. As of 31.07.2019, some 323.701,54 USD out of the total loan has been used through the Special Account and some 667.372,86 USD has been used through Direct Payment. 2. MAIN ACCOUNTING POLICIES In TEIAS, a separate accounting system has not been established for the World Bank projects. TEIAS obtains a number of loans from the Bank, and other international organizations, by which it utilized a substantial amount of funds at total. Financial statements of the project has been established according to the accounting principles based on cash collection and payment. 3. LIMITATIONS ON THE USE THE FUNDS AND OTHER ENTITIES In accordance with the Grant Agreement between the Turkish Government and the World Bank, the use of the funds in the Special Account is limited to the project objectives. Project funds left in the Account at the end of the project will be returned to the World Bank. 4. CASH BALANCE AS OF 31 JULY 2019 The cash balance in USD as of 31 July 2019 is as follows: Loan Funds Counter Part Total Funds Special Account 0,00 0,00 0,00 (Halkbank Ankara Corporate Branch) Fixed Funds 0,00 0,00 0,00 Checking Accounts (Local Bank 0,00 0,00 0,00 Account) Total 0,00 1 0,00 0,00 5. AMOUNTS PLANNED IN PAD The cumulative amounts for the financing of TEIAS projects under Renewable Energy Integration Technical Assistance Project (TFA 1619) are not included in PAD, however the project amounts in the Table of Sources and Utilization of Funds have been taken from the relevant Departments in TEIAS. 6. INTEREST INCOME The interest is charged by Halk Bank to the Special Account at Ankara Corporate Branch of Halk Bank. Since the net interest of 133.55 USD earned which was acquired from TEIAS's Special Account belonging to year 2017, was accrued on 08.01.2018, it is shown in the Table of Sources and Utilization of Funds belonging to the closing period and the beginning of 2018, mentioned interest income has been transferred to our running account in the same Bank with the instructions of our Company. However, since the interest income belonging to year 2018 wasn't accrued by Halk Bank, it hasn't shown in the current period. Since the net interest of 1,26 USD earned which was acquired from TEIAS's Special Account from the beginning of 2019 to the closing date, was accrued on 06.08.2019, it is shown in the Table of Sources and Utilization of Funds belonging to the closing period and as of the closing date of TEIAS's Special Account, mentioned interest income has been transferred to our running account in the same Bank with the instructions of our Company.Those gains are not used for the Project's purposes, they are used to finance ordinary business activities of TEIAS and accounted in the accounting system of TEIAS. 7. EXCHANGE RATE The currency of the grant no. TFA1619 is USD. However contracts for projects involve one or more currency. Therefore, payments are made the currency specified in the contract. Due to the time and parity difference between invoice amounts and payments dates may occur favorable or unfavorable foreign exchange gain or loss. Related issues has been given a place in the Statement of Sources and Uses of Funds. aute bt8- 3