EDM ELECTRICIDADE DE MO AMBIQUE E.P IBD O Power Efficiency and Retiability improvement project Maputo Independent Auditor's Report 31 Dezembro 2018 Tel: 258 21 300720 Av 25 de Setembro Fax: 258 21325091 no 1230,30 andar Bloco 5 JB D O Email:bdo@bdo co mz Maputo-Mogambique www bdo co mz CP 4200 TO EDM - ELECTRICIDADE DE MOcAMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) MAPUTO INDEPENDENT AUDITOR'S REPORT Opinion We have audited the financial statements of P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP), which comprise the statement of financial position as at 31 December 2018 and the statement of cash receipts and disbursements and notes to the financial statements, including a summary of significant accounting policies. In our opinion the accompanying financial statements present fairly, in all material respects, the financial position of the P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) as at 31 December, 2018, and its statements of receipts and disbursements for the year then ended, in accordance with basis of accounting as described in Note 2.2 and in the manner required by Mozambique legislation. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and other technical and ethical recommendation from Body of Accountants and Auditors of Mozambique (OCAM). Our responsibilities under those standards are further described in the Auditor's Responsibilities for Audit the Financial Statements section of our report. We are independent of the Entity in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Mozambique, 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. Emphasis of Matter - Basis of Accounting We draw attention to the Note 2.2 to the financial statements, which described the basis of accounting. The financial statements are prepared to assist the entity in complying with the financial reporting provision of the contract referred below. As a result the financial statement may not the suitable for another purpose. Our report is intended solely for the entity and should not be distributed to or used by parties other than the entity. Our opinion is not modified in respect to this matter. BDO Lda , uma empresa de respoosabilidade limitada Mogambacana, e membro da BDO international Limted, uma empresa Inglesa limitada per garantia, e faz parte da rede internacional de firmas independentes BDO. OO 0 a marca da rede BDO e de cada uma das suas firmas membros. NUIT 400068038, Sociedade por quotas, Capital social USD 70000 Matrcula 12019 na Conservatoria do Registo Comercial de Maputo AutorizaqAo para actividades de Auditona e Certificaoao de Contas per despacho do 27/10/99 de Vice-Ministro do Piano e Finanqas. Inscrita na OCAM com n' 02/SAC/OCAM/201 2. IBDO EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P158249 - POWER EFFICIENCY AND REALIBILITY IMPROVEMENT PROJECT (PERIP) In addition We have verified that: " The statement of the Special Account, as set out on pages 4 to 8, gives a true and fair view of the financial position of the Special Account for the year ended 31 December 2018, in accordance with World Bank Guidelines; and m In respect to Statement of Expenditure (SO), adequate supporting documentation has been maintained accordingly and such expenditures are eligible for financing under the Project Preparation Advance IDA V025-MZ and Grant number D238-MZ. Responsibilities ovManagemen t n Those hargeblwith Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements, in accordance with basis of accounting as described in Note 2.2 and in the manner required by Mozambique legislation, 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. In preparing the financial statements, management is responsible for assessing the Entity ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives 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 scepticism throughout 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 Audit report - Year ended 31 December 2018 2 IBDO EDM - ELECTRICIDADE DE MO(AMBIQUE, EP. P158249 - POWER EFFICIENCY AND REALIBILITY IMPROVEMENT PROJECT (PERIP) resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. " Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit 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 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 inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as going concern. We 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. BDO (MOZAMBIQUE), LDA Registered Audit Firm nr 02/5AC/OCAM/2012, represented by: 1R Pfl Engagement Partner: Abdul Satar A. Hamid Registered Auditor: O7I/A/OCAM/2012 Maputo, 24 July 2019 Audit report - Year ended 31 December 2018 3 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF SOURCES AND USES OF FUNDS AT 31 DECEMBER 2018 (Amount expressed in USD) GRANT D238 MZ Description Notes 31dec18 Accumulated Opening Balance IDA - Special account 129 050,00 129 050,00 129 050,00 129 050,00 Add: Sources of Funds Direct Payments PPF Application 640 348,00 640 348,00 EDM Application 1 396 108,00 1 396 108,00 3 2036456,00 2036456,00 2 165 506,00 2 165 506,00 Less: Uses of Funds Grant Account Payments 3 2 036 456,00 2 036 456,00 Special account payments: 4 122 984,00 122 984,00 2 159440,00 2 159440,00 Closing Balance IDA Special account 5 6 066,0 6 066,00 -1 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (Amounts expressed in USD) Description Notes 2018 Accumulated Receipts Direct payments 3 2 036 456,00 2 036 456,00 2 036 456,00 2 036 456,00 Payments (1) Goods, training, works, consultant's services for part 3 (a) of the Project 0,00 0,00 (2) Goods, works, non-consulting services, Operating Costs, Training and consultant's services for Parts 1, 2 and 3 (b) of the Project 1 396 108,00 1 396 108,00 (3)Refund of Preparation Advance 640 348,00 640 348,00 2 036 456,00 2 036 456,00 Surplus/(Deficit) 0,00 0,00 5 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (Amounts expressed in USD) IDA V025 - MZ Total credit Disbursement Disbursement Categories Agreement in prior years during the Accumulated Balance year 1) Goods, non-consuttants services, consultants services and operating costs 2 000 000,00 504 908,00 122 984,00 627 892,00 1 372 108,00 2000000,00 504908,00 122984,00 627892,00 1 372108,00 6 EDM - ELECTRICIDADE DE MO§AMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (Amounts expressed in SDR) GRANT D238-MZ Total credit Disbursement Disbursement Categories Areditn Disbursements during the Accumulated Balance Agreement in prior years year (1) Goods, training, works, consultant's services for part (3a) of the Project 1 403 000,00 0,00 0,00 0,00 1 403 000,00 (2) Goods, works, non- consulting services, Operating Costs, Training and consultant's services for Parts 1, 2 and 3(b) of the Project 103 757 000,00 0,00 999 300,00 999 300,00 102 757 700,00 (3)Refund of Preparation Advance 1 440 000,00 0,00 449 957,00 449 957,00 990 043,00 106 600 000,00 0,00 1 449257,00 1 449 257,00 105 150 743,00 7 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF THE SPECIAL ACCOUNT FOR THE IDA V025 - MZ FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (Amounts expressed in USD) Description Notes 2018 Total Opening balance as at 01 January 2018 129 050,00 129 050,00 Add: Current year payments 0,00 0,00 Total Add 129 050,00 Reduce: Current year payments: Application under PPF 4 122 984,00 122 984,00 Total Reduce 122 984,00 Balance as at 31 December 2018 5 6 066,00 8 EDM - ELECTRICIDADE DE MO AMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) NOTES TO THE FINANCIAL STATEMENTS 1 Introduction Entity designation Electricidade de Mogambique, EP Project designation Power Efficiency and Reliability Improvement Project (PERIP) Address Avenida Agostinho Neto n'70, Maputo, Mocambique Activities Rehabilitation and Upgrade of Network Infrastructure NUIT 600000063 Board of directors President: N/A Banks Standard Bank - 1081218741073 Description Amount (USD) Amount (SDR) % Donor/Contribution World Bank - Direct PaymentsGra 2 036 456,00 1 449 257,00 100 2 036 456,00 1 449 257,00 100 1.1 Description POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) was established between the Republic of Mozambique and the international Development Association. The objective of the project is to improve the operational capacity of the electricity network in the project areas and the operational efficiency of EDM. The project consists of the following parts: Part 1: Rehabilitation and Upgrade of Network Infrastructure; Part 2: Enhancement of EDM Operational and Commercial Operations: a) Organizational Restructuring, Process Reengineering and Capacity Building; b) Consolidation of SIGEM; c) Revenue Protection Program; d) Upgrade of Information Systems Part 3: Capacity Building and Implementation Support: a) Capacity Building and Implementation support for MIREME; and b) Capacity Building and Implementation support for EDM 9 EDM - ELECTRICIDADE DE MO(AMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) 1.2 Percentage of Expenditure Financed By Credit The percentages of expenditures for items to be financed by IDA Grant (D238-MZ) are as follows: C Amount of the advance % of Expenditures to be Categores allocated (SDR) financed (1) Goods, training, works, consultant's services for part (3a) of the Project 1 403 000,00 100 (2) Goods, works, non-consulting services, Operating Costs, Training and consultant's services for Parts 1, 2 snd 3(b) of the Project 103 757 000,00 100 Amount payable pursuant to section 2.07 (a) of (3)Refund of Preparation Advance 1 440 000,00 general conditions 106 600 000,00 1.3 Special account Project Preparation Advance (IDA V025-MZ), requires that a Special Account is open. The purpose of the Special Account is to pay eligible expenditures comprising of categories as set out in the credit account statement. These payments will be subsequently justified to IDA, with respective documentation or issuance of Statement of Expenditures (SOE's) for replenishment of the Special Account or refunding of the initial deposit. The Special Account was opened at Standard Bank. 10 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) 2 Accounting policies The following paragraphs describe the main accounting policies applied consistently by the project. 2.1 Basis of Presentation The Statement of Sources and Uses of Funds, compiled from Project accounting records, was prepared on the cash basis of accounting. Under the cash basis of accounting, receipts are not recorded until received in cash and disbursements are assigned to the period in which the cash payment is made. 2.2 Equipment and Supplies Expenditures relating to equipment and supplies are not recorded as assets in the Statement of Source and uses of Funds, but are controlled through a fixed assets register. 2.3 Advances to Suppliers Advances made to suppliers for future receipts of equipment and materials or services, are registered as expenses and allocated to the respective categories when the cash payment is made even if the receipt of equipment or services has not yet occurred. However, a financial control is maintained over advances and retentions. 2.4 Reporting Currency The financial statements are presented in United States Dollars (USD) unless otherwise stated. 2.5 Foreign Currency Transactions Transactions in foreign currencies are recorded in USD, at the rate of exchange ruling at the date of the transaction made by the IDA or at date of the replenishment of the Special Account. EDM - ELECTRICIDADE DE MO(AMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) 3 Direct payments Application Category Category Category (1) (2) (3) Total (USD) Tota(SDR) PPF Application PPF - Prin Reinstate 1 0,00 0,00 633 958,00 633 958,00 445 467,00 PPF- Charge 2 0,00 0,00 6 390,00 6 390,00 4490,00 0,00 0,00 640348,00 640 348,00 449 957,00 EDM Application Application 1 0,00 26 285,00 0,00 26 285,00 18 798,00 Application 2 0,00 45 541,00 0,00 45 541,00 32 810,00 Application 3 0,00 68 311,00 0,00 68 311,00 49 215,00 Application 5 0,00 69 741,00 0,00 69 741,00 49822,00 Application 6 0,00 205 929,00 0,00 205 929,00 147 114,00 Application 7 0,00 721 230,00 0,00 721 230,00 514 980,00 Application 8 0,00 47 020,00 0,00 47 020,00 33 667,00 Application 9 0,00 28 224,00 0,00 28224,00 20 191,00 Application 10 0,00 7 323,00 0,00 7 323,00 5 239,00 Application 11 0,00 7432,00 0,00 7432,00 5 388,00 Application 12 0,00 21 971,00 0,00 21 971,00 15 868,00 Application 13 0,00 45 132,00 0,00 45 132,00 32 628,00 Application 14 0,00 21 971,00 0,00 21 971,00 15 854,00 Application 15 0,00 79998,00 0,00 79 998,00 57726,00 0,00 1 396 108,00 0,00 1 396 108,00 999 300,00 0,00 1 396 108,00 640 348,00 2 036 456,00 1 449 257,00 4 Special account payments Category (1) Month Training Goods Consulting Operating Total in USD services costs February 0,00 0,00 5 638,00 13,00 5651,00 March 28 000,00 0,00 0,00 112,00 28 112,00 April 1 863,00 0,00 0,00 2,00 1 865,00 May 4500,00 0,00 15000,00 112,00 19612,00 June 0,00 0,00 45999,00 120,00 46 119,00 July 0,00 0,00 6 571,00 10,00 6 581,00 August 0,00 0,00 15 044,00 0,00 15 044,00 34 363,00 0,00 88 252,00 369,00 *122984,00 *This disbursement is included in the PPF - Prin Reinstate, WB Transaction number 01 12 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P158249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) 5 Closing balance Description Currency 31dec18 IDA V025 - MZ GRANT D238-MZ Banks Special account Standard Bank USD USD 6 066,00 0,00 Interest received USD 0,00 0,00 Closing balance 6 066,00 0,00 13 IBDO Av. 25 de Setembro, n°1230 3° andar bloco 5 Maputo-Moçambique www.bdo.co.mz bdo@bdo.co.mz