I nt..,},,f-kf '81.&.l\'1! JI.'l°h&.l'Lf'I! tT1lt\.h I f'LU/11 9"Coo&. h1A°lfr'T taC7 t'..7i'l The Federal Democratic Republic of Ethiopia I Audit Services Corporation I I INDEPENDENT AUDITOR'S REPORT TO THE SUPERVISING AUTHORITY OF I ETHIOPIAN ELECTRIC POWER We have audited the financial statements of Ethiopian Electric Power, Geothermal Sector I Development Project, financed under IDA Credit No. 54680- ET, which comprise the balance sheet as at 7 July 2017, and the statement of sources and uses of funds and the Designated Account statement for the year then ended, and a summary of significant I accounting policies and other explanatory information. Chief Executive Officer's Responsibility for the Financial Statements I The Chief Executive Officer of Ethiopian Electric Power is responsible for preparation of financial statements that give a true and fair view under the modified cash basis of accounting as described in note 2 to the financial statements and for such internal control as management I determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. I Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. I We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material I misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and I disclosures in the financial statements. The Procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor I considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the I entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I I ~ 251-011-5515222 Fax 251-011-5513083 E-mail: ASC@ethionet.com 815720 I 251-011-5535012 251-011-5535015 251-011-5535016 I I I INDEPENDENT AUDITOR'S REPORT TO THE SUPERVISING AUTHORITY OF I ETHIOPIAN ELECTRIC POWER (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a I basis for our audit opinion. Opinion I In our opinion the financial statements give a true and fair view of the financial position of Ethiopian Electric Power, Geothermal Sector Development Project, financed under IDA I Credit No. 54680-ET, as at 7 July 2017 and of its sources and uses of funds for the year then ended in accordance with the modified cash basis of accounting described in note 2 to the financial statements. I Report on Other Requirements In our opinion I - during the period IDA funds have been used in accordance with the conditions of the relevant financing agreement and only for the purposes for which the financing was I provided; - counterpart funds have been provided and used in accordance with the financing I agreement, and only for the purposes for which the financing was provided; - goods, works and services financed have been provided in accordance with the I relevant financing agreement and disbursement letters: - all necessary supporting documents, records and accounts have been maintained in I respect of all Project activities; - the funds disbursed covered expenditures that are eligible for financing under IDA I - Credit No. 54680-ET; there was a clear linkage between the books of account and the financial statements; I - our examination reveals no major weaknesses or irregularities in the system of internal control over financial expenditures other than that mentioned in the I management letter. - the Designated Account has been maintained in accordance with the provisions of the I financing agreement and funds disbursed out of the Account were used only for the purposes intended in the financing agreement. I })_v.J;t_ i<;;e~-C? ,T~ Lov-po v-ok;u\.,, 3 January 2018 I 2 I I I I ETHIOPIAN ELECTRIC POWER GEOTHERMAL SECTOR DEVELOPMENT PROJECT I IDA CREDIT NO. 54680-ET ST ATEMENT OF SOURCES AND USES OF FUNDS FOR THE YAER ENDED 7 JULY 2017 I 2017 Ethiopian Birr Cumulative 2016 Ethiopian Birr Ethiopian Birr I I FINANCING Credit from IDA Initial deposit to Designated I Account EEP'S Contribution 9,385,998 163,056,800 23,260,824 13,874,846 Gain on foreign exchange 10,242,914 21,808,384 11,565,470 I TOTAL FINANCING 19,628,912 208,126,008 25,440,316 I PROJECT EXPENDITURES Consultants' services Compensation 71,399 567,296 375,069 495,897 375,069 Operating 10,958,073 24,724,928 13,766,855 I TOTAL PROJECT EXPENDITURES I 1,029,472 25.667 293 14,637,821 I EXCESS OF FINANCING OVER EXPENDITURES 8,599,440 182.458.715 11!,B!.!~.~25 I I I I I I I I 3 I I I I ETHIOPIAN ELECTRIC POWER GEOTHERMAL SECTOR DEVELOPMENT PROJECT I IDA CREDIT NO. 54680- ET BALANCE SHEET AS AT 7 JULY 2017 I I ASSETS Notes 2017 Eth iopian Birr 2016 Ethiopian Birr I CURRENT ASSETS Cash at bank 3 178,123,872 174,086,001 Advance to contractors 10,287,832 - - --- I 188,411,704 174,086,001 CURRENT LIABILITIES I Withholding tax Sundry Payables - 8,079 2,886 223,736 Payable to Grant TF-017206 5,944,910 - I 5,952,989 226,622 NET CURRENT ASSETS 182.458.715 173,859,379 I REPRESENTED BY I ACCUMULATED FUND 182,458.715 173.852,372 I I I I I I I 4 I I I I ETHIOPIAN ELECTRIC POWER I GEOTHERMAL SECTOR DEVELOPMENT PROJECT IDA CREDIT NO. 54680-ET DESIGNATED ACCOUNT STATEMENT I For the year ended 7 July 2017 Account number 100651300008 I Depository bank Address National Bank of Ethiopia Addis Ababa, Ethiopia I Related credit Currency IDA 5468 ET USO I USD Equivalent in Ethiopian Birr I Beginning balance as at 7 July 2016 7,976,026.00 174,123,028 I Less: Payment for consultancy services 452,680.27 7,523,345.73 10,359,232 163,763,796 I Add: Gain on foreign exchange 10,242,914 Ending balance at 7 July 2017 7,523.345.73 174,006.712 I I I I I I I I I 5 I I I ETHIOPIAN ELECTRIC POWER GEOTHERMALSECTORDEVELOPMENTPROJECT I IDA CREDIT NO. 54680- ET NOTES TO THE FINANCIAL STATEMENTS 7 JULY 2017 I 1 PROJECT INFORMATION I This Project was established to implement IDA Credit No. 54680- ET which was jointly financed by the Government of the Federal Democratic Republic of Ethiopia and the International Development Association (IDA) on 10 June 2014.The main I objective of the project is to develop geothermal resources in Ethiopia to generate electricity. I The Project consists of the following parts:- i) Aiuto Geothermal Site Development -drilling and testing production wells and setting up steam gathering system, and financing of drilling management and I supervision contracts, as well as services related to reservoir engineering and management. I ii) Alalobad Geothermal Site Development-drilling and testing exploration wells and conducting a feasible study of the Alalobad geothermal site. iii) I Drilling Rigs, Associated Accessories and Spare Parts-provision of two full size modem diesel electric drilling rigs with all associated equipment. iv) Legal, Institutional, and Regulatory Framework Development, Project I Cost- development of the legislation and regulations related to geothermal sector, provision of technical assistance and capacity building and strengthening the EEP' s capacity for project management, monitoring and I supervision, including financing of Operating Costs. I 2 SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation I These financial statements have been prepared on a modified cash basis whereby non- monetary assets are expensed when acquired and monetary assets and liabilities are I carried at fair value. b) Currency I These financial statements are presented in Birr. Transactions in foreign currency are translated into Birr at the approximate rate of exchange prevailing at the date of the I transaction. Cash balances denominated in foreign currencies are translated into Birr at the exchange rates ruling at the balance sheet date. I 6 I I I I ETHIOPIAN ELECTRIC POWER GEOTHERMALSECTORDEVELOPMENTPROJECT I IDA CREDIT NO. 54680-ET NOTES TO THE FINANCIAL STATEMENTS (continued) 7 JULY 2017 I 3 BANK BALANCES EthioJ!ian I National Bank of Ethiopia- Ale No. 0100651300008 Birr 174,006,712 I Commercial Bank of Ethiopia Ale No. 1000127000623 Commercial Bank of Ethiopia Ale No. 771,506 I 1000185591569 3,345,654 178.123.872 I 4 DATE OF AUTHORIZATION The Chief Executive Officer of Ethiopian Electrical Power authorized the issue of I these financial statements on 3 January 2018. I I I I I I I I I 7 I I