EDM ELECTRICIDADE DE MO AMBIQUE E.P IBD O Power Efficiency and Reliability improvement project Maputo Independent Auditor's Report 31 December 2017 Tel: 258 21 300720 Av 25 de Setembro ~BDO . IB OFax: 258 21325091 n0 1230,3' andar Sloco 5 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 P1 58249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP),, which comprise the statement of financial position as at 31 December 2017 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 as at 31 December 2017, 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 Ld t., uma ompresa do responsabiae limitada Ma9ambicaoa, 6 membra do BO International Limited uma empresa inglesa limitada por garantia, e faz parte do re itoerntcioal de firmoas independentes BDO. BOO 6 a marca do rde BOO dcl ooda o rma dsos sa so firm as membros. NUIT 400068038, Sociedade par quotas, Capital social USD 70000 Matricua 120190na Consorvatonao do Registo Comercdol do Mapata Autorizapao pana actividades do Auditoria e Certificaon do Cantos par despacha do 27/1199 de Vice-Minfstra do Piano e Financas Iniscrita na OCAM comn' 02/SAC/OCAM/201 2 |BDO EDM - ELECTRICIDADE DE MO(AMBIQUE, EP. P18249 - 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 7, gives a true and fair view of the financial position of the Special Account for the year ended 31 December 2017, in accordance with World Bank Guidelines; and * In respect to Statement of Expenditure (SOEI), adequate supporting documentation has been maintained accordingly and such expenditures are eligible for financing under the Project Preparation Advance (IDA V025-MZ). Responsibilities of Management and Those Charged with 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 2017 2 BDO EDM - ELECTRICIDADE DE MO AMBIQUE, EP. P18249 - 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/SAC/OCAM/2012, represented by: Engagement Partner: Abdut Satar A. Hamid Registered Auditor: 01 /EZ?OCAM/2012 Maputo, 24 July 2019 Audit report - Year ended 31 December 2017 3 EDM - ELECTRICIDADE DE MO(AMBIQUE, EP. P18249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF SOURCES AND USES OF FUNDS AT 31 DECEMBER 2017 (Amount expressed in USD) Description Notes 31dec17 Accumulated Opening Balance IDA - Special account 320 734,00 0,00 320 734,00 0,00 Add: Sources of Funds IDA Funds Direct Payments 3 283 958,00 283 958,00 Advance to Special Account 0,00 350 000,00 283 958,00 633 958,00 604 692,00 633 958,00 Less: Uses of Funds Grant Account Payments 3 283 958,00 283 958,00 Special account payments: 4 191 684,00 220 950,00 475 642,00 504 908,00 Closing Balance IDA Special account 5 129 050,00 129050,00 -4 EDM - ELECTRICIDADE DE MO%AMBIQUE, EP. P18249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 01 JANUARY 2017 TO 31 DECEMBER 2017 (Amounts expressed in USD) Description Notes 2017 Accumulated Receipts Direct payments 3 283 958,00 283 958,00 Advance to Special Account 0,00 350 000,00 283 958,00 633 958,00 Payments Special account (1) Goods, non-consulting services, consulting services and Operating Costs 475 642,00 504 908,00 475 642,00 504 908,00 Surplus/(Deficit) (191 684,00) 129 050,00 5 EDM - ELECTRICIDADE DE MO(AMBIQUE, EP. P18249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 01 JANUARY 2017 TO 31 DECEMBER 2017 (Amounts expressed in USD) IDA V025 - MZ Total credit Disbursement Disbursement Categories Agreement in prior years during the Accumulated Balance year 1) Goods, non-consultants services, consultants services and operating costs 2 000 000,00 29 266,00 475 642,00 504 908,00 1 495 092,00 2 000 000,00 29 266,00 475 642,00 504 908,00 1 495 092,00 6 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P18249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) STATEMENT OF THE SPECIAL ACCOUNT (IDA V025 MZ) FOR THE PERIOD FROM 01 JANUARY 2017 TO 31 DECEMBER 2017 (Amounts expressed in USD) Description Notes 2017 Total Opening balance as at 01 January 2017 320 734,00 320 734,00 Add: Previous year payments 0,00 0,00 Current year payments: Applications 283 958,00 283 958,00 Total Add 283 958,00 Reduce: Current year payments: Applications 283 958,00 Special account 191 684,00 475 642,00 Total Reduce 475 642,00 Balance as at 31 December 2017 5 129 050,00 7 EDM - ELECTRICIDADE DE MOCAMBIQUE, EP. P18249 - 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, Mogambique Activities Rehabilitation and Upgrade of Network Infrastructure NUIT 600000063 Banks Standard Bank - 1081218741073 Description Amount % Donor/Contribution World Bank 0,00 100 0,00 100 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 8 EDM - ELECTRICIDADE DE MOAMBIQUE, EP. P 18249 - 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 credit are as follows: Categories Amount of the advance % of Expenditures to be allocated (USD) financed (1) Goods, non-consultants' services, consultants services and operating costs 2 000 000,00 100 2000 000,00 100 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. 9 EDM - ELECTRICIDADE DE MOgAMBIQUE, EP. P18249 - 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. 10 EDM - ELECTRICIDADE DE MOgAMBIQUE, EP. P18249 - POWER EFFICIENCY AND RELIABILITY IMPROVEMENT PROJECT (PERIP) 3 Direct payments Description Category (1) Total (USD) Current year payments Application 2 14240,00 14 240,00 Application 3 12 128,00 12 128,00 Application 4 19 400,00 19 400,00 Application 5 3 560,00 3 560,00 Application 6 19 160,00 19 160,00 Application 7 3 032,00 3 032,00 Application 9 188 819,00 188 819,00 Application 11 23 619,00 23 619,00 283 958,00 283 958,00 4 Special account payments Description Category (1) Total (USD) Fary 12 732,00 12 732,00 March 32 248,00 32 248,00 April 20 719,00 20 719,00 May 6 615,00 6 615,00 June 4 493,00 4 493,00 July 21 611,00 21 611,00 August 51 603,00 51 603,00 41 663,00 41 663,00 191 684,00 191 684,00 5 Closing balance Banks Description Currency Amount Special account USD 129 050,00 Interest received Closing balance 0,00 129 050,00 11 IBDO Av. 25 de Setembro, n01230 3° andar bloco 5 Maputo-Moçambique www.bdo.co.mz bdo@bdo.co.mz