Suleiman & Co. Certified Public Accountants - License No. 205 Correspondent Firm of RSM International in East Jerusalem, West Bank and Gaza THE MINISTRY OF FINANCE Project Title ADVANCING SUSTAINABILITY IN PERFORMANCE, INFRASTRUCTURE AND RELIABILITY OF THE ENERGY SECTOR IN THE WEST BANK AND GAZA (ASPIRE) Funded by THE INTERNATIONAL DEVELOPMENT ASSOCIATION Managed by THE PALESTINIAN ENERGY NATIONAL RESOURCES AUTHORITY Financial Statements and Independent Auditor’s Report For the Year Ended December 31, 2023 Ramallah Al Masyoun Taj Mahal building No. 10 phone 970 2 297-5576 Fax 970 2 297-5577 E-mail: info@suleimanco.com The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Table of Contents Page No. Independent Auditor’s Report 2-3 Statement of Balance Sheet 4 Statement of Sources and Uses of Funds 5 Statement of Cash Flow 6 Designated Bank Accounts Statements 7-8 Notes to the Project Financial Statements 9-15 1 Suleiman & Co. Certified Public Accountants - License No. 205 Correspondent Firm of RSM International in East Jerusalem, West Bank and Gaza Independent Auditor’s Report To the Ministry of Finance Ramallah- Palestine Opinion We have audited the Financial Statements of “Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in the West Bank and Gaza Project (ASPIRE)” (hereinafter “the Project”) funded by the International Development Association (the World Bank) and managed by the Palestinian Energy National Resources Authority (PENRA), which comprise the Statement of Balance Sheet as of December 31, 2023, and the related Statement of Sources and Uses of Funds, Cash Flow and Designated Bank Accounts Statements for the year ended December 31, 2023, 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 Balance Sheet of “Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in the West Bank and Gaza Project (ASPIRE)” funded by the International Development Association (the World Bank) and managed by the Palestinian Energy National Resources Authority (PENRA) as of December 31, 2023, and the related Statement of Sources and Uses of Funds, Cash Flow and Designated Bank Accounts Statement for the year then ended in accordance with the basis of accounting as describes in Note 2. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) with special reference to ISA 800. 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 Project in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in areas under the jurisdiction of the Palestinian Authority, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Matters Based on our review, in all material respects: 1. The Project expenditures reimbursed on basis of Statements of Expenditures (SOE) are eligible to the Grant Agreement and are reflected on the Financial Statements. 2. The Designated Bank Accounts have been used exclusively for payment of eligible expenditures as reflected in the Financial Statements. 3. The Project’s accounting system (books and records), established and maintained by the PENRA to record the financial transactions of the Project, provides the basis for preparation of the Project’s Financial Statements; 4. Internal control over financial reporting involved in the preparation of replenishments, direct payments, payments through special commitments, and reimbursements can be relied upon to support the related withdrawals. 5. The Project was in all material respects in compliance with the laws, regulations, guidelines and provisions governed by the Grant Agreement. 6. Procurement Guidelines have been properly applied in accordance with the Project’s Grant Agreement. Ramallah Al Masyoun Taj Mahal building No. 10 phone 970 2 297-5576 Fax 970 2 297-5577 E-mail: info@suleimanco.com 2 Suleiman & Co. Certified Public Accountants - License No. 205 Correspondent Firm of RSM International in East Jerusalem, West Bank and Gaza Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these Financial Statements in accordance with the basis of accounting as described in Note 2, 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. PENRA is responsible for overseeing the Project’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 Project Financial Statements taken 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 audit. We also: 1. 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. 2. 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 Project’s internal control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. 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 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, if any. Suleiman & Co. – Certified Public Accountants Ismail Suleiman License number 131/2000 Ramallah: July 2, 2024 Ramallah Al Masyoun Taj Mahal building No. 10 phone 970 2 297-5576 Fax 970 2 297-5577 E-mail: info@suleimanco.com 3 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Statement of Balance Sheet (All amounts in USD) Note 2023 2022 Assets Current assets Cash at banks 8 2,201,354 2,116,276 Total current assets 2,201,354 2,116,276 Total assets 2,201,354 2,116,276 Liabilities and fund balance Fund balance 2,201,354 2,116,276 Total liabilities and fund balance 2,201,354 2,116,276 The accompanying notes form an integral part of these Financial Statements. 4 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Statement of Sources and Uses of Funds (All amounts in USD) Cumulative up to December 31, 2023 2022 2023 DA- DA- Direct Note TF0B3015 TF0B3036 Payment Total Total Total Fund balance – beginning of the year 1,422,196 694,080 - 2,116,276 2,107,848 - Sources of fund Advance payment - - - - - 2,250,000 Replenishment 3 2,834,428 925,156 - 3,759,584 646,722 4,581,146 Direct payments 3 - - 1,019,328 1,019,328 260,406 2,104,247 Total sources of fund 2,834,428 925,156 1,019,328 4,778,912 907,128 8,935,393 Uses of fund Category (1)-Goods, works, non-consulting services, consulting services, sub- financing under part 3(b) (i) of the Project, training and operating costs under Project (except for expenditures under parts 3(c)) Component 1: Improving infrastructure for regional electricity interconnections in the West Bank and Gaza 4 2,171,515 - 1,019,328 3,190,843 378,249 4,393,605 Component 2: Improving sustainability of service delivery (operational performance of DISCOs) 4 - 559,587 - 559,587 - 559,587 Component 3: Enabling private sector engagement in renewable energy 4 317,986 - - 317,986 4,320 322,306 Comp .4 : Technical assistance and capacity building 4&5 289,089 336,329 - 625,418 516,131 1,458,541 Sub-total 2,778,590 895,916 1,019,328 4,693,834 898,700 6,734,039 Category (2)- Capitlization of the liquidity support account under part 3 (c) of the Project - - - - - Sub-total - - - - - - Total uses of funds 2,778,590 895,916 1,019,328 4,693,834 898,700 6,734,039 Change in fund balance 55,838 29,240 - 85,078 8,428 2,201,354 Fund balance- end of the year 1,478,034 723,320 - 2,201,354 2,116,276 2,201,354 The accompanying notes form an integral part of these Financial Statements. 5 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Statement of Cash Flow (All amounts in USD) 2023 2022 Cash flows from operating activities Changes in fund balance for the year 85,078 8,428 Net cash provided by operating activities 85,078 8,428 Increase in cash at banks 85,078 8,428 Cash at banks, beginning of the year 2,116,276 2,107,848 Cash at banks, end of the year 2,201,354 2,116,276 6 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Designated Bank Account Statement- DA- TF0B3015 Bank account number 3207208/001/3001/000 Depository bank Bank of Palestine Address Ramallah Related loan/ credit ASPIRE- TF0B3015 Currency U.S. Dollar (USD) Note 2023 2022 Balance, beginning of the year 1,422,196 1,362,129 Receipts during the year 3 2,834,428 646,722 2,834,428 646,722 Deduct Payments for project expenditures 4 2,778,590 586,655 2,778,590 586,655 Balance, end of the year 8 1,478,034 1,422,196 The accompanying notes form an integral part of these Financial Statements. 7 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Designated Bank Account Statement- DA- TF0B3036 Bank account number 3207206/001/3001/000 Depository bank Bank of Palestine Address Ramallah Related loan/ credit ASPIRE- TF0B3036 Currency U.S. Dollar (USD) Note 2023 2022 Balance, beginning of the year 694,080 745,719 Receipts during the year 3 925,156 260,406 925,156 260,406 Deduct Payments for project expenditures 4 895,916 312,045 895,916 312,045 Balance, end of the year 8 723,320 694,080 The accompanying notes form an integral part of these Financial Statements. 8 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Notes to the Project Financial Statements (All amounts in USD) 1. The Project and its Financing The Palestinian Liberation Organization, for the benefit of the Palestinian Authority, and the International Development Association “the World Bank” signed two Trust Fund Grant Agreements (the Agreements), to finance a project entitled the “Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in the West Bank and Gaza” (ASPIRE), managed by the Palestinian Energy National Resources Authority (PENRA). Certain details of the Agreements follow: • Trust Fund Grant Agreement Number TF0B3015 in the amount of USD 49 Million has been signed on June 30, 2020 with a closing date of December 31, 2024. • Trust Fund Grant Agreement Number TF0B3036 in the amount of USD 14 Million has been signed on June 30, 2020 with a closing date of December 31, 2024. The application deadline for each above grant will be after 4 months of the closing date (four- month grace period). The objective of the ASPIRE is to improve operational and financial performance of electricity sector institutions and diversification of energy sources in West Bank and Gaza. ASPIRE consists of the following parts: Part 1- Improving infrastructure for regional electricity interconnections in West Bank & Gaza. Part 2- Improving Sustainability of Service Delivery in West Bank & Gaza DISCOs. Part 3- Enabling Private Sector Engagement in Renewable Energy in West Bank & Gaza. Part 4- Technical Assistance, Capacity Building and Project Management. 9 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Notes to the Project Financial Statements – continued (All amounts in USD) ASPIRE categories and related budgets for TF0B3036 and TF0B3015, are as follows: Amount of the Grants Allocated (in USD) Total % Of Expenditures Category TF0B3015 TF0B3036 Amount to be Financed 1. Goods, works, non-consulting services, consultants’ services, Sub- Financings under part 3(b) (i) of the project, Training and Operating Cost under the project (except for expenditures under part 3(c)) 29,000,000 14,000,000 43,000,000 100% 2. Capitalization of the Liquidity Suppport Account under part 3 (c) of the project 20,000,000 - 20,000,000 100% Total Amount 49,000,000 14,000,000 63,000,000 2. Summary of Significant Accounting Policies The principal accounting policies applied by PENRA in preparing the Financial Statements of ASPIRE are set below: • Basis of accounting ASPIRE’s Financial Statements are prepared using the modified cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRS). Receipts are recognized when cash provided by the World Bank is received by PENRA or when direct payment is affected by donor. Expenditures are recognized when incurred or when are due for direct payment. • Historical cost convention ASPIRE’s Financial Statements have been prepared bases on the historical cost convention. • Foreign currency ASPIRE’s basic functional currency is the United States Dollar (USD). Transactions that are expressed or denominated in other currencies were translated to USD using exchange rates in effect at the time of each transaction. Differences arising from the fluctuations in exchange rates were treated as exchange gains or losses in the Statement of Sources and Uses of Funds and Changes in Fund Balance. 10 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Notes to the Project Financial Statements – continued (All amounts in USD) 3. Sources of Funds These amounts represent transfers made by the World Bank to the Project designated bank accounts number 3207208 & 3207206 at the Banks in USD and direct payments, as detailed below: DA- DA- Direct No. Date of Transfer TF0B3015 TF0B3036 Payment Total Cumulative up to December 31, 2022 2,321,562 1,010,406 824,513 4,156,481 2023 TF0B3015 ASPIRE PID MDTF- 7 March 10, 2023 - - 1,019,328 1,019,328 ASPIRE PID MDTF- 8 April 2, 2023 451,809 - - 451,809 ASPIRE PID MDTF- 9 June 21, 2023 773,831 - - 773,831 ASPIRE PID MDTF- 10 August 30, 2023 426,699 - - 426,699 ASPIRE PID MDTF- 11 October 29, 2023 801,930 - - 801,930 ASPIRE PID MDTF- 12 December 13, 2023 380,159 - - 380,159 Sub-total 2,834,428 - 1,019,328 3,853,756 TF0B3036 ASPIRE TFGWB- 6 July 2, 2023 - 207,821 - 207,821 ASPIRE TFGWB- 7 October 29, 2023 - 108,537 - 108,537 ASPIRE TFGWB- 5 December 14, 2023 - 608,798 - 608,798 Sub-total - 925,156 - 925,156 Grand Total 2,834,428 925,156 1,019,328 4,778,912 Cumulative up to December 31, 2023 5,155,990 1,935,562 1,843,841 8,935,393 11 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Notes to the Project Financial Statements – continued (All amounts in USD) 4. Uses of Funds Payments under the Project for the following disbursement components: Cumulative up to December 2023 2022 31, 2023 DA- DA- Direct TF0B3015 TF0B3036 Payment Total Total Total Component 1: Improving Infrastructure for Regional Electricity Interconnections in the West Bank and Gaza Subcomponent : 1.1 Rehabilitation of IEC connection points in West Bank & Gaza 89,876 - - 89,876 38,518 128,394 Subcomponent :1.2 Upgrade of MV lines in Nablus, Jenin, Hebron and Gaza to supply additional electricity from IEC 2,081,639 - 1,019,328 3,100,967 339,731 4,265,211 Sub-total 2,171,515 - 1,019,328 3,190,843 378,249 4,393,605 Component 2: Improving Sustainability of Service Delivery (Operational Performance of DISCOs) Subcomponent :2.1 - 559,587 - 559,587 - 559,587 Subcomponent :2.2 - - - - - - Sub-total - 559,587 - 559,587 - 559,587 Component 3: Enabling Private Sector Engagement in Renewable Energy Subcomponent :3.1 317,986 - - 317,986 4,320 322,306 Subcomponent :3.2 - - - - - - Sub-total 317,986 - - 317,986 4,320 322,306 Comp .4 : Technical Assistance & Capacity Building 289,089 336,329 - 625,418 516,131 1,458,541 Sub-total 289,089 336,329 - 625,418 516,131 1,458,541 Total uses of funds 2,778,590 895,916 1,019,328 4,693,834 898,700 6,734,039 12 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Notes to the Project Financial Statements – continued (All amounts in USD) 5. Component 4: Technical Assistance & Capacity Building Cumulative up to December 31, 2023 2022 2023 DA- DA- TF0B3015 TF0B3036 Total Total Total Operational Costs For PEA 93,689 317,447 411,136 348,189 978,368 Liquidity Support Fund Design Consultant- Mark Newbery 4,920 - 4,920 14,280 46,640 Project Execution Consultant for PENRA PMU -Fabian Odeh 73,847 - 73,847 51,273 148,077 Consulting Management Services “Supply & Installation of 3 Medium Voltage Lines from Qusin-Sarra Junction to Qusin-Bet Iba Junction -Dr. Amer Al Hamouz - - - - 15,000 Consultancy Service for updating Environmental and Social Impact Assessment (ESIA) for “The medium voltage single circuit overhead line between Jericho and Ramallah”- CEP 12,528 - 12,528 18,792 31,320 Technical and Financial Feasibility assessment and cost estimate for Photovoltaic Systems and Energy Efficiency Measures on the Health Sector in West Bank (Palestine)”- AYAVA 34,916 - 34,916 14,964 49,880 Consultancy Services to the Palestinian Energy & Natural Resources Authority for the negotiation of a Gas Purchase Agreement for G4G Project- Trowers & Hamlins 52,220 - 52,220 48,332 100,552 Consultancy Service for a Preliminary Environmental and Social Impact Assessment (P- ESIA) for 2 MV underground interventions in Gaza.Dr. Yunes Mogheir - - - 7,000 7,000 Liquidity Support Fund – Financial/Technical Support – Local-FA’ED AWASHREH 8,584 - 8,584 4,966 45,924 Review assess and modify PETL's non-applied version of the Financial System- PWC - 18,750 18,750 - 18,750 Audit fees 8,091 - 8,091 8,091 16,182 Bank charges 294 132 426 244 848 Total 289,089 336,329 625,418 516,131 1,458,541 13 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Notes to the Project Financial Statements – continued (All amounts in USD) 6. SOE Procedures Payments under the Project for the following disbursement categories: Category 1 Category 1 TF 0B3015 TF 0B3036 Total Cumulative up to December 31, 2022 899,366 1,140,839 2,040,205 TF 0B3015 ASPIRE PID MDTF- 7 1,019,328 - 1,019,328 ASPIRE PID MDTF- 8 374,005 - 374,005 ASPIRE PID MDTF- 9 773,831 - 773,831 ASPIRE PID MDTF- 10 426,699 - 426,699 ASPIRE PID MDTF- 11 801,930 - 801,930 ASPIRE PID MDTF- 12 380,159 - 380,159 Sub-total 3,775,952 - 3,775,952 TF 0B3036 ASPIRE TFGWB- 6 - 151,901 151,901 ASPIRE TFGWB- 7 - 108,537 108,537 ASPIRE TFGWB- 5 - 608,798 608,798 Sub-total - 869,236 869,236 Total Client Connection up to December 31, 2023 4,675,318 2,010,075 6,685,393 Add: Expenses recorded by PENRA in the year but not reported to WB as of December 31, 2023: TF 0B3015 21,966 - 21,966 TF 0B3036 - 26,680 26,680 PENRA records as of December 31, 2023 4,697,284 2,036,755 6,734,039 14 The Ministry of Finance Advancing Sustainability in Performance, Infrastructure and Reliability of the Energy Sector in West Bank and Gaza Project (ASPIRE) Funded by the International Development Association Managed by the Palestinian Energy National Resources Authority Financial Statements for the Year Ended December 31, 2023 Notes to the Project Financial Statements – continued (All amounts in USD) 7. Reconciliations between Client Connection and PENRA Records Cumulative up to December 31, 2023 DA- TF0B3015 DA- TF0B3036 Total Project account per the client connection Advance payment 1,500,000 750,000 2,250,000 Category (1)-Goods, works, non-consulting services, consulting services, sub-financing under part 3(b) (i) of the Project, training and operating costs under Project (except for expenditures under parts 3(c)) 4,675,318 2,010,075 6,685,393 Category (2)- Capitlization of the liquidity support account under part 3 (c) of the Project - - - 6,175,318 2,760,075 8,935,393 Project accounts per PENRA records Category (1)-Goods, works, non-consulting services, consulting services, sub-financing under part 3(b) (i) of the Project, training and operating costs under Project (except for expenditures under parts 3(c)) 4,697,284 2,036,755 6,734,039 Category (2)- Capitlization of the liquidity support account under part 3 (c) of the Project - - - Cash at banks (Note 8) 1,478,034 723,320 2,201,354 6,175,318 2,760,075 8,935,393 Difference - - - 8. Cash at Banks The fund balance at December 31, 2023 & 2022 represents the following: 2023 2022 Bank of Palestine-USD- TF0B3015 1,478,034 1,422,196 Bank of Palestine-USD- TF0B3036 723,320 692,097 Wrong transfer by Bank* - 1,983 2,201,354 2,116,276 *This item represents a wrong transfer by the bank, the amount was returned to the Bank on January 22, 2023. 15