Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant and Loan Financial Statements for the year ended 31 December 2021 (with independent auditors' report thereon) Contents IN D EPEN D E N T A U D ITO R S' REPO RT ........................................................................................................... i STA TEM EN T O F SO U R C ES A N D USES O F FUN D S ................................................................................... 1 STA TEM ENT O F D ISBUR SEM EN TS ............................................................................................................. 2 1. G EN ER A L ................................................... - .............................................................................................. 4 2. BA SIS O F PR EPA RA TIO N .................................................................................................BO................ 8 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES............................................................... 8 4. IDA FU N DIN G ...........................................................................................................................NG............... 9 5. IBR D FU N DING .................................................................................................NDING.9..................... ............. 9 6. EBR D FU NDIN9G ............................................................................................... ....................................... 9 7. K FW FU N D IN G ........................................................................................................................NDING.9........... 9 8. G O O DS A ND IN STA LLA TIO N S ............................................................................................................. 9 9. CO N SU L TA N T SERV IC E S...................................................................................................................... 9 10. K ESH C O NT R IBU TIO N .......................................................................................................................... 10 11. CA SH W ITH BA N K S ................................................................................................................................ 10 STA T E M EN T O F PR O JEC T 'S A C C O U N T .......................................................................................AN........ I Ernst & Young Certified Auditors Tel: +35542419575 Albania Branch ey.ccn NUIS: K619110121 uildig b r lbrahim RugovaStr, Sky Tower,6"floor working world 1001,Tirana,Albania Independent Auditor's Report To the shareholder and management of Korporata Elektroenergjitike Shqiptare sh.a. Opinion We have audited the financial statements of "Dam Safety Project" ("the Project"), implemented by Korporata Elektroenergjitike Shqiptare sh.a. ("the Company" or "KESH") and financed by International Development Association ("IDA") Loan No. 44800 ALB, European Bank for Reconstruction and Development ("EBRD") Loan, International Bank for Reconstruction and Development ("IBRD") Loan No. 81110 AL and Loan No. 88620 AL, State Secretariat for Economic Affairs of the Swiss Confederation ("SECO") Grant, KFW Frankfurt am Main ("KFW") Grant and KFW Frankfurt am Main ("KFW") Loan No.26946, which comprise the Statement of Sources and Uses of Funds, and Statement of Expenditure for the year ended 31 December 2021, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying financial statements are prepared in all material respects, in accordance with the basis of accounting described in Notes 2 and 3 to the financial statements. 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 our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements of the Law No. 10091, dated 5 March 2009 "On the statutory audit and the organization of the statutory auditors and chartered accountants professions", amended, that are relevant to our audit of the financial statements in Albania, 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 and Restriction on Use and Distribution We draw attention to Notes 2 and 3 to the financial statements, which describe the basis of accounting. The financial statements are prepared to provide information to the Project's lender, and to the shareholder and management of the Company. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the Project's management, the lender, and the shareholder and management of the Company and should not be used by other parties. Our opinion is not modified in respect of this matter. Report on Other Requirements As required under the Terms of Reference guidelines, we have examined the supplementary schedule of the Special Account and Project Account associated with the Project. We report that this supplementary schedule is consistent, in all material aspect, with the accounting and financial matters reflected in the Project's financial statements for the year ended 31 December 2021. Other Matters The Project's Statement of Sources and Uses of Funds, includes numeric information for cumulative funds and expenditure from the inception date to 31 December 2021. These balances are provided for information purposes only and do not form part of the audited financial statements. Responsibilities of Management and Those Charged with Governance for the Project's Financial Statements Management is responsible for the preparation of the Project's financial statements in accordance with the basis of accounting described in Notes 2 and 3 to the Project's financial statements, and for such internal control as management determines is necessary to enable the preparation of Project's financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor's Responsibilities for the Audit of the Project's Financial Statements Our objectives are to obtain reasonable assurance about whether the Project's financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' 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 Project's 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 Project's 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. 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. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with those charged with governance of the "Dam Safety Project" 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. Ernst & Young Ekspert6 Kontab6l t6 Autorizuar Mario Vangjel Dega n6 Shqip6ri Certifie ditor September 29, 022 Tirana, Albania ii Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant (Amounts in USD) Statement of Sources and Uses of Funds for the year ended 31 December 2020 Cumulative from 23 October 2008 Year ended Year ended (inception date) 31 December 31 December to3l December 2021 2019 2020 Notes (unaudited) Sources of funds IDA funding Initial allocation - - 131,700 Direct Payments 4 14,530 318,667 28,521,286 SOE procedures - - 3,447,724 IBRD Funding Direct payment 3,691,351 4,366,675 29,097,905 SOE procedures 5 238,920 238,920 SECO Funding Direct payment - - 6,716,734 EBRD Funding Direct payment 6 1,957,426 3,220,350 14,639,687 KFW Grant Funding Direct payment - - 309,410 KFW Loan Funding Direct payment 7 3,066,347 3,849,333 7,035,690 KESH contribution 10 - - 265,530 8,968,574 11,755,025 90,404,587 Uses of funds Goods and installations 8 7,695,672 11,048,227 77,196,907 Consultant services 9 1,207,062 741,697 12,509,811 Procurement of IT and archiving equipment - - 51,751 Staff training - - 7,373 Front end fee commission - - 205,368 Bank charges 582 - 62,672 Loan interest payments - - 265,530 8,903,316 11,789,924 90,299,412 Surplus of receipts over disbursements 65,258 (34,899) 105,174 Foreign currency translation effect (3,338) (227) (43,254) Cash at the beginning of the period 11 - 35,126 - Cash at the end of the period 11 61,920 - 61,920 The Statement of Sources and Uses of Funds is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 2 to 10. The fina cial statementsof the Dam Safety Projects implemented by Korporata Elektroenergjitike Shqiptare - KESH Sh.a. ere a orised foi ss d'byte Management of KESH on SO , /ZZand signed on its behalf by: Fatos un Eridana Peqini Director Pof IU Project Accountant Korporata Elektroenergiitike Shqiptare Sh. a. Korporata Elektroenergiitike Shqiptare Sh. a. 1 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) Statement of Disbursements for the year ended 31 December 2021 Direct payment Replenishment Total Date (all categories) (all categories) disbursements IDA Loan 44800 AL AF Consult, Switzerland, Consultancy exp. 15/01/2021 14,530 - 14,530 Total Disbursements of IDA 14,530 - 14,530 IBRD Loan 81110 AL No disbursements in the year 2021 - - Total disbursements of IBRD Loan 81110 AL - No disbursement has occurred in IBRD Loan 8110 AL during the year 2021. Loan is closed 31.12.2019. IBRD Loan 88620 AL AFRY Consulting Invoices 1826/62, 1826/63 21/01/2021 161,563 - 161,563 Ciltug A.S Lot 1 Fierza IPC 15 26/01/2021 899,327 - 899,327 Ciltug A.S. Lot I Fierza IPC 16 03/03/2021 269,193 - 269,193 Ciltug A.S. Lot 1 Fierza IPC 17 24/05/2021 357,831 - 357,831 Ciltug A.S. Lot 1 Fierza IPC 18 24/05/2021 409,820 - 409,820 AFRY Consulting Invoices 1826/64-65-66 27/05/2021 226,839 - 226,839 Disbursment DA-C 25/06/2021 - 238,920 238,920 Ciltug A.S. Lot 1 Fierza IPC 19 16/09/2021 491,738 491,738 Ciltug A.S. Lot 1 Fierza IPC 20 16/09/2021 270,081 - 270,081 giltug A.S. Lot I Fierza IPC 21 04/11/2021 289,406 - 289,406 Ciltug A.S Operat.Certif. Lot 2 Komani 27/12/2021 315,553 - 315,553 (Partial) - - - Total disbursements of IBRD Loan 88620AL 3,691,351 238,920 3,930,271 EBRD Loan Qiltug A.S Lot 2 Koman IPC 17 05/01/2021 126,641 - 126,641 Qiltug A.S Lot 2 Koman IPC 18/19 21/06/2021 363,025 - 363,025 Qiltug A.S Lot 2 Koman IPC 20 04/08/2021 277,841 - 277,841 Qiltug A.S Lot 2 Koman IPC 21 04/08/2021 147,485 - 147,485 giltug A.S Lot 2 Koman IPC 22 17/09/2021 166,476 - 166,476 Qiltug A.S Lot 2 Koman IPC 23 18/10/2021 197,077 - 197,077 Qiltug A.S Lot 2 Koman IPC 24 10/11/2021 243,808 - 243,808 Qiltug A.S Lot 2 Koman IPC 25 14/12/2021 246,938 - 246,938 Qiltug A.S Complet. Certif. RG 3 28/12/2021 124,533 - 124,533 Qiltug A.S. Operat. Certif (Partial) 28/12/2021 63,603 - 63,603 Total disbursements of EBRD 1,957,427 - 1,957,426 KFW Grant No disbursements in the year 2021 - - Total disbursements of KFW Grant - No disbursement has occurred in KFW Grant during the year 2021. 2 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) Statement of Disbursements (continued) for the year ended 31 December 2021 Date Direct payment Replenishment Total (all categories) (all categories) disbursement Fichtner GmbH Consultancy 03/02/2021 115,493 - 115,493 Fichtner GmbH Consultancy 03/02/2021 103,825 - 103,825 Andritz Hydro IPC 03 Vau Dejes 03/02/2021 276,383 - 276,383 Andritz Hydro IPC 03Vau Dejes 03/02/2021 396,998 - 396,998 Andritz Hydro IPC 04Vau Dejes 01/04/2021 179,514 - 179,514 Andritz Hydro IPC 04Vau Dejes 01/04/2021 118,722 - 118,722 JV AFRY-OfitecoConsultancy DMDC 10/06/2021 85,154 - 85,154 Fichtner GmbH Consultancy 21/07/2021 112,358 - 112,358 Andritz Hydro IPC 05Vau Dejes 09/08/2021 203,018 - 203,018 Andritz Hydro IPC 05 Vau Dejes 09/08/2021 415,218 - 415,218 Andritz Hydro IPC 06 Vau Dejes 28/10/2021 189,290 - 189,290 Andritz Hydro IPC 06 Vau Dejes 28/10/2021 151,338 - 151,338 Fichtner GmbH Consultancy 28/10/2021 113,574 - 113,574 Andritz Hydro IPC 07 Vau Dejes 10/11/2021 60,053 - 60,053 Andritz Hydro IPC 07 Vau Dejes 10/11/2021 236,922 - 236,922 Andritz Hydro VO-001 10/11/2021 39,657 - 39,657 Andritz Hydro VO-001 10/11/2021 43,614 - 43,614 Fichtner GmbH Consultancy 08/12/2021 100,646 - 100,646 Andritz Hydro IPC 08 Vau Dejes 29/12/2021 65,758 - 65,758 Andritz Hydro IPC 08 Vau Dejes 29/12/2021 58,812 - 58,812 Total disbursements of KfW Loan 26946 3,066,347 - 3,066,347 SECO Grant No disbursements in the year 2021 - - Total disbursements of SECO Grant - - Total Disbursements 2021 8,729,655 238,920 8,968,574 3J Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) 1. General The Dam Safety Project ("the Project") aims to assist Korporata Elektroenergjitike Shqiptare Sh.a. ("KESH") to safeguard the hydroelectric dams on the Drin and Mat river cascades and to improve the operational efficiency of said hydroelectric dams and enhance the stability of power supply in the regional market. * IDA Loan No. 44800-AL Based on the Financial Agreement between the Albanian Government and IDA/Loan No.44800-AL, for the Dam Safety Project ratified by Albanian Parliament with the Law No.9965, date 24 July 2008, and Subsidiary Loan Agreement between the Ministry of Finance and KESH, date 25 November 2008, IDA agrees to extend a loan up to maximum SDR 21,700,000 to the Albanian Government. From this amount, the Ministry of Finance agreed to extend to the project implementing unit SDR 1,901,850 (equivalent to EUR 2 million) as a grant and the remaining SDR 19,798,150 as a sub loan. The loan is subject to a service charge of 0.75% per annum, payable with semi-annual instalments on each 15 April and 15 October up to 15 April 2028. The maximum commitment charge rate payable by the recipient on the un-withdrawn financing balance is 0.5% per annum. The loan payment currency is EURO. Expenditure categories to be financed under the above mentioned loan, are amended through Government Decision No. 134, dated 24 February 2016, "For the approval in principle of the amendment of the financing agreement between the Republic of Albania and the International Development Association (IDA) for the Dam Safety Project". Reallocation of the expenditure categories is as follows: Percentage of the Amount of the Loan allocated expenditures to be Category (expressed in SDR) financed including taxes 1. Construction contracts 14,550,000 100% 2. Consulting services and training for other than 2.1; 2.4 of the Project 4,700,000 100% 3. Hydropower Development and Water Management Consulting Services 2.1;2.4 of the Project 2,450,000 100% Total 21,700,000 IDA Loan No. 44800-AL is also amended through Government Decision No.632 dated 26 October 2018 "For the approval in principle of the amendment of the financing agreement between the Republic of Albania and the International Development Association (IDA) for the Dam Safety Project", for closing date and reallocation of expenditure categories. Closing date is being extended up to December 31,2020 with a grace period for disbursements up to 30 June 2021. At the same time through this Government Decision is done the reallocation of the expenditure categories to be financed under this loan as follows: Percentage of the Amount of the Loan allocated expenditures to be Category (expressed in SDR) financed including taxes 1. Construction contracts 14,550,000 100% 2. Consulting services and training for other than 2.1; 2.4 of the Project 5,000,000 100% 3. Hydropower Development and Water Management Consulting Services 2.1;2.4 of the Project 2,150,000 100% Total 21,700,000 The Project components include: Part 1: Dam Safety Infrastructure Investments 1. Provision of goods, works and services for dam remedial measures of very high priority, including: (a) the specification and installation of water alarm systems in the Drin and Mat river basins; and (b) the specification and implementation of dam monitoring systems for the Drin and Mat river basins. 2. Provision of goods, works and services for dam remedial measures of high priority, including: (a) the rehabilitation of a spillway at Fierza Dam; (b) the rehabilitation and maintenance of spillways at VauDejes Dam; and (c) the modernization and improvement of the PIE'S Dam safety department. 4 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) 1. General (continued) * IDA Loan No. 44800-AL (continued) Part 1: Dam Safety Infrastructure Investments(continued) 3. Provision of goods, works and services for dam remedial measures of medium priority and operational improvements, including: (a) the general rehabilitation of two spillways and the modification of the outlet of one spillway at Koman dam; (b) the rehabilitation of electromechanical equipment and a control 4. Monitoring system at Koman Hydropower plant; and (c) the implementation of a load frequency control system. 5. Provision of goods works and services for the other dam safety infrastructure investments on the Drin and Mat rivers. Part 2: Technical Assistance and Training for Dam Safety 1. Provision of services to the Project Implementation Entity - PIE (KESH) to implement an integrated water resources management approach for the management of the Drin and Mat river basins, as well as the optimization of power dispatching and water resources management. 2. Provision of consultants' services to assist the PIE with procurement, design and supervision activities under the Project. 3. Provision of consultants' services and training for the preparation of an Emergency Preparedness Plan and for the institutional strengthening of the PIE's dam safety department and the Albanian Committee of Large Dams. 4. Provision of consultants' services, goods and training for the improvement of the PIE' s financial management capacity, including the establishment of a new financial management system, the study of options for the PIE to establish an independent power generation company, and the establishment of such independent power generation company. 5. Provision of consultants' services for the independent Panel of Experts overseeing the design and the implementation of Project activities in accordance with the Association' s Operational Policy 4.37.KESH has established and maintains a Project Implementing Entity (PIU) responsible for the coordination, management, monitoring and evaluation of all the aspects of project implementation since March 2009. * IBRD Loans No. 81110-AL/ 88620-AL Based on the Loan Agreement between the Albanian Government and IBRD No.81110-AL, for the Dam Safety Project for the purpose of providing additional financing of the Original Project ratified by Albanian Parliament with the Law No.40/2012, date 12 April 2012, and Subsidiary Loan Agreement between the Ministry of Finance and KESH, date 17 February 2012, IBRD agrees to extend a loan up to maximum 15,500,000 EUR to the Albanian Government. The IBRD Loan No.81110-AL is subject to a front-end fee equal to 0.25 % of the Loan amount and the interest shall be a rate equal to the Reference Rate for the Loan Currency plus the variable Spread payable by the recipient on 15 May and 15 November of each year up to 15 May 2029. The closing date of the loan was 30 June 2019. Expenditure categories to be financed under this loan were as follows: Amount of the Loan allocated Percentage of the expenditures Category (expressed in EUR) to be financed 1. Construction contracts 15,000,000 100% 2.Front-end Fee 38,750 3.Unallocated 461,250 Total 15,500,000 IBRD No.811 10-AL Loan through Government Decision No.608, dated 17 October 2018 "For the approval in principle of the amendment of the financing agreement between the Republic of Albania and the International Bank for Reconstruction and Development (IBRD) for the Dam Safety Project", is amended for closing date which is being extended up to December 31,2020 and expenditure categories financed under the loan were modified between the categories as follows: Amount of the Loan allocated Percentage of the expenditures Category (expressed in EUR) to be financed 1. Construction contracts 15,461,250 100% 2.Front-end Fee 38,750 3.Unallocated 0 Total 15,500,000 The loan is fully disbursed up to June 2019. 5 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) 1. General (continued) At the same time based on the Loan Agreement between Albanian Government, International Bank for Reconstruction and Development IBRD and KESH, signed in June 21, 2018, is approved the second additional financing for Dam Safety Project in the amount of 12,000,000 EUR. This Loan Agreement IBRD No.88620-AL, is ratified by Albanian Parliament with the Law 61/2018 dated 20 September 2018 and Subsidiary Loan Agreement for a second additional financing between Ministry of Finance and KESH date 8 October 2018. The Loan is subject to a Front and Fee equal to one quarter of one percent (0.25%) of the loan amount and interest rate is the Reference Rate for the loan currency plus Fixed Spread payable by the recipient on May 15 and November 15 of each year up to 15 May 2040.The closing date of the loan was 31 December 2020. The Categories of Expenditures to be financed are in the following table: Amount of the Loan Percentage of the illocated (expressed in expenditures to be Category EUR) financed 1. Goods and Works for Part 1.1(a), 1.2 a) 1.2(b), Part 2.2, 2.3 and 2.4 of the Project and consultant services 10,370,000 100% 2. Goods and works for Part 1.1 (b) of the Project 1,600,000 20% 3. Front-end Fee 30,000 Total 12,000,000 Through Government Decision No.817 date 21.10.2020 is approved in principle Amending Agreement with exchange letters of the second additional financing, extending closing date up to 31 December 2021, with a grace period for disbursements up to 30 April 2022. * SECO Grant Based on the Project Agreement dated 24 May 2011, between the Albanian Government, the Government of Swiss Confederation represented by the State Secretariat for Economic Affairs ("SECO") and Albanian Power Corporation "KESH' for the Dam Safety Project with the purpose to assist KESH in operating the dam safety monitoring system reliably and according to the best international practices and in establishing dam safety emergency and maintenance procedures as well as putting in place the protection measures of dams and their appurtenant structures against rock fall at the Drin and Mat River Cascades. SECO agrees to grant a non-reimbursable Contribution up to maximum CHF 6,400,000 to the Albanian Government. The last availability date was 31 December 2019, as per amendment no. 3, of the Agreement between the Government of the Republic of Albania (represented by the Council of Ministers), KESH and the Government of the Swiss Confederation (represented by the Swiss State Secretariat for Economic Affairs, Federal Department of Economic Affairs, Education and Science). The proceeds of the Contribution shall be used to finance: a. A dam monitoring system; b. Assistance to KESH to establish the dam safety procedures (dam safety maintenance plan and Internal Emergency Action Plan, IEAP); c. Rock fall protection measures of the dams and their appurtenant structures. Through the Amendment no.4 of the Agreement between Government of Albania represented by Council of Ministers of Albania and Albanian Power Corporation and the Swiss Confederation represented by the Swiss State Secretariat for Economic Affairs of the Federal Department of Economic Affairs, Education and Research on 05 December 2019, contracting parties have agreed through Amendment no.4 for an additional mandate to Strengthen Dam Safety Monitoring. The project Agreement shall remain in force until all obligations under it have been fulfilled, but not later than 31 of December 2023. 6 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) 1. General (continued) * EBRD Loan No.43125 Based on the Loan Agreement between the Albanian Government and EBRD / Loan No. 43125, for the Dam Safety Project for the purpose of providing additional financing of the Koman Hydropower Dam Safety Upgrade ratified by Albanian Parliament with the Law No.103/2013, dated 25 March 2013, EBRD agrees to extend the amount of EUR 12,700,000 to the Albanian Government. The loan is payable in 26 semi-annual instalments and bears an interest of 1.218 % p.a. inclusive of I % p.a. margin, payable by the recipient on 25 March and 25 September of each year. The last availability date was 31 December 2016 and expenditure categories as follows: Amount of the Loan Percentage of the allocated expenditures to be Category (expressed in EUR) financed 1. Construction contractsfor part A 10,000,000 100% 2. Construction contractsfor part B 2,573,000 100% 3.Front-end Commission 127,000 - Total 12,700,000 100% Through the Law 88/2018 of the Albanian Parliament is ratified the Modification Agreement No.1 of the Loan Agreement dated 31.12.2012 between Government of Albania and European Bank for Reconstruction and Development EBRD regarding to Loan No.43125. This modification Agreement dated 28 September 2018 is between Republic of Albania represented by the Ministry of Economy and Finance and European Bank for Reconstruction and Development (EBRD). Closing date of the above-mentioned Loan is being modified up to December 31,2021 and expenditure categories to be financed under the loan are modified between the categories as follows: Category Amount of the Loan Percentage of the allocated expenditures to be (expressed in EUR) financed 1. Goods and works for part A 5,619,575 100% 2. Goods and works for part B 825,201 100% 3.Goods and works for part C 6,128,224 100% 4. Front end Fee Commission 127,000 Total 12,700,000 100% * KFW Grant Based on the Financing Agreement dated 14 April 2015, between KFW Frankfurt am Main ("KFW") and Albanian Power Corporation "KESH" for expert services in preparation of a feasibility study for establishing a Drin River Cascade Monitoring & Dispatch Centre (CMDC) (including evaluation of present available sensors and data, identification of different solutions for a real-time monitoring of technical data, development of modelling and forecast options), KFW agrees to extend a non-reimbursable financial contribution up to EUR 175,000 to KESH. This expert service is going to be financed by a special fund No.10554 provided by the German Government. Also, under the Supplemental Financing Agreement dated 07 October 2016, KFW agreed to provide an additional financial contribution of EUR 145,000, for the same purpose in the framework and financed by special funds No.10554. Financial contribution of KfW not exceeds the amount EUR 320,000, based on section 1, article 1.1 of this Agreement. Based on the section 4 "Termination of this Agreement", legal relations between KfW and KESH shall terminate no later than 15 years after signing of this Agreement. From this contribution until 30 December 2020 is disbursed the amount of EUR 278,568. Last disbursement was until 30 December 2017. 7 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) 1. General (continued) * KFW Loan Based on the Financial Agreement dated on 30 June 2015, between the Albanian Government and KFW Frankfurt am Main ("KFW") for the Dam Safety Project ratified by Albanian Parliament with the Law No.9199, dated 30 July 2015, and Subsidiary Loan Agreement between the Ministry of Finance and KESH, dated 30December 2015, KFW agrees to extend a loan up to maximum EUR 20,000,000 to the Albanian Government. KfW Loan No.26946 is subject to a service charge of 1.5% per annum, payable with semi-annual instalments on each 30June and 30December up to 30 June 2027. The commitment charge rate payable by the borrower on the un- withdrawn financing balance is 0.25% per annum. Also, the borrower will pay KFW a non-refundable one-time lump-sum management fee of 1% of the loan amount. The loan payment currency is EURO. No fund was disbursed up to 31 December 2017and KFW has the right to refuse to make disbursements after 30 December 2018. Through Government Decision No.405 dated 19.06.2019"For the approval in principle of the loan agreement between the Republic of Albania and KFW Frankfurt am Main ("KFW") for the Dam Safety Projects amended closing date of the Loan No. 26946, which is being extended up to May 31,2021. The Project components include: a) Rehabilitation of the spillways of the hydro power plant Vau Dejes b) Implementation of a Dam Monitoring and Dispatch Centre, and c) Consultant Services For the deadline of the original Loan Agreement No.26946 dated 30.06.2015; is agreed between KfW and the Ministry of Finance to extend the deadline disbursements until 30 December 2021, through exchanging letter dated 12.05.2021. 2. Basis of preparation The Project's Financial Statements have been prepared on the cash basis of accounting, which differs from Albanian and International Financial Reporting Standards. On this basis, revenues are recognized when received rather than when earned and expenses are recognized when paid rather than when incurred. Accordingly, direct payments of the Project's expenses, are recognized as sources and uses of funds at the time the payment is made. Cumulative information on cash receipts and disbursements from the Project's inception to date is presented in the Statement of Sources and Uses of Funds for information purposes only (unaudited). 3. Summary of significant accounting policies The accounting policies set out below have been applied consistently throughout the period. a) Reporting currency The Project has adopted the US Dollar as its reporting currency for consistency with the reporting needs of one of the principle donors. Funds are received in EURO and CHF and expenses are sustained in the same currency of funds received. Cash and bank balances in other currencies are converted into USD at the year-end rate of exchange. Transactions in other currencies are converted into USD using the exchange rate ruling at the date of the transaction. Foreign exchange differences that may arise are recognised in the Statement of Sources and Uses of Funds. The applicable official exchange rates of the Bank of Albania (USD to Currency Unit) as at 31 December2021 and 2020 are as below: 31 December 2021 31 December 2020 EUR 1.13 1.23 CHF 1.10 1.14 8 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) 3. Summary of significant accounting policies (Continued) b) Recognition of revenues and expenses Revenues are recognised when received rather than when earned, and expenses are recognised when paid rather than when incurred. Accordingly, direct payments of the Project's expenses, which are made from the proceeds of loans or other financing, are recognised as sources and uses of funds at the time the payment is made. c) Netting It is the Project's Policy to include amounts that were netted with the Government and other Public Institutions (i.e. Transmission Operator and Ministry of Finance) in its financial statements and present them as loan repayments (see Note 10). 4. IDA funding During 2021, from IDA Loan No.44800-AL, were disbursed a total amount of USD 14,530 (2020: USD 318,667) for consultancy services. The total amount disbursed by IDA through the Project's bank account in 2021 is USD 0 (2020: 0 Euro). Payments are processed through direct disbursements to consultants' accounts. 5. IBRD funding During 2021, from IBRD Loan No.88620 were disbursed a total amount of USD 3,691,351(2020: USD 4,366,675) related to payments of goods and installations supplies provided by subcontractors and for consultancy. Total amount disbursed by IBRD 88620 Loan through the project's bank account in 2021 is 200,000 EUR or USD 238,920 (2020:0 EUR). 6. EBRD funding From EBRD Loan No. 43125, is disbursed during 2021 the amount of USD 1,957,427 (2020: USD 3,220,350) related to payments of goods, supplies and installations provided by subcontractors. 7. KFW funding KFW Loan No. 26946 disbursements during 2021, are in the amount of USD 3,066,347 (2020: USD 3,849,333) related to payments effected to consultancy services for Vau Dejes Spillways Rehabilitation, consultancy for Dam Monitoring and Dispatch Centre for Drin River Cascade, and the payments related to goods and installations for Rehabilitation of Spillways and Construction of New Stoplogs at Vau Dejes HPP. 8. Goods and Installations Goods and installations are composed as follows: Year ended Year ended Supplier Lender 31 December 2021 31 December 2020 Andritz Hydro GmbH E-M IBRD - 909,815 Andritz Hydro Spillways KfW 2,435,297 3,634,091 Ciltug AS EBRD, IBRD 5,260,375 6,504,321 CAN France EBRD - - SOLEXPERTS SECO - - Hydro Exploitation SECO - - BSF SWISS PHOTO SECO - - Total 7,695,672 11,048,227 9. Consultant services Consultant services are composed as follows: Year ended Year ended Consultant Lender 31 December 2021 31 December 2020 AF Consult AG IDA,IBRD 576,012 317,563 Fichtner KFW 545,897 171,119 JV AFRY-Ofiteco KfW 85,154 44,123 Deloitte Albania IDA - 208,893 Peter Co IDA - - Peter Mason IDA - Pavlos Marinos IDA - - Total 1,207,062 741,698 9 Dam Safety Project - IDA Loan 44800 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant Notes to the Financial Statements for the year ended 31 December 2021 (Amounts in USD, unless otherwise stated) 9. Consultant services (Continued) Except the panel of experts of AFRY Consulting (previously named Colenco/ AF Consulting) which acts as consultancy experts for the Dam Safety Project, the german company Fichtner GmbH&Co.KG, is acting as consultant for the consulting services for an implementation Consultant for VAU DEJES Spillway Rehabilitation under KfW Loan. Bank commissions IBRD 582 10. KESH Contribution KESH, OSHEE and the Ministry of Finance had outstanding balances that were payable/receivable to each other. In 2009, it was decided that KESH, the Transmission System Operator ('OST'), and Distribution System Operator ('OSSH') would spin off. OST and OSSH were established as separate legal entities that manage respectively the power transmission and distribution systems in Albania. OSSH was subsequently acquired by CEZ, a.s. and was established as a private entity named as CEZ Shperndarje. Following the transfer of control in CEZ Shp6rndarje from EZ, a.s to the Ministry of Economic Development, Trade and Entrepreneurship (MZHETS) based on the Memorandum of Understanding signed between the Republic of Albania and CEZ A.5 on 23 June 2014, CEZ Shprndaije is classified as a state-controlled entity and named as Operatori i Shprndaijes si Energjist Elektrike ("OSHEE"). To avoid additional cash movements, these institutions reached a common agreement and based on a compensation decision no.126, dated 11 February 2015, between KESH sh.a, OSSHE and the Ministry of Finance, loan interest payments are netted against the balances of the three entities involved, resulting in lower amounts of rights and obligations for the outstanding loans for each of the above. No such agreement has been reached during 2021 and 2020. KESH has the following amounts of interest and commissions due and not paid to the Albanian Ministry of Finance as at 31 December 2021 under the sub-loan agreement: Cumulative Cumulative Commission Interest of Total Total Lender Interest Commission of the year the Year Interest Commissions IDA no.4480 1,034,306 - - 192,957 1,227,263 IBRD no.8111 108,099 - - 792 108,891 - EBRD no.43125 361,521 208,514 7,969 113,530 475,051 216,483 KfW 37,769 456,206 37,994 72,035 109,804 494,200 IBRD no.8862 45,367 54,624 24,291 30,099 75,466 78,915 11. Cash in banks At 31 December 2021 cash at banks amounts USD 61,918.48 or equivalent to EUR 54,627.32 (2020: USD 0) and is held at Intesa SanPaolo Bank Albania. A reconciliation between opening balance of the bank account, movements during the year and the closing balance is presented in Appendix I to these financial statements. 10 APPENDIX Dam Safety Project IDA Loan 4480 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant and Loan Statement of Project's Account (Supplementary schedules to the Financial Statements) Dam Safety Project - IDA Loan 4480 ALB, IBRD Loan, EBRD Loan, SECO Grant and KFW Grant (Amounts in USD, unless otherwise slated) Account No. 2023030701 Depository Bank Intesa San Paolo Bank Address Rr."Ismail Qemali", Tirana Currency EUR 2021 2020 Balance as at 1 January - 31,339 Funds received: SOE Procedures 200.000 Total funds received 200,000 - Disbursement: Consultancy services (144,885.35) (31,339) Bank charges (487.33) (0) Total disbursements (145,372.68) (31,339) Cash in transit - Balance as at 31 December 54,627.32 -