OSHC "BARQI TOJIK" "Nurek HPP Rehabilitation Project, Phase I" Grant No. D179-TJ, Loan No. 6024-TJ, Loan No. 6025-TJ" Special purpose project financial statements for the year ended December 31, 2019 and independent auditors' report OPEN STOCK HOLDING COMPANY "BARQI TOJIK" PROJECT IMPLEMENTATION UNIT "Nurek HPP Rehabilitation Project, Phase I" Grant No. D179-TJ,Loan No. 6024-TJ, Loan No. 6025-TJ" TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2019 2 INDEPENDENT AUDITORS' REPORT 3-5 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 Statement of cash proceeds and disbursements 6 Statement of uses of funds by project components 7 Notes to the special purpose project financial statements 8-13 STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 The following statement, which should be read in conjunction with the independent auditors' responsibilities stated in the independent auditors' report set out on pages 3-5, is made with a view to distinguish the respective responsibilities of management and those of the independent auditors in relation to the special purpose project financial statements of "Nurek HPP Rehabilitation Project Phase I" Grant No. D179-TJ, Loan No. 6024-TJ, Loan No. 6025-TJ", financed under Financing Agreements Grant No. D-179, Loan No.6024-TJ, Loan No.6025-TJ (the "Project"). Management is responsible for the preparation of this special purpose project financial statements, the financial position, cash proceeds and disbursements, uses of funds by project components, statement of applications for the year ended December 31, 2019 in accordance with International Public Sector Accounting Standard "Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International Public Accounting Standards Board of the International Federation of Accountants and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"). In preparing the special purpose project financial statements, management is responsible for: * selecting suitable accounting policies and applying them consistently; * making judgments and estimates that are reasonable and prudent; * stating whether IPSAS and WB Guidelines have been followed, subject to any material departures disclosed and explained in the special purpose project financial statements; and * preparing the special purpose project financial statements on a going concern basis, unless it is inappropriate to presume that the Project will continue its activity for the foreseeable future. Management is also responsible for: * designing, implementing and maintaining effective and sound system of internal control and for revealing risks in system of internal control; * maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Project, and which enable them to ensure that the special purpose project financial statements of the Project comply with IPSAS and WB Guidelines; * compliance with laws and regulations of the Republic of Tajikistan, accounting system of the Project and the requirements of the World Bank; * taking such steps as are reasonably available to them to safeguard the assets of the Project; and * detecting and preventing fraud and other irregularities. The special purpose project financial statements for the year ended December 31, 2019 were approved and authorized for issue on June 30, 2020 by the management of the Project. On behaf of -the Man_a ent:4 Ismoilzoda M. Dus uk amedov A. Habibov U. Safarov A. Chairman Chi ccountant Head of PIU Financial manager of PIU June 30, 2020 Dushanbe, Republic of Tajikistan 2 A MOORE MOORE STEPHENS KSC ASSURANCE SRL 175 Calea Floreasca, Floreasca Tower Building, 13th floor, District 1 Bucharest - Romania 1 +4 0374 490 074 +4 0374 094 191 info@moore.ro INDEPENDENT AU DITORS' REPORT To the Management of the Project "Nurek HIPP Rehabilitation Project Phase I": Report on the special purpose project financial statements Opinion We have audited the accompanying special purpose project financial statements of"Nurek Hydropower Rehabilitation Project, Phase 1", financed under Financing Agreements Grant No. DI 79-TJ, Loan No. 6024-TJ, Loan No. 6025-T (the "Project") which comprise the statement of cash proceeds and disbursements. the statement of uses of funds by project components for the year ended December 3 1. 2019 and a summary of significant accounting policies and other explanatory information (the "special purpose project financial statements"). In our opinion, the accompanying special purpose project financial statements are consistent, in all material respects, cash proceeds and disbursements, and uses of funds by Project components for the year ended December 31, 2019 in accordance with International Public Sector Accounting Standard "Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants, and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (rite 'WB Guidelines"). 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 Project 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 oar audit of the financial statements in the Republic of Tajikistan. 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 Without qualifying our opinion, we draw attention to Note 2 to the special purpose project financial statements which describe the basis of accounting. These special purpose project financial statements were prepared for complying with the approptiate World Bank Guidelines and Grant agreement requirements, and therefore are not intended to be a complete presentation of the -Nurek Hydropower Rehabilitation Project, Phase I" (the "Project") operations. Other matter The special purpose project financial statements are prepared to assist the Project to compl JII requirements of the World Bank. As a result the special purpose project financial statements ka Ns suitable for another purpose. AS NCE AS S%NO S.V MOORE Responsibilities of management and those charged with governance for the special purpose project financial statements Management is responsible for the preparation of these special purpose project financial statements in accordance with International Public Sector Accounting Standard "Financial Reporting Under the Cash Basis of Accounting" (the IPSAS") issued by the International Public Accounting Standards Board of the International Federation of Accountants, and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"), and for such internal control as management determines is necessary to enable the preparation of the special purpose project financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibilities for the audit of the special purpose project financial statements Our objectives are to obtain reasonable assurance about whether the special purpose project 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 the special purpose project financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose project 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. * 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 Project'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 special purpose project 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 Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the special purpose project financial statements, including the disclosures. and whether the special purpose project financial statements represent the underlying transactions and events in a manner that achieves fair presentation. >MOORE < (~'STLPH ENS KSC ASSU-'NCE S R.L. 4 MOORE We communicate with those charged with Igovernance regarding, anong other matters., the planned scope and timing of the audit and significant audit findings. including any significant deficiencies in interna] control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. MOOR STUEPHENS ASSURANCE S.R L.g Moore Stephens KSC fl Bucharest, Romania June 30, 2020 OPEN STOCK HOLDING COMPANY "BARQI TOJIK" PROJECT IMPLEMENTATION UNIT "Nurek HPP Rehabilitation Project, Phase I" Grant No. D179-TJ,Loan No. 6024-TJ, Loan No. 6025- TJ" STATEMENT OF CASH PROCEEDS AND DISBURSEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 in US Dollars Notes For the period Cumulative For the year Cumulative ended December ended December 31, 2019 31, 2018 Opening balance - - Funds received Loan IDA No. 6025-TJ 4 - 250 000 250 000 250 000 Loan IDA No. 6024-TJ 4 - 58050 58050 58050 Grant IDA No. DI79-TJ 4 1 245400 21 542523 20297 122 20297 122 OSHC "Barqi Tojik" - 78065 78065 78065 1 245 400 21 928 638 20 683 237 20 683 237 Reimbursement OSHC "Barqi Tojik" 4 (30548) (78 066) (47518) (47 518) (30 548) (78 066) (47 518) (47 518) Project expenses Loan IDA No. 6025-TJ Front-end fee 5 - 250 000 250 000 250 000 Loan IDA No. 6024-TJ Refund of Preparation Advance - 58050 58050 58050 Grant IDA No. D179-TJ Goods, Works, Non-Consulting Services, Consultants' Services, Training and Incremental Operating Costs 1 214 852 21 542 522 20 327 670 20 327 670 Total project expenses 1 214 852 21 850 572 20 635 720 20 635 720 Closing balance - - - - On behalf of th anagement: Ismoilzoda M. D tmukhdmedov A. Habibov U. Sa rov A. Chairman C e ccountant Head of PIU Financial manager of PlU June 30, 2020 Dushanbe, Republic of Tajikistan The notes on pages 8-12 form an integral part of the special purpose project financial statements, The Independent Auditors' Report is on pages 3-5 6 OPEN STOCK HOLDING COMPANY "BARQI TOJIK" PROJECT IMPLEMENTATION UNIT "Nurek HPP Rehabilitation Project, Phase I" Grant No. D179-TJ, Loan No. 6024-TJ, Loan No. 6025- TJ" STATEMENT OF FUNDS BY PROJECT COMPONENTS FOR THE YEAR ENDED DECEMBER 31, 2019 (in US Dollars) For the year Cumulative For the year Cumulative ended ended December 31, December 31, 2019 2018 Grant IDA No. D179-TJ Part 1. Goods, Works, Non-Consulting Services, Consultants' Services, Training and Incremental Operating Costs Goods 98 136 98 136 - Works - 20 114532 20 114532 20 114532 Non-Consulting Services (Audit) 129 549 264 622 135 073 135 073 Consultants' Services 969 816 1 035 064 65 248 65 248 Training 17351 30 168 12817 12817 Loan IDA No. 6024-TJ Part 1. Goods, Works, Non-Consulting Services, Consultants' Services, Training and Incremental Operating Costs Consultants' Services - Works Training Consulting Individuals Services - - Goods . Bussines trip - . Part 2. Refund of Preparation Advance - 58,050 58,050 58,050 Loan IDA No. 6025-TJ Part 3. Front-end fee - 250,000 250,000 250,000 1214852 21850572 20635720 20635720 On behalf of the- anagement: Ismoilzoda M. D stmukh edov A. Habibov U. Safarov A. Chairman hi Accountant Head of PIU Financial manager of PIU June 30, 2020 Dushanbe, Republic of Tajikistan The notes on pages 8-13 form an integral part of the special purpose project financial statements. The Independent Auditors' Report is on pages 3-5 7 OPEN STOCK HOLDING COMPANY "BARQI TOJIK" PROJECT IMPLEMENTATION UNIT "Nurek HPP Rehabilitation Project, Phase I" Grant No. D179-TJ, Loan No. 6024-TJ, Loan No. 6025- TJ" NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 (in USDollars) 1. GENERAL INFORMATION In accordance with the Financing Agreement between the Republic of Tajikistan and the International Development Association (hereinafter - the "World Bank") of June 2, 2017, the World Bank provided the Republic of Tajikistan: Loan No. 6024-TJ in the amount of 100 million US dollars. Loan No. 6024-TJ in the amount of 49.1 million US dollars. Grant No. D - 179 TJ in the amount of 41.8 million SDR. A grant / loan was provided for the implementation of the Project "Project for the Reconstruction of the Nurek HPP, Phase 1" (hereinafter referred to as the "Project"), The project consists of 2 parts. The goal of the project is to restore three power units and key components of the infrastructure of the Nurek HPP, as well as to increase the safety of the dam. Project purpose The grant was provided for the following types of project activities: Part 1. Restoration of three power units, including generators, turbines, main valves of the discharge pipeline, transformers, auxiliary systems and the main auxiliary equipment of the power plant. Provision of spare parts, as well as equipment for operation and maintenance. Part 2. Repairing tunnel spillways, repairing spillway gates, automatic gates / lifting systems, improving protection of the impermeable zone of the rock fill dam above the main zone ridge. Measures to improve seismic safety. Installation of a modem forecasting / flood warning system and the preparation of optimized operating rules to increase the capacity of the dam and floods. Repair and upgrading of instrumentation control systems to improve the collection and analysis of dam safety monitoring data. Update an emergency preparedness action plan. Project management The project is implemented by the Project Implementation Unit at the OSHC "Barqi Tojik", Contribution of OSHC "Barqi Tojik" to the Projects OSHC "Barqi Tojik" contributes to the Project by performing direct payments, as well as providing funding sources, when granted funds are not readily available, which are subsequently reimbursed. Duration of the Project is from June 2, 2017 to December 31, 2023. 8 2. PRESENTATION OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS Basis of preparation These special purpose project financial statements have been prepared in accordance with the International Public Sector Accounting Standard (the "IPSAS") "Financial Reporting under the Cash Basis of Accounting" issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"). Under the cash basis system income (or expenditure) is recognized when cash is received (or paid) irrespective of when goods or services are received. The Project's approved budget disclosed by categories of expenses is not publicly available and as such comparison of budget and actual amounts is not presented. These special purpose project financial statements consist of: * Statement of cash proceeds and disbursements; * Statement of uses of funds by project components; * Notes to the special purpose project financial statements, including short description of main statements of accounting policy and other descriptive notes. The reporting currency of these special purpose project financial statements is US Dollars (the "USD"). 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash basis of accounting Special purpose project financial statements are prepared on a cash basis of accounting. The cash basis of accounting recognizes transactions and events only when cash (including cash equivalents) is received or paid by the entity. Special purpose project financial statements prepared under the cash basis provide readers with information about the sources of cash raised during the period, the purposes for which cash was used and the cash balances at the reporting date. The measurement focus in the special purpose project financial statements is balances of cash and changes therein. Foreign currency Operations in foreign currency initially are counted in functional currency by the official currency exchange rate settled by the National Bank of Tajikistan (the "NBT") on a date of operation. All payments made in local currency are translated into USD at the official exchange rate defined by National Bank of Tajikistan, at the date of transaction. Monetary assets and liabilities expressed in foreign currency are converted to functional currency at official exchange rate on a date settled by the NBT. All foreign exchange differences resulted from maturity or recounting are included in statement of cash proceeds and disbursements. Non-monetary items are valued according to their historic cost in foreign currency, which are recalculated on rates of the initial operation date. 9 Cash and cash equivalents Cash and cash equivalents include cash on hand and due from banks, which can be converted to the corresponding amount of cash in the short term. Taxes In accordance with the subsidiary agreement between Ministry of Finance of the Republic of Tajikistan and OSHC "Barqi Tojik", which is conducted for the Advance, the Project is exempted from value added tax and social tax payments. Calculation and payment of personal income tax and pension fund contributions from income of local staff and consultants is made in accordance with the requirements and rates of the Tax Code of the Republic of Tajikistan. Project expenses The expenses are recorded in the period when they were actually paid. Sources of funds The funds were provided by the World Bank to the Project through direct payment to the end supplier of goods and/or services, reimbursement of expenses and contribution of OSHC "Barqi Tojik". 4. FUNDS RECEIVED The funds received were presented by the following reimbursement methods: For the year Cumulative For the year Cumulative ended ended December 31, December 31, 2019 2018 Financing method / sources of financing: Grant IDA No. D179-TJ Direct payment 1 214 751 21 464 457 20 249 605 20 249 605 Reimbursement 30547 78065 47517 47517 Loan IDA No. 6024-TJ Refund of Preparation - 58 050 58 050 58 050 Advance Loan IDA No. 6025-TJ Direct payment Reimbursement - 250 000 250 000 250 000 1 245 400 21 850 572 20 605 172 20605 172 OSHC "Barki Tojik" contribution Incurred expenses - 78,065 78 065 78 065 Reimbursed to OSHC "Barki Tojik" (30 547) (78 065) (47 518) (47 518) (30547) - 30547 30547 1 214852 21 850572 20635720 20635720 F 10 5. PROJECT EXPENDITURES Project expenditures by components are presented in the statement of funds by project components. Project expenditures on major categories are presented in the statement of cash proceeds and disbursements. Breakdown of project expenses by nature is presented as follows: For the year Cumulative For the year Cumulative ended ended December 31, December 31, 2019 2018 Grant IDA No. D179-TJ Works - 20 114532 20114532 20 114532 Goods 98 136 98 136 - - Non-Consulting Services 129 549 264 622 135 073 135 073 (Audit) Consultants' Services 969 816 1 035 064 65 248 65 248 Training 17351 30 168 12817 12817 Loan IDA No. 6024-TJ Refund of Preparation Advance - 58,050 58,050 58,050 Loan IDA No. 6025-TJ Front-end fee - 250,000 250,000 250,000 1214852 21850572 20635720 20635720 6. FINANCIAL POSITION Financial position as at December 31, 2019, and 2017 comprise of: December 31, December 31, 2019 2017 ASSETS AND EXPENDITURES Cumulative project expenditures: Loan IDA No. 6025-TJ 250 000 250 000 Loan IDA No. 6024-TJ 58050 58050 Grant No. D179-TJ 21542522 20327670 TOTAL ASSETS AND EXPENDITURES 21 850 572 20635 720 FINANCING Grant No. D179-TJ Grants received 21542522 20297 122 OSHC "Barki Tojik" contribution - 30548 Loan IDA No. 6024-TJ Grants received 58 050 58 050 OSHC "Barki Tojik" contribution . Loan IDA No. 6025-TJ Grants received 250 000 250 000 OSHC "Barki Tojik" contribution TOTAL FINANCING 21850572 20635720 111 7. WITHDRAWAL APPLICATIONS Withdrawal applications for the year ended December 31, 2019 comprise: Sources of Applica Date Direct Reimburse Total financing tion payment ment Grant No.179-TJ 5 18/01/2019 43,783 - 43,783 8 08/02/2019 - 30,548 30,548 6 06/02/2019 152,772 - 152,772 9 06/02/2019 98,136 - 98,136 010A 06/02/2019 491,747 - 491,747 12 12/07/2019 114,973 - 114,973 13 10/09/2019 129,549 - 129,549 14 17/12/2019 110,070 - 110,070 15 15/12/2019 - 73,823 73,823 1,141,030 104,371 1,245,400 8. UNDRAWN FUNDS For the year ended December 31, 2019 undrawn funds are presented as follows: Grant IDA No. Loan IDA Loan IDA No. D179-TJ No. 6024-TJ 6025-TJ Approved grant amount/loan 56 565 000 69 135 000 100 000 000 Disbursed during the period from January 1, 2018 to December 31, 2019 21542522 58050 250 000 Undrawn amount 35022478 69076950 99750000 Grant IDA No. Loan IDA Loan IDA No. D179-TJ No. 6024-TJ 6025-TJ Grant/loan received as at January 1, 2019 20 297 122 58 050 250 000 Disbursed in 2019 1 245 400 - - Grant/loan received as at December 31, 2019 21542 522 58050 250 000 L1 L 12 9. COMMITMENTS In the normal course of activities, the Project concludes agreements with suppliers of goods and services in accordance with the established budget and procurement plan. The contract value of obligations valid as at December 31, 2019 was as follows: Counterparty CCY Contract amount Date of contract Date of contract balance signing completion "Multiple Contractor Andritz EUR 100,700,853 December 31, Hydro Dcme 1 nyr TJS 32,721,626 2023 (ongoing)" June 24, 2018 Stucky Ltd. CHF December 12, June 12, 2022 4,159,7862016 Moore Stephens KSC with USD AITEN Consulting Group 145,600 July31, 2020 acting as sub-consultant December 9, (ongoing) 2019 JV of Baker Tilly-s USD September 13, 256,830 2019 March 13, 2020 Mr. Mirzo Zargarov USD 13,440 August 22, 2019 August 22, 2020 LLC BDO Chance TiS 125,894 November 26, January 27, 2023 125,894 2019 Jnay2,22 Mr. Igor Ziderer USD 12,600 September 3, December 31, 2019 2020 10. LEGAL CASES There were no any legal claims related to the Project. 11. EVENTS AFTER THE REPORTING DATE At January 3, 2020 until the date of issue of these special purpose project financial statements the World Bank has contributed to the Project as follows Sources of Application Date Direct Reimbursement Total financing payment TF A4615 16 March 2,2020 290 871 - 290 871 17 February 6, 2020 1339419 - 1 339419 19 January 13, 2020 14394 - 14394 20 January 6, 2020 128415 - 128415 21 January 3, 2020 122539 - 122539 22 April 6, 2020 3 066 128 - 3 066 128 23 April 7, 2020 259154 - 259 154 25 May 29, 2020 23910 - 23910 24 May 6, 2020 134038 - 134038 26 May 1, 2020 63 949 - 63 949 27 June 4, 2020 1 600 979 - 1 600 979 7043796 - 7043796 As at the date of issue of the special purpose project financial statements no significant events or transactions happened, which should be disclosed in the special purpose project financial statements, except for the events or transactions described above. 13