The Federal Democratic Republic of Ethiopia Audit Services Corporation INDEPENDENT AUDITORS' REPORT TO THE SUPERVISING AUTHORITY OF ETHIOPIAN ELECTRIC POWER We have audited the financial statements of Ethiopian Electric Power, Electricity Network Reinforcement and Expansion Project, financed under IDA Credit No. 5126 ET, Parts 1. 2 and 4.1, which comprise the balance sheet as at 7 July 2015 and the statement of sources and uses of funds and the Designated Account statement for the year then ended. and a summarx of significant accounting policies and other explanatorN information. Chief Executive Officer's Responsibility for the FinancialStatements The Chief Executive Officer of Ethiopian Electric Power is responsible for preparation of financial statements that give a true and fair view under the modified cash basis of accounting as described in note 2 to the financial statements and for such internal control as management determines is necessar\ to enable the preparation of financial statements that are free from material misstatement, wx hether due to fraud or error. Auditor's Responsibilit Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit inxolves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The Procedures selected depend on the auditor's Judgment. including the assessment of the risks of material misstatement of the financial statements. whether due to fraud or error. In making those risk assessments. the auditor considers internal control relevant to the entity's preparation and fair presentation of the inancial statements in order to design audit procedures that are appropriate in the circumstances. but not for the purpose of expressing an opinion on the effectiveness of the entit\"s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as wxell as evaluating the overall presentation of the financial statements. 251-011-i5 I_ Fax 25 1-01 1-5513083 E-mail: ASC,dethionet.com 7 5720 251-011-5535012 25 1-011-5535015 251-011-5535016 INDEPENDENT AUDITORS' REPORT TO THE SUPERVISING AUTHORITY OF ETHIOPIAN ELECTRIC POWER (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion the financial statements give a true and fair view of the financial position of Ethiopian Electric Power. Electricity Net\\ork Reinforcement and Expansion Project financed under IDA Credit No. 5126 ET, Parts 1. 2 and 4.1, as at 7 July 2015 and of its sources and uses of funds for the year then ended in accordance with the modified cash basis of accounting described in note 2 to the financial statements. Report on Other Requirements In our opinion - during the period IDA funds have been used in accordance with the conditions of the relevant financing agreement and only for the purposes for which the financing was provided: - counterpart funds have been provided and used in accordance with the financing agreement. and only for the purposes for which the financing was provided: - gloods. works and services financed have been provided in accordance with the relevant financing agreement and disbursement letters: - all necessary supporting documents, records and accounts have been maintained in respect of all Project activities; - the ftmds disbursed covered expenditures that are eligible for financing under IDA Credit No. 5126 ET. Parts 1, 2 and 4.1: a0 - there was a clear linkage between the books of account and the financial statements: - our examination revealed no weaknesses or irregularities in the systems of internal Ala controls over financial expenditure: - the Designated Account has been maintained in accordance with the provisions of the financing agreement and funds disbursed out of the said Account were used only for the purposes intended in the financina aareement: and - with respect to statements of expenditure, we understand that none were submitted during the year ended 7 July 2015. 30 December 2015 a2 ETHIOPIAN ELECTRIC POWER ELECTRICITY NETWORK REINFORCEMENT AND EXPANSION PROJECT IDA CREDIT NO. 5126 ET, Parts 1, 2 and 4.1 STATEMENT OF SOURCES AND EXPENDITURES FOR THE YEAR ENDED 7 JULY 2015 Cumulative from 12 June 2012 to 2015 7 July 2015 2014 Ethiopian Birr Ethiopian Birr Ethiopian Biri da FINANCING Credit from IDA Initial deposit to Designated Account 94.641.500 94.641.500 a0 Direct payments 124,333.264 170.129,096 45.795.832 SOE Procedures 116,773,616 116.773,616 - Special Commitment 793,267.751 793.267.751 - EEP's contribution 34,723.304 42.222.191 7,498.887 Gain on foreign exchange 3.42 1.482 4.229.658 808.176 Advance exchange difference 6.930.616 6.930.616 - TOTAL FINANCING 1,079,450,033 1,228,194,428 148,744,395 PROJECT EXPENDITURES Supplies 1.087.609.054 1.103,960.674 16.351.620 Civil works 52.005.132 52,005.132 - Consultant'sservice 3.481.483 3.481,483 - TraininU 788.916 788.916 - Operating cost 22.126.622 22.126.622 - TOTAL EXPENDITURES 1,166,011,207 1,182,362,827 16,351,620 (DEFICIENCY) EXCESS OF FINANCING OVER EXPENDITURE (86,561,174) 45831,601 132,392,775 3 ETHIOPIAN ELECTRIC POWER ELECTRICITY NETWORK REINFORCEMENT AND EXPANSION PROJECT IDA CREDIT NO. 5126 ET, Parts 1, 2 and 4.1 BALANCE SHEET AS AT 7 JULY 2015 2015 2014 Notes Ethiopian Birr Ethiopian Birr ASSETS CURRENT ASSETS Advance to contractors 153.968.376 119,438,341 Letter of credit - 7.498,887 Cash at bank 3 6.929.481 5.455.547 160,897,857 132,392,775 CURRENT LIABILITIES Retention 111.459.427 - Withholding tax 772.309 Other pavables 2.834.520 115,066,256 - NET CURRENT ASSET 45,831,601 132,392,775 REPRESENTED BY FUND BALANCE 4 45,831,601 132,392,775 4 ETHIOPIAN ELECTRIC POWER ELECTRICITY NETWORK REINFORCEMENT AND EXPANSION PROJECT IDA CREDIT NO. 5126 ET, Parts 1, 2 and 4.1 DESIGNATED ACCOUNT STATEMENT For year ended 7 July 2015 Account number 0261516900000 Depository bank National Bank of Ethiopia Address Addis Ababa. Ethiopia Related credit IDA 5126 - ET Currency USD USD Equivalent in Birr Beginning balance 7 July 2014 278.341.40 5.455.547.11 Add: Replenishments 5.866.544.03 116.773.616.20 6.144.885.43 122.229.163.31 Less: Payment for goods and services 5.808.207.06 118.721.165.24 336.678.37 3.507.998.07 Gain on foreign exchange - 3.421.482.47 Ending balance 7 July 2015 336.678.37 6.929.480.54 tn405 ETHIOPIAN ELECTRIC POWER ELECTRICITY NETWORK REINFORCEMENT AND EXPANSION PROJECT IDA CREDIT NO. 5126 ET, PARTS 1, 2 AND 4.1 NOTES TO THE FINANCIAL STATEMENTS 7 JULY 2015 I PROJECT INFORMATION The Project was established to implement IDA credit No. 5126 ET which is jointly financed by the Government of the Federal Democratic Republic of Ethiopia and the International Development Association (IDA). The main objective of these parts of the Project is the reinforcement and expansion of the electricity network. The Project became effective in October 2013. 2 SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation These financial statements have been prepared on a modified cash basis whereby non- monetary assets are expensed when acquired and monetary assets and liabilities are carried at fair value. b) Currency These financial statements are presented in Birr. Transactions in foreign currency are translated into Birr at the approximate rate of exchange prevailing at the date of the transaction. Cash balances denominated in foreign currencies are translated into Birr at the exchange rates ruling at the balance sheet date. 3 BANK BALANCES 2015 2014 Ethiopian Birr Ethiopian Bir National Bank of Ethiopia- A/c No. 0101181300058 6929.481 5-455,547 4 ACCUMULATE FUND Ethiopian Birr Balance at 7 July 2014 132.392.775 Less: Deficiency of financing over expenditure for the year (86.561.174) 45.831.601 6 A 40 ETHIOPIAN ELECTRIC POWER ELECTRICITY NETWORK REINFORCEMENT AND EXPANSION PROJECT IDA CREDIT NO. 5126 ET, PARTS 1, 2 AND 4.1 NOTES TO THE FINANCIAL STATEMENTS (continued) 7 JULY 2015 5 DATE OF AUTHORIZATION The Chief Executive Officer of Ethiopian Electric Power authorized the issue of these financial statements on 30 December 2015. la7 go ma am 40 40 AS 7