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A N N U A L R E P O R T 2 011

ANNUAL REPORT 2011 Elektro energija d.o.o.FOREWORD 1

annual report

FOR THE YEAR 2011

LJUBLJANA, MARCH 2012

ELEKTRO ENERGIJA,

podjetje za prodajo elektrike in drugih

energentov, svetovanje in storitve, d.o.o

Slovenska cesta 58, 1000 Ljubljana, Slovenia

www.elektro-energija.si

3annual report 2011 elektro energija d.o.o.ContentS

ContentS

Operating Highlights in 2011 ............................................................................................... 5

Important Events in 2011 ...................................................................................................... 6

Main Objectives in 2012 ........................................................................................................ 7

Management Report .............................................................................................................. 8

Report of the Founder’s Management Board ................................................................... 9

1. GENERAL DATA ....................................................................................................... 11

1.1. Company’s ID ...........................................................................................................12

1.2. Organisation and Activities of the Company ...................................................13

1.3. Management ............................................................................................................14

1.4. Founder of the Company ......................................................................................15

1.5. Corporate Governance ...........................................................................................15

2. BUSINESS REPORT ................................................................................................17

2.1. Mission, Vision and Values ...................................................................................18

2.2. General Operating Conditions .............................................................................19

2.3. Energy Balance of the Republic of Slovenia for 2011....................................21

2.4. Sale of Electricity ....................................................................................................22

2.5. Marketing ..................................................................................................................25

2.6. Performance Analysis ............................................................................................25

2.7. Development of Electricity Market in Slovenia ................................................27

2.8. Risk Management ...................................................................................................28

2.9. Investments ..............................................................................................................33

2.10. Information Technology ........................................................................................34

2.11. Quality Management .............................................................................................34

2.12. Planing and Development ....................................................................................35

3. CORPORATE SOCIAL RESPONSIBILTY .............................................................37

3.1. Concern for Employees .........................................................................................38

3.2. Concern for Other Publics .....................................................................................40

3.3. Communication with Interest Groups ................................................................41

4. AUDITOR'S REPORT ...............................................................................................43

5. FINANCIAL REPORT ...............................................................................................47

annual report elektro energija d.o.o. for the year 2011

publisher: elektro energija d.o.o.

Design: Sonja eržen u.d.i.a.

printing house: Medium d.o.o.

photography: Shutterstock and archive elektro energija d.o.o.

print run: 100

July 2012

54 annual report 2011 elektro energija d.o.o.operatInG HIGHlIGHtS In 2011

letno poroČIlo 2011 elektro energija d.o.o.pouDarKI prI poSloVanJu V letu 2011

2011

net sales (in eur) 365,581,662

net profit or loss for the period (in eur) 1,454,661

added value (in eur) 6,054,613

Sales of electricity – wholesale (in kWh) 3,243,941,979

Sales of electricity - wholesale (in eur) 167,849,288

Sales of electricity– retail (in kWh) 3,157,237,366

Sales of electricity – retail (in eur) 197,732,374

number od employees as at 31st December 2011 69

total assets as at 31st December 2011 (in eur) 75,321,227

equity as at 31st December 2011 (in eur) 6,963,881

operatInG HIGHlIGHtS In 2011

76 annual report 2011 elektro energija d.o.o.MaIn oBJeCtIVeS In 2012

annual report 2011 elektro energija d.o.o.IMportant eVentS In 2011

IMportant eVentS In 2011

In april 2011, elektro ljubljana d.d. established a subsidiary elektro energija d.o.o. with the intent of demerging the activities of electricity purchases and sales. Mr. Gregor Božič, MSc, hitherto the executive Director of the ou (organizational unit) for electricity purchases and Sales with elektro ljubljana d.d., was appointed the Managing Director of the Company. Based on the previously performed due diligence, a contract on the division of assets and liabilities was drafted and signed by the management of both, namely the transferring company and the acquiring company. the division agreement between elektro ljubljana d.d. and elektro energija d.o.o. defines the assets and the liabilities for the activities of electricity sales and purchases, which have been transferred to the new company elektro energija d.o.o.

the demerger with the pertaining transfer of the sales and purchases activities onto the new company elektro energija d.o.o., was entered into court register on 1st December 2011, following the prior consent by the demerger auditor, the Supervisory Board and the assembly of elektro ljubljana d.d.'s Shareholders. the financial year for the new company elektro energija d.o.o. is deemed to be the entire calendar year of 2011, based on the opening balance sheet as at 1st January 2011, which forms an integral part of the demerger contract. In the field of electricity purchases and sales, intense activities for the establishment of the new company elektro energija d.o.o. were conducted as early as the end of 2010 and during the course of the entire year 2011.

upon the demerging procedure, it was necessary to amend or renew any pertinent contractual relations with the electricity suppliers as well as with the service suppliers, regulate the terms and conditions as well as the employment contracts for the transfer of employees and to precisely define the contractual relations between the parent company elektro ljubljana d.d. and the newly established subsidiary elektro energija d.o.o., regarding the provision of services, which will be carried out by elektro ljubljana d.d. for its newly established subsidiary. up to 1st December 2011, electricity purchases and sales activities were carried out within the framework of elektro ljubljana d.d., but were transferred to the new company as of 1st December 2011. Final consumers of electricity have thereof been informed in advance.

MaIn oBJeCtIVeS In 2012

• financial growth on the wholesale market in order to expand the trading infrastructure and the number of business partners in liquid markets across Germany and austria;

• maintaining the market share in the sale of electricity to commercial and household consumers, implementing a new sales policy with a greater emphasis on credit risks management and the effective debt recovery;

• reinforcing our commercial network and quality, developing and introducing new electricity products to final consumers and establishing a loyalty scheme;

• ensuring effective It support to our processes, whereby its services rely on contemporary global trends and guidelines of the development of computer technology, adding new functionalities to the CrM system, to the trading system, and to the portfolio and risks management;

• establishing a system for the Company’s performance management.

98 letannual report 2011 elektro energija d.o.o.report oF tHe FounDer’S ManaGeMent BoarD

annual report 2011 elektro energija d.o.o.ManaGeMent report

ManaGInG DIreCtor GreGor BožIČ M.Sc.

CHaIrMan oF tHe ManaGeMent BoarD

anDreJ rIBIČ

ManaGeMent report

2011 was marked by the division of elektro ljubljana d.d. through the creation of a new company - elektro energija d.o.o - that would henceforth undertake electricity trading activities. this would be an enterprise able to achieve a greater focus, as well as more rapid growth and expansive operations across both domestic and foreign markets.

elektro energija d.o.o. completed 2011 with a net profit of eur 1,454,661, which is eur1,185,700 more than initially planned; as 2011 was the first year of operation, directly comparable data with previous years is lacking. Information contained in financial statements regarding purchase and sale of electricity, which was presented separately in the annual reports of elektro ljubljana d.d. for the 2008 to 2010 period, are not fully comparable with the data from 2011 due to the fact that operating costs per individual activities were divided according to different criteria.

2011, and the creation of the new enterprise, was most notably marked by: • preparation of all activities for the transfer of trading operations to the new

company;• improvement of the information system with a view to the division of

processes within the competence of the supplier and the performer of services for the distribution system operator;

• increase of trading operations in the wholesale market;• the nuclear disaster in Japan, and the consequent rise of energy prices in

wholesale markets;• co-ordination of retail prices for household consumers with the growth of

electricity prices in the retail market;• intense marketing of fixed price packages for household consumers;• moves to establish a loyalty scheme.

the Management has endeavoured to establish business transparency, which allows a greater sense of commitment and motivation among employees, satisfaction and loyalty among customers and consumers, as well as the understanding and support of the founder for the further development of the company.

I would sincerely like to thank all the employees of elektro ljubljana d.d. and elektro energija d.o.o. who have contributed to the successful completion of the demerger, the creation of the electricity trading project, as well as to the realisation of our business objectives in 2011. I would also like to express my heartfelt gratitude to the Chairman of the Management Board of elektro ljubljana d.d., and to the members of the Supervisory Board of the founder for their support in this most demanding project.

elektro energija d.o.o.Gregor Božič M.Sc.Managing Director

report oF tHe FounDer’S ManaGeMent BoarD Separating the performance of regulated and marketing processes brings a greater focus on the development of individual activities and a greater transparency to business operations. the majority of Western european electricity companies separated their trading and supply activities from network operations years ago. experience has revealed that such division allows a markedly more rapid development of trading enterprises, which were traditionally oriented only towards those areas where their associated companies operated the distribution network. the practice is also in accordance with the vision of the eu’s energy policy, which in the long term envisions a single european electricity market, where individual players can compete on both wholesale and retail electricity markets. the expansion of business operations onto foreign markets will allow the growth of the newly created elektro energija d.o.o., where it can apply and take full advantage of the extensive knowledge and experience of its employees demonstrated in the opening up of the market in Slovenia.

the project to hive-off electricity trading operations was conducted according to book value in the context of the previously carried out due diligence. the Management Boards of elektro ljubljana d.d. and elektro energija d.o.o. signed a contract on the division of assets and liabilities which were transferred to the new company – elektro energija d.o.o. Consent was given to the contract on division by the auditors, as well as the Supervisory Board and the General assembly of Shareholders of elektro ljubljana d.d..

the Chairman of the Management Board of elektro ljubljana d.d. represents the founder of the new company elektro energija d.o.o.. under the articles of association, the founder shall provide consent in relation to all important decisions made by the Management Board of elektro energija d.o.o.. In 2011, the founder adopted the following decisions:• appointment of Mr. Gregor Božič as the company’s Managing Director for

a four-year term;• approval of the supplemented Memorandum of association of elektro

energija d.o.o.;• consent to the rules on organisation and the System of positions;• conclusion of a contract between elektro ljubljana d.d. and elektro

energija d.o.o on the performance of services;• approval of the Business plan for 2012.

all such decisions made by the founder are entered in the register of decisions. pursuant to the articles of association of elektro energija d.o.o., it is necessary to obtain prior approval from the Supervisory Board of the founder for every decision made by the founder which is then entered in the elektro energija register of decisions. all decisions thus entered were initially discussed by the elektro ljubljana Supervisory Board, and thence approved.

elektro ljubljana d.d.andrej ribičChairman of the Management Board

It seems to me that this light emphasises my beauty. It’s true.

1GENERAL

DATA

ANNUAL REPORT 2011 Elektro energija d.o.o.GENERAL DATA

ANNUAL REPORT 2011 Elektro energija d.o.o.GENERAL DATA 1312

CoMpany’S ID

Company name eleKtro enerGIJa, podjetje za prodajo elektrike in drugih energentov, svetovanje in storitve, d.o.o.

Shortened name elektro energija d.o.o.

Headquarters ljubljana

Business address Slovenska cesta 58, 1000 ljubljana, Slovenia

Type of company limited company

Legal status of the entity entered

Date of entry into court register 16th May 2011

Registration number 3974316

Tax Identifaction Number (TIN) SI19950853

Company’s share capital eur 3,000,000

Website www.elektro-energija.si

Number of employees as at 31st December 2011

69

orGanISatIon anD aCtIVItIeS oF tHe CoMpany

under european Directive 96/92/eS concerning common rules for the internal market of electrical energy, which requires independence of the distribution network operator from interests related to the production and supply of electricity, elektro ljubljana d.d. implemented a process aimed at hiving off its electricity trading activities. on 16th May 2011, in accordance with the requirements of the said directive, elektro ljubljana d.d. established a new limited liability enterprise, elektro energija d.o.o, as an energy wholesaler, retailer, consultancy and service provider. as of 1st December 2011, and by means of this universal legal succession from the parent company, electricity trading operations were transferred to the elektro energija d.o.o. subsidiary, which is fully owned and controlled by elektro ljubljana d.d.

In addition to trading electrical energy in both retail and wholesale markets, elektro energija d.o.o. shall perform other activities in accordance with the articles of association. the individual divisions of the newly formed company are as follows:

Wholesale Trade concludes power purchase and sales agreements for standardised and non-standardised electricity products, as well as trades take or pay contracts and options on the forward, current, electricity balancing and bilateral wholesale markets, further to which it ensures the provision of necessary cross-border transmission capacities.

Retail Trade concludes contracts with consumers and producers within the scope of distribution networks, whereby sale or purchase is bound by the consumption or production at individual points of exchange.

Corporate Services encompassing the company’s Financial and accounting Services, legal, General and Hr Services, as well as Information technology and process Support, together with portfolio and risk Management.

1.1. 1.2.

CORPORATE SERVICES

MANAGEMENT

ou InForMatIon, teCHnoloGy anD proCeSS Support

OU RETAIL

OU WHOLESALE

ou portFolIo ManaGeMent anD rISK ManaGeMent

ou FInanCe anD aCCountInG SerVICeS

ou leGal, General anD Hr SerVICeS

ANNUAL REPORT 2011 Elektro energija d.o.o.GENERAL DATA

ANNUAL REPORT 2011 Elektro energija d.o.o.GENERAL DATA 1514

ManaGeMent

Managing DirectorMr. Gregor Božič, MSc

Advisor and Deputy Director Mr. roman ponebšek

Advisor to the Management Ms. Janja Horvat Jaklič, MSc

Director OU Wholesale Mr. nikola Krečar, MSc

Director OU Retail Mr. Milan lampret

Head of OU Financial and Accounting Services Ms. Barbara Špan

Head of OU Legal, HR and General Services Ms .taja Simoniti, MSc

Head of OU Portfolio and Risk Management Mr. robert Janeš

Head of OU for IT Technology and Process Support Mr. Jože Mestnik

Head of Communications Ms. Violeta Irgl, MSc

FounDer oF tHe CoMpany

the founder and the sole proprietor of the company elektro energija d.o.o is the company elektro ljubljana d.d.. elektro ljubljana d.d. is the owner of the electricity infrastructure, leasedout to the company SoDo d.o.o. pursuant to the Contract on the lease of electro Distribution Infrastructure and performance of Services for the System operator of the Distribution electricity network. Its activities include operating and development of the sistribution system, users’ services and distribution network services.

Corporate GoVernanCe

Corporate governance derives from the Companies act, the Company’s articles of association as well as the rights and responsibilities of the Company’s administrative and management bodies.

the Company is a limited company and is 100% owned by the company elektro ljubljana d.d. In legal traffic, the Company shall be answerable for their own liabilities with all their assets.

the company is governed by the founder and the single-member management. the founder controls the conduct of business operations and, upon the management request, adopts the principles of business policies, including the objectives and the strategy of electricity trading a well as the strategy of risk management.

1.3. 1.4.

1.5.

Sometimes I think it is easier to express myself with music than with words. It is easier to find the right tone, and I’m louder as well.

2BUSINESS

REPORT

ANNUAL REPORT 2011 Elektro energija d.o.o.BUSINESS REPORT

ANNUAL REPORT 2011 Elektro energija d.o.o.BUSINESS REPORT 1918

MISSIon, VISIon anD ValueS

MissionEnsuring quality power In its provision of electrical power and related services, elektro energija d.o.o combines responsible business operations with longstanding knowledge and experience that follows the needs of the consumer. We are aware that customer satisfaction is of key importance, and hence our mission is clear: the uninterrupted supply of high-quality environment-friendly electrical energy at a competitive price.

VisionThrough expanding and enhancing its business, Elektro Energija strives to maintain its pre-eminent market position as Slovenia’s leading retailer of electricity.In addition to maintaining a stable market share, the company intends to develop into a well-established and recognizable wholesaler throughout Southeastern europe. It shall ensure and maintain ever-more reliable and responsible risk management, which will provide stability to business operations as well as the further development of elektro energija over the coming years.

Well aware of all the challenges of the market and competition, the company follows consumers needs at all levels. By means of excellence, innovation and knowledge development, elektro energija d.o.o. plans to become a service-oriented company which, as regards profitability, is comparable to the best in the region. In its provision of products and services of the highest quality, it shall continue to maintain its position as a market leader and the largest electricity supplier in Slovenia. through its ambition to extend its electricity trading operations into the markets of Central and Southeast europe, elektro energija d.o.o. intends to remain a step ahead of the competition by facing broader and more ambitiously set challenges. through optimal pricing, professional competence and excellence, elektro energija d.o.o. shall maintain a premier position by gaining the permanent trust of the consumer.

ValuesCustomers and Business Partners – The Centre of Our Universe Meeting the needs of customers and business partners quickly, efficiently co-operatively and with service of the highest quality is forever central to elektro energija’s business operations; indeed, their needs and expectations are paramount. By providing excellence at all levels in the services provided, as well as through successful collaboration in common challenges, elektro energija co-create success through long-term partnership.

Elektro Energija Employees - The Key to Our Success Boasting more than one hundred years of electricity supply tradition, elektro energija d.o.o is proud of its roots. aware of our responsibility in creating the future, we remain highly motivated: with an inexhaustible wish for knowledge and the ongoing development of their talents, elektro energija employees are highly qualified experts, driven by excellence and meeting the very highest of standards. Connected by long-standing bounds of co-operation, the mutual exchange of ideas, knowledge and experience, networking with positive energy is synonymous with our approach; together, we have created the foundation of our company and this shall be the driving force behind our future progress and success.

Responsibility and Efficiency through responsible and efficient business operations and acceptable risk taking, elektro energija d.o.o ensures its shareholders a stable return on their investment.

Growth and Development - The Only Constants In undertaking its business, elektro energija follows the maxim of ongoing development and progress. through experience, professional expertise, excellence, innovation and service, adapted to the needs of the client, the company faces every challenge responsibly and strives for the permanent improvement of efficiency and performance at all levels of its operations.

Global Responsibility With Energy Duty-bound to maintain a pristine natural world, and with a conservative and considerate attitude towards the treasure that is our natural world, elektro energija is forever mindful in its exploitation of resources, and maintains ongoing responsibility towards all factors that impact the environment. By being aware of the key importance of preserving environmental and social balances, the company energetically and enthusiastically supports sustainable development - locally, across Slovenia as well as europe-wide.

General operatInG ConDItIonS

the International Monetary Fund forecasted that global economic growth in 2011 would be lower than in 2010. the most optimistic forecasts were for the uSa, Germany and asian countries; realization of such growth, however, rested on the state of public finances. In europe, as economies started to pick up, forecast GDp growth stood at cca. 1.75%; a positive business climate and consequent reduction in unemployment were predicated on good prospects for the global economy. Such positive expectations certainly bypassed Slovenia’s construction industry sector, where troubles continued. Consumer prices also rose across europe, even more than in Slovenia, whereas the key underlying inflation pressures derived from higher prices for fuel and food. Slovenia’s inflation rate stood at 2.1%, while the sluggish economy hampered any real growth in wages and inflation, which commensurately alleviated the anticipated rises in the prices of energy and manufactures.

economic growth in Slovenia remained very modest; GDp fell by 0.2% in real terms, and there was no sense of any recovery from recession. exports exerted the most positive effect on GDp, nevertheless, foreign demand remained weak. Domestic demand declined considerably, both household and public sector expenditure fell by 1.6%. Fierce conditions in euro zone financial markets further obstructed investment, which consequently decreased by 5.6%.

a characteristic of 2011 was the european Central Bank’s changing base rates four times after almost two years without a change. In april, the eurIBor rate rose from 1.0% to 1.25%, then by further basis points in July; however, by november it had fallen back to 1.0%. on 6th September 2011, tired of the surging Swiss franc, Switzerland’s national Bank intervened to set a minimum exchange rate of 1.20 francs to the euro.

Slovenia received a cut in its credit rating, which further worsened access to financing sources, and although the pressure on the banking sector was somewhat alleviated by eCB intervention, there was no real scope for further borrowing; indeed, Slovenian banks must look to redeem four billion eur of liabilities during 2012. In 2011 elektro energija continued to face considerable payment disorder as well as a high number of insolvency procedures involving its business partners.

2.1.

2.2.



output measures decreased in real terms in most of Slovenia’s industrial sectors in 2011, with construction affected the most; the public sector - and in particular education and health - grew. the cost of living increased by 2.0% over the year; together with rising energy and liquid fuel prices, food and beverage prices rose the most, while communications services, clothing and footwear witnessed overall reductions in 2011.

the Wholsale electricity Market During 2011, movements in wholesale electricity prices were primarily influenced by events related to the unrest in northern africa and the Middle east, the corollary of the nuclear disaster at Fukushima, as well as the consequences of the european debt crisis as it spread from Greece to Italy and thence almost the entire continent.

the first rise in prices was triggered by the political unrest across north africa, and in egypt and libya in particular. these revolutions caused negative sentiment in relation to oil supply security, which was reflected in the price hike of fuels in all global markets. Due to the aforementioned events, pressure on prices remained until the libyan situation began to settle in autumn 2011.

another important event, which significantly impacted energy prices in 2011, was the nuclear disaster at Japan’s Fukushima nuclear plant on 11th March. the tsunami, which hit the eastern seaboard of Japan, had a significant impact on the development of new global energy policies. numerous countries convened crisis meetings to determine the future of nuclear power; some countries adopted security measures, while Germany adopted a decision to immediately close ageing nuclear reactors and phase out all nuclear plants over the coming decade. this triggered an impulsive increase in electricity prices, and the cost of power in international markets shot up. In the following month base-load energy soared by a record 23.3% to eur 62.53 per MWh, whereas futures for 2012 delivery rose by eur 9.35 to eur 58.16 per MWh.

upon the settlement of the political situation across most of north africa, and upon stabilization of the situation in Japan, prices started to level out during the second half of the year. Due to the rising intensity of the debt crisis in Greece, and then Italy, and due to the risk to overall economic development in europe, wholesale prices achieved on the futures market started to fall towards year’s end. Mention should also be made as to the construction of a larger number of renewable schemes which had an impact on electricity prices in short-term markets, as well as the influence of subsidies to the automotive sector which artificially maintained economic growth and commensurately higher electricity prices.

the price of electricity in Slovenia is closely linked to prices on the european energy exchange (eeX) futures market, and hence every particular move in the price of electricity on this exchange has had a direct impact on prices in the Southeast european region, of which Slovenia is also part. upon events which are typical for this region, certain deviations and correlations between forecast and realized prices in europe and the Southeastern region can be observed. one peculiarity of the region is its considerable dependence on hydro-energy production. In normal circumstances this is not so noticeable; however, in a dry season, such as that which was experienced in the last quarter of 2011, an additional increase above european prices at the eeX was apparent in Southeast europe, where prices were always higher than in Central europe. Disparities on a monthly level reached as much as 3.2 eur per MWh, and even as much as 50 eur per MWh - or more - at an hourly level, whereas annual rights to import of electricity from austria to Slovenia in 2012 stood at 3.41 eur per MWh at the auction held at the beginning of December.

the retail electricity MarketDuring 2011, the economic and financial crisis continued to depress the retail electricity market, while the company introduced a number of new activities and schemes with buyers and

competition in mind. electricity prices throughout 2011 varied greatly ranging between 50 to 60 eur per MWh. as a consequence of the lack of electricity in the region, the final prices paid by consumers were influenced by the costs of using cross-border transmission capacities.

In its establishing retail prices, elektro energija followed conditions on the wholesale markets. prices charged household consumers were increased on 1st July 2011. the rates charged commercial customers, who play a more active role in the purchase of electricity, is constantly linked to wholesale market prices, and most of all reflect the time of conclusion of the contract together with the consumers’ attitude towards risk. the influence of the economic and financial crisis was also reflected in increased credit risks which every electricity supplier is forced to face. as a response to the tense conditions, a more proactive approach towards outstanding debts was initiated, as was the implementation of a credit rating regime for all of elektro energija’s business partners.

Competition pressure on the retail market continued throughout 2011. By playing an active role on the market, elektro energija was successful in maintaining its pre-eminent position in Slovenia.

regulatory Framework the division of elektro ljubljana’s operations, the take-over of capital, as well as all rights and obligations pertaining to the trading and supply of electricity was transferred to the newly created subsidiary enterprise elektro energija d.o.o. on 1st December 2011.

on 28th September 2011, elektro energija d.o.o. obtained a licence to perform energy supply, trading, representation and intervention activities on Slovenia’s electricity market. pursuant to the energy act rS, the licence was issued for the period of five years and is entered into the energy agency rS register.

the challenge we shall face over the coming year is related to the change of the energy act (official Gazette rS no. 37/2011). Henceforth, each supplier shall appoint an impartial independent person charged with the resolution of any disputes with consumers.

enerGy BalanCe oF tHe repuBlIC oF SloVenIa For 2011

acting upon a proposal of the Ministry of the economy, the Government of the republic of Slovenia, on 8th September 2011 adopted the energy balance of the republic of Slovenia for 2011, which illustrates the flow of supply, transformation and utilization of all energy sources. For the company elektro energija d.o.o. the balance of electricity s in the republic of Slovenia is of principal interest. the forecasted final consumption of electricity in the energy balance of the republic of Slovenia for 2011 was 12,788 GWh which is 5% more than in the previous year. the industry consumed 5,792 GWh (8% more compared to the previous year), transport 232 GWh (11% more) and the remaining consumption 6,764 GWh (2% more).

In 2011 the trend of reducing the use of fossil fuels continued, while the share of using renewable energy sources and energy from waste as well as the production of electricity from voltaic solar plants had increased. Since the needs for electricity in the republic of Slovenia exceeded domestic capacities, Slovenia had to import 1,763 GWh of electricity also in 2011 which represented 12% of gross consumption of electricity.

2.3.



Sale oF eleCtrICIty

Wholesalethe year 2011 was marked predominantly by the partial division of the company elektro energija d.o.o. from the mother company elektro ljubljana d.o.o.. Due to the partial division, we prepared and performed all contractual relations, which were necessary for the further smooth operation within the framework of the new company – elektro energija d.o.o.. Due to the said partial division, we postponed the procedure for the entrance onto German and austrian markets to the year 2012. In 2012 we are planning to enter the wholesale market in austria and Germany. For this purpose, we are carrying out activities for the establishment of appropriate trading infrastructure which encompasses the registration of balance groups in Germany and austria, setting up contractual relationships with operators of transmission networks, accession to the membership in the european energy exchange epeX and the futures exchange eeX Derivatives, setting up partnership relations with intermediary companies which provide liquid trading platforms (tFS, ICap and Spectron) as well the establishment of new partnership relations with larger energy companies in the eu in the south-eastern region. the establishment of daughter companies for the operations in austria and Germany is not necessary.

In the field of wholesale, we recorded a significant increase of trading activities with standardised products. Besides ensuring the necessary quantities for retail, we additionally sold more than 3 tWh of electricity by active participation on the wholesale market. With the increased scope of business we created some additional positive price difference and thus better purchasing conditions for our final consumers.

We participated in the public procurement of SoDo d.o.o. where we were the most successful participant and ensured ourselves the role of electricity supplier covering the losses in four of five distribution networks (elektro Maribor, elektro Celje, elektro primorska and elektro Gorenjska). Due to legal discrepancies, we were not able to act as a supplier for the territory of distribution network elektro ljubljana d.o.o.. We thus acquired the status of supplier to the aforementioned networks for the period of two years (2011 and 2012) with the foreseen annual volume of 450 GWh.

In 2011 we performed independedly in our own balance group of elektro ljubljana d.d., as of 1st January 2011 we thus not only run an independed balance group and four balance sub-groups, but also independendly provide for all short-term purchasing and selling needs of the entire balance group and balance sub-groups. We have also become an active participant in short-term trading at the BSp Southpool exchange. We were gradually increasing the sales volume at the said exchange throughout the year and by the volume of trading quantities obtained the status of liquid provider.

We also started with the active otC trading. By enetering the otC trading platforms, we were able to actively trade also with standardized long-term futures products which are used to secure the volume and the prices for the purchase of electricity. We additionally also concluded contractual relations and expanded cooperation with other operators of trading platforms in such way that we will be able to operate on German platforms when we have entered the German market. the said changes have and will have a considerable impact on flexibility and efficiency of operations of the balance group as a whole.

upon increasing the volume of business operations, we also adjusted our organizational structure in order to provide efficient operating. We set up an organizational unit for wholesale, within which we control all processes necessary to perform trading. this was followed by Hr reinforcement

in the field of trading as well as the portfolio management and the back office. Such Hr concept enables a flexible and efficient operating of this organizational unit which will in the future be reinforced. We drafted a plan of the It support improvement and the further development of organization. By increasing the scope of activities, it was necessary to set up an appropriate and suitable It support in order to enable efficient operations in the wholesale market. .

retailIn the field of electricity trading, elektro energija d.o.o. is the universal legal successor of elektro ljubljana d.d. in such way that the method and the scope of business operatinos did not change for the long-term consumers of elektro ljubljana d.d.. the universal legal succession enables that the existing electricity trading contracts remain valid.

In the field of retail in 2011, we continued with our mission in such way that we provided stable and competitive conditions of supply for our commercial and household consumers in regard with their purchasing activities and habits as well as their attitude towards risk taking. We were furthermore developing new options for the purchase of electricity per individual segments, developing business relationships and various additional services.

COMMERCIAL CONSUMPTION

Industrial and larger commercial consumers mostly take an active role in purchasing electricity and conclude contracts for a limited time whereupon they have a known retail price for the chosen period of time and quantities. these consumers choose the time of purchasing electricity themselves. We develop a business relationship with them and maintain an active approach to informing and meeting their needs, which enabled us to keep the market share in this segment. We also continued with the development and offer of products which protect our buyers from price volatility which has further contributed to meeting the needs of this segment of consumers. Furthermore, we offered contemporary services of consumption management to our commercial consumers, which enable them to adjust their consumption to certain the time period and so achieve savings with the fixing price of electricity.

Medium and small commercial consumers conclude electricity purchasing contracts for limited or indefinite periods of time. the consumer chooses the type of contract by himself. More active consumers, whose number and share keeps growing, opt for limited period contracts, since they wish to have an influence on the moment of the purchase of electricity and hence on the level of the achieved fixing price. the type of contract for each consumer is also related to the volume of the consumed electricity. Since this a numerical segment, we carried out several market actions for the year 2012 and the following years, whereby the date of such action was set out in regard with the favourable wholesale market conditions and according to the activities in the Slovenian market.

Smaller and less active consumers conclude contracts for indefinite period of time, where elektro energija d.o.o. has an option to change the price in the event that the prices in the electricity wholesale market change. We did not change the prices for those consumers in 2011. In this segment, we experienced the continuation of the trend where consumers switch from indefinite time contracts to forward contracts for a limited period as well as the pressure of competition , however, we managed to limit that by our responsiveness and flexibility as well as with several market actions.

throughout the year we participated, as bidders, at public procurements by national budget users for the supply of electricity, where competitiveness was even harder than in other market

2.4.



segments due to lower credit risks, however, we still managed to keep the existing ones and obtain some new national budget users.

HOUSEHOLD CONSUMPTION

In 2011 we intensified our marketing activities and loyalty Scheme activities and on the other hand experienced stronger activities by our competitors. We, of course, continued to offer the option to conclude a contract for a definite period of time with fixed prices for a selected time period (My package). this approach enabled us to keep most of our consumers.

SERVICES FOR COMMERCIAL AND HOUSEHOLD CONSUMERS

our consumers can choose among various communication paths. In our information offices they can obtain information and arrange all the formalities in the process of consumers’ and network users’ relations management (from submitting the application for the network connection, to changes at the metering point or in their contractual relationship). our information offices are located in ljubljana and novo mesto, Kočevje and trbovlje.

a very important communication channel is our Call Centre which covers over 75% of all contacts with our consumers and where we have been recording a growing trend. 5.5% of consumers contact us via regular mail. the use of electronic marketing paths is increasing, proved by the fact that 5.1% of our consumers contacted us per e-mail. other electronic services were used by one percent of consumers. 9.4% of consumers submitted their requests via answering machine, while 4% submitted it via electronic secretary. In 2011 we recorded over 250,000 contacts with our users.

as of 1st December 2012, we enable the use of electronic services without a digital certificate at the website “My energy” and have so merged all our electronic services under one entry point. We have so increased the clarity and applicability of services and bring the contemporary communication paths closer to our consumers and simplify the procedures.

energy Management at the end of 2011, we started performing our final activities within the scope of the project for the set-up of information system for comprehensive and integral method of electricity trading management, which includes quantity aggregation, consumption forecast and analysis of the elektro energija d.o.o. balance group portfolio, as well as the risk management.

By carrying out this project, we wish to obtain the tools for quantity aggregation management of the balance group members, which would facilitate efficient preparation of data, tools for long-term and short-term forecast of electricity quantity realization of the balance group members as well as the tools for forecasting electricity prices. our objective is to set-up tools for establishing the value of portfolio of individual members, portfolio of the balance group as a whole and to assess the level of risk exposure, establish a connection between the wholesale and retail market management as well as the management of basic information from the wholesale market. We shall thus obtain a general overview over the business process of the purchase and the sale of electricity which will represent support in adopting strategic decisions. We will furthermore also decrease the exposure to operational risks and shorten the time for the preparation of proposals.

MarKetInG

By implementing various methods of market communication, adjusted to the needs of individual market segments, we carry out various activities with the purpose of preserving the exisiting market share in the sale of electricity to households and commercial consumers, to constantly develop and design new products for various target groups, take care of the enhancement of the company’s recognisability and attain the highest possible satisfaction, loyalty and commitment from our buyers.

In 2011, most of the marketing funds were earmarked for providing information on the partial division of the company elektro energija d.o.o. the Company appeared in a string of radio and tV advertisements and in a whole range of tools used in public relations. In the spring and autumn period we dedicated our attention to the household segment within the scope of our action My package (Moj paket), which ensures the unchanged price of electricity for the chosen period of time to our consumers.

Furtehrmore, we started with activities for the set-up of a loyalty scheme, where we sent out coupons providing various benefits and advantages for the household consumers. We are well aware of the significance of maintaining good relations with our existing consumers also in the future.

the current market conditions request a more advanced segmentation of buyers on the basis of their lifestyle, they also request a connection between the existing services and the new services with electricity products as well as the development of new marketing channels. In the future, the company will dedicate considerable attention to the development of products from the field of non-price competition, which will also be supported by the efficient marketing communication tools.

perForManCe analySIS

Comparative figures for the year 2010 are the data pertaining to the electricity sales and purchasing activities which were published in the income statement per activities in the elektro ljubljana d.d. annual report for 2010.

elektro energija d.o.o. concluded the financial year 2011 with net profit for the period in the amount of eur 1,454,661, i.e. 1,185,700 more than initially planned.

revenuesIn 2011, the company generated total revenues in the amount of eur 366,222,259, which was 18.7% more than planned and 73.3% more than it was realized in 2010. the steep increase of turnover shall be ascribed to the significantly expanded volume of business in the wholesale market. the company started to develop the wholesale activities more intensely in 2010 and in 2011 they recorded the first noticeable results which considerably exceeded expectations.

net turnover represents 99.8% of all revenues or eur 365,581,662 (eur 365,527,655 thereof was generated in the domestic and eur 54,007 in the foreign market). the planned turnover was exceeded by 19.0%, and/or exceeded the turnover from 2010 by 76.6%.

2.5.

2.6.



Financial revenue represents 0.1% of total revenues, i.e. eur 507,853. It exceeded the planned revenue by 42.5% and/or exceeded the financial revenue from 2010 by 64.0%.other revenues amounted to eur 132,744.

expensestotal expenses of the Company in 2011 amounted to eur 364,067,786, which is 18.1% more than planned and 76.6% more than realized in the year 2010. the steep increase of expenses shall also be ascribed to the significally expanded volume of business transactions in the wholesale market.

Costs pertaining to the purchase of electricity represent the largest proportion of expenses, namely 97.7% or eur 355,387,596. those costs exceeded the planned costs by 18.6% and/or those realized in 2010 by 79.8%.

Service costs amounted to eur 3,735,838 and exceeded the planned costs by 2.8%. they were 60.8% percent higher than those realized in 2010 which was a consequence of different allocation of costs in the year 2010.

labour costs amounted to eur 2,519,875. they exceeded the plan by 0.6% and those realized in 2010 by 59.6%. the rise was a consequence of a significant increase in the number of employees due to new positions following the establishment of the subsidiary as well as due to a different distribution of costs in the time before the demerger and after it.

Wtite-offs amounted to eur 1,596,479 and were by 6.1% lower than planned. they were 95.2% higher then the realized write-offs in 2010.

Financial expenses amounted to eur 395,835. they were 21.5% lower than planned and 6.6% higher than those, realized in 2010. reduction of financial expenses compared to the planned epenses were the result of the drop of euribor in the last quarter.

net profit or lossnet profit for the period amounted to eur 1,454,661 which exceeded the planned profit by 438.8 %.

DeVelopMent oF eleCtrICIty MarKet In SloVenIaelektro energija d.o.o. has its roots in the supply of electricity to consumers; prior to the opening of Slovenia’s electricity market, this was conducted on the basis of the tariff system within the scope of the elektro ljubljana d.d. distribution system. the retail business includes both consumer supply and the purchase of electricity from small producers (micro-generation) connected to the distribution network; the wholesale segment encompasses the conclusion of contracts with electricity traders and generators as well as larger consumers. the wholesale business embraces the cross-border exchange of electricity and involves various international traders, as well as transactions with products following the principle ‘take-or-pay’.

a balance group needs to be established in every territory in which trading is performed in order to facilitate independent performance on the electricity market. Balance groups may comprise groupings of consumers and producers, or solely consumers, or purely producers (generators). there are also balance groups consitsing only of traders who have neither consumers nor producers as members. Such balance groups are intended exclusively for wholesale trading and are - as a rule - established across a grouping of countries. as of 1st January 2011, elektro energija d.o.o. became part of a balance group in Slovenia, the membership of which includes both network-connected purchaser-consumers of electricity as well as generators from whom elektro energija purchases electrical power.

Slovenia’s retail electricity market has been developing parallel to the wholesale one, and today both retail and wholesale markets can be described as well-developed. Buyers of electricity in the retail market can purchase complex products which correlate with those offered in the wholesale market. the european energy exchange (eeX) exerts a strong influence on Slovenia’s wholesale market, which has itself organized its own energy exchange - Southpool - though at present it only conducts day-ahead trading. the futures market and the balancing market operate bilaterally between groups of members. the futures market concludes business for one month to several years ahead, while the balancing market addresses supply and demand for the day ahead as well as on an immediate hourly basis. Slovenia’s futures market is primarily influenced by the futures market in the Balkans region, which also sets the anticipated prices of cross-border transmission capacities at the border between austria and Slovenia, and thus the closing price of futures products in Slovenia.

Slovenia’s extant cross-border transmission capacities with neighbouring states, together with the anticipated net surpluses and/or shortfalls of electrical energy in the Balkans, promptly set forth differences in the prices of futures on the european energy exchange (eeX) and those on the Slovenian bilateral market. Futures in Slovenia are for the most part higher than equivalent products on the eeX, which is unfavourable to all purchasers and consumers of electricity in Slovenia.

european regulation aimed at improving transparency is gradually opening up and normalising Slovenia’s wholesale market; retail consumers are benefiting as a consequence, while balance groups with members connected to the transmission network are also invariably in a better position. regulation of the wholesale market aims to establish a common european platform for trading cross-border transmission capacities as well as reduce insider trading risk and prevent other such abuses within the electricity market.

a number of anomalies, which are a consequence of a lack of organization of the electricity futures market in Slovenia, are apparent. often retail prices are lower than for comparable products in the wholesale market. this situation represents additional risk, in particular for those retail suppliers who do not enjoy well developed wholesale trading divisions.

as described above, business in Slovenia is not conducted merely within the scope of generators’ production and/or retail consumption, but rather a more complex process in which the owners of the electricity product change several times along the value chain. Certain players in the market merely implement hedging strategies in relation to production and/or supply; other traders purchase with the intent of resale and the anticipation of profit. the scope of the latter exceeds, several fold, those transactions concluded by the producers and/or suppliers for the needs of consumers.

2.7.



rISK ManaGeMent

elektro energija d.o.o. applies systematic risk management as well as a process of identification and evaluation of risks pertaining to the company, together with adoption and implementation of measures that afford protection. risks can be perceived as the possibility that certain actions or activities might precipitate unwanted results or consequences; at the same time, risk taking may provide business opportunities which yield higher profits. elektro energija therefore employs a risk management system that balances potential benefits and losses. During 2011 a proactive risk management strategy was implemented primarily as a preventive measure rather than a retroactive one.

elektro energija d.o.o. as the electricity supplier is exposed to significant risks. these risks derive from the very nature of our activities and the underdevelopment of the electricity market in terms of insufficient transparency and liquidity. With futures contracts new risks appeared which result from the more demanding planning of required quantities of electricity and estimation of prices, because of a longer time frame.

risks arise from two sources: outside the company (external risks) and from the company itself (internal risks). external risks occur due to changes in the environment where a company operates (political, economic, technological and social changes). Internal risks arise from the processes or information pertaining to the management. risks that arise from procceses ocurr in the event where processes are not adjusted to the company’s strategy, when processes are performed unefficiently and when processes do not increase business partners’ satisfaction. risks which arise from management information encompass risks of wrong decisions made by the management due to incomplete, false or obsolete information.

We are facing risks in all business processes in the Company which is why we regularly identify them and try to manage them with every reasonable effort. We are well aware that by establishing a new company we are facing additional and larger risks which is why the process of identification has to be even more meticulous.

In our company we have divided risks into four groups: market risks, business risks, credit risks and operational risks.

Market risks Market risks encompass risks to which an electricity supplier is exposed to due to the changes in the prices of goods, interest rates and changes to exchange rates.

price risks are mostly affected by changes in the structure of generation sources, the energy balance of a particular price region, limitations on cross-border transmission capacities, variability of prices of other energy products, weather, hydrology, refits to power plants and the current congestion on the transmission capacities. price risks may also arise due to the difference between the price of the long-term purchase of an individual electricity product, purchased to build a portfolio, and the market price of that product. additional price risks are a result of differences between the forecasted form of price scheme and the current form of price scheme, adapted to the prices of the long-term, medium-term, short-term electricity purchases. In 2011, we were limiting price risks in trading with electricity predominantly by concurrently closing the outstanding positions and hedging on the financial markets. For that purpose we monitored, analyzed and optimized positions, monitored and analyzed the movement of the electricity products prices and drew up price forecasts for electricity products. We were managing the wholesale market price risks also by fixing the purchasing

prices to the liquid market, by establishing partnerships in order to ensure various derivatives and by appropriate price forecasts. We were managing price risks pertaining to the retail market by linking the price for the final consumers to the liquid market, by offering derivatives to the consumers and by linking the prices for the calculation of quantity deviations of the consumers to the liquid market. the biggest price risk occurs with open transactions without a counter transaction, which elektro energija d.o.o. did not enter in the business year 2011.

We were partially exposed to the interest-rate risk in 2011, due to the partial take-over of long-term loans following the demerger. Most of our long-term loans are based on the referential interest rate eurIBor, while one minor loan is based on lIBor. all loan contracts are concluded on the basis of variable interest rates; however, all loans have a satisfactory level of fixed increases of referential interest rates. risks which might occur due to changeable interest rates in the market, are linked primarily to the possibility of unexpected rise of referential interest rates and the pertaining costs of the company’s financing. In the Company we control the loan portfolio which might be affected by the change of interest rate, and at the same time we actively analyse and monitor the movement of interest rates by inquiring in various business banks and we also reserved the right to the early repayment of the loans and to exchange a variable interest rate for a fixed interest rate.

to a lesser extent, our company was exposed to the currency risk, since most of our transactions and loans were nominated in eur, save for one loan which was nominated in Swiss francs and will become due in 2012. In 2011 the value of Swiss franc increased considerably. the Swiss national Bank intervened when it decided to set minimum exchange rate of 1.20 franc to the euro. Despite the relative volatility of the Swiss franc, elektro energija d.o.o. evaluates that risk as low, which is why – save for daily monitoring and analysis of currencies – the Company did not undertake any special measures for the management of that risk.

In 2011, elektro energija d.o.o. was conducting the electricity trading activities solely in eur and was thus not exposed to the currency risk. If the Company had been conducting business, to a significant extent of the trading portfolio, in the markets with currency risks, they would have been using future transactions and currency clauses as hedging against currency risks.

2.8.

Risk Area Risk Description Method of Risk Management Exposure

price risk difference between electricity purchase price and sales price simultaneous closing of positions low

price risk difference between the realized price diagram and the forecasted price diagram

quality analysis, prices linked to liquidity market low

interest rate risk

considerable change of interest rate

active monitoring and analysis of interest rate movement, cooperation with several banks, right to early repayment, possibility to change variable interest rate to the fixed ones

low

currency risk considerable change in currency exchange

business operations in eur, active monitoring and analysis of the value of currency low

Commercial risks Commercial risks include quantitative and liquidity risks, pertaining to performing the basis activity as well as regulatory risks.

For a supplier, quantity risks, which arise due to the differences between the contractual and the consumed/supplied quantity of electricity, are very important. this is most commonly a consequence of weather conditions and temperatures as well as the change in the number of consumers in the sales portfolio. Quantity risks are also influenced by the differences



between the products in the wholesale and retail electricity markets. additional type of quantity risk is a consequence of random outage of a line or other equipment as well as interevtions by the network operator. on the wholesale side, we managed quantitative risks by limiting the quantitative and the financial exposure in electricity purchases and sales and through appropriate forecasts of required quantities, which take into account annual growth in consumption and the anticipated market share. on the retail side, we were managing the quantity risks by dispearsing the final consumers’ portfolios and with contractual provisions pertaining to the forecast of electricity consumption by final consumers. In 2011, in order to improve the accuracy of the consumption forecast, we started to implement the software for elaborating short-term and long-term consumption forecasts and at the same time improved the process of monitoring the sale of electricity by final consumers. We furthermore also designed various purchase and sales portfolios, classified by the type of transactions or consumers, which simplified monitoring the quantitative exposure and adjusted the procedures for the protection of portfolio’s characteristics

Liquidity risks also represent quite significant commercial risks and arise from the lack of depth of the electricity market, its general illiquidity, or the illiquidity of the individual products. the causes of liquidity risks lie in the structure and model of the market, outages of generating units or transmission capacities, and exceptional weather conditions.

the Company tried to overcome the problem of poor liquidity in the wholesale market by selecting appropriate partners and by dispersal of purchase transactions over time. Furthermore, we last year started trading on various other markets and started with the import of electricity. Such trading connects electricity markets with better liquidity which further diminishes liquidity risks.

liquidity risks encompass also risks, relating to the lack of available financial resources and inability of a company to settle its obligations by the agreed due date. For elektro energija d.o.o. the risk of short-term solvency is increased also due to the seasonal movement of quantities and various payment deadlines in respect of the purchased and sold electricity. liquidity so weakens in the winter months. For that reason our Company regularly plans and monitors its payment ability. In the event of occasional weaker payment ability, we seek solution in taking short-term bridging loans. liquidity reserve in the form of approved credit lines from commercial banks, dispersed financial obligations, continuous harmonization of the maturity of accounts receivables and payables, as well as the consistent recovery of due payments, all enable an efficient management of cash flows. the objective of liquidity management measures is, of course, to maintain the payment ability for the settlement of all financial obligations within the agreed maturity dates and thus preserve the credit rating with our business partners with whom we have signed the eFet agreements.

Regulatory risks encompass non-market factors such as legal complications, changed or indeterminated legislation as well as political decisions. We manage these risks through constant monitoring of legislation, participation at public consultations and through contractual temporal dispersion of purchase transactions.

Risk area Risk description Method of risk management Exposure

quantitative risk

difference between contractual and consumed/supplied quantity of electricity

active monitoring of quantative exposure, suitable forecast of quantity, dispersal of final consumers’ portfolio

moderate

liquidity risk

lack of electricity market’s depth, illiquidity of certain products

increased number of partners and markets, temporal dispersion of business transactions moderate

regulatory risk

changes to legislation and pertaining regulations

cooperation with regulatory authorities in the process of preparation of documents, systematic monitoring of the environment and timely responsiveness

moderate

Credit risks Credit risks arise from late payments, bankruptcies or compulsory settlements of the partners from the wholesale or retail market, from the risk of disregards of the contractual provisions by business partners as well as from the quality of credit ratings. that group of risks also encompasses risk of exposure to a certain partners or a group of partners. In 2011, elektro energija d.o.o. was more exposed to the credit risks which arise from the deteriorated economic conditions and the consequential increased lack of payment discipline. the conctractual payment deadlines were frequently exceeded. the number of insolvency procedures of final consumers significantly increased compared to 2010, we estimate that in 2011 twice as many partners were subject to such procedures than in 2010.

We were managing credit risks in wholesale market trading by obtaining credit ratings of our suppliers, by setting forth credit limits and by requesting guarantees for the event of non-execution of business transactions, in the form of bank guarantees, bills of exchange or guarantees by their parent companies or associated companies. When concluding new contracts, we followed the rule of offsetting the purchase and sales transactions. In 2011, we were daily monitoring the exposure towards our suppliers, whereby we were evaluating all concluded business transactions and, in the event of increased risks, called for additional guarantees.

In order to diminish credit risks in electricity retail, we devoted a lot of attention also in 2011 to the monitoring of our debtors and tightening of the debt management policy. We introduced a standardized work flow, whereby we provided the appropriate collection and dissemination of information, demarcation of responsibilities and automated initiation of activities of responsible persons. When concluding contracts with new major customers, we used a credit rating, created according to our own methodology as well as credit ratings by credit rating agencies. these ratings were used for new business partners prior to the conclusion of the contract and for the existing partners, when the existing contracts were renewed. If a buyer received bad ratings, we drew up appropriate contracts, obtained guarantees of parent or affiliated companies or, as a last resort, demanded bills of exchange or bank guarantees. We requested from the household consumers to have no unsettled obligations from the previous supplies of electricity, before concluding a new contract with them, which is founded in the Special Conditions for the Conclusion of electricity Supply Contract – Household Consumers. as regards our largest electricity consumers, their financial state was being monitored also during the supply. If their credit ratings deteriorated or if the media published information on the deteriorating financial position of our business partner, more attention was paid to the recovery of possible debts from this partner. this means the facilitation of procedures in the recovery of debts process, which, in the worst case scenario, could lead also to the termination of their supply contract and cashing-in of potential guarantees.

Besides the efficient credit risk analysis, elektro energija d.o.o. also disposes of clearly defined collection processes, reminding system and system of customer monitoring. these activities are well supported by the CrM information system which enables daily import of data on frozen accounts and any changes to the states of companies in publicly accessible registers. In that way, our Company receives updated warnings about any changes as regards our partners.

Risks pertaining to disregard of contractual provisions by our business partners may have a negative impact on the operating result of the Company which is why they shall obligatorily be properly managed. In order to diminish the risk of disregard of contractual provisions by our business partners in the wholesale, we were using the standardized eFet umbrella contracts, which regulate the entire process from the conclusion of a contract to the supply/consumption of electricity as well as all the procedures for the event of any possible infringments which include the methods of compensation of damage/loss. In order to diminish the risks in the sale to final consumers, we used contracts which clearly define contractual penalties and damages in the event of an infringement of contractual provisions.




risk of bankruptcies and compulsory settlements

financial loss due to business partners’ bankruptcies and compulsory settlements

active monitoring of business partners, obtaining and producing credit rating, defining and monitoring credit limits, use of various collaterals and guarantees

moderate

risks of disregard of contractual provisions

financial loss due to disregard of contractual provision by business partners

contracts with regulated procedures for the event of infringement of the contractual provisions

moderate

operational risks (Hr and It risks)operational risks encompass potential losses due to inappropriate systems, wrongly chosen models, wrong or inadequate management and control, deceit or human error. In order to remedy the risk of malfunction of the information system, we continuously carried out control over the development and functioning of the information systems. this was carried out by implementing our own knowledge and by purchasing well-established and renowned information systems.

In regard thereof, measures for diminishing risks related to the It resources were regularly implemented, namely the following:

• annual penetration test, • annual updating of the plan of business continuity, including check-ups, • daily provision of security protections at various levels, • daily monitoring of security events.

We were limiting the risks of wrong or inadequate management and control by procedures and processes of checking, defining competences and limitations as regards the approval of concluding business transactions for individual traders and sales personnel. Company’s exposure is being checked every day by revising the concluded business transactions and by monitoring the individual portfolios of the concluded business transacions. elektro energija d.o.o. manages its current business operations via its own It support. In order to improve the information support, integrity of business operations and the control over the Company’s business operations, elekto energija d.o.o. shall continue to invest into information supported trading systems with automatic controls and monitoring open positions. With all the aforementioned, the probability of unauthorized entrance into information system as well as human error and misuse will be further diminished. With the same procedures we were also limiting the risk of fraud. Furthermore, the positvive climate in the Company and the employees’ satisfaction has an additional impact on the reduction of the risk of fraud.

Human resources based risk represents one of the most significant risks for a company as regards its growth and ever increasing volume of business operations. the development and performance of a company depends on its employees, which is why we encourage personal growth of each individual on his/her field of expertise as well as on the team level. Self-initiative, professional expertise, flexibility, awareness of high-quality and responsible work and most of all, good relations which represent the foundation on which the Company can build its future. the loss of key employees represents the highest risk for a company.

risk Management in the Business year 2011In the Business year 2011, pursuant to the economic plan, elektro energija d.o.o. increased the trading quantities of electricity. the exceptional increase in trading required an upgrade of trading infrastructure, namely through enhanced cooperation with energy exchanges as well as by setting up credit lines with the business partners. We also took into account the possible increased credit risks, so that we mostly opted to conclude business transactions with the largest trading companies.the conscious conclusion of merely hedging transactions, whereby we were hedged by the quantity and the price of the concluded business transactions, ensured us a low risk exposure or even the complete hedging. Furthermore, we are monitoring all the concluded business transactions on a daily basis and evaluate them according to hourly and price curves of the pertaining electricity markets. In 2012, elektro energija d.o.o. shall upgrade the trading platform in the endeavors to acquire a better It support for trading activities (type of purchases, concluded contracts, characteristics of individual offtakes) as well as for the set-up of key account management and monitoring of the key customers’ needs.

InVeStMentS Investments into fixed asets, tangible assets and long-term deferred costs in 2011 amounted to eur 580,700. our investments are characterized by the fact that they do not run over longer periods of time and that the calculation of depreciation starts running from the month, following the month when the fixed assets were purchased. We therefore do not run our investments through planning items of the investment plan as was characteristic for our business operations in the previous years. Investments were allocated for the upgrade of information system and computer hardware, telephone sets as a consequence of switching to Ip telephony, as well as for the purchase of means of transport. the major share of investmens represented the investments into information system for the management of quantity aggregation and into upgrade of the integrated information system.

InForMatIon teCHnoloGy Close intertwinement of information technology and business areas enables the utilization of best practices in all areas of business processes. the development of information technology which relies on the latest global trends facilitates long-term reliability and high-quality decision-making support.


risks pertaining to It financial loss due to inadequate systems

continuous control over development and functioning of information system, analysis of models and algorithms

low

risks of wrong or inadequate management and control

financial loss due to inadequate management, control and frauds

procedures and processes of checking, defining competencies and limitations as regards approval of conclusion of business transactions

low

Hr risks loss of key employees encouraging personal and professional growth of employees, positive climate in Company moderate

2.9.

2.10.



In elektro energija d.o.o., we have three substantial application systems, namely the joined integrated information system (IIS), the CrM system and the information system for the management of quantity aggregation, forecast of electricity consumption, forecast of electricity prices, balance sub-group portfolio analysis and risk management (etrM). the joined integrated information system is maintained and developed in cooperation with the company Informatika d.d.. the scope and dynamics of work are determined by an annual contract, concluded every year between the elektro ljubljana d.d. and Informatika d.d. which was also joined and signed by elektro energija d.o.o.. the renewal of the existing system is still in the process on the aforementioned information system and encompasses the, which includes, within our own development the creation of the new form of charging, ledgers and the erp system. at the beginning of the year, we started supporting the process of the conclusion of contracts for the basic supply and supply packages for household consumers, by our CrM system. the system was also sucessfuly integrated with our Call Centre, the etrM system and the Internet portal site. We also computerized the process of incoming mail which supports the integration into the CrM system and carried out the digitalization of documents. In this way, we are one step closer to the establishment of a uniform outlook at the consumer and to the reduction of information assimetry between the consumers and the Company’s employees.

QualIty ManaGeMentDemerging of marketing activities of the purchase and sale of electricity in 2011, which fulfilled the requirements of the Slovenian and the european legislation for a better transparency of business operations, and the fact that elektro ljubljana d.d. has had, for six years now, four larger operational fields regulated according to the ISo standards, namely: ISo 9001 - Quality Management System, ISo 14001 - environmental Management System, oHSaS 18001 - occupational Health and Safety Management, ISo 27001 - Information security management – were both reasons for a thorough consideration on the continuation of regulation of individual fields of business according to the principles of good practice which are provided by the standards from the ISo group also in the newly established Company.

Within the framework of the project team for the preparation of the business model for the organization of the company for the purchase and sale of electricity, as well as upon the initiative of the persons in charge of the uality management system in elektro ljubljana d.d., a decision has been made that, in order to guarantee smooth and transparent business operations of the new Company, at least the certificates ISo 9001 and ISo 27001 shall be obtained.

Based on that decision, all endeavors of employees who work in the area of quality management in 2011, were focused on the project for the new Company to receive the said two certificates. the evaluation and the certification procedure were carried out in June 2011 within the scope of the assessment in the company elektro ljubljana d.d.

the Management Systems Certification Commission of the Slovenian Institute of Quality and Metrology adopted a decision on 30th June 2011 on granting certificates to the company elektro energija d.o.o.. the newly founded company was thus granted two certificates, namely ISo 9001 and ISo 27001 on the basis of the prepared quality management system policies, which merged quality and the information security management. the entire system is based on the responsibility of each individual in the organization to meet the objectives pertaining to quality as well as to responsibly carry out concrete tasks based on the unambiguously entrusted authorizations and competences.

the fact that the newly established Company elektro energija d.o.o. acquired the ISo 9001 and ISo 27001 standard certificates, is a major achievement and represents the fulfillment of the set objectives for the year 2011, however, also an obligation for all employees to continue with the good work in the field of quality and information security management.

Activities Relating to the Quality Management Systemone of the main objectives was the harmonization of processes pursuant to the provisions of the ISo 9001 quality management system, which was a pre-requisite for the acquisition of the certificate. permanent objectives pertaining to quality are: to meet the customers’ demands, to attain the strategic and tactical objectives of business operations, to achieve the optimal organization and transparency of business operations, to operate in accordance with the applicable regulations in force and continuously supervise the economics of business operations which should all enable a successful operation of the Company.

Activities relating to the Information Security System By the development of market system in the field of electricity, new technologies and new organizational models, new risks have emerged in business operations which could, without appropriate measures, become unmanageable. the primary purpose of the implementation of the ISo 27001 information security management system in the company elektro energija d.o.o. was to ensure a higher level of confidentiality, irreproachableness and availability of the Company’s information.

By implementing the said standards, we endeavor to ensure the appropriate mechanisms for constant surveillance and assessment of information security and on that basis also the appropriate risk management pertaining to the It assets. a considerable emphasizes was focused on creating the awareness of employees on the urgency of the introduction of certain security controls..

planInG anD DeVelopMent

Wholesale We are planning to purchase and then carry out the final implementation of the comprehensive It support to the processes in the ou Wholesale. It will encompass a comprehensive scope of all business areas and recording of all contractual relations (physical, financial, futures…), timetables, recording of issued and received invoices, wholesale portfolio management, risk management and payment monitoring.

In 2012 we are expecting an increase in the volume of trading in all standardized products in the region. By entering the austrian and the German markets in 2012, we are expecting an additional increase in the volume of trading quantities.

retailIn the field of electricity retail trading in 2012, we shall continuously take care of competitiveness, quality improvement and responsiveness to the supply demands of our final consumer, namely by developing products and services based on the consumers’ lifestyle and also in order to improve the market share and to improve risk management. as regards the latter, we shall dedicate our utmost attention, beside the quantitative and the price risks, to the credit risks. We will continue with the development of the loyalty scheme which will enable our customers to benefit from various benefits provided by our business partners. We will also carry out public procurements for the allocation of means earmarked for the measures for the efficient use of energy to our final consumers.

2.11.

2.12.

3CORPORATE

SOCIAL RESPONSIBILTY

Just to the end of this page, then I’ll turn off the light. Promise! Maybe.

ANNUAL REPORT 2011 Elektro energija d.o.o.CORPORATE SOCIAL RESPONSIBILITY

ANNUAL REPORT 2011 Elektro energija d.o.o.CORPORATE SOCIAL RESPONSIBILITY 3938

ConCern For eMployeeS

elektro energija d.o.o. continues with the tradition of elektro ljubljana d.d. and encourages training and education of employees since the Company is aware that only well qualified and creative employees ensure long-term competitiveness in this rapidly changing environment. our Hr activities are based on the principles of contemporary human resources management, which aims to provide a systematic, permanent professional and personal development of employees, adjusted to the needs of working processes and external environment (the market). It is built on the values of mutual respect and trust. We are a team where all employees endeavor to reach the same objective. We would like to find an optimal working position in our Company for each of our employees, where his/her contribution would be the most effective.

number of employeesFollowing the demerger, 68 employees were transferred to the new company and one employee was employed by the Company independently, due to the lack of appropriate human resources in the parent company. as at 31st December 2011 elektro energija d.o.o. employed 69 employees, assigned to 52 different positions.

the age structure shows that around 50 percent of employees are aged between 31 and 45.

Age structure

Age 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60

Number 1 5 13 11 15 9 10 4 Total 69

51-55 56-60

the education structure of employees shows that the majority of employees have secondary and/or higher education.

Unskilled SkilledSecon-

dary

3 Year Higher Educ.

University Degree

Master's Degree

Doctor’s Degree

Total

2 6 18 5 30 6 1 69

3.1.

taBelarIC repreSentatIon oF aGe StruCture oF eleKtro enerGIJa D.o.o. eMployeeS.

GrapHICal preSentatIon oF aGe StruCture oF eMployeeS at eleKtro enerGIJa D.o.o.

eDuCatIon StruCture oF eMployeeS In eleKtro

enerGIJa D.o.o. aS at 31St DeCeMBer 2011

GrapHICal preSentatIon oF

eDuCatIon StruCture oF eMployeeS In eleKtro

enerGIJa D.o.o. aS at 31St DeCeMBer 2011

our fundamental tasks in 2012 are the introduction of annual employees’ interviews, introduction of performance indicators per individual organizational units as well as the education needs analysis and preparation of programmes for internal and external trainings. We posess of a lot of knowledge within our company and would like to transfer it also to those who need it and all those who express their interest therefore. When assessing our educational needs, we will also take into account the suggestions made by the management, requests arising from the external environment (legislation, market) as well as the conclusions arising from the annual interviews.

occupational Health and Safety In the same manner as in the parent company, elektro energija d.o.o. will provide medical examinations for the employees in line with the prescribed periodics. In the current year, we recorded one accident on the way to work. In line with the requirements of occupational medicine, we drew up a new health risk assessment in line with the new systematization of workplaces.

the Company also partially finances the supplementary pension insurance. It also shows its care and concern for the employees in such way that the parents of young children and the persons who take care of their relatives who need special care, are enabled to have flexible working hours and the possibility of utilizing additional days off. the Company wishes to help its employees to harmonize their family and their professional lives.

unSKIlleD (2)

SKIlleD (6)

SeConDary (18)

3 year HIGHer eDuC. (5)

DoCtor'S DeGree (1)

MaSter'S DeGree (6)

unIVerSty DeGree (30)

21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60

16

14

12

10

8

6

4

2

0

aGe StruCture

nuMBer

ANNUAL REPORT 2011 Elektro energija d.o.o.CORPORATE SOCIAL RESPONSIBILITY

ANNUAL REPORT 2011 Elektro energija d.o.o.CORPORATE SOCIAL RESPONSIBILITY 4140

ConCern For otHer puBlICS

In the pursuit of its business objectives, elektro energija d.o.o. follows the principle of social responsibility. this is reflected in the concern for its employees, customers and the broader social environment. the Company provides advice to the customers, raises awareness on the efficient use of energy and renewable sources of energy. We have been carrying out those activities ever since 1991 in the form of informative brochures with advice for household consumers, while in the past few years such activities have been carried out through the activities of consultation offices, the website, information forwarded to the media and new services carried out in various other ways. Within the framework of consultations on the efficient electricity use, promotional Consultation session was organized in 2011, marking the World energy Saving Day, which included practical demonstration of electricity consumption metering of various appliances and options of monitoring our own electricity consumption. the event received very positive responses, both by the consumers as well as by the media. the Company will by all means continue to organize such events also in 2012.

Within the framework of the ‘18th elektra’s soiree’, we organized a business-social gathering for our largest buyers of electricity, and the event also included a lecture by the renowned expert, Mr. Mojmir Mrak. the response of the business partners was positive and we shall therefore continue to organize such professional meetings in the future.

In 2011 the Company still helped carrying out various humanitarian projects, organized by organizations and individuals. We continued to support and cooperate with the association to Help the Sick and the Suffering – red noses with visiting the sick children in hospitals.

In the field of the media, the Company followed the principles of openness, pro-activity and transparency, in line with the Media act. at events, important for the Company operations, the media received press releases which were also published on our website. the media have also received prompt replies to their questions as well as other useful and topical information.

In 2011 yet again, the Company’s experts presented themselves to a broader electric energy professional public with professional articles and contributions at various professional events and thus significantly contributed to the development and progress of that branch of industry.

3.2. 3.3. CoMMunICatIon WItH IntereSt GroupS

In pursuing its business operations, elektro energija d.o.o. engages in pro-active and two-way communication which leads to the understanding of needs and expectations of the electricity buyers and other interest groups.

In 2011, the communication activities were focused mainly on the contents, relating to the demerger of the purchase and sales of electricity with the objective to increase the awareness about the mission, vision and objectives of the Company; and also on informing about the range of electricity products in the market and the recognazibility of the services. a special emphasis in 2011 was given to the contents, relating to the efficient use of electricity.

elektro energija d.o.o. offers all its consumers a myriad communication paths:

• the website www.elektro-energija.si, questions under FaQ, the use of electronic services Moja energija (my energy);

• e-mail: [email protected]; • the answering machine at the telephone number of our Call Centre; • consumers who wish a personal contact may contact the operators in our Call Centre at:

01 230 40 01; we actively try to solve the waiting time at peak times; • you can also visit us personally in one of our offices, namely in ljubljana, trbovlje, Kočevje

and novo mesto. the replies by the elektro energija d.o.o. experts are communicated in the shortest possible time.

In the field of media communication, elektro energija d.o.o. takes care of systematic, pro-active and open communication. In order to increase the recognizabilty of products and services, knowledge of relevant subjects, understanding and trust, we sent public releases to the media and other contents for the presentation of the Company’s demerging project and new services.

the customers also receive various contents on the back side of their electricity bills, per mailand by way of personal visits. In 2011 we updated the information brochures and leaflets on the offer of electricity and various other services in order to achieve better understanding and trust.

In 2011, the employees were being informed mainly through the internal newsletter of the company elektro ljubljana d.d. called elektro novice (electric news) which has now already been published for ten years and aims to build up the commitment to the company as well as create common culture, furthermore, the employees can so find all relevant information pertaining to the Company’s operations, all in one place. In 2011, 10 issues of the newsletter were published. the communication with employees also took place place in other ways, mostly via e-mail, intranet and bulletin boards. as regards any relevant contents, the employees were regularly receiving public releases and various notifications. all employees with access to the Internet may access up-to-date press releases and information by typing in the keywords ‘elektro ljubljana or elektrogospodarstvo’ into their browsers.

4AUDITOR'S

REPORT

Mainly, I still work in the same old way, by hand. Just because of the feeling. I still have a feeling for wood, though I don’t see as I used to. But if there is good light, I can manage.

4544 annual report 2011 elektro energija d.o.o.auDItor'S report

annual report 2011 elektro energija d.o.o.auDItor'S report

5FINANCIAL

REPORT

I need to recharge the battery. But one day I’ll have my own office. Spacious, bright, airy and with a wonderful view, just like this one.

ANNUAL REPORT 2011 Elektro energija d.o.o.FINANCIAL REPORT

ANNUAL REPORT 2011 Elektro energija d.o.o.FINANCIAL REPORT 4948

BalanCe SHeet as at 31st December 2011 in eur

Note 31 Dec 2011Opening

1 Jan 2011

A. Long-term assets 1,647,146 1,845,489

I. Intangible assets and long-term deferred costs and accrued revenues 5.1. 776,222 368,940

1. long-term property rights 3,667 0

5. other long-term deferred costs and accrued revenues 772,555 368,940

II. tangible assets 5.2. 870,924 867,716

1. land and buildings 723,922 760,655

a) land 25,199 25,199

a) Buildings 698,723 735,456

2. production equipment and machinery 145,002 107,061

4. tangible fixed assets being acquired 2,000 0

IV. long-term financial investments 5.3. 0 608,833

1. long-term financial investments save loans 0 608,833

b) Shares and equity interests in the Group 0 285,676

c) other shares and equity interests 0 323,157

B. Current assets 73,073,000 49,629,939IV. Short-term operating receivables 5.4. 72,266,213 49,449,423

1. Short-term operating receivables due by companies in the Group 29,267 0

2. Short-term accounts receivables 67,835,379 47,104,075

3. Short-term operating receivables due by others 4,401,567 2,345,348

V. Cash and cash equivalents 5.5. 806,787 180,516

C. Short-term deferred costs (expenses) and accrued revenues

5.6. 601,081 811,676

ASSETS 75,321,227 52,287,104A. Equity 5.7. 6,963,881 6,520,406I. Called-up capital 3,000,000 2,992,5001. Share capital 3,000,000 2,992,500

II. Capital reserves 2,509,220 3,284,228

IV. revaluation adjustment surplus 0 243,678

VI. net profit (or loss) for the financial year 1,454,661 0

B. provisions and long-term accrued costs and deferred revenues 5.8. 355,973 207,847

1. Provisions for pensions and similar liabilities 355,973 207,847C. long-term financial and operating liabilities 5,342,289 6,634,914

I. Long-term financial liabilities 5.9. 5,342,289 6,634,9142. long-term financial liabilities to banks 5,342,289 6,634,914

D. Short-term financial and operating liabilities 62,276,907 38,620,767

II. Short-term financial liabilities 5.9. 6,952,089 1,167,7911. Short-term financial liabilities to companies in the Group 2,653,061 0

2. Short-term financial liabilities to banks 4,299,028 1,167,791

III. Short-term operating liabilities 5.10. 55,324,818 37,452,976

1. Short-term operating liabilities to companies in the Group 381,058 0

2. Short-term accounts payable 50,913,944 34,993,806

5. Short-term operating liabilities arising from advances 1,009,120 699,435

6. other short-term operating liabilities 3,020,696 1,759,735

e. Short-term accrued costs (expenses) and deferred revenues 5.11. 382,177 303,170

LIABILITIES 75,321,227 52,287,104

the notes to the financial statements form an integral part of the financial statements and should be read in conjunction with them.

CoMpreHenSIVe InCoMe StateMent for the year ended 31st December 2011 in eur

Note 2011 Purchasing and Sales of Electricity 2010

1. net sales revenues 6.1. 365,581,662 207,005,830

a) on domestic market 365,527,655 206,907,052

b) on foreign markets 54,007 98,778

4. other operating revenues 0 1,373

Operating revenues 365,581,662 207,007,203

5. Costs of goods, material and services 6.2. 359,331,638 200,090,860

a) purchase value of goods sold and material used 355,595,800 197,767,652

b) Costs of services 3,735,838 2,323,208

6. labour costs 6.3. 2,519,875 1,578,954

a) Costs of wages and salaries 1,843,308 1,173,560

b) Costs of supplementary pension insurance 82,839 52,435

c) other social security costs 292,760 153,991

d) other labour costs 300,968 198,968

7. Write-downs 6.4. 1,596,479 818,051

a) Depreciation and amortisation expenses 150,913 97,440

b) revaluation operating expenses for intangible and tangible fixed assets 6,508 1,592

c) revaluation operating expenses associated with current assets 1,439,058 719,019

8. other operating expenses 6.5. 195,411 49,225

Operating profit (or loss) 1,938,259 4,470,113

9. Financial revenues from equity interests 6.6. 134,368 0

a) Financial revenues from equity interests in other companies 134,368 0

10. Financial revenues from loans 6.6. 2,081 389

a) Financial revenues from loans granted to others 2,081 38911. Financial revenues from operating receivables 6.6. 371,404 309,313

a) Financial revenues from operating receivables due by others 371,404 309,313

12.Financial expenses arising from impairment and financial investments write-offs

0 39

13. Financial expenses arising from financial liabilities 6.7. 328,879 244,551

a) Financial expenses arising from loans received from companies in the Group

10,930 0

a) Financial expenses arising from received bank loans 317,949 244,551

14. Financial expenses arising from operating liabilities 6.7. 66,956 126,738

a) Financial expenses arising from accounts payable 22,542 125,648

b) Financial expenses arising from other operating liabilities 44,414 1,090

Net profit (or loss) from ordinary activities 2,050,277 4,408,487

15. other revenues 6.8. 132,744 3,991,159

16. other expenses 6.9. 28,548 3,266,506

Net profit (or loss) from extraordinary activities 104,196 724,653

17. Corporate Income tax 6.11. 699,812 0

19. Net profit (or loss) for the financial year 6.10. 1,454,661 5,133,140

21. Changes in revaluation surplus on available-for-sale financial assets (243.678) (5.680)

24. Total comprehensive income for the financial year 6.12. 1,210,983 5,127,460




CaSH FloW StateMent for the year ended 31st December 2011 in eur

2011 2010

CASH FLOW FROM OPERATING ACTIVITIES

Inflows from the sale of products and services 523,314,381 373,382,098

other inflows from operating activities 11,145 35,582

Inflows arising from operating activities 523,325,526 373,417,680

outflows for purchase of material and services (511,310,349) (367,086,453)

outflows for wages and salaries, employees’ profit-sharing (843,444) (945,561)

outflows for contributions and duties of all types (14,651,052) (9,820,063)

other outflows arising from operating activities (14,894) (26,963)

Outflows arising from operating activities (526,819,739) (377,879,040)

Net cash operating inflows/outflows (3,494,213) (4,461,360)

CASH FLOW FROM INVESTMENT ACTIVITIES

Inflows from interests and equity interests in other entities 8,695 0

Inflows from disposal of tangible fixed assets 2,860 0

Inflows from disposal of long-term financial investments 492,181 0

Inflows arising from investment activities 503,736 0

outflows from acquisition of intangible fixed assets (493,289) (125,000)

outflows from acquisition of tangible fixed assets (101,576) (1,632)

Outflows arising from investment activities (594,865) (126,632)

Net cash (inflows and outflows) used in investment activities (91,129) (126,632)

CASH FLOWS FROM FINANCING ACTIVITIES

Inflows from paid-in capital 7,500 0

Inflows from an increase in long-term financial liabilities 0 5,500,000

Inflows from an increase in short-term liabilities 10,653,315 0

Inflows from financing activities 10,660,815 5,500,000

outflows from interest pertaining to financing activities (275,234) (177,859)

repayment of long-term financial liabilities (1,173,967) (553,633)

repayment of short-term financial liabilities (5,000,000) 0

Outflows pertaining to financing activities (6,449,201) (711,492)

Net cash used in financing activities 4,211,614 4,768,508

CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 806,788 180,516

Financial result in the period (sum of net flows) 626,272 180,516

opening balance of cash and cash equivalents 180,516 0


StateMent oF CHanGeS In eQuIty for the year ended 31st December 2011 in eur

Changes in equity Share capitalCapital

reserves

Equity revaluation adjustment

Net profit (or loss) for the

financial year Total

A.1.Opening balance as at 1 January 2011

2,992,500 3,248,228 243,678 0 6,520,406

B.1.Changes in equity transactions with owners

7,500 (775,008) 0 0 (767,508)

a) entry of called-up capital 7,500 0 0 0 7,500

i)Decrease of capital reserves pursuant to tax administration of rS

0 (775,008) 0 0 (775,008)

B.2.Total comprehensive income for the financial year

0 0 (243,678) 1,454,661 1,210,983

a)entry of net profit/loss for the financial year

0 0 0 1,454,661 1,454,661

d)Changes in revaluation surplus of financial investments

0 0 (243,678) 0 (243,678)

D.Closing balance as at 31 December 2011

3,000,000 2,509,220 0 1,454,661 6,963,881

ACCUMULATED PROFIT 1,454,661 1,454,661




noteS to tHe FInanCIal StateMentS for the year ended on 31st December 2011

1. activityIn 2011, pursuant to the provisions of article 623 of the Companies act of the republic of Slovenia (ZGD-1) elektro ljubljana d.d. undertook a restructuring project which gave rise to the creation of a new limited liability shareholding enterprise - elektro energija d.o.o. - entirely owned by its founder. through this demerger procedure, elektro ljubljana transferred operations, employees, assets and liabilities to the new company, which would henceforth undertake its erstwhile electricity trading business.

elektro energija d.o.o. generates revenues from the retail and wholesale trade of power as well as the direct sale of electricity to consumers

2. employeesas at 31st December 2011, the Company employed 69 employees. the employee educational structure is provided in the Business report under Item 3.

3. exchange rates and Methods of Conversion to the national Currency

transactions in foreign currencies are translated the functional currency at the reference middle exchange rate of the Bank of Slovenia.

4. Summary of accounting policiespursuant to Slovenian accounting Standards, elektro energija d.o.o. has compiled its balance sheet as at 31st December 2011 as well as its statements of cash flow, comprehensive income, and changes in equity, for the 2011 financial (calendar) year.

the date of the demerger was set at 31st December 2010. as of 1st January 2011, and pursuant to the provisions of the Companies act, elektro energija became the parent company’s successor in all activities related to the trade as well as retail and wholesale sale of electricity. Separate annual reports were drawn up for elektro energija d.o.o. and elektro ljubljana d.d. for fiscal 2011, while the levy of corporation tax in relation to these two enterprises is henceforth assessed independently.

Consequent to the demerger, balance sheet and income statement data is recorded in comparison with the opening balance as of the date of the division - i.e. 1st January 2011 - whilst in the comprehensive income statement data is compared with that pertaining to the parent company’s electricity purchase and sales activities published in elektro ljubljana d.d.’s 2010 annual report. Comparative data for 2010 in relation to the cash flow statement and

the disclosure of items in the financial and business report are recalculated on the basis of comparable data recorded in 2010.

performance analysis is presented under Item 2.5. of business part of the annual report.

the following accounting assumptions were applied by elektro energija (hereinafter: the Company) in the compilation of its annual report:• only assets and liabilities pertaining to the Company and its activities are recorded in the

balance sheet. Costs, revenues and expenses were recorded as incurred and in the accounting period to which they relate, regardless of inflows and outflows.

• an assumption is made that the Company shall continue to operate in the foreseeable future, and that interim and annual results represent relative values.

• the principle of historical cost has been applied in the compilation of the financial statements and notes thereto.

In its selection of accounting policies, i.e. the rules and procedures that must be observed and applied in compiling financial statements as well as throughout the accounting process, the Company took into consideration the principle of prudence, giving precedence to substance over form and the significance of events.

the Company has respected the principle of individual valuation of assets and liabilities.

Version I under the Slovenian accounting Standards (SaS) 25.5 was used to compile the statement of comprehensive income.

the cash flow statement was compiled according to Version I in accordance with SaS 26.6, i.e. the direct method. Data for the compilation of the cash flow statement derives from accounting data.

the cash flow statement also discloses cash inflows and outflows generated by the Company’s activities performed in its own name as well as on behalf of SoDo d.o.o.. these activities, which do not constitute the Company’s revenue, encompass charging grid and other fees on joint invoices issued for the supply of electricity.

the statement of changes in equity was compiled pursuant to Version I of SaS 27.2.

a) Intangible assets, long-term deferred costs & accrued revenues, as well as tangible fixed assets

Intangible assets comprise property rights for computer software. Intangible assets are disclosed at their historical price. the asset lifetime is defined as three years.

Deferred costs and accrued revenues comprise long-term chargeable costs for the development of information systems and statutory funds remunerated to the reserve fund for immovable property owned by the Company. In procurement and acquisition, long-term deferred costs and accrued revenues are recognised upon incurral and thence depreciated at a rate of 10% per annum.

real estate at Slovenska Cesta 58/II in ljubljana represents fixed assets obtained by the Company in the demerger process, as does other tangible assets, comprising business premises, computer equipment and vehicles. tangible fixed assets are valued at their historical cost, which comprises their procurement cost and all duties and costs that can be directly ascribed to them in making them fit for their intended use.



the Company values the intangible assets and tangible fixed assets pursuant to the historical cost principle.

the Company has no tangible fixed assets acquired by financial lease, nor has its assets been pledged against any mortgage.

b) Depreciation

on the basis of historical cost and in relation to anticipated useful life, the depreciation of individual fixed assets is calculated pursuant to the straight-line method of amortisation. Fixed assets under construction are not depreciated; for accounting purposes, only those fixed assets put into service are depreciated.

DepreCIatIon rateS applIeD In 2011

Buildings 2.00% do 3.33%

equipment 3.33% do 20.00%

Vehicles 8.33% do 14.29%

Furniture 6.67% do 12.5%

Computer equipment 33.33%

c) Receivables

the majority of operating receivables comprise of accounts receivable during the normal course of operations. receivables are disclosed at their net values in the balance sheet, and decreased by the amount of value adjustments created in relation to doubtful and disputed receivables. the Company employs an accounting assessment in its value adjustments, and, calculated on the basis of experience from previous years, applies a percentage downward revaluation of doubtful and disputed receivables.

receivables under litigation and in relation to bankruptcy proceedings not yet published in the official Gazette of the republic of Slovenia, together with receivables from compulsory settlement proceedings awaiting confirmation, are adjusted downwards by 80%. In relation to other receivables due more than 90 days, the downward adjustment calculation is based on experience from previous years and expectations for the current financial year; namely, in the amount of: 30% for receivables pertaining to the supply of electricity and services, and 50% in relation to default interest receivables.

appropriate value adjustments (write-downs) in relation to receivables pertain to revaluated operating expenses.

receivables and liabilities are acknowledged for the purposes of deferred tax if they exceed 1% of the Company’s annual revenues. If the Company assesses that the amounts of receivables and liabilities in relation deferred taxes are - individually or in total - irrelevant, they shall be neither recognised nor eliminated.

d) Provisions

In accordance with the requirements of Slovenian accounting Standards, the Company creates non-current provisions for employee bonuses, severance payments and retirement pensions at the current value of the employer’s liabilities towards employees. Such non-current provisions are calculated by an authorised actuary.

e) Taxation

the Company is liable for the payment of Corporate Income tax.

f) Cash and cash equivalents

this includes cash, current and transaction account balances, as well as commercial bank deposits available at call.

g) Financial investments

Comprising shares and equity holdings in other enterprises, which the Company has held for more than one year, these represent long term assets anticipated to yield returns (financial revenues).

the Company obtained equity (shares) in the process of demerger; it sold these holdings to the parent company on 1st December 2011, thus divesting itself of these assets. the Company does not record any short-term financial investments.

h) Short-term accrued costs and deferred revenues

Short-term accrued costs and deferred revenues encompass expenses postponed in the short term; those which debit operations as of 31st December 2011 shall become due in 2012.

i) Equity

the Company’s total equity is defined as the sum of the investments made by the owner (elektro ljubljana d.d.), and the revenues amounts generated by the Company which pertain to its single shareholder.

the Company’s share capital and capital reserves represent cash and non-cash contributions made by the owners of the parent company, elektro ljubljana d.d., which enjoys a 100% holding in elektro energija d.o.o..

the equity revaluation surplus is recognised on the basis of the revaluation of financial investments.net profit carried over from previous years is the remainder of net profits which have been paid out or otherwise disbursed to shareholders.

j) Long-term and short-term liabilities

long–term and short-term financial liabilities are acknowledged liabilities arising from the financing of own assets and represents liabilities towards creditors.

upon initial recognition, long–term and short-term financial liabilities are valued at cost, and are later lowered by the amounts remunerated. long–term and short-term financial liabilities are revalued at their amortised amounts.

that portion of long-term financial liabilities which shall become due within one year of balance sheet date is transferred and rerecorded under short-term liabilities.



Short-term operating liabilities comprise of suppliers credits for purchased goods and services. upon initial recognition, short-term operating liabilities are valued at the documented amounts which are evidential that goods were received and services rendered.

the book value of long-term and short-term liabilities is equal to amortised cost.

k) Revenues

revenues engender an increase in assets or decrease in liabilities in the financial year; they are recognised for accounting purposes when it is reasonable to expect their receipt.

operating revenues are revenues arising from sales and other business activities.

net operating revenues represents income from the sale of products (electricity) and services rendered. they are calculated on the basis of contractual values and sales prices, stated on invoices and other documents, decreased by the sum of discounts granted.

Financial revenues represent income from investments. they arise from long-term and short-term financial investments and derive specifically from receivables in the form of interest and participation in profits. Such income is recognised upon actual settlement (remuneration).

extraordinary revenues pertain to non-standard items. they are disclosed in the amounts in which they actually arise.

l) Expenses

expenses represent outflows during the reporting period in the form of increases in indebtedness or decreases in the value of assets. expenses are disclosed only when they can be reliably quantified.

operating expenses are, in principal, equal to accrued costs in the accounting period. they encompass the procurement costs of goods and services rendered, together with the costs of materials, labour and depreciation.

other operating expenses include various other outlays as well as duties and obligations to the state.

revaluated operating expenses encompass write-downs of fixed assets and write-offs of receivables.

the actual value of write-downs in relation to fixed assets pertains to the amortization of property, plant and equipment which retain residual (non-written-off) book value. the upward revaluation of operating expenses also arises from the disposal of fixed assets when book value exceeds the actual sales value, as well as in relation to receivables where downward value adjustments are made on the basis of doubtful and disputed accounts.

Finance expenses pertain to expenditure from financing and investment; the former consists primarily of interest expenses. Finance expenses are recognised upon actual settlement, regardless of related payments.

extraordinary expenses pertain to non-standard items. they are disclosed in the amounts in which they actually arise.

5. Disclosure of Balance Sheet Items5.1. INTANGIBLE ASSETS AND LONG-TERM DEFERRED COSTS & ACCRUED REVENUES

2011 in eur

Long-term rights, concessions, licences

& other rights

Long-term deferred

expensesReserve

fund

Total intangible assets and long-term deferred costs &

accrued revenues

Procurement value

Balance as at 1 Jan 2011 234,784 361,970 6,970 603,724

Acquisitions 13,872 479,416 163 493,451

Alienations 0 (70,023) (5,941) (75,964)

Balance as at 31 Dec 2011 248,656 771,363 1,192 1,021,211

Value adjustment

Balance as at 1 Jan 2011 234,784 234,784

Depreciation 10,205 10,205

Balance as at 31 Dec 2011 244,989 244,989

Net book value

Balance as at 1 Jan 2011 0 361,970 6,970 368,940

Balance as at 31 Dec 2011 3,667 771,363 1,192 776,222

Intangible assets comprise property rights for computer software. Deferred costs and accrued revenues comprise long-term chargeable costs for the development of information systems and statutory funds remunerated to the reserve fund for immovable property owned by the Company.

5.2. TANGIBLE FIXED ASSETS

2011 in eur

Land Buildings Equipment Advances Total

Procurement value

Balance as at 1 Jan 2011 25,199 1,758,784 414,578 2,198,561

Increases 740 100,653 101,393

Decreases (43,410) (43,410)

advances for acquisition of tangible fixed assets

2,000 2,000

Balance as at 31 Dec 2011 25,199 1,759,524 471,821 2,258,544

Value adjustment

Balance as at 1 Jan 2011 1,023,328 307,517 1,330,845

Depreciation 37,473 43,033 80,506

Decreases/write-offs (23,731) (23,731)

Balance as at 31 Dec 2011 1,060,801 326,819 1,387,620

Net book value

Balance as at 1 Jan 2011 25,199 735,456 107,061 867,716

Balance as at 31 Dec 2011 25,199 698,723 145,002 2,000 870,924

In 2011, the procurement value of tangible fixed assets increased by eur 101,393. Decrease in procurement value due to elimination stood at eur 43,410.



the Company has no loans taken out for the acquisition of fixed assets.the Company’s business premises are located in the former premises of elektro ljubljana d.d..

Value adjustment of tangible fixed assets increased by eur 80,506 and decreased by eur 23,731 due to elimination.

5.3. FINANCIAL INVESTMENTS

CHanGeS In FInanCIal InVeStMentS In 2011in eur

Shares and interests in associated companies

Other long-term financial investments Total

Long-term financial investments

Balance as at 1 Jan 2011 285,676 323,157 608,833

Decreases – disposal (285,676) (323,157) (608,833)

Balance as at 31 Dec 2011 0 0 0

In 2011, the long-term financial investments decreased due to the sales of shares. the Company thus generated revenues in the amount of eur 127,025.

5.4. OPERATING RECEIVABLES

SHort-terM aCCountS reCeIVaBleS in eur

Balance as at 31 Dec 2011

Balance as at 1 Jan 2011

accounts receivables 70,216,566 48,176,885

other accounts receivables 632,122 698,757

receivables from default interests 373,580 333,879

Total accounts receivables 71,222,268 49,209,521

adjustment to accounts receivables (3,357,622) (2,105,446)

Total accounts receivables with adjustments 67,864,646 47,104,075

BreaKDoWn oF aCCountS reCeIVaBleS By MaturIty in eur

31 Dec 2011 % 1 Jan 2010 %

not yet due 59,622,655 83,7 40,058,897 81.4

overdue by up to 30 days 5,163,170 7,3 4,527,810 9.2

overdue from 31 to 60 days 1,876,477 2,6 1,127,943 2.3

overdue from 61 to 90 days 686,537 1,0 381,695 0.8

Overdue by more than 90 days 3,873,429 5,4 3,113,175 6.3

Total 71,222,268 100,0 49,209,520 100.0

Adjustment (3,357,622) (2,105,445)

Balance 67,864,646 47,104,075

In all accounts receivables at the end of 2011 16.3% were not settled when due; as at 1st January 2011 the Company recorded 18.6% of such receivables. the receivables overdue by more than 90 days include also the accounts receivables in the procedure of compulsory settlement, sued or in the process of bankruptcy procedure and for which apposite value adjustment has already been performed.

CHanGeS In reValuatIon aDJuStMent relateD to aCCountS reCeIVaBleS In 2011 in eur

Adjustments to original

receivables

Adjustment to default interests Total

Value adjustment of receivables as at 1 Jan 2011 1,952,070 153,375 2,105,445

additional adjustment 1,353,357 85,701 1,439,058

Decrease – write-off (162,601) (24,280) (186,881)

Final balance 3,142,826 214,796 3,357,622

Value adjustment of receivables increased by 55.5% in comparison to 2010. the increase is the consequence of bankruptcies, compulsory settlements, deletion and legal actions.

Short-term operating receivables towards others account for 6.1% of all short-term operating receivables. the major part appertains to receivables arising from deductible Vat, which is due in the following accounting period.

account receivables are not secured with insurance instruments.

5.5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent deposits on transaction accounts in the amount of eur 20,570 and money under way in the amount of eur 786,217.

5.6. SHORT-TERM ACCRUED REVENUES AND DEFERRED EXPENSES

in eur

31 Dec 2011 1 Jan 2011

Decision of tax administration 2008 0 811,676

Short-term accrued revenues 601,081 0

Total 601,081 811,676

With the opening balance a proportionate portion of receivables for tax liability arising from the interpretation of the Special tax office that a taxable entity is not eligible to carry forward 100% of tax losses recorded in Corporate Income tax calculation prior to 2006, was assigned to elektro energija d.o.o.. the Company filed a law suit at the administrative Court. an amount of eur 36,667 was reimbursed, which represents a portion of tax liability pursuant to the decision on prepayment of Corporate Income tax for 2008.

accrued revenues are revenues arising from imbalance settlement for negative imbalances with Borzen, estimated for December 2011. In February 2012, elektro ljubljana d.d. billed Borzen for eur 594,962 pursuant to the final imbalance settlement. Deferred expenses amounted to eur 6.120.

5.7. EQUITY

Share capital of the Company as at 1st January 2011 in the amount of eur 6,520,406 represents 100% investment of elektro ljubljana d.d.. Changes in equity are disclosed in the Statement of Changes in equity.



BreaKDoWn oF eQuIty in eur

31 Dec 2011 1 Jan 2011

Share capital 3,000,000 2,992,500

Capital reserves 2,509,220 3,284,228

revaluation surplus 0 243,678

net profit/loss for the financial year 1,454,661 0

EQUITY 6,963,881 6,520,406

DISTRIBUTABLE PROFIT 1,454,661 0

In 2011, the Company covered liabilities arising from the Decision issued by the tax administration in the amount of eur 775,008 from capital reserves in short-term accrued revenues and deferred expenses. the appeal was rejected and as a consequence the Company decreased the capital reserves. a claim for a revision of the Decision has been filed.

net profit for the financial year equals distributable profit and amounts to eur 1,454,661.

DIStrIButaBle proFIt For 2011 in eur

31 Dec 2011

net profit/loss for the financial year 1,454,661

DISTRIBUTABLE PROFIT 1,454,661

In line with the powers prescribed by the Companies act, the Managing Director decided that net profit for the financial year shall be retained by the Company as undistributed net profit.

5.8. PROVISIONS

CHanGeS to proVISIonS In 2011 in eur

Severance payments

Loyalty bonuses Total

Balance as at 1 Jan 2011 99.096 108.751 207.847

utilised 0 (11.653) (11.653)

Formed 83.798 75.981 159.779

Balance as at 31 Dec 2011 182.894 173.079 355.973

according to the actuary calculation, the liabilities for severance payments for the retirement amount to eur 182,894 and loyalty bonuses amount to eur 173,079 on 31st December 2011. In 2011, loyalty bonuses were paid in the amount of eur 309,526. long-term provisions for liabilities to severance payments and loyalty bonuses on 31st December 2010 were additionally formed in the amount of eur 83,799 and eur 75,981, respectively. In comparison to 2010 the amount increased primarily due to changes outside the Company which are taken into consideration in actuary calculation.

assumptions applied in the actuary calculation:• number of employees as at 31st December 2011 (gender, age, total and retirement period

of service, average net and gross salary for the period from october to December 2011);• the method applied in the calculation of severance payments and loyalty bonuses;• growth of average salary by 3%;• nominal long-term interest rate: 3.03%.

5.9. FINANCIAL LIABILITIES

long-term and short-term financial liabilities primarily comprise liabilities for loans received from banks, namely: in eur

31 Dec 2011 1 Jan 2011

long-term financial liabilities to domestic banks 5,342,289 6,634,914

Short-term part of financial liabilities to banks 1,298,774 1,167,791

Short-term financial liabilities to associated companies 2,653,061 0

Short-term financial liabilities to domestic banks 3,000,254 0

Total 12,294,378 7,802,705

the short-term portion of long-term loans is disclosed under current financial liabilities in the balance sheet in the amount of eur 1,298,774.

Bills of exchange were issued as loan collateral.

long-term and short-term financial liabilities to domestic banks are loans which were transferred onto the Company in the process of demerger. the loans were taken out for the purposes of ordinary activity of purchase and sales of electricity. the amount of long-term loans represents loans taken out for a period longer than 5 years. the loans shall be repaid by 2018. In 2011, the average interest rate of long-term loans ranged from 1.5072 to 3.7415%.

Short-term financial liabilities to associated companies comprise a loan given to the Company by its parent company on 1st December 2011. pursuant to the loan agreement between the associated companies the loan is to be repaid by 30th May 2012 at variable interest rate set forth in the rules on the recognised rate of interest (official Gazette of rS, nos. 141/06 and 52/07). In December 2011 the interest rate stood at 2.697%.

Short-term liabilities to domestic banks comprise an approved overdraft facility on the Company’s transaction account as at 31st December 2011 at a 5.6% interest rate.

5.10. OPERATING LIABILITIES

operating liabilities are primarily current operating liabilities to suppliers. the balance of total liabilities to suppliers as at 31st December 2011 increased by 46.6% referring to the balance as at 1st January 2011.

SHort-terM operatInG lIaBIlItIeS to SupplIerS in eur

31 Dec 2011 1 Jan 2011

liabilities to electricity suppliers 40,690,036 23,528,809

liabilities to other suppliers 10,604,966 11,464,997

Total 51,295,002 34,993,806

other operating liabilities include liabilities to employees for December salaries and liabilities to the government and other institutions.



5.11. SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUES

CHanGeS to SHort-terM aCCrueD CoStS anD DeFerreD reVenueS In 2011 in eur

Balance as at 1 Jan 2011 Increases Decreases

Balance as at 31 Dec 2011

accrued costs of the electricity purchase for losses in network

303,170 382,177 (303,170) 382,177

the amount of accrued costs (expenses) of electricity purchase represent costs charged in 2012 after the final reconciliation of electricity trading balances with all participants in power trading.

6. Disclosure of Comprehensive Income Statement Items

Comparative data for 2010 represent data on the purchase and sales of electricity published in the comprehensive income statement in the annual report of elektro ljubljana d.d. for 2010.

6.1. NET SALES REVENUES AND OTHER OPERATING REVENUES

net sales revenues primarily comprise revenues from the sale of electricity. In 2011, total net sales revenues amounted to eur 365,581,662, compared to eur 207,005,830 in 2010. revenues from retail amount to eur 234.6 million, and revenues from wholesale to eur 109.3 million. In 2010, there were no revenues from wholesale operations.

6.2. COSTS OF GOODS, MATERIAL AND SERVICES

the costs of goods include the purchase of electricity, which amounted to eur 355,387,596 in 2011, compared with eur 197,633,331 in 2010. the costs of goods increased primarily due to larger scope of wholesale operations on the electricity market.

Costs of material include primarily the costs of stationary.

Costs of services amounted to eur 3.735.838 in 2011, and to eur 2.323.208 in 2010 and mainly comprise costs of billing, payment transactions, commissions of users and other regular operating costs.

6.3. LABOUR COSTS

labour costs include salaries and wages calculated in accordance with the company-level collective agreement and other applicable rules and regulations governing the calculation of salaries and wages.

labour costs arising from the purchase and sales of electricity disclosed in the income statement as per activities for 2010 were used as comparative data. Since the division of labour costs in 2010 was performed on the basis of average values, the data are not entirely comparable with the labour costs in 2011.

Salaries and wages were calculated in the amount of eur 2,519,875 in 2011 and in the amount of eur 1,578,954 in 2010. of which salaries and wages amounted to eur 1,843,308 in 2011 and eur 1,173,560 in 2010, costs of social security amounted to eur 292,760 in 2011 and eur 153,991 in 2010, costs of supplementary pension insurance of employees amounted to eur 82,839 in 2011 and eur 52,435 in 2010.

other labour costs comprise employee annual leave bonus, other employment earnings, reimbursement of travel-to-work costs, costs of voluntary employee accident insurance and social relief costs. In 2011, other labour costs amounted to eur 300,968 and in 2010 to eur 198,968.

6.4. WRITE-OFFS

Depreciation was calculated on the purchase price of fixed assets.

revaluation operating expenses for current assets comprise value adjustments to accounts receivables arising from doubtful and disputed receivables. In 2011 these increased by 55.5% over 2010. Disclosure related to the formation and changes in revaluation adjustments of receivables is provided under Item 5.4. of this report.

6.5. OTHER OPERATING EXPENSES

other operating expenses are mainly provisions for severance payments at retirement and loyalty bonuses. Disclosure is provided under Item 5.8. of this report.

6.6. FINANCIAL REVENUES

Financial revenues from shareholding interests relate to dividends received and difference in the sale of shares. Financial revenues from operating receivables mostly include default interest for belated payments for the supply of electricity.

6.7. FINANCIAL EXPENSES

Financial expenses for the interest rates arising from loans amount to eur 328.879. Financial expenses from operating liabilities from interests mostly pertain to liabilities to suppliers.

6.8. OTHER REVENUES

other revenues include the amount arising from the Court Decision on the reduction of penalty of the Competition protection office in the amount of eur 3,408,118.

6.9. OTHER EXPENSES

In 2010, other expenses included expenses for the return of the overcharged electricity consumption due to the alleged concerted increase of electricity prices in 2009 in the amount of eur 3,264,641.

the remaining other expenses were expenses for donations and financial assistance.



6.10. NET PROFIT FOR THE FINANCIAL YEAR

In 2011, the Company generated a net profit of eur 1,454,661. additional disclosure is provided under Item 5.7. of this report.

General capital revaluation adjustment If the Company made a general capital revaluation adjustment based on growth in the consumer price index in 2011 (2%), it would have disclosed a net profit of eur 1,315,383.

6.11. CORPORATE INCOME TAX

In 2011, the Corporate Income tax amounted to eur 699,812

Corporate InCoMe taX For 2011 in eur

31 Dec 2011

Profit before tax 2,154,473

revenues decreasing the tax base (7,342)

expenses increasing the tax base 1,621,149

expenses decreasing the tax base (186,731)

Decrease in the tax base due to tax relief (70,836)

other (11,653)

Tax base 3,499,060

tax rate 20%

Corporate Income Tax 699,812

Effective tax rate 32.4%

6.12. TOTAL COMPREHENSIVE INCOME OF THE FINANCIAL PERIOD

the total comprehensive income of the financial year 2011 amounts to eur 1,210,983 and is by eur 243,678 lower than net profit or loss for the current year, due to the changes of surplus from revaluated financial investments available for sale.

7. Costs per Functional Groups in eur

2010 2011

production costs 356,688,924 193,580,133

Sales costs 5,345,798 5,132,970

Costs of ordinary activities 163,113 168,542

Breakdown of costs as per functional groups provides records of costs sustained as per cost centres and accounts. For this purpose costs centres and accounts appertaining to individual functional group are defined.

8. Cash Flow StatementCash flow statement demonstrates the changes in cash and cash equivalents for financial year 2011, and compares them to the data recorded in 2010.

this includes cash, current and transaction account balances, as well as commercial bank deposits available at call.

CaSH FloW in eur

2011 2010

Cash flows from operating activities (3,494,213) (4,461,360)

Cash flows from investment activities (91,129) (126,632)

Cash flows from financing activities 4,211,614 4,768,508

Cash flows in the financial year 626.272 180.516

Cash flows from operating activities include interest received and paid due to belated payments. Cash flows from investment activities comprise inflows arising from interest on loans given, while cash flows from financing activities comprise outflows arising from interest on loans raised.

Cash flows from operating and investment activities are negative for both financial years. In 2011 and according to data calculated for 2010, the Company financed from loans.

9. off-Balance Sheet Items

oFF-BalanCe SHeet IteMS aS at 31 DeCeMBer 2011 in eur

31 Dec 2011 1 Jan 2011

Bills of exchange 9,641,317 7,802,705

Guarantees 24,127,982 21,704,578

Small inventory and protective equipment in use 11,068 9,891

Total off-balance sheet liabilities 33,780,367 29,517,174

Bills of exchange represent collateral for loans raised. their value is equal to the value of loans that the Company raised from the creditors holding the bills of exchange.

Guarantees in 2011 comprise performance guarantees issued and received in the process of trading with electricity.



10. Disclosure of events with related partiesas at 31st December 2011, the Company recorded receivables and liabilities to related parties arising from ordinary operations, namely as follows: in eur

31 Dec 2011

Balance sheet

Assets

receivables from elektro ljubljana d.d. 29,267

Liabilities

liabilities to elektro ljubljana d.d. for loan raised 2,653,061

liabilities to elektro ljubljana d.d. for interest 10,930

liabilities to suppliers – elektro ljubljana d.d. 257,836

liabilities to suppliers – el oVe d.o.o. 123,222

Income statement

Costs of services – elektro ljubljana d.d. 229,171

Costs of electricity purchase – el oVe d.o.o. 617,497

expenses for interest – elektro ljubljana d.d. 10,930

11. Disclosure of remuneration received by Members of the Management Board and employees employed on the Basis of Managerial Contract

GroSS InCoMe oF tHe ManaGeMent BoarD For 2011 in eur

SalaryReimbursement

of costsAnnual

leave bonusLoyalty bonus Benefits Total

Managing Director

77,614 1,359 1,550 1,000 2,577 84,100

GroSS InCoMe oF eMployeeS eMployeD on tHe BaSIS oF ManaGerIal ContraCtS For 2011 FroM DeCeMBer 2011 onWarDS in eur

No. of employees Salary

Reimbursement of costs Benefits Total

3 17,246 339 157 17,742

as at 31st December 2011, the Company did not record any outstanding receivables, issued sureties or liabilities to the aforementioned groups.

12. Contingent and assumed liabilitiesVarious claims have been filed against the Company, and remain open as at 31st December 2011. However, none of the disputes in question involve significant amounts.there is insufficient information to reasonably assess the eventual outcomes of open and filed claims, or to assess the potential cost of losses in individual lawsuits.

13. events after the Balance Sheet Datethe annual report was confirmed by the Managing Director on 15th May 2012. no other events occurred after the balance-sheet date, i.e. 17th May 2012, which would affect the assets and liabilities disclosed as at the balance sheet date.

elektro ljubljana d.d. gave surety to the Company in the amount of eur12 million for a period of one year. the Company did not begin trading with derivates by the end of april 2012 nor did it trade at leipzig Stock exchange.

14. auditing Coststhe costs of auditing the Company’s financial statements in 2011 totalled eur 6,500 without Vat.

15. relations with the Controlling Company and Statement Issued pursuant to article 545 of the Companies act

For the period from 1st January 2011 to 30th november 2011, the corporate services department recorded eur 1,489,110 in costs and expenses, including rent and other indirect services, imputed to elektro energija d.o.o.. Since 1 December 2011, elektro energija d.o.o. operated on its own behalf and its own account. as of 1st January 2011, elektro ljubljana d.d. became the parent company of elektro energija d.o.o.

elektro ljubljana d.d. has concluded the following contracts and agreements with elektro energija d.o.o. since 1 December 2011:• contract on the performance of accounting, human resource management and legal

services, together with services pertaining to network use, telecommunications and information technology;

• contract on the rent of facilities and equipment at dispersed locations;• contract on the provision of power flow dynamics metrics and data;• contract on the rent of temporary electricity cabinets, retracting cabinets and billing for fuse

replacement: and, • agreement for a short-term loan for an amount set forth after the demerger and arising from

mutual operations in December 2011. this loan was repaid in full before 30th May 2011.

the above contracts and agreements entered into force on or after 1st December 2011. Costs arising from the aforementioned contracts and agreements in December 2011 totalled eur 107,699. Costs arising from the December 2011 loan stood at eur10,930.

In addition to operations involving elektro ljubljana d.d. as the parent company, elektro energija d.o.o. also co-operated with other associated enterprises during 2011. In addition to its not being deprived or impaired in the aforementioned operations, elektro energija d.o.o. did not enter into any litigation in 2011, nor were any of its activities or operations influenced or performed upon the initiative or in the interest of elektro ljubljana d.d. or its associated enterprises.

Detailed information on the value and content of relevant operations involving the parent company and associated enterprises are presented under individual items in the financial report.



16. performance Indicators STATEMENT OF THE MANAGING DIRECTOR

In endorsing the financial statements for the year ended 31st December 2011, the Managing Director of elektro energija d.o.o. confirms that they have been compiled in accordance with the appropriate accounting guidelines, applicable legislation and Slovenian accounting Standards. the accounting estimates were drawn up pursuant to such principles as prudence and due diligence, and that the annual report presents a true and fair reflection of the results of the operations as well as the financial situation of elektro energija d.o.o. in 2011.

the Managing Director is responsible for the appropriate management of accountancy, for the instigation, operation and maintenance of internal control related with the preparation and fair presentation of financial statements that do not contain false statements as a consequence of error or fraud. Moreover, the Managing Director is also responsible for adopting appropriate measures to protect the company’s assets and confirms that the financial statements and pertaining notes are presented on the basis of accounting assumption, which takes into consideration the principle of going concern. the Managing Director is acquainted with the content of the integral parts of elektro energija’s 2011 annual report, and thus the document in its entirety. through his signature, the Managing Director concurs with the statements and the annual report.

In its operations the Company respected the recommendations of the Capital assets Management agency of the republic of Slovenia.

nevenka lavrič Gregor Božič, M.Sc. accounting and Finance eleKtro enerGIJa d.o.o.

ljubljana, on 17th May 2012

INVESTMENT RATIOS 1 Jan 2011 31 Dec 2011

Fixed assets investment ratio = fixed assets (at net book value) / assets 0.02 0.01

Financial investment ratio = total long-term and short-term financial investments and investment property / assets

0.01 /

Long-term investment ratio = total fixed assets and long-term deferred costs and accrued revenues (at net book value), long-term financial investments, investment property and long-term operating receivables / assets

0.03 0.01

FINANCING RATIOS

Self-financing ratio = equity / liabilities 0.12 0.09

Long-term financing ratio = total equity, long-term debt and long-term provisions and long-term accrued costs and deferred revenues / liabilities

0.26 0.17

HORIZONTAL FINANCIAL STRUCTURE RATIOS

Equity to fixed assets ratio = equity / fixed assets (at net book value) 7.51 8.00

Quick ratio = liquid assets / short-term liabilities 0.00 0.01

Accelerated liquidity ratio = total liquid assets and short-term receivables / short-term liabilities 1.29 1.17

Current ratio = current assets / short-term liabilities 1.29 1.17

EFFICIENCY RATIOS

Operating efficiency ratio = operating revenues / operating expenses 1.01

Overall efficiency ratio = revenues / expenses 1.01

PROFITABILITY RATIOS

Net return on assets (ROA) = net profit or loss / average assets 0.02

Net return on equity (ROE) = net profit or loss for the financial year / average equity (excluding net profit or loss for the current year)

0.24

Dividend to share capital ratio = dividends paid in the financial year / average share capital /

ASSET MANAGEMENT RATIOS

Total assets turnover ratio = revenues / average assets 5.74

Receivables turnover ratio (RTR) = operating revenues / average operating receivables 6.36

Inventory turnover ratio = operating revenues / average inventories /

ANNUAL REPORT 2011 Elektro energija d.o.o.FINANCIAL REPORT70

annual report 2011 - elektro energija€¦ · the project to hive-off electricity trading...

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