Charts of Accounts and Reporting Forms

Croatian Energy Regulatory Agency

Ms. Gordana Stanković

Bucharest, RomaniaMay 19-20, 2008

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Assets evaluation and privatization

Hrvatska elektroprivreda d.d. (HEP d.d.) remains to exist in the form of a stock corporation and is the parent company of the HEP Group with the same capital stock as before the HEP Group was founded.HEP d.d. is a state-owned corporation.HEP d.d. is the founder and the sole owner of the newly established companies, consolidates the management of the subsidiary companies of the HEP Group and retains ownership of assets which are contractually transferred to the subsidiaries or daughter-companies for management.

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Assets evaluation and privatization

HEP Group chart

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Treatment of O&M costs

Operation and maintenance provided by a person or company outside the DSO and TSO are performed in accordance with Ordinance on Scale of Norms.

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Cost Allocation Method

“Parent” (HEP d.d.) assigns costs of shared functions to “daughter” companies for the purpose of monitoring separated accounting of regulated activities.

Allocation keys for shared costs (insurance, main building maintenance, banking costs, payment system costs, safety at work costs etc.) which are recorded in the HEP d.d. Bookkeeping Department :

Number of HEP Group employeesm2 space used in the administrative building Percentage of participation in depreciationAccording to equipment and small inventory usage

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Cost Allocation Method

Direct costs of each shared functions’ organizational unit are allocated to “daughter” companies using the percentages calculated as arithmetic mean value of share of every single “daughter” in average total costs, average value of longterm assets and average labour costs in preceding three years.

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Disallowed costs

All costs are allowed.

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Treatment of the cost of new construction

COST PLUS METHOD (Cost-of-Service, Rate-of Return)

UTP = TPpos+ TPkap

= TPpos+ A + (PPTK/100) · RI

= TPpos+ A + PRim

Long-term tangible and intangible assets and working capital (kn)

Weighted average costs of capital (%)

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Treatment of the cost of new construction

RI – average value of regulated assets

RI=RIp+ RIk /2

value of regulated assets in the beginning of the year and does not include the value of assets received without charge

value of regulated assets at the end of the year

RIk = RIp + NI – BI – A – OR

value of new investments

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Treatment of the cost of new construction

The value of new investments in the regulatory year includes planned costs of the construction of capital facilities, revitalization, replacement and recontruction, repair and renovation. Planed amounts of these costs are in the Plan of Development and Construction for the period of up to 3 years which utility is obliged to submit to the Agency by November 30 of the current regulatory year at the latest.Therefore, investments in progress are included into rate base but not the entire value, only half of the amount (arithmetic mean value), even though they are not put into service.

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Thank you for your attention!

Croatian Energy Regulatory AgencyUlica grada Vukovara 14, ZagrebTel: ++385 1 6323 755Fax: ++385 1 6115 344www.hera.hr