NPG TRANSELECTRICA SA

Two-Tier Company

Consolidated Financial Statements

as at and for the financial year ended on

December 31, 2021

Prepared in accordance with the

Order of the Ministry of Public Finance no. 2844/2016

as subsequently amended and supplemented

on the approval of accounting regulations

in line with the International Financial Reporting Standards

free translation

Consolidated Statement of Financial Position for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

Consolidated Statement of Financial Position for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

The attached consolidated financial statements were signed by the Company’s management on 17 March 2022 :

Directorat,

Consolidated Statement of Profit and Loss for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

Consolidated Statement of Profit and Loss for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

The attached consolidated financial statements were signed by the Company’s management on 17 March 2022 :

Directorat,

Consolidated Statement of Changes in Shreholders’ Equities for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

The attached consolidated financial statements were signed by the Company’s management on 17 March 2022 :

Directorat,

Consolidated Statement of Changes in Shreholders’ Equities for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

The attached consolidated financial statements were signed by the Company’s management on 17 March 2022 :

Directorat,

Consolidated Statement of Cash Flows for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

Consolidated Statement of Cash Flows for the period concluded on December 31 st , 2021

( All amounts are expressed in thousand LEI, unless otherwise provided )

The attached consolidated financial statements were signed by the Company’s management on 17 March 2022 :

Directorat,

Notes to the consolidated financial statements as at December 31 st , 2021

( All amounts are in thousand LEI, unless stated otherwise )

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The main activity of CNTEE Transelectrica SA (“Company”) and of its subsidiaries (called with the Company, “Group”) consists in: provision of electricity transmission services and of system services, balancing market operator, administrator of the bonus type support scheme, other associated activities . They are performed in accordance with the provisions of operational licence 161/2000 issued by ANRE, updated by ANRE Decision 758/21.04.2021, with the General terms associated to the licence, approved by ANRE Order 104/2014, with later amendments and additions and with the final Company certification as transmission and system operator of the National Power System, according to the ownership unbundling model under ANRE Order 164/07.12.2015.

Headquarters address: Blvd. General Gheorghe Magheru 33, Bucharest, sector 1 . For the time being the Company’s executive branch perform in the working location situated in Str. Olteni 2-4, Bucharest, sector 3 , Romania .

The Group’s consolidated financial statements of 31 December 2020 elaborated in accordance with the International Financial ReportingStandards adopted by the European Union are available at the Company’s working location in Str. Olteni 2-4, Bucharest 3, Romania .

Beginning in 2006 Company shares are transacted on the Bucharest Stock Exchange under TEL symbol.

In accordance with the Decision of the Shareholders’ General Extraordinary Assembly of 18 July 2012 the Company changed from the unitary to the two-tier management system in order to mark clear distinction of management from control activities. Thus the Company is managed by a Directorate, under surveillance of a Supervisory Board .

Company establishment

In accordance with Governmental Decision (“HG”) 627 on reorganising the National Electricity Company SA (“Predecessor entity”), issued on 31 July 2000 by Romania’s Government, it has been separated into four new entities (“Successor entities”). The single shareholder of Successor entities was the Romanian State, by means of the Ministry of Economy (“ME”). CNTEE Transelectrica SA was established after such reorganisation as joint stock company with main business of electricity transmission and dispatch, organisation and management of the electricity market .

As provided in Note 12, on 31 December 2021 the shareholders of CNTEE Transelectrica SA are: the Romanian State represented by the Secretariat General of the Government, holding 43,020,309 shares (58.69%), NN Group NV having 4,007,688 shares (5.47%), PAVAL HOLDING with 4,753,567 shares (6.49%), other legal person shareholders holding 16,172,331 shares (22.05%) and other natural person shareholders having 5,349,247 shares (7.30%).

In accordance with Governmental Emergency Ordinance (OUG) 68/2019 establishing certain measures for public central administration and amending and adding certain norms, published in Romania’s Official Gazette 898/06.11.2019, beginning with 6 November 2019 the exercise of rights and performance of duties ensuing from the state’s shareholder capacity in the National Power Grid Company Transelectrica SA is performed by the Secretariat General of the Government .

On 14.11.2019 the Central Depositary SA registered the transfer of 43,020,309 shares (representing 58.68% of the share capital) issued by CNTEE Transelectrica SA from the Romanian State’s account through the Ministry of Economy into the Romanian State’s account represented by the Government through the Secretariat General of the Government, following application of the provisions from Governmental Emergency Ordinance 68/2019 establishing certain measures for public central administration and amending and adding certain norms .

These Consolidated Financial Statements elaborated as of and for the financial year ended on 31 December 2021 include the financial statements of the parent Company and of its subsidiaries Smart SA and Teletrans SA, jointly called the “Group”.

Notes to the consolidated financial statements as at December 31 st , 2021

( All amounts are in thousand LEI, unless stated otherwise )

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The main Group subsidiaries included in the consolidation and the percentage of shares held by the Company are provided below :

SMART SA

SMART SA seated in Blvd Magheru 33, Bucharest 1 and central headquarters in Blvd. Gheorghe Sincai, Formenerg Building, 1 st floor, Bucharest 4 has the reviews and repairs of energised instrumentation and equipment, transformers and auto-transformers as main business. It was established under HG 710/19.07.2001 on 1 November 2001.

The Shareholders’ General Extraordinary Assembly of Smart SA approved by Decision 14/10.12.2014 to increase the share capital of Smart SA by contribution in kind with the value of lands which ownership certificates were obtained for and the Romanian State shareholder was introduced. Later it was cancelled after pronouncement of Appeal Court Bucharest of civil sentence 835/2019 under file 7763/2/2018.

Civil sentence 598/11.06.2020 pronounced under file 37718/3/2019 by Bucharest Tribunal decided erasing mention 449314/23.12.2014 which registered with ONRC Decision 12375/22.12.2014 of the Board of Administration’s Chairman on increasing the share capital and amending the Articles of association.

On 20.11.2020 Subsidiary SMART SA registered with the Trade Register Office from Bucharest Tribunal the amendments included in civil sentence 598/11.06.2020, as well as the amendments of the Articles of Association approved by AGA on 25.09.2019 in compliance with civil sentence 835/2019, pronounced by the Appeal Court Bucharest.

Consequently on the date of these financial statements the share capital of SMART SA has been subscribed and fully paid by CNTEE Transelectrica SA in its capacity of single shareholder.

Subsidiary SMART SA has as main business revisions and repairs to energised instrumentation and equipment, transformersand autotransformers, remedy of incidents in electric installations, and micro- production of electric equipment. The Company has 8 subsidiaries with no legal personality, situated in the same locations as Transelectrica’s territorial units .

The mission which SMART SA was established for has been and still is to provide preventive maintenance, special work and corrective maintenance to the Electricity Transmission Grid (RET) starting from the primordial objective of Transelectrica: to provide electricity transmission in the national transmission network under safe steady state conditions .

The main general strategic objectives are at least the following:

✓ Providing high availability of RET assets

✓ Increasing operational resilience

✓ Diminishing intervention times

✓ Coordinating maintenance services / work with the outage schedule of the National Power Dispatcher (DEN)

On 31 December 2021 the share capital was of 38,529 thousand Lei, of which 38,529 subscribed and fully paid by the Company as single shareholder.

TELETRANS SA

Teletrans SA was established under AGA Decision 13/04.12.2002 of Transelectrica, according to Law 31/1990 and to Orders 3098 and 3101 of 23.10.2002 from the Ministry of Industry and Commerce. TELETRANS shares are 100% held by Transelectrica.

In accordance with its by-laws and applicable norms Teletrans holds the ANCOM certificate of networks supplier or of electronic communication services as of 2002 (OUG 679/2002), whereby it benefits of the right to provide the following electronic communication services :

Notes to the consolidated financial statements as at December 31 st , 2021

( All amounts are in thousand LEI, unless stated otherwise )

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• Electronic communication services dedicated to the public: (i) Leased line services and (ii) Services of electronic communications, others than phone and leased lines (beginning with 01.07.2003);

• Private networks and electronic communications services (beginning with 15.01.2003).

• Also the personnel of TELETRANS benefit of certifications relevant for the operation and administration of IT&C systems dedicated to critical infrastructures;

On 31.12.2021 the share capital was of 6,874 thousand Lei (687,443 shares, 10 Lei nominal value), Transelectrica being single shareholder. Teletrans’ results are consolidated with the Company’s .

Group mission

The mission of this Group is to provide secure operation of the National Power System (SEN) while complying with the norms and performance provided in applicable technical regulations and to provide public services to all users of electricity transmission networks, under transparent non-discriminating equidistant conditions for all market participants .

Other information about Group activities

The participation of EuropeanTransmission System Operators(TSO) to ENTSO-E is regulated by the applicable European legislation (Regulation 943/2019 regarding the internal electricity market (reformingRegulation 714/2009 regarding network access terms for cross-borderelectricityexchanges)): “All transmission system operators cooperate community-wide by means of ENTSO-E for electricity, with a view to promote the completion and operation of the internal electricity market and inter-area trade, as well as in order to provide optimum management, coordinated operation and sound technical development of the European electricity transmission network ”.

The Company’s capacity of ENTSO-E member is a prerequisite for its access to decision-making with respect to European strategy and legislation in this domain and to defend and sustain Company interests in the activities /projects performed in the association and in the European Commission .

ENTSO-E was established in 2009 as non-profit association seated in Brussels by uniting the associations of European TSOs organised according to synchronously interconnected regions (UCTE, ETSO, BALTSO, NORDEL, UKTSOA, and ATSOI). Transelectrica has been UCTE and ETSO member since October 2004, the Romanian electric power system being included in the Continental Europe Regional Group .

Transelectrica SA is affiliated member in the following international organisations:

➢ ENTSO – E - European Network of de Transmission System Operators for Electricity;

➢ CIGRE - International Council of great high voltage electricity networks;

➢ LWA - International Live Work Association;

CNTEE Transelectrica SA is responsible for the safe reliable efficient operation of SEN, thus fulfilling the provisions of EU Directive 54/2003, article 9.

On 25 August 2021 the credit rating agency Moody’s Investors Service published their updated credit opinion assessing the current and future capability of Transelectrica to meet its payment liabilities to creditors , granting it Ba1 positive. Later on 27 October 2021 in consequence of sovereign rating improving, the rating agency issued a new credit opinion for Transelectrica, granting it Baa3 stable.

Such rating is justified by:

(1) Low business risk profile, given the strategic importance and natural monopoly of Transelectrica, as owner and fully regulated operator of the electricity transmsission network;

(2) Sound financial profile with low indebtedness;

(3) Steady improvement of the regulatory framework;

Under such evaluation the Company’s rating is situated equal to the sovereign on (Baa3 stable), thus recognising the Company’s improved financial performance and sound operational results, which provide premises for future financing under optimum costs in order to make the investments assumed in the fourth regulatory period under the best condition.

Getting Baa3 rating with stable outlook consolidates a favourable position regardiing the Company’s capacity to comply with its current and future financial covenants, showing that Transelectrica has got sound financial profile with low indebtedness and sound stable predictable financial values.

Notes to the consolidated financial statements as at December 31 st , 2021

( All amounts are in thousand LEI, unless stated otherwise )

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Activities in the energy sector are regulated by the National Regulatory Authority in Energy (“ANRE”), public autonomous institution that is active in: elaboration, approval of and monitoring the application of all compulsory regulations nation-wide required for the operation of the electricity, heat and natural gas sector and market under efficient competitive transparent conditions, while also providing consumer protection .

ANRE has the following attributions and competence in the sector of electricity and heat produced by cogeneration: granting, suspending or withdrawing permits and licences, elaborating and approving the tariff calculation methodologies and regulated prices, approving tariffs and regulated prices, establishing framework contracts, approving technical and commercial regulations, etc.

ANRE establishes tariff for electricity transmission and system services. Consequently, the decisions taken by ANRE can have significant influence over the Company’s activities.

The Company’s operational activities are performed under licence 161/2000 issued by ANRE for electricity transmission and provision of system services, valid until 2025, updated by ANRE Decision 758/21.04.2021 and the General terms associated to the licence approved under ANRE Order 104/2014, with later amendments and additions .

Taking into account the Company’s activities and revenues are regulated by ANRE, the most important risks related to such issue are the following:

- The regulatory framework is quite recent and subject to permanent change, which might impact the Company’s performance;

- ANRE decisions about future tariffs can influence Company activities;

Final certification of Transelectrica as TSO for SEN, according to the ownership unbundling model

In accordance with the provisions of the Electricity and natural gas law 123/2012, with later amendments and additions, the National Regulatory Authority in the Energy domain (ANRE) by Order 164/07.12.2015 approved the certification of the National Power Grid Company Transelectrica SA as transmission and system operator of the National Power System according to the ownership unbundling model .

The ownership unbundling model became available to the Company according to Law 123/2012 of electricity and natural gas, transposing Directive 2009/72/EC.

ANRE Order 164/07.12.2015 accompanied by Notice C (2015) 7053 final/12.10.2015 of the European Commission as integral part of the Order, was published in Romania’s Official Gazette 908/08.12.2015 and, together with its Approval report, is transmitted by ANRE to the European Commission .

This order applies the provisions of the European Union’s and of the national legislation regarding the certification of the transmission system operator.

The certification notification was transmitted to the European Union that published it in EU’s Journal on 08.01.2016, in accordance with article 10 para (2) of Directive 2009/72/EC.

Electricity transmission and system service tariffs

Electricity transmission is an activity of general interest in the electricity domain, licensed and monitored by a public authority (public service), of natural monopoly nature. Tariffs charged by the Company for its transmission and system services are established and approved by ANRE (see Note 20).

2021 is the second in a series of five consecutive years constituting the fourth period of multiannual tariff regulation for electricity transmission (1 January 2020 - 31 December 2024). The main coordinates of this regulatory period were established by ANRE based on the specific regulatory framework, namely the methodology establishing the electricity transmission tariff. Compared to the previous methodologic forms based on which the tariffs were established in the previous regulatory period (1 July 2014 - 30 June 2019) and in the transition period from the previous regulatory period to the current regulatory period (1 July 2019 - 31 December 2019), the applicable methodology setting tariffs within the fourth regulatory period has not undergone substantial changes .

As far as the fundamental aspects of the methodology are concerned (how regulated income is constituted and its main elements, recovery of operating costs, recovery and remuneration of capital invested in regulated assets, presence and nature of incentives, how to collect regulated income), they remained unchanged ensuring the continuity and predictability of the regulatory framework. Detailed tariff settings for the entire current multi-annual regulatory period were initially set in 2019.

Notes to the consolidated financial statements as at December 31 st , 2021

( All amounts are in thousand LEI, unless stated otherwise )

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