CNTEE Transelectrica SA Two-Tier Company

Condensed Stand-alone Interim Financial Statements on the date and for the six-month period concluded on June 30th, 2018

Drafted according to The International Accounting Standard 34 – "Interim Financial Reporting"

CNTEE Transelectrica SA Condensed stand-alone statement of the financial position on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

	Note	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Assets
Fixed assets
Tangible assets	4	2,951,894,381	3,044,365,315
Intangible assets	4	15,792,687	15,563,225
Financial assets	4	80,245,910	78,038,750
Total fixed assets		3,047,932,978	3,137,967,290
Current assets
Inventories		34,943,333	32,014,652
Clients and assimilated accounts	5	715,781,413	818,529,879
Other financial assets	7	125,045,000	-
Cash and cash equivalents	6	545,607,214	520,746,500
Total current assets		1,421,376,960	1,371,291,031
Total assets		4,469,309,938	4,509,258,321
Shareholders' equity and liabilities Shareholders' equity
Share capital, from which:		733,031,420	733,031,420
Subscribed share capital		733,031,420	733,031,420
Share premium		49,842,552	49,842,552
Legal reserves		118,961,487	118,961,487
Revaluation reserves		477,515,837	499,921,435
Other reserves		58,337,182	56,953,503
Retained earnings		1,379,347,445	1,258,921,369
Total shareholders' equity	8	2,817,035,923	2,717,631,766
Non-current liabilities
Non-current deferred revenues	9	400,955,731	410,642,185
Loans	10	156,257,774	195,185,934
Deferred tax liabilities		23,391,539	25,036,280
Obligations regarding employee benefits		52,646,906	52,646,906
Total non-current liabilities		633,251,950	683,511,305
Current liabilities
Trade and other payables	11	622,880,063	699,936,819
Other taxes and social insurance obligations	12	7,740,147	8,688,192
Loans and related interest	10	302,967,220	317,063,988
Provisions		41,697,199	41,545,187
Short-term deferred revenues	9	43,737,436	40,881,064
Total current liabilities		1,019,022,065	1,108,115,250
Total liabilities		1,652,274,015	1,791,626,555
Total shareholders' equity and liabilities		4,469,309,938	4,509,258,321

The attached notes 1-22 shall constitute an integral part of these condensed stand-alone interim financial statements.

The separate account of Profit and Loss for the six-month period ended on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

	Note	April 1st – June 30th, 2018	April 1st – June 30th, 2017	January 1st – June 30th, 2018	January 1st – June 30th, 2017
Revenues
Transmission revenues		233,153,040	255,416,926	505,074,216	554,006,359
System service revenues		173,146,004	166,148,655	375,193,553	355,377,968
Revenues from the balancing market		130,386,236	181,884,612	330,847,124	805,047,971
Other revenues		11,730,351	10,619,192	22,235,189	24,899,801
Total revenues	14	548,415,631	614,069,385	1,233,350,082	1,739,332,099
Operating expenses
System operating expenses	15	(63,272,794)	(52,290,687)	(149,916,123)	(129,082,827)
Expenses on the balancing market	15	(130,386,236)	(181,884,612)	(330,847,124)	(805,047,971)
Expenses regarding the technological system services	15	(151,728,247)	(159,503,097)	(309,386,826)	(319,024,315)
Depreciation		(75,562,566)	(77,853,942)	(151,093,895)	(156,161,590)
Salaries and other retributions	16	(45,515,949)	(46,417,612)	(88,843,216)	(87,841,347)
Repairs and maintenance		(25,023,105)	(20,212,532)	(37,635,936)	(34,272,456)
Materials and consumables		(2,751,692)	(1,465,178)	(4,466,819)	(3,017,173)
Other operating expenses	17	(23,989,784)	(37,017,975)	(49,305,245)	(76,194,284)
Total operating expenses		(518,230,373)	(576,645,635)	(1,121,495,184)	(1,610,641,963)
Operating profit		30,185,258	37,423,750	111,854,898	128,690,136
Financial revenues		4,513,792	5,443,861	7,103,951	12,067,728
Financial expenses		(6,036,075)	(9,148,427)	(12,301,888)	(20,436,983)
Net financial result	18	(1,522,283)	(3,704,566)	(5,197,937)	(8,369,255)
Profit before income tax		28,662,975	33,719,184	106,656,961	120,320,881
Income tax	13	1,161,212	(6,393,537)	(8,636,482)	(21,937,590)
Profit of the financial year		29,824,187	27,325,647	98,020,479	98,383,291

The separate account of Profit and Loss for the six-month period ended on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

	April 1st – June 30th, 2018	April 1st – June 30th, 2017	January 1st – June 30th, 2018	January 1st – June 30th, 2017
Profit for the period	29,824,187	27,325,647	98,020,479	98,383,291
Other comprehensive income	-	-	-	- -
Total comprehensive income 98,020,479	29,824,187	27,325,647		- 98,383,291

This condensed stand-alone interim financial statements has been approved by Management on August 3rd, 2018 and have been signed on its behalf by:

Adrian-Constantin RUSU	Andreea Georgiana FLOREA	Adrian-Mircea TEODORESCU	Constantin SARAGEA	Viorel VASIU
Directorate Chairman	Directorate Member	Directorate Member	Directorate Member	Directorate Member
Ana-Iuliana DINU		Cristina STOIAN		Veronica CRISU
Economic, Financial & Administrative Unit Director		Economics and Financial Strategy Department Director		Accounting Department Manager

The attached notes 1-22 shall constitute an integral part of these condensed stand-alone interim financial statement

	Share capital	Share premium	Legal reserves	Reserve fund from reevaluation	Other reserves	Retained earnings	Total
Balance on January 1st, 2017	733,031,420	49,842,552	116,360,295	549,088,226	56,953,728	1,602,438,193	3,107,714,414
Global result of the period
Profit of the financial year	-	-	-	-	-	71,057,644	71,057,644
Other elements of the comprehensive income, from which: Recognition of actuarial gains regarding the determined plan of benefits Total other elements of the comprehensive	- -	- -	- -	- -	- -	- -	- -
income of the period	-	- -
Total comprehensive income of the period Other elements		- -	-	-	-	71,057,644	71,057,644
Transfer of the reserves from reevaluation in the retained earnings Increase of the legal reserve fund	- -	- -	- -	(12,738,513) -	- -	12,738,513 -	- -
Other elements	-	-	-	-	-	-	-
Total other elements	-	-	-	(12,738,513)	-	12,738,513	-
Contribution from shareholders and distributions to shareholders
Subsidies of public assets (connection fee)	-	-	-	-	-	-	-
Distribution of dividends	-	- -	-	-	-	-	-
Total contributions from shareholders and	-	-	-	-	-	-	-
distributions to shareholders Balance as of December 31st, 2017 as per AGA as per AGA Decision no. 6 of 30.04.2018	733,031,420	49,842,552	116,360,295	536,349,713	56,953,728	1,686,234,350	3,178,772,058
Balance as of January 1st, 2018 as per AGA as per AGA Decision no. 6 of 30.04.2018	733,031,420	49,842,552	118,961,487	499,921,435	56,953,503	1,258,921,369	2,717,631,766
Comprehensive income of the period
Profit of the financial year	-	-	-	-	-	98,020,479	98,020,479
Other elements of the comprehensive income, from which:	- -	-	- -	-	-	-	-
Recognition of actuarial losses regarding the determined plan of benefits	- -	-	-	-	-	-	-
Total other elements of the comprehensive income	-	-	-	-	-	-	-
Total comprehensive income of the period Other elements	- -	-	-	-- -	-	98,020,479	98,020,479
Transfer of the reserves from reevaluation in the retained earnings	-			(22,405,598)	-	22,405,598	-
Increase of the legal reserve fund Other elements	- -	- -	- -	- -	- -	- -	- -
Total other modifications	-	-	-	(22,405,598)	-	22,405,598	-
Contribution from shareholders and distributions to shareholders
Derecognition of public assets	-	-	-	-	-	-	-
Subsidies of public assets (connection fee)	-	-	-	-	1,383,679	-	1,383,679
Distribution of dividends	-	- -	-	-	- -	- -	- -
Total contributions from shareholders and distributions to shareholders	-	-	-	-	1,383,679	-	1,383,679
Balance on June 30th, 2018	733,031,420	49,842,552	118,961,487	477,515,837	58,337,182	1,379,347,445	2,817,035,923

The attached notes 1-22 shall constitute an integral part of these condensed stand-alone interim financial statements.

Notes on the stand-alone interim financial statements on June 30th, 2018

(All amounts are expressed in RON, unless otherwise indicated)

	The six-month period concluded on June 30th , 2018	The six-month period concluded on June 30th , 2017
Treasury flows from the operating activity
Profit of the financial year	98,020,479	98,383,291
Adjustments for:
Income tax expense	8,636,482	21,937,590
Depreciation expenses	151,093,895	156,161,590
Expenditures with adjustments for trade receivables impairment	4,184,338	33,840,741
Reversal of adjustments for trade receivables impairment	(3,603,920)	(5,977,685)
Net revenues with adjustments for various debtors impairment	(2,828,349)	(880,847)
Net expenditures with adjustments for inventories impairment	75,348	571,312
Net income/loss from the sale of tangible assets, net	(360,682)	427,394
Net expenditures on adjustments regarding tangible assets	505,141	695,889
Net expenditures/(income) regarding provisions for risks and expenses	38,339	(8,306,536)
Interest expenses, interest revenues and unrealized revenues
from exchange rate differences	6,521,909	8,274,535
Cash flows before changes in the current capital	262,282,980	305,127,274
Changes in:
Clients and assimilated accounts - electricity and other activities	37,512,219	(44,639,377)
Clients – balancing	58,912,614	65,853,749
Clients – cogeneration	9,033,475	(64,456,698)
Inventories	(2,928,681)	(2,221,002)
Trade payables and other liabilities - electricity and other activities	115,588,679	(67,935,011)
Liabilities – balancing	(79,011,634)	(151,585,727)
Liabilities – cogeneration	(88,854,757)	(32,562,243)
Other taxes and social insurance liabilities	(948,045)	897,541
Deferred revenues	(15,690,297)	(11,176,765)
Treasury flows from the operating activity	295,896,553	(2,698,259)
Paid interests	(4,400,993)	(5,324,109)
Paid income tax	(11,193,720)	-
Net cash from the operating activity	280,301,840	(8,022,368)
Cash flows from the investment activity
Acquisition of tangible and intangible assets	(82,440,177)	(85,336,654)
Proceeds from EC grants	10,243,894	-
Collected interests	3,009,948	3,539,853
Owned shareholdings at TSC NET	(2,207,160)	-
Collection from sales of tangible assets	675,628	-
Other financial assets	(125,045,000)	(30,010,000)
Net cash used in the investment activity	(195,762,867)	(111,806,801)
Treasury flows used in the financing activity
Repayments of long-term loans	(58,693,051)	(69,726,554)
Use of the cogeneration credit line Paid dividends	- (985,208)	43,107,907 (164,837,407)
Net cash used in the financing activity	(59,678,259)	(191,456,054)
Net decrease of cash and cash equivalents	24,860,714	(311,285,223)
Cash and cash equivalents on January 1st	520,746,500	933,661,193
Cash and cash equivalents at the end of the period	545,607,214	933,661,193 622,375,970

The notes attached 1-22 constitute an important part of this separate financial report.

1. General Information

The main activity of CNTEE Transelectrica SA ("The Company") consists of: the electricity transmission services and of the system service, operator of the balancing market, administrator of the bonus type support scheme, other related activities. These activities take place according to the provisions of the operating license no. 161/2000 issued by ANRE, updated by Decision ANRE no. 802/May 18th, 2016, of the general Conditions associated to the license approved by ANRE Order no. 104/2014 and of the final certification of the Company as a transmission and system operator of the National Energy System according to the model of separating the property ("ownership unbundling").

The address of the social headquarters is 33 General Gheorghe Magheru Blvd., Bucharest, district 1. Currently, the activity of the Company's executive takes place at the place of operations in 2-4 Otopeni Street, district 3, Bucharest.

The stand-alone interim financial statements drafted on June 30th, 2018 are not audited.

2. Bases of Drafting

a) Declaration of conformity

These condensed stand-alone interim financial statements were drafted according to IAS 34 Interim Financial Reporting. These do not include all the necessary information for a complete set of financial reports according to the International Financial Reporting Standards ("IFRS"). However, certain explanatory notes are included for explaining the events and the transactions which are significant for understanding the modifications from the financial position and the performance of the Company from the last stand-alone financial annual reports from the date of and for the financial year concluded on December 31st , 2017.

b) Professional reasoning and estimations

The significant reasoning used by the management for applying the accounting policies of the Company and the main uncertainty sources regarding estimations were the same with those applied to the stand-alone financial reports from the date of and for the financial year concluded on December 31st, 2017.

3. Significant accounting policies

The accounting policies applied in these condensed stand-alone interim financial statements are the same with those applied in the Company's stand-alone financial statements from the date of and for the financial year concluded on December 31st , 2017, to the exception of adopting the new standards in force as of January 1st, 2018.

The Company anticipates that the adoption by the UE of the IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from Contracts with Customers" applicable for annual periods starting with or after January 1st, 2018, shall not have a significant impact on the financial statements of the Company during the initial period of application.

4. Tangible, intangible and financial assets

i) Tangible assets

The decrease of the total value of the tangible assets on June 30th, 2018 in comparison with December 31st, 2017 was determined by the record of the depreciation of these assets.

In the first semester of 2018, the value of tangible assets in progress is mainly represented by investment works in the high voltage electricity substations and lines, as follows:

Upgrading the Suceava 110 kV and 20 kV substation 7,501,722;
Upgrading the command-control-protection system of the Sardanesti 220/110/20 kV substation 5,547,969;
400 kV OHL interconnecting Resita (Romania) Pancevo (Serbia) 4,607,083;
Replacing AT 2 200 MVA, 231/121/10.5, from the Resita 220/110 kV substation 4,270,112;
Connection of Turnu Măgurele, Mostistea, Stâlpu, Teleajen substations to the optical fiber network of CNTEE Transelectrica SA – Batch 2 – 4,270,199;
Technical upgrade of the Isaccea 400 kV substation Stage I replacing the compensation bobbins, the corresponding cells and the Stupina 400 kV cell – 4,155,177;
Equipment for videowall type display for the control rooms of the dispatching CPD/TPD centers 3,692,883;
Technical upgrade of the Otelarie Hunedoara 220 kV substation 3,577,033;

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Technical upgrade of the Bradu 400/220/110/20 kV substation 3,544,986;
Replacing the connectors from electrical substations 3,407,137;
Regulation of the coexistence between LEA 400 kV Mintia Arad, in the section 15-20, with the Lugoj Deva highway, 4th lot – 2,572,812;
Connection of the MDF factory demand facility from Arges, Oarja commune, Ceausesti village, Armata point, 5 and 46 land plots, connection to the 110 kV bus-bar of the Pitesti Sud 220/110/20 kV substation via a 110 kV UPL with a ca. 450 m length – 1,833,141;
Technical update of the Turnu Severin Est 220/110 kV substation 1,676,289;
Upgrading the Dumbrava 220/110 kV substation 1,695,176;
Regulation of the adjacency between LEA 400 kV Mintia Arad, in the section 35-37, with the Lugoj Deva highway, 4th lot – 1,444,192;
Computing and software hardware and software laptops 864,644;
Upgrading the hardware and software platforms of the SCADA system in the Slatina substation 782,672;
Technology research and development center for working with live equipment (LST) and rapid intervention in the NPS – center building – 777,213;
Relocation of the 220 kV high voltage networks Sebeș-Turda highway, 1st lot, km 0+000 km 17+000, section A – Alba Iulia-Şugag 220 kV OHL d.c., Gâlceag, km 7+800, in the 25 – 26 opening and km 11+080 – milestone 15 – 737,968;
Replacing the accumulator batteries no. 1, 2, 3 and 4 in the Portile de Fier substation 633,007;
Technical upgrade of the Ungheni 220/110/20 kV substation 528,267;
Relocation of the 220 kV high voltage networks Sebeș Turda highway, 1st lot, km 0+000 km 17+000, section A km 0+000 – 14+000: – Cluj Floresti-Alba Iulia 220 kV s.c. OHL, km 13+185, in the opening 300-301 – 424,235.

In the first semester of 2018, the biggest transfers from tangible assets in progress at tangible assets are mainly represented by the creation of assets of the investment objectives, so:

400 kV OHL interconnecting Resita (Romania) Pancevo (Serbia) 98,590,976;
Upgrading the Suceava 110 kV and 20 kV electrical substations 16,650,633;
Upgrading the Cluj Est 400/110/10 kV electric substation 13,397,886;
Replacing AT and TRAFO in electrical substations Stage II 11,589,719;
Upgrading the command-control-protection system of the Sardanesti 220/110/20 kV substation 11,016,977;
Connection of Turnu Măgurele, Mostistea, Stâlpu, Teleajen substations to the optical fiber network of CNTEE Transelectrica SA – Batch 2 – 4,506,399;
Reparation of the failure of the 110-120 terminals of the Bucharest Sud Ghizdaru 220 kV OHL 4,274,773;
Replacing AT 2 200 MVA, 231/121/10.5, from the Resita 220/110 kV substation 4,254,252;
Equipment for videowall type display for the control rooms of the dispatching CPD/TPD centers 3,692,883;
Assembling the optic fiber and upgrading the system of distance protections on 400 kV OHL d.c. Tantareni-Turceni and 400 kV OHL s.c. Urechesti-Rovinari - 2,849,279;
Assembling the optic fiber on the Fundeni-Brazi Vest 220 kV OHL 1 st lot – 2,396,915;
Upgrading the 110/6 kV substation from the Pestis 220/110/6 kV substation 1,835,204;
Upgrading the hardware platforms of the SCADA system in the Slatina substation 1,796,946;
Computing and software hardware and software laptops 1,388,018;
Replacing the connectors from electrical stations 986,840;
Relocation of the 220 kV high voltage networks Sebeș Turda highway, 1st lot, km 0+000 km 17+000, section A – Alba Iulia – Şugag 220 kV OHL d.c., Gâlceag, km 7+800, in the 25 – 26 opening and km 11+080 – milestone 15 – 737,968;
Converting the Portile de Fier Resita Timisoara Sacalaz Arad axis to the 400 kV voltage stage I 400 kV OHL s.c. Portile de fier - (Anina) – Resita – 701,108;
Regulating the coexistence between the Mintia-Sibiu 400 kV OHL, in the 6-8 opening, and the Lugoj-Deva highway, 4th lot, Ilia-Deva district, km 77+361 - km 99+500 – 643,849;
Replacing the accumulator batteries no. 1, 2, 3 and 4 in the Portile de Fier substation 424,235.

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

The balance of tangible assets in progress on June 30th, 2018 is represented by the projects in progress, the most significant being listed below:

Technical upgrade of the Bradu 400/220/110/20 kV substation 40,338,844;
PTG connection of the Ivești 300 MW WPP, Fălciu 1 88 MW WPP and Fălciu 2 18 MW WPP via the new Banca (400)/220/110 kV substation – 46,884,983;
Converting the Portile de Fier Resita Timisoara Sacalaz Arad axis to the 400 kV voltage stage I 400 kV OHL s.c. Portile de fier - (Anina) – Resita – 20,378,619;
Technical upgrade of the Otelarie Hunedoara 220 kV substation 3,632,375;
Extending the services providing business continuity and recovery after disasters 14,419,361;
Integrated security system in electric substations, stage IV 10,308,122;
Technical update of the Turnu Severin Est 220/110 kV substation 6,240,911;
Connecting the Isaccea Varna 400 kV OHL and the Isaccea Dobrudja OHL in the Medgidia Sud 400 kV substation – 10,861,114;
400 kV OHL d.c. Cernavodă-Stâlpu and connection in Gura Ialomiței 8,392,419;
Converting the Portile de Fier Resita Timisoara Sacalaz Arad axis to the 400 kV voltage stage I Resita 400/220/110 kV substation – 6,619,547;
400 kV HVDC Link (submarine cable Romania Turkey) 5,853,759;
Technical upgrade of the Isaccea 400 kV substation Stage I replacing the compensation bobbins, the corresponding cells and the Stupina 400 kV cell – 5,399,433;
400 kV OHL Gadalin Suceava, including the NPS interconnection 6,021,417;
Technical upgrade of the Hasdat 220/110 kV substation 4,456,278;
Suceava Balti 400 kV OHL, for the part of the project on Romanian territory 4,433,086;
Extending the control system with new functions and IT registration of access in the objectives of CNTEE Transelectrica SA - 3,200,918;
400 kV OHL d.c. Gutinas Smardan 3,227,997;
Converting of the Portile de fier Resita Timisoara Sacalaz Arad axis to 400 kV, stage II Resita Timisoara – Sacalaz 400 kV OHL d.c. (Timisoara 220/110 kV substation) – 3,223,388;
Connecting the 136 MW wind power plant Platonesti, Ialomita county, to the PTG by constructing a 110 kV cell in the Gura Ialomitei 400/110 kV substation – 2,889,337;
Integrated security system in electric substations, stage III 2,798,024;
Upgrading the Arefu 220/110/20 kV substation 2,802,025;
Upgrading the Raureni 220/110/20 kV substation 2,771,986;
By-passing the Cetate 110 kV OHL 1 & 2 in the proximity of the Ostrovul Mare 110/20/6 kV substation 2,578,438;
PTG connection of Dumesti 99 MW WPP and Romanesti 30 MW WPP, Iasi county, through constructing a 110 kV line cell in the FAI 220/110 kV substation – 2,545,853;
Upgrading the Dumbrava 220/110 kV substation 2,624,959;
Security solution for implementing the security measures related to classified information 2,024,289;
Executive DCBPA / CPA: Consolidation, upgrading and extension of the CNTEE "Transelectrica" headquarters – 1,627,393;
Replacing the connectors from electrical substations 3,210,585;
Integrated security system at the new Banca (400) 220/110 kV substation 1,133,202;
Deploying an optical fiber line between the Pitesti Sud 110 kV substation and the remote control and installation supervision center of Pitesti transportation branch – 1,085,377;
Connecting the Stupina 400 kV substation to the PTG and connecting the Isaccea-Varna 400 kV OHL 874,015;
Technical upgrade of the Tulcea Vest 400/110/20 kV substation the construction part 2,739,753;
Ostrovu Mare 220 kV OHL double circuit PTG 755,084;
Oradea Beckescsaba 400 kV OHL 770,350;
Stalpu 400 kV substation 751,519.
Converting the Brazi Vest Teleajen Stalpu 220 kV OHL to 400 kV, including the purchase of the 400MVA 400/220/20 kV AT, extension works for stations – 693,864;
Technical upgrade of the Domnesti 400/110/20 kV substation 600,471;
Technology research and development center for working with live equipment (LST) and rapid intervention in the NPS – center building – 1,426,994;

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Connecting the Sarichioi 33 MW wind power plant, Tulcea county, to the PTG, in the Zebil 110 kV OHL cell from the Tulcea Vest 400/110 kV substation – 632,769.

ii) Intangible assets

For the intangible assets in progress, the largest entries in the first semester of 2018 were:

Software licenses to be used in the Suceava 110 kV and 20 kV electrical substation 236,093;
NEPLAN software licenses + CIM/XML 7 NEPLAN Software module licenses (2 new licenses, 5 CIM/XML modules) and upgrade for 13 NEPLAN licenses + 5 CIM/XML module licenses – 22,707.

In the first semester of 2018, the largest transfers of intangible assets in progress to intangible assets are represented by:

Upgrading the software platforms of the SCADA system in the Slatina substation 401,058;
Software licenses to be used in the Suceava 110 kV and 20 kV electrical substation 236,093;
Metering and SCADA licenses for Sardanesti 220/110/20 kV substation 149,852;
Software licenses to be used in the Cluj Est 400/110/10 kV electrical substation 117,765;
Upgrade of the existing antimalware solution 22,707.

The balance of intangible assets in progress on June 30th, 2018 is represented by the projects in progress, the most significant being listed below:

Implementing a system of Electronic Archiving and Document Management within CNTEE Transelectrica SA 5,474,290;
Replacement of EMS SCADA AREVA system components software component, hardware component 4,000,079;
MIS extension advanced reporting and budget planning solution 3,047,834;
Extending the services providing business continuity and recovery after disasters to the executive 351,208.

iii) Financial assets

The increase in value of financial assets as of June 30th, 2018 compared to December 31st, 2017 was determined by the Company's affiliation to the Regional Security Coordination Centre (RSCC) TSCNET Services GmbH and the corresponding share purchase transaction.

The General Assembly of Shareholders no. 9/05.06.2018 approved the Company's affiliation to the Regional Security Coordination Centre and the Company's participation to the share capital of TSCNET Services GmbH, amounting to 2,207,160 was paid on June 25th, 2018.

While implementing the regional initiatives regarding the implementation of "Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management" and the "Commission Regulation (EU) 2017/1485 of 2 August 2017 establishing a guideline on electricity transmission system operation" at CNTEE Transelectrica SA level, the Company identified the need of an affiliation with the Regional Security Coordination Centre (RSCC) TSCNET Services GmbH.

The Centre was founded to service the Transmission and System Operators (TSOs) from the eastern, central and western region of Europe (the CORE region – a region that Romania is part of), in order to facilitate the coordinated implementation of the European grid codes, according to the affiliation model adopted by all Transmission and System Operators in the region.

5. Trade receivables and other receivables

On June 30th, 2018 and December 31st, 2017, the trade receivables and other receivables are presented as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Trade receivables	772,172,089	846,827,429
Other Receivables	120,383,839	116,536,143
Down payments to suppliers	10,233,519	11,102,342
VAT to be recovered	13,572,388	47,005,991
Adjustments for impairment of uncertain trade receivables	(123,231,137)	(122,650,719)
Adjustments for depreciating other uncertain receivables	(77,349,285)	(80,291,307)

Total trade receivables and other receivables 715,781,413 818,529,879

The structure of the trade receivables is presented as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Customers on the electricity market, out of which:	770,957,921	845,529,240
- Clients - operational activity	375,977,661	382,602,892
- Clients - balancing market	184,634,934	243,547,548
- Clients - bonus type support scheme to promote the high
efficiency cogeneration	210,345,326	219,378,800
Clients from other activities	1,214,168	1,298,189
Total trade receivables	772,172,089	846,827,429

CNTEE Transelectrica SA operates based on the Operating License No. 161/2000 issued by ANRE, as updated by the Decision of ANRE Chairman no. 802/May 18th, 2016, for the transmission of electricity, the provision of the system service and for the management of the balancing market.

On June 30th, 2018, the current customers in the operational activity registered a decrease compared to December 31st, 2017, which was mainly determined by:

rise in the level of collection of receivables;
decrease in the electricity quantity delivered to consumers in the months of May and June 2018 compared to the months of November and December 2017.

The main current customers on the electricity market are represented by: RAAN, Electrica Furnizare SA, Electrocentrale Bucuresti SA, Ciga Energy, Enel Energie Muntenia SA, E.ON Energie Romania SA, Enel Energie SA, Petprod SRL, Alro SA, CET Govora SA. The weight of the main customers on the electricity market is about 52% in the Total Gross Receivables.

The current receivables for the balancing market, amounting to 184,634,934, registered a value decrease compared to December 31st, 2017, following a decrease in the transactions on this market.

CNTEE Transelectrica SA operates its activities related to the bonus type support scheme for promoting the high efficiency cogeneration, acting as the administrator of the support scheme according to the provisions of the Government Decision no. 1215/2009, "the main tasks being to collect, on a monthly basis, the contribution for cogeneration and the monthly payment of bonuses".

On June 30th, 2018, the Company registered receivables to be cashed from the bonus type support scheme for promoting the high efficiency cogeneration in a proportion of approximately 27% (December 31st, 2017 - 26%) of the total trade receivables.

The customers from the bonus type support scheme for promoting the high efficiency cogeneration registered a decrease in the receivables as of June 30th, 2018, mainly determined by the collection of receivables amounting to 140,341,573 related to the ANRE decisions regarding overcompensation the cogeneration activity for 2017, registered according to the ANRE decisions issued in the month of March 2018, on the overcompensation of the activity regarding the support scheme for the year 2017, as well as of the amounts spread up for payment in the first semester for the overcompensation for the year of 2015 from SC Electrocentrale Oradea SA.

In the timeframe January 1st – June 30th, 2018, the amounts related to the bonus type support scheme have decreased compared to December 31st, 2017, as a result of the collection of receivables, mainly due to the collection via bank transactions (7,798,826) related to the overcompensation for the year of 2015 from Termoficare Oradea (for Electrocentrale Oradea, according to the staging Convention).

On June 30th, 2018, the Company registered receivables amounting to 210,345,326, represented by the issued invoices under the bonus type support scheme for high efficiency cogeneration, out of which:

overcompensation for the timeframe 2011 2013 in the amount of 76,702,140, namely from RAAN 63,467,054 and CET Govora SA - 13,235,086;
undue bonus for 2014 in the amount of 3,914,960, namely from RAAN 1,981,235, CET Govora 1,933,725;
undue bonus for 2015 in the amount of 563,899, namely from CET Govora 534,377, Interagro 29,523;

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

overcompensation for 2015 in the amount of 1,976,132, namely from Electrocentrale Oradea (debt taken over by Termoficare Oradea);
overcompensation for 2016 in the amount of 56,680,387, namely from Electrocentrale Bucuresti 56,680,387;
contribution for cogeneration not collected from the suppliers of electricity consumers, in the amount of 20,805,819, namely from: Transenergo Com – 5,882,073, PetProd - 4,391,193, Romenergy Industry – 2,680,620, RAAN-2,385,922, UGM Energy – 1,814,175, CET Govora – 900,864, KDF Energy – 887,527 and others.

At the date of this interim financial statement, the Company has fully collected the receivables for overcompensating the activity regarding the support scheme for the year of 2017 (the amount of 140,341,573), as follows: collections via bank transactions in the amount of 90,898,688 from Electrocentrale Bucuresti and collections on the grounds of compensations made via the Management and Informatics Institute (on the grounds of GD no. 685/1999) in the amount of 49,442,885 (out of which: Electrocentrale Bucuresti-35,756,183; CET Govora–10,658,266; Enet SA–3,028,436).

For discharging the receivables generated by the overcompensation and the undue bonus, the Company requested the reciprocal compensations from the qualified producers in the support scheme. For producers (RAAN, Electrocentrale Bucuresti, CET Govora) that have not agreed to this way of discharging the reciprocal receivables and debts, the Company has applied and continues to apply the provisions of Article 17 (5) of the Order of ANRE Chairman no. 116 / 2013 for approving the Regulation on determining the way to collect the contribution for high efficiency cogeneration and payment of the bonus for the electricity produced in high efficiency cogeneration: "if the manufacturer did not make the payment in full to the administrator of the support scheme for its obligations resulted in accordance with the provisions of this Regulation, the administrator of the support scheme pays to the producer the difference between the invoices issued by the producer and the payment obligations of the producer on the support scheme, with explicit mention on the payment document of the respective amounts", and detained from payment the amounts due related to the corresponding support scheme.

CNTEE Transelectrica SA has concluded an agreement with CET Govora on compensation and rescheduling of payments for the amounts representing the equivalent receivables from the counter value of the overcompensation for the timeframe 2011-2013 and of the undue bonus for 2014 (Agreement no. C 135/June 30th, 2015 and Addendum no. 1/August 4th, 2015). The period of the Agreement was 1 year (timeframe July 2015 - August 2016) and stipulated the Company's right to calculate and collect payment penalties over the installment period.

According to the Agreement, the Company's receivables to be collected from CET Govora SA were compensated with the debts to CET Govora SA, represented by the cogeneration bonus for the period May 2014 - October 2015 detained pursuant to the Art. 17 (5) from the Order of the ANRE Chairman no. 116/2013 and the provisions of the Agreement, in the amount of 40,507,669.

Following the suspension in court, by Civil sentence no. 3185/November 27th, 2015, the ANRE Decision no. 738/March 28th, 2014 on setting the overcompensation amount for the timeframe 2011 - 2013, CET Govora SA no longer respected the obligations undertaken according to the Agreement.

Starting with May 9th, 2016, the general insolvency proceedings were opened for CET Govora. To recover its liabilities recorded before the insolvency proceedings, the Company applied the specific procedures provided by the Law no. 85/2014 on Insolvency and requested admission of its liabilities, according to the law.

Given the aforementioned facts, starting with May 9th, 2016, the Company has terminated the enforcement of article 17 (5) from the Order of ANRE Chairman no. 116 / 2013 on approving the Regulation regarding the settlement of the collection procedure of the high efficiency cogeneration contribution and the payment of the bonus for the electricity produced via high efficiency cogeneration, and has paid the cogeneration bonus to CET Govora on a monthly basis.

Via Civil Decision no. 2430/October 5th, 2016, the High Court of Cassation and Justice admitted the appeal declared by ANRE against Civil Ruling no. 3185/November 27th, 2015, has partially cancelled the contested sentence and has rejected the suspension request lodged by CET Govora, the judgement being final. Thus, starting with 05.10.2016, the effects of the ANRE Decision no. 738/28.03.2014 are no longer suspended, being in full effect.

Under these circumstances, the Company enforces the provisions of article 17 (5) of the ANRE Order no. 116 / 2013 for the reciprocal debts and receivables occurred after the insolvency proceedings, retaining the bonus owed to CET Govora SA up to the amounts unpaid to the Company according to the support scheme.

On December 8th, 2016, by Government Decision no. 925, the amendment and supplement have been adopted for GD no. 1215/2009 on setting the necessary criteria and conditions to implement the support scheme for promoting the high efficiency cogeneration based on the useful heat demand.

Thus, on June 30th, 2018 the Company does not register provisions for the support scheme, the unrecovered value of these receivables being included in the cogeneration contribution.

Other receivables

As of June 30th, 2018, Other Receivables amounting to 120,383,839 primarily include different debtors (101,925,848),

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018

(All amounts are expressed in RON, unless otherwise indicated)

deferred expenses (7,827,074) and other long-term receivables (4,534,654) and income tax to be recovered (2,521,532). The different debtors position amounts to 101,925,848 out of which late payment penalties calculated to late paying clients, amounting to 61,931,448 (out of which the amount of 26,012,769 represents penalties in relation to the support scheme). The largest penalties for late payment have been registered by the following customers: RAAN (16,901,449), SC CET Govora (9,606,504), SC Eco Energy SRL (8,909,843), SC Petprod SRL (8,894,655), Total Electric Oltenia (3,288,967), Arelco Power (2,816,658), Enol Grup (2,541,312), Also Energ (2,121,010). For the penalty charges for late payment of the receivables from operating activities were recorded depreciation adjustments.

In the debtor category, the following receivables are also registered:

the down payments granted to the supplier ELCOMEX IEA SA amounting to 31,180,858, to which penalties amounting to 687,458 have been added. The down payments have been granted to the supplier ELCOMEX - IEA SA for performing the following projects:
o Connecting the Isaccea-Varna 400 kV OHL and the Isaccea-Dobrudja OHL to the Medgidia Sud 400 kV substation – down payment amounting to 9,948,593;
o Converting the Portile de Fier Resita Timisoara Sacalaz Arad axis to the 400 kV voltage Stage I Resita 400/220/110 kV substation – down payment amounting to 21,232,265.

The down payments made to ELCOMEX - IEA SA have been secured with the insurance policies issued by Asito Kapital S.A.

On April 7th, 2017 the Court of Constanta, Section II Civil, by Hearing protocol no. 294/2017, upheld the application for a declaration of insolvency of the debtor Elcomex - IEA SA, naming Pricewaterhouse Coopers Business Recovery Services IPURL as insolvency administrator.

On the day of insolvency, CNTEE Transelectrica SA held the following agreements concluded with SC Elcomex IEA SA: C163/29.07.2015: "Converting the Portile de Fier - Resita - Timisoara - Sacalaz - Arad / the 400/220/110 kV Resita substation to 400 kV" and C255/18.11.2015 "Connecting the Isaccea-Varna 400 kV OHL and Isaccea-Dobruja 400 kV OHL in the Medgidia Sud 400 kV substation, stage I". Following the declaration of insolvency of SC Elcomex IEA SA, CNTEE Transelectrica SA entered on its statement of affairs for the amount of 31,189,487 lei, representing the consideration of the down payment made to SC Elcomex IEA SA for the agreements no. C163/29.07.2015 and C255/18.11.2015 and other expenses.

Pricewaterhouse Coopers Business Recovery Services IPURL notifies CNTEE Transelectrica SA on 07.07.2017, regarding the cancellation of the agreement C 163/29.07.2015 "Converting the Porțile de Fier-Reșița-Timișoara-Săcălaz-Arad to 400 kV / the 400/220/110 kV Reșița substation". On August 8th, 2017, the judiciary administrator Pricewaterhouse Coopers Business Recovery Services IPURL considers itself bound to note the cancellation by CNTEE Transelectrica SA of the agreement no. C255 from November 18th, 2015, regarding "Connection of the Isaccea-Varna 400 kV OHL and Isaccea-Dobruja 400 kV OHL in the Medgidia Sud 400 kV OHL, Stage I", notified by the Company with letter no. 24597 from July 5 th, 2017, and at the same time the termination of the agreement on the initiative of CNTEE Transelectrica SA.

On July 1st, 2017, the Company submitted an application for summons regarding the issuance of a payment order, an action subject to the case file no. 24552/3/2017 on the docket of the Bucharest Court, Section VI Civil, requesting the Court to rule a decision obliging the debtor ASITO KAPITAL SA to pay the amount of 7,058,773.36 Euro (the equivalent of 31,180,857.96 lei), representing guarantee policies for the down payments no. BR – 1500544/November 18th, 2015, and no. BR – 1500520/July 29th, 2015. The court ordered the staying of proceedings until November 7th, 2017, in the case file no. 24552/3/2017, on the docket of the Bucharest Court, Section VI Civil. Hearing: 24.10.2017

Solution in brief: Accepted application. Orders the debtor to pay, within 20 days from notification of this decision, the amount of 2,237,750.83 euro (the equivalent of 9,948,592.64 lei at the exchange rate of 4.4458 euro), representing the down payment which was not reimbursed but guaranteed via letter of guarantee for the payment of the down payment no. BR-1500544/18.11.2015, as well as the amount of 4,821,022.53 euro (the equivalent of 21,233,265.32 lei at the exchange rate of 4.4041 lei/euro) representing the down payment which was not reimbursed but guaranteed via letter of guarantee for the payment of the down payment no. BR-1500520/29.07.2015; 200 lei as legal expenses. With right of request in annulment within 10 days from notification. By the date of drafting these financial statements, Decision 4067/2017 - 07.11.2017 has not been drafted and communicated in order to be enforced.

Impairment adjustment are recorded in the amount of 31,876,744.

receivables from OPCOM representing VAT for the contribution in kind to the subsidiary's equity, amounting to 4,517,460;

The deferred expenses amounting to 7,827,074 are represented mainly by the advances on contracts concluded with the suppliers of electricity needed for covering the own technological consumption for future periods (1,778,454), a guarantee fee for the BEI 25710 loan (82,291) and commission of ING credit granting (191,592), levies paid for 2018 to national and international institutions (2,345,958), rents (605,425), ANRE yearly contribution (1,507,537).

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Other receivables amounted to 4,534,654, of which 4,199,505 represent guarantees for temporary occupation of the land calculated and retained in accordance with the art. 39 paragraph (1), paragraph (2) and paragraph (5) of the Law no. 46/2008 regarding the Forestry Code in order to achieve the investment objective LEA 400 kV Resita - Pancevo (Serbia).

VAT to be recovered

As of June 30th, 2018, the Company registers VAT to be recovered amounting to 13,572,388, mainly representing negative VAT accounts for the months of March 2018 (4,400,202), April 2018 (8,310,560), May 2018 (334,720) and June 2018 (2,829,735) and undue VAT on payment position amounting to 2,302,829. As of these interim financial statements, the amount of 12,710,762 has been collected from this balance.

Down payments to suppliers

As of June 30th, 2018, the down payments to suppliers are represented by the suppliers who are debtors for services amounted to 10,233,519, this mainly represent amounts from transactions related to the price coupling mechanism. Application of the price coupling mechanism began on November 19th, 2014, the date at which the project "4 Market Market Coupling" which provides the unification of the electricity markets DAM Square (Next Day Market) from Romania, Hungary, Czech Republic and Slovakia entered in the operating phase. Within the price coupling mechanism for the dayahead markets, the electricity exchanges correlate the day-ahead electricity transactions based on bids, taking into account the interconnection capacity provided by the TSOs, by which it is implicitly allocated CNTEE Transelectrica SA, acting as TSO, transfers the electricity both in physical and commercial terms to the neighboring TSOs (MAVIR-Hungary) and manages the congestion revenues along the respective interconnection (Article 139 from ANRE Order no. 82/2014), while in relation to SC OPCOM SA it acts as Implicit Participant on the Day-Ahead Market.

As a Transfer Agent and Implicit Participant, CNTEE Transelectrica SA has the commercial task to settle the power traded between SC OPCOM SA and MAVIR.

Adjustments for depreciation of trade receivables, of uncertain trade receivables and of other uncertain receivables

As of June 30th, 2018, the highest adjustments of depreciation, calculated for the trade receivables and related penalties, have been recorded for Elcomex IEA SA (31,868,316), SC Eco Energy SRL (24,736,066), SC Petprod SRL (23,539,650), Arelco Power (17,359,453), SC Total Electric Oltenia SA (14,185,577), Romenergy Industry (13,512,997), Elsaco Energy (9,293,972), RAAN (8,516,707), Also Energ (7,177,167), CET Brasov (4,664,627), Opcom (4,517,460). The Company took the following measures in order to recover the impaired receivables: court proceedings, entering on the statement of affairs, requesting clarifications from ANAF (regarding the VAT collected from Opcom) and so on.

The Company's exposure to the collection risk, as well as the value adjustments for trade receivables, are presented in Note 21.

The Company anticipates that the adoption by the UE of the IFRS 9 "Financial Instruments" applicable for annual periods starting with or after January 1st, 2018, shall not have a significant impact on the financial statements of the Company during the initial period of application.

6. Cash and cash equivalents

On June 30th, 2018 and December 31st, 2017, the cash and cash equivalents were presented as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Current accounts and bank deposits, out of which:	545,422,777	520,708,388
- cash and deposits from high efficiency cogeneration	15,523,480	19,172,948
- cash from revenues related to interconnection capacity allocation used for grid investments	104,190,752	84,247,056
- cash from the connection fee	25,262,366	31,152,565
Petty cash	86,709	37,850
Other cash equivalents	97,728	262

Total

545,607,214 520,746,500

The bank deposits with maturity smaller than 90 days, constituted with cash available in current accounts (including cogeneration deposits) amounted to 531,402,636 at June 30th, 2018 and to 251,047,468 at December 31st, 2017.

7. Other financial assets

On June 30th, 2018 and December 31st, 2017, the other financial assets were presented as follows:

	June 30th, 2018	December 31st, 2017
Bank deposits with maturity larger than 90 days	125,045,000	-

Total	125,045,000	-

The bank deposits with maturity bigger than 90 days, constituted with cash available in current accounts amounted to 125,045,000 at June 30th, 2018.

8. Shareholders' equity

According to GEO 86/2014 on the establishment of reorganization measures at central public administration level and for modifying and completion of some normative acts, on February 20th, 2015 was recorded in the Company's shareholder Register the transfer of 43,020,309 shares from the account of the Romanian State from the administration of the General Secretariat of Government, in the account of the Romanian State in the management of the Ministry of Economy, Trade and Tourism.

Under the provisions of Article 2 of Government Emergency Ordinance no. 55/November 19th, 2015 on the establishment of reorganization measures at the central government level and to supplement several acts, the Ministry of Economy, Trade and Business Environment Relationship (MECRMA) was incorporated by reorganizing and taking over the activities of the Ministry of Economy, Trade and Tourism, which was dissolved, and by merging and structures in the field of small and medium businesses of the Ministry of Energy, Small and Medium Enterprises and Business Environment.

According to the provisions of GD no. 27/January 12th, 2017 on the organization and functioning of the Ministry of Economy, the Company functions under the authority of the Ministry of Economy. On March 3rd, 2017 the transfer in the amount of 43,020,309 shares was registered in the Company's Shareholder Register, from the account of the Romanian State from the administration of the Ministry of Economy, Trade and Tourism, in the account of the Romanian State in the administration of the Ministry of Economy.

At the end of each reporting period, the subscribed and paid share capital of the Company amounted to 733,031,420 is divided into 73,303,142 ordinary shares with a nominal value of 10 lei/share and corresponds to the one registered in the Trade Register.

The shareholding structure on June 30th, 2018 and December 31st, 2017 is as follows:

		June 30th, 2018	December 31st, 2017
	Number of	% of the share	Number of	% of the share
Shareholder	shares	capital	shares	capital

Romanian State through MECRMA	43,020,309	58.69%	43,020,309	58.69%
Other legal person shareholders	20,280,101	27.67%	20,689,339	28.22%
DEDEMAN SRL	4,323,567	5.89%	4,192,363	5.72%
Other natural person shareholders	5,679,165	7.75%	5,401,131	7.37%
Total	73,303,142	100.00%	73,303,142	100.00%

The increase in equity on June 30th, 2018 compared to December 31st, 2017 was driven primarily by registering the net profit in the reported result, amounting to 98,020,479, conducted on June 30th, 2018.

9. Deferred revenues

Deferred revenues are mainly represented by: the connection fee, other subsidies for investments, non-refundable European funds collected from the Ministry of European Funds, as well as revenues from the use of interconnection capacities. As of June 30th, 2018, the report of the deferred revenues is as follows:

	June 30th, 2018	Of which: the short-term portion as of June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018	Of which: the short-term portion as of December 31st, 2017
Deferred Revenues –
interconnection capacity
allocation	7,590,122	7,590,122	5,797,166	5,797,166
Deferred Revenues – European
Funds	2,558,135	2,558,135	2,558,135	2,558,135
Funds from the connection fee	296,921,085	25,111,325	311,396,019	23,558,353
European Funds	108,233,642	6,952,394	101,624,877	7,415,017
Other subsidies	29,390,183	1,525,460	30,147,052	1,552,393
Total	444,693,167	43,737,436	451,523,249	40,881,064

Evolution of the short-term deferred revenues in the timeframe January - June 2018 is presented as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Balance at the beginning of the period	40,881,064	38,125,074
Advance income related to the interconnection capacity	30,377,223	75,479,347
Income from European Funds	-	1,327,202
Transfer of long-term deferred income	1,063,416	2,299,514
Revenues from the use of the interconnection capacity	(28,584,267)	(76,260,688)
Revenues from European Funds	-	(89,385)
Total	43,737,436	40,881,064

The evolution in advance long-term revenues during the period of January-June 2018 is presented as follows:

	June 30th, 2018	December 31st, 2017
Balance at the beginning of the period	410,642,185	429,858,527
Connection fee (repaid)/ collected	(1,535,679)	14,227,840
Collection fee for fixed assets belonging to The State public domain	(1,383,679)	-
Non-refundable funds	10,243,894	157,426
Other deferred revenues	14,544	16,502
Transfer to short-term deferred revenues	(1,063,416)	(2,299,514)
Release of deferred revenues	(15,962,118)	(31,318,596)
Total	400,955,731	410,642,185

In May 2018, the Company collected the amount of 10,243,894 lei from the European Commission for the project of common interest "Internal Line between Cernavoda and Stalpu", representing non-refundable funds from the Connecting Europe Facility mechanism. The "Internal Line between Cernavoda and Stalpu" project includes the following investments:

Cernavoda-Stalpu 400 kV OHL d.c. and connection in the Gura Ialomitei substation (new line);
Extending the Cernavoda 400 kV substation;
Extending the Gura Ialomitei 400 kV substation;
Stalpu 400 kV Substation (new substation).

Innovation and Networks Executive Agency (INEA) shall monitor and control the project implementation.

10. Loans

● Long-term loans

As of June 30th, 2018, the value of long-term loans has diminished compared to December 31st, 2017 mainly due to repayments made under the existing loan agreements. During timeframe January - June 2018, no withdrawals from long-term loans were conducted.

Movements in loans during the six-month period ended on June 30th, 2018 are presented as follows:

	Currency	Interest rate		Book value	Due date
Balance as of January 1st , 2018				509,355,179
New withdrawals				0
Refunds, from which:				(58,693,051)
NIB PIL No 02/18	USD	LIBOR+0.9%		(3,317,660)	15-Apr-2018
BIRD 7181	EUR	last communicated 0%		(16,343,540)	15-Ian-2020
NIB PIL No 03/5	EUR	EURIBOR+0.85%		(5,361,875)	15-Sep-2018
NIB PIL No 02/37	EUR	EURIBOR+0.9%		(2,870,311)	15-Sep-2018
BEI 25709	EUR	3.596%		(5,612,268)	10-Sep-2025
BEI 25710	EUR	3.856%+2.847%		(5,622,957)	11-Apr-2028
ING + BRD	EUR	EURIBOR+2.75%		(19,564,440)	13-Feb-2019
Differences of exchange on the date of reimbursement				(25,001)
Balance on June 30th, 2018			715,958,913	450,637,128

On June 30th, 2018 and December 31st, 2017, the balance of long-term loans contracted from credit institutions is presented as follows:

Description	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
NIB PIL No 02/18	-	3,417,420
BIRD 7181	27,267,769	43,603,118
NIB PIL No 03/5	5,360,265	10,717,310
NIB PIL No 02/37	2,869,450	5,737,176
BEI 25709	84,158,750	89,742,370
BEI 25710	91,827,654	97,425,565
ING + BRD	39,153,240	58,712,220
Unsecured bonds	200,000,000	200,000,000
Total long-term loans from credit institutions,
out of which:	450,637,128	509,355,179
Current portion of long-term loans
	(294,379,354)	(314,169,245)
Total long-term loans net of current rates
	156,257,774	195,185,934

The long-term portion of loans will be repaid as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Between 1 and 2 years	25,222,434	51,449,375
Between 2 and 5 years	67,426,596	68,912,530
Over 5 years	63,608,744	74,824,029
Total	156,257,774	195,185,934

The company did not perform activities related to hedging its foreign currency obligations or to exposure to interest rate risks.

All long-term loans, except JBIC, BEI 25709, 25710 EIB and the Bonds, bear the variable interest and therefore the book value of long-term loans approximates their fair value.

● Short-term loans

The short-term Loans are detailed as follows:

June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
294,379,354	314,169,245
2,103,483	2,460,222
6,484,383	434,521
302,967,220	317,063,988

● Loans contracted for the current activity

Transelectrica has concluded the credit agreement no. C55/01.03.2018 with Raiffeisen Bank for a period of 12 months for financing the bonus type support scheme for high efficiency cogeneration, in the form of overdraft amounting to 100,000,000, with an interest calculated according to the ROBOR 1M reference rate, plus a negative margin of 0.35%. In the event that the value of the ROBOR 1M reference rate is smaller than 0.35%, the interest rate applied shall be of 0%. On June 30th, 2018, the credit line is not used.

This was guaranteed by:

movable mortgage on the account opened at the bank;
movable mortgage on receivables resulted from contracts regarding the contribution for high efficiency cogeneration, concluded with Cez Vanzare S.A., E.ON Energie Romania S.A.

11. Trade and other payables

On June 30th, 2018 and December 31st, 2017 trade payables and other liabilities are presented as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Electricity market suppliers	411,559,626	538,923,244
Asset providers	41,088,379	62,898,568
Providers of other activities	27,471,710	27,782,443
Amounts due to the employees	5,455,529	5,866,258
Other liabilities	137,304,819	64,466,306
Total	622,880,063	699,936,819

On June 30th, 2018 and December 31st, 2017, outstanding debts on the energy market amounted to 411,559,626 and 538,923,244 respectively, and presented the following structure:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Suppliers on the electricity market, out of which:
- suppliers - operational activity	151,303,681	110,800,907
- suppliers - balancing market - suppliers - the bonus type support scheme for promoting the high	125,908,833	204,920,467
efficiency cogeneration	134,347,113	223,201,870
Total	411,559,626	538,923,244

• increase in the balance of debts related to the operational activity was mainly determined by the increase in the electricity quantity for covering the own technological consumption in the transmission grid.

• the decrease in the balance of debts related to the balancing market was determined by the payment of current obligations on the electricity market on December 31st, 2017 and by the decrease in the trading volume on the balancing market from the 1st semester of 2018 compared to the 4th quarter of 2017.

The providers on the electricity market are represented mainly by: SC Hidroelectrica SA, Electrocentrale Bucuresti, RAAN, Complex Energetic Oltenia, Mavir. On June 30th, 2018, their share in total energy providers is about 75%.

the decrease in debts related to the support scheme towards the suppliers (producers) was determined by the payment of the invoices issued as per ANRE decisions for the undue bonus and the ante-overcompensation for 2017.

As of June 30th, 2018, payment obligations were registered towards suppliers (producers) in the amount of 134,347,113 (Electrocentrale Bucuresti – 66,558,268, RAAN – 51,183,836, CET Govora SA – 4,408,824, and others), representing the monthly cogeneration bonus, the ante-overcompensation for the years of 2014, 2014 and 2015, as well as the bonus not granted for the years of 2015 and 2016. The amounts representing the debts of the Company regarding the support scheme towards Electrocentrale Bucuresti, RAAN, CET Govora have been retained from payment on the grounds of Article 17 (5) of the Order of the ANRE Chairman no. 116 / 2013, because the suppliers (producers) registered payment obligations towards the Company regarding the bonus type support scheme.

The Company requested the agreement of the suppliers (producers) who did not pay for the overcompensation invoices and the undue bonus, to compensate the reciprocal debts at their minimum level via the Management and Informatics Institute (IMI), entity that unitedly manages all information received from tax-payers, according to the provisions of GD no. 685 / 1999.

The producers (RAAN, Electrocentrale Bucuresti, CET Govora) that have not agreed to this method of discharging the reciprocal receivables and debts, and therefore the Company has applied and continues to apply the provisions of Article 17 (5) of the Order of ANRE Chairman no. 116 / 2013 for approving the Regulation on determining the way to collect the contribution for high efficiency cogeneration and payment of bonus for electricity produced in high efficiency cogeneration: "if the manufacturer did not make the payment in full to the administrator of the support scheme for its obligations resulted in accordance with the provisions of this Regulation, the administrator of the support scheme pays to the producer the difference between the invoices issued by the producer and the payment obligations of the producer on the support scheme with explicit mention on the payment document of the respective amounts" and detained from payment the amounts due related to the corresponding support scheme.

CNTEE Transelectrica SA has concluded an agreement with CET Govora on the compensation and rescheduling of payments for the amounts representing the equivalent receivables from the counter value of the overcompensation for the timeframe 2011 - 2013 and of the undue bonus for 2014 (Agreement no. C 135 / June 30th, 2015 and Addendum no. 1 / August 4th, 2015). The period of the Agreement was 1 year (timeframe July 2015 - August 2016) and stipulated the Company's right to calculate and collect payment penalties over the installment period.

Following the suspension in court, by Civil sentence no. 3185/ November 27th, 2015, the ANRE Decision no. 738/ March 28th, 2014 on setting the overcompensation amount for the timeframe 2011 - 2013, CET Gavora SA no longer respected the

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

obligations undertaken according to the Agreement. Starting with May 9th, 2016, the general insolvency proceedings were opened for CET Govora. Given the provisions of Law no. 85/2014 on insolvency, starting with May 9th, 2016, the Company has terminated the enforcement of Article 17 (5) from the Order of ANRE Chairman no. 116/2013 on approving the Regulation regarding the settlement of the collection procedure of the high efficiency cogeneration contribution and the payment of the bonus for the electricity produced via high efficiency cogeneration, and has paid the due cogeneration bonus to CET Govora on a monthly basis.

Via Civil Decision no. 2430/October 5th, 2016, the High Court of Cassation and Justice admitted the appeal declared by ANRE against Civil sentence no. 3185/November 27th, 2015, has partially cancelled the sentence and has rejected the suspension request lodged by CET Govora. Thus, starting with October 5th, 2016, the effects of the ANRE Decision no. 738/March 28th, 2014 are no longer suspended, being in full effect.

The decrease of the balance of asset suppliers on June 30th, 2018 compared to December 31st, 2017 is due to the payment of the debts towards the asset suppliers.
The debts towards suppliers of other activities are mainly represented by the not due debts related to the services provided by third parties, debts which have registered a decrease compared to December 31st, 2017.
As of June 30th, 2018, the Company registers no outstanding debts towards suppliers, the state budget or local institutions.
The debts' structure recorded as "other liabilities" is presented as follows:

	June 30th , 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Different Creditors	106,971,500	31,958,422
Clients - creditors	19,699,703	20,823,604
Dividends to be paid	1,429,124	2,414,333
Other liabilities	9,204,492	9,269,947
Total	137,304,819	64,466,306

On June 30th, 2018, the position 'different creditors' in the amount of 106,971,500 represented mainly the net position of the support scheme for high efficiency cogeneration, which on June 30th, 2018 registers a debt position amounting to 105,708,446 (December 31st, 2017: 30,451,865).

The net position of the support scheme is the difference between:

the amount of contributions to be collected from the electricity suppliers, the amount of the overcompensation of the activity of electricity and heat production in high-efficiency cogeneration, the undue bonus to be collected from the producers, according to the ANRE decisions, on the one hand, and
the cogeneration bonus amount withheld under Article 17 (5) of the Order no. 116/2013 of the ANRE Chairman, the ante-overcompensation and the bonus not granted to be paid to the high efficiency cogeneration energy producers, the beneficiaries of the support scheme, on the other hand.

"Customers creditors" on June 30th, 2018 amounted to 19,699,703, out of which 19,217,863 represent amounts collected in advance from MAVIR and OPCOM within the transactions related to the price coupling mechanism.

On June 30th, 2018, the dividends owed and unpaid to the Company's shareholders amount to 1,429,124, out of which the amount of 259,764 is related to dividends distributed from the profit of the year 2016. These amounts are available to the shareholders through the payment agent.

Other debts amounting to 9,204,492 are mainly represented by payment guarantees – energy market contracts and guarantees for the proper execution of service contracts concluded by CNTEE Transelectrica SA.

(All amounts are expressed in RON, unless otherwise indicated)

12. Other taxes and social insurance obligations

On June 30th, 2018 and December 31st, 2017, other taxes and social insurance obligations included:
----------------------------------------------------------------------------------------------------	--	--	--

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Contribution to social insurance funds	5,225,506	5,097,678
Payroll tax	964,435	1,913,700
Other taxes to pay	1,550,206	1,676,814
Total	7,740,147	8,688,192

On June 30th, 2018, the company registered payment obligations for contributions to social insurance funds, payroll tax and other taxes that were paid in the month of July, 2018.

13. Income tax

The current and deferred corporate tax of the Company is determined at a statutory rate of 16%.

The expenses on the corporate tax for the second quarter of 2018 and second quarter of 2017, as well as on June 30th, 2018 and June 30th, 2017 are presented as follows:

	Q II 2018	Q II 2017	June 30th, 2018	June 30th, 2017
Current income tax expenses	(330,764)	8,064,579	10,281,223	24,994,167
Deferred income tax net expenses	(830,448)	(1,671,042)	(1,644,741)	(3,056,577)
Total	(1,161,212)	6,393,537	8,636,482	21,937,590

14. Operating revenues

The second quarter of 2018 compared with the second quarter of 2017

Operating revenues include revenues from the transmission and system services provided by the Company on the electricity market, as well as the allocation of interconnection capacity, balancing market operating services and other revenues.

The average tariffs approved by ANRE for services provided on the electricity market for the second quarters of 2018 and 2017 are presented as follows:

	Average price for the transmission service	Average price for the ancillary services	Average price for the functional system services
Order no. 122/19.12.2017 - for the second quarter of 2018	16.86	12.06	1.11
Order no. 27/22.06.2016 - for the second quarter of 2017	18.70	11.58	1.30

The average tariff for the electricity transmission has two components: the tariff for the electricity injected into the transmission grid (TG) and the tariff for the electricity drawn off the transmission grid (TL). The zonal tariffs regarding the transmission service for the injection of electricity into the transmission grid (TG) and for drawing electricity off the transmission grid (TL) have been approved by ANRE Order no. 48/2017.

The amount of electricity delivered to consumers to whom the prices for services provided on the electricity market were applied, is presented as follows:

	Second quarter 2018	Second quarter of 2017
The amount of electricity delivered to consumers (MWh)	12,957,074	12,801,012

The revenues earned in the second quarter of 2018 and in the second quarter of 2017 are as follows:

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

	Second quarter 2018	Second quarter of 2017
Transmission revenues	217,209,813	238,555,614
Revenues from allocating the interconnection capacity	13,082,092	14,678,313
Revenues from reactive energy	1,688,412	1,642,668
Revenues from Inter TSO Compensation (ITC)	31,343	326,776
Revenues from Own Technological Consumption (OTC) transactions	1,141,380	213,555
Transmission revenues – total	233,153,040	255,416,926
Functional system service revenues	14,381,911	16,625,948
Revenues from technological system services	157,924,433	148,865,307
Revenues from unplanned shifts on DAM	634,067	657,400
Emergency aid revenues	205,593	0
System service revenues – total	173,146,004	166,148,655
Revenues on the balancing market	130,386,236	181,884,612
Other revenues	11,730,351	10,619,192
Total revenues	548,415,631	614,069,385

Transmission revenues

Given the rise in the amount of electricity delivered to consumers in the second quarter of 2018 compared to the second quarter of 2017, namely of 1.22% or 156,062 MWh, the income from the transmission service has registered a decrease in the amount of 21,345,801, determined by the decrease of the average tariffs approved by ANRE (according to the table on the average tariffs approved by ANRE for the analyzed timeframes, presented above).

Functional system service revenues

In the second quarter of 2018, the revenues from functional system services registered a decrease compared to the second quarter of 2017 with the amount of 2,244,037, determined by the decrease of the average tariff approved by ANRE (according to the table on the average tariffs approved by ANRE for the analyzed periods, presented above).

Revenues from allocating the interconnection capacity

In the second quarter of 2018, the income from the interconnection capacity allocation has registered an decrease compared to the second quarter of 2017, in the amount of 1,596,221, corresponding to the level of usage of the available interconnection capacity by traders on the electricity market.

The market for interconnection capacity allocation is fluctuating, the prices evolve depending on demand and the need of the participants on the energy market to purchase interconnection capacity.

The mechanism for the allocation of interconnection capacity consists in organizing annual, monthly, daily and intra-daily auctions. The annual, monthly and intra-daily are explicit – only the transmission capacity is bid on, and the daily ones with Hungary are implicit - are allocated simultaneously with the energy and capacity via the coupling mechanism.

The incorporation of the regional energy exchange by Romania, Hungary, the Czech Republic and Slovakia on November 19th, 2014 requires that these four countries have a unique price of electricity traded on the spot markets. The capacity allocation between Romania and Hungary, the only country of the 3 with which Romania has a border, is made by the carriers- Transelectrica and MAVIR, through the common mechanism, based on a bilateral agreement.

Starting with 2016, the UIOSI principle has been implemented at the border with Bulgaria, and starting with 2017 at the border with Serbia as well. According to this principle the participants not using the capacity won at the annual and monthly auctions, are compensated (by Transelectrica) for that capacity. This will subsequently be sold in the daily auctions.

On the Hungarian border the direction is reversed, meaning that MAVIR compensates the participants for the unused capacities. The compensations are set at the marginal price related to the daily auctions or at the market spread price related to the price differences on the Hungarian Day Ahead market (DA) and the Romanian Day Ahead market (DA). For this reason, the congestion income on the HU-RO border was lower.

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018

(All amounts are expressed in RON, unless otherwise indicated)

Using the net incomes from the interconnection capacity allocation is achieved in accordance with Article 22 (4) of the ANRE Order no. 53/2013 and Article 16 (6) of the Regulation (EC) no. 714/2009, as a source of financing for upgrading and development of the interconnection capacity with the neighboring systems.

Revenues from technological system services

Revenues from the technological system services have registered an increase in the second quarter of 2018 compared to the second quarter of 2017 in the amount of 9,059,126, determined by the 1.22% increase in the quantity of electricity delivered to consumers and by the increase of the average tariff approved by ANRE for these services (according to the table on the average tariffs approved by ANRE for the analyzed timeframes, presented above).

The income from the technological system services gained in the second quarter of 2018 were higher with 6,196,186 compared with the expenditures on the purchase of technological system services that were achieved. This amount is found within the gross profit of the Company, reported on June 30th, 2018.

Revenues on the balancing market

The revenues from the balancing market have registered a decrease in the second quarter of 2018 compared to the second quarter of 2017, with the amount of 51,498,376, determined by:

the negative imbalances registered at the level of electricity suppliers on the balancing market which were lower in the second quarter of 2018 compared to the second quarter of 2017;
higher hydraulicity in the second quarter of 2018 compared to the second quarter of 2017 (especially in April); the physical notifications generally exceeded the internal consumption at NPS level;
material decrease in system balancing costs (the result of increase selections and activating the thermal groups).

The balancing market represents a sector with zero profit for the Company.

The first semester of 2018 compared with the first semester of 2017

In the first semester of 2018 and the first semester of 2017, the average tariffs applicable in the second quarter of 2018 and in the second quarter of 2017 respectively, have been maintained.

The electricity volume delivered to consumers in the first semester of 2018 and in the first semester of 2017 is as follows:

	First semester First semester of 2018
		2017
The amount of electricity delivered to consumers (MWh)	27,957,786	27,402,464

The revenues earned in the first semester of 2018 and in the first semester of 2017 are as follows:

	First semester 2018	First semester of 2017
Transmission revenues	469,986,954	511,376,659
Revenues from allocating the interconnection capacity	29,756,670	38,233,240
Revenues from reactive energy	3,432,176	3,186,638
Revenues from Inter TSO Compensation (ITC)	80,590	604,665
Revenues from Own Technological Consumption (OTC) transactions	1,817,826	605,157
Transmission revenues – total	505,074,216	554,006,359
Functional system service revenues	31,032,625	35,607,835
Revenues from technological system services	342,418,133	318,908,051
Revenues from unplanned shifts on DAM	1,468,489	862,082
Emergency aid revenues	274,306	0
System service revenues – total	375,193,553	355,377,968
Revenues on the balancing market	330,847,124	805,047,971
Other revenues	22,235,189	24,899,801
Total revenues	1,233,350,082	1,739,332,099

Transmission revenues

Given the rise in the amount of electricity delivered to consumers in the first semester of 2018 compared to the first semester of 2017, namely of 2.03% or 555,322 MWh, the income from the transmission service has registered a decrease in the amount of 41,389,705, determined by the decrease of the average tariffs approved by ANRE (according to the table on the average tariffs approved by ANRE for the analyzed timeframes, presented above).

Functional system service revenues

In the first semester of 2018, the revenues from functional system services registered a decrease compared to the first semester of 2017 with the amount of 4,575,210, determined by the decrease of the average tariff approved by ANRE (according to the table on the average tariffs approved by ANRE for the analyzed periods, presented above).

Revenues from allocating the interconnection capacity

In the first semester of 2018, the income from the interconnection capacity allocation has registered a decrease compared to the first semester of 2017, in the amount of 8,476,570, corresponding to the level of usage of the available interconnection capacity by traders on the electricity market.

The market for interconnection capacity allocation is fluctuating, the prices evolve depending on demand and the need of the participants on the energy market to purchase interconnection capacity.

The incorporation of the regional energy exchange by Romania, Hungary, the Czech Republic and Slovakia on November 19th, 2014 requires that these four countries have a unique price of electricity traded on the spot markets. The capacity allocation between Romania and Hungary, the only country of the 3 with which Romania has a border, is made by the carriers: Transelectrica and MAVIR, through the common mechanism, based on a bilateral agreement.

Revenues from technological system services

Revenues from the technological system services have registered an increase in the first semester of 2018 compared to the first semester of 2017 in the amount of 23,510,082, determined by the 2.03% increase in the quantity of electricity delivered to consumers and by the increase of the average tariff approved by ANRE for these services, starting with January 1st, 2018 (according to the table on the average tariffs approved by ANRE for the analyzed timeframes, presented above).

The income from the technological system services gained in the first semester of 2018 were higher with 33,031,307 compared with the expenditures on the purchase of technological system services that were achieved. The profit was achieved due to favorable market conditions and good governance of the acquisition process by auctioning the necessary power reserves from the electricity producers, embodied in obtaining, on auctions, of average unit prices lower than the unit prices forecasted, which were the basis for calculating the tariff for the technological system services. This amount is found within the gross profit of the Company, reported on June 30th, 2018.

Revenues on the balancing market

The income from the balancing market have registered a decrease in the first semester of 2018 compared to the first semester of 2017, with the amount of 474,200,847, determined by:

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

the negative imbalances registered at the level of electricity suppliers on the balancing market which were lower in the first semester of 2018 compared to the first semester of 2017, and the significant decrease of the imbalance between the notified net contractual position and the actually delivered electricity, respectively;
the access to available energy in dispatchable groups has maintained low values in the first semester of 2018 compared to the first semester of 2017;
the available energy in dispatchable groups has maintained high values in the first semester of 2018 compared to the first semester of 2017, as a result of:
the registration of higher quotas of the Danube flow level;
the functioning under good conditions of the coal, gas and nuclear groups for the most part of the first semester of 2018.
higher hydraulicity in the first semester of 2018 compared to the first quarter of 2017 (especially in April); the physical notifications generally exceeded the internal consumption at NPS level;
material decrease in system balancing costs (the result of increase selections and activating the thermal groups).

The balancing market represents a sector with zero profit for the Company.

15. Expenses for operating the system and from the balancing market

The second quarter of 2018 compared with the second quarter of 2017

The expenses in the second quarter of 2018 and in the second quarter of 2017 are as follows:

	Second quarter 2018	Second quarter of 2017
Expenses on own technological consumption	54,292,136	38,944,630
Expenses on congestions	154,595	1,615
Expenses on electricity consumption in PTG substations	3,419,623	3,120,811
Expenses with functional system services	2,586,314	3,501,400
Expenditures on Inter TSO Compensation (ITC)	2,820,126	6,722,231
Total Operational Expenses	63,272,794	52,290,687
Expenses regarding the technological system services	151,728,247	159,503,097
Expenses on the balancing market	130,386,236	181,884,612
Total	345,387,277	393,678,396

Expenses on Own Technological Consumption

These represent expenses on the purchase of electricity on the free energy market for covering the own technological consumption (OTC) in the PTG and they were higher in the second quarter of 2018 compared to the second quarter of 2017, with the amount of 15,347,506, mainly determined by the increase in the electricity quantity for covering the own technological consumption in the transmission grid and by the increase in the average purchase price of electricity needed to cover the OTC in the PTG.

Expenses on congestions

Congestions (network restrictions) are requests for electricity transmission beyond the technical capacity of the network, requiring corrective actions from the transmission and system operator and occur in the situation in which, in the programming of the operation or the operation in real time, the power flow between two nodes or system areas leads to the non-accomplishment of the safety parameters in the operation of a power system.

In the second quarter of the current year, the expenses on congestions have been registered to amount to 154,595, determined by the compliance with the safety criterion N-1 for the planned outage of the Rosiori-Mukacevo 400 kV interconnection OHL.

Expenses with functional system services

The expenses on the functional system services represent the non-contracted international exchanges of electricity with the neighboring countries and the expenses on unplanned exchanges on the Day-Ahead Market. These expenditures have registered a decrease in the second quarter of 2018 compared to the second quarter of 2017, amounting to 915,086, mainly

determined by the decrease in the expenditures on the day-ahead market regarding the unplanned electricity exchanges with the neighboring countries connected to the NES.

Expenditures on Inter TSO Compensation (ITC)

ITC expenses, amounting to 2,820,126, represent the monthly payment obligations/rights of collection for each transmission system operator (TSO). They are established within the compensation/settlement mechanism for the effects of using the power transmission grid (PTG) for transits of electricity between TSO operators from 35 countries that acceded to this mechanism of the ENTSO-E. In the second quarter of 2018 these expenses were lower with 3,902,105 compared to same period of the previous year.

Expenses regarding the technological system services

In the second quarter of 2018, the expenditures regarding the technological system services have recorded a decrease compared to the second quarter of 2017, in the amount of 7,774,850, determined by the purchasing prices on the competitive market which were lower compared to the similar period of the previous year.

The technological system services are purchased by the Company from producers in order to comply with the operational security limits of the NPS and of the quality of the electricity transmitted at the parameters required by the technical norms in force.

The contracting of these services is performed:

in a regulatory manner, based on Government Decisions and Decisions of the National Energy Regulatory Authority (ANRE);
through competitive mechanisms.

In the second quarter of 2018 the purchase of technological system services was conducted in the regulatory regime according to ANRE decision no. 906/2017 (from SC Hidroelectrica SA) and ANRE decision no. 665/2018 (from SC Hunedoara SA).

CNTEE Transelectrica SA re-invoices the value of the technological system services purchased from producers, to the electricity suppliers licensed by ANRE, entities who ultimately benefit from these services.

Expenses on the balancing market

The expenditures on the balancing market result from the notifications / achievements of the participants on this market, and are fully covered by the income from the balancing market. In the second quarter of 2018, these amounted 130,386,236.

The first semester of 2018 compared with the first semester of 2017

The expenses in the first semester of 2018 compared with the ones in the first semester of 2017 are as follows:

	First semester of 2018	First semester of 2017
Expenses on own technological consumption	121,522,874	100,983,892
Expenses on congestions	5,389,177	41,360
Expenses on electricity consumption in PTG substations	8,986,533	7,389,595
Expenses with functional system services	5,797,413	8,642,749
Expenditures on Inter TSO Compensation (ITC)	8,220,126	12,025,231
Total Operational Expenses	149,916,123	129,082,827
Expenses regarding the technological system services	309,386,826	319,024,315
Expenses on the balancing market	330,847,124	805,047,971
Total	790,150,073	1,253,155,113

Expenses on Own Technological Consumption

Technological consumption expenses (OTC) are represented by electricity procurement costs as necessary to maintain installations under voltage and provide electricity transmission through the interconnected electricity grid.

These were higher in the first semester of 2018 compared to the first semester of 2017, with the amount of 20,538,982, mainly determined by the increase in the electricity quantity for covering the own technological consumption in the transmission grid.

Expenses on congestions

In the first semester of 2018, the expenses on congestions have been registered to amount to 5,389,177.

Bad weather conditions (blizzard, frost) registered in the month of February 2018 in Dobrogea generated a failure on the Constanta Nord – Tariverde 400 kV OHL. The line failure was caused by breaking the double insulators chain on the R phase at pole no. 7 and the fall of the active conductor.

Under these circumstances, in order to observe the N-1 safety criterion during the accidental outage of the Constanta Nord – Tariverde 400 kV OHL, the Company lowered the DWPP production in the Dobrogea area, section 6 and the Tulcea – Tariverde area, at values under the notified power. The total energy quantity reduced on the congestion until recommissioning the line amounted to 19,766 MWh, with the congestion cost incurred to CNTEE Transelectrica SA amounting to 5,234,582.

In April 2018, the expenses on congestions have been registered to amount to 154,595, determined by the compliance with the safety criterion N-1 for the planned outage of the Rosiori-Mukacevo 400 kV interconnection OHL.

Expenses on electricity consumption in PTG substations

These expenses registered an increase of 1,596,938 in the first semester of 2018 compared to the first semester of 2017, determined by the increase in the purchasing prices for electricity.

Expenses with functional system services

These expenditures have registered a decrease in the first semester of 2018 compared to the first semester of 2017, amounting to 2,845,336, mainly determined by the decrease in the expenditures on the day-ahead market regarding the unplanned electricity exchanges with the neighboring countries connected to the NES.

Expenditures on Inter TSO Compensation (ITC)

The monthly payment/collection obligations for each transmission system operator (TSO) are set forth within the clearing (settlement) mechanism for the effects of using the PTG for electricity transfers between the OTS from the 35 countries that acceded to this mechanism within the ENTSO-E. In the first semester of the current year, these expenses have been 3,805,105 lower compared to the first semester of 2017.

Expenses regarding the technological system services

The expenditures regarding the technological system services have recorded a decrease in the first semester in the amount of 9,637,489, determined by the purchasing prices on the competitive market which were lower compared to the similar period of the previous year.

In the reported period, the Company purchased technological system services under regulated regime pursuant to the ANRE decisions and the applicable legal regulations.

In the first semester of 2018 the purchase of technological system services was conducted in the regulatory regime according to ANRE decision no. 906/2017 (from SC Hidroelectrica SA) and ANRE decision no. 655/2018 (from SC Hunedoara SA), as well as pursuant to GD no. 760/11.10.2017, approving the "Winter Program in the Energy Sector for Assuring the safety and stability of the NES".

Expenses on the balancing market

The expenses for the first semester of the current year related to the balancing market amounted to 330,847,124 following the evolution presented in the chapter Revenues on the balancing market.

These expenses result from the notifications/achievements of the participants on this market, and are fully covered by the income from the balancing market.

16. Expenses on staff

	Second quarter of 2018	Second quarter of 2017
Expenses on staff wages	39,454,028	31,432,917
Social expenses	1,500,128	2,115,526
Expenses with employee vouchers	1,489,614	2,890,096
Expenses regarding employees' shareholding to the profit of the
previous year	0	6,423,004
Expenses of the mandate contract and other committees, commissions	553,154	452,635
Expenses for social security and protection	2,227,065	10,756,283
Provisions constituted for expenses with wages and similar expenses	(2,781)	(7,908,656)
Other expenses	294,741	255,807
Total	45,515,949	46,417,612
	First semester of 2018	First semester of 2017
Expenses on staff wages	77,569,102	62,745,588
Social expenses	2,175,876	2,344,158
Expenses with employee vouchers	3,169,371	3,988,057
Expenses regarding employees' shareholding to the profit of the
previous year	0	6,423,004
Expenses of the mandate contract and other committees, commissions	1,092,850	839,280
Expenses for social security and protection	4,354,059	19,037,163
Provisions constituted for expenses with wages and similar expenses	(6,792)	(7,959,620)

Other expenses	488,750	423,717

The staff expenses incurred in the first semester of 2018 register an increase compared to the first semester of 2017, mainly determined by the tax measures provided in GEO no. 79/2017 amending and supplementing Law no. 227/2015 on the Fiscal Code.

17. Other Operating Expenses

	Second quarter of 2018	Second quarter of 2017
Other expenses on third party services	13,368,950	12,358,512
Postal expenses and telecommunication fees	209,623	288,827
Expenses on rents	2,122,794	2,075,187
Net (Revenues)/operating expenses related to the impairment of
current assets	(2,369,224)	11,807,838
Other expenses	10,657,641	10,487,611
Total	23,989,784	37,017,975
	First semester of 2018	First semester of 2017
Other expenses on third party services	24,686,526	23,873,315
Postal expenses and telecommunication fees	462,907	561,571
Expenses on rents	4,272,422	4,162,694

Net (Revenues)/operating expenses related to the impairment of current assets (2,172,583) 27,553,521 Other expenses 22,055,973 20,043,183 Total 49,305,245 76,194,284

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Such expenses decreased in the period reported in the current year, compared to the similar period in 2017, mainly determined by the decrease of the (net) operating expenses related to the impairment of current assets. Thus, in the first semester of 2018, receivable impairment adjustments were registered for uncertain customers or clients in the insolvency, mainly for: Eva Energy, Cet Govora SA, Arcelormittal Galati SA, and in the first semester of 2017, receivable impairment adjustments were registered for uncertain customers or clients in the insolvency, mainly for Arelco Power SRL, Elsaco Energy SRL, Fidelis Energy SRL, Cet Govora SA, Transenergo Com SA etc.

18. Net financial result

	Second quarter of 2018	Second quarter of 2017
Interest revenues	2,307,664	1,465,122
Revenues from exchange rate differences	914,208	3,970,290
Other financial revenues	1,291,920	8,449
Total financial revenue	4,513,792	5,443,861
Expenses on Interest	(4,960,711)	(5,477,635)
Expenses from exchange rate differences	(1,075,364)	(3,670,792)
Total financial expenses	(6,036,075)	(9,148,427)
Net financial result	(1,522,283)	(3,704,566)
	First semester of 2018	First semester of 2017
Interest revenues	3,547,207	2,975,715
Revenues from exchange rate differences	2,245,109	9,069,649
Other financial revenues	1,311,635	22,364
Total financial revenue	7,103,951	12,067,728
Expenses on Interest	(10,094,117)	(11,041,753)
Expenses from exchange rate differences	(2,207,771)	(9,395,230)
Total financial expenses	(12,301,888)	(20,436,983)
Net financial result	(5,197,937)	(8,369,255)

On June 30th, 2018 the Company recorded a net financial loss amounting to 5,197,937, with 3,171,318 lower than the one registered in the similar period of 2017. This was mainly a result of the interest rate net expenses registered in the first semester of 2018, which were with 1,519,128 lower than the first six months of 2017, as well as a result of the amounts collected as dividends from the Teletrans and Opcom subsidiaries, amounting to 1,275,413 (in the "Other financial revenues" section), while in 2017 these were collected during the second semester.

The exchange rates of the national currency recorded on June 30th, 2018 compared to the one recorded on June 30th, 2017 are presented as follows:

Currency	30.06.2018	30.06.2017
Lei / Euros	4.6611	4.5539
Lei / US Dollars	4.0033	3.9915

19. Litigations, commitments and contingencies

i) Litigations

The management regularly analyses the ongoing litigations, and after consulting with its legal representatives decides the need to create provisions for the amounts involved or of their presentation in the financial reports.

Considering the existing information, the Company's Management believes that there are no significant ongoing litigations in which the Company has the quality of defendant, except for the following disputes:

• Pending with the Mehedinti Court – Section II Civil, Administrative and Fiscal Litigation Section, the file no. 3616/101/2014 was recorded, involving the "claims in the amount of 1,090,831.70, counter value of invoice no.

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

1300215/31.12.2013", a file in which the Company is the defendant, the plaintiff being the Autonomous Authority for Nuclear Activities – RAAN.

By civil sentence no. 127 ruled on October 10th, 2014, the Mehedinti Court admitted the request lodged by plaintiff RAAN and ordered CNTEE Transelectrica SA to pay the amount of 1,090,831.70 lei, the counter value of invoice no. 1300215/31.12.2013.

The amount requested for payment represents penalties calculated by RAAN for the bonus due from the support scheme and withheld from payment by the Company, in its capacity as Administrator of the support scheme, who enforced the provisions of Article 17 (5) of ANRE's Order no. 116 / 2013 (see Note 9). The amount was enforced by RAAN on July 15th , 2016, as per the Decision issued by the Bankruptcy Receiver Office Ailiesei si Guta in the enforcement file no. 12105/2016.

By civil decision no. 843/2015, the Craiova Court of Appeal rejected the appeal filed by CNTEE Transelectrica SA against civil sentence no. 127/10.10.2014, as lacking interest.

Against the decision no. 843/November 5th, 2015 of the Court of Appeal Craiova - Section II Civil, pronounced in the public hearing from November 5th, 2015, in file no. 3616/101/2014, as well as against the decision no. 127/2014 of the Mehedinti Court- Section II Civil, Administrative and Fiscal Litigation, pronounced in the public hearing from October 10th, 2014, in file no. 3616/101/2014, as well as against the Decision no. 1/2015 of the Mehedinti Court - Section II Civil, Administrative and Fiscal Litigation, pronounced in the public hearing from January 9th, 2015, in file no. 3616/101/2014, CNTEE Transelectrica SA filed an appeal asking the court to allow the appeal as it was filed and to reverse the judgment and sentences under appeal and to refer the case to the trial court in the territorial jurisdiction for judgement, and to declare the compliance with the requirements of Articles 1616 and 1617 of the Civil Code, reason for which it is being required to declare the intervention of the compensation of mutual debts, and their redemption up to the amount of the smallest of them, namely the total amount requested by the plaintiff in the application for summons, ordering the appellee - plaintiff to pay the expenses occurred with this appeal.

The appeal was registered on the docket of the High Court of Cassation and Justice who decided to reverse decision no. 843/2015 and to remand the case for retrial to the same court, the Court of Appeal Craiova.

By decision no. 124/2017, the Court of Appeal Craiova admitted the appeal declared by Transelectrica and remanded sentence no. 127/2014 pronounced by the Mehedinti Court, and the case was remanded for retrial to the Bucharest Court – Section VI Civil. On the docket of the Bucharest Court, the case was registered under no. 40444/3/2017 who, via civil sentence no. 4406/04.12.2017, admitted the request lodged by RAAN and ordered Transelectrica to pay the amount of 1,090,831.70 lei. The decision is under appeal.

In the period 2014 - 2015, the Company has retained the due support scheme bonus from payment to RAAN, pursuant to the provisions of the ANRE regulations, namely the Article 17 (5) of ANRE Chairman's Order no. 116/2013.

Under these conditions, RAAN calculated penalties for late payment of the due cogeneration bonus in the amount of 3,496,914, withheld from the payment by the Company in the account of non-cashed receivables. The amount of 3,496,914 was refused for payment by the Company and was not registered as a liability in the support scheme.

• Pending with the Mehedinti Court - Section II Civil, Administrative and Fiscal Litigation Section, the file no. 1284/101/2015 was recorded, involving the "claims in the amount of 11,637,440", a file in which the Company is the defendant, the plaintiff being the Autonomous Authority for Nuclear Activities - RAAN.

By the application for summons filed by the plaintiff, they asked Transelectrica SA to pay the amount of 11,637,439.66 lei.

On May 22th, 2015, the Mehedinti Court - Section II Civil, Administrative and Fiscal Litigation Section, ruled the sentence no. 41/2015, by which it ordered the following: 'Admits the exception for lacking territorial jurisdiction. Declines jurisdiction in favor of Bucharest Court, Section VI Civil. With no means of appeal." The file was registered to the Bucharest Court - Section VI Civil, under no. 24206/3/2015.

The applicant RAAN filed a request to amend the amount of the alleged right, seeking the increased amount of 17,805,680 from Transelectrica SA.

On November 3rd, 2015, the Bucharest Court, Section VI Civil delivered the sentence no. 6075/2015, by which it ordered the following: 'Upholds the application in the way it was completed. Orders the defendant to pay the plaintiff the amount of 17,805,680, representing the equivalent value of the bonus and penalties. Dismisses the application for granting legal

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018

(All amounts are expressed in RON, unless otherwise indicated)

expenses, lodged by the plaintiff, as ill-founded. With appeal within 30 days from communication. The appeal is lodged at the Bucharest Court - Section VI Civil."

The ruling was communicated on July 4th, 2016, according to the registration entry stamp of the correspondence with Transelectrica SA. An appeal was lodged against the sentence. By Hearing protocol from January 12th, 2017, pronounced in the file no. 24206/3/2015, the Court of Appeal Bucharest ordered the postponement of the hearing of the appeal until the final settlement of the file no. 9089/101/2013/a152 on the docket of the Mehedinti Court, on the grounds of Article 413 (1) (1) of the New Civil Procedure Code. With appeal throughout the suspension.

The Court of Appeal Bucharest decided the suspension of the judgement of the case, considering that its settlement depends on the decision that shall be pronounced in file no. 9089/101/2013/a 152 on the docket of the High Court of Cassation and Justice, involving the challenge of the additional receivables table of the Autonomous Authority for Nuclear Activities SA.

• Pending with the Bucharest Court – Section VI Civil the file no. 26024/3/2015 was recorded, involving the "claims", a file in which the Company is the defendant, the plaintiff being the Autonomous Authority for Nuclear Activities – RAAN. By application for summons filed by the plaintiff, they asked Transelectrica SA to pay the amount of 10,274,679.

The court reserved judgement on June 13th, 2016, postponing the ruling until June 27th, 2016 when, by hearing protocol, it ordered the redocking of the case in order to discuss the administration of additional evidence to establish mutual debts and compensation invoked by the defendant, to date, setting the next hearing on November 28th, 2016.

By Hearing protocol from November 28th, 2016, the Bucharest Court has suspended the cause according to Article 413 (1) of the New Civil Procedure Code, in conjunction with Article 411 (1) of the New Civil Procedure Code. With appeal throughout the suspension.

The Court of Bucharest decided the suspension of the judgement of the case, considering that its settlement depends on the decision to be ruled in file no. 3014/2/2014 on the docket of the High Court of Cassation and Justice, involving appeal annulment of the Decision of the ANRE Chairman no. 743/2014.

• Pending with the Bucharest Court – Section VI Civil the file no. 3694/3/2016 was recorded, involving the "claims", a file in which the Company is the defendant, the plaintiff being the Autonomous Authority for Nuclear Activities – RAAN. By application for summons filed by the plaintiff, they asked Transelectrica SA to pay the amount of 15,698,722.

On the grounds of Article 413 (1) (1) of the Civil Procedure Code, on October 20th, 2016, the Bucharest Court ordered the suspension of judgement until the final settlement of the file no. 3014/2/2014 on the docket of the High Court of Cassation and Justice, involving appeal – annulment of the Decision of the ANRE Chairman no. 743/2014. With appeal throughout the suspension.

• Pending with the Mehedinti Court – Section II Civil, Administrative and Fiscal Litigation Section, the file no. 9089/101/2013/a140 was recorded, involving the "claims in the amount of 86,513,431", a file in which the Company is the defendant, the plaintiff being the Autonomous Authority for Nuclear Activities – RAAN.

By application for summons filed by the plaintiff, they asked Transelectrica SA to pay the amount of 86,513,431 lei.

On May 19th, 2018, the Mehedinti Court - Section II Civil, Administrative and Fiscal Litigation Section, pronounced a hearing protocol by which it ordered the following: "on the grounds of Article 413 (1) of the Civil Procedure Code, suspends the case until the settlement of the file no. 3014 / 2 / 2014 on the docket of the High Court of Cassation and Justice". With appeal throughout the suspension. Pronounced today, May 19th, 2016, in open court."

• We also mention the fact that, by the protocol dated on September 18th, 2013, ruled by the Mehedinti Court in file no. 9089/101/2013, the opening of the general insolvency proceedings has been ordered against the debtor Autonomous Administration for Nuclear Activities R.A. (R.A.A.N.)

Through the sentence no. 387/March 20th, 2014, the Mehedinti Court confirmed the reorganization plan of the debtor Autonomous Administration for Nuclear Activities, proposed by the insolvency administrator Tudor & Partners SPRL and voted on by the General Assembly of Creditors according to the minutes of February 28th, 2014.

By interim decision no. 10/January 28th, 2016, pronounced by the Mehedinti Court - Section II Civil, Administrative and Fiscal Litigation, the liquidator ordered the commencement of the bankruptcy procedure for the debtor pursuant to Article 107 (1) C of Law. no. 85/2006, and the dissolution of the debtor and cancellation of the debtor's right to administer.

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Through the Decision no. 563/June 14th, 2016, the Court of Appeal Craiova - Section II Civil rejected the appeals lodged against interim decision no. 10/January 28th, 2016, ruled by the Mehedinti Court - Section II Civil, Administrative and Fiscal Litigation Section.

By the hearing protocol of June 30th, 2016, Mehedinti Court - Section II Civil, Administrative and Fiscal Litigation Section set the new procedural time limit as follows: "Sets the deadline for the submission of claims arising in the proceedings to August 13th, 2016. Sets the deadline for the verification of claims arising during the procedure, preparation, display and communication of additional table of receivables on September 29th, 2016. Sets the deadline for filing objections against receivables arising in the proceedings on October 9th, 2016 and for resolving the objections against receivables arising in the proceedings on October 20th, 2016. Sets the deadline for the preparation and display of the consolidated final table on November 10th, 2016."

Together with filing the receivables declaration in the bankruptcy proceedings of RAAN, Transelectrica SA may invoke the provisions of Article 52 of Law no. 85/2006, applicable to the bankruptcy proceedings for RAAN, provisions taken from Article 90 of Law no. 85/2014 concerning the creditor's right to invoke the compensation of his receivable with the one of the debtors, when the legal provisions on compensation in legal proceedings are completed on the date of commencement of the procedure. Transelectrica SA has been registered in the table of debtor RAAN with the amount of 11,264,777 lei under the category of receivables resulting from the continuation of the debtor's activity, the amount requested by our company being equal to 89,360,986 lei, our amount of 78,096,208.76 lei not being registered in the preliminary table because "this is not listed as owed in RAAN's accounting records." Moreover, the liquidator considered that the request regarding the registration in the table of the amount equal to 78,096,209 lei is tardily filed, being related to the timeframe 2011 – 2013, reason for which the receivable declaration should have been filed at the moment of commencement of the insolvency proceedings, namely on September 18th, 2013. Objection was filed against the Table. The Mehedinti Court approved the evidence with the audit expertise. The parties lodged objections against the audit expertise report, which were admitted by the court who set the hearing on February 22nd, 2018. At the appeal hearing from February 22nd, 2018, the hearing was set for the continuation of the proceedings: 11.10.2018.

• Following a verification conducted in 2013, the Court of Auditors issued several measures to be implemented by the Company as a result of a series of deficits identified within this verification. The decision and protocol issued by the Court of Auditors have been appealed before the Court of Appeal Bucharest, the file no. 1658/2/2014 being constituted.

At the hearing from January 20th, 2016, the court postponed the case so that the appointed accounting expert can express his point of view regarding the objections of the plaintiff against the expert report concerned and so that the technical expert can perform the expertise. On June 29th, 2016, the court postponed the case so that the technical expertise report may be finished. The next hearing was set on October 26th, 2016, and until the date of drafting this report, no other changes have been registered.

The following solution was ruled on June 13th, 2018:

Solution type: Partly admits the request.

Solution in brief: Partly admits the plaintiff's action. Partly cancels protocol no. 7/20.02.2014, decision no. 37/9.12.2013 and control report no. 35521/6.11.2012 issued by the defendant regarding the measures imposed via the aforementioned decision at points I.1, I.3, I.6, I.8, I.11, II.14, II, 15, II.17, II.18, II.20, II.21, II.22 and in part the measure from point II.13, namely by removing the phrase "including the contested items related to the invoices issued by SC FLOREA ADMINSTRARE IMOBILIARĂ SRL". For the remainder, the court rejects the request of the plaintiff as groundless. Approves the electricity technical expertise report drafted by Toaxen Vasile as expert. Orders the defendant to pay the plaintiff the amount of 121,375 lei as legal expenses (partially the expert fees and stamp duty). With appeal within 15 days from communication. The appeal shall be lodged before the Bucharest Court of Appeal – Section VIII, Administrative and Fiscal Litigation Section. Ruled in open court this 13th day of June, 2018. Document: Decision 2771/2018 from June 13th, 2018.

• CNTEE Transelectrica SA filed a complaint against the Order of the ANRE Chairman no. 51/June 26th, 2014, registered at ANRE under no. 47714/August 4th, 2014, and an appeal before the Court of Appeal Bucharest, subject of the file no. 4921/2/2014, requesting either the amendment of the aforementioned Order, or the issuance of a new order, which should recalculate the RRR value at the level of 9.87% (recalculated with a (β) coefficient of 1.0359, according to the internal analyses conducted by Transelectrica) or, should this request be rejected, using the same percentage of 8.52% set by ANRE for the year of 2013 and for the first semester of 2014.

On June 26th, 2014, the ANRE Order no. 51 was issued, published in the Official Journal under no. 474/June 27th, 2014 on the approval of the average tariff for the transmission service, the tariff for the system service and the zonal tariffs for the transmission service, payable to the National Power Grid Company "Transelectrica" - SA, and the repealing of Addendum no. 1 of the ANRE Chairman's Order no. 96/2013 regarding the approval of the average tariff for the transmission service, the tariff for the system service, the zonal tariffs for the transmission service and the tariffs for the reactive electrical energy, payable to economic agents from the electricity sector.

The values taken into consideration for calculating the Regulated Rate on Return (RRR 1 ) by ANRE, according to the Methodology on establishing the tariffs for the electricity transmission service, approved by ANRE Order no. 53/2013 ("the Methodology") have determined an RRR value of 7.7%.

CNTEE Transelectrica SA considers that the enforcement of the provisions of Article 51 of the Methodology on establishing the Beta (β) parameter at the value of 0.432 shall determine the financial damage of the company by decreasing the rentability with an estimated value of 138.4 mil. lei³ , having a significant impact on the financial interests of the company.

At the hearing from February 9th, 2016, the court admitted the evidence with the audit expertise - specialization financial investments and other entities of movable goods, extended the discussion on the technical evidence discussion – electroenergetic specialization, after administering the evidence with the audit expertise - specialization financial investments and other entities of movable goods.

At the hearings from March 25th, 2016, April 22nd, 2016, June 10th, 2016 and March 3rd, 2017, the court postponed the judgement of the cause because of the missing technical expertise report. The deadline for completion of the expertise was set to September 25th, 2018.

• On March 4th, 2014, the European Commission issued a communication stating that it has imposed a fine of 1,031,000 EUR to the subsidiary of SC OPCOM S.A. for the abuse of dominant position on the Romanian market in order to facilitate the trading of electricity on the spot market, in breach of the EU antitrust rules. The Company was included in the trial acting as parent company to the subsidiary SC OPCOM S.A., being jointly responsible for paying the fine.

The General Assembly of the subsidiary SC OPCOM SA shareholders, at the meeting from June 10th, 2014, decided upon full payment of the fine amounting to 1,031,000 euro imposed by the Directorate General for Competition – European Commission for breaching of Article 102 of the Treaty on the Functioning of the European Union, according to the Decision no. AT 39984 in the antitrust case. The subsidiary SC OPCOM SA has made full payment of the fine set by the European Commission.

On November 24th, 2014, the subsidiary SC OPCOM SA summoned CNTEE Transelectrica SA in order to force it to pay the amount of 582,086 euro (2,585,162 lei at the National Bank of Romania exchange rate from November 24th, 2014), representing the amount paid by her as fine, from the total of the fine amounting to 1,031,000 euro.

Also, the subsidiary SC OPCOM SA requested the court to order the Company to pay the amount of 84,867.67 lei as lawful interest related to the period between June 11th, 2014 - November 24th, 2014, plus legal expenses amounting to 37,828. The action filed by the subsidiary SC OPCOM SA is subject of the file no. 40814 / 3 / 2014 on the docket of the Bucharest Court, Section VI Civil, involving claims, litigation with professionals matter. CNTEE Transelectrica SA has lodged counterclaim against the application for summons in this case, invoking exceptions and defenses on the main issue of the matter regarding the unfounded and unlawful character of the action.

On July 24th, 2015, the Bucharest Court ruled the judgement no. 4275/2015, by which it ordered the following: "Admits the application for summons filed by plaintiff Romanian Gas and Electricity Market Operator - OPCOM S.A. against defendant National Power Grid Company "Transelectrica" S.A. Orders the defendant to pay the plaintiff the amount of 582,086.31 euro, representing the amount paid by the plaintiff in the defendant's stead from the fine in the amount of 1,031,000 euro, imposed by the Decision of the European Commission on March 5th, 2014 in the case no. AT.39984 and of the lawful interest related to the amount of 582,086 euro, calculated on June 11th, 2014 and up until de day of the actual payment. Orders the defendant to pay the plaintiff the amount of 37,828 lei, as legal expenses. With right of appeal within 30 days from notification. The request for appeal shall be lodged before the Bucharest Court – Section VI Civil."

Against sentence no. 4275/2015, pronounced in the aforementioned file, Transelectrica SA filed an appeal, which was registered on the docket of the Court of Appeal Bucharest. The resolution of the Court of Appeal is the following: Admits the appeal. Changes the appealed civil sentence completely, meaning that it rejects the application for summons as illfounded. Orders the appellee - plaintiff to pay the trial expenses to the appellant - defendant amounting to 16,129, representing legal stamp duty. With appeal within 30 days from notification. Ruled in open court today, October 10th, 2016. Document: Decision 1517/2016 from October 10th, 2016.

¹ RRR - Regulated Rate on Return is presented in the technical literature as WACC – Weighted Average Cost of Capital – translated as Weighted Average Cost of Capital, the equation of both indicators being similar: RRR = WACC = CCP + Kp/(1 – T) + CCI x Ki

² The value that caused the decrease of the RRR to 7.7%

³ Value calculated compared to the RRR of 8.52%

OPCOM S.A. filed a second appeal. The High Court of Cassation and Justice decided the following: Grants, in principle, the appellant-plaintiff Operatorul Pieței de Energie Electrică și Gaze Naturale – OPCOM S.A. motion against decision no. 1517/10.10.2016, ruled by the Bucharest Court of Appeal – Section V Civil. Sets the hearing for solving the appeal on March 13th, 2018. The parties will be summoned. Ruled in open court today, December 5th, 2017.

At the hearing from March 13th, 2018, the court granted the appellant-plaintiff Operatorul Pieței de Energie Electrică și Gaze Naturale – OPCOM S.A. motion against decision no. 1517/10.10.2016, ruled by the Bucharest Court of Appeal – Section V Civil. Invalidates the contested decision and refers the case to the court of appeal. Final.

In 2014, the company recorded a provision amounting to 2,670,029 for the litigation with the subsidiary SC OPCOM SA.

• In 2013, Conaid Company SRL took legal actions against CNTEE Transelectrica SA for the unjustified refusal of the latter to sign an addendum to the connection agreement or to sign a new connection agreement, and requested the compensation for costs incurred up to that time, amounted to 17,419,508 lei and loss of profit for the period 2013 - 2033 amounting to EUR 722,756,000. So far, the Company did not conclude an addendum to the connection agreement because the suspensive provisions included therein have not been met by Conaid Company SRL. A new connection agreement would have had to be concluded by March 11th, 2014, the date on which the technical connection permit has expired. On the date of these financial statements, the amounts claimed by Conaid Company SRL were regarded as contingent liabilities as it is unlikely to settle this obligation, there will be necessary outflows of resources embodying economic benefits and the value of obligation cannot be evaluated with sufficient reliability. The file no. 5302/2/2013 was on the docket of the High Court, involving the obligation of issuing of an administrative document, the procedural stage – second appeal, the hearing being on December 9th, 2015. At this hearing, the High Court of Cassation and Justice admitted, in principle, the second appeals and set the hearing, in substance, of the second appeals on April 8th, 2016, Formation 4, summoning the parties. The case trial was postponed for the date of June 17th, 2016, when the court reserved judgement, postponing the judgement until June 29th, 2016, when it pronounced Decision no. 2148/2016, by which it ordered the following: 'Rejects the exceptions invoked by the appellant - plaintiff S.C. Conaid Company S.R.L., via insolvency administrator RVA Insolvency Specialists SPRL, and by the appellant - defendant Transelectrica S.A. Admits the second appeal filed by the defendant National Power Grid Company Transelectrica S.A. against the hearing protocol of February 18th, 2014 and the civil sentence no. 1866 of June 11th, 2014, pronounced by the Court of Appeal Bucharest – Section VIII, Administrative and Fiscal Litigation Section. Partially invalidates the contested protocol and judgment and refers the case to the Bucharest Court – Section VI Civil, for settlement of the application of the plaintiff sought against the National Power Grid Company Transelectrica S.A. Maintains the other provisions of the sentence concerning the plaintiff's action against the National Regulatory Authority for Energy. Rejects the second appeals of the plaintiff SC Conaid Company S.R.L. via insolvency administrator RVA Insolvency Specialists SPRL and the intervener S.C. Duro Felguera S.A. against the civil sentence no. 1866 of June 11th, 2014 pronounced by the Bucharest Court of Appeal – Section VIII, Administrative and Fiscal Litigation. Rejects the second appeal filed by the defendant National Power Grid Company Transelectrica S.A. against the hearing protocol from March 25th, 2014, pronounced by the Bucharest Court of Appeal - Section VIII, Administrative and Fiscal Litigation. Final. Ruled in open court on June 29th, 2016.

On the docket of Bucharest Court – Section VI Civil, the case was registered under no. 12107/3/2017. By civil sentence no. 4364/23.11.2017, the Court admits the exception to the ineligibility of the claim and rejects it as ineligible. It also rejects the motion to intervene in the interest of the plaintiff. With right of appeal within 30 days from notification. The appeal is lodged at the Bucharest Court - Section VI Civil. Sent to the parties via registry today, November 23rd, 2017.

• Following a verification conducted in 2017, the Court of Auditors issued several measures to be implemented by the Company as a result of a series of deficits identified within this verification. CNTEE Transelectrica SA filed a total of 8 objections against the measures ruled by the Romanian Court of Auditors (CCR) via Decision no. 8/27.06.2017 requesting the annulment thereof, as well as the Decision no. 77/03.08.2017 registered with the Company's secretariat under no. 29117/08.08.2017, as well as the Control Report no. 19211/26.05.2017. The objections are currently pending with the Bucharest Court of Appeal and the High Court of Cassation and Justice.

• Case file no. 47332/3/2017 on the docket of the Bucharest Court - Section VI Civil, by which the company FF Wind Energy International SRL requests the following against CNTEE Transelectrica SA: - the annulment of the unilateral statement for the termination of the PTG connection agreement no. 85/14.03.2011 issued on March 2nd, 2016 under no. 8295, - ordering the Company to pay the amount of 32,777,167.35 lei as damages following the termination of the agreement and to pay the amount of 45,000,000 euro as the amount of depreciation of the company FF Wind Energy International SRL caused by the impairment of its purpose. Status of the file: in preliminary proceedings for notification of the action and filing statement of defense. Hearing: 06.09.2018.

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

• The general tax inspection took place at Transelectrica SA's headquarters, which regarded the period between December 2005 and December 2010. The general tax inspection commenced on December 14th, 2011 and ended on June 26th, 2017, the date of the final discussion with Transelectrica SA.

ANAF – DGAMC set forth additional tax payment liabilities to the Company, respectively corporation tax and VAT, as well as ancillary tax liabilities (interest/late interest and late payment interest) related to the technological system services (TSS) invoiced by the electricity suppliers, considered not deductible following the tax inspection.

On the grounds of the Notice of assessment no. F-MC 439/30.06.2017 amounting to a total of 99,013,399 lei, ANAF – DGAMC set forth additional tax payment liabilities to the Company amounting to 35,105,092 lei, as well as ancillary tax liabilities (interest/late interest and late payment interest) amounting to 63,908,307 lei.

ANAF's Tax inspection report mainly records the following additional payment liabilities:

Corporation tax amounting to 13,726,800 plus accessories, owed for a number of 123 unused invoices identified as missing (they were destroyed in the fire that broke out the night of June 26th - 27th, 2009, at the business office from Millennium Business Center from 2 - 4 Armand Calinescu Street, District 2, where the company carried out its activity), documents under special regime.

These invoices were subject to a litigation with ANAF, the latter sending a tax inspection report on September 20th , 2011 which estimated the amount of collected VAT for a number of 123 unused invoices identified as missing.

At the hearing from April 30th, 2014, the court of first instance - Bucharest Court of Appeal, Section VIII Administrative and Fiscal Litigation (Decision no. 1356/2014) in case no. 6657/2/2012 rejected "the application of the defendant CNTEE Transelectrica SA is rejected (Complaint against the Fiscal administrative document issued by ANAF)". On March 1st, 2017, through decision no. 779, the High Court of Cassation and Justice ordered the following: "rejects the exception of inadmissibility of the appeal for annulment filed by the contesting party Transelectrica SA, advanced via counterstatement by appellee General Directorate for Large Taxpayers Management. Rejects the appeal for annulment filed by the contesting party Transelectrica SA against Civil Decision no. 1945 from June 16th, 2016 of the High Court of Cassation and Justice - Administrative and Fiscal Litigation Section, ruled in file no. 6657/2/2012, as ill-founded. Irrevocable."

Corporation tax amounting to 4,795,483 and collected VAT amounting to 5,694,636 plus accessories, owed for a number of 349 unused invoices identified as missing (they were destroyed in the fire that broke out the night of June 26th - 27th, 2009, at the business office from Millennium Business Center from 2 - 4 Armand Calinescu Street, District 2, where the company carried out its activity), documents under special regime;
Corporation tax amounting to 4,320,277 and collected VAT amounting to 5,130,329 plus accessories, related to the expenses on technological system services invoiced by the generators in the time interval between January 1st, 2007 and December 31st, 2010 and according to which the Company issued penalty invoices calculated by applying a percentage of 200% on the unit price without VAT, multiplied by the quantity of services not carried out. According to the findings of the tax inspection team, based on the issued penalty invoices non-deductible expenses have been set forth for the technological system services not performed / not carried out, which generates additional corporation tax to be paid, as well as additional VAT to be paid, corresponding to the technological system services not performed / not carried out, invoiced by the electricity suppliers.

Within the legal deadline, the Company appealed the Note of assessment no. F-MC 439/June 30th, 2017, according to GD no. 92/2003 on the Fiscal Procedure Code. ANAF issued enforcement order no. 13540/22.08.2017; the additional payment obligations according to Notice of assessment no. F-MC 439/30.06.2017 were enforced based on this order.

The Company requested the annulment of the enforcement order no. 13540/22.08.2017 before the Court of Appeal – casefile no. 7141/2/2017. Solution in brief: Admits the lack of jurisdiction related to subject matter of the Court of Appeal Bucharest – Administrative and Fiscal Litigation Section. Declines the jurisdiction related to subject matter for this case in favor of Bucharest 1st District Court. With no means of appeal. Ruled in open court today, February 8th, 2018. Document: Decision no. 478/2018 from February 8th, 2018.

After declining the jurisdiction, pending with the 1st District Court is the casefile no. 8993/299/2018 through which the Company disputed the enforcement started on the grounds of enforcement order no. 13540/22.08.2017 which is based on the Notice of assessment no. F-MC 439/30.06.2017.

Solution in brief: Admits the suspension request filed by the contesting party. On the grounds of Article 413 (1) (1) of the Civil Procedure Code, judgement is suspended until the final settlement of casefile no. 1802/2/2018, pending with the Court of Appeal Bucharest, Section VIII Administrative and Fiscal Litigation. With appeal throughout the suspension. The notice of appeal must be filed with the Bucharest 1st District Court. Delivered in open court. Document: Hearing protocol – Suspension 17.04.2018.

Pending with the Court of Appeal is the casefile no. 1802/2/2018 through which the Company contested the fiscal administrative document - Decision no. f-mc 439/30.06.2017. Hearing: 23.10.2018.

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Upon contestation by the Company of the fiscal administrative document - Decision no. f-mc 439/30.06.2017, ANAF notified the Company of Decision no. 122/13.03.2018 through it rejects, as ungrounded, the contestation filed by CNTEE Transelectrica SA; the decision was received on March 16th, 2018, after filing the application for summons which is subject to casefile no. 1802/2/2018.

The company is also involved in significant litigations in which it has the quality of plaintiff, especially for debt recovery (e.g. Eco Energy SRL, Petprod SRL, Total Electric Oltenia SA, Arcelormittal Galati SA, Regia Autonoma de Activitati Nucleare, Romenergy Industry SRL, Energy Holding SRL, UGM Energy Trading SRL, CET Iasi, CET Bacau, CET Braila, CET Govora, CET Brasov, Elsaco Energy SRL, Elsaco Esco, Arelco Power SRL, Arelco Energy SRL, Inversolar Energy SA, Opcom, etc.). The company recorded adjustments for value losses for the customers and other receivables in litigation and for the customers in bankruptcy. At the same time, the Company is also involved in litigations against former Directorate and Board of Supervisors members, regarding the mandate agreements concluded between the Company and themselves.

The management of the Company considers it is likely that there will be no cases in which an outflow of resources will be required for settling the pending litigation. In addition, there are no other pending litigations which, either by their nature or by their value would deem necessary the presentation of some contingent assets or liabilities significant for the activity of the Company.

ii) Commitments

As of June 30th, 2018, and December 31st, 2017, the Company had commitments amounting to 810,383,970 and 1,121,769,861 mainly representing ongoing contracts related to the investment program for the modernization and upgrading of the transmission grid.

iii) Contingencies

The following control measures are ongoing at the Company's headquarters:

The Ministry of Public Finances – Directorate General for Economic and Financial Inspection – inspection measure started on September 15th, 2017 and suspended at the same date via Notification no. 243104/29.11.2017. The inspection measure was resumed on June 18th, 2018 (as per Notification no. 261403/12.06.2018) and suspended via Notification no. 261775/17.07.2018. The verification objectives for the period 2012 – 2016 are the following:

substantiating and execution of the statement of expenditure and revenue;
observing the budgetary, economic, financial and accounting discipline;
observing the legal provisions related to the State's public and private goods and the administrative and territorial units, held under any form;
observing the provisions of GO no. 64/2001 on the allocation of profit of national companies, national undertakings and commercial companies fully or majority State-owned, as well as autonomous companies, as subsequently amended and supplemented;
the way of using the constituted reserves;
the way of organizing and exercising the mandatory internal/managerial control instruments;
the way of substantiating and justifying the amounts granted from the general consolidated budget.

• The Ministry of Economy – Direction for Minister Control Body – the control commenced on January 18th, 2018 – the objectives of the measure are: verifying the observance of legal provisions and internal norms pertaining to the entity's organization and functioning, verifying the way in which the acquisition activity is organized and performed, verifying the way in which consultancy, legal assistance and representation and litigation agreements are concluded and performed, verifying the way in which the sponsorship agreements are concluded and performed, verifying the way in which the transportation expenses are made, analysis of the way in which orders, instructions and other requirements of the Ministry of Economy in the specific field of activity are performed, verifying the completion status of the measures ruled via previous reports, comparative analysis of the entity's economic and financial results in the last three years of activity.

• As of June 30th, 2018, Teletrans S.A., the Company's subsidiary, was subject to a control measure started on May 29th , 2015, carried out by the Directorate General for Economic and Financial Inspection of the Ministry of Public Finances; the periods subject to verification is January 1st, 2010 – December 31st, 2014 as per administrative order no. 82/27.05.2015 and January 1st, 2015 – present date, as per administrative order no. 38/31.05.2017. The objectives of the economic and financial inspection measure are:

substantiating and execution of the statement of expenditure and revenue;
observing the budgetary, economic, financial and accounting discipline;

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

observing the legal provisions related to the State's public and private goods and the administrative and territorial units;
the way of organizing and exercising the mandatory internal/managerial control instruments;
observing the provisions of GO no. 26/2013 on the consolidation of the financial discipline of economic agents where the State or the administrative and territorial units are sole or majority shareholders or they hold, directly or indirectly, a majority participation, in the period 2015 – present date.

As of June 30th, 2018. Teletrans S.A., the Company's subsidiary, was subject to a control measure carried out by the Directorate General for Economic and Financial Inspection of the Ministry of Public Finances for the period 2010 – 2014 which was completed in 2018. The draft economic and financial inspection report issued on February 21st, 2018 claims the effect of prejudicing the state budget with the total amount of 88,778,158 lei, representing amounts collected but not paid to the state budget in the period 2006 – 2016, due to leasing the goods belonging to the State's public domain (infrastructure capacities and elements from the public telecommunications network) while not observing by the Company's and Teletrans S.A.'s employees of the provisions of Art. 14, Art. 15 and Art. 16 of Law no. 213/1998 on public patrimony.

Via Notification no. 13443 of March 26th, 2018, Teletrans informed Transelectrica of the following:

between February 21st, 2018 and March 10th, 2018 took place several meetings between Teletrans representatives and the representatives of the control team within the Ministry. Following these meetings, it was established that the basis for calculation used in the draft report was false as it took into consideration strictly the registered revenues, without considering the expenses incurred (the total depreciation of the network equipment purchased, the human resource and the total indirect expenses related to this activity) and without truly considering the commercial and legal relations between Transelectrica and Teletrans.
as a result, the control team and the management of the Directorate General for Economic and Financial Inspection of the Ministry of Public Finances granted Teletrans a new deadline for filing the revised report and additional explanations for the controlled time period, delaying the initial deadline of February 27th, 2018 to March 30th, 2018.

Regarding the legality of the operation of excess optic fiber – in the argument of the legal nature of the contractual relationship the legal opinion issued by Bostina&Asociatii was considered. According to this opinion, the previous contract no. C45/2006 was qualified as a mandate contract without representation for the "conclusion by SC TELETRANS SA in their own name but in the account of the public telecommunications network of Transelectrica of contracts aiming to market its infrastructure capacity and elements". The qualification granted to the legal document allowed the conclusion of Convention no. C111/2014 while maintaining the nature of the legal relations between the parties.

The Company has not finished the required analysis with regards to the possible effect over the interim financial statements for the period ended on June 30th, 2018, of the economic and financial inspection report, issued on February 21st, 2018, until the date of the approval of the interim financial statements for the period ended on March 31st, 2018.

There are currently litigations pending with the Court of Auditors pertaining to the control measures carried out in 2013 and 2017. Considering the findings of the Court of Auditors stated in the Decisions from 2013 and 2017, there is a possibility that future additional fiscal obligations shall arise; at this moment these obligations cannot be accurately determined in conformity with the IAS 37 Standard – Provisions, contingent liabilities and contingent assets.

Thus, considering all of the above, as of June 30th, 2018 the Company did not have the necessary information to make a pertinent analysis with regards to determining the effect over the interim financial statements for the period ended on June 30th, 2018, of the conclusion of the draft report.

20. Affiliated Parties

Affiliate	Country of origin	June 30th, 2018 % of shares	December 31st, 2017 % of shares
SMART SA *)	Romania	70	70
TELETRANS SA	Romania	100	100
ICEMENERG SA **)	Romania	-	-
OPCOM SA ****)	Romania	97.84	100
FORMENERG SA	Romania	100	100
ICEMENERG SERVICE SA ***)	Romania	100	100

i) Transactions with the Company's subsidiaries

*) On the docket of the courts there was a litigation - file no. 32675/3/2015 - involving the annulment of Resolution of the

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Designated Person No. 154954/December 30th, 2014, pronounced in file no. 449314/December 23rd, 2014, under which the Trade Register attached to the Bucharest Court has registered the share capital increase of the subsidiary SC Smart SA with contribution in kind and amended the Articles of Association according to Decision no. 12375/December 22nd, 2014 of the Chairman of the Board of Directors of the subsidiary and according to Board Decision no. 19/December 22nd, 2014. The Company also requested the competent court for the annulment of the two aforementioned decisions and the suspension of the enforcement of deeds whose annulment is requested, until the resolution of the promoted action.

In the file no. 32675/3/2015, the Bucharest Court – Section VI Civil pronounced the civil sentence no. 6468/November 16th , 2015, through which it ordered the following: "Admits the exception of inadmissibility. Dismisses the application for summons filed by the plaintiff Transelectrica against the defendants: the subsidiary Company for electricity transmission grid maintenance services SMART SA, the Romanian State and ONRC, as inadmissible. With right of appeal within 30 days from notification. The appeal is lodged with the Bucharest Court Section VI Civil. Pronounced in open court today, November 16th, 2015". CNTEE Transelectrica SA lodged an appeal, which was registered on the docket of the Court of Appeal, the case being settled at the hearing from May 23rd, 2016, when the Court of Appeal Bucharest ruled the civil decision no. 903/23.05.2016, by which it ordered the following: "Rejects the appeal as ill-founded. Admits the notification of the Constitutional Court. Pursuant to Article 29 (4) of Law no. 47/1992, notifies the Constitutional Court to resolve the exception of unconstitutionality of Article 114 (3) of Law no. 31/1990 in relation to the provisions of Article 16, Article 21 and Article 44 of the Constitution, exception invoked by the appellant. Final."

**) On April 7th, 2014 it was accepted by the National Trade Register, the file registration number 121452/April 3rd, 2014 involving the deregistration of the Subsidiary Institute for Energy Research and Modernization – ICEMENERG SA Bucharest. Through the order no. 123/March 13th, 2014 (act of registration and authorization of functioning), was registered at the Trade Register the 'National Institute of Research and Development for Energy Bucharest" (GD no. 925/2010). The company filed a complaint against the resolution of ORC director ordering the registration in the trade register of the deregistration of the Subsidiary ICEMENERG SA Bucharest.

Bucharest Court, Civil Section VI, through the sentence no. 3569/July 14th, 2014 pronounced in the file no. 15483/3/2014, in which the company was found in contradiction with the defendants the Subsidiary Institute for Energy Research and Modernization "Icemenerg" S.A. Bucharest and the National Institute of Research and Development for Energy-Icemenerg Bucharest rejected the complaint of the Company, motivated by the fact that GD no. 925/2010 was not abolished until the deregistration at ORC (Trade Register Office). The Court of Appeal has notified on February 24th, 2015 the solution pronounced in the file no. 15483/3/2014 and namely Decision no. 173/2015, which dismissed the appeal of CNTEE Transelectrica SA as ill-founded, the decision being final.

Against the Decision no. 173/2015, pronounced by Bucharest Court of Appeal, Transelectrica SA filed an appeal for annulment, which makes the object of the file no. 1088/2/2015 before the Court of Appeal - Section VI Civil, with hearings on May 13th, 2015. On May 13th, 2015, by Decision no. 777/2015, the Court of Appeal Bucharest dismissed the appeal for annulment as ill-founded, the decision being final.

At the meetings from March 28th, 2016 and August 30th, 2016, the Extraordinary General Assembly did not approve the decrease of the share capital of CNTEE Transelectrica SA with the amount of 1,084,610 lei, representing the share capital subscribed and paid of the ICEMENERG SA Bucuresti subsidiary, by decreasing the participation of the Romanian State in the share capital of CNTEE Transelectrica SA, for enforcing the provisions of GD no. 925/2010. In 2015, the Company registered an impairment amounting to 1,083,450 for the shares held by the Institute for Energy Research and Upgrades – ICEMENERG SA Bucharest subsidiary, which was removed from the register.

***) On June 9th, 2017, the Bucharest Court – Section VI Civil pronounced the entering into bankruptcy under the simplified procedure of the debtor subsidiary ICEMENERG SERVICE – SA, and appointed Solvendi SPRL as temporary liquidator.

In 2016, the Company registered an impairment amounting to 493,000 for the shares held by the SC ICEMENERG SERVICE SA subsidiary.

****)

In 2016, the share capital of SC OPCOM SA was increased by 22,587,300, by in-kind contribution of shareholder CNTEE Transelectrica SA.

The in-kind contribution consists of intangible assets, namely "OPCOM Electricity Trade Exchange" and "OPCOM Electricity Regional Exchange", self-funded by the Company and from IBRD funds, valued as per Valuation Report no. 786/15.03.2016 issued by JPA Audit & Consultanta SRL. The amendment of the articles of incorporation of SC OPCOM SA, based on the Decision no. 6/15.06.2016 of the Extraordinary General Assembly of Shareholders, was registered at the Trade Registry Office according to the Certificate for Registration of Specifications of 11.07.2016. In the financial statements of SC OPCOM SA, the share capital of was increased by the in-kind contribution of shareholder CNTEE

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Transelectrica SA, the increase being registered as subscribed and not fully paid up share capital.

On February 13th, 2018, the Extraordinary General Assembly of the SC OPCOM SA subsidiary approved the share capital increase of Operatorul Pietei de Energie Electrica si de Gaze Naturale OPCOM SA ("OPCOM SA") by the amount of 678,790 lei, via in-kind contribution represented by the value of the land plot for which the company obtained the Certificate authenticating the ownership rights for land plots series M03 no. 12899/27.02.2014, issued by the Ministry of Economy. The in-kind contribution was assessed by an expert designated by the National Trade Registry Office. In exchange for the in-kind contribution to the share capital, the company issued for the new shareholder – the Romanian State via the Ministry of Economy, who exercises the duties of an involved party as of the date of the AGEA decision – a number of 67,879 new nominative shares with a nominal value of 10 lei each. On March 20th, 2018, the National Trade Registry Office attached to the Bucharest Court settled the application to register the share capital increase of OPCOM SA and, consequently, as of March 31st, 2018, the share capital of OPCOM SA amounts to 31,366,090 lei, representing a number of 3,136,609 nominative shares with a value of 10 lei per share and a shareholding quota in gains and loss of 97.84%.

The total value of the shares held by the Company in its subsidiaries amounted to 78,038,750 on June 30th, 2018, 2017 and to 78,038,750 on December 31st, 2017.

The adoption by the UE of the IFRS 9 "Financial Instruments" applicable for annual periods starting with or after January 1 st, 2018, does not have a significant impact on the financial statements of the Company during the initial period of application.

AFFILIATE	Trade	receivables*)	Trade	payables
		December 31st, 2017		December 31st, 2017
		as per AGA		as per AGA
		Decision no. 6 of		Decision no. 6 of
ENTITY	June 30th, 2018	30.04.2018	June 30th, 2018	30.04.2018
SC SMART SA	89,240	16,884,019	8,462,256	8,992,426
SC TELETRANS SA	1,362,490	192,966	6,323,320	7,361,973
SC OPCOM SA	22,195,992	23,995,729	8,347,906	7,442,483
TOTAL	23,647,722	41,072,714	23,133,482	23,796,882

Balances with subsidiaries owned by the Company are presented as follows:

*) The trade receivables are presented at their gross value.

Transactions carried out with the Company's subsidiaries in the reporting period are detailed as follows:

AFFILIATE	Sales
	Second quarter	Second quarter of		First semester of
ENTITY	2018	2017	First semester 2018	2017
SC SMART SA	154,484	128,973	396,534	363,827
SC TELETRANS SA	1,373,146	260,222	1,623,840	492,893
SC OPCOM SA	62,253,372	302,593,668	118,642,019	452158.146
TOTAL	63,781,002	302,982,863	120,662,393	453,014,866

AFFILIATE	Purchases
		Second quarter of	First semester	First semester of
ENTITY	Second quarter 2018	2017	2018	2017
SC SMART SA	16,217,726	12,187,941	29,671,823	27,910,913
SC TELETRANS SA	9,483,138	5,878,902	16,927,907	14,853,264
SC FORMENERG SA	3,126	47,055	4,041	47,055
SC OPCOM SA	54,806,994	25,233,293	135,972,089	112,492,488
TOTAL	80,510,984	43,347,191	182,575,860	155,303,720

Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

ii) Remuneration of Company's Management

The wages paid to the management for the services rendered consist mainly of the base salary and also benefits upon termination of the labor agreement and upon post-employment. These are detailed as follows:

	Second quarter of 2018	Second quarter of 2017	First semester of 2018	First semester of 2017
Short-term benefits	3,144,067	2,679,328	6,212,783	6,139,778
Other long-term benefits	-	-	-	31,596
Total	3,144,067	2,679,328	6,212,783	6,171,374

21. Credit Risk

The credit risk is the risk in which the Company bears a financial loss following the non-fulfilment of contractual obligations by a customer or counterparty to a financial instrument. This risk results mainly from trade receivables and the cash and cash equivalents.

The treatment of counterparty risk is based on internal and external factors of success of the Company. The external factors of success - which have an effect upon the systematic reduction of the risk, are: decentralizing the energy sector in which the production, transmission, distribution and supply are separate activities and the customer interface is represented by the supplier, the electricity trading on the Romanian market on two market segments: the regulated market and the competitive market. The internal factors of success in the treatment of counterparty risk include: diversifying the client portfolio and diversifying the number of services on the electricity market.

Financial assets that may submit the Company to the risk of collection are mainly the trade receivables and the cash and cash equivalents. The company has enforced a series of policies that ensure that the sale of services is performed towards the customers with an appropriate collection by including in their commercial contracts of their obligation to provide financial guarantees. The value of receivables, net of the adjustments for value losses, represents the maximum amount exposed at the risk of collection.

At the date of reporting, the maximum exposure to the risk of collection was:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Financial assets
Net trade receivables	648,940,952	724,176,710
Other net receivables and down payments to suppliers	53,268,073	47,347,178
VAT to be recovered	13,572,388	47,005,991
Cash and cash equivalents	545,607,214	520,746,500
Other financial assets	125,045,000	-
Total	1,386,433,627	1,339,276,379

The status of the maturity of receivables on the day of drafting the report of the financial position, is presented below:

	Gross Value	Adjustment of depreciation	Gross Value	Adjustment of depreciation
	June 30th, 2018	June 30th, 2018	December 31st , 2017 as per AGA Decision no. 6 of 30.04.2018	December 31st , 2017 as per AGA Decision no. 6 of 30.04.2018
Not due	412,979,819	1,774,541	557,134,751	1,268,176
Due date exceeded by 1 to 30 days	74,245,796	-	1,649	2,345
Due date exceeded by 31 to 90 days	1,104,934	325,654	2,780,207	2,853,477
Due date exceeded by 90 to 180 days	2,063,529	-	(322,245)	-
Due date exceeded by 180 to 270
days	1,638,423	1,638,356	58,688,984	1,618,294
Due date exceeded by 270 to 365
days	810,383	513,554	25,856,404	21,850,588
Due date exceeded by more than a
year	279,329,205	118,979,032	202,687,679	95,057,839
Total	772,172,089	123,231,137	846,827,429	122,650,719

The status of the maturity of "Other receivables" on the date of drafting the report of the financial position, is presented below:

	Gross Value June 30th, 2018	Adjustment of depreciation June 30th, 2018	Gross Value as of December 31st , 2017, as per AGA as per AGA Decision no. 6 of 30.04.2018	Adjustment of depreciation as of December 31st, 2017, as per AGA as per AGA Decision no. 6 of 30.04.2018
Not due	29,119,299	2,566,026	70,307,272	2,525,896
Due date exceeded by 1 to 30 days	37,251	-	55,235	-
Due date exceeded by 31 to 90 days	162,596	-	63,007	57,063
Due date exceeded by 90 to 180 days	94,023	73,880	34,644,875	34,533,556
Due date exceeded by 180 to 270 days	51,923	48,634	2,954,880	2,925,623
Due date exceeded by 270 to 365 days	34,599,360	34,551,057	179,445	112,945
Due date exceeded by more than a year	66,552,907	40,109,687	66,439,763	40,136,225
Total	130,617,358	77,349,285	174,644,477	80,291,308

For recovering the adjusted receivables for depreciation, the Company has taken the following measures: taking legal action, registering in the statement of affairs etc.

Transelectrica's policy is to register impairments amounting to 100% for clients in litigation, under insolvency and bankruptcy, and 100% from trade receivables and other receivables not collected for more than 180 days, except for outstanding receivables generated by the support scheme. The Company also makes a case by case analysis of uncollected trade and other receivables. The adoption by the UE of the IFRS 9 "Financial Instruments" applicable for annual periods starting with or after January 1st, 2018, does not have a significant additional impact on the financial statements of the Company during the initial period of application.

The evolution of depreciation adjustments for uncertain receivables is presented as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Balance on the 1st of January	122,650,719	100,578,031
Recognition of impairments	4,184,338	36,575,509
Reversal of impairments	3,603,920	14,502,821
Balance at the end of the period	123,231,137	122,650,719

The evolution of depreciation adjustments for other uncertain receivables is presented as follows:

	June 30th, 2018	December 31st, 2017 as per AGA Decision no. 6 of 30.04.2018
Balance on the 1st of January	80,291,307	90,080,080
Recognition of impairments	175,924	38,009,855
Reversal of impairments	3,117,946	47,798,627
Balance at the end of the period	77,349,285	80,291,308

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

The cash is placed in financial institutions, which are considered as having minimal risk. The deposits are placed with Banca Comeciala Romana, Garanti Bank, Alpha Bank, Banca Transilvania, Exim Bank, BRD, ING, CITIBANK, Raiffeisen, Credit Europe Bank.

22. Subsequent Events

Moody's granted the Company the Ba1 rating, with a perspective improvement from stable to positive

As of July 3rd, 2018, Moody's improved the rating perspective from stable to positive.

Changes in the Directorate structure

At the meeting from July 11th, 2018, the Board of Supervisors decided the following:

extending the mandates of the following provisional members of the Directorate by a duration of 2 months, until September 16th, 2018:

Adrian Constantin RUSU
Andreea Georgiana FLOREA
Constantin SARAGEA

appointing as provisional Directorate members with a 2-month mandate, starting with July 17th, 2018 and until September 16th, 2018, of the following persons:

Adrian-Mircea TEODORESCU
Viorel VASIU

The appointment of the aforementioned Directorate members became effective starting with the date of signing before a notary public of the declaration of acceptance of the mandate as member of the National Power Grid Company "Transelectrica" S.A. Directorate.

Pursuant to Art. 18 (4) of the Articles of Association of the National Power Grid Company "Transelectrica" – S.A., the Board of Supervisors appoints Mr. Adrian – Constantin RUSU as Directorate Chairman (alternatively called Chief Executive Officer – "CEO" – of the Company) of the National Power Grid Company "Transelectrica" – S.A., starting with July 17th, 2018.

Mandate acceptance by the Directorate provisional members

The new provisional members of the Directorate, namely Mr. Adrian-Mircea TEODORESCU and Mr. Viorel VASIU, appointed on July 11th, 2018 by the Board of Supervisors for a 2-month mandate, signed before the notary the declaration of acceptance of their mandates on July 11th, 2018, their appointment being effective as of July 17th, 2018.

Amending and supplementing the Electricity and Natural Gas Act no. 123/2012

Law no. 167 of July 10th, 2018, amending and supplementing the Electricity and Natural Gas Act no. 123/2012, was published in the Official Journal no. 604 of July 16th, 2018.

Taking over the modernization works carried out at the Suceava 400/220/110/20 kV transformation electrical substation

On July 27th, 2018, CNTEE Transelectrica SA inaugurated the modernization works carried out in the Suceava 400/220/110/20 kV transformation electrical substation, and important node in the Power Transmission Grid which ensures the operational safety of the National Power System and which connects the country's historical provinces. Started in August 2015, the modernization works aimed the 110 kV and 20 kV voltage levels and have been carried out by the Siemens SRL - EMSESNS PROD SRL association. The investment is valuated at over 24 million lei and is fully financed by the Company's own funds. The Suceava 400/220/110/20 kV substation is an important energy node in the northern part of the country, both for the future Gadalin-Suceava 400 kV OHL (which will close off the 400 kV ring between the Moldova and Ardeal regions), and the future Suceava-Balti 400 kV OHL (which is part of the interconnection project for the power systems of Romania and the Republic of Moldova).

CNTEE TRANSELECTRICA SA

SEMESTRIAL REPORT

January – June 2018

REPORT REGARDING THE ECONOMICAL AND FINANCIAL ACTIVITY OF CNTEE "TRANSELECTRICA" SA

according to provisions of Article 65 of Law no. 24/2017 on the capital market and the Regulation no. 5/2018 issued by the Financial Supervisory Authority

for the period ending on June 30th, 2018

Report date:	August 14th, 2018
Company name:	NATIONAL POWER GRID COMPANY TRANSELECTRICA SA, two-tier company
Registered office:	Bucharest, No. 33 Gen. Gheorghe Magheru Blvd., 3rd district, ZIP code 010325
Operational office:	4, Olteni Street, 3rd District, ZIP Bucharest, No. 2 - code 030786
Telephone / fax:	021 303 5611/ 021 303 5610
Unique registration code:	13328043
Number in the Commercial Register:	J40/ 8060/ 2000
LEI Code (Legal Entity Identifier)	254900OLXOUQC90M036
Company's establishment date:	July 31st, 2000 / OUG 627
Share capital:	733,031,420 RON, subscribed and paid
Trading regulated market for the issued securities:	Bucharest Stock Exchange, Premium Category
The main features of the issued securities:	73,303,142 shares with a nominal value of 10 RON / share, dematerialized, registered, ordinary, indivisible shares, freely tradable from August 29th, 2006 under the TEL symbol.
	20,000 bonds with a nominal value of 10,000 RON / bond, nominative, dematerialized and unsecured rd bonds, traded at the BSE, the Credit Title sector – 3 Category, corporate Bonds under the TEL 18 symbol, within the category; Maturity date December 19th , 2018.
Total market value:	1,623,664,595 RON (22.15 RONi/share as of 30.06.2018)
Applied accounting standard:	International Financial Reporting Standards
Audit:	The quarterly financial statements drafted on June 30th , 2018 are not audited

RESPONSIBLE PERSONS' STATEMENT

To our knowledge, the non-audited condensed stand-alone interim financial statements for the six-months period ended on June 30th, 2018, drafted according to the international accounting standard 34 (International Financial Reporting Standards as approved by the European Union) provide a correct and realistic view of CNTEE Transelectrica SA's assets, bonds, financial position, profit and loss account.

This report contains correct and complete information regarding the financial and economic situation and the activity of CNTEE Transelectrica SA.

Bucharest, August 14th, 2018

Directorate,

Adrian-Constantin RUSU

Directorate Chairman

Andreea Georgiana FLOREA

Directorate Member

Constantin SARAGEA

Directorate Member

Adrian-Mircea TEODORESCU

Directorate Member

Viorel VASIU

Key figures 6 M 2018 vs 6 M 2017

KEY FIGURES – 6 months 2018

FINANCIAL			OPERATIONAL
RON 1,233 mn	▼29.1% y/y	Revenues	2.76* ▲0.58pp %
RON 263 mn	▼7.7% y/y	EBITDA	21.91 ▲1.21% TWh y/y
RON 98.02 mn	▼0.4% y/y	Net income	energy).
27.96 TWh	▲2.0% y/y	Charged energy

%	▲0.58pp y/y	OTC
TWh	▲1.21% y/y	Transmitted energy***

OTC Own Technological Consumption

* The value of own technological consumption in the electric energy taken over by the power transmission grid (transmitted energy).

volume** ** The charged quantity is defined as the amount of energy extracted from the public electricity grids (transmission grid and distribution grid), except the exports of energy.

*** The transmitted quantity is defined as the amount of energy physically conveyed within the transmission grid.

INVESTMENTS
RON 82.44 mn	▼3.4% y/y	Purchase of tangible and intangible assets
RON 187.74 mn	▲396% y/y	Fixed assets recorded in the accounts (PIF)

Note: In order to facilitate reading and understanding of the results, certain figures presented in graphs and/or tables use RON million as the unit of measure and are rounded up to this unit. This presentation convention might cause, in certain cases, minor differences between the total figures obtained by adding up the components.

Financial data

The summary of the financial results on June 30th , 2018 is presented in the tables below. The financial results are not audited and the extended version for the same time period is presented in the Annexes to this Report.

Separate account of profit and loss
[RON mn] figures not audited	S1 2018	S1 2017	Δ	Δ (%)

Charged energy volume - TWh	27.96	27.40	0.56	2%
ALLOWED PROFIT ACTIVITIES
Operational revenue	560	615	(55)	(9)%
Transmission and other revenues on the	505	554	(49)	(9)%
electricity market Functional system services	33	36	(4)	(11)%
Other revenues	22	25	(3)	(11)%
Operational costs	330	330	0	0%
System operation costs	150	129	21	16%
Repairs and maintenance	38	34	4	12%
Salaries and other retributions	89	88	1	1%
Other costs	53	79	(26)	(33)%
EBITDA	230	285	(55)	(19)%
Depreciation	151	156	(5)	(3)%
EBIT	79	129	(50)	(39)%
ZERO-PROFIT ACTIVITIES
Operational revenue	673	1,124	(451)	(40)%
Technological system services	342	319	24	7%
The balancing market	331	805	(474)	(59)%
Operational costs	640	1,124	(484)	(43)%
Technological system services	309	319	(10)	(3)%
The balancing market	331	805	(474)	(59)%
EBIT	33	0	33	n/a
ALL ACTIVITIES (WITH ALLOWED PROFIT AND ZERO-PROFIT)
Operational revenue	1,233	1,739	(506)	(29)%
Operational costs	970	1,454	(484)	(33)%
EBITDA	263	285	(22)	(8)%
Depreciation	151	156	(5)	(3)%
EBIT	112	129	(17)	(13)%
Financial result	(5)	(8)	2	(38)%
EBT	107	120	(14)	(11)%
Income tax	9	22	(13)	(61)%
Net income	98	98	0	0%

Stand-alone situation of financial position
[RON mn] figures not audited	June 30th, 2018	December 31st, 2017 As per HAGA no. 6/30.04.2018	Δ	Δ (%)
Fixed assets
Tangible assets	2,952	3,044	(92)	(3)%
Intangible assets	16	16	0	1%
Financial assets	80	78	2	3%
Total fixed assets	3,048	3,138	(90)	(3)%
Current assets
Inventories	35	32	3	9%
Clients and assimilated accounts	716	818	(102)	(13)%
Other financial assets	125	0	125	n/a
Cash and equivalents	546	521	25	(4.8)%
Total current assets	1,421	1,371	51	3.7%
TOTAL ASSETS	4,469	4,509	(39)	(1)%
Shareholders' equity	2,817	2,718	99	4%
Non-current liabilities
Loans	156	195	(39)	(20)%
Other liabilities	477	488	(11)	(2)%
Total non-current liabilities	633	684	(50)	(7)%
Current liabilities
Loans	303	317	(14)	(4)%
Other liabilities	716	791	(75)	(9)%
Total current liabilities	1,019	1,108	(89)	(8)%
Total liabilities	1,652	1,792	(139)	(8)%
Shareholders' equity and liabilities	4,469	4,509	(39)	(1)%

Stand-alone situation of treasury flow
[RON mn] figures not audited	S1 2018	S1 2017	Δ	Δ (%)
Treasury flow before changing the working capital	262	305	(43)	(14)%
Treasury flows from the operating activity	296	(3)	299	n/a
Net cash from the operating activity	280	(8)	288	n/a
Net cash from the investment activity	(196)	(112)	(84)	n/a
Net cash used in the financing activity	(60)	(191)	132	n/a
Net increase/decrease in cash and cash equivalents	25	(311)	336	n/a
Cash and cash equivalents as of January 1st	521	934	(413)	(44)%
Cash and cash equivalents at the end of the period	546	622	(77)	(12)%

OPERATIONAL RESULTS

Charged energy volume

In the first semester of 2018, the total charged energy volume for the services performed on the energy market (27.96 TWh) registered an increase of 2% compared to the first semester of 2017 (the difference between the two periods being +0.6 TWh).

This trend was identified in every analyzed month of 2018, mainly in the months of January and February when, due to the very low temperatures, the energy consumption was high.

Operational revenue

The total operational revenue of the first semester of 2018 registered a 29% decrease compared to the similar period of the previous year (RON 1,233 mn in the first semester of 2018, from RON 1,739 mn in the first semester of 2017).

The allowed profit activities segment registered a 8.98% decrease in revenues (RON 560 mn in first semester of 2018 from RON 615 mn in first semester of 2017), determined by the lowering of average tariffs for the transmission service starting with July 1st, 2017, given the increase in energy consumption.

The revenues from the interconnection capacity allocation registered a 22.2% decrease compared to the amount achieved in the first semester of 2017 (RON 30 mn in the first semester of 2018 from RON 38 mn in the first semester of 2017) related to the usage level of the interconnection availability by the traders on the energy market.

The mechanism for the allocation of interconnection capacity consists in organizing annual, monthly, daily and intraday auctions. The annual, monthly and intraday auctions are explicit – only the transmission capacity is bid on, and the daily ones with Hungary are implicit – are allocated simultaneously with the energy and capacity via the coupling mechanism.

On November 19th, 2014, the establishment of the regional energy exchange by Romania, Hungary, The Czech Republic and Slovakia means these four countries should reach the same electricity price for the volumes traded on spot markets. Capacity allocation between Romania and Hungary, the only one of the 3 countries Romania has a border with, is performed by the transmission operators: Transelectrica and MAVIR, using a common mechanism based on a bilateral agreement.

Starting with 2016, the UIOSI principle has been implemented at the border with Bulgaria, and starting with 2017 at the border with Serbia as well. According to this principle, the participants not using the capacity won at the annual and monthly auctions, are compensated (by Transelectrica) for that capacity. The spare capacity is subsequently sold in the daily auctions. On the Hungarian border the direction is reversed, meaning that MAVIR compensates the participants for the unused capacities.

The interconnection capacity allocation market is fluctuating, the prices evolve depending on demand and the need of the participants on the energy market to purchase interconnection capacity.

*Transmission tariff, functional system services, reactive energy, unplanned exchanges DAM, ITC

The zero-profit activities revenues registered a 40.10% decrease (RON 673 mn in the first semester of 2018, from RON 1,124 mn in the first semester of 2017), determined mainly by the 58.90% decrease of revenues on the balancing market, as a result of:

the negative imbalance registered at the level of electricity suppliers on the balancing market in the first semester of 2018 in comparison with the first semester of 2017, namely the significant reduction of the imbalance between the notified net contractual position and the actually delivered electricity;
accessing the available energy in dispatchable groups has maintained high values in the first semester of 2018 compared to the first semester of 2017;
the available energy in dispatchable groups has maintained high values in the first semester of 2018
the registration of higher quotas of the Danube flow level;
the functioning under good conditions, for the largest part of the first semester of 2018, of the coal, gas and nuclear plants.
higher hydraulicity in the first semester of 2018 compared to the first semester of 2017 (especially in April); the physical notifications generally exceeded the internal consumption at NPS level;

The balancing market represents a sector with zero profit for the Company.

In the first semester of 2018, the revenues from the performed technological services increased by 7% compared to the same period of 2017, due to the increase of the average tariffs for technological system services starting with January 1st, 2018, given the energy consumption increase.

Operational expenses

The total operational expenses (including depreciation) registered in the first semester of 2018 decreased by 30.4% compared to the similar period of the previous year (RON 1,121 mn, down from RON 1,611 mn in the same period of 2017) mainly as a result of non-profit segment evolution, but also as a result of registering lower amounts in the category of depreciation adjustments.

In the segment of activities with allowed profit, the expenses (including depreciation) registered a 1.09% decrease (RON 481 mn, down from RON 486 mn in the same period of 2017).

OTC: In the first semester of 2018, these expenses have increased with the amount of RON 20.5 mn compared to the ones registered in the first semester of 2017, due to the increase of the electricity quantity necessary to cover the OTC in PTG with ca. 30% (from 474,629 MWh in the first semester of 2017, to 616,816 MWh in the first semester of 2018).

Thus, in the first semester of 2018, the electricity for covering the OTC has been purchased on the free energy market, namely on the Centralized Market for Electricity Bilateral Contracts (CMBC), the Day–Ahead Market (DAM), the Balancing Market (BM) and the Intra–Day Market (IDM) at the average purchase price of 196.4 RON/MWh, compared to the average purchase price of 212.6 RON/MWh in the first semester of 2017.

*Preliminary values

Starting 18.01.2018 entered into force the Contract "Electricity Acquisition to Cover the Imbalances from the Notified Quantities for the Technological Loss of Electricity in Transport Electricity through Transfer of Balancing Responsibility" no. C380 / 06.10.2014, concluded between CNTEE Transelectrica SA and CIGA ENERGY SA, whereby the purchase prices of the energy on the balancing market were reduced.

Congestions: Congestions (grid restrictions) are requests for electricity transmission beyond the technical capacity of the network, requiring corrective actions from the transmission and system operator and occur in the situation in which, in the programming of the operation or the operation in real time, the power flow between two nodes or system areas leads to the non–compliance with the safety parameters in the operation of a power system.

In the first semester of 2018, the Company registered congestion related total expenses amounting to RON 5.4 mn due to the failure occurred on the Constanța Nord-Tariverde 400 kV OHL in February 2018 (RON 5.2 mn) as well as congestion related expenses amounting to RON 0.1 mn due to the compliance with the safety standard N-1 for the planned outage of the Roșiori-Mukacevo 400 kV interconnection OHL.

The zero-profit activities segment registered a 43.04% cost decrease (RON 640 mn from RON 1,124 mn in the same period of 2017), determined mainly by the decrease of expenses on the balancing market which followed the corresponding evolution of revenues.

These expenses result from the notifications/performances of participants on this market, being fully covered by revenues from the balancing market.

In the period January-June 2018, the technological system services expenses registered a 3.02% decrease compared to the similar period of 2017, generated by the purchase prices for technological system services from the competitive market which were lower compared to the same period of the previous year.

In the reported period, the Company purchased technological system services under regulated regime pursuant to the ANRE decisions and the applicable legal regulations.

In the first semester of 2018 the purchase of technological system services was conducted in the regulatory regime according to ANRE decision no. 906/2017 (from SC Hidroelectrica SA) and GD no. 760/11.10.2017, approving the "Winter Program in the Energy Sector for Assuring the safety and stability of the NES".

CNTEE Transelectrica SA re–invoices the value of the technological system services purchased from producers, to the electricity suppliers licensed by ANRE, entities who ultimately benefit from these services.

Operational result

The allowed profit activities registered a positive result of RON 79 mn, decreased from RON 129 mn (H1 2017) due to the lowering of the average transmission tariffs approved by ANRE for the transmission service (10%) and of the functional system tariffs (15%), as well as due to the lowering of revenues from interconnection capacity allocation.

EBIT generated by the zero–profit activities registered a positive result of RON 33 mn compared to result null at S1 2017 being influenced by the increase in the revenue of the technological system services generated by an increase of 5% in the tariffs.

For the entire activity, EBIT registered a decrease of ca. 13.08% (RON 112 mn, down from RON 129 mn in the period of January-June 2017).

Gross profit (EBT)

The gross profit registered a 11.36% decrease, from RON 120 mn in the period of January-June 2017, down to RON 107 mn in the period of January-June 2018.

The difference between the profit registered in January-June 2018 and January-June 2017, broken down in the constitutive elements of the profit, is presented in the graph below:

Financial result

The net financial result registered in January-June 2018 was a RON 5 mn. Compared to the net financial result registered in January-June 2017, the net loss registered in the reporting period of 2018 decreased by RON 3 mn. This was mainly influenced by the RON 2 mn decrease in net expenses with interest rates during the first semester of 2018 compared to the first six months of 2017, as well as the amounts collected as dividends from the Teletrans and Opcom branches amounting to RON 1 mn, while in 2017 these were collected during the second semester.

The evolution of the RON/euro and RON/usd exchange rate in the first semester of 2018 is presented in the graph below.

Exchange rate evolution

Net result

Given that gross profit was 11% lower in H1 by 2018 compared to H1 2017, net profit was comparable, due the application of tax deductions corresponding to reinvested earnings.

FINANCIAL POSITION

Fixed assets

Fixed assets registered a ca. 3% decrease in the first semester, due to a decrease in property, plant and equipment.

In the first semester of 2018, the Company registered a decrease in value of property, plant and equipment compared to December 31st, 2017, determined by the registration of the depreciation of such assets. In the first semester of 2018, the property, plant and equipment in progress are represented in particular by the investment works in high voltage electricity substation and lines, and the biggest transfers from tangible assets in progress to tangible assets are mainly represented by the creation of assets of the investment objectives.

Current assets

Current assets recorded a 4% increase in the first semester of 2018 (RON 1,421 mn) compared to the value registered as of December 31st, 2017 (RON 1,371 mn), mainly determined by the RON 125 mn increase in "Other financial assets", representing bank deposits with maturity over 90 days, consisting of cash available in current accounts, which were dissolved as of December 31st, 2017.

On June 30th, 2018, the current customers in the operational activity and balancing market registered a decrease compared to December 31st, 2017, which was mainly determined by:

– the decrease in the electricity quantity delivered to consumers in May and June of 2018, compared to November and December of 2017 and the collection of receivables;

– the decrease in trades on the balancing market (current receivables amounting to RON 184.6 mn).

On June 30th, 2018, the Company registered receivables to be collected from the bonus type support scheme for promoting the high-efficiency cogeneration in a proportion of approximately 27% (December 31st , 2017 – 26%) of the total trade receivables.

The customers from the bonus type support scheme for promoting the high-efficiency cogeneration registered a decrease in the receivables on June 30th, 2018, mainly determined by the collection of receivables related to the ANRE decisions on the overcompensation of the cogeneration activity for 2017, amounting to RON 140 mn, registered according to the ANRE Decisions issued in the month of March 2018, on the overcompensation of the activity regarding the support scheme for the year of 2017, as well as the amounts spread up for payment in the first semester for the overcompensation related to 2015 from SC Electrocentrale Oradea SA.

In the timeframe January 1st – June 30th, 2018, the amounts related to the bonus type support scheme have decreased compared to December 31st, 2017, as a result of the collection of receivables, mainly due to the collection via bank transactions (RON 7.8 mn) related to the overcompensation for the year of 2015 from Termoficare Oradea (for Electrocentrale Oradea, according to the staging Convention).

On June 30th, 2018 the Company registered receivables amounting to RON 210.3 mn, represented by the issued invoices under the bonus type support scheme for highefficiency cogeneration, out of which:

– overcompensation for the period of 2011-2013 in the amount of RON 76.7 mn, namely from RAAN – RON 63.4 mn and CET Govora SA – RON 13.2 mn;

– undue bonus for 2014 amounting to RON 3.9 mn, namely from RAAN – RON 2 mn, CET Govora – RON 1.9 mn;

– undue bonus for 2015 amounting to RON 0.5 mn, namely from CET Govora – RON 0.53 mn and Interagro – RON 0.3 mn;

– overcompensation for 2015 in the amount of RON 2 mn, namely from Electrocentrale Oradea (debt taken over by Termoficare Oradea);

– overcompensation for 2016 amounting to RON 56.7 mn, namely from Electrocentrale București;

– cogeneration contribution not collected from the suppliers of energy consumers, amounting to RON 20.8 mn, namely from: Transenergo Com – RON 5.8 mn, PetProd – RON 4.3 mn, Romenergy Industry – RON 2.7 mn, RAAN – RON 2.4 mn, UGM Energy – RON 1.8 mn, CET Govora – RON 0.9 mn, KDF Energy – RON 0.9 mn and others.

grounds of compensations made via the Management and Informatics Institute (on the grounds of GD no. 685/1999) in the amount of RON 49.4 mn (out of which: Electrocentrale București – RON 35.7 mn; CET Govora – RON 10.7 mn; Enet SA – RON 3 mn).

On June 30th, 2018, "Other receivables" amounting to RON 120 mn mainly included:

various debtors (RON 102 mn), out of which:

– interest on late payments computed for clients in default of payment, amounting to RON 61.9 mn (of which the amount of RON 26 mn represents penalties related to the support scheme). The highest interests on late payments have been registered by the following clients: RAAN (RON 16.9 mn), SC CET Govora (RON 9.6 mn), SC Eco Energy SRL (RON 8.9 mn), SC Petprod SRL (RON 8.9 mn), Total Electric Oltenia (RON 3.3 mn), Arelco Power (RON 2.8 mn), Enol Grup (RON 2.5 mn) Also Energ (RON 2.1 mn). Impairment adjustments were recorded for the interest on late payments calculated for the late payment on receivables from the operational activity;

– down payments made to the supplier ELCOMEX – IEA SA amounting to RON 31.2 mn for which penalties amounting to RON 0.69 mn have been calculated. The down payments have been granted to the supplier ELCOMEX - IEA SA for performing the projects and are secured with the insurance policies issued by Asito Kapital S.A.

On April 7th, 2017 the Court of Constanta, Section II Civil, by Hearing protocol no. 294/2017, upheld the application for a declaration of insolvency of the debtor Elcomex – IEA SA, naming Pricewaterhouse Coopers Business Recovery Services IPURL as insolvency administrator.

At the date of the financial statements, the amounts guaranteed by ASITO KAPITAL SA for the payment of down payments have not been recovered, the Company registered impairment adjustments amounting to RON 31.18 mn.

– receivables from OPCOM representing VAT for the contribution in kind to the subsidiary's equity, amounting to RON 4.5 mn;

deferred expenses amounting to RON 7.8 mn mainly represented by the advances on contracts concluded with the suppliers of electricity needed for covering the own technological consumption for future periods (RON 1.8 mn), a guarantee fee for the BEI 25710 loan (RON 0.08 mn) and commission of ING credit granting (RON 0.02 mn), levies paid for 2018 to national and international institutions (RON 2.3 mn), rents (RON 0.6 mn), ANRE yearly contribution (RON 1.5 mn);
other long-term receivables amounting to RON 4.5 mn, out of which RON 4.2 mn represent guarantees for temporary occupation of the land calculated and retained in accordance with Article 39 (1), (2) and (5) of Law no. 46/2008 on the Forestry Code, in order to achieve the investment objective Resita-Pancevo (Serbia) 400 kV OHL.

Liabilities

Long-term liabilities in the amount of RON 633 mn on June 30th, 2018 have registered a 7% decrease as a result of reimbursements performed in the first semester of 2018, as per the current loan agreements.

At the same time, short-term liabilities have registered an 8% decrease (from RON 1,108 mn as of December 31st , 2017, to RON 1,019 mn as of June 30th, 2018 mainly determined by:

the 11% decrease in trade payables and other liabilities (from RON 700 mn as of December 31st , 2017, to RON 623 mn as of June 30th, 2018), due to:

the decrease in the balance of debts related to the balancing market was determined by the payment of current obligations on the electricity market on December 31st, 2017 and by the decrease in the trading volume on the balancing market in the first semester of 2018 compared to the fourth quarter of 2017.
the decrease in debts related to the support scheme towards the suppliers (producers) was determined by the payment of the invoices issued as per ANRE decisions for the undue bonus and the anteovercompensation for 2017.

As of June 30th, 2018, the largest share position "Different creditors" category in the amount of RON 107 mn, represents the debt of the support scheme for highefficiency cogeneration, in amount of RON 105.7 mn (December 31st, 2017: RON 30.4 mn).

The interest bearing debts (long-term and short-term) are structurally presented in the following:

Structure per currency at June 30th, 2018

Shareholders' equity

Shareholders' equity registered a 4% increase mainly due to the 9% increase in retained earnings (RON 1,379 mn on June 30th, 2018, compared to RON 1,259 mn on December 31st, 2017) following the transfer of the result of the first half of the year 2018.

EVOLUTION OF SHARES

(January 1st, 2018 to June 30th , 2018)

In the period between January and June 2018, the Transelectrica share (BSE symbol: TEL) registered a weaker evolution compared to the main index of the Bucharest Stock Exchange (BET) but also compared to the BET-NG index.

2018 debuted with a trading price of 24.55 RON/share while the market capitalization amounts to RON 1,624 mn and the share price at the end of the period (June 30th, 2018) amounted to 22.15 RON. The minimum trading price was registered on 04.06.2018 and it amounted to 19.40 RON/share, and the maximum of 27.25 RON/share was registered on 23.01.2018.

Operational data

THE ENERGY BALANCE OF NPS

Analyzing the development of the energy balance components in the period of January-June 2018 compared to the same period of the previous year, we can see that the net internal consumption¹ rose by 2.4% and the net energy production rose by 0.7%.

The physical cross-border exchanges for export decreased by 18.9% compared to the similar period of 2017, while the cross-border flows for import registered a decrease of 13.02%.

GENERATION MIX

In the period of January-June 2018 compared to 2017, the generation mix structure registered a decrease in the weight of the thermal component of approximately 6.6%, of the nuclear component of 1.9% and of the renewable sources generation of 9.3%.

The weight of the hydro component registered a 19.5% increase (9.6 TWh compared to 8.1 TWh).

Analyzing the weights of the net generation mix components for January-June 2018, we observe that the highest weight (38%) is represented by the thermal component, followed by the hydro component (31%), and the energy generated from renewable and nuclear sources has a weight of approximately 15% and 16% respectively.

NATIONAL PRODUCTION PARK

In the first semester of 2018, the gross capacity installed in power plants registered a 0.6% decrease compared to the same period of 2017.

The capacity installed in renewable energy power plants rose by approximately 0.01%, from 4,534 MW installed on June 30th, 2017, to 4,535 MW installed on June 30th , 2018.

The dynamics of the installed capacity corresponding to the period of January-June 2018 and 2017 respectively is presented further below:

48.3% 18.4% 5.7% 27.5% 2.9% 66.8% 30.3% Photovoltaic 4,535 Wind Biomass Thermal Nuclear Hydro Renewable

Installed capacity S1 2018 (24,604 MW, gross value)

¹ values do not include the consumption of auxiliary services from the power plants generating electricity; the value of the net load includes the losses from transmission and distribution grids, as well as the consumption of pumps from the pumping storage hydropower substations.

Installed capacity S1 2017 (24,742 MW, gross value) 27.3% 5.7% 48.6% 18.3% 2.9% Photovoltaic 66.7% Wind 30.4% 4,534 Biomass Thermal Nuclear Hydro Renewable

OWN TECHNOLOGICAL CONSUMPTION

CROSS-BORDER FLOWS

The cross-border flows have registered significant evolutions in relation to Serbia, Bulgaria and Ukraine.

Thus, compared to the first semester of 2017, the physical flows for export decreased on the Bulgarian (42.4% -884 GWh) and Serbian (48% -548 GWh) interconnection, while increases were registered on the Hungarian and Ukrainian interconnections.

Analyzing the physical flows for import we observe increases on the Bulgarian and Serbian interconnections, while on the Hungarian and Ukrainian interconnections we observe decreases.

In the first semester of 2018, the degree of usage of the total capacity allocated on the interconnection lines for export decreased compared to the first semester of 2017 on most destinations; the interconnection with Ukraine was the only one to register an increase (+9pp).

Degree of usage of the total allocated capacity (%)

The physical flows for both import and export on each border are presented below:

In the first semester of 2018, the OTC in PTG rose by ca. 27.90% compared to the similar period of 2017, due to the disadvantageous physical import/export flows throughout the analyzed period, due to the disadvantageous distribution of production in the month of April but also due to the significantly disadvantageous weather conditions in the month of June which determined the accentuated increase of Corona losses. Reported to the energy contour input, the losses increased from 2.18% to 2.76%.

PHYSICAL OTC GROWTH FACTORS

In January 2018, the absolute value of the OTC rose by ca. 18.51% compared to January 2017, due to the disadvantageous physical import/export flows and the disadvantageous distribution of production which led to the increase of the energy transmission remotely from the sources, and due to the significantly disadvantageous weather conditions which determined the increase of Corona losses. The losses percentage reported at the PTG-input energy rose from 2.05% in 2017 to 2.44% in 2018. The net internal energy consumption was 3.16% lower compared to January 2017. The contour input energy decreased by 0.29% in January 2018, compared to the similar period of 2017. The rainfall quantities registered were also higher than in the previous year.

In February 2018, the absolute value of the OTC rose by ca. 33.74% compared to February 2017, due to the disadvantageous physical import/export flows and the disadvantageous distribution of production which led to the increase of the energy transmission remotely from the sources, and due to the significantly disadvantageous weather conditions which determined the increase of Corona losses. The losses percentage reported at the PTG-input energy rose from 2.28% in 2017 to 2.81% in 2018. The net internal energy consumption in February 2018 was 2.6% higher compared to February 2017. The contour input energy increased by 8.34% in February 2018, compared to the similar period of 2017. The weather conditions have been more unfavorable, the rainfall quantities recorded in the South area, with the highest density in transmission lines, being much higher than in the previous year.

In March 2018, the absolute value of the OTC rose by ca. 47.56% compared to March 2017, due to the disadvantageous physical import/export flows and the disadvantageous distribution of production which led to the increase of the energy transmission remotely from the sources, and due to the significantly disadvantageous weather conditions which determined the increase of Corona losses. The losses percentage reported at the PTG-input energy rose from 2.31% in 2017 to 3.26% in 2018. The net internal energy consumption in March 2018 was ca. 10.9% higher compared to March 2017. The contour input energy increased by 4.43% in March 2018, compared to the similar period of 2017. The weather conditions have been much more unfavorable, the registered rainfall quantities being much higher than in the previous year (in the Oltenia area, one of the areas with the highest density in transmission lines, the rainfall quantity was nearly four times higher compared to March 2017).

In conclusion, in the first quarter of 2018, the OTC in PTG rose by ca. 33.26% compared to the similar period of 2018, due to the disadvantageous physical import/export flows and the disadvantageous distribution of production which led to the increase of the energy transmission remotely from the sources, and due to the significantly disadvantageous weather conditions which determined the accentuated increase of Corona losses. Reported to the energy contour input, the losses increased from 2.21% to 2.83%.

In April 2018, the absolute value of the OTC rose by ca. 36.08% compared to April 2017, due to the disadvantageous physical import/export flows and the disadvantageous distribution of production which led to the increase of the energy transmission remotely from the sources. The losses percentage reported at the PTGinput energy rose from 2.05% in 2017 to 3.01% in 2018. The net internal energy consumption was 1.45% lower compared to April 2017. The contour input energy decreased by 7.55% in April 2018, compared to the similar period of 2017. The weather conditions have been more favorable, the rainfall quantities registered being lower than in the previous year.

In May 2018, the absolute value of the OTC rose by ca. 6.66% compared to May 2017 due to the disadvantageous physical import/export flows. The losses percentage reported at the PTG-input energy rose from 2.29% in 2017 to 2.48% in 2018. The net internal energy consumption was 1.40% higher compared to May 2017. The contour input energy decreased by 1.37% in May 2018, compared to the similar period of 2017. The weather conditions have been more favorable, the rainfall quantities registered being lower than in the previous year.

In June 2018, the absolute value of the OTC rose by ca. 22.74% compared to June 2017 due to the disadvantageous physical import/export flows and due to the disadvantageous weather conditions which determined the increase in Corona losses. The losses percentage reported at the PTG-input energy rose from 2.13% in 2017 to 2.53% in 2018. The net internal energy consumption was 3.8% higher compared to June 2017. The contour input energy increased by 3.3% in June 2018, compared to the similar period of 2017. The weather conditions have been disadvantageous, the rainfall quantities registered being amongst the highest registered in the month of June.

In the second quarter of 2018, the OTC in PTG rose by ca. 21.5% compared to the similar period of 2017, particularly due to the disadvantageous physical import/export flows throughout the analyzed period, due to the disadvantageous distribution of production in the

month of April but also due to the significantly disadvantageous weather conditions in the month of June which determined the accentuated increase of

Corona losses. Reported to the energy contour input, the losses increased from 2.15% to 2.67%.

Investments

FIXED ASSETS REGISTERED IN THE ACCOUNTS

The value of fixed assets recorded in the accounts in the first semester of 2018 amounted to RON 187.74 mn.

In the first semester of 2018, the biggest transfers from tangible assets in progress at tangible assets are mainly represented by the creation of assets of the investment objectives, so:

400 kV OHL interconnecting Reșița (Romania) Pancevo (Serbia) – RON 98.59 mn;
Upgrading the Suceava 110 kV and 20 kV substation – RON 16.65 mn;
Upgrading the Cluj Est 400/110/10 kV substation RON 13.39 mn;
Replacing AT and Trafo in the substations, Stage 2 – RON 11.58 mn;
Upgrading the command-control-protection system of the Sărdănești 220/110/20 kV substation – RON 11.01 mn;
Connection of Turnu Măgurele, Mostiștea, Stâlpu, Teleajen substations to the optical fiber network of CNTEE Transelectrica SA – Batch 2 – RON 4.50 mn;
Reparation of the failure of the 110-120 terminals of the Bucharest Sud-Ghizdaru 220 kV OHL – RON 4.27 mn;
Replacing AT 2 200 MVA, 231/121/10.5, from the Reșița 220/110 kV substation – RON 4.25 mn;
Equipment for videowall type display for the control rooms of the dispatching centers DEC/DET – RON 3.69 mn;
Assembling the optic fiber and upgrading the system of distance protections on the Țânțăreni-Turceni 400 kV OHL d.c. and the Urechești-Rovinari 400 kV OHL s.c. – RON 2.84 mn;
Assembling the optic fiber on the Fundeni-Brazi Vest 220 kV OHL – Batch 1 – RON 2.39 mn;
Upgrading the 110/6 kV substation from the Pestiș 220/110/6 kV substation – RON 1.83 mn;
Upgrading the hardware platforms of the SCADA system in the Slatina substation – RON 1.79 mn;
Computing and software hardware and software – laptops – RON 1.38 mn;
Replacing the connectors from electrical substations – RON 0.98 mn;
Relocation of the 220 kV high voltage networks Sebeș-Turda highway, Batch 1, km 0+000 – km 17+000, section A – Alba Iulia-Șugag 220 kV OHL d.c., Gâlceag, km 7+800, in the 25-26 opening and km 11+080 – milestone 15 – RON 0.73 mn;
Converting the Porțile de Fier-Reșița-Timișoara-Săcălaz-Arad axis to the 400 kV voltage – stage I – Porțile de Fier-(Anina)-Reșita 400kV OHL s.c. – RON 0.70 mn;
Regulating the coexistence between the Mintia-Sibiu 400 kV OHL, in the 6-8 opening, and the Lugoj-Deva highway, Batch 4, Ilia-Deva district, km 77+361 - km 99+500 – RON 0.64 mn;
Replacing the accumulator batteries no. 1, 2, 3 and 4 in the Porțile de Fier substation – RON 0.42 mn.

PURCHASES OF ASSETS

The purchases of tangible and intangible assets in the first semester of 2018 amount to RON 82.44 mn, compared to the first semester of 2017 when the purchases amounted to RON 85.30 mn.

The balance of tangible assets in progress on June 30th, 2018 is represented by the projects in progress, the most significant being listed below:

Technical upgrade of the Bradu 400/220/110/20 kV substation – RON 40.33 mn;
PTG connection of the Ivești 300 MW WPP, Fălciu 1 88 MW WPP and Fălciu 2 18 MW WPP via the new Banca (400)/220/110 kV substation – RON 46.88 mn;
Converting the Porțile de Fier-Reșița-Timișoara-Săcălaz-Arad axis to the 400 kV voltage – stage I – Porțile de Fier-(Anina)-Reșita 400kV OHL s.c. – RON 20.37 mn;
Technical upgrade of the Oțelărie Hunedoara 220 kV substation – RON 3.63 mn;
Extending the services providing business continuity and recovery after disasters – RON 14.41 mn;
Integrated security system in electric substations, stage IV – RON 10.30 mn;
Technical update of the Turnu Severin Est 220/110 kV substation – RON 6.24 mn;
Connecting the Isaccea-Varna 400 kV OHL and the Isaccea-Dobrudja 400 kV OHL in the Medgidia Sud 400 kV substation – RON 10.86 mn;
Cernavodă-Stâlpu 400 kV OHL d.c. and connection in Gura Ialomiței – RON 8.39 mn;
Converting the Porțile de Fier-Reșița-Timișoara-Săcălaz-Arad axis to the 400 kV voltage – stage I – Reșița 400/220/110 kV substation – RON 6.61 mn;
400 kV HVDC Link (submarine cable Romania-Turkey) – RON 5.85 mn;
Technical upgrade of the Isaccea 400 kV substation – Stage I – replacing the compensation bobbins, the corresponding cells and the Stupina 400 kV cell – RON 5.39 mn;
Gădălin-Suceava 400 kV OHL, including the NPS interconnection – RON 6.02 mn;
Technical upgrade of the Hasdat 220/110 kV substation – RON 4.45 mn;
Suceava-Bălți 400 kV OHL, for the part of the project on Romanian territory – RON 4.43 mn;
Extending the control system with new functions and IT registration of access in the objectives of CNTEE Transelectrica SA – RON 3.20 mn;
Gutinaș-Smârdan 400 kV OHL d.c. RON 3.22 mn;
Converting of the Porțile de Fier-Reșița-Timișoara-Săcălaz-Arad axis to 400 kV, stage II, Reșița-Timișoara-Săcălaz 400 kV OHL d.c. (Timișoara 220/110 kV substation) – RON 3.22 mn;
Connecting the Platonești 136 MW WPP, Ialomița county, to the PTG through constructing a 110 kV cell in the Gura Ialomiței 400/110 kV substation – RON 2.88 mn;
Integrated security system in electric substations, stage III – RON 2.79 mn;
Upgrading the Arefu 220/110/20 kV substation RON 2.80 mn;
Upgrading the Răureni 220/110/20 kV substation RON 2.77 mn;
By-passing the Cetate 1 & 2 110 kV OHL in the proximity of the Ostrovul Mare 110/20/6 kV substation – RON 2.57 mn;
Connecting the Dumești 99 MW WPP and the Românești 30 MW WPP, Iași county, to the PTG, through constructing a 110 kV cell in the FAI 220/110 kV substation – RON 2.54 mn;
Upgrading the Dumbrava 220/110 kV substation RON 2.62 mn;
Security solution for implementing the security measures related to classified information – RON 2.02 mn;
Executive DCBPA / CPA: Consolidation, upgrading and extension of the CNTEE "Transelectrica" headquarters – RON 1.62 mn;
Replacing the connectors from electrical substations – RON 3.21 mn;
Integrated security system at the new Banca (400) 220/110 kV substation – RON 1.13 mn;
Performing the optical fiber communication system between the Pitești Sud 110 kV substation and the center for remote control and supervision for installations of Pitești transportation branch – RON 1,08 mn;
Connecting the Stupina 400 kV substation to the PTG and connecting the Isaccea – Varna 400 kV OHL – RON 0.87 mn;
Technical upgrade of the Tulcea Vest 400/110/20 kV substation – construction part – RON 2.73 mn;
Ostrovu Mare 220 kV OHL d.c. PTG RON 0.75 mn;
Oradea–Beckescsaba 400 kV OHL–RON 0.77 mn;
Stâlpu 400 kV substation RON 0.75 mn;
Converting the Brazi Vest-Teleajen-Stâlpu 220 kV OHL to 400 kV, including the purchase of the 400MVA 400/220/20 kV AT, extension works for the transportation branch – RON 0.69 mn;
Technical upgrade of the Domnești 400/110/20 kV substation – RON 0.60 mn;
Research and development center for technologies for working under voltage (LST) and rapid intervention in the NPS – center building – RON 1.42 mn;
Connecting the Sarichioi 33 MW WPP, Tulcea county, to the PTG, in the Zebil 110 kV OHL cell from the Tulcea Vest 400/110 kV substation – RON 0.63 mn;

CONTRACTUAL MATTERS

The most important investment contracts concluded in the first semester of 2018 are:

Technical upgrade of the Smârdan 400/110/20 kV substation – RON 107.2 mn;
Technical upgrade of the Hășdat 220/110 kV substation – RON 49.7 mn;
Technical upgrade of the Craiova Nord 220/110 kV substation – RON 46.07 mn;
Connecting the Isaccea-Varna 400 kV OHL and the Isaccea-Dobrudja 400 kV OHL in the Medgidia Sud 400 kV substation, stage II – 400 kV OHL d.c., connections in the Medgidia Sud substation – RON 41.5 mn.

Significant events

EVENTS OCCURRED IN JANUARY – MARCH 2018

DECISION NO. 1 of the General Assembly of Shareholders – Acceptance of the mandate as provisional member of the Board of Supervisors

The Company's Ordinary General Assembly of Shareholders recalls Beatrice AMBRO from the position of provisional member of the Board of Supervisors of the Company and appoints Constantin DUMITRU as provisional member of the Board of Supervisors, with a mandate duration until March 30th, 2018, also approving the form of the mandate contract.

The appointment of Constantin DUMITRU became effective starting with January 15th, 2018, the date of signing before a notary public of the declaration of acceptance of the mandate as provisional member of the Company's Board of Supervisors.

Extending the Directorate mandate

On January 15th, 2018, the Board of Supervisors decided the extension of the mandate contract of the provisional members of the Directorate, via an Addendum for a period of 2 months, namely up to March 16th, 2018. Thus, the Directorate structure was the following:

Georgeta-Corina POPESCU 2. Andreea-Georgiana FLOREA 3. Dan-Valeriu ARDELEAN 4. Mircea-Toma MODRAN 5. Florin-Cristian TĂTARU.

Public consultation regarding the Implementation Framework for the European platform for the imbalance netting process

Pursuant to Article 22 (1) of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing (also available on www.transelectrica.ro under the Pan-European Codes section), within six months since the entry into force of the regulation, all TSOs develop a proposal regarding the implementation framework for the European platform for the imbalance netting process.

Thus, the Project Team Imbalance Netting work group was founded at ENTSO-E level, aiming to prepare all deliverables related to the imbalance netting process for the future European Platform, in accordance with the requirements provided in the Regulation. To date, this work group completed the Implementation Framework document and initiated the public consultation. This public consultation refers to the proposal developed by all TSOs regarding the implementation framework of a European Platform for the imbalance netting process, as per Article 22 of the Code.

The public consultation was launched on ENTSO-E's webpage on January 15th, 2018 at 12:00 o'clock, and closed on March 15th, 2018 at 12:00 o'clock.

Fire at the București Sud substation

The fire started on Monday, January 22nd, 2018 at 21:23 o'clock at an equipment from the București Sud 400/220/110 kV transformation substation impacted neither the electricity supply for consumers, nor the operational security of the national power system. Firefighters extinguished the fire and there were no injuries or material damages. The equipment impacted by the fire (bucking coil) shall be investigated in order to establish the cause of the fire.

First consultation stage within the MARI project (Manually Activated Reserves Initiative)

The MARI and PICASSO projects are in the final stages of analyzing the results of the public consultation. The consultation process took place in November and December 2017. A total of 65 stakeholders participated at the MARI consultation and answered a questionnaire of 45 questions pertaining to the planification of the new platform. A total of 58 stakeholders took part in the PICASSO consultation, answering 67 questions.

Two meetings took place in order to discuss the aforementioned consultations, as well as other important developments within the two projects.

The feedback provided during the consultations and workshops will be reflected in preparing the proposals for the implementation frameworks of the mFRR and aFRR platforms. The proposals for the implementation frameworks will be consulted upon this summer with the stakeholders before their completion and submission to the NRAs for approval.

Notification regarding the intention to amend the framework sale and purchase agreement for ancillary services

The Company proposed to amend the framework sale and purchase agreement for ancillary services between the Ancillary services supplier and the Transmission and System Operator, governed by the provisions of Order no. 21/2007 of the ANRE Chairman.

In order to identify a solution accepted by all ancillary services market participants, a public consultation will be launched pertaining to the proposals of the Company regarding the amendment of the framework sale and purchase agreement for ancillary services between the Ancillary services supplier and the Transmission and System Operator, governed by the provisions of Order no. 21/2007 of the ANRE Chairman.

European Commission's approval from January 25th, 2018 of the grant amounting to 27,085,000 euro for constructing the Cernavodă-Stâlpu 400 kV electrical line

The project for construction the Cernavodă-Stâlpu 400 kV electrical line is the first of the six projects of common interest of Transelectrica, included on the list revised in November of last year, to receive financing from the European Commission.

The Cernavodă-Stâlpu overhead electrical line shall contribute to the increase in interconnection capacity between Romania and Bulgaria and to the integration of wind energy in the Dobrogea area.

The Cernavodă-Stâlpu line project, part of the Black Sea Corridor cluster, is one of the six major investment objectives carried out by the National Power Grid Company Transelectrica SA which are on the third list of projects of common interest (PCI) regarding the energy infrastructure, adopted last year in November by the European Commission. The total value of the six investment projects amounts to ca. one billion RON. All of these projects contribute to the construction of the 400 kV national ring, an objective included in the program for government which leads to an increase of the operational security of the NPS and to reaching an economical operational regime of the PTG.

The construction of this line is a necessity, considering the development perspectives of the generation park in the Dobrogea area. The Cernavodă-Stâlpu 400 kV line will have a length of ca. 160 km and in order to commission it, we must construct the Stâlpu 400 kV substation and extend the Cernavodă and Gura Ialomiței substations. As per the 10 years' development plan of CNTEE Transelectrica SA, the Cernavodă-Stâlpu 400 kV OHL will be completed in 2020.

DECISION NO. 3 of the Company's Ordinary General Assembly of Shareholders from March 5 th, 2018

The Company's Ordinary General Assembly of Shareholders established the Investment plan for the financial year of 2018 and the estimates for 2019 and 2020 and approved the Company's sets the statement of expenditure and revenue for the year of 2018, as well as the estimates for 2019 and 2020.

It also approves the purchase of consulting, assistance and/or representation legal services for the National Power Grid Company Transelectrica S.A. in connection with actual and potential litigations of the Company or, as the case may be, if the Company would be against actual/former members of the Board of Supervisors and Directorate for the execution of the mandate contracts concluded with them and the Directorate mandate for taking the necessary legal action for contracting the aforementioned consulting, assistance and/or representation legal services for the National Power Grid Company Transelectrica S.A. and for signing the contract with the law firm.

Appointment of provisional Directorate members

At the meeting of March 14th, 2018, the Board of Supervisors appointed as provisional Directorate members, starting with March 17th, 2018, the following persons:

Georgeta-Corina POPESCU
Andreea-Georgiana FLOREA
Dan-Valeriu ARDELEAN
Florin-Cristian TĂTARU

The mandate is granted for a 4-month period with the possibility of extension, for solid reasons, for another 2 months.

Pursuant to Art. 18 (4) of the Articles of Association of the Company, the Board of Supervisors appoints Mrs. Corina POPESCU as Directorate Chairman, alternatively called Chief Executive Officer – "CEO" –

of the National Power Grid Company "Transelectrica"– SA, starting with March 17th, 2018.

The provisional members of the Directorate, appointed on March 14th, 2018 by the Board of Supervisors, signed the declaration of acceptance of their mandates on March 15th, 2018, their appointment being effective since March 17th, 2018 according to the declaration of acceptance.

DECISION NO. 4 of the Company's Ordinary General Assembly of Shareholders from March 29th, 2018

The Company's Ordinary General Assembly of Shareholders appoints the following persons as provisional members of the Board of Supervisors starting with March 31st, 2018:

Cristian Eugen RADU
Liviu ILAȘI
Constantin DUMITRU
Fănel MIHALCEA
Ion CIUCULETE
Gheorghe OLTEANU
Alin-Sorin MITRICĂ

Web service in the information platform of the balancing market

The Company implemented the web services connection feature in the information platform the balancing market. Details regarding the new feature are available at: https://markets.transelectrica.ro/wse/damasservice.as mx.

DECISION NO. 5 of the Company's Ordinary General Assembly of Shareholders from March 29th, 2018

The Company's Ordinary General Assembly of Shareholders establishes the mandate duration for the provisional administrators to two months, starting with March 31st, 2018 and until May 30th, 2018 respectively, but no later than the conclusion of the selection procedures under G.E.O. 109/2011, if the procedure will be over within this timeframe.

EVENTS APRIL – JUNE 2018

Appointment of the provisional Supervisory Board Chairman

At the meeting from April 13th, 2018, the members of the Supervisory Board appointed Mr. OLTEANU Gheorghe to the position of Chairman of the Supervisory Board.

Appointment of a provisional Directorate member

At the meeting from April 20th, 2018, the Board of Supervisors appointed Mr. Adrian-Constantin RUSU in the position of provisional Directorate member. The term of office is granted for the period left until the mandate expiration of the Directorate members in office, namely until July 16th, 2018.

The appointment of Mr. Adrian-Constantin RUSU became effective starting with the date of signing before a notary public of the declaration of acceptance of the mandate as member of the National Power Grid Company "Transelectrica" S.A.

DECISION NO. 6 of the Company's Ordinary General Assembly of Shareholders from March 30th, 2018 on the approval of the Company's stand-alone and consolidated financial statements

The Company's Ordinary General Assembly of Shareholders approves the stand-alone and consolidated financial statements of CNTEE "Transelectrica"–SA for the financial year of 2017, amended by the registration of the loss resulted from the additional payment obligations recorded in the tax inspection report of ANAF – DGAMC, amounting to RON 75.7 mn, detailed in the Company's Memo no. 14134/March 29th, 2018, in the reported result resulted from the correction of accounting errors.

The distribution of the profit corresponding to the financial year of 2017 is approved with the following destinations:

Destination	Amount (RON mn)
Accounting profit remaining after deducting income tax as of December 31st, 2017	28.2
Allocation of accounting profit to the following destinations:
Legal reserve (5%)	2.6
Other allocations provided by law – exemption of reinvested income tax	12.5
Other allocations provided by law – revenues obtained in 2017 by allocating the interconnection capacity (net of income tax and legal reserve) – partial distribution, limited by the net profit	13.1
Profit not distributed	-

Approval is granted for the establishment of reserves amounting to RON 33.9 mn, corresponding to the income acquired from the transmission capacity allocation on the interconnection lines, left uncovered following the profit distribution of 2017 from the surplus acquired from revaluation reserves, non-taxable for the destination modification.

Approval is granted for covering of losses generated from actuarial losses amounting to RON 16.6 mn and covering the loss generated from additional payment obligations recorded in the tax inspection report of ANAF – DGAMC amounting to RON 75.7 mn, from the surplus acquired from the revaluation reserves, nontaxable for the destination modification.

Approval is granted for the discharge of the Directorate and Board of Supervisors members for the financial year of 2017.

Availability of Transelectrica's sustainability report for 2017

The sustainability report is published for the first time, developed according to the recommendations of the Global Reporting Initiative standard (GRI). This is a document which refers to 2017 and considers the Company's development with a clear orientation towards investments, sustainability and predictability.

The report is available online on www.transelectrica.ro, the Investor Relations and Financial Reports/Periodical Reports/Reports section.

Change of the Company's Directorate Chairman

On May 4th, 2018, the Board of Supervisors assigns the position of Directorate Chairman, alternatively called Executive General Manager or Chief Executive Officer – "CEO" of the National Power Grid Company "Transelectrica" SA, starting with May 7th, 2018, to Mr. RUSU Adrian-Constantin.

Starting with May 7th, 2018, the position of Mrs. Georgeta-Corina POPESCU as Directorate Chairman, alternatively called Executive General Manager or Chief Executive Officer – "CEO" of The National Power Grid Company "Transelectrica" SA ceases.

Conclusion of the agreement for financing through European funds of the project of common interest "Internal line between Cernavodă and Stâlpu" between the European Commission and Transelectrica on April 20th , 2018

The Company collected the first tranche on May 8th , 2018, amounting to 2.2 million euro, from the funds approved in January by the European Commission for building the high-voltage internal line Cernavodă-Stâlpu, one of the projects of common interest. The total value of the grant approved by the European Commission via the Connecting Europe Facility amounts to 27 million euro. This amount covers 50% of the investment's eligible expenses, the rest of the amount will be covered through the Company's own financial sources. The deadline for completion of the investment is December 31st, 2020.

The Cernavodă-Stâlpu d.c. 400 kV line aims at strengthening the cross section between the West coast of the Black Sea (Eastern Romania) and the rest of the European system, contributing at the same time to the strengthening of the Romanian electricity transmission grid, the increase in interconnection capacity between Romania and Bulgaria and the integration of wind energy in the Dobrogea area.

The new 400 kV line will have a length of ca. 160 km and in order to commission it, we must construct the Stâlpu 400 kV substation and extend the Cernavodă and Gura Ialomiței substations.

Investment of more than RON 83 mn, the Oradea-Bekescsaba 400 kV OHL

The project of the Oradea-Bekescsaba 400 kV Overhead Power Line – an investment of more than RON 83 mn blocked in 2008 due to expropriations – has been released following a Government Decision from May 10th, 2018, allowing the completion of the ongoing expropriation proceedings for privately held real estate which are currently found in the expropriation corridor for the public service construction of national interest: the Oradea-Bekescsaba 400 kV OHL. The same Government Decision approved funds for installing a 100 MVAr bucking coil in the Oradea Sud 400 kV substation and for purchasing telecommunication and broadcast equipment for the Oradea-Bekescsaba 400 kV OHL.

This Government Decision allows the completion of the Oradea-Bekescsaba 400 kV Overhead Power Line; this is a large-scale investment, with an updated value in 2014 of over RON 83 mn. Completing this investment is of crucial significance for the operational security of the National Power System.

Inauguration of the Reșița-Pancevo interconnection Overhead Power Line

Transelectrica launches the Reșița (Romania) – Pancevo (Serbia) interconnection 400 kV Overhead Power Line with a ceremony held in Reșița, in the presence of the management of both Romanian and Serbian transmission system operators. The investment amounts to RON 81.5 mn and is fully financed by Romanian companies.

The part of the Reșița-Pancevo 400 kV OHL on Romanian territory, completed on March 30th, 2018, is carried out in double circuit and crosses 11 cities from Caraș-Severin county.

The portion on Romanian territory has a length of 63 kilometres and a number of 206 poles.

The portion on Serbian territory has a length of 68 kilometres.

Construction works for the overhead line commenced in October 2014.

Appointment of the structure and setting forth the mandate of the Board of Supervisors

Decision no. 8 of the AGOA meeting from May 29th sets forth the duration of the mandate of the provisional members of Transelectrica's Board of Supervisors to four months, starting with 31.05.2018.

Decision no. 7 of the AGOA meeting sets forth the following structure of Transelectrica's Board of Supervisors:

Gheorghe OLTEANU
Ion CIUCULETE
Liviu ILIAȘI
Adrian MITROI
Alin-Sorin MITRICĂ
Fănel MIHALCEA
Constantin DUMITRU
Directorate member mandate waiver

In line with the provisions of the Mandate Contract no. C69/16.03.2018, Ms. Georgeta-Corina POPESCU requested the retirement from the position of Directorate member starting with June 1st, 2018.

2017 annual reporting availability

The reporting includes:

The stand-alone financial statements as of and for the financial year concluded on December 31st, 2017, drafted according to Order no. 2844/2016 of the Minister of Public Finances, as subsequently amended and supplemented, for the approval of the Accounting regulations in line with the International Financial Reporting Standards.
The independent auditor's report on the stand-alone financial statements as of and for the financial year concluded on December 31st, 2017, drafted according to Order no. 2844/2016 of the Minister of Public Finances, as subsequently amended and supplemented, for the approval of the Accounting regulations in line with the International Financial Reporting Standards.
The 2017 annual report on the stand-alone financial statements of CNTEE Transelectrica SA, drafted according to Order no. 2844/2016 of the Ministry of Public Finances, as subsequently amended and supplemented and according to Law no. 24/2017 on the issuers of finance instruments and market operations and to Annex 32 of Regulation 1/2006 issued by the National Securities Commission.
The consolidated financial statements as of and for the financial year concluded on December 31st, 2017, drafted according to the International Financial Reporting Standards, as subsequently amended and supplemented and adopted by the European Union.
The independent auditor's report on the consolidated financial statements as of and for the financial year concluded on December 31st, 2017, drafted according to the International Financial Reporting Standards, as subsequently amended and supplemented and adopted by the European Union.
The 2017 annual report on the consolidated financial statements of CNTEE Transelectrica SA, drafted according to the International Financial Reporting Standards, as subsequently amended and supplemented and adopted by the European Union.
The stand-alone financial statements as of and for the financial year concluded on December 31st, 2017, in line with Decision no. 6 of the Ordinary General Assembly of Shareholders of the National Power Grid Company "Transelectrica" – S.A. of April 30th, 2018, as per the current Report related to Decision no. 6/30.04.2018 of the AGOA, submitted to BSE on April 30th, 2018.
The consolidated financial statements as of and for the financial year concluded on December 31st, 2017, in line with Decision no. 6 of the Ordinary General Assembly of Shareholders of the National Power Grid Company "Transelectrica" – S.A. of April 30th, 2018, as per the current Report related to Decision no. 6/30.04.2018 of the AGOA, submitted to BSE on April 30th , 2018.
Note regarding the Stand-alone financial results included in the 2017 annual report, in line with Decision no. 6 of the Ordinary General Assembly of Shareholders of the National Power Grid Company "Transelectrica" – S.A. of April 30th, 2018.
Note regarding the Consolidated financial results included in the 2017 consolidated annual report, in line with Decision no. 6 of the Ordinary General Assembly of Shareholders of the National Power Grid Company "Transelectrica" – S.A. of April 30th, 2018.

CNTEE Transelectrica SA's affiliation to TSCNET

On June 5th, the AGEA approves CNTEE Transelectrica SA's affiliation to the Security Coordination Centre in the CORE region, TSCNET Services GmbH, via the Company's shareholding in this centre.

Appointment of the Board of Supervisors Chairman and appointment of a provisional member of the Directorate

The Board of Supervisors appointed On June 8th Mr. Gheorghe OLTEANU in the position of Board of Supervisors Chairman and Mr. Constantin SARAGEA in the position of provisional member of the Directorate.

The term of office of the provisional member of the Directorate is granted for the period left until the mandate expiration of the Directorate members in office, namely until July 16th, 2018.

Acceptance of mandate – provisional member of the Directorate

Mr. Constantin SARAGEA, appointed on June 8th , 2018 by the Board of Supervisors, signed the declaration of acceptance of his mandate on June 14th , 2018, his appointment being effective as of the date of signing the declaration.

14th Central & Eastern Europe Regional Energy Forum

The 14th Central & Eastern Europe Regional Energy Forum – FOREN 2018, with the main theme: "Central and Eastern Europe in the New Era of Energy Transition: Challenges, Investment Opportunity and Technological Innovations" was held in Costinești during 10-14 June. The event was organized by the Romanian National Committee of the World Energy Council (RNC-WEC), under the leadership of the World Energy Council.

CNTEE Transelectrica SA attended FOREN 2018 as co-organizer.

SUBSEQUENT EVENTS

Regulated tariffs in force as of July 1 st, 2018

ANRE Order no. 108/20.06.2018 was published in the Official Journal no. 519/25.06.2018, approving the average tariff of transmission services, the components of the transmission tariff introducing electricity into the grid (TG) and taking out electricity from the grid (TL), the tariff of system services and the regulated price of reactive electricity charged by the Company.

Thus, the regulated tariffs concerning to the electricity transmission service and system services effective as of July 1st, 2018, are:

	Tariff effective	Tariff effective	Differe
	by June 30th ,	as of July 1st ,	nce
Service	2018	2018
	RON/MWh	RON/MWh	%
I. Electricity	16.86	18.13	+7.5%
Transmission
II. Functional	1.11	1.11	-
system services
III. Technological	12.06	10.44	-13.4%
system services

Moody's granted the Company the Ba1 rating, with a perspective improvement from stable to positive

The International Credit Rating Agency Moody's Investors Service reconfirms the rating granted last year to the National Power Grid Company "Transelectrica", namely Ba1, with a perspective improvement from stable to positive.

The Moody's rating is a favourable objective opinion regarding Transelectrica's ability to comply with its financial obligations.

The rating's perspective improvement from stable to positive demonstrates that Transelectrica has very strong, stable and predictable financial values, which shows a development path characterized by a consistent implementation of regulatory norms which is expected to continue.

Changes in the Directorate structure

Since the mandate of the current Directorate members shall automatically be terminated on July 16th, 2018, the National Power Grid Company "Transelectrica" – S.A. informs the shareholders and investors that, at the meeting from July 11th, 2018, the Board of Supervisors decided the following:

extending the mandates of the following provisional members of the Directorate by a duration of 2 months, until September 16th , 2018:
Adrian-Constantin RUSU
Andreea Georgiana FLOREA
Constantin SARAGEA
appointing as provisional Directorate members with a 2-month mandate, starting with July 17th, 2018 and until September 16th, 2018, of the following persons:
Adrian-Mircea TEODORESCU
Viorel VASIU

The appointment of the aforementioned Directorate members becomes effective starting with the date of signing before a notary public of the declaration of acceptance of the mandate as member of the National Power Grid Company "Transelectrica" S.A. Directorate.

Pursuant to Art. 18 (4) of the Articles of Association of the National Power Grid Company "Transelectrica" – S.A., the Board of Supervisors appoints Mr. Adrian-Constantin RUSU as Directorate Chairman (alternatively called Chief Executive Officer – "CEO" – of the Company) of the National Power Grid Company "Transelectrica" – S.A., starting with July 17th, 2018.

Acceptance of mandates – provisional members of the Directorate

Changes in the Energy Law

In the Official Journal of Romania no. 604 of July 16 th , 2018 was published the Law no. 167 of July 10 th , 2018 for the amendment and completion of the Law on Electricity and Natural Gas no. 123/2012.

Investments completed in the first semester of 2018

The investments completed and put into service (PIF) during the first semester of 2018 amount to approximately RON 166 mn, of which the main objectives are the following:

400 kV OHL interconnecting Reșița (Romania) – Pancevo (Serbia);

Upgrade of the Cluj Est 400/110/10 kV substation; Replacing AT (autotransformers) and trafo (transformers) in substations – stage 2 – Batch I – Replacing AT1 – 200 MVA in the Craiova Nord 220/110 kV substation;

Replacing AT and trafo in substations – stage 2 – Batch I – Replacing AT2 – 200 MVA in the Arefu 220/110 kV substation; Upgrade of the commandcontrol-protection system of the Sărdănești 220/110/20 kV substation;

Upgrade of the Suceava 110 kV and 20 kV substation – stage II: 110 kV cells, AT – FAI 220 kV cell, 20 kV substation; Installing optical fiber on the Fundeni-Brazi Vest 220 kV OHL – Batch 1;

Connection of Turnu Măgurele, Mostiștea, Stâlpu, Teleajen substations to the optical fiber network of CNTEE Transelectrica SA – Batch 2.

Other Issues

SHAREHOLDERS' STRUCTURE

Shareholder's structure as of June 30th, 2018 is the following:

Shareholder name	No. of shares
The Romanian State	43,020,309
Dedeman SRL	4,323,567
Other shareholders - legal persons	20,280,101
Other shareholders - natural persons	5,679,165
Total	73,303,142

TARIFFS

The tariffs approved by ANRE (Order no. 48 / 2017) are presented in the table below:

Index	Tariff	UM	Tariff applied as of July 1st , 2016	Tariff applied as of July 1st , 2017	Difference %
A	Electricity transmission	RON/ MWh	18.70	16.86	-9.8%
B	Functional system service	RON/ MWh	1.30	1.11	-14.6%
C	Technological system service	RONi/ MWh	11.58	9.39	-18.9%
	Charged quantity	TWh	52.0	54.0	-

Electricity transmission service

The tariff decrease (-9.8%) is explained mainly by two factors:

1. The negative ex-post corrections - the negative corrections applied for the compensation of differences between the forecasted values used to calculate the tariff in the previous tariff years and the actual recorded values (final corrections for the year July 1st , 2015 - June 30th, 2016, preliminary corrections for the year July 1st, 2016 - June 30th, 2017).

DIRECTORATE MEMBERSHIP

On the date of issuing this report, the Directorate structure is the following:

Adrian Constantin RUSU	Chairman of the Directorate
Andreea Georgiana FLOREA	Directorate Member
Constantin SARAGEA	Directorate Member
Viorel VASIU	Directorate Member
Adrian-Mircea TEODORESCU	Directorate Member

The contribution of ex-post corrections to the decrease in the new approved tariff compared to the previous tariff is of -5.6%.

The most important elements of the ex-post corrections applied in calculating the new approved tariff are: (i) the price of energy purchased to cover the own technological consumption, (ii) the inflation index, (iii) using a part of the incomes resulted from interconnection capacity allocation as a complementary source for the regulated tariff in order to cover the regulated costs, (iv) the increase of energy consumption above the level forecasted by ANRE when planning the tariff;

2. The electricity volume chargeable at the extraction point was increased from 52 TWh to 54 TWh. The contribution of the change in the chargeable volume to the decrease in the new approved tariff compared to the previous tariff is of -3.7%.

In addition to the negative corrections there have been other factors which contributed to the establishment of the approved tariff value, entered into force on July 1st , 2017, valabile until June 30th, 2018 compared to the tariff in force until June 30th, 2017:

The forecasted inflation used for the calculation of the new approved tariff was higher than the forecasted inflation used for the calculation of the previous tariff (the inflation index used for the calculation of the new tariff is higher than the inflation index used for the calculation of the tariff for the previous tariff year). The contribution of the inflation index difference to the modification in the new approved tariff compared to the previous tariff is of +0.37%;

The basic annual income calculated as a sum of the annual regulated costs, set forth based on the cost forecast for a period of 5 years, approved by ANRE for the regulation period July 1st, 2014 - June 30th, 2019, is slightly higher than the basic annual income corresponding to the previous tariff year. The linearization of the annual income series within the regulation period led to a redistribution of the annual income within the period, while keeping constant the total income value for 5 years, the income development from one year to the next representing a decreasing negative slope. The cumulated contribution of the two elements presented within this paragraph to the modification in the new approved tariff compared to the previous tariff is of -0.92%.

Functional system service

The tariff decrease (-14.6%) was determined by:

The negative ex-post correction included in the new tariff is higher than the negative correction applied to the tariff for the previous year. The contribution of the ex-post correction to the decrease in the new approved tariff compared to the previous tariff is of -3.8%;
The annual forecast for costs included in the new approved tariff is lower than the annual forecast for costs included in the tariff for the previous year. The contribution of the reduction of the annual forecast for costs to the decrease in the new approved tariff compared to the tariff in force is of -6.9%;
The electricity volume chargeable at the extraction point was increased from 52 TWh to 54 TWh. The contribution of the change in the chargeable volume to the decrease in the new approved tariff compared to the previous tariff is of -3.8%.

Technological system service

The tariff decrease (-18.9%) on June 30th, 2017 compared to the similar period was determined by:

The negative ex-post correction included in the new approved tariff, set forth according to the methodology applicable for partial compensation (amounting to 80%) of the estimated profit to be accumulated until June 30th, 2017. The profit was mainly obtained due to the significant reduction of unit purchasing prices via auctions for stand-by system services compared to the unit prices forecasted by ANRE. In order to mitigate the impact on the regulated tariff, on Transelectrica's request, a new staging program was set forth for the application of the correction on the grounds of which 50% of the total correction was applied in the new approved tariff, following that the remaining 50% to be applied to the subsequent tariff revisions. The contribution of the ex-post correction to the decrease in the new approved tariff compared to the tariff in force is of -4.6%;

The annual forecast for costs included in the new tariff for purchasing stand-by system services in the tariff year July 1 st, 2017 - June 30th, 2018 is lower than the forecast for costs included in the tariff year July 1st, 2016 - June 30th, 2017. The reduction of the forecast for costs was determined by the reduction of purchasing prices via auctions for stand-by system services in the current tariff year compared to the prices forecasted by ANRE, especially in the second half of 2016. The contribution of the reduction of the annual forecast for costs to the decrease in the new approved tariff compared to the previous tariff is of -10.6%;
The electricity volume chargeable at the extraction point was increased from 52 TWh to 54 TWh. The contribution of the change in the chargeable volume to the decrease in the new approved tariff compared to the tariff in force is of -3.7%.
The regulatory framework for the stand-by system services activity (ANRE Order no. 45/2017) includes tariff adjustment mechanisms after a minimum of six months from the approval of the tariff, created to ensure the full and timely recovery of the costs incurred by the Company in purchasing such services.

Thus at January 1st, 2018 Transelectrica requested ANRE to revise the regulated tariff for stand-by system services starting with this date, given the following:

the major discrepancy between the real prices paid by Transelectrica when purchasing standby system services under competitive regime and the prices forecasted by ANRE at the moment of approval of the tariff for the 4th tariff year;

the level of the financial loss occurred from the stand-by system services activity estimated for the period July – December 2017 (the first half of the 4th tariff year) is above the negative correction level taken into consideration by ANRE when approving the tariff for the 4th tariff year;
supplementing the reserve quantity in the immediately subsequent period (January-March 2018) according to the winter program in the energy sector, approved by GD no. 760/2017, additional and unanticipated costs will be generated for the TSO at the moment of approval of the tariff enforced since July 1st , 2017.

As the difference between the revenues and the justified costs of Transelectrica exceeded 5%, ANRE, according to the provisions of art. 18 of the ANRE Order no. 45/2017, on the basis of price estimates for the purchase of competitive technological system services and the assumption of increase in electricity (by 2% compared to the estimated amount of electricity for the second half of 2017), set a new tariff for the first semester of 2018 (the second semester of the tariff year # 4) worth 12.06 RON/MWh, correcting the cost/income discrepancy of the TSO, up 28% compared to the one applied in the second half of 2017 by 9.39 RON/MWh

Revenues from technological system services registered an increase in the first half of 2018 compared to the first half of 2017 due to the increase in the amount of electricity delivered to consumers by 2.03% and the increase in the average tariff approved by ANRE for these services starting with January 1, 2018.

In the first half of the year 2018, the revenues from technological system services were higher compared to the costs of purchasing technological services. The profit was obtained due to favorable market conditions and good management of the bidding process of the power reserves needed by the electricity producers, resulting in the auctioning of lower unit prices lower than the foreseen unit prices which were the basis of the calculation of the tariff for technological system services.

LITIGATIONS

The most significant litigations influencing the Company are presented below:

Note: For ease of reading and understanding, all amounts in this chapter are given in RON/euro.

RAAN

Pending with the Mehedinți Court - Section II Civil, Administrative and Fiscal Litigation Section, the case file no. 3616/101/2014 was recorded, involving the "claims in the amount of 109.0831,70 RON, consideration of invoice no. 1300215/31.12.2013", a case file in which the Company is the defendant, the plaintiff being the Autonomous Authority for Nuclear Activities – RAAN.

By civil sentence no. 127 ruled on October 10th, 2014, the Mehedinți Court admitted the request lodged by plaintiff RAAN and ordered the Company to pay the amount of 1,090,831.70 RON, the consideration of invoice no. 1300215/31.12.2013.

The Company filed an appeal asking the court to allow the appeal as it was filed and to reverse the judgment and sentences under appeal and to refer the case to the trial court in the territorial jurisdiction for judgement, and to declare the compliance with the requirements of Articles 1616 and 1617 of the Civil Code, reason for which it is being required to declare the intervention of the compensation of mutual debts, and their redemption up to the amount of the smallest of them, namely the total amount requested by the plaintiff in the application for summons, ordering the appellee plaintiff to pay the expenses occurred with this appeal.

By decision no. 124/2017, the Court of Appeal Craiova admitted the appeal declared by Transelectrica and remanded sentence no. 127/2014 pronounced by the Mehedinți Court, and the case was remanded for retrial to the Bucharest Court – Section VI Civil.On the docket of the Bucharest Court, the case was registered under no. 40444/3/2017 who, via civil sentence no. 4406/04.12.2017, admitted the request lodged by RAAN and ordered Transelectrica to pay the amount of 1,090,831.70 RON. The decision is under appeal.

In the period 2014-2015, the Company has retained the due support scheme bonus from payment to RAAN, pursuant to the provisions of the ANRE regulations, namely the Article 17 (5) of ANRE Chairman's Order no. 116/2013.

Under these circumstances, RAAN calculated late payment penalties for the due cogeneration bonus amounting to 3,496,914 RON, withheld from payment to the Company in the outstanding receivables account. The amount of 3,496,914 RON was refused for payment by the Company and was not registered as a liability in the support scheme.

The subject matter of the case file no. 9089/101/2013/a152 is a contestation of the additional Table of receivables against debtor RAAN, the value of the matter at issue being 89,360,986.06 RON.

Transelectrica SA has been registered in the table of debtor RAAN with the amount of 11,264,777.30 RON under the category of receivables resulting from the continuation of the debtor's activity, the amount requested by our company being equal to 89,360,986.06 RON. The amount of 78,096,208.76 RON was not registered in the preliminary table because "this is not listed as owed in RAAN's accounting records." Moreover, the liquidator considered that the request regarding the registration in the table of the amount equal to 78,096,208.76 RON is tardily filed, being related to the timeframe 2011- 2013, reason for which the receivable declaration should have been filed at the moment of commencement of the insolvency proceedings, namely on September 18th, 2013. The additional receivables table was contested within the legal deadline. The Mehedinți Court approved the accounting expertise proof.

At the hearing from 14.06.2018 the judgement of the cause is postponed until the settlement of the file no. 3014/2/2014 pending with the High Court of Cassation and Justice. On June 28th, 2018 a hearing is set for October 11th , 2018, for continuing the proceedings, namely to hand over the heavy water quantities, to consolidate the statement of affairs after settling all objections, to continue all proceedings for recovering claims, to represent the debtor's company in court for recovering claims, to complete the evaluation of the assets, to draft the sell regulations and to continue the activities for capitalization of the company's goods.

COURT OF AUDITORS

Following a verification conducted in 2013, the Court of Auditors issued several measures to be implemented by the Company as a result of a series of deficits identified within this verification. The decision and protocol issued by the Court of Auditors have been appealed before the Court of Appeal Bucharest, the case file no. 1658/2/2014 was thus constituted, aimed at the "annulment of the control documents" – Protocol no. 7/20.02.2014 issued by the Court of Auditors.

On 13.06.2018, the court partly admits the plaintiff's action. Partly cancels protocol no. 7/20.02.2014, decision no. 37/9.12.2013 and control report no. 35521/6.11.2012 issued by the defendant regarding the measures imposed via the aforementioned decision at points I.1, I.3, I.6, I.8, I.11, II.14, II, 15, II.17, II.18, II.20, II.21, II.22 and in part the measure from point II.13, namely by removing the phrase "including the contested items related to the invoices issued by SC FLOREA ADMINSTRARE IMOBILIARĂ SRL". For the remainder, the court rejects the request of the plaintiff as groundless. Approves the electricity technical expertise report drafted by Toaxen Vasile as expert. Orders the defendant to pay the plaintiff the amount of 121,375 RON as legal expenses (partially the expert fees and legal stamp duty). The decision is not drawn up.

Following a verification conducted in 2017, the Court of Auditors issued several measures to be implemented by the Company as a result of a series of deficits identified within this verification. CNTEE Transelectrica SA filed a total of 8 objections against the measures ruled by the Romanian Court of Auditors (CCR) via Decision no. 8/27.06.2017 requesting the annulment thereof, as well as the Decision no. 77/03.08.2017 registered with the Company's secretariat under no. 29117/08.08.2017, as well as the Control Report no. 19211/26.05.2017. The objections are currently pending with the Bucharest Court of Appeal and the High Court of Cassation and Justice.

Case file no. 6578/2/2017 pertains to the annulment of the findings from point 9 and the measure ruled at point II.11; The hearing for the case file is set for September 25th, 2018, the accounting expertise proof being admitted.

Case file no. 6577/2/2017 pertains to the annulment of the findings from point 13 and the measure ruled at point II.13; The hearing for the case file is set for October 10th, 2018, the accounting expertise proof being admitted.

Case file no. 6576/2/2017 pertains to the annulment of the findings from points 7.1, 7.2 and 8 and the measure ruled at point II.10; The hearing for the case file is set for September 18th, 2018.

Case file no. 6574/2/2017 pertains to the annulment of the findings from point 5.2 and the measures ruled at point II.8; The court reserved judgement on 08.02.2018, postponing the judgement until 22.02.2018, and then until 08.03.2018 when, via Decision no. 1704/2018 it ruled the following: "Rejects the exception to the ineligibility of the claim invoked by the defendant as groundless. Rejects the request in annulment as groundless. Rejects the suspension request as groundless. Rejects the plaintiff's request to order the defendant to pay the legal costs, as groundless. With right of appeal within 5 days from notification with regard to the solution given for the suspension request, within 15 days from notification with regard to the solution given for the merits of the case and the request to appeal will be submitted to the Court of Appeal Bucharest – Section VIII, Administrative and Fiscal Litigation Section. Ruled in open court today, March 8th, 2018."

The sentence was not communicated as of this date.

Case file no. 6581/2/2017 pertains to the annulment of the findings from point 6 and the measure ruled at point II.9; The hearing for the case file is set for October 12th, 2018.

Case file no. 6580/2/2017 pertains to the annulment of the findings from point 10 and the measure ruled at point II.12; Rejects the application for suspension of operation as ill-founded: Decision 2424/24.05.2018

Case file no. 6582/2/2017 pertains to the annulment of the findings from point 11 and the measure ruled at point I.5;

By Decision no. 274/2017, the Court of Appeal Bucharest ruled the following: "Rejects the request as groundless. With right of appeal within 5 days from notification, with the remission of sentence on the head of the claim, which is submitted to the Court of Appeal Bucharest. With right of appeal within 15 days from notification, with the annulment of the action on the head of the claim, which is submitted to the Court of Appeal Bucharest. Ruled on January 29th, 2018, pursuant to Art. 402 in conjunction with Art. 396 (2) of the Romanian Civil Procedure Code, notified via the registry of the court.", as per the information available on the court website. Point 11 of the decision states: "acceptance for payment of construction works completed by third parties, without being based on progress reports drafted by the developer and appropriated by Transelectrica SA certifying the developer's execution of works according to the conditions under which they have been contracted and invoiced" and, as a consequence, the measure from point I.5 is ordered. Transelectrica SA filed appeal.

Case file no. 6583/2/2017 pertains to the annulment of the findings from point 5.1 and the measure ruled at point II.7.

The Bucharest Court of Appeal reserved judgement on December 7th, 2017, postponing the judgement until December 21st, 2017, and then until December 28th , 2017 when, via Decision no. 5207/2017 it ruled the following: "Rejects the exception to the ineligibility of the claim invoked by the defendant as groundless. Rejects the request in annulment as groundless. Rejects the suspension request as groundless. Rejects the plaintiff's request to order the defendant to pay the legal costs, as groundless. With right of appeal within 5 days from notification with regard to the solution given for the suspension request, within 15 days from notification with regard to the solution given for the merits of the case and the request to appeal will be submitted to the Court of Appeal Bucharest – Section VIII, Administrative and Fiscal Litigation Section. Ruled in open court today, December 28th, 2017." as per the information available on the court website.

ANRE

CNTEE Transelectrica SA filed a complaint against the Order of the ANRE Chairman no. 51/June 26th, 2014, registered at ANRE under no. 47714/August 4th, 2014, and an appeal before the Court of Appeal Bucharest, subject of the file no. 4921/2/2014, requesting either the amendment of the aforementioned Order, or the issuance of a new order, which should recalculate the RRR value at the level of 9.87% (recalculated with a (β) coefficient of 1.0359, according to the internal analyses conducted by Transelectrica) or, should this request be rejected, using the same percentage of 8.52% set by ANRE for the year of 2013 and for the first semester of 2014.

On June 26th, 2014, the ANRE Order no. 51 was issued, published in the Official Journal under no. 474/June 27th, 2014 on the approval of the average tariff for the transmission service, the tariff for the system service and the zonal tariffs for the transmission service, payable to the National Power Grid Company "Transelectrica" – SA, and the repealing of Addendum no. 1 of the ANRE Chairman's Order no. 96/2013 regarding the approval of the average tariff for the transmission service, the tariff for the system service, the zonal tariffs for the transmission service and the tariffs for the reactive

electrical energy, payable to economic agents from the electricity sector.

The values taken into consideration for calculating the Regulated Rate on Return (RRR¹ ) by ANRE, according to the Methodology on establishing the tariffs for the electricity transmission service, approved by ANRE Order no. 53/2013 ("the Methodology") have determined a RRR value of 7.7%.

CNTEE Transelectrica SA considers that the enforcement of the provisions of Article 51 of the Methodology on establishing the Beta (β) parameter at the value of 0.432 shall determine the financial damage of the company by decreasing the rentability with an estimated value of RON 138.4 mn³ , having a significant impact on the financial interests of the company.

The expert's fee was paid by the plaintiff at the hearing from 27.03.2018 and the approved expertise report shall be carried out and submitted to the file via notification to the expert. At the hearing from 26.06.2018, the notification to the appointed expert was requested under penalty of a fine. The case is postponed for 25.09.2018.

OPCOM

On November 24th, 2014, the Operator of the Electricity and Natural Gas Market – OPCOM SA sued the Company in order to force it to pay the amount of 582,086.31 euro (2,585,161.72 RON), representing the amount paid by her as fine, from the total of the fine amounting to 1,031,000 euro, the request being subject of file no. 40814/3/2014.

Previously, the General Assembly of Shareholders of the subsidiary OPCOM SA decided at the meeting from June 10th, 2014, upon full payment of the fine amounting to 1,031,000 euro imposed by the Directorate General for Competition – European Commission for breaching of Article 102 of the Treaty on the Functioning of the European Union, according to the Decision no. AT 39984 in the antitrust case.

Also, OPCOM SA requested the court to order the Company to pay the amount of 84,867.67 RON as lawful interest related to the period between June 11th , 2014 and November 24th, 2014.

¹ RRR – Regulated Rate on Return is presented in the technical literature as WACC – Weighted Average Cost of Capital – translated as Weighted Average Cost of Capital, the equation of both indicators being similar: RRR = WACC = CCP + Kp/(1 – T) + CCI x Ki

The action filed by OPCOM SA is subject of the file no. 40814/3/2014 on the docket of the Bucharest Court, Section VI Civil, involving claims, litigation with professionals matter.

At the hearing from July 24th, 2015, the court admitted the request for summons filed by the plaintiff the Electricity and Gas Market Operator – OPCOM S.A. in contradiction with the defendant the National Power Grid Company Transelectrica S.A. and ordered to the defendant to pay the plaintiff the sum of 582.086,31 Euros, representing the sum paid by the plaintiff instead of the defendant in the amount of 1.031.000 euro applied by Decision of the European Commission on 5th March 2014 in the case AT.39984, and of the statutory rate, on the amount of 582.086,31 Euros, calculated from 11th June 2014 until the date of the actual payment. The court also orders the defendant to pay the plaintiff the amount of 37,828 RON, as legal expenses, with right of appeal within 30 days from notification. Against the sentence no. 4275/2015, pronounced in the aforementioned file, Transelectrica SA formulated an appeal, which was registered before Bucharest Court of Appeal.

The settlement of the Court of Appeal, in short: changes the appealed civil sentence completely, meaning that it rejects the application for summons as ill-founded. Orders the appellee-plaintiff to pay the trial expenses to the appellant-defendant amounting to 16,129 RON, representing legal stamp duty. The appeal was set within 30 days from notification and it was pronounced in the public hearing of October 10th , 2016. Document: Decision 1517/2016 of 10.10.2016.

OPCOM S.A. filed an appeal which was registered with the High Court of Cassation and Justice.

Hearing with the High Court of Cassation and Justice: 13.03.2018. Solution of the High Court of Cassation and Justice, in brief: Grants the appellant-plaintiff Operatorul Pieței de Energie Electrică și Gaze Naturale – OPCOM S.A. motion against decision no. 1517/10.10.2016, ruled by the Bucharest Court of Appeal – Section V Civil. Invalidates the contested decision and refers the case to the court of appeal. Final.

ROMENERGY INDUSTRY SRL

On June 30th, 2016, the general insolvency proceedings are opened for the entire amount of 16,112,165.18 RON. The receivable was admitted and registered in the preliminary table. Case file no. 2088/107/2016 is pending with the Alba Court.

² The value that caused the decrease of the RRR to 7.7% ³ Value calculated compared to the RRR of 8.52%

The hearing is set on January 29th, 2018 for continuing the bankruptcy proceedings by capitalizing the assets and recovering the receivables. The liquidator will draft and submit to the case the monthly activity reports set forth by paragraph 1 of Article 21 of Law no. 85/2006, on the 15th of each month for the previous month. They will submit the summary report every 120 days, foreseen in the final part of paragraph 1 of Article 21 of Law no. 85/2006, for the verification term, 5 days before the term.

Solution in brief: Sets the hearing on September 17th , 2018, for continuing the bankruptcy proceedings by capitalizing the assets and recovering the receivables, as well as for the liquidator to examine the request regarding the assignment of a debt filed by the transferee B2 KAPITAL PORTOFOLIO MANAGEMENT S.R.L. The liquidator will draft and submit to the case: the monthly activity reports set forth by paragraph 1 of Article 59 of Law no. 85/2014, on the 15th of each month for the previous month; - the summary report every 120 days, foreseen in the final part of paragraph 3 of Article 59 of Law no. 85/2014, for the verification term, 5 days before the term. Document: Hearing protocol from April 23rd, 2018.

ASITO KAPITAL SRL

The object of the casefile no. 24552/3/2017 is "authorization for payment – claims", the litigation value being 31,180,857.96 RON.

At the hearing from November 7th, 2017, after deliberation, the Bucharest Court ruled the following solution in brief:

Admits the request.
Orders the debtor to pay, within 20 days from notification of this decision, the amount of 2,237,750.83 euro (the equivalent of 9,948,592.64 RON at the exchange rate of 4.4458 euro), representing the down payment which was not reimbursed but guaranteed via letter of guarantee no. BR-1500544/18.11.2015;
Orders the debtor to pay, within 20 days from notification of this decision, the amount of 4,821,022.53 euro (the equivalent of 21,233,265.32 RON at the exchange rate of 4.4041 euro), representing the down payment which was not reimbursed but guaranteed via letter of guarantee no. BR-1500520/29.07.2015;
Orders the debtor to pay, within 20 days from notification of this decision, the amount of 200 RON representing legal expenses. With right of request in annulment within 10 days from notification. Document: Decision 4067/2017 - 07.11.2017.

By the date of drafting these financial statements, Decision 4067/2017 – 07.11.2017 has not been drafted and communicated in order to be enforced.

CONAID COMPANY SRL

In 2013, Conaid Company SRL took legal actions against CNTEE Transelectrica SA for the unjustified refusal of the latter to sign an addendum to the connection agreement or to sign a new connection agreement, and requested the compensation for costs incurred up to that time, amounted to RON 17.4 mn and loss of profit for the period 2013-2033 amounting to EUR 722,756,000. So far, the Company did not conclude an addendum to the connection agreement because the suspensive provisions included therein have not been met by Conaid Company SRL. A new connection agreement would have had to be concluded by March 11th, 2014, the date on which the technical connection permit has expired. On the date of these financial statements, the amounts claimed by Conaid Company SRL were regarded as contingent liabilities as it is unlikely to settle this obligation, there will be necessary outflows of resources embodying economic benefits and the value of obligation cannot be evaluated with sufficient reliability. The file no. 5302/2/2013 was on the dockets of the High Court of Cassation and Justice, the Administrative and Fiscal Litigation Section, involving the obligation of issuing an administrative document in procedural stage – second appeal, the next hearing being on December 9th, 2015. At this hearing, the High Court of Cassation and Justice admitted, in principle, the second appeals and set the hearing, in substance, of the second appeals on April 8th, 2016, Formation 4, summoning the parties.

The judgement was postponed for June 17th, 2016, when the court reserved judgement, postponing the judgement until June 29th, 2016, when it pronounced Decision no. 2148/2016, by which it ordered the following: "Rejects the exceptions invoked by the appellant - plaintiff S.C. Conaid Company S.R.L., via insolvency administrator RVA Insolvency Specialists SPRL, and by the appellant - defendant National Power Grid Company Transelectrica S.A. Admits the second appeal filed by the defendant National Company for Energy Transportation Transelectrica S.A. against the hearing protocol of February 18th , 2014 and the civil sentence no. 1866 of June 11th , 2014, pronounced by the Court of Appeal Bucharest – Section VIII, Administrative and Fiscal Litigation Section. Partially invalidates the contested protocol

and judgment and refers the case to the Bucharest Court – Section VI Civil, for settlement of the application of the plaintiff sought against the National Power Grid Company Transelectrica S.A. Maintains the other provisions of the sentence concerning the plaintiff's action against the National Regulatory Authority for Energy. Rejects the second appeals of the plaintiff SC Conaid Company S.R.L. via insolvency administrator RVA Insolvency Specialists SPRL and the intervener S.C. Duro Felguera S.A. against the civil sentence no. 1866 of June 11th, 2014 pronounced by the Bucharest Court of Appeal – Section VIII, Administrative and Fiscal Litigation Section. Rejects the second appeal filed by the defendant National Power Grid Company Transelectrica S.A. against the hearing protocol from March 25th, 2014, pronounced by the Bucharest Court of Appeal - Section VIII, Administrative and Fiscal Litigation Section. Final. Ruled in open court on June 29th, 2016.

On the docket of Bucharest Court – Section VI Civil, the case was registered under no. 12107/3/2017. By civil sentence no. 4364/23.11.2017, the Court admits the exception to the ineligibility of the claim and rejects it as ineligible. It also rejects the motion to intervene in the interest of the plaintiff. With right of appeal within 30 days from notification. The appeal is lodged at the Bucharest Court – Section VI Civil. Sent to the parties via registry on November 23rd, 2017.

FF WIND ENERGY INTERNAȚIONAL SRL

Case file no. 47332/3/2017 on the docket of the Bucharest Court - Section VI Civil, by which the company FF Wind Energy International SRL requests the following against CNTEE Transelectrica SA: - the annulment of the unilateral statement for the termination of the PTG connection agreement no. 85/14.03.2011 issued on March 2nd, 2016 under no. 8295, - ordering the Company to pay the amount of 32,777,167.35 RON as damages following the termination of the agreement and to pay the amount of 45,000,000 euro as the amount of depreciation of the company FF Wind Energy International SRL caused by the impairment of its purpose.

Status of the file: in preliminary proceedings for notification of the action and filing statement of defence. The Court postpones the case for taking of evidence. Hearing: 06.09.2018.

S.C. DAGESH ROM SRL

Case file no. 17284/3/2015 is pending with the Bucharest Court and related to claims – amounting to 2,784,950 RON, representing the rent indexation and late payment penalties for the rent indexation + 168,500 RON, representing the difference from the services fee and late payment penalties.

The solution admits the exception of the prescription regarding the claims represented by: the rent difference requested for the period 04.03.2012 - 12.05.2012, the late payment penalties for the requested amounts as rent difference for the period 04.03.2012 - 12.05.2012, the service fee difference requested for the period 04.03.2012 - 12.05.2012, the penalties for the requested amounts as service fee difference calculated for the period 04.03.2012 - 12.05.2012. The Court rejects these claims as time-barred. It also rejects the other claims as ill-founded. Orders the plaintiff to pay the defendant the amount of 2 thousand RON, as legal expenses. With appeal within 30 days from communication. The appeal is lodged at the Bucharest Court - Section VI Civil. Ruled in open court on November 15th, 2016. Decision no. 7230/2016 from November 15th, 2016.

According to Decision no. 810/20.04.2018, the contested sentence is partly changed. Admits the application for summons, meaning that it orders the defendant to pay the plaintiff the amount of 76,265.23 RON as service fee difference for the year of 2012 and the amount of 76,265.23 RON as late payment penalties. The rest of the provisions of the appealed sentence are maintained. Orders the defendant/appellant to pay to the plaintiff/appellee the amount of 31,877.45 RON as legal costs for both first instance as well as the appeal. With right of appeal within 30 days from notification. The appeal shall be lodged before the Bucharest Court of Appeal – Section VI Civil. Both parties appealed and the case is in the filtering proceedings with the High Court of Cassation and Justice.

ANAF

At Transelectrica SA's headquarters the general tax inspection took place, which regarded the period between December 2005 and December 2010. The general tax inspection commenced on December 14th , 2011 and ended on June 26th, 2017, the date of the final discussion with Transelectrica SA.

ANAF – DGAMC set forth additional tax payment liabilities to the Company, respectively corporation tax and VAT, as well as ancillary tax liabilities (interest/late interest and late payment interest) related to the ancillary services (STS) invoiced by the electricity suppliers, considered not deductible following the tax inspection.

According to the Notice of assessment no. F-MC 439/30.06.2017, amounting to a total of 99,013,399

RON, ANAF – DGAMC set forth additional tax payment liabilities to the Company, amounting to 35,105,092 RON, as well as ancillary tax liabilities (interest/late interest and late payment interest), amounting to 63,908,307 RON.

ANAF's Tax inspection report mainly records the following additional payment liabilities:

Corporation tax amounting to 13,726,800 RON plus accessories, owed for a number of unused invoices identified as missing (they were destroyed in the fire that broke out the night of June 26th - 27th, 2009, at the business office from Millennium Business Centre from 2-4 Armand Călinescu Street, District 2, where the company carried out its activity), documents under special regime.

These invoices were subject to a litigation with ANAF, the latter sending a tax inspection report on September 20th, 2011 which estimated the amount of collected VAT for a number of unused invoices identified as missing.

Within the legal deadline, the Company appealed the Note of assessment no. F-MC 439/June 30th, 2017, according to GD no. 92/2003 on the Fiscal Procedure Code.

ANAF issued enforcement order no. 13540/22.08.2017; the additional payment obligations according to Notice of assessment no. F-MC 439/30.06.2017 were enforced based on this order.

The Company requested the annulment of the enforcement order no. 13540/22.08.2017 before the Court of Appeal – casefile no. 7141/2/2017. Solution in brief: Admits the lack of jurisdiction related to subject matter of the Court of Appeal Bucharest – Administrative and Fiscal Litigation Section. Declines the jurisdiction related to subject matter for this case in favour of Bucharest 1st District Court. With no means of appeal. Ruled in open court, on February 8th, 2018. Document: Decision 478/2018 of 08.02.2018.

Solution in brief: Admits the suspension request filed by the contesting party. On the grounds of Article 413 (1) (1) of the Civil Procedure Code, judgement is suspended until the final settlement of casefile no. 1802/2/2018, pending with the Court of Appeal Bucharest, Section VIII, Administrative and Fiscal Litigation Section. With appeal throughout the suspension. The notice of appeal must be filed with the Bucharest 1st District Court. Delivered in open court.

Document: Hearing protocol – Suspension 17.04.2018

Pending with the Court of Appeal in proceedings for a preliminary ruling is the casefile no. 1802/2/2018 through which the Company contested the fiscal administrative document - Decision no. F-MC 439/30.06.2017.

Upon contestation by the Company of the fiscal administrative document - Decision no. F-MC 439/30.06.2017, ANAF notified the Company of Decision no. 122/13.03.2018 through it rejects, as ungrounded, the contestation filed by CNTEE Transelectrica SA; the decision was received on March 16th, 2018, after filing the application for summons which is subject to casefile no. 1802/2/2018. The following court hearing date was set on 23.10.2018.

At the same time, the Company is also involved in litigations against former Directorate and Board of Supervisors members, regarding the mandate agreements concluded between the Company and themselves.

ANNEX 1: Stand-alone situation of financial position

		December 31st ,
[RON mn] figures not audited	June 30th, 2018	2017 As per HAGA no. 6/30.04.2018	Δ	Δ (%)
ASSETS
Fixed assets
Tangible assets	2,952	3,044	(92)	(3)%
Intangible assets	16	16	0	1%
Financial assets	80	78	2	3%
Total fixed assets	3,048	3,138	(90)	(3)%
Current assets
Inventories	35	32	3	9%
Clients and assimilated	716	818	(102)	(13)%
accounts
Other financial assets	125	0	125	n/a
Cash and equivalents Total current assets	546 1,421	521 1,371	25 51	5% 4%

TOTAL ASSETS	4,469	4,509	(39)	(1)%
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Share capital, out of which	733	733	0	0%
Subscribed share capital	733	733	0	0%
Share premium	50	50	0	0%
Legal reserves	119	119	0	0%
Revaluation reserves	478	500	(22)	(4)%
Other reserves	58	57	1	2%
Retained earnings	1,379	1,259	120	10%
Total shareholders' equity	2,817	2,718	99	4%
Long term liabilities
Non-current deferred revenues	401	411	(10)	(2)%
Loans	156	195	(39)	(20)%
Deferred tax liabilities	23	25	(2)	(7)%
Obligations regarding employee benefits	53	53	0	0%
Total non-current liabilities	633	684	(50)	(7)%
Current liabilities
Trade and other payables	623	700	(77)	(11)%
Other taxes and social insurance obligations	8	9	(1)	(11)%
Loans and related interest	303	317	(14)	(4)%
Provisions	42	42	0	0%
Short-term deferred revenues	44	41	3	7%
Total current liabilities	1,019	1,108	(89)	(8)%
Total liabilities	1,652	1,792	(139)	(8)%
Total shareholders' equity and liabilities	4,469	4,509	(39)	(1)%

ANNEX 2: Separate account of profit and loss

figures not audited [RON mn]	Semester I
Indicator	Accrued 2018	Accrued 2017	Budgeted 2018	Accrued 2018 vs 2017	Accrued 2018 vs 2017 (%)	Accrued vs Budgeted 2018	Accrued vs Budgeted 2018 (%)
Operating revenues
Transmission revenues	505	554	510	(49)	(9)%	(5)	(1)%
System service revenues	375	355	365	20	6%	10	3%
Revenues from the balancing market	331	805	514	(474)	(59)%	(183)	(36)%
Other revenues	22	25	20	(3)	(13)%	3	14%
Total operating revenues	1,233	1,739	1,408	(506)	(29)%	(175)	(12)%
Operating expenses
System operation expenses	150	129	133	21	16%	17	13%
Expenses on the balancing market	331	805	514	(474)	(59)%	(183)	(36)%
Expenses regarding the stand-by system services	309	319	333	(10)	(3)%	(24)	(7)%
Depreciation	151	156	165	(5)	(3)%	(14)	(8)%
Salaries and other retributions	89	88	95	1	1%	(6)	(6)%
Maintenance and repairs	38	34	45	4	12%	(7)	(16)%
Materials and consumables	4	3	8	1	33%	(4)	(50)%
Other operating expenses	49	77	64	(28)	(36)%	(15)	(23)%
Total operating expenses	1,121	1,611	1,357	(490)	(30)%	(236)	(17)%
Operating result	112	129	52	(17)	(13)%	60	117%
Financial revenues	7	12	3	(5)	(42)%	4	133%
Financial expenses	12	20	13	(8)	(41)%	(1)	(5)%
Net financial result	(5)	(8)	(10)	3	(40)%	5	(48)%
Result before income tax	107	120	42	(13)	(11)%	65	155%
Income tax	9	22	7	(13)	(59)%	2	37%
Result of the financial year	98	98	35	0	0%	63	177%

ANNEX 3: Stand-alone situation of treasury flow

[RON mn] figures not audited	S1 2018	S1 2017	Δ
Treasury flows from the operating activity
Profit of the Financial Year	98	98	(0)
Adjustments for:
Income tax expense	9	22	(13)
Depreciation expenses	151	156	(5)
Expenditures with adjustments for trade receivables impairment	4	34	(30)
Reversal of adjustments for trade receivables impairment	(4)	(6)	2
Net revenues with adjustments for various debtors impairment	(3)	(1)	(2)
Net expenditures with adjustments for inventories impairment	0	1	(0)
Net income/loss from the sale of tangible assets, net	(0)	0	(1)
Net expenditures on adjustments regarding tangible assets	1	1	(0)
Net expenditures/(income) regarding provisions for risks and expenses	0	(8)	8
Interest expenses, interest revenues and unrealized revenues from exchange differences	7	8	(2)
Cash flows before changes in the current capital	262	305	(43)
Changes in:
Clients and assimilated accounts - electricity and other activities	38	(45)	82
Clients – balancing	59	66	(7)
Clients – cogeneration	9	(64)	73
Inventories	(3)	(2)	(1)
Trade payables and other liabilities - electricity and other activities	116	(68)	184
Liabilities – balancing	(79)	(152)	73
Liabilities – cogeneration	(89)	(33)	(56)
Other taxes and social insurance liabilities	(1)	1	(2)
Deferred revenues	(16)	(11)	(5)
Treasury flows from the operating activity	296	(3)	299
Paid interests	(4)	(5)	1
Paid income tax	(11)	0	(11)
Net cash from the operating activity	280	(8)	288
Cash Flows from the Investment Activity
Acquisition of tangible and intangible assets	(82)	(85)	3
Proceeds from EC grants	10	0	10
Collected interests	3	4	(1)
Owned shareholdings at TSC NET	(2)	0	(2)
Collection from sales of tangible assets	1	0	1
Other financial assets	(125)	(30)	(95)
Net cash used in the investment activity	(196)	(112)	(84)
Treasury flows used in the financing activity
Repayments of long-term loans	(59)	(70)	11
Use of the Cogeneration Credit Line	0	43	(43)
Paid dividends	(1)	(165)	164
Net cash used in the financing activity	(60)	(191)	132
Net decrease of cash and cash equivalents	25	(311)	336
Cash and cash equivalents on January 1st	521	934	(413)
Cash and cash equivalents at the end of the period	546	622	(77)

Indicator		Calculation formula	S1 2018	S1 2018
	Liquidity indicators	Current assets
a)	Current liquidity indicator	Current liabilities	1.39	1.83
Risk indicators
a)	Debt ratio indicator	Debt capital x 100 Shareholders' Equity	16.30	20.37
b)	Debt ratio indicator	Debt capital x 100 Committed capital	14.02	16.92
Activity indicators
a)	Days' sales outstanding ratio	Average credit balance* x no. of days Turnover	78.29	59.29
b)	Non-current assets turnover ratio	Turnover Fixed assets	0.40	0.53

ANNEX 4: Economical and Financial Indicators for the reporting period - unaudited results

*When calculating the average balance account, the customers contributing to the turnover have been taken into consideration (energy, balancing, other customers, customer's invoices to be issued). The values corresponding to uncertain customers, cogeneration scheme and overcompensation were not included in the average balance account.

Annex 5 REPORT (according to the Decision of the Extraordinary General Assembly of Shareholders no. 4/29.04.2015) regarding the agreements signed in the first semester of 2018 for the purchase of goods, services and works with a value greater than 500,000 euro/purchase (for purchases of goods and works) and of 100,000 euro/acquisition respectively (for services)

	Agreement			Value		Agreement		Acquisition
No.	number	Agreement Subject	Duration	Thousand	Thousand	type	Legal basis	procedure
				RON	Euro
0	1	2	3	4	5	6	7	8
1	C 110/2018	Technical upgrade of the Smârdan 400/110/20 kV substation	66 months	107,194	0.00	Works	Law 99/2016 + GD 394/2016	Open Auction
2	C 136/2018	Maintenance services in the field of telecommunications, information technology and computer science at CNTEE Transelectrica SA level	48 months	106,977	0.00	Services	Law 99/2016 + GD 394/2016	Negotiation without prior invitation
3	C 111/2018	Connecting the Isaccea-Varna 400 kV OHL and the Isaccea-Dobrudja 400 kV OHL in the Medgidia Sud 400 kV substation, stage II – 400 kV OHL d.c., connections in the Medgidia Sud substation	18 months	41,505	0.00	Works	Law 99/2016 + GD 394/2016	Open Auction
4	BC 556/2018	RK – București Sud-Pelicanu 400 kV OHL	48 months	37,693	0.00	Works	Law 99/2016 + GD 394/2016	Open Auction
5	C 84/2018	Replacement of EMS SCADA AREVA system components - hardware component	38 months	19,245	0.00	Supply	Law 99/2016 + GD 394/2016	Open Auction
6	C 100/2018	Converting the Porțile de Fier-Reșița-Timișoara-Săcălaz-Arad axis to the 400 kV voltage / Reșița 400/220/110 kV substation – secondary equipment and related services	28 months	0.00	2,438	Supply	Law 99/2016 + GD 394/2016	Negotiation without prior invitation
7	C 130/2018	Lot 2 – Mobile bays of 220 kV	8 months	0.00	1,934	Supply	Law 99/2016 + GD 394/2016	Open Auction
8	C 129/2018	Lot 1 – Mobile bays of 400 kV	8.5 months	0.00	1,329	Supply	Law 99/2016 + GD 394/2016	Open Auction
9	CJ 8/2018	Specialized security and intervention services for the Cluj transmission branch objectives	36 months	5,131	0.00	Services	Law 99/2016 + GD 394/2016	Open auction
10	C 120/2018	Intervention beams system	6 months	4,400	0.00	Supply	Law 99/2016 + GD 394/2016	Open auction
11	PT 19/5878/2018	Maintenance services for the passages of the 220-400 kV OHL in tree crown cover areas	36 months	4,165	0.00	Services	Law 99/2016 + GD 394/2016	Open auction
12	C 93/2018	Support service for the SAP HR/PY licenses (framework agreement)	48 months	882	0.00	Services	Law 99/2016 + GD 394/2016	Simplified procedure
13	BC 555/2018	Maintenance services for the passages of the OHL in tree crown cover areas	36 months	553	0.00	Services	Law 99/2016 + GD 394/2016	Open auction

Annex 6 – Glossary of terms

AGOA	The Ordinary General Meeting of Shareholders
"ANRE"	National Regulatory Authority for Energy
"ARB"	Asset regulatory base
"BSE"	Bucharest Stock Exchange, regulated market operator for trading Shares
"CEE"	European Economic Community
"Company", "CNTEE", "TEL"	National Power Grid Company Transelectrica SA
"OTC"	Own Technological Consumption
"BS"	Board of Supervisors
"NPD"	National Power Dispatcher
"EBIT"	Earnings Before Interest & Tax
"EBITDA"	Earnings Before Interest, Taxes, Depreciation and Amortization
"EBT"	Earnings Before Tax
"ENTSO-E"	European Network of Transmission System Operators for Electricity
"GD"	Government Decision
"IFRS"	International Financial Reporting Standards
"JPY"	Japanese Yen, the official currency of Japan
"OHL"	Overhead Power Line
"Leu" or "Lei" or "RON"	The official currency of Romania
"MFP"	Ministry of Public Finance
"OJ"	Official Journal of Romania
"GO"	Government Ordinance
"OPCOM"	Romanian Electricity Market Operator OPCOM SA
"GEO"	Government Emergency Ordinance
"DAM"	Day-Ahead Market
"PTG"	Power Transmission Grid, national and strategic interest electric grid with a nominal voltage greater than 110 kV
"NPS"	National Power System
"SMART"	Trading Company for the Electric Transport Network Maintenance SMART SA
"FSS"	Functional System Service
"TSS"	Technological System Service
"TEL"	Stock exchange symbol for Transelectrica
"TSR"	Total Shareholder Return
"EU"	European Union
"UM"	Unit of measurement
"USD" or "US dollars"	American Dollar, the official currency of the United States of America
"WACC"	Weighted Average Cost of Capital

AI Terminal

C.N.T.E.E. Transelectrica

2299_ir_2018-08-16_9035bb93-9c8d-47df-a774-faede806ec53.pdf

CNTEE Transelectrica SA Two-Tier Company

CNTEE Transelectrica SA Condensed stand-alone statement of the financial position on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

1. General Information

2. Bases of Drafting

a) Declaration of conformity

b) Professional reasoning and estimations

3. Significant accounting policies

4. Tangible, intangible and financial assets

i) Tangible assets

ii) Intangible assets

iii) Financial assets

5. Trade receivables and other receivables

Total trade receivables and other receivables 715,781,413 818,529,879

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Other receivables

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

VAT to be recovered

Down payments to suppliers

Adjustments for depreciation of trade receivables, of uncertain trade receivables and of other uncertain receivables

6. Cash and cash equivalents

Total

7. Other financial assets

8. Shareholders' equity

9. Deferred revenues

10. Loans

● Long-term loans

● Short-term loans

● Loans contracted for the current activity

11. Trade and other payables

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

12. Other taxes and social insurance obligations

13. Income tax

14. Operating revenues

The second quarter of 2018 compared with the second quarter of 2017

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

Transmission revenues

Functional system service revenues

Revenues from allocating the interconnection capacity

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018

Revenues from technological system services

Revenues on the balancing market

The first semester of 2018 compared with the first semester of 2017

Transmission revenues

Functional system service revenues

Revenues from allocating the interconnection capacity

Revenues from technological system services

Revenues on the balancing market

15. Expenses for operating the system and from the balancing market

The second quarter of 2018 compared with the second quarter of 2017

Expenses on Own Technological Consumption

Expenses on congestions

Expenses with functional system services

Expenditures on Inter TSO Compensation (ITC)

Expenses regarding the technological system services

Expenses on the balancing market

The first semester of 2018 compared with the first semester of 2017

Expenses on Own Technological Consumption

Expenses on congestions

Expenses on electricity consumption in PTG substations

Expenses with functional system services

Expenditures on Inter TSO Compensation (ITC)

Expenses regarding the technological system services

Expenses on the balancing market

16. Expenses on staff

17. Other Operating Expenses

18. Net financial result

19. Litigations, commitments and contingencies

i) Litigations

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

ii) Commitments

iii) Contingencies

CNTEE Transelectrica SA Notes on the stand-alone interim financial statements on June 30th, 2018 (All amounts are expressed in RON, unless otherwise indicated)

20. Affiliated Parties