S.N.T.G.N. Transgaz S.A. — Interim / Quarterly Report 2020

Feb 22, 2021

CURRENT REPORT

according to the provisions of Art. 247 of the Financial Surveillance Authority Regulation no. 5/2018

Name of issuing entity: SNTGN TRANSGAZ SA MEDIAŞ Headquarters: Mediaş, 1 Constantin I. Motas Square, Sibiu County Telephone/fax number: 0269803333/0269839029 Tax identification code: RO 13068733 Trade Register number: J32/301/2000 Subscribed and paid-up capital: RON 117,738,440 Regulated market on which issued securities are traded: Bucharest Stock Exchange.

Reported events: Draft financial statements for 2020, unaudited

In accordance with the data in the Financial Communication Calendar and in compliance with the provisions of the specific laws on the capital market regarding reporting to capital market institutions and shareholders, the National Gas Transmission Company Transgaz SA informs all stakeholders of the individual and consolidated draft annual financial statements for 2020, unaudited.

1. The main financial and economic indicators according to the draft individual financial statements as at 31 December 2020, compared to the ones achieved in the same period of 2019 are presented in the table below:

			*	thousand LEI*
No.	Name	Obtained 2019	Draft 2020	Increase
0	1	2	3	4=3/2x100- 100
1.	Operating revenue before the balancing and construction activity, according to IFRIC12	1.576.667	1.332.657	-15%
2.	Revenue from the balancing activity	324.688	199.239	-39%
3.	Revenue from the construction activity according to IFRIC12	868.357	1.575.005	81%
4.	Financial revenue	98.952	60.465	-39%
5.	Operating costs before the balancing and construction activity, according to IFRIC12	1.228.699	1.099.003	-11%
6.	Costs from the balancing activity	324.688	199.239	-39%
7.	Cost of constructed assets according to IFRIC12	868.357	1.575.005	81%
8.	Financial costs	27.818	19.574	-30%
9.	GROSS PROFIT, of which:	419.102	274.545	-34%
	 from operation	347.968	233.654	-33%
	 from the financial activity	71.134	40.891	-43%
10.	Income tax	70.843	44.755	-37%
11.	NET PROFIT	348.259	229.790	-34%

Operating revenue before the balancing and construction activity, according to IFRIC12 decreased by 15% as compared to 2019, which is lower by LEI 244.010 thousand.

The revenue was influenced mainly by the following factors:

• commodity revenue lower by LEI 106.379 thousand due to:
  • the commodity transmission tariff lower by LEI 0,60 /MWh, with a negative influence of LEI 73.280 thousand;
  • the transmitted gas quantity lower by 12.380.000MWh/847.235 thousand cm (▼9%), compared to 2019, with a negative influence of LEI 33.098 thousand, detailed by categories of consumers as follows:

		12 months 2019	12 months 2020	Differences
Quantity transmitted for	MWh	69.513.278	57.162.565	-12.350.713
direct consumers	thousand m3	6.147.306	5.309.374	-837.932
Quantity transmitted for	MWh	76.102.315	76.073.028	-29.287
distribution	thousand m3	7.080.195	7.070.892	-9.303
	MWh	145.615.593	133.235.593	-12.380.000
Total	thousand m3	13.227.501	12.380.266	-847.235

The commodity tariffs decreased in 2020 as compared to 2019, mainly due to:

• o Order 10/2017 of the ANRE President on the amending of Order 32/2014 of ANRE President on the approval of the Gas Transmission Regulated Revenue, Total Revenue and Regulated Tariffs Methodology, which establishes the increasing by 5% per year of the percentage by which the approved revenue is recovered by the application of the capacity booking tariff, up to 85%, and the decreasing of the percentage by which the approved revenue is recovered by the application of the commodity tariff. In gas year 2019-2020 the variable component of the total revenue at the basis of the commodity tariffs is 25% of the total revenue and in gas year 2020-2021 to 20% of the total revenue;
• o at the substantiation of the tariffs for gas years 2019-2020 and 2020-2021, the tax on the monopoly was not recognised by ANRE at the pass-through costs and implicitly at the regulated revenue.
• revenue from capacity booking higher LEI 64.246 thousand due to:
  • capacity booking tariff higher by LEI 0,19/MWh, with a positive influence of LEI 69.510 thousand, increase mainly determined by the invoicing of revenue from the auction premium, following the capacity booking auctions performed according to the CAM-NC by interconnection points;
  • booked capacities lower by 2.213.274 MWh, with a negative influence of LEI 5.264 thousand;
• international gas transmission revenue lower by LEI 213.474 thousand due to the termination of the transmission contract with Gazprom Export Ltd for the Isaccea 2 - Negru Voda 2 pipeline and regulation of the Isaccea 1 – Negru Voda 1 pipeline transmission revenue according to the methodology approved by ANRE Order 41/2019 following the connection of this pipeline to the National Transmssion System from 1 October 2019;
• other operating revenue higher by LEI 11.596 thousand.

Revenue from the balancing activity decreased by LEI 125.449 thousand based on the following factors:

• o trading price lower by LEI 35,21/MWh, with a negative influence of LEI 108.948 thousand;
• o quantity lower by 165.680 MWh with a negative influence of LEI 16.501 thousand;

Revenue from the construction activity higher by LEI 706.648 thousand, registered in line with IFRIC 12, according to which revenue and costs related to the construction activity or the improvement of the transmission network, in exchange of which the intangible asset is registered, must be acknowledged in line with IAS 11, Construction Contracts.

Financial revenue with a negative influence of LEI 38.487 thousand, mainly based on the registration of the updating of the regulated assets with the inflation rate for 2020, the 2015-2019 inflation rate being used in the previous year.

Operating costs before the balancing and construction activity according to IFRIC12 decreased by 11% as compared to 2019, which is lower by LEI 129.697 thousand.

The company made savings of LEI 216.592 thousand to the following cost elements:

• other operating costs: LEI 67.126 thousand, based on the decreasing of the adjustments for impairment of current assets by LEI 64.161 thousand;
• cost of taxes and duties due to the state: LEI 39.420 thousand, mainly due to the decreasing of the gas transmission licence fee cost by LEI 28.884 thousand and of the monopoly tax cost by LEI 10.501 thousand;
• costs of NTS concession royalty: LEI 43.660 thousand; Transgaz pays a royalty amounting to 0,4% of the gross revenue obtained from the operations of gas transmission and transit through the national transmission systems which are the public property of the state, after the entry into force of Law 244/09.11.2020; before that the rate was 10%;
• costs of provision for risks and charges: LEI 65.615 thousand, mainly due to the recording in 2019 of the provision regarding the investigation performed by the Competition Council amounting to LEI 41.758 thousand, and to decreasing its value in 2020 with the amount of LEI 7.591 thousand, following the decision of the Competition Council to apply a LEI 34.166 thousand penalty on the company;
• other material costs: LEI 771 thousand.

Exceedings amounting to LEI 86.895 thousand were recorded to the following cost elements:

transmission system gas consumption LEI 12.930 thousand, due to: - the quantity of natural gas for NTS gas consumption higher by 64.293 MWh as compared to 2019, with a negative influence of LEI 6.649 thousand;

• the average purchase price obtained higher by LEI 8,91/MWh as compared to the one obtained in 2019, with a negative influence of LEI 6.281 thousand;

• employee costs: LEI 17.712 thousand;

• cost of depreciation: LEI 51.551 thousand, based on the completion and commissioning of the major investment projects;
• cost of maintenance and transmission: LEI 518 thousand;
• cost of auxiliary materials: LEI 4.184 thousand.

The financial cost is lower by LEI 8.244 thousand mainly based on the foreign currency exchange loss.

Compared to 2019 the draft gross profit in 2020 decreased by 34%, which is lower by LEI 144.556 thousand.

2. The main consolidated draft financial and economic indicators obtained as at 31 December 2020, compared to the indicators obtained in the same period of 2019 are presented in the table below:

* thousand lei *

No.	Name	Consolidated obtained 2019	Consolidated draft 2020	Increase
0	1	2	3	4=3/2x100- 100
1.	Operating revenue before the balancing and construction activity, according to IFRIC12	1.575.925	1.337.153	-15%
2.	Revenue from the balancing activity	324.688	199.239	-39%
3.	Revenue from the construction activity according to IFRIC12	868.357	1.575.005	81%
4.	Financial revenue	101.618	71.134	-30%
5.	Operating costs before the balancing and construction activity, according to IFRIC12	1.234.622	1.103.340	-11%
6.	Costs from the balancing activity	324.688	199.239	-39%
7.	Cost of constructed assets according to IFRIC12	868.357	1.575.005	81%
8.	Financial costs	30.779	35.477	15%
9.	GROSS PROFIT, of which:	412.143	269.469	-35%
	from operation 	341.303	233.812	-31%
	 from the financial activity	70.840	35.657	-50%
10.	Income tax	70.749	44.905	-37%
11.	NET PROFIT	341.394	224.564	-34%

Compared to the consolidated results obtained in 2019, the consolidated draft gross profit in 2020 decreased by 35%, which is lower by LEI 142.673 thousand.

The consolidated companies of the Transgaz group are:

		Shreholding (%)
SNTGN Transgaz SA	Mother company
Eurotransgaz SRL	Company owned by SNTGN Transgaz SA	100%
Vestmoldtransgaz SRL	Company owned by Eurotransgaz SRL	100%

We note that the consolidated and individual draft financial statements for 2020 were prepared in accordance with IFRS-EU and are not audited.

For a full view of the report you can access the link below or Transgaz' website at: http://www.transgaz.ro/ro/investitori/raportari\_financiare

ION STERIAN DIRECTOR GENERAL

THE NATIONAL GAS TRANSMISSION COMPANY TRANSGAZ S.A.

PRELIMINARY UNAUDITED INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED BY THE EUROPEAN UNION

This version of the interim financial statements is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

INTERIM STATEMENT OF FINANCIAL POSITION (expressed in lei, unless otherwise stated)

	31 December 2020	31 December 2019
	(unaudited)
ASSET
Fixed assets
Tangible Assets	449.717.871	476.405.816
Rights of use of the leased assets	8.962.615	9.359.179
Intangible Assets	4.050.713.059	3.058.556.071
Financial assets	237.526.608	215.886.809
Trade receivables and other receivables	1.239.998.760	723.921.414
	5.986.918.913	4.484.129.289
Current assets
Inventories	191.038.387	488.033.645
Commercial receivables and other receivables	714.293.310	485.867.200
Cash and cash equivalent	276.168.508	311.138.161
	1.181.500.205	1.285.039.006
Total asset	7.168.419.118	5.769.168.295
EQUITY AND DEBTS
Equity
Share capital	117.738.440	117.738.440
Hyperinflation adjustment of share capital	441.418.396	441.418.396
Share premium	247.478.865	247.478.865
Other reserves	1.265.796.861	1.265.796.861
Retained earnings	1.741.443.300	1.709.507.825
	3.813.875.862	3.781.940.387
Long-term debts
Long-term loans	1.537.297.089	661.062.420
Provision for employee benefits	130.390.607	119.858.608
Deferred revenue	1.061.771.214	647.728.922
Deferred tax payment	4.455.031	7.860.382
Commercial debt and other debts	6.764.158	53.278.838
	2.740.678.099	1.489.789.170
Current debts
Commercial debts and other debts	475.729.918	420.478.016
Provision for risks and charges	63.337.913	72.239.710
Short-term loans	70.379.600	2.867.580
Provision for employee benefits	4.417.726	1.853.432
	613.865.157	497.438.738
Total debts	3.354.543.256	1.987.227.908
Total equity and debts	7.168.419.118	5.769.168.295
Director – General	Chief Financial Officer
Ion Sterian	Marius Lupean

INTERIM STATEMENT OF THE COMPREHENSIVE INCOME (expressed in lei, unless otherwise stated)

	The year ended 31 December 2020 (unaudited)	The year ended 31 December 2019
Revenue from the domestic transmission activity	1.150.464.877	1.192.597.737
Revenue from the international transmission activity	114.222.513	327.696.392
Other revenue	67.969.332	56.372.901
Operational revenue before the balancing and
construction activity according to IFRIC12	1.332.656.722	1.576.667.030
Depreciation	(245.173.820)	(193.622.482)
Employees costs	(431.359.573)	(413.647.347)
NTS gas consumption, materials and consumables used	(115.609.386)	(99.266.835)
Expenses with royalties	(107.622.364)	(151.282.768)
Maintenance and transmission	(30.362.501)	(29.844.354)
Taxes and other amounts owed to the state	(71.869.798)	(111.290.009)
Revenue/ (Expenses) with provisions for risks and charges	15.796.569	(49.818.887)
Other operating cost	(112.801.701)	(179.926.744)
Operational profit before the balancing and construction activity according to IFRIC12	233.654.148	347.967.604
Revenue from the balancing activity	199.239.243	324.687.807
Cost of balancing gas	(199.239.243)	(324.687.807)
Revenue from the construction activity according to IFRIC12	1.575.004.683	868.356.796
Cost of assets constructed according to IFRIC12	(1.575.004.683)	(868.356.796)
Operational profit	233.654.148	347.967.604
Financial revenue	60.465.235	98.951.903
Financial cost	(19.574.100)	(27.817.927)
Financial revenue, net	40.891.135	71.133.976
Profit before tax	274.545.283	419.101.580
Profit tax expense	(44.755.688)	(70.842.564)
Net profit for the period	229.789.595	348.259.016
Basic and diluted earnings per share
(expressed in lei per share)	19,52	29,58
Actuarial gain / loss for the period	(15.712.752)	(4.636.774)
Total comprehensive income for the period	214.076.843	343.622.242

Ion Sterian Marius Lupean

Director - General Chief Financial Officer

THE NATIONAL GAS TRANSMISSION COMPANY TRANSGAZ S.A.

PRELIMINARY UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED BY THE EUROPEAN UNION

This version of the interim financial statements is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION (expressed in lei, unless otherwise stated)

	31 December 2020	31 December 2019
	(unaudited)
ASSET
Fixed assets
Tangible Assets	736.716.054	622.962.093
Rights of use of the leased assets	8.962.615	9.359.179
Intangible Assets	4.050.743.217	3.058.597.272
Financial assets	-	-
Goodwill	9.082.127	9.775.599
Trade receivables and other receivables	1.239.998.760	723.921.414
	6.045.502.773	4.424.615.557
Current assets
Inventories	194.119.244	494.614.492
Commercial receivables and other receivables	718.780.716	524.500.459
Cash and cash equivalent	289.446.278	352.985.119
	1.202.346.238	1.372.100.070
Total asset	7.247.849.011	5.796.715.627
EQUITY AND DEBTS
Equity
Share capital	117.738.440	117.738.440
Hyperinflation adjustment of share capital	441.418.396	441.418.396
Share premium	247.478.865	247.478.865
Other reserves	1.265.796.861	1.265.796.861
Retained earnings	1.729.553.565	1.699.175.132
Exchange rate differences from consolidation	(19.371.772)	3.668.307
	3.782.614.355	3.775.276.001
Long-term debts
Long-term loans	1.644.649.219	661.062.420
Provision for employee benefits	130.390.607	119.858.608
Deferred revenue	1.061.771.214	647.728.922
Deferred tax payment	4.791.295	8.071.065
Commercial debt and other debts	6.764.158	53.278.838
	2.848.366.493	1.489.999.853
Current debts
Commercial debts and other debts	478.732.924	454.479.051
Provision for risks and charges	63.337.913	72.239.710
Short-term loans	70.379.600	2.867.580
Provision for employee benefits	4.417.726	1.853.432
	616.868.163	531.439.773
Total debts	3.465.234.656	2.021.439.626
Total equity and debts	7.247.849.011	5.796.715.627

Ion Sterian Marius Lupean

Director – General Chief Financial Officer

CONSOLIDATED INTERIM STATEMENT OF THE COMPREHENSIVE INCOME (expressed in lei, unless otherwise stated)

	The year ended 31 December 2020 (unaudited)	The year ended 31 December 2019
Revenue from the domestic transmission activity	1.150.464.877	1.192.597.737
Revenue from the international transmission activity	114.222.513	327.696.392
Other revenue	72.465.329	55.630.757
Operational revenue before the balancing and
construction activity according to IFRIC12	1.337.152.719	1.575.924.886
Depreciation	(246.883.505)	(195.700.887)
Employees costs	(433.968.413)	(415.818.106)
NTS gas consumption, materials and consumables used	(115.609.386)	(99.266.835)
Expenses with royalties	(107.760.493)	(151.374.380)
Maintenance and transmission	(30.453.861)	(29.899.092)
Taxes and other amounts owed to the state	(71.869.898)	(111.290.048)
Revenue/ (Expenses) with provisions for risks and charges	15.748.742	(49.818.887)
Other operating cost	(112.543.595)	(181.453.361)
Operational profit before the balancing and
construction activity according to IFRIC12	233.812.310	341.303.290
Revenue from the balancing activity	199.239.243	324.687.807
Cost of balancing gas	(199.239.243)	(324.687.807)
Revenue from the construction activity according to IFRIC12	1.575.004.683	868.356.796
Cost of assets constructed according to IFRIC12	(1.575.004.683)	(868.356.796)
Operational profit	233.812.310	341.303.290
Financial revenue	71.134.021	101.618.158
Financial cost	(35.476.981)	(30.778.655)
Financial revenue, net	35.657.040	70.839.503
Profit before tax	269.469.350	412.142.793
Profit tax expense	(44.905.103)	(70.748.512)
Net profit for the period	224.564.247	341.394.281
Exchange rate differences	(19.371.772)	3.668.307
Basic and diluted earnings per share
(expressed in lei per share)	19,07	29,00
Actuarial gain / loss for the period	(15.712.752)	(4.636.774)
Total comprehensive income for the period	189.479.722	340.425.814

Ion Sterian Marius Lupean

Director - General Chief Financial Officer