Electrica Oltenia S.A. Annual Report 2006 · Electrica Oltenia S.A. is a joint stock company based in Romania and is the main supplier of electricity in the counties of Olt, Dolj,

Electrica Oltenia S.A.Annual Report2006

CEZOltenia_engl.qxd 8/2/07 6:22 PM Page 2011

CEZ Group

Energy without borders


Electrica Oltenia S.A. is a joint stock company based in

Romania and is the main supplier of electricity in the counties

of Olt, Dolj, Gorj, Vâlcea, Arge[, Mehedin]i and Teleorman.

Since 2005, CEZ, a.s. has been the majority shareholder (51%)

of the Company.

The Company has 249 transformation stations and

51 thousand kilometers of power lines (0.4 kV and 110 kV).

Electrica S.A., a state owned company, used to be the

Company's sole shareholder. In October 1, 2005, ČEZ, a.s.

became the majority shareholder (51%) in the Company, with

Electrica S.A. retaining the remaining 49%. ČEZ, a.s. is based

in the Czech Republic, and its registered address is Duhová

2/1444, Prague 4, 140 53, Czech Republic.

On September 7, 2006, the Shareholders' General Assembly

decided to alter its ownership structure, and ČEZ, a.s. was

taken over by ZAPADOCESKA ENERGETIKA, a.s.,

SEVEROMORAVSKA ENERGETIKA, a.s. and

VYCHODOCESKA ENERGETIKA, a.s., with each entity taking

a single share in the Company.

In October 2006, 12% of Electrica S.A.'s shares in the

Company were transferred to S.C. Fondul Proprietatea S.A.


Electrica Oltenia S.A.in 2006

1,348,905Revenue

(thousand RON)

11.40ROIC

(Return on Invested Capital)

(%)


95,203Net income

(thousand RON)

-61,553EVA

(Economic Value Added)

(thousand RON)

4.48ROA, net

(Return on Assets)

(%)


CEZ Group2

CEZ Group

CEZ Group Territory

The Leader in the Power Market

of Central and Southeastern Europe

CEZ Group is a dynamic, integrated electricity conglomerate

based in the Czech Republic and with operations in a number

of countries in the region of Central and Southeastern Europe.

Its principal businesses encompass generation, distribution,

and sale of electricity and heat as well as coal mining.

The shares of the parent company ČEZ, a.s. are traded in

Prague and Warsaw, and they are also a significant part of the

stock exchange indexes there. The company's largest

shareholder is the Czech Republic. Over the past few years,

ČEZ, a.s. has become one of the largest companies,

by market capitalization, in this entire region.

A critical part of CEZ Group's mission is to maximize returns

and ensure long-term growth in shareholder value. To this end,

CEZ Group focuses its efforts on fulfilling the vision of

becoming the leader in the power markets of Central and

Southeastern Europe.

Operational Excellence

The first pillar for fulfilling the CEZ Group's vision is operational

excellence through continual improvements in efficiency.

Increased productivity, cost savings, and improvements in the

services we provide comprise the foundation for sustained

growth in the company's market value and its competitiveness.

CEZ Group began pursuing integration and efficiency

improvements in the Czech Republic with the project VIZE 2008,

whose primary goal was to transform the legacy organization,

which was based on geographically defined subsidiaries,

into a standard process-based organization and implement

unbundling. The requirement of Czech and European Union

legislation to separate, or “unbundle”, the licensed and regulated

activity of distribution from the sale of electricity was fulfilled

at the beginning of 2006. Since 2003, VIZE 2008 and

subsequent changes to the organization and optimizing of

individual processes have yielded a cumulative savings of

CZK 7.9 billion. In addition, 2006 saw the commencement of

more key CEZ Group projects designed to focus companies

more on the customer, improving internal processes toward

this end, developing human resources, and thereby bringing

about a major improvement in the quality of customer services.

International Expansion

Another part of the CEZ Group vision is to develop operations

beyond the borders of the Czech Republic. CEZ Group's

priority focus is on the markets of Central and Southeastern

Europe, where we can best employ our unique experience in

managing an electricity conglomerate during a period of

transition to a liberalized power market and unbundling of

regulated activities from the rest of the conglomerate.

Successful acquisitions in Poland, Bulgaria and Romania have

opened up new markets for CEZ Group. The Group's

subsidiaries in Hungary and Serbia have gained a solid foothold

in their respective markets. A joint venture engaged in upgrading

and expanding a generating plant has been started in Republika

Srpska in Bosnia and Herzegovina. ČEZ, a.s. is quickly

integrating new companies into the Group and implementing

best practices in both core and ancillary processes.

Plant Portfolio Renewal

The third pillar for achieving CEZ Group's ambitious goal is the

renewal, or retrofitting, of our existing power stations. Currently

documentation is being prepared for a complete retrofit of the

brown coal-fired Tušimice II Power Station in the Czech

Republic, and the realization of the project is slated to begin in

June 2007. Another big project is the construction of a new


CEZ Group 3

660 MW brown coal-fired plant in the Ledvice Power Station

compound in North Bohemia. In this project, documentation

for administrative proceedings has been completed.

A third project – the complete retrofit of Prunéřov II Power

Station – has also been commenced.

The increased efficiency of the retrofitted and new coal-fired

power stations will increase fuel efficiency by 15 – 25%

compared to the technology currently in use. At the same time

there will be a reduction in the emissions of the gases produced

by coal combustion. The reduction in CO2 emissions is in line

with the reduction in fuel consumption, i.e. 15 – 25%. Emissions

of nitrogen oxides will be cut by approximately 60%, while

sulfur dioxide emissions will fall by roughly 50%.

Plant renewal is also taking place in the Republika Srpska in

Bosnia and Herzegovina, in the form of a joint venture.

Renewal of plants in Poland is in the planning stage.

CEZ Group is interested in developing similar activities in the

target territory of Central and Southeastern Europe and is

participating in tenders toward this end.

Corporate Culture

To accomplish these demanding goals in a long-term,

sustained fashion, CEZ Group will need to systematically

develop its corporate culture and human resources.

The corporate culture is based on the following seven

key principles:

1. creating value while maintaining safety standards,

2. individual responsibility for meeting ambitious targets,

3. building unity within CEZ Group,

4. developing human potential,

5. creating an international organization,

6. accepting constant change,

7. moral integrity.

Corporate Citizenship and Environmental StewardshipCEZ Group's business is governed by strict ethical standards

that include behaving responsibly toward society and the

environment. CEZ Group is a major supporter of a number of

non-profit organizations and public-benefit projects. In addition

to continually reducing the environmental impact of coal

mining and electricity generation and distribution, CEZ Group

commenced two major environmental initiatives in 2006: first,

the disbursement of proceeds from the sale of Green Energy

to fund third-party projects for developing renewable sources

of energy and, second, a public declaration of CEZ Group's

contribution toward sustainable development. One of the main

points of the declaration is a pledge to utilize gains realized on

sales of CO2 allowances saved by investing them in

technologies that protect the environment.

Anticipated Commercial and Financial Situation in 2007

In 2007, CEZ Group anticipates continual rapid growth

in commercial performance, driven by the successful

implementation of strategic initiatives (operational excellence,

international growth, plant portfolio renewal) and changes

in the electricity markets (in particular, growth in wholesale

electricity prices). In view of the above, consolidated net

income is expected to be up over 24% compared to 2006

(i.e. more than CZK 35 billion) and income before other

income (expenses) and income taxes, depreciation and

amortization (EBITDA) are to rise by more than 12%

(i.e. to over CZK 70.9 billion). The aggregate contribution of

foreign operations to EBITDA is expected to be 19% higher,

i.e. a minimum of CZK 5.8 billion.


Contents

Key Figures 6

Important Events of 2006 and 2007 Up to Annual Report Closing Date 7

A Message from Mr. Jan Veškrna 10

Directors and Officers 12

Financial Performance 18

Revenue, Costs and Earnings 18

Structure of Assets 19

Liabilities and Equity 20

Financial Risk Management Politics 20

Procurement and Supply of Electricity 22

Main Types of Customers 22

Customer Headcount 22

Sales Performance in 2006 22

Sales to End Customers in 2006 22

The Regulatory Framework for the Romanian Wholesale Energy Market 23

The Distribution Grid Operation 26

Strategic Objectives of Electrica Oltenia S.A. 27

Capital Expenditure 30

Integrated Management System for Quality - Environment - Security and Work Health 33

Environmental Protection 34

Shareholding and Securities 35

Human Resources and Social Policy 38

Workforce Size and Composition 38

Social Policy 39

Social Expenditure 39

On the Job Training Programmes and Courses 39

Donation and Sponsorship Programme 40

Litigations 40

Electrica Oltenia S.A. Contents4


Contents Electrica Oltenia S.A. 5

Independent Auditors’ Report 41

Financial Statements as at and for the Year Ended December 31, 2006 42

Balance Sheet 42

Income Statement 43

Statements of Changes in Equity 44

Cash Flow Statements 45

Notes to the Financial Statements 46

Corporate Information 46

Significant Accounting Policies 47

Property, Plant and Equipment 54

Intangible Assets 56

Other Financial Assets 57

Trade Receivables 57

Receivables from Related Parties 57

Cash and Cash Equivalents 58

Shareholders’ Equity 58

Long Term Liabilities to Related Parties 60

Deferred Income 60

Trade Payables 61

Short Term Liabilities to Related Parties 61

Other Current Liabilities 61

Provisions 62

Sales of Electricity 63

Other Operating Revenues 64

Electricity Purchased 64

Materials and Supplies 64

Repairs and Maintenance 64

Salaries, Wages and Other Employee Benefits 65

Depreciation, Amortization and Impairment Charges 65

Financial Income, Net 65

Other Operational Expenses 66

Income Taxes 66

Related Parties 68

Number of Employees 69

Financial Risk Management Objectives and Policies 69

Commitments and Contingencies 70

Restatement of Comparative Figures 72

Subsequent Events 72

Glossary of Terms and Abbreviations 73

Method Used to Calculate Key Figures 74

Information for Shareholders and Investors 75

Information on Persons Responsible for the Annual Report 76


Electrica Oltenia S.A. Key Figures6

Key Figures

Key Figures

units 2004 2005 2006

Employee headcount as of December 31 number 2,930 2,969 2,971

Revenue thousand RON 1,299,385 1,292,436 1,348,905

out of that: electricity thousand RON 1,227,877 1,126,885 1,120,448

EBITDA thousand RON 235,961 166,949 245,706

EBIT thousand RON -83,219 65,582 143,025

Net profit thousand RON -131,615 73,017 95,203

Total assets thousand RON 1,612,971 2,078,250 2,192,791

Equity thousand RON 1,088,140 1,599,117 1,728,087

Loans thousand RON 48,381 11,635 0

Loans / Equity % 4.45 0.73 0

Investments thousand RON 63,159 103,265 208,792

Operating cash flow thousand RON 44,381 129,708 107,568

Sales area km2 41,828 41,828 41,828

Electricity sale GWh 5,261 4,145 3,852

Eligible consumers GWh 0 53 397

Captive consumers GWh 5,261 4,023 3,048

Commercial GWh 4,238 2,945 2,274

Households GWh 1,023 1,077 1,171

Other sales GWh 0 69 407

Number of consumption points number 1,386,333 1,394,321 1,370,017

Eligible consumers number 191 392 134

Captive consumers number 1,386,142 1,393,929 1,369,883

Commercial number 94,812 96,301 83,442

Households number 1,291,330 1,297,628 1,286,575

Peak load MW 1,002 992 1,292

Grid extension length km 50,375 50,321 50,792

of which: high voltage km 3,512 3,506 3,535

medium voltage km 19,688 19,640 19,624

low voltage km 27,175 27,175 27,633

Number of conversion stations number 10,214 9,985 10,089

of which: own number 10,214 9,985 10,089

owned by third parties number 0 0 0

ROIC (Return on Invested Capital) % -6.81 3.63 11.40

EVA (Economic Value Added) thousand RON -221,266 -56,800 -61,553

ROE, net (Return on Equity) % -13.8 5.17 5.70

ROA, net (Return on Assets) % -9 3.76 4.48

EBIT margin % -6.4 5.07 10.89

Debt / Equity % 4.45 0.73 0.00

Debt/ EBITDA % 20.50 6.97 0.00

Current ratio % 80.41 224.08 236.44

Operating cash flow to liabilities ratio % 8.46 27.07 23.15

Asset turnover 1 0.81 0.62 0.62

Coverage of non-current assets % 94.74 126.18 125.22

Extent of depreciation % 24.06 7.18 6.73


Important Events of 2006

February

the official start of the Unbundling project.

March

selection of the Unbundling project team and the beginning of

an analysis of possible scenarios.

May

the management team of CEZ Romania visits the seven

subsidiaries of the company to explain to employees the

need for the Unbundling process.

June

Administration Council approves the partial separation that

generates two companies: CEZ Distribu]ie and CEZ Vånzare,

final stage of “Electrician’s Trophy” contest in Electrica

Oltenia,

initiation meeting of “Centralizing the financial function” (SSC)

project,

project initiation meeting for the new reading-invoicing-

collection in Electrica Oltenia.

July

national “Electrician’s Trophy” contest.

7

Important Events of 2006 and 2007 Up to Annual Report Closing Date

August

opening meeting for the implementation of the new ERP +

CIS software.

September

the second stage of the SSC project begins: design stage,

ERP + CIS project: process leaders team visits Prague.

October

first stage of the ERP project: Blueprint stage,

Electrica Oltenia wins “2005 Investor of the Year

in Romania” award.

November

Fondul Proprietatea becomes a shareholder of Electrica

Oltenia (12%),

Shareholders’ General Assembly approves the Unbundling

plan.

December

approval of Blueprints for ERP,

the CEZ Romania managerial team tours the region to

explain to employees the need to centralize the

financial function and other internal issues,

meeting in Râmnicu Vâlcea with the 30 largest clients of

Electrica Oltenia,

approval and publication of the separation plan,

optimizing the management of subsidiaries.

Important Events of 2006 and 2007 Up to Annual Report Closing Date Electrica Oltenia S.A.


One of CEZ Group’s commitments during the

privatization process was to introduce best practices

into the distribution sector in Romania.

During 2006, the Company commenced

restructuring projects related to Unbundling, the

centralization of financial services and implementing

the new ERP software.

The general trend is towards the centralization of

administrative functions and introducing modern

technology to improve distribution operations.


CEZ Group is proud to be building its corporate

citizenship in all the countries where it is present. CEZ

affiliates always try hard to build excellent relationships

both with the central authorities and local government.

Electrica Oltenia and its successors will continue to build

on these good relations.


Electrica Oltenia S.A. A Message from Mr. Jan Veškrna

CEZ Romania, part of CEZ Group, one of the most important

electrical power producers, suppliers and distributors in

Europe, both in terms of operating capacity and in the number

of clients served, is beginning a very important year for its

consolidation and expansion plans. CEZ Romania holds a

majority stake in Electrica Oltenia, the shareholding structure of

which is as follows: CEZ 51%, Electrica 37% and Fondul

Proprietatea 12%.

Electrica Oltenia was declared “The best investor of 2005” by

the Romanian Chamber for Commerce and Industry in October

2006.

Posting good financial results, Electrica Oltenia reported a net

profit of 95,203 thousand RON for 2006, 0.22% less than its

target, and 37.14% more than last year's profit. This

substantial growth was due to revenue from the sale of

electricity, which grew by 4.37%; since the volume of power

sold was down by 7%, we can conclude that other sales

revenue are responsible for this development.

The steady plan for investment we made at the very beginning

has been totally and successfully implemented; moreover, the

plan was surpassed by 13%. As a result of the dedication

shown by CEZ Romania team, the plans for developing our

business are ongoing, even though the privatization process

has now been completed.

CEZ Romania is carrying out its most ambitious plan yet - the

project LIFE IMO (Integration management office). The principal

aim of this project is the reunification, supervision and

assessment of all separation and restructuring activities in

which CEZ Romania has been involved in this period. Basically,

the LIFE project gathers under its umbrella the restructuring

and unbundling project which is being carried out in order to

comply with European Directive 2003/54/EC on the unbundling

of businesses in the energy sector, which must be

implemented in Romania by July 1, 2007. To meet the

demands of the European Union, we have decided to separate

the distribution operator from other operations which do not

legally, functionally or from an accounting point of view involve

distribution.

We are looking to consolidate CEZ Group in Romania. I fully

trust that the future companies of CEZ Romania will lead the

Romanian energy market.

Jan Veškrna

Chairman of the Board of Directors

A Message fromMr. Jan Veškrna

10



Directors and Officers

Gabriel Negril` (* 1955)

General Director

Graduated in 1981 with a degree in Electrical Engineering from

Timi[oara State University, with a Major in power engineering.

He started his career as an engineer the Municipal Distribution

Centre of the Electricity Networks Enterprise of Târgu-Jiu.

Between 1983 and 1987 he headed the Operations

Department and from 1987 to 1998 he was the Head of the

Supply Department. He gained broad experience in both of the

company's main areas of business - the distribution and supply

of electricity. Throughout this period, he participated in training

in the field of repair optimisations (1984), and management

(1984, 1988, 1992, 1994, 1999). Between 1998 and1999 he

worked as the Chief Engineer of the Development Department,

and in 1999 he became the Head of Distribution Department in

S.D.F.E.E. Târgu-Jiu. He held this position until 2001, when he

joined the managerial team of D.F.E.E. Electrica Oltenia, as

Technical & Development Director.

In 2003 he was appointed Project Manager for implementing

the SAP R/3 Application of the Oltenia subsidiary. Between

May 23, 2005 and October 31, 2005 he regained his position

at Târgu-Jiu, as Chief Engineer of the Distribution Department,

and, since November 1, 2005, he has been the General

Manager of Electrica Oltenia S.A.

Emi Mitrofan (* 1950)

Financial Director

Obtained a degree in Commerce from the Academy of

Economics in Bucharest in 1973, and began work as an

economist for OJT Drobeta. In 1976 he was transferred to IRE

Drobeta where, between January 1, 1983 and June 1, 2006,

he coordinated financial and accountancy operations, as chief

accountant (1983-1991 and 2002-2006) and as economic

director (1991-2002).

During this time, he also completed training courses in politics

and energy management (1999), managerial accounting (2001)

and the new accountancy system harmonized with international

standards (2001). Since June 1, 2006, he has been Financial

Director of Electrica Oltenia S.A.

Electrica Oltenia S.A. Directors and Officers12


Vicen]iu Alexandru (* 1947)

Technical and Development Director

Obtained a degree in Electrical Engineering 1969 from Timi[oara

State University. He started his career as an engineer at the

Electric Networks Enterprise in Craiova, in the High-Voltage

Section, where he worked until 1972. Between 1972 and 2005

he worked in the PRAM-TC Section, as Head Engineer (1978),

Head Specialist Engineer (1988), Deputy Head of Department

(1991) and Head of the PRAM-TC Section (1998). Throughout

this time he took part in training in PRAM and automation (1974,

1979, 1985, 1989), and participated in specialist courses in

power engineering (1977, 1987) and management (1997, 1998,

1999). Since December 2005 he has been theTechnical &

Development Director of Electrica Oltenia S.A.

Board of Directors

Jan Veškrna (* 1965)

President

Obtained a degree in Microelectronics from the Faculty of

Electronics in Brno. After graduation, in 1989, he started his

career as design engineer for CHEPOS Engineering&NBS

company in Brno, as part of the design group for technological

processes of automated control systems. In 1990 he finished

his postgraduate classes in France (EN SIC Nancy) in the field

of Chemical Engineering (“Diplôme de génie chimique“).

Between 1990 and 1995, in his capacity as a design engineer,

he took part in the creation of the following investments:

Central Refinery Iraq, Vacuum Distillation Unit Egypt Suez,

Alumina Plant Project of IRAN, Hydrotreater Charge Heater

Syria Homs, as well as in a whole series of investments in the

Czech Republic in the energy and petrochemical fields. Since

1996 he has been General Manager of ABB Power Plant

Control, the main shareholder of which was the German firm

KWL Mannheim. This company operated exclusively in the

energy sector, supplying monitoring systems and setting up

power and low power facilities, both for the internal market and

for export to Iran, India, Germany, Austria, Poland, Russia, The

Netherlands, Great Britain and Slovakia.

In 1999, Mr. Veškrna was appointed commercial director of

DALKIA, being in charge of selling power, heating and systems

services. He was a member of the strategic planning team, as

well as a member of the Managing Committee. In 2003 he was

named Commercial Director and he became a member of the

Managing Board of Severomoravská energetika, a. s. (Northern

Moravia Energy Co.), part of the CEZ Group. In 2004 he

became the Chairman of the Managing Board and the General

Manager of Středočeská energetická, a.s. (Central Czech

Energy Co.), which is also a member of CEZ Group. In 2005 he

began working for ČEZ, a.s., as Country Manager for Romania.

Directors and Officers Electrica Oltenia S.A. 13


Martin Pacovský (* 1973)

Member

Obtained a degree in Finance and Accounting from the faculty

of Economics, in Prague, and an M.A. in Business

Administration from The Rochester Institute of Technology.

He has worked for DELTAX Systems, a.s, where he started as

Chief Accountant and continued as Chief Financial Officer. In

LAUFEN CZ s.r.o. (sanitary ware producer, member of the

LAUFEN Group, Switzerland) he was CFO responsible for

Eastern Europe, and in NKT CABLES, a.s. (Danish cable

producer) he worked as a CFO for the Czech Republic and as

IT Manager for Eastern Europe. In March 2005 he joined CEZ

Group specifically for the project for restructuring Electrica

Oltenia S.A.

Luboš Pavlas (* 1957)

Member

After being Chief Executive Officer (CEO) of Pražská

teplárenská, a.s., Mr. Luboš Pavlas decided to come to work

for ČEZ. He is currently using his broad experience and know-

how to support the international expansion of the company,

working with of the managerial team in Romania. Until this year,

Mr. Pavlas was the Chairman of the Executive Council of the

Heating Companies Association, and Chairman of the Energy

Employers' Association in the Czech Republic.

Electrica Oltenia S.A. Directors and Officers14


Tudor {erban (* 1947)

Member

Obtained a degree in Power Engineering 1973 from the Faculty

of Electrical Engineering at Ia[i Polytechnic Institute. He is

currently working on his doctorate at the Polytechnic Institute

of Bucharest.

Between 1973 and 1999 he worked for Electric Networks

Enterprise in Constan]a, where he rose from engineer to

General Manager (1996-1999). Between 1999 and 2001 he

was General Manager of Electrica S.A. Bucharest, where he

also worked as a Consultant (2001-2005). Now he works as

Technical & Development Director of Electrica S.A. Bucharest.

Previously, he also been President of the Romanian Energy

Board C.I.G.R.E. (1999), President of the Romanian Energy

Employers (1999), Vice-president of ELPEGA Employers

(1999), President of the Romanian Energy Distributors and

Transport C.I.R.E.D. (2000).

In 2000, The Ministry of Industry and Resources awarded him

the Order of Merit, with the title “Knight for outstanding

achievements in the area of energy systems”.

Dan C`t`lin Stancu (* 1963)

Member

Graduated from the Faculty of Electric Engineering of the

Polytechnic Institute of Bucharest (1982-1988), then obtained an

M.A. in Business Administration” in England at the Codecs-Open

University and a “Professional Certificate in Management” (2002-

2003) and a “Diploma in Management” (2004-2005). He worked

in Electrica Muntenia Sud S.A. as Executive Manager (2001-

2004), as Project Manager of the SAP Application for the same

subsidiary and, since August 2005, he has been Deputy

Privatization Manager in Electrica S.A. Bucharest.

He has made a significant contribution to the SAP application and

to the development of the customer relations system. He has also

participated in projects involving the SRAC-IQNet certification for

the Quality System of Management ISO 9001/2000 at Electrica

Muntenia Sud, as well as in the privatization of Electrica S.A.

branches.

Directors and Officers Electrica Oltenia S.A. 15


The Company's share capital consists of 71,523,469

authorized, issued and fully paid shares with a

nominal value of RON 10 each.

As of December 31, 2006, the Company has tax

qualifying revaluation reserves amounting to

approximately RON 13,750 thousand arising out of

the revaluation of its tangible fixed assets as of

December 31, 2003.

By April 2006, the company repaid all Electrica S.A.’s

loans, thus eliminating a possible financial risk.


Financial Risk Management Politics is central to the

strategic management of Electrica Oltenia S.A. Its main

objective is to identify and address the risks related to

the company's financial activities, focusing on

preventing and eliminating potential negative influences.


Electrica Oltenia S.A. Financial Performance18

Revenue, Costs and Earnings

In 2006 the company posted a net income of 95,203 thousand RON,

0.22% below target, and 37.14% higher than the previous year. This

rise in profit was generated by revenue from the sale of electricity,

which rose by 4.37%; as the volume of electricity sold decreased by

7%, we can conclude that other operating revenue generated this

development.

For 2007, a net profit of 127,618 thousand RON was planned for

the Romanian companies in CEZ Group. Operational revenue was

13.04% above target and up 4.37% relative to 2005, while

operational costs were 1.71% lower than the previous year. The

target for operational costs in 2007 is 1,176,181 thousand RON,

8.38% higher than the target in 2006, and 2.46% lower than the

one achieved in 2006.

The greater part of operational costs - 66% - derived from the

purchase of electricity, followed by depreciation - 8%, labour

costs- 8%, repairs and maintenance - 8%, materials - under 1%,

and other operational costs - 9%.

Labour costs exceeded their 2006 targets by 1.71%, due to a 5%

wage increase for all employees from March 2006, promotions

during the year and bonuses for ECO projects that were not

accounted for when the budgets were drafted. A 60% increase in

labour costs is estimated for 2007, due to growth in business and

a 40% rise in employee numbers, as well as possible severance

payments.

Maintenance expenses increased in 2006 by 1% to 102,692

thousand RON; a 5% decrease of the maintenance expenses is

planned for 2007.

Financial Performance


In 2006, the costs of materials fell by approximately 55% through improved management of expenditure.

The company reported a 5,609 thousand RON loss on its financial operations due to exchange rate differences, caused by the

appreciation of the LEU against the EURO, from 3.6771 RON/EURO on December 31, 2005 to 3.3817 RON/EURO on December 31,

2006.

Summary of Financial Information for 2005-2006

units 2005 2006

Total assets thousand RON 2,078,250 2,192,791

Fixed assets thousand RON 1,411,049 1,525,876

Current assets thousand RON 667,201 666,915

Total liabilities thousand RON 2,078,250 2,192,791

Shareholders’ equity thousand RON 1,599,117 1,728,087

Total debts thousand RON 479,133 464,704

Operating revenue thousand RON 1,292,436 1,348,905

Operating expenditures thousand RON 1,226,854 1,205,880

Operating result thousand RON 65,582 143,025

Financial net profit / loss thousand RON 18,221 -5,609

Gross Profit thousand RON 83,803 137,416

Income taxes thousand RON 10,786 42,213

Net Profit thousand RON 73,017 95,203

Structure of Assets

At the end of 2006, total assets were worth 2,192,791 thousand RON. Due to investments, that doubled in 2006 compared to the

previous year. Tangible fixed assets went up to 116,480 thousand RON, representing almost 8% of the level reported at the end of

2005. Intangible fixed assets decreased slightly, by 709 thousand RON.

Assets under construction reached 666,915 thousand RON, an increase of below 0.1% on the previous year, but their structure was

significantly changed. Receivables were valued at 43,765 thousand RON (an increase of approximately 22% on the previous year) to the

detriment of cash and cash in bank, that fell 11.2% (51,936 thousand RON). This change suggests the collection of receivables. The

value of stocks of materials rose from 3,385 thousand RON to 3,992 thousand RON, due to decreased consumption.

Structure of Assets

units 2005 2006

Tangible and intangible assets thousand RON 1,406,551 1,522,322

Financial assets thousand RON 4,498 3,554

Current assets thousand RON 667,201 666,915

Total 2,078,250 2,192,791

Financial Performance Electrica Oltenia S.A. 19


Electrica Oltenia S.A. Financial Performance20

Liabilities and Equity

In 2006, the shareholders' equity in the company did not change, but the capital increased through an increase of profit. The premium

on capital registered last year remained unchanged at 114,095 thousand RON, although changes in the shareholding structure had

occurred. This suggests that the new shareholders bought the shares at their nominal value.

Overall, the company's liabilities rose to 464,704 thousand RON, 3% less than in 2005, and long-term liabilities amounted to 182,636

thousand RON. Current liabilities decreased from 297,756 thousand RON in 2005 to 282,068 thousand RON in 2006, of which 88,092

were accruals. Electrica Oltenia did not issue bonds, while the bank loans taken by Electrica S.A. before its privatization were paid in full

in April 2006.

Liabilities and Equity Structure

units 2005 2006

Share Capital thousand RON 799,033 799,033

Reserves, retained earnings and net result for the period thousand RON 800,084 929,054

Trade and other payables, deferred tax, long term liabilities thousand RON 363,520 313,320

Accruals, deferred income and prepaid expenses thousand RON 115,613 151,384

Total 2,078,250 2,192,791

Financial Risk Management Politics

In 2006, the project to reorganise Electrica Oltenia began: the project to separate its sales and distribution operations, the

centralization of its financial functions and implementation of the new ERP information system. For all these projects, Electrica Oltenia

has used the services of auditors and consultants, some internationally renowned, others locally.

In April 2006, the company repaid all Electrica S.A.'s loans, thus eliminating a possible financial risk. Other risks that can significantly

affect Electrica Oltenia's results are: exchange rate risks, credit risks, litigation and severance payments.

The Financial Risk Management Policy is central to Electrica Oltenia's management strategy. Its main objective is to identify and

address risks arising from the company's financial activities, focusing on preventing and eliminating any potential negative influences.


The Exchange Rate Risk

Electrica Oltenia seeks to implement the most effective financial strategy possible, taking into account two main scenarios:

1. The passive approach: it is too difficult to predict exchange rates accurately and Electrica Oltenia could opt to take no measures

to protect itself against this risk.

2. The active approach: there is a good chance of being able to predict exchange rates and Electrica Oltenia opts to take measures to

protect itself, as below:

a) The exchange rate is established in advance - Electrica Oltenia gets the opportunity to decide the exchange rate in advance, for

transactions, sales and purchases.

b) The option of choosing the exchange rate: Electrica Oltenia retains the option of protecting itself totally or partially against

unfavourable fluctuations in the exchange rate, while at the same time retaining the option of reaping the advantages of a

favourable fluctuation.

The Credit Risk

Electrica Oltenia is compelled by law to provide new consumers with electricity distribution services, without assessing their financial

situation. To cover this risk, Electrica Oltenia constitutes accruals based on the aging of receivables. If the client has a poor credit

history, Electrica Oltenia requires a bank guarantee. For eligible consumers, the credit risk is evaluated prior to signing the contract.

The losses in receivables are compensated for by the regulation authority, which takes these costs into account when setting tariffs.

Litigations

The company is involved in a series of litigations regarding the ownership of land crossed by electricity distribution grids. In these

litigations, Electrica Oltenia has constituted provisions based on the demands of the claimees. The procedure for the collection of

receivables indicates the term in which Electrica Oltenia may take action against consumers who are unable (or unwilling) to pay.

Compensatory Salaries

Under the Collective Labour Agreement between unions and the Company, Electrica Oltenia must make severance payments to

employees who are fired, on the basis of the employee's number of years of service:

Number of years Number of gross salaries

1 - 5 years 4

5 - 10 years 6

10 - 20 years 7

over 20 years 10

Due to this situation, provisions were created.

21Financial Performance Electrica Oltenia S.A.


22

Under license no. 458/29.04.2002, Electrica Oltenia S.A. supplies

electricity to various customers, who are classified into three

major groups: large customers, small customers and residential

customers in the Oltenia region, which is made up of 7 counties:

Arge[, Dolj, Mehedin]i, Olt, Vâlcea and Teleorman.

The Supply of Electric Power is undertaken in the

following fields:

contracting electrical power and building a relationship with

clients, in accordance with the frame contract approved by

ANRE - for captive customers only;

contracting electric power and building relationships with

clients through negotiation (for eligible customers);

purchasing electricity from the wholesale market at optimized

average acquisition costs and forecasting demand for electricity;

supplying electric power to customers, based on voltage type,

customer segment and corresponding price structure;

invoicing electric power to end customers;

collecting payment for electric power sold and establishing

procedures for recovering receivables from customers.

Main Types of Customers

Electrica Oltenia's customers can be grouped as follows:

Captive customers, who cannot choose their electric power

suppliers and who are invoiced at regulated prices;

Eligible customers, who can negotiate their contracts directly

with the license holder;

“Grey” customers, who may to negotiate their contracts, yet do

not avail of this option, and therefore receive their power at the

regulated price.

The distribution service is ensured through contracts between

Electrica Oltenia S.A. and the customer or between Electrica

Oltenia S.A. and the customer's supplier as an distributor, or

between Electrica Oltenia and another distributor for eligible

customers in the areas where Electrica Oltenia is not licensed as a

distributor.

Customer Headcount

At the end of 2006, Electrica Oltenia S.A. had 1,370,017

customers, of which 134 were eligible customers and 1,369,883

were captive customers (54 connected to high-voltage grids,

2,628 connected to medium voltage grids and 1,367,201

connected to low-voltage grids).

Under Government Decision No. 644/2005, the wholesale energy

market was modified as of July 1, 2005 and, as a result, Electrica

Oltenia S.A aimed to increase its number of eligible customers, so

that at the beginning of 2006, Electrica Oltenia S.A had in its

portfolio 16 ECO-eligible customers. At the end of 2006, Electrica

Oltenia S.A. provided electricity at negotiated rates for 134

consumption points, 7 of which were in distribution areas where

Electrica Oltenia was not an supplier of electricity.

Big customers 1,853

Small customers 81,589

Residential customers 1,286,575

Sales Performance in 2006 (MWh)

In 2006 Electrica Oltenia S.A. sold 3,445,253 MWh, as follows:

3,048,340 MWh (88.48%) captive customers, including other

license holders' industrial points of consumption from the area

covered by Electrica Oltenia S.A.;

396,913 MWh (11.52%) to Electrica Oltenia S.A.'s own eligible

customers

Sales to End Customers in 2006 (MWh)

Electrica Oltenia S.A., as a distributor and supplier of electricity,

aims to continuously improve both its relationship with its

customers and the company's image, by increasing the quality of

its services. These consist of professional customer care at all

points of contact with the customer, including meter reading,

simple and easy-to-understand invoicing, and providing an

uninterrupted supply of energy.

Customers connected to high-voltage grids 461,794 MWh

Customers connected to medium-voltage grids 977,275 MWh

Customers connected to low-voltage grids 2,006,183 MWh

Electrica Oltenia S.A. Electricity Procurement and Supply

Procurement and Supply of Electricity


23Electricity Procurement and Supply Electrica Oltenia S.A.

The Regulatory Framework for the RomanianWholesale Energy Market

1. Romanian Legislation

The Commercial Code for the wholesale energy market,

approved by A.N.R.E. (The National Authority for Energy

Regulation) Decision no. 25/2004;

A.N.R.E. Decision no. 30/2005 on the regulatory framework for

the wholesale energy market;

A.N.R.E. Decision no. 36/2005 for the working framework for

the wholesale energy market;

Energy Law no. 318/2003;

The methodology for setting tariffs for electricity for captive

customers, approved through ANRE Decision no. 11/2005;

The procedure for modifying sums from regulated contracts

concluded between producers and suppliers of captive

customers, approved by A.N.R.E. Decision no. 1007/2006;

The methodology for establishing prices and quantities for

electricity sold by producers through regulated contracts and

the methodology of price settlement for thermal energy delivered

from plants with co-generation groups, approved under

A.N.R.E. Order no. 24/2005;

The regulation of the organization and functioning of the Green

Certificate Market, approved through A.N.R.E. Order no.

22/2006;

ANRE Order no. 37/2006, approving changes in the compulsory

quote of Green Certificates for 2006;

Government Decision no. 958/2005, outlining policy on the

system for promoting electric power obtained from renewable

sources of energy;

The operating procedure - allotting the interconnectivity capacity

of SEN (The National Power System) with neighboring electrical

grids, issued by C.N. Transelectrica S.A.;

Government Decision no. 644/2005 on the liberalisation of the

energy market;

ANRE Order no. 44/2005, on capping prices on the equilibrium

market;

ANRE Order no. 23/2006 on capping prices on the equilibrium

market;

ANRE Order no. 33/2006 on capping prices on the equilibrium

market;

Decision no. 42/2005, approving the regulatory framework for

trading bilateral electrical power contracts;

The framework for the Centralized Market of Bilateral Contracts

for electric power;

A.N.R.E. Decision no. 61/2005 on the regulatory framework for

the wholesale energy market.

2. Regulators on the Energy Market

The Ministry of Economy and Trade

The National Authority for Energy Regulation (A.N.R.E.)

3. The Participants on the Wholesale Energy Market

Electricity producers;

Electricity suppliers

Electricity distributors;

Transmission System Operator / Measurement Operator -

C.N. Transelectrica S.A.;

Electricity Market Operator / Settlement Operator -

S.C. OPCOM S.A.

4. The Structure of the Wholesale Energy Market

The Romanian energy market consists of the following specific

markets:

The bilateral, regulated or negotiated contracts market - the

license holders are free to enter bilateral electric power

transactions, which are made legal through fixed term sale-

purchase contracts;

The Day-Ahead Market (PZU) is a centralized voluntary market in

which one concludes daily firm electric power contracts and

transactions for each period of trading for the corresponding

delivery day, based on the offers sent by its participants; this

market is managed by the electric power market operator;

The Equilibrium Market is a centralized mandatory market for

electricity producers, on which the transport and the system

operator buys and sells active electricity from other suppliers in

order to compensate for deviations between forecast energy

production and actual power consumption;

The technological system services market is a centralized

voluntary market which uses no discriminating market

mechanisms - fixed term tenders and/or bilateral contracts - to

ensure a sufficient quantity of technological system services

available for the Transmission System Operator and for

distribution operators;

The centralized market for the allocation of international

interconnectivity capacities is a voluntary market organized by

OTS (The Transmission System Operator); the allocation is

performed through tenders, separately for imports done through

contracts on periods up to one year and through Day- Ahead

Market transactions;

The Green Certificates Market is a centralized market organized

by OPCOM (The Romanian Electricity Market Operator) in order

to trade Green Certificates, with the purpose of promoting

electric energy produced from renewable sources;

The centralized market of bilateral contracts assigned through

public tender is a voluntary market, organized by electric power

suppliers, where contracts with physical delivery for electric

power are traded among market participants, under specific

rules.


5. The Participation of Electrica Oltenia S.A. in the Wholesale Energy Market

Electrica Oltenia S.A. is licenced to distribute and supply electricity on the wholesale energy market in Romania. It distributes electricity

under license no. 457/29.04.2002, and may supply electricity under license no. 458/29.04.2002. Both licences are granted by A.N.R.E.,

as the statutory authority.

Participation in the Day-Ahead Market (PZU) is ensured by Participation Convention no. 5912/27.06.2005.

Participation in the energy market segment constituted by the Centralized Market of Bilateral Contracts (PCCB) is ensured under

Participation Convention no. 895/19.01.2006.

Participation in the Centralized Market of Green Certificates (PCCV) is ensured under Participation Convention no. 6074/05.05.2006.

On July 1, 2005, the day the Equilibrium Market began to function, Electrica Oltenia S.A. transferred responsibility for equilibrium to the

Part Responsible for Equilibrium (PRE) Electrica S.A.

Energy Market Liberalization in Electrica Oltenia S.A. in 2006 (%)

The Acquisition of Electricity for Sale to Captive Customers and to Cover Grid Losses (Regulated Market)

The acquisition of electric power intended for sale to captive customers and to cover own industrial consumption (CPT) was achieved in

2006 under:

Bilateral regulated contracts for the sale and purchase of electricity;

Bilateral contracts for the sale and purchase of electricity with the purpose of covering own industrial consumption in the distribution grids;

Transactions on the Day-Ahead Market;

Energy ensured by C.N.Transelectrica S.A. as a result of recorded unbalanced energy;

Contracts negotiated between electricity producers and suppliers in order to cover the volumes of electricity not realized through

A.N.R.E. regulated contracts, in the period up to December 31, 2006.

Electrica Oltenia S.A. Electricity Procurement and Supply24


Electricity Procurement and Supply Electrica Oltenia S.A. 25

For 2006, A.N.R.E. established a portfolio of producers for each supplier to captive customers to ensure the captive customers' demand

for electricity and to cover own industrial consumption for electricity distribution grids.

For Electrica Oltenia S.A. these producers are:

S.C. Hidroelectrica S.A. - producer;

S.N. Nuclearelectrica S.A. - producer;

S.C. Complexul Energetic Rovinari S.A. - producer;

S.C. Complexul Energetic Turceni S.A. - producer;

S.C. Complexul Energetic Craiova S.A. - producer;

Regia Autonom` pentru Activit`]i Nucleare - self-producer;

S.C. CET Govora S.A. - producer;

S.C. Electrocentrale Deva S.A. - producer;

S.C. Electrocentrale Bucure[ti S.A. - producer;

S.C. Termoelectrica S.A. - producer.

Electric Power Purchase Structure in 2006 (%)

Electrica Oltenia S.A. concluded sale-purchase contracts with each of these electricity producers in order to ensure the sale of electricity

to captive customers and contracts to ensure its own industrial consumption.

6. The Purchase of Electric Power for Eligible Customers

In 2006, the purchase of electricity for sale to eligible customers of Electrica Oltenia S.A. was achieved by:

Fixed term bilateral negotiated contracts for the sale and purchase of electricity, closed for determined periods of time, whose contents

are set forth by the parties through direct negotiation, in compliance with the Regulations of the Commercial Code; these contracts can

be concluded with producers or other suppliers, in their capacity as participants on the wholesale energy market;

Bilateral contracts with a foreign partner. For the unfolding of import contracts, both parties must ensure that the necessary

international interconnectivity capacity is met (annexes on ensuring interconnection capacity);

Transactions on the Day- Ahead Market;

Energy provided by C.N. Transelectrica S.A. as a result of recorded imbalances.

SN Nuclearelectrica

Electrica Bucure[ti

Hidroelectrica

Complex Energetic Turceni

Electrocentrale Bucure[ti

Electrocentrale Deva

Complex Energetic Craiova

Complex Energetic Rovinari

Termoelectrica

RAAN

Hidroelectrica-MHC

Day-Ahead Market

S.C. CET Govora S.A.

Other suppliers

0.41% 1.41%1.17%2.43% 9.95%

7.65%

2.55%

4.61%

3.90%

14.68%

25.90%

13.36%

6.61%

5.37%


26 Electrica Oltenia S.A. The Distribution Grid Operation

In 2006, Electrica Oltenia S.A.'s distribution grid provided a total

volume of 12,028,135 MWh (compared with 2005 - 12,659,325

MWh). The highest hourly peak load, that of 1,292 MW, was

recorded on January 18, 2006 at 7:00 p.m.

From February to May 2006 severe weather caused floods and

landslides that led to numerous incidents in Electrica Oltenia

S.A's distribution grids. Most of these incidents were registered

in the 20 kV and 0.4 kV grids in branches in Craiova, Târgu Jiu,

Drobeta Turnu Severin, Vâlcea, Pite[ti and Slatina (broken

pylons, landslides, and destroyed conductors and insulations).

Average weekly peak load in Electrica Oltenia’s network (MW/week)

The losses coefficient in the distribution grid represents the

difference between the energy received in the system (contour)

and the total energy delivered, measured as a percentage of the

energy received in the system. Among the most important

objectives of the distribution activities are improved safety in

supplying electricity at contracted parameters and the reduction

of own industrial consumption.

Priorities in the Distribution Sector:

Connecting new consumers to the network;

Passing from 6 kV voltage to 20 kV voltage;

Eliminating double transformation;

Reducing the interruption number in the MV (medium voltage)

network by:

– Setting up re-closers;

– Setting up remote control separators;

– Developing SCADA (Supervisory Control and Data

Acquisition);

– Setting up the wire defectometers on medium voltage

cables.

Replacing the storage batteries in transforming stations with

reduced maintenance storage batteries;

Replacing the ceramic insulations from 110 kV transforming

stations bars with composite insulations;

Replacing the VKLF(S) isolators with 110 kV and 20 kV aerial

electric lines made of composite insulations;

Replacing horn arresters with metallic oxide made arresters;

Diagnosing and rehabilitating the power transformers from

transformer stations;

Expanding the tele-management system.

The DistributionGrid Operation

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

734

445

Week

MW

800

700

600

500

400

300


Strategic Objectives of Electrica Oltenia S.A. Electrica Oltenia S.A.

Strategic Objectivesof Electrica Oltenia S.A.

Unbundling

As part of EU membership, Romania imposed unbundling

requirements on its energy distributors, including Electrica

Oltenia. Under this process, Electrica Oltenia will be divided into 2

separate legal entities containing regulated (CEZ Distribu]ie S.A.)

and non-regulated (CEZ Vânzare S.A.) activities. As part of this

process, the new shared-service company CEZ Servicii S.A. will

be created in order to provide shared services to both CEZ

Distribu]ie and CEZ Vânzare.

Improvements in Efficiency

One of CEZ Group's commitments during the privatization

process was to bring best practices to the distribution sector in

Romania. As part of the implementation of best practices, CEZ

plans to improve the efficiency of its entire operation in Electrica

Oltenia and its successors. The general trend is towards

administrative centralization and the introduction of more efficient

modern technology to improve distribution.

Corporate Citizenship

CEZ Group is proud to build its corporate citizenship in all the

countries where it is present. CEZ affiliates always try hard to

build excellent relationships with both central and local

government. Electrica Oltenia and its successors will continue to

build positive relations.

27


As of December 31, 2006, cash and cash equivalents

included foreign currency deposits of 254,615

thousand RON, earning interest at a rate of 3.91%.

Among the advantages for clients of Electrica Oltenia S.A.

as a result of implementating the Integrated Management

System, is that their requests and suggestions are

responded to speedily through the imposition of terms and

responsibilities.

At the end of 2006, Electrica Oltenia S.A. had 1,370,017

customers, of which 134 were eligible customers and

1,369,883 captive customers (54 connected to high-voltage

grids, 2,628 connected to medium voltage grids and

1,367,201 connected to low-voltage grids).


In the long run, through the Environment Management

Programs designed for fixed periods, Electrica Oltenia

S.A. will aim to improve its operations in order to rapidly

prevent its plants from having a damaging effect on the

environment.


30

In 2006 Electrica Oltenia S.A. had an investment programme

financed from internal resources worth 183,276 thousand RON

for distribution activities and 2,306 thousand RON for sales

activities. Putting this programme in place cost 166,676 thousand

RON for distribution activities and 2,282 thousand RON for sales

operations.

Achievements as of December 31, 2006 were as follows:

Value of work units units amount

Investment works financed from internal resources for distribution operations thousand RON 180,406

Investment works financed from internal resources for sales operations thousand RON 1,062

Investment works financed from connection tariff thousand RON 27,322

Total thousand RON 208,791

Putting in Operation at December 31, 2006:

Putting in operation units amount units amount

Putting in operation investment financed from internal resources for distribution operations thousand RON 174,859

Putting in operation investment financed from internal resources for sales operations thousand RON 2,282

Putting in operation investment financed from connection tariff thousand RON 28,914

Total thousand RON 206,056

Main Areas to which Funds were Assigned:

The upgrade of 896.85 km-length low voltage grids and of

39,632 electric taps;

The improvement of voltage level in low voltage grids by

installing 88 new transformer points;

The upgrade of 136.72 km-length medium voltage grids and

the installation of 149 remote control re-closers;

The upgrade of 20.46 km-length high voltage grids;

The upgrading of 11 transformer stations and of 8 connection

points;

199,449 thousand RON has been assigned to the distribution grid.

To comply with Environmental Law No. 137/1995, approved by

Emergency Government Ordinance No. 195/2005, the roofs of

transformer stations were modernized by replacing the asbestos

cement tiles with non-polluting materials, at a cost of 970

thousand RON.

In order to upgrade the informational system, 5,831 thousand

RON were allocated and used to buy computers, laptops,

servers and licenses.

Additional investments of 2,541 thousand RON were made in

equipment, tools and other instruments, appliances and tools,

out of which 1,906 thousand RON was for distribution operations

and 635 thousand RON for sales operations.

In 2006, 625 investments were contracted, worth a total of

225,993 thousand RON.

Capital Expenditure

Electrica Oltenia S.A. Capital Expenditure


31Capital Expenditure Electrica Oltenia S.A.

The Most Important Investments from the Technical Point of View, Achieved and Functional in 2006 by Electrica Oltenia S.A.,

Consisted of:

1. Upgrading a low voltage electricity grid and connection in V`d`stri]a, Olt county belonging to SDFEE Slatina, with an execution

period of two months and a contracted value of 1,165 thousand RON.

Start-up date: August 17, 2006, upgrading an aerial low voltage electric grid measuring 8.1 km in length, by replacing the classic Al

conductors with twisted conductor type TYIR 50 OLAL+3x70 mmp and upgrading 565 connections.

2. Upgrading a low voltage electric grid, connections and improvement of voltage level in the village of Bârlogu, Negra[i -

belonging to SDFEE Pite[ti, with an execution period of 5 months and a contracted value of 1,055 thousand RON.

Start-up date: August 7, 2006, upgrading 8.3 km of a low voltage electric grid by replacing the classic Al conductors with a twisted

conductor type TYIR 50 OLAL+3x70 mmp, upgrading 272 connections, and setting up a new 100 kVA transformation point and a

0.155 km medium voltage aerial electric grid.

3. Upgrading distribution capacity and improvement of the degree of continuity Stolniceni - Râmnicu Vâlcea - belonging to SDFEE

Râmnicu Vâlcea, with an execution period of 4 months and a contracted value of 1,011 thousand RON. Start-up date: April 27, 2006,

upgrading a 4.5 km low voltage electric grid by replacing the classic Al conductors with a type TYIR 50 OLAL+3x70 mmp twisted

conductor, upgrading 141 connections, and setting up two new160 kVA transformation points and a 2.3 km medium voltage aerial

electric grid.

4. The setting up of automatic re-closers in the medium voltage aerial electric grid belonging to SDFEE Slatina - with a deadline of

2 months and a contract value of 825 thousand RON.

Start-up date: December 22, 2005, assembling 11 automatic re-closers in medium voltage electric grid lines.

5. The retrofit of the 110/20kV transformer station from Ro[iorii de Vede, Teleorman County - belonging to SDFEE Alexandria with

a deadline of 2 months and a contract value of 744 thousand RON.

Start-up date: November 23, 2005, upgrading 11 line cells on 110 kV.

6. The retrofit of the 110/20kV transformer station from Vâlcea Nord, Vâlcea county - belonging to SDFEE Râmnicu Vâlcea, with a

deadline of 2 months and a contract value of 917 thousand RON.

Start-up date: December 7, 2005, upgrading 22 line cells on 20 kV.

7. Upgrading 6 kV feeders supplying PA 1 Motru and passing to 20 kV, Motru, Gorj county - belonging to SDFEE Târgu Jiu with a

deadline of 2 months and a contract value of 640 thousand RON.

Start-up date: November 1, 2006, laying 2.3 km of medium voltage underground electric line.

The Most Important Investments in 2006 (thousand RON)

Investment Plan 2006 Achieved 2006 Plan 2006 Achieved 2006

Rehabilitation of electric grids in order to reduce CPT, Alexandria 2, Teleorman county 768 1,710

Upgrading of electric grid and connection V`d`stri]a, Olt county 1,165 1,249

Upgrading of electric grid and connection Gvardeni]a, Mehedin]i county 1,290 1,229

Upgrading of electric grid and connection Schela Cladovei, Mehedin]i county 1,243 1,148

Upgrading of electric grid and connection Zâmbreasca, Teleorman county 635 1,147

Upgrading of electric grid and connection Strehaia, Mehedin]i county 1,150 1,124

Automatic process of distribution by installing remote control separators and re-closers

in electric grids belonging to S.D.F.E.E Slatina, Olt county 100 1,115

Upgrading of electric grids and correspondent connections PTCZ3 Caracal, Olt county 1,010 1,102

Upgrading of low voltage electric grid, connections and improvement of voltage level village of Bârlogu, Negra[i 895 1,078

Upgrading distribution capacity and improvement of continuity Stolniceni - Râmnicu Vâlcea, Vâlcea county 1,059 1,059


The main investments which Electrica Oltenia S.A. must make in the coming period:

Upgrading and re-technologizing its 110 kV / MT transforming stations;

Passing from 6 kV voltage installations to 20 kV voltage installations;

Developing an automated distribution system (SAD) by setting up remote control operated re-closers and separators;

Integrating all transformation stations in SCADA;

Replacing ceramic insulation in 110 kV aerial electric grids and 20 kV aerial electric grids with composite-type insulation;

Integral upgrading of aerial electric grids, 0,4 kV underground electric grids and connection;

Expanding the telex-management and monitoring system of electricity quality parameters;

Implementing the GIS system;

Finalizing the CALL CENTRE system;

Implementing a management and customer relation system.

The stated investments should bring about:

An increase in the safety of electricity distribution for all customers;

A reduction of electricity losses;

An improvement in safety in operating electric devices and general operational safety;

Less faults in electrical equipment and shorter interruption of supply to the customers;

Ensuring the quality parameters for electricity supplied in accordance with ANRE regulations;

Decrease in the volumes of electricity not delivered to customers as a result of incidental power cuts;

Reduction of expenses for maintenance and repairs.

Grid Investment Evolution Between 2005 - 2006 (thousand RON):

Research and Development Expenditure

In 2006 the Company had no research and development expenditure.

32

2006

2005

80,000

181,468.79

91,059.00

120,000 160,000 total000,040

Electrica Oltenia S.A. Capital Expenditure


Integrated Management System for Quality - Environment - Security and Work Health Electrica Oltenia S.A.

Integrated ManagementSystem for Quality -Environment - Security andLabour Safety

The integrated management system (SIM) in the quality -

environment - security and labour safety fields was maintained

and improved under Electrica Oltenia S.A.'s management policy

on increasing customers trust and satisfaction in the quality of

services.

1. Planning consisted in:

customizing the Company's policy for developing the

Unbundling project framework;

ensuring human resources (personnel monitored with

decisions with direct responsibilities regarding SIM) as well as

financial resources;

drafting the management programmes (general objectives and

specific objectives on divisions), of training programmes,

internal audits, process monitoring and improvement);

initiating the identification of main and support processes and

subprocesses of management for the future CEZ companies

(CEZ Distribu]ie, CEZ Vånzare, CEZ Servicii and CEZ Romania);

updating SIM documentation (SIM Manual,19 General

Procedures and some Operational Procedures) under to the new

procedures identified.

2. The very action of maintaining and improving SIM consisted in

the development of business under the requirements in SR EN

ISO 9001/2001, SR EN ISO 14001/1997 and in the second

half of SR EN ISO 14001/2005 and OHSAS/2004.

3. The control and supervision of SIM functioning was done

through:

monitoring processes,

internal audit and external audit processes,

Internal audits of the approved programmes took place and

were performed by trained and certified auditors with

competency in internal and external audits of quality,

environment and work safety under the ISO SR EN

19001/2003 standard. These audits checked the applicability

of all reference standards and of the documents describing the

operations.

External audits: in May 2006 the supervisory audit was

performed by SRAC - Romanian Society for Quality Insurance -

SRAC - a company that also benefits from recognition

agreements with bodies from countries that are members of

IQNet, the International Quality Network..

4. As a result of these monitoring operations and audits,

corrective and preventive action was taken, leading to an

improvement of SIM efficiency and efficacy. The advantages

perceived by Electrica Oltenia S.A. clients as a result of the

implementation of this system are: the speedy response to

their requests and suggestions by imposing terms and

responsibilities; reducing the time taken to address

customers’ complaints; efficient monitoring of the distribution

and supply of electricity at the quality level imposed by

performance standards; preventing environmental pollution as

an general objective and, last but not least, the transparency

imposed by “external communication with the interested

audience” - another requirement imposed by international

standards.

33


34 Electrica Oltenia S.A. Environmental Protection

Environmental Protection

In 2006, Electrica Oltenia S.A. was involved in environmental

issues, relating to the field of possible damage caused by

electrical distribution and supply on the environment, on

communities, soil, flora and fauna, and that potentially caused by

telecommunications, signalling, and transmission networks in

Oltenia Electrica S.A.'s region. These environmental issues were

identified in order for action to be taken to prevent, reduce and

even eliminate possible or known damage by electrical

installations on the environment.

These actions take place in compliance with:

legal requirements and other requirements related to the

environment: European Directives, Laws, Governmental

Decisions, Emergency Governmental Ordinances, MMGA

(The Ministry for Environment and Water Management)

Regulations and Norms;

requirements of the System of Environment Management: The

SR EN ISO 14001/2004 standard (SR EN ISO - the Romanian

Standard in accordance with International Organization for

Standardization), the Management Policy and Program,

General Procedures, Operational Environment Procedures;

classified list of the environment protection works of

Electrica Oltenia S.A.

To this end, the management of Electrica Oltenia S.A. drew up

an annual action plan for environmental protection, consisting of

works, prevention and improvements to reduce, limit and

eliminate possible and known impacts on the environment

resulting from operations and plant.

Most of the programme's changes consist of routine work done

on a regular basis on Electrica Oltenia S.A.'s installations (and

which can be found in the company's investment programs, in

maintenance/ repair programs), but which, to a certain extent,

involve environmental protection.

The programme also includes works outsourced to local

companies specializing in environmental protection in specific

communities. Thus, through the environment protection program

drawn up for 2006, work has been carried out to:

decrease atmospheric emissions:

– replace ceramic insulation on 110 kV aerial electric grids,

where electric discharges with an ozone generating effect

were found, with insulation made of composite materials;

– replace asbestos-cement tile roofs with tiles made of non-

polluting materials - 10,200 sqm;

the collection, transport and disposal of waste waters into

sewerage;

the collection, transport and disposal of urban waste;

the collection, transport and disposal of industrial waste;

the collection, transport and disposal of dangerous waste:

preventing soil pollution by:

– replacing storage batteries in transformer plants with

watertight batteries;

– replacing wooden poles with concrete poles;

– repairing electrical equipment in order to stop dielectric oil

leakage;

– replacing some OSB cables insulated with oil impregnated

paper;

– repairing the damaged edges of concrete tubs which are

placed under electric transformers in order to prevent the

leakage of the oil accumulated in rainwater

creating firebreaks in the path of aerial electric grids in order to

prevent forest fires;

measures to protect soil and help it recover: reclaiming land

affected by work on the underground electric grid.

Electrica Oltenia S.A. considers that, through work carried out in

2006, it has contributed to the decrease, limitation and even to

the elimination of the known impact of energy installations on the

environment, as well as to complying with legislation and with

other environmental requirements relevant to its activities -

objectives which were also stated in the Environment

Management Program.

In the long run, through the Environment Management

Programmes designed for fixed periods, Electrica Oltenia S.A.

will aim to improve its operations in order to eliminate, as soon

as possible, potential environmental risks arising from its

installations.


35Shareholding and Securities Electrica Oltenia S.A.

At the beginning of 2006, Electrica Oltenia had a social capital of

799,033 thousand RON and 71,523,469 shares divided between

the two shareholders:

Shareholder Number of shares % Amount (thousand RON)

CEZ, a.s. 36,481,415 51% 407,507

Electrica S.A. 35,042,054 49% 391,526

Total 71,523,469 100% 799,033

As a result of the Shareholder's General Assembly on September

7, 2006, the structure of the shareholding was changed as follows:


CEZ, a.s. 36,481,412 51% 407,506.80

ZAPADOCESKA ENERGETIKA, a.s. 1 0% 0.01

SEVEROMORAVSKA ENERGETIKA, a.s. 1 0% 0.01

VYCHODOCESKA ENERGETIKA, a.s. 1 0% 0.01

Electrica S.A. 35,042,054 49% 391,526.17

Total 71,523,469 100% 799,033.00

The structure of the shareholding was again changed at the end

of October 2006, as follows:


CEZ, a.s. 36,481,412 51% 407,506.80




Electrica S.A. 26,459,238 37% 295,630.05

S.C. Fondul Proprietatea S.A. 8,582,816 12% 95,896.13

Total 71,523,469 100% 799,033.00

The value of the social capital on December 31, 2006, according

to the Romanian Accounting System and the Register of Trade

was 715,235 thousand RON.

Shareholding and Securities


In 2006, 115 employees took part in professional

training courses organized by specialized and

certified companies.

The main areas tackled during the professional training

programmes in 2006 included economic and financial

culture, know-how in cost structures and quality

control.

The aim of the participants was to ongoing personal

development and to use the knowledge acquired to

improve the Company's operations and the quality of

customer services.


To comply with industry regulations on transparency in

providing services offered by CEZ Distribu]ie S.A. to CEZ

Vânzare S.A. and vice versa, in February 2007 the

Company's Administrative Council approved the setting up of

another company, CEZ Servicii S.R.L., to provide finance,

controlling, accounting, IT, HR, and Customer Care Services

to CEZ Distribu]ie S.A. and CEZ Vânzare S.A.


38 Electrica Oltenia S.A. Human Resources and Social Policy

3. Workforce Depending on Seniority in 2006

Workforce Size and Composition

Herein we shall present the structure of the staff:

Human Resources and Social Policy

1. Workforce Education Structure in 2006

2. Workforce Age Structure in 2006


39Human Resources and Social Policy Electrica Oltenia S.A.

Social Policy

Under The Collective Labour Agreement of Electrica Oltenia S.A., registered at the Dolj Labour and Social Security and Family

Office, number 144/13882/28.09.2005:

a. The approved form of payment is on an hourly basis;

b. The payment rights granted to employees consist of:– Gross salary according to the salary grid;

– Bonuses in addition to gross salary (seniority, seniority in Electrica Oltenia S.A., unsocial working conditions, working on

nonworking days, sickness or injury leave, night work, sustained overtime work, additional duties, supervisory and/or

coordinating work);

– Management position bonus.

c. The gross salary is established through negotiation, within the parameters set by the Functions and Profession Classified List

which is appended to the Collective Labor Agreement of Electrica Oltenia S.A;

d. Employees enjoy other rights, too, depending on position (jubilee bonuses, retirement bonuses, holidays bonus, end-of-year

bonus, marriage bonus, difference between monthly wage and sick leave payment for incapacitation following hospitalization -

sick leave is at 75%, 85% or 100% of the employee's monthly wage, depending on the type of sickness - leaving indemnity);

e. Former employees of Electrica Oltenia S.A., now retirees, receive 1200 KWh worth of electricity free per year.

Social Expenses

A. In 2006, expenditure on socio-cultural and sports activities totalled 1,148 thousand RON, of which:

a) 560 thousand RON was allocated for the part-payment of holidays and vouchers granted to employees;

b) 28 thousand RON was aid granted yearly for medicines, prostheses and health materials for seriously ill employees only;

c) 266 thousand was RON allocated to Christmas gifts for employees with children;

d) 294 thousand RON was granted for other expenses (death indemnity, birth indemnity, prizes for Electrician's Trophy, Women's Day).

B. As permitted by law, in 2006 employees received food vouchers worth 4,595 thousand RON.

On the Job Training Programmes and Courses

The main targets of the professional training programmes and courses in Electrica Oltenia S.A. are:

to help employees adapt to the changes produced by privatization;

to help employees adapt to the requirements of their job: knowledge, behaviour, skills, attitude;

to help employees improve their communications skills;

to help employees prepare for any other changes.

In 2006, 115 employees took part in professional training courses organized by specialized and certified companies, in order to

achieve continuous personal development and to use the knowledge acquired for the improvement of the company's operations and

of the quality of customer services.

The main areas tackled during the professional training programs in 2006 were:

economic and financial culture;

know-how in costs structure;

modern methods for the exploitation and maintenance of the electric grid;

efficient electric power distribution and supply;

environmental protection;

safety and first aid;

quality management;

new technologies for development and rehabilitation projects.


40 Electrica Oltenia S.A. Donation and Sponsorship Programme | Litigations

Electrica Oltenia S.A. does not have a programme for donations

and sponsorships. Therefore, no related expenditure was made

in 2006.

At the end of 2006, Electrica Oltenia S.A. had 16 ongoing

litigations, with individual claims of over 100 thousand RON.

However, only five of them have the potential to have a negative

impact upon the company's results. Electrica Oltenia S.A. is a

claimant in 3 lawsuits against SNCFR S.A. (Romanian National

Railway Company), the requested cumulated value being 20,454

thousand RON.

Electrica Oltenia S.A. is the defendant in two other lawsuits, as

follows:

in the first lawsuit, the claimant is Preda Victoria in Arge[ county,

seeking damages totalling 10,323 thousand RON for her inability

to use her own property, which is being used by assets

belonging to Electrica Oltenia;

in the second lawsuit, the claimant is S.C. Zah`rul Calafat,

seeking damages totalling 23,138 thousand RON, due to

power cuts.

Donation and SponsorshipProgramme

Litigations


41Independent Auditors' Report Electrica Oltenia S.A.

Independent Auditors' Report

To the Shareholders of S.C. CEZ Distribu]ie S.A.

We have audited the accompanying financial statements of S.C. CEZ Distribu]ie S.A. (“the Company”), formerly S.C. Filiala de

Distribu]ie [i Furnizare a Energiei Electrice Electrica Oltenia S.A., which comprise the balance sheet as at December 31, 2006 and the

income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant

accounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International

Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the

preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;

selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance

with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the

audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The

procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the

financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to

the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also

includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,

2006, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting

Standards.

Ernst & Young SRL

April 30, 2007

Bucharest, Romania


42 Electrica Oltenia S.A. Financial Statements

CEZ Distribu]ie S.A.Balance SheetFinancial Statements as at and for the Year Ended December 31, 2006

(thousand RON)

Notes December 31, December 31, 20052006 (Note 30)

Assets

Non-current Assets

Property, plant and equipment 3 1,517,977 1,401,497

Intangible assets 4 4,345 5,054

Other financial assets 5 3,554 4,498

Total Non-Current Assets 1,525,876 1,411,049

Current Assets

Inventories 3,992 3,385

Trade receivables 6 33,116 193,994

Receivables from related parties 7, 26 5,249 606

Current income tax receivable - 144

Other current assets 7,237 5,286

Other financial assets 5 5,471

Cash and cash equivalents 8 411,850 463,786

Total Current Assets 666,915 667,201

Total assets 2,192,791 2,078,250

Shareholders Equity and Liabilities

Shareholders' Equity

Share capital 9 799,033 799,033

Share premium 9 114,095 114,095

Contributions for share capital increase 929 929

Revaluation reserve 9 571,216 542,410

Retained earnings 9 201,541 111,757

Other reserves 9 41,273 30,893

Total Shareholders' Equity 1,728,087 1,599,117

Liabilities

Non-current Liabilities

Long term liabilities to related parties 10, 26 - 8,125

Deferred income 11 151,384 115,613

Deferred tax liability 25 28,722 55,223

Other non-current liabilities 2,530 2,416

Total Non-current Liabilities 182,636 181,377

Current Liabilities

Trade payables 12 138,340 85,601

Short term liabilities to related parties 13, 26 25,135 100,274

Current income tax liability 10,674 -

Other current liabilities 14 19,827 36,266

Provisions 15 88,092 75,615

Total Current Liabilities 282,068 297,756

Total Liabilities 464,704 479,133

Total shareholders equity and liabilities 2,192,791 2,078,250

The accompanying notes are an integral part of these financial statements.


43Financial Statements Electrica Oltenia S.A.

CEZ Distribu]ie S.A.Income StatementFinancial Statements as at and for the Year Ended December 31, 2006

(thousand RON)

Notes December 31, 2006 December 31, 2005(Note 30)

Revenues

Sales of electricity 16 1,120,448 1,126,885

Other operating revenues 17 228,457 165,551

Total revenues 1,348,905 1,292,436

Expenses

Electricity purchased 18 793,134 814,736

Materials and supplies 19 10,511 26,158

Repairs and maintenance 20 102,692 111,353

Salaries, wages and other employee benefits 21 93,394 76,174

Depreciation, amortization and impairment charge 22 102,681 101,367

Financial income, net 23 5,609 (18,221)

Other operational expenses 24 103,468 97,066

Total expenses 1,211,489 1,208,633

Profit before income tax 137,416 83,803

Income tax expense / (income) 25 42,213 10,786

Profit for the year 95,203 73,017


These financial statements have been authorized for issue on April 30, 2007:

Emi Mitrofan Gabriel Negril`

Finance Director General Manager


44 Electrica Oltenia S.A. Financial Statements

CEZ Distribu]ie S.A.Statements of Changes in EquityFinancial Statements as at and for the Year Ended December 31, 2006

(thousand RON)

Share Share Contribution for Revaluation Other Retained Totalcapital premium share capital reserve reserve earnings

increase

Balance as at January 1, 2005 (Note 30) 548,671 - 929 468,606 4,348 65,586 1,088,140

Reversal of public patrimony (Note 9) - - - - (301) - (301)

Share premium (Note 9) - 114,095 - -- - 114,095

Share capital increase (Note 9) 250,362 - - - - - 250,362

Revaluation surplus (Notes 3, 9) - - - 78,727 - - 78,727

Reversal of revaluation surplus (Note 9) - - - (1,328) - - (1,328)

Reserve for investments (Note 9) - - 26,846 (26,846) -

Deferred tax impact

on revaluation reserves (Note 9, 25) (3,595) - - (3,595)

Profit for the year - - - - - 73,017 73,017

Balance as at December 31, 2005 (Note 30) 799,033 114,095 929 542,410 30,893 111,757 1,599,117

Increase of the legal reserve 6,171 (6,171)

Reversal of reserve for investments (Note 9) (26,846) 26,846 -

Reserve for investments for 2006 (Note 9) 31,055 (31,055) -

Reversal of revaluation surplus (Note 9) - - - (4,961) - 4,961

Deferred tax impact on

revaluation reserves (Notes 9, 25) - - - 33,767 - - 33,766

Profit for the year - - - - - 95,203 95,203

Balance as at December 31, 2006 799,033 114,095 929 571,216 41,273 201,541 1,728,087



45Financial Statements Electrica Oltenia S.A.

CEZ Distribu]ie S.A.Cash flow statementsFinancial Statements as at and for the Year Ended December 31, 2006

(thousand RON)

Notes December 31, 2006 December 31, 2005(Note 30)

Cash flows from operating activities

Profit before income tax 137,416 83,803

Adjustments to reconcile profit before income tax to net cash provided by operating activities:

Depreciation, amortization and impairment 22 102,681 101,367

Loss on disposal of property, plant and equipment 24 1,357 2,068

Income from subsidies 17 (4,855) (5,101)

Allowance for doubtful debtors 6 34,604 8,115

Write down of other current assets 83 3,180

Provisions for risks and charges 15 12,477 30,481

Interest revenue, net 23 (19,352) (1,200)

Total 126,995 138,910

Changes in assets and liabilities:

Increase in other financial assets 5 (4,527) (3,267)

Increase in inventories (607) (1,404)

Increase in receivables 6 (73,726) (11,157)

Decrease / (Increase) in receivables from related parties 7, 26 (4,643) 49,801

Increase in other assets (2,034) (7,975)

Decrease / (Increase) in trade payables 12 52,739 77,402

Decrease / (Increase) in liabilities to related parties 13, 26 (83,264) (147,913)

(Decrease) in other liabilities (16,325) (14,501)

Cash generated from operations 132,024 163,699

Interest paid 23 (327) (2,890)

Income tax paid (24,129) (31,101)

Net cash provided by operating activities 107,568 129,708

Cash flows from investing activities

Acquisition of property, plant and equipment, net (218,221) (106,849)

Acquisition of intangible assets, net (1,588) (491)

Interest received 23 19,679 4,090

Net cash used in investing activities (200,130) (103,250)

Cash flows from financing activities

Proceeds from issue of shares - 364,457

Subsidies received 40,626 30,510

Net cash provided by financing activities 40,626 394,967

Net increase in cash and cash equivalents (51,936) 421,425

Cash and cash equivalents at beginning of period 463,786 42,361

Cash and cash equivalents at end of period 8 411,850 463,786



46 Electrica Oltenia S.A. Notes to the Financial Statements

Notes to the Financial Statements

1. Corporate Information

S.C. CEZ Distribu]ie S.A. (“the Company”), formerly S.C. Filiala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Oltenia S.A.), is

a joint stock company domiciled in Romania. The principal place of business is 2 Brestei Street, Craiova, Romania. The Company's

registered address is 44 Brestei Street, Craiova, Romania.

The Company is the main supplier of electricity in Olt, Dolj, Gorj, Vâlcea, Arge[, Mehedin]i and Teleorman counties operating with 249

conversion stations and electric lines (0.4 kV and 110 kV) having a total length of 51 thousand kilometers.

The Company's activities are regulated by the National Authority for Electricity Sector Regulation (“ANRE”). The acquisition price paid

to the electricity producers, which are owned by the State, for the electricity received from the National Electricity System, as well as

the electricity distribution tariffs and the electricity supply tariffs are not exclusively influenced by the Company's decisions, but they

are regulated by ANRE.

The Company's operations are conducted through the following units:

– the headquarters (located in Craiova)

– electricity distribution and supply branches (SDFEE).

The electricity distribution and supply regional branches of the Company are the following:

a) S.C. Sucursala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Craiova;

b) S.C. Sucursala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Alexandria;

c) S.C. Sucursala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Drobeta Turnu Severin;

d) S.C. Sucursala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Pite[ti;

e) S.C. Sucursala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Slatina;

f) S.C. Sucursala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Târgu Jiu;

g) S.C. Sucursala de Distribu]ie [i Furnizare a Energiei Electrice Electrica Vâlcea.

Before September 30, 2005, Electrica S.A., a State owned company, was a 100% shareholder of the Company.

Since September 30, 2005, ČEZ, a.s. has been the majority shareholder (51%) of the Company, Electrica S.A. retaining 49%.

As a subsidiary of ČEZ, a.s., a company domiciled in the Czech Republic with registered address at Duhová 2/1444, Praha 4, 140

53, Czech Republic. The ultimate parent company of the Company is ČEZ, a.s. The Company is consolidated into ČEZ, a.s. since

October 1, 2005.

As a result of the decision of the Shareholder's General Assembly on September 7, 2006, the shareholders structure changed and ČEZ, a.s.

sold to ZAPADOCESKA ENERGETIKA, a.s, SEVEROMORAVSKA ENERGETIKA, a.s., VYCHODOCESKA ENERGETIKA, a.s. 3 shares, one

share to each entity.

In accordance with Law 247/2005, in October 2006 12% (8,582,816) of the Company's shares, currently held by Electrica S.A., were

transferred to S.C. Fondul Proprietatea S.A.


47Notes to the Financial Statements Electrica Oltenia S.A.

2. Significant Accounting Policies

2.1. Basis of Preparation

The attached financial statements are presented in Romanian Lei (“RON”), rounded to the nearest thousand. The financial statements

have been prepared under the historical cost convention, modified to include tangible assets revaluation and adjusted as required by

IAS 29 (“Financial Reporting in Hyperinflationary Economies”) until December 31, 2003. Starting from January 1, 2004, the Romanian

economy is not considered a hyperinflationary economy. The Company stopped the application of IAS 29 from that date.

IAS 29, “Financial Reporting in Hyperinflationary Economies”, requires that financial statements of enterprises that report in the

currency of a hyperinflationary economy should be stated in terms of the measuring unit current at the balance sheet date and that

corresponding figures should be restated on the same terms.

Statement of Compliance

The Company is required to maintain its books and records in accordance with accounting principles and practices mandated by the

Romanian Law on Accounting.

The accompanying financial statements of the Company are prepared in accordance with International Financial Reporting Standards

(IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board and International

Accounting Standards and Standing Interpretations Committee, respectively, that remain in effect.

2.2 Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year except the following:

The Company has adopted the following new and amended IFRS and IFRIC interpretations during the year.

Adoption of these revised standards and interpretations did not have any effect on the financial statements of the Company. They did

however give rise to additional disclosures:

– IAS 1 and IAS 19 Amendment - Actuarial Gains and Losses, Group Plans and Disclosures

– IAS 21 Amendment - The Effects of Changes in Foreign Exchange Rates

– IAS 39 Amendment - Cash Flow Hedge Accounting of Forecast Intragroup Transactions

– IAS 39 Amendment - The Fair Value Option

– IAS 39 and IFRS 4 Amendment - Financial Guarantee Contracts

– IFRS 6 - Exploration for and Evaluation of Mineral Resources

– IFRIC 4 - Determining whether an Arrangement Contains a Lease

– IFRIC 5 - Rights to Interests arising from Decommissioning, Restoration, and Environmental Rehabilitation Funds

– IFRIC 6 - Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

IAS 1 and IAS 19 Amendment - Actuarial Gains and Losses, Group Plans and Disclosures

As of January 1, 2006, the Company adopted the amendments to IAS 19. As a result, additional disclosures are made providing

information about trends in the assets and liabilities in the defined benefit plans and the assumptions underlying the components of

the defined benefit cost. This statement is not applicable to the Company's financial statements.

IAS 21 The Effects of Changes in Foreign Exchange Rates

As of January 1, 2006, the Company adopted the amendments to IAS 21. They require that all exchange differences arising from a

monetary item that forms part of the Company's net investment in a foreign operation shall be recognized in a separate component of

equity in the consolidated financial statements regardless of the currency in which the monetary item is denominated. This change did

not have an effect on the Company's financial statements.

IAS 39 Amendment - Cash Flow Hedge Accounting of Forecast Intra-group Transactions

IAS 39 was amended to permit the foreign currency risk of a highly probable intragroup forecast transaction to qualify as the hedged

item in a cash flow hedge, provided that the transaction is denominated in a currency other than the functional currency of the entity

entering into that transaction and that the foreign currency risk will affect the consolidated income statement. As the Company

currently has no such transactions, the amendment did not have an effect on the financial statements.


48

IAS 39 Amendment - The Fair Value Option

IAS 39 was amended to restrict the use of the option to designate any financial asset or any financial liability to be measured at fair

value through the income statement. The Company had not previously used this option, hence the amendment did not have an effect

on the financial statements.

IAS 39 and IFRS 4 Amendment - Financial Guarantee Contracts

IAS 39 was amended to require financial guarantee contracts that are not considered to be insurance contracts to be recognized

initially at fair value and to be remeasured at the higher of the amount determined in accordance with IAS 37 Provisions, Contingent

Liabilities and Contingent Assets and the amount initially recognized less, when appropriate, cumulative amortization recognized in

accordance with IAS 18 Revenue. This amendment did not have an effect on the financial statements.

IFRS 6 - Exploration for and Evaluation of Mineral Resources

The Company adopted IFRS 6 as of January 1, 2006, which provides guidance for accounting for expenditures incurred in the

exploration and evaluation of mineral resources. It is limited to considering the nature of such costs that may be capitalized as assets

and the facts and circumstances which indicate when such assets may be impaired and the level at which impairment is assessed.

This standard did not have an effect on the financial statements.

IFRIC 4 - Determining whether an Arrangement Contains a Lease

The Company adopted IFRIC Interpretation 4 as of January 1, 2006, which provides guidance in determining whether arrangements

contain a lease to which lease accounting must be applied. This change in accounting policy did not have any impact on the

Company as at December 31, 2006.

IFRIC 5 - Rights to Interests Arising from Decommissioning, Restoration, and Environmental Rehabilitation Funds

The Company adopted IFRIC Interpretation 5 as of January 1, 2006, which establishes the accounting treatment for funds established

to help finance decommissioning for a companies assets. As the entity does not currently operate in a country where such funds exist,

this interpretation has had no impact on the financial statements.

IFRIC 6 - Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

The Company adopted IFRIC Interpretation 6 as of January 1, 2006, which established the recognition date for liabilities arising from

the EU Directive relating to the disposal of Waste Electrical and Electronic Equipment. This interpretation did not have an effect on the

financial statements.

2.3. Significant Estimates and Assumptions

The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make

estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at

the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results

could differ from those estimates.

The key assumptions and other key sources of estimation concerning future uncertainty at the balance sheet date that have

a significant risk of causing material adjustments to the carrying amount of assets or liabilities within the next financial year are as

follows:

Post Employment Benefits

The cost of post employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions

about discount rates, expected rates of staff turnover and future salary increases. Due to the long term nature of such benefits, these

estimations are subject to significant uncertainty. The value of the provision for retirement benefits is 32,470 thousand RON at

December 31, 2006 and 32,784 thousand RON at December 31, 2005. Further details are provided in Note 15.

Electrica Oltenia S.A. Notes to the Financial Statements


49

2.4. Summary of Significant Accounting Policies

Property, Plant and Equipment

Following initial recognition at cost, land and buildings are carried at a revalued amount, which is the fair value at the date of the

revaluation, less any subsequent accumulated depreciation (except for land) and subsequent accumulated impairment losses.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate

that the carrying value may not be recoverable.

Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying

amount.

Any revaluation surplus is credited to the revaluation reserve included in the equity section of the balance sheet except to the extent

that it reverses a revaluation decrease of the same asset previously recognized in profit and loss, in which case the increase is

recognized in profit and loss. A revaluation deficit is recognized in profit and in loss except that a deficit offsetting a previous surplus

on the same asset is directly offset against the surplus in the asset revaluation reserve.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its

use or disposal. Any gain or loss arising from the derecognition of the asset is included in the income statement in the year in which

the asset is derecognized.

Subsequent Repairs and Maintenance Expenditure

Expenditure on repairs and maintenance of property, plant and equipment, made to restore or to maintain the value of these assets,

are recognized in the income statement when incurred, while expenditures made in order to improve technical performance are

capitalized and depreciated over the remaining useful life of that fixed asset.

Depreciation

Depreciation is calculated on a straight-line basis over the useful life of the assets.

The estimated useful lives (in years) used in the calculation of depreciation of property, plant and equipment are as follows:

Category Useful lives

Buildings 53

Lines 24

Technological Equipment 18

Measurement instruments 3

Transportation means 8

Furniture 8

Meters 11

The useful lives and depreciation method are reviewed periodically to ensure that they are consistent with the expected pattern of

economic benefits derived from the assets.

Intangible Assets

Intangible assets are stated at their restated cost, as a result of the adjustments made up to December 31, 2003 to account for the

effects of inflation as per the provisions of IAS 29 (“Financial Reporting in Hyperinflationary Economies”), less any accumulated

amortization and accumulated impairment losses. All intangible assets have finite lives. Amortization is recognized in the income

statement on a straight-line basis over the estimated useful lives of the intangible assets. Intangible assets consist mainly of

customized software. These are amortized on a straight-line basis over 5 years.

Foreign Currency Transactions

Transactions in foreign currencies are translated to RON by applying the exchange rates prevailing at the time of the transaction. Assets

and liabilities denominated in foreign currencies at year-end are translated to RON at the exchange rates prevailing on that date. Realized

and unrealized exchange gains and losses are charged to the income statement. The exchange rate of RON/USD as at December 31,

2005 and 2006 was RON 2.5676 / USD 1, and RON 3.1078 / USD 1, respectively. The exchange rate of RON/EUR as at December 31,

2006 and 2005 was RON 3.3817 / EUR 1, and RON 3.6771 / EUR 1, respectively.

Receivables

Receivables include invoices issued at the balance sheet date for the supply of electricity, late-payment interest, as well as the estimated

amount receivable for electricity supplied at year-end but invoiced in the period subsequent to the year-end. Receivables are stated at

their nominal value reduced to the estimated recoverable amount through the allowance for doubtful receivables.

Notes to the Financial Statements Electrica Oltenia S.A.


50

Inventories

Inventories consist of consumables, spare parts and other inventories, which include mainly maintenance materials for the distribution

network. These materials are recorded under inventories when purchased and then expensed or capitalized, as appropriate, when

consumed. The cost of inventories comprises the purchase cost and other costs incurred in bringing the inventories to their present

location and condition.

Inventories are stated at the lower of cost and net realizable value. Cost is determined mainly on a weighted average basis. Where

necessary, a write down of the carrying value of inventories is made for excess, obsolete and defective inventories.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, current accounts and bank deposits with an original maturity of three months or less.

Cash denominated in foreign currency is translated at period-end exchange rates.

Cash Restricted in its Use

Restricted balances of cash shown under other non-current financial assets as restricted funds (see Notes 5 and 8) relate to cash

deposits held as collateral for the issuance of guarantees and letters of credit. The non-current classification is based on the expected

timing of the release of the funds to the Company.

Impairment

The carrying amounts of the Company's assets, other than inventories and deferred tax assets are reviewed at each balance sheet

date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is

estimated. An impairment loss is recognized in the income statement or in shareholders' equity whenever the carrying amount of an

asset exceeds its recoverable amount.

Computation of Recoverable Amount

An asset's recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell and its value in use and is

determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other

assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and

is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value

using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment losses of continuing operations are recognized in the income statement in those expense categories consistent with the

function of the impaired asset.

Trade Accounts Payable and Accruals

Trade accounts payable to suppliers are recorded at invoiced values and include amounts payable for the acquisition of electricity,

contracted work and services. Accruals are reported at expected settlement values.

Long Term Debt

Borrowings are initially recognized at the amount of the proceeds received, net of transaction costs. They are subsequently carried at

amortized cost using the effective interest rate method, the difference between net proceeds and redemption value being recognized in

the net income over the life of the borrowings as interest expense.

Transaction costs include fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and

securities exchanges.

Income Taxes

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable

income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in

respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is

based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or

substantially enacted at the balance sheet date.

Deferred tax assets and liabilities are recognized regardless of when the temporary difference is likely to reverse. Deferred tax assets and

liabilities are not discounted. Deferred tax assets are recognized when it is probable that sufficient taxable profits will be available against

which the deferred tax assets can be utilized. A deferred tax liability is recognized for all taxable temporary differences.

Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same

or a different period, directly to equity.



51

Related Parties

Parties are considered related when one controls the other directly or indirectly, or is in the position to exert significant influence on the

other party, through ownership, contractual rights, family relationship, or otherwise.

Financial Instruments

Financial assets and financial liabilities carried on the accompanying balance sheet include cash and cash equivalents, trade and other

accounts receivable and payable, and long term liabilities to related parties (including loans). The accounting policies on recognition and

measurement of these items are disclosed in the respective accounting policies. Management believes that the estimated fair values of

these instruments approximate their carrying amounts.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest,

dividends, gains and losses relating to a financial instrument classified as a liability are reported as expense or income as incurred.

Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when

the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realize the asset and settle the

liability simultaneously.

Financial assets are derecognized when the rights to receive cash flow from the asset has expired. Financial liabilities are derecognized

when the obligation under the liability is discharged, cancelled or expires.

Employee Benefits

The Company accounts for employee present, retirement and post retirement benefits in accordance with IAS 19 “Employee Benefits”.

Retirement and post retirement benefits are estimated on the basis of an actuarial evaluation. As of December 31, 2006, the related

liability for current (accrued entitlement) and retired employees was quantified by an independent, qualified actuary.

Both the Company and its employees are legally obliged to make defined contributions (included in the social security contributions) to

the National Pension Fund, managed by the Romanian State Social Security (a defined contribution plan financed on a pay-as-you-earn

basis). As such, the Company has no legal or constructive obligation to pay future benefits. Its only obligation is to pay the contributions

as they fall due. If the Company ceases to employ members of the Romanian State Social Security plan, it will have no obligation to pay

the benefits earned by its own employees in previous years. The Company's contributions relating to defined contribution plans are

charged to income in the year to which they relate.

Short-term employee benefits include wages, salaries and social security contributions. Short-term employee benefits are recognized as

expenses as services are rendered.

In accordance with the Collective Labor Agreement in force as of December 31, 2006 the Company's employees were entitled to receive

the following retirement and post retirement benefits:

– 1-3 base monthly salaries upon retirement, depending on the number of years of employment with the Company;

– 1-3 base monthly salaries, payable in the month of retirement as a loyalty bonus, depending of the number of years of employment

with Company;

– Free consumption of electricity of 1,150 KWh per annum, which also extends to the employees' spouses under certain conditions;

– Aid in the event of death of an employee by causes other than work accident or professional illness, of RON 1,542;

– Aid in the event of death of an employee caused by work accident or professional illness, of 12 basic monthly salaries.

Revenue Recognition

Revenues are recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the

amount of the revenue can be measured reliably. Revenues, including interest for late payments, comprise primarily the value of electricity

supplied. Revenues from services are recognized when earned.

Development Tax

In accordance with the requirements of Government Ordinance no. 26/1999, the Company has to invoice and collect development tax,

computed as 9% of the value of electricity delivered to customers. The development tax collected has to be transferred to the Ministry of

Economy and Commerce ("MEC"), the former Ministry of Industry and Resources (“MIR”), together with related penalties, if any.

Before December 31, 2002, these funds were considered as contributions to share capital at the moment when the corresponding

investment projects in progress were finished. Starting from January 1, 2003, the amounts of the development tax utilized are recorded

as government subsidies in accordance with IAS 20 "Accounting for Government Grants and Disclosure of Government Assistance".

Up to December 31, 2004, MEC allocated the development tax collected to the companies operating in the electricity sector (including

the Company), in order to be used for the development of the electricity network, on an investment project basis.

Starting from January 1, 2005, according to Government Ordinance 89/2004 approved by Law 529/2004, the development tax is no

longer transferred to the State Budget. The Company records such reserves at the lower of 6% of revenues from the sale of electricity

and the level of profit for the year.

These reserves are used for financing in-house investments regarding the modernization and development of the electricity network in

accordance with the permitted use of these funds, as per the relevant provisions contained within Government Ordinance 89/2004.

The provisions of Government Ordinance 89/2004 outlined above were in force until December 31, 2006.



52

Subsidies

Subsidies are accounted for as deferred income and recognized as income at the moment of recognition of the related costs.

Connection Fees

The value of new connections to the national electricity network is invoiced to consumers through the connection fee (in accordance with

Government Decision no. 2/1992) and is recorded as deferred income and recognized as income at the moment of recording the

depreciation of the related assets. In the case of legal entities, except for public institutions, the connection fee also includes a fixed

amount to be used for the future development of the electricity network. New connections to the electricity network are the property of

the Company.

Financial Guarantee Contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs

because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantees are initially recognized at fair value plus any transaction costs that are directly attributable to the acquisition or issue

of the financial asset or financial liability.

After initial recognition the financial guarantee shall be measured at the higher of the amount initially recognized and the amount

determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Provisions

A provision is recognized when, and only when, the enterprise has a present obligation (legal or constructive) as a result of a past event

and it is probable (i.e. it is more likely than not to occur) that an outflow of resources embodying economic benefits will be required to

settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is

material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.

Contingencies

The Company recognizes in its financial statements contingent liabilities only if the possibility of an outflow of resources that represent

economic benefits is probable (i.e. it is more likely than not to occur). The Company discloses in its financial statements contingent

liabilities if the possibility of an outflow of resources that represent economic benefits is possible (i.e. it is less likely than not to occur).

The Company discloses in its financial statements contingent assets only if the possibility of an inflow of economic benefits is probable.

Geographical Segments

The Company's activities (electricity supply and distribution activity) are conducted in several locations in Romania. Management

considers the entire operations as one business segment.

Functional Currency

Based on the economic substance of the underlying events and circumstances relevant to the Company, the functional currency of the

Company has been determined to be the Romanian Leu (RON).

Restatement of Comparative Figures

Certain adjustments affecting the financial statements as of and for the year ended December 31, 2005 and December 31, 2004 have

been made during the year, restating the year 2005 comparative figures and opening balances as of January 1, 2005 (see Note 30).



53

2.5. Future Changes in Accounting Policies

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for accounting

periods beginning on or after January 1, 2007 or later periods which the Company has not early adopted, are as follows:

IFRS 7, Financial Instruments: Disclosures, and a complementary amendment to IAS 1, Presentation of Financial Statements -

Capital Disclosures (effective for financial years beginning on or after January 1, 2007).

IFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and

quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit

risk, liquidity risk and market risk, including sensitivity analysis to market risk. It replaces IAS 30, Disclosures in the Financial Statements of

Banks and Similar Financial Institutions, and disclosure requirements in IAS 32, Financial Instruments: Disclosure and Presentation. It is

applicable to all entities that report under IFRS. The amendment to IAS 1 introduces disclosures about the level of an entity's capital and

how it manages capital. The Company assessed the impact of IFRS 7 and the amendment to IAS 1 and concluded that the main

additional disclosures will be the sensitivity analysis to market risk and the capital.

IFRS 8, Operating Segments (effective for financial years beginning on or after January 1, 2009).

IFRS 8 replaces IAS 14 Segment Reporting and adopts a management approach to segment reporting. The information reported would

be that which management uses internally for evaluating the performance of operating segments and allocating resources to those

segments. This information may be different from that reported in the balance sheet and income statement and entities will need to

provide explanations and reconciliations of the differences. This standard will have no effect on the Company's operations.

IFRIC 7, Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies (effective for financial

years beginning on or after March 1, 2006).

IFRIC 7 requires entities to apply IAS 29 Financial Reporting in Hyper-inflationary Economies in the reporting period in which an entity first

identifies the existence of hyperinflation in the economy of its functional currency as if the economy had always been hyperinflationary.

IFRIC 7 is not relevant to the Company's operations.

IFRIC 8, Scope of IFRS 2 (effective for financial years beginning on or after May 1, 2006).

IFRIC 8 clarifies that IFRS 2 Share-based payment will apply to any arrangement when equity instruments are granted or liabilities (based

on the value of an entity's equity instrument) are incurred by an entity, when the identifiable consideration appears to be less that the fair

value of the instruments given.


IFRIC 9, Reassessment of Embedded Derivatives (effective for financial years beginning on or after June 1, 2006).

IFRIC 9 requires an entity to assess whether a contract contains an embedded derivative at the date an entity first becomes a party to the

contract and prohibits reassessment unless there is a change to the contract that significantly modifies the cash flows.


IFRIC 10, Interim Financial Reporting and Impairment (effective for financial years beginning on or after November 1, 2006).

This Interpretation may impact the financial statements should any impairment losses be recognized in the interim financial statements in

relation to available for sale equity investments, unquoted equity instruments carried at cost and goodwill as these may not be reversed in

later interim periods or when preparing the annual financial statements.

IFRIC 11, IFRS 2-Group and Treasury Share Transactions (effective for financial years beginning on or after March 1, 2007).

This Interpretation requires arrangements whereby an employee is granted rights to an entity's equity instruments to be accounted for as

an equity-settled scheme by an entity even if the entity chooses or is required to buy those equity instruments from another party, or the

shareholders of the entity provide the equity instruments needed. The Interpretation also extends to the way in which subsidiaries, in their

separate financial statements, account for schemes when their employees receive rights to equity instruments of the parent. IFRIC 11 is

not relevant to the Company's operations.

IFRIC 12, Service Concession Arrangements (effective for financial years beginning on or after January 1, 2008).

The interpretation outlines an approach to account for contractual arrangements arising from entities providing public services. It provides

for the operator not to account for the infrastructure as property, plant and equipment, but recognize a financial asset and / or an

intangible asset. IFRIC 12 is not relevant to the Company's operations.



54

3. Property, Plant and Equipment

The movement in the carrying value of property plant and equipment during the year ended December 31, 2006

is as follows (thousand RON):

Land Buildings Plant and Other fixed Construction in Totalequipment assets progress

Cost or valuation

Balance as at January 1, 2006 18,147 1,089,183 353,760 2,616 36,798 1,500,504

Additions - 147,838 68,210 416 189,653 406,117

Disposals - (2,224) (953) (6) (186,977) (190,160)

Balance as at December 31, 2006 18,147 1,234,797 421,017 3,026 39,474 1,716,461

Accumulated depreciation

Balance as at January 1, 2006 - (56,945) (30,478) (455) - (87,878)

Depreciation expense - (58,190) (36,922) (449) - (95,561)

Accumulated depreciation of disposals - 651 368 3 - 1,022

Balance as at December 31, 2006 - (114,484) (67,032) (901) - (182,417)

Accumulated impairment

Balance as at January 1, 2006 - (3,611) (1,354) (2) (6,493) (11,460)

Increase in impairment provision - (3,389) (1,549) (4,938)

Balance as at December 31, 2006 - (7,000) (2,903) (2) (6,493) (16,398)

Net book value after impairmentloss, before revaluation surplusat December 31, 2006 18,147 1,116,924 352,436 2,125 39,474 1,529,106

Accumulated revaluation surplus

Balance as at January 1, 2006 and December 31, 2006 - 330 - 1 - 331

Carrying amount


Balance at December 31, 2006 18,147 1,113,643 351,082 2,124 32,981 1,517,977

The movement in the carrying value of property plant and equipment during the year ended December 31, 2005

was as follows (thousand RON):

Land Buildings Plant and Other fixed Construction in Totalequipment assets progress

Cost or valuation


Additions 2 71,794 25,228 401 91,059 188,484

Disposals (1) (47) (65) - (85,219) (85,332)

Adjustment for capitalization of meters - - 78,397 - - 78,397


Accumulated depreciation

Balance as at January 1, 2005 - - - - - -

Depreciation expense - (56,945) (30,478) (455) - (87,878)

Accumulated depreciation of disposals - - - - - -

Balance as at December 31, 2005 - (56,945) (30,478) (455) - (87,878)

Accumulated impairment


Increase in impairment provision - (3,611) (1,354) (2) (6,493) (11,460)

Balance as at December 31, 2005 - (3,611) (1,354) (2) (6,493) (11,460)

Net book value after impairmentloss, before revaluation surplusat December 31, 2005 18,147 1,028,627 321,928 2,159 30,305 1,401,166

Accumulated revaluation surplus


Revaluation surplus in year - 330 - 1 - 331

Balance as at December 31, 2005 - 330 - 1 - 331

Carrying amount





55

As of December 31, 2003 and September 30, 2005, the Company's property, plant and equipment were valued by an independent

valuator at their fair value. The fair value of the property, plant and equipment, estimated in accordance with the International

Accounting Standards 16 “Property, Plant and Equipment” and 36 “Impairment of Assets”, is their market value. When there is no

evidence of market value because of the specialized nature of the plant and equipment and because these items are rarely sold,

except as part of a continuing business, they are valued at their depreciated replacement cost. These values have been adjusted in

accordance with IAS 36 “Impairment of Assets” in order to reflect the recoverable amount.

In order to value property, plant and equipment as of September 30, 2005, these have been split by the independent valuator into two

groups, according to their contribution to the two main activities of the Company, i.e. the distribution and supply activities, and also

into three further groups formed, according to the valuation method employed, in order to derive their fair value, as follows:

– Assets valued at market value;

– Assets valued at replacement cost new using information collected from the market, and depreciated by physical, functional and

economic obsolescence, where applicable;

– Assets valued by indexing their historical value using an appropriate index.

Revaluation differences were recorded for each property, plant and equipment item.

For buildings used for special purposes (sub-station buildings, transfer stations, etc), the reconstruction/replacement cost method was

applied. In the case of administrative buildings, residential property and some of the warehouses, one market-oriented method was

applied, namely, the rental income capitalization approach or market comparison approach.

Lines, cables and other technical equipment were valued using the depreciated replacement cost (DRC) method, taking into account

the particular nature of these fixed assets that may not be sold separately but as part of the business, or that may be sold in extremely

rare situations and only within a power distribution entity that generates revenues.

Other fixed assets, including vehicles and office furniture and equipment were revalued based mainly on second-hand prices obtained

from the market.

The Company does not have temporarily idle plant and equipment as of December 31, 2006.

There are no pledged buildings in patrimony.

The basis of calculation for the impairment charges in 2005 and 2006 was the valuation exercise carried out by the independent

valuator as of September 30, 2005.

Assets that are proposed to be disposed, as well as those for which their disposal has been approved have a nil carrying amount as

of December 31, 2006.

The Company received 800 thousand RON for the sale of property, plant and equipment during the year (2005: 230 thousand RON).

Impairment losses of property, plant and equipment are disclosed under 'Depreciation, amortization and impairment charges' in the

income statement.

The Company has commitments to purchase property plant and equipment amounting to 36,277 thousand RON as of December 31,

2006.

The Company has not disclosed information on what the carrying value of its property, plant and equipment would have been had it

stated these at cost instead of at valuation, as this would have resulted in undue cost to estimate such amounts in comparison to the

benefit that may be derived by the users of these financial statements from providing such disclosure.



56

4. Intangible Assets

The movement in the carrying value of intangible assets during the year ended December 31, 2006 is as follows (thousand RON):

Software Rights and other Total

Cost

At January 1, 2006 8,034 56 8,090

Additions 1,561 - 1,561

Retirements - - -

Transfers 56 (56) -

At December 31, 2006 9,651 - 9,651

Accumulated amortization

At January 1, 2006 3,001 35 3,036

Amortization charge for the year 2,297 - 2,297

Transfers 35 (35) -

At December 31, 2006 5,333 - 5,333

Intangible assets in progress 27 27

Net carrying amount

At December 31, 2006 4,345 - 4,345

The remaining useful life of software at December 31, 2006 is 2 years.

The movement in the carrying value of intangible assets during the year ended December 31, 2005 was as follows (thousand RON):

Software Rights and other Total

Cost

At January 1, 2005 6,644 181 6,825

Additions 1,390 - 1,390

Retirements - (125) (125)

At December 31, 2005 8,034 56 8,090

Accumulated amortization

At January 1, 2005 999 93 1,092

Amortization charge for the year 2,002 27 2,029

Disposals - (85) (85)

At December 31, 2005 3,001 35 3,036

Intangible assets in progress - - -

Net carrying amount

At December 31, 2005 5,033 21 5,054

Software licenses, rights and other intangible assets are amortized using the straight line method over a period of 5 years.

Amortization of intangibles is disclosed under 'Depreciation, amortization and impairment charges' in the income statement.

There are no contractual commitments for the acquisition of intangible assets.



57

5. Other Financial Assets

The composition of other financial assets at December 31, 2006 and 2005, included under non-current assets,


31.12.2006 31.12.2005

Guarantee letter 2,898 2,898

Administrators' guarantees 560 526

Completion bonds received from suppliers - 812

Other financial assets 96 262

Total 3,554 4,498

The Guarantee letter at December 31, 2005 and 2006 relates to a real estate guarantee without dispossession over a collateral

deposit account of 2,898 thousand RON for the period from November 25, 2005 to January 31, 2008. The applicable interest rate is

5.25%, based on the Guarantee Agreement no 192/35185.

Administrators' guarantees at December 31, 2005 and 2006 relate to guarantees provided by the Company's warehouses Administrators.

Completion bonds received from suppliers at December 31, 2005 represent guarantees provided for good performance.

Other financial assets at December 31, 2006, included under current assets, comprise the following letters of guarantee:

– A guarantee for OPCOM auction participation with dispossession over a collateral deposit account of 1,189 thousand RON for the

period from December 22, 2006 to January 5, 2007.

– A guarantee for OPCOM auction participation with dispossession over a collateral deposit account of 4,260 thousand RON for the

period from December 20, 2006 to January 5, 2007.

– A payment guarantee for the rent of collection cash with dispossession over a collateral deposit account of 15 thousand RON for

the period from November 24, 2006 to April 30, 2007.

– A payment guarantee for the rent of collection cash with dispossession over a collateral deposit account of 7 thousand RON for the

period from November 24, 2006 to April 30, 2007.

6. Trade Receivables

The composition of trade receivables at December 31, 2006 and 2005 is as follows (thousand RON):

31.12.2006 31.12.2005

Receivables from sale of electricity 250,733 206,740

Receivables from others services rendered 42,868 13,135

Allowance for receivables:

Allowance for doubtful accounts receivable from the sale of electricity (54,704) (18,135)

Allowance for receivables from other services rendered (5,781) (7,746)

Total 233,116 193,994

Trade receivables are non-interest bearing and are generally on 30-60 days' payment term. No guarantees have been provided for any

receivables and they are unsecured.

7. Receivables from Related Parties

The composition of receivables from related parties at December 31, 2006 and 2005 is as follows (thousand RON):

31.12.2006 31.12.2005

Electrica S.A. 1,962 404

E.on Moldova S.A. 23 -

ENEL Electrica Dobrogea S.A. 44 -

Electrica Muntenia Sud S.A. 166 -

ENEL Electrica Banat S.A. 89 2

Electrica Transilvania Nord S.A. 20 -

Electrica Transilvania Sud S.A. 84 -

SISEE and AISEE Oltenia 199 200

SISEE and AISEE Banat 1 -

CEZ România S.R.L. 2,659 -

CEZ Data s.r.o 2 -

Total 5,249 606

For details on the related parties referred to above see Note 26.



58

8. Cash and Cash Equivalents

The composition of cash and cash equivalents at December 31, 2006 and 2005 is as follows (thousand RON):

31.12.2006 31.12.2005

Cash on hand and current accounts with banks 6,901 206,750

Cash equivalents - 50

Short-term deposits 404,949 256,986

Total 411,850 463,786

At December 31, 2006 and 2005, cash and cash equivalents included foreign currency deposits of thousand RON 254,615 and

thousand RON 377,144, respectively, earning interest at a rate of 3.91% (2005: 2.5%).

9. Shareholders' Equity

Share Capital

The Company's share capital consists of 71,523,469 authorized, issued and fully paid shares with a nominal value of RON 10 each.

As at December 31, 2006 the share capital structure is as follows:

Numbers of shares Numbers of Amountshares of holding

ČEZ, a.s. 36,481,412 51% 407,507.80




Electrica S.A. 26,459,238 37% 295,630.05

S.C. Fondul Proprietatea S.A. 8,582,816 12% 95,896.13

Total 71,523,469 100% 799,033.00

As at December 31, 2005, the share capital structure and split of the inflation restated value of share capital presented in the balance

sheet is as follows:

Number of shares Percentage of holding Amount

ČEZ, a.s. 36,481,415 51% 407,507

Electrica S.A. 35,042,054 49% 391,526

Total 71,523,469 100% 799,033

The movement in the share account as number and value during the years ended December 31, 2006 and December 31, 2005

is presented below (thousand RON):

Number of shares Amount

As at January 1, 2005 46,487,204 548,671

Issued in 2005 25,036,265 250,362

As at December 31, 2005 and 2006 71,523,469 799,033

Following an international tender process, on April 5, 2005, a privatization agreement was concluded between Electrica S.A. (the “Seller”)

and ČEZ a.s. (the “Purchaser”). The Shareholder's General Meeting held on September 30, 2005 approved the transfer of

11,445,150 shares from the Seller to the Purchaser and the increase of share capital by the issuance of 25,036,265 new shares to

ČEZ, a.s., which were settled in cash.

The value of the registered share capital in accordance with the Romanian Statutory accounting records and trade registry amounts to

RON 715,235 thousand as of December 31, 2006 and as of December 2005. The difference between the value of share capital per

the Romanian Statutory accounting records and the value presented in these financial statements relates to the adjustment made in

these financial statements in accordance with the provisions of IAS 29 (“Financial Reporting in Hyperinflationary Economies”), which is

not applicable under the applicable Romanian Accounting Regulations.

As a result of Shareholders' General Assembly Decision, dated September 7, 2006, the shareholders’ structure changed and ČEZ a.s.

sold to ZAPADOCESKA ENERGETIKA, a.s, SEVEROMORAVSKA ENERGETIKA, a.s., VYCHODOCESKA ENERGETIKA, a.s. 3 shares,

one share to each entity.

According to Law 247/2005, in October 2006 12% (8,582,816) of the Company's shares, currently held by Electrica S.A., were

transferred to S.C. Fondul Proprietatea S.A.



59

Share Premium

The balance of the share premium account at January 1, 2005, December 31, 2005 and December 31, 2006 amounts to RON 114,095

and represents the difference between the nominal value of shares acquired by ČEZ, a.s. (RON equivalent of EUR 71 million) and total cash

paid was recorded by the Company as share premium.

Revaluation Reserve

The movement in the revaluation reserve during the years ended December 31, 2006 and 2005 is presented below (thousand RON):

Amount (Note 30)

Balance as at January 1, 2005 (Note 30) 468,606

Revaluation surplus 78,727

Reversal of revaluation surplus (1,328)

Deferred tax impact on fixed assets and revaluation reserve (Note 25) (3,595)

Balance as at December 31, 2005 (Note 30) 542,410

Reversal of revaluation surplus (4,961)

Deferred tax impact on fixed assets and revaluation reserve (Note 25) 33,767

Balance as at December 31, 2006 571,216

As of December 31, 2006, the Company has tax qualifying revaluation reserves amounting to approximately 13,750 thousand RON

arising out of the revaluation of its tangible fixed assets as of December 31, 2003.

The tax qualifying revaluation reserve becomes taxable if amounts are intended for or distributed to shareholders and in certain other

cases, including use to offset statutory accounting losses.

The amount of the income tax liability that would arise in the event of the utilization of the revaluation reserve in future, using the

current income tax rate of 16%, amounts to approximately 2,200 thousand RON.

Retained Earnings

The movement in retained earnings during the years ended December 31, 2006 and 2005 is presented below (thousand RON):

Amount

Balance as at January 1, 2005 (Note 30) 65,586

Reserve for investments (26,846)

Profit for the year 73,017

Balance as at December 31, 2005 (Note 30) 111,757

Reversal of reserve for investments 26,846

Reserve for investments (31,055)

Legal reserve (6,171)

Reversal of revaluation surplus 4,961

Profit for the year 95,203

Balance as at December 31, 2006 201,541

The retained earnings per the Romanian Statutory accounting records as of December 31, 2006, which are available for distribution,

amount to 68,831 thousand RON (December 31, 2005: RON mil). The accumulated profit per the Romanian Statutory accounting

records as of December 31, 2006, amount to 106,057 thousand RON (December 31, 2005: 164,356 thousand RON loss).

Other Reserves

The movement in other reserves during the years ended December 31, 2006 and 2005 is presented below (thousand RON):

Amount

At January 1, 2005 4,348

Reversal of public patrimony (301)

Reserve for investments 26,846

At December 31, 2005 30,893

Reversal of reserve for investments (26,846)

Legal reserve 6,171

Reserve for investments 31,055

At December 31, 2006 41,273

Included under other reserves as of December 31, 2006 are legal reserves of 6,171 thousand RON restricted from distribution under

Statutory requirements and reserves for investments, related to the Energy Fund, of 31,055 thousand RON, which were set up in

accordance with Government Ordinance 89/2004, which may be used for specific investments made to the Company's distribution

network.



60

10. Long Term Liabilities to Related Parties

As of December 31, 2006, the Company has no long term liabilities to related parties. Loans contracted through Electrica S.A. were

repaid during the year ended December 31, 2006.

Composition of long term liabilities to related parties at December 31, 2005 was as follows (thousand RON):

Name of credit Balance as of 31.12.2005 Balance as of 31.12.2005in foreign currency in local currency

(thousand RON )

Loan BEI 1.8194/1995: EUR 654,962 436,642 2,007

Loan BIRD 3636/1995: USD 103,020 89,647 301

Loan ING: 10,803 thousand RON - 9,260

Other - 67

Total 11,635

Name of credit Short term Long term BalancePortion portion

Loan BEI 1.8194/1995 EUR 401 1,606 2,007

Loan BIRD 3636/1995 USD 22 279 301

Loan ING 3,087 6,173 9,260

Other - 67 67

Total 3,510 8,125 11,635

The interest rates indicated above are historical rates for fixed rate debt and current market rates for floating rate debt.

The following table analyses the long-term debt at December 31, 2005 by currency (in thousand):

Name of credit Foreign currency 31.12.2005RON

USD 97 300

EUR 546 2,007

RON - 9,328

Total long-term debt 11,635

11. Deferred Income

Deferred income as of December 31, 2006 and 2005 consists of the following (thousand RON):

31.12.2006 31.12.2005

Connection fees subsidies 151,048 115,322

Rental income 336 291

Total 151,384 115,613

Connection fees subsidies include the unamortized portion of capitalized connection fees received from customers upon their

connection to the national electricity network.



61

12. Trade Payables

Trade payables as of December 31, 2006 and 2005 consist of the following (thousand RON):

31.12.2006 31.12.2005

Domestic suppliers - purchases of electricity 72,378 61,486

Domestic suppliers - other supplies and services 15,295 4,244

Fixed asset suppliers 28,356 17,547

Accruals for supplier's invoices not received 22,311 2,324

Total 138,340 85,601

Trade payables are non interest bearing and are normally settled on 30-day terms, except for amounts payable to fixed asset

suppliers which are normally settled on 60-day terms.

13. Short Term Liabilities to Related Parties

Short-term liabilities to related parties as of December 31, 2006 and 2005 consist of the following (thousand RON):

31.12.2006 31.12.2005

Energy acquisitions from CEZ Romania S.R.L. 2,565 -

Energy acquisitions from Electrica S.A. 4,465 58,577

Loans payable to Electrica S.A. - current portion - 3,510

Repairs and maintenance services performed by SISEE and AISEE Oltenia 17,287 38,055

Repairs and maintenance services performed by SISEE and AISEE Banat 31 -

Guarantee for auction participation from ČEZ Logistika s.r.o. 787 -

Repairs and maintenance services received from and operating leasing liabilities and other liabilities payable

to E.on Moldova SA and Electrica Muntenia Nord S.A. - 132

Total 25,135 100,274

For details on the related parties referred to above see Note 26.

14. Other Current Liabilities

Other current liabilities at December 31, 2006 and 2005 are as follows (thousand RON):

31.12.2006 31.12.2005

Payables to employees 2,917 1,908

Social security payable 3,895 2,671

VAT payable 5,925 4,473

Salary tax and other taxes 400 864

TV Tax payable to RTV 863 12,441

Radio Tax payable to RTV 1,613 7,839

Other payables 4,214 6,070

Total 19,827 36,266



62

15. Provisions

The movement in provisions between December 31, 2005 and December 31, 2006 is presented in the following table (thousand RON):

Explanation Decreases31.12.2005 Increases Utilized Reversed 31.12.2006

Provision for penalties and cost of

replacement of old meters in

accordance with Law 178/2003 32,000 - 7,210 - 24,790

Provision for retirement benefits 32,784 1,272 1,586 - 32,470

Provision for green certificates not acquired by the Company

for energy supplied 120 241 - 121 240

Provision for environmental obligations related to the cost of

disposal of roof tiles containing asbestos and obsolete condensers 1,115 1,000 1,115 1,000

Provision for penalties payable to SISEE Oltenia (2003-2005) 1,598 - - - 1,598

Provision for restructuring 6,300 13,171 4,160 4,114 11,197

Provision for discretionary employees bonuses 1,010 - 940 70 -

Provision for litigation against Drobeta branch 69 10 69 - 10

Provision for litigation for land at Pite[ti branch 256 127 256 - 127

Provision for litigation - Pitesti, land - 10,323 - 6,939 3,384

Provision for litigation - Craiova Zaharul Calafat - 6,941 - - 6,941

Provision for litigation - Valnefer company 363 150 - 363 150

Provision for restructuring of the finance, controlling, accounting,

IT, HR, and customer care functions - 3,288 1,786 - 1,502

Provision for payments from profit to employees - 2,654 - - 2,654

Provisions for staff bonuses as a result of their participation in

the Company's profits, as the Collective Labor Agreement specifies - 1,788 43 - 1,745

Provision related to SINDSERV's claims - 2,080 - 2,080 -

Provision for audit fees - 97 - - 97

Others litigations - 256 69 - 187

Total 75,615 43,398 17,234 13,687 88,092

The Company has booked a provision, amounting to 24,790 thousand RON, for penalties that may be levied and the cost of replacing

old meters in accordance with Law 178/1003. The Company follows a continuous program for the replacement of old meters and

intends to release and / or increase the provision made in proportion with the number of old meters replaced, or the number of

additional old meters categorized as such in each financial year, respectively.

Retirement and post retirement benefits are estimated on the basis of an actuarial evaluation performed by an independent, qualified

actuary.

The key assumptions used in the actuarial evaluation are as follows:

– Discount rate of 7.49% for 2007 and thereafter decreasing to 3.53% in 2051.

– A 12.6 % increase of the level of salaries in 2006; the increase in the salaries level is reduced to 2% in 2051.

– A 1% turnover of the number of employees and also assuming that the Company does not have any plans to reduce the number of

employees.

– All employees will retire when they reach retirement age.



63

The provision for environmental obligations related to the cost of replacement of roof tiles containing asbestos and disposal of

obsolete condensers relate to the cost of disposal of roof tiles containing asbestos and obsolete condensers and represents the

estimated cost of complying with the Government Decision 124/2003 dealing with the disposal of construction materials containing

asbestos and the costs of complying with Government Decision 173/2000, as modified by Government Decision 291/2005, dealing

with waste management and environmental protection. The level of the provision represents Management's best estimate, based on

information provided by the Company's technical experts in the case of the disposal of roof tiles containing asbestos and based on a

contract signed with a company specializing in the disposal of obsolete condensers in the case of the condensers. The Company

follows a continuous program for the replacement of roof tiles containing asbestos and disposal of obsolete condensers and intends

to release the provision made in proportion with the percentage of completion of the related programme in each financial year.

The provision for penalties payable to SISEE Oltenia (2003-2005) relates to estimated penalties payable for the years 2003 and 2004,

as well as the nine month period ended September 30, 2005, in accordance with the provisions of the maintenance contract between

the Company and SISEE Oltenia. The Company anticipates reaching an agreement with SISEE Oltenia, in relation to the final amount

of the penalties payable, during the year 2007.

The provision for restructuring costs, amounting to 11,197 thousand RON, includes the estimated remaining costs associated with the

legal and accounting separation of the Company's supply and distribution activities so as to comply with local Energy Sector

regulations in force. The restructuring process is expected to be completed by July 2007 (see Note 30 for further details).

The provision for discretionary employee bonuses relates to an accrual for discretionary performance bonuses which the Management

decided to award to certain employees involved in special projects. These bonuses will be paid to employees during the year 2007.

Two significant litigations are in progress, for which the provision as of December 31, 2006 amounts to 10,325 thousand RON. This

provision comprises a provision in relation to the litigation with Preda Victoria, amounting to 3,384 thousand RON, related to the claim

initiated by an individual for the rent for his land, which is by the electricity network, and the provision for Zah`rul Calafat were the

plaintiff claims damages related to the cost of damaged production as a result of a fault in the voltage of electricity supplied to their

factory (6,941 thousand RON). The timing of the related cash outflows is uncertain and would depend on the timing of the conclusion

of the legal proceedings.

The provision for litigation with Valnefer company relates to the claim initiated by this company for the cost of repairing its timber

warehouse which was damaged as a result of fire, which was allegedly caused by the electricity meter. The Company anticipates that

the litigation proceedings will be concluded during the year 2007.

The provision for restructuring of the finance, controlling, accounting, IT, HR, and customer care functions relates to the costs for the

implementation of the shared services structure for the respective functions of the Company, which commenced in the year 2006.

16. Sales of Electricity

The composition of sales of electricity for the years ended December 31, 2006 and 2005 is as follows (thousand RON):

2006 2005

Corporate customers 672,081 806,197

Reactive electrical energy 23,127 20,178

Households 357,788 289,839

Retired employees of the Company 2,885 2,683

Other electricity distribution companies 64,567 7,988

Total 1,120,448 1,126,885



64

17. Other Operating Revenues

Other operating revenues for the years ended December 31, 2006 and 2005 consist of the following (thousand RON):

2006 2005

Services rendered 166,370 118,460

Rental revenues 15,767 13,708

Sales of merchandise 2,002 917

Revenues from activity - local households 30 176

IT services rendered 495 458

Revenues from sundry activities 8,703 13,556

Operating subsidies 45 57

Fines, penalties and damages 26,990 11,728

Subsidies received for investments made 4,855 5,101

Other operating revenues 3,200 1,390

Total 228,457 165,551

18. Electricity Purchased

Electricity purchased during the years ended December 31, 2006 and 2005 consist of the following (thousand RON):

2006 2005

Energy purchased from the transmission system 782,381 80,484

Energy purchased from third parties 10,753 734,252

Total 793,134 814,736

19. Materials and Supplies

Materials and supplies during the years ended December 31, 2006 and 2005 consist of the following (thousand RON):

2006 2005

Purchases of auxiliary materials 1,694 1,045

Expenses regarding the non technological fuel used 180 140

Expenses regarding spare parts used 2,342 18,939

Expenses regarding materials used for protection and security 2,634 2,512

Expenses regarding the protection equipments 1,572 1,224

Expenses regarding other consumables 1,029 1,495

Electricity, heating and water 1,060 803

Total 10,511 26,158

20. Repairs and Maintenance

Repairs and maintenance during the years ended December 31, 2006 and 2005 consist of the following (thousand RON):

2006 2005

Maintenance works 79,331 86,248

Maintenance services received from related parties 23,361 25,105

Total 102,692 111,353



65

21. Salaries, Wages and Other Employee Benefits

Salaries, wages and other employee benefits during the years ended December 31, 2006 and 2005

consist of the following (thousand RON):

2006 2005

Salaries (including bonuses) 66,650 56,343

Company's contribution to social security funds 21,002 18,811

Other employees' expenses 1,147 1,020

Meal tickets 4,595 -

Total 93,394 76,174

22. Depreciation, Amortization and Impairment Charge

Depreciation, amortization and impairment charge for the years ended December 31, 2006 and 2005

is analyzed as follows (thousand RON):

2006 2005

Depreciation of property, plant and equipment 95,561 87,878

Amortization of intangible assets 2,297 2,029

Impairment charge 4,823 11,460

Total 102,681 101,367

The impairment charge for years 2006 and 2005 relates to the impairment loss recognized in the income statement as a result of the

physical inventory of the Company's fixed assets.

23. Financial Income, Net

Financial income, net, for the years ended December 31, 2006 and 2005 consists of the following (thousand RON):

2006 2005

Interest revenue 19,679 4,090

Foreign exchange gains 10,279 16,633

Other financial costs 1,129 432

Interest expenses (327) (2,890)

Foreign exchange losses (36,369) (44)

Total income / (expense) (5,609) 18,221

The major drivers of the financial result during 2006 were the net foreign exchange losses and interest revenue. The high value of the

foreign exchange losses in 2006 was generated by the appreciation of the local currency against the EUR (by 8%), from

RON 3.6771 / EUR 1 to RON 3.3817 / EUR 1 between December 31, 2005 and December 31, 2006.

The above mentioned losses were mainly covered by the income generated from the interest collected as the result of the free cash,

denominated both in RON and in EURO, invested in the Romanian money market. The financial investments consisted of time

deposits and Treasury Bills issued by Finance Ministry, with regular maturities of one month. In the first half of 2006, the credits

engaged by the Company were fully reimbursed, including accrued interest.



66

24. Other Operational Expenses

Other operational expenses during the years ended December 31, 2006 and 2005 consist of the following (thousand RON):

2006 2005

Expenses regarding other non-storable materials 226 4,446

Cost of merchandise sold 1,900 869

Packaging costs 5 9

Rental expenses 5,075 4,974

Insurance expenses - 12

Cost of services rendered by individuals 356 70

Commissions and fees 40 5,932

Protocol expenses 40 86

Advertising and promotion expenses 166 55

Transport of goods and personnel expenses 48 27

Travel expenses 1,200 955

Postal expenses 4,803 3,880

Bank commissions and similar charges 607 1,008

Others services received 35,860 25,165

Other Taxes 1,977 2,702

Write off of bad debts 83 7,861

Damages payments 177 280

Fines and penalties 7 159

Net additional provisions / (release) of provisions 47,282 33,662

Loss on disposal of property, plant and equipment 1,357 2,068

Other operational expenses 2,259 2,846

Total 103,468 97,066

25. Income Taxes

Income Tax Legislation

Corporate income tax is calculated in accordance with Romanian tax regulations at the rate of 16% for 2006 and 2005.

The legal and fiscal environment in Romania and its implementation into practice changes frequently and is subject to different

interpretations by various Ministries of the Government. The Romanian government has a number of agencies that are authorized to

conduct audits (“controls”) of Romanian companies as well as foreign companies doing business in Romania. These controls are

similar in nature to tax audits performed by tax authorities in many countries, but may extend not only to tax matters but to other legal

or regulatory matters in which the applicable agency may be interested. In addition, the agencies conducting these controls may be

subject to significantly less regulation and the company under review may have significantly less practical safeguards than is

customary in many countries.

Income tax returns are subject to review and correction by the tax authorities for a period of five years subsequent to their filing.

Management believes that it has adequately provided for tax liabilities in the accompanying financial statements; however, the risk

remains that tax authorities could take differing positions with regards to the interpretation of these issues and the effect could be

significant.



67

As at December 31, 2006 and 2005, the income tax expense is analyzed as follows (thousand RON):

31.12.2006 31.12.2005(Note 30)

Current income tax 34,947 18,706

Deferred income tax 7,266 (7,920)

Total 42,213 10,786

As at December 31, 2006 and 2005, the income tax expense is analyzed as follows (thousand RON):

2006 2005(Note 30)

Profit before tax 137,416 83,803

Statutory income tax rate 16% 16%

Expected Income tax expense 21,987 13,408

Add (deduct) tax effect of:

Deductible depreciation (3,207) (13,556)

Deductible legal reserve (1,079) (438)

Other deductible items (1,574) (4,725)

Non-taxable income (15,046) (24,873)

Fixed assets (depreciation, amortization and deferred tax effect on revaluation of land) - 11,979

Non deductible provisions and reserves 21,530 26,356

Other non-deductible items 13,187 2,635

Income taxes 42,213 10,786

Effective tax rate 31% 13%

As at December 31, 2006 and 2005, the net deferred tax liability on temporary differences is analyzed as follows (thousand RON):

Balance sheet Income statement31.12.2006 31.12.2005 2006 2005

(Note 30) (Note 30)

Deferred income 2,502 2,755 253 124

Property Plant & Equipment (33,493) (65,060) - -

Intangible assets (35) (69) 34 (164)

Other assets 729 (226) (955) 226

Revaluation reserve - (2,200) - -

Liabilities 1,575 9,577 8,002 (8,106)

Total (28,722) (55,223) 7,266 (7,920)

The movement in the deferred tax liability on property, plant and equipment during the years ended December 31, 2006 and 2005 has

been credited / debited into the revaluation reserve account within equity, respectively. Similarly, the movement in the deferred tax

liability on the revaluation reserve during the year ended December 31, 2006 has also been credited into the revaluation reserve

account within equity.

The reconciliation of deferred income tax liability movements in the years ended December 31, 2006 and 2005


2006 2005 (Note 30)

Opening deferred tax liability as of January 1 55,223 59,548

Deferred tax liability charged / (credited) directly to equity (33,767) 3,595

Deferred income tax charge / (income) for the year 7,266 (7,920)

Closing deferred tax liability as of December 31 28,722 55,223



68

26. Related Parties

Receivables and payables from / to related parties as of December 31, 2006 and 2005

are presented in the following table (thousand RON):

Receivable from Payable to31.12.2006 31.12.2005 31.12.2006 31.12.2005

Electrica S.A. 1,962 404 4,465 70,145

E.on Moldova S.A. 23 - - 131

ENEL Electrica Dobrogea S.A. 44 - - 30

Electrica Muntenia Nord S.A. - - - 1

Electrica Muntenia Sud S.A. 166 - - 31

ENEL Electrica Banat S.A. 89 2 - 6

Electrica Transilvania Nord S.A. 20 - - -

Electrica Transilvania Sud S.A. 84 - - -

SISEE and AISEE Oltenia 199 200 17,287 38,055

SISEE and AISEE Banat 1 - 31 -

CEZ România S.R.L. 2,659 - 2,565 -

CEZ Logistika s.r.o. - - 787 -

CEZ Data s.r.o. 2 - - -

Total 5,249 606 25,135 108,399

Presented under:

Current assets 5,249 606 - -

Non-current liabilities - - 8,125

Current liabilities - 25,135 100,274

Total 5,249 606 25,135 108,399

Amounts payable to Electrica S.A. consist mainly of payables related to the purchase of electricity, repairs and maintenance and other

services.

Transactions with related parties during 2006 and 2005 are presented in the following table (thousand RON):

Sales/Revenues Sales/Revenues Purchases/expenses Purchases/expensesin 2006 in 2005 in 2006 in 2005

Electrica S.A. 27,352 4,923 103,370 443,931

E.on Moldova S.A. 529 671 131 248

ENEL Electrica Dobrogea S.A. 294 458 59 700

Electrica Muntenia Nord S.A. 566 807 24 2,790

Electrica Muntenia Sud S.A. 2,044 1,304 75 366

ENEL Electrica Banat S.A. 676 774 229 276

Electrica Transilvania Nord S.A. 877 1,011 52 365

Electrica Transilvania Sud S.A. 2,238 1,914 160 212

SISEE and AISEE Oltenia 2,995 - 145,727 133,410

SISEE and AISEE Muntenia Nord - - 1 30

SISEE and AISEE Muntenia Sud 1 - - -

SISEE and AISEE Banat 7 - 669 11

SISEE and AISEE Moldova - - 26

CEZ Romania S.R.L. 2,733 - 15,378 -

CEZ Logistika s.r.o. - - 787 -

CEZ Data s.r.o. 2 - - -

CEZ a.s. 44 - - -

Total 40,358 11,862 266,662 582,365

Transactions with related parties relate mainly to the cross-selling of electricity among the members of the electricity market in

Romania. The only exception being the transactions with Electrica S.A. where certain other services were provided to the Company

and SISEE, the maintenance services provider within Electrica S.A. group. All related party transactions are concluded on an arms'

length basis. All balances are unsecured and no guarantees have been provided or received for related party receivables or payables.

Electrica S.A. is a shareholder of the Company, holding 37% of its share capital as of December 31, 2006 (December 31, 2005: held

49% of the share capital). Electrica Muntenia Nord S.A., Electrica Muntenia Sud S.A., Electrica Transilvania Nord S.A. and Electrica

Transilvania Sud S.A. are subsidiaries of Electrica S.A., engaged in the supply and distribution of electricity in their respective regions

of coverage.

E.on Moldova S.A., ENEL Electrica Dobrogea S.A. and ENEL Electrica Banat S.A., which were previously subsidiaries of Electrica S.A.,

continued to be considered as related parties with the Company, as Electrica S.A. maintained a minority shareholding in these entities

following the completion of the privatization process in 2006.

SISEE Oltenia, SISEE Muntenia Nord, SISEE Muntenia Sud, SISEE Banat and SISEE Moldova are branches of Electrica S.A. engaged

mainly in the maintenance of the electricity distribution networks in their respective regions of coverage. Each SISEE branch includes a

number of Agencies of Maintenance and Energy Services (AISEE).



CEZ România SRL, ČEZ Logistika, s.r.o., ČEZ Data, s.r.o. are wholly owned subsidiaries of ČEZ, a.s., the Company's ultimate parent

company.

Transactions with CEZ Romania S.R.L. relate to the acquisition of electricity from this entity and the provision of various management

services by this entity to the Company.

Transactions with ČEZ Logistika, s.r.o. relate to the acquisition of meters.

The short term employee benefits of the key management personnel of the Company for 2006 amount to 367 thousand RON while for

2005 they amounted to 349 thousand RON. Other employee benefits to key management personnel are the same as those offered to

other employees, including termination, retirement and post retirement benefits (see Notes 2.3 and 29).

The short term employee benefits of the Board of Directors members of the Company for 2006 amount to RON 300 thousand while

for 2005 they amounted to 75 thousand RON. No other benefits are granted to Board of Directors members.

Key Management Personnel (as of December 31, 2006)

The Company's key management personnel are the following:

– Gabriel Negril` - General Manager

– Emi Mitrofan - Finance Director

– Vicen]iu Alexandru - Technical & Development Director

Board of Directors Members (as of December 31, 2006)

The Company's Board of Directors members are the following:

– Jan Veškrna - President

– Martin Pacovský - Member

– Luboš Pavlas - Member

– Tudor {erban - Member

– Dan C`t`lin Stancu - Member

27. Number of Employees

The average number of employees for the years ended December 31, 2006 and 2005 was as follows:

2006 % 2005 %

Workers 1,949 66% 1,929 65%

Other categories 1,022 34% 1,040 35%

Total 2,971 100% 2,969 100%

28. Financial Risk Management Objectives and Policies

During the year 2006 the Company commenced reorganization projects related to the unbundling, financial services centralization and

new ERP software implementation. For all these projects, the Company used advisors and consultants, most of them with

international recognition.

The financial instruments of the Company are composed of trade receivable and payable, cash and cash equivalents and long-term

liabilities to related parties (including loans).

In April 2006, the Company paid the loans contracted through Electrica S.A. and, in that way, it has been eliminated the related

financial risk. Other risks which significantly affect the results of the Company are foreign exchange risk, credit risk, litigation and lay-

off indemnities.

The Risk Management Policy is a central part of the Company's strategic management. Its main objective is to identify and treat the

risks related to the financial activities of the Company, being focused on the prevention and elimination of potential harmful influences.



Foreign Exchange Risk

Regarding the foreign exchange risk, the Company has in view the embracing of the most suitable financial strategy, out of the major

scenarios:

– The passive approach: the certainty degree related to the exchange rate prediction is too low and the Company might decide to not

take any steps for the protection against this risk;

– The active approach: the certainty degree related to the exchange rate prediction is high and the Company decides to take steps

for the protection purpose against the exchange risk, as follows:

Exchange rate anticipated settlement - the Company has the opportunity to set in advance the level of the exchange rate that will

be considered for the currency trade, both selling and buying;

Option on exchange rate: - the Company has the opportunity to purchase total or partial protection against an unfavorable

evolution of the rate and, at the same time, keeps the chance to take advantage from the favorable movement of the rate.

Currently the Company is exposed to foreign exchange rate risk through its purchase transactions and its policy is not to hedge this risk.

Credit Risk

The Company is obliged by the law to provide electricity distribution services to new customers without performing a credit check. For

this risk the Company raise provisions depending on receivables’ age. If the corporate customers have a poor track record on their

payables history, the Company requests a bank guarantee.

From eligible customers the credit risk is assessed before signing up. Bad debts are compensated by the regulatory authority,

recognizing the related costs in tariffs.

The maximum credit risk exposure is equal to the accounts receivable balance at December 31, 2006.

Litigation

The Company is involved in a series of lawsuits related to ownership title deeds for land on which electricity and distribution networks

lie. For all these litigation the Company sets up provisions depending on the claimants' demands.

The receivables recovery procedure stipulates the deadline by which the Company should bring an action against the customer if he

cannot (or does not) pay.

29. Commitments and Contingencies

As of December 31, 2006 and 2005, the Company had committed to the following capital expenditure program:

a) Distribution activity (thousand RON)

Objective 31.12.2006Financed from

Own resources Total

Investments on installations 39,120 39,120

Production centre / units development 44 44

Equipment and other investment expenses 813 813

Total 39,977 39,977


Own resources Total

Investments on installations 1,602 1,602

Production centre / units development 17,159 17,159

Equipment and other investment expenses - -

Supplying new subscribers with energy 124,249 124,249

Fixtures and fittings 40,123 40,123

Electrification, ANL dwellings 143 143

Total 183,276 183,276



b) Supply activity (thousand RON)

There was no committed capital expenditure for the supply activity as of December 31, 2006.


Own resources Total

Servicing users; Arrangement pay office 1,097 1,097

Fixtures and fittings 1,209 1,209

Total 2,306 2,306

These capital expenditure projects are reviewed periodically. Consequently the actual figures may be different from those estimated

above.

The Company has no operating lease commitments.

Environmental Matters

During 2006, the Company developed its program aimed at monitoring and reducing the pollution level of its installations.

The environment protection expenses incurred by the Company in 2006 and 2005 amounted to approximately RON 68,515 and RON

34,109, respectively. The main expenses were made for the prevention of water and soil pollution and for the recovery and protection

of land. The accompanying financial statements do not include any provision for contingent environmental liabilities.

Ownership Titles for Land

According to the Company's policy, the financial statements include only the value of land for which title deeds were obtained as at

the date of issuance of these financial statements.

According to Law 99/1999, in case the Company obtains the title deeds to land after the privatization, the land will be considered as

contribution in kind of the State or local authorities. In this respect, the Company will increase the share capital in line with the value of

the land, and the beneficiary of this increase will be the State or local authorities.

Financial Risk Management Objectives and Policies

According to Law 318/2003, the land on which transformer stations, electricity distribution networks are located, until the date of this

law being effective in use (August 16, 2003), is and remains in the State ownership. Moreover, licenses holders for exploiting the

capacities of production, distribution and transport of electricity will obtain the right to use and to have access to public facilities in

relation with the land, public or private ownership, located in the neighborhood of energetic capacities.

The Law does not prohibit the Company from obtaining title deeds for land on which conversion stations or electricity distribution

networks are located.

The Company is involved in a series of lawsuits related to ownership title deeds for land on which electricity and distribution networks

lie (lawsuits in progress when Law 318/2003 was effective). The final outcome of these legal actions could not be estimated as of the

date of issuance of these financial statements.

Staff Lay-Off Indemnities

According to the Collective Labor Agreement between the Company and the Labor Union, the Company is obliged to pay lay-off

indemnities to the employees made redundant based on the number of years of employment with the Company, as follows:

Number of years No. of gross salaries

1- 5 years 4

5- 10 years 6

10- 20 years 7

over 20 years 10

Other Contingencies

The Company is and may become party to certain lawsuits or governmental actions before various courts and governmental agencies

arising from the course of normal business and involving contractual matters, income and value added taxes and other matters. These

lawsuits or actions may have a material impact upon the Company's financial position or results of operations.



30. Restatement of Comparative Figures

Certain adjustments affecting the financial statements as of and for the year ended December 31, 2005 and December 31, 2004 have

been made during the year, restating the year 2005 comparative figures and opening balances as of January 1, 2005.

The adjustments made relate to the recording of the impact of the movement in the deferred tax liability, related to the revaluation of

fixed assets and the revaluation reserve, in the income statement instead of being charged or credited directly to equity.

The corrections made to the balances as of December 31, 2005 are presented in the following table (thousand RON):

December 31, 2005Balance Sheet As reported Adjustments Restated

Revaluation reserve 609,669 (67,259) 542,410

Retained earnings 44,498 67,259 111,757

The corrections made to the balances as of January 1, 2005 are presented in the following table (thousand RON):

January 1, 2005Balance Sheet As reported Adjustments Restated

Revaluation reserve 532,270 (63,664) 468,606

Retained earnings 1,922 63,664 65,586

The corrections made to the income statement for the year ended December 31, 2005

are presented in the following table (thousand RON):

Year ended December 31, 2005Income Statement As reported Adjustments Restated

Income tax expense 14,381 (3,595) 10,786

Net profit for the year 69,422 3,595 73,017

31. Subsequent Events

During 2006 the Company initiated the process of separation of the electricity distribution and supply activities of the Company in

order to implement the unbundling of its two activities, as per the European Directive 2003/54/EC and the Romanian Government's

Decision no. 890/2003.

As of March 15, 2007, a new company was set up, CEZ Vânzare S.A., to which the electricity supply activity was transferred from the

Company. CEZ Vânzare S.A. has the same shareholding structure as the Company and it will supply electricity to eligible consumers.

The Company, which on March 15, 2007 was renamed CEZ Distribu]ie S.A., will continue as an operator of the distribution system

and owner of the distribution-related assets.

Complying with the regulations of the industry in relation to the transparency in relation to services to be offered by CEZ Distribu]ie S.A. to

CEZ Vânzare S.A. and vice versa, in February 2007 the Company's Administration Council approved the setting up of another company,

CEZ Servicii S.R.L., which will provide finance, controlling, accounting, IT, HR, and Customer care services to CEZ Distribu]ie S.A. and CEZ

Vânzare S.A.

Regarding the finance, controlling, accounting, IT, HR, and Customer care functions, following CEZ Group's model, the Company is in

the process of implementing a shared services structure. The objective of this structure is to improve the quality of service, accuracy

and timeliness of the provided services, as well as streamline costs. The establishment of the shared services centre, to be located in

Pite[ti, is anticipated to be completed by June 30, 2007. Although in the short run the Company will incur one-off costs, in the

medium and long run the savings that will be achieved through the new structure are anticipated to be significant.



Glossary of Terms and Abbreviations Electrica Oltenia S.A. 73

Glossary of Terms and Abbreviations

Term Description

SISE, SISEE Maintenance and Energy Services Branch of S.C. Electrica Serv. S.A.

ANRE The National Authority for Energy Regulation

BMP Measurement and Protection Unit

CCM Collective Labor Contract

CET Thermal Power Plant

CN National Company

CPT Own Technological Consumption

EBIT Earnings Before Interests and Taxes

EBITDA Earnings Before Interests, Taxes, Depreciations and Amortization

EVA Economic Value Added

HG Governmental Decision

IAS International Accounting Standards

IFRS International Financial Reporting Standards

INT Improvement of Voltage Level

IQNet International Quality Network

IRE Electrical Networks Enterprise

ISO The International Standards Organization

kVA kilo Volt Ampere

LEA Aerial Electric Power Grid

LES Underground Electric Power Grid

MHC Small Hydro Power Plant

MMGA The Ministry for Environment and Water Management

OHSAS Occupational Health and Safety Assessment Series

OJT County Office for Tourism

OPCOM The Romanian Electricity Market Operator

OTS Transmission System Operator

OUG Emergency Government Ordinance

PCB Poly Chlorine Biphenyl

PRAM-TC Protections, Relays and Measurement Devices - Telecommunications

PT Transformer Point

PTA Aerial Transformer Point

PZU The Day-Ahead Market

ROA Return on Assets

ROE Return on Equity

ROIC Return on Invested Capital

SEN The National Power System

SIM The Integrated Management System

SN CFR Romanian National Railway Company

SR EN ISO Romanian Quality Standards in Compliance with ISO Standards

SRAC National Committee for Quality Assurance


Method Used to Calculate Key Figures

Key Figures Method Used to Calculate Key Figures

Return on Invested Capital (ROIC) Adjusted EBIT x (1-corporate income tax) / Average invested capital

Return on Equity (ROE), net Profit after tax / Average shareholders’ equity

Return on Assets (ROA), net Profit after tax / Average total assets

EBIT margin EBIT / Turnover

Debt / Equity Debt / Shareholders’ equity

Total indebtedness (provisions excluded) (Liabilities + Other liabilities - Provisions) / Total liabilities and equity

Long-term indebtedness Long-term borrowings / Total liabilities and equity

Current ratio Current assets / Current liabilities

Operating cash flow to liabilities ratio Operating cash flow / Liabilities

Assets turnover Total revenues / Total assets

Coverage of non-current assets (Shareholders’ equity + Long-term liabilities) / Fixed Assets

Extent of depreciation Depreciation / Total fixed assets

74 Electrica Oltenia S.A. Method Used to Calculate Key Figures


75Information for Shareholders and Investors Electrica Oltenia S.A.

Information for Shareholders and Investors

Contacts

General Manager Technical and Development Director

Gabriel Negril` Vicen]iu Alexandru

Tel.: +40 251 40 50 00 Tel.: +40 251 40 51 00

e-mail: [email protected] e-mail: [email protected]

Financial Director Public Relations

Emi Mitrofan Liana T`t`ranu

Tel.: +40 251 40 54 00 Tel.: +40 251 40 50 65

e-mail: [email protected] e-mail: [email protected]


76 Electrica Oltenia S.A. Information on Persons Responsible for the Annual Report

Information on Persons Responsible for the Annual Report

Responsibility for the Annual Report

Statutory Declaration:

I hereby declare that the information presented in the Annual Report is factual and that no material circumstances have been omitted

or distorted.

Gabriel Negril` Emi Mitrofan

General Manager Financial Director

Electrica Oltenia S.A. Electrica Oltenia S.A


Electrica Oltenia S.A.

2 Brestei Street

Craiova, Dolj

Romania

Recorded in the Commercial Register of Craiova under the number J16/148/2002

Year of inception: 2002

ID No: J16/148/2002

CUI : R 14491102

Legal Form: joint stock company

Bankers : Banca Comercial` Român` ; IBAN Account: RO22 RNCB 2600 0001 5489 0001

Tel. : +40 251 40 50 02

Fax : +40 251 40 50 04

2006 Annual Report closing date: May 31, 2007

Design and coordination:

© B.I.G. Prague, Hill & Knowlton Associate, 2007

Adaptation and execution:

© BtB Advertising, Bucharest, 2007



Documents

Electrica Oltenia S.A. Annual Report 2006 · Electrica Oltenia S.A. is a joint stock company based in Romania and is the main supplier of electricity in the counties of Olt, Dolj,