ANNUAL REPORT RWE Supply & Trading CZ, a.s.

Transkript

1 ANNUAL REPORT RWE Supply & Trading CZ, a.s.

2 Key figures (CAS) 2015 Total sales (CZK m) 142,007 EBITDA (CZK m) 7,361 Operating result (CZK m) 7,361 Profit before taxation (CZK m) -6,103 Profit after taxation (CZK m) -4,635 Investments (CZK m) 0 Number of employees (converted to FTE) 17 RWE Supply & Trading CZ, a.s. is hereinafter also referred to as the Company or RWE Supply & Trading CZ 2 Abbreviations Used: CAS CEO CFO FTE Czech accounting legislation Chief Executive Officer Chief Financial Officer Full-time equivalent The Annual Report has been prepared in the Czech language and in English. In all matters of interpretation of information, views or opinions, the Czech version of the Annual Report takes precedence over the English version.

3 TABLE OF CONTENT 1 THE CHAIRMAN S STATEMENT 4 2 REPORT OF THE SUPERVISORY BOARD FOR BACKGROUND Identification Information about Shareholders and Securities Governing and Supervisory Bodies Persons Responsible for the Annual Report and for the Audit of Financial Statements 9 4 MANAGEMENT REPORT FOR Results Gas Business Human Resources Occupational Health and Safety and Environmental Protection Subsequent Events Outlook 16 5 FINANCIAL PART Financial Statements Notes to Financial Statements INDEPENDENT AUDITOR S REPORT 33 7 REPORT ON RELATIONS BETWEEN RELATED PARTIES FOR THE ACCOUNTING PERIOD OF

4 1 THE CHAIRMAN S STATEMENT Ladies and gentlemen, 2015 was the third year during which RWE Supply & Trading CZ operated as a pure midstream company. I recall that, after the restructuring that was finished in 2012, our company does neither own storage nor pipeline assets but rents capacity instead as needed to conduct its supply and wholesale business hinging on long-term gas supply contracts as well as short-term purchases on the one hand and sales to customers and counterparties at the Czech and foreign wholesale traded gas markets on the other hand. 4 The year 2015 was characterized by a further deterioration of raw materials prices at large and oil and traded gas prices in particular. Nonetheless, the sustained demand destruction for gas stemming from subsidized renewables has continued and constitutes a major challenge for the gas business at large. Through our industry association, Eurogas, we have launched significant initiatives to intensify gas advocacy. The thrust of such advocacy has changed, we no longer present ourselves as a transitional fuel, but rather as an integral part of an integrated low carbon system, including the ability of integrating hydrogene derived from power to gas, but also biogas, meaningfully into the system. I mentioned last year that the reputational damage to our product natural gas through (mis-) use as a political weapon was an ongoing challenge. Sadly, many events in 2015 augmented the perception of the public that natural gas was used as a political instrument. We had some promising discussions with our Russian partners about this issue and we shall need to continue our efforts. Since (public) perception is reality, it is obvious that the reputational damage of natural gas can no longer be remedied by (rational) gas advocacy alone. In our view, confidence in the security of gas supplies can only be reestablished by a fully functioning European traded gas market. Namely, if prices are formed by supply and demand, security of supply will no longer be a matter of physical dependency, but rather a function of price: if supplies are cut, prices will go up and attract other sources of supply. We therefore welcome the vigour with which the new European Commission aspires to complete the single European gas market. Market circumstances appear to be in our favour to underpin our point of markets working by supply and demand: We are facing an impending gas supply glut for the next 4 to 5 years stemming from more than 200 bcm of liquefaction capacity coming on stream, some 80 bcm from the US alone. Demand destruction and oversupply can quickly become a serious issue in the face of take-or-pay obligations under long-term contracts. Such situation can only be responsibly managed if the pricing allows disposal of surplus volumes at the point of first sale, namely in the traded wholesale gas markets at wholesale traded market prices. As reported last year, the Company was successful in achieving such pricing and was therefore, albeit

5 selling approximately TWh of natural gas on European wholesale markets outside the Czech Republic, not adversely affected in its financial results. According to the contract with Gazprom export, the parties commenced on 1 June 2015 the commercial discussions on the parameters of gas deliveries in near future. In case of non-agreement until time given, both parties can request price revision. Given the remaining uncertainty over the outcome of such deliberations, the decline in oil prices made it advisable to secure future positions with a view to mitigate potential risks. This has, temporarily, affected the balance sheet but will stabilize P&L. In 2015, the Company successfully negotiated a reduction of overall payments to eustream for gas transmission in combination with a change of capacity payments from US dollars to Euro. In the 2012 price review with our Slovak storage system operator NAFTA, the arbitration award was received and all payments settled by 31 December The 2015 price review was amicably settled in 2015, with the payment to follow in the first quarter of In summary, the external circumstances in the past 12 months were not easy at all; they required much effort in all areas of our operations and I would like to extend a special thanks to all colleagues involved for a job well done. Whilst the past year was difficult, it was also a successful period. I look forward to further cooperation with our suppliers and also our wholesale customers, RWE Energie, s.r.o. and RWE Gas Slovensko, s.r.o., and with the large number of our partners outside the RWE Group. 5 Dr. Wolfgang Peters Chairman of the Board of Directors

6 2 REPORT OF THE SUPERVISORY BOARD FOR 2015 The Supervisory Board continuously monitored the Company s business activities, its results and the Board of Directors performance of its powers and responsibilities in past period. In 2015 the Supervisory Board held two ordinary meetings and had a quorum at all times. At its meetings the Supervisory Board discussed all matters for which it is responsible under the relevant legal regulations, the Company s Articles of Association, and the decisions adopted by the sole shareholder acting in the capacity of the General Meeting, including the documents that the Supervisory Board requested from the Board of Directors as part of its supervisory activity. Members of the Board of Directors commented on these documents when they were discussed by the Supervisory Board. In performing its supervisory activity the Supervisory Board did not find anything inconsistent with generally applicable legal regulations, the Company s Articles of Association, or the decisions of the sole shareholder acting in the capacity of the General Meeting. On 10 March 2016, the Supervisory Board reviewed the Company s financial statements for the period ended 31 December 2015, the Board of Directors proposal for loss settlement for 2015 and the Report on Relations for the accounting period of The Supervisory Board noted that the Company had not sustained any damage caused by the operations described in this report, and it had therefore not been required to compensate for such damage. 6 The Supervisory Board concluded that the financial statements give a true and fair view of the financial position of the Company as at 31 December 2015, its financial performance and its cash flows for the period ended 31 December 2015 in accordance with Czech accounting legislation. The Supervisory Board recommends to the General Meeting to approve the financial statements for the period ended 31 December 2015 and the Board of Directors proposal for the loss settlement for The Supervisory Board expresses its gratitude to all employees for their work performed for the Company in Prague, on 10 March 2016 Andree Stracke Chairman, Supervisory Board

7 3 BACKGROUND 3.1 Identification Name: RWE Supply & Trading CZ, a.s. Registered office: Limuzská 12/3135, Praha 10 - Strašnice, PSČ Company No.: Legal form: Joint stock company Establishment and Inception In its Resolution No 1072 of 1 November 2000, the Government of the Czech Republic approved the procedure for the privatisation of state-owned Transgas, s.p. and minority interests in regional distribution companies. On 2 May 2001, the National Property Fund of the Czech Republic removed all assets from Transgas, s.p. and contributed them to a newly established company, Transgas, a.s. The new company was incorporated on 18 June 2001 in the Commercial Register maintained by the Municipal Court in Prague, Section B, Insert In its Resolution No 1342 of 17 December 2001, the Government of the Czech Republic issued, under Section 10 (1) of Act No 92/1991 on the Conditions of the Transfer of the State s Property to Other Persons, as amended, a decision to privatise the State s equity interests in the business of Transgas, a.s. and regional distribution companies by way of a trade sale to RWE Gas Aktiengesellschaft, having its registered office at Kampstrasse 49, D Dortmund, the Federal Republic of Germany. On 29 January 2002, the respective Share Purchase Agreement was signed by and between the National Property Fund of the Czech Republic and RWE Gas Aktiengesellschaft. This step completed the process of the privatisation of the Czech gas industry. Company profile RWE Supply & Trading CZ is a commercial company whose core business is natural gas wholesale. RWE Supply & Trading CZ, a.s. is not part of the group of companies controlled by RWE Česká republika a.s. 7 The Company s organizational units abroad The Company has no organizational unit abroad. Research and Development The Company does not carry out research and development of new products. 3.2 Information about Shareholders and Securities The Company has issued 36,550,385 registered shares in certificated form, each with a par value of CZK 800. The sole shareholder of RWE Supply & Trading CZ as at 31 December was RWE Gas International N.V., having its registered office at Willemsplein 4, 5211AK, s-hertogenbosch, the Kingdom of the Netherlands.

8 3.3 Governing and Supervisory Bodies The Company s Board of Directors as at 31 December 2015 Dr. Wolfgang Peters Chairman Born: 12 June 1953 Education: University of Hamburg, Doctorate in Law, Executive MBA, California State University Hayward Membership of bodies of other companies: Executive Director of the Gas Value Chain Company GmbH Any other business activities: Shareholder of the Gas Value Chain Company GmbH Axel Gerhardy Vice-Chairman Born: 14 August 1971 Education: Georg-August Universität, Göttingen, Economics Membership of bodies of other companies: Vice-Chairman of the RWE Česká republika a.s. Board of Directors, Member of the RWE Group Business Services GmbH Supervisory Board Any other business activities: None 8 Changes in the Company's Board of Directors in 2015: The term of office of Vice-Chairman of the Board of Directors Axel Gerhardy ended on 1 July On 23 June 2015, the sole shareholder exercising the rights and powers of the General Meeting reappointed Mr. Gerhardy as Member of the Board of Directors effective as of 2 July On 24 June 2015, the Board of Directors elected Mr. Gerhardy as the Vice-Chairman with the effect as of 2 July The Company s Supervisory Board as at 31 December 2015 Andree Stracke Chairman Born: 10 July 1968 Education: University Köln / University Osnabrück, Economics Membership of bodies of other companies: Executive Director of RWE Supply & Trading GmbH Member of the Board of Directors of RWE & Turcas Dogalgaz Ithalat ve Ihracat A.S. Any other business activities: Member of the Advisory Board of PEGAS (EEX/Powernext), Member of the Executive Advisory Board (EAB) of the EAGC (European Autumn Gas Conference), Member of the Board of Afrika-Verein e.v. Dr. Michael Herrmann Vice-Chairman Born: 26 May 1964 Education: Technical University Darmstadt, Doctorate in Theoretical Physics Membership of bodies of other companies: Vice-Chairman of the RWE Polska S.A. Supervisory Board Any other business activities: None

9 Christian Harald Ring Member Born: 25 August 1968 Education: Albert-Ludwigs-Universität Freiburg, Law Membership of bodies of other companies: Member of the PT Rheincoal Supply & Trading Indonesia Board of Commissioners Any other business activities: None The composition of the Company s Supervisory Board did not change in Persons Responsible for the Annual Report and for the Audit of Financial Statements Auditor and the audit company responsible for reviewing the financial statements of RWE Supply & Trading CZ, a.s. for 2015 Audit company: Responsible auditor: PricewaterhouseCoopers Audit, s.r.o. Tomáš Bašta Hvězdova 1734/2c, Nusle, Praha 4 Licence No 1966 Registered in the Register of Audit Companies with the Chamber of Auditors of the Czech Republic under Licence No Prague, 10 March 2016 Person responsible for accounting Lucie Čejková Head of Accounting RWE Group Business Services CZ, s.r.o. Persons responsible for the Annual Report of RWE Supply & Trading CZ, a.s. for 2015 The undersigned hereby affirm that the disclosures in this Annual Report are true and that no material circumstances have been omitted or distorted. Dr. Wolfgang Peters Chairman, Board of Directors Axel Gerhardy Vice-Chairman, Board of Directors

10 4 MANAGEMENT REPORT FOR Results Revenues, Expenses, Profit Earnings before and after taxes in 2015 amounted to CZK -6,103 and -4,365 million, respectively. Year 2015 (CZK m) 2014 (CZK m) Operating result 7,361 1,309 Value added -1, Changes in operations-related provisions and allowances 8,496 1,985 Other operating income and expenses Financial result -13,464 1,943 Income tax on ordinary activities 1,468-1,508 Earnings after taxes -4,635 1, Operating income and expenses amounted to 140,423 and 133,062 million, respectively, translating into CZK 7,361 million in operating profit, a year-over-year increase of CZK 6,052 million. The high year-over-year rise was mainly due to the dissolution of an allowance for future losses and risks relating to in-effect long-term natural gas purchase agreements. The unfavorable trend of gas procurement costs exceeding achievable selling prices continued. The Company reported CZK 1,323 million in negative value added. Value added decreased by CZK 688 million year-over-year. The financial result amounted to CZK -13,464 million and mainly consisted of the negative outcome of a onetime revaluation of commodity derivatives. Following the decrease of forward prices during 2015, the market value of financial swaps decreased from CZK 1,468 million on 31 December 2014 to CZK -12,213 million on 31 December Assets and Liabilities Assets At 31 December 2015, the total value of the Company's assets amounted to CZK 49,184 million, a 21.4 % yearover-year decrease. At year-end, the Company had no fixed assets. Current and other assets fell by CZK 13,406 and amounted to CZK 49,184 million at 31 December As to current assets, the value of short-term receivables and stocks decreased by CZK 12,623 million and CZK 2,242 milion, respectively, while long-term receivables increased by CZK 1,468 million. The decrease in short-term receivables was mainly due to a lower volume of short-term loans and credit provided to other RWE Group companies. Short-term financial assets grew by CZK 3 million and other assets by CZK 12 million. Overall, short-term receivables and stocks accounted for 92% and 5% of current and other assets, respectively.

11 Structure of assets 31 December Fixed assets Short-term debtors Stocks Long-term debtors Short-term financial assets Other assets Structure of assets 31 December Fixed assets Short-term debtors Stocks Long-term debtors Short-term financial assets Other assets Liabilities At 31 December 2015, equity decreased by CZK 6,379 million to CZK 24,654 million, which amounts to 50.1% of total liabilities. The reason behind the decrease in equity was the distribution of profit earned in 2014 and incurred loss of As in the past, the Company financed its operations mainly using its own resources in External financing sources and other liabilities amounted to CZK 24,530 million, where short-term liabilities, long-term liabilities, and reserves accounted for 97.9%, 1.4%, and 0.7%, respectively.

12 Structure of equity and liabilities 31 December Equity Provisions Short-term liabilities Long-term liabilities Other liabilities Structure of equity and liabilities 31 December Equity Provisions Short-term liabilities Long-term liabilities Other liabilities Risk Management Risk management in the Company falls within the remit of RWE Supply & Trading GmbH. All identified risks are recorded in the Risk Catalogue. Moreover, all risks are entered into a risk matrix to facilitate the identification of the most serious threats in terms of the probability of their occurrence and the extent of potential damage. The Company is mainly exposed to the market risk, which stems from long-term natural gas purchase agreements. Further, active measures are taken to manage commodity risks relating to natural gas trading, currency risks, interest risks, and credit risks relating to business partners. Depending on their nature, the most serious risks are hedged against by insurance, provisions, hedging transactions, caps on risk positions, and various other preventive measures. All derivatives are revalued at fair value as at the balance sheet date. The Company does not use hedge accounting.

13 4.2 Gas Business Gas Procurement In the reported year, the procurement portfolio of RWE Supply & Trading CZ mainly consisted of long-term natural gas supply contracts. The quantity of gas purchased under long-term contracts in 2015 totaled TWh. Gas prices paid under purchase agreements were based on wholesale market prices and to some extent on the development of exchange rates. Apart from withdrawals from underground storage, flexible supplies were achieved by short-term purchases of natural gas on wholesale markets. This arrangement allowed diversifying the procurement portfolio and significantly improved the security of supply. Gas Sale In 2015, RWE Supply & Trading CZ sold TWh of natural gas to its Czech customers, including short-term purchases. Natural gas sold in the Czech Republic was traded based on standard trade agreements (EFET), where specific transactions are confirmed under transaction sheets that specify in detail the general terms set out in the relevant master agreements. During the reported year, RWE Supply & Trading CZ was active on other foreign markets, particularly in Slovakia and in Germany. The Company provided supplies to all customers in conformity with its contractual commitments. The volume of natural gas RWE Supply & Trading CZ sold on foreign wholesale markets in 2015 amounted to TWh. 13 Gas Storage RWE Supply & Trading CZ stored gas in underground storage facilities in the Czech Republic and in Slovakia, which, among other benefits, guaranteed the required supply security standard and allowed covering a consumption increase in the winter. Services RWE Supply & Trading CZ provided trading and dispatching services to other RWE Group companies on a contractual basis.

14 4.3 Human Resources For a second year in a row, the Human Resources Department of RWE Česká republika a.s. ("HR") conducted activities aimed at standardizing and improving the efficiency of staff-related processes, and provided HR services to all RWE Group companies in the Czech Republic. Strategic objectives included reinforcing performanceoriented culture, improving staff training and development, encouraging talented employees, promoting RWE's reputation as a stable and modern employer, and supporting RWE's business operations. Several important events took place under the auspices of the Human Resources Department of RWE Česká republika a.s. in They primarily focused on issues relating to the flexible working style, diversity, and support for employment among the young generation. In May 2015, RWE hosted a diversity-oriented conference entitled "Let's Be Flexi". The event focused on presentations of flexible work arrangements and their effect on employees' work performance, motivation, creativity, and loyalty. RWE attended specialized conferences held in the Czech Republic, where we presented our experience with the flexible work style. In November, RWE's employees were given the opportunity to take active part in the Day of Working from Anywhere, an initiative organized by the Microsoft Corporation to promote the idea of flexible working style. In June 2015, RWE attended a parliamentary seminar where it took part in a debate about unemployment among young people. The seminar was sponsored by the Alliance for Youth, founded by the Nestlé Corporation RWE participated in two pillars: CV Clinic and Job Clinic. The main objective was to support young individuals in gaining practical experience and skills for improving their position on the labor market. 14 As in the past, last year's edition of the "Diversity Talks over Breakfast with " series elicited a very favorable response, allowing employees to meet interesting personalities from science, culture, industry, and religious life. In 2015, the RWE Group in the Czech Republic placed second in the Company of the Year contest organized by Gender Studies. The jury that evaluated entrants in last year's edition, titled "Breaking the Glass Ceiling Support for Career Growth of Women", valued highly our efforts to increase the representation of women in management positions, activities related to the Women to Lead program, attention paid to talented female employees, and wide-ranging support for the use of internal mentoring. The contest was supported by the EU Structural Funds, specifically the Operational Program Human Resources and Employment. As regards cooperation with universities and student organizations, we organized three job fairs in Ostrava. February marked the successful completion of the Trainee Program for the years All nine trainees found employment within the RWE Group in the Czech Republic. Another round of the Trainee Program began in September for the period, where 10 university graduates were assigned to nine departments of RWE companies in the Czech Republic. During the reported year, we enlarged the portfolio of products and services available under the employee benefit application accessible through the RWE Benefit Portal. As in previous years, employees were able to donate their benefit points for charity. As part of the employee benefit program, we negotiated numerous discounts for RWE employees, mainly for travel and insurance products and various services. Staffing Levels RWE Supply & Trading CZ had 18 employees at 31 December 2015.

15 Workforce Structure by Education 4 14 Complete secondary school University Wages Wage levels developed in accordance with the conditions and principles agreed in the Collective Agreement and the Company's human resources strategy. Professional Training and Development As in previous years, all RWE Group employees in the Czech Republic underwent an annual assessment of skills that included the formulation of personal development plans. The Company's structured staff training system pays close attention to the continual improvement of technical knowledge and personal development in three key areas where (a) we focus on results (Deliver), (b) we are a team (Connect), and (c) we improve (Develop). 15 Staff training is organized to reflect the 70:20:10 learning and development model. HR offers not only a wide range of in-house and e-learning courses and seminars, but also such training forms as mentoring, coaching, and participation in various projects. In the reported year, the training catalogue was enlarged by the addition of e- learning courses targeting soft skills and technical skills through seminars mostly organized by internal specialists from RWE Group companies in the Czech Republic. One of the Group's main priorities in 2015 was identifying high-potential employees and educating management staff on the process of performance management. In both areas, approaches and processes were standardized throughout the RWE Group. Social Policy The Company performed its obligations under the Collective Agreement, including Annexes 1 and 2, for the period from 1 January 2014 to 31 December The Collective Agreement was signed with the SOS Energie Trade Union, the UNIOS RWE Association of Trade Union Locals, and the ECHO Náchod Heating Plant in December 2013.

16 4.4 Occupational Health and Safety and Environmental Protection Occupational Health and Safety Occupational health and safety (OHS) is one of the highest priorities in all RWE Group companies in the Czech Republic. This area is regarded as an integral part of our corporate social responsibility to our staff as well as to employees of our contractors. In 2015, we executed programs aimed at developing the OHS culture in areas that included management employees' involvement in and awareness of safety-related issues, improvement of road traffic, OHS-related contractor management, and standardization and simplification of processes. All employees were invited to attend one of 16 workshops entitled "Seven Step to Health", which focused on improving the medical condition of the workforce through self-coaching and appropriate lifestyle changes. RWE won the highest award in the "Health Promoting Enterprise" contest organized by the National Institute of Public Health under the aegis of the Czech Ministry of Health. In 2015, lost time injury frequency (LTIF) (number of injuries per 1,000,000 work hours) was set at 2.0, including injuries sustained by contractors' staff. According to our internal methodology, LTIF amounted to 0.0 with regard to our workforce and 1.34 of injuries sustained by contractor's staff are included. Only one occupational accident took place in the Company; the incident did not result in incapacity for work. Maintaining workplace safety remains to be the goal of RWE Supply & Trading CZ. The LTIF target set for 2016 is 1.9, including accidents of contractors' workers. 16 Environmental Protection Environmental protection is a key priority for RWE Supply and Trading CZ. In view of the low number of employees and the nature of its business, which consists exclusively of trading and administrative tasks, the Company's operations do not have an adverse impact on the environment. Assessments of the environmental sustainability of the RWE Group's international operations are published in such global indexes as the Dow Jones Indexes and the Carbon Disclosure Project. 4.5 Subsequent Events At the date of this Annual Report, there have been no reportable events liable to have a material effect on the assessment of the Company's business. On 16 February 2016, RWE Gas International N. V., with registered office at Willemsplein 4, 5211AK, s-hertogenbosch, Netherlands, transferred its 100% stake in the Company to RWE Supply & Trading GmbH, with registered office at Altenessener Strasse 27, Essen, Germany. Following the transaction, RWE Supply & Trading GmbH has become the sole shareholder of the Company. 4.6 Outlook As already mentioned in the Chairman s statement the commercial discussions with Gazprom Export on the parameters of gas deliveries have been commenced on 1 June 2015 and are running. In case of non-agreement both parties have the option to request price revision.

17 Late 2013 saw the termination of a long-term gas transmission agreement with jordgas Transport on the grounds of the German transmission service provider s breach of obligations, and a dispute then arose in the wake of the termination; the decision on the dispute at the first-instance level is expected in the course of During 2016, the company will focus on the revision of all agreements to provide supporting services in order to optimize the price and the quality of individual services. 17

18 5 FINANCIAL PART 5.1 Financial Statements Company name: RWE Supply & Trading CZ, a.s. Identification number: Legal form: joint stock company Primary business: gas trade Balance sheet date: 31 December 2015 Date of preparation of the financial statements: 17 February 2016 BALANCE SHEET (in thousand Czech crowns) 18 Ref. ASSETS Gross Provision Net Net a b TOTAL ASSETS 50,243,065 (1,059,300) 49,183,765 62,589,741 C. Current assets 50,208,798 (1,059,300) 49,149,498 62,543,654 C. I. Inventories 3,342,743 (1,059,300) 2,283,443 4,525,293 C. I. 1. Finished goods 3,342,743 (1,059,300) 2,283,443 4,525,293 C. II. Long-term receivables 1,717,168-1,717, ,525 C. II. 1. Deferred tax asset 1,717,168-1,717, ,525 C. III. Short-term receivables 45,143,041-45,143,041 57,765,926 C. III. 1. Trade receivables 3,839,985-3,839,985 2,969, Receivables - subsidiaries / controlling parties 33,048,996-33,048,996 38,772, Taxes - receivables from the state 212, , Short-term advances paid 10,131-10,131 64, Estimated receivables 6,562,628-6,562,628 9,698, Other receivables 1,468,601-1,468,601 6,260,554 C. IV. Financial assets 5,846-5,846 2,910 C. IV. 1. Cash in hand Cash at bank 5,839-5,839 2,910 D. I. Prepayments and accrued income 34,267-34,267 46,087 D. I. 1. Prepaid expenses 31,364-31,364 32, Accrued income 2,903-2,903 13,274

19 Ref. LIABILITIES AND EQUITY a b 5 6 TOTAL LIABILITIES AND EQUITY 49,183,765 62,589,741 A. Equity 24,653,845 31,032,644 A. I. Share capital 29,240,308 29,240,308 A. I. 1. Share capital 29,240,308 29,240,308 A. II. Capital contributions 48,724 48,519 A. II. 1. Other capital contributions 48,724 48,519 A. V. Profit / (loss) for the current period (4,635,187) 1,743,817 B. Liabilities 24,519,280 31,545,868 B. I. Provisions 178,381 9,318,743 B. I. 1. Income tax provision - 242, Other provisions 178,381 9,076,056 B. II. Long-term liabilities 324,300 1,047,389 B. II. 1. Long-term advances received 324,300 1,047,389 B. III. Short-term liabilities 24,016,599 21,179,736 B. III. 1. Trade payables 375,883 1,988, Liabilities to employees 2,151 1, Liabilities for social security and health insurance Taxes and state subsidies payable 870,630 1,237, Short-term advances received 695, , Estimated payables 8,515,469 12,359, Other payables 13,556,247 4,848,052 C. I. Accruals and deferred income 10,640 11,229 C. I. 1. Accrued expenses Deferred income 10,629 11,225 19

20 Company name: RWE Supply & Trading CZ, a.s. Identification number: Legal form: joint stock company Primary business: gas trade Balance sheet date: 31 December 2015 Date of preparation of the financial statements: 17 February 2016 INCOME STATEMENT (in thousand Czech crowns) 20 Ref. DESCRIPTION Accounting period a b 1 2 II. Sales of production 140,166, ,040,716 II. 1. Sales of own products and services 142,006, ,075, Changes in inventories of finished goods and work in progress (1,840,350) (2,034,507) B. Cost of sales 141,489, ,675,290 B. 1. Raw materials and consumables used 141,351, ,297, Services 137, ,989 + Added value (1,322,932) (634,574) C. Staff costs 27,081 33,299 C. 1. Wages and salaries 20,446 25, Emoluments of board members Social security and health insurance costs 5,750 6, Other social costs D. Taxes and charges E. Depreciation and amortization expense III. Sales of fixed assets and raw materials - 3,570 III. 1. Sales of fixed assets - 3,570 F. Net book value of fixed assets and raw materials sold - 4,592 F. 1. Net book value of fixed assets sold - 4,592 G. Changes in operating provisions and complex prepaid expenses (8,496,175) (1,985,495) IV. Other operating income 256, H. Other operating expenses 41,760 8,023 * Operating result 7,360,568 1,308,901 IX. Gain on revaluation of securities and derivatives 5,331,891 9,147,914 L. Loss on revaluation of securities and derivatives 19,439,952 6,438,695 X. Interest income 59,014 97,821 N. Interest expense XI. Other financial income 6,548,714 3,545,580 O. Other financial expenses 5,963,163 4,409,406 * Financial result (13,463,513) 1,942,739 Q. Tax on profit or loss on ordinary activities (1,467,758) 1,507,823 Q current (115) 240, deferred (1,467,643) 1,267,052 ** Profit or loss on ordinary activities after taxation (4,635,187) 1,743,817 *** Net profit / (loss) for the financial period (4,635,187) 1,743,817 **** Net profit / (loss) before taxation (6,102,945) 3,251,640

21 Statement of changes in shareholders equity Year ended 31 December 2015 (CZK 000) Share capital Reserve fund Capital funds Retained earnings / (Accumulated losses) Total As at 1 January ,240,308 4,055,685 48,503 24,037,985 57,382,481 Reserve fund pay-out - (4,055,685) - - (4,055,685) Dividends paid (24,037,985) (24,037,985) Contribution of land at fair value Net profit for ,743,817 1,743,817 As at 31 December ,240,308-48,519 1,743,817 31,032,644 Dividends paid (1,743,817) (1,743,817) Contribution of land at fair value Net loss for (4,635,187) (4,635,187) As at 31 December ,240,308-48,724 (4,635,187) 24,653,845 21

22 Cash flow statement Year ended 31 December 2015 (CZK 000) Cash flows from operating activities Net profit/(loss) on ordinary activities before tax (6,102,945) 3,251,640 A.1 Adjustments for non-cash movements: A.1.1 Depreciation of fixed assets A.1.2 Changes in provisions and allowances (8,496,175) (1,985,495) A.1.3 (Profit)/loss from disposal of fixed assets - 1,022 A.1.4 Net interest expense/(income) (58,997) (97,346) A.1.5 Change in fair value of financial derivatives 13,460,932 (2,119,610) A* Net cash flow from operating activities before tax and changes in working capital (1,197,185) (949,576) A.2 Working capital changes: A.2.1 Changes in receivables and prepayments and accrued income 2,276,640 32,547,515 A.2.2 Changes in short-term payables, accrued expenses and deferred income (6,511,026) (6,364,625) A.2.3 Changes in inventories 1,840,350 2,926,923 A** Net cash flow from operating activities before tax (3,591,221) 28,160,237 A.3 Interest paid (10) (2,623) A.4 Interest received 69,386 90,001 A.5 Income tax on ordinary activities paid (455,273) (182,827) A*** Net cash flow from operating activities (3,977,118) 28,064, Cash flows from investing activities B.1 Acquisition of fixed assets - (450) B.2 Proceeds from the sale of fixed assets - 3,570 B.3 Loans to related parties, other changes in investments 5,654,467 - B*** Net cash flow from investing activities 5,654,467 3,120 Cash flows from financing activities C.2 Changes in equity: C.2.1 Dividends and reserve fund paid (1,743,817) (28,093,670) C*** Net cash flow from financing activities (1,743,817) (28,093,670) Net decrease in cash and cash equivalents (66,468) (25,762) Cash and cash equivalents as at the beginning of the year 986,278 1,012,039 Cash and cash equivalents as at the end of the year 919, ,278

23 5.2 Notes to Financial Statements 1. General information 1.1. Introductory information about the Company RWE Supply & Trading CZ, a.s. ( the Company ) was incorporated on 18 June 2001 and has its registered office in Prague 10 - Strašnice, Limuzská 12/3135, Czech Republic. The Company s main business activity is trade with natural gas in accordance with the Act No. 458/2000 Coll. on conditions for undertaking the business and for the execution of state administration in the energy sector and on amendments to certain acts. Identification number of the Company is The members of the Board of Directors as at 31 December 2015 and 2014 were as follows: Name Wolfgang Peters Axel Gerhardy Position Chairman Vice-Chairman The members of the Supervisory Board as at 31 December 2015 and 2014 were as follows: Name Andree Stracke Michael Herrmann Christian Harald Ring Position Chairman Vice-Chairman Member The term of office of Vice-Chairman of the Board of Directors Axel Gerhardy ended on 1 July On 23 June 2015, the sole shareholder exercising the rights and powers of the General Meeting reappointed Mr. Gerhardy as Member of the Board of Directors effective as of 2 July On 24 June 2015, the Board of Directors elected Mr. Gerhardy as the Vice-Chairman with the effect as of 2 July The Company is organised as follows: The General Meeting is the supreme body of the Company. The Board of Directors is the body governing the Company s activities and acting on its behalf. The Supervisory Board is the controlling body of the Company. Management of the Company is divided in the three sections: Commodity North, Gas Asset Origination and Gas Portfolio Management. 2. Accounting policies 2.1. Basis of preparation The financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the Czech Republic and have been prepared under the historical cost convention except as disclosed below Inventories Inventories of gas, stored in the underground storages, are treated as finished goods. Acquisition cost of gas includes transport costs. Total inventory of gas in the underground storages is valued based on the actual status of the volume of gas in technical units expressed in financial terms. Gas injected is valued using the average acquisition cost in the month of acquisition and disposals of the natural gas during the course of the year (usage, recalculations due to

24 temperature changes, operating losses) are valued using the average cost of gas inventory in the underground storages, determined as at the last day of the previous month. A provision for impairment is created when the carrying value of inventory is greater than its estimated net realisable amount. Short-term and long-term advances paid for the purchase of natural gas are classified in the Balance Sheet to the row Advances paid for inventory" Receivables Receivables are stated at nominal value less a provision for doubtful amounts. A provision for doubtful amounts is created on the basis of an ageing analysis and individual evaluation of the credit worthiness of the customers. Receivables from related parties have not been provided for Cash and cash equivalents The Company has prepared a Cash flow statement using the indirect method. Cash and cash equivalents include cash in hand, stamps and vouchers and cash in banks, including bank overdraft. Cash equivalents are short-term highly liquid investments that can be exchanged for a predictable amount of cash and no significant changes of value over time are expected. Cash equivalents are, for example, deposits with a maturity of less than 3 months from the date of acquisition and liquid debt securities traded in public markets. 24 The Company uses so-called cash-pooling within the group. A receivable (liability) that arises from cash-pooling is presented in the Cash flow statement as a part of the item Cash and Cash equivalents if it is due within three months after the balance sheet date. Other deposits within the group, outside of Cash-pooling, which are due within three months after the balance sheet date are not presented as a part of the item Cash and cash equivalents Foreign currency translation Transactions denominated in a foreign currency are translated and recorded at the rate of exchange ruling as at the first day of the month. Cash, receivables and liabilities balances denominated in foreign currencies have been translated at the exchange rate published by the Czech National Bank as at the balance sheet date. All exchange gains and losses on cash, receivables and liabilities balances are recorded in the income statement. The Company treats advances paid in foreign currencies for the acquisition of fixed assets or inventories as receivables denominated in foreign currencies and therefore these assets are translated at the exchange rate published by the Czech National Bank as at the balance sheet date Derivative financial instruments Derivative financial instruments including foreign exchange contracts, currency and interest rate swaps and other derivative financial instruments are initially recognised on the balance sheet at cost and subsequently are re-measured at their fair value. Fair values are obtained from quoted market prices and discounted cash flow models as appropriate. All derivatives are presented in other receivables or in other payables when their fair value is positive or negative, respectively. Certain derivatives embedded in other financial instruments are not treated as separate derivatives.

25 Changes in the fair value of derivatives held for trading are included in gain or loss on revaluation of securities and derivatives Revenue recognition The Company recognizes as revenue mainly income from the sale of gas, related services and changes in gas inventories stored in the underground storages. Cost of sales includes mainly the cost of gas purchases, gas transportation and gas storage in the rented underground storages. Sales of services are recognised as at the date the services are rendered and are stated net of discounts and value added tax Provisions The Company recognises provisions relating to probable future obligations or expenditures, when the purpose of the obligations or expenditures is known but the precise amount, or the time when the obligation or expenditure will crystallise, is not known. However, provisions are not created for future operating expenditures or for expenditures directly related to future revenue transactions. The Company recognises a provision for its future income tax payable which is presented net of advances paid for the income tax. If advances paid are higher than the estimated income tax payable the difference is recognised as a short-term receivable Employment benefits Regular contributions are made to the state to fund the national pension plan. The Company also provides contributions to defined contribution plans operated by independent pension funds and capital life insurance. The contribution for pension and life insurance is recognized as an expense Deferred tax 25 Deferred tax is recognised on all temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Deferred tax asset is recognised if it is probable that sufficient future taxable profit will be available against which the asset can be utilised Related parties The Company s related parties are considered to be the following: parties, which directly or indirectly control the Company, their subsidiaries and associates; parties, which have directly or indirectly significant influence on the Company; members of the Company s or parent company s statutory and supervisory boards and management and parties close to such members, including entities in which they have a controlling or significant influence. Material transactions and outstanding balances with related parties are disclosed in Notes 11 and Subsequent events The effects of events, which occurred between the balance sheet date and the date of preparation of the financial statements, are recognised in the financial statements in the case that these events provide further evidence of conditions that existed as at the balance sheet date. Where significant events occur subsequent to the balance sheet date but prior to the preparation of the financial statements, which are indicative of conditions that arose subsequent to the balance sheet date, the effects of these events are disclosed, but are not themselves recognised in the financial statements.

26 3. Inventories No inventory discrepancies were identified during the stock count of inventories for the year ended 31 December 2015 and 31 December The Company created a provision for gas inventory as at 31 December 2015 of CZK 1,059,300,000 (as at 31 December 2014: CZK 657,800,000). Analysis of the change in the provision for inventories: (CZK 000) Opening balance as at 1 January 657,800 - Charge for the year 401, ,800 Closing balance as at 31 December 1,059, , Receivables 26 (CZK 000) 31 December December 2014 Trade receivables - current 3,839,981 2,968,375 - overdue Total trade receivables 3,839,985 2,969,363 Estimated receivables 6,562,628 9,698,464 Other receivables - current 34,740,428 45,098,099 Net book value of short-term receivables 45,143,041 57,765,926 Deferred tax receivable 1,717, ,525 Total long-term receivables 1,717, ,525 Total net book value of receivables 46,860,209 58,015,451 Unsettled receivables have not been secured and none of them are due after more than 5 years. Trade receivables as at 31 December 2015 and 2014 include mainly receivables for gas sales to related parties (Note 12 Related party transactions). Other receivables include mainly intercompany deposits in the amount of CZK 32,135,032,000 as at 31 December 2015 (as at 31 December 2014: CZK 37,789,500,000), receivables arising from cash-pooling from companies within the group in the amount of CZK 913,964,000 (as at 31 December 2014: CZK 983,368,000), receivables from financial derivatives in the amount of CZK 1,439,895,000 (as at 31 December 2014: CZK 6,237,888,000) and short-term advances paid in the amount of CZK 10,131,000 (as at 31 December 2014: CZK 64,084,000). Estimated receivables contain mainly unbilled gas deliveries amounting to CZK 6,560,935,000 as at 31 December 2015 (as at 31 December 2014: CZK 9,367,143,000). For analysis of deferred tax asset, see Note 9 Income tax.

27 5. Equity Authorised and issued share capital 31 December December 2014 Carrying value No. of pieces Carrying value No. of pieces (CZK 000) (CZK 000) Ordinary shares of CZK 800, fully paid 36,550,385 29,240,308 36,550,385 29,240,308 The Company is fully owned by RWE Gas International N.V., incorporated in the Netherlands, and the ultimate holding company is RWE Aktiengesellschaft, incorporated in Germany. The Company is fully governed by the Act on Corporations and used the option not to create a reserve fund. This fact is further enabled by the Articles of Associations of the Company. The sole shareholder approved the financial statements for 2014 and decided about the distribution of profit earned in 2014 of CZK 1,743,817,000 on 23 March Provisions (CZK 000) Income tax provision Other Total Opening balance as at 1 January ,742 11,719,351 11,904,093 Charge for the year 242,687 3,278,288 3,520,975 Decrease in the year (184,742) (5,921,583) (6,106,325) Closing balance as at 31 December ,687 9,076,056 9,318,743 Charge for the year - 12,440 12,440 Decrease in the year (242,687) (8,910,115) (9,152,802) Closing balance as at 31 December , , For an analysis of the current and deferred income taxes, see Note 9 Income tax. Other provisions in the total amount of CZK 178,381,000 contain mainly the provisions for future losses and risks arising from the long-term gas purchase contracts (as at 31 December 2014: other provisions contain mainly the provisions for future losses and risks arising from the long-term gas purchase contracts and expected unfavourable development of market prices in the total amount of CZK 9,076,056,000). 7. Liabilities (CZK 000) 31 December December 2014 Trade payables - current 375,883 1,988,541 Estimated payables 8,515,469 12,359,427 Other payables - current 15,125,247 6,831,768 Total short-term liabilities 24,016,599 21,179,736 Total long-term liabilities 324,300 1,047,389 Total short-term and long-term liabilities 24,340,899 22,227,125 Trade and other payables have not been secured against any assets of the Company and are not due after more than 5 years. Estimated payables contain mainly accrual for unbilled gas deliveries in the amount of CZK 8,371,849,000 as at 31 December 2015 (as at 31 December 2014: CZK 11,997,058,000). The Company does not have any overdue payables related to social or health insurance or any other overdue payables to tax authorities or other state institutions.

28 Other payables contain negative fair value of financial derivatives in amount of CZK 13,556,166,000 as at 31 December 2015 (as at 31 December 2014: CZK 4,847,665,000) see Note 8 Derivative financial instruments, and liabilities from value added tax in the amount of CZK ,000 (as at 31 December 2014: CZK 1,237,057,000) and short-term advances paid in the amount of CZK 695,804,000 (as at 31 December 2014: CZK 745,206,000). Long-term liabilities as at 31 December 2015 represent long-term advances paid in the amount of CZK 324,300,000 (as at 31 December 2014: CZK 1,047,389,000). 8. Derivative financial instruments The fair value of derivatives is presented in Other receivables if positive, or in Other payables if negative. Derivatives can be divided as follows: Forward instruments: 31 December December 2014 Fair value Nominal Fair value Nominal (CZK 000) Positive Negative amount Positive Negative amount Forward rate agreements 150,303 (53,471) 27,524, ,934 (239,015) 18,869,066 Total forward instruments 150,303 (53,471) 27,524, ,934 (239,015) 18,869,066 Swap instruments: 31 December December 2014 Fair value Volume of Fair value (CZK 000) Positive Negative commodity Positive Negative Volume of commodity 28 Fuel oil commodity swap 683,431 (6,897,026) 2,438,632, t 3,223,797 (2,470,355) (169,854) t Gas oil commodity swap 591,454 (6,351,844) 1,725,087, t 2,801,935 (2,097,509) (121,466) t Coal oil commodity swap 14,633 (253,825) 884,991, t 35,762 (40,785) (57,586) t Index commodity swap 74 - (1) GWh 15,459 - (75) GWh Total swap instruments 1,289,592 (13,502,695) 6,076,953 (4,608,649) Nominal amount of forward instruments and volume of commodity swap instruments represent net volume of concluded forward and swap transactions. Changes in fair value of trading derivatives are recorded in the income statement. Gains and losses from realised derivatives transactions: (CZK 000) 31 December December 2014 Gains from currency derivatives 661, ,165 Losses from currency derivatives (659,763) (1,003,852) Gains from commodity derivatives 5,653,446 2,133,399 Losses from commodity derivatives (4,801,968) (2,811,833) Total 853,134 (909,121) Certain derivative transactions, although providing effective economic hedges under the Company's risk management positions, do not qualify for hedge accounting under Czech accounting rules. Therefore, they are presented above as trading derivatives.