A statement of management's responsibility for the preparation and approval of the consolidated financial statements for the year ending 31 December 2013 of

Management of Open Stock Holding Power Company Barki Tojik (hereinafter – “the Company”) and its subsidiaries (hereinafter – “the Group”) is responsible for the preparation of the consolidated financial statements that present fairly the financial position of the Group as at 31 December 2013, and the results of its operations, cash flows and changes in shareholder’s equity for the year then ended, in compliance with International Financial Reporting Standards (“IFRS”).

In preparing the consolidated financial statements, management is responsible for:

• properly selecting and applying accounting policies;
• presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's consolidated financial position and financial performance;
• making an assessment of the Group's ability to continue as a going concern.

Management is also responsible for:

• designing, implementing and maintaining an effective and sound system of internal controls, throughout the Group;
• maintaining adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the consolidated financial position of the Group, and which enable them to ensure that the consolidated financial statements of the Group comply with IFRS;
• maintaining statutory accounting records in compliance with the legislation of the Republic of Tajikistan and IFRS;
• taking such steps as are reasonably available to them to safeguard the assets of the Group; and
• detecting and preventing fraud and other irregularities.

The consolidated financial statements of the Group for the year ended 31 December 2013 were approved by management on 28 July 2014.

On behalf of the Management:

______________________________ ______________________________

Rakhmatzoda R.M. Khasanov B.

Chairman Chief Accountant

28 July 2014 28 July 2014

Dushanbe Dushanbe

Republic of Tajikistan Republic of Tajikistan 

Independent auditors' report

To the Shareholder of Open Stock Holding Power Company Barki Tojik:

We were engaged to audit the accompanying consolidated financial statements of Open Stock Holding Power Company Barki Tojik (“the Company”) and its subsidiaries (“the Group”), which comprise the consolidated statement of financial position as at 31 December 2013, and the consolidated statement of profit and loss and other comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on conducting the audit in accordance with International Standards on Auditing. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for disclaimer of opinion

As at 31 December 2013, property, plant and equipment are carried in the consolidated statement of financial position at 5,050,251 thousand Somoni. In 2010 the Group performed valuation of these assets in accordance with state valuation methodology. As a result of this revaluation the book value of the property, plant and equipment increased by 1,802,319 thousand Somoni. In the absence of an internationally accepted valuation report prepared by independent valuations experts, we were unable to obtain sufficient appropriate audit evidence about the valuation of the property, plant and equipment. Consequently, we were unable to determine whether any adjustments to these amounts were necessary.

Due to the inadequacy of the accounting system and the underlying accounting records, we were unable to satisfy ourselves as to the following items and its cash flows (all amounts are in thousands of Tajik Somoni – TJS):

• Long-term investments of TJS 182,512 as at 31 December 2013;
• Deferred tax assets of TJS 111,034 as at 31 December 2013;
• Inventory of TJS 1,150,853 as at 31 December 2013;
• Trade and other receivables of TJS 453,653 as at 31 December 2013;
• Prepayments of TJS 264,433 as at 31 December 2013;
• Retained earnings of TJS 25,110 as at 31 December 2013;
• Deferred revenue of TJS 1,823,831 as at 31 December 2013;
• Long-term liabilities of TJS 1,048,405 as at 31 December 2013;
• Short-term debt of TJS 1,225,441 as at 31 December 2013;
• Short-term accrued liabilities of TJS 1,442,797 as at 31 December 2013;
• Trade and other payables of TJS 1,137,902 as at 31 December 2013;
• Prepayments received and other accounts payable of 105,652 as at 31 December 2013;
• Revenue of TJS 1,227,977 for the year ended 31 December 2013;
• Cost of sales of TJS 599,635 for the year ended 31 December 2013;
• Selling expenses of TJS 607,347 for the year ended 31 December 2013;
• General and administrative expenses of TJS 350,844 for the year ended 31 December 2013;
• Net foreign exchange loss of TJS 16,154 for the year ended 31 December 2013;
• Other expenses of TJS 25,340 for the year ended 31 December 2013;
• Finance income of TJS 169,544 for the year ended 31 December 2013;
• Finance costs of TJS 408,593 for the year ended 31 December 2013;
• Income tax benefit of TJS 26,842 for the year ended 31 December 2013.

Disclaimer of opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the consolidated financial statements.

28 July 2014

Dushanbe

Republic of Tajikistan

Consolidated statement of financial position

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013

(in thousand Tajik Somoni)

	Notes	31 December 2013		31 December 2012
ASSETS
Non-current assets
Property, plant and equipment	7	5,050,251		4,811,585
Intangible assets	8	213		237
Long-term accounts receivable	9	1,303		49,012
Long-term investments	10	182,512		182,512
Deferred tax assets	23	111,034		69,597
Other long-term assets		18		30
Total non-current assets		5,345,331		5,112,973
Current assets
Inventory	11	1,150,853		818,884
Trade and other receivables	12	453,653		267,772
Prepayments	13	264,433		101,347
Current income tax assets	23	-		2,682
Cash and cash equivalents	14	3,001		9,412
Total current assets		1,871,940		1,200,097
TOTAL ASSETS		7,217,271		6,313,070
EQUITY
Share capital	15	383,836		383,836
Foreign exchange differences from translation of foreign subsidiaries		(9)		(9)
Retained earnings		25,110		608,660
Reserves	16	24,302		24,302
Total equity		433,239		1,016,789
LIABILITIES
Non-current liabilities
Deferred revenue	21	1,823,831		1,803,099
Long-term liabilities	22	1,048,405		1,078,580
Total non-current liabilities		2,872,236		2,881,679
Current liabilities
Short-term debt	17	1,225,441		691,912
Short-term accrued liabilities	18	1,442,797		946,494
Current income tax payable		4		-
Trade and other payables	19	1,137,902		663,863
Prepayments received and other accounts payable	20	105,652		112,333
Total current liabilities		3,911,796		2,414,602
Total liabilities		6,784,032		5,296,281
TOTAL EQUITY AND LIABILITIES		7,217,271		6,313,070

On behalf of the Management:

________________________ ___________________________

Rakhmatzoda R.M.                  Khasanov B.

Chairman                                  Chief Accountant

28 July 2014                               28 July 2014

Dushanbe                                    Dushanbe

Republic of Tajikistan                Republic of Tajikistan

The notes on pages 9-49 form an integral part of these consolidated financial statements.

Consolidated statement of comprehensive income

CONSOILDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

(in thousand Tajik Somoni)

	Notes	Year ended 31 December 2013		Year ended 31 December 2012
Revenue	24	1,227,977		1,099,377
Cost of sales	25	(599,635)		(519,045)
Gross profit		628,342		580,332
Selling expenses	26	(607,347)		(479,645)
General and administrative expenses	27	(350,844)		(161,146)
Foreign exchange (loss)/gain, net		(16,154)		12,907
Other gains and losses	28	(25,340)		(25,264)
Finance income	29	169,544		118,845
Finance costs	29	(408,593)		(346,879)
Loss before tax		(610,392)		(300,850)
Income tax benefit/(expense)	23	26,842		(30,720)
Net loss		(583,550)		(331,570)
Total comprehensive loss		(583,550)		(331,570)

On behalf of the Management:

______________________________ _____________________________

Rakhmatzoda R.M.                                 Khasanov B.

Chairman                                                 Chief Accountant

28 July 2014                                              28 July 2014

Dushanbe                                                   Dushanbe

Republic of Tajikistan                               Republic of Tajikistan

The notes on pages 9-49 form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

(in thousand Tajik Somoni)

			Share capital		Reserves		Retained earnings		Foreign exchange differences from translation of foreign subsidiaries		Total
Balance at 1 January 2012			383,836		24,302		940,230		(9)		1,348,359
Total comprehensive loss for the year			-		-		(331,570)		-		(331,570)
Balance at 31 December 2012			383,836		24,302		608,660		(9)		1,016,789
Total comprehensive loss for the year			-		-		(583,550)		-		(583,550)
Balance at 31 December 2013			383,836		24,302		25,110		(9)		433,239

On behalf of the Management:

______________________________ _____________________________

Rakhmatzoda R.M.                                 Khasanov B.

Chairman                                                 Chief Accountant

28 July 2014                                              28 July 2014

Dushanbe                                                   Dushanbe

Republic of Tajikistan                               Republic of Tajikistan

The notes on pages 9-49 form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2013

(in thousand Tajik Somoni)

	Notes	Year ended 31 December 2013		Year ended 31 December 2012
CASH FLOWS FROM OPERATING ACTIVITY:
Sales proceeds		928,045		820,535
Other income from operations		22,167		28,623
TOTAL CASH INFLOW FROM OPERATING ACTIVITY		950,212		849,158
Cost of sales		(493,105)		(524,478)
Payroll and social tax		(206,168)		(190,661)
Payment for services		(64,799)		(39,790)
Interest payment		(144,564)		(40,227)
Income tax payment		(41,103)		(52,684)
Other taxes payment		(188,792)		(143,930)
Other operating payments		(55,959)		(124,528)
TOTAL CASH OUTFLOW FROM OPERATING ACTIVITY		(1,194,490)		(1,116,298)
CASH OUTFLOW FROM OPERATING ACTIVITY		(244,278)		(267,140)
CASH FLOWS FROM INVESTING ACTIVITY:
Acquisition of property, plant and equipment		(3,691)		(2,106)
TOTAL CASH OUTFLOW FROM INVESTING ACTIVITY		(3,691)		(2,106)
NET CASH OUTFLOW FROM INVESTING ACTIVITY		(3,691)		(2,106)

OPEN STOCK HOLDING POWER COMPANY BARKI TOJIK

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2013

(in thousand Tajik Somoni)

	Notes	Year ended 31 December 2013		Year ended 31 December 2012
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings		554,314		372,180
Repayment of borrowings		(314,239)		(112,898)
NET CASH INFLOW FROM FINANCING ACTIVITY		240,075		259,282
Effect of exchange rate changes on the balance of cash held in foreign currencies		1,483		(149)
Net change in cash and cash equivalents		(6,411)		(10,113)
CASH AND CASH EQUIVALENTS at the beginning of the year	15	9,412		19,525
CASH AND CASH EQUIVALENTS at the end of the year	15	3,001		9,412

On behalf of the Management:

______________________________ _____________________________

Rakhmatzoda R.M.                                      Khasanov B.

Chairman                                                      Chief Accountant

28 July 2014                                                   28 July 2014

Dushanbe                                                        Dushanbe

Republic of Tajikistan                                    Republic of Tajikistan

The notes on pages 9-49 form an integral part of these consolidated financial statements.

1. GENERAL INFORMATION

Open Stock Holding Power Company Barki Tojik (hereinafter the “Company”) was registered in the Ministry of Justice of the Republic of Tajikistan on 3 June 1999. The Company and its subsidiaries (the “Group”) carry out its activity in the Republic of Tajikistan. The Group is a stock company and was established in accordance with the legislation of the Republic of Tajikistan.

Group's principal activity is the generation, transmission and distribution of electricity and heat in the Republic of Tajikistan. The Group also sells electricity to neighboring countries due to its operational needs. Electricity is generated on six hydropower stations, which are the structural units of the Group. Operating activity of the Group is regulated by the Law of the Republic of Tajikistan “On natural monopolies” (hereinafter the “Law”), as the Group is the dominant in the generation and supply of electricity power in the Republic of Tajikistan. In accordance with the Law, tariffs of the Group must be coordinated and agreed with the Agency for regulation of natural monopolies of the Republic of Tajikistan (hereinafter the “Agency”). The main customers are SUE Tajik Aluminum Company, OJSC Azot, Tojikazot, Tojikkimiesanoat, OJSC Pamir Energy Company and the population of the Republic of Tajikistan.

Company’s Head office is located at: Republic of Tajikistan, Dushanbe, I. Somoni ave, 64.

As at 31 December 2013 and 2012, the sole shareholder of the Company is the Government of the Republic of Tajikistan. Ultimate control of the Group is carried out by the Government of the Republic of Tajikistan.

Property of the Group was formed from the assets which were on the books of State Joint-Stock Holding Company Barki Tojik. The Group is the owner of the property transferred to it by the founder, other than the property of legal entities listed as joint-stock companies, state enterprises, organisations and institutions under the management of the Group.

Open Stock Holding Power Company Barki Tojik is the holder of shares of joint-stock companies, granted by the Government of the Republic of Tajikistan, operating in the electricity sector and performs the right of possession, use and disposition of property, businesses and institutions, given for management in accordance with the article 232 of the Civil Code of the Republic of Tajikistan.

The property of the Group includes the following branches and representative offices:

Nurek branch	Nurek hydropower station
Baipaza branch	Baipaza hydropower station
Varzob branch	Cascade and Varzob hydropower stations
Vakhsh branch	Cascade and Vakhsh hydropower stations
Kairakkum branch	Kairakkum hydropower station
Dushanbe branch	Central electric networks
Kayrakkum branch	Leninabad electric networks
Khujand branch	Khujand electric networks
Rasht branch	Rasht electric networks
Kurgan Tube branch	Kurgan Tube city electric networks
Chkalovsk branch	Chkalovsk city electric networks
Representation of OSHPC Barki Tojik in the Russian Federation

The following organisations are under control of the Group:

OJSC Shabakahoi Barkii Istaravshan

OJSC Shabakahoi Barkii Panjakent

OJSC Shabakahoi Barkii Shahri Dushanbe

OJSC Shabakahoi Barkii Shahri Kulob

OJSC Shabakahoi Barkii Kulob

OJSC Shabakahoi Barkii Tursunzoda

OJSC Shabakahoi Barkii Janubi

OJSC Dushanbinskiy Heat Station

OJSC Shabakahoi Barkii Yavon

OJSC Remontno-Mekhanicheskiy Zavod

OJSC Shabakahoi Barkii Janubi

OJSC Shabakahoi Barkii Isfara

OJSC Yavanskaya Heat Station

ОJSC Logistical Utility Tajikenergosnab

The Group has a subsidiary – Limited Liability Company Bark Kimgan. Share of the Group in the share capital of the subsidiary is 100%.

Number of Group’s personnel for 2013 and 2012 in average was 13,009 and 13,328, respectively.

These consolidated financial statements were authorised for issue by the Group’s management on 28 July 2014.

2. CURRENT ECONOMIC ENVIRONMENT

Emerging markets such as Tajikistan are subject to different risks than more developed markets, including economic, political and social, and legal and legislative risks. Laws and regulations affecting businesses in Tajikistan continue to change rapidly, tax and regulatory frameworks are subject to varying interpretations. The future economic direction of Tajikistan is heavily influenced by the fiscal and monetary policies adopted by the government, together with developments in the legal, regulatory, and political environment.

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for revaluation of property, plant and equipment and certain financial instruments. The principal accounting policies applied in preparation of the consolidated financial statements are set out below. These accounting policies were consistently applied in all periods covered in this consolidated financial statements, unless otherwise stated.

These consolidated financial statements have been prepared on the historical cost basis except for the following lines:

• Long term financial liabilities at amortised cost;
• Fixed assets and construction in progress are based on historical cost basis, which includes the revaluations performed based on Decree of the Government of the Republic of Tajikistan based on coefficients and instructions, prepared by the Government of the Republic of Tajikistan, aimed to reflect inflation.

Going concern

These consolidated financial statements have been prepared on the assumption that the Group is a going concern and will continue its operation for the foreseeable future. The management and shareholder have the intention to further develop the Group’s activities in the Republic of Tajikistan. The Group is owned by the Government of the Republic of Tajikistan and generates, distributes and sells electricity in Tajikistan. Electricity remains the key element for the economy of Tajikistan, as well as fundamental for the Government’s social and economical objectives.

Based on above, the Management believes that the going concern assumption is appropriate for the Group due to its sufficient capital and continuing financing from the sole shareholder of the Group.

Functional and presentation currency

The functional currency of each of the Group’s consolidated entities is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and the Group’s presentation currency is national currency of the Republic of Tajikistan Tajik Somoni (“Somoni”).

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries), which are recorded as branches for the purpose of the consolidated financial statements as at 31 December 2013 and 2012.

The subsidiary is consolidated from the date of acquisition, which is the date when control is achieved over the subsidiary, and discontinued from consolidation when the control is transferred. The consolidated financial statements of the subsidiaries is prepared for the same period as for the Company, based on consistently applied accounting policy for all branches of the Company.

Changes in ownership of subsidiaries without loss of control are treated as transactions equity. If the Group transfers the control over the subsidiary the following is reflected:

• discontinues recognition of assets and liabilities of the subsidiary;
• records the fair value of proceeds received in exchange;
• records fair value of outstanding portion of the investment;
• records gains or losses in statement of comprehensive income;
• reclassifies interest of the Company in subsidiaries, recognised in other comprehensive income before to statement of comprehensive income or retained earnings in accordance with particular requirements.

The consolidated financial statements of the subsidiaries is prepared for the same period as the Company, based on consistently applied accounting policy for all branches of the Company.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Significant accounting policies

The significant accounting policies applied by the Group in preparation of the consolidated financial statements are stated below:

Foreign currency transactions

The functional currency of the Company and the Group’s presentation currency is national currency of the Republic of Tajikistan Tajik Somoni (“Somoni”). The Group applies direct method of consolidation, and upon disposal of foreign investment performs the reclassification of gains and losses from translation differences to statement of comprehensive income.

	31December 2013	31 December 2012
Somoni / USD	4.7741	4.7644
Somoni / EUR	6.5772	6.3009
Somoni / Russian Rouble	0.1446	0.1571

Transactions in foreign currency are initially recognised by the companies of the Group in functional currency at exchange rate at the date of transaction.

Monetary assets and liabilities denominated in foreign currency are revalued at spot rate of functional currency effective at the reporting date.

All foreign currency differences are transferred to statement of comprehensive income.

Non-monetary lines at historical cost in foreign currency, are recognised at exchange rate effective at the date of initial transaction. Non-monetary lines at revalued method in foreign currency are recognised at the exchange rate effective at the date of consideration of fair value. Gains and losses arising from non-monetary items are treated same as gains and losses from foreign currency transactions (foreign exchange differences on lines, gains and losses for which are recognised in other comprehensive income and added to other comprehensive income, for lines of gains and losses, which are recorded in gains and losses – in gains and losses).

Assets and liabilities in foreign investments are translated to Somoni at the exchange rate effective at the reporting date, and statement of comprehensive income of such subsidiaries, are recorded at the rate effective on the date of transaction. Translation differences arising from such treatment are recorded in other comprehensive income. Upon disposal of foreign investment the component of other comprehensive income, related to this foreign investment are transferred to consolidated statement of comprehensive income.

Revenue recognition

Revenue is recognised only if inflow of economic benefits to the Group is probable, and if revenue can be reliably measured, despite of the timing of cash proceeds. The revenue is measured at fair value of the consideration received or receivable, in accordance with contractual terms of payments.

Electricity sales

Electricity sales revenue is recognised when customers on post-paid metering are billed for the power consumed. The billing is done for each monthly billing cycle based on the units consumed as read on the customers’ electricity meters and the approved customer tariffs.Electricity sales revenue is recognised in the financial statements net of Valued Added Tax (VAT).

Interest income

Interest income and expense on financial instruments held at amortised cost, and interest bearing financial assets, classified as held-for-sale are recognised based on effective interest rate method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. The interest income is added to finance income in the consolidated statement of comprehensive income.

Taxes

Current income tax

Current tax assets and liabilities for the current period as measured at recoverable from or payable to taxation authorities. The tax rates and tax legislation applied for calculations are the rates and legislation accepted or factually adopted as at reporting date in the countries, where the Group performs its activities and has taxable income.

Deferred taxes

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are recognised for all taxable temporary differences, except for cases when:

• Deferred tax liabilities arising at initial recording of goodwill, asset or liability as a result of transaction other than business combination, and at transaction date does not impact accounting profit nor taxable profit or loss;
• Taxable temporary differences in respect of investments in subsidiaries, associates, as well as interest in joint ventures, and if possible to control distribution by periods related to recoverability of temporary differences, and there is high probability of recovery of temporary difference in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, unused tax incentives and unused tax losses, to the extent of highly probable upcoming profits, against which the recovery of deductible temporary differences, unused tax incentives and unused tax losses will take place, except for:

• Deferred tax asset, related to temporary difference as a result of initial recognition of asset or liability arising from business combinations, which at the date of transaction does not impact accounting nor tax profit or losses;
• Deductible temporary differences as a result of investments in subsidiaries, associated companies, as well as interest in joint venture where the deferred tax assets are recognised to the extend of highly probable upcoming profits, against which the recovery of deductible temporary differences, unused tax incentives and unused tax losses will take place.

The book value of deferred tax assets is reviewed at each reporting date and decreased to the extent of sufficient profits, which will allow to use all or part of the deferred tax assets, are assessed as unlikely. Deferred tax assets not recognised in the statements are reviewed at each reporting date and are recognised to the extent, when there is high probability of upcoming profits, allowing to recover such tax assets.

Deferred tax assets and liabilities are valued at tax rates, which are expected to be applied in the period, when such asset will be recovered or liability settled at tax rates (tax regulation), which were accepted or factually adopted at the reporting date.

Deferred tax, related to the components other than statement of comprehensive income, as also not recorded in statement of comprehensive income. The deferred taxes are recognised in accordance with underlying transactions or in as a component of other comprehensive income, or directly on equity.

Deferred tax assets and deferred tax liabilities are offset only if there are legal right for offset of current income tax assets and liabilities, and deferred taxes are related to the same company and tax authority.

Property, plant and equipment

The equipment is held at revalued amount less accumulated depreciation and/or accumulated loss from impairment, if any. This cost includes cost of replaced spare parts, as well as borrowing costs, in case of long term construction projects, when certain criteria are met. When there is a need for significant component replacement within defined period the Group disposes the replaced component and recognizes new components in accordance with useful life and depreciation. Expenses related to major technical check are included to the cost of the asset, as replaced equipment, when related criteria are met. All other expenses for maintenance are included in the consolidated statement of comprehensive income as incurred.

The buildings are held at revalued amount less accumulated depreciation and impairment losses.

Depreciation is charged at straight line method during the useful life of the asset:

Property, plant and equipment group	Useful life (years)
1. Building	80-100
2. Constructions
- Transmission equipment	50-80
3. Machinery and equipment
- Hydro turbines	50-80
- Electronic equipment	10-50
- Production equipment	10-80
4. Other fixed assets
- Vehicles	5-15
- Office equipment	5-10
- Furniture and appliances	10-15
- Leasehold improvements	5-20
- Land improvements	5-20

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss, and presented in the consolidated statement of comprehensive income for the period, when derecognition took place.

The useful life term and depreciation method are annually reassessed, and adjusted if needed.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised as expenses, in the period when such expenses incurred. Borrowing costs include the payment for interest and other expenses, incurred by the Group in respect of borrowings.

Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost. Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired are recorded at cost less accumulated amortisation and accumulated impairment losses (if any). Internally generated intangible assets, except for development costs included to the cost of an asset, and related expenses included in the consolidated statement of comprehensive income in the period, when incurred.

The useful life of intangible assets can be definite or indefinite.

Intangible assets with definite useful life are amortised during the period of this period and subject for impairment assessment if such indicators exist. The period and amortisation method for all intangible asset with definite useful life are reassessed at least at each reporting date. Changes in estimated useful life or structure of inflow of future benefits inherent to the asset are added to the consolidated financial statements as changes in period and method of amortisation, depending on situation, and disclosed as changes in estimates. The amortisation expenses for intangible assets with definite useful life recognised in the consolidated statement of comprehensive income in the category, which relates to the function of the intangible asset.

Intangible assets with indefinite useful life are not amortised, rather tested separately for impairment on an annual basis.

The useful life term of intangible assets with indefinite useful life is reviewed on an annual basis in order to determine whether it is reasonable to continue classify the asset as intangible asset with indefinite useful life. If it is not acceptable, the change in useful life of an asset is prospectively changed from indefinite to definite.

Gains and losses from disposal of intangible assets are measured as difference from proceeds and book value of the asset and recognised in the consolidated statement of comprehensive income at the date of disposal of use asset.

Patents and licenses

Patents are issued for the period of 10 years by the relevant state body with a right to prolong. License on right for intellectual property issued from 5-10 years, depending on type of license.

Licenses can be prolonged in the end of the term, if the Group will comply with preset conditions. Prolongation can be maid for notional fee or free of charge. Therefore the useful life of these licenses is treated as indefinite.

Financial instruments – initial recognition and subsequent measurement

(а) Financial assets

Initial recognition and measurement

Financial assets within the scope of IAS 39 are classified into the following specified categories: financial assets ‘at fair value through profit or loss' (FVTPL), financial assets and ‘loans and receivables', ‘held-to-maturity' investments, ‘available-for-sale' (AFS). The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets initially recognised at fair value plus, in case of investments not at fair value through profit or loss, the transaction costs.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. Financial assets of the Group includes the cash and short term deposits, trade and other receivables, loans and other amounts receivables and unquoted financial instruments.

Subsequent measurement

Subsequent measurement of financial assets is subject of its classification in a following way:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Amortised cost includes the discounts and premiums at acquisition, as well as commissions or other fees, which are integral part of the effective interest rate method. Amortisation based on effective interest rate method is included in finance income in the consolidated statement of comprehensive income. Expenses related to impairment are recorded in the consolidated statement of comprehensive income as finance cost.

Short-term trade receivables are recoded at cost less bad debt reserve.

Available-for-sale financial assets (AFS financial assets)

Available-for sale financial assets include equity and promissory notes. Equity investments classified as available-for-sale are the investments, are those not classified as held for trading, nor at fair value through profit or loss. Promissory notes within this category are instruments without defined term of sale and can be sold for liquidity purposes as a result of changing market conditions.

Subsequent to initial recognition the financial investments available-for-sale are measured at fair value, and resulting gains and losses are recorded as component of other comprehensive income as reserve for available-for-sale instruments. The instrument is held within this classification until derecognition or impairment adjustment, upon which the accumulated gains and losses from reserve on available-for-sale investments are reclassified to other operating gains and losses of statement of comprehensive income. Interest income on promissory notes available-for-sale are recorded at effective interest rate method and added to the statement of comprehensive income.

The Group has assessed its financial assets, available-for-sale for assumption of ability an intention to sell in the foreseeable future.

Derecognition

Derecognition of financial asset (or if applicable –part of the financial asset or part of the group of financial assets) performed if:

• The rights for cash proceeds and asset matured;
• The Group has transferred its rights for cash proceeds from the asset, or has accepted the liability to perform the payment to the third party in full and without any delays; or if (a) the Group has transferred substantially all risks and rewards from such asset, or (b) Group did not transfer, but also did not retain risks and rewards from such asset, therefore transferred the control over such asset.

If the Group has transferred all rights for cash proceeds from asset, or has concluded an agent agreement, but did not retain all risks and rewards from such asset, as well as did not transfer control over such asset, the new asset is recognised to the extend the Group continues its participation in the asset.

In this case the Group also recognizes related liabilities. The transferred asset and related liabilities are valued based rights and liabilities retained by the Group.

The continuous participation in form of guarantee on asset transferred is recognised at lower of initial book value and maximum possible amount to be claimed from the Group.

Impairment of financial instruments

At each reporting date the Group performs the assessment of indicators of impairment of financial asset or group of financial assets. Financial asset or group of financial assets can be impaired if, and only if, when there is a reliable evidence of impairment as a result of one of number of events taking place subsequent to initial recognition (the “event resulting the loss”), which resulted the impact, which can be reliably measured, on expected future cash flows of the financial asset or group of financial assets. The indicators of impairment can include the fact that debtor or group of debtors are experiencing insolvency issues, and cannot repay the debt or has delays is repayment of interest or principal amount of debt, as well as probability of insolvency and upcoming liquidation process or financial restructuring. Moreover, such indicators include observable evidence, indicating existence of reliably measured decrease in expected cash flows of the financial instrument, in particular, the changes in overdue debts or economic environment, which has certain dependencies with defaults in repayments of debt.

Financial assets recorded at amortised cost

The Group performs the assessment of indicators of impairment financial assets recorded at amortised cost if individually significant or if individually insignificant, than by groups. If the Group identifies the reliable evidence of absence of impairment, despite of the significance, such asset is included in the group of financial assets with similar characteristic of credit risk, and subsequently reviews this group for impairment indicators in aggregate. Assets, individually assessed as impaired are not included in aggregate assessment of the group for impairment.

When there is reliable evidence of incurred losses from impairment, the amount of loss is recognised as a difference of book value and discounted expected future cash flows (without expected future credit losses not yet incurred).

Present value of expected future cash flows are discounted at initial effective interest rate of the financial asset. If the interest rate of borrowing is a floating rate, the discount rate for impairment loss calculation is current effective interest rate.

The book value of the asset decreases through reserve account, and amount of loss added to the consolidated statement of comprehensive income. Accrual of interest income on decreased book value continued based on rate, used for discounting future cash flows for the purpose of assessing losses from impairment. Interest income is included in financial income in the consolidated statement of comprehensive income. Loans along with related provisions are not included in the consolidated statement of financial position if there is not evidence of recoverability of such and all available security was sold or transferred to the Group. If during the subsequent period the amount of calculated losses from impairment increases or decreases as a result of an event taking place after recognition of impairment, the amount of losses recognised increase or decrease by means of reserve account adjustment. If the subsequently the write-off of value of financial asset recovers, the amount of recovery recognised as decrease of finance costs in the consolidated statement of comprehensive income.

Financial investments, available-for-sale

The Group performs the annual assessment for impairment indicators for the investments held-for-sale.

If the investments in equity instruments, classified as available-for-sale, the reliable evidence of impairment would be significant and continuous decrease in fair value of the investment below its initial acquisition cost. The significance is measured in comparison to initial acquisition cost, continuous means the comparison to the period, when decrease below initial acquisition cost took place. When reliable evidence of impairment is identified the amount of comprehensive loss, calculated as difference of book value and current fair value, less any other impairment loss recognised in the statement of comprehensive income, the loss is reclassified from other comprehensive income to the consolidated statement of comprehensive income.

The promissory notes classified as available-for-sale are subject of same impairment criteria applied to financial assets recorded at amortised cost. However the amount of impairment loss recognised is the difference of amortised cost and current fair value, less accumulated impairment loss for this investment, recognised previously in the consolidated statement of comprehensive income.

Accrual of interest income on decreased book value continued based on rate, used for discounting future cash flows for the purpose of assessing losses from impairment. Interest income is included in financial income in the consolidated statement of comprehensive income. If during the subsequent period the fair value of the promissory note will increase and this increase can be reliably tied with event taking place after initial loss recognition in the consolidated statement of comprehensive income, the impairment losses are recovered in profit and loss.

(b) Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit and loss and borrowings. Group classifies the financial liabilities at initial recognition.

Financial liabilities initially recorded at fair value and in case of borrowings and loans, which are recorded at amortised costs its initial recognition includes the transaction costs directly related to issue and acquisition.

Financial liabilities of the Group include the trade and other accounts payable, loans and borrowings.

Subsequent measurement

Subsequent measurement of financial liabilities depends on classification as follows:

Loans and borrowings

Subsequent to initial recognition interest bearing loans and borrowings are measured at amortised cost based on effective interest method. Gains and losses resulting from these instruments included in consolidated statement of comprehensive income at derecognition, as well as amortizing at effective interest rate.

Amortised cost includes the discounts and premiums at acquisition, as well as commissions or other fees, which are integral part of the effective interest rate method. Amortisation based on effective interest rate method is included in finance income in the consolidated statement of comprehensive income.

Derecognition

The financial liabilities in consolidated statement of financial position is derecognised when liability is settled, cancelled or the matured.

If the existing financial liability is substituted by another liability with the same counterparty with substantially different terms, or if existing liability terms are substantially changed, than such change is treated as derecognition of initial instrument and recognition of the instrument, and difference of book value are recorded in consolidated statement of comprehensive income.

(c) Offset of financial instruments

Financial assets and financial liabilities are offset and net amount is presented in the consolidated statement of financial position if, and only if there is existing contractual and legal right to offset these instruments, as well as intention to recognize as net amount, or dispose assets simultaneously with liabilities.

(d) Fair value of financial instruments

Fair value of financial instruments, which are quoted on active marketplace at each reporting date, determined based on market quotes or dealer quotes (quotes for bid for long position and quotes for ask for short position), without transaction costs consideration.

Financial instruments which are not quoted on an active marketplace the fair value is determined based on application of valuation methods. These methods include use of prices recently performed transactions based on market conditions, use of current fair value of similar instruments, analysis of discounted cash flows and other valuation models.

Inventories

Expenses incurred to deliver and bring to the condition ready for use are treated as follows:

Materials and inventories are carried at:

• cost for purchases under FIFO costing method.

Impairment of non-financial assets

The Group performs the assessment of impairment indicators of the assets at each reporting date. If such indicators exist or if there is a requirement to perform impairment test, than Group perform the assessment of recoverability of asset. The recoverable amount of the asset or component, generating cash flows (“CGI”) is higher of fair value of the asset (CGI) less cost to sell and value in use of the asset (CGI). Recoverable amount is determined for separate asset, except for cases, when such asset does not generate cash flows, which dependent on cash flows generated by other assets or group of assets. If the book value of the asset or CGI exceeds its recoverable amount, the asset is impaired and written off to recoverable amount. When estimated value in use future cash flows are discounted at the discount rate before taxation, which reflects the current market estimate of time value of money and risks related to the asset. When determining fair value of the asset less cost to sell recent market deals (if any) are taken into account. If no such information is available, appropriate valuation model is used. These calculations are supported by valuation coefficients, market prices of freely convertible shares of the subsidiaries or other available indicators of the fair value.

If the book value of the asset or CGI exceeds its recoverable amount, the asset is considered as impaired and written down to recoverable amount. Under assessment of value in use the future cash flows are discounted at the rate net of tax, which reflects the present market value of cash flows and risks inherent to the asset. Under assessment of the fair value less cost to sell, the recent market transactions (if were existent) are taken into consideration. If no such transaction took place the relevant valuation model is applied. These computations are supported by estimated coefficients, active market quotes of subsidiaries shares and other available indicators of fair value.

Impairment losses from ongoing activities (including inventory impairment) are included in the consolidated statement of comprehensive income as a component of those expenses, which are related to the function of the asset, except for previously revalued real estate if revaluation was recognised in other comprehensive income. In such cases the impairment loss is deducted from other comprehensive income to the extent the revaluation gain was recognised.

The Group performs assessment of indicators whether indicators of impairment loss still exist or decreased on an annual basis. If such indicator exist the Group assess the recoverable amount of the asset or cash generating component. Previously recorded impairment losses recovered only if the changes in applied estimate of the recoverability of the asset, since most recent impairment loss recorded. The recovery is limited to the book have not exceeding its recoverable amount, as well as not exceeding book value less depreciation, which would be charged if such impairment loss would not be recorded. This recovery of loss is included in the statement of comprehensive income.

Cash and short term deposits

Cash and short term deposits in the consolidated statement of financial position include the cash in banks and petty cash.

Provisions

Provision are recorded if the Group has current liabilities (legal or constructive), as a result of the past events, with a probable outflow economic benefits required to settle liability, and such liability can be reliably measured. If the Group expects to recover all or part of the provisions, e.g. under insurance contracts, the recovery is recorded as a separate asset, but only when such recovery inflow is not doubted. Expenses, related to the provision, are added to the consolidated statement of comprehensive income less recovery.

Retirement benefits and other remunerations

The Group performs payments to Social Fund in accordance with pension scheme of the Republic of Tajikistan. The payments to social fund are fixed. The Group will not have any further legal or constructive liabilities to the Fund in relation to the retirement benefits if Fund will not have sufficient resources to perform payments to employees for services performed in current and previous years.

The Group performs fixed payments to State Social Fund amounting to 25% of salaries of the employees and recorded in the period as incurred. The Group does not have any other pension or other schemes or liabilities to perform pension payments to its employees.

4. CRITICAL ACCOUNTING ESTIMATES AND PROFESSIONAL JUDGEMENTS IN APPLYING ACCOUNTING POLICY

The Group makes estimates and assumptions that affect within the next financial period the amounts of assets and liabilities recognised in consolidated financial statements. Estimates and judgments are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgments, apart from those involving estimations, in the process of applying the accounting policies. Judgments that have the most significant impact on the figures recorded in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amounts of assets and liabilities within the next financial period include:

Significant accounting judgments, estimates and assumptions

The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions at the end of the reporting period that affect the amounts of revenue, costs, assets and liabilities, presented in statements. However, uncertainty of these assumptions and estimates could result outcomes, that could require in future material adjustments of book value of asset or liability in respect of which such assumptions and estimates are made.

Judgments

In the process of applying the Group’s accounting policy, management has used the following judgments, which have the most significant effect on the amounts recognised in the consolidated financial statements.

Estimates and assumptions

The key assumptions about the future and other key sources of estimation of uncertainty at the reporting date, which may cause significant adjustments of the carrying value of assets and liabilities during the next financial year, are discussed below. Assumptions and estimates are based on the Group’s source data, which it had at the time of preparation of the consolidated financial statements. However, current circumstances and assumptions regarding the future are subject to change due to market changes or circumstances beyond the control of the Group. Such changes are reflected in the assumptions as they occur.

Impairment of non-financial assets

Impairment occurs when the carrying amount of an asset or the cash-generating unit, exceeds its recoverable amount, which is the higher of fair value less costs to sell and value in use. The fair value less costs to sell is based on available information on commercial deals of sales of similar assets or observable market prices less incremental costs incurred in connection with the disposal of an asset. The calculation of value in use is based on a discounted cash flow model. Cash flows are taken from the budget for the next five years and do not include restructuring activity, in conducting of which the Group does not have obligations or significant investment in future, which will improve the asset tested for impairment of cash generating unit. The recoverable amount is most sensitive to the discount rate used in the discounted cash flow model, and also to the expected cash inflows and the growth rate, used for extrapolation. More information about the key assumptions used to determine the recoverable amount of the various units, generating cash, including sensitivity analysis, is provided in Note 31.

The fair value of financial statements

In cases when the fair value of financial instruments and financial liabilities recorded in the consolidated statement of financial position can not be derived from active markets, they are determined using valuation techniques, including discounted cash flow model. As a source data for these models is used information from observable markets, but in those cases where this is not feasible, a certain proportion of judgment is required to determine fair value. The judgments include considerations of such data as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the fair value of financial instruments, recognised in consolidated financial statements.

Useful lives of property, plant and equipment

The Group reviews the estimated useful lives of property and equipment at the end of each annual reporting period. During the financial year, Management of the Group did not change useful life of property, plant and equipment.

Market rate of borrowings received

As described in Note 22, the Group uses valuation techniques that include inputs that are not based on observable market date to estimate the fair value of long-term borrowings. Borrowings are discounted at 24% annual rate, which is considered the market rate by the Management of the Group.

5. NEW STANDARDS AND CHANGES IN EXISTING STANDARDS AND INTERPRETATIONS

Amendments to IFRSs affecting amounts reported in the financial statements

In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in these financial statements.

Standards affecting the financial statements

IFRS 13 Fair Value Measurement. The Company has applied IFRS 13 for the first time in the current year. IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement requirements of IFRS 13 apply to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under IFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS 13 includes extensive disclosure requirements.

IFRS 13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these transitional provisions, the Company has not made any new disclosures required by IFRS 13 for the 2012 comparative period (please see Notes 6, 7 and 28 for the 2013 disclosures). Other than the additional disclosures, the application of IFRS 13 has not had any material impact on the amounts recognised in the financial statements.

New and revised IFRSs in issue but not yet effective

The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective:

• IFRS 9 Financial Instruments
• Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosures²
• Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities¹
• Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities¹
• Amendments to IAS 36 Impairment of Assets¹
• Amendments to IAS 39 Financial Instruments: Recognition and Measurement¹
• Amendments to IFRIC 21 Levies¹

¹ Effective for annual periods beginning on or after 1 January 2014, with earlier application permitted.

² Effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities. The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realisation and settlement’.

The management of the Company do not anticipate that the application of these amendments to IAS 32 will have a significant impact on the Company's financial statements as the Company does not have any financial assets and financial liabilities that qualify for offset.

6. RELATED PARTY TRANSACTIONS

The parties are considered as related if one party can control the other party, under common control or can exercise significant influence over decision making process in relation to its operations or exercise joint control. Determining whether parties are related includes the assessment of relations of parties, and not only legal form. The information on the Company and ultimate shareholder of the Group are disclosed in Note 1.

For the purpose of these financial statements the Management of the Group and Group itself are related parties.

Remuneration paid to chairman and deputy chairmen for services as executive managers includes the salaries in accordance with staff schedule and bonuses for performance in accordance with Bonus Regulation. The remuneration to Management of the Group is performed based on time-bonus system.

For the year ended 31 December 2013 and 2012, remuneration to key management is presented as follows:

	For the year ended 31 December 2013	For the year ended 31December 2012
Salaries and bonuses	192,245	377,222
Social fund payments	48,061	94,305
Total	240,306	471,527

Transactions with state entities

The disclosure exemptions introduced in IAS 24 (as revised in 2010) were applied as the Group a government-related entity. Therefore some government related parties, which previously met definition of related parties, were excluded from the scope of the Standard.

7. PROPERTY, PLANT AND EQUIPMENT

Changes of book value of property, plant and equipment is presentes below:

	Building and construction		Machinery and equipment		Other fixed assets		Construction in progress		Total
INITIAL COST
As at 31 December 2011	1,854,075		1,549,759		162,456		2,614,157		6,180,447
Additions	3,154		16,414		4,235		300,196		323,999
Internal transfers	561,426		1,000,235		1,009		(1,562,670)		-
Disposals	(1,718)		(4,753)		(2,796)		(36,640)		(45,907)
As at 31 December 2012	2,416,937		2,561,655		164,904		1,315,043		6,458,539
Additions	-		46,415		11,378		394,480		452,273
Internal transfers	37,477		148,522		3,855		(189,854)		-
Disposals	(1,209)		(41,452)		(3,240)		-		(45,901)
As at 31 December 2013	2,453,205		2,715,140		176,897		1,519,669		6,864,911
ACCUMULATED DEPRECIATION
As at 31 December 2011	859,398		608,677		75,689		-		1,543,764
Depreciation for year	32,656		61,865		12,704		-		107,225
Disposals	(1,962)		(1,863)		(210)		-		(4,035)
As at 31 December 2012	890,092		668,679		88,183		-		1,646,954
Depreciation for year	57,611		107,313		15,145		-		180,069
Disposals	(1,129)		(5,216)		(6,018)		-		(12,363)
As at 31 December 2013	946,574		770,776		97,310		-		1,814,660
NET BOOK VALUE
As at 31 December 2013	1,506,631		1,944,364		79,587		1,519,669		5,050,251
As at 31 December 2012	1,526,845		1,892,976		76,721		1,315,043		4,811,585

Plant, property and equipment and construction in progress are not insured.

The Group monitors the use of its assets, but as the sole shareholder of the Groups is the Government of the Republic of Tajikistan, Group can not independently dispose fixed assets without the permission of the State Committee on Investments and State Property Management of the Republic of Tajikistan.

In-kind contribution to the Group included assets in form of power electrical equipment and electricity transmission devices, injected by the Government of the Republic of Tajikistan.

The Group borrows funds specifically for acquisition of assets that meet certain requirements and determines the amount of borrowing costs eligible for capitalisation as the sum of the actual costs incurred on these loans during the period. During 2013 Group has capitalised 205,719 thousand Somoni to the cost of constructed assets.

8. INTANGIBLE ASSETS

	Intangible assets
INITIAL COST
As at 31 December 2011	320
Additions	3
As at 31 December 2012	323
Additions	11
As at 31 December 2013	334
ACCUMULATED AMORTISATION
As at 31 December 2011	53
Additions	33
As at 31 December 2012	86
Additions	35
As at 31 December 2013	121
NET BOOK VALUE
Net book value as at 31 December 2013	213
Net book value as at 31 December 2012	237

9. LONG-TERM ACCOUNTS RECEIVABLE

	31 December 2013		31 December 2012
Accounts receivable	1,303		49,012
Total	1,303		49,012

As at 31 December 2013 and 2012, other long-term receivables include advances paid for construction of production facilities and equipment supply.

10. LONG-TERM INVESTMENTS

	31 December 2013		31 December 2012
Investment in Sangtuda-2	150,796		150,796
Investment in Roghun HPS	31,603		31,603
Others	113		113
Total	182,512		182,512

In 2006, the Group has signed agreement with OJSC Sangob on financing of the construction of Sangtuda HPS in the amount of 40,000 thousand USD. In accordance with the agreement after 12 years of use, the Hydropower Plant would be transferred to the Group. As at 31 December 2012, the Group has fully paid obligations under the agreement.

In 2010, the Group acquired the shares of OJSC Roghun HPS amounting to 23,700 thousand Somoni.

11. INVENTORY

	31 December 2013		31 December 2012
Materials and disposables	851,217		632,026
Spare parts	141,488		102,822
Oil products	40,055		65,690
Goods	2,040		387
Construction materials	1,945		1,030
Supplies and other	114,684		17,410
	1,151,429		819,365
Less: Provision for obsolete inventory	(576)		(481)
Total	1,150,853		818,884

The table below shows the change in provision for obsolete inventory:

	Year ended 31 December 2013		Year ended 31 December 2012
At the beginning of the year	481		509
Provision	95		-
Inventory written off	-		(28)
At the end of the year	576		481

12. TRADE AND OTHER RECEIVABLES

	31 December 2013	31 December 2012
Accounts receivable for electricity (national currency)	1,113,714	806,196
Accounts receivable for electricity (foreign currency)	21,914	-
Taxes recoverable	13,645	2,141
Accounts receivable for goods and services	8,683	20,875
Accounts receivable for heat	7,146	6,785
Advances to employees	946	682
Other receivables	9,304	11,663
	1,175,352	848,342
Less: Provision for bad debts	(704,187)	(578,814)
Less: Provision for impairment	(17,512)	(1,756)
Total	453,653	267,772

The table below shows the change in provision for bad debt reserve on trade and other receivables:

	Year ended 31 December 2013		Year ended 31 December 2012
At the beginning of the year	578,814		487,779
Changes in estimates in the allowance for impairment during the year (Note 26)	125,875		94,764
Amounts written off	(502)		(3,729)
At the end of the year	704,187		578,814

The table below shows the change in provision for impairement on trade and other receivables:

	Year ended 31 December 2013	Year ended 31 December 2012
At the beginning of the year	1,756	3,101
Changes in estimates in the impairment during the year (Note 26)	15,756	(1,345)
At the end of the year	17,512	1,756

As at 31 Decmebr 2013 and 2012, ageing analysis of trade receivables is as follows:

Year	Total	Not overdue	Past due but not impaired	Overdue and impaired
			<30 days	30-90 days	90-120 days	120-360 days	>360 days
31 December 2013	1,175,352	299,342	78,713	112,074	154,633	248,245	282,345
31 December 2012	848,342	187,446	-	48,075	72,145	90,950	449,726

13. PREPAYMENTS

	31 December 2013	31 December 2012
Goods paid in advance	208,567	51,393
Services paid in advance in national currency	20,783	47,260
Other advance payments	35,083	18,662
	264,433	117,315
Less: Impairment reserve	-	(15,968)
Total	264,433	101,347

The table below shows the change in provision for impairement on prepayments:

	Year ended 31 December 2013	Year ended 31 December 2012
At the beginning of the year	15,968	10,810
Changes in estimates in the impairment during the year	-	5,158
Written off against provision	(15,968)	-
At the end of the year	-	15,968

14. CASH AND CASH EQUIVALENTS

	31 December 2013	31 December 2012
Cash at bank in national currency	1,916	8,101
Cash on hand in national currency	812	674
Cash at bank in foreign currency in local banks	263	602
Cash in transit	9	34
Restricted cash	1	1
Total	3,001	9,412

15. EQUITY

As at 31 December 2013 and 2012, announced, issued and paid capital of the Group amounted to 383,836 thousand Somoni and 383,836 thousand Somoni, respectively.

In 2013 and 2012, the Group has not announced any dividends.

16. RESERVES

As at 31 December 2013 and 2012, the reserve, formed of retained earnings based on decision of the sole shareholder Group, amounted to 24,302 thousand Somoni,

17. SHORT-TERM DEBT

Short-term debt is as follows:

	31 December 2013	31 December 2012
Current portion of long-term debt in foreign currency (Note 22)	600,855	295,937
Bank loan from Orienbank in national currency	588,350	347,404
Loans from the Ministry of Finance of the Republic of Tajikistan in foreign currency	27,928	27,872
Loans from the Ministry of Finance of the Republic of Tajikistan in national currency	4,155	16,555
Other short-term debts	4,153	4,144
Total	1,225,441	691,912

Current portion of long-term debt is allocated in accordance with repayment schedule of principal on loans (Note 31).

18. SHORT-TERM ACCRUED LIABILITIES

Short-term accrued liabilities are as follows:

	31 December 2013	31 December 2012
Interest payable	527,963	411,561
Accrued financial sanctions	425,451	276,395
VAT payable	276,866	132,249
Road users tax payable	73,501	43,980
Payroll payable	59,016	22,269
Royalty tax	30,550	27,410
Social tax payable	17,722	5,845
Unused vacation reserve	11,889	11,232
Personal income tax payable	7,871	3,076
Taxes, other than income tax	5,698	7,942
Other current liabilities	3,682	2,985
Other accrued expenses	2,588	1,550
Total	1,442,797	946,494

19. TRADE AND OTHER ACCOUNTS PAYABLE

Trade and other accounts payable are as follows:

	31 December 2013	31 December 2012
Accounts payable for goods and services	1,123,225	627,717
Accounts payable for property, plant and equipment	14,677	36,146
Total	1,137,902	663,863

Below is information on the largest creditors:

	31 December 2013	31 December 2012
Sangtuda-1	427,187	320,180
Sangtuda-2	133,075	50,046
Nokili Talco, LLC	30,289	3,230
Mehrdodi Dilshod LLC	15,538	-
Promsnabservice	11,095	-
Talco Management (Shokhon, LLC)	10,806	4,584
Somontaminot	7,333	-
Ben, LLC	6,713	3,648
Super Oil, LLC	5,404	5,371
Uzbekenergo (Uzbekistan)	4,980	1,845
Kyrgyzstan NEK	3,913	495
Paikom, LLC	3,646	4,200
OJSC Somon Khatlon	3,276	3,276
OJSC Somon Sanoat	2,895	-
Sughd Inter Tour, LLC	2,511	4,095
Electric stations (Kazakhstan)	2,233	2,228
Garmofar Union, LLC	1,561	3,103
Sament Management	1,014	-
Bark, LLC	600	3,042
Katari Dier, LLC	283	7,888
Mehrona 2010, LLC	53	3,577
Torus 2011	16	10,170
JSC Splibau	-	18,534
Firuz Ltd., LLC	-	10,698
Nuri Osmon, LLC	-	7,492
Safiri Rushd, LLC	-	5,809
Maryam, LLC	-	4,924
Paikom, LLC	-	4,200
Ningbao Internau	-	3,671
Regar Cabel	-	3,573
Tekhnologiyai ma’danshinosi va kuhkori, LLC	-	3,532
CJSC Hasan & Co	-	3,299
Shokhon, LLC	-	3,266
Factory Electrotekhmash	-	3,085
KEGOC (Kazakhstan)	-	2,430
Tojiktsement, LLC	-	1,567
Senefit firm Ltd.	-	1,479
Fortes group	-	1,244
Elto Somon-Tajhizot	-	1,234
Tajikcabel OJSC	-	1,106
Ukz Expert, LLC	-	1,063
Pomir Osiyo, LLC	-	670
Other	463,481	150,009
Total	1,137,902	663,863

20. PREPAYMENTS RECEIVED AND OTHER ACCOUNTS PAYABLE

Prepayments received and other accounts payable are as follows:

	31 December 2013	31 December 2012
Prepayments received for electricity in national currency	35,227	22,810
Payables under construction agreements	-	1,023
Other prepayments received	1,135	382
Other accounts payable	69,290	88,118
Total	105,652	112,333

21. DEFERRED REVENUE

Deferred revenue is as follows:

	31 December 2013	31 December 2012
Deferred income derived from government grants at interest rate below the market rates	1,662,232	1,685,342
Deferred income from grants	142,438	98,587
Other deferred revenue	19,161	19,170
Total	1,823,831	1,803,099

Deferred income from grants and other deferred revenue in the form of special-purpose financing, is gratuitous assets received from the government.

Deferred income derived from government grants at interest rate below the market rates is as follows:

	31 December 2013	31 December 2012
EximBank 06015	549,800	632,479
EximBank 06015-06016	145,041	156,642
EximBank 06016	116,381	133,708
EximBank 2010 (024)	130,874	133,975
Construction of the unified electric system of the Northern Tajikistan	98,237	100,692
ADB-1817	75,977	91,193
Regional project on electricity transmission 0213 TAJ	61,339	5,280
ADB -2303	54,021	58,633
KFW	55,268	50,666
IDB 0030	40,441	40,355
ADB 0124	91,705	37,973
Grant №H566 TJ	34,922	36,474
IDB -011-029-031	24,883	31,200
IDB -0022	27,196	26,418
Kuweit fund	21,980	25,102
KFW	25,879	24,479
Credit №4093 TJ & Grant №H178 TJ	21,107	23,944
Swiss Government	19,594	22,381
OFID -1141Р	18,526	20,833
ADB -1912	13,939	15,093
Reconstruction of substation Regar 500 Kwh	11,603	-
Grant №H372 TJ	9,595	10,375
PIU	7,941	925
Swiss Government	5,561	5,951
State Property Fund subloan agreement	422	571
Total	1,662,232	1,685,342

Other deferred revenue and deferred income from grants includes:

	31 December 2013	31 December 2012
Sangtuda-2	71,448	64,313
PIU South-North	19,000	19,000
Tutak HPS	8,000	7,000
Kukhiston HPS	5,582	5,582
Shahrinav	3,568	2,068
TajHPS	3,486	3,486
CHPS	3,412	3,412
Kukhiston-1HPS	3,410	3,410
Lakhshi Jirgatol	2,988	487
Rehabilitation of lines in Matchoh	2,800	1,800
Pushti bog HPS	1,491	491
OJSC TGEM addendum#3 dated 02.05.09	1,177	1,177
Eastern boiler	971	971
Tajikenergoproject Agreement#7а dated 01.03.2008	947	947
Sokhtmon, LLC Subcontract agreement #2 dated 02.05.2009	450	450
Shifobakhsh, LLC Subcontract agreement #1 dated 02.05.2009	300	300
Isfara HPS	160	160
Parvoz	139	139
Muhandis, LLC	52	52
Mekhcalon #1 Agreement dated 19.03.2008	43	43
Grant IDA	-	2,469
Other	32,175	-
Total	161,599	117,757

22. LONG-TERM LIABILITIES

Long-term liabilities are as follows:

	31 December 2013	31 December 2012
Loans in the foreign currency	2,698,492	2,745,692
Loans in the national currency	840	1,080
Discount on loans	(1,822,046)	(1,838,192)
Restructured loan	170,000	170,000
Other long-term liabilities	1,119	-
Total	1,048,405	1,078,580

As at 31 December 2013, loans include:

Name	Currency	Initial amount		Including		Discount
		In currency	In somoni	Long-term portion	Current portion	In Somoni
ADB – 1817	US Dollar	26,576	196,051	107,828	88,223	86,485
IDB - 011-029-031	Euro (Islamic Dinar)	10,563	77,925	58,444	19,481	28,151
Swiss Government	US Dollar	8,862	42,309	30,674	11,635	21,138
ADB - 2303	US Dollar	12,314	90,938	77,212	13,626	58,899
IDB - 0030	US Dollar	13,980	66,741	56,730	10,011	41,224
OFID - 1141Р	US Dollar	7,907	37,747	30,198	7,549	20,486
Kuweit fund	US Dollar (Kuweit Dinar)	12,718	60,716	45,524	15,192	28,706
EximBank 06015	US Dollar	267,219	1,275,732	978,061	297,671	638,387
EximBank 06016	US Dollar	55,228	263,662	202,141	61,521	133,608
EximBank 06015-06016	US Dollar	51,000	243,479	227,247	16,232	155,841
EximBank 2010 (024)	US Dollar	35,055	167,016	167,356	-	131,147
KFW Grant	ЕВРО	16,916	111,261	105,341	5,920	58,887
KFW Grant	ЕВРО	6,578	43,268	37,513	5,755	27,556
ADB - 0124	US Dollar	30,650	146,326	133,252	13,074	91,967
IDB - 0022	US Dollar	11,150	53,233	40,559	12,675	28,130
ADB - 1912	US Dollar	3,062	22,589	14,118	8,471	13,970
Regional project on electricity transmission 0213 TAJ	US Dollar	18,125	86,529	86,529	-	61,349
Construction of the unified electric system of the Northern Tajikistan	US Dollar	26,464	126,341	126,341	-	98,442
Reconstruction of Regar substation	US Dollar	3,689	17,611	17,611	120	11,603
IDA Grant №Н566	US Dollar	15,353	73,299	73,299	-	37,197
SECO Grant	US Dollar	2,323	11,092	9,706	1,387	5,877
IDA Grant №Н372	US Dollar	4,003	19,111	17,837	1,274	10,468
IDA Loan №4093, №178	US Dollar	11,183	53,391	42,713	10,678	24,165
PIU	US Dollar	2,568	12,258	12,258	-	7,942
State Property Fund subloan	Somoni	1,200	1,200	840	360	421
Total		654,686	3,299,825	2,699,332	600,855	1,822,046

As at 31 December 2012, loans include:

Name	Currency	Initial amount		Including		Discount
		In currency	In somoni	Long-term portion	Current portion	In Somoni
ADB – 1817	US Dollar	26,576	194,961	141,347	53,614	101,495
IDB - 011-029-031	Euro (Islamic Dinar)	10,563	77,493	67,806	9,687	34,398
Swiss Government	US Dollar	8,862	42,223	16,889	25,334	23,876
ADB - 2303	US Dollar	12,314	90,333	83,558	6,775	63,382
IDB - 0030	US Dollar	12,566	59,872	53,211	6,661	41,054
OFID - 1141Р	US Dollar	7,907	37,670	33,903	3,767	22,746
Kuwait fund	US Dollar (Kuwait Dinar)	12,718	60,592	51,503	9,089	31,763
EximBank 06015	US Dollar	267,219	1,273,140	1,145,826	127,314	719,601
EximBank 06016	US Dollar	55,228	263,127	228,043	35,084	150,629
EximBank 06015-06016	US Dollar	51,000	242,984	242,984	-	167,102
EximBank 2010 (024)	US Dollar	35,055	167,016	167,016	-	133,975
KFW Grant	ЕВРО	14,814	93,344	93,344	-	52,005
KFW Grant	ЕВРО	5,761	36,300	32,992	3,308	25,058
ADB - 0124	US Dollar	11,641	55,463	55,463	-	38,158
IDB - 0022	US Dollar	9,798	46,683	39,031	7,652	27,297
ADB - 1912	US Dollar	3,062	22,463	19,007	3,456	15,093
Regional project on electricity transmission 0213 TAJ	US Dollar	1,527	7,276	7,276	-	5,280
Construction of the unified electric system of the Northern Tajikistan	US Dollar	26,464	126,084	126,084	-	100,692
IDA Grant №Н566	US Dollar	12,526	59,678	59,678	-	38,670
SECO Grant	US Dollar	2,316	11,069	10,544	525	6,254
IDA Grant №Н372	US Dollar	4,003	19,073	19,073	-	11,225
IDA Loan №4093, №178	US Dollar	11,183	53,282	49,730	3,552	26,947
PIU	US Dollar	290	1,382	1,382	-	924
State Property Fund subloan	Somoni	1,201	1,201	1,082	119	568
Total		604,594	3,042,709	2,746,772	295,937	1,838,192

Loan agreements are presented in the following table:

Loan	Lender	Purpose of the loan	Origination date	Maturity date	Loan amount under the agreement	Interest rate
2010 (024- 029 BT)	EximBank	Construction of high-tension transmission line 220 kilowatt «Khujand-Ayni»	16 December 2010	21 September 2036	35 055 thousand US Dollars	3%
1141Р	OFID	For expansion of cooperation in energy sector between Tajikistan and Afghanistan	6 September 2007	15 March 2027	8500 thousand US Dollars	1%
0030.	Islamic Development Bank	For expansion of cooperation in energy sector between Tajikistan and Afghanistan	31 October 2007	30 November 2031	14 067 thousand US Dollars	3%
0124- TAJ (SF)	Asian Development Bank	Project on reconstruction of ОРУ-500 kilowatt on Nurek HPP	26 December 2008	15 October 2033	54,770 thousand US Dollars	5%
No number	KfW	For change of transmittal equipment 220 kilowatt on Nurek HPP	25 July 2008	1 November 2033	18,000 thousand Euro	8%
Grant №566TJ	International Development Association	Emergency Energy Recovery Assistance Project	16 July 2010	15 September 2030	9,900 thousand SDR	6%
Grant №H372 TJ)	International Development Association	Emergency increasing of volume and solidity of import of electricity especially in winter period	30 October 2008	15 September 2028	4,342 thousand US Dollars	6%
Credit №4093 TJ	International Development Association	Energy Loss Reduction Project	6 December 2005	15 June 2026	11,183 thousand US Dollars	6%
06016.	EximBank	For construction of power grid 220 кВ «Lolazor-Khatlon»	19 April 2006	21 February 2028	55,228 thousand US Dollars	3%
06015.	EximBank	For construction of power grid 500 кВ «ug-Sever»	19 April 2006	21 February 2028	267,219 thousand US Dollars	2%
665	Kuweit fund	Reconstruction of power grid of Dushanbe city	24 June 2003	15 November 2030	3,600 thousand Kuweit Dinars	0%
IDB -0022	Islamic Development Bank	Construction of small HPPs	18 April 2004	30 June 2031	6,623 thousand Islamic Dinars	3,5%
IDB -011- 029-031	Islamic Development Bank	Solid power supply in rural regions of Tajikistan	29 January 2001	31 December 2021	7,000 thousand Islamic dinars	5%
Swiss Government	Swiss Government	For financing of Swiss Subproject on energy loss reduction	8 September 2003	1 August 2017	8,862 thousand US Dollars	2%
2303	Asian Development Bank	For construction of intersystem power grid	22 February 2007	1 December 2031	8,500 thousand US Dollars	Libor+ 0,5%
1817	Asian Development Bank	Power grid rehabilitation project	26 February 2001	15 December 2025	39,947 thousand US Dollars	1,5%
06015-06016	EximBank	Additional construction of high tension transmission line 500/220 кВ Юг-Север, Lolazor-Khatlon	15 May 2009	21 August 2028	51,000 thousand US Dollars	5%
1912-TAJ (SF)	Asian Development Bank	Emergency project on stabilisation of Baipaza landslide	20 October 2003	1 December 2033	5,320 thousand US Dollars	2,5%
0213-TAJ -28 БТ	Asian Development Bank	Regional project on electricity transmission	23 November 2010	15 September 2036	112,500 thousand US Dollars	5%
KFW-034ВТ	KFW	Construction of distributing facility of 220кВ on Nurek HPS	28 June 2011	30 May 2032	7,000 thousand US Dollars	3%
2011 (19) TOTAL № (170)-030 БТ	EximBank	Constrcution of united electricity system in Northern Tajikistan	20 July 2011	21 March 2031	26,464 thousand US Dollars	3%
Swiss Government	International Development Association	Electricity Loss Reduction Project	29 June 2007	30 June 2012	6,600 thousand US Dollars	6%
Grant №TF096573-035 BT	Swiss trust fund	Electricity Loss Reduction Project	20 December 2011	15 September 2031	3,150 thousand US Dollars	6%
266-025	Exim Bank	Reconstruction of Regar substation	31 July 2013	31 July 2033	35,043 thousand US Dollars	6%
n/a	EBRD	PIU	n/a	n/a	158 thousand US Dollars	n/a
41538	EBRD	PIU	n/a	05 April 2026	10,150 thousand US Dollars	Libor +1%

23. INCOME TAX

As at 31 December 2012 and 2011, income tax assets and liabilities of the Group included:

	31 December 2013	31 December 2012
Income tax assets:
Deferred income tax assets	111,034	69,597
Current income tax assets	-	2,682
Total income tax assets	111,034	72,279
Incometaxliabilities:
Current income tax liabilities	4	-
Total income tax liabilities	4	-

The Group measures and records its current income tax payable and its tax bases in its assets and liabilities in accordance with the tax regulations of the Republic of Tajikistan where the Group operates, which may differ from IFRS.

The Group is subject to certain permanent tax differences due to the non-tax deductibility of certain expenses and certain income being treated as non-taxable for tax purposes.

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Temporary differences as at 31 December 2013 and 2012 relate mostly to different methods/timing of income and expense recognition as well as to temporary differences generated by tax–book bases’ differences for certain assets.

The tax rate used for the reconciliations below is the corporate tax rate of 15% payable by corporate entities in the Republic of Tajikistan on taxable profits (as defined) under tax law in that jurisdiction.

Deferred tax assets as at 31 December 2013 are as follows:

	IFRS	Tax accounting	Difference
Property, plant and equipment	5,050,251	5,080,089	(29,838)
Inventory	1,150,853	1,151,429	(576)
Trade and other receivables	453,653	1,175,352	(721,699)
Short-term accrued liabilities	1,442,797	1,430,908	11,889
	8,097,554	8,837,778
Temporary difference			(740,224)
Tax rate			15%
Deferred tax assets at the end of the year			(111,034)

Deferred tax assets as at 31 December 2012 are as follows:

	IFRS	Tax accounting	Difference
Property, plant and equipment	4,811,585	4,841,619	(30,034)
Inventory	818,884	819,365	(481)
Trade and other receivables	267,772	865,318	(597,546)
Short-term accrued liabilities	946,494	935,262	11,232
Trade and other payables	663,863	511,013	152,850
	7,557,610	8,021,589
Temporary difference			(463,979)
Tax rate			15%
Deferred tax assets at the end of the year			(69,597)

A reconciliation of income tax benefit as applicable to loss before income tax at the statutory income tax rate to income tax expense was as follows for the years ended 31 December 2013 and 2012:

	Year ended 31 December 2013	Year ended 31 December 2012
Current income tax expense	14,595	13,444
Deferred income tax (benefit)/expense	(41,437)	17,276
Incometax(benefit) /expenses	(26,842)	30,720
Loss before income tax	(605,576)	(300,850)
Statutory tax rate	15%	15%
Income tax expense at the statutory tax rate	(90,836)	(45,128)
Effect of tax losses	61,798	74,383
Effect of permanent tax differences	2,196	1,465
Income tax (benefit) /expenses	(26,842)	30,720

Deferred income tax assets	Year ended 31 December 2013	Year ended 31 December 2012
As at January 1	69,597	86,873
Deferred income tax benefit	41,437	(17,276)
As at December 31	111,034	69,597

24. REVENUE

	Year ended 31 December 2013	Year ended 31 December 2012
Revenue from the sale of electricity	1,224,867	1,097,803
Revenue from the sale of heat	3,041	1,284
Other revenue	69	290
Total	1,227,977	1,099,377

25. COST OF SALES

	Year ended 31 December 2013	Year ended 31 December 2012
Cost of electricity	510,693	449,455
Cost of heat	88,942	68,107
Cost of services provided	-	1,483
Total	599,635	519,045

Cost includes the following:

	Year ended 31 December 2013	Year ended 31 December 2012
Inventories	137,900	362,513
Remuneration of production workers and administrative staff	58,684	44,215
Depreciation of production equipment	29,554	26,051
Insurance expenses	14,679	11,070
Other costs of production units	358,818	75,196
Total	599,635	519,045

Cost of sales include cost of own generated electricity, heat and the cost of purchased electricity. The cost of self generated electricity and heat include actual expenses of Hydropower Stations and Heat Power Plants.

26. SELLING EXPENSES

	Year ended 31 December 2013	Year ended 31 December 2012
Depreciation expenses	127,511	74,688
Bad debt expenses (Note 12)	125,875	94,764
Payroll	118,035	97,871
Social fund contribution	31,717	24,636
Receivables and other assets impairement expense/(recovery) (Note 12)	15,756	(1,345)
Other selling expenses	188,453	189,031
Total	607,347	479,645

Selling expense include production expenses of enterprises - electricity networks, which are involved in transmission and distribution of electricity.

27. GENERAL AND ADMINISTRATIVE EXPENSES

	Year ended 31 December 2013	Year ended 31 December 2012
Fines and penalties on taxes	289,997	61,961
Taxes, other than income tax	32,279	21,433
Payroll	12,182	11,889
Depreciation expenses	2,977	3,323
Bank charges	3,542	1,879
Social fund contribution	3,296	3,249
Other fines and penalties	5	100
PIU expenses	-	21,051
Other expenses	6,566	36,261
Total	350,844	161,146

General and administrative expenses include expenses of Head Office, Project Implementation Unit, DPMTO and Representative office in Russian Federation, subsidiary of the Joint Limited Liability Company Bark-Kimgan.

28. OTHER GAINS AND LOSSES

	Year ended 31 December 2013	Year ended 31 December 2012
Revenue from inventory sale	5,425	1,336
Loss from disposal of property, plant and equipment	(3,628)	(4,109)
Other expenses	(27,137)	(22,491)
Total	(25,340)	(25,264)

29. FINANCE INCOME AND COSTS

	Year ended 31 December 2013	Year ended 31 December 2012
Finance income:
Amortisation of discount on loans	169,544	118,845
Total	169,544	118,845
Finance costs:
Amortisation of discount on loans	(169,544)	(118,845)
Interest expenses on loans	(239,049)	(139,504)
Penalties on loans	-	(88,530)
Total	(408,593)	(346,879)
Total finance (cost)/income	(239,049)	(228,034)

30. FAIR VALUE OF FINANCIAL INSTRUMENTS

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions As no readily available market exists for large part of the Group’s financial instruments, judgment is necessary in arriving at fair value, based on current economic conditions and specific risks attributable to the instrument.

As at 31 December 2013 and 2012, the following methods and assumptions were used by the Group to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

Cash and cash equivalents - The carrying amount represents their fair value.

Trade and other receivables- The carrying amount is considered a reasonable estimate of their fair value as the allowance for estimated doubtful amounts is considered a reasonable estimate of the discount required to reflect the impact of credit risk.

Trade and other payables- The carrying amount is a reasonable estimate of their fair value due to their short term nature.

Long term borrowing - The carrying amount is considered a reasonable estimate of their fair value as applied interest rate on long term borrowings is considered to be a reasonable approximation of the market rate with reference to loans with similar credit risk level and maturity period at the reporting date.

31. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(a) Changes in the energy sector

Industry as well as a whole system of the Republic of Tajikistan is experiencing significant restructuring and reform (the process of transformation of the country with a planned economy into a state with a market economy), and the future direction of reforms and results are unknown at this time. Potential reforms in tariff policy, repayment of debt by state enterprises, reorganisation of the market of gross sale and implementation of measures to promote competition in gross sale market, can have a significant impact on companies in this industry. Due to uncertainty regarding the ongoing changes in the industry, management is unable to assess the impact of reforms on the present and future financial position of the Group. However management believes that these uncertainties will have not a significant impact on operational activity compared to other companies operating in the Republic of Tajikistan.

(b) Social commitments and pensions and retirement plans

The Group incurs expenses on development and maintenance of social objects and welfare of its workers and other social needs.

Employees of the Group receive pension benefits in accordance with the laws and regulations of the Republic of Tajikistan.

As at 31 December 2013, the Group was not liable for any supplementary pensions, post- retirement health care, insurance benefits, or retirement indemnities to its current or former employees.

(c) Insurance

As at 31 December 2013, the Group had no insurance coverage in respect of its assets, activities and its public obligations and other risks, to be insured. Since the absence of insurance does not mean reducing the cost of the asset or liability is incurred, provisions were not included in the consolidated financial statements for uncertain losses.

(d) Environment protection issues

Official laws of the Republic of Tajikistan #58 “On environment protection” dated 15.06.2004 and #228 “On air protection” dated 01.02.1996 are aimed to protect atmosphere from pollution and established maximum permissible level of emission of harmful substances.

Integrated control and permits for allowable emissions of pollutants are conducted in accordance with the article 11 “Basic requirements for the valuation of atmosphere air quality” and article 13 “Measurement and control of emissions into the atmosphere”.

The Republic of Tajikistan has acceded to the Kyoto Protocol and ratified it on 22 November 2008. After the ratification of Kyoto Protocol coordination is assigned to Committee for environmental protection under the Government of the Republic of Tajikistan.

Legislation for environmental protection in the Republic of Tajikistan is in the process of development and government agencies continuously revising standards for the application of such legislation. The Group periodically evaluates its obligations under environmental regulations. As obligations are defined, they are immediately defined in the consolidated accounts. Potential liabilities that may arise as a result of changes in existing regulations, litigation in civil cases or legislation can not be estimated with any certainty, but could be significant. Under the existing system of control and penalties for non-compliance with the existing legislation, Management believes that at the moment there are no significant liabilities related to environmental damage.

(e) Litigation

During the year the Group was involved in a number of litigations (as a claimant and defendant) arising in the ordinary course of business. In present time the Company is obligated to repay 29,740 thousand Somoni to OJSC “Sangtuda-1”. In Management’s opinion at present time there are no any other pending legal proceedings or other claims, finishing of which could have a material adverse effect on the financial results and financial position of the Group, or which would not have been accrued or disclosed in these consolidated financial statements.

(f) Technical risks

Reconstruction of the electric power industry is dictated by the current situation in the energy sector due to the rapid deterioration of the technical condition of the fixed assets of the Group. Implementation of current and capital repairs is not enough; new construction, rehabilitation, reconstruction and technical re-equipment is required in accordance with technical progress.

Thus technical risk of impairment is high.

(g) Capital commitments

As at 31 December 2013 and 2012 the Group had capital commitments to continue financing the constructions and maintainance of infrastructure for generation, transmission and distribution of the electricity in the Republic of Tajikistan.

32. FINANCIAL RISKS MANAGEMENT

Main financial liabilities of the Group include loans, trade and other payables and agreements of financial guarantee. Main purpose of these financial liabilities is financing Group’s operations and support of its activity.

Group has trade and other receivables, cash and cash equivalents and short-term deposits, which directly arise in the course of Group’s operational activity. The Group also keeps investment held for sale.

The Group is subject to market risk, credit risk and liquidity risk.

Management of the Group controls risk management process. Management reviews and approves risk management policy.

Prior to placement of Group’s shares, duties of Superior Body are performed by the Government of the Republic of Tajikistan. Exclusive powers of Superior Body are:

• Determination of main directions of Company’s activity, approval of annual reports and financial statements,
• Amending of Group’s charter, including change of its share capital,
• Election of members of auditing committee (inspector) of the Group and their dismissal,
• Approval of Audit committee reports,
• Taking decision on acquisition of shares, issued by the Group,
• Taking decision on reorganisation and liquidation of the Group, assignment of liquidation committee and approval of liquidation balance sheet,
• Election of Group’s Chairman and his termination,
• Exercise of other powers, prescribed by laws of the Republic of Tajikistan and charter of the Group.

Market risk

Market risk is a risk of possible fluctuations of the fair value of future cash flows as a result of changes in market prices. Market prices include four types of risks: interest rate risk, currency risk, risk of price change and other price risks. Financial instruments which are subject of market risk include loans, deposits, investments held for sale.

Sensitivity analysis as at 31 December 2012 and 2011 is presented below. Sensitivity analysis was prepared on the basis of assumption that amount of net debt and part of financial instruments in foreign currency is constant.

Analysis does not include effect of changes of market variables on book value of pensions and other liabilities on employee’s termination, provisions and also nonfinancial assets and liabilities of subdivisions.

In preparing sensitivity analysis the following assumptions were made:

Sensitivity of consolidated statement of financial position is associated with debt instruments held for sale.

Sensitivity of relevant account of consolidated statement of comprehensive income is the effect of proposed changes of relevant market risks.

The analysis was made on the basis of financial assets and financial liabilities held as at 31 December 2013 and 2012.

Risk of price changes

Risk of price changes is the risk or uncertainty arising from possible changes in market prices and their impact on future performance and results of operational activity of the Group.

Price decrease can lead to decrease of net income and cash flows. Maintaining low prices for an extended period of time can lead to a reduction in activity and may ultimately have an impact on the Group’s ability to fulfill its obligations under the contracts. Management estimates the decline as hardly probable and Group does not use derivative instruments to reduce its exposure to this risk.

The Group enters into long-term contracts for products supply on standard commercial terms; thereby the Group is not exposed to the risk of loss of revenue due to price increase on the market.

Interest rate risk

Interest rate risk is a risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market interest rate risks. Risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.

The following table details the Group’s sensitivity to a 3% increase and decrease in the interest rates in 2013 and 2012, respectively. Management of the Group believes that given the current economic conditions in Tajikistan that a 3% increase is a realistic movement in the interest rates. This is the sensitivity rate used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. The sensitivity analysis includes only outstanding liabilities with floating rates.

	As at 31 December 2013		As at 31 December 2012
	Interest rate +3%	Interest rate -3%	Interest rate +3%	Interest rate -3%
Financial liabilities:
Long term liabilities	(2,668)	2,668	(2,668)	2,668
Net impact on profit or loss before tax	(2,668)	2,668	(2,668)	2,668
Net impact on equity	(2,001)	2,001	(2,001)	2,001

Currency risk

Currency risk is a risk that the fair value of future cash flows of financial instruments will fluctuate due to changes in exchange rates. The Group’s exposure to foreign currency exchange rates is stipulated primarily due to Group’s operating activity (when sales or expenses are denominated in currencies, other than the functional currency of the Group), as well as the Group’s net investment in foreign subsidiaries.

The Group exports its production to Central Asia, acquires equipment and materials from overseas suppliers and attracts a substantial amount of long-term loans in foreign currency. Significant concentration of currency risk lies in loans denominated in various foreign currencies (mainly in US dollars). In accordance with he Group’s accounting policy, these loans were translated to Somoni using exchange rates prevailed at the balance sheet date. However future changes in exchange rate of Somoni to US dollar are unpredictable. Future changes in exchange rates may affect the carrying value of liabilities denominated in foreign currencies.

There are strict restrictions and controls in respect of Somoni conversion into other currencies.

Currently Somoni is not convertible currency outside the Republic of Tajikistan.

	Tajik Somoni	US Dollar (1USD = 4.7741 TJS)	Euro (1EUR = 6.5772 TJS)	SDR (1SDR= 7.3521 TJS)	31 December 2013 Total
Financial assets:
Cash and cash equivalents	2,713	288	-	-	3,001
Trade and other receivables	314,522	139,131	-	-	453,653
Long-term investments	182,512	-	-	-	182,512
Totalfinancialassets	499,747	139,419	-	-	639,166
Financial liabilities:
Trade and other payables	1,119,846	18,056	-	-	1,137,902
Short-term debt	246,155	437,356	154,527	387,403	1,225,441
Long-term liabilities	170,000	791,962	86,443	-	1,048,405
Short-term accrued liabilities	815,640	502,663	19,621	104,873	1,442,797
Total financialliabilities	2,351,641	1,750,037	260,591	492,276	4,854,545
Open currency position	(1,851,894)	(1,610,618)	(260,591)	(492,276)

	Tajik Somoni	US Dollar (1 USD= 4.7644 TJS)	Euro (1 EUR= 6.3009 TJS)	SDR (1SDR= 7.3225 TJS)	31 December 2012 Total
Financial assets:
Cash and cash equivalents	8,806	606	-	-	9,412
Trade and other receivables	255,035	12,737	-	-	267,772
Long-term investments	182,512	-	-	-	182,512
Totalfinancialassets	446,353	13,343	-	-	459,696
Financial liabilities:
Trade and other payables	573,557	73,782	16,524	-	663,863
Short-term debt	146,555	468,517	3,308	73,532	691,912
Long-term liabilities	171,080	762,776	41,739	102,985	1,078,580
Short-term accrued liabilities	120,172	434,485	11,118	154,922	720,697
Totalfinancialliabilities	1,011,364	1,739,560	72,689	331,439	3,155,052
Open currency position	(565,011)	(1,726,217)	(72,689)	(331,439)

Currency risk sensitivity

The following table details the Company’s Sensitivity to a 8% increase and decrease in the USD against the TJS for 2013 and 2012, respectively. These rates are the sensitivity rates used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign currency exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the period for a 8% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Company where the denomination of the loan is in a currency other than the currency of the lender or the borrower.

	As at 31 December 2013		As at 31 December 2012
	TJS/USD +8%	TJS/USD -8%	TJS/USD +8%	TJS/USD -8%
Impact on profit or loss	(128,849)	128,849	(138,097)	138,097

	As at 31 December 2013		As at 31 December 2012
	TJS/SDR +8%	TJS/SDR -8%	TJS/SDR +8%	TJS/SDR -8%
Impact on profit or loss	(39,382)	39,382	(26,515)	26,515

As electricity tariffs of the Company are denominated in USD, it partially seeks to offset any foreign exchange gains or losses from its net borrowings/liabilities denominated in foreign currencies.

Credit risk

Credit risk is a risk that the Group will incur financial loss because the counterparties fail to meet their obligations under financial instrument or client contract. The Group is exposed to credit risk related to its operating activity (primarily, trade receivables).

Trade accounts receivable

Credit risk management associated with customers is performed by each subsidiary in accordance with the policies, procedures and control system established by the Group in respect of credit risk management associated with customers. Regular monitoring of outstanding accounts receivables is carried out.

Financial assets of the Group, which are potentially subject to credit risk, compose primarily of trade receivables.

In 2013 the percentage of money collection for the sold energy in the whole group was 76,1% (accrued – 1,276,987 thousand Somoni, paid – 971,356 thousand Somoni), including Tajik Aluminium Plant 47.8% (accrued – 279,099 thousand Somoni, paid – 133,544 thousand Somoni).

Approximately 21,9% of all sales in 2013 were supplied to the largest industrial consumer Tajik Aluminum Plant (TADAZ), which is currently controlled by the Government of the Republic of Tajikistan.

In 2012 the percentage of money collection for the sold energy in the whole group was 89.3% (accrued – 1,245,193 thousand Somoni, paid - 1,111,841 thousand Somoni), including Tajik Aluminium Plant 115.8% (accrued – 430,763 thousand Somoni, paid – 498,936 thousand Somoni).

Approximately 34.6% of all sales in 2012 were supplied to the largest industrial consumer Tajik Aluminum Plant (TADAZ), which is currently controlled by the Government of the Republic of Tajikistan. Only 4.3% of accounts receivable is accounted for Tajik Aluminium Plant.

The carrying value of accounts receivable, net of allowance for bad debt, represents the maximum amount exposed to credit risk.

Need for impairment recognition is reviewed at each balance sheet date, individually for each large entity. In addition, the amounts due from a large number of individuals are grouped into homogeneous groups and assessed for impairment on a collective basis. The calculations are based on the information on actual losses incurred in the past. The maximum exposure to credit risk at the reporting date is presented by the book value of each class of financial assets. The Group does not have the property received as security for the debt owed to it.

Although collection of receivables could be influenced by economic factors, Management believes that there is no substantial risk of loss beyond the provision for impairment of receivables.

Liquidity risk

Group exercises control over the risk of shortage of funds using a recurring liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and contracts for the hire purchase.

The Group has access to financing in sufficient amounts and terms of loans to be paid within 12 months may be postponed to a later date by agreement with current creditors.

The following table summarizes the contractual undiscounted payments on financial liabilities of the Group by maturity.

	Up to 1 month	From 1 to 6 months	From 6 months to 1 year	Over 1 year	31 December 2013 Total
Financial liabilities:
Trade and other payables	-	1,137,902	-	-	1,137,902
Short-term debt	-	1,225,441	-	-	1,225,441
Long-term liabilities	-	-	-	2,870,451	2,870,451
Short-term accrued liabilities	1,233,917	193,309	15,571	-	1,442,797
Total financial liabilities	1,233,917	2,556,652	15,571	2,870,451	6,676,591

	Up to 1 month	From 1 to 6 months	From 6 months to 1 year	Over 1 year	31 December 2012 Total
Financial liabilities:
Trade and other payables	663,863	-	-	-	663,863
Short-term debt	647,722	19,885	24,305	-	691,912
Long-term liabilities	-	-	-	2,916,772	2,916,772
Short-term accrued liabilities	720,697	-	-	-	720,697
Totalfinancialliabilities	2,032,282	19,885	24,305	2,916,772	4,993,244

Capital management

Capital includes capital owned by the Government of the Republic of Tajikistan.

The main objective of the Group’s capital management is to ensure a strong credit rating and an adequate level of capital to conduct its operations and maximize shareholder value.

The Group manages its capital structure and its changes in response to changes of economic conditions.

For the year ended 31 December 2013 and 2012 no changes were made in the objectives, policies and processes for managing capital.

The Group monitors capital using gearing ratio, which is calculated by dividing net debt by total capital and net debt.

Group’s policy is to maintain the value of this ratio in the range 25-40%. Net debt includes interest-bearing loans and borrowings, trade and other payables less cash and cash equivalents.

	31 December 2013	31 December 2012
Short-term debt	1,225,441	691,912
Long-term liabilities	1,048,405	1,078,580
Trade and other payables	1,137,902	663,863
Short-term accrued liabilities	1,442,797	946,494
Less: cash and short-term deposits	(3,001)	(9,412)
Net debt	4,851,544	3,371,437
Total equity	433,239	1,016,789
Equity and net debt	5,284,783	4,388,226
Gearing	92%	77%

33. SUBSEQUENT EVENTS

There were no significant events subsequent to 31 December 2013.