NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016

(in thousand Tajik somoni, unless otherwise stated)

1. GENERAL INFORMATION

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

The Group’s principal activity is generation, transmission and distribution of electricity and thermal energy in the Republic of Tajikistan. The Group also sells electricity to neighboring countries due to its operational needs. Electricity is generated on five 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” (the “Law”), as the Group is the dominant in the generation and supply of electricity 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 (the “Agency”). The main customers are SUE “Tajik Aluminum Company”, OJSC “Rogun HPS”, OJSC “Tojikcement”, OJSC “Tojikhimprom”, OJSC “Pamir Energy Company”, «Da Afghanistan Breshna Sherkat», LLC and the population of the Republic of Tajikistan.

The Group’s Head office is located in the Republic of Tajikistan, Dushanbe, I. Somoni ave, 64.

As at December 31, 2016 and 2015, the sole shareholder of the Group was 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 Open Joint Stock Holding Company “Barqi Tojik”. The Group owns the property transferred by its founder, except the property of legal entities listed as joint stock companies, state enterprises, organizations and institutions which are under the management of the Group.

Open Joint Stock Holding Company “Barqi Tojik” is the holder of shares of joint stock companies, granted by the Government of the Republic of Tajikistan, operating in the energy sector and performs the right of possession, use and disposition of property, businesses and institutions were provided 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 of Varzob hydropower stations

Vakhsh branch Cascade of Vakhsh hydropower stations

Kairakkum branch Kairakkum hydropower station

Dushanbe branch Central electric networks

Sogd branch Sogd 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 OJSHC “Barqi Tojik” in

the Russian Federation

The following organizations are under control of the Group:

OJSC “Shabakahoi Barqii Istaravshan”

OJSC “Shabakahoi Barqii Panjakent”

OJSC ‘Shabakahoi Barqii Shahri Dushanbe”

OJSC “Shabakahoi Barqii Shahri Kulob”

OJSC “Shabakahoi Barqii Kulob”

OJSC “Shabakahoi Barqii Tursunzoda”

OJSC “Shabakahoi Barqii Janubi”

OJSC “Dushanbinskaya Heat Station”

OJSC “Shabakahoi Barqii Yavon”

OJSC “Remontno-Mekhanicheskiy Zavod”

OJSC “Shabakahoi Barqii Dangara”

OJSC “Shabakahoi Barqii Isfara”

OJSC “Shabakahoi Barqii Norak”

OJSC “Yavanskaya Heat Station”

DPMTO “Tajikenergosnab”

OJSHC “Barqi Tojik” has a subsidiary - Limited Liability Company “Barq - Servis”. The main activity of the subsidiary is providing electrical equipment repair and maintenance services. The share of OJSHC “Barqi Tojik” in the authorized capital of the subsidiary is 100%..

As at December 31, 2016 and 2015 the Group had 12,208 and 12,742 employees, respectively.

The consolidated financial statements were authorized for issue by the Group’s management on June 23, 2017.

2. OPERATING ENVIRONMENT

In contrast to the more developed markets emerging markets, such as the Republic of Tajikistan, are exposed to various risks, including economic, political and social, and legal and legislative risks. As has happened in the past, actual or perceived financial problems or an increase in the perceived risks associated with investing in emerging economies could adversely affect the investment climate in countries and the countries’ economy in general.

Laws and regulations affecting businesses in the Republic of Tajikistan continue to change rapidly. Tax, currency and customs legislation within the country are subject to varying interpretations, and other legal and fiscal difficulties leading to the challenges faced by the Group. The future economic direction of the Republic of Tajikistan is largely dependent on economic, fiscal and monetary measures undertaken by the government, together with legal, regulatory developments.

These consolidated financial statements do not include any adjustments that would have been required due resolution of the uncertainty in the future. Possible adjustments may be made to the consolidated statements in that period in which necessity of their reflection will become evident, and it will be possible to estimate their numerical values.

Changes in the energy sector

Industry as well as the other systems 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, reorganization 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 not have a significant impact on operational activity compared to other companies operating in the Republic of Tajikistan.

3. PRESENTATION OF FINANCIAL STATEMENTS

Report on compliance

These financial statements have been prepared in accordance with the International Financial Reporting Standards (the “IFRS”) issued by the International Accounting Standards Board (the “IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (the “IFRIC”).

Use of estimates and assumptions

The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Due to the inherent uncertainty in making those estimates, actual results reported in future periods could differ from such estimates.

Basis of presentation

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:

• Non-current financial liabilities at amortized cost;

• Fixed assets and construction in progress are stated at revalued cost based on revaluation carried by an independent consulting company LLC “BDO Consulting” as at December 31, 2013.

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. This basis may not be appropriate as the Group incurred a loss of 2,339,288 thousand somoni for the year ended December 31, 2016, and, as at that date its current liabilities exceeded its current assets by 7,310,816 thousand somoni, and accumulated deficit amounted to 7,514,603 thousand somoni. These factors indicate the existence of a material uncertainty, which may cast significant doubt about the Group’s ability to continue as a going concern.

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 the major share of electricity consumed in the Republic of Tajikistan. Electric power generated by the Group remains the key element for the economy of the Republic of Tajikistan, as well as fundamental for the Government’s social and economic objectives.

Based on above, the Management believes that the going concern assumption is appropriate for the Group due to 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 Group and the Group’s presentation currency is national currency of the Republic of Tajikistan Tajik somoni (the “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 December 31, 2016 and 2015.

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

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

4. SIGNIFICANT ACCOUNTING POLICIES

Foreign currency transactions

The functional currency of the Group and the Group’s presentation currency is national currency of the Republic of Tajikistan Tajik somoni (the “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 the consolidated statement of profit or loss and other comprehensive income.

	December 31, 2016	December 31, 2015
Somoni / USD	7.8762	6.9902
Somoni / EUR	8.3070	7.6389
Somoni / Russian Rouble	0.1261	0.1031
Somoni / XDR	10.5548	9.7097

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 the consolidated statement of profit or loss and other 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.

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 the consolidated statement of profit or loss and other comprehensive income.

Until 1 January 2010, the date of transition to IFRS, the Group considered adjustments to the carrying value of assets and liabilities to fair value arising on the acquisition, as assets and liabilities of the Group. Therefore, these assets and liabilities are non-monetary items that are already expressed in the functional currency of the Group and, therefore, the additional exchange rate differences do not occur.

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

Revenue from sale of electricity 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. Revenue from sale of electricity is recognised in the consolidated 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 profit or loss and other 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 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

After initial recognition as an asset, property, plant and equipment are carried at revalued cost, being the fair value of the object on the date of revaluation less any subsequent accumulated depreciation and impairment losses.

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 non-current 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 profit or loss and other comprehensive income as incurred.

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

Depreciation is charged on the carrying value of property, plant and equipment to write off assets over their useful life. Depreciation is charged at straight line method at the following rates:

Property, plant and equipment group Useful life (years)
1. Buildings	3-98
2. Constructions
- Transmission equipment	2-90
3. Machinery and equipment
- Hydro turbines	5-50
- Electronic equipment	4-50
- Production equipment	3-75
4. Other fixed assets
- Vehicles	3-25
- Office equipment	3-20
- Furniture and appliances	3-50
- Leasehold improvements	6-55
- Land improvements	6-50

In 2015, the useful life of property, plant and equipment were reconsidered and increased. Changes in depreciation accruals were made on perspective basis.

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.

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 are not capitalized, 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 made for notional fee or free of charge. Therefore the useful life of these licenses is treated as indefinite.

Impairment of tangible and intangible assets

At the end of each reporting period, the Group assesses whether there is any indication that fixed and intangible assets may be impaired. If any such indication exists evaluation is carried out for a possible reduction in the recoverable amount of assets (if any). If it is impossible to estimate the recoverable amount of an individual asset, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately as an expense, except where the relevant asset (land, buildings, or equipment) carried at a revalued amount. In this case the impairment loss is recognized as a reduction of revaluation of the respective fund.

If an impairment loss subsequently reverses, the carrying amount of an asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined if the asset was not recognized an impairment loss (cash-generating unit) in prior years. Reversal of an impairment loss is recognized immediately in the statement of profit or loss and other comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

During write-off of a revalued property, plant and equipment, the amounts included in the revaluation reserve are transferred to retained earnings.

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.

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 current 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:

Accounts receivable

Accounts receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, such financial assets are measured at amortized cost using effective interest rate method, less any impairment losses. Amortized cost is calculated considering any discount or premium on acquisition and fee or costs that are an integral part of the effective interest rate. Amortization based on the use of the effective interest rate is included in finance income in the consolidated statement of profit or loss and other comprehensive income. The losses arising from impairment are recognized in the consolidated statement of profit or loss and other comprehensive income.

Current trade accounts receivable recognizes at cost less allowance on doubtful debts.

Available-for-sale 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 assets

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 amortized 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 profit or loss and other comprehensive income. Loans along with related provisions are not included in the consolidated statement of financial position if there is no 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 profit or loss and other 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 amortized cost based on effective interest rate method. Gains and losses resulting from these instruments included in consolidated statement of profit or loss and other comprehensive income at derecognition, as well as amortizing at effective interest rate.

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

Inventories are stated at the lower of cost or net realizable value. Cost of inventories is determined using the FIFO 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 (the “CGCF”) is higher of fair value of the asset less cost to sell and value in use of the asset. 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 CGCF 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 CGCF 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 each reporting dates. If such indicator exists the Group assesses 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 consolidated statement of profit or loss and other comprehensive income.

Cash and current deposits

Cash and current deposits in the consolidated statement of financial position include the cash in banks and cash on hands.

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.

Pensions and another employee benefits post-employment benefits

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 the 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.

Application of new and revised international financial reporting standards

A number of new Standards and Interpretations has been issued and not yet adopted as at December 31, 2016 and had not been applied in preparation of these consolidated financial statements. Following Standards and Interpretations are relevant to operations of the Group. The Group intends to adopt these Standards and Interpretations from their effective dates. The Group has not analyzed potential effect of adoption of these standards on its consolidated financial statements.

The Group has adopted the following new or revised standards and interpretations issued by International Accounting Standards Board and the International Financial Reporting Interpretations Committee (the “IFRIC”) which became effective for the Group’s consolidated financial statements for the year ended December 31, 2016:

• Amendments to IFRS 10 “Consolidated financial statements”, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures” - the amendments clarify that the exemption from preparing consolidated financial statements is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all its subsidiaries at fair value in accordance with IFRS 10. Consequential amendments have also been made to IAS 28 to clarify that the exemption from applying the equity method is also applicable to an investor in an associate or joint venture if that investor is a subsidiary of an investment entity that measures all its subsidiaries at fair value.

• IFRS 11 “Joint arrangements”. The amendments provide guidance on how to account for the acquisition of an interest in a joint operation in which the activities constitute a business as defined in IFRS 3 “Business combinations”.

• Amendments to IAS 1 “Disclosure Initiative” - the amendments were a response to comments that there were difficulties in applying the concept of materiality in practice as the wording of some of the requirements in IAS 1 had in some cases been read to prevent the use of judgement.

• Amendments to IAS 16 “Property, plant and equipment” and IAS 38 “Intangible assets” clarify acceptable methods of depreciation and amortisation.

• Amendments to IAS 16 “Property, plant and equipment” and IAS 41 “Agriculture” - the amendments define a bearer plant and require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16, instead of IAS 41.

• Amendments to IAS 27 “Separate financial statements” - the amendments focus on separate financial statements and allow the use of the equity method in such statements. Specifically, the amendments allow an entity to account for investments in subsidiaries, joint ventures and associates in its separate financial statements: at cost; in accordance with IFRS 9; or using the equity method as described in IAS 28.

• IFRS 14 “Regulatory Deferral Accounts” permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes, for ‘regulatory deferral account balances’ in accordance with its previous GAAP, both on initial adoption of IFRS and in subsequent financial statements.

The adoption of the new or revised standards did not have significant effect on the financial position or

performance of the Group.

New and revised IFRSs in issue but not yet effective

At the date of authorization of this financial information, the following new standards and interpretations

were in issue, but not mandatorily yet effective, and which the Group has not early adopted:

• IFRS 9 “Financial Instruments” - IFRS 9 is a new standard for financial instruments that is intended to replace IAS 39. The replacement consists of the following three phases: Phase 1: Classification and measurement of financial assets and financial liabilities. Phase 2: Impairment methodology. Phase 3: Hedge accounting.

• IFRS 15 “Revenue from contracts with customers” provides a single model of Revenue accounting. It will replace all actual standards on Revenue recognition including IAS 18 “Revenue” and IAS 11 “Construction contracts” and corresponding interpretations.

• IFRS 16 “Leases” provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors.

• Amendments to IFRS 2 “Share-based Payment” clarify the following: the accounting for cash-settled share-based payment transactions that include a performance condition; the classification of share- based payment transactions with net settlement features; the accounting for modifications of share- based payment transactions from cash-settled to equity-settled.

• Amendments to IFRS 10 “Consolidated financial statements” and IAS 28 “Investments in Associates and Joint Ventures” - the amendments deal with situations where a sale or contribution of assets between an investor and its associate or joint venture is in place.

• Amendments to IAS 12 “Income tax” the amendment clarifies the accounting for deferred tax assets for unrealised losses on debt instruments should be clarified by a separate narrow-scope project.

• Amendments to IAS 7 Statement of Cash Flows - the amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The Group intends to adopt these new standards and amendments, if applicable, when they become

effective.

5. 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 the 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 recognized 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 offinancial instruments

In cases when the fair value of financial instruments and financial liabilities recorded in the consolidated statement of financial position cannot 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 the consolidated financial statements.

Allowance for doubtful debts, advances paid, investments and allowance for cost decrease to net realizable value and obsolete inventories

Determining the direction of allowance for doubtful debts, advances paid, investments and allowance for cost decrease to net realizable value and obsolete inventories requires management to make assumptions based on the best estimates of the Group’s ability to realize these assets. As a result of the general changes in the economy or other similar circumstances after the reporting date, management may draw conclusions that may differ from the finding made in the preparation of these consolidated financial statements.

Useful lives of property, plant and equipment

The Group estimates the useful lives of fixed assets at each reporting date. The estimation of the useful lives of fixed assets depends on factors such as economical use, repair and customer service programs, technological progress and other business conditions. Management’s assessment of the useful lives of fixed assets reflects the relevant information available to management as at the date the consolidated financial statements.

Market rate of borrowings received

The Group uses valuation techniques that include inputs that are not based on observable market date to estimate the fair value of non-current borrowings. Borrowings are discounted at a rate of 4.12% per annum as at December 31, 2016 (3.96% as at December 31, 2015), which the Management of the Group has defined as the market rates on non-current borrowings.

Revaluation and impairment of property, plant and equipment

The following assumptions were used by the Management of the Group during the impairment test of property, plant and equipment:

Assumptions			Forecast			After- forecast period
		2017	2018	2019	2020
a)	Tariffs increase (internal sales)	15%	10%	10%	10%	15%
b)	Tariff increase (export)	19%	8%	8%	8%	8%
c)	Production volume increase	4%	4%	4%	4%	4%
d)	Volume of export increase	3%	3%	3%	3%	3%
e)	Cost of sales increase	10%	10%	10%	10%	10%
f)	General and administrative expenses increase	5%	5%	5%	5%	5%
h)	Selling expenses increase	5%	5%	5%	5%	5%

6. RESTATEMENT AND RECLASSIFICATION Restatements

The Group’s trade and other accounts payable include a liability towards the supplier HPP “Sangtuda 2”. The Group had differences with the data of HPP “Sangtuda-2” starting from 2014. The deviation is the result of different interpretation of contract provisions regarding the purchase of electricity concluded between the Group and company “Sangob”, Islamic Republic of Iran, which owns controlling stake of HPP “Sangtuda-2”. In 2016 the Group recognized the remaining accounts payable and made all necessary adjustments to bring the Group’s data in line with the balances of the HPP “Sangtuda-2”. The Group made retrospective adjustment of the consolidated financial statements in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”. Comparative amounts have been presented and have been adjusted in the previous period.

Effect of changes in the consolidated financial statements for the year ended December 31, 2015 is presented below:

	As previously recognized in consolidated financial statements	Amount of adjustment	Recognized in current consolidated financial statements
the consolidated statement of financial position
	December 31, 2015		December 31, 2015
Trade and other accounts payable	1,227,369	206,473	1,433,842
Accumulated deficit	(5,299,629)	(206,473)	(5,506,102)
the consolidated statement of profit or loss and other comprehensive income
	Year ended December 31, 2015		Year ended December 31, 2015
Cost of sales	(907,143)	(109,244)	(1,016,387)

7.PROPERTY, PLANT AND EQUIPMENT

As at December 31, 2016 and 2015 property, plant and equipment of the Group are presented as follows:

	Buildings and constructions	Machinery and equipment	Other	Construction in progress and equipment for installation	Total
Cost December 31, 2014	5,783,592	4,230,489	80,606	1,185,725	11,280,412
Additions	6,945	18,927	28,527	710,132	764,531
Transfer from inventory	530	76,864	19,935	101,755	199,084
Internal movement	15,078	94,073	1,570	(110,721)	-
Disposals	(1,166)	(71)	(140)	(168)	(1,545)
Change in revaluation surplus due to disposal	(3,477)	-	-	-	(3,477)
December 31, 2015	5,801,502	4,420,282	130,498	1,886,723	12,239,005
Additions	30,982	28,035	38,724	2,054,823	2,152,564
Transfer from inventory	(2,334)	20,981	174	54,901	73,722
Internal movement	27,656	582,946	632	(611,234)	-
Disposals	(2,960)	(2,815)	(311)	(1,674)	(7,760)
December 31, 2016	5,854,846	5,049,429	169,717	3,383,539	14,457,531
Accumulated Depreciation December 31, 2014	840,917	1,399,549	38,249	109,639	2,388,354
Charge for the period	189,540	298,484	11,728		499,752
Disposals	(349)	(61)	(25)	-	(435)
December 31, 2015	1,030,108	1,697,972	49,952	109,639	2,887,671
Charge for the period	158,225	252,060	11,216		421,501
Disposals	(2,152)	(1,508)	(290)	-	(3,950)
Internal movement	(164)	(26)	190	-	-
December 31, 2016	1,186,017	1,948,498	61,068	109,639	3,305,222
Net book value at December 31, 2015	4,771,394	2,722,310	80,546	1,777,084	9,351,334
at December 31, 2016	4,668,829	3,100,931	108,649	3,273,900	11,152,309

As at December 31, 2016 and 2015 fixed assets and construction in progress were not insured.

The Group monitors the use of its assets, but because the Group’s sole shareholder is the Government of the Republic of Tajikistan, it is not able to write-off fixed assets without the permission of the State Committee on Investments and Property Management of the Republic of Tajikistan.

Fixed assets received as grant mostly consist of electrical equipment and power transmission devices transferred under the control of the Group by the Government of the Republic of Tajikistan and by electricity consumers - legal entities and individuals of the Republic of Tajikistan. These grants were recognized as deferred income in accordance with IAS 20 “Accounting for government grants and disclosure of government assistance” which is amortized over the useful life of the associated granted assets. As at December 31, 2016 and 2015 amount of deferred income equaled to 84,077 thousand somoni and 33,071 thousand somoni, respectively (Note 16).

The Group borrows funds to acquire assets and capitalizes the interest on assets that meets certain requirements prescribed in IAS 23 “Borrowing costs”. In 2016 and 2015 the Group capitalized 128,838 thousand somoni and 66,892 thousand somoni, respectively, on the cost of construction in progress.

As at December 31, 2016 and 2015 Group’s assets were pledged as collateral on borrowings comprised of buildings and constructions, machinery and equipment, other fixed assets, construction in progress and equipment for installation of subsidiary of the Group - Baipaza hydropower station. As at December 31, 2016 and 2015 net book value of Baipaza hydropower station fixed assets equaled to 449,452 thousand somoni and 462,594 thousand somoni, respectively.

As at December 31, 2016 and 2015 amount of fully depreciated property, plant and equipment equaled to 257,131 thousand somoni and 188,584 thousand somoni, respectively.

The Group adopted revaluation model for property, plant and equipment accounting in accordance with IAS 16 Property, plant and equipment. In 2014 the Group performed and recognized revaluation of property, plant and equipment as at December 31, 2013. Before recognition of revaluation results the carrying value of fixed assets as at December 31, 2013 equaled to 6,883,777 thousand somoni, accumulated depreciation equaled to 1,806,854 thousand somoni.

The Group was granted temporary permission to operate the new thermal electric power plant Dushanbe-2 (the “TPP Dushanbe-2”), part of which was available for use and put into operation during 2015. Accumulated costs for construction and endowment for new TPP Dushanbe-2 are not recognized and not presented in the consolidated financial statements of the Group. The Group recognizes all income and expenses related to the use and operations of TPP Dushanbe-2 except for the depreciation expenses, which according to management’s estimates are 19,372 thousand somoni (see Note 23).

8. NON-CURRENT ADVANCES PAID

As at December 31, 2016 and 2015 the Group’s non-current advances paid are as follows:

	December 31, 2016	December 31, 2015
Non-current advances paid	523,902	950,745
	523,902	950,745

As at December 31, 2016 and 2015 non-current advances paid include advances for the construction of production facilities and supply of equipment.

9.NON-CURRENT INVESTMENTS

As at December 31, 2016 and 2015 the Group’s non-current investments are as follows:

	December 31, 2016	December 31, 2015
Shares in HPP “Sangtuda - 2”	150,796	150,796
OJSC “Rogun HPP”	31,603	31,603
Other	113	113
Allowance on impairment of non-current investments	(113)	(113)
	182,399	182,399

In 2006 the Group has signed agreement with OJSC “Sangob” on financing of the construction of HPP Sangtuda-2 in the amount of 40,000 thousand US dollars. In accordance with the agreement after 12 years of use the Hydropower Plant would be transferred to the Group. As at December 31, 2012 the Group has fully paid obligations under the agreement. In accordance with terms of the agreement on purchase of electricity the Group has to purchase electricity from HPP Sangtuda-2 at fixed price which should be increased by 5% annualy starting from 2015.

In 2010 the Group acquired the shares of OJSC “Rogun HPP” amounting to 23,700 thousand somoni. The obligations of OJSC “Roghun HPS” to the Group in the amount of 7,933 thousand somoni were converted into shares at the agreement of both parties and the Ministry of Finance of the Republic of Tajikistan.

There was no movement in the allowance on impairment of non-current investments for the years ended December 31, 2016 and 2015.

10. INVENTORIES

As at December 31, 2016 and 2015 inventories of the Group are as follows:

	December 31, 2016	December 31, 2015
Materials	486,291	518,341
Spare parts	134,032	154,298
Fuel and lubricants	104,973	87,589
Low valuable items	23,705	23,232
Construction materials	3,982	7,729
Supplies and others	13,688	14,058
Allowance for cost decrease to net realizable value and obsolete inventories	(222,619)	(226,317)
	544,052	578,930

The movement in allowance for cost decrease to net realizable value and obsolete inventories for the years ended December 31, 2016 and 2015 is presented as follows:

	2016 г.	2015 г.
at January 1	226,317	156,175
(Recovery)/accrual of allowance	(3,698)	70,142
at December 31	222,619	226,317

11. TRADE AND OTHER ACCOUNTS RECEIVABLE

As at December 31, 2016 and 2015 trade and other accounts receivable of the Group are as follows:

	December 31, 2016	December 31, 2015.
Accounts receivable for electricity	974,402	862,104
Accounts receivable for heat	11,224	10,626
Accounts receivable for goods and services	3,418	2,423
Other receivables	324	352
Allowance for doubtful debts	(569,091)	(464,677)
	420,277	410,828

The movement in the allowance for doubtful debts for the years ended December 31, 2016 and 2015 is

presented as follows:

		2016 г.	2015 г.
at January 1		464,677	379,616
Accrual of allowance		104,414	107,200
Write-off		-	(22,139)
at December 31		569,091	464,677
The most significant debtors of the Group are as follows:
	December 31, 2016		December 31, 2015
SUE “Tajik Aluminum Company”	391,290		411,697
The State Department of Land Resources and Irrigation	68,403		46,352
DA Afghanistan Breshna Sherkat	22,925		17,295
OJSC “Tojikhimprom”	17,993		16,416
OJSC “Rogun HPP”	15,236		7,992
Dushanbe heating network enterprise	11,132		10,148
12. CURRENT ADVANCES PAID
As at December 31, 2016 and 2015 current advances paid of the Group are as follows:
		December 31, 2016	December 31, 2015
Advances paid for goods and services		69,494	43,803
Advances to employees		309	1,105
Other advance prepayments		50	55
Allowance for doubtful advances paid		(18,965)	(27,169)
		50,888	17,794
The movement in allowance for doubtful advances paid for the years ended December 31, 2016 and 2015 is presented as follows:
		2016 г.	2015 г.
at January 1		27,169	61,325
Accrual of allowance		(8,204)	(34,152)
Write-off		-	(4)
at December 31		18,965	27,169

13. CASH AND CASH EQUIVALENTS

As at December 31, 2016 and 2015 cash and cash equivalents of the Group are as follows:

	December 31, 2016	December 31, 2015
Cash in bank account	76,048	61,099
Cash on hand	679	531
Cash in foreign bank account	51	31
	76,778	61,661

14. SHARE CAPITAL

As at December 31, 2016 and 2015 announced, issued and paid share capital of the Group amounted to 410,101 thousand somoni.

In 2015 share capital of the Group was increased by 26,265 thousand somoni in accordance with the Decree of the Government of the Republic of Tajikistan #730 dated November 28, 2015. The increase was done through offsetting accounts payable for electricity of the Group to OJSC “Sangtuda HPP-1” and tax liabilities of the OJSC “Sangtuda HPP-1” to the state budget of the Republic of Tajikistan.

In 2016 and 2015 the Group did not announce any dividends.

15. BORROWED FUNDS

As at December 31, 2016 and 2015 non-current borrowed funds of the Group are as follows:

	December 31, 2016	December 31, 2015
Loan from the Ministry of finance of Republic of Tajikistan	6,624,765	4,902,221
Loans from OJSC “Orienbank”	183,515	1,014,697
Loan from the European Bank for Reconstruction and Development	49,475	32,757
Unamortized portion of discount	(187,679)	(162,478)
Unamortized portion of front-end fee	(7,571)	(5,946)
	6,662,505	5,781,251

The Group uses valuation techniques that include inputs that are not based on observable market date to

estimate the fair value of non-current borrowings. Borrowings are discounted at a rate of 4.12% per annum as at December 31, 2016 (3.96% as at December 31, 2015), which the Management of the Group has defined as the market rates on non-current borrowings.

Movement of discount on non-current borrowed funds for the years ended December 31, 2016 and 2015

is presented as follows:

	2016	2015
at January 1	162,478	103,915
Discount recognition	1,275 3,960	3,960
Amortization	(22,011)	(19,762)
Effect of change in discount rate	26,405	42,712
Forex effect	19,532	31,653
at December 31	187,679	162,478
As at December 31, 2016 and 2015 current borrowed funds of the Group are as follows:
	December 31, 2016	December 31, 2015
Loan from the Ministry of finance of Republic of Tajikistan	1,910,592	1,502,587
Interest payable	1,663,116	1,156,348
Loans from OJSC “Orienbank”	1,056,025	87,378
Front-end fee payable	12,087	10,748
Loan from the European Bank for Reconstruction and Development	5,008	5,787
Unamortized portion of front-end fee	(482)	(351)
	4,646,346	2,762,497

As at December 31, 2016 and 2015 weighted average interest rate on borrowed funds was 6.5% and 6.8%, respectively.

Current portion of non-current borrowings is allocated in accordance with the repayment schedule of principal on loans.

As at December 31, 2016 and 2015 outstanding amount on loans received from Ministry of finance of the Republic of Tajikistan and European Bank for Reconstruction and Development is presented in the following table:

Loan #	Creditor	Loan purpose	Agreement date	Maturity date	Loan amount	Interest rate	December 31, 2015	December 31 2016
№ 2010 (024)TOTAL 131- 029БТ	The Export-Import Bank of China	Construction of high power electric grid 220 kV “Khujand- Ayni”	December 15, 2010	September 21, 2031	35,055 thousand USD	3%	245,041	276,100
1141Р	OPEC	Expansion of energy cooperation between Tajikistan and Afghanistan	June 28, 2011	August 15, 2026	8,500 thousand USD	3%	55,269	62,274
ТАД 030-032 БТ	Islamic Development bank	Expansion of energy cooperation between Tajikistan and Afghanistan	June 28, 2011	November 30, 2031	14,067 thousand USD	3%	97,722	110,108
0124- TAJ (SF)	Asian Development Bank	Funding of the Project for reconstruction of ORU-500 Kw on Nurek HPP	December 20, 2011	October 15, 2033	54,770 thousand USD	5%	334,982	429,148
Taj 021 БТ	KfW	Replacement of the 220 kV switchgear at Nurek HPP	February 3, 2009	November 01, 2033	18,000 thousand EUR	8%	137,495	149,521
Grant №566TJ	International Development Association	Emergency assistance in the restoration project of the energy sector	July 16, 2010	September 15, 2030	15,000 thousand USD	6%	107,324	120,927
Grant № H372 TJ)	International Development Association	Immediate increase in volume and increasing the reliability of energy supply in the country, especially in the winter season.	October 30, 2008	September 15, 2028	4,342 thousand USD	6%	27,983	31,530
Credit № 4093 TJ	International Development Association	Funding of the project to reduce power losses	December 6, 2005	September 15, 2026	11,446 thousand USD	6%	78,174	88,083
6016	The Export-Import Bank of China	Construction of power lines 220 kV “Lolazor-Khatlon”	December 16, 2006	June 21, 2026	55,228 thousand USD	3%	386,052	434,984
6015	The Export-Import Bank of China	Construction of power lines 500 kV “South-North”	December 21, 2006	June 21, 2026	267,219 thousand USD	3%	1,867,920	2,104,674
665	The Kuwait Fund for Arab Economic Development	Funding of the project for reconstruction of electric grids in Dushanbe	September 20, 2003	October 1, 2029	3,600 thousand KWD	5%	81,546	91,210

Loan #	Creditor	Loan purpose	Agreement date	Maturity date	Loan amount	Interest rate	December 31, 2015	December 31, 2016
IDB -0022	Islamic Development bank	Construction of small HPPs	March 18, 2005	December 30, 2029	7,623 thousand IDB	3.50%	70,148	76,254
IDB -011-029-031	Islamic Development bank	Reliable power supply in rural areas of Tajikistan	November 26, 2004	December 31, 2020	10,400 thousand IDB	5%	102,566	111,493
Switzerland Confederation	Switzerland Confederation	Funding of the Swiss Subproject for rehabilitation of the power system	December 1, 2003	June 30, 2029	8,862 thousand USD	1.50%	61,948	69,800
2303	Asian Development Bank	Construction of intersystem electric grids	May 21, 2007	December 1, 2031	14,475 thousand XDR	Libor + 0,5%	119,562	129,968
1817	Asian Development Bank	Funding of the Power System Rehabilitation Project	August 20, 2001	December 15, 2025	26,576 thousand XDR	5.00%	258,045	263,789
06015-06016	The Export-Import Bank of China	Additional construction of high-voltage power lines 500/220 kV South-North, Lolazor-Khatlon	May 29, 2007	December 21, 2028	51.000 thousand USD	3%	356,500	401,686
1912-TAJ (SF)	Asian Development Bank	Funding of the Emergency project to stabilize landslides Baipaza HPP	October 20, 2003	December 1, 2033	4,001 thousand XDR	1.50%	29,731	32,319
0213-TAJ-28 BT	Asian Development Bank	Funding of the regional project for the transfer of electricity	November 23, 2010	September 15, 2036	112,500 thousand USD	5%	498,307	770,143
KFW-034BT	KfW	Construction of 220 kV switchgear at Nurek	June 2, 2011	May 30, 2032	7,000 thousand EUR	3%	53,470	58,147
2011 (19) TOTAL № (170)-030 БТ	The Export-Import Bank of China	Construction of unified energetic system in north region of Republic of Tajikistan	July 20, 2011	March 21, 2031	26,464 thousand USD	3%	184,987	208,434
Government of Switzerland confederation	International Development Association	Funding of “Energy loss reduction project”	June 29, 2007	June 15, 2032	2,582 thousand USD	6%	16,241	18,300
Grant №TF096573- 035 BT	Switzerland Trust Fund	Funding of “Energy loss reduction project”	December 21, 2011	September 15, 2031	3,468 thousand USD	6%	23,806	26,823
266-025	The Export-Import Bank of China	Reconstruction of Regar substation	July 31, 2013	November 21, 2033	35,043 thousand USD	6%	232,067	276,008

Loan #	Creditor	Loan purpose	Agreement date	Maturity date	Loan amount	Interest rate	December 31, 2015	December 31, 2016
№TAJ 2015-10(БТ)	International Development Association	Funding of the project “Providing electricity in winter period”	September 21, 2015	April 15, 2035	5,000 thousand USD	3%	9,383	22,361
TAJ 2014-028-1	The Export-Import Bank of China	Funding of the project “Construction of the second phase of the HES Dushanbe- 2”	December 18, 2014	June 21, 2034	178 969 thousand USD	5%	-	808,004
TAJ 2014-028-2	The Export-Import Bank of China	Funding of the project “Construction of the second phase of the HES Dushanbe- 2”	December 18, 2014	August 21, 2039	929,977 thousand CNY	5%	927,135	1,054,408
TAJ 2014-006 (БТ- 026)	Asian Development Bank	Funding of the project “Rehabilitation Head HPP 240 MW”	December 25, 2014	September 15, 2039	136,000 thousand USD	5%	9,907	198,808
TAJ 2014-007(БТ-027	Islamic Development bank	Funding of the project “Reconstruction of substation Ravshan”	May 5, 2015	October 15, 2038	13,070 thousand USD	3%	1,291	3,140
2015-009(БТ-027)	Asian Development Bank	Implementation of accounting system of wholesale supply of electricity and improving power system design	November 15, 2015	April 15, 2040	54,000 thousand USD	5%	6,009	67,182
41553	European Bank for Reconstruction and Development	Reconstruction of Kairakkum HPP	June 25, 2014	December 8, 2029	50,000 thousand USD	Libor +1%	35,391	3,938
41538	European Bank for Reconstruction and Development	Reduction of electricity losses in the Sughd region	June 15, 2011	April 5, 2016	10,150 thousand USD	Libor +1%	3,495	50,545
EIB Serapis № 2009 0675 - 031BT		Renovation of the energy sector of the Republic of Tajikistan	October 12, 2011	September 15, 2030	10,141 thousand USD	3%	-	38,532
Funding for the project construction of small hydropower plant “Kulob” and “Vose’	State committee on investment and state property management of the Republic of Tajikistan	Funding of the project “Construction of small hydropower plant “Kulob” and “Vose” to provide electricity to the rural population”	January 1, 2008	June 30, 2018	1,200 thousand TJS	1%	1,200	1,200

Loan #	Creditor	Loan purpose	Agreement date	Maturity date	Loan amount	Interest rate	December 31, 2015	December 31, 2016
Loan agreement #11 from 28/04/2008	The Ministry of Finance of the Republic of Tajikistan	Repair and modernization of Dushanbe HPS	December 1, 2009	-	900 thousand USD	-	12	-
Loan agreement #TAJ-013	The Ministry of Finance of the Republic of Tajikistan	Repair and modernization of Western boiler Dushanbe HPS	July 22, 2008	-	2,500 thousand USD	-	8,663	-
Loan agreement #TAJ-2014 -011 (BT)	The Ministry of Finance of the Republic of Tajikistan	Settlement of liabilities to company “Sangob” IRI	August 28, 2014	-	2,000 thousand USD	-	13,980	-
							6,443,352	8,589,841

16. DEFERRED INCOME

As at December 31, 2016 and 2015 deferred income of the Group comprises of current and non-current

portions.

Non-current portion of deferred income:

	December 31, 2016	December 31, 2015
Deferred income on grants received from Government of the Republic of Tajikistan	311,441	269,299
Deferred income on discounting of non-current borrowed funds at the rate lower than market rate	86,504	89,206
Deferred income on fixed assets received as grant	80,459	31,701
	478,404	390,206
Current portion of deferred income:
	December 31, 2016	December 31, 2015
Deferred income on fixed assets received as grant	3,618	1,370
Deferred income on grants received from the Government of the Republic of Tajikistan	1,589	1,138
	5,207	2,508
Deferred income on grants received is presented in the form of targeted funding for the construction of fixed assets and granted assets from the state bodies, which include mainly electrical equipment and facilities for power transfer devices transferred to the control of the Group by the Government of the Republic of Tajikistan.
Deferred income on fixed assets received as grant represents fixed assets transferred under the control of the Group by the electricity consumers - legal entities and individuals of the Republic of Tajikistan. These grants were recognized as deferred income in accordance with IAS 20, which is amortized equally over the useful life of the granted assets. As at December 31, 2016 and 2015 amount of deferred income equaled to 84,077 thousand somoni and 33,071 thousand somoni, respectively.
Movement of deferred income on discounting of non-current borrowed funds at the rate lower than market rate for the years ended December 31, 2016 and 2015 was as follows:
	2016 г.	2015 г.
at January 1	89,206	89,007
Deferred income recognition	1,276	3,960
Amortization of deferred income	(3,978)	(3,761)
at December 31	86,504	89,206

Movement of deferred income on grants received from Government of the Republic of Tajikistan for the years ended December 31, 2016 and 2015 is presented as follows:

Long-term portion	2016	2015
at January 1	269,299	185,074
Grants received during a year	43,957	85,363
Transferred to short-term portion	(1,815)	(1,138)
at December 31	311,441	269,299
Short-term portion	2016	2015
at January 1	1,138	1,138
Transferred from long-term portion	1,815	1,138
Amortized during a year	(1,364)	(1,138)
at December 31	1,589	1,138
Movement of deferred income on fixed assets received as grant for the years ended December 31, 2016 and 2015 is presented as follows:
Long-term portion	2016	2015
Balance as at January 1	31,701	19,027
Grants received during a year	52,690	13,805
Transferred to short-term portion	(3,932)	(1,131)
Balance as at December 31	80,459	31,701
Short-term portion	2016	2015
At January 1	1,370	894
Transferred from long-term portion	3,932	1,131
Amortized during a year	(1,684)	(655)
At December 31	3,618	1,370

17. TRADE AND OTHER ACCOUNTS PAYABLE

As at December 31, 2016 and 2015 trade and other accounts payable of the Group are as follows:

		December 31, 2016	December 31, 2015 (restated)
Accounts payable for electricity		1,437,279	1,056,050
Accounts payable for goods and services		175,363	254,908
Accounts payable for equipment		43,559	94,702
Accounts payable for construction works		6,228	25,299
Other accounts payable		3,847	2,883
		1,666,276	1,433,842
Below is information on the largest creditors:
	December 31, 2016		December 31, 2015 (restated)
Islamic Republic of Iran Company “Sangob” (HPP “Sangtuda-2”)		769,646	536,613
OJSC “HPP Sangtuda-1”		654,285	505,834
TBEA (China)		24,860	40,548
Consortium Alstom & Gencer		22,745	21,370
LLC “Amorat O”		10,000	-
Talco Management Limited		-	40,775
18. ADVANCES RECEIVED
As at December 31, 2016 and 2015 advances received by the Group are as follows:
		December 31, 2016	December 31, 2015
Prepayments received for electricity		81,612	74,374
Advances received for thermal energy		92	68
Other advances received		59	760
		81,763	75,202

19. TAXES PAYABLE

As at December 31, 2016 and 2015 taxes payable of the Group are as follows:

	December 31, 2016	December 31, 2015
Value added tax payable	124,280	135,959
Road tax payable	11,503	17,716
Social tax payable	5,060	4,603
Personal income tax payable	2,582	2,847
Royalty tax payable	2,349	1,923
Income tax payable	104	7,618
Other taxes	421	594
	146,299	171,260
20. OTHER PAYABLES AND ACCRUED EXPENSES
As at December 31, 2016 and 2015 other payables and accrued expenses of the Group are as follows:
	December 31, 2016	December 31, 2015
Fines and penalties on overdue borrowed funds	1,744,377	1,132,944
Fines and penalties on taxes	71,901	37,324
Unused vacation provision	21,184	15,139
Salary payable	15,781	16,900
Other liabilities	4,931	4,921
	1,858,174	1,207,228
The movement in provision for unused vacation for the years ended December 31, 2016 and 2015 is presented as follows:
	2016	2015
at January 1	15,139	16,956
Accrual/(recovery) of provision	6,045	(1,817)
at December 31	21,184	15,139

21. INCOME TAX

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. For the years ended December 31, 2016 and 2015 on the territory of the Republic of Tajikistan, the income tax rate for production legal entities was 14%, but not less than 1% from gross revenue according to the tax law of the Republic of Tajikistan.

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 December 31, 2016 and 2015 relate mostly to different methods of income and expense recognition as well as to temporary differences generated by tax - book bases’ differences for certain assets and liabilities.

	Year ended December 31, 2016	Year ended December 31, 2015
Current income tax expenses	21,643	21,089
Changes in deferred income tax	-	-
Income tax expenses	21,643	21,089
Temporary differences as at December 31, 2016 and 2015, comprise:
	December 31, 2016	December 31, 2015
Deferred income tax assets:
Tax loss carry forward	5,458,747	3,318,504
Allowance for doubtful debts	569,091	464,677
Deferred income	397,107	303,508
Allowance for cost decrease to net realizable value and obsolete
inventories	222,619	226,317
Allowance for doubtful advances paid	18,965	27,169
Unused vacation provision	21,184	15,139
Impairment allowance on long-term investments	113	113
Total deferred income tax assets	6,687,826	4,355,427
Deferred income tax liabilities:
Discount on borrowed funds	101,175	73,272
Total deferred income tax liabilities	101,175	73,272
Net deferred income tax assets	6,586,651	4,282,155
Net deferred income tax assets at statutory tax rate (14%)	856,265	599,502
Allowance on net deferred income tax assets	(856,265)	(599,502)
Net deferred income tax assets less allowance	-	-

Temporary differences between tax accounting and current financial statement as well as tax losses lead

to deferred tax liabilities as at December 31, 2016 and 2015 as a result of the following:

	December 31, 2015	Recognized in the consolidated statement of profit or loss and other comprehensive income	Recognized in equity	December 31, 2016
Temporary differences:
Tax loss carry forward	464,591	245,047	-	709,638
Allowance for doubtful debts	65,055	8,927	-	73,982
Deferred income	42,491	9,133	-	51,624
Allowance for cost decrease to net realizable value and obsolete inventories	31,684	(2,744)	-	28,940
Allowance for doubtful advances paid	3,804	(1,339)	-	2,465
Unused vacation provision	2,119	635	-	2,754
Impairment allowance on long-term investments	16	(1)	-	15
Discount on borrowed funds	(10,258)	(2,895)	-	(13,153)
	599,502	256,763		856,265
	December 31, 2014	Recognized in the consolidated statement of profit or loss and other comprehensive income	Recognized in equity	December 31, 2015
Temporary differences:
Tax losses to be offset	151,013	313,578	-	464,591
Allowance on doubtful debts	53,146	11,909	-	65,055
Deferred income	28,859	13,632	-	42,491
Allowance for cost decrease to net realizable value and obsolete inventories	21,865	9,819	-	31,684
Allowance on doubtful amount of advances	8,586	(4,782)	-	3,804
Unused vacation provision	2,374	(255)	-	2,119
Allowance for impairment of non-current investments	16	-	-	16
Discount on borrowed funds	(2,087)	(8,171)	-	(10,258)
	263,772	335,730	-	599,502

22. REVENUE

The Group’s revenues from sales of electricity and thermal energy for the years ended December 31,

2016 and 2015 are as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
Revenue from sale of electricity	1,683,446	1,542,742
Revenue from sale of thermal energy	5,175	5,923
	1,688,621	1,548,665
23. COST OF SALES
The cost of electricity and thermal energy produced for the years ended December 31, 2016 and 2015 were as follows:
	Year ended December 31, 2016.	Year ended December 31, 2015 (restated)
Cost of electricity	955,269	836,734
Technical losses on transmission of electricity	152,093	118,344
Cost of thermal energy	111,540	61,309
	1,218,902	1,016,387
Cost of thermal energy does not include depreciation of fixed assets of TPP Dushanbe-2, which according to management’s estimates are 19,372 thousand somoni (see Note 7).
Cost of sales includes the following articles:
	Year ended December 31, 2016	Year ended December 31, 2015 (restated)
Cost of purchased electricity	621,485	495,921
Depreciation of fixed assets	227,479	222,390
Materials	214,790	146,834
Salary and related taxes	74,510	79,485
Taxes other than income tax	33,741	34,348
Other	46,897	37,409
	1,218,902	1,016,387

24. SELLING EXPENSES

The selling expenses of the Group for the years ended December 31, 2016 and 2015 are as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
Depreciation	191,258	270,718
Salary and related taxes	138,450	141,018
Accrual of allowance for doubtful accounts receivable	104,414	107,200
Inventories	70,102	79,336
Services	21,954	15,883
Fixed assets maintenance	11,568	16,788
Fuel	9,387	9,565
Business trip	2,640	3,472
Recovery of allowance for doubtful advances paid	(8,204)	(34,152)
Other	37,215	27,356
	578,784	637,184
Distribution costs include expenses of the branches - power grids, which engaged in the transmission and sale of electricity.
25. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the years ended December 31, 2016 and 2015 are as follows:
	Year ended December 31, 2016	Year ended December 31, 2015
Taxes other than income tax	42,862	35,491
Fines and penalties on taxes	37,807	40,515
Salary and related taxes	17,681	17,355
Depreciation	2,764	3,811
Professional services	2,723	2,412
Fuel	2,511	5,116
Fixed assets maintenance	1,208	1,444
Business trip	1,142	1,083
Representation expenses	923	256
Rent	708	1,640
Communication	545	830
Utility	498	397
Bank fees	201	372
Other	8,416	9,147
	119,989	119,869

General and administrative expenses include the expenses of the HQ, the Center of projects

implementation, DPMTO representative offices in the Russian Federation, subsidiary – Limited Liability

Company “Barq – Servis”.

Annually as a result of tax audit carried out by tax authorities the Group accrues fines and penalties for

different taxes.

26. FINANCIAL GAIN AND LOSS

Financial gain and loss for the years ended December 31, 2016 and 2015 are as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
Financial gain
Effect of change in discount rate of borrowings	26,405	42,712
	26,405	42,712
Financial loss
Interest expenses	474,573	333,177
Penalties on borrowed funds	486,378	330,924
Amortization of discount on borrowed funds	22,011	19,762
Amortization of front-end fee	423	253
	983,385	684,116
27. OTHER NON-OPERATING GAIN/(LOSS), NET
Other non-operating gain/(loss), net for the years ended December 31, 2016 and 2015 are as follows:
	Year ended December 31, 2016	Year ended December 31, 2015
Amortization of deferred income	7,026	5,554
Recovery/(accrual) of allowance for cost decrease to net realizable value and obsolete inventories	3,698	(70,142)
Inventory sales, net	3,342	11,734
Loss from disposal of property, plant and equipment	(3,810)	(4,555)
Other expenses	5,976	(15,663)
	16,232	(73,072)

28. 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 December 31, 2016 and 2015 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

current nature.

Non-current borrowing - The carrying amount is considered a reasonable estimate of their fair value as

applied interest rate on non-current 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.

Fair values are primarily determined using quoted market prices or standard pricing models using

observable market inputs where available and are presented to reflect the expected gross future cash

in/outflows. The Group classifies the fair values of its financial instruments into a three level hierarchy

based on the degree of the source and observability of the inputs that are used to derive the fair value of

the financial asset or liability as follows:

Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can assess at the measurement date; or

Level 2 Inputs other than quoted inputs included in Level 1 that are observable for the assets or liabilities, either directly or indirectly; or

Level 3 Unobservable inputs for the assets or liabilities, requiring the Group to make market based assumptions.

Level 1 classifications primarily include financial assets and financial liabilities that are exchange traded, whereas Level 2 classifications primarily include financial assets and financial liabilities which derive their fair value primarily from exchange quotes and readily observable quotes. Level 3 classifications primarily include financial assets and financial liabilities which derive their fair value predominately from models that use applicable market based estimates surrounding location, quality and credit differentials. In circumstances where the Group cannot verify fair value with observable market inputs (Level 3 fair values), it is possible that a different valuation model could produce a materially different estimate of fair value.

It is the Group’s policy that transactions and activities in trade related financial instruments be concluded under master netting agreements or long form confirmations to enable balances due to/from a common counterparty to be offset in the event of default, insolvency or bankruptcy by the counterparty.

The following tables show the fair values of financial assets and financial liabilities as at December 31, 2016 and 2015. Other assets and liabilities which are measured at fair value on a recurring basis are cash and cash equivalents. There are no nonrecurring fair value measurements.

	Level 1	Level 2	Level 3	December 31, 2016 Total
FINANCIAL ASSETS:
Cash and cash equivalents	76,778	-	-	76,778
Trade and other accounts receivable	-	-	420,277	420,277
Non-current investments	-	-	182,399	182,399
TOTAL FINANCIAL ASSETS	76,778	-	602,676	679,454
FINANCIAL LIABILITIES:
Current trade and other accounts payable	-	-	1,666,276	1,666,276
Non-current trade and other accounts payable	-	-	15,408	15,408
Current borrowed funds	-	4,646,346	-	4,646,346
Non-current borrowed funds	-	6,662,505	-	6,662,505
Other payables and accrued expenses	-	-	1,786,273	1,786,273
TOTAL FINANCIAL LIABILITIES	-	11,308,851	3,467,957	14,776,808
	Level 1	Level 2	Level 3	December 31, 2015 Total (restated)
FINANCIAL ASSETS:
Cash and cash equivalents	61,661	-	-	61,661
Trade and other accounts receivable	-	-	410,828	410,828
Non-current investments	-	-	182,399	182,399
TOTAL FINANCIAL ASSETS	61,661	-	593,227	654,888
FINANCIAL LIABILITIES:
Current trade and other accounts payable			1,433,842	1,433,842
Current borrowed funds	-	2,762,497	-	2,762,497
Non-current borrowed funds	-	5,781,251	-	5,781,251
Other short-term payables and accrued expenses	-	-	1,169,904	1,169,904
TOTAL FINANCIAL LIABILITIES	-	8,543,748	2,603,746	11,147,494

29. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(a) Social commitments and pensions and retirement plans

The Group incurs expenses on development and maintenance of social objects and welfare of its employees 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 December 31, 2016 and 2015 the Group was not liable for any supplementary pensions, postretirement health care, insurance benefits, or retirement indemnities to its current or former employees.

(b) Insurance

As at December 31, 2016 and 2015 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 assets or incurrence of liabilities, provisions were not considered in the consolidated financial statements for uncertain losses.

(c) Environment protection issues

Official laws of the Republic of Tajikistan #58 “On environment protection” dated June 15, 2004, and #228 “On air protection” dated February 1, 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 November 22, 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 revise standards for the application of such legislation. The Group periodically evaluates its obligations under environmental regulations. As obligations are defined, they are recognized immediately in the consolidated statements. Potential liabilities that may arise as a result of changes in existing regulations, litigation in civil cases or legislation cannot 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.

(d) Litigation

In Management’s opinion at present time there are no any pending legal proceedings or other claims, which could have a material adverse effect on the financial results and financial position of the Group, or which would not be accrued or disclosed in these consolidated financial statements.

(e) 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 are required in accordance with technical progress. Thus, technical risk of impairment is high.

(f) Capital commitments

As at December 31, 2016 and 2015 the Group’s capital commitments to continue financing the constructions and maintenance of infrastructure for generation, transmission and distribution of the electricity in the Republic of Tajikistan amounted to 1,363,717 thousand somoni and 2,572,495 thousand somoni respectively.

(g) Liabilities with counterparties

The Group’s trade and other accounts payable include a liability towards the supplier HPP “Sangtuda 2”. HPP “Sangtuda-2” charged penalties for the Group's accounts payable due to overdue payment for electricity. The Management of the Group believes that the amount of penalties will not be claimed by the HPP “Sangtuda-2” and probability of payment of penalties is remote.

30. TRANSACTIONS WITH RELATED PARTIES

In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

Transactions with state companies

The Group applies the exemption from the application of IAS 24, disclosures in respect of related party transactions and balances and transactions, including commitments, because it is associated with the state organization. Accordingly, the Group discloses the nature of their relationship with the Government, the description and the amount of each operation that is significant, individually or in the aggregate.

The following amounts in the consolidated statement of financial position as at December 31, 2016 and 2015 arose from transactions with related parties:

	December 31, 2016		December 31, 2015
	Related party transactions	Total category as per the consolidated financial statements caption	Related party transactions	Total category as per the consolidated financial statements caption
Non-current investments	31,603	182,399	31,603	182,399
Trade and other accounts receivable	221,827	420,277	235,879	410,828
Cash and cash equivalents	74,990	76,778	55,622	61,661
Current borrowed funds	6,445,909	6,662,505	4,747,371	5,781,251
Non-current borrowed funds	3,469,843	4,646,346	2,604,878	2,762,497
Other payables and accrued expenses	1,743,787	1,858,174	1,132,944	1,207,228

The following amounts were included in the consolidated statement of profit or loss and other comprehensive income for the years ended December 31, 2016 and 2015 which arose due to transactions with related parties:

	2016		2015 (restated)
	Related party transactions	Total category as per the consolidated financial statements caption	Related party transactions	Total category as per the consolidated financial statements caption
Revenue	394,644	1,688,621	402,329	1,548,665
Cost of sales	462,963	1,218,902	379,746	1,016,387
Selling expenses	39,059	578,784	55,997	637,184
Net loss on foreign exchange
operations	883,042	1,147,843	1,721,071	1,991,678
Financial loss	700,286	983,385	462,279	684,116

For the years ended December 31, 2016 and 2015 the remuneration of key management was as follows:

	December 31, 2016	December 31, 2015
Salary and bonuses	237	302
Contributions to social fund	59	75
	296	377

31. 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 current 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 Group’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.

Geographical concentration

The geographical concentration of assets and liabilities are disclosed below:

	Republic of Tajikistan	OECD countries	Other	2016 Total
FINANCIAL ASSETS:
Cash and cash equivalents	76,727	-	51	76,778
Trade and other accounts receivable	401,724	-	18,553	420,277
Non-current investments	182,399	-	-	182,399
TOTAL FINANCIAL ASSETS	660,850		18,604	679,454
FINANCIAL LIABILITIES:
Current trade and other accounts payable	1,604,649	38,824	22,803	1,666,276
Non-current trade and other accounts payable	15,408	-	-	15,408
Current borrowed funds	4,612,525	33,821	-	4,646,346
Non-current borrowed funds	6,618,355	44,150	-	6,662,505
Other current payables and accrued expenses	1,786,273	-	-	1,786,273
TOTAL FINANCIAL LIABILITIES	14,637,210	116,795	22,803	14,776,808
	Republic of Tajikistan	OECD countries	Other	2015 Total (restated)
FINANCIAL ASSETS:
Cash and cash equivalents	61,630	-	31	61,661
Trade and other accounts receivable	396,175	-	14,653	410,828
Non-current investments	182,399	-	-	182,399
TOTAL FINANCIAL ASSETS	640,204		14,684	654,888
FINANCIAL LIABILITIES:
Current trade and other accounts payable	1,321,226	59,489	53,127	1,433,842
Current borrowed funds	2,756,685	5,812	-	2,762,497
Non-current borrowed funds	5,752,447	28,804	-	5,781,251
Other current payables and accrued expenses	1,169,904	-	-	1,169,904
TOTAL FINANCIAL LIABILITIES	11,000,262	94,105	53,127	11,147,494

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 to market risk, include loans, deposits, investments held for sale.

Sensitivity analysis as at December 31, 2016 and 2015 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 profit or loss and other 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 existing as at December 31, 2016 and 2015.

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 non-current 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.

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 Afghanistan and countries of Central Asia, acquires equipment and materials from overseas suppliers and attracts a substantial amount of non-current loans in foreign currency. Significant concentration of currency risk lies in loans denominated in various foreign currencies (mainly in US dollars). In accordance with the Group’s accounting policy, these loans were translated to somoni using exchange rates prevailed at the reporting 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016

(in thousand Tajik somoni, unless otherwise stated)

	TJS	USD	EUR	XDR	KWD	Other	2016 Total
FINANCIAL ASSETS:
Cash and cash equivalents	25,226	51,501	-	-	-	51	76,778
Trade and other accounts receivable	401,724	18,553	-	-	-	-	420,277
Non-current investments	182,399	-	-	-	-	-	182,399
TOTAL FINANCIAL ASSETS	609,349	70,054				51	679,454
FINANCIAL LIABILITIES:
Current trade and other accounts payable	835,084	816,796	14,396	-	-	-	1,666,276
Non-current trade and other accounts payable	-	15,408	-	-	-	-	15,408
Current borrowed funds	14,686	3,858,453	110,990	523,842	76,499	61,876	4,646,346
Non-current borrowed funds	96	5,100,429	158,437	296,025	54,726	1,052,792	6,662,505
Other current payables and accrued expenses	42,510	1,264,889	37,873	385,154	51,235	4,612	1,786,273
TOTAL FINANCIAL LIABILITIES	892,376	11,055,975	321,696	1,205,021	182,460	1,119,280	14,776,808
Open currency position	(283,027)	(10,985,921)	(321,696)	(1,205,021)	(182,460)	(1,119,229)	(14,097,354)

	TJS	USD	EUR	XDR	KWD	Other	2015 Total (restated)
FINANCIAL ASSETS:
Cash and cash equivalents	18,586	43,044	-	-	-	31	61,661
Trade and other accounts receivable	396,175	14,653	-	-	-	-	410,828
Non-current investments	182,399	-	-	-	-	-	182,399
TOTAL FINANCIAL ASSETS	597,160	57,697				31	654,888
FINANCIAL LIABILITIES:
Current trade and other accounts payable	783,636	628,429	21,777	-	-	-	1,433,842
Current borrowed funds	5,499	2,145,344	86,758	455,023	60,240	9,633	2,762,497
Non-current borrowed funds	85,326	4,285,363	148,495	283,613	53,005	925,449	5,781,251
Other current payables and accrued expenses	84,684	751,132	20,684	278,427	34,968	9	1,169,904
TOTAL FINANCIAL LIABILITIES	959,145	7,810,268	277,714	1,017,063	148,213	935,091	11,147,494
Open currency position	(361,985)	(7,752,571)	(277,714)	(1,017,063)	(148,213)	(935,060)	(10,492,606)

Currency risk sensitivity

The following table details the Group’s sensitivity to a 10% increase and decrease in the USD and XDR against the TJS for 2016 and 2015, 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 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower.

	2016		2015
	Official USD exchange rate, +10%	Official USD exchange rate, -10%	Official USD exchange rate, +10%	Official USD exchange rate, -10%
Impact on profit and loss	(1,098,592)	1,098,592	(775,257)	775,257
	2016		2015
	Official XDR exchange rate, +10%	Official XDR exchange rate, -10%	Official XDR exchange rate, +10%	Official XDR exchange rate, -10%
Impact on profit and loss	(120,502)	120,502	(101,706)	101,706

The Group is not exposed to interest rate risk as the amount of the Group’s borrowings raised with floating rate is insignificant.

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 receivable is carried out.

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

In 2016 the percentage of money collection for the sold energy in the whole group was 92.2% (accrued – 1,949,750 thousand somoni VAT inclusive, paid – 1,797,765 thousand somoni), including Tajik Aluminium Plant 107% (accrued – 280,770 thousand somoni VAT inclusive, paid – 301,177 thousand somoni).

In 2015 the percentage of money collection for the sold energy in the whole group was 76.1% (accrued - 1,916,796 thousand somoni VAT inclusive, paid - 1,656,734 thousand somoni), including Tajik Aluminium Plant 16.1% (accrued - 302,263 thousand somoni VAT inclusive, paid - 266,789 thousand somoni).

Approximately 14% of all sales in 2016 (16% in 2015) were supplied to the largest industrial consumer Tajik Aluminum Plant (TADAZ), which is currently controlled by the Government of the Republic of Tajikistan.

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

Need for impairment recognition is reviewed at each reporting 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 payment by installments contracts.

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2016

(in thousand Tajik somoni, unless otherwise stated)

	Less than 1 month	1 - 3 months	3 months - 1 year	1-5 years	More than 5 years	Undefined	2016 Total
FINANCIAL ASSETS:
Cash and cash equivalents	76,778	-	-	-	-	-	76,778
Trade and other accounts receivable	420,277	-	-	-	-	-	420,277
Non-current investments	-	-	-	-	-	182,399	182,399
TOTAL FINANCIAL ASSETS	497,055					182,399	679,454
FINANCIAL LIABILITIES:
Current trade and other accounts payable	1,666,276	-	-	-	-	-	1,666,276
Non-current trade and other accounts payable	-	-	-	15,408	-	-	15,408
Current borrowed funds	4,253,697	42,343	350,306	-	-	-	4,646,346
Non-current borrowed funds	-	-	-	1,993,994	4,668,511	-	6,662,505
Other current payables and accrued expenses	1,766,854	3,531	15,888	-	-	-	1,786,273
TOTAL FINANCIAL LIABILITIES	7,686,827	45,874	366,194	2,009,402	4,668,511		14,776,808
Difference between financial assets and liabilities	(7,189,772)	(45,874)	(366,194)	(2,009,402)	(4,668,511)	182,399	(14,097,354)

	Less than 1 month	1 - 3 months	3 months - 1 year	1-5 years	More than 5 years	Undefined	2015 Total (restated)
FINANCIAL ASSETS:
Cash and cash equivalents	61,661	-	-	-	-	-	61,661
Trade and other accounts receivable	410,828	-	-	-	-	-	410,828
Non-current investments	-	-	-	-	-	182,399	182,399
TOTAL FINANCIAL ASSETS	472,489					182,399	654,888
FINANCIAL LIABILITIES:
Current trade and other accounts payable	1,433,842	-	-	-	-	-	1,433,842
Current borrowed funds	2,385,833	-	376,664	-	-	-	2,762,497
Non-current borrowed funds	-	-	-	2,286,190	3,495,061	-	5,781,251
Other current payables and accrued expenses	1,156,027	2,523	11,354	-	-	-	1,169,904
TOTAL FINANCIAL LIABILITIES	4,975,702	2,523	388,018	2,286,190	3,495,061		11,147,494
Difference between financial assets and liabilities	(4,503,213)	(2,523)	(388,018)	(2,286,190)	(3,495,061)	182,399	(10,492,606)