48
49
Interim Financial Statements
Starting with the year 2011 and in accordance with paragraph 5 of Article 82 of
Law 2238/1994, the Group companies whose financial statements are audited by
mandatory statutory auditor or audit firm, under the provisions of Law 2190/1920,
are subject to a tax audit by statutory auditors or audit firms and receives annual
Tax Compliance Certificate. In order to consider that the fiscal year was inspected
by the tax authorities, must be applied as specified in paragraph 1a of Article 6
of POL 1159/2011.
For the fiscal year 2012 and 2013, the Group companies which were subject to
tax audit by statutory auditors or audit firm, received a Tax Compliance Certificate
free of disputes in 2013 and 2014 accordingly.
For the 2014 tax audit, the companies of the Group which operate in Greece have
been subjected to a tax audit by Sworn Auditors according to article 65A par. 1 of
law 4174/2013 and of law 4262/2014. Said tax audit has been completed during
2015 and the tax certificates were distributed by the statutory auditors.
For fiscal year 2015, the tax audit which is being carried out by the auditors is
not expected to result in a significant variation in tax liabilities incorporated in the
financial statements. This tax audit is now in progress and the tax certificates are
expected after the publication of the first semester 2016 financial statements by
the statutory auditors. In case that additional tax liability arise, it is not expected to
affect significantly the financial statements.
8.17 Other Contingent Assets & Liabilities
Note on Independent Power Transmission Operator S.A. (ADMIE)
On 17.12.2014, Independent Power Transmission Operator S.A. (IPTO or ADMIE)
sent briefing notes to our subsidiary company, Aluminium of Greece (henceforth
the “Subsidiary”), requesting the issuance of a credit invoice for the amount of
€
17.4m relating to the Excise Tax (ET) on Gas consumed at the Combined Heat
and Power (CHP) Plant for the period of 28/11/2012 until 31/10/2013 (henceforth
the “Period”). Said ET was invoiced to ADMIE during the aforementioned period,
pursuant to its related debit notes.
In relation to the above, we note the following:
- The CHP station is a dispatchable cogeneration unit, part of which qualifies
as highly efficient (High-Efficiency Combined Heat and Power/ HE-CHP) under
the Code’s provisions, but also under the specific operational terms which were
approved by way of RAE’s Decision No. 700/2012 (as amended by Decision
341/2013).
- According to Article 197(2) of Law 4001/2011, from 1/9/2011 onwards, all HE-
CHP stations, regardless of their installed capacity, gain priority for the allocation
of their loads. In particular, in accordance with Article 197(3) of the above Law,
HE-CHP stations with an installed capacity over 35MW are to be compensated
with the tariff which derives from the table displayed in Law 3468/2006, plus the
Natural Gas Clause Coefficient (CC), which is calculated using the following for-
mula: CC = 1+(AGP-26)/(100 x nel)
Where:
AGP: the monthly mean average unitary selling price of natural gas to NG users
in Greece who are also electricity customers, in
€
/MWh using the gross calorific
value (GCV). This value is determined by the Ministry of Environment, Energy and
Climate Change’s Petroleum Policy Directorate and is communicated to Hellenic
Transmission System Operator S.A. (HTSO or DESMIE) on a monthly basis.
nel: the electrical efficiency of the provision for High-Efficiency CHP based on
the gross calorific value (GCV) of natural gas, which is defined in accordance
with the station’s technical information, as reported by the relevant Operator. The
CC value cannot be lower than one (1) and is determined on a case-by-case
basis by way of a decision made by the Minister of Environment, Energy and
Climate Change (henceforth the “Ministerial Decision”) following consultation by
RAE. RAE’s opinion must also take the plant’s installed capacity into account, in a
way so that the determined value generally decreases as the capacity increases.
Moreover, the AGP is displayed in
€
/MWh and
includes the ET, as specified in the letter sent
by the Ministry of Environment, Energy and Cli-
mate Change’s Petroleum Policy Directorate on
2/11/2011.
The High-Efficiency CHP station owned by the
subsidiary company Aluminium of Greece has an
installed capacity of 334MW, of which 134.6MW
has priority in entering the system (HE-CHP) in ac-
cordance with the aforementioned decisions which
approved the Specific Operational Terms. From
1/9/2011 until 31/10/2013 (which ADMIE set as the
final date for settling the ET), the CC value, as de-
fined above, had not been established because the
relevant decision had not been issued by the Minis-
ter of Environment, Energy and Climate Change, de-
spite the fact that the Regulatory Authority for Energy
had issued two relevant opinions in accordance with
the provisions of Article 197(2) of Law 4001/2011
(RAE 3/2012 and RAE 5/2013). Consequently, the
Subsidiary’s HE-CHP neither issued invoices nor
received a tariff in accordance with the provisions
of Law 4001/2011. Instead, following the signing
of a Private Agreement between the Subsidiary
and the Operator of Electricity Market (LAGIE) on
26.4.2013, HE-CHP issued temporary invoices, for
the entire aforementioned period, at the minimum
price which could have resulted from the applica-
tion of the mathematical formula established by Law
4001/2011 (if the CC value was set at the unit price,
i.e., if the AGP amounted to 26
€
/MWh). According
to the Private Agreement, the final settlement was to
take place following the establishment of the CC by
way of the issuance of the relevant Ministerial Deci-
sion, so that dispatched HE-CHP energy would be
compensated in accordance with the provisions of
the “Supplementary Agreement for Transactions
relating to Electricity from the Dispatchable High-
Efficiency CHP Station” (Government Gazette B’
3108/23.11.2012) which was concluded between
the Subsidiary and LAGIE on 28.11.2012.
The aforementioned provisions of Law 4001/2011, in
conjunction with the provisions specified in the let-
ter sent by the Ministry of Environment, Energy and
Climate Change’s Petroleum Policy Directorate, as
well as the provisions of both the Subsidiary’s Pri-
vate Agreement with LAGIE and the “Supplementary
Agreement for Transactions relating to Electricity
from the Dispatchable High-Efficiency CHP Station”
between the two parties, require that the Natural
Gas ET is recovered to the extent that the natural
gas was consumed in generating electricity. There-
fore, the Subsidiary also recognized the part of the
Natural Gas ET which corresponded to consump-
tions made in generating useful heat (steam for the
Alumina production process) as a liability (deducted
from ADMIE’s receivables balance), the total value
of which amounted to
€
9.1m.
Regarding the remaining balance of ADMIE’s rel-
evant briefing note, which amounts to
€
8.3m and
relates to the Natural Gas ET which corresponded to
consumptions for electricity generation (HE- CHP),
it is noted that this does not constitute a liability for
the Group. Specifically, in accordance with IAS 37,
“a liability is a present obligation of the entity arising
from past events, the settlement of which is expect-
ed to result in an outflow from the entity of resources
embodying economic benefits”. Based on the above and given that
the Subsidiary has not received a final compensatory price for the
Period (by way of the CC, see above), while, based on the Private
Agreement between the Subsidiary and LAGIE, the final settlement will
take place following the issuance of the relevant Ministerial Decision
regarding the establishment of the CC (which has not been issued),
the Subsidiary believes that it has no commitment which would legally
constitute an obligation to return the amount of
€
8.3m. A relevant li-
ability may arise once the aforementioned Ministerial Decision regard-
ing the establishment of the CC is issued, in which case the Group
estimates that the final compensation that it will receive for electric-
ity dispatched to the system as High-Efficiency CHP will exceed the
amount of
€
8.3m. Therefore, it is not expected that a loss will result for
the Company Group.
Finally, in respect of the final settlement of the CHP pricing for 2013
it is noted that, on the 4th of June 2015 the subsidiary Aluminium of
Greece (the Subsidiary), sent a letter to the Operator of the Electric-
ity Market (LAGHE) asking the convene of the Dispute Settlement
Committee as provided in the article 16 p. 2 of the “Supplementary
Agreement for Transactions relating to Electricity from the Dispatch-
able High-Efficiency CHP Station” signed between the parties. The
dispute in consideration concerns the imposition of a 10% special tax
plus an extra 10% of one-off discount on tariffs, both regarding the
financial year 2013. On 11/6/2015 LAGIE accepted the request of the
Subsidiary and further actions are expected to occur within the follow-
ing period.
The minutes of the off-court Settlement Committee dated 24/11/2015,
confirmed the failure for a settlement agreement between the parties.
Mytilineos SA with its letter dated 21/1/2016 proposed to the Greek
Operator of Electricity Market (LAGIE) to bring the said dispute to ar-
bitration after the Regulatory Authority for Energy (RAE) based on the
provisions of the article 16 par. 4 of the Supplementary Power Pur-
chase Agreement signed between the parties on 28/11/2012. Further
to that, Mytilineos SA has also attached a draft arbitration memoran-
dum pending LAGIE’s final consent.
Power purchase agreement between ALUMINIUM OF GREECE and
PPC
Following arbitral decision no. D1/1/2013 (the Arbitral Decision) , which
was issued by RAE’s Permanent Court of Arbitration on 31.10.2013
which defined the fair and reasonable price for the electricity supplied
by PPC to ALUMINIUM OF GREECE (henceforth the “Subsidiary Com-
pany”) during the period of time between 1-7-2010 and 31-12-2013,
and after the decision of the Athens Court of Appeal No 634/2016,
the two parties have not signed a power purchase agreement for the
period between 1/1/2014 and the date on which the interim financial
statements for the first half of 2016 were approved by the Board of
Directors (BOD).
On 7/1/2014, PPC’s Board of Directors requested the convening of an
Extraordinary General Meeting (EGM), the main topic of discussion of
which concerned the terms by which the Subsidiary Company would
be charged from 1/1/2014 onwards. PPC’s Extraordinary General
Meeting eventually convened on 28/2/2014 and decided the following:
a) The provision of an exceptional discount of 10% on PPC’s approved
tariffs for High Voltage customers, for 1 + 1 year, from 1.1.2014 on-
wards.
b) A further 10% discount on top of the aforementioned discount for
High Voltage customers with an annual consumption over 1000 GWH.
c) A further 25% discount on the A4 tariff for all High Voltage cus-
tomers, apart from those with an annual consumption over than 1000
GWH, for consumption during off-peak hours of minimum demand
(nighttime and weekends), as an incentive for increasing consumption
during these time periods.
Following that, PPC unilaterally invoices the Subsid-
iary Company, from 1.1.2014 onwards on the basis
of the pre-mentioned industrial tariff, plus a 20% dis-
count according to the relevant EGM decision.
The Subsidiary considers that the points under a,
b and c above, as part of the said EGM decision,
merely constitute an offer of pricing terms on behalf
of PPC, to its large industrial customers. In this re-
spect, the Subsidiary Company has entered in dis-
cussions with PPC in good faith, expressing both
its opinion and reservations in relation to the terms
and content of the power purchase agreement un-
der negotiation, particularly taking into account the
relevant developments.
More specifically, according to the provisions of L.
4336/2015 (Gazette 94/Α’/2015), the Hellenic Re-
public, in the context of the signing of the 3rd Mem-
orandum with the Institutions, undertook the obliga-
tion to review the invoices of PPC up to September
2015, substituting the 20% discount, with invoices
based on the marginal cost of production, especial-
ly taking into account the volume and consumption
profile of each customer that may affect said cost.
In addition, in the beginning of 2016, the Hellenic
Competition Commission (HCC) took a unani-
mous decision and accepted the commitments
undertaken by PPC, based on article 25 par. 6 of
L. 3959/2011, in the context of an investigation held
by HCC in the Greek electricity market, following a
complaint submitted by Mytilineos Holdings and the
Subsidiary Company regarding abuse of dominant
position from PPC.
Particularly, based on HCC 621/2016 decision, PPC
committed to continue supplying electricity to the
Subsidiary Company based on current terms and
conditions, accepting among others the price paid
by the Subsidiary Company which is equal to the
one determined by the Arbitral Decision. PPC also
committed to negotiate with the Subsidiary Com-
pany in good faith and due time in accordance with
Legislation and to refrain from any action, state-
ment, announcement etc that could adversely affect
said negotiations. The negotiations continue as of
today in a good faith.
The context of said negotiation is governed by cur-
rent Legislation and the following interpretative deci-
sions, in both National and European level, having a
special reference on the issue of the pricing of the
Subsidiary Company and mainly validating the Arbi-
tral Decision:
- The decisions of Regulatory Authority of Energy
(RAE): 346/2012, 831Α /2012, 798/2011, 692/2011
- The decision of the Athens Court of Appeal
(634/2016) that rejects the petition for annulment
filed by PPC against the Arbitral Decision.
- The 25/3/2015 decision of the European Com-
mission [C(2015)1942 final], that disposes to file the
petition of PPC, with allegations for granting state
aid by the Arbitral Decision.
- The decision 621/2015 of the HCC.
- The aforementioned provisions of L. 4336/2015.
