1 Project Financial Statements

1EDM - ELECTRICIDADE DE MOQAMBIQUE, E.P.

1Transmission Upgrade Project -Extension and Reinforcement ofMatambo Substation - 2014-2016

1rst January 2014 to 31 December 2015

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EDM - ELECTRICIDADE DE MOgAMBIQUE, E.P.

TRANSMISSION UPGRADE PROJECT - EXTENSION AND REINFORCEMENT OF MATAMBO SUBSTATION -2014-2016

CONTENTS PAGE

INDEPENDENT AUDITOR'S REPORT 1-2

FINANCIAL STATEMENTS 3

ACCOUNTING POLICIES 4

NOTES TO THE FINANCIAL STATEMENTS 5-7

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Rua Belmiro Obadias Muianga, N' 179 Fax: +258 21 32 1984M Y ET Caixa Postai 366 Email: emst.young.ey.com

Maputo NUIT:400 006 245Building a better Mogambique www.ey.comworking world

INDEPENDENT AUDITOR'S REPORT

To the Project Management of

ELECTRICIDADE DE MOQAMBIQUE, E.P.

TRANSMISSION UPGRADE PROJECT - EXTENSION AND REINFORCEMENT OF MATAMBO

SUBSTATION

Report on the financial statements

We have audited the accompanying financial statements of TRANSMISSION UPGRADE

PROJECT - EXTENSION AND REINFORCEMENT OF MATAMBO SUBSTATION, which comprise

the statement of receipts and payments at 31 December 2015 (reflecting a total of payments of

USD 3.915.979), for the period from 1rst January 2014 to 31 December 2015, and a summary

of significant accounting policies and other explanatory notes set out in page 5.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial

statements in accordance with accounting principles generally accepted in Mozambique. This

responsibility includes: designing, implementing and maintaining internal control relevant to the

preparation and fair presentation of financial statements that are free from material

misstatement, whether due to fraud or error; selecting and applying appropriate accounting

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

Auditor's Responsibility

Our responsibility is to express an opin on on these financial statements based on our audit. We

conducted our audit in accordance with nternational Standards on Auditing. Those standards

require that we comply with ethcal requ rements and plan and perform the audit to obtain

reasonable assurance whether the fnandia statements are free from material misstatement.

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An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor's

judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity's preparation and fair presentation of the

financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity's internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,

the financial position of TRANSMISSION UPGRADE PROJECT - EXTENSION AND

REINFORCEMENT OF MATAMBO SUBSTATION as of 31 December 2015, for the year then

ended in accordance with accounting principles accordance with the accounting policies set out

in page 5.

YOUNG, LDA

2

CONSOLIDATED STATEMENT OF INCOME AND EXPENDITURE FOR THE PERIODO COMPRIDING 1 JANUARY 2014 TO 31 DECEMBER 2015

(Accounts Expressed in USD)

L Notes 31-Dec-2015 31-Dec-2014

CASH RECEIPTS

Opening balance 1.043.090 225.982

Funds received 3 3.357,736 1.192.182

Interests 4 602 349

TOTAL RECEIPTS 4.401.428 1.418.513

L I EXPENDITURES

Supply and installation 5 2.484.040 45.339

Consultants services 6 728.876 329.324

Others suppliers 7 326.392 -

Bank charges 8 1.128 690

Withholding tax 9 120 70

TOTAL EXPENDITURES 3.540.556 375.423

Closing balance 10 860.872 1.043.090

Bank balance 10 860.872 1.043.090

FINANCE AND ADMINISTRATION MANAGER PROJECT MANAGER

LlL

LUAU -

(Accounts Expressed in USD)

1. INTRODUTION

World Bank, represented by IDA - International Development Association and the Government of Mozambique represented by EDM

signed an agreement to carry Out a project called EDM Transmission Upgrade Project, Mozambique 2013-2015.

The main objective of improving the transmission system of Matambo Substation (Transmission upgrade of Matambo substation) is to

L I reduce the frequency of electricity outages in Tete province.

The specific objectives are to enable EDM to provide sufficient, affordable and reliable electricity for the purpose of economic growth.

The project shall carried out in accordance with the programme document titled "Credit number 4354 - MOZ Amended and Restated

Financing Agreement" dated 11-15-2013

L I 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

[AJ The financial statement, compiled from the Project Unit accounting records, was prepared on the cash basis of accounting. Under

cash basis of accounting, receipts are not recorded until received in cash and disbursements are assigned to the period in which cash

payment is made.

Foreign Currency Transactions

The books of accounts of the Project are maintained in American Dollars (USD). The statement of receipts and payments is also

expressed in American Dollars (USD) unless otherwise stated. Transactions in other currencies are converted in American Dollars

(USD) by the Project, and are reflected as expenditure in the year of purchase.

Procedures

The disbursements of the funds, made available by the International Development Association (IDA), are made by direct transfers or

by requests for payments sent to the Special Account, which was created with funds made available by IDA, in a bank account of the

Project maintained in Maputo (BCI - Fomento)

3. Funds received

Funds received from donor are analyzed as follows:

ir 2015

Donors (Funds transferred on 02-06-2015) 122.208Donors (Funds transferred on 28-08-2015) 567.326Direct payment made by donor 2.668.202

Total cash receipts 3.357.736

U 4

(Accounts Expressed in USD)

U4. Interests

WI Revenue from interest relating with the Project's deposit account, could be analyzed as follows:

2015

January 60February 54March 61April 58

May 38June 31

July 31

August 40

September 66

October 64November 50December 49

602

U[ . 5. Supply and installation

Expenses with Supply an installation are made as follows:

2015 2014

Joint Venture National Contracting Co. Ltd -EMCO Ltd 2.484.040 45.339

2.484.040 45.339

6. Consultant's services

L I Expenses with Consultant's services are made as follows:

2015 2014

SMEC Intemational (Pty) Ltd 728.876 329324

728.876 329.324

-incr.-LERM .VrWWILIm Wo .P 1UrI %I 4 31 UMEilDErAUI a

(Accounts Expressed in USD)

7. Others suppliers

Expenses with Others suppliers are made as follows:

2015 2014

Siemens, S.A. 326.392 0

326.392 0

8. Bank charges

Bank charges corresponds are made as follows:

2015

April 357May 374June 76August 20September 287November 13

1.128

9. Withholding tax

Corresponds to the interest withholding tax, and could be analyzed as follows:

2015

January 12February 11March 12April 12May 8

June 6

July 6August 8September 13October 13November 10December 10

1201

6

(Accounts Expressed in USD)

10. Closing Balance

The financial position of the income over expenditure as at December 31, 2014, corresponds to the existing final balance in banks,

which is represented by:

2015 2014

BCl Fomento - 10488126.10.001 - USD 860.872 1,043.090

860.872 1.043.090

11. Taxes

The possibility exists that the fiscal authorities could review the amount of company tax as well as other taxes paid by the company

including employee tax and withholding taxes.

FINANCE AND ADMINISTRATION MANAGER PROJECT MANAGER

2:ALV

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