FINANCIAL STATEMENTS

at the date and for the financial year ended

December 31, 2021

 

 

prepared in accordance with the accounting regulations in accordance with

the International Financial Reporting Standards

approved by the Ministry of Finance Order no. 2844/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONTENTS:

Page

Financial Statements

 

Statement of the Financial Standing at December 31 2021

2-3

Statement of the profit or loss and other global result elements for the year ended December 31, 2021

4

Statement of changes in equity on December 2021

5

Cash-flow Statement for the year ended December 31 2021

7-8

Explanatory Notes to the financial statements on December 31 2021

9

 

 

 

I. FINANCIAL STANDING on DECEMBER 31st, 2021

- RON-

Name

Note:

December 31,

2021

December, 31

2020

ASSETS

Intangible assets

Tangible assets

5

512,823,088

504,534,005

Intangible assets

6

6,941,740

4,313,253

Financial Assets

7

411,171

1,111,921

Receivables related to the deferred corporate tax

14

4,637,485

4,955,676

Total Non-current assets

 

524,813,484

514,914,855

Current assets

Inventories

8

5,312,087

5,912,006

Trade receivables and other receivables

9

48,922,158

40,260,134

Cash and cash equivalents

10

191,751,271

198,257,333

Prepaid expenses

 

623,444

602,808

Total current assets

 

246,608,960

245,032,281

TOTAL ASSETS

 

771,422,444

759,947,136

SHAREHOLDER’S EQUITY AND LIABILITIES

Equities

Subscribed and paid-up share capital

11

28,569,842

28,569,842

Legal reserves

11

5,713,968

5,713,968

Revaluation reserves

11

18,360,121

20,931,765

Other reserves

11

517,047,601

500,269,257

Retained earnings

11

46,288,764

40,678,977

Year’s Result

11

51,928,770

60,846,759

Total shareholders’ equities

 

667,909,066

657,010,568

Long-term liabilities

Long-term liabilities

13

1,287,802

-

Long-term liabilities to employees

13

16,628,683

19,864,043

Other long-term liabilities

12

3,458,842

3,470,722

Total long-term liabilities

 

21,375,327

23,334,765

Current liabilities

Trade liabilities

12

32,147,560

23,583,540

Current Corporate Tax

12

2,049,325

738,139

Other liabilities

12

27,106,187

29,892,967

Short-term liabilities to employees

13

12,065,900

14,127,500

Short-term provisions

13

8,769,079

11,259,657

Total current liabilities

 

82,138,051

79,601,803

Total liabilities

 

103,513,378

102,936,568

TOTAL EQUITIES AND LIABILITIES

 

771,422,444

759,947,136

These financial statements, from page 2 to page 57, have been authorized for issue and signed by the company management on March 21st, 2022.

 

Director General

Economic Director

Eng.Dorin Tudora

Econ. Sanda Toader

 

The attached notes, from 1 to 57, have been authorized for issue and signed by the company’s management on March 21, 2022.

 

II. STATEMENT OF PROFIT or LOSS and other ELEMENTS of the GLOBAL RESULT for the FINANCIAL YEAR ended DECEMBER 31st, 2021

 

 - RON-

Name

Note:

December 31,

2021

December, 31

2020

Revenues from contracts

 

412,786,582

406,928,337

Other revenues

 

40,684,781

40,707,357

Earnings from disposal of assets

 

4,914,629

-

Total operating revenues

16

458,385,992

447,635,694

Stocks Expenses

 

5,448,472

6,106,005

Expenses with energy and water

 

16,552,710

12,465,234

Personnel expenses

 

168,219,096

162,558,904

Impairments of fixed assets, less adjustments related to rights of use resulted from leasing contracts

 

51,939,320

47,384,780

Impairments for the rights of use resulted from leasing contracts

 

1,672,808

1,925,587

Impairments of current assets

 

277,838

(346,944)

Expenses with external services

 

109,775,835

107,481,861

Loss from disposal of assets

 

-

41,323

Provision adjustments

 

(4,143,683)

(2,802,153)

Other expenses

 

50,906,821

47,804,980

Total Operating Expenses

17

400,649,217

382,619,577

Operating Profit

 

57,736,775

65,016,117

Financial Revenues

 

3,428,282

6,122,271

Interest expenses related to leasing contracts

 

202,065

532,077

Other financial revenues

 

127,759

153,711

Financial Expenses

 

329,824

685,788

Financial profit

18

3,098,458

5,436,483

Profit before income tax

 

60,835,233

70,452,600

Expenses with current corporate tax

14

9,155,006

9,176,821

Expenses with (revenues coming from) deferred corporate tax

 

(248,543)

429,020

Profit of the period

 

51,928,770

60,846,759

Actuarial loss from discounted benefits granted upon retirement

 

2,975,347

(2,160,408)

Revaluation surplus (Loss from impairment) of tangible assets)

 

-

2,376,682

Other elements of the equities - retained earnings

 

408,156

-

Total other global result elements that will not be subsequently reclassified as profit or loss

 

3,383,503

216,274

Net increase of the modernization quota reserve

 

9,810,724

3,192,763

Total other global result elements that will not be subsequently reclassified as profit or loss

 

9,810,724

3,192,763

TOTAL OTHER GLOBAL RESULTS

 

13,194,227

3,409,037

TOTAL GLOBAL RESULT

 

65,122,997

64,255,796

Earnings per share

 

6.00

7.03

 

These financial statements from page 2 to page 57 have been authorized for issue and signed by the company management on March 21st, 2022.                                                       

Director General

Economic Director

Eng.Dorin Tudora

Econ. Sanda Toader

                                                                                

The attached notes, from 1 to 24, are integral part of these financial statements.

 

 

III. STATEMENT OF THE CHANGES IN EQUITIES ON DECEMBER 31st, 2021

 

- RON-

Name

Share capital

Legal reserves

Revaluation reserves

Other reserves

Retained earnings

Year’s profit or loss

Total shareholders’ equities

Balance on January 1, 2021

28,569,842

5,713,968

20,931,765

500,269,257

40,678,977

60,846,759

657,010,568

Net result of the year

-

-

-

-

-

51,928,770

51,928,770

Actuarial gains of the period

-

-

-

-

2,975,347

-

2,975,347

Surplus from revaluation

-

-

(2,571,644)

-

2,571,644

-

-

Other elements of the equities - retained earnings

-

-

-

-

408,156

-

408,156

Retained earnings coming from the adoption, for the first time, of IAS 19 - paper profit

-

-

-

-

(1,175,672)

-

(1,175,672)

Retained earnings coming from the adoption for the first time of IAS 29 - achieved earnings

-

-

-

-

1,175,672

-

1,175,672

Allocation of profit provided by law - exemption of reinvested profits

-

-

-

1,484,680

47,138

(1,531,818)

-

Net increase of the modernization quota reserve

-

-

-

9,810,724

-

-

9,810,724

Total other global result elements

-

-

(2,571,644)

11,295,404

6,002,285

(1,531,818)

13,194,227

Total global revenues related to the period

-

-

(2,571,644)

11,295,404

6,002,285

50,396,952

65,122,997

Dividends due to shareholders

-

-

-

-

(392,498)

(59,314,941)

(59,707,439)

Prescribed distributions

-

-

-

5,482,940

-

-

5,482,940

Total transactions with the owners directly recognized in equities

-

-

-

5,482,940

(392,498)

(59,314,941)

(54,224,499)

Balance on December 31, 2021

28,569,842

5,713,968

18,360,121

517,047,601

46,288,764

51,928,770

667,909,066

 

 

STATEMENT OF THE CHANGES IN EQUITIES ON DECEMBER 31st, 2020

 

- RON-

Name

Share capital

Legal reserves

Revaluation reserves

Other reserves

Retained earnings

Year’s profit or loss

Total shareholders’ equities

Balance on January 1, 2020

28,569,842

5,713,968

21,111,893

495,540,772

43,997,162

58,876,719

     653,810,356

Net result of the year

-

-

-

-

-

60,846,759

60,846,759

Actuarial loss of the period

-

-

-

-

(2,160,408)

-

(2,160,408)

Surplus out of reevaluation of tangible assets

-

-

2,372,778

3,904

-

-

2,376,682

Surplus from revaluation

-

-

(2,552,906)

-

2,552,906

-

-

Allocation of profit provided by law - exemption of reinvested profits

-

-

-

1,531,818

(412,543)

(1,119,275)

-

Net increase of the modernization quota reserve

-

-

-

3,192,763

-

-

3,192,763

Total other global result elements

-

-

(180,128)

4,728,485

(20,045)

(1,119,275)

3,409,037

Total global revenues related to the period

-

-

(180,128)

4,728,485

(20,045)

59,727,484

64,255,796

Dividends due to shareholders

-

-

-

-

(3,298,140)

(57,757,444)

(61,055,584)

Total transactions with the owners directly recognized in equities

-

-

-

-

(3,298,140)

(57,757,444)

(61,055,584)

Balance on  December 31, 2020

28,569,842

5,713,968

20,931,765

500,269,257

40,678,977

60,846,759

657,010,568

Note: The position „Other reserves” includes also the reserve representing the modernization quota in amount of 470,931,860 RON at 31.12.2021, namely 461,121,136 RON at 01.01.2021. This reserve has a special regime, provided in GD no.168/1998, this being destined exclusively to the financing of the modernization works and development works related to the goods belonging to the public domain. The modernization quota is being collected at the extent of capitalization and proceeds of the production and is being reflected in reserves accounts, on account of the expenses.  On a monthly basis is being written back to the revenues the modernization quota at the level of depreciation of the fix assets financed out of this source.

These financial statements from page 2 to page 57 have been authorized for issue and signed by the company’s management on March 21st, 2022.                       

Director General

Economic Director

Eng.Dorin Tudora

Econ. Sanda Toader

 

The attached notes, from 1 to 24, are integral part of these financial statements.

 

 

IV. CASH-FLOW STATEMENT FOR THE YEAR ENEDED December 31, 2021 (DIRECT METHOD)

 

- RON-

 

Name of the Item

12 months, 2021

 

12 months 2020

 

 

Cash flows from operating activities:

 

 

+

Proceeds from services supply

447,653,380

451,156,972

+

Proceeds from interests related to banking placements

3,320,322

6,572,110

+

Other proceeds

9,830,470

4,902,357

-

Payments to the suppliers of goods and services

121,740,032

117,925,202

-

Payments to and on behalf of the employees

166,734,770

160,129,565

-

VAT Payments

51,157,829

43,942,659

-

Expenses with corporate tax and specific tax

7,868,902

11,515,138

-

Other payments regarding operating activities

43,857,072

41,803,337

A

Net cash from operating activity

69,445,567

87,315,538

 

Cash flows from investment activities:

 

 

+

Proceeds from sale of tangible assets

302,162

 63,378

+

Proceeds from modernization quota

47,490,268

36,980,848

-

Payments for purchase of tangible assets

63,416,908

102,602,530

B

Net cash from investing activity

(15,624,478)

(65,558,304)

 

Cash-flows from financing activities

 

 

-

Paid Dividends

57,690,483

59,117,819

-

Payments on the debt related to the leasing

2,430,264

2,764,889

-

Interest payments

206,404

194,144

C

Net cash from financing activities

(60,327,151)

(62,076,852)

 

Net increase of the cash and cash equivalents=A+B+C=D2-D1

(6,506,062)

(40,319,618)

 

D1

Cash and cash equivalents at the beginning of the period

198,257,333

238,576,951

 

D2

Cash and cash equivalents at the end of the period

191,751,271

198,257,333

Cash and cash equivalents at 31.12.2021 have decreased by 3.3% compared to December 31, 2020 (191,751,271 RON compared to 198,257,333 RON), fact due to the decrease of the cash out of the operating activity.

Of the total of 191,751,271 million RON in the balance as of 31.12.2021, the share of the modernization quota is of 124,109,878 RON.

The effects of the three activity areas (operation, investment and financing) over the cash in the 12 months period of 2021 reveal the followings:

- the operating activity triggered a cash-flow in amount of 69,445,567 RON;

- the investments activity ended with a negative cash-flow in amount of 15,624,478 RON;

- the financing activity has lowered the total cash flow by 60,327,151 RON, due to the cash outputs mainly for the payment of dividends in amount of 57,690,483 RON.

The value of the net cash flow from the operating activity registers a decrease of 17,869,971 RON due to the increase of payments to the suppliers, following the augmentation of the electric power prices and natural gas, of payments to employees and to the state budget.  

The net cash from the investment activity register a negative value, higher with 49,933,826 RON compared to the level registered in 2020, due to the decrease of the cash outputs for the payment of investment suppliers.  

 

The net cash from the financing activity registers in both compared periods negative amounts determined by the payment of dividends to the shareholders and the amounts related to leasing.

 

These financial statements from page 2 to page 57 have been authorized for issue and signed by the company’s management on March 21st, 2022.

 

Director General

Economic Director

Eng.Dorin Tudora

Econ. Sanda Toader

 

The attached notes, from 1 to 24, are integral part of these financial statements.

 

 

V. EXPLANATORY NOTES TO THE FINANCIAL STATEMENT ON DECEMBER 31, 2021

 

1. Business Description and General Information

 

The company “CONPET” S.A. (“The Company”) is a joint-stock company, with a unitary system administration, as per Law no. 31/1990 on the companies, republished, subsequent amendments, is registered at the Prahova Trade Registry under no. J29/6/1991, and the Financial Supervisory Authority by the registration certificate no. 7227/1997.

Address of the registered offices is Ploiesti City, No. 1-3, Anul 1848 Street, Prahova County.

 

CONPET S.A. is the concessionaire of the crude oil, rich gas, condensate and ethane National Transport System, capacity acquired, in 2002, following the conclusion with the National Agency of Mineral Resources (NAMR), the competent authority representing the State’s interests in the oil resources sector, of an Oil Concession Agreement, approved by GD no.793/25.07.2002.

 

The company’s shares are being traded at the Bucharest Stock Exchange (BSE) starting September 5, 2013, under the “COTE” symbol.

Currently, the company CONPET S.A. is included in 7 indexes of the total 9, namely BET, BET-TR, BET-XT, BET-XT-TR, BET-BK, BET-NG and BET Plus.

 

On 31.12.2021, CONPET S.A. had a market capitalization of 683.9 million RON (138,2 million Euro), ranking 26 in Top 30 issuers according to capitalization”.

 

Company’s Establishment

CONPET is set up based on GD no.1213/20.11.1990 regarding the set-up of the joint stock commercial companies in the industry, pursuant to Law no.15/1990 regarding the reorganization of the public economic units as autonomous administrations and joint stock companies, by taking over all assets and liabilities of the former Crude Oil Pipeline Transport Enterprise (Rom.I.T.T.C.).

 

The shareholder structure and number of voting rights at 31.12.2021 are:

  1. a) The Romanian State by the Ministry of Energy, holding 5,083,372 shares representing 58.72% of the share capital,

    b) The Romanian State by the Ministry of Energy, holding 2,292,221 shares representing 26.47% the share capital,

    c) natural persons, with 1,281,935 shares representing 14.81% of the share capital.

    Company’s Mission

CONPET mission is the operation of the National Transport System via Pipelines under safe and secure conditions, free access to the system’s available capacity to all the inquirers, authorized legal persons, under equal conditions, on a non-discriminatory and transparent basis.

 

Other Information on the Company’s Business

As per the Articles of Incorporation, the company’s core business is the transport of crude oil, rich gas, ethane and condensate via pipelines aiming at supplying the refineries with crude oil and derivatives out of domestic production, as well as with imported crude oil (NACE code 4950-“transports via pipelines”).

CONPET supplies transport services for its clients both via the National Transport System concessioned based on the Oil Concession Agreement of the National Transport System of Crude Oil, Rich Gas, Condensate and Ethane via pipelines, as well as by rail, from the loading ramps to the refineries, for the oil areas not connected to the major transport pipelines.

The crude oil National Transport System represents the ensemble of the major interconnected pipelines ensuring the collection of the oil extracted from the exploitation areas or of the imported, from the delivery sites to the processing units.

 

CONPET, as Concessionaire of the crude oil National Transport System entitles as common carrier and the obligation to provide, as per the legal provisions, free access to the system’s available capacity to all the inquirers, authorized legal persons, under equal conditions, on a non-discriminatory and transparent basis.

The crude oil National Transport System belongs to the Romanian State public domain and is being administered by NAMR (as per the Oil Law provisions). This comprises a pipeline system of approx. 3,800 km and a transport throughput of 18.5 million tons/year.

 

The Legal Environment

The activity in the oil sector is being regulated by the Oil Law no. 238/2004.

The National Agency for Mineral Resources (NAMR) represents the interests of the State in oil resources domain and is the competent authority authorized to apply the dispositions of Law 238/2004. As per the Oil Law, the National Agency for Mineral Resources entitles as Concession Provider of the goods belonging to the public domain, concessioned to the operators acting in the oil industry.

The main responsibilities of NAMR are the followings:

- negotiates and concludes, on behalf of the State, oil agreements;

- grants mining concession licenses and exploitation permits;

- issues regulatory acts, norms, instructions, orders and regulations;

- controls the compliance, by the holders of the concession agreements with the concession licenses and exploitation permits conditions;

- manages the crude oil National Transport Systems via pipelines and regulates the exploitation activities thereof by system’s concession agreements concluded;

- annuls the concession/administration acts;

- approves the tariffs and the frame-contract for the transport of crude oil, rich gas, condensate and ethane.

 

 

The tariff for the supply of the transport service via the National Transport System of crude oil, rich gas, condensate and ethane.

 

The transport tariff stands for the exchange value of the transport service supplied by the holder of the oil concession, as common carrier for the transport, via the crude oil National Transport System, of an oil ton along the oil take-over sites from the domestic producers or import and the delivery sites to the refineries.

 

The company practices different transport tariffs for the two subsystems belonging to the National Transport System, namely the subsystem for the transport of the crude oil, rich gas, condensate and ethane from the domestic production and the subsystem for the transport of the imported crude oil. For the transport on the import subsystem are being settled tariffs per refineries and per transported quantity installments, being applied the bracket tariff model.

The transport tariffs are being established in accordance with NAMR Order no.53/2008 for the approval of the guidelines regarding the criteria, methodology and settlement procedure of the regulated for the transport via the National Transport System and are being approved by NAMR as competent authority.  

The transport tariffs are determined by the value of transmission allocation of the amount of oil transported to the beneficiaries, the appropriate distances, using a methodology based on the determination of the cost of service, defined as all the revenue required to cover the transportation system operations, including:

- the operating cost, including: material expenses, personnel expenses, pipeline maintenance expenses, expenses with energy, gas and water, costs related to the amortization of the fixed assets, the royalty and other taxes applicable to the transporter, expenses related to the provision of pipeline guard, decontamination expenses, other expenses;

- modernization and development quota;

- a reasonable profit margin.

 

2. Preparation Grounds

 

(a) Statement of Compliance

These financial statements of the Company have been drafted under the accounting regulations compliant with the International Financial Reporting Standards (“IFRS”) approved by Order of the Ministry of Public Finances no.2844/2016  

The IFRS standards represent the standards adopted according to the procedure provided by the Regulation (EC) no.1.606/2002 of the European Parliament and the Council from July 19, 2002 on the application of the International Financial Reporting Standards and include standards and interpretations approved by the Committee for Accounting International Standards (“IASB”), Accounting International Standards (“IAS”) and interpretations issued by the Committee for the Interpretation of the International Financial Reporting Standards (“IFRIC”).

 

The financial statements prepared at the date and for the financial year ended December 31, 2021, have been audited.

(b) Overview of the Financial Statements

The financial statements are being presented in compliance with IAS,1 the Overview of the Financial Statements.  The company has adopted an overview based on liquidity within the financial standing and an overview of the revenues and expenses according to the nature thereof within the statement of profit and loss and other elements of the global result, considering that these methods of presentation offer credible information and more relevant than the information presented based on other methods permitted by IAS 1.

 

(c) Functional and Presentation Currency

The financial statements are being presented in Romanian Lei (RON), as per the applicable accounting regulations, all amounts being rounded at the closest RON. The Romanian Leu (RON) is also the functional currency of the Company, as it is being defined by IAS,21, The effects of the variation of the currency.

 

(d) Evaluation Grounds  

The financial statements are being prepared at historical cost, except for the tangible assets, other than the tangible assets in progress, which are being assessed at the reevaluated value, while the stocks are being assessed at the smallest value between the cost and the net achievable value.  

The accounting policies defined here-below have been consistently applied for all periods presented in these financial statements.  

 

(e) Business Continuity

The financial statements have been prepared considering the ongoing concern.

 

(f) Accounting Estimates and Professional Reasoning

The preparation of the financial statements pursuant to the International Financial Reporting Standards („IFRS”) implies the use, by the Company, of estimates, professional reasoning and hypotheses affecting the reported value related to assets, liabilities, revenues and expenses. Estimates and assumptions are continuously evaluated and are based on historical experience and other factors, including predictions of future events that are believed to be reasonable under certain circumstances. The results of these estimates set the grounds for the professional reasonings regarding the accounting value of the assets and liabilities that cannot be obtained from other information sources. The actual results may be different from the estimates values.

The significant reasonings used by the management for the application of the Company’s accounting policies and the main sources of uncertainty regarding the estimates have been the same with those applied to the financial statements related to 2020.

 

(g) The Use of Estimates and Reasonings

CONPET concluded, in 2002, a concession contract with NAMR according to which the Company is entitled to use public patrimony assets including the goods part of the crude oil National Transport System.  

The company CONPET operates as a joint stock company, as per the Law no.31/1990 on the companies, republished, with subsequent amendments, where most of shares are being held by the State, being a public enterprise as per GDO. 109/2011 on corporate governance of public enterprises. The services supplied by the company are not public services, as they are being supplied in the benefit of the clients legal persons, therefore do not fall under the provisions of IFRIC 12, Services Concession Agreements.

 

3. Accounting Policies

Hereinafter, there are being described the significant accounting policies applied consistently by the company on preparation of its financial statements.

 

(a) Transactions in Foreign Currency

The transactions in foreign currency are being expressed in RON by application of the currency from the date of transaction. The monetary assets and the debts expressed in foreign currency at the end of the period are being transformed in RON at the currency valid at that date.

The earnings and losses generated by the differences of currency, realized or not realized, are being registered in the profit and loss statement and other elements of the global result of the respective financial year.  

 

The foreign exchange of the main foreign currencies were:

 

 

December 31, 2021

December 31, 2020

RON/EURO

4.9481

4.8694

RON/EURO

4.3707

3.9660

RON/GBP

5.8994

5.4201

 

(b) Accounting for the Effect of Hyperinflation

In accordance with IAS 29 Financial reporting in hyperinflationary economies, the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy shall be presented in the current unit balance-sheet date, i.e. non-monetary items are restated using a general price index from date of acquisition or contribution.

Therefore, the values reported in terms of purchasing power on December 31, 2003 are treated as the basis for the carrying amounts of these financial statements.

As the characteristics of the economic environment in Romania indicate the cessation of hyperinflation, starting January 1,2004, the company no longer applies IAS 29.  

 

(c) Financial Instruments

(i) Non-derivative financial assets

The company initially recognizes the financial assets (receivables and deposits) the date they have been initiated.  

All other financial assets, here included the assets designated at fair value through profit or loss, are recognized initially on the trade date, when the Company becomes party of the contractual terms of the instrument.

Any interest in the financial assets transferred that is created or retained by the Company is recognized separately, as asset or liability.

The financial assets and debts are offset and in the statement of the financial position is being presented the net value exclusively when the Company has the legal right to offset the amounts and intends either to settle them on a net basis, or to realize the asset and settle the obligation simultaneously.  At 31.12.2021, the company holds the following non-derivative financial assets: cash, cash equivalents and receivables.

 

Short-term investments

The treasury accounting, as per item 92 of Order 2844/2016, provides for the records related to existence and movement of short-term investments, cash in bank accounts/pay offices, the short-term bank credits and other treasury values.

In the category of short-term investments are comprised Government securities: Government bonds, as well as treasury bills, which have been purchased in view of achieving a short-term profit.

On entering the Company, the short-term investments are being assessed based on the purchase cost, by which we understand the purchase price, or the value established under the contracts.

During 2021, the company has not had transactions representing short-term investment and does not have short-term investments in balance at the end of the year.

 

Receivables

Receivables are financial assets with fix payments or determinable that are not listed on an active market.  Receivables contain trade receivables and other receivables.

 

Cash and cash equivalents

Cash and cash equivalents comprise the amounts recorded in cash accounts, current accounts, deposits redeemable at maturity and other cash equivalents. The cash availability in foreign currency are revalued at the exchange rate at the end of the period.

 

(ii) Non-derivative financial liabilities

The Company recognizes in the book-keeping the non-derivative financial liabilities on the trade date when the Company becomes party to the contractual terms of the instrument.  The Company has the following non-derivative financial liabilities: guarantees retained within contractual transactions, trade payables and other liabilities.

 

Trade liabilities

Liabilities to the suppliers and other liabilities include the exchange value of the products suppliers’ deliveries, works executed and the services supplied.

Leasing liabilities

As per IFRS 16, a contract is or contains a leasing contract in case that contract confers the right to control the use of an asset identified for a certain period in exchange of a countervalue.  

For such contracts, at the date of initiation of performance thereof, a lessee must recognize an asset related to the right of use and a debt deriving from the leasing contract, debt generating interest.  

The company includes in the item “Other debts” also the debts deriving from the leasing contracts at the present value of the payments of leasing that are not paid at that date.

 

(iii) Share capital - Common stocks

The share capital consisting of common stocks (ordinary) is recorded at the value established based on the articles of association and addenda.

The company recognizes the amendments to the share capital only after the accomplishment of the legal procedures provided by Law no.31/1990.

 

(d)Tangible assets

(i) Recognition and Assessment

The tangible assets in the company’s patrimony are being classified in the following category of assets of same kind and similar use.

- lands;

- constructions;

- operating oil product;

- technological equipment, measuring installations and devices, control and adjustment and means of transport;

- other tangible assets;

- tangible assets in progress.

The tangible assets are initially evaluated at cost by the Company.  After initial recognition the tangible assets are being revealed in the statement of the financial standing at reevaluated value, established based on an assessment report drafted by an authorized independent expert.

The reevaluations are made with fair regularity to make sure that the accounting value does not significantly differ from what would have been determined by using the fair value at the date of the reporting period.

The tangible assets are being presented in the statement of the financial standing at the re-evaluated value, diminished by the cumulated depreciation and the loss from cumulated depreciation, except for advance payments and ongoing tangible assets appear at cost.

 

The cost of an element of tangible assets is made up of the procurement price, here included the import fees or non-recoverable procurement fees, the transport expenses, manipulation, commissions, notary fees, expenses with permits acquirement and other non-recoverable expenses directly related to tangible assets and any other direct costs attributable to bringing the assets to the place and in operating conditions.

The tangible assets in progress stand for unfinished investments performed in-house or under contract.  They are being evaluated at the production or procurement cost, as the case may be.  Tangible assets in progress pass to the category of tangible assets completed after the reception, putting into operation or commissioning thereof, as the case may be.

The cost of a tangible asset built in-house is being determined by using the same principles as for a purchased asset.  

The Company does not recognize in the carrying amount of a tangible asset item the current repairs and usual maintenance, these costs are recognized as an expense when incurred.  

The costs of current maintenance are mainly the workmanship and expandable costs and may include the cost of small components.  The purpose of these expenses is often described as being meant for the “repairs and maintenance “of the tangible assets element.

 

(ii) Ulterior costs

 

Replacements of several components of tangible assets

The components of several elements of tangible assets may need the replacements at time regulated intervals. The company recognizes in the carrying amount of a tangible assets element the cost of the replaced part of such an element, when that cost is borne by the company, if the validation criteria are being met, for tangible assets.

 

General Regular Inspections  

One condition for the continuation of the exploitation of an element of tangible asset is the performance of a general major regular inspection for detecting defects, notwithstanding they are being replaced or not component parts of the respective assets.  When a general regular inspection is being performed, the related cost is recognized in the accounting value of the tangible asset as a replacement, if the recognition criteria are satisfied.

An element of tangible assets and any significant part initially recognized are derecognized in the moment of disposal or when are not being expected future economic benefits from its use or sale.

If an element of tangible asset is re-assessed, all the other assets it is part of are re-evaluated, except for the situation when there is no active market for that asset.  A class of intangible assets contains assets of the same nature and similar use, being operated by the entity.  If the fair value of a tangible asset cannot be determined by reference to an active market, the asset value presented in the balance sheet is its reassessed value at the date of the last reassessment, wherefrom are being decreased the cumulated value impairments.

 

When certain components of a tangible asset have a different useful life, they are being counted as distinct elements (major components) of tangible assets.

The statement related to the evolution of tangible assets of the Company during 2021 and 2020 is being detailed in note 5.

 

Operating Oil Product

The company recognizes in tangible assets the operating oil product evaluated in the balance sheet at determined cost from the revaluation performed as per GD no.26 from January 22,1992 updated with inflation rate up to 31.12.2003, when Romanian economy was inflationary.  Since the oil operating product of the Company physically renews at every pumping and that the component elements of this product do not bear, therefore, moral or qualitative depreciation, the operation oil product has not useful life, thus is not being depreciated.  The company presents the operating oil product at the cost value, here included the effects of restatements registered in the previous years as per application of “IAS29”, Financial reporting in the hyperinflationary economies”.

 

The Goods belonging to State Public Domain

The company administers goods belonging to the State public domain, as grantor of the oil concession Agreement concluded with the National Agency for Mineral Resources, approved by GD no.793/2002 for a period of 30 years.

Pursuant to the concession agreement, the objectives assumed by CONPET S.A. in relation to its activity are: to ensure the operation of the national transport system via pipelines under maximum safety and economic efficiency conditions, to continuously improve the quality of services and to protect the environment.

The goods resulting following the investments provided by the rehabilitation, modernization and development programs performed out of own company’s financing sources are being capitalized and depreciate on the minimum duration related to the remaining lifespan of the respective asset or the remaining term of the concession agreement.  The goods are to be included in the State’s public domain at the date of amortization of the investment by the company, namely on the expiry of the normal operation term or cease of the oil agreement, if applicable, as per the legal provisions.

 

(iii) Reclassification as Investment Property

When an asset is being held more for obtaining revenues out of rentals or for the increase of the capital value or both, rather than for being used in the production or supply of goods and services, for administrative purposes or to be sold during the normal carry out of the activity, the asset is being transferred in investment property. Our company transfers an asset in the category of investment property if the latter generates cash flows that are, to a large extent, independent of other assets held.

The company does not hold investment property in balance at the date of preparation of these financial statements.

 

(iv) Intangible Assets held in view of Sale

When there is an amendment brought to the use of an intangible asset, meaning that its accounting value is to be recovered mainly by a sale transaction and not by its continuous use, the company records the asset transfer from the tangible assets category to non-current assets held in view of sale.

The non-current assets are classified as assets held for sale when:  

- They are available for immediate sale;  

- The company’s management is engaged in a sales plan;  

- There are minimum chances that the sales plan incur significant changes or be withdrawn;  

- It is being initiated an active program to find buyers;  

- The assets group is being traded at a reasonable price as compared to the fair value;  

- It is expected that the sale be concluded within 12 months as of the date of assets classification as held for sale.  

Certain events or circumstances may extend the period for the completion of sale by more than one year. An extension of the period does not prevent an asset (or an asset group to be disposed) to be classified as being held in view of sale in case the delay is caused by events or circumstances outside the management control and there are enough proofs that the company remains committed to the plan regarding the asset’s sale (or the group destined to disposal).

The intangible assets (or asset group to be disposed) classified as being held in view of sale are being assessed by the company at the minimum between the accounting value and the fair value, less the sale costs.

The intangible assets are not being depreciated whilst they are being classified in view of sale.

 

(v) Assets related to the right of use of the assets taken by leasing

On initiation of a contract, the company evaluates if that contract is or includes a leasing.  A contract is or contains a leasing contract in case that contract confers the right to control the use of an asset identified for a certain period in exchange of a countervalue.

As per IFRS 16, Leasing Contracts, at the date of starting the performance, the company, as lessee, recognizes an asset related to the right of use.  The cost of the asset related to the right of use includes the value of the initial value of the debt deriving from the leasing contract, any leasing payment being performed at the date of initiation of performance or prior to third date, minus any in leasing stimulants received or any direct initial cost borne by the company as lessee.

The company reevaluates if a contract is or includes a leasing only provided that the terms and conditions of the contract are amended. The company determines the duration of a leasing contract as being the irrevocable period of a leasing contract, along with:  

(a) the periods covered by an option of extension of a leasing contract if the lessee has the reasonable confidence that it will exercise that option; and  

 (b) the periods covered by an option of termination of the leasing contract if the lessee has the reasonable confidence that it will exercise that option.

 

In terms of financial standing, the assets related to the right of use are being included in the same element-item as the one where are being presented the assets-support of the company.

 

(vi) Amortization

Depreciation is being calculated by using the straight-line method.

The useful life of the tangible assets fit with those provided in the Catalog regarding the classification and normal operating durations of the fixed assets approved by Decision 2.139/2004.

The goods resulting following the investments related to the national transport system via pipelines pays off along the minimum duration between the remaining lifespan of the respective asset or the remaining duration from the concession agreement.

The assets related to the rights of use of the assets taken in leasing are linearly depreciated, all along contract duration.

The lifespans of the tangible assets are being periodically revised and, if applicable, at the date of value increase thereof, due to some expenses subsequently performed.

 

(vii) Sale/ cessation of Intangible Assets  

Tangible assets that are scrapped or sold are being derecognized from the balance sheet together with the corresponding accumulated depreciation. Any profit or loss resulting from such an operation are included in current profit or loss.  

The gain or loss resulting from the non-acknowledgment of an element from tangible assets, determined as difference between net proceeds from sale included in the operating revenues and the net accounting value of the asset included in other operating expenses are being revealed as separate position in the Statement of profit and loss and other elements of the global result.

 

(e) Intangible Assets

 

(i) Recognition and Assessment

Intangible assets are initially recognized at cost.  The cost of intangible assets include expenses that are not directly attributable to the purchase of the respective elements.  The expenditure related to the acquisition of software licenses is capitalized based on the costs of purchase and commissioning of the respective programs.  The costs associated to the maintenance of the software programs are recognized as expenses upon occurrence.

 

(ii) Subsequent Expenditure

The subsequent expenses are capitalized only when they increase the future economic benefits embodied in the value of the asset to which they are intended.  All other expenditure, including expenditure on the goodwill and the internally generated brands are recognized in profit or loss when incurred.

 

(iii) Depreciation

Depreciation is recognized in profit or loss using the linear method for the useful life estimated for intangible assets other than goodwill, from the date they are available for use.

 

(f) Depreciation of Assets  

The Non-Financial Assets

The carrying value of the Company's assets that are not of a financial nature, other than deferred tax assets, are reviewed at each reporting date to identify the existence of depreciation indices.  If such indices exist, it is being estimated the recoverable amount of the said assets.

The recoverable amount of an asset or of a cash-generating unit is the maximum between its use value and its fair value, less the costs to sell that asset or units.  A cash-generating unit is the smallest identifiable group that generates cash and that independently of the other assets and other groups of assets could generate cash flows. To determine the use value, the expected future cash flows are discounted using a discount rate before taxation, which reflects the current market conditions and the risks specific to the said asset.

A depreciation loss is recognized when the carrying amount of the asset or cash-generating unit exceeds its estimated recoverable amount of the asset or the cash-generating unit.  

The depreciation losses recognized during the previous periods are being assessed at each reporting date to determine whether they have diminished or no longer exist.  The depreciation loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

Given some internal and external factors, the Company assessed the net book value registered at the balance sheet date for depreciable tangible assets, in order to evaluate the possibility of existence of a depreciation thereof, which could attract the record of an adjustment for depreciation.  

 

The Financial Assets

The short-term receivables are not discounted. The recoverable amount of other assets is deemed the highest value between the fair value (less sale costs) and the use value.  Estimating the use value of an asset involves updating the estimated future cash flows using a pre-tax discount rate that reflects current market assessments regarding the time value of money and the risks specific to the asset.

Depreciation losses on financial assets or a receivable recorded at the amortized cost is reversed if there has been a change in the estimates used to determine the recoverable amount.

 

(g) Stocks

The main categories of stocks are: consumables, spare parts, ongoing services and materials like inventory objects.

The stocks are valued at the lower of cost and net achievable value.  

The cost of stocks is based on the first in - first out (FIFO) principle and includes costs incurred for the purchase of inventories, production or processing costs and other costs incurred for bringing the inventories in the form and present location.  

The net achievable value is the estimated selling price to be obtained in the ordinary course of business, less estimated costs of completion, when appropriate, and the estimated costs necessary to the sale.

If applicable there will be applied impairments for the obsolete stocks, slow movement or damaged.

 

(h) Dividends

The dividends are recognized as liability in the period in which their distribution is approved.  The distribution of dividends is being performed subsequently to the approval of the annual financial statements.

 

(i) Revaluation reserves

The revaluations are performed with sufficient regularity so that the carrying amount does not differ substantially from that which would be determined using the fair value at the balance sheet date.  

The difference between the value resulting after revaluation and the net accounting value of tangible assets is presented either according to its nature (appreciation/depreciation), either at the revaluation reserve as a distinct sub-element in “Equities” or in the "Profit and Loss" account.

If the revaluation result is an increase over the net accounting value, then, it is treated as follows: as an increase of the revaluation reserve presented within the total equity, if there was no  previous decrease recognized as an expense related to that asset or as an income to compensate the expense with the decrease previously recognized at that asset.  

If the revaluation result is a decrease of the net accounting value, it is treated as an expense with the entire value of the depreciation when in the revaluation reserve is not recorded an amount on the asset (revaluation surplus) or as a decrease of the reserve from the revaluation by the minimum between the value of that reserve and the amount of the decrease and the possible difference remaining uncovered is recorded as an expense.  

The revaluation surplus included in the revaluation reserve is transferred to the retained result when this surplus represents an achieved gain. The gain is deemed realized as monthly amortization is being registered and when deleting from the records of the asset for which was established the revaluation reserve. No part of the revaluation reserve can be distributed, directly or indirectly, except for the case when it represents achieved earnings.

 

A particularity occurs in case of the assets financed out of the modernization quota.

Thus, in case the revaluation result shows an increase compared to the net accounting value, then it is being treated as follows:  

- as an increase of the revaluation reserve, if there was no previous decrease written-back as an expense related to that asset,  

- as an increase of the reserve established out of the modernization quota, up to the set-off of the decrease previously recognized and for which, simultaneously with the depreciation expense was also diminished the quota reserve by writing-back to revenues.  

In case the result of revaluation is a decrease of the net accounting value, the latter will be treated as an expense when in the revaluation reserve is not registered an amount related to that asset (revaluation surplus) and the reserve formed out of the modernization quota is diminished simultaneously by writing-back as income.

Starting May 1, 2009, the statutory reserves from the revaluation of fixed assets, including the lands, performed after January 1, 2004, which are deducted from calculation of taxable profit through tax depreciation or from expenditure regarding the assets assigned and / or squashed, shall be taxed concurrently with the deduction of the fiscal depreciation, respectively when deducting from the administration of these fixed assets, as appropriate.

The achieved reserves are taxable in the future, in case of change of reserve destination, reserve distribution towards the participants in any form, liquidation, division, merger of the taxpayer or of any other reason except for transfer, after May 1, 2009, of the reserves mentioned in the previous paragraph.

(j) Legal Reserves

The legal reserves are constituted in a rate of 5% of gross statutory profit, as of the end of the year until the total legal reserves reach 20% of the nominal share capital (statutory) paid-up in compliance with the legal provisions. These reserves are deductible at the calculation of the corporate tax and are distributable exclusively upon liquidation of the Company.

 

(k) Other reserves

The company constitutes profit reserves also at the expense of the modernization quota, based on the GD no.168/1998 on setting the quota for the expenses necessary for the development and modernization of crude oil and natural gas production, refining, transport and petroleum distribution, subsequent amendments, presented in GD’s no.768 of 7 September 2000 and 1116 of 10th of October 2002 and according to the provisions of Law no.227/2015 on the Fiscal Code. The modernization quota is approved by the National Agency for Mineral Resources (NAMR) once with the approval of the transport tariffs.  

In other reserves - the modernization quota, as sub-element of the accounts of equities are being included the amounts representing the plus resulting from the revaluation of the tangible assets financed out of this source, until the clearing of the decrease previously acknowledged.

 

(l) Related Parties

The Parties are deemed related in case they are subject to control (or joint control) by the same entity or when an entity can directly or indirectly control or significantly influence the other party, either through ownership, contractual rights, family relationship or otherwise, as defined in IAS 24 Presentation of Affiliated Party Disclosures.

 

(m)  The Benefits of the Employees

(i) Benefits granted upon Retirement  

In the normal course of business, the Company makes payments to the Romanian State in the account of his employees, at the statutory rates.  

All employees of the company are included in the Romanian State pension plan.  These costs are being recognized in the statement of global result once with salaries recognition.

The Company recognizes a provision for retirement benefits. The discounted value of the liabilities related to the benefits granted on retirement is annually determined by an independent actuary.  The Company operates no other pensions or post-retirement benefits plan and, consequently, has no sort of other pensions-related liabilities.

 

(ii)  Short-term Employees Benefits  

The short-term employees’ benefits are the ones to be settled in no more than 12 months as of the end of the reporting period when the employees have supplied the said services. These benefits are mainly represented by salaries and contributions of the employer to the social insurance, rest and medical leaves, the employees’ share of profit.  The liabilities related to these benefits are recognized as expense while the services are supplied and are assessed on a non-discounted basis.    

The company establishes a fund for the employees’ share of profit, as per the provisions of the Government Ordinance no.64/August 30, 2001.


(n) Provisions

Provisions are recognized when the Company has a current obligation (legal or implicit) generated by a past event, when it is probable that an outflow of resources be required to settle the obligation and duty can be estimated reliably.

The amount recognized as a provision is the best estimate at the balance sheet date, of the costs required to settle this obligation.

The best estimate of the costs required to settle current debt is the amount that the Company would pay, reasonably, to settle the obligation at the balance sheet date, or transfer it to a third party at that time.

Where the effect of the time value of money is material, the amount of the provision is the present value of the expenditure expected to be required to settle the obligation.  The discount rate used reflects current market assessments of the time-value of money and the risks specific to the liability.

Gains from the expected disposal of assets should not be considered in measuring a provision.

If estimated that one or all expenses related to a provision will be reimbursed by a third party, the reimbursement is recognized only when it is certain that it will be received. The reimbursement is considered as a separate asset.

Provisions are reviewed at each balance sheet date and adjusted as to reflect the current best estimate. In case that, for settling an obligation is no longer possible an outflow of resources, then the provision must be canceled by write-back as income.

 

(o) Subsidies  

Subsidies for assets, including non-monetary subsidies at fair value, are recorded in the accounting as investment subsidies and are recognized in the balance sheet as deferred income.  The deferred income is recorded in the profit and loss account statement upon registration of the depreciation expenses or upon the scrapping or disposal of assets.

The subsidies that compensate the Company for the expenses incurred are recognized systematically in the profit or loss account, in the same periods when the expenses are recognized.

 

(p) Revenues

Revenues related to Services Supply

The revenues from the services supply are recognized in the period in which they were provided in correspondence with the stage of execution.

As per IFRS 15 Revenues from clients’ contracts, the value of the trade price allocated to an obligation of execution is recognized in revenues when (or gradually) an execution measure in being fulfilled.

In order to determine the trade price there are being considered the terms of the contract and the usual business practices. The price of the transaction represents the value of the consideration to which the company expects to have the right in exchange of the transfer of goods or services promised to a client, not including the collected amounts on behalf of some third parties.

 

Revenues from royalties, rentals and interests

Recognition rules:

- interests are recognized periodically, proportionally, upon generation of the said income, on an accrual-based accounting, as per the contract;

- royalties and rentals are recognized on an accrual accounting basis, under the contract.

 

(q) Financial Revenues and Expenses  

The financial revenues comprise interest revenues related to the funds invested and other financial revenues. The interest revenues are recognized in profit or loss of the period, on the accrual-based accounting, using the effective interest method.  

The financial expenses mainly contain expenses with interests related to leasing contracts and the expense related to currency differences.

 

The interest expenses generated by the debts coming from the leasing contracts are being registered in the loss and profit account along the leasing contract, being calculated at the outstanding balance of the debt related to the leasing, for each stage. This thing will determine higher expenses at the beginning of the leasing contract.

 

(r) Tax

The corporate tax expenses comprise the current tax and the deferred tax.  

The corporate tax is recognized either in the profit and loss of the period, or outside the profit and loss, in other elements of the global result or straight in the equities.

 

(i) Current Tax

The current tax is the tax payable on the profit realized in the current period, determined using tax rates enacted at the reporting date and any adjustment for prior periods. For the financial year ended December 31, 2021, the corporate tax rate, under the Fiscal Code, was of 16%.

 

(ii) Deferred Tax

The deferred tax is determined by the Company using the balance sheet method for those temporary differences arising between the tax calculation base on assets and liabilities and their book value, used for the individual financial statements reporting.  

The deferred tax is calculated using the tax rates that are expected to apply to the temporary differences upon the write-back thereof, under the legislation in force at the reporting date.

The receivables and debts related to Deferred tax are offset only if there is a legally enforceable right to offset current tax liabilities and receivables and whether they are related to the tax collected by the same tax authority on the same entity subject to taxation, or different tax authorities but willing to achieve settlement of current receivables and payables by the tax, using a net basis or the related assets and liabilities will be realized simultaneously.  

The receivable related receivable is recognized by the Company only to the extent where the achievement of future profits is likely to happen, which can be used to cover the tax loss. The deferred tax related receivable is recognized by the Company only to the extent where the achievement of future profits is likely to happen, which can be used to cover the tax loss. The additional taxes that arise from the distribution of dividends are recognized, at the same time, with the liability of dividends’ payment.  

 

(iii) Tax Exposures  

For the determination of current and deferred tax, the Company considers the impact of uncertain fiscal positions and the possibility of occurrence of additional taxes and interests.  This assessment is based on estimates and assumptions and may involve a series of judgments about the future events. New information may become available, thus determining the Company to change its judgment regarding the accuracy in estimating the existing fiscal liabilities; such changes in fiscal obligations affect the tax expense in the period in which such determination is made.

 

(s) Earnings per share  

The earnings per share is determined by dividing the profit or loss attributable to the Company’s ordinary shareholders to the weighted average number of ordinary shares for the period under review.  

 

(t) Business Segments Reporting

A segment is a distinct component of the Company that provides certain products or services (business segment) or provides products and services in a particular geographical environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.  

The company CONPET has a single reportable segment, namely transport services supply for its clients both via the National Transport System and by railway.

 

(u) Contingent Assets and Liabilities  

The contingent liabilities are not recognized in the statement of the financial standing and in the profit and loss account.  They are disclosed in the notes to the financial statements, except for the possibility of an outflow of resources representing economic benefits is being removed.

A contingent asset is not recognized in the financial statements and in the profit and loss account but disclosed when an inflow of economic benefits is likely to happen.  

 

(v) Ulterior Events

The financial statements reflect subsequent events after the year-end, events that provide additional information on the Company's position at the reporting date or those that indicate a possible violation of the going concern principle (events that cause adjustments). Events following the end of the year that are not adjusting events are disclosed in notes when they are considered significant.

 

(w) Comparative Figures

The statement of the financial standing for the year ended December 31, 2021 shows comparability with the statement of the financial standing for the financial year ended December 31, 2020.

 

(x) New Standards and Interpretations

The following new standards and amendments of the existing standards issued by the International Accounting Standards Committee (IASB) and adopted by the European Union (EU) have not yet entered into force along the annual financial reporting period ended  December 31, 2021, but not bearing a significant impact on the financial statements have not been presented in detail: [IAS 8.30 (a)]: