PJSC Mosenergo : IFRS Consolidated Financial Statements for the year ended 31 December 2021

PJSC MOSENERGO

IFRS CONSOLIDATED FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT

31 December 2021

Moscow | 2022

Contents
Independent Auditor's Report ……………………………….........................................................................3
Consolidated statement of financial position ……………………………………….......................................9
Consolidated statement of comprehensive income ……………………………………………………...… 10
Consolidated statement of cash flows ……………………..…………………………..................................	11
Consolidated statement of changes in equity ……………………………………………………….......	…..12
Notes to the consolidated financial statements:
1	General information.............................................................................................................................	12
2	Significant accounting policies............................................................................................................	13
3	Professional judgments, estimates and assumptions............................................................................	27
4	Segment information ...........................................................................................................................	29
5	Related parties .....................................................................................................................................	31
6	Property, plant and equipment.............................................................................................................	35
7	Investment property .............................................................................................................................	37
8	Intangible assets...................................................................................................................................	38
9	Investments in associates.....................................................................................................................	38
10	Accounts receivable and prepayments.................................................................................................	39
11	Financial assets ....................................................................................................................................	40
12	Inventories ...........................................................................................................................................	40
13	Cash and cash equivalents ...................................................................................................................	41
14	Assets held for sale ..............................................................................................................................	41
15	Equity ..................................................................................................................................................	41
16	Borrowings ..........................................................................................................................................	42
17	Provisions for post-employee benefits.................................................................................................	42
18	Accounts payable and other liabilities .................................................................................................	44
19	Income tax ...........................................................................................................................................	44
20	Other taxes payable .............................................................................................................................	45
21	Provisions ............................................................................................................................................	46
22	Revenue ...............................................................................................................................................	46
23	Operating expenses..............................................................................................................................	46
24	Finance income and expense ...............................................................................................................	47
25	Basic and diluted earnings per share, attributable to PJSC Mosenergo...............................................	48
26	Contingent and contractual obligations ...............................................................................................	48
27	Financial risk factors ...........................................................................................................................	49
28	Fair value of financial instruments ......................................................................................................	54
29	Events after the reporting period .........................................................................................................	55

2

Independent Auditor's Report

To the Shareholders and the Board of Directors of Public Joint Stock Company for power and electrification Mosenergo

Opinion

We have audited the accompanying consolidated financial statements of Public Joint Stock Company for power and electrification Mosenergo (PJSC Mosenergo) and its subsidiaries (hereinafter - the Group), which comprise the consolidated statement of financial position as at 31 December 2021 and the consolidated statements of comprehensive income, of cash flows and of changes in equity for the year ended 31 December 2021, and notes to the consolidated financial statements comprising a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2021 and consolidated financial performance and its consolidated cash flows for the year ended 31 December 2021 in accordance with International Financial Reporting Standards ("IFRSs").

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Rules of Independence of the Auditors and Audit Organizations and the Code of Professional Ethics of the Auditors, which are in accordance with International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of property, plant and equipment

Due to the material carrying amount of property, plant and equipment, continuing volatility of macroeconomic parameters and prices of raw materials, the impact of the spread of coronavirus as well as the high level of subjectivity of the underlying assumptions, judgments and estimates of the Group's management we consider this area to be one of the most significance in the audit.

As of 31 December 2021, the Group's management identified indicators of impairment of property, plant and equipment related to individual cash-generating units and tested these assets for impairment in accordance with the requirements of IAS 36 "Impairment of Assets". As a result of the testing, an impairment loss was recognised for several cash-generating units.

We assessed the input data in the calculations, such as the volume of production and tariffs for heat and electric energy, and main key assumptions, such as discount rate, management forecasts, macroeconomic assumptions. We engaged our valuation experts to assist us in carrying out these procedures who, among other things, analysed the methodology used by the Group when performing impairment testing of property, plant and equipment and the consistency of its application by the Group and analysed the sensitivity of the models applied for testing purposes to changes in key assumptions.

Based on the results of the audit procedures we believe that the significant assumptions and methodology applied in calculating the recoverable of amount property, plant and equipment are acceptable.

Information about the approaches applied to measure and recognise impairment of property, plant and equipment is provided in Note 2 "Summary of significant accounting policies" and Note 3 "Critical accounting estimates, assumptions and judgements" to the consolidated financial statements, information about the conducted impairment testing is disclosed in Note 6 "Property, plant and equipment" to the consolidated financial statements.

Allowance for expected credit losses

One of high-risk audit areas is the evaluation of sufficiency of allowance for expected credit losses. This matter is one of most significance in our audit in view of the need to apply professional judgements and estimates to assess the allowance for expected credit losses.

We analysed the method applied to assess the allowance for expected credit losses, which included, inter alia, the use of provision matrix. We analysed judgements and estimates applied by the Group's management to assess the allowance, whether on an individual or collective basis. We focused on critical review of information used by the Group to assess the risk of a default based on input data about defaults and information about current conditions and forecasts of future economic conditions.

Based on the results of the audit procedures we believe that the significant assumptions applied by the management to assess the allowance for expected credit losses are acceptable.

Information about the main accounting policies applied to account for the allowance for expected credit losses is provided in Note 2 "Summary of significant accounting policies" to the consolidated financial statements, and information about the accounts receivable and the allowance for expected credit losses is disclosed in Note 10 "Trade and other receivables" and Note 27 "Financial risk factors to the consolidated financial statements".

Measuring recoverable amount of the investment in an associate

In view of the material carrying amount of the investment in LLC GEH Industrial Assets (an associate) and the complexity of measuring its recoverable amount, its calculation model providing for forecasting and discounting of future cash flows, which involves highly subjective assumptions and estimates applied by the Group's management, we consider this area to be one of the most significant audit areas.

As at 31 December 2021, the Group's management identified indications of impairment of the investment in LLC GEH Industrial Assets and tested that investment for impairment in compliance with the requirements of IAS 36 Impairment of Assets by measuring the recoverable amount of the investment based on the calculation of value in use. The testing did not show any impairment loss.

Our audit procedures in respect of this area included:

• testing the principles applied to prepare future cash flow forecasts;

• evaluating appropriateness of expected cash flow forecasts by comparing them to the latest budgets of LLC GEH Industrial Assets;
• involvement of valuation experts, who analysed the methodology used by the Group for impairment testing and consistency of its application by the Group, assessed inputs and assumptions used to calculate the recoverable amount of the investment by the Group's management and analysed sensitivity of the forecasted discounted cash flows to changes in key assumptions.

Based on the results of the audit procedures, we believe that the information and key assumptions applied by the Group's management to calculate the recoverable amount of the investment in LLC GEH Industrial Assets are acceptable.

Information about the applied measurement and accounting methods for investments in associates is disclosed in Note 2 "Significant accounting policies" to the consolidated financial statements and information about the value of the investment in LLC GEH Industrial Assets is disclosed in Note 9 "Investments in associates" to the consolidated financial statements.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Annual report of PJSC Mosenergo for 2021 and the Issuer's report of PJSC Mosenergo for the 12 months of 2021, but does not include the consolidated financial statements and our auditor's report thereon. The Annual report of PJSC Mosenergo for 2021 and the Issuer's report of PJSC Mosenergo for the 12 months of 2021 are expected to be made available to us after the date of this auditor's report.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

When we read the Annual report of PJSC Mosenergo for 2021 and the Issuer's report of PJSC Mosenergo for the 12 months of 2021, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

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

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.