Societatea Națională de Gaze Naturale ROMGAZ SA

Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiești SRL

No.5830/17.04.2024

Assessment Report of General

Manager's Activity for 2023

Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

Assessment Report of General Manager's Activity for 2023

Pursuant to art. 36 para. (5) of the Emergency Ordinance no. 109/2011 on the corporate governance of public enterprises, as subsequently amended and supplemented, the Board of Directors of SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL(Gas Storage Subsidiary DEPOGAZ Ploiesti SRL) prepared the Assessment Report of the General Manager's activity for 2023, based on the Report of the General Manager for 2023, approved by HCA (Decision of the Board of Directors) no.6, dated 23.04.2024

Chair of the Board of Directors

STĂNESCU NICOLAE BOGDAN CODRUȚ

_________________

Document approved by the Decision of the Board of Directors no.6 dated 23.04.2024

Assessment Report of General Manager's Activity for 2023

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL

(Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

Table of Contents

1.

Company Presentation

4

1.1.

Company identification data

5

1.2.

Business purpose

6

2.

Objectives and Key Performance Indicators

6

2.1. Objectives and strategic directions of action, according to the Letter of Expectations of the Sole

Shareholder

6

2.2. Objectives specific to the storage activity derived from the global objectives set by the Sole

Shareholder

7

2.3. Stewardship Plan

8

2.3.1. Stewardship Component

9

2.3.2. Management Component

9

a. Corporate Governance

11

b. General, specific objectives and directions of action on risk management and internal control....

13

c. General, specific objectives and directions of action on ethics and integrityof

22

  1. General, specific objectives and directions of action from an organizational/human resources point of view……………………………………………………………………………………………………………...….. 26

e.

Objectives and directions of action - Storage, Technical, Investment

29

f.

General, specific objectives and directions of action in the field of Sectoral Procurement

40

  1. General, specific objectives and directions of action - Quality, Environment, Occupational Health and Safety…………………………………………………………………………………………………..………….41

h.

Financial statements, capacities, tariffs

49

i.

Financial scenario 2022 - 2027

50

j.

Forecasted Investment Program of the Natural Gas Storage System 2023-2027

56

2.4. Key Performance Indicators

64

2.4.1. Key performance indicators for the calculation of the variable component of the remuneration of the General Manager - approved by the Decision of the Sole Shareholder SNGN Romgaz SA no.

7/12.05.2023 .................................................................................................................................................... 64

2.4.2. Description of Key Performance Indicators for the calculation of the variable remuneration

component

65

2.4.3 Degree of achievement of Key Performance Indicators on December 31, 2023

67

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

1. Company Presentation

Who is DEPOGAZ?

SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL ("DEPOGAZ" or "Subsidiary") is the main gas storage operator in Romania, with a share of approximately 90.54% of Romania's total active storage capacity.

By the Decision of the Extraordinary General Meeting of Shareholders of SNGN Romgaz SA no. 10/19.12.2014, based on Directive 2009/73/EC of the European Parliament and of the Council of the European Union, transposed into national law by the Law on Electricity and Natural Gas no. 123/2012, as subsequently amended and supplemented, the natural gas storage activity was separated from SNGN Romgaz SA and is carried out by SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL(Gas Storage Subsidiary DEPOGAZ Ploiesti SRL), as an independent operator, as of April 1, 2018.

Natural gas shall be stored for the purpose of:

  1. ensuring security in the supply of natural gas to final customers;
  2. harmonisation of changes in seasonal, daily, and hourly consumption with available gas sources;
  3. ensuring permanent physical balance of the SNT (National Transmission System);
  4. carrying out other commercial activities.

DEPOGAZ VISION

Modernising the existing gas storage capacities and increasing safety and flexibility level, inclusively through the multi-cycle use of storage capacities, will contribute to a competitive gas market and the development of energy markets and the creation of regional energy security mechanisms, in accordance with common EU rules.

DEPOGAZ MISSION

  • Increasing customer and stakeholder satisfaction;
  • Ensuring the availability and timeliness of the underground gas storage service;
  • Efficient and effective resolution of storage facilities infrastructure interventions without affecting the interests of customers and other stakeholders;
  • Continuous development and improvement of the underground gas storage service;
  • Proposing projects of national interest, as well as supporting and implementing them;
  • Proposal of Projects of Common Interest at European Union level so as to contribute to the achievement of an integrated market at regional level.

DEPOGAZ CORE VALUES

  • Social responsibility and respect for the environment;
  • Professionalism, Efficiency and Performance.
  • Excellence is the target we seek and encourage in everything we do by offering innovative problem-solving solutions that deliver outstanding results for our partners.

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

  • Integrity is the mandatory requirement for all DEPOGAZ employees.
  • We promote transparency, honesty, and fairness both within the organization and in relation to our partners and customers.
  • Promptness define our team that promotes at a high level the importance of a fair and transparent relationship with customers.
  • Loyalty underpins the cultivation of a long-term relationship with our customers and partners.

1.1. Company identification data

DEPOGAZ is a public enterprise, established as a Subsidiary, having the legal status of a limited liability company (S.R.L.), having SNGN Romgaz SA as Sole Shareholder. The Company is established under the Companies Law no. 31/1990, republished, as subsequently amended, and supplemented, and carries out its activity in accordance with the Romanian legislation and the Articles of Incorporation.

Business name:

SNGN Romgaz SA - Filiala de Înmagazinare

Gaze Naturale DEPOGAZ Ploiesti SRL(Gas

Storage Subsidiary DEPOGAZ Ploiesti SRL)

Registered office:

Str. Gh. Gr. G. Cantacuzino, no. 184, Ploiesti,

Prahova, postal code 100492

Tel/Fax No

0374-403800 /0374-097420

Email/ Website

secretariat@depogazploiesti.ro

www.depogazploiesti.ro

Sole registration number

34915261

Registration number in the Trade

J29/1181/21.08.2015

Register

Class of the main business

NACE Class 0910 - Services activities incidental to the

extraction of crude oil and natural gas;

Class of the secondary business

NACE Class 5210 - Storage;

NACE Class 7022 - Business and management

consultancy activities;

NACE Class 4221 - Construction of utility projects for

fluids;

NACE Class 7112 - Engineering and related technical

consultancy activities;

NACE Class 4321 - Electrical installation work;

NACE Class 7120 - Technical testing and analysis,

including of natural gas;

Class NACE 2562 - General mechanical operations;

Class NACE 5224 - Handling activities.

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

1.2. Business purpose

DEPOGAZ, as a storage operator, is a legal entity which carries out the storage activity and is responsible for the safe operation of natural gas storage facilities.

The object of activity is the storage of natural gas, i.e. all activities and operations carried out by the storage operator for or in connection with the reservation of storage capacities in underground storage and the injection, storage, and withdrawal from these capacities of specified quantities of natural gas.

The natural gas storage process usually takes place in two cycles (phases): from April to October - injection cycle and from November to March - withdrawal cycle, but at the request of customers or the gas transmission system operator, reversals of those cycles may occur alternatively.

Injection Cycle (April - October)

The gas taken over by SNT is measured, purified, and compressed (if applicable) and injected into the natural gas storage facilities operated by DEPOGAZ via the injection/withdrawal wells.

Withdrawal cycle (November - March)

The gas taken from the injection/ withdrawal wells of each gas facility is directed to the conditioning facilities (heating, lamination, separation of impurities), drying, compression (if applicable), measurement and delivered in SNT at quality parameters according to the legislation.

2. Objectives and Key Performance Indicators

Measuring the company's performance is a process of improving the activities carried out and the use of the resources employed in order to efficiently achieve the objectives assumed by the Directors and the General Manager through the Company's Stewardship Plan, a plan that includes the stewardship component, the management component and the key financial and non-financial performance indicators for the calculation of the variable component of remuneration.

The strategic objectives included in the Company's Stewardship Plan for the timeframe 2023-2027 are derived from the Letter of Expectations of the Sole Shareholder, SNGN ROMGAZ SA and aim at optimizing, developing and dividing the underground gas storage activity by reconsidering its importance, in order to ensure continuity and flexibility in the natural gas supply, identifying new opportunities for growth and diversification of the Subsidiary's activity, both internally and regionally, increasing the performance of the Subsidiary, effectual management and implementation of corporate governance framework.

2.1. Objectives and strategic directions of action, according to the Letter of Expectations of the Sole Shareholder

Strategic directions of action, according to the Letter of Expectations of the Sole Shareholder:

  1. Operational excellence for efficiency and quality;
  2. Ensuring a dedicated and skilled workforce;
  3. Implementation of the corporate governance framework: public governance, internal control, risk management, audit committee, internal public audit, and external audit.

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

Global strategic objectives desired by the Sole Shareholder for the entire activity, considering its Letter of Expectations:

  • Increasing the portfolio of gas resources and reserves, by discovering new resources and by developing and improving the recovery of already discovered resources;
  • Strengthening the position in the markets for the provision of underground gas storage services.
  • Optimising, development, and diversification of the underground storage of natural gas by reconsidering its importance to ensure reliability, continuity, and flexibility in gas supply.
  • Increasing the daily withdrawal capacity, through investments that reduce the dependence of the daily withdrawal capacity on the reservoir pressure;
  • Exploring/ identifying the possibilities of storing natural gas in salt mine cavities;
  • Identifying new opportunities for growth and diversification of the company's activity, both internally and regionally;
  • Increasing the company's performance;
  • The completion of the investment projects started and the development of the proposed projects (increasing the daily withdrawal capacity of the Bilciuresti UGS, increasing the storage capacity of the Ghercesti UGS, increasing the storage capacity of the Sarmasel UGS, upgrading the infrastructure of the Balaceanca UGS system, new Falticeni UGS).

2.2. Objectives specific to the storage activity derived from the global objectives set by the

Sole Shareholder

During the term of office of the Board of Directors and the General Manager, the main objectives specific to the storage activity, derived from the global objectives established by the Sole Shareholder, are:

  • Optimising, development, and diversification of the underground storage of natural gas by reconsidering its importance to ensure reliability, continuity, and flexibility in gas supply.
  • increasing the daily injection/ withdrawal capacity, through investments;
  • exploring/ identifying the possibilities of storing natural gas in salt mine cavities;
  • identifying new opportunities for growth and diversification of the company's activity, both internally and regionally;
  • increasing the company's performance.

The proposed strategic directions in the short, medium, and long term are:

  1. Modernization of UGSs,
  2. increasing the storage capacity,
  3. increasing the flexibility of the infrastructure,
  4. Increasing the degree of operational safety of wells used in the activity of injection/ withdrawal of gas from UGSs.

In addition to the strategic objectives/ directions, the Board of Directors and the incumbent General Manager aim to respond effectively to the expectations of the Sole Shareholder and the Ministry of Energy for the next 4 years, expectations mainly aimed at, but not limited to:

  • participation and development of projects, together with TSOs and other important actors in the energy and financial sector, on hydrogen /low carbon natural gas as part of the European Union Green Transition Plan and based on the EU "Fit for 55" Package;

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

  • participation and development of projects, together with important actors in the energy and financial sector, on the capture and storage of CO2 as an integral part of the European Union's effort to limit greenhouse gas emissions;
  • implementation of a program for digital integration of all processes within DEPOGAZ, both technological processes (well, group of wells, surface installations, drying stations, compressor stations and measuring stations), as well as financial and commercial ones in line with the EU digital strategy and integrated into the Digital Decade of Europe. This program will lead to:
    o Simplification, digitization, and automation of processes within DEPOGAZ;
    o Making decisions at the right time and based on real-time data collected from the field; o Digital monitoring and supervision to increase the operational safety of the equipment;
    o Application of digital analysis and modelling procedures to storage-withdrawal processes.
  • the establishment of a state natural gas reserve available to the state authorities in crisis / emergency situations, in application of the specific legislation in the field;
  • streamlining/ reducing the company's expenses with electricity used for own consumption by implementing projects to produce it from renewable sources (photovoltaic panels);
  • in the context of climate and environmental challenges, the European Union has proposed to member countries a new growth strategy aimed at transforming it into a fair and prosperous society with a modern, competitive, and resource-efficient economy, with no net greenhouse gas emissions in 2050 and where economic growth is decoupled from the use of resources. In this regard, the members of the Board of Directors and the General Manager propose the formation of a working group to develop a draft on the DEPOGAZ Energy Strategy including climate and environmental objectives for the period 2024-2050.

The strategic objectives of DEPOGAZ for the period 2023-2027 are formulated based on the diagnostic analysis carried out and the proposed development directions, with the aim of capitalizing on the opportunities and strengthening the existing strengths at the level of the company, each objective being associated with specific actions to achieve.

2.3. Stewardship Plan

The Management Plan of the Board of Directors of SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploieşti SRL reflects the vision of the management of DEPOGAZ regarding the management of activities in the interest of the company and stakeholders, in the medium and long term, based on the evolution of the natural gas storage activity so far, the current context and trends in the field of services at national and international level, as well as the forecasts and prospects that can be anticipated, so as to ensure the maintenance of a modern, financially viable, economically sustainable company, an operator that provides quality services to customers and meets the expectations of stakeholders, an economic operator responsible to society and the environment, in the conditions of sustainable development.

The Management Plan, consisting of the management component and the management component, is drawn up based on the main purpose and strategic objectives of SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploieşti SRL, as a natural gas storage operator, in accordance with the expectations of the Sole Shareholder, SNGN Romgaz SA and in the context of the current socio-economic environment.

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

When developing the Stewardship Plan, the key priorities, and targets of the activity of SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL(Gas Storage Subsidiary DEPOGAZ Ploiesti SRL, as well as the risks to which the Subsidiary is exposed have been considered.

The strategic objectives of DEPOGAZ for the period 2023-2027 are formulated based on the diagnostic analysis carried out and the proposed development directions, with the aim of capitalizing on the opportunities and strengthening the existing strengths at the level of the company, each objective being associated with specific actions to achieve.

The strategic vision of the DEPOGAZ directors and the General Manager refers mainly to:

  • operational effectiveness and stability;
  • energy safety and security;
  • performance optimization;
  • sustainable development of society.

The Stewardship Plan addresses three main strategic directions:

  1. Operational excellence for efficiency and quality,
  2. Ensuring a dedicated and skilled workforce;
  3. Implementation of the corporate governance framework: public governance, internal control, risk management, audit committee, internal public audit, and external audit.
  1. Stewardship Component

The Stewardship Component of the Stewardship Plan for the period 2023-2027 was prepared in accordance with the provisions of art. 30 para. (1) of GEO no. 109/2011 on the corporate governance of public enterprises, as subsequently amended and supplemented by the Board of Directors of SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL appointed by the Decision of the Sole Shareholder no. 1/19.01.2023.

The stewardship component of the Stewardship Plan was submitted for information to the Sole Shareholder on February 20, 2023.

The detailed analysis of the company on its business segments led to the proposal of the strategic development objectives, corroborated with the identification of the performance indicators proposed during the mandate.

2.3.2. Management Component

By the Decision of the Board of Directors no. 18 dated 21.11.2022, it was approved the appointment of Mr. Vasile Carstea as Interim General Manager of SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL for a period of 4 months, with the possibility of extending it up to a maximum of 6 months or until the end of the selection procedure, effective 28.11.2022, concluding with him a Mandate Contract.

By the Decision of the Board of Directors no. 5 dated 06.03.2023, it was approved the appointment of Mr. Vasile Carstea as General Manager of SNGN Romgaz SA - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL for a period of 4 years starting with 06.03.2023, according to the provisions of GEO no. 109/2011 on the corporate governance of public enterprises as amended, concluding with him a Mandate Contract.

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Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL (Gas Storage Subsidiary DEPOGAZ Ploiesti SRL)

In 2023, the General Manager of the Company had the duties stipulated in the Mandate Contracts nos. 1135/25.11.2022 and 1185/06.03.2023, in the Internal Rules of the Board of Directors and in the Articles of Incorporation, supplemented by the applicable legal provisions.

According to the Internal Rules of the Board of Directors, the responsibilities of the General Manager include:

  1. elaboration of the management component of the Stewardship Plan and its submission, for approval, to the Board;
  2. fulfilling the objectives and performance criteria of the company stipulated in the mandate contract;
  3. supervising the preparation of the strategy, multi-year business plans and annual budget and submit them to the Board for verification and endorsement/approval, as applicable;
  4. coordinating the work of the Executive Directors;
  5. implementing the main directions of activity and development of the Company
  6. ensuring the implementation of effective risk management and internal managerial control systems;
  7. informing the Board of Directors on a regular basis on the operations undertaken and those envisaged to be undertaken, including drawing up quarterly reports on the implementation of the mandate;
  8. any other task delegated to him by the Board.

The General Manager shall provide the Board of Directors, on a regular and comprehensive basis, with detailed information on all important aspects of the Company's business. In addition, any event of major importance shall be communicated immediately to the Board of Directors. The General Manager approves the form of all the materials subject to the analysis of the Board of Directors, supporting the content of the materials, legality, necessity or, as the case may be, their opportunity, materials that constitute the basis of the decisions adopted by the Board of Directors. At the same time, the organization of the execution and, as the case may be, the execution of the Decisions of the Board of Directors is ensured by the care of the General Manager. Thus, the measures ordered by the Decisions of the Board of Directors of the reference period have been implemented.

Any member of the Board of Directors may also request information from the General Manager regarding the operational management of the Company.

The Management Component of the Stewardship Plan for the period 2023-2027 was prepared in accordance with the provisions of art. 36 para. (1) of GEO no. 109/2011 on the corporate governance of public enterprises, as subsequently amended and supplemented by the General Manager of DEPOGAZ appointed by the Decision no. 5/06.03.2023 issued by the Board of Directors.

The Management Component of the Stewardship Plan was based on the managerial vision of the General Manager for the strategic development of DEPOGAZ between 2023 and 2027, based on the evolution of the natural gas storage activity so far, the current context and trends in the field of services at national and international level, as well as the forecasts and prospects that can be anticipated, so as to ensure the maintenance of a modern, financially viable, economically sustainable company, an operator that provides quality services to customers, meets the expectations of stakeholders and pays special attention to the social responsibility that aims to permanently increase the company's accountability to employees, the Sole Shareholder, partners, the community and the environment.

The Management Component of the Stewardship Plan 2023 - 2027 was approved by the Decision of the Board of Directors no. 6/31.03.2023.

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SNGN Romgaz SA published this content on 24 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 May 2024 08:43:06 UTC.