ELECTRICITY REGULATORY ANNUAL REPORT FY 2016 -17 LOW The cover image is of Turbines in The power house of The 5.54 MW Rwimi Hyropower Projec?r in Kosese Dis?rric?r. ERA Annual Report 2016 - 17 ELECTRICHY AUTHDRIH AUTHORITY Corporate Social Responsibility 1.0 WHO WE ARE 11 5.0 PERFORMANCE OF THE ELECTRICITY SUPPLY INDUSTRY 45 1.1 Our FuncTions 11 5.1 Loss ReducTion 45 1.2 ObjecTives 1 1 5.2 Energy Purchases and Soles by UETCL 45 1.3 Our Vision 12 5.3 Energy Soles by DisTribuTion Compdnies 49 1.4 Our Mission 12 5.4 CusTomer Connections 49 1.5 Our Core Values 12 5.5 TerminoTion of FerdsulT Engineering Services LimiTed's Licenses 49 1.6 Key performonce highlighTs 13 1.7 Members of The ElecTriciTy ReguldTory AuThoriTy 15 6.0 SECTOR INVESTMENTS 51 1.8 STdTemenT by The Choirmdn 18 6.1 Approved lnvesTmenT Plons 51 1.9 Chief ExecuTive Of?cer?s ReporT 20 7.0 STAKEHOLDER MANAGEMENT 56 2.0 GOVERNANCE STATEMENT 23 7.1 STdkeholder EngogemenT Frdmework 56 2.1 ComposiTion of The AuThoriTy 23 7.2 Consumer ProTecTion 57 2.2 Pro?le of The EPA AuThoriTy Members 23 7.3 ComploinTs Received Per CoTegory 57 2.3 ConducT of MeeTings of The AuThoriTy 26 7.4 STroTegies on effecTive compldinTs for 2017/18 58 2.4 CommiTTees of The AuThoriTy 26 7.5 Public OuTredch 58 2.5 AuThoriTy MeeTings ond Decisions 30 7.6 Aworeness Drives 58 7.7 STokeholder EngogemenT AcTiviTies 58 3.0 POWER SUPPLY SECURITY AND DEMAND 32 7.7.1 Public Heorings 58 3.1 ElecTriciTy GeneroTion 32 7.7.2 ConsulToTive MeeTings 59 3.2 ProjecTs Licensed in 2016/17 33 7.7.3 CorporoTe Socidl ResponsibiliTy 59 3.3 Licensed ProjecTs under ConsTrucTion 34 3.4 ProjecTs dT FedsibiliTy STudy 35 8.0 HUMAN RESOURCE AND ADMINISTRATION 63 3.5 Power Demond 35 8.1 Troining ond SToff DevelopmenT 63 3.6 EvocuoTion 35 8.1.1 Trdining of SToff 63 3.7 ElecTriciTy 36 8.1.2 RecruiTmenTs in FY 2016/17 63 3.8 Energy Ef?ciency 37 8.1.3 STon DiversiTy 65 3.9 DevelopmenT of Reody Boord Guidelines 38 8.1.4 PromoTions 65 8.1.5 Succession Plonning 65 4.0 MONITORING AND ENFORCEMENT OF COMPLIANCE 40 8.1.6 RemuneroTion Policy 66 4.1 SToTuTory lnspecTions 40 8.1.7 ResignoTions 66 4.2 lmprovemenT of The DisTribuTion NeTwork 40 8.1.8 Welfdre 66 4.3 EnvironmenTol MoniToring ond Complionce 42 8.1.9 OccupoTionol SofeTy HeolTh 66 4.4 QuoliTy of Service 42 8.2 CopiTol DevelopmenT (New ERA House) 66 "ii PRIMARY EDUCATIOI 6 ERA I Annual ReporT 2016 - 17 ERA Annual ReporT 2016 - 17 7 List of Tables Table I: Human Resource Attendance 22 Table 2: Audit Committee Sittings 23 Table 3: Technical Committee Attendance 24 9.0 STRATEGIC ourLook 68 Table 4: Attendance of the Authority meetings 25 Siroleg'c cons'dgm'om 68 Table 5: Licensed Projects in FY 201 6/1 7 27 9'2 Key trends affecting the Authority 69 Table 6' Licensed Projects under Construction 28 9.3 Strategic Outlook for the Next Three Years 70 . 9.4 Performance Aspirations 7] Table 7: Pr0jects at Study 28 9.5 Risk Management 72 Table 8: Major Projects executed during FY 201 6/1 7 35 Table 9: Compliance Monitoring and Enforcement Reviews 37 10-0 FINANCIAL PERFORMANCE 74 Table IO: Approved Investment Plan for Umeme Limited in 201 6 42 10-] STATEMENTS 75 Table I I: Approved Investment Plan for Umeme Limited in 2OI 7 43 10'2 Management Responsrbility 75 Table I2: Approved Investment Plan for Eskom Uganda Limited in 201 6 43 10.3 Auditor Responsrbility 75 . . . 10.4 Opinion 75 Table I3: Approved Investment Plan for Eskom Uganda Limited in 2OI 7 44 Table I4: Key stakeholder categories 47 Table I5: Customer Complaints received in FY 2015/Table I6: Public Hearings in respect of License Applications 51 Table I7: Staff recruited in 201 6/1 7 54 Table I8: ERA Staff Compliment in FY 2OI 6/1 7 54 Table I9: Key trends for the next Three Years 59 Table 20: Key Performance Indicators 61 Table 21: Risk Identi?cation and Mitigation 62 List of Figures Figure I: Generation Mix of Uganda 25 Figure 2: Location of the Licensed Projects in FY 201 6/1 7 26 Figure 3: Licensees? compliance with Q03 37 Figure 4: Umeme Loss reduction 38 Figure 5: UETCL Energy Purchases in FY 201 6/1 7 39 Figure 6: UETCL Energy sales in FY 2OI 6/1 7 40 Figure 7: The complaints received per category 48 Figure 8: Staff Diversity 54 8 ERA I Annual Report 2016 - I7 ERA Annual Report 2016 - I7 9 List of Abbreviations BECS DSM ERA ESI FESL FY GET HPP IAS IFRS IFRIC JICA KIS KPLC KPS KRECS MW NPA NPS NSSF PACMECS PAYE PPA PV REA SIC SCADA UBOS UGX UIA UMA URA USD UEDCL UEGCL UETCL VAT WENRECO WHT African Development Bank Bundibugyo Energy Co?operative Society Demand Side Management Electricity Regulatory Authority Electricity Supply Industry Ferdsult Engineering Services Limited Financial Year Global Energy Transfer for Feed?in?Tariff Hydropower Project/Plant International Accounting Standard International Financial Reporting Standard International Financial Reporting Interpretations Committee Japan International Cooperation Agency Kalangala Infrastructure Services Kenya Power and Lighting Company Kiira Power Station Kyegegwa Rural Electricity Cooperative Society Mega Watts National Planning Authority Nalubaale Power Station National Social Security Fund Pader Abim Community Multi?Purpose Electric Co?operative Society Limited Pay As You Earn Power Purchase Agreement Photo Voltaic Quality of Service Rural Electri?cation Agency Renewable Energy Feed?in Tariff Standard Interpretations Committee Supervisory Control and Data Acquisition Uganda Bureau of Statistics Uganda Shillings Uganda Investment Authority Uganda Manufacturers Association Uganda Revenue Authority United States Dollar Uganda Electricity Distribution Company Limited Uganda Electricity Generation Company Limited Uganda Electricity Transmission Company Limited Value Added Tax West Nile Rural Electri?cation Company Withholding Tax 10 ERA I Annual Report 2016 17 Who we are The Electricity Regulatory Authority (ERA) is a statutory body established in 2000, in accordance with the Electricity Act, 1999, Chapter 145 of the Laws of Uganda. The Authority is mandated by the Act to regulate the generation, transmission, sale, export, import and distribution of electrical energy in Uganda. 1.1 Our Functions The Authority is statutorily charged with the following functions, under Section 10 of the Electricity Act, 1999:- To issue Licenses for: The generation, transmission, distribution or sale of electricity; and, (ii) The ownership or operation of transmission systems; To receive and process applications for Licenses; To prescribe conditions and terms of Licenses issued under the Act; (01) To modify Licenses issued under the Act; To make and enforce directions to ensure compliance with Licenses issued under the Act; To establish a Tariff structure and to investigate Tariff charges, whether or not a speci?c complaint has been made for a Tariff adjustment; To approve rates of charges and terms and conditions of electricity services provided by transmission and distribution companies; To review the organization of generation, transmission and distribution companies or other legal entities engaged in the generation, transmission and distribution of electricity to the extent that that organization affects or is likely to affect the operation of the Electricity Sector and the ef?cient supply of electricity; To develop and enforce performance standards for the generation, transmission and distribution of electricity; To encourage the development of uniform electricity industry standards and codes of conduct To establish a uniform system of accounts for licensees; 1.2 In the To advise the Minister regarding the need for Electricity Sector projects; To prepare industry reports and to gather information from generation, transmission and distribution companies; To prescribe and collect Licence fees; To provide for the procedure for investment programmes by transmission and distribution companies; To approve standards for the quality of electricity supply services provided; To approve codes of conduct in respect of the operation of transmission and distribution systems; To acquire information and carry out investigations relating to any of its functions; and, To perform any other function that is incidental or consequential to its functions under this section, or as may be conferred on it by any other law. Strategic Objectives review period, the Authority executed its mandate guided by the following Strategic Objectives, as drawn from the ERA Ten?Year Strategic Plan, 2014/15 to 2023/24. (OI Increase electricity generation to meet present and future demand through attraction of both private and public sector investment and integration of environmental concerns. Promote energy ef?ciency and demand side management practices. Strengthen national and regional electricity transmission and distribution infrastructure and enhance regional collaboration in electricity regulation. Increase technical, commercial and operational ef?ciency in electricity generation, transmission and distribution. Promote reasonable and fair pricing of electricity services. Promote objectivity, transparency and accountability to stakeholders. Enhance good governance, internal operating ef?ciency and sustainability of ERA. Enhance human capital management. Improve use of technology and promote optimal utilization of organizational assets. - A - .- VISION Omssmu VALUES :?gir? 'l r" 2 1.3 Our Vision ?To be an effective regulator that promotes Safe, Ef?cient, Reliable and Sustainable Electricity Supply?. 1.4 Our Mission ?To regulate the Electricity Industry in accordance with applicable Laws, Policies, Standards and International Best practice.? 1.5 Our Core Values Professionalism Integrity lnnova?on Transparency and Accountability Equal and Fair Opportunity Stakeholder Sensitivity Teamwork 12 ERA I Annual Report 2016 - 17 1.6 Key performance highlights Performance 2016/17 2015/16 Area . Installed Generation 1 Supply Security Capacity 914 MW 863.6 MW Number of Licensed Projects 6 1 1 Capacrty of Licensed 813.7 MW 108 MW PrOJects Capacrty of Licensed . 930.8 MW 98 MW PrOJects under Construction 2 Customer/ Quality of Service 9/10 Licensees 5/10 Licensees Stakeholder Compliance reviewed reviewed GET-FIT Projects under . 7 6 Construction Customer Connections 1,104,093 925,597 UETCL Energy Purchases 3,588.8 3,422.6 UETCL Energy Sales 3,582 3,295 Eng?? ?'95 by 2,692.4 2,534.7 346/380 213/231 Complaints resolution complaints complaints resolved resolved 3 Financial Cost to Income ratio 77.3% 88.6% Budget absorption 92.2% 92.4% Investments approved US $201.3 Million Million 4 Internal Busrness Number of Tariff Reviews 10 Licensees 9 Licensees Processes 5 Human Resources Total staff numbers 54 54 Recruitments 12 6 ERA Annual Report 2016 - 17 13 Key performance highlights Supply Security Item 2016/17 2015/16 8T8 Capacity 91 4 MW 863.6 MW CfaLpacity WT Projects under 930.8 MW 98 MW Construction 481,104,093 8T8 925,597 I, E) 3,588.8 ewn 8T8 3,422.6 ewn I E) UETCLEnergySaIes 3,582 3'295 I, 9 5883338885 g?T? 2,692.4 2,534.7 3? Cost to Income ratio {El?n 77.3% 533?? 88 6% Budgetabsorption ?n 92.2% 92 4% REESE 54 54 14 ERA I Annual Report 2016 - i7 Members of the Electricity Regulatory Authority Chairman Mr. Richard Santo Apire October 201 i to-date Member Eng. Fabian Rwamwema Tibeita October 201 i to?date Member Eng. Joseph Oteng Otogo July 2014 to?date Member Member Amb. Joan Rwabyomere lax/r5355; Kanaabi October 2015 tO-dote - October 2015 to?date ERA Annual Report 2016 - i7 15 The Management Team 16 ERA I Annual Report 2016 - 17 Eng. Ziria Tibalwa Waako Chief Executive Of?cer from March 2017 to-date,? Ag. CEO from November 20 16 to February 2017; and Director Technical Regulation from July 2012 to October 2016. Dr. Benon M. Mutambi Chief Executive Of?cer from 201 1 to November 2016 Dr. Geofrey Okoboi Director Economic Regulation from August 2013 to?date CPA Edward Iruura Director Financial Services from December 2015 to-date Mr. Harold Obiga Director Legal and Authority Affairs from February 2017 to?date Mr. Peter Kifyo Ag. Director Technical Regulation November 2016 to-date ERA Annual Report 2016 - 17 17 Richard SanTo Apire Chairman IT is my privilege and honor To presenT The Annual ReporT for The ?nancial year 2016/17 on behalf of The EIecTriciTy RegulaTory AuThoriTy. During The period under review, ERA sTeadily progressed along iTs TrajecTory of becoming an ?effecTive regulaTor ThaT promoTes Safe, Ef?cienT, Reliable and SusTainable EIecTriciTy Supply?. In 18 ERA I Annual ReporT 2016 - 17 STaTemenT by The Chairman The execuTion of iTs mandaTe as provided for under The EIecTriciTy ACT, 1999, The AuThoriTy underTook various iniTiaTives To boosT generaTion capaciTy as well as Technical, commercial, and operaTional ef?ciency in The generaTion, Transmission and disTribuTion segmenTs. The AuThoriTy regisTered an increase in The counTry?s insTalled generaTion capaciTy, from IrT/[x 863.6 MW TO 914.1 MW In December 2016, Uganda?s EIecTriciTy Supply IndusTry Through GET supporT achieved yeT anoTher major milesTone, wiTh The commissioning of The ?rsT Grid?connecfed Solar PhoTo VolTaic PlanT in The counTry. The 10 MW PlanT is IocaTed in SoroTi DisTricT and was developed by Access Uganda Solar LimiTed. The AuThoriTy inTensi?ed compliance moniToring Through off?siTe reviews and on?siTe visiTs (sTaTuTory inspecTion) of licensees To ascerTain performance levels wiTh regard To Technical, ?nancial, economic, and environmenTal parameTers. This noT only provided The AuThoriTy wiTh relevanT informaTion for regulaTory purposes buT also enabled The licensees To remedy areas of non-compliance. In an efforT To mainTain The favorable Renewable Energy InvesTmenT climaTe creaTed by The EIecTriciTy RegulaTory AuThoriTy, ERA wiTh supporT from The GET program revised The Renewable Energy Feed-in Tariffs in July 2016. This is expecTed To susTain The level of ?nancial viabiliTy of poTenTial power generaTion projecTs To ensure ThaT The counTry remains one of The besT invesTmenT desTinaTions on The African con?nenT and licensed six (6) projecTs wiTh a proposed generaTion capaciTy of 813.7 MW To furTher boosT The generaTion capaciTy. <2 813.7 MW $3 In recogniTion of The invaluable conTribuTion ThaT sTakeholders make Towards The AuThoriTy?s decision-making process, ERA exTensively consulTed iTs sTakeholders on several regulaTory issues To arrive of fair, reasonable decisions. We pledge To conTinue execuTing The mandaTe of The AuThoriTy in a TransparenT manner. As we progress info The new ?nancial year wiTh renewed commiTmenT To mainTaining a favorable regulaTory environmenT ThaT caTers for The inTeresTs of diverse sTakeholders, I wish To exTend my sincere appreciaTion To all The sTakeholders ThaT have conTinuously supporTed The AuThoriTy. To The GovernmenT of Uganda in general, The MinisTer of Energy and Mineral DevelopmenT and The MinisTer of Finance, Planning and Economic DevelopmenT in parTicular, DevelopmenT ParTners and The oTher sTakeholders, we say Thank you. To my colleagues The Members of The AuThoriTy, The ManagemenT and STaff, Thank you for your commiTmenT To serving ERA and The EIecTriciTy Supply IndusTry as a whole. q. .. Richard Sanfo Apire Chairman ERA Annual ReporT 2016 17 19 a: Ray!? . "El?n-r. Eng. Ziria Tibalwa Waako Chief Executive Officer lam pleased To presenT The ElecTriciTy RegulaTory AuThoriTy's Annual ReporT for ?nancial year 2016/17. Following The celebraTed performance and milesTones during The previous ?nancial year, The AuThoriTy reinforced The solid foundaTion esTablished over years of regulaTion and conTinued on The journey of consTanT improvemenT and innovaTion ThaT will enable us To achieve our vision of being an ?effecTive regulaTor ThaT promoTes Safe, Ef?cienT, Reliable and SusTainable ElecTriciTy Supply?. 20 ERA I Annual ReporT 2016 - 17 Chief ExecuTive Of?cer?s ReporT The AuThoriTy carried ouT ?nancial and commercial performance reviews of licensed companies To deTermine Their performance in comparison To The TargeTs seT by ERA. The licensees generally performed well in respecT of meeTing demand for energy buT had challenges wiTh meeTing The TargeTs on Energy Losses and OperaTion and MainTenance expendiTure. Regardless of The challenges, The enTiTies remain going concerns for The foreseeable fuTure. g; 201.3 Million Due To These invesTmenTs, The lndusTry regisTered reduced Energy Losses of 17.5%, from 21% in The lasT ?nancial year. This subsequenle increased The Energy Sales by DisTribuTion UTiliTies from 3,295 To 3,582 Gwh. As mandaTed by The ElecTriciTy 1999, ERA Timely reviewed sTrucTures of ElecTriciTy Tariffs and seT Tariffs To be charged by various licensees as per The applicable Tariff MeThodologies. The resulTanT End-User Tariffs were largely dependenT on changes in The Exchange raTe, in?aTion raTe and The price of fuel on The inTernaTional marl1.0 raTio Process 30% auTomaTion raTe ERA Annual ReporT 2016 17 71 9.5 Risk Management The AuThoriTy recognizes The imporTance of Risk Governance and Thus a comprehensive analysis of The necessary framework To enable The RegulaTor To compeTenle manage iTs risk porTfolio has been underTaken and awaiTs approval by The Board of ERA. The AuThoriTy is exposed To risks ThaT can have an impacT on achievemenT of iTs goals and objecTives. For ThaT reason, if is obliged To miTigaTe ThreaTs and opTimize opporTuniTies in order To realize iTs objecTives suf?cienle and successfully implemenT iTs mandaTe. Table 21: Risk Identi?cafion and MiTigaTion Risk CapTion Risk Descripfion MiTigaTion In?aTlon, exchange raTes, and fuel prices which have an impacT on The Tariff may be unsTable in The long run. UnsTable macro?economic facTors Non?Technical losses Increased secTor cosTs Low Energy Demand Non-Technical losses As such, a policy is being developed aimed aT enabling The organizaTion To insTiTuTe a sysTem ThaT encourages an appropriaTe risk culTure, and To form an effecTive Risk ManagemenT Framework. The AuThoriTy plans To use The Risk ManagemenT Policy and Framework conTinuously Through seeking new ways of building sTakeholder value, recognizing a connecTion beTween value creaTion and risk managemenT in an organizaTional environmenT where risks are noT jusT hazards To be avoided, buT evenTs To be managed. Some of The AuThoriTy?s key risks idenTi?ed and Their miTigaTion measures are idenTi?ed in Table 21. QuarTerly Tariff AdjusTmenT mechanism To adjusT for changes in exchange raTe, in?aTion and fuel prices. lmplemenTaTion of measures To compensaTe and/or manage The movemenTs in macro economic facTors. DeTermine Energy Loss TrajecTories for disTribuTion and Transmission companies. lmplemenT an incenTive? based Tariff regime. 72 lncreased secTor cosTs Low Energy Demand lnadequaTe SecTor funding ERA I Annual ReporT 2016 -17 In The shorT run, capaciTy ouTsTrips demand since major projecTs such as Karuma and lsimba are expecTed online The nexT Two (2) years. This implies ThaT The uniT price of elecTriciTy will be higher. Increase in access and demand requires a loT of funding. The secTor may be unable To raise The required capiTal of The righT Time. Increase in access and demand requires a loT of funding. The secTor may be unable To raise The required capiTal of The righT Time. Consider oTher sources of ?nancing which do noT adversely impacT The Tariff, such as concession ?nancing. Develop connecTion policies To increase access and grow producTive use of energy. Consider oTher sources of ?nancing which do noT adversely impacT The Tariff, such as concession ?nancing. Risk Capfion Risk DescripTion MiTigaTion lnadequaTe SecTor funding Low sTakeholder awareness levels Failure of licensees To comply wiTh applicable laws Resource consTrainTs High Turnover of key human resources Increase in access and demand requires a loT of funding. The secTor may be unable To raise The required capiTal aT The righT Time. Low awareness levels may cause ERA To lose in?uence among iTs key sTakeholders. Licensees may fail To comply wiTh applicable laws. LackofadequaTeresourcesTo underTake all ERA's acTiviTies. The AuThoriTy is currenle dependenT on The Tariffs for mosT of iTs revenues. There is a risk ThaT policy direcTives aimed aT reducing The Tariffs may lead To reduchon in revenues. The privaTe secTor has The abiliTy To offer high salaries To aTTracT The key compeTenT resources, which could affecT ERA's performance. Consider oTher sources of ?nancing which do noT adversely impacT The Tariff, such as concession ?nancing. lmplemenT The STakeholder ManagemenT STraTegy. STandardize requiremenTs. Regular moniToring and inspecTion of licensees. EnforcemenT framework for non? compliance. Develop and implemenT funding sTraTegy Timely lmplemenTaTion of STaff IvloTivaTion, ReTenTion and Succession Plans. ERA Annual ReporT 2016 17 73 Financial Performance The ?nancial ouTIook of The AuThoriTy in The ?nancial year 2016/17 aimed aT conTinuing To grow The insTiTuTion Towards ?nancial susTainabiliTy. The AuThoriTy realized more revenues by 24 per cenT againsT The planned budgeT. The realizaTion was on accounT of Three facTors, including: The licensing of The Two (2) GovernmenT Power ProjecTs (Isimba HPP - 183 MW and Karuma HPP - 600 MW) ?ve monThs earlier Than iniTiaIIy anTicipaTed. The second conTribuTing facTor was The realizaTion of renTal and inTeresT incomes noT inifially included in The budgeT, and invesTing projecT funds in Treasury bills and ?xed depodh. The depreciaTion of The Uganda Shilling over The pasT 12 (Twelve) monThs also conTribuTed To The growTh in revenues. DepreciaTion affecTed The revenues which were denominafed in UniTed STaTes Dollars (sTronger foreign currency). The Uganda Shilling depreciaTed by aT IeasT 6% over The 12-monThs period under review againsT The UniTed STaTes Dollar. The year's budgeT had assumed an exchange raTe of UGX and The ?nancial year, aT UGX The oTher facTors are discussed wiThin The individual revenue sTream performance. In Terms of expendiTure, The AuThoriTy spenT in line wiTh The approved budgeT and The availabiIiTy of funds. To a greaT exTenT, The planned acTiviTies were underTaken as highlighTed in The previous secTions. A few acTiviTies were iniTiaTed and are being implemenTed. These acTiviTies include The consuITancies for Veri?caTion of Umeme LimiTed's Prepaid MeTers, InTernaTional OrganizaTion for STandardizaTion (ISO) Cerfi?cafion, developmenT of STrucTuraI Designs as well as procuremenT of The conTracTor for The new ERA House, and recruiTmenTs for some posiTions. Key among The planned expendiTure funds ThaT were noT commiTTed was funding meanT for The purchase of four (4) sTaTion wagons. DespiTe such challenges, The AuThoriTy implemenTed iTs acTiviTies in accordance wiTh SecTion 10 of The ElecTriciTy The overall ?nancial performance of The AuThoriTy in The review period was a neT surplus of UGX 5,939,067,369 aTTribuTed To The planned saving on The new ERA House and a saving on The implemenTed acTiviTies. These in addiTion To The neT exchange gains arising from revaluaTion of receivables, payables and bank balances conTribuTed To The realizaTion of revenues beyond The approved budgeT. Audifed Financial STaTemenTs 10.2 ManagemenfResponsibilify The Public Finance ManagemenT 2015, SecTion 51 (3) and The ElecTriciTy ACT, 1999, Cap 145 SecTion 28 (1) require The AuThoriTy To keep proper books of accounTs for each ?nancial year. These should give a True and fair view of HS ?nancial posiTion aT The year?end, resulTs of performance (income and expendiTure) and cash ?ows. Accordingly, The DirecTors of ERA are responsible for The preparaTion and presenTaTion of The Financial STaTemenTs in accordance wiTh The InTernaTionaI Financial ReporTing STandards (IFRSs). The DirecTors are furTher responsible for ensuring ThaT inTernaI conTroI policies and pracTices are puT in place. This responsibiliTy is uITimaTer delegaTed To The ERA ManagemenT. The DirecTors have puT in place inTernaI conTrols, policies and procedures ThaT enable preparaTion of Financial STaTemenTs ThaT are free from maTerial missTaTemenTs wheTher due To fraud or error. The DirecTors, Therefore, accepT responsibiliTy for This year?s Financial STaTemenTs, which have been prepared based on The reasonable esTimaTes and are in conformiTy wiTh The InTernaTionaI Financial ReporTing STandards. The assessmenT made by The ERA DirecTors shows ThaT The AuThoriTy will remain a going concern in The foreseeable fuTure. NoThing maTeriaI has come To The aTTenTion of The DirecTors of The AuThoriTy or iTs ManagemenT ThaT would hinder The company's abiliTy To remain a going concern. if SECRETARY we? Thurman Eii?i'?'rli?fgm 10.3 Audifor?s Responsibility The responsibiliTy as sTaTed under ArTicIe 163 of The ConsTiTuTion of The Republic of Uganda and SecTions 13 and 19 of The NaTionaI AudiT 2008 is To audiT and express an opinion on The sTaTemenTs based on The audiT. I conducTed The audiT in accordance wiTh The InTernaTionaI STandards on AudiTing. Those sTandards require ThaT I comply wiTh The eThicaI requiremenTs and plan and perform The audiT To obTain reasonable assurance wheTher The ?nancial sTaTemenTs are free from maTerial missTaTemenTs. An audiT involves performing audiT procedures To obTain evidence abouT The amounTs and disclosures in The Financial STaTemenTs as well as evidence supporTing compliance wiTh The relevanT laws and regulaTions. The procedures selecTed depend on The AudiTor?s judgemenT including The assessmenT of risks of maTeriaI missTaTemenT of The Financial STaTemenTs wheTher due To fraud or error. In making Those risk assessmenTs, The audiTor considers inTernaI conTrols relevanT To The enTiTy?s preparaTion and fair presenTaTion of Financial STaTemenTs in order To design audiT procedures ThaT are appropriaTe in The circumsTances buT noT for purposes of expressing an opinion on The effecTiveness of The enTiTy?s inTernal conTroI. An audiT also includes evaluaTing The appropriaTeness of accounTing policies used and The reasonableness of accounTing esTimaTes made by ManagemenT as well as evaluaTing The overall presenTaTion of The Financial STaTemenTs. I believe ThaT The audiT evidence I have obTained is suf?cienT and appropriaTe To provide a basis of our opinion. 10.4 Opinion In my opinion, The Financial STaTemenTs of The ElecTriciTy RegulaTory AuThoriTy for The year ended 30Th June 2017 are prepared, in all maTeriaI respecTs in accordance wiTh The InTernaTionaI Financial ReporTing STandards and SecTion 51 (1) of The Public Finance ManagemenT 2015. John F. S. Muwa AUDITOR GENERAL ERA Annual ReporT 2016 17 75 Electricity Regulaton/ Authority Statement of Financial Position as at June, 2017 UGX UGX ASSETS Non?Current Assets Non?Current Assets 3 Current Assets Cash and Bank balances 4 Prepayments and Advances 5 Short?term Investments 6 Receivables 7 Current Liabilities 9,119,291,104 4,564,846,544 605,326,897 10,947,405,396 3,572,351,286 19,689,930,123 9,087,758,720 4,514,836,032 1,478,944,102 1,410,503,147 1,697,155,049 9,101,438,329 REVENUE License fees Levy Charges Application Fees Installation Permits Rental Income Other Income REVENUE OPERATING EXPENSES Electricity Regulatory Authority Statement of Comprehensive Income for the period ended June, 2017 UGX UGX 15,716,956,897 4,473,01 1,674 913,673,209 174,034,850 1 19,105,754 665,31 1,433 22,062,093,817 10,362,434,264 3,863,761,979 682,279,647 152,527,839 91,547,085 144,943,373 15,297,494,187 Payables 8 1,744,131,940 1,612,015,944 Deferred Income 9 10,137,413,037 5,205,096,304 Payroll and Gratuity Accruals 10 329,794,488 451,573,124 (12,21 1,339,465) (7,268,685,372) Net Current Assets (Liabilities) 7,478,590,658 1,832,752,958 NET ASSETS 16,597,881 ,763 10,920,511,679 EQUITY AND RESERVES Government of Uganda Equity 280,000,000 280,000,000 General Reserves 20 10,825,351 ,306 4,903,466,579 Revaluation Reserves 20 5,492,530,456 5,737,045,100 TOTAL EQUITY AND RESERVES 16,597,881 ,763 10,920,511,679 Personnel Expenses 13 (9,645,025,056) (7,212,085,521) Board Expenses 1 1 (1,235,079,347) (1,059,066,150) General Administration 17 (1,358,400,605) (1,223,51 1,652) Promotion and Advertisements 16 (329,959,994) (258,752,841) Training, Workshops and Conferences 12 (1,199,634,779) (1,043,142,192) Monitoring and Compliance 15 (590,053,960) (477,455,020) Consultancy Fees 14 (444,642,891) (464,429,692) Stakeholder Programmes 19 (1,009,136,570) (796,013,039) Depreciation 3 (483,761,206) (365,212,489) TOTAL OPERATING EXPENSES (16,295,694,409) (12,899,668,596) TOTAL OPERATING EXPENSES 5,766,399,408 2,397,825,591 Foreign Exchange Gain 18 172,667,961 225,908,572 Operating Surplus for the Year 5,939,067,369 2,623,734,163 OTHER COMPREHENSIVE INCOME Revaluation Surplus 3 - 5,104,510,123 TOTAL 5,939,067,369 7,728,244,286 INCOME FOR THE YEAR 76 ERA I Annual Report 2016 - 17 ERA Annual Report 2016 17 Electricity Regulatory Authority Statement of Changes in Equity as at 30*h June, 2017 Electricity Regulaton/ Authority Cash Flow Statement as at June, 2017 UGX UGX Revaluation Reserve Government General Equity Reserves Cash ?ows from Operating activities Operating Surplus for the period Bad Debts Expense Write-off of books and journals Depreciation and software amortization Interest received Pro?t on disposal of Non?current Assets Changes in Working Capital Movement in prepayments and advances Movement in Receivables Movement in Payables Movement in Deferred Income Increase in Payroll and Gratuity Accruals Net Movement in Working Capital Net Cash in-Flows from operating activities Cash flows from Investment Activities Interest on Fixed Deposits and Treasury Bills Prior Year Adjustment-General Reserves Proceeds from disposal of Non-current Assets Purchase of Fixed Assets NET CASH FLOW Cash and Cash Equivalents at begin? ning of the year Cash and Cash Equivalents at end of period Represented by: CASH AND BANK BALANCE AS AT 30""l JUNE, 2017 78 ERA I Annual Report 2016 - I7 C) 21 21 5,939,067,369 483,761,206 -61 6,593,315 5,806,235,260 873,617,205 ?1,875,196,237 132,1 15,997 4,932,316,733 ?121,778,636 3,941,075,061 9,747,310,321 616,593,315 ?17,699,001 ?759,291,874 9,586,912,761 5,925,339,179 15,512,251 ,940 15,512,251 ,940 2,623,734,163 288,760,105 365,212,489 -52,713,155 ?6,770,000 3,218,223,602 22,224,571 ?786,418,501 124,971,290 189,649,759 ?39,71 5,068 -489,287,950 2,728,935,653 52,713,155 6,770,000 ?659,282,426 2,129,136,379 3,796,202,800 5,925,339,179 5,925,339,179 Balance at July 01,2016 Prior year adjust? ment Surplus during the period BALANCE AT 30TH JUNE, 2017 UGX 280,000,000 280,000,000 UGX 4,903,466,579 ?17,699,001 5,939,067,369 10,824,834,947 UGX UGX 5,737,045,100 10,920,51 I ,679 ?243,998,284 -261 697,285 - 5,939,067,369 5,493,046,816 16,597,881 ,763 ERA Annual Report 2016 I7 79 Notes to the Financial Statements for the Financial Year Ended 30*h June, 2017 GENERAL The Electricity Regulatory Authority (?the Authority?) is a statutory body established as an agency of the Government of Uganda under the Electricity Act, 1999, Chapter 145 of the Laws of Uganda. For purposes of the Electricity Act, 1999, and the Public Finance Management Act, 201 5, the balance sheet has been named as the Statement of Financial Position in these Financial Statements, and the Revenue and Expenditure account is represented by the Statement of Comprehensive Income. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PREPARATION 80 ERA I Annual Report 2016 - 17 Basis of Accounting The Financial Statements have been prepared in accordance with and comply with the International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). The Financial Statements have been prepared on the historical cost basis, adjusted for fair values of some classes of assets. Functional and presentation currency The Financial Statements are presented in Uganda Shillings, which is the Authority's functional currency. AII ?nancial information presented in Uganda Shillings has been presented in absolute terms (UGX) except when otherwise indicated. RECENTLY ISSUED ACCOUNTING ACCOUNTING PRONOUNCEMENTS Newly Effective Standards Standards Detailed requirements IFRS l6 Leases Investment Entities (Amendments to IFRS IO, IFRS 12 and IAS 27) IFRS I4 Regulatory Deferral Accounts (Issued: 30 January 2014) Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) Recoverable Amount Disclosures for Non?Financial Assets (Amendments to IAS 36) Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) IFRIC 21 Levies Issued in January 2016, IFRS I6 replaces the previous Leases Standard, IAS - 17 Leases, and related Interpretations. IFRS I6 is effective from 1 January 2019 and an entity can choose to apply IFRS 16 before that date but only if it also applies IFRS 15 - Revenue from Contracts with Customers. Consolidation relief for investment funds IFRS 14 permits an entity which is a ?rst- time adopter of the International Financial Reporting Standards to continue to account, with some limited changes, for ?regulatory deferral account balances? in accordance with its previous GAAP, both on initial adoption of IFRSs and in subsequent Financial Statements. The standard amends IAS 32 Financial Instruments: Presentation to provide clari?cations on the application of the offsetting rules. The IASB issued amendments to reverse the unintended requirement in IFRS 13 - Fair Value Measurement to disclose the recoverable amount of every cash?generating unit to which signi?cant goodwill or inde?nite? Iived intangible assets have been allocated. Under the amendments, recoverable amount is required to be disclosed only when an impairment loss has been recognized or reversed. The amendments apply retrospectively for annual periods beginning on or after 1 January 2014. Providing relief from discontinuing an existing hedging relationship when a novation that was not contemplated in the original hedging documentation meets speci?c criteria. A new interpretation has provided more clarity as to when a liability for a levy should be recognized. ERA Annual Report 2016 17 81 Effective for the ?nancial year commencing 1st January, 2018 IFRS 9 Financial Instruments All Standards and Interpretations will be adopted at their effective date, except for those Standards and Interpretations that are not applicable to the entity. IFRS 14, IAS 41, IAS 27, IFRS 10, IAS 28, IFRS 11 and IFRS 12 are not applicable to the business of the entity and will therefore have no impact on future ?nancial statements. The Authority is of the opinion that the impact of the application of the remaining Standards and Interpretations will be as follows. De?ned Bene?t Plans: Employee Contributions (Amendments to IAS 19) The amendments introduce relief that will reduce the complexity and burden of accounting for certain contributions from employees or third parties. Such contributions are eligible for practical expedient if they are: i. Set out in the formal terms of the plan; ii. Linked to service; and, Independent of the number of years of service. When contributions are eligible for the practical expedient, an entity is permitted (but not required) to recognize them as a reduction of the service cost in the period in which the related service is rendered. This Standard will not have a signi?cant impact on the Authority as it does not have a de?ned bene?t scheme. The amendments apply retrospectively for annual periods beginning on or after 1st July 2014 with early adoption permitted. Effective the ?nancial year commencing 1st January, 2021, IFRS 17 - Insurance Contracts supersedes IFRS 4 Insurance Contracts as of 1ST January 2021. IFRS 17 requires insurance liabilities to be measured at a current ful?llment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. ANNUAL IMPROVEMENTS TO IFRS STANDARDS 2014?201 6 CYCLE IFRS I - Deletes the short-term exemptions in paragraphs of IFRS I, because they have now served their intended purpose. IFRS 12 - Clari?es the scope of the Standard by specifying that the disclosure requirements in the 82 ERA I Annual Report 2016 - 17 Standard, except for those in paragraphs apply to an entity's interests listed in paragraph 5 that are classi?ed as held for sale, held for distribution or as discontinued operations in accordance with IFRS 5: Non?current Assets held for Sale and Discontinued Operations. IAS 28 - Clari?es that the election to measure at fair value through pro?t or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organization, or other qualifying entity, is available for each investment in an associate or joint venture on an investment?by? investment basis, upon initial recognition. RECENTLY ISSUED ACCOUNTING NEW ACCOUNTING PRONOUNCEMENTS IFRS 15 - Revenue from Contracts with Customers (Effective date: 15* January 2018) IFRS 15 provides a single, principles-based ?ve?step model to be applied to all contracts with customers. The ?ve steps in the model are as follows: i. Identify the contract with the customer; ii. Identify the performance obligations in the contract; Determine the transaction price; iv. Allocate the transaction price to the performance obligations in the contracts; and recognize revenue when (or as) the entity satis?es a performance obligation. Guidance is provided on topics such as the point at which revenue is recognized, accounting for variable consideration, costs of ful?lling and obtaining a contract and various related matters. New disclosures about revenue are also introduced. Clari?cation of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 and IAS 38) The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue?based methods of depreciation cannot be used for property, plant and equipment. The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue?based amortization methods for intangible assets is inappropriate. The presumption can be overcome only when revenue and the consumption of the economic bene?ts of the intangible asset are ?highly correlated?, or when the intangible asset is expressed as a measure of revenue. The Authority currently has (but not signi?cant) property, plant and equipment and or intangible assets. These amendments are thus not anticipated to cause a signi?cant impact in the near future. The Authority will, however, adopt these standards on the effective date. The amendments apply prospectively for annual periods beginning on or after I January 2016 and early adoption is permitted. Disclosure Initiative (Amendments to IAS 1) The amendments provide additional guidance on the application of materiality and aggregation when preparing Financial Statements. IFRS 15 Revenue from contracts with customers This Standard replaces IAS 11 - Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 - Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC 31 Revenue Barter of Transactions Involving Advertising Services. The Standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract?based ?ve?step analysis of transactions to determine whether, how much and when revenue is recognized. This new Standard will most likely have a signi?cant impact on the Authority, which will include a possible change in the timing of when revenue from licensees is recognized and the amount of revenue recognized. The Authority will perform a more detailed assessment of the impact of this Standard. The Standard is effective for annual periods beginning on or after 1ST January 2017, with early adoption permitted under IFRS. IFRS 9 - Financial Instruments On 24Th July 2014, the IASB issued the ?nal IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the project to replace IAS 39 - Financial Instruments. Recognition and Measurement This Standard will have a signi?cant impact on the Authority, which will include changes in the measurement bases of the Authority?s ?nancial assets to amortized cost, fair value through other comprehensive income or fair value through pro?t or loss. Even though these measurement categories are similar to IAS 39, the criteria for classi?cation into these categories are signi?cantly different. In addition, the IFRS 9 impairment model has been changed from an ?incurred loss" model from IAS 39 to an ?expected credit loss? model, which is expected to increase the provision for bad debts recognized. The Standard is effective for annual periods beginning on or after 1St January 2018, with retrospective application or early adoption permitted. REVENUE RECOGNITION Revenue is measured at the fair value of the consideration received or receivable from provision of goods and services. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Fees and commissions are recognized on an accrual basis on delivery of the related service. Interest income is recognized on an accrual basis by reference to the principal outstanding and at the effective interest rate applicable. Grant revenue is recognized when received by the entity and when the conditions for the grant are met. PROPERTY, PLANT AND EQUIPMENT Equipment are stated at the cost of bringing the assets to their present location and condition, less accumulated depreciation and any accumulated impairment losses. DEPRECIATION Depreciation is calculated to write off the cost of property, plant and equipment on a straight line basis using the following annual rates. Asset Esttmate Buildings 2% Motor vehicles 25% Computer equipment 30% Furniture and Fittings 12.5% Tools 10% Software/Intangibles 30% 50 Years 5 Years 3 1/3 Years 8 Years 10 Years 3 1/3 Years ERA Annual Report 2016 17 83 Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Gains and losses on disposal of equipment are determined by reference to their carrying amount and are taken into account in determining operating surplus/de?cit. INTANGIBLE ASSETS Software Software acquired by the Authority is measured at cost, less accumulated amortization and any accumulated impairment losses. Expenditure on internally developed software is recognized as an asset when the Authority is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic bene?ts, and can reliably measure the costs to complete the development. The capitalized costs of internally developed software include all costs directly attributable to developing the software and capitalized borrowing costs, and are amortized over its useful life. Internally developed software is stated at capitalized cost less accumulated amortization and impairment. Subsequent expenditure on software assets is capitalized only when it increases the future economic bene?ts embodied in the speci?c asset to which it relates. All other expenditure is expensed as i . Software is amortized on a straight line basis over its estimated useful life, from the date that it is available for use. The estimated useful life of software for the current and comparative periods is three years. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. CAPITAL GRANTS Grants related to the acquisition of assets are recognized in the Statement of Comprehensive Income on a systematic basis over the useful lives of the assets acquired as per IAS 20. The Authority, however, neither received any grants for the year ended 30th June 2017 nor had any running grant. SUBSIDIARY A subsidiary is a company in which the Authority either directly or indirectly has an interest of more than 50% of the voting rights or otherwise has power to exercise control over the operations of the entity when it is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Authority does not currently have direct or indirect interest or voting rights in any company 84 ERA I Annual Report 2016 - 17 and therefore, its Financial Statements were not impacted by performance of another company. WORK IN PROGRESS The Authority took a decision during the ?nancial year ended 30Th June 2015 to construct new premises at the ERA property in Lugogo Industrial Area. In the FY 2015/16, two consultants were procured; one successfully carried out the environmental impact assessment of the premises, while the other was tasked with development of structural designs for the building and supervision, sourcing for the contractor and supervision of the contractor?s works when construction commences in ?nancial year 2017/18. All the project costs incurred to?date are currently reported as work in progress under the Property, Plant and Equipment and will be capitalized upon completion. Other remaining work in progress relates to a new Human Resource software which was under development/customization at the date of reporting. IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS At the end of each reporting period, the Authority reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Authority estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identi?ed, corporate assets are also allocated to individual cash?generating units, or otherwise they are allocated to the smallest group of cash?generating units for which a reasonable and consistent allocation basis can be identi?ed. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ?ows are discounted to their present value using a pre?tax discount rate that re?ects current market assessments of the time value of money and the risks speci?c to the asset for which the estimates of future cash ?ows have not been adjusted. Intangible assets with inde?nite useful lives and intangible assets not yet available for use are tested for impairment annually; and, Where an impairment loss subsequently reverses, the carrying amount of the asset (cash?generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash?generating unit) in prior years. A reversal of an impairment loss is recognized immediately in pro?t or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. FINANCIAL INSTRUMENTS Financial Assets Financial assets are recognized initially at cost using settlements date accounting. Held to maturity investments are subsequently measured at amortized cost while ?nancial assets held for trading and available for sale are measured at fair value. Financial Assets and Financial Liabilities Recognition The Authority initially recognizes loans and receivables on the date that they are originated. Regular way purchases and sales of ?nancial assets are recognized on the trade date at which the Authority commits to purchase or sell the assets. All other ?nancial assets and liabilities (including assets and liabilities designated at fair value through pro?t or loss are recognized initially on the trade date, which is the date that the Authority becomes a party to the contractual provisions of the instrument. A ?nancial asset or ?nancial liability is measured initially at fair value plus, for an item not at fair value through pro?t or loss, transaction costs that are directly attributable to its acquisition or issue. Financial Assets The Authority classi?es its ?nancial assets in one of the following categories: (1) Loans and receivables; (ii) Held to maturity; At fair value through pro?t or loss; and, (iv)Held for trading; or designated at fair value through pro?t or loss. Financial Liabilities The Authority classi?es its ?nancial liabilities as measured at amortized cost or fair value through pro?t or loss. (ii)Derecognition Financial Assets The Authority derecognizes a ?nancial asset when the contractual rights to the cash ?ows from the ?nancial asset expire, or it transfers the rights to receive the contractual cash ?ows in a transaction in which substantially all the risks and rewards of ownership of the ?nancial asset are transferred; or in which the Authority neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the ?nancial asset. Any interest in such transferred ?nancial assets that qualify for Derecognition that is created or retained by the Authority is recognized as a separate asset or liability. On de?recognition of a ?nancial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset) transferred and the sum of: The consideration received (including any new asset obtained less any new liability assumed); and, (ii) Any cumulative gain or loss that had been recognized in other comprehensive income is recognized in pro?t or loss. Financial Liabilities The Authority derecognizes a ?nancial liability when its contractual obligations are discharged, cancelled or expire. Offsetting Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Authority has a legal right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. If there is no quoted price in an active market, then the Authority uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. Amortized Cost Measurement The amortized cost of a ?nancial asset or liability is the amount at which the ?nancial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount recognized and the maturity amount minus any reduction for impairment. ERA Annual Report 2016 17 85 Fair Value Measurement Fair value is The price ThaT would be received To sell an asseT or paid To Transfer a liability in an orderly TransacTion beTween markeT participants aT The measurement daTe in The principal or, in iTs absence, The mosT advantageous market To which The AuThoriTy has access aT ThaT daTe. The fair value of a liabiliTy re?ects iTs non-performance risk. When available, The AuThoriTy measures The fair value of an insTrumenT using The quoTed price in an acTive market for ThaT insTrumenT. A market is regarded as acTive if TransacTions for The asset or liabiliTy Take place wiTh suf?cient frequency and volume To provide pricing informaTion on an ongoing basis. If There is no quoTed price in an active market, Then The AuThoriTy uses valuaTion Techniques ThaT maximize The use of relevant observable inpuTs and minimize The use of unobservable inpuTs. The chosen valuaTion Technique incorporaTes all of The facTors ThaT markeT parTicipanTs would Take inTo accounT in pricing a TransacTion. The besT evidence of The fair value of a ?nancial insTrumenT aT iniTial recognition is normally The TransacTion price, ThaT is, The fair value of The consideration given or received. If The AuThoriTy determines ThaT The fair value aT initial recogniTion differs from The TransacTion price and The fair value is evidenced neiTher by a quoTed price in an acTive markeT for an identical asseT or liability nor based on a valuaTion Technique ThaT uses only daTa from observable markeTs, Then The ?nancial insTrumenT is initially measured aT fair value, adjusTed To defer The difference beTween The fair value at initial recogniTion and The TransacTion price. Subsequently, ThaT difference is recognized in The STaTemenT of Comprehensive Income on an appropriate basis over The life of The insTrumenT buT no later Than when The valuaTion is wholly supporTed by observable market daTa or The TransacTion is closed ouT. Identi?cation and Measurement of Impairment AT each reporting daTe, The AuThoriTy assesses whether There is objective evidence ThaT ?nancial assets noT carried aT fair value Through pro?T or loss are impaired. A ?nancial asseT or a group of ?nancial assets is impaired when objective evidence demonstrates ThaT a loss evenT has occurred afTer The initial recogniTion of The dsseT(s) and ThaT The loss evenT has an impacT on The fuTure cash ?ows of The dsseT(s) ThaT can be estimated reliably. Impairment losses on assets measured aT amortized cosT are calculated as The difference beTween The 86 ERA I Annual Report 2016 - 17 carrying amounT and The present value of estimated future cash ?ows discounted aT The asseT's original effective inTeresT rate. Investment Securities InvesTmenT securities are initially measured aT fair value plus, in case of invesTmenT securities noT aT fair value, Through pro?t or loss, incremental direcT TransacTion costs, and subsequently accounted for depending on Their classi?cation as either held?To? maTuriTy, fair value Through pro?T or loss, or available for sale. Held-to-Maturity Held-To?maturiTy investments are non-derivative assets wiTh ?xed or determinable payments and ?xed maTuriTy ThaT The AuThoriTy has The positive inTenT and ability To hold To maTuriTy, and which are noT designated as aT fair value Through pro?T or loss or as available for sale. Held?To?maTuriTy investments are carried aT amortized cosT using The effective inTeresT method, less any impairment losses. A sale or reclassi?cation of a more Than insigni?cant amount of held?To?maTuriTy investments would result in The reclassi?cation of all held?To?maTuriTy investments as available for sale, and would prevent The AuThoriTy from classifying investment securities as held To maturity forThe currenT and The following Two ?nancial years. However, sales and reclassi?cations in any of The following circumstances would noT Trigger a reclassi?cation: i) Sales or reclassi?cations ThaT are so close To maTuriTy ThaT changes in The market raTe of inTeresT would noT have a signi?cant effect on The ?nancial asset?s fair value; ii) Sales or reclassi?cations afTer The AuThoriTy has collected substantially all of The asset?s original principal; and, sales or reclassi?cations aTTribuTable To non?recurring isoIaTed evenTs beyond The AuThoriTy?s control ThaT could noT have been reasonably anticipated. Loans and Receivables Loans and receivables are non-derivative ?nancial assets wiTh ?xed or determinable payments and ?xed maTuriTies ThaT are noT quoTed in an acTive markeT. Loans and receivables are recognized when cash is advanced To borrowers; and are iniTially recognized aT fair value plus any direchy aTTribuTable TransacTion cosT. Subsequent To iniTiaI recognition, Trade receivables are carried aT an amortized cosT using The effective inTeresT meThod. An esTimaTe is made for doubtful receivables based on a review of all outstanding amounTs aT The year end. Bad debts are written off during The year in which They are identi?ed. Speci?c provision is made for all known bad debts. Bad debts are wriTTen off when all reasonable sTeps To recover Them have been Taken wiThouT success. PROVISIONS Provisions are recognized when The AuThoriTy has a present legal or constructive obligation as a result of pasT events; if is probable ThaT an out?ow of resources embodying economic bene?ts will be required To seTTIe The obligation; and a reliable esTimaTe of The amount can be made. RETIREMENT BENEFIT OBLIGATIONS National Social Security Fund The AuThoriTy makes contributions To The National Social Security Fund (NSSF) which is a sTaTuTory reTiremenT bene?Tscheme established underThe NSSF ACT. This is a de?ned contribution scheme inTo which The AuThoriTy contributes 10% of The employees? gross cash emoluments. The AuThoriTy's contribution is charged To The Revenue and Expenditure accounT as iT falls due. CASH AND CASH EQUIVALENTS For The purposes of The STaTemenT of Cash Flows, cash and cash equivalents comprise cash on hand, deposits held aT call wiTh banks, excluding oTher shorT-Term highly liquid invesTmenTs or ?xed deposits. COMPARATIVES Where necessary, comparative ?gures have been adjusTed To conform To changes in presenTaTion in The current year. TRANSLATION OF FOREIGN CURRENCIES Assets and liabilities aT The end of The reporting period which are expressed in foreign currencies are TransIaTed inTo Uganda Shillings aT The raTe of exchange ruling aT The reporting daTe. Foreign currency TransacTions during The year are Translated inTo Uganda Shillings aT The raTes ruling aT The TransacTion daTes. The resulting differences are dealt wiTh in The STaTemenT of Comprehensive Income in The year in which They arise. ERA Annual Report 2016 17 87 88 ERA I Annual Report 2016 17 1. Balance b/fwd at 1 July 2016 Capitalisation of Buildings Additions during the period Prior year adjustments Balance c/fwd at JUNE 30, 2017 FIXED ASSETS SCHEDULE 1,394,648,760 1,394,648,760 Buildings 3,952,112,418 (159,035,178) 3,793,076,240 Motor Vehicles 1,565,281,073 150,064,326 1,715,345,399 Furniture Fixtures 425,905,186 48,301,973 70,274,253 544,481,412 Of?ce Equipment 498,1 73,003 294,147,763 3,576,144 795,896,910 Computers Accessories 513,666,959 66,61 7,876 480,000 580,764,835 362,531 ,983 22,781,000 (18,543,590) 366,769,393 13,560,627 1 77,378,936 190,939,563 Investment Property 2,547,860,000 (72,800,000) 2,475,060,000 11,273,740,009 759,291,874 (175,049,371) 11,856,982,513 ACCUMULATED DEPRECIATION Balance b/fwd at 1 July 2016 Depreciation adjustment Depreciation charge for the period Prior Year Adjustments Balance c/fwd at JUNE 30, 2017 159,036,177.50 40,954,500 10,987,265 210,977,942 692,919,786 243,516,440 (10,852,859) 925,573,367 299,844,630 33,912,535 37,362,521 371,119,686 254,948,391 69,624,138 32,677,739 357,250,268 425,287,899 64,880,518 (144,000) 490,024,417 281,144,407 23,581,875 (3,752,954) 300,963,328 72,800,000 7,291 ,200 1,691,201 81 ,782,401 2,185,981,290 483,761 ,206 67,948,913 2,737,691,409 Net Book Value at JUNE 30, 2017 Net Book Value at 30 June 2016 1,394,648,760 1,394,648,760 3,582,098,298 3,793,076,240 789,772,032 872,361,287 1 73,361,726 126,060,556 438,646,642 243,224,61 2 90,740,41 8 88,379,060 65,806,065 81,387,576 190,939,563 13,560,627 2,393,277,599 2,475,060,000 9,119,291,104 9,087,758,717 ERA Annual Report 2016 17 89 Company Butama Hydro Electricity 30,522,650 40,820, 640 SM. Hydro (13,459,409) Kametsi Energy (U) Albatros Energy (U) Limited 258,401 ,1 64 288,760,105 12,041,647 7 RECEIVABLES 10,947,405,396 1,410,503,147 Fixed Deposits Treasury Bills 3,252,964,603 7,694,440,793 1,410,503,147 6 SHORT-TERM INVESTMENTS 605,326,897 1,478,944,102 Staff Loans and advances 493,283,301 363,946,61 1 Prepayments 1 12,043,596 124,756,977 Accrued Income Project Cash Advances 988 I I 2,146,890 093 625 5 PREPAYMENTS AND ADVANCES 4,564,846,544 4,514,836,032 Petty Cash Stanbic Bank 45,270,404 589,191,885 Stanbic Bank UGX 27,850,673 93,209,529 Standard Chartered Standard Chartered UGX 3,828,717,963 663,007,504 3,816,837,504 15,597CASH AND BANK UGX UGX Details PAYABLES Trade crediiors Provision for bad debis VAT Payable (Claimable) WHT Payable Sundry suppliers Prepaid/Deferred reni DEFERRED INCOME Africa EMS Mpanga Albairos Energy (U) Limiied ARPE LTD Bundibugyo Energy Cooperaiive Socieiy Bujagali Energy Limiied Eleciro?Maxx Uganda Limiied Elgon (U) Limiied Esl