ORES Group CONSOLIDATED FINANCIAL IFRS STATEMENTS 2014

ORES Group

IFRS2014

CONSOLIDATEDFINANCIAL

S TAT E M E N T S

2 IFRS 2014 ORES GroupCONSOLIDATED FINANCIAL STATEMENTS

ORES Group

IFRS

CONSOLIDATEDFINANCIAL

S TAT E M E N T S

2014Name and FormORES. Cooperative Company with Limited Liability.

Registered Office2, Avenue Jean Monnet, 1348 Louvain-la-Neuve Belgium.

IncorporationIncorporated on December 31, 2013.

Articles of Association and AmendmentsThe bylaws were published in the Belgian Official Gazette on 10 January 2014 under the number 0012014.


Table of contents

1. IFRS FINANCIAL STATEMENTS ............................................................................................................04

1.0. Management Report .......................................................................................................................04

1.1. Consolidated Income Statement..................................................................................12

1.2. Consolidated Statement of Other Comprehensive Income ....13

1.3. Consolidated Statement of Financial Position .........................................14

1.4. Consolidated Statement of Changes in Equity .......................................15

1.5. Consolidated Statement of Cash Flows .............................................................16

2. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .......17

3. ACCOUNTING POLICIES OF THE ORES GROUP ................................................80

4. INDEPENDENT AUDITOR’S REPORT .........................................................................................96


1. IFRS Financial Statements1.0 Management report IFRS consolidated

financial statements on year-end 2014

Ladies and gentlemen,

We are honoured to report to you on the activities of the ORES Group during the financial year ended 31 December 2014, and to submit for your approval the consolidated financial statements closed at 31 December 2014 and prepared in accordance with IFRS.

1° Review of the business development, results and financial position of the Company, and description of the principal risks and uncertainties

A. PRELIMINARY COMMENT

The ORES Group (hereafter referred to as the “Group”) consists, on the one hand, of the limited liability cooperative company ORES Assets scrl (thereafter referred to as “DSO” or “ORES Assets”), created from the merger of the eight Walloon associations of municipalities with external partner active in electricity and gas distribution, on 31 December 2013 with a retroactive effect as from 1 January 2013 and, on the other hand, of the limited liability cooperative company ORES (“ORES scrl”) whose shares are almost entirely held by the DSO (99.68%); the remaining part is held by the financing associations of municipalities (“intercommunales pures de financement”) and RESA. In addition, ORES has invested in two companies: Atrias, held at 16.67%, and Index’is, held at 30%. ORES has a significant influence over these two companies which are consequently consolidated using the equity method.

ORES Assets is an association of municipalities with external partner (“intercommunale mixte”) and is held at 75% by Walloon municipalities or financing associations of municipalities active in the area where it operates, and at 25% by Electrabel SA.

The Group is exclusively active in Wallonia, Belgium, on the territory of the municipalities which are shareholders of the DSO. The address of the Group is the headquarters of ORES scrl, located Avenue Jean Monnet 2, 1348 Louvain-la-Neuve (Belgium).

The distribution tariffs approved by the regulator and applied by the eight DSO’s before their merger in 2013 have not been modified as a result of the operation. They continued to apply during 2014. Indeed, the federal legislator adopted on 20 December 2013 a law confirming that in case of a merger, different tariffs could continue to apply in each geographical areas where the former DSO’s were active. The unique DSO (ORES Assets) includes eight sectors that correspond to the geographical areas of the former DSO’s (Namur, Hainaut (split between electricity and gas sectors), East area, Verviers, Luxemburg, Walloon Brabant, Mouscron).

Tariffs are determined based on estimations of the total costs. Notwithstanding the entry into force of the law dated 8 January 2012 and the repeal of the Royal Decrees from 2008, old tariffs decisions in terms of distribution for the regulatory period 2009-2012 remain valid until their termination, cancellation or modification. In application of Articles 12bis and 12quater, §2 of the law dated 29 April 1999, as well as Articles 15/5ter and 15/5quinquies §2 of the law dated 12 April 1965, the CREG, as the regulator, extended the tariffs of the distribution networks approved for 2012 and for the eights former DSO, for the regulatory periods 2013 and 2014. Provisions contained in the law dated 8 January 2012 and in the Royal Decrees from 2008 were therefore applied during the periods 2013 and 2014. On 5 February 2015, the CWaPE (the Walloon regulatory body) approved the tariffs of the distribution networks for the periods 2015 and 2016, based on the new tariff methodology adopted on 16 August 2014.

Also note that concerning the allocation of the regulatory balances 2008 and 2009, as well as the allocation of the regulatory balances 2010 to 2013, the CWaPE authorised 10% of those accumulated balances (by sector and energy) to be reflected under the form of prepayments in the tariffs for 2015 and 2016.

Finally, it should be noted that following the vote of the Program Law dated 19 December 2014 by the Federal Parliament and published in the Belgian Official Gazette on 29 December 2014, the DSO will now be subject to income taxes (as from fiscal year 2016 – Income 2015).


B. COMMENTS ON THE FINANCIAL STATEMENTS WITH THE AIM OF PROVIDING A FAIR VIEW ON THE BUSINESS EVOLUTION AND FINANCIAL POSITION OF THE COMPANY

a) CONSOLIDATED INCOME STATEMENT AT 31/12/2014 In k€

31/12/2014 31/12/2013

Operating income 1,096,786 1,107,857

Operating expenses (715,192) (720,867)

EBITDA 381,595 386,990

Depreciation and impairment (134,621) (128,769)

EBIT 246,973 258,220

Financial result (82,172) (70,404)

Result before taxes 164,801 187,816

Taxes (2,186) (4,654)

RESULT FOR THE PERIOD 162,615 183,162

The decrease in the consolidated result for the period (-20,548 k€) is largely due to the lower return on invested capital (REMCI) of the Group (69,935 k€ in 2014 compared to 81,933 k€ in 2013, a decrease of 11,998 k€) which was strongly influenced by the current low rates of OLO 10 years (1.72% in 2014 compared to 2.43% in 2013, down by 29.22%).

The REMCI (by energy) of the Group amounted in 2014 to:

• Electricity: 46,286 k€ (55,102 k€ in 2013)

• Gas: 23,649 k€ (26,831 k€ in 2013)

In addition to this, financial expenses increase by +10,321 k€, related to interest expenses on the new bond of 80,000 k€ issued end of July 2014 and the actuarial differences linked to the unwinding of provisions for long-term employee benefits, primarily due to a lower discount rate (-1.60%).

An analysis of the significant changes between 2013 and 2014 can be found below.

The turnover of the Group decreases by 65,567 k€ for an amount of 1,037,769 k€ in 2014 (1,103,336 k€ in 2013) and is composed (by activity) of:

• Electricity: 851,273 k€ (2013: 883,813 k€)

➜ Transit fees invoiced: they amount to 793,956 k€ in 2014 compared to 818,825 k€ in 2013. The decrease is due to lower volumes that transited through the network (-4.61%) and a lower average price per KWh (-1.58%).

➜ Transfer of assets from customers: they decreased to amount to 47,126 k€ in 2014 (51,159 k€ in 2013).

• Gas: 156,494 k€ (2013: 184,252 k€)

➜ Transit fees invoiced: they amount to 147,663 k€ in 2014 compared to 172,537 k€ in 2013. This decrease is mainly due to softer weather conditions in 2014 compared to 2013 (28% decrease in degree-days in 2014).

➜ Public service obligations: they amount to 4,995 k€ in 2014 compared to 7,301 k€ in 2013.

• Other activities: 30,002 k€ (35,271 k€ in 2013)

➜ The decrease in other activities is due to a decrease in third party network management during the year (-3,349 k€). As a reminder, following the partial demerger of “Intermosane”, the distribution network of the city centre of Liege is still managed by the Group but on behalf of RESA.

1 Degree-days provide a picture of the average profile of the heating needs of a house in Belgium. For a given day, the degree-days used by the natural gas sector in Belgium are equal to the difference between 16,5°C and the average temperature measured by the IRM located in Uccle.


Concerning the other operating expenses, we observe an increase in the grid fees (+10,137 k€) due to higher (+22%) transport costs per MWh (tariff Elia) and higher costs (6%) for overload and contributions, mainly due to the impact of the measures undertaken to support renewable energy and the overload linked to green certificates.

Concerning the purchase of goods, the decrease of 16,161 k€ was mainly due to fewer losses on the network during the year (-9,375 k€). This is due to the efficiency efforts realized by the group, by the decrease in goods purchased in 2014 compared to 2013 (-14.40%), strengthen by lower purchase prices (-8%), recently renegotiated for a lower amount compared to 2013.

Salary costs and employee benefits were relatively stable and amount to 156,605 k€ in 2014 compared to 155,483 k€ in 2013.

The write off increase on trade receivables (+5,858 k€) is mainly explained by a significant write off increase on trade receivables related to protected customers and under “Supplier X”.

Financial expenses amount to 84,045 k€ and mainly include interests on bonds (15,359 k€), subscribed in October 2012 for an amount of 350,000 k€ and in July 2014 for an amount of 80,000 k€, interests on long-term treasury bills (private investments) (6,991 k€), subscribed in 2012 for an amount of 189,750 k€, interests paid on bank loans (25,928 k€) and swaps (18,330 k€), decreasing following the expiration of several bank loans, and other bank fees. They also include the interest expense related to the unwinding of discount of provisions for employee benefits, with a significant increase in 2014 compared to 2013 (+12,762 k€) mainly due to a lower discount rate (1.60%).

Financial income decreases by 1,448 k€ namely due to lower interest rates and essentially includes interests on SICAV investments or bank deposits (2014: 1,797 k€; 2013: 3,234 k€).

Taxes for an amount of 2,186 k€ mainly include the fiscal provision based on the 2014 result (-1,036 k€), withholding tax linked to interests on investments and bank accounts (5,903 k€) as well as the tax on dividends distributed (1,368 k€).

Following the vote of the Program Law dated 19 December 2014 by the Federal Parliament and published in the Belgian Official Gazette on 29 December 2014, the DSO will now be subject to income taxes as from fiscal year 2016 (Income 2015). In this context, IFRS require the recognition of a deferred tax that we acted for the first time in the consolidated financial statements of the Group at 31 December 2014 for an amount of 3,477 k€.

b) OTHER COMPREHENSIVE INCOME AT 31/12/2014

In k€

31/12/2014 31/12/2013

Change in fair value of cash flow hedges 1,872 21,412

Actuarial gains and losses on defined benefit plans (29,040) 65,739

Other comprehensive income of the continued activities (27,168) 87,151

Taxes on other comprehensive income (184,059) -

Other comprehensive income (OCI) for the period (211,227) 87,151

COMPREHENSIVE INCOME FOR THE PERIOD (48,612) 270,314

The significant decrease in other comprehensive income (-318,926 k€) relates to:

• The modification in the fiscal status of ORES Assets as from 1 January 2015 and the fact that it will be subject to income tax. Indeed, in this context, the temporary differences arising from assets or liabilities whose changes are recognised in OCI must be booked in the same line end December 2014. This concerns namely the deferred tax calculated on the revaluation of assets in 2001 and 2002 in ORES Assets and for a residual value at 31 December 2014 of 604,080 k€.

• The actuarial loss on defined benefit plans (-29,040 k€) mainly due to a lower discount rate (from 3.05% to 1.45% in 2014).


c) STATEMENT OF FINANCIAL POSITION AT 31/12/2014 (k€)

Total balance sheet amounts to 4,026,196 k€ (2013: 3,955,748 k€) and is composed mainly of the following items:

ASSETS

Intangible assets for an amount of 21,408 k€ are related to expenses on IT projects (15,277 k€) and expenses on research and development activities (6,131 k€). They are amortised at a rate of 20% on a prorated basis.

Property, plant and equipment amount to 3,457,169 k€ in 2014 (2013: 3,335,203 k€) and mainly relate to land and buildings (79,804 k€), distribution network (3,343,758 k€) and equipment (29,154 k€). Investments for the year amount to 253,138 k€ (2013: 229,860 k€) increasing mainly related to our electricity and gas distribution network.

Investments in associates are only related to investments in Index’Is scrl and in Atrias scrl for a total amount of 989 k€. These companies are consolidated using the equity method at year-end 2014.

Stocks amount to 24,089 k€ and are located on the whole territory of Wallonia. The main stock is located in the store in Aye.

Trade receivables amount to 158,137 k€ (-39,589 k€ compared to 2013) and are mainly related to receivables on energy suppliers linked to the invoicing of transit fees, as well as other receivables towards protected customers and “supplier X”. This significant decrease is due to a decrease of 19,298 k€ in transit fees receivables, to be linked with the decrease of our turnover, and also due to the decrease in receivables related to public service obligations (-17,027 k€) caused by significant irrecoverable of old receivables on public service obligations for around 17,000 k€.

Other receivables amount to 49,215 k€ (stable compared to 2013) and mainly include the interim dividend paid to the shareholders in October 2014 (43,186 k€), receivables linked to damages caused to the network by third parties (2,800 k€), recoverable VAT (2,254 k€) as well as other receivables.

The financial investments for a total amount of 115,811 k€ (2013: 199,670 k€) were conducted in accordance with the decisions of the Board of Directors to implement a prudent policy in this context. Investments in ING, BNPP, Belfius and KBC market funds amount to 36,704 k€ and term deposits on Belfius, CBC and ING accounts amount to 79,106 k€. The downward trend observed in 2014 is mainly due to the fact that the Group used the cash generated by the bond issued in October 2012 to meet its obligations.

Cash at bank and in hand amounts to 12,190 k€ (2013: 9,742 k€) and includes cash at bank and social funds.

Other current assets amount to 13,793 k€ (2013: 13,537 k€) and are mainly related to interests to receive on associates advances and bank deposits (287 k€), invoices recorded during 2014 but for which a part also relates to 2015 (8,832 k€) as well as a receivable towards the city of Liège related to pensions (2,591 k€).

Regulatory assets (149,221 k€) include the amounts accumulated since 2008 that will be recovered via the tariffs in subsequent regulatory periods, after the approval by the regulator. Regulatory assets are strongly increasing (+62,780 k€) mainly due to the volume effect (actual volumes distributed are less significant than budgeted) and also due to the increase in costs linked to public service obligations.


LIABILITIES

The share capital amounts to 787,320 k€ at 31/12/2014 and consists of:

• Shares A: 401,936 k€

• Shares R: 385,384 k€

Non-controlling interests represent the share of the subsidiary ORES scrl (0.32%) sold in 2013 by ORES Assets to the financing associations of municipalities and to RESA (sale of 8 social shares).

Non-current borrowings amount to 1,723,737 k€ (1,820,052 k€ in 2013) and relate to bank loans (1,108,287 k€), private investments (189,750 k€) and two issued bonds (425,700 k€). The decrease (-96,315 k€) is explained by the fact that the Group received additional cash following the bond issued in October 2012 and had therefore no need to borrow from banks to meet its obligations, except for the new bond issue in July 2014 for an amount of 80,000 k€.

Provisions for employee benefits for an amount of 147,139 k€ increase in 2014 (+9,358 k€) mainly due to a lower discount rate (1.45% compared to 3.05% in 2013), offset by a lower inflation rate (-0.25%) and an increase in our plan assets thanks to the good performance realised by the investments of the pension funds.

Other provisions (15,792 k€) consist mainly of an environmental provision for polluted sites (5,342 k€) and a provision for litigation from the past (installation displacements) (6,293 k€). The decrease in this caption (-7,819 k€) is mainly due to:

• The reversal for an amount of 2,400 k€ of a provision recognised in 2013 following a correction in the meter readings. The litigation was settled in 2014;

• A decrease in the provision for litigations from the past (installation displacements) for an amount of 2,628 k€ following the settlement of several litigations;

• A reversal of provision related to polluted soils for 1,769 k€.

As mentioned above, following the modification in the fiscal status of ORES Assets as from 1 January 2015 and the fact that it will be subject to income tax, a deferred tax liability was recognised for the first time in 2014 for an amount of 180,582 k€.

Other non-current liabilities only relate to the valuation at fair value of the long-term swaps contracted by the Group for an amount of 40,446 k€ (2013: 43,342 k€); the short-term part was reclassified as other current liabilities for an amount of 3,377 k€ (2013: 2,352 k€).

The current borrowings consist of bank loans from Belfius, ING, CBC and BNP Paribas (185,340 k€) to be reimbursed in 2015.

Invoices from suppliers and invoices to receive are the main items in trade payables (144,204 k€) and do not contain any contested liability.

Other payables amount to 61,900 k€ (2013: 59,589 k€) and include short-term employee benefits, social security and other tax payables for an amount of 48,065 k€ as well as a debt towards RESA (8,218 k€) and towards employees (social funds for an amount of 2,979 k€).

Regulatory liabilities (50,124 k€) include the accumulated amounts since 2008 that will be integrated in the tariffs for subsequent regulatory periods after the approval by the regulator. The increase (+32,644 k€) is due, on one hand, to the decrease of the rate of OLO 10 years (used in the formula for the computation of the REMCI) and, on the other hand, to the modification of the transport tariffs but also from the purchase price of electricity losses lower than budgeted.


C. RISKS AND UNCERTAINTIES

Description of the measures taken to face up to the risks and uncertainties to which the Group is exposedSince 2009, ORES scrl is in charge of electricity and natural gas network operations, owned by ORES Assets scrl, the Walloon distribution network operator established by the merger end 2013 of the associations of municipalities Ideg, IEH, IGH, Interest, Interlux, Intermosane, Sedilec and Simogel.

ORES scrl and ORES Assets scrl constitute a coherent economic group (“ORES”) for which a consolidated analysis of the principal risks and uncertainties is prepared on a yearly basis. ORES is aware that this list might not be exhaustive, as other risks might exist or gain importance in the future however they appear limited currently. The order of appearance on the presentation below is not representative of importance.

a) REGULATORY AND INSTITUTIONAL RISKS

A regulatory framework defines ORES activities. Any change made by the legislator or the regulator might affect ORES. Since 1 July 2014, the tariff jurisdiction for the electricity and gas distribution has been regionalised. From now on, all relevant topics on that field fall within the regional jurisdiction, which strengthens the coherence between investments policy and financing through the tariffs. The CWaPE became the sole regulatory body for the electricity and gas distribution on the territory of the Walloon municipalities. A tariff methodology and tariffs were approved by the regulator for 2015 and 2016. They are part of the framework applicable to the DSO since 2009. ORES must ensure the operational efficiency and costs control in order to enrol in the 2015-2016 budget approved by the regulator, despite the new needs for resources claimed with respect to the essential modernisation of the network.

The competency to decide on regulatory balances has also been entrusted by regional Decree to the CWaPE. The 2015-2016 tariffs validate a repercussion of 10% of the accumulated regulatory balances during 2008-2013 through the tariffs.

The CWaPE plans to modify the tariff methodology applicable to the next regulatory period. ORES is part of this commitment, namely to allow the adaption of the tariff structure to the constraints and the cost structure of the DSO, to ensure sustainability of the activities of the DSO. Although the modification of the tariff methodology could affect the profitability of ORES, the obligation for regulators and legislators to take into account the European directives “Third Energy Package” limits this risk.

Furthermore, the Walloon government adopts at the beginning of each legislature a declaration of regional policy in which one chapter is dedicated to energy and contains the broad outlines of the energy policy. ORES strives to proactively anticipate the changes that would result, like all other legal and regulatory changes, and that could affect its activities. ORES wishes to act as a market(s) facilitator, to position itself as the legitimate partner and to be recognised as the preferred partner of public authorities with respect to energy policy.

b) OPERATIONAL RISKS

Risks related to the degradation of networks

ORES operates electricity and natural gas distribution networks to ensure their reliability. However, natural phenomena and intentional or unintentional damage by third parties may lead to incidents and damage to these networks. Insurance policies aim to cover the financial consequences of these risks.

Technological risks

The rapid evolution in the number of decentralised electricity production units creates uncertainty about the specifics to be answered by the future distribution networks. One of the technological challenges ORES faces is the integration of intelligence into the networks, given the large information to convey, aiming to a technical redefinition of networks and the related telecommunication strategy. Smart meters, smart grids, active client participation, not only consumer but also producer, portfolio steering, are all hot topics that ORES takes into account by testing different concepts through projects and pilot experiences. These prototypes are used to assess the technological performance of assets, yesterday only accessories for the main activities and tomorrow at the heart of the DSO activities.


Black-out and shortage risks

The intermittent and unpredictable nature of this growing renewable energy production also contributes to modify the historical balance of the electricity system. The growth of the electricity production, from renewable energy challenges the conventional generation and can lead to significant variations in electricity flows both on transport and distribution networks. This leads to an increase of a black-out risk (total collapse of the network). Another risk emerged due to the unavailability of the old conventional plants, which is the risk of shortage (lack of predictable capacity linked to an imbalance between production and consumption). To ensure or restore this balance, the federal authorities and Elia, the transportation system operator (TSO), have established a series of actions and measures on which ORES also contributed. The company evaluated the impact of an “emergency load-shedding” decided by the authorities on the electricity supply of priority customers by those same authorities. ORES also introduced information tools for customers that would be affected by the rolling black-out, introduced crisis management exercises and updated ad hoc procedures.

Data quality risks

Data control is a key challenge to meet the regulatory obligations, ensure effective internal control, meet the expectations of our stakeholders and take strategic decisions to face the challenges ahead for the development of our business. Projects and programs are in place in that field since 2013.

Power market model

The evolution of the Belgian market model arising among others from increased decentralised production, flexibility management or private networks could affect the roles of TSO, DSO, balancing responsible entities, producer and supplier who were traditionally well defined. ORES is very attentive to this development and wishes in this context to reaffirm the role of market(s) facilitator recognised as being the DSO since the liberalisation of the electricity and gas markets. In this context, ORES participates in studies to define the interactions between market players, their roles and related responsibilities.

Environmental risks

The implementation of the Decree of 5 December 2008 on soil management could justify certain expenses linked to the restructuring of certain polluted sites. In this context, ORES takes appropriate measures to prevent soil pollution and to inform about the existence of pollution. Adequate provisions are made.

Safety and welfare risks

Whatever the activity of the company, the Group considers that it is crucial for its employees to constantly bear in mind the prevention requirements as well as the requirements in terms of health and safety to reduce the risk of accident on the workplace. In this context, the company implemented an action plan that is reviewed annually.

Risk of legal disputes

The risk of legal disputes is inherent to ORES activities. When appropriate, adequate provisions have been made or will be made to cover this risk.

IT and telecommunication risks

Generally, alteration or loss of databases, IT systems failure, propagation of viruses or hacking, failure in the telecommunication network,… could hinder the customer service and prevent the smooth running of the company. ORES takes the necessary measures to protect its systems and data, as well as their communication to avoid intrusion in its activities management.


c) FINANCIAL RISKS

Credit risks

ORES scrl established a treasury bills program at the beginning of 2011 with the guarantee of ORES Assets scrl. Since 2012, the program enables to issue treasury bills having a duration comprised between five and eight years. In 2012, a guarantee was granted by ORES Assets scrl to ORES scrl, the latter being responsible for meeting the financing needs. The amounts collected via the bond issues in 2012, 2014 and 2015 as well as the private investments enable to cover the financing needs of ORES. Two short-term credit lines were granted to ORES scrl for a total amount of 100 M€ and are available until end 2017.

ORES follows a financing policy using diversified sources of funding on the capital market.

Interest rate risk

A change in interest rates has an impact on financial expenses. To reduce this risk as much as possible, ORES has a funding policy that seeks to achieve an optimal balance between fixed and floating interest rates. In addition, hedging instruments are used to hedge uncertain positions. The funding policy takes into account the difference in duration of the loans and the useful life of the assets.

In order to control the interest rate risk, ORES uses derivative financial instruments such as interest rate swaps (short-term rates to long-term rates), as well as interest rate CAPs. Debt management and market data are followed carefully. No derivatives are used for speculative purposes.

Tax risk

As from fiscal year 2016 (income 2015), ORES Assets will no longer be subject to corporate tax but to income tax, as this is already the case for ORES scrl. Since the tariff methodology requires all tax expenses to be included in the tariffs, the impact should be limited for ORES.

Assets and liquidity risks

In this context, ORES has the possibility to ask counterparties to provide a bank guarantee for the invoicing of fees for using the network, and strengthen the specific measures for the collection of receivables related to works conducted in the context of the network operations via tendering procedures targeted to factoring companies.

ORES benefits from a short-term financing capacity via its treasury bills program and the credit lines discussed above; we can consider that the liquidity risk is almost nil for ORES.

Treasury management can limit market, assets and liquidity risks. Management has implemented a prudent investment policy, based on diversification and limited use of risky (in terms of credit and interest rate) products.

Finally, the tariff methodology provides that all costs related to the funding policy are covered by the regulatory budget.

Macroeconomic and cyclical risks

The current economic crisis could affect the demand for electricity and natural gas. This potential decrease in volume is normally not supported by ORES. The tariff methodology provides that subsequent losses would be included as part of the regulatory balances and normally reflected in the tariffs for the next regulatory period.

d) REPUTATION

Generally, certain circumstances might have a negative impact on ORES reputation. The Company carefully tries to avoid the proliferation of popular misconceptions by explaining the costs control on the distribution or the different components of the invoice.

Ottignies, Louvain-la-Neuve, 22 April 2015,

the Board of Directors


1.1 Consolidated Income Statement In k€

Note 31/12/2014 31/12/2013 DIFFÉRENCE

Turnover 01 - A 1,037,769 1,103,336 (65,567)

Regulated balances 01 - B 30,137 (25,901) 56,037

Other operating income 02 28,880 30,422 (1,542)

Operating income 1,096,786 1,107,857 (11,071)

Purchase of goods 03 (46,906) (63,067) 16,161

Grid fees 03 (338,955) (328,818) (10,137)

Lane fees 03 (46,816) (44,026) (2,790)

Employee Benefits 20-21-22 (156,605) (155,483) (1,122)

Write down of trade receivables 12 (17,424) (11,566) (5,858)

Other operating expenses 04 (108,486) (117,906) 9,421

Operating expenses (715,192) (720,867) 5,676

Operating result before depreciation and amortization 381,595 386,990 (5,395)

Depreciation and impairment on (in)tangible assets 09-10 (134,621) (128,769) (5,852)

Operating result 246,973 258,220 (11,247)

Financial Income 05 1,872 3,320 (1,448)

Financial Expenses 06 (84,045) (73,724) (10,321)

Financial result (82,172) (70,404) (11,769)

Share of the result of associates 26 0 0 0

Result before taxes 164,801 187,816 (23,016)

Taxes 24 A (2,186) (4,654) 2,468

Result for the period of the continued activities 162,615 183,162 (20,548)

Result for the period 162,615 183,162 (20,548)

Result of the period attributable to owners of the company 162,615 183,162 (20,548)

Result of the period attributable to non-controlling interests 0 0 0


1.2 Consolidated Statement of Other Comprehensive Income

In k€

Note 31/12/2014 31/12/2013 DIFFERENCE

Result for the period 162,615 183,162 (20,548)

Other comprehensive income

Recyclable in the profit and loss account (188,560) 21,412 (209,972)

Change in fair value of cash flow hedges 17-18-27-28 1,872 21,412 (19,540)

Taxes on items that are or may be reclassified to profit and loss account 24-B (190,432) 0 (190,432)

Non-recyclable in the profit and loss account (22,667) 65,739 (88,406)

Actuarial gains and losses on defined benefit plans 22 (29,040) 65,739 (94,779)

Taxes on items that will not be reclassified to profit and loss account 24-B 6,373 0 6,373

Other comprehensive income of the continued activities - Net (211,227) 87,151 (298,378)

Other comprehensive income - Net (211,227) 87,151 (298,378)

Other comprehensive income attributable to owners of the company (211,227) 87,151 (298,378)

Other comprehensive income attributable to non-controlling interests 0 0 0

COMPREHENSIVE INCOME FOR THE PERIOD (48,612) 270,314 (318,926)


1.3 Consolidated Statement of Financial Position

In k€

Note 31/12/2014 31/12/2013 DIFFERENCE

ASSETS

Non-current assets 3,492,630 3,364,895 127,736

Goodwill 08 8,955 8,955 0

Intangible assets 09 21,408 17,000 4,408

Property, plant and equipment 10 3,457,169 3,335,203 121,966

Investments in associates 26 989 989 0

Other non-current assets 11 4,109 2,748 1,361

Current assets 384,344 504,412 (120,068)

Inventories 13 24,089 20,444 3,645

Trade receivables 12 158,137 197,726 (39,589)

Other receivables 12 49,215 52,180 (2,965)

Current tax assets 12 11,110 11,114 (4)

Cash and cash equivalents 14 128,001 209,412 (81,411)

Other current assets 13,793 13,537 255

Total assets excluding regulatory assets 3,876,975 3,869,307 7,668

Regulatory assets 01 - B 149,221 86,441 62,780

TOTAL ASSETS 4,026,196 3,955,748 70,448

LIABILITIES

Equity 1,470,170 1,581,657 (111,487)

Share capital 15 787,320 771,370 15,950

Retained earnings 677,561 614,147 63,414

Other reserves 5,258 196,110 (190,851)

Non-controlling interests 31 31 0

Non-current liabilities 2,107,695 2,024,786 82,909

Borrowings 16 1,723,737 1,820,052 (96,315)

Provisions for employee benefits 20 147,139 137,781 9,358

Other provisions 19 15,792 23,611 (7,819)

Deferred tax liabilities 24-B 180,582 0 180,582

Other non-current liabilities 17-18-27-28 40,446 43,342 (2,897)

Current liabilities 398,207 331,824 66,383

Borrowings 16 185,340 116,735 68,605

Trade payables 17 144,204 149,263 (5,059)

Other payables 18 61,900 59,589 2,311

Current tax liabilities 111 158 (47)

Other current liabilities 18 6,652 6,079 573

Total liabilities excluding regulatory liabilities 3,976,071 3,938,267 37,804

Regulatory liabilities 01 - B 50,124 17,481 32,644

TOTAL LIABILITIES 4,026,196 3,955,748 70,448


1.4 Consolidated Statement of Changes in Equity

RESERVES In k€

SHA

RE

C

API

TAL

CA

SH F

LOW

H

ED

GE

S

AC

TUA

RIA

L G

AIN

S A

ND

LO

SSE

S O

N

DE

FIN

ED

B

EN

EFI

T PL

AN

S

STA

TUTO

RY

RE

SER

VE

S

TOTA

L

RE

TAIN

ED

E

AR

NIN

GS

NO

N-

CO

NTR

OLL

ING

IN

TER

EST

S

EQ

UIT

Y O

F TH

E

DIS

CO

NTI

NU

ED

A

CTI

VIT

IES

TOTA

L EQ

UIT

Y

AT 1ST JANUARY 2014 771,370 (45,694) 10,291 231,513 196,110 614,147 31 0 1,581,657

Comprehensive income for the period

Profit and loss 162,615 162,615

Other comprehensive income, net of income tax 16,767 (22,667) (205,327) (211,227) (211,227)

Transactions with shareholders

Dividends relating to the previous year

(78,825) (78,825)

Capital increase through creation of A shares

42,227 42,227

Capital decrease through repayment of R shares and conversion into A shares

(26,277) (26,277)

Transfers

Transfers from or to statutory reserves 20,375 20,375 (20,375) 0

AT 31 DECEMBER 2014 787,320 (28,927) (12,376) 46,562 5,258 677,561 31 0 1,470,170

RESERVES In k€

SHA

RE

C

API

TAL

CA

SH F

LOW

H

ED

GE

S

AC

TUA

RIA

L G

AIN

S A

ND

LO

SSE

S O

N

DE

FIN

ED

B

EN

EFI

T PL

AN

S

STA

TUTO

RY

RE

SER

VE

S

TOTA

L

RE

TAIN

ED

E

AR

NIN

GS

NO

N-

CO

NTR

OLL

ING

IN

TER

EST

S

EQ

UIT

Y O

F TH

E

DIS

CO

NTI

NU

ED

A

CTI

VIT

IES

TOTA

L EQ

UIT

YAT 1ST JANUARY 2013 764,905 (67,107) (55,448) 203,605 81,051 552,904 0 39,124 1,437,983

Comprehensive income for the period

Profit and loss 183,162 183,162

Other comprehensive income 21,412 65,739 87,151 87,151

Transactions with shareholders

Dividends relating to the previous year

(93,981) (93,981)

Capital increase through creation of R shares

20,290 20,290

Capital decrease through repayment of A shares

(13,825) (13,825)

Liquidation of TV activity (31) 31 0

Change in scope of consolidation

(39,124) (39,124)

Transfers

Transfers from or to statutory reserves 27,908 27,908 (27,908) 0

AT 31 DECEMBER 2013 771,370 (45,694) 10,291 231,513 196,110 614,147 31 0 1,581,657


1.5. Consolidated Statement of Cash Flows In k€

Note 31/12/2014 31/12/2013

OPERATING CASH FLOW

Comprehensive income for the period 162,615 183,162

Adjustments for the following elements:

Depreciation and impairment on (in)tangible assets 09-10 134,621 128,769

Changes in provisions 19-20 (43,727) (40,242)

Gains or losses on sales of (in)tangible assets 09-10 (256) (401)

Write down of trade receivables 12 18,189 12,652

Financial income 05 (1,872) (3,320)

Financial charges 06 84,045 73,724

Income tax expenses recognised in profit or loss 24 2,186 4,654

Regulatory Balances 01B (30,137) 25,901

Share in the result of associates 26 0 0

Operating cash flow before change in working capital 325,664 384,898

Change in working capital

Change in inventories 13 (3,645) 4,821

Change in trade and other receivables 12 18,761 (23,650)

Change in trade and other payables 17 (2,178) 62,231

Operating cash flow 338,603 428,301

Paid interest 06 (65,830) (69,633)

Received interest 05 1,575 3,046

Paid taxes (6,758) (15,043)

Net operating cash flow 267,590 346,670

INVESTING CASH FLOWAcquisition of intangible assets 09-10 (7,888) (10,351)

Sale of intangible assets 09-10 0 0

Acquisition of tangible assets 09-10 (253,139) (229,860)

Sale of tangible assets 09-10 286 401

Other investing cash flows 26 0 0

Net investing cash flow (260,741) (239,810)

FINANCING CASH FLOWChange in capital 15 15,950 6,465

Borrowings issuance 16 79,347 46

Borrowings repayment 16 (109,045) (110,144)

Issuance and repayment of long term receivables 11 (1,361) 2,185

Paid dividends 15 (73,193) (80,901)

Grants related to assets 42 7

Sale of partial interests in a subsidiary 0 31

Net financing cash flow (88,260) (182,311)

CHANGE IN CASH AND CASH EQUIVALENTS OF THE CONTINUED ACTIVITIES (81,411) (75,451)

CASH AND CASH EQUIVALENTS BEGIN OF PERIOD 209,412 284,863

CASH AND CASH EQUIVALENTS END OF PERIOD 128,001 209,412

17 IFRS 2014 ORES GroupCONSOLIDATED FINANCIAL STATEMENT

2. Notes to the Consolidated Financial Statements

Preliminary note to the consolidated financial statements ................................................................................................18

NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME ...........19

Note 01 A Turnover ..............................................................................................................................................................................................19 Note 01 B Regulatory Balances ...............................................................................................................................................................21 Note 02 Other Operating Income ...................................................................................................................................................23 Note 03 Cost of sales ....................................................................................................................................................................................24 Note 04 Other Operating Expenses ..............................................................................................................................................25 Note 05 Financial Income .........................................................................................................................................................................26 Note 06 Financial Expenses ...................................................................................................................................................................27 Note 07 Segment Information .............................................................................................................................................................28

NOTES TO THE FINANCIAL POSITION .........................................................................................32

Note 08 Goodwill .............................................................................................................................................................................................32 Note 09 Intangible assets .........................................................................................................................................................................33 Note 10 Property, plant and equipment ....................................................................................................................................34 Note 11 Financial assets ............................................................................................................................................................................36 Note 12 Trade and other receivables ...........................................................................................................................................37 Note 13 Inventories ........................................................................................................................................................................................39 Note 14 Cash and cash equivalents ...............................................................................................................................................40 Note 15 Capital ...................................................................................................................................................................................................41 Note 16 Borrowings .......................................................................................................................................................................................43 Note 17 Other financial liabilities .....................................................................................................................................................47 Note 18 Other payables and other liabilities ........................................................................................................................48 Note 19 Provisions ...........................................................................................................................................................................................49 Note 20 Employee benefits – General ........................................................................................................................................51 Note 21 Employee Benefits - Defined Contribution Plans ......................................................................................52 Note 22 Employee benefits – Defined Benefit Plans ....................................................................................................54 Note 23 Leases (lessee) ..............................................................................................................................................................................61 Note 24 A Current Taxes .................................................................................................................................................................................62 Note 24 B Deferred taxes ..............................................................................................................................................................................64 Note 25 Subsidiaries ......................................................................................................................................................................................65 Note 26 Investments in associates ..................................................................................................................................................66 Note 27 Fair value of financial instruments .............................................................................................................................68 Note 28 Derivative instruments ..........................................................................................................................................................69

OTHER NOTES ...........................................................................................................................................................................70

Note 29 Related Parties ..............................................................................................................................................................................70 Note 30 Events after the reporting period ..............................................................................................................................73 Note 31 Management of financial risks ......................................................................................................................................74


Preliminary note to the consolidated financial statements

A. REPORTING ENTITY AND GROUP ORES

The ORES Group (hereafter referred to as the “Group”) consists, on the one hand, of ORES Assets scrl, established from the merger of the eight Walloon associations of municipalities with external partner (“active in power and gas distribution”, thereafter referred to as “DSO” or “ORES Assets”) dated 31 December 2013 with a retroactive effect as from 1 January 2013, and, on the other hand, of the limited liability cooperative company ORES scrl (“ORES scrl”) whose shares are almost entirely held by the DSO (99.68%); the left part (0.32%) is held by seven financing associations of municipalities (“intercommunales pures de financement”) and the Group RESA.

ORES scrl has invested in two companies: Atrias, held at 16.67%, and Indexis, held at 30%. ORES scrl has a significant influence over these two companies which are consequently consolidated using the equity method.

The DSO is an association of municipalities with external partner (“intercommunales mixtes”): it is held at 75% by Walloon municipalities or financing associations of municipalities, on the territory where they operate, and at 25% by Electrabel SA (thus ultimately by the GDF Suez Group).

The Group is thus exclusively active in Wallonia, Belgium, on the territory of the municipalities that are the shareholders of the DSO. The address of the Group is the headquarters of ORES Assets, located Avenue Jean Monnet 2, 1348 Louvain-la-Neuve (Belgium).

B. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Board of directors of ORES Assets approved the Group consolidated financial statements and authorised their publication on 22 April 2015.

C. SIGNIFICANT EVENTS FOR THE YEAR 2014

The first half of the 2014 financial year began with the finalizing of the project to create a single Distribution System Operator (single DSO) through the merger of the eight Walloon associations of municipalities with external partner (“intercommunales mixtes”) which took place on 31 December 2013. Due to this merger, the shareholders structure was modified. ORES Assets replaced the eight DSO and now holds almost all shares of the capital of ORES scrl. Each of the seven financing associations of municipalities (Idefin, IPFH, Finest, Finimo, Sofilux, Sedifin et IEG), as well as the company RESA, hold one share of ORES scrl.

The Board of Directors of ORES scrl was renewed by the Shareholders meeting held on 26 June 2014. It has now 17 directors who represent the public authorities, except for the CEO of ORES scrl, and is chaired by Didier Donfut. The Shareholders meeting held on 26 June 2014 also allowed to appoint the company RSM Interaudit, represented by Thierry Lejuste, as the auditor of the IFRS consolidated financial statements.

The Group also took the opportunity to conclude a long-term financing guaranteed by ORES Assets, allowing to increase the overall maturity of its debt. This opportunity materialised at the end of July 2014 by the issuance of a bond in the form of a private investment for an amount of € 80 million for a period of 30 years and bearing an interest rate of 4%.

Moreover, the new distribution tariffs were developed during the year and finally approved begin 2015. These tariffs are the first to be approved by the regional regulator since the transfer of the tariff jurisdiction from the CREG to the CWaPE, and also the first tariffs approved since 2009.

Finally, it should be noted that the fiscal year 2014 is the last one for which ORES Assets is not subject to corporate income taxes. Indeed, following the vote of the Program Law dated 19 December 2014 by the Federal Parliament, the DSO should now become subject to corporate income tax as from the fiscal year 2016, income 2015.

All figures presented in the following tables are in thousands of euros.


NOTE 01 A - TURNOVER

In k€

Electricity 31/12/2014 31/12/2013

Transit fees 793,956 818,825

Public service obligation (OSP) 8,943 12,631

Transfer of assets from customers 47,126 51,159

Other 1,248 1,198

851,273 883,813

Gas

Transit fees 147,663 172,537

Public service obligation 4,995 7,301

Transfer of assets from customers 3,836 4,414

156,494 184,252

Not allocated

Third party inventory management 4,596 6,517

Construction contracts 6,333 6,332

Third party network management 19,073 22,422

30,002 35,271

TOTAL TURNOVER 1,037,769 1,103,336

TRANSIT FEESThe Group’s turnover is mainly composed of income and expenses related to the transits fees from the electricity and gas distribution network. The Group provides on behalf of the energy suppliers the electricity and gas distribution directly to the houses and companies that are connected to the network. Concerning the electricity, the transit fee also includes a fee for the transport network for which Elia is the sole manager. The fee is invoiced by Elia to the Group and is recorded as a cost of sales (cascade principle - See also note 03).

Income and expenses related to transit fees are recognised based on the tariffs applicable for the year as soon as the electricity or gas has been supplied and transported to consumers that are connected to the network during the related period. The amounts recognised as income are based on meter readings and estimates for the part of the network that has not been metered. These estimates are adjusted at year-end with the unmetered transit fee (RTNR) which is calculated based on the total actual volume that has transited on the network.

The regulatory environment in which the Group operates is described in Note 3.A.15. The guidelines adopted on 13 July 2009 at the European level (‘Third Energy Package’) have been transposed into Belgian law on 8 January 2012 and the related law was published in the Belgian Official Gazette on 11 January 2012. The Royal Decrees of 2 September 2008 determining the tariffs are repealed and the federal regulator (CREG) was the sole jurisdiction to determine the tariff methodology applicable to the energy distribution. However, seeing that the decision to transfer the tariff official competency related to the distribution network to the Regions involved the determination of a new tariff methodology by the regional regulator (“CWaPE”) as soon as the transfer of jurisdiction became effective on 1 July 2014, the federal regulator decided to extend the application of the tariffs approved for 2012 to the years 2013 and 2014. The principles contained in the law of 8 January 2012 and the Royal Decrees of 2008 have therefore been applied for the year-end 2013 and 2014. Please note that the CWaPE approved on 5 February 2015 the tariffs for the years 2015 and 2016 based on the tariff methodology adopted on 16 August 2014.

The authorised revenue determined by law related to the distribution of electricity and gas is based, on the one hand, on all the necessary costs to carry out the tasks of the DSO and, on the other hand, on the fair margin for the remuneration of the capital invested in the infrastructure network. The comparison between this allowed revenue on non-controllable costs and amounts recognised as turnover determines the annual balances (assets and liabilities) that the DSO will have to pass on the tariffs in subsequent regulatory periods. Annual regulatory balances and their impact on future tariffs are subject to approval by the regulator.

The decrease in transit fees for electricity by € 24.9 million mainly relates to a decrease in volumes in 2014 compared to 2013 (-3,8%). This decrease is mainly related to the low-voltage network (-7%) due to a mild winter in 2014 but also due to a growing part of renewable energy produced and used by the consumer himself.


The decrease in transit fees for gas by € 24.9 million is explained by the increase in temperature in 2014 compared to 2013 (28% decrease in degree-days in 2014). Degree-days provide a picture of the average profile of the heating needs of a house in Belgium. For a given day, the degree-days used by the natural gas sector in Belgium are equal to the difference between 16,5°C and the average temperature as measured by the IRM located in Uccle. This led to a decrease in the volumes transported of 15,3% compared to 2013.

PUBLIC SERVICE OBLIGATIONS (OSP)

The Walloon government imposes to the DSO public service obligations (OSP) that are clearly defined, transparent, non-discriminatory and which are subject to review by the CWaPE, including:

• to ensure energy supply to protected customers at the social tariff. The difference between the social tariff and the market price is recovered by the DSO via the regulator (funds managed by the regulator), which ensures neutrality in the income statement;

• to ensure the installation of a budget meter at the request of the client or in the frame of a procedure of payment default of the end customer towards its energy supplier;

• to ensure on a temporary basis the supply of end customers who find themselves temporarily without a supply contract or for whom the contract has been suspended (customers are called ‘supplier X’). The corresponding energy purchases are recognised in cost of sales (see Note 03).

• single counter: in order to simplify the administrative procedures, the DSO is the single point of contact for electricity producers with a solar photovoltaic installation of a net power of 10 kVa at most, wishing to connect to the network and benefit from the system of green certificates.

In addition to these activities that generate turnover, DSO is subject to the following public service obligations:

• to ensure the maintenance of public lighting which is the property of the municipalities;

Costs relating thereto are recorded in “other operating expenses” (note 04) or in “employee benefits” (note 20).

Income and expenses related to the sale of energy in the context of public service obligations (including protected customers) are recognised when electricity or gas has been supplied and transported to consumers connected to the network during the corresponding period. The amounts recognised as revenue are based on meter readings and estimates for the part of the network that has not been metered. These estimates are adjusted at year-end with the unmetered energy supply (ENR) which is calculated based on the total actual volume that has transited on the network.

Revenue in 2014 linked to public service obligations for both gas and electricity follows the same downward trend (€ -6 million) as transit fees and is explained by the same reason which is a decrease in volumes sold to customers in 2014 compared to 2013.

TRANSFER OF ASSETS FROM CUSTOMERS

Transfer of assets from customers related to the construction of connections or extensions to the network are recognised as a general rule when the service of the connection or the extension has been delivered.

The downward trend in transfer of assets from customers comes mainly from a cyclical element, namely the evolution of the volume of work involved.

THIRD PARTY INVENTORY MANAGEMENT

The Group has entered into a service contract providing inventory management (logistics) on behalf of a third party, to which it also sells merchandise.

The decrease observed this year is mainly due to the dimension of the merchandises (lower dimension compared to 2013). Indeed, the fees are based on the square-meters used by the third party.

CONSTRUCTION CONTRACTS

The turnover of the Group also includes revenue from construction contracts for various projects such as the expansion work done on public lightings. To the extent that the end of a construction contract can be estimated reliably, revenue and expenses related to this contract are recognised in the income statement in accordance with the percentage of completion of the contract.

THIRD PARTY NETWORK MANAGEMENT

Following the partial demerger of “Intermosane”, the distribution network of the city center of Liege is still managed by ORES scrl but on behalf of RESA (Nethys) .


NOTE 01 B – REGULATORY BALANCES

In k€

1. STATEMENT OF FINANCIAL POSITION 31/12/2014 31/12/2013

Regulatory assets

Tariff period 2008-2014 149,221 86,441 Regulatory liabilities

Tariff period 2008-2014 (50,124) (17,481)

TOTAL REGULATORY BALANCES 99,097 68,960

2. STATEMENT OF COMPREHENSIVE INCOME 31/12/2014 31/12/2013

Electricity

Tariff period 2008-2014 7,118 (18,528)

Gas

Tariff period 2008-2014 23,019 (7,373)

TOTAL SOLDES TARIFAIRES 30,137 (25,901)

The regulatory environment in which the Group operates is described in the accounting policies (3.A.15).

The authorised revenues determined by law related to the distribution of electricity and gas is based on the one hand, on all the necessary costs to carry out the tasks of the DSO and, on the other hand, on the fair margin for the remuneration of the capital invested in the infrastructure network. The comparison between this allowed revenue on non-controllable costs and amounts recognised as turnover determines the annual balances (assets and liabilities) that the DSO will have to pass on the tariffs in subsequent regulatory periods. Annual balances and their impact on future tariffs are subject to approval by the regulator.

Currently, there is no specific IFRS dealing with the accounting treatment of regulated balances in a regulated environment. Discussions are in progress within the IASB concerning the publication of a new standard on rate-regulated activities that would clarify the accounting treatment. In this context, a transitional standard was published in January 2014 (IFRS 14 Regulatory Deferral Accounts) but applies only to IFRS first-time adopters. It explicitly allows the recognition of regulated assets and liabilities within the statement of financial position and these assets and liabilities should be presented in a separate caption, distinct from the other assets or liabilities. The Group took the assumption that these balances would be recovered in the future and are therefore recognised as an asset or a liability. If it turns out that the accounting treatment adopted by the Group is not in line with the future guidelines published by the IASB, future results as well as equity would have to be adjusted.

In addition, the CWaPE approved on 5 February 2015 the tariffs for the years 2015 and 2016 based on the tariff methodology adopted on 16 August 2014. These will include a recovery equivalent to 20% of the accumulated regulatory balances at end 2013: 10% will be recovered during the year 2015 and the remaining 10% during the year 2016.

Regulatory balances at the end of 2014 result in a regulatory asset for an amount of € 99.1 million (compared to € 68.9 million in 2013) and is mainly due to the differences observed during the regulatory period between actuals and initial budget assumptions: in terms of volume, cost indexation, electricity price for the purchase of losses on the network, the level of transit fees and the return on invested capital (REMCI) based on OLO rate. The increase of public service obligations makes also part of this gap between actuals and budget.

The regulatory balances increase then by € 30.1 million, with an increase of € 7.1 million related to the electricity and € 23.0 million related to the gas.


The following items explain the impact on the 2014 income statement:

- Electricity:

The volume effect has a major positive role in 2014 given that the actual quantities distributed are lower than initially budgeted, due to the softer weather conditions in 2014 compared to 2013 but also due to a growing part of renewable energy (wind and photovoltaic) produced and used by the consumer himself.

The increase in costs related to public services obligations is another driver of the increase in regulatory balances. Indeed, actual costs in 2014 were higher than initially budgeted and have not yet been reflected in the tariffs during the current period (namely the significant increase in bad debt allowances for irrecoverable trade receivables – see note 12). Finally, the indexation of controllable costs is another factor that triggered the increase in regulatory balances. The Royal Decree prescribes an annual mechanism of re-indexation of controllable costs that allows the integration in the regulatory balances of the difference between budgeted inflation and actual real parameters.

This is to a large extent offset by:

1) a change in the transport network tariff;

2) a purchase price for electricity losses lower than budgeted;

3) a lower OLO rate on the return on invested capital; budgeted rate was 3.9%, whereas actual rate is only 1.7% in 2014

- Gas:

In line with electricity activity, the volume effect also plays a significant positive role in 2014 given that the actual quantities distributed are lower than initially budgeted, due to the soft weather conditions in 2014 compared to 2013. The increase in the costs related to public service obligations also contributes to the increase in regulatory balances. Indeed, the actual costs in 2014 are higher than budgeted and have not yet been reflected in the tariffs during the current period. This increase is mainly due to the significant increase in write downs for irrecoverable trade receivables during the year (see note 12) and the increase in Road charges.

This is partially offset by a lower OLO rate on the return on invested capital: budgeted rate was 3.9%, whereas actual rate is only 1.7% in 2014.


NOTE 02 – OTHER OPERATING INCOME

In k€

31/12/2014 31/12/2013

Recovery of fraudulent consumption 4,736 5,663

Recovery from clients 9,840 8,284

Network damages 3,899 2,849

Rentals / Supplies 4,265 3,994

Other recovery of expenses 6,140 9,632

28,880 30,422

«Other recovery of expenses» mainly relates to recoveries other than those related to customers from distribution system operators, such as:

1) Trainings paid by our subcontractors to obtain a work permit on our networks;

2) The reinvoicing of costs related to joint projects conducted with our counterparts from Brussels or Flanders;

3) Fees paid by other companies in the sector for administrative management.


NOTE 03 – COST OF SALES

In k€

31/12/2014 31/12/2013

Goods and supplies

Energy purchases (OSP - gas and electricity) 7,263 9,473

Network losses (electricity) 34,128 43,503

Goods 5,515 10,091

46,906 63,067

Grid fees (electricity) 338,955 328,818

Road charges 46,816 44,026

432,677 435,911

GOODS AND SUPPLIES

This caption mainly relates to the purchase of losses from the electricity sector. Indeed, following the decree of the Walloon Government dated 16/10/2003, the DSO compensates the energy losses in the distribution network by purchasing suitable energy subject to public market rules (competitive tendering procedure (bid or tender call)).

The energy purchases are related to some specific customers (protected customers) in the context of public service obligations.

The decrease of € 2.2 million in energy purchases is related to the decrease in revenue linked to public service obligations (see note 01 A). The decrease is primarily due to lower prices and a decrease in volumes due to softer weather conditions in 2014 compared to 2013.

Concerning the electricity losses on the network, the decrease (€ 9.4 million) is related to the fall in the volumes purchased in 2014 compared to 2013 (-14.40%), along with a decrease in the purchase price (-8.16%) that was recently renegotiated for a lower amount compared to last year.

GRID FEES

The electricity transport system operator monthly invoices the DSO the fee for using its network. The DSO reinvoices that fee to the energy suppliers (cascade principle). This applies only to the electricity sector as the gas transport fee is charged directly by the transport system operator to the energy suppliers.

Although the volumes transported decreased by 7%, the grid fees invoiced by Elia have increased by € 10.1 million. This is due, on the one hand, to an increase in the transport costs per MWH (Elia tariff) of 22% and, on the other hand, to higher costs (6%) for overhead and contributions, mainly due to the impact of the measures undertaken to support renewable energy and the overload of green certificates.

ROAD CHARGES

DSO is required to calculate twice a year road charges related to electricity distribution (fully repaid to the municipalities) or gas distribution (repaid to municipalities, to provinces and the Walloon Region).


NOTE 04 – OTHER OPERATING EXPENSES

In k€

31/12/2014 31/12/2013

Network maintenance charges (1) 7,690 15,418

Third party fees (2) 26,459 11,716

IT consultancy fees (2) 22,699 36,992

Call Center expenses 6,191 6,063

Insurance 1,592 2,379

Vehicles lease 2,275 2,229

Property & optical fiber lease 9,580 9,419

Other lease 9,827 9,328

Vehicles costs (3) 6,978 7,718

Own furniture 8,705 8,408

Others (4) 6,490 8,236

108,486 117,906

(1) NETWORK MAINTENANCE CHARGES

The decrease of € 7.7 million is largely due to higher contributions to extension and renewal works conducted on the network, rather than the maintenance work itself (+6% compared to 2013). This also applies to the investments during the year that were sharply higher in 2014 compared to 2013 (see note 10). The decrease is also due to the reclassification of maintenance charges linked to the buildings, machines and IT material to the caption “Others” (see point 4 below).

(2) THIRD PARTY AND IT CONSULTANCY FEES

The increase in “third party fees” is explained by the reclassification (€ +14 million) of several charges that were classified as IT consultancy fees but were actually other consultancy fees.

(3) VEHICLES LEASE

The decrease is mainly due to workers cars thanks to a reduction in the number of cars in 2014 (43 cars less compared to 2013). In addition, the year 2014 was more favourably impacted by lower diesel prices, with an average price of € 1.2196 in 2013 compared to an average price of € 1.1925 in 2014, equivalent to a 2.30% decrease.

(4) OTHERS

Other expenses mainly comprise:

• Various professional fees related to the sector for an amount of € 1.4 million (2013: € 1.5 million)

• The cost of staff training which corresponds to about 5% of the total remuneration of the Group (although the legal obligation is only 1,9%) and other expenses reimbursed to employees for an amount of € 4.1 million (2013: € 4.7 million)

• The allocations and reversals of provisions for an amount of € -7.5 million (2013: € -0.3 million)

• Various costs linked to the maintenance of buildings, machines and IT material for an amount of € 5.9 million. In 2013, these costs were presented as part of the network maintenance charges.

The decrease in this caption is mainly due to significant reversals of provisions for litigations that were settled in favour of the Group during the year (see also note 19 on provisions).


NOTE 05 – FINANCIAL INCOME

In k€

31/12/2014 31/12/2013

Interest income 1,797 3,234

Dividends from equity investments

Other 75 86

1,872 3,320

In 2013, the Group received a significant amount of cash following the issuance in October 2012 of a bond for € 350 million, whereas only a bond for an amount of € 80 million was issued in 2014. The money raised in 2012 thus allowed to carry out more important term investments (€ 115.8 million at year-end 2014 compared to € 199.7 million at year-end 2013) with longer durations, and so benefit from more favourable interest rates.


NOTE 06 – FINANCIAL EXPENSES

In k€

31/12/2014 31/12/2013

Interest on loans 25,928 28,261

Interests on treasury bills 6,991 6,914

Interests on bonds 15,359 14,542

Interest on loans from related parties

Other interest expenses 19,541 20,543

TOTAL INTEREST EXPENSE 67,819 70,260

Unwinding of discounts on provisions 16,226 3,464

Other financial expenses

TOTAL FINANCIAL EXPENSES 84,045 73,724

TREASURY BILLS PROGRAM

The Treasury bills program was established in 2011 with the joint guarantee from the eight DSO (merged on 31 December 2013 to form ORES Assets) for a period of ten years and a maximum amount of € 250 million.

Its objective was to diversify the short term funding resources, namely to cope with the equity reduction in conformity with the guidance of the regulator.

In order to meet its current and future challenges, the Group appealed again to the capital market in 2012. Indeed, pursuing its strategy of diversification of funding sources, the Group has modified the characteristics of its treasury bills program in order to be able to issue securities for periods exceeding 12 months.

This allowed to raise an amount of € 189.7 million by the end of 2012, with a related financial charge of € 6.9 million for the year 2014 (same amount in 2013).

BOND ISSUE

ORES scrl issued a bond of € 350 million on 2 October 2012 in order to diversify its funding sources and ensure the financial needs of the company and its shareholder, ORES Assets, for the years 2012 and 2013 but also 2014. The bonds have a term of 9 years and bear an interest rate of 4%.

In 2014, Ores scrl issued another bond of € 80 million on 29 July 2014 in order to ensure part of the financing needs of the Group for the year 2015. The bonds issued have a term of 30 years and bear an interest rate of 4%.

The increase in financial expenses for an amount of € 0.8 million is simply related to the new bond issue.

LOANS

As in 2013, the excess of cash received from the bonds and from private investments has allowed not to renew the loans maturing in 2014; the interest expenses for the year is therefore lower than in 2013.

IRS (presented as part of other interest expenses)

The interest expenses on IRS used to hedge the floating rates (recognised as other interest expenses) have slightly decreased compared to 2013 (€ -1.3 million) due to the fact that several IRS have matured in 2014 and have not been renewed (see also note 28 on derivatives).

UNWINDING OF DISCOUNTS ON PROVISIONS

This caption records the actuarial variations related to the discount on provisions regarding jubilees and invalidity as these two advantages are considered as other long term benefits.

This increase is due on one hand to the modification of the assumption related to the discount rate (-1.60% compared to 2013) and on the other hand, to a higher monthly salary basis used in the jubilees premiums (see also note 12).


NOTE 07 – SEGMENT INFORMATION

The executive committee of ORES scrl, overseen by the Board of ORES scrl and ORES Assets, is the most important chief operating decision maker of the Group. In its daily management, it reviews the annual accounts of ORES Assets and ORES scrl prepared under Belgian GAAP. Indeed, the Group operates in a regulated environment in which the financial statements of each entity of the Group, prepared in accordance with Belgian GAAP, for each type of energy (gas and electricity), have an impact on future tariffs. Therefore, the Group is organised into eight operating segments with a distinction between the electricity and gas energy, plus limited activities related to the recovery of past unpaid receivables prior to the market liberalisation (called «supply» activity). The activity of the company ORES scrl is to manage the expenses of ORES Assets; it invoices all its expenses to ORES Assets at cost price and therefore makes no profit.

The operating segments provide identical services to customers of a similar nature in different geographical areas. The activity of each segment is similar depending on the type of energy, so that the operating segments can be grouped into two main areas, namely gas and electricity and another limited activity (supply). These segments are representative of how the Group is managed and correspond to the consolidation criteria set out in IFRS 8 - Operating Segments.

Financial data per operating segment according to Belgian GAAP

1. INCOME STATEMENT In k€

31/12/2014TOTAL

GASTOTAL

ELECTRICITYOTHER

ACTIVITIES (1) ORES (2)TOTAL

CONSOLIDATED (3)

Belgian GAAP

Turnover 174,796 816,017 555,961 1,546,774

Other operating income 7,531 22,016 1,194 12,313 43,055

Operating expenses (132,063) (744,790) (362) (563,876) (1,441,092)

Operating result 50,264 93,242 832 4,398 148,737

Financial Income 9 46 49 23,197 23,300

Financial Expenses (22,076) (43,937) (28) (23,197) (89,237)

Financial result (22,067) (43,890) 20 0 (65,937)

Other (97) (97)

Result before taxes 28,197 49,352 853 4,301 82,703

Taxes (942) 5 (7) (4,301) (5,245)

RESULT FOR THE PERIOD 27,255 49,357 846 (0) 77,458

31/12/2013

Belgian GAAP

Turnover 171,947 822,439 0 542,241 1,536,627

Other operating income 7,929 21,003 1,353 12,055 42,340

Operating expenses (128,858) (739,707) (411) (550,685) (1,419,661)

Operating result 51,018 103,735 942 3,611 159,306

Financial Income 42 115 65 21,745 21,967

Financial Expenses (21,973) (45,176) (11) (21,745) (88,905)

Financial result (21,932) (45,060) 54 0 (66,938)

Other

Result before taxes 29,086 58,675 996 3,612 92,368

Taxes (1,357) 1 (10) (3,612) (4,978)

RESULT FOR THE PERIOD 27,729 58,676 985 (0) 87,390

(1) Other activities like supply of goods and services to third parties(2) ORES scrl is a 99.68% subsidiary of ORES Assets(3) Consolidated financial statements of the Group without elimination of intercompany transactions


NOTE 07 – SEGMENT INFORMATION (next)

2. STATEMENT OF FINANCIAL POSITION In k€

31/12/2014TOTAL

GASTOTAL

ELECTRICITYOTHER


CONSOLIDATED (3)

Belgian GAAP

Non-current assets 1,043,169 2,237,003 4,579 560,565 3,845,316

Property, plant and equipment 1,043,016 2,236,563 4,564 10,431 3,294,574

Other non-current assets 153 441 15 550,133 550,741

Current assets 141,855 365,931 (88,313) 176,673 596,146

Inventories 8,627 24,089 32,716

Trade receivables 37,345 186,767 (88,489) 20,876 156,499

Cash and cash equivalent 129,428 129,428

Other current assets 104,511 170,537 176 2,281 277,504

TOTAL ASSETS 1,185,024 2,602,935 (83,734) 737,238 4,441,462

Equity 504,336 1,156,327 0 495 1,661,159

Share capital 247,721 539,599 458 787,777

Retained earnings 0

Other reserves 256,616 616,728 873,343

Capital subsidy 38 38

Non-current liabilities 552,040 1,118,282 0 619,750 2,290,071

Borrowings 545,126 1,110,464 619,750 2,275,341

Provisions 6,914 7,817 14,731

Current liabilities 128,648 328,326 (83,734) 116,992 490,232

Borrowings 79,230 96,984 176,214

Trade debts 7,228 86,399 2 51,331 144,960

Other current liabilities 42,191 144,942 (83,736) 65,662 169,059

TOTAL LIABILITIES 1,185,024 2,602,935 (83,734) 737,238 4,441,462

(1) Other activities like supply of goods and services to third parties(2) ORES scrl is a 99.68% subsidiary of ORES Assets(3) Consolidated financial statements of the Group without elimination of intercompany transactionses



2. STATEMENT OF FINANCIAL POSITION (NEXT) In k€

31/12/2013TOTAL

GASTOTAL

ELECTRICITYOTHER


CONSOLIDATED (3)

Belgian GAAP

Non-current assets 1,000,237 2,200,677 4,745 391,501 3,597,160

Property, plant and equipment 997,098 2,194,307 4,730 8,051 3,204,185

Other non-current assets 3,139 6,370 15 383,450 392,974

Current assets 113,848 311,165 (21,534) 272,830 676,309

Inventories 0 8,334 0 20,444 28,778

Trade receivables 37,791 150,235 (22,470) 37,776 203,333

Cash and cash equivalent 0 0 0 210,916 210,916

Other current assets 76,057 152,596 936 3,693 233,282

TOTAL ASSETS 1,114,085 2,511,841 (16,789) 664,331 4,273,469

Equity 485,176 1,142,162 0 463 1,627,801

Share capital 238,177 533,193 458 771,827

Retained earnings 0 0 0 0

Other reserves 246,999 608,969 0 855,969

Capital subsidy 0 0 5 5

Non-current liabilities 556,669 1,127,581 575 539,750 2,224,575

Borrowings 548,906 1,117,861 539,750 2,206,517

Provisions 7,763 9,720 575 0 18,058

Current liabilities 72,240 242,098 (17,364) 124,118 421,092

Borrowings 27,812 81,187 46 109,045

Trade debts 4,954 85,545 2 61,486 151,988

Other current liabilities 39,473 75,366 (17,367) 62,586 160,060

TOTAL LIABILITIES 1,114,085 2,511,841 (16,789) 664,331 4,273,469

(1) Other activities like supply of goods and services to third parties (2) ORES scrl is a 99.68% subsidiary of ORES Assets(3) Consolidated financial statements of the Group without elimination of intercompany transactions



3. RECONCILIATION OF SEGMENT INFORMATION (established under Belgian GAAP) AND THE GROUP FINANCIAL STATEMENTS (prepared in accordance with IFRS) In k€

31/12/2014SEGMENT

INFORMATION

GROUP FINANCIAL

STATEMENTS VARIATION

Income statement

Turnover and regulated balances 1,546,774 1,067,906 (478,868)

Result before taxes 82,703 164,801 82,098

Statement of financial position

Total assets 4,441,462 4,026,196 (415,267)

Total liabilities 4,441,462 4,026,196 (415,267)

31/12/2013

Income statement

Turnover and regulated balances 1,536,627 1,077,435 (459,191)

Result before taxes 92,368 187,816 95,448

Statement of financial position

Total assets 4,273,469 3,955,748 (317,721)

Total liabilities 4,273,469 3,955,748 (317,721)

Difference between segment information and consolidated financial statements of ORES Assets:

• Intercompany transactions, balances, income and expenses between operating segments have been eliminated in full during the consolidation.

• Recognition of dividends (and the related corporate taxes) when approved by the Shareholder’s meeting.

• Provision for employee benefits: (1) Recognition of provisions related to pension plans offered by the Group. 2) No deferral of pension costs taken over from a third party.

• Transfer of assets from customers related to extension work on the network: recognised as income and not as a deduction of property, plant and equipment.

• Intangible assets & property, plant and equipment 1) Depreciation of assets as soon as they are ready for their intended use. 2) Adjustment of employee costs capitalised in the value of property, plant and equipment.

• Recognition of the derivative financial instruments at their fair value.

These differences have been detailed in full in the note of transition to IFRS of the Group for its first combined financial statements at the end of December 2012.

Information related to the geographical areas of activities

The Group operates exclusively in Belgium, in the Walloon Region. Each segment operates in a specific and exclusive geographic area.

Information related to the major customers

Our major customers for the gas sector are Electrabel Customer Solutions and Luminus, representing 74% of the total amount of transit fees (76% in 2013).

Our major customers for the electricity sector are Electrabel Customer Solutions and Luminus, representing 70% of the total amount of transit fees (73% in 2013).


NOTE 08 – GOODWILL

In k€

31/12/2014 31/12/2013

Acquisition cost 8,955 8,955

Accumulated impairment losses

8,955 8,955

Goodwill initially relates to the acquisition of ORES scrl by the eight DSO’s (merged on 31 December 2013 to form a unique DSO, ORES Assets). ORES scrl provides services for the DSO and manages all employees of the economic Group consisting of ORES Assets and its subsidiary ORES scrl. The goodwill recognised at the acquisition date corresponds to the know-how of these employees.

As explained in the accounting policies, the cash-generating units (CGU) have been defined as being the eight operating segments by energy.

During the impairment test, the recoverable amount of the CGU is determined by calculating its value in use. This calculation uses cash flow projection based on budgets approved by management. This budget corresponds to the budget approved by the regulator when determining the tariffs and covers a period of one year. Cash flows beyond the budget period are extrapolated using a zero growth rate.

The discount rate used to determine the value in use is the rate of return (WACC) determined by the tariff methodology (see note 3.A.15 for a description of the regulatory environment). The Group believes that this rate of return is not significantly different from market rates.

Based on these assumptions, the value in use determined by the model is approximately equal to the net assets determined in accordance with Belgian GAAP (RAB including the working capital). However, the net assets determined in accordance with IFRS are systematically lower than the net assets determined in accordance with Belgian GAAP due to the recognition of a provision for pension plans. Accordingly, the value in use is systematically lower than the book value (IFRS) of each CGU. As a consequence, no impairment loss has to be recognised. Management believes that a change in the key assumptions described above would not trigger the recognition of an impairment loss.


NOTE 09 – INTANGIBLE ASSETS

In k€

31/12/2014 31/12/2013

Acquisition cost 28,704 20,921

Accumulated amortisation and impairment (7,296) (3,921)

21,408 17,000

SOFTWARE DEVELOPMENT TOTAL

COST

Balance at 1 January 2013 10,066 504 10,570

Additions 6,540 3,198 9,738

Additions from internal developments 613 613

Disposals 0

Balance at 1 January 2014 16,606 4,315 20,921

Additions 4,362 1,097 5,459

Additions from internal developments 2,428 2,428

Disposals (104) (104)

Balance at 31 December 2014 20,968 7,736 28,704

ACCUMULATED AMORTISATION AND IMPAIRMENT

Balance at 1 January 2013 (1,704) (101) (1,805)

Amortisation expense (1,753) (363) (2,116)

Disposals 0

Balance at 1 January 2014 (3,457) (464) (3,921)

Amortisation expense (2,234) (1,148) (3,382)

Disposals 7 7

Balance at 31 December 2014 (5,691) (1,605) (7,296)

CARRIED AT COST 15,277 6,131 21,408

CARRIED AT REVALUED COST 0

Description of the major other intangible assets and the main movements of the period

The major intangible assets acquired in 2014 primarily include the development of IT solutions, namely a system for the management of metered data (€ 1.4 million) and a new application for the monitoring of work and operations conducted on the network (€ 1.8 million). Technological developments in the field of network management, smart metering and other developments highlight the fact that significant research and development costs are generated and it is likely that they cover periods longer than what was observed in the past. In this context, since 2012, the Group has therefore opted to proceed with the activation of specific expenses related to research and development activities (€ 3.5 million in 2014).

Intangible assets are amortised on a prorate-temporis basis using the linear method over their useful life of 5 years.

Amounts of commitments for acquisition of intangible assets in 2015

In k€

31/12/2014 31/12/2013

Internal IT projects 2,546 3,057

2,546 3,057


NOTE 10 – PROPERTY, PLANT AND EQUIPMENT

In k€

31/12/2014 31/12/2013

Acquisition cost 5,617,243 5,405,400

Accumulated depreciation and impairment (2,160,074) (2,070,197)

3,457,169 3,335,203

Land & Buildings 79,804 77,340

Distribution network 3,343,758 3,223,918

Equipment 29,154 29,326

Other 4,453 4,619

3,457,169 3,335,203

LAND & BUILDINGS

DISTRIBUTION NETWORK EQUIPMENT OTHER TOTAL

COST

Balance at 1 January 2013 110,739 4,960,098 131,547 8,307 5,210,691

Additions 2,873 219,195 7,792 229,860

Disposals (125) (31,660) (3,366) (35,151)

Other 0

Balance at 1 January 2014 113,487 5,147,633 135,973 8,307 5,405,400

Additions 4,388 242,471 6,279 253,138

Disposals (1) (35,670) (5,624) (41,295)

Other 0

Balance at 31 December 2014 117,874 5,354,434 136,628 8,307 5,617,243

ACCUMULATED DEPRECIATION AND IMPAIRMENT

Balance at 1 January 2013 (34,301) (1,837,961) (102,912) (3,522) (1,978,696)

Depreciation expense (1,880) (112,388) (7,043) (166) (121,477)

Disposals 34 26,634 3,308 29,976

Other 0

Balance at 1 January 2014 (36,147) (1,923,715) (106,647) (3,688) (2,070,197)

Depreciation expense (1,923) (117,425) (6,373) (166) (125,887)

Disposals 30,464 5,546 36,010

Other 0

Balance at 31 December 2014 (38,070) (2,010,676) (107,474) (3,854) (2,160,074)

CARRIED AT COST 79,804 3,343,758 29,154 4,453 3,457,169

CARRIED AT REVALUED COST


NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (next)

Description of the property, plant and equipment and the main movements of the period

Investments in the current period as well as in 2013 are mainly related to our network distribution of gas and electricity for an amount of € 242 million on a total investment amount of € 253 million for this year (2013: € 229 million), consisting of:

Electricity: 58% relates to the replacement of equipment and 42% to the expansion of networks and installations of new cabins for a total amount of € 160 million (€ 156 million in 2013).

2014

Cabins MV/LV: 18,2% Budget meters: 2,4% Stations: 3,5% Connections & meters LV: 14,3% Connections & meters MV: 5,4% Low Voltage (LV) Network: 19,5% Middle Voltage (MV) Network: 37%

2014

Lower Pression (LP) connections: 33,4% LP Pipings: 26,7% LP Meters devices: 5,7% Budget meters: 1,3% MP Pipings & Connections: 30,0% MP Stations: 0,6% MP Meters devices: 0,4% Cabins: 1,8%

2013

Cabins MV/LV: 21,3% Budget meters 3,6% Stations: 3,5% Connections & meters LV: 17,3% Connections & meters MV: 5,2% Low Voltage (LV) Network: 19,5% Middle Voltage (MV) Network: 30%

2013

Lower Pression (LP) connections: 29,1% LP Pipings: 25,0% LP Meters devices: 7,1% Budget meters: 3,5% MP Pipings & Connections: 32,5% MP Stations: 0,4% MP Meters devices: 1,6% Cabins: 0,9%

Gas: 52% was spent on sanitation works and 48% was spent on extensions of the existing network for a total amount of € 82 million (2013: € 73 million).

Amounts of commitments for acquisition of PPE in 2015 In k€

31/12/2014 31/12/2013

Distribution network 43,905 38,005

Distribution network Gas 12,851 14,635

Equipments 9,730 5,099

Rolling stock 1,297 1,013

67,783 58,752


NOTE 11 - FINANCIAL ASSETS

In k€

NON-CURRENT CURRENT

31/12/2014 31/12/2013 31/12/2014 31/12/2013

Financial assets available for sale

Unlisted equity instruments 841 425

841 425 0 0

Financial assets measured at fair value through profit or loss

Listed equity instruments 1,426 1,505

0 0 1,426 1,505

Loans and receivables

Trade receivables 158,137 197,726

Other receivables 3,268 2,323 49,215 52,180

3,268 2,323 207,352 249,906

4,109 2,748 208,778 251,411

Fair value

The fair value of trade receivables is presumed to be equal to their carrying value.


NOTE 12 - TRADE AND OTHER RECEIVABLES

In k€

NON-CURRENT CURRENT

31/12/2014 31/12/2013 31/12/2014 31/12/2013

Trade receivables

Distribution 117,532 136,830

Public service obligation (OSP) 58,798 75,825

Other 35,655 38,009

Write downs on trade receivables (53,848) (52,938)

0 0 158,137 197,726

Other receivables

Interim dividend 43,186 48,818

VAT 2,254 894

Other 3,268 2,323 6,370 4,890

Write downs on other receivables (2,595) (2,422)

3,268 2,354 49,215 52,180

Current tax assets 11,110 11,114

3,268 2,354 218,462 261,020

Changes in trade receivables are firstly due to lower receivables related to transit fees that have decreased by € 19 million, linked to the decrease in our turnover (see Note 01), and secondly due to a significant decrease in receivables related to public service obligations (€ -17 million) as a consequence of an increase in write downs on old trade receivables for an amount of € 17 million (see below).

The current tax assets in 2013 mainly consists in the payment of an amount of € 5.8 million related to a disputed tax on the dividend paid to the private shareholder related to the sector ORES Verviers. This litigation was finally settled in favour of the Group and the tax authority will have to reimburse this amount in 2015.

In k€

TRADE RECEIVABLES OTHER RECEIVABLES

31/12/2014 31/12/2013 31/12/2014 31/12/2013

Loans and receivables not impaired

Not yet due 131,693 142,257 57,462 61,391

Up to 60 days 622 13,252 717 907

61 to 90 days 631 866

91 to 180 days 338 780

> 180 days 1,017 1,197

134,301 158,352 58,179 62,298

Movement in the impairment provision

At 1 January 52,938 45,881 2,422 1,785

Impairment write downs 4,440 8,271 173 637

Reversal of write downs (3,530) (1,214)

AT 31 DECEMBER 53,848 52,938 2,595 2,422


NOTE 12 - TRADE AND OTHER RECEIVABLES (next)

In most cases, past due receivables for more than 60 days are subject to impairment. The Group uses external companies since 2011 to recover impaired receivables. One of these companies guarantees an average recovery rate of around 40% on the energy activity and another company guarantees an average recovery rate of around 33% on the receivables related to works activity. Write downs are recognised on the non-guaranteed part of impaired receivables.

The majority of our impairment losses (64% in 2014 compared to 69% in 2013) relates to the protected customers of ORES Assets and the supply to the end customers that have no supply contract or for which the supply contract has been suspended (customers referred to as ‘supplier X’). Impairments on receivables due to frauds on our network is another significant part which represent 29% in 2014 compared to 25% in 2013.

During the year, an important part of the receivables managed by the external companies have been booked as irrecoverable for an amount of € 17.1 million. Indeed, since the current contract with these companies are coming to an end, the managed receivables that were not recovered by them have been recognised as an expense during the year, thereby leading for most of them to a reversal of impairment, which explains most of the decrease in impairments compared to 2013.

In k€

Provisions for impairment losses 31/12/2014 31/12/2013

Statement of financial position (56,443) (55,360)

Statement of comprehensive income (17,424) (11,566)

TRADE RECEIVABLES OTHER RECEIVABLES

31/12/2014 31/12/2013 31/12/2014 31/12/2013

Loans and receivables which are impaired

Up to 60 days 50 (67)

61 to 90 days 1,578 1,656 419 173

91 to 180 days 4,189 6,399 672 328

> 180 days 71,867 84,324 3,650 2,917

77,684 92,312 4,741 3,418


NOTE 13 – INVENTORIES

In k€

31/12/2014 31/12/2013

Raw materials and furnitures 24,089 20,444

TOTAL GROSS 24,089 20,444

Write downs

Reversal of write downs

24,089 20,444

Inventories expensed in the period (cost of sales) 5,515 10,091

Carrying amount of inventories pledged as security for liabilities

Inventories are located throughout the Walloon region, the bulk being concentrated in the supply store located in Aye whose turnover is 6 times a year.

Higher inventories is linked to an order of raw materials booked in inventories at the end of December but that was not yet delivered to the different regions at the time of the inventory. It is also due to fewer transactions on inventories managed on behalf of Nethys.


NOTE 14 – CASH AND CASH EQUIVALENTS

In k€

Cash and cash equivalents include the following for the purpose of the cash flow statement: 31/12/2014 31/12/2013

Cash at bank and in hand 12,190 9,742

Short-term bank deposits 115,811 199,670

128,001 209,412

The financial investments represent a total amount of € 115.8 million and were conducted in accordance with the decisions of the Board of Directors to implement a prudent policy in this context. Investments in ING, BNPP, Belfius, KBC market funds as well as in Belgian Companies Opportunities (Bank Degroof) market funds amount to € 36.7 million as at 31/12/2014 (€ 61.4 million in 2013). Term investments on Belfius, CBC and ING accounts were also made up to € 79.1 million (compared to € 138.3 million in 2013).

The downward trend observed in 2014 is mainly due to the fact that the Group used the cash generated by the bond issued in October 2012 to deal with its operating and financing expenses. Except for the bond issued in July 2014, the Group did not use other financing sources (see also the analysis of the statement of cash flows).

As a reminder, the Group has established in 2012 two major financing programs in order to meet its future obligations:

A) TREASURY BILLS

The Treasury bills program was established in 2011 with the joint guarantee from the eight DSO’s (merged on 31/12/2013 to form a unique DSO: ORES Assets) for a period of ten years and a maximum amount of € 250 million. Its objective is to diversify the short term funding resources, namely to cope with the equity reduction in conformity with the guidance of the regulator.

In order to meet its current and future challenges, the Group appealed again to the capital market in 2012. Indeed, pursuing its strategy of diversification of funding sources, the Group has modified the characteristics of its treasury bills program in order to be able to issue securities for periods exceeding 12 months.

This allowed to raise an amount of € 141.9 million by the end of 2011, fully reimbursed in 2012, and an amount of € 189.7 million in 2012 for which the first treasury bills mature in 2017 (see also note 16 on borrowings).

B) BONDS ISSUE

ORES scrl issued a bond of € 350 million on 2 October 2012 in order to diversify its funding sources and ensure the financial needs of the company and its shareholders, the Walloon DSO’s (merged on 31/12/2013 to form a unique DSO: ORES Assets), for the years 2012, 2013 and 2014. The bonds have a term of 9 years and bear an interest rate of 4%.

During this year, ORES scrl issued a bond (with a private investment form) of € 80 million on 29 July 2014, , thereby allowing to ensure part of the financial needs of the company and its shareholder for the year 2015. The bonds have a term of 30 years and bear an interest rate of 4%.


NOTE 15 - CAPITAL

In k€

ORES ASSETS SCRL

SHARE A SHARE R TOTAL

1. NUMBER OF SHARES

Opening Balance 2013 45,476,384 4,254,856 49,731,240

Capital increase 718,235 718,235

Capital Reimbursement (40,000) (40,000)

Conversion share R to share A 98,250 (98,250) 0

Equity of the discontinued activities (1,178,852) (1,178,852)

Closing Balance 2014 45,114,017 4,116,606 49,230,623

Capital increase 1,436,480 1,436,480

Capital Reimbursement 0


CLOSING BALANCE 2014 46,813,265 3,853,838 50,667,103

2. SHARE CAPITAL

Opening Balance 2013 347,718 425,486 773,204

Capital increase 10,465 10,465

Capital Reimbursement (4,000) (4,000)


Equity of the discontinued activities (8,299) (8,299)

Closing Balance 2014 359,709 411,661 771,370

Capital increase 15,950 0 15,950

Capital Reimbursement 0


CLOSING BALANCE 2014 401,936 385,384 787,320

3. DIVIDEND PER SHARE

Dividends approved by AGM 2013 80,217 15,740 95,957*

Dividend per share 1.76 3.70 1.93

Dividends approved by AGM 2014 65,533 13,292 78,825*

Dividend per share 1.45 3.23 1.60

* Dividends for the period approved by the Shareholder’s meeting are paid in two parts by the Group : an interim dividend is first paid during the period prior to the approval of the dividends by the Shareholder’s meeting and the balance outstanding is then paid during the period in which the dividends are approved by the Shareholder’s meeting.

Therefore, the amount of dividends recognised in the consolidated statement of cash flows consists of:

In k€

2013 2014

Amount of dividends from year N-1 paid by the Group in year N = 32,083 30,007

Amount of the interim dividend from year N paid by the Group in year N = 48,818 43,186

80,901 73,193


NOTE 15 - CAPITAL (next)

4. ADDITIONAL DISCLOSURES

As a cooperative, the capital of ORES Assets is composed of a fixed and a variable part. The fixed part cannot be less than € 18,550 and is fully represented by shares A. Shares A include voting right and right to dividends whereas shares R, with a nominal value of € 100, grant their holder with a right to dividends without voting right. The dividend related to shares R is paid by priority and it is recoverable. Obligations attached to both types of shares are governed by the Company Code, the local democracy and decentralisation Code and the bylaws of the DSO.

Allocation of capital:

In k€

Solde au 31 Decembre 2013 ORES ASSETS SCRL

PART A FIXED 149

PART A VAR 359,560

PART R 411,661

771,370

Solde au 31 Decembre 2014

PART A FIXED 149

PART A VAR 401,787

PART R 385,384

787,320

Capital transactions in 2013

The subscribed capital decreased by € 1.8 million due to the following events that occurred in 2013:

• Recapitalisation occurred in late 2013 to partially fund the investments for next year for an amount of € 10.5 million (cash payment of € 10.5 million and conversion of shares R into shares A for an amount of € 9.8 million).

• Reimbursement to the shareholders of 40,000 shares R for an amount of € 4 million.

• Capital reduction following the partial demerger of «Intermosane» for an amount of € 8.3 million.

Capital transactions in 2014

The subscribed capital increased by € 15.9 million (net amount) following the recapitalisation for an amount of € 42.2 million at year-end 2014 in order to finance the investments for the year 2015. Since a part of this capital increase was funded by public shareholder via the conversion of shares R into shares A (262,768 shares R, equivalent to € 26.3 million), the net increase is limited to € 15.9 million.


NOTE 16 – BORROWINGS

In k€

CARRYING AMOUNT FAIR VALUE

31/12/2014 31/12/2013 31/12/2014 31/12/2013 HIERARCHICAL LEVEL

Unsecured - Non-current

Bank loans 1,108,287 1,284,501 1,144,665 1,312,135 Level 2

Treasury bills - Private investments 189,750 189,750 220,772 216,589 Level 2

Bonds 425,700 345,801 561,703 409,423 Level 2

1,723,737 1,820,052 1,927,140 1,938,147

Unsecured - Current

Bank overdrafts 0 46 0 46 Level 2

Bank loans 175,934 116,689 175,934 116,689 Level 2

Treasury bills - Private investments

Bonds 9,406 9,406 Level 2

185,340 116,735 185,340 116,735

TOTAL FINANCIAL LIABILITIES 1,909,077 1,936,787 2,112,480 2,054,882

of which: current 185,340 116,735 185,340 116,735

of which: non-current 1,723,737 1,820,052 1,927,140 1,938,147

Following the bond issue in October 2012, the Group received additional cash, part of which enabled to cover its financing needs for 2013. The Group had therefore no need to borrow from banks to meet its obligations. Except for the bond issued in July 2014, no new borrowing has been contracted during the year. Bank loans maturing in 2014 have consequently not been renewed, thus explaining the decrease in bank loans in 2014.

TREASURY BILLS PROGRAM

The Treasury bills program was established in 2011 with the joint guarantee from the eight DSO’s (merged on 31/12/2013 to form a unique DSO: ORES Assets) for a period of ten years and a maximum amount of € 250 million. Its objective is to diversify the short term funding resources, namely to cope with the equity reduction in conformity with the guidance of the regulator.

In order to meet its current and future challenges, the Group appealed again to the capital market. Indeed, pursuing its strategy of diversification of funding sources, the Group has modified the characteristics of its treasury bills program in order to be able to issue securities for periods exceeding 12 months (private investments).

The outstanding balance of short-term treasury bills amounted to € 141.9 million at the end of 2011 and was fully reimbursed in 2012. The Group took advantage of the pressure on long-term rate to strengthen its short-term position into a long-term position through private investments for an amount of € 189.7 million at 31/12/2014. The first treasury bills issued in 2012 only mature in 2017 (see also note 14).

BONDS ISSUE

ORES scrl issued a bond of € 350 million on 2 October 2012 in order to diversify its funding sources and ensure the financial needs of the company and its shareholder, the Walloon DSO, for the years 2012, 2013 and 2014. The bonds have a term of 9 years and bear an interest rate of 4%.

ORES scrl issued a bond of € 80 million on 29 July 2014, in the context of its private investments, thereby allowing to ensure part of the financial needs of the company and its shareholder for the year 2015. The bonds have a term of 30 years and bear an interest rate of 4%.


NOTE 16 – BORROWINGS (next)

GLOSSARY OF TERMS USED IN THE SEGMENTATION OF LOANS:

Fixed adjustable rate: borrowing whose rate is fixed for a period longer than a year and within the period of debt repayment. After this period, the rate is revised depending on market evolution.

Hedged floating rate: floating rate borrowing hedged by a hedging instrument (IRS or CAP).

Hedged and structured floating rate: two instruments are included in this category:

• Barrier structured products: loans with a fixed rate that is below the standard rate as long as the reference rate (short-term Euribor rate) does not exceed a predetermined rate (the “barrier”).

• Slope structured products: products whose rate is based on a range of variation between short and long-term rates. The rate is low as long as the difference between the short-term rate and the long term-rate is below a threshold and becomes much higher if it exceeds the threshold.

Description of the methods used to determine the fair value

Fixed adjustable rate: at the end of the reporting period, sum of the future discounted cash flows with capital and interests calculated based on market rates (including the bonds among others) at the end of the reporting period.

Adjustable fixed rate financing: at the end of the reporting period, the sum of the discounted future cash flows with capital and interests calculated based on market rates at the end of the reporting period.

Floating rate financing: fair value is presumed equal to the carrying amount at the end of the reporting period.

Structured financing: the carrying amount at the end of the reporting period for the non-structured part + valuation of the structured part based on the market rates at the end of the reporting period.

Treasury bills: the fair value is presumed equal to the carrying amount at the end of the reporting period.

REPAYMENTS ARE SCHEDULED AS FOLLOWS (by term and type of interest rate)

In k€

31/12/2014FIXED RATE

ADJUSTABLE FIXED RATE

FLOATING RATE

HEDGED FLOATING

RATE

STRUCTURED FLOATING

RATE TOTAL

Within one year 18,187 10,284 67,780 69,434 19,656 185,340

>1 and <3 years 74,398 20,581 4,299 128,935 39,313 267,524

>3 and <5 years 60,528 20,600 4,299 119,002 39,313 243,741

>5 and <15 years 434,853 54,406 16,133 506,853 120,868 1,133,114

>15 years 79,357 79,357

667,323 105,871 92,509 824,224 219,150 1,909,077

31/12/2013

Within one year 14,876 10,620 2,149 69,434 19,656 116,735

>1 and <3 years 14,935 21,254 69,929 138,867 39,313 284,298

>3 and <5 years 74,554 21,273 4,299 119,002 39,313 258,441

>5 and <15 years 487,103 65,050 18,098 534,297 140,524 1,245,072

>15 years 184 32,057 32,241

591,468 118,197 94,659 893,657 238,806 1,936,787



REPAYMENTS ARE SCHEDULED AS FOLLOWS (by term and nature of loan)

In k€

31/12/2014BANK

OVERDRAFTSBANK

LOANSTREASURY

BILLS BOND TOTAL

Within one year 0 175,934 9,406 185,340

>1 and <3 years 208,524 59,000 267,524

>3 and <5 years 192,992 50,750 243,742

>5 and <15 years 706,771 80,000 346,343 1,133,114

>15 years 79,357 79,357

0 1,284,221 189,750 435,106 1,909,077

31/12/2013

Within one year 46 116,689 116,735

>1 and <3 years 284,298 284,298

>3 and <5 years 199,440 59,000 258,440

>5 and <15 years 768,521 130,750 345,801 1,245,072

>15 years 32,242 32,242

46 1,401,190 189,750 345,801 1,936,787

All borrowings are denominated in EURO.

Undrawn borrowing facilities:

Two credit lines exist within the ORES Group for € 50 million each and they have been renewed by the end of 2014 for a period of 3 years. They will thus expire in 2017.



SUMMARY OF THE MAJOR BORROWINGS (INCLUDING INTERETS RATES)

CARRYING AMOUNT In k€

31/1

2/20

14

31/1

2/20

13

INIT

IAL

AM

OU

NT

MA

TUR

ITY

D

ATE

FIX

ED

/

FLO

ATI

NG

R

ATE

INTE

REST

RAT

E

APP

LIC

AB

LE

AT

CLO

SIN

G

2014

IRS

- N

OTI

ON

NE

L

IRS

- FA

IR

VALU

E

MA

TUR

ITY

D

ATE

INTE

REST

RAT

E

APP

LIC

AB

LE

AT

CLO

SIN

G

2014

Borrowing 1 - MP 2007 6,556 12,415 24,038 2028 Floating 3.93%

Borrowing 2 - MP 2008 82,621 88,523 118,030 2029 Floating 3.57% 82,621 5,707 30/12/16 Taux fixe à 3.57%

Borrowing 3 - KP 2008 66,536 75,324 134,830 2029 Floating 3.47% 63,700 5,824 29/12/17 Taux fixe à 3.47%

Borrowing 4 - FP50 2008 369,787 404,646 505,807 2030 Floating

1.69% 43,187 747 31/12/15 Taux fixe à 1.69 %

1.69% 31,190 542 31/12/15 Taux fixe à 1.69 %

1.70% 58,150 1,014 31/12/15 Taux fixe à 1.70 %

3.56% 94,723 14,147 31/12/14 Taux fixe à 3.56 %

Borrowing 5 - MP 2009 59,309 59,309 59,309 2015 Floating 0.80%

Borrowing 6 - MP FP 2010 71,900 71,900 71,900 2021 Floating 3.33% 25,000 4,746 31/12/20 Taux fixe

à 3.33 %

Borrowing 7 - MP 2011 74,124 101,763 153,318 2022 Floating

1.59% 21,771 1,280 31/12/21 Taux fixe à 1.59 %

0.92% 17,157 245 31/12/16Taux fixe à

0.92 %

1.83% 6,521 415 29/12/21Taux fixe à

1.83 %

3.63% 28,676 737 31/03/17Taux fixe à

3.63 %

Borrowing 8 22,500 25,000 50,000 2024 Fixed 3.41%

Borrowing 9 39,380 42,960 71,600 2026 Fixed 3.30%

Bond N°1 346,342 345,801 346,342 2021 Fixed 4%

Bond N°2 79,358 0 79,358 2044 Fixed 4%

Long-term treasury bills - Private investments 189,750 189,750 189,750

Between 2017 &

2020 Fixed

Between 3.43% et

4.04%

1,408,163 1,417,391 1,804,282 472,696 35,404

The borrowing contracts of the Group are not subject to specific covenants (ratios etc) to be complied with. However, with respect to the bonds, the Group has to maintain a ratio equity to total assets of 30%. This ratio is an integral part of the bylaws of ORES Assets (see note 31 on capital management).


NOTE 17 - OTHER FINANCIAL LIABILITIES

NON-CURRENT CURRENT

31/12/2014 31/12/2013 31/12/2014 31/12/2013

Financial liabilities measured at fair value through profit or loss

Derivatives instruments - IRS 40,446 43,342 3,377 2,352

40,446 43,342 3,377 2,352

Financial liabilities measured at amortised cost (excluding borrowings)

Trade payables 144,204 149,263

Other payables 61,900 59,589

0 0 206,104 208,852

40,446 43,342 209,481 211,204

Fair valueThe fair value of trade payables corresponds to their carrying value.

31/12/2014 31/12/2013

Average credit period for trade payables (days) 50 50

Despite another decrease in the average Euribor rates in 2014, from 0.36% in 2013 to 0.15% in 2014, the evolution of the fair value of the IRS remains positive (€ +1.9 million). This is explained by the significant decrease in the total notional amount of the IRS in 2014 (€ -147 million), due to the fact that the IRS with a highly negative fair value matured in 2014 and have not been renewed, and the difference between the average Euribor rate (see above) and the average rate of the IRS (0.72% at year-end 2014 compared to 1.75% at year-end 2013) is weaker compared to last year (difference of 0.57% at year-end 2014 compared to 1.39% at year-end 2013). We refer to the sensitivity analysis in note 31 for more information.

Please note that the IRS which will be matured in 2015 have been reclassified as other current financial liabilities for an amount of € 3.4 million.


NOTE 18 – OTHER PAYABLES AND OTHER LIABILITIES

In k€

CARRYING AMOUNT

31/12/2014 31/12/2013

Social security and other tax payables 18,692 16,444

Short Term Employee Benefits & accruals 29,373 29,166

Accrued charges 235 706

Deferred income 1,252 1,511

Derivatives - IRS 43,823 45,694

Others 15,622 15,489

108,997 109,010

of which: non-current 40,446 43,342

of which: current 68,551 83,687

The Group decided to classify all its pension provisions as non-current liabilities as from 2014 (see note 20). In order to present relevant comparative information and in accordance with IAS 8, comparative figures for 2013 have been restated to take this modification into account, which led to a reclassification as non-current for an amount of € 18 million.

For a more detailed explanation of the pension provisions and employee benefits, see note 20.

For an analysis of the evolution of the fair value of the IRS, see note 17.


NOTE 19 - PROVISIONS

In k€

31/12/2014 31/12/2013

Depollution 5,342 7,111

Litigation 10,450 16,500

15,792 23,611

of which: current


In k€

Movement in the provisions (excluding employee benefits) 2014 DEPOLLUTION LITIGATIONS TOTAL

At 1 January 7,111 16,500 23,611

Additional provisions recognised 165 165

Amounts used in the period (678) (678)

Amounts reversed during the period (1,769) (5,537) (7,306)

AT END OF THE PERIOD 5,342 10,450 15,792

of which: current 0 0 0

of which: non-current 5,342 10,450 15,792

In k€

Movement in the provisions (excluding employee benefits) 2013 DEPOLLUTION LITIGATIONS TOTAL

At 1 January 7,111 17,468 24,579

Additional provisions recognised 2,922 2,922

Amounts used in the period (712) (712)

Amounts reversed during the period (3,178) (3,178)

AT END OF THE PERIOD 7,111 16,500 23,611

of which: current 0 0 0

of which: non-current 7,111 16,500 23,611

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and if it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.


NOTE 19 - PROVISIONS (next)

DEPOLLUTION

The implementation of the decree dated 5 December 2008 related to soil management could justify certain expenses related to soil pollution clean-up on some polluted sites. Under these circumstances, the Group takes appropriate measures in terms of soil pollution prevention and in terms of information about the existence of pollution. Provisions are recorded in this respect.

In this regard, 5 sites have been subjects to an orientation study in 2012 which demonstrated the existence of pollution exceeding the thresholds defined by the soil decree. Under the implementation of article 5 of this decree, the Group has notified the concerned administration and municipalities and has booked provisions based on estimations established by independent experts in the frame of these studies. No new soil studies were conducted in 2013 and 2014.

In 2014, a provision for polluted soils for an amount of € 1.8 million was reversed seeing that the site to which the provision was related will be sold in 2015. Indeed, a preliminary sale agreement was signed in December 2014 in which the acquirer discharges the Group from any further soil sanitation costs that would be needed in the future.

LITIGATIONS

Due to its activities, the Group is also exposed to legal risks. Provisions for litigations are frequently updated in agreement with the Group’s legal department. The amount recognised as a provision is the Group’s best estimate of the consideration required to settle the present obligation.

In 2012, a € 2.3 million accrual was recognised for a litigation with the customs and excise administration regarding the energy subscriptions to invoice towards regional protected clients. This litigation has been settled in 2013 through the payment of an indemnity fee for an amount of € 23K. The provision has thus been entirely reversed, which justifies the most important part of the reversals during the year 2013.

Following a probable and unfavourable error in the metering in the past, a provision has been booked in 2013 for an amount of € 2.4 million. This litigation was finally settled in 2014 with the payment of an indemnity for an amount of € 0.7 million. A reversal of the provision was thus recognised for an amount of € 1.7 million at year-end 2014.


NOTE 20 – EMPLOYEE BENEFITS – GENERAL

In k€

Statement of financial position 31/12/2014 31/12/2013

Non-current

Pension Benefits (134,253) (86,269)

Pension Benefits - Annuities 119,488 102,120

Other post employment benefits 115,447 87,134

Other long-term benefits 46,457 34,796

147,139 137,781

Current

Short Term Employee Benefits 29,373 29,166

29,373 47,185

176,512 166,947

The increase in our employee benefits is mainly due to the significant decrease in the discount rate, from 3.05% in 2013 to 1.45% in 2014 following the fall of the interest rates on the financial markets in 2014 (€ +75.6 million), offset on the one hand by a decrease in the inflation rate by 0.25% in order to better reflect the current economic situation (€ -10 million) and, on the other hand, by a significant increase in our plan assets thanks to, among others, the good performances realised by investments on our pension plans (€ +48 million).

Please note that the Group has opted for the prudent option to fund defined benefit plans as much as possible, which explains that the plan assets are higher than the pension liabilities in 2013 and 2014 (€ -86.7 million in 2013 and € -134.2 million in 2014).

Post-employment benefits consist mainly of tariff reductions and health care benefit granted to employees after retirement.

Other long-term benefits include jubilee benefits granted to executives and employees.

In k€

Statement of comprehensive income 31/12/2014 31/12/2013

Wages and salaries 137,353 139,544

Social security contributions 39,630 40,190

Pension expenses and other long-term benefits 20,279 15,233

Other social expenses 15,311 13,956

Of which included in the cost of PP&E (55,968) (53,440)

156,605 155,483

Average number of personnel 31/12/2014 31/12/2013

Employees - Total full-time equivalent 2,387 2,417


NOTE 21 - EMPLOYEE BENEFITS - DEFINED CONTRIBUTION PLANS

DESCRIPTION OF DEFINED CONTRIBUTION PLANS IN THE GROUP:

Two defined contribution plans exist within the Group: one aimed at executives and management hired from 01/05/1999 or having opted for this plan as of 01/01/2007 (Powerbel), and the other one aimed at employees hired from 01/01/2002 (Enerbel). These plans grant a retirement capital determined by the amount of premiums paid and returns assigned to them.

1. ENERBEL

The employee contribution is a step rate formula equal to 0.875% of the portion of the salary below a ceiling plus 2.625% of the portion of the salary above this ceiling. This contribution is deducted monthly from the salary of the affiliates. The employer contribution is equal to 3 times the employee contribution.

2. POWERBEL

Personal contribution is determined based on a rate by level, equal to 0.6% of the remuneration that lower than a specific threshold, increased by 4.6% for the part of the remuneration above the threshold. This contribution is monthly deducted from the salary of the employee. Employer contribution is equal to 4 times the employee’s contribution.

In k€

31/12/2014 31/12/2013

Amount recognised in statement of comprehensive income 2,774 2,556

Expected contributions during the next period for DC plans 3,378 3,112

There were not changes in 2014 compared to 2013 with respect to the defined contribution plans.

3. PLAN ASSETS ALLOCATION

The plan assets are managed by a Luxembourg fund (Esperide) and divided into four investment areas, each with a specific risk profile:

A) Low risk : euro zone bonds as well as international bonds, both high quality.

B) Medium risk: the goal is to increase the traditional diversification generally arising from a mix of bonds and equity. Therefore, this zone invests in convertible bonds, real estate, high yield bonds, emerging debts, ...

C) High Risk: the aim is to capture the risk premium by investing in assets at risk like equity, private equity, listed real estate, ...

D) Dynamic Asset Allocation: the goal is to quickly adapt the portfolio structure to special events in order to limit losses in periods of stress.

For Enerbel, plan assets are allocated as follows:

• 40% Esperides Low Risk

• 12% Esperides Medium Risk

• 28% Esperides High Risk

• 20% Esperides Dynamic Asset Allocation

In Powerbel, the employees can chose among the following strategies and are given the possibility to change their strategy once a year:

• 50% Growth / 50% Defensive




NOTE 21 - EMPLOYEE BENEFITS - DEFINED CONTRIBUTION PLANS (next)

4. RISK ANALYSIS

Defined Contribution Plans (Enerbel and Powerbel) expose the employer to investment risk. The employee contributions are paid into a group insurance (Contassur S.A.- branch 21- deferred capital without refund) which grants a technical interest rate of 3.25% plus profit sharing.

Following article 24 of the WAPILPC, a minimum return guarantee of 3.75% must be realized on the employee contributions upon payment of the commitments. This guarantee falls under the responsibility of the employer. The current decrease in bond interest rates could urge the insurers to reduce their technical interest rate. Such a decision would increase the investment risk for the employer.

The employer contributions are paid into a Pension Fund (Powerbel or Enerbel) which offers no minimum return guarantee.

Following article 24 of the WAPILPC, a minimum return guarantee of 3.25% must be realized on the employer contributions upon payment of the commitments. This guarantee falls under the responsibility of the employer.

In order to compensate the current low interest rates on the markets, it is necessary to increase the risk exposure. However, this risk level has to be managed taking into account the age of the members. This is why the trustees of Powerbel propose to the members a new option to manage their assets. This option called “Life-Cycle” offers an evolution of the risk exposure from “Growth” to more “Defensive” throughout the member’s career.

5. ACCOUNTING POLICY CHOICE

The “Intrinsic Value” method is chosen. This method consists of calculating, for each member separately, the minimum guaranteed reserve (taking into account an interest rate of 3.75% for employee contributions and an interest rate of 3.25% for employer contributions) and the mathematical reserve, both at the financial reporting date. The guaranteed reserve is equal to the maximum between the minimum guaranteed reserve and the mathematical reserve. A deficit occurs when the guaranteed reserve is higher than the mathematical reserve. Each shortfall has to be covered by the employer and an accrual has to be booked in the consolidated financial statements.

The two main arguments in favour of this choice are as follows:

1) A strict application of the “Projected Unit Credit Method” (PUC Method), as currently prescribed by lAS 19, would require an assumption about the evolution of the minimum guaranteed return on future contributions in order to determine a best estimate of the projected benefits. If the best estimate of the expected rate of return is the currently applicable guaranteed rate of return, this assumption could be viewed as incompatible with the other assumptions in a period of low discount rate.

2) The application of the PUC method also requests that the benefits could be determined on a projected basis. Unfortunately, this is not the case since the return on contributions is equal to the maximum between the minimum guaranteed rate of return and the return realized by the fund. Further the minimum guaranteed return may also vary on legislative decision.

The situation at year-end 2014 of the two defined contribution plans is as follows

ORES POWERBEL (€) ENERBEL (€)

Total minimum guaranteed reserves 6,524,629.17 7,314,870.13

Total mathematical reserves 7,363,742.70 8,409,993.66

DIFFERENCE 839,113.53 1,095,123.53

As highlighted by the table above and confirmed by the insurer, the return at year-end 2014 was at least 3.25%. As such, no provision was recognised since there are no deficit.

The amount of the future expenses will depend on the evolution of the wages.

Note that in case of death of the agent prior to the retirement age, a death benefit is paid to his or her heirs and an annual pension will be paid to each child aged less than 25 years.


NOTE 22 – EMPLOYEE BENEFITS – DEFINED BENEFIT PLANS

Funded defined benefit plans:

Several defined benefit plans exist within Ores scrl and are governed by the parity commission of Gas & Electricity (CP 326). They are mainly intended for employees hired before 01/01/2002 and for executives and executive directors hired before 01/05/1999 with permanent contracts and benefiting from the Gas & Electricity status. The pension benefit which will be transferred to employees mainly depends on one hand on number of years and months of accomplished services under employment contract at the regular pension age even in case of anticipation. To these years of experience, an additional number of years of experience can be added up following the CCT and the 2007-2008 framework convention. On the other hand, it also depends on the salary of the agent at the retirement age. In case of death of the agent prior to the retirement age, the death capital will be transferred to its beneficiaries and an annuity will be allocated to each child under the age of 25. These commitments are mentioned under «Defined benefit obligation / Funded plans».

Unfunded defined benefit plans:

A system called “general expenses system” is mentioned under this section. This system, stopped since 01/01/1993, aimed at granting a life annuity amounting to 75% of the last salary for a complete career minus the paritary legal pension. In case of death, the annuity is 60% reversible in favour of the surviving spouse. For orphans, the annuity is set at 15% of the pension annuity or to 25% for orphans who lost mother and father (maximum 3 orphans). Since 01/01/2007, acquired rights in terms of retirement have been built up in Elgabel for a career going onwards as from that date. This section also comprises advantages granted by the group upon retirement of agents such as healthcare and tariff reductions.

In k€

Statement of financial position 31/12/2014 31/12/2013

Present value of the defined benefit obligations/Funded plans 221,606 220,523

Plan assets (355,859) (306,793)

Deficit / (surplus) (134,253) (86,270)

Present value of the other long term benefits/Funded plans 53,030 41,881

Plan assets of the other long term benefits (6,573) (7,084)

Deficit / (surplus) 46,457 34,797

Present value of the defined benefit obligations/Unfunded plan 234,935 189,254

Effect of the asset ceiling

Other

NET LIABILITY ARISING FROM DEFINED BENEFIT OBLIGATION 147,139 137,781

REIMBURSEMENT RIGHTS (2,591) (2,573)

In k€

Statement of comprehensive income 31/12/2014 31/12/2013

Service cost

Current service cost 8,512 10,069

Past service cost (including curtailments)(Gain)/loss from settlement 8,512 1,286

17,024 11,355

Cost of past services is linked to the impact of the change in the method of calculation for the agents that could benefit from the plan “59 years”. Indeed, following the increase in the retirement age and the conditions of anticipation reviewed by the Government, the plan was modified and foresees since 2014 the possibility for an agent to retire one year before the theoretical retirement date as defined in the assumptions, provided that several conditions of anticipation would be met, namely in terms of career seniority.


NOTE 22 – EMPLOYEE BENEFITS – DEFINED BENEFIT PLANS (next)

In k€

Net interest on the net defined benefit liability/(asset) 31/12/2014 31/12/2013

Interest cost on the defined benefit obligation 12,503 12,620

Interest income on plan assets (9,606) (7,492)

Interest income on reimbursement rights

Interest on the effect of the asset ceiling

2,897 5,128

Defined benefit cost recognized in profit or loss (positive = charge; negative = income) 19,921 16,483

In k€

Remeasurements of net defined benefit liability/(asset) recognised in other comprehensive income (OCI) 31/12/2014 31/12/2013

Actuarial (gains)/losses on defined benefit obligation arising from

i) changes in demographic assumptions 0 (15,230)

ii) changes in financial assumptions 63,338 (34,937)

iii) experience adjustments (11,288) (12,857)

iv) subtotal 52,050 (63,024)

i) Return on plan assets excluding interest income on plan assets (14,802) (2,715)

ii) Change in financial assumptions (8,208) 0

Change in the effect of the asset ceiling excluding interest on this effect

29,040 (65,739)

Defined benefit cost 48,961 (49,256)

The negative impact in OCI in 2014 is mainly due to:

1) The change in the discount rate from 3.05% in 2013 to 1.45% in 2014 (€ +75.6 million);

2) The decrease in the inflation rate by 0.25% in order to better reflect current economic situation (€ -10 million).

This is partially offset by the significant increase in our plan assets thanks to, among others, good performance achieved by our pension funds. Indeed, the rate of return was nearly 8% in 2014 compared to the estimate of 3.05% (€ +14.8 million).

In addition, the Group decided to revalue its plan assets related to the insurance contracts following the significant decrease of the discount rate in 2014 in order to comply with IAS 19 §115 (€ +8.2 million).



In k€

Movements in the present value of the defined benefit obligation were as as follows: 31/12/2014 31/12/2013

Opening balance 409,778 483,303

Current service cost 8,512 10,069

Interest cost 12,503 12,620

Contributions from plan participants 792 885

Actuarial (gains)/losses arising from

i) changes in demographic assumptions 0 (15,230)

ii) changes in financial assumptions 63,338 (34,937)

iii) experience adjustments (11,288) (12,857)

Past service cost 8,512 1,286

Benefits paid (35,606) (35,361)

Other

CLOSING BALANCE 456,541 409,778

In k€

Movements in the fair value of the plan assets were as as follows: 31/12/2014 31/12/2013

Opening balance 306,793 279,793

Interest income on plan assets 9,606 7,492

Return on plan assets excluding interest income on plan assets 14,802 2,715

Actuarial gaps 8,208 0

Contributions from employer 51,264 51,269

Contributions from plan participants 792 885

Benefits paid (35,606) (35,361)

CLOSING BALANCE 355,859 306,793

ACTUAL RETURN ON PLAN ASSETS 24,408 10,207



In k€

Principal actuarial assumptions used for the purpose of the actuarial valuations were as follows: 31/12/2014 31/12/2013

Discount rate 1.45% 3.05%

Future salary increases (outside inflation) 1.00% 0.75%

Future pension increases 0.00% 0.00%

Expected medical cost increase (outside inflation) 1.00% 1.00%

Increase of average cost of tariff reductions 1.75% 2.00%

Inflation rate 1.75% 2.00%

Average assumed retirement age 63 years 63 years

Mortality Table used for active employees MR - 5/FR MR - 5/FR

Mortality Table used for retirees MR/FR MR/FR

Life expectancy in years of a pensioner retiring at age 65:

For a Person aged 65 at closing date:

- Male 23 23

- Female 22 22

As no prospective mortality tables are used, no change occurs therefore in the life expectation of a pensioner retiring at the age of 65 in twenty years.

DEFINED BENEFIT OBLIGATION

Breakdown of defined benefit obligation by type of plan participants : 31/12/2014 31/12/2013

Active plan participants 279,771 250,833

Terminated plan participants with deferred benefit entitlements 5,073 4,764

Retired plan participants and beneficiaries 171,697 154,180

456,541 409,777


Breakdown of defined benefit obligation by type of benefits: 31/12/2014 31/12/2013

Retirement or death benefits 341,094 322,643

Other post-employment benefits (medical and tariff reductions) 115,447 87,134

456,541 409,777



FAIR VALUE OF PLAN ASSETS

Major categories of plan assets : 31/12/2014 31/12/2013

With a quoted market price in an active market 291,063 248,999

Shares (Eurozone) 56,614 45,606

Shares (Outside eurozone) 48,673 36,159

Government bonds (Eurozone) 16,313 13,434

Other bonds (Eurozone) 134,747 138,326

Other bonds (Outside eurozone) 34,716 15,474

With a no quoted market price in an active market 71,369 64,878

Cash and cash equivalents 2,748 5,022

Real property 14,970 0

Insurance contract 8,209 0

Other 45,442 59,856

362,432 313,877


Sensitivity analysis for each significant actuarial assumption on defined benefit obligation 31/12/2014 31/12/2013

Discount rate plus 0.50% (26,121) (16,432)

Salary increase plus 0.50% (outside inflation) 22,794 17,661

Medical cost increase plus 1% 14,463 9,056

Increase of average cost of tariff reductions plus 0.50% 5,137 1,516

Inflation plus 0.25% 11,456 7,786

1 year age correction to "male" mortality tables 3,873 2,991

1 year age correction to "female" mortality tables 6,217 4,917

31/12/2014 31/12/2013

Weighted average duration of the defined benefit obligation 8 8

Expected contributions during the next period for DB plans 3,224 17,039



Each year, the discount rate used to calculate the pension liabilities with regard to the financing and the minimum funding requirements is challenged with the expected return on assets, of which the investment policy is defined by the sponsor.

This expected return is obtained from the risk-free rate given by financial markets at the moment of the control, from risk premiums for each class of assets in the portfolio and from their corresponding volatility. If the expected return is lower than the discount rate, the latter is lowered.

A stress test is performed annually. This test verifies that the minimum funding requirements are covered to “shocks” with probabilities of occurrence of 0.5%.

The affiliates (mostly) contribute to the financing of the retirement benefits by paying a personal contribution of type “defined contribution” (step rate formula a%t1 + b%t2) deducted monthly from their salaries.

The annual balance of the defined benefit lump sum is financed by the employer by a recurrent allocation expressed as a percentage of the total payroll of the affiliates. This percentage is defined by the aggregate cost method and is reviewed annually. This method of financing consists to smooth future costs over the remaining period of the plan. The costs are estimated on projected bases (salary growth and inflation taken into account). The assumptions related to salary increase, inflation, employee turnover and age-term are defined on basis of historical statistics of the company. The mortality tables used are the ones corresponding to the observed experience within the financing vehicle. The discount rate is set up with regard to the investment strategy of the company. These assumptions are challenged on a regular basis.

Exceptional events (such as modification of the plan, change of assumptions, too short degree of coverage...) can eventually lead to outstanding payments from the sponsor.

In 2014, the discount rate significantly decreased from 3.05% to 1.45% following the decrease in the rate of return on 10-years high quality corporate bonds (AAA).

The average duration of defined benefit obligation is about 8 years. These plans are closed and the benefits are awarded in the form of lump sum (no annuities paid). This explains the relatively short duration.

Description of the risks linked to the defined benefit plans

The defined benefit plans expose the company to actuarial risks such as investment risk, interest rate risk, longevity risk and salary risk.



1. INVESTMENT RISK

The present value of the defined benefit plan liability is calculated using a discount rate determined to high quality corporate yields. If the return on plan asset is below this rate, it will create a plan deficit. Currently the plan has a relatively balanced investment presented as follows:

ELGABEL % PENSIOBEL %INSURANCE

COMPANIES % TOTAL %

Investments quoted in an active market 81.90 82.33 73.01 80.31

Shares (Eurozone) 18.17 20.96 2.78 15.62

Shares (Outside eurozone) 15.59 15.01 4.15 13.43

Government bonds (Eurozone) 2.40 2.31 13.87 4.50

Other bonds (Eurozone) 33.95 32.69 52.20 37.18

Other bonds (Outside eurozone) 11.79 11.35 0.00 9.58

Unquoted investments 18.10 17.67 26.99 19.69

Qualifying insurance contracts 0.00 0.00 12.32 2.27

Real property 4.29 4.13 3.51 4.13

Cash and cash equivalents 0.74 0.95 0.72 0.76

Other 13.07 12.59 10.44 12.54

TOTAL 100.00 100.00 100.00 100.00

Due to the long-term nature of the plan liabilities, the board of the pension fund considers it appropriate that a reasonable portion of the plan assets should be invested in equity securities to leverage the return generated by the fund.

2. INTEREST RISK

A decrease in the bond interest rate will increase the plan liability. However, this will be partially offset by an increase in the return on the plan’s debt investments.

3. LONGEVITY RISK

The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

A study has been conducted in 2013 in order to determine the mortality tables that fit the best the historical observation of the portfolio. The resulting mortality tables are the MR/FR tables for the pensioners and the MR (corrected with 5 years) / FR (without correction) for the active people.

4. SALARY RISK

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.


NOTE 23 – LEASES (LESSEE)

In k€

OPERATING LEASES 31/12/2014 31/12/2013

Payments recognised as an expense in the income statement

Mimimum lease payments 21,682 20,976

Sublease payments received (4,265) (3,994)

17,417 16,982

In k€

31/12/2014 31/12/2013

Maturity of outstanding commitments under non-cancellable operating leases with a term of more than one year

Within one year 6,425 4,473

>1 and <2 years 4,134 3,986

>2 and <5 years 5,220 6,567

>5 years 1,424 1,779

17,203 16,805

There are no liabilities recognised in respect of non-cancellable operating leases.

Lease payments mainly include:

1) The lease of office buildings for a total amount of € 3.4 million compared to € 3.6 million in 2013;

2) The lease of cars for executives and management for an amount of € 2.3 million compared to € 2.2 million in 2013;

3) The lease of IT hardware & software (PC, laptop, printer, licenses, ...) for an amount of € 7.2 million compared to € 7.0 million in 2013;

4) Fees paid for the access to injection stations and for the use of optical fibers for an amount of € 5.5 million compared to € 5.8 million in 2013.


NOTE 24 A - CURRENT TAXES

In k€

1. TAXES RECOGNIZED IN THE INCOME STATEMENT 31/12/2014 31/12/2013

Current income tax expense in respect of the period (1,986) (1,489)

Adjustments recognised in the current period in relation to the current tax of prior years 378 (276)

Tax payable on interests received 5,903 5,376

Tax payable on dividends declared 1,368 1,043

Current tax expense 5,663 4,654

Deferred tax expense (income) relating to changes in tax law (3,477) 0

Deferred tax expense (income) relating to origination and reversal of temporary differences

Deferred tax expense (income) (3,477) 0

TOTAL TAX IN THE INCOME STATEMENT 2,186 4,654 In k€

2. THE RECONCILIATION OF THE EFFECTIVE TAX RATE WITH THE THEORITICAL TAX RATE SHOULD BE SUMMARIZED BELOW: 31/12/2014 31/12/2013

Result before taxes 164,801 187,816

Tax rate applicable in Belgium 33.99% 33.99%

Theoretical tax to pay 56,016 63,839

Adjustments:

Specific taxation applicable to the DSO (27,071) (31,428)

Non-taxable IFRS result (28,945) (32,411)

Taxes on non-deductible expenses (1,986) (1,489)

Tax payable on interests received 5,903 5,376

Tax payable on dividends declared 1,368 1,043

Effect on differed tax due to a change in tax status of the DSO (3,477) 0

(54,208) (58,909)

Adjustments recognised in the current period in relation to the current tax of prior years 378 (276)

TOTAL TAX DURING THE PERIOD 2,186 4,654

AVERAGE EFFECTIVE RATE 1.33% 2.48%

The vote of the law by the Federal Parliament on 19 December 2014 and published in the Belgian Official Gazette on 29 December 2014 results in ORES Assets being subject to corporate income tax as from the fiscal year 2016 (2015 income).

At 31 December 2014, income tax is thus applicable to the company ORES scrl but not applicable to ORES Assets. ORES scrl has a result equal to nil as the company is working on behalf of ORES Assets and invoices at cost price without making any profit. As a result, income taxes that have been recognised are exclusively related to non-deductible expenses.

ORES Assets is not yet subject to corporate income tax but is still liable to withholding tax on the interest income. In addition, corporate taxes are due by ORES Assets on the total amount distributed as dividends to the private shareholder concerning the gas activity only. These taxes are recognised in the year in which the dividend is definitively approved by the shareholder’s meeting.

As in 2013, no deferred tax was recognised in 2014 on the profit of the period since ORES Assets was not yet subject to income tax but subject to a 15.45% tax on the total amount of dividends distributed to the private shareholder concerning the gas activity only.

The table below details the corporate income tax expenses that the Group would have recognised for both periods if it had been subject to income tax.


NOTE 24 A - CURRENT TAXES (next)

In k€

3. INCOME TAXES RECOGNISED IN OTHER COMPREHENSIVE INCOME SHOULD BE DETAILED BELOW: 31/12/2014 31/12/2013

Property revaluations 205,327 0

(Profit) on fair value of hedging instruments entered into for cash flow hedges (14,895) 0

Deferred tax (Profit) on DB pension plans (6,373) 0

184,059 0

TOTAL INCOME TAX IN OTHER COMPREHENSIVE INCOME 184,059 0

Following the modification in the tax status of ORES Assets that will become subject to income tax as from 1 January 2015, temporary differences arising from assets and liabilities whose changes are recognised in other comprehensive income have also been recognised in this caption as prescribed by IAS 12 – Income Taxes.

This is particularly the case for the hedging IRS at year-end 2014, on which a deferred tax asset of € 14.9 million has been recognised, or for the actuarial differences on defined benefits plans on which a deferred tax asset of € 6.4 million has been recognised.

The deferred tax expense of € 205.3 million recognised in other comprehensive income relates to the revaluation from 2001 and 2002 for which the residual value at 31 December is € 604 million in the financial statements of ORES Assets (see also accounting policies A.6.). As prescribed under Belgian GAAP, the corresponding liability was recognised at that time for the same amount in equity.

At the date of transition to IFRS, the exemption prescribed by IFRS 1 (see appendix D6 and D8B) that allows to retain the carrying amount of fixed assets determined under Belgian GAAP as deemed cost under IFRS was applied (see also the note on transition to IFRS in the IFRS financial statements of the Group for the year-end 2012). On this basis, the revaluation was kept in the IFRS consolidated financial statement, although the revaluation model is not an accounting policy applied by the Group in its financial statements after the date of transition to IFRS.

Since the depreciation charge linked to the revaluation is not tax deductible under Belgian law, a deferred tax liability has been recognised for an amount of € 205.3 million (€ 604 million * 33.99%) in other comprehensive income at 31 December 2014, based on SIC 25 – Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders and IAS 12 – Income Taxes.

Indeed, SIC 25 §4 prescribed: “The current and deferred tax consequences of a change in tax status shall be included in profit or loss for the period, unless those consequences relate to transactions and events that result, in the same or a different period, in a direct credit or charge to the recognised amount of equity or in amounts recognised in other comprehensive income. (…) Those tax consequences that relate to amounts recognised in other comprehensive income shall be recognised in other comprehensive income”.

IAS 12 §62(a) mentions fixed assets revaluations as an example that could trigger deferred tax to be recognised in other comprehensive income.

Consequently, the Group decided to recognise the deferred tax expense related to the fixed assets revaluation in other comprehensive income.


NOTE 24 B – DEFERRED TAXES

In k€

ACTIFS PASSIFS NET1. OVERVIEW OF DEFERRED TAX ASSETS

AND LIABILITIES BY TYPE OF TEMPORARY DIFFERENCE:

31/12/2014 31/12/2013 31/12/2014 31/12/2013 31/12/2014 31/12/2013

Intangible assets (2,522) (2,522)

Property, plant and equipment (63,909) (63,909)

Investments in associates (1) (1)

Other current assets 27,794 27,794

Retained earnings (205,327) (205,327)

Provisions for employee benefits 50,013 50,013

Other provisions (344) (344)

Other non-current liabilities 13,747 13,747

Other payables (261) (261)

Other current liabilities 228 228

Total temporary differences 91,782 0 (272,364) 0 (180,582) 0

Deferred tax assets/(liabilities) 91,782 0 (272,364) 0 (180,582) 0

Offsetting of tax (1) (91,782) 91,782 0

TOTAL, NET 0 0 (180,582) 0 (180,582) 0

(1) As prescribed by IAS 12 – Income Taxes, deferred tax assets and liabilities must be offset under certain conditions if they relate to income taxes due to the same tax authority.

In k€

2. 2. MOVEMENT OF DEFERRED TAX BALANCES

OPE

NIN

G

BA

LAN

CE

REC

OG

NIS

ED

IN IN

CO

ME

ST

ATEM

ENT

RE

CO

GN

ISE

D

IN O

THE

R

CO

MPR

EH

EN

-SI

VE

INC

OM

E

RE

CO

GN

ISE

D

DIR

EC

TLY

IN

EQ

UIT

Y

CLO

SIN

G

BA

LAN

CE

Temporary differences

Intangible assets (2,522) (2,522)

Property, plant and equipment (63,909) (63,909)

Investments in associates (1) (1)

Other current assets 27,794 27,794

Retained earnings (205,327) (205,327)

Provisions for employee benefits 43,640 6,373 50,013

Other provisions (344) (344)

Other non-current liabilities 13,747 13,747

Other payables (261) (261)

Other current liabilities (920) 1,148 228

0 3,477 (184,059) 0 (180,582)

Tax credits and tax losses carried forward

Tax credits 0

Tax losses carried forward 0

Total 0

TOTAL, NET 0 3,477 (184,059) 0 (180,582)

In k€

3. RECOGNIZED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS FOLLOWS 31/12/2014 31/12/2013

Deferred tax assets

Deferred tax liabilities (180,582)

(180,582) 0


NOTE 25 - SUBSIDIARIES

OVERVIEW OF SUBSIDIARIES COUNTRY OF

INCORPORATION

PROPORTION OF OWNERSHIP

INTEREST

PROPORTION OF VOTING

POWER HELDREPORTING

PERIODPRINCIPAL

ACTIVITY

ORES scrl Belgium 99.68% 99.68% DecemberEnergy network

operator

Ores’s shareholding is made out of the following “intercommunales”:

% PARTICIPATION NUMBER OF SHARES

ORES Assets 99.68% 2452

RESA 0.04% 1

IPF IDEFIN 0.04% 1

IPF IPFH 0.04% 1

IPF FINEST 0.04% 1

IPF SOFILUX 0.04% 1

IPF FINIMO 0.04% 1

IPF SEDIFIN 0.04% 1

IPF IEG 0.04% 1

100.00% 2,460

In 2013, ORES Assets sold 7 social shares of ORES scrl to financing associations of municipalities («intercommunales pures de financement») and one share to RESA (formerly Tecteo). This resulted in the recognition of non-controlling interests in the consolidated financial statements for an amount of € 31K.

There are no entities with more then 50% voting power but which are not consolidated.

There are no entities with less then 50% voting power and which are consolidated.

There are no significant restrictions on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or repayments of loans and advances.


NOTE 26 - INVESTMENTS IN ASSOCIATES

OVERVIEW OF ASSOCIATES

COUNTRY OF INCORPORA-

TION

PROPORTION OF OWNERSHIP

INTEREST

PROPORTION OF VOTING POWER

HELD

FAIR VALUE OF THE INVESTMENT IN

ASSOCIATES(1)PRINCIPAL

ACTIVITY

Index'is Belgium 30% 30% N/A

Metering IT support to ORES economical group and EANDIS economical

group.

Atrias Belgium 16.67% (2) 16.67% (2) N/A

Metering IT support to ORES economical group,

EANDIS economical group and other DSO’s in Belgium

(1) For which a disclosed quoted price is available (2) The capital and voting right percentage owned in Atrias was 25% in 2011.

The Ores group has a significant influence on Atrias through its presence at the board of directors but also because the investments and budget decisions are taken unanimously.

In case of deadlock, a three quarters majority is required. In k€

MOVEMENTS IN THE INVESTMENTS IN ASSOCIATES 31/12/2014 31/12/2013

Balance at 1 January 989 989

Acquisition of investment

Share of (loss)/profit

Disposal of investment

Balance at 31 December 989 989

Goodwill included in carrying amount of investments in associates 0 0


NOTE 26 - INVESTMENTS IN ASSOCIATES (next)

SUMMARISED FINANCIAL INFORMATION In k€

INDEX’IS ATRIAS TOTAL

31/12/2014 31/12/2013 31/12/2014 31/12/2013 31/12/2014 31/12/2013

Sales and other operating revenues 23,294 23,584 5,823 4,889 29,117 28,473

Profit (loss) before interest and taxation 40 90 55 30 95 120

Finance costs and other finance expenses (15) (15) (22) (1) (37) (14)

Profit (loss) before taxation 25 75 33 31 58 106

Taxation (25) (75) (33) (31) (58) (106)

Profit (loss) for the year 0 0 0 0 0 0

Profit (loss) attributable to owners of the company

In k€

INDEX’IS ATRIAS TOTAL

31/12/2014 31/12/2013 31/12/2014 31/12/2013 31/12/2014 31/12/2013

Non-current assets 2,269 3,641 5,147 2,647 7,416 6,288

Current Assets 8,125 8,404 7,451 1,934 15,576 10,338

Total Assets 10,394 12,045 12,598 4,581 22,992 16,626

Non-current liabilities 0 0

Current liabilities 7,107 8,757 12,580 4,563 19,687 13,320

Total Liabilities 7,107 8,757 12,580 4,563 19,687 13,320

Net assets 3,287 3,288 18 18 3,305 3,306

Group's share of net assets 986 986 3 3 989 989

Loans made by group companies to associates 1,020 1,470 1,652 205 2,672 1,675


NOTE 27 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Following hierarchy used by the entity for determining the fair value of financial instruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

1. ANALYSIS OF FINANCIAL INSTRUMENTS RECORDED AT FAIR VALUE BY LEVEL OF THE FAIR VALUE HIERARCHY In k€

31/12/2014 31/12/2013

LEV

EL

1

LEV

EL

2

LEV

EL

3

TOTA

L FA

IR

VALU

ES

LEV

EL

1

LEV

EL

2

LEV

EL

3

TOTA

L FA

IR

VALU

ES

Financial assets

Unlisted equity instruments 841 841 425 425

Trade receivables 158,137 158,137 197,726 197,726

Other receivables 49,215 49,215 52,180 52,180

TOTAL FINANCIAL ASSETS 0 208,193 0 208,193 0 250,331 0 250,331

Financial liabilities

Trade payables 144,204 144,204 149,263 149,263

Other payables 61,900 61,900 59,589 59,589

Interest rate swaps 43,823 43,823 45,694 45,694

TOTAL FINANCIAL LIABILITIES 0 249,927 0 249,927 254,546 0 254,546

Description of the methods used for determining the fair value of derivatives

1) For derivative financial instruments

Fair value is determined based on the estimated future cash flows and the interest rate curves.

2) For the trade receivables and trade payables, as well as other receivables and payables

The fair value is presumed equal to the book value.

See note 17 for an analysis of the evolution of the fair value of the IRS.


NOTE 28 – DERIVATIVE INSTRUMENTS

In k€

POSITIVE FAIR VALUES

NEGATIVE FAIR VALUES

OVERVIEW OF DERIVATIVE INSTRUMENTS 31/12/2014 31/12/2013 31/12/2014 31/12/2013

Derivative instruments used in cash flow hedges

Interest rate swaps 43,823 45,694

0 0 43,823 45,694


of which: current 3,377 2,352

HEDGING POLICY WITHIN THE GROUP

A change in interest rates has an impact on the financial expenses. To reduce this risk to a minimum, the Group applies a policy of funding which seeks to achieve an optimal balance between fixed and floating interest rates. In addition, hedging instruments are used to hedge the uncertain evolutions. The funding policy takes into account the difference in maturity of the loans and life of the assets. These three points (interest rate, maturity of the loans and use of hedging derivatives) have been decided by the governing bodies of ORES Assets and ORES scrl, which helped to determine the necessary financial policy of proactive debt management.

In order to mitigate the interest rate risk, the Group uses derivative financial instruments such as interest rate swaps (short-term rates to long-term rates). Within the Group, debt management and market data are carefully monitored. No derivatives are used for speculative purposes.

Despite another decrease in the average Euribor rates in 2014, from 0.36% in 2013 to 0.15% in 2014, the evolution of the fair value of the swaps remains positive (€ +1.9 million). This is explained by the significant decrease in the total notional amount of the swaps in 2014 (€ -147 million), due to the fact that the swaps with a highly negative fair value matured in 2014 and have not been renewed, and the difference between the average Euribor rate (see above) and the average rate of the IRS (0.72% at year-end 2014 compared to 1.75% at year-end 2013) is weaker compared to last year (difference of 0.57% at year-end 2014 compared to 1.39% at year-end 2013). We refer to the sensitivity analysis in note 31 for more information.

Several swaps which will mature in 2015 were reclassified as other current financial liabilities for € 3.4 million.


NOTE 29 - RELATED PARTIES

Transactions mentioned here below are those performed with all related parties (exception made of the consolidated related parties) including:

1) Majority shareholders and all companies directly or indirectly owned by them;

2) Shareholders with a significant influence;

3) Associates or joints ventures;

4) Group’s key personnel;

5) Other significant related parties.

In k€

31/12/2014AMOUNTS

RECEIVABLEAMOUNTS PAYABLE

STATEMENT OF COMPREHENSIVE INCOME

NAME OF RELATED PARTY TYPE OF RELATIONSHIP

AFT

ER

ON

E Y

EA

R

WIT

HIN

ON

E Y

EA

R

AFT

ER

ON

E Y

EA

R

WIT

HIN

ON

E Y

EA

R

PER

SON

AL

AN

D

RE

AL

GU

AR

AN

TEE

S

OTH

ER

SIG

NIF

ICA

NT

FIN

AN

CIA

L C

OM

MIT

TME

NTS

TUR

NO

VE

R

OTH

ER

OPE

RA

TIN

G

INC

OM

E

CO

ST O

F SA

LES

OTH

ER

OPE

RA

TIN

G

EX

PEN

SES

FIN

AN

CIA

L IN

CO

ME

Electrabel S.A - SupplierIT services

163 (3,014)

Electrabel S.A - SupplierLeases (ORES lessee)

(69)

Electrabel S.A - SupplierInsurance services

230 (4,473)

Electrabel S.A - SupplierElectricity purchase

4,399 (44,381) (1,988)

Electrabel S.A - SupplierDiverse services

(1,382)

Electrabel S.A - CustomerTransit Fees

39,448 509,150 266

Electrabel S.A - CustomerLeases (ORES lessor)

427 636

COFELY - Fabricom S.A.Subcontractor services

607 (16,060)

Indexis - CustomerAccounting services

27 270

Indexis - SupplierMetering IT services

1,307 (8,803)

IndexisShareholder funding

1,020 2,580

AtriasShareholder funding

1,652 399

Atrias - CustomerAccounting services

13 128

Atrias - SupplierMetering IT services

(504) (1,317)

LABORELECConsultancy service

574 (2,200)

ContassurHR services

65 (245)

GDF SUEZInsurance services

(261)

N'ALLOCall center

854 (6,192)

IPFHRoad charges

(14,435)

TRACTEBELConsultancy service

18 (23)

2,672 39,915 0 7,713 0 2,979 509,150 1,300 (58,816) (46,027) 0


NOTE 29 - RELATED PARTIES (next)

In k€

AMOUNTS RECEIVABLE

AMOUNTS PAYABLE

STATEMENT OF COMPREHENSIVE INCOME

31/12/2013

NAME OF RELATED PARTY TYPE OF RELATIONSHIP

AFT

ER

ON

E Y

EA

R

WIT

HIN

ON

E Y

EA

R

AFT

ER

ON

E Y

EA

R

WIT

HIN

ON

E Y

EA

R

PER

SON

AL

AN

D R

EA

L G

UA

RA

NTE

ES

OTH

ER

SIG

NIF

ICA

NT

FIN

AN

CIA

L C

OM

MIT

TME

NTS

TUR

NO

VE

R

OTH

ER

OPE

RA

TIN

G

INC

OM

E

CO

ST O

F SA

LES

OTH

ER

OPE

RA

TIN

G

EX

PEN

SES

FIN

AN

CIA

L IN

CO

ME

Electrabel S.A - SupplierIT services

2,985 (12,205)

Electrabel S.A - SupplierLeases (ORES lessee)

(750)

Electrabel S.A - Supplier Insurance services

(4,359)

Electrabel S.A - Supplier Electricity purchase

10,328 (20,670) (5,018)

Electrabel S.A - Customer Transit Fees

44,822 658,078

Electrabel S.A - Customer Leases (ORES lessor)

572 724

COFELY - Fabricom S.A. Subcontractor services

17 1,590 152 81 (14,891)

Indexis - Customer Accounting services

27 267

Indexis - Supplier Metering IT services

667 (5,979)

IndexisShareholder funding

1,470 2,130 11

AtriasShareholder funding

205 1,846 1

Atrias - CustomerAccounting services

13 130

Atrias - SupplierMetering IT services

143 (1,001)

LABORELECConsultancy service

239 (2,269)

ContassurHR services

64 (237)

GDF SUEZInsurance services

(292)

N'ALLOCall center

902 (6,065)

IDEFIN Road charges

(5,483)

IPFHRoad charges

(9,973)

SITASubcontracting waste

25 (359)

TRACTEBELConsultancy service

43 (56)

1,675 45,451 0 16,986 0 3,976 658,230 1,202 (36,126) (53,481) 12

Regarding bank borrowings, it is important to note that Walloon municipalities and the private shareholder have provided guarantees for some borrowings for a total amount of € 758.4 million or 39.73% of the total bank financial debt (compared to € 816 million in 2013, or 42.13% of the total bank financial debt).


NOTE 29 - RELATED PARTIES (next)

In k€

EMPLOYEE BENEFITS TO KEY MANAGEMENT PERSONNEL 31/12/2014 31/12/2013

Short term employee benefits 1,676 2,010

Post employment benefits

Present value defined benefit obligation 3,104 2,468

Net period pension cost 120 99

Termination benefits

Defined Contribution Plans

Other long-term benefits

Present value defined benefit obligation 371 444

Net period pension cost 12 15

5,283 5,036

The key management personnel is composed of the members of the Boards of Directors of ORES scrl and of the members of the Executive Committee of ORES scrl.


NOTE 30 – EVENTS AFTER THE REPORTING PERIOD

In k€

ESTIMATED FINANCIAL IMPACT

NATURESTATEMENT OF FINANCIAL

POSITIONSTATEMENT OF

COMPREHENSIVE INCOME

Proposed dividend to the AGM in 2015 60,083

60,083 0

At the beginning of 2015, two significant financial transactions were concluded. Indeed, two private investments for an amount of € 100 million each were respectively concluded on 26/01/2015 and 03/02/2015, thereby enabling the Group to cover its financial needs for the year 2015.


NOTE 31 – MANAGEMENT OF FINANCIAL RISKS

1. CREDIT RISK

The credit risk is defined as being “the risk resulting from the uncertainty created by the counterparties’ or clients’ possibility or will to fulfil their obligations. A risk therefore exists for the company whenever it puts itself in a position where it expects to receive funds from a bank, from a client or from a market counterparty”.

The credit risk is the risk that the debtor does not fulfil its initial obligation to reimburse a “credit”. Its components are:

1) The counterparty risk: risk that a counterparty (part of a market transaction) does not fulfil its obligations towards the company. It is a debtor’s risk of default over which the company holds a debt or an assimilated off balance sheet commitment.

2) The liquidity risk: appears whenever the counterparty finds itself in an illiquid position (temporary or structural) => risk of non-payment.

3) The risk linked to the activity or to the structure of the counterparty: for example, the risk that a decrease in turnover would deteriorate the profitability which would in turn deteriorate the liquidity in case of a lasting decrease. Indeed, a company suffering from financial difficulties will prioritise its obligations, it will give a secondary position to its creditors and honour its commitments later.

4) The sector risk: risk related to the business sector of activities.

5) Financial risk: risk related to macroeconomic financial crisis (devaluation, rates revaluation).

6) Political risk: risk related to the possibility that a change in laws or regulations would reduce the expected rate of return.

GENERAL DESCRIPTION OF THE CREDIT RISK MANAGEMENT:

The group deals with credit risk in diverse ways. Concerning the treasury and investments, the group’s excess cash is either deposited on financial institutions accounts or invested in different diversified obligations issued by companies fulfilling strict selection criteria. Alternatively, it can be invested through placements rights in financial instruments fulfilling either strict capital protection or diversification criteria (savings account, term deposits and monetary funds - treasury sicav AAA).

Concerning the trade receivables, a distinction should be made between:

• Receivables related to transit fees due by energy suppliers (€ 118 million in 2014 compared to € 136 million in 2013). => risk concentration as 2 clients represent 72,5% of the turnover on transit fees (2013: 74,5%) – see note on segment reporting

Strategy: obtain bank guarantees and balance sheet analysis before determining the terms of payment.

• Receivables related to public service obligations (energy supply) and various work (€ 59 million in 2014 compared to € 76 million in 2013). => decreasing due to the write-down of a significant amount of trade receivables on protected customers (see note 12 on trade receivables)

Strategy: Strategy: the Group uses external companies since 2011 in order to recover bad debts. One of these companies guarantees an average recovery rate of around 40% on the energy activity and another company guarantees an average recovery rate of around 33% on the receivables related to works activity. Write downs are recognised on the non-guaranteed part of impaired receivables.

In 2013, one of these companies has lowered its recoverability rate (-25%) following the difficulties to collect certain receivables, thereby leading to an increase of write downs during the year.


NOTE 31 – MANAGEMENT OF FINANCIAL RISKS (next)

In k€

MAXIMUM EXPOSURE TO CREDIT RISK 31/12/2014 31/12/2013

Trade receivables 207,352 249,906

Financial assets available for sale 841 425

Cash and cash equivalents 128,001 209,412

336,194 459,743

2. LIQUIDITY RISK

The liquidity risk is the risk that an entity faces difficulties to fulfil its obligations related to financial instruments.

GENERAL DESCRIPTION OF THE LIQUIDITY RISK MANAGEMENT:

The liquidity risk is related to the group’s necessity to obtain the external funding it needs to realise its investments program and to re-finance its existing financial debts amongst other things.

The financial policy based on covering the financing needs over several periods, diversifying the funding sources and maintaining cash surplus enable the group to limit its liquidity risk.

The group has put in place a funding strategy over several years, e.g. via the issue of a € 350 million bond in October 2012, and € 80 million in July 2014, in order to cover all funding needs for 2012, 2013, 2014 and a part of 2015.

ORES scrl established a treasury bills program at the beginning of 2011 with the guarantee of ORES Assets, amounting to € 250 million with a duration of 10 years. Since 2012, the documentation of this program was adapted to enable ORES scrl to issue treasury bills having a duration of more than a year. At 31st December 2014, the total issued in this context amounted to € 189 million.

In addition to this progam, ORES Assets granted another guarantee to ORES scrl for an amount of € 1,352.5 million in order to ensure the sustainability of its financial policy. This was used in the context of the bon issue of € 350 million in 2012, the bond issue of € 80 million in 2014 and for the renewal of credit lines for € 100 million at year-end 2014. Let’s note also that at the beginning of 2015, trough this guarantee, two news private investments were made for an amount of €100 million each to cover the financial needs of the year 2015.

The Group’s liquidity is ensured through the upholding of confirmed credit facilities. The Group has € 100 million of confirmed and unused credit lines at its disposal. They cover about 40% of the annual funding needs of the group.

Regarding the upholding of cash surplus, the Group’s cash position amounts to € 128 million on 31 December 2014 (2013: € 209 million) - See note 14. The breakdown of credit lines contracted by the Group is detailed in note 16.



MATURITY ANALYSIS (BASED ON UNDISCOUNTED FUTURE FINANCIAL FLOWS)

31/12/2014CARRYING

AMOUNT < 1 YEAR>1 AND

<3 YEAR>3 AND

<5 YEARS>5 AND

<15 YEARS >15 YEARS

NO MATURITY

DATE TOTAL

Trade and other receivables 207,352 207,352 207,352

Financial assets available for sale 841 841 841

cash and cash equivalent 128,001 128,001 128,001

Total assets 336,194 335,353 0 0 0 0 841 336,194

Derivative financial liabilities 43,823 15,773 18,341 8,457 42,571

Borrowings 1,909,077 220,301 349,398 314,276 1,256,405 126,641 2,267,021

Other financial liabilities 0

Trade and other payables 206,104 206,104 206,104

Total liabilities 2,159,004 442,177 367,739 322,733 1,256,405 126,641 0 2,515,696

LIQUIDITY RISK TOTAL (1,822,809) (106,824) (367,739) (322,733) (1,256,405) (126,641) 841 (2,179,502)



MATURITY ANALYSIS (BASED ON UNDISCOUNTED FUTURE FINANCIAL FLOWS)

31/12/2013CARRYING

AMOUNT < 1 YEAR>1 AND

<3 YEAR>3 AND

<5 YEARS>5 AND

<15 YEARS >15 YEARS

NO MATURITY

DATE TOTAL

Trade and other receivables 249,906 249,906 249,906

Financial assets available for sale 425 425 425

Cash and cash equivalent 209,412 209,412 209,412

Total assets 459,743 459,318 0 0 0 0 425 459,743

Derivative financial liabilities 45,694 17,889 20,934 5,992 1,510 46,325

Borrowings 1,936,787 160,041 379,523 354,372 1,446,842 33,593 2,374,371

Other financial liabilities 0

Trade and other payables 208,852 208,852 208,852

Total liabilities 2,191,333 386,782 400,457 360,364 1,448,352 33,593 0 2,629,548

LIQUIDITY RISK TOTAL (1,731,590) 72,536 (400,457) (360,364) (1,448,352) (33,593) 425 (2,169,805)

3. MARKET RISK

The market risk is the risk that the fair value or the future cash flows from a financial investment fluctuates due to market prices variations. The market risk comprises three types of risks:

• Exchange rate (exchange rate risk) - not applicable to the Group;

• Market interest rate (interest rate risk);

• Market price (i.e. shares prices, commodities prices) - not applicable to the Group.

The Group is exposed through its activities mainly to the financial risks associated with changes in interest rates. Indeed, the price risk associated with the SICAV, considered as cash equivalents, is not significant.

INTEREST RATE RISK

To reduce the interest rate risks, the Group has established a policy that aims to balance the interest rates of the debt between fixed and floating rates. To manage the volatility of the interest rate, the Group uses hedging instruments (IRS, cap or structured debt) depending the market situation. The value of those hedging instruments may vary depending on the evolution of the interest rates. The portfolio is managed centrally at Group level and is reviewed periodically.



Sensitivity analysis

METHODS AND ASSUMPTIONS USED IN THE PREPARATION OF THE SENSITIVITY ANALYSIS

The interest rate to use before any change in margin is calculated as follows:

We use the latest rate that prevails on the last working day of the period (31/12) and we calculate the average for the Euribor rates (Euribor 1, 3, 6, 12 months) and for the IRS (for a period of 1 to 30 years). At 31st December 2014, the average Euribor rate is 0.15% (0.36% in 2013) and the average rate on IRS is 0.71% (1.75% in 2013).

Based on these averages, we recalculate the financial flows as at 01/01/N+1.

Then we simulate the impact of an increase of 50 basis points of the rate calculated below. We do the same by simulating the impact of a decrease of 50 basis points in the yield curve calculated below.

THE IMPACT IN EACH COLUMN IS MEASURED AT 2 LEVELS:

1) Impact on result before tax (for all instruments): this column represents the difference between the simulated financial charges compared to the financial charges calculated based on the average rate at the end of the reporting period (positive = gain; negative = loss).

2) On equity: this column represents the difference between the book value calculated at the end of the reporting period based on the average rate compared to the simulated book value (outstanding capital or market value – positive = gain; negative = loss).

+ 50 BASIS POINTS - 50 BASIS POINTS

31/12/2014IMPACT ON PROFIT

BEFORE TAX IMPACT ON EQUITYIMPACT ON PROFIT

BEFORE TAX IMPACT ON EQUITY

Debt (5,277) 1,120

IRS 3,429 8,242 (947) (1,418)

(1,848) 8,242 173 (1,418)

+ 50 BASIS POINTS - 50 BASIS POINTS

31/12/2013IMPACT ON PROFIT

BEFORE TAX IMPACT ON EQUITYIMPACT ON PROFIT

BEFORE TAX IMPACT ON EQUITY

Debt (8,613) 511

IRS 5,416 13,130 (962) (38,936)

(3,197) 13,130 (451) (38,936)

An increase of 50 basis points would lower our result before tax by € 1.8 million but would also raise our equity by € 8.2 million. A decrease of 50 basis points would increase our result before tax by € 0.2 million but would decrease our equity by € 1.4 million.



4. CAPITAL RISK MANAGEMENT

General description of how capital risk is managed

The Group share capital consists of the capital of ORES Assets scrl. In 2012, it was represented by the eight Walloon DSO’s: IDEG scrl, I.E.H. scrl, I.G.H. scrl, Interest scrl, Interlux scrl, Intermosane scrl, Sedilec scrl and Simogel scrl that merged on 31st December 2013 to establish ORES Assets scrl. This merger was effective with retroactive effect as from 01 January 2013 from an accounting point of view.

The capital of ORES Assets is composed of a fixed part (fully subscribed, paid and fixed at € 148,800) and a variable part. The fixed part of the capital is represented by shares A while the variable part is represented by shares A & shares R. Shares A include voting right and right to dividends whereas shares R grant their holder with a priority right to dividends, capped and recoverable, without voting right.

The decision to increase or reduce the fixed part of the capital must be validated by the Shareholders’ meeting. This part of the capital varies depending on the admission or exclusion of shareholders and other increases or reductions of variable capital. The variable part may be increased or reduced by a resolution of the Board of directors and does not require a modifications of the bylaws, but the reimbursement of shares A and R requires the approval of the Shareholders’ meeting. In case of a capital increase, the new shares will be offered for subscription to the shareholders in proportion to their participation in the share capital.

An association of municipalities (“intercommunale”) must have at least two municipalities as shareholders. Any other private or public legal entity may enter in the shareholding of an association of municipalities.

To be admitted as a shareholder of ORES scrl, certain conditions must be met. The bylaws require that the shareholder must

(i) be approved by the Board;

(ii) subscribe or acquire at least one part of the DSO and fully pay the subscription, which implies the acceptance of the social bylaws, the shareholders agreement and, if applicable, internal regulations.

ORES Assets is a so-called “mixed” association of municipalities because its capital is held, for the major part, by municipalities that are all located in the Walloon region (except one), directly or indirectly via a financing association of municipalities (“intercommunale pure de financement”), and by a private shareholder (currently Electrabel) for the left part. 75% of the shares A are held by municipalities and by 7 financing associations of municipalities and 25% are held by Electrabel. Shares R are exclusively held by the financing associations of municipalities or some municipalities.

The Group shareholding can be summarised as follows:

Municipalities and financing associations of municipalities (“intercommunales pures de financement”)

75%

Private shareholder (Electrabel SA) 25%

As from 1st January 2019 and until 30 June 2019, Electrabel has a put option on its own shares A, enabling a full exit of the Group in case the option is exercised. Public shareholders will then have an obligation to buy the related shares A or they can cease this obligation to a designated third parties.

Please note that at the end of 2014, a draft agreement was approved by both the 7 financing associations of municipalities and Electrabel, confirming the exit of the private shareholder at 31st December 2016 instead of 2019 as originally planned.

The regulatory environment in which the Group operates is described in note 3.A.15 in the accounting policies. The rate of return of the fair margin determined by law particularly depends particularly on the ratio equity of ORES Assets over Regulated Asset Base (RAB). In its equity management, it is mentioned in the bylaws of ORES Assets to takes into account a 33% ratio of equity to RAB. This is also recommended by the regulator in its tariffs guidelines. A 30% equity ratio compared to total balance sheet is also written in the bylaws of ORES Assets.


3. Accounting policies ORES Assets scrl

A. Significant accounting policies

The significant accounting policies used by the Group in the preparation of its consolidated financial statements are described below.

A.1. BASIS OF PREPARATION

Statement of compliance

The consolidated financial statements include the Group consolidated financial statements for the year ended 31 December 2014. The Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments that are measured at their fair values

Functional and presentation currency

The consolidated financial statements are expressed in thousands Euros (€). Euro is the functional currency (currency of the primary economic environment in which the entity operates) used within the Group.

A.2. NEW, REVISED AND AMENDED STANDARDS AND INTERPRETATIONS

The Group has applied the standards and interpretations applicable to the accounting period ended 31 December 2014.

New Standards and interpretations applicable for the annual period beginning on 1 January 2014.

• IFRS 10 Consolidated Financial Statements (applicable for annual periods beginning on or after 1 January 2014)

• IFRS 11 Joint Arrangements (applicable for annual periods beginning on or after 1 January 2014)

• IFRS 12 Disclosures of Interests in Other Entities (applicable for annual periods beginning on or after 1 January 2014)

• IAS 27 Separate Financial Statements (applicable for annual periods beginning on or after 1 January 2014)

• IAS 28 Investments in Associates and Joint Ventures (applicable for annual periods beginning on or after 1 January 2014)

• Amendments to IFRS 10, IFRS 12 and IAS 27 – Consolidated Financial Statements and Disclosure of Interests in Other Entities: Investment Entities (applicable for annual periods beginning on or after 1 January 2014)

• Amendments to IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (applicable for annual periods beginning on or after 1 January 2014)

• Amendments to IAS 36 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Asset (applicable for annual periods beginning on or after 1 January 2014)

• Amendments to IAS 39 Financial Instruments – Novation of Derivatives and Continuation of Hedge Accounting (applicable for annual periods beginning on or after 1 January 2014)

• IFRIC 21 Levies (applicable for annual periods beginning on or after 17 June 2014)


Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2014

• IFRS 9 Financial Instruments and subsequent amendments (applicable for annual periods beginning on or after 1 January 2018, but not yet endorsed in EU)

• IFRS 14 Regulatory Deferral Accounts (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU)

• IFRS 15 Revenue from Contracts with Customers (applicable for annual periods beginning on or after 1 January 2017, but not yet endorsed in EU)

• Improvements to IFRS (2010-2012) (applicable for annual periods beginning on or after 1 February 2015)

• Improvements to IFRS (2011-2013) (applicable for annual periods beginning on or after 1 January 2015)

• Improvements to IFRS (2012-2014) (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU)

• Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and Amortisation (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU)

• Amendments to IAS 19 Defined Benefit Plans – Employee Contributions (applicable for annual periods beginning on or after 1 February 2015)

• Amendments to IAS 27 Equity Method in Separate Financial Statements (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU)

• Amendments to IAS 1 Disclosure Initiative (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU)

The Group does not anticipate the application of any new standard or interpretation published but not yet applicable.

According to the Group, the implementation of the aforementioned standards, interpretations and amendments will have no significant impact on the consolidated financial statements.

A.3. BASIS OF CONSOLIDATION

As explained in the preliminary note, the eight DSO have merged on 31 December 2013 with retroactive effect on 1 January 2013 to create ORES Assets (hereafter referred to as ORES Assets or DSO), an electricity and gas Distribution System Operator (“DSO”) in Wallonia that holds at 31 December 2014 the exclusive control of its sole subsidiary ORES scrl (hereafter referred to as ORES scrl”). For the preparation of the consolidated financial statements of the Group, ORES Assets consolidated its subsidiary using the full consolidation method.

The Group consolidated financial statements incorporate the financial statements of the entities controlled by ORES Assets (its subsidiaries). Control is achieved when the Group:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with investee; and

• has the ability to use its power to affect its returns.

The assessment of control is done on a case-by-case basis in accordance with IFRS 10, IFRS 11 IFRS 12 and IAS 28.

Subsidiaries are the entities controlled by the Group and are consolidated using the full consolidation method when existence of control has been established until the Group ceases to have control over the entity.

An associate is an entity over which the Group has significant influence without controlling it. Associates are consolidated using the equity method when existence of significant influence has been established until the Group ceases to have significant influence over the entity.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. An investment in a joint venture is accounted for using the equity method from the date on which the existence of joint control has been established until the Group ceases to have joint control over the entity.

All intra-group transactions, balances, income and expenses are eliminated in full during the consolidation process for the preparation of the consolidated financial statements.


A.4. BUSINESS COMBINATIONS AND GOODWILL

When the Group obtains control over an integrated set of assets and activities that meet the definition of a business in accordance with IFRS 3 – Business Combinations, acquiree’s assets, liabilities and contingent liabilities are recognised at their fair value at the date of acquisition. Goodwill is measured as the excess of the sum of the consideration transferred and the amount of any non-controlling interests over the share acquired in the fair value of the acquiree’s net identifiable assets. The goodwill is allocated to the cash-generating units and is not amortised, but is reviewed for impairment annually.

A.5. INTANGIBLE ASSETS

Intangible assets are recognised if and only if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of that asset can be measured reliably.

Intangible assets are initially measured at cost. The cost of an internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria in accordance with IAS 38. The cost of an internally-generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Intangible assets acquired in a business combination in accordance with IFRS 3 are measured at their fair values at the date of acquisition.

After initial recognition, intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets are amortised on a straight-line basis over their estimated useful life. Amortisation begins when the asset is capable of operating in the manner intended by management.

USEFUL LIFE

IT SOFTWARE 5 years

DEVELOPMENT 5 years

IT software

Software licenses acquired by the Group are recognised at their acquisition cost less accumulated amortisation and any accumulated impairment losses. Internally-generated IT software’s are recognised at their cost and development costs if they meet the criteria required by IAS 38.

Research and Development costs

Research costs are expensed in the period in which they are incurred. Development costs are capitalised if the criteria for recognition as an intangible assets defined by IAS 38 are met. The capitalised development costs are subsequently amortised linearly over their useful life, taking into account any accumulated impairment losses.

A.6. PROPERTY, PLANT AND EQUIPMENT

As a general rule, the Group is the legal owner of the property, plant and equipment consisting of the network installation, buildings, lands, vehicles, furniture and tools.

Property, plant and equipment are recognised as assets at acquisition or production cost if and only if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The cost of an item of property, plant and equipment comprises its purchase or production price and any costs directly attributable to the location and condition necessary for its operation, including the initial estimation of the dismantling and removing the asset and restoring the site on which it is located, if applicable.

Transfers of assets from customers related to the connections to the network are not deducted from the value of the items of property, plant and equipment to which they are related but are recognised as turnover in accordance with IFRIC 18 – Transfers of Assets from Customers.

After their initial recognition at historical cost, property, plant and equipment owned by the Group are depreciated using the straight-line method and are carried on the balance sheet at cost less accumulated depreciation and impairment. Depreciation begins when the asset is capable of operating in the manner intended by management. The components of an item of property, plant and equipment with a significant cost and different useful lives are recognised separately. Lands are not depreciated.

At the end of each reporting period, the Group proceeds to the disposal of items of property, plant and equipment that are no longer in service. The carrying amount of the property, plant and equipment that are abandoned is then derecognised.


Property, plant and equipment have been revalued in application of the law on the organisation of the gas market and the fiscal status of the electricity producers dated 29 April 1999 (known as “Electricity Law”) and the law on the transport of gas products and other canalisations dated 12 April 1965 (known as “Gas Law”) and their implementing decrees dated 2 September 2008. The revalued amount is derived from the regulated asset or initial ‘Regulated Asset Base’ (iRAB) as defined by the Electricity Law and Gas Law and their implementing decrees and as determined with the CREG in 2007. This corresponds to the sum of the value of the net economic reconstruction of the property, plant and equipment as determined at 31/12/2001 (electricity) and at 31/12/2002 (gas) as well as the working capital requirements. The value of the revaluation recognised in the books is the difference between the value of the iRAB as approved by the CREG and the book value of property, plant and equipment at those dates.

The value of the regulated asset is critical in determining the fair margin attributed to the DSO for a given reporting period, and therefore the tariffs applicable in a given regulatory period. A complete description of the regulatory mechanism is provided in section A.15 below.

Depreciation rates used by the Group have been defined in the implementing decrees of the Electricity and Gas Laws. These rates reflect a good estimate of the useful life of property, plant and equipment for the sector in which the Group operates. The residual value is always presumed to be zero at the end of the useful life of an asset. The following table details the depreciation rates:

PROPERTY, PLANT AND EQUIPMENT DEPRECIATION RATE

Industrial buildings 3% (33 years)

Administrative buildings 2% (50 years)

Cables 2% (50 years)

Lines 2% (50 years)

Stations and cabins (HV and LV equipment) 3% (33 years)

Connections – Transformations 3% (33 years)

Connections – Wires and cables 2% (50 years)

Measurement equipment 3% (33 years)

Electronic meters, budget meters 10% (10 years)

Remote control, lab equipment and dispatching 10% (10 years)

Data transmission and optical fibers 10% (10 years)

Furniture and equipment 10% (10 years)

Vehicles 20% (5 years)

Administrative equipment (IT equipment) 33% (3 years)

A.7. IMPAIRMENT OF NON-FINANCIAL ASSETS

At the end of each reporting period, the Group assesses whether there is any indication that assets have suffered an impairment loss. If any such indication exists, the Group estimates the recoverable amount of the asset. An asset is impaired when its carrying amount is higher than its recoverable amount. The recoverable amount of an asset or a cash-generating unit (CGU) is the higher of an asset’s fair value less costs of disposal and its value in use. If it is not possible to estimate the recoverable amount for the individual asset, the Group estimates the recoverable amount for the CGU to which it belongs.

Cash-generating units are defined as the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets. The Group is structured in eight operating segments and has therefore defined its CGUs as the eight operating segments with a distinction between electricity and gas activities within each of them.

Goodwill is reviewed annually for impairment. Goodwill is allocated to the CGUs on a consistent basis with the key used in allocating the expenses incurred by ORES scrl between the segments for a given energy (based on the connection points or EAN).


The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognised in prior period for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the Group estimates the recoverable amount of that asset. The increased carrying amount of that asset attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or depreciation) if no impairment loss had been recognised for that asset in prior years. Impairment losses on goodwill are never reversed.

A.8. LEASES

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Agreements that do not take the legal form of a lease are analysed with reference to IFRIC 4 – Determining Whether an Arrangement Contains a Lease to determine whether or not they contain a lease contract to be accounted for in accordance with IAS 17 – Leases.

Finance leases

Assets held under finance leases by the Group are recognised as assets at their fair value or, if lower, at the present value of the minimum lease payments. The corresponding liability is included in the consolidated statement of financial position as a finance lease obligation with the same value as the assets. Assets held under finance leases are depreciated over their estimated useful life on the same basis as property, plant and equipment or, if shorter, over the lease term.

Lease payments are apportioned between finance expenses and reduction of the lease obligation.

Assets owned by the Group and leased to third parties under finance leases are derecognised and a receivable is recognised as an asset in the balance sheet for an amount equal to the net investment in the lease contract. The recognition of financial income is made based on pattern reflecting a constant periodic rate of return on the lessor’s net investment in the finance lease.

Operating leases

Assets held by the Group under operating leases are not recognised in the balance sheet. Operating lease payments are recognised as an expense in the period in which they are incurred on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Assets owned by the Group and leased to third parties under operating leases are recognised in the balance sheet as property, plant and equipment or intangible assets. Rental income from operating lease is recognised as income on a straight-line basis over the lease term. The depreciation method used for the leased assets is consistent with the method used for similar assets.

A.9. INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost of inventories includes the purchase, conversion and other costs incurred to bring the inventories to their present location and condition. Net release value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Costs of inventories are determined by using the weighted average cost.


A.10. FINANCIAL INSTRUMENTS

Financial instruments held by the Group are recognised and measured with reference to IAS 32 and IAS 39. The Group does not enter into or trade financial instruments for speculative purposes. The Group is engaged in financial instruments only for economic hedging purposes.

A.10.1. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand and in banks, as well as short-term deposits with a maturity of three months or less.

A.10.2. LOANS AND RECEIVABLES

Loans and receivables are financial assets with fixed or determinable payments which are not quoted in an active market. They are initially recognised at their fair value, which in most cases correspond to their nominal value, plus transaction costs. After their initial recognition, these financial assets are measured at amortised cost using the effective interest method, less any impairment. An impairment loss is recognised if there is any objective indication that the Group might not recover all the amounts due. As a general rule, and except if it is not justified, receivables are impaired if they are past due for more than 60 days.

A public tender was launched in 2011 to allow the recovery of receivables due from energy supply to end customers, as well as receivables related to construction works. This contract foresees a recovery rate by the contractor. The share of those receivables that have been written down for impairment is the percentage not guaranteed by the contractor.

Gains or losses are recognised in the income statement when the financial asset recognised at amortised cost is derecognised or impaired.

A.10.3. EFFECTIVE INTEREST RATE METHOD

The effective interest rate method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating interest incomes or expenses over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash in- or outflows through the expected life of the financial instrument or, where appropriate, a shorter period so as to determine the net carrying amount for the financial asset or the financial liability.

A.10.4. BORROWINGS

The Group is financed through conventional loans and treasury bills or bonds. Borrowings contracted by the Group are financial liabilities that are initially measured at their fair value less transaction costs. Subsequently, financial liabilities are measured at amortised cost using the effective interest method less repayments of principal. Interest expense is recognised using the effective interest rate. Costs related to the issuance of bonds or treasury bills are deducted from the debt at the date of issue and are taken into account in calculating the effective interest rate in order to replenish the amount of debt.

A.10.5. DERIVATIVE FINANCIAL INSTRUMENTS

The Group enters into a variety of derivative financial instruments like interest rate swap (from 5 to 10 years) or interest rate caps to manage its exposure to interest rates arising from operating, financing and investing activities.

The accounting treatment of the derivative financial instruments depends on their designation or not as a hedging instrument and on the nature of the hedge relationship. Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured at fair value at the end of each reporting period. The resulting gain or loss is recognised in the income statement immediately, unless the derivative is designated and effective as a hedging instrument.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the financial instrument is more than 12 months. In case of a maturity below 12 months, they are presented as a current assets or a current liability.


A.10.6. HEDGE ACCOUNTING

The Group designates certain hedging instruments in a cash flow hedge relationship in respect of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or a liability, a firm commitment or a highly probable forecast transaction that could affect the income statement. Hedge accounting related to fair value hedge is not applied by the Group in this case. The Group applies hedge accounting with respect to the interest rate swaps, while the interest rate caps are not designated as hedging instruments in a hedge relationship.

In accordance with IAS 39, the hedge relationship must be formally designated and documented. Documentation must include the link between the hedge relationship and the risk management, the relationship between the risk and the hedging instrument, the hedged position, the nature of the hedged risk and the technique used to assess whether the relationship is effective or not.

The hedge relationship must be highly effective in achieving offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk and a reliable estimate of the effectiveness can be made. To be highly effective in achieving offsetting changes in cash flows attributable to the hedged risk, the actual results of the hedge must be within a range of 80% to 125%.

The effective portion of changes in the fair value of the hedging instrument in a cash flow hedge is recognised in other comprehensive income (equity). The gain or loss relating to the ineffective portion is recognised immediately in the income statement (including the ineffectiveness within the range 80-125%).

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised in the income statement when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in the income statement.

A.10.7. AVAILABLE-FOR-SALE FINANCIAL ASSETS (AFS)

AFS financial assets include investments in entities that are nor consolidated nor recognised using the equity method. AFS financial assets are measured at fair value. Fair value changes on AFS financial assets are recognised directly in other comprehensive income. Once it has been determined that an AFS financial asset is impaired, the cumulative loss that had been recognised directly in equity is recycled in the income statement. AFS financial assets whose fair value cannot be reliably determinable are measured at cost. Measurement at cost is used by the Group for all its AFS financial assets.

A.11. EMPLOYEE BENEFITS

The Group has opted for an early application of IAS 19 revised in 2012.

The Group provides to its employees various short and long-term benefits and post-employment benefits, in accordance with the applicable laws in Belgium.

A.11.1. SHORT-TERM EMPLOYEE BENEFITS

When an employee has rendered services to the Group during the reporting period, the Group recognises the non-discounted amount of short-term employee benefits in return of services rendered: as a liability, after deducting the amount already paid (if applicable), and as expenses (unless another IFRS requires or authorises the capitalisation in the carrying amount of an asset).

A.11.2. POST-EMPLOYMENT BENEFITS

Post-employment benefits are classified in 2 categories: defined benefit or defined contribution plans.

Defined contribution plans are measured and recognised according to the “intrinsic value” approach. The method consists in calculating, at the end of the reporting period and for each plan participant, the minimum guaranteed reserve (taking into account an interest rate of 3.75% for employee contributions and 3.25% for employer contributions) and the mathematical reserve. The guaranteed reserve is equal to the higher of the minimum guaranteed reserve and the mathematical reserve. If the guaranteed reserve is higher than the mathematical reserve, there is a deficit. Any deficit must be covered by the employer and an appropriate provision must be recognised in the consolidated financial statements.

Contributions paid with respect to defined contribution plans are recognised as expenses when employees have rendered the services giving rights to those contributions.

Concerning the defined benefit plans, the amount recognised as a net liability (asset) corresponds to the difference between the present value of future obligations and the fair value of the plan assets.


If the calculation of the net obligation gives rise to a surplus for the Group, the asset recognised for this surplus is limited to the present value of any future plan refunds or any reduction in future contributions to the plan.

Cost of defined benefits includes cost of services and net interests on the net liability (asset) recognised in net result (respectively in employee costs for the cost of services, and as financial expenses (income) for the net interests), as well as the revaluations of the net liability (asset) recognised in other comprehensive income.

The present value of the obligation and the costs of services are determined by using the projected unit credit method and actuarial valuations are performed at the end of each reporting period.

The actuarial calculation method implies the use and formulation of actuarial assumptions by the Group, involving the discount rate, evolution of wages, medical costs inflation, employee turnover and mortality tables. These actuarial assumptions correspond to the best estimations of the variables that will determine the final cost of post-employment benefits. The discount rate reflects the rate of return on high quality corporate bonds with a term equal to the estimated duration of the post-employment benefits obligations.

A.11.3. OTHER LONG-TERM EMPLOYEE BENEFITS

The accounting treatment of the other long-term employee benefits is similar to the accounting treatment for post-employment benefits, except for the fact that revaluations of the net liability (asset) are accounted for in the income statement instead of being recognised in other comprehensive income.

The actuarial calculations of post-employment obligations and other long-term employee benefits are performed by independent actuaries.

A.12. PROVISIONS

A provision is recognised when the Group has a present obligation (legal or constructive), at the end of the reporting period, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation. Provisions with a term equal to or above 12 months are discounted if the effect of discounting is material. Provisions recognised by the Group mainly relate to litigation and risks related to the clean-up of polluted soils.

Environmental liabilities

The Group regularly analyses all its environmental risks and the corresponding provisions. Main environmental risks are related to sites that present a significant level of pollution. The amount of the provisions recognised to cover those risks are based on the best estimate of the resources that will be necessary to settle the obligation, in terms of study fees and clean-up of the concerned soils, on the basis of valuation analyses prepared by independent experts. The Group measures those provisions to the best of its knowledge of applicable laws and regulations depending on the extent of the pollution and the studies that need to be performed concerning the environmental impact.

A.13. BORROWING COSTS

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (assets that necessarily take a substantial period of time to get ready for their intended use) are added to the cost of those assets. All other borrowing costs are expensed in the period in which they are incurred.


A.14. FINANCIAL INCOME AND EXPENSES

Financial expenses comprise the interests on borrowings and financial debts calculated using the effective interest rate method, as well as the increase in provisions following the unwinding of discount due to the time evolution.

Financial income comprises the interests income on investments recognised using the effective interest rate method, as well as dividends recognised when the right of the Group to receive those payments has been established.

Changes in the fair value of derivative financial instruments held by the Group that are not designated in a hedge accounting relationship are presented as financial expenses or financial income.

A.15. REVENUE RECOGNITION

A.15.1. REGULATORY ENVIRONMENT EFFECTIVE UNTIL 2011

The regulatory environment described below is the one applicable in 2011 which is the year of the conversion of the consolidated financial statements of Group ORES to IFRS. For subsequent reporting periods, changes in the regulatory environment presented in the next sub-sections must be considered.

As the federal state was competent concerning the distribution tariff of gas and electricity, the activity of the DSO was then governed by the law on the organisation of the gas market and the fiscal status of the electricity producers dated 29 April 1999 (known as ‘Electricity Law’) and by the law on the transport of gas products and other canalisations dated 12 April 1965 (known as ‘Gas Law’), as amended after by the law dated 8 June 2008; under sections 12octies (Electricity Law) and 15/5decies (Gas Law) and by Royal Decrees dated 2 September 2008. The application of the royal decrees is organised by regulatory periods, the first of which covers the years 2009 to 2012.

According to the Royal Decrees mentioned above, the turnover of the DSO includes the following items:

1. All necessary costs to carry out the tasks of the DSO. These costs are divided between costs that are ‘manageable’, over which the DSO has direct control (e.g., wages or purchases), and costs that are ‘non-manageable’, over which the DSO has no direct control (e.g., pension costs, financial expenses or taxes).

2. The fair margin, intended to provide returns for the capital invested in the network. It is calculated as a percentage of return (R) applied to an average value of the regulated asset (Regulated Asset Base or « RAB »). In this calculation:

(a) R is function of a risk-free interest rate (OLO 10 years) and a risk premium (allocation between equity and debt in the balance sheet of the DSO, with an optimisation if the equity represents 33% of the total; only a return of OLO + 70 basis points is applied on the portion outside the 33%).

(b) RAB includes property, plant and equipment and the need for working capital of the DSO. It is determined based on the revaluation that occurred in 2001 (based on the replacement value of the network at that date), called iRAB.

The invoicing of the DSO is based on the tariffs approved by the CREG for the current regulatory period. They have been established based on:

• A budget of costs and fair margin (depending on an investments budget for the determination of the RAB, among others), which is the budgeted turnover; and

• An estimate of the volumes sold to determine the tariffs for the units distributed (electricity or gas).

At the end of the reporting period, the DSO has recognised:

• Actual volumes to which the so-called ‘periodic’ tariffs are applied; and

• Other services (for example, transfers of assets from customers related to the connection to the network) resulting from the application of the so-called ‘non-periodic’ tariffs

The amount recognised is compared to the amount authorised by law. Differences are analysed in detail:

• Differences between actual costs and budgeted costs are generally taken into account for non-manageable costs, which is not the case for the differences observed on manageable costs. Any difference on the manageable costs comes as an increase or a decrease of the net income of the DSO.

• Differences between actual volumes and projected sales volume included in the budget are also taken into account.


These two types of differences (on non-manageable costs and volumes) give rise to the recognition of an annual outstanding balance which is (according to the Royal Decrees) a « receivable or a debt towards customers as a whole » and is transferred to the deferral accounts in the balance sheet in the statutory accounts of the DSO prepared in accordance with Belgian GAAP.

Till 2014, outstanding balances were monitored annually by the CREG. At the end of the last year of a regulatory period, these balances were controlled for the last 4 prior periods. Then, the CREG submitted an advice to the Minister responsible for the energy on the appropriate allocation of these balances. The final allocation is subject to a decision taken by the Council of Ministers.

During the conversion of the Group to IFRS, it has been decided to make a distinction in the statement of financial position between regulatory assets and regulatory liabilities. The variation of the regulated balances during the period is presented in the statement of comprehensive income as part of the operating income.

A.15.2. EVOLUTION OF THE REGULATORY ENVIRONMENT IN 2012

Transposition of European directives called « Third Energy Package »

Electricity directive (2009/72/CE) and gas directive (2009/73/CE) approved by the European Parliament and the European Council in July 2009 form the new European legal framework. They are the so-called « Third Package » directives.

At the federal level, these directives have been transposed into the law dated 8 January 2012 .

They impose detailed rules to the regulator in terms of motivation, transparency and timing to follow during the consultation for the determination of a tariff methodology.

The consultation initiated by the CREG did not meet these rules so that the consultation had to be restarted. The CREG finally judged that the consultation procedure defined in the law dated 8 January 2012 and the proposed agenda contained in the law would not allow the approval of new tariffs for a new regulatory period before 1 January 2013 or even before 1 January 2014.

Therefore, the CREG decided on 26 April 2012 to extend the tariffs of 2012 to the periods 2013 and 2014.


Transfer of the tariff competency to regional authorities

The transfer of the competency on the tariff distribution of gas and electricity (except for the networks with a transport function) from the federal government to the regions was planned by the institutional agreement dated 11 October 2011. During the year 2013, this agreement was transposed into an official legislation text: the special law dated 6 January 2014 related to the sixth reform of the State. Article 19 has amended Article 6 §1 VII of the special law on institutional reforms dated 8 August 1980 confirming the granting of this competency to the regions. The effective date of the transfer was fixed on 1st July 2014.

One of the impacts of this transfer is a change of regulator. The CREG will no longer be in charge of the tariff distribution as this competency will be transferred to the regional regulators, namely the “Commission Wallonne Pour l’Energie” (CWaPE), the ‘Vlaamse Regulator van de Elektriciteits- en Gasmarkt’ (Vreg) and ‘Bruxelles Gaz Electricité’ (Brugel).

The CWaPE wished to anticipate the transfer of competency in order to prepare the establishment of the tariff methodology and the adoption of the tariffs by starting reflexions with the DSO. Indeed, as the tariffs established in 2012 have been extended until 31 December 2014, it is then very important to have approved tariffs that would come into force as from 1 January 2015.


1. “Gas” Decree transposed from directive 2009/73/CE

The regional Walloon “Electricity” Decree, approved on 11 April 2014, contained provisions transposed from the European directive 2009/72/CE. This new Decree namely broaden the scope of public service obligations and the role of distribution network operators as suppliers of these customers.

Several provisions from the Electricity Decree require the official publication of executory decrees from the Walloon government. It concerns namely the provisions that broaden the scope of public service obligations and those introducing the mechanism of connecting the renewable energy installations to the network with flexible access.

1. See ORES scrl, activity report 2011 on the transposition of European directives so-called ‘Third Energy Package’.


In order not to cause confusion for the customer and not to alter the functioning of the market, symmetric adaptions had to be approved for the gas market. The government therefore decided to pursue the work conducted under the previous legislation with the aim of the adoption of the gas Decree.

By the time of this report, the new gas Decree had just been approved at third reading by the Walloon government. ORES was invited by the latter to comment on different technical points during the preparation of the text.

2. Distribution tariffs

The Electricity Decree transferred the competency of distribution tariffs approval from the CREG to the CWaPE as from 1 July 2014. The latter thus became the sole jurisdiction to determine the tariff methodology in compliance with the tariff guidelines from the government.

To enable the new legislature to develop new tariff guidelines that would be integrated into a new tariff methodology, the CWaPE first wished to limit the extent of the tariff methodology to a transitional period of two years, 2015-2016.

During this transitional period, the tariff methodologies developed by the CWaPE are largely inspired by the methodologies used previously by the CREG.

In anticipation of the transfer of the jurisdiction, the CWaPE also wanted to launch a consultation with the distribution network operators during the first semester of 2013, and by the end of 2013 a consultation aimed at determining the tariff methodologies. In 2014, the CWaPE continued its works and organised during the beginning of the year a consultation with the network operators concerning models linking costs and tariffs; in July, an official public consultation was launched with all market participants in order to finalise mid-August the definitive approval of the transitional tariff methodology. ORES was actively involved in each stage of the development of the methodology and made comments and proposals in response to the transmitted documents.

In accordance with the adopted tariff methodology, the network operators have introduced early September a tariff proposal together with a budget. Concerning ORES, the proposals were approved after review by the CWaPE in two steps: non-periodic tariffs in December 2014 and all tariff proposals and budget in February 2015.

The distribution costs for ORES have increased by 11% over 7 years, which corresponds to an increase lower than the inflation. This increase is explained as follows: in 2014, the extended and indexed tariffs were still based on consumption volumes assumptions determined in 2008 by the CREG, without taking into account the emergence of photovoltaics. Concerning the tariffs for 2015, ORES retained more realistic assumptions, consistent with the downward trend in volumes noted during the last years.

The evolution of the tariff envelope for the gas distribution on the same 7-years period corresponds to an increase of around 50%. For the majority part, this increase is due to the public service obligations that keep rising since 2009 and by different taxes within the distribution tariffs. The remaining part of the increase is related to our investments policy in the networks, especially in the context of natural gas promotion by the Walloon Region (free connections and extensions).

For more details on the evolution of costs and tariff, see ORES Assets annual report 2014.

3. Regional policy statement

Following the regional elections in 2014, a new Walloon government was established. This is part of the energy transition process that significantly impacts the activities of ORES, while stressing the need for a sustainable approach and therefore also control on the distribution tariffs. For the implementation of its new tariff jurisdiction, the Walloon government laid down guidelines and committed to clearly identify the components of the invoice and to control the regional components of the price of gas and electricity, in compliance with the CWaPE jurisdiction and in collaboration with federal stakeholders in order to ensure consistency in the energy price policy for the benefit of the consumer.

The government also want to explore the opportunity of gradually harmonising the distribution tariffs and the cost of public service obligations as well as regional levies, aiming to streamline the costs and preserve investments on the whole territory.

Finally, it committed to ensure that any proposal from the CWaPE or government decision that might have an impact on the electricity or gas tariff would first be subject to a specific tariff impact assessment by the regulator.


A.15.5. TURNOVER

Revenue from the sale of goods is recognised when all the following conditions have been satisfied:

• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of ordinary revenues can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the entity; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction has to be recognised by reference to the stage of completion of the transaction at the end of the reporting period.

Revenue is measured at the fair value of the counterpart received, less discounts, rebates and levies or taxes on the sales.

The Group turnover, corresponding to revenue according to IAS 18, mainly comprises revenue from the following activities:

• Transit fees and sale of energy in the context of public service obligations

• Transfers of assets from customers

• Construction contracts

• Regulatory balances

1. TRANSIT FEES AND SALE OF ENERGY IN THE CONTEXT OF PUBLIC SERVICE OBLIGATIONS

The turnover of the Group is based primarily on revenue and expenses related to transit fees of the network for the distribution of electricity and gas. On behalf of energy suppliers, the Group distributes electricity and gas to homes and companies connected to the network. In terms of electricity, transit fees include the fee for the transportation network that is exclusively managed by Elia. The transportation fee is invoiced to the Group by Elia and is recognised as a cost of sales (cascade principle) leading to a neutral impact on the income statement.

Revenue and expenses related to transit fees and the sale of energy in the context of public service obligations (including protected customers) are recognised when electricity or gas has been supplied to the customers connected to the network in the corresponding period. The amounts recognised as revenue are based on meter readings and on estimations for the unmetered part of the network. These estimates are adjusted at the end of the reporting period with the unmetered transit fee (RTNR) and the unmetered energy (ENR) which are calculated based on the total actual volumes that have transited on the network.

2. TRANSFERS OF ASSETS FROM CUSTOMERSTransfers of assets from customers in the construction of connections or extensions to the network are presented and recognised as revenue generally when the service of connection or extension takes place.

3. CONSTRUCTION CONTRACTSThe turnover of the Group includes incomes from construction contracts for various works such as public lighting or network maintenance. If the end of a construction contract can be estimated reliably, revenues and expenses related to this contract are recognised in the income statement according to the percentage of completion of the contract.

4. REGULATORY BALANCESThe authorised revenues determined by law related to the distribution of electricity and gas is based on the one hand, on all the necessary costs to carry out the tasks of the DSO and, on the other hand, on the fair margin for the remuneration of the capital invested in the infrastructure network. The comparison between this allowed revenue on non-controllable costs and amounts recognised as turnover and between the budgeted volumes and the real volumes transited on network determines the annual balances (assets and liabilities) that the DSO will have to pass on the tariffs in subsequent regulatory periods. Annual balances and their impact on future tariffs are subject to approval by the regulator (see A.15.1. above).


A.16. INCOME TAXES

Income tax expense represents the sum of the tax currently payable and deferred tax.

A.16.1. CURRENT TAX

The current tax payable is based on taxable profit for the year. Taxable profit differs from “profit before taxes” as reported in the consolidated income statement because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

Taxes related to the distribution of dividends to the private shareholder and related to the gas activity are recognised when the dividends to be paid are recognised as a liability.

The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

A.16.2. DEFERRED TAX

Deferred tax is recognised for temporary differences between the carrying amounts of assets and liabilities in the financial statements and their corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets generally are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be used. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, no deferred tax liabilities have been recognised on the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries, joint operations, joint ventures, and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to use the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on the same tax entity; or on different tax entities but they intend to settle their current tax assets and liabilities on a net basis or to pay their current tax liabilities and to realize their current tax assets simultaneously.

A.16.3. CURRENT AND DEFERRED TAX FOR THE PERIOD

Current and deferred tax are recognised as an expense or income in the consolidated profit and loss account, except when they relate to items that are recognised outside profit and loss account (whether in other comprehensive income or directly in equity), in which case the current and the deferred tax are also recognised in other comprehensive income or directly in equity.

If the current or deferred tax arises from the initial accounting for a business combination. the tax effect is taken into account in the accounting for the business combination.


B. Critical accounting judgements and key estimates used in the preparation of the consolidated financial statements

The preparation of the consolidated financial statements in accordance with IFRS requires making accounting estimates and requires management to exercise judgement in the application of the Group’s accounting policies. Key assumptions related to the future and other main sources of uncertainty related to the estimates used in the preparation of the consolidated financial statements at the end of the reporting period are presented below.

B.1. SIGNIFICANT ESTIMATES IN THE APPLICATION OF THE ACCOUNTING POLICIES

B.1.1. ACTUARIAL OBLIGATIONS UNDER PENSION PLANS, OTHER POST-EMPLOYMENT BENEFITS AND OTHER LONG-TERM BENEFITS

Obligations of the Group related to pension plans are valued annually by independent actuaries. Management determines the actuarial assumptions used for the valuation of these obligations. The Group believes that the assumptions used are appropriate and justified. Actuarial assumptions used by the Group include the following elements:

• Discount rate

• Expected growth rate of wages

• Average inflation rate

• Employee turnover

• Mortality table

• Amounts of tariff reductions

• Amounts of medical costs

B.1.2. FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

Fair value of derivative financial instruments held by the Group is calculated based on market values by an external valuation company for all the IRS, and directly by the Group for the valuation of the CAP in collaboration with financial institutions.

B.1.3. MEASUREMENT OF THE PROVISIONS

All significant legal litigations are reviewed regularly by the legal department of the Group with the support of the Group’s finance department and external counsels when appropriate. This review includes an assessment of the need to recognise provisions or adapt existing provisions. The provisions that are recognised on litigations are based on the value of the claim or on the estimated amount of the exposure.

The valuation of the environmental provisions is based on studies conducted by independent experts making an estimate of the future costs of soil sanitation.

In all cases, the amount recorded by the Group as a provision corresponds to the best estimate of the expenditure required to settle the present obligation at the balance sheet date.

B.1.4. IMPAIRMENT TESTS

The Group tests goodwill for impairment annually, as well as cash-generating units for which there are indicators that tend to demonstrate that the carrying amount might exceed the recoverable amount. To determine if it is appropriate to recognise an impairment loss, it is necessary to estimate the value in use of the cash-generating unit. The calculation of the value in use requires management to estimate the future cash flows that will be generated by the cash-generating unit (for goodwill, by the cash-generating unit to which it has been allocated) and to apply an appropriate discount rate to calculate the present value (see also note 8).


B.1.5. DISTRIBUTED VOLUMES

Amounts recognised as revenue are based on meter readings and estimates for the unmetered part of the network. These estimates are adjusted at the end of the reporting period with the unmetered transit fee (RTNR) and the unmetered energy (ENR) which are calculated based on total volumes that have transited on the network.

B.2. SIGNIFICANT JUDGMENT APPLIED TO THE ACCOUNTING POLICIES

B.2.1. TURNOVER MEASUREMENT

B.2.1.1. Regulatory balances

Currently, there are no specific IFRS dealing with the accounting treatment of regulated balances in a regulated environment. Discussions are in progress within the IASB concerning the publication of new standard on rate-regulated activities that would clarify the accounting treatment. In this context, a transitional standard was published in January 2014 (IFRS 14 – Regulatory Deferral Accounts) but applies only to first-time adopters of IFRS. It explicitly allows the recognition of regulated assets and liabilities within the statement of financial position and these assets and liabilities should be presented in a separate caption, distinct from the other assets or liabilities. The Group took the assumption that these balances would be recovered in the future and are therefore recognised as an asset or a liability. If it turns out that the accounting treatment adopted by the Group is not in line with the future guidelines published by the IASB, future results as well as equity would have to be adjusted.

B.2.1.2. Transfers of assets from customers (IFRIC 18 – Transfers of Assets from Customers)

The Group carries out connection and extension works on the gas and electricity network, for which transfers of assets from customers are required. In this case, the Group considers whether the transfer of assets from customers is within the scope of the interpretation IFRIC 18 on the basis of all facts and circumstances and, where applicable, the transfer is recognised as turnover.

B.2.2. CLASSIFICATION DEBT/EQUITY

The Group reviews all relevant facts and circumstances to determine whether an instrument is a debt instrument or an equity instrument in accordance with IAS 39 – Financial Instruments: Recognition and Measurement. The Group determined that the different categories of shares represented the capital (see note 15) are equity instruments.

B.2.3. EXISTENCE OF AN OBLIGATION IN APPLICATION OF IAS 37

The Group determines on case by case basis whether there is an obligation that could have a negative impact on its financial position. Indeed, the Group regularly reviews pending litigations and determines whether it is probable that the settlement of the obligation will require an outflow of resources. If this is the case, provisions are recognised for an amount that corresponds to the best estimate of the consideration required to settle the obligation (the outcome of the procedures cannot be predicted with certainty).

B.2.4. DEFERRED TAXES

At 31 December 2014, corporate income tax is applicable to the company ORES scrl but not applicable to ORES Assets yet. ORES scrl has a result equal to nil as the company is working on behalf of ORES Assets and invoices at cost price without making any profit. As a result, income taxes that have been recognised are exclusively related to non-deductible expenses.

Taxes are paid by ORES Assets on the amount of dividends related to the gas activity and distributed to the private shareholder and not on dividends related to the electricity activity.

No deferred tax was recognised for 2013 since ORES Assets was not yet subject to corporate income tax.

Following the vote of the law by the Federal Parliament on 19 December 2014 and published in the Belgian Official Gazette on 29 December 2014 results in ORES Assets being subject to income tax as from the fiscal year 2016 (2015 income). Due to this change in fiscal status for the mother company, the Group decided to recognise a deferred tax in its consolidated financial statements at year-end 2014, resulting in the offsetting of the deferred taxes arising from the subsidiary and the mother company.


C. Changes in accounting policies, changes in accounting estimates and errors

A change in accounting policy is applied only if the change is required by a standard or an interpretation or it results in the financial statements providing more reliable and relevant information. Early application of a standard or an interpretation is not a voluntary change in accounting policies with reference to IAS 8.

A change in accounting policy is applied retrospectively unless it is impracticable to determine the period-specific effects for one or more periods presented. In addition, a change in accounting policy upon initial application of an IFRS that includes specific transitional provisions applying to that change is not applied retrospectively.

Even if great attention is placed on the preparation of the Group financial statements, errors may occur during the recognition, measurement, valuation, presentation or the inclusion of information on items of the financial statements. If necessary, the Group retrospectively corrects significant errors from prior periods in the first financial statements authorised for issue after the discovery of these errors.

Uncertainties related to the Group’s activities require the use of estimates in the preparation of the financial statements. The use of estimates is an important part of the preparation of the financial statements and does not undermine their reliability. An estimate is revised if changes occur in the circumstance on which it was based, or if new information is available. The revision of an estimate does not relate to prior periods and is not a correction of error.


4. Independent Auditor’s Report

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ORES Group

2, Avenue Jean Monnet 1348 Louvain-la-Neuve Tél. : +32(0)78.15.78.01

[email protected]

www.ores.net www.oresassets.net

ORES Group CONSOLIDATED FINANCIAL IFRS STATEMENTS 2014

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