ANNUAL REPORT OF âTRANSGAZâ MANAGEMENT INDIVIDUAL ...

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SNTGN “TRANSGAZ” SA Medias Annual Management Report for 2007 management seeks to reduce the potential negative effects of such risks on the financial performance of our company. 5.2.1. Credit risk The company is subject to credit risks generated by its commercial receivables and other types of receivables. All new clients shall provide references on their credit worthiness. The due date of receivables shall be attentively monitored and the amounts due after deadline shall timely be observed. 5.2.2. Currency risks The company is subject to the currency exchange rate fluctuations by debts from loans or by commercial debts denominated in currency. Due to associated high costs, the company’s policy does not provide the use of financial instruments for mitigating such risks. 5.2.3. Interest rate risks The company’s financial cash flows are affected by interest rate fluctuations, mainly due to the variable interest loans. The company does not use interest rate hedging instruments. 5.2.4. Liquidity risks A cautious management of liquidity risks implies keeping sufficient cash and credit lines available. Due to the company’s business, Transgaz seeks flexibility in the financing means, by keeping credit lines available for financing operating activities. 5.2.5. Capital market risks Transgaz increased its share capital by initial public offering of shares developed within November 19 th – December 7 th , 2007 followed by trading of allocation rights and shares on the Bucharest Stock Exchange. Under Law no. 297/2004 on the capital market, the companies admitted for trading shall report to the Romanian National Securities Commission and to Bucharest Stock Exchange. Therefore, Transgaz shall immediately report any legal deed concluded with administrators, employees, shareholders and third parties related thereto. The company shall make available trimestrial, semestrial and annual reports both to the public and to the Romanian National Securities Commission and shall notify shareholders and the Romanian National Securities Commission of priviledged information, of any financial, corporate, environmental factors, of any change in objectives or business strategy and investment plans significantly influencing the company’s business. As a small stock exchange, Bucharest Stock Exchange is quite fragile as regards the fluctuations in the market price of listed shares, such price being influenced by the information provided by the issuer. Page 46 of 54
SNTGN “TRANSGAZ” SA Medias Annual Management Report for 2007 CH.6. MISCELLANEOUS 6.1. The rating agency, Standard&Poors improved the company’s rating from “BB+”, positive outlook, to “BBB-“, negative outlook, tnat is “investment grade”, Transgaz being the sole Romanian company granted such rating. The upgrading of Transgaz’ rating reflects the company’s improved financial profile following the successful completion of the initial public offering of shares and the increase in the share and visibility of the operational cash flow, as a result of a significant growth in the transmission tariff. The negative outlook reflects Romania’s perspective and the likelihood of adverse macro-economic growth in Romania, as well as a certain uncertainty related to the influence the state might have on the company’s financial and dividend policies. Transgaz’ rating could be reviewed as stable in case of any upgrading of the sovereign rating. 6.2. Under the capital market legislation, that is Law no. 297/2004 and Regulation no. 1/2006 of the Romanian National Securities Commission on the security issuers and operations, the trading of Transgaz’ shares on the regulated market, managed by Bucharest Stock Exchange, started on January 24 th , 2008. 6.3. The amount gained as a result of the IPO, i.e. lei 251,933,300, was recorded as an own financing source in February 2008, and was intended to partially finance the investment programme for 2008. 6.4. The “Network Code for the National Gas Transmission System” was approved under Order no. 54/December 13 th , 2007 of The National Energy Regulatory Authority and published in the Official Journal no. 71 bis of January 30 th , 2008. The Code shall enter into force on July 1 st , 2008 and shall provide regulations of the NTS operating conditions. The application of this Code confirms the company’s efforts to be in line with the European legislation. The introduction of unbalancing charges for users leads to an inproved NTS operation and to more disciplined users thereof. 6.5. January 15 th , 2008 was the kick-off date of the informatics project “Informational Platform for SNTGN TRANSGAZ SA” which was meant to ensure communication between the TSO and its trading partners for the application of the Network Code. The project shall be completed on September 20 th , 2008. Page 47 of 54
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