Taiwan Cogeneration Corporation and Subsidiaries
Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022 and Independent Auditors' Report
DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES
The companies required to be included in the consolidated financial statements of affiliates in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" for the year ended December 31, 2023 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as of and for the year ended December 31, 2023 as provided in International Financial Reporting Standard No. 10, "Consolidated Financial Statements". Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies as of and for the year ended December 31, 2023. Hence, we did not prepare a separate set of consolidated financial statements of affiliates for the year ended December 31, 2023.
Very truly yours,
TAIWAN COGENERATION CORPORATION
By
HUANG, SHUN-YI
Chairman
March 13, 2024
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The key audit matters of the Group's consolidated financial statements for the year ended December 31, 2023 are described as follows:
Associates' Litigation Related to the Fair Trade Act
Please refer to Note 38(d) for details on the associates' litigation related to the Fair Trade Act, Note 4(o) for accounting policies on provisions and Note 5(a) for critical accounting judgments and key sources of estimation uncertainty.
Taiwan Power Company (TPC) claimed to have suffered losses due to joint actions by Independent Power Producers, which violated the Fair Trade Act, and filed a civil action for damages against the associates of the Group, including Sun Ba Power Corporation, Star Energy Power Corporation, Star Buck Power Corporation, and Kuo Kuang Power Company Ltd.
The aforementioned associates commissioned attorneys to analyze the case and believe they have not caused any losses to TPC. As a result, they have not recognized provisions for the relevant litigation, which in turn has not affected the Group's balance of investment accounted for using the equity method and the share of profit of associates accounted for using the equity method. The aforementioned associates have also engaged attorneys to assist with civil litigation matters. Since the litigation is still ongoing and the claimed amount is material to the consolidated financial statements of the Group, the outcome may change with subsequent developments of the cases, involving significant judgments by management. Thus, the assessment of contingent events in the associates' litigation related to the Fair Trade Act was considered as one of the key audit matters.
In our audit, we have obtained relevant documents, such as the lawsuit papers for the aforementioned case; discussed the management's correspondence with attorneys and the evaluation of the pending litigation; sent confirmation requests to the attorneys and reviewed their responses and assessments; and reviewed the latest developments of the pending litigation up to the date of the audit report to assess whether the associates' litigation related to the Fair Trade Act had been appropriately accounted for and disclosed in accordance with International Accounting Standard 37, "Provisions, Contingent Liabilities and Contingent Assets".
Evaluation of Profit and Loss of Construction Contracts
Please refer to Note 28 for information on construction contracts, Note 4(p) for the accounting policies on revenue recognition of construction contracts, and Note 5(b) for the critical accounting judgments and key sources of estimation uncertainty related to the evaluation of profit and loss of construction contracts.
The Group has entered into a construction contract for a large-scale offshore wind power generation project in central Taiwan. The construction service revenue of the aforementioned contract recognized for the year ended December 31, 2023 amounted to NT$901,290 thousand, representing 17% of the Group's consolidated operating revenue. The percentage of completion and related profit or loss from the construction contract were assessed and determined by the Group's management based on the nature of activities, expected subcontracting, construction periods, progress, methods, etc., involving critical accounting judgments made by the management. Thus, the evaluation of profit and loss of construction contracts was considered as one of the key audit matters.
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In our audit, we visited and observed the construction site; obtained the construction contract and construction project schedules; expected total construction cost and construction acceptance reports; verified the construction cost, the estimated remaining cost before completion, and related supporting documents on a sampling basis in evaluating the reasonableness of the method and assumptions used by the management in the calculation of the percentage of completion; recalculated the percentage of completion, construction service revenue, construction service cost, profit or loss of the construction contract, contract assets and contract liabilities for accuracy; and assessed the appropriateness of provisions.
Other Matter
We have also audited the standalone financial statements of Taiwan Cogeneration Corporation as of and for the years ended December 31, 2023 and 2022 on which we have issued an unmodified opinion.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the FSC, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including the audit committee, are responsible for overseeing the Group's financial reporting process.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2023, and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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The engagement partners on the audits resulting in this independent auditors' report are Chao-Mei Chen and Cheng-Chuan Yu.
Deloitte & Touche
Taipei, Taiwan
Republic of China
March 13, 2024
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors' report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors' report and consolidated financial statements shall prevail.
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TAIWAN COGENERATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND 2022
(In Thousands of New Taiwan Dollars)
2023 | 2022 | ||||||||||||
ASSETS | Amount | % | Amount | % | |||||||||
CURRENT ASSETS | |||||||||||||
Cash and cash equivalents (Notes 4 and 6) | $ | 1,922,822 | 7 | $ | 3,734,653 | 15 | |||||||
Financial assets at amortized cost (Notes 4, 7, 8 and 37) | 734,293 | 3 | 20,341 | - | |||||||||
Contract assets (Notes 4, 5, 26, 28 and 36) | 2,121,745 | 8 | 1,959,825 | 8 | |||||||||
Accounts receivable (Notes 4, 9 and 28) | 755,728 | 3 | 521,402 | 2 | |||||||||
Accounts receivable from related parties (Notes 4, 28 and 36) | 90,450 | - | 151,212 | 1 | |||||||||
Finance lease receivables (Notes 4, 10 and 36) | 9,941 | - | 10,324 | - | |||||||||
Other receivables (Notes 4, 30 and 36) | 30,896 | - | 36,885 | - | |||||||||
Inventories (Notes 4 and 11) | 7,951 | - | 18,104 | - | |||||||||
Prepaid construction costs (Note 26) | - | - | 46,184 | - | |||||||||
Prepaid value-added tax | 118,697 | 1 | 102,751 | 1 | |||||||||
Other current assets | 38,478 | - | 34,523 | - | |||||||||
Total current assets | 5,831,001 | 22 | 6,636,204 | 27 | |||||||||
NON-CURRENT ASSETS | |||||||||||||
Financial assets at fair value through other comprehensive income (Notes 4, 12 and 35) | 270,054 | 1 | 277,120 | 1 | |||||||||
Financial assets at amortized cost (Notes 4, 7, 8 and 37) | 32,631 | - | 34,104 | - | |||||||||
Investments accounted for using the equity method (Notes 4 and 14) | 14,000,694 | 54 | 13,004,719 | 52 | |||||||||
Property, plant and equipment (Notes 4, 15 and 37) | 4,286,965 | 17 | 3,231,917 | 13 | |||||||||
Right-of-use assets (Notes 4 and 16) | 420,234 | 2 | 417,718 | 2 | |||||||||
Goodwill (Notes 4 and 17) | 96,370 | - | 141,014 | - | |||||||||
Intangible assets (Notes 4, 18 and 37) | 879,838 | 3 | 937,452 | 4 | |||||||||
Deferred income tax assets (Notes 4 and 30) | 232,304 | 1 | 188,007 | 1 | |||||||||
Prepayments for equipment | - | - | 7,149 | - | |||||||||
Long-term finance lease receivables (Notes 4, 10 and 36) | 852 | - | 11,325 | - | |||||||||
Refundable deposits | 84,590 | - | 69,134 | - | |||||||||
Other non-current assets (Note 19) | 19,480 | - | 20,537 | - | |||||||||
Total non-current assets | 20,324,012 | 78 | 18,340,196 | 73 | |||||||||
TOTAL | $ | 26,155,013 | 100 | $ | 24,976,400 | 100 | |||||||
LIABILITIES AND EQUITY | |||||||||||||
CURRENT LIABILITIES | |||||||||||||
Short-term borrowings (Notes 20 and 37) | $ | 55,000 | - | $ | 67,000 | - | |||||||
Short-term bills payable (Note 20) | 999,130 | 4 | 999,276 | 4 | |||||||||
Contract liabilities (Notes 4, 5, 26, 28 and 36) | 113,264 | 1 | 583,082 | 3 | |||||||||
Accounts payable | 105,244 | - | 156,870 | 1 | |||||||||
Construction costs payable | 2,959,261 | 11 | 3,220,782 | 13 | |||||||||
Accounts payable to related parties (Note 36) | 1,329 | - | 2,045 | - | |||||||||
Other payables (Notes 22 and 36) | 618,700 | 2 | 315,915 | 1 | |||||||||
Current income tax liabilities (Notes 4 and 30) | 74,121 | - | 70,657 | - | |||||||||
Provisions (Notes 4, 24 and 26) | 465,448 | 2 | 259,197 | 1 | |||||||||
Lease liabilities (Notes 4, 16 and 36) | 63,743 | - | 53,315 | - | |||||||||
Current portion of long-term borrowings (Notes 20 and 37) | 161,471 | 1 | 947,393 | 4 | |||||||||
Other current liabilities | 4,019 | - | 24,905 | - | |||||||||
Total current liabilities | 5,620,730 | 21 | 6,700,437 | 27 | |||||||||
NON-CURRENT LIABILITIES | |||||||||||||
Long-term borrowings (Notes 20 and 37) | 1,590,437 | 6 | 3,127,031 | 13 | |||||||||
Contract liabilities (Notes 4 and 28) | 168,845 | 1 | 122,188 | 1 | |||||||||
Lease liabilities (Notes 4, 16 and 36) | 419,328 | 2 | 424,382 | 2 | |||||||||
Bonds payable (Note 21) | 2,498,517 | 10 | 2,497,884 | 10 | |||||||||
Provisions (Notes 4 and 24) | 14,613 | - | 14,296 | - | |||||||||
Deferred income tax liabilities (Notes 4 and 30) | 63,284 | - | 70,691 | - | |||||||||
Net defined benefit liabilities (Notes 4 and 25) | 121,842 | - | 112,088 | - | |||||||||
Guarantee deposits received | 53,732 | - | 41,297 | - | |||||||||
Other liabilities (Notes 4 and 23) | 16,019 | - | 15,866 | - | |||||||||
Total non-current liabilities | 4,946,617 | 19 | 6,425,723 | 26 | |||||||||
Total liabilities | 10,567,347 | 40 | 13,126,160 | 53 | |||||||||
EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 27) | |||||||||||||
Share capital | |||||||||||||
Ordinary shares | 7,302,820 | 28 | 5,890,486 | 24 | |||||||||
Capital surplus | 2,621,919 | 10 | 499,694 | 2 | |||||||||
Retained earnings | |||||||||||||
Legal reserve | 1,828,961 | 7 | 1,737,133 | 7 | |||||||||
Special reserve | 2,435,361 | 9 | 2,621,945 | 10 | |||||||||
Unappropriated earnings | 1,269,700 | 5 | 958,281 | 4 | |||||||||
Total retained earnings | 5,534,022 | 21 | 5,317,359 | 21 | |||||||||
Other equity | (9,189) | - | (14,130) | - | |||||||||
Total equity attributable to owners of the Corporation | 15,449,572 | 59 | 11,693,409 | 47 | |||||||||
NON-CONTROLLING INTERESTS | 138,094 | 1 | 156,831 | - | |||||||||
Total equity | 15,587,666 | 60 | 11,850,240 | 47 | |||||||||
TOTAL | $ | 26,155,013 | 100 | $ | 24,976,400 | 100 | |||||||
The accompanying notes are an integral part of the consolidated financial statements.
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TAIWAN COGENERATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2023 | 2022 | ||||||||||
Amount | % | Amount | % | ||||||||
OPERATING REVENUE (Notes 4, 5, 28 and 36) | |||||||||||
Sales | $ 1,543,441 | 29 | $ 1,690,298 | 36 | |||||||
Construction services | 3,542,988 | 66 | 2,777,596 | 60 | |||||||
Operations, maintenance and consulting services | 261,973 | 5 | 200,987 | 4 | |||||||
Total operating revenues | 5,348,402 | 100 | 4,668,881 | 100 | |||||||
OPERATING COSTS (Notes 5, 25, 29 and 36) | |||||||||||
Cost of sales | 1,339,298 | 25 | 1,351,155 | 29 | |||||||
Construction services | 3,229,348 | 60 | 2,494,907 | 53 | |||||||
Operations, maintenance and consulting services | 236,498 | 5 | 194,593 | 4 | |||||||
Total operating costs | 4,805,144 | 90 | 4,040,655 | 86 | |||||||
GROSS PROFIT | 543,258 | 10 | 628,226 | 14 | |||||||
(UNREALIZED) REALIZED GAIN ON | |||||||||||
TRANSACTIONS WITH ASSOCIATES | (23,699) | - | 9,355 | - | |||||||
REALIZED GROSS PROFIT | 519,559 | 10 | 637,581 | 14 | |||||||
OPERATING EXPENSES (Notes 25, 29 and 36) | 535,940 | 10 | 401,716 | 9 | |||||||
(LOSS) PROFIT FROM OPERATIONS | (16,381) | - | 235,865 | 5 | |||||||
NON-OPERATING INCOME AND EXPENSES | |||||||||||
Interest income | 27,832 | 1 | 5,431 | - | |||||||
Other income (Notes 29 and 36) | 27,044 | - | 23,502 | - | |||||||
Other gains and losses (Notes 16, 17 and 29) | (32,689) | (1) | 36,414 | 1 | |||||||
Finance costs (Note 29) | (100,595) | (2) | (86,457) | (2) | |||||||
Share of profit of associates accounted for using the | |||||||||||
equity method (Note 14) | 1,398,007 | 26 | 791,123 | 17 | |||||||
Total non-operating income and expenses | 1,319,599 | 24 | 770,013 | 16 | |||||||
PROFIT BEFORE INCOME TAX | 1,303,218 | 24 | 1,005,878 | 21 | |||||||
INCOME TAX EXPENSE (Notes 4 and 30) | (60,833) | (1) | (88,863) | (1) | |||||||
NET PROFIT | 1,242,385 | 23 | 917,015 | 20 | |||||||
(Continued) |
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TAIWAN COGENERATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2023 | 2022 | ||||||||||||
Amount | % | Amount | % | ||||||||||
OTHER COMPREHENSIVE (LOSS) INCOME | |||||||||||||
Items that will not be reclassified subsequently to | |||||||||||||
profit or loss: | |||||||||||||
Remeasurement of defined (loss) benefit plans | |||||||||||||
(Note 25) | $ | (7,668) | - | $ | 13,478 | - | |||||||
Unrealized (loss) gain on investments in equity | |||||||||||||
instruments at fair value through other | |||||||||||||
comprehensive income (Note 35) | (7,066) | - | 1,810 | - | |||||||||
Share of remeasurement of defined benefit plans | |||||||||||||
of associates accounted for using the equity | |||||||||||||
method | 1,357 | - | 722 | - | |||||||||
Share of unrealized gain (loss) on investments in | |||||||||||||
equity instruments at fair value through other | |||||||||||||
comprehensive income of associates accounted | |||||||||||||
for using the equity method | 5,255 | - | (16,946) | (1) | |||||||||
Income tax relating to items that will not be | |||||||||||||
reclassified subsequently to profit or loss | |||||||||||||
(Notes 4 and 30) | 1,534 | - | (2,695) | - | |||||||||
(6,588) | - | (3,631) | (1) | ||||||||||
Items that may be reclassified subsequently to profit | |||||||||||||
or loss: | |||||||||||||
Exchange differences on translation of the | |||||||||||||
financial statements of foreign operations | 3,720 | - | (986) | - | |||||||||
Share of other comprehensive income (loss) of | |||||||||||||
associate accounted for using the equity method | 3,032 | - | (9,386) | - | |||||||||
6,752 | - | (10,372) | - | ||||||||||
Other comprehensive income (loss), net of | |||||||||||||
income tax | 164 | - | (14,003) | (1) | |||||||||
TOTAL COMPREHENSIVE INCOME | $ | 1,242,549 | 23 | $ | 903,012 | 19 | |||||||
NET PROFIT (LOSS) ATTRIBUTABLE TO: | |||||||||||||
Owners of the Corporation | $ | 1,252,275 | 23 | $ | 906,774 | 20 | |||||||
Non-controlling interests | (9,890) | - | 10,241 | - | |||||||||
$ | 1,242,385 | 23 | $ | 917,015 | 20 | ||||||||
TOTAL COMPREHENSIVE INCOME (LOSS) | |||||||||||||
ATTRIBUTABLE TO: | |||||||||||||
Owners of the Corporation | $ | 1,252,439 | 23 | $ | 892,771 | 19 | |||||||
Non-controlling interests | (9,890) | - | 10,241 | - | |||||||||
$ | 1,242,549 | 23 | $ | 903,012 | 19 | ||||||||
(Continued) | |||||||||||||
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