Page 1

2015

LIETUVOS ENERGIJA, UAB CONSOLIDATED AND COMPANY‘S FINANCIAL STATEMENTS CONDENSED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2015 (unaudited)

Energetikos įmonių grupė

www.le.lt


TURINYS

CONDENSED INTERIM FINANCIAL STATEMENTS Condensed interim statements of financial position Condensed interim statements of comprehensive income Condensed interim statements of cash flows

3 4-5 6

Condensed interim statements if changes in equity

7-8

Notes to the condensed interim financial statements

9 – 28

Translation note: This condensed interim financial information is a translation from the original, which was prepared in Lithuanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of this document takes precedence over this translation.

Energetikos įmonių grupė www.le.lt

2


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Notes

Group

Company 2015-06-30 2014-12-31

2015-06-30

2014-12-31

19 045 1 623 350 643 43 091 117 242 743 4 696 2 980 7 330 1 943 995

15 334 1 621 089 7 37 394 123 240 812 4 696 7 574 8 203 1 935 232

7 1 076 150 238 975 4 696 28 1 319 856

9 968 386 238 975 4 696 32 1 212 098

25 515 17 244 94 443 13 784 553 3 433 2 011 193 657 350 640 162 350 802 2 294 797

53 013 9 338 130 534 21 557 645 7 247 15 211 019 433 368 576 433 944 2 369 176

47 1 125 3 918 53 39 477 44 620 77 44 697 1 364 553

3 2 102 15 31 347 33 467 77 33 544 1 245 642

11

1 212 156 93 406 (35 524) 1 270 038 48 879 1 318 917

1 210 568 92 039 (42 547) 1 260 060 48 830 1 308 890

1 212 156 4 281 61 299 1 277 736 1 277 736

1 210 568 74 34 322 1 244 964 1 244 964

12

290 752 39 307 071 23 742 6 214 53 504 10 451 691 773

250 015 42 304 449 21 436 8 543 53 973 17 550 656 008

40 930 40 930

23 23

69 972 35 883 12 58 597 39 809 3 356 16 558 59 920 284 107 975 880 2 294 797

128 076 13 456 18 142 405 40 030 12 032 5 884 62 377 404 278 1 060 286 2 369 176

297 36 45 554 45 887 86 817 1 364 553

188 159 308 655 678 1 245 642

ASSETS Non-current assets Intangible assets Property, plant and equipment Prepayments for non-current assets Investment property Investments in subsidiaries Investments in associates Amounts receivable after one year Long-term investments Other non-current assets Deferred income tax asset Total non-current assets Current assets Inventories Prepayments Trade receivables Other amounts receivable Other current assets Prepaid income tax Short-term investments Cash and cash equivalents

4 5

6 7 8

9

8 10

Non-current assets held for sale Total current assets TOTAL ASSETS

EQUITY AND LIABILITIES Equity Share capital Reserves Retained earnings (deficit) Equity attributable to owners of the parent Non-controlling interests Total equity Liabilities Non-current liabilities Non-current borrowings Finance lease liabilities Grants and subsidies Deferred income tax liabilities Provisions Deferred income Other non-current amounts payable and liabilities Total non-current liabilities Current liabilities Current portion of long-term debts Current borrowings Current portion of finance lease liabilities Trade payables Advance amounts received Income tax liabilities Provisions Other current amounts payable and liabilities Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

13

12 12

13

-

The accompanying notes form an integral part of these condensed interim financial statements. Condensed interim financial statements were approved by Lietuvos energija, UAB at 25 August 2015.

Dalius Misiūnas Chief Executive Officer

Darius Kašauskas Finance and Treasury Director

Energetikos įmonių grupė www.le.lt

Edita Steponavičienė Accounting department director of Verslo Aptarnavimo Centras UAB acting under Order No V-020 of 24 April 2015

3


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF COMPREHENSIVE INCOME For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Notes

Revenue Sales revenue Other income Total revenue

Group 2015 Jan-Jun

2015 Apr-Jun

2014 Jan-Jun

2014 Apr-Jun

2015 Jan-Jun

Company 2015 2014 Apr-Jun Jan-Jun

2014 Apr-Jun

525 358 22 946 548 304

214 244 12 296 226 540

384 627 18 105 402 732

184 027 9 769 193 795

936 1 937

573 1 574

1 1

1 1

(385 660) (4 616) (37 061) (46 915) (15 069) (17 900) (507 221) 41 083

(161 073) (3 912) (18 017) (23 293) (9 700) (8 633) (224 628) 1 912

(210 052) (24 386) (63 523) (33 170) (15 984) (13 334) (360 449) 42 283

(92 178) (19 582) (32 104) (16 245) (9 635) (5 524) (175 268) 18 527

(2) (1 369) (2 552) (3 923) (2 986)

(1) (735) (2 230) (2 966) (2 392)

(3) (1 379) (622) (2 004) (2 003)

(1) (771) (366) (1 138) (1 137)

3 143 (4 618) -

1 343 (1 250) -

44 660 43 210 (28 379) 4 131 (4 510) (87)

44 660 43 210 (28 379) 3 195 (2 427) (87)

64 031 (1 730)

62 299 (142)

71 755 (64) -

70 846 (62) -

Profit (loss) before tax Current year income tax expense Deferred income tax (expense)/income Net profit (loss)

39 608 (6 124) (3 189) 30 295

2 005 (1 311) (1 374) (680)

101 308 (7 106) 1 225 95 427

77 699 (7 958) 5 499 76 240

59 315 (36) (3) 59 276

59 765 (36) (17) 59 712

69 688 (7) 25 69 706

69 647 (7) 24 69 664

Attributable to: Owners of the parent Non-controlling interests

27 458 2 837

(1 792) 1 112

92 238 3 189

75 390 850

59 276 -

59 712 -

69 706 -

69 664 -

Operating expenses Purchases of electricity, gas for trading and related services Purchases of gas and heavy fuel oil Depreciation and amortisation Wages and salaries and related expenses Repair and maintenance expenses Other expenses Total operating expenses Operating profit (loss) Negative goodwill on acquisition of AB Lietuvos Dujos Share of result of associate Re-measurement of associate Finance income Finance costs Share of results of associates

14

15 16

The accompanying notes form an integral part of these condensed interim financial statements. Condensed interim financial statements were approved by Lietuvos energija, UAB at 25 August 2015.

Dalius Misiūnas Chief Executive Officer

Energetikos įmonių grupė www.le.lt

Darius Kašauskas Finance and Treasury Director

Edita Steponavičienė Accounting department director of Verslo Aptarnavimo Centras UAB acting under Order No V-020 of 24 April 2015

4


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF COMPREHENSIVE INCOME For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated Notes

2015 Jan-Jun

Group 2014 Jan-Jun

2015 Apr-Jun

2014 Apr-Jun

2015 Jan-Jun

Company 2015 2014 Apr-Jun Jan-Jun

2014 Apr-Jun

Other comprehensive income (loss) Items that will not be reclassified to profit or loss Gain (loss) on revaluation of non-current assets Items that will not be reclassified to profit or loss, total Items that will be reclassified to profit or loss Change in fair value of available-for-sale financial assets Items that will be reclassified to profit or loss, total Other comprehensive income (loss) Total comprehensive income (loss) for the period

(54) (54)

-

-

-

-

-

-

-

(54) 30 241

(680)

55 55 55 95 482

55 55 55 76 295

-

-

55 55 55 69 761

55 55 55 69 719

Attributable to: Owners of the parent Non-controlling interests

27 404 2 837

(1 792) 1 112

92 293 3 189

75 445 850

59 276 -

59 712 -

69 761 -

69 719 -

The accompanying notes form an integral part of these condensed interim financial statements. Condensed interim financial statements were approved by Lietuvos energija, UAB at 25 August 2015.

Dalius Misiūnas Chief Executive Officer

Energetikos įmonių grupė www.le.lt

Darius Kašauskas Finance and Treasury Director

Edita Steponavičienė Accounting department director of Verslo Aptarnavimo Centras UAB acting under Order No V-020 of 24 April 2015

5


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF CASH FLOWS For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Group Cash flows from operating activities Net profit (loss) for the year Adjustments for non-monetary expenses (income): Depreciation and amortisation expenses Impairment of PP&E/reversal of impairment Share of profit of associates and joint ventures Impairment of investments in subsidiaries Income tax expenses (Depreciation) of grants Increase (decrease) in provisions Change in fair value of trade derivatives (Income) expenses on revaluation of emission allowances (Gain) loss on disposal/write-off of property, plant and equipment (Gain) on acquisition of business Elimination of results of financing and investing activities: Interest income Interest expenses Other finance (income) costs Changes in working capital: (Increase) decrease in trade receivables and other amounts receivable (Increase) decrease in inventories, prepayments and other current assets Increase (decrease) in amounts payable, deferred income and advance amounts received Income tax (paid) Net cash flows from (used in) operating activities Cash flows from investing activities (Acquisition) of property, plant and equipment and intangible assets Disposal of property, plant and equipment and intangible assets Loans (granted), loan repayments Change in time deposits Acquisition of subsidiaries (associates) Grants received Bonds acquired Bonds redeemed Interest received Change in non-controlling interest due to changes in Group’s structure Dividends received Acquisition of AB LESTO shares from minority shareholders Acquisition of AB Lietuvos Dujos shares Net cash flows from (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Finance lease payments Interest paid Dividends paid Acquisition of AB LESTO shares from minority shareholders Net cash flows from (used in) financing activities Increase (decrease) in cash and cash equivalents (including overdraft) Cash and cash equivalents (including overdraft) at the beginning of the year Cash and cash equivalents (including overdraft) at the end of the year

4,5 5 6

15 16

Company 2015-06-30 2014-06-30

2015-06-30

2014-06-30

30 295

95 427

59 276

69 706

42 972 (125) 9 314 (5 787) 10 476 (1 947) (302) 697 -

69 392 (1 775) 87 5 881 (5 869) 6 789 1 364 (59 537)

2 1 667 39 -

2 (18) -

(2 451) 2 449 1 477

(2 000) 4 264 (1 884)

(3 293) 142 (59 150)

(1 960) 61 (69 795)

46 204

5 785

(1 047)

(2 435)

21 197

(3 302)

-

(23)

(93 066)

(28 852)

(19)

255

(3 979) 57 424

(6 557) 79 213

(2 383)

(4 207)

(52 625) 1 066 4 168 829

(51 260) 320 (28 944) 2 011 47 181 672

(23 334) 1 202

(29 868) (3) 47 181 578

238

-

-

-

(46 324)

1 924 (102 746) (130 842)

60 738 38 606

69 668 (34 142) (139 411) (85 997)

80 334 (96 867) (8) (2 909) (30 614) (50 064)

211 631 (178 874) (126) (4 652) (6 153) (34 142) (12 316)

(28 093) (28 093)

14 623 (13 204) (43) 1 376

(38 964)

(63 945)

8 130

(88 828)

10

197 989

141 244

31 347

89 774

10

159 025

77 299

39 477

946

18

18

The accompanying notes form an integral part of these condensed interim financial statements. Condensed interim financial statements were approved by Lietuvos energija, UAB at 25 August 2015.

Dalius Misiūnas Chief Executive Officer

Darius Kašauskas Finance and Treasury Director

Energetikos įmonių grupė www.le.lt

Edita Steponavičienė Accounting department director of Verslo Aptarnavimo Centras UAB acting under Order No V-020 of 24 April 2015

6


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Equity attributable to owners of the Group Group

Notes

Balance at 1 January 2014 Change in fair value of available-for-sale financial assets, net of deferred income tax Total other comprehensive income (loss) for the year Net profit (loss) for the year Total comprehensive income (loss) for the year Transfer of revaluation reserve to retained earnings (transfer of depreciation, net of deferred income tax) Transfer to reserves and movement in reserves Dividends Increase in share capital

6

Acquisition of shares from non-controlling interest Acquisition of subsidiary Balance at 30 June 2014 Balance at 1 January 2015 Change in fair value of available-for-sale financial assets, net of deferred income tax Total other comprehensive income (loss) for the year Net profit (loss) for the year Total comprehensive income (loss) for the year Transfer of revaluation reserve to retained earnings (transfer of depreciation, net of deferred income tax) Transfer to reserves and movement in reserves Dividends Result of conversion of share capital Acquisition of shares from non-controlling interest Adjustment of income tax due to acquisition of part of business (Note 3) Balance at 30 June 2015

18 11

Share capital

Legal reserve

Revaluation reserve

Other reserves

Retained earnings

Noncontrolling interest

Subtotal

Total

1 177 932

22 322

210 721

188 678

8 746

1 608 399

202 510

1 810 909

-

-

-

55 55 55

92 238 92 238

55 55 92 238 92 293

3 189 3 189

55 55 95 427 95 482

32 636

362

(188 703)

11 771 188 341

-

(11 771) -

-

-

(7 568)

28 106

(2)

57 569

(7 568) 32 636

1 210 568

1 678

32 636

24 362

227 056

28

1 210 568

24 362

67 630

-

-

(54)

-

-

1 588 1 212 156

87 351

(121 493)

(34 142)

358 665

1 820 679

8 040 84 678

8 040 1 905 357

47

(42 547)

1 260 060

48 830

1 308 890

-

-

(54)

-

(54)

(54) (54)

-

27 458 27 458

(54) 27 458 27 404

2 837 2 837

(54) 30 295 30 241

-

(2 833)

-

2 833

-

-

-

4 413 2 28 777

(188) 64 555

27 74

(4 413) (28 093) 699 8 539 (35 524)

27 (28 093) 1 588 513 8 539 1 270 038

8 (2 521) (275) 48 879

35 (30 614) 1 588 238 8 539 1 318 917

The accompanying notes form an integral part of these condensed interim financial statements. Condensed interim financial statements were approved by Lietuvos energija, UAB at 25 August 2015.

Dalius Misiūnas Chief Executive Officer

Energetikos įmonių grupė www.le.lt

Darius Kašauskas Finance and Treasury Director

Edita Steponavičienė Accounting department director of Verslo Aptarnavimo Centras UAB acting under Order No V-020 of 24 April 2015

7


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Company

Notes

Balance at 1 January 2014

Share capital

Legal reserve

Other reserves

Retained earnings

1 177 932 32 636

-

-

Change in fair value of available-for-sale financial assets, net of deferred income tax

-

-

55

-

55

Net profit (loss) for the year

-

-

-

69 706

69 706

Balance at 30 June 2014

1 210 568

-

55

44 492

1 255 115

Balance at 1 January 2015

Increase in share capital

6

(25 214) -

Total

1 152 718 32 636

1 210 568

-

74

34 322

1 244 965

Transfer to legal reserve

-

4 207

-

(4 207)

-

Dividends

-

-

-

(28 093)

(28 093)

1 588

-

-

-

1 588

Result of conversion of share capital

11

Net profit (loss) for the year Balance at 30 June 2015

-

-

-

59 276

59 276

1 212 156

4 207

74

61 299

1 277 736

The accompanying notes form an integral part of these condensed interim financial statements. Condensed interim financial statements were approved by Lietuvos energija, UAB at 25 August 2015.

Dalius Misiūnas Chief Executive Officer

Energetikos įmonių grupė www.le.lt

Darius Kašauskas Finance and Treasury Director

Edita Steponavičienė Accounting department director of Verslo Aptarnavimo Centras UAB acting under Order No V-020 of 24 April 2015

8


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

1

General information

This financial information contains unaudited condensed interim financial information of Lietuvos Energija UAB (hereinafter referred to as “the Company”) and its subsidiaries (hereinafter collectively referred to as “the Group”) for a six-month period ended 30 June 2014 (hereinafter referred to as “the financial information” or “the interim financial information”). Lietuvos Energija UAB is a private limited liability company registered in the Republic of Lithuania. The address of the Company’s registered office is Žvejų g. 14, LT-09310, Vilnius, Lithuania. The Company is a limited liability profit-seeking entity registered on 28 August 2008 with the Register of Legal Entities managed by the public institution the Centre of Registers. The Company’s code 301844044, VAT payer’s code LT10004278519. The Company has been established for an unlimited period. Lietuvos Energija UAB is a parent company, which is responsible for the management and coordination of activities of the Group companies engaged in electric power and heat production and supply, electric power import and export, distribution and trade, natural gas distribution and trade, as well as in service and development of electric energy industry. The Company analyses the activities of the Group companies, represents the whole group, implements its shareholders‘ rights and obligations, defines operation guidelines and rules, and coordinates the activities in the fields of finance, law, strategy and development, human resources, risk management, audit, technology, communication and other. The Company seeks to ensure effective operation of the Group companies, implementation of goals related to the Group’s activities set forth in the National Energetic Independence Strategy and other legal acts, ensuring that it builds a sustainable value in a socially responsible manner. The Company is wholly owned by the state of the Republic of Lithuania. 2015-06-30

Company’s shareholder

Share capital, thous. Eur

Republic of Lithuania represented by the Lithuanian Ministry of Finance

1 212 156

2014-12-31

Share capital, thous. Eur

%

100,00

1 210 568

%

100,00

The Group consists of Lietuvos Energija UAB and subsidiaries directly or indirectly controlled by the Company:

Company

Effective ownership interest at

Office address

2015-06-30 (%)

Lietuvos energijos gamyba, AB

Elektrinės Elektrėnai

AB LESTO

g.

21,

Share capital

Main activity

(EUR‘000) 2015-06-30

96,13

184 174

Electricity generation, supply, import, export and trade

Aguonų g. 26, Vilnius

94,39

175 144

Electricity supply and distribution to end users

AB Lietuvos dujos

Aguonų g. 24, Vilnius

96,64

84 299

Natural gas supply and distribution to end users

NT Valdos, UAB

Geologų g. 16, Vilnius

100,00

85 550

Operation of real estate, other related activities and provision of services

UAB Duomenų logistikos centras

A. Juozapavičiaus g. 13, Vilnius

79,64

4 028

Support services telecommunications

UAB ELEKTROS TINKLO PASLAUGOS

Motorų g. 2, Vilnius

100,00

5 483

Construction, repair and maintenance of electricity networks and related equipment, connection of customers to the grid

UAB Kauno energetikos remontas

Chemijos Kaunas

100,00

4 421

Repairs of energy equipment, manufacturing of metal structures

UAB LITGAS

Žvejų g. 14, Vilnius

66,67

13 050

Supply of liquid natural gas via terminal and trade in natural gas

Gotlitas UAB

Chemijos Kaunas

100,00

3

Energijos tiekimas UAB

Lukšio g. 1, Vilnius

100,00

218

Public Institution Energetikų mokymo centras

Jeruzalės Vilnius

g.

100,00

85

Professional development and continuing training of energy specialists

Geton Energy OÜ

Narva mnt Talinas

5, 10117

100,00

35

Supply of electricity

Geton Energy SIA

Bezdelingu 12, 1048, Ryga

100,00

28

Supply of electricity

UAB Technologijų ir inovacijų centras

A. Juozapavičiaus g. 13, Vilnius

97,80

6 438

g.

g.

17,

17,

21,

LV-

Energetikos įmonių grupė www.le.lt

for

information

technology

and

Accommodation services, trade Supply of electricity and natural gas

Provision of IT, telecommunication and other services

9


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Company

Office address

Effective ownership interest at 2015-06-30 (%)

Share capital

Main activity

(EUR‘000) 2015-06-30

UAB VAE SPB

Smolensko g. 5, Vilnius

100,00

293

Nuclear power plant Project development, business and other management consultations

UAB Lietuvos dujų tiekimas

Žvejų g. 14, Vilnius

100,00

870

Natural gas supply, import, export and trade

UAB Verslo aptarnavimo centras

P. Lukšio g. 5B, Vilnius

97,00

580

Organisation and execution of public procurement, accounting and personnel administration services

Lietuvos energijos paramos fondas

Žvejų g. 14, Vilnius

100,00

3

Provision of support for projects, initiatives and activities of public interest

UAB Vilniaus kogeneracinė jėgainė

Žvejų g. 14, Vilnius

100,00

3

Set up of cogeneration power plants heat by refuses and biofuel

UAB Kauno kogeneracinė jėgainė

Žvejų g. 14, Vilnius

100,00

3

Set up of cogeneration power plants heat by refuses and biofuel

As at 30 June 2015 the Group had 5 555 employees (31 December 2014 – 5 602), the Company had 76 employees (31 December 2014 61). The Company‘s management approved these financial statements on 25 August 2015.

2

Summary of significant accounting policies

This condensed interim financial information for a six-month period ended 30 June 2015 has been prepared in accordance with International Accounting Standards (IAS) as adopted by European Union and applicable for the preparation of interim financial statements (IAS 34 Interim Financial Reporting). For a better understanding of data contained in the condensed interim financial information, this financial information should be read in conjunction with the consolidated and the Company’s financial statements for the year ended 31 December 2014, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU. The accounting policies applied in the preparation of this condensed interim financial information are consistent with those of the annual financial statements for the year ended 31 December 2014.

Income tax Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

Functional and presentation currency These condensed interim financial statements are presented in the national currency the euro (EUR), which is the Group’s and Company’s functional and presentation currency. Until 31 December 2014, the currency of the Republic of Lithuania was the litas. The litas was pegged to the euro at the exchange rate of LTL 3,4528 to EUR 1. With effect from 1 January 2015, Lithuania joined the euro area and the euro became its national currency. The euro replaced the litas at the exchange rate of LTL 3,4528 to EUR 1. The Groupo and the Company converted comparative figures from the litas to the euro using the official exchange rate, i.e. LTL 3,4528 to EUR 1. The conversion of the authorised share capital is disclosed in Note 11.

New and amended standards, and interpretations There are no new standards, amendments and interpretations that are mandatory for the Group and the Company with effect from 2015, and that would have a material impact on the Group’s and Company‘s financial information. The Group and Company‘s management do not believe the newly published standards, amendments and interpretations that are mandatory for the Group’s and Company‘s reporting periods beginning on or after 1 January 2016 will have a material impact on the Group’s and Company‘s financial statements. Accounting policies applied to significant transactions within the Group in relation to the Group‘s restructuring are set out below (as described in Note 6).

Business combinations Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power

Energetikos įmonių grupė www.le.lt

10


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and they are deconsolidated from the date that control ceases. IFRS 3 Business Combinations is not applied to business combinations involving entities under common control, therefore, for the purpose of this financial information business combinations involving entities under common control were accounted for using the ‘pooling of interest’ method. Acquisition method is applied to account for acquisition of subsidiaries that are not part of the Company‘s group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred in a bargain purchase, the equity interests issued, and the liabilities assumed at the bargain purchase date. Acquisition-related costs are expensed as incurred. Identifiable net assets, liabilities and contingent liabilities acquired in the acquiree, which meet IFRS 3 Business Combinations criteria, are recognised at their fair values at the acquisition date. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. Minority interest in the acquiree is initially recognised at the minority interest‘s proportionate share of the recognised amounts of net assets, liabilities and contingent liabilities.

Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

3

Critical accounting estimates and judgments used in the preparation of financial statements

Accounting estimates and judgments are continuously reviewed and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The preparation of financial information according to International Financial Reporting Standards as adopted by the EU requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses, and disclosures of contingencies. Changes in the underlying assumptions, estimates and judgments may have a material effect on this financial information. The accounting estimates applied in preparing the condensed interim financial information are consistent with those used in preparing the annual financial statements for the year ended 31 December 2014.

Revaluation and impairment of assets The Group accounts for property, plant and equipment (except for the assets of power plants, gas distribution pipelines and gas technological equipment) at revalued amount in accordance with International Accounting Standard 16 Property, plant and equipment. If the value of assets is measured based on a depreciated replacement cost method, International Valuation Standards require that an economic depreciation test should be performed. Accounting standards require a periodical review of property, plant and equipment for impairment. The value of property, plant and equipment should be reduced if its carrying value in the statement of financial position is higher than its value in use or the fair value less cost to sell. In other words, the carrying amount of property, plant and equipment reported in the statement of financial position should be written down to the higher of the present value of the future benefits that would be derived by the Company or the Group from the continued use of the assets and the proceeds it would derive from the asset's disposal. According to the Amendment to the Law effective from 1 June 2009, the upper limits of prices for electricity distribution services are to be determined based on the value of assets used in licensed activities of the service provider established and approved by the National Commission for the Energy Control and Prices (hereinafter – the Commission) in accordance with the principles for determination of the value of assets used in licensed activities of the service provider drafted by the Commission and approved by the Government. According to Resolution No 1026 of the Government of the Republic of Lithuania of 24 September 2014 On the Principles for the Determination of the Value of Assets Used in the Licensed Activities of the Electricity Service Provider and the methodology for the establishment of prices approved by the Commission in 2015, when determining the upper limits of prices for electricity distribution services, the value of assets used in the licensed activities of the service provider is equal to the net book value (carrying amount) of property, plant and equipment as at 31 December 2001 as increased by the amount of investments accomplished and agreed with the Commission and reduced by the depreciation amount calculated using depreciation rates approved by the Commission. The value of network elements modelled by the LRAIC accounting model necessary for the performance of regulated activities, the useful life of which ends in the course of the regulation period, is calculated using the current cost accounting, i.e. referring to the present recoverable value. Provisions of Resolution No 1142 of 2009 and Resolution No 1026 of 2014 of the Government of the Republic of Lithuania resulted in the impairment of assets used in the Company's activities

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Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Revaluation of assets of subsidiaries, except for LESTO AB, and fair value measurement As at 31 December 2014, independent valuation of assets was performed at the Group with respect to NT Valdos, UAB (buildings, structures and motor vehicles) and AB Lietuvos Dujos (buildings, structures and motor vehicles). The valuation was carried out by independent valuation companies and the Group's valuation specialists. Property, plant and equipment of subsidiary AB Lietuvos Dujos was remeasured at fair value on business combination. As at 31 December 2013, independent valuation of assets was performed at the Group with respect to NT Valdos, UAB (buildings and structures), Lietuvos energijos gamyba AB (assets carried at revalued amount) and UAB ELEKTROS TINKLO PASLAUGOS. The valuation was carried out by independent valuation companies. Based on the judgement of the Group's management, the carrying amount of these assets did not significantly differ from their fair value as at 31 December 2014 and 30 June 2015. As at 31 December 2011, valuation of property, plant and equipment of UAB Kauno Energetikos Remontas was performed. Based on the judgement of the Group's management, the carrying amount of these assets did not significantly differ from their fair value as at 31 December 2012, 2013 and 2014 and at 30 June 2015. Taking into consideration the date when the last revaluation of these assets was performed and their acquisition dates, the management believes that as at 31 December 2014 and at 30 June 2015 the fair value of the Group’s property, plant and equipment measured at revalued amount did not significantly differ from its carrying amount. AB LESTO Revaluation of property plant and equipment The Company accounts for property, plant and equipment at revalued amount in accordance with IAS 16, ‘Property, plant and equipment’. Based on the requirements set forth in paragraph 31 of IAS 16, in 2014 the Company performed valuation of its property, plant and equipment with reference to the report on valuation of PP&E prepared by Ernst & Young Baltic UAB, and determined that the fair value of PP&E (including construction in progress) as at 31 December 2014 amounted to Eur 683 million, which was Eur 618 million lower than the carrying amount of PP&E equal to Eur 1 301 million as at 31 December 2014. A significant change in the value of PP&E was mainly caused by application of economic obsolescence. In view of the decisions adopted during the period 2009-2015 by the National Control Commission for Prices and Energy (the Commission) and based on economic obsolescence estimates (using the income method), the value of the Company‘s PP&E is lower than that, which is estimated under the cost method. The fair value of the AB LESTO property, plant and equipment was determined using the income and cost methods. All PP&E was attributed to Level 3 in the fair value hierarchy, as set forth in IFRS 13. Valuation of property was carried out in the following stages: (i) replacement cost of new assets was estimated; (ii) physical and functional obsolescence of assets was determined; (iii) possible recoverability of assets was assessed (using the income method). When estimating economic obsolescence, a cash flow forecast was prepared for the period from IVQ 2014 to 2024. There have been no significant changes in key assumptions used in the cash flow forecast to estimate economic obsolescence of assets since the last valuation of assets, therefore, these assumptions are regarded as relevant as at 30 June 2015 as well. It is important to note that all above-mentioned assumptions used for the valuation of assets did not significantly change during the period from the last valuation of property, plant and equipment until 30 June 2015, therefore, no possible impairment indications have been identified with respect to property, plant and equipment as at 30 June 2015.

Impairment of assets stated at acquisition cost The Group makes an assessment, at least annually, whether there are any indications that the carrying amount of property, plant and equipment has been impaired. In 2015 and 2014, the Group accounted for assets of the Hydro Power Plant, Pumped Storage Power Plant, structures and equipment (Combined Cycle Unit and Reserve Power Plant) of the Thermal Power Plant, gas distribution pipelines, gas technological equipment, IT and telecommunication equipment at cost in accordance with International Accounting Standard No16 ‘Property, plant and equipment’. As at 30 June 2015 and 31 December 2014, the Group’s management tested for impairment the property, plant and equipment of Kruonis Pumped Storage Power Plant and Kaunas Hydro Power Plant named after Algirdas Brazauskas and did not identify any impairment indications. In view of the Group’s management decision on dismantling units 1 and 2 of the Reserve Power Plant at the end of 2014, the Company recognised impairment loss of Eur 11.5 million equal to the carrying value of units 1 and 2 of the Reserve Power Plant as at 31 December 2014. Dismantling works of units 1 and 2 were started in 2015. On 31 December 2014, impairment test was carried out for property, plant and equipment of Elektrėnai Complex, and it was determined that the recoverable amount exceeded the carrying amount of Eur 590,2 million, hence no impairment was recognised. In the opinion of the Group's management there were no significant changes in the Group's operating environment during the first half of 2015 that would affect assumptions of the previous impairment test, therefore, on 30 June 2015 no impairment test was carried out for property, plant and equipment of Elektrėnai Complex with the carrying amount of Eur 588 million.

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12


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Impairment of investments in subsidiaries Although the shares of the Company’s subsidiaries AB LESTO, AB Lietuvos Dujos and Lietuvos energijos gamyba AB are traded on Vilnius Stock Exchange, the Group's management believes this market is not active enough so that the quoted stock prices could be treated as equivalent to the fair value of investments in subsidiaries at the reporting date. As at 30 June 2015, the Company performed the impairment test in respect of investment in the subsidiary AB LESTO using the discounted cash flow method. Discounted cash flows were calculated according to effective legal acts and methodologies regulating the distribution activity and considering most likely electricity distribution activity development scenario together with uncertainties existing in the electricity branch. Based on analysis performed, Company’s management has determined that investment in AB LESTO is not impaired as of 30 June 2015. As at 30 June 2015, the Company performed the impairment test in respect of investment in the subsidiary AB Lietuvos dujos using the discounted cash flow method. Discounted cash flows were calculated according to effective legal acts and methodologies regulating the distribution activity and considering most likely natural gas distribution activity development scenario together with uncertainties existing in the gas branch. Discounted cash flows were calculated using a pre-tax discount rate of 7.09%, which corresponds to the return applied by the Commission in price regulation. In view of the analysis, the Company's management determined that the investment in AB Lietuvos Dujos was not impaired as at 30 June 2015. As at 30 June 2015, the Company performed the impairment test in respect of investment in the subsidiary UAB VAE SPB and recognized impairment of 575 thous. Eur. As at 30 June 2015, the Company performed the impairment test in respect of investment in the subsidiary UAB LITGAS using the discounted cash flow method. Discounted cash flows were calculated according to effective legal acts and methodologies regulating the designated supplier activity and considering most likely natural gas trading activity development scenario together with uncertainties existing in the liquid natural gas branch. Discounted cash flows were calculated using a pre-tax discount rate of 9.72%, which corresponds to the required capital return. Based on analysis performed, Company’s management has recognized impairment of 1 092 thous. Eur.

Consideration for the disposal of Litgrid AB In the implementation of the requirements of the Law on Electricity, on 4 July 2012 the Lithuanian Government passed Resolution No 826 Regarding the Establishment of the Private Limited Liability Company and Investment of State-owned Assets whereby instructed the Ministry of Energy to establish a private limited liability company and pass all necessary decisions in order to transfer shares of Litgrid AB held by Lietuvos Energija UAB to a newly established private limited liability company EPSO-G UAB at a certain consideration in view of the market price of shares established by independent assessors. The independent assessor established the market value of 97,5% of shares of Litgrid AB using the income (value-in-use) method. The purchase-sale agreement of shares of Litgrid AB provide for a supplementary element to the final consideration, the amount of which depends on the regulatory environment in future periods. On 24 September 2014, the Government approved the Procedure for Determining Regulated Prices in Electric Energy Sector and on 15 January 2015 the Commission approved a new (LRAIC) regulation methodology. On 19 January 2015, the Commission established the upper limit of the price for electricity transmission services via high voltage networks for Litgrid AB. As basic assumptions for supplementary element calculation did not change since the date of last financial statements, in the Company’s management assessment according to the purchase-sale agreement of shares of Litgrid AB the value of the supplementary element is equal to zero as at 30 June 2015.

Assessment of supplementary elements to the final considerations for shares acquired Supplementary element to the final consideration for shares of NT Valdos, UAB In April 2015 the Company has acquired shares of NT Valdos, UAB from AB LESTO, Lietuvos energijos gamyba, AB, UAB Duomenų logistikos centras and Litgrid AB and so acquired 100% direct control over these shares. Detail information about shares purchase is provided in the note 6. Supplementary element to the final consideration is provided for the shares acquired until 31 March 2019, it‘s amount depends on results achieved by NT Valdos, UAB. Maximum amount of supplementary element is 19 400 thous. Eur. In the assessment of Company‘s management NT Valdos, UAB will achieve set results in the future, therefore maximum amount of supplementary element was accounted for in accounts payable – 19 400 thous. Eur. The supplementary element was discounted to the present value using the average interest rate published by Bank of Lithuania for loans over 1 000 thous. Eur, which at the initial recognition date was equal to 2,65%. Investment cost in subsidiary was reduced by the amount of discount. Impact of discounting will be accounted as finance expenses in the financial statements in later accounting periods. Supplementary element to the final consideration for shares of UAB Kauno energetikos remontas As at 31 March 2015 the Company concluded shares acquisition agreement with Lietuvos energijos gamyba AB and acquired 100% or 15 244 112 ordinary shares of UAB Kauno energetikos remontas. Detail information about the agreement is provided in the note 6. UAB Kauno energetikos remontas is implementing the Biofuel Boiler House Project for Lietuvos energijos gamyba AB. As at 31 December 2014 for this project 3 853 thous. Eur provision was recognized in the financial statements of UAB Kauno energetikos remontas. If loss from Biofuel Boiler House Project implementation will increase of decrease by more than 50 thous. Eur, UAB Kauno energetikos remontas shares price will be adjusted by 89% of such change.

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13


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated At 30 June 2015 Company‘s management has assessed Biofuel Boiler House Project implementation, assessed the supplementary element to the final consideration and determined that it‘s value is equal to zero, as main assumptions for its calculation did not change.

Useful lives of property, plant and equipment The estimation of the useful lives of items of property, plant and equipment is a matter of judgement based on the experience with similar assets. Economic benefits are received through continuing use. However, other factors, such as technical or commercial obsolescence and physical wear and tear, result in the diminution of the economic benefits embodied in the assets. Management assesses the remaining useful lives in accordance with the current technical conditions of the assets and estimated period during which the assets are expected to earn benefits for the Group. The following key factors are considered: (a) expected usage of the assets; (b) expected physical wear and tear, which depends on operational factors and maintenance programme; and (c) technical or commercial obsolescence arising from changes in market conditions.

Accrued revenue Revenue received from household customers is recognised based on the payments received, therefore, at the end of each reporting period the amount of the revenue earned but not yet paid by household customers is estimated and accrued by the management of the Group company operating distribution networks. Accrued revenue is estimated as 1/3 of total payments for electricity received in December. The accrued revenue is based on past experience and average term of payment by customers for electricity. The management has estimated that the majority of household customers declare and make payment for the electricity consumed on approx. the 20th day of the month, while electricity is supplied for a full month (30 or 31 days). Consequently, the electricity consumed during the remaining 10 days is proportionally calculated referring to the total volume of electricity provided to the electricity supply network (the actually known variable) and the total volume of electricity declared by household customers during December and multiplied by the average rate per 1 kWh.

Consumption of overdeclared electricity With effect from 2014, the Company reduced the prices for electricity. Based on the Company‘s estimates, in 2013 there was no significant difference between the volume of electricity declared and the volume of electricity actually consumed by household customers. With effect from 2015, the Company reduced the prices for electricity; however a part of household customers declared more electricity than they have actually consumed. The Company has estimated the overdeclared amount. In 2014, the estimated difference was accounted for as advance amounts received.

Accounting for customer connection fees Before 1 July 2009, the Group used to defer income received from new customer connections to the grid and recognised it as deferred income over the period of 31 years, which is the average useful life of electricity equipment constructed by the Group upon connection of new customers. Management of the distribution companies of the Group believe that the period of provision of services to customers is indefinite, therefore, the average useful life of electricity equipment constructed by the Group upon connection of new customers was used as the best estimate of the period over which connection fees paid customers were recognised as income. With effect from 1 July 2009 and based on IFRIC 18 interpretation, the newly connected customers to the grid do not obtain any additional future benefits as compared to all the remaining customers, consequently, the provision of connection service is treated as completed and income from connection is recognised upon the connection of a new customer.

Impairment of amounts receivable Impairment losses for amounts receivables are determined based on the management’s estimates on recoverability and timing relating to the amounts that will not be collectable according to the original terms of receivables. This determination requires significant judgement. Judgement is exercised based on significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments. Current estimates of the management could change significantly as a result of change in situation in the market and the economy as a whole. Recoverability rate also highly depends on success rate and actions employed relating to recovery of significantly overdue amounts receivable. Amounts receivable are assessed to determine their value and impairment individually or collectively in a group of similar receivables. In case of individually assessed receivables for impairment, the Group takes into account the available or accessible data from external sources of information on market trends and forecasts, the possible credit enhancements (collateral) provided for receivables and events providing evidence of impairment of receivables such as, for example, fulfilment of contractual terms, the borrower's actual performance, etc. In case of collectively assessed receivables for impairment, the Group takes into account the historical statistics, and reviews annually whether the provisioning rates used for collectively assessed receivables are in line with the historical data of impairment of receivables, and that the provisioning rates used for collectively assessed receivables are approved for the upcoming year.Tax audits The tax authorities may at any time inspect the books and records within 5 years subsequent to the reported tax year, and may impose additional tax assessments and penalties. The Group’s management is not aware of any circumstances that might result in a potential material liability in this respect.

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14


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Change in taxation of goodwill As at 15 October 2014 AB Lietuvos dujos concluded agreement with UAB Lietuvos dujų tiekimas and transferred natural gas supply activity together with assets, rights and obligations allocated to it. Ownership right to the part of the company – natural gas supply activity - was transferred to UAB Lietuvos dujų tiekimas at 31 October 2014 according to the agreement. According to the agreement UAB Lietuvos dujų tiekimas paid the price for the natural gas supply activity together with assets, rights and obligations allocated to it, which amounted to 17 510 thous. Eur and was set by independent assessor as market value for the natural gas supply activity. Carrying amount of net assets acquired comprised 74 434 thous. Eur. Significant difference between paid price and carrying amount of net assets acquired appeared due to requirements of International Financial Reporting Standards, according to which impact of retrospective reduction of prices of imported OAO Gazprom gas for companies for the period from 1 January 2013 to 30 April 2014 could not be accounted as current period expenses. UAB Lietuvos dujų tiekimas has assessed taxation risk and considered written communication between UAB Lietuvos dujų tiekimas and National Tax authority and recognized the difference between carrying amount of net assets acquired (17 510 thous. Eur) and fair value of gas supply business set by independent assessors (74 434 thous. Eur) as negative goodwill and calculated income tax. Seeking to clarify taxation aspects for this transaction, UAB Lietuvos dujų tiekimas has approached National Tax Authority asking for binding decision, as taxation questions are closely related to the future natural gas sale agreements, though they are affected by the retrospective reduction of the imported gas prices obtained from Gazprom OAO. As at 30 April 2015 UAB Lietuvos dujų tiekimas has obtained binding decision of National Tax Authority, according to it the difference between net assets acquired and market value of natural gas supply business set by independent assessors should not be accounted as a negative goodwill and should not be taxed with income tax. As the income tax impact in amount of 8 539 thous. Eur recognized in 2014 was accounted for in the retained earnings, adjusting entry required after National Tax authority decision in 2015 was also accounted in retained earnings.

Provisions for the utilisation of emission allowances The Group estimates provisions for utilisation of emission allowances based on actual emissions over the reporting period multiplied by the market price for one unit of emission allowances. Actual emissions are approved by a relevant regulating state over the period of 4 months after the year end. Based on historic experience, the Company’s management does not expect any significant differences to arise between the estimated provision at 30 June 2015 and the quality of emissions which will be approved in 2016.

Accrual of PSO service fees The variable part of PSO service fees is estimated with reference to variable costs incurred during the reporting period. The producers ensuring the security of electric power supply and reserves of energy system, submit their PSO service fee estimates to the Commission which include breakdown of variable electric power production costs – natural gas, heavy fuel oil, emission allowance costs, and costs for reagent desulphurisation. The variable part of PSO service fees for the upcoming calendar year is estimated with reference to the expected variable costs to be incurred in the production of the approved quota of electricity to be compensated.

Fair value of financial assets and financial liabilities The Group‘s and the Company‘s underlying financial assets and liabilities not measured at fair value include trade and other amounts receivable, trade and other amounts payable, non-current and current borrowings. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and financial liabilities is not lower than the amount payable on demand, which is discounted starting from the first day on which its payment may be demanded. The carrying amount of cash and cash equivalents, current trade and other amounts receivable, current trade and other amounts payable and current borrowings approximates their fair value. The fair value of non-current borrowings is determined with reference to the market price of loans of the same or similar nature or interest rates payable at that time on similar maturity debts. The fair value of non-current borrowings with variable interest approximates their carrying amount in cases when margins payable on such loans are consistent with loan margins currently available in the market.

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15


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

4

Intangible assets Group

Patents and licenses

Computer software

Emission allowances

Other intangible assets

Goodwill

Total

Net book value as at 1 January 2014 Acquisition of AB Lietuvos dujos Acquisitions Reclassified from/to PP&E Write-offs/Emission allowances utilised Disposals Revaluation of emission allowances Grant received Amortisation Net book value as at 30 June 2014

240 313 729 (123) 1 159

1 797 314 37 265 (500) 1 913

8 313 (2 908) 1 042 393 6 840

1 224 131 (265) (4) (14) 1 072

51 582 51 582

63 156 627 897 (2 908) (4) 1 042 393 (637) 62 566

Net book value as at 1 January 2015 Acquisitions Reclassified from/to PP&E Write-offs/Emission allowances utilised Disposals Revaluation of emission allowances Repayment of emission allowances lent Grant received Amortisation Net book value as at 30 June 2015

1 356 1 (297) 1 060

3 201 192 11 (808) 2 596

10 531 (2 992) 412 4 615 2 139 14 705

246 455 (17) 684

-

15 334 647 12 (2 992) 412 4 615 2 139 (1 122) 19 045

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16


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

5

Property, plant and equipment

Group

Land

Buildings

Structures and machinery

Gas distribution pipelines and related equipment

Gas technological equipment and structures

Assets of Hydro Power Plant, Pumped Storage Power Plan and Lithuanian Power Plant

Structures and machinery of Thermal Power Plant

Motor vehicles

IT and telecommunic ation equipment

Other PP&E

Constructi on in progress

Total

Net book value as at 1 January 2014 Acquisition of AB Lietuvos dujos Acquisitions Disposals Write-offs Reclassification between categories Reclassification to assets, intangible assets Reclassification to investment property Reclassification (to) from inventories Depreciation Net book value as at 30 June 2014

2 011 2 011

104 714 10 516 103 (29) (55) 740 (20) (1 566) (3 012) 111 391

1 206 088 1 228 312 (44) (1 583) 34 532 (12) (112) (44 829) 1 195 580

105 127 105 127

4 336 4 336

140 265 2 227 52 (3 949) 136 597

603 219 52 (1) 926 154 (12 675) 591 675

15 657 2 562 333 (99) (2) (1 070) 17 381

4 699 758 290 (64) (2) (934) 4 747

21 593 4 579 102 (84) (2) 419 (2 286) 24 321

21 382 1 061 43 060 (2) (36 844) 28 657

2 119 628 130 167 44 254 (320) (1 647) (32) (1 678) 206 (68 755) 2 221 823

Net book value as at 1 January 2015 Acquisitions Disposals Write-offs Impairment/reversal of impairment Revaluation Reclassification between categories Reclassification to assets, intangible assets Reclassification to investment property Reclassification to assets held for sale Reclassification (to) from inventories Depreciation Net book value as at 30 June 2015

2 011

66 948 131 (456) (8) 712 (5 462) (1 748) 60 117

653 911 255 (12) (1 033) 40 865 (230) (16 019) 677 737

104 811 14 (1) 2 378 (1 583) 105 619

4 611 61 (3) (222) 4 447

133 013 25 37 (3 975) 129 100

568 497 765 125 29 801 161 (12 643) 586 706

17 788 3 015 (237) (64) 11 (994) 69 (2 413) 17 175

13 413 240 (14) (2) 18 (1) (1) (1 305) 12 348

11 885 304 (6)

44 201 47 383 (75 436) (11) 147 16 284

1 621 089 52 107 (719) (1 050) 125 (64) (12) (5 695) (994) 413 (41 850) 1 623 350

2 011

Energetikos įmonių grupė www.le.lt

1 565 (1 942) 11 806

17


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Company

Net book value as at 1 January 2014 Acquisitions Depreciation

Net book value as at 30 June 2014 Net book value as at 1 January 2015 Depreciation

Net book value as at 30 June 2015

Construction in progress

Other tangible assets

Total

9 (2) 7

-

9 (2) 7

9 (2)

-

9 (2)

7

-

7

In 2015 and 2014, the Group's property, plant and equipment (excluding structures and machinery of Hydro Power Plant, Pumped Storage Power Plant and Thermal Power Plant (Combined Cycle Unit, Reserve Power Plant), gas distribution pipelines, gas technological equipment and IT and telecommunications equipment) were stated at revalued amount.

Energetikos įmonių grupė www.le.lt

18


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

6

Investments in subsidiaries and other investments

As at 27 April 2015 the Company concluded shares acquisition agreement with AB LESTO and acquired 57,30% or 1 692 666 ordinary shares of NT Valdos, UAB. Shares acquisition price - 41 176 thous. Eur, supplementary element to the final consideration 11 120 thous. Eur (Note 3). As at 27 April 2015 the Company concluded shares acquisition agreement with Lietuvos energijos gamyba, AB and acquired 41,73 % or 1 232 897 ordinary shares of NT Valdos, UAB. Shares acquisition price - 29 987 thous. Eur, supplementary element to the final consideration 8 099 thous. Eur (Note 3). As at 27 April 2015 the Company concluded shares acquisition agreement with UAB Duomenų logistikos centras and acquired 0,59 % or 17 384 ordinary shares of NT Valdos, UAB. Shares acquisition price – 424 thous. Eur, supplementary element to the final consideration 114 thous. Eur (Note 3). As at 30 April 2015 the Company concluded shares acquisition agreement with Litgrid AB and acquired 0,35 % or 10 193 ordinary shares of NT Valdos, UAB. Shares acquisition price – 252 thous. Eur, supplementary element to the final consideration 67 thous. Eur (Note 3). Supplementary element to final consideration accounted for 19 400 thous. Eur and was discounted to the present value using average interest rate published by the Bank of Lithuania equal to 2,65% (Note 3). Discounting effect at initial recognition comprised 1,895 thous. Eur. By mean of above-mentioned agreements the Company has acquired 100% direct control over its subsidiary NT Valdos, UAB. As at 31 March 2015 the Company concluded shares acquisition agreement with Lietuvos energijos gamyba AB and acquired 100 % or 15 244 112 ordinary shares of UAB Kauno energetikos remontas and 100% or 750 000 ordinary shares of Energijos tiekimas UAB. Shares of UAB Kauno energetikos remontas acquisition price – 4 778 thous. Eur, Energijos tiekimas UAB - 6 883 thous. Eur. By mean of this agreement the Company has acquired control over indirectly owned subsidiaries Geton Energy SIA and Geton Energy OU. As at 31 March 2015 the Company concluded shares acquisition agreement with AB LESTO and acquired 100% or 18 904 ordinary shares of UAB ELEKTROS TINKLO PASLAUGOS. Shares acquisition price – 7 695 thous. Eur. At 19 February 2015 new companies - UAB Vilniaus kogeneracinė jėgainė and UAB Kauno kogeneracinė jėgainė – were established, whose activity is aimed at modernization of heat economy in Vilnius and Kaunas by set up of cogeneration power plants heat by refuses and biofuel. New power plants also will produce significant part of electricity at competitive price, which will secure more favorable electricity prices to consumers. Share capital of new companies is 2 900 Euro each, shares quantity – 10 000 units each at nominal price 0,29 Euro per share, shares subscribed were paid in full at 20 February 2015. During the 1st half of 2014, the Company acquired 96.64% of shares of AB Lietuvos Dujos. The shares were acquired in three stages: 1)

On 21 February 2014 , the Company's share capital was increased through in-kind contribution by the Lithuanian Finance Ministry of state-owned 51 454 638 (17,7%) shares of AB Lietuvos dujos with the value of 32 636 022 Eur

2)

On 21 May 2014 the Company signed an agreement with German concern E.ON Ruhrgas International, under which the Company acquired 113 118 140 (38.9%) of shares of AB Lietuvos Dujos. The acquisition cost of the shares totaled 63 429 280 Eur;

3)

Pursuant to Art. 31 of the Lithuanian Law on Securities, on 19 June 2014 the Company implemented a mandatory non-competitive takeover bid to buy up the remaining shares of AB Lietuvos Dujos from Russian company Gazprom and minority shareholders, and acquired 116 357 288 (40.03%) shares. The acquisition cost of the shares totaled 75 981 309 Eur.

On 21 May 2014 the Company signed an agreement with German concern E.ON Ruhrgas International , under which the Company acquired 71 040 473 (11.76%) of shares of AB LESTO. The acquisition cost of the shares totaled 31 142 369 Eur. At 30 October 2014 the Company has concluded shares acquisition agreement and acquired 18 111 517 UAB VAE SPB shares. As at 30 January 2015 the Company has paid remaining amount outstanding for supplementary element to the acquisition price 724 thous. Eur.

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19


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

As at 30 June 2015 the Company‘s investments in subsidiaries and other investments comprised: Company name Subsidiaries: AB LESTO Lietuvos energijos gamyba, AB AB Lietuvos dujos NT Valdos, UAB UAB LITGAS UAB ELEKTROS TINKLO PASLAUGOS UAB Duomenų logistikos centras Energijos tiekimas UAB UAB Kauno energetikos remontas UAB Technologijų ir inovacijų centras UAB VAE SPB UAB Lietuvos dujų tiekimas Public institution Energetikų mokymo centras UAB Verslo aptarnavimo centras Lietuvos energijos paramos fondas UAB Vilniaus kogeneracinė jėgainė UAB Kauno kogeneracinė jėgainė

Acquisition cost

538 874 294 832 172 047 89 373 8 689 7 695 7 268 6 883 4 778 3 218 1 018 869 309 295 3 3 3 1 136 157

Impairment

Contributions against loss

(55 781) (1 092) (2 563) (575) (60 011)

Carrying amount

4 4

483 093 294 832 172 047 89 373 7 597 7 695 4 705 6 883 4 778 3 218 447 869 309 295 3 3 3 1 076 150

Interest held (%)

94,39 96,13 96,64 100,00 66,67 100,00 79,64 100,00 100,00 50,00 100,00 100,00 100,00 51,00 100,00 100,00 100,00

As at 31 December 2014 the Company‘s investments in subsidiaries and other investments comprised: Company name Subsidiaries: AB LESTO Lietuvos energijos gamyba, AB AB Lietuvos dujos UAB LITGAS UAB Duomenų logistikos centras UAB Technologijų ir inovacijų centras UAB VAE SPB UAB Lietuvos dujų tiekimas Public institution Energetikų mokymo centras UAB Verslo aptarnavimo centras Lietuvos energijos paramos fondas

Investments: NT Valdos, UAB

7

Acquisition cost

Impairment

Contributions against loss

Carrying amount

Interest held (%)

538 874 294 832 172 047 8 689 7 268 3 218 293 869 309 295 3 1 026 697

(55 781) (2 563) (58 344)

4 4

483 093 294 832 172 047 8 689 4 705 3 218 297 869 309 295 3 968 357

94,39 96,13 96,64 66,67 79,64 97,80 100,00 100,00 100,00 97,00 100,00

29 29 1 026 726

(58 344)

4

29 29 968 386

0,03

Amounts receivable after one year Group 2015-06-30

Amount receivable on disposal of Litgrid AB Loan granted Other Total: Less: impairment Carrying amount

Company 2014-12-31

2015-06-30

2014-12-31

209 975 29 000 3 768 242 974 -

209 975 29 000 2 068 241 043 (231)

209 975 29 000 238 975 -

209 975 29 000 -

242 743

240 812

238 975

238 975

-

In the management‘s opinion, the carrying amount of amount receivable from EPSO-G on disposal of LITGRID AB and of the loan granted and other amounts approximated their fair value as of 30 June 2015. In May 2014, a loan was granted and amendments were made to the agreement for purchase/sale of LITGRID AB shares: considering the changes in repayment dates, the interest rates were reviewed and set anew. On 17 June 2014, a loan subordination agreement was signed between the bank, the Company and EPSO-G UAB, under which the Company subordinates a loan of 52 000 thous. Eur granted to EPSO-G UAB, in respect of the credit agreement signed between the bank and EPSO- G UAB.

Energetikos įmonių grupė www.le.lt

20


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated At 13 May 2015 UAB “EPSO-G” fulfilled its obligations to credit institution, therefore from 13 May 2015 the subordinated loan agreement of „Lietuvos energija“ UAB and UAB “EPSO-G“ in respect of UAB “EPSO-G“ is terminated.

8

Investments and other financial assets

Long term investments comprise as follows: Group 2015-06-30

Company 2014-12-31

2015-06-30

2014-12-31

Financial assets available for sale

4 696

4 696

4 696

4 696

Carrying amount

4 696

4 696

4 696

4 696

Short term investments comprise as follows: Group 2015-06-30 Trading derivatives Accrued interest Other Carrying amount

Company 2014-12-31

2015-06-30

2014-12-31

1 957

-

-

-

53

15

53

15

1

-

-

-

2 011

15

53

15

As of 30 June 2015, the Group‘s and the Company‘s available- for-sale financial assets comprised Lithuanian Government securities denominated in litas with redemption dates maturing at 20 October 2016. The weighted average annual interest rate on securities as at 30 June 2015 was 1.67% (as at 30 June 2014 – 1,67%). In 2014, the Group and the Company sold prior to maturity some of its securities that were classified as held-to-maturity financial assets as of 31 December 2013, and classified the remaining securities as available-for-sale financial assets measured at fair value. The Company will not classify its securities as held-to-maturity for the period of 2 years, i.e. until 31 May 2016. As of 30 June 2015, the Lithuanian Government bonds were accounted for at fair value, which is attributable to Level 1 in the fair value hierarchy. The fair value of debt securities was estimated with reference to the highest bid price (including accrued coupons) for relevant debt securities available from one of the three Lithuanian banks as at 30 June 2015. The nominal value of investments was multiplied by the best bid price (including accrued coupons) available as of 30 June 2015.

9

Inventories Group 2015-06-30

Company 2014-12-31

2015-06-30

2014-12-31

7 303

6 333

-

-

12 099

44 246

-

-

670

802

-

-

Heavy fuel oil

6 981

4 771

-

-

Other

1 501

818

-

-

Total

28 554

56 970

-

-

Less: write-down to net realisable value

(3 039)

(3 957)

-

-

Carrying amount

25 515

53 013

-

-

Consumables, raw materials and spare parts Goods for resale (including natural gas) Electricity meters

Goods for resale include liquid natural gas held in LNG Terminal, its balance was significantly increased as of 31 December 2014 because of first liquid natural gas cargo delivered according to the supply agreement between UAB LITGAS and Statoil ASA.

Energetikos įmonių grupė www.le.lt

21


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated Movement on the account of write-down of inventories to net realisable value during the period ended 30 June 2015 and 31 December 2014 was as follows: Group Carrying amount as at 1 January 2014 Impairment Reversal of impairment Carrying amount as at 31 December 2014

Company 4 195 504 (742) (3 957)

-

Carrying amount as at 1 January 2015 Impairment Reversal of impairment

3 957 67 (985)

-

Carrying amount as at 30 June 2015

3 039

-

10 Cash and cash equivalents Group 2015-06-30 Cash in bank and on hand

2015-06-30

2014-12-31

193 397

182 296

39 477

31 347

-

28 723

-

-

260

-

-

-

193 657

211 019

39 477

31 347

Overnight deposits Time deposits Carrying amount

Company 2014-12-31

For the purpose of cash flow statement, cash and cash equivalents, and bank overdrafts were as follows: Group 2015-06-30

Company 2014-12-31

2015-06-30

2014-12-31

Cash and cash equivalents

193 657

211 019

39 477

Bank overdrafts (Note 12)

(34 632)

(13 030)

-

-

Carrying amount

159 025

197 989

39 477

31 347

31 347

11 Share capital As at 30 June 2015 the Company‘s share capital comprised 1 212 156 294 Eur. As at 30 June 2015 the Company‘s share capital was divided in to 4 179 849 289 ordinary shares with par value 0,29 Eur each. As at 31 December 2014 the Company‘s share capital comprised 4 179 849 289 Lt. As at 31 December 2014 the Company‘s share capital was divided in to 4 179 849 289 ordinary shares with par value 1 Lt each. As at 30 June 2015 and 31 December 2014 share capital was fully paid. In accordance with the Lithuanian Law on the Adoption of the Euro in the Republic of Lithuania and the provisions of the procedure for the conversion of the nominal value of the share capital to the euro of Lietuvos Centrinis Vertybinių Popierių Depozitoriumas AB (Central Securities Depository of Lithuania), on 1 January 2015 the Company's authorized share capital was converted to the euro. The result of the conversion of the nominal value of shares amounted to 1 588 thous. Eur. The Company included the result of conversion in comprehensive income in line ‚Finance costs‘ (Note 16).

Energetikos įmonių grupė www.le.lt

22


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

12 Borrowings Group 2015-06-30

Company 2014-12-31

2015-06-30

2014-12-31

Non-current Bank borrowings

290 752

250 015

-

-

Current portion of long-term loans

69 972

128 076

-

-

Bank overdraft (Note 10)

34 632

13 031

-

-

1 251

418

-

-

-

7

-

-

396 607

391 547

-

-

Current

Other borrowings Accrued interest Total borrowings

Non-current borrowings analyzed by maturity: Group 2015-06-30

Company 2014-12-31

2015-06-30

2014-12-31

Between 1 and 2 years

85 537

81 334

-

-

Between 2 and 5 years

136 993

95 928

-

-

68 222

72 753

-

-

290 752

250 015

-

-

After 5 years Total

The loan agreements contain certain financial and non-financial covenants that the individual Group companies are obliged to comply with. As at 31 December 2014, AB LESTO was not in compliance with one of the financial covenants stipulated in a long-term loan agreement; therefore, the loan balance of EUR 6 316 thousand was reclassified in full to current borrowings. As at 30 June 2015 the Group companies complied with all covenants. As at 30 June 2015 and 31 December 2014, the fair value of borrowings approximated their carrying amount, except for Lietuvos Energijos Gamyba AB borrowings with the carrying amount of 154 280 thous. Eur ir 162 886 thous. Eur respectively. The fair value of these borrowings as at 30 June 2015 were approximately 144 479 thous. Eur (31 December 2014 – 154 143 thous. Eur). The fair value was estimated using a discount rate of 2.54% (31 December 2014 – 2.46%).

13 Provisions Group 2015-06-30

Non-current

Company 2014-12-31

2015-06-30

2014-12-31

6 214

8 543

-

-

Current

16 558

5 884

-

-

Carrying amount

22 772

14 427

-

-

Energetikos įmonių grupė www.le.lt

23


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

Provisions for litigations and claims

Group

1 January 2014 Increase during the period Utilised during the period Increase/decrease on change assumptions Acquisition of AB Lietuvos dujos 30 June 2014

1 January 2015 Increase during the period Utilised during the period (Note 6) Increase/decrease on change assumptions 30 June 2015

of

of

Emission allowance liabilities

Provisions for employee benefits

Provisions for onerous contracts

1 997 56 (198)

Total

112 52 (31)

2 822 439 (2 951)

-

4 931 547 (3 180)

-

186

-

-

186

133

496

2 306 4 161

6 930 6 930

9 236 11 720

83 -

2 839 1 493 (2 992)

3 398 281 (672)

8 107 10 738 (613)

14 427 12 512 (4 277)

-

110

-

-

110

83

1 450

3 007

18 232

22 772

The provision for onerous contracts with household consumers was recognised with reference to forecast sales volume, prices agreed with the Commission for the 1st half of 2015, and forecast prices for the 2nd half of 2015 and for 2016.

14 Other expenses Group 2015-06-30

Company 2014-06-30

2014-06-30

2014-06-30

Taxes

3 241

2 524

21

13

Telecommunication and IT services

1 915

1 631

101

117

Motor vehicles

1 701

2 040

53

67

Customer service

1 400

1 126

-

-

Rent

1 205

1 361

74

82

Impairment of receivables

1 123

631

-

-

Write-offs of PP&E

1 043

1 648

-

-

Utility services

852

1 026

23

39

Consulting services

661

570

314

159

Expenses of low-value inventory items

508

323

-

-

Marketing

452

238

62

38

Expenses related to revaluation of emission allowances and provisions

281

(1 534)

-

-

Business trips

266

176

19

21

Personnel development

250

175

35

15

-

-

1 667

-

Impairment of inventories

(602)

(26)

-

-

Other expenses

3 602

1 425

183

71

17 900

13 334

2 552

622

Impairment of investments in subsidiaries

15 Finance income Group 2015-06-30 Interest income Dividends received

Company 2014-06-30

2015-06-30

2014-06-30

2 451

2 000

3 293

1 960

-

1 924

60 738

69 668

Foreign exchange positive effect

345

-

-

-

Other finance income

347

207

-

127

3 143

4 131

64 031

71 755

Energetikos įmonių grupė www.le.lt

24


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

16 Finance costs Group 2015-06-30

Company 2014-06-30

2015-06-30

2014-06-30

Result of conversion of share capital

1 588

-

1 588

-

Interest expense

2 449

4 264

142

61

580

3

-

-

1

243

-

3

4 618

4 510

1 730

64

Foreign exchange negative effect Other finance costs

17 Income tax Income tax expenses comprise current income tax and deferred income tax. Income tax at a rate of 15% is applied to profit for 2015 (the same as in 2014) in accordance with the Lithuanian regulatory legislation on taxation

18 Dividends Based on the Order issued by the Lithuanian Ministry of Finance on 29 April 2015, the Company‘s set of annual financial statements was approved and dividends for the state-owned Company‘s shares were established in amount 28 093 thous. Eur The Company did not pay any dividends for the first half year 2014. During the General Shareholder‘s Meeting of AB LESTO held on 27 April 2015, the decision was made to pay out dividends in the amount of 12 079 thous. Eur from profit for appropriation. The Company received dividends of 11 401 thous. Eur. During the General Shareholder‘s Meeting of Lietuvos energijos gamyba AB held on 27 April 2015, the decision was made to pay out dividends in the amount of 21 720 thous. Eur from profit for appropriation. The Company received dividends of 20 880 thous. Eur. During the General Shareholder‘s Meeting of AB Lietuvos dujos held on 27 April 2015, the decision was made to pay out dividends in the amount of 27 993 thous. Eur from profit for appropriation. The Company received dividends of 27 054 thous. Eur. During the General Shareholder‘s Meeting of UAB Duomenų logistikos centras held on 8 April 2015, the decision was made to pay out dividends in the amount of 311 thous. Eur from profit for appropriation. The Company received dividends of 248 thous. Eur. During the General Shareholder‘s Meeting of Energijos tiekimas UAB held on 27 April 2015, the decision was made to pay out dividends in the amount of 1 155 thous. Eur from profit for appropriation. The Company received dividends of 1 155 thous. Eur.

19 Transactions with related parties As at 30 June 2015 and 31 December 2014 the parent company was the Republic of Lithuania represented by Ministry of Finance. For the purpose of disclosure of related parties, the Republic of Lithuania does not include central and local government authorities. The disclosures comprise transactions and their balances with the parent company, subsidiaries (Company‘s transactions), associates and all entities controlled by or under significant influence of the state (transactions with these entities are disclosed only if they are material), and management.

Group‘s transactions with related parties Sale of goods and services in January – June 2015 and 2014: Group 2015-06-30 UAB EPSO-G Other related parties

Energetikos įmonių grupė www.le.lt

2014-06-30 2 191 53 099

1 586 25 751

55 290

27 337

25


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated Purchases of goods and services in January – June 2015 and 2014: Group 2015-06-30 UAB EPSO-G Litgrid AB BALTPOOL UAB UAB TETAS AB „Amber Grid“ (from 2014 07.01) Other related parties

2014-06-30 30 233 43 694 7 426

34 277 86 286 4 836

4 464 711

-

86 528

125 399

Amounts receivable from related parties Group 2015-06-30 UAB EPSO-G Litgrid AB BALTPOOL UAB UAB TETAS AB Amber Grid (from 2014 07.01) Other related parties

2014-12-31

241 933 3 672 19 899 183 29 265

240 372 3 198 9 983 359 297 73

265 981

254 282

Amounts payable to related parties Group 2015-06-30 UAB EPSO-G Litgrid AB BALTPOOL UAB UAB TETAS AB Amber Grid (from 2014 07.01) Other related parties

2014-12-31 5 626 13 048 4 265 1 386 -

8 976 19 487 3 275 349 494

24 325

32 581

Company‘s transactions with related parties Sale of goods and services in January – June 2015 and 2014: Company 2015-06-30

2014-06-30

AB LESTO Lietuvos energijos gamyba AB AB Lietuvos dujos UAB Lietuvos dujų tiekimas NT Valdos, UAB UAB Kauno energetikos remontas UAB Verslo aptarnavimo centras Energijos tiekimas UAB UAB LITGAS UAB ELEKTROS TINKLO PASLAUGOS UAB Technologijų ir inovacijų centras UAB VAE SPB Public institution Energetikų mokymų centras UAB Duomenų logistikos centras UAB EPSO-G

277 181 156 73 39 37 36 28 1 068 26 18 13 12 11 2 191

1 3 1 586

Total

4 166

1 590

Energetikos įmonių grupė www.le.lt

26


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated Purchases of goods and services in January – June 2015 and 2014: Company 2015-06-30 AB LESTO Lietuvos energijos gamyba, AB UAB Duomenų logistikos centras NT Valdos. UAB UAB Verslo aptarnavimo centras UAB Technologijų ir inovacijų centras Public Institution Energetikų mokymų centras Litgrid AB Total

2014-06-30

58 980 49 024 528 132 109 99 3 252

5 544 12 013 172 119 -

109 127

17 848

Amounts receivable from related parties Company 2015-06-30

2014-12-31

AB LESTO Lietuvos energijos gamyba AB AB Lietuvos dujos UAB Lietuvos dujų tiekimas NT Valdos, UAB UAB Kauno energetikos remontas UAB Verslo aptarnavimo centras Energijos tiekimas UAB

335 219 190 88 47 46 37 34

-

UAB LITGAS UAB ELEKTROS TINKLO PASLAUGOS

712 32

204 -

UAB Technologijų ir inovacijų centras UAB VAE SPB

22 16

-

Public institution Energetikų mokymų centras UAB Duomenų logistikos centras

15 13

-

UAB EPSO-G

241 933

240 371

Total

243 739

240 575

Amounts payable to related parties: Company 2015-06-30

2014-12-31

AB LESTO Lietuvos energijos gamyba, AB NT Valdos, UAB UAB Verslo aptarnavimo centras UAB Technologijų ir inovacijų centras UAB Duomenų logistikos centras Public institution Energetikų mokymo centras Litgrid AB

46 724 38 763 26 21 19 422 1 189

27 22 81 1 -

Total

86 165

131

Management compensation: Group 2015-06-30 Salaries and other short-term benefits Whereof: Termination benefits and benefits to Board Members Number of management staff

2 005 255 73

Company 2014-06-30 1 310 140 56*

2015-06-30 332 56 10

2014-06-30 302 51 9

Management in the table above includes heads of administration and their deputies, and chief financiers. *does not include AB Lietuvos dujos data

Energetikos įmonių grupė www.le.lt

27


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated

20 Commitments and contingencies Buyout of electricity equipment I n 2015, AB LESTO executed simplified procedure of buyout of electricity objects (electricity networks) installed for common use using the funds of homestead owners in line with the deadlines stipulated in Resolution No. 1257 of 31 August 2010 of the Lithuanian Government On the establishment of deadlines for the buyout from cooperatives the electricity transmission and distribution lines, transformer substations, electric facilities and other equipment designated for the transmission and distribution of electricity and installed in the territory of homestead owners using the funds of such homestead owners, i.e. by 1 July 2011. During the first half of 2015, 1 electricity networks of common use for the value of EUR 2 (2014: 6 electricity networks for the value of EUR 67 thousand) were bought out. During the period from the start date of the buyout procedure until 30 June 2015, 941 electricity networks of common use of homestead cooperatives for the value of EUR 11 852 thousand were bought out. As at 30 June 2015, 13 applications with requests to buyout equipment on concessionary terms remained unsettled with the value of EUR 189 thousand.

Capital expenditure commitments As at 30 June 2015, AB LESTO capital expenditure commitments assumed under the contracts as at the date of the financial statements but not accounted for in the financial statements amounted to EUR 21 586 thousand (31 December 2014: EUR 8 179 thousand).

Litigations Dispute with Vilniaus Energija Vilniaus Energija UAB (the claimant) filed a claim to Vilnius Regional Administrative Court, whereby it requested to award damages of EUR 9,284 million from AB LESTO. The claimant insisted that it incurred losses of EUR 9 284 thousand because for the purpose of ensuring compliance with the Lithuanian Government Resolution No 1051 of 20 November 2013 and the provisions of agreement on purchase/sale of electricity signed with the claimant, in 2014 AB LESTO purchased only that volume of supported electricity, which was produced under the technical minimum mode at the thermal power plants owned by the claimant. The claimant noted that the legal acts stipulated a requirement whereby AB LESTO was obliged to purchase maximum volume, and AB LESTO failed to comply with such requirement. In its claim, the claimant requested as follows: to recognise the provisions of agreement on purchase/sale of electricity (No 80000/232945/753, dated 30 December 2013) between the claimant and respondent as void ab initio; to oblige the respondent to purchase the maximum volume of supported electricity in 2014 from the claimant, which was established for the claimant’s thermal power plants No 2 and No 3 by the Lithuanian Government Resolution No 1051 of 20 November 2013; and to award damages of EUR 9 284 thousand from the respondent, as well as 6% annual interest on the awarded amount of damages from the respondent, staring from the date of initiation of the case until full fulfilment of the court’s ruling, plus litigation costs incurred. The respondent does not agree with the claimant‘s position that the respondent should be obliged to purchase full volume of supported electricity produced at thermal power plants No 2 and No 3, because the description of PSO services and other effective legal acts do not stipulate that the respondent is obliged to purchase full volume of electricity produced at thermal power plants No 2 and No 3. During the investigation of the case, on 18 July 2014 the claimant requested to apply to the Constitutional Court in order to investigate whether certain provisions of the above-mentioned Resolution are not in contravention of the Lithuanian Constitution; such request of the claimant was rejected by the court; On 30 April 2015, the claimant filed a repeat request for the suspension of the case and application to the Constitutional Court in order to investigate a probable non-compliance of regulatory legislation with the Lithuanian Constitution and the laws. On 16 June 2015, the court ruled on the suspension of this civil case until the investigation of the court's reference to the Constitutional Court of the Republic of Lithuania and the passing of its ruling. Considering the fact that the Constitutional Court has not yet passed any ruling in this case (it is probable that the request of the court of the first instance might be returned, etc.) and that in the AB LESTO opinion, the claimant‘s claim has no grounds and should not be satisfied, this claim was not accounted for in the financial statements. Dispute with the National Control Commission for Prices and Energy AB LESTO filed a complaint to Vilnius Regional Administrative Court with request to annul the related Resolutions of the National Control Commission for Prices and Energy (the Commission), oblige the Commission to eliminate the violations, and include the following items in the level of revenue used for price cap calculation when determining the price caps for electricity distribution services provided by AB LESTO through medium and low voltage networks for the upcoming period: – difference of EUR 7 777 thousand for 2015, which occurred as result of improper WACC amount applied by the Commission; – difference of EUR 4 638 thousand for 2015, which occurred as result of the Commission’s improper application of requirements set forth in legal acts in respect of allowable return on investment for AB LESTO; – amount of EUR 16 455 thousand, as a result of unsubstantiated costs identified by the Commission during the audit that have been treated by AB LESTO as attributable to regulated activity costs; – amount of EUR 11 929 thousand, as a result of the Commission’s improper application of the requirements set forth in legal acts in respect of allowable return on investment and required regulated activity costs for AB LESTO.

Energetikos įmonių grupė www.le.lt

28


Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated In addition, AB LESTO filed a complaint to Vilnius Regional Administrative Court with request to annul the Commission’s Resolutions and oblige the Commission to eliminate the violations, which resulted in: – –

lower revenue of AB LESTO from PSO services for 2015 by EUR 862,78 million; lower electricity acquisition costs of AB LESTO for 2015 by EUR 311,63 million.

AB LESTO filed an appeal against the Commission's Regulation before the court whereby the Commission approved the regulatory period of electricity distribution activity of AB LESTO from 2016 to 2020; established the unadjusted amount of the regulated asset base (RAB) of the distribution activity in the medium and low voltage networks calculated using the LRAIC accounting model for the last (target) year of the regulatory period, i.e. 2020; the amount of the cost of capital in the medium and low voltage networks; the amounts of depreciation expenses in the medium and low voltage networks; the rate of return on investments in the medium and low voltage networks that meets the prudence criterion; the amount of operating expenses (OPEX) in the medium and low voltage networks. In the AB LESTO opinion, when the Commission adopted the relevant Resolution it violated procedures established by the legal acts aimed at ensuring the evaluation of objective circumstances and the reasonableness of the decision, improperly applied the effective laws, improperly applied rules for the estimation of the value of the regulated assets, applied the incorrect rate of return on investments (WACC) that does not meet the prudence criterion; improperly applied rules for the determination of operating costs, etc. AB LESTO objects to the Commission's Resolution No O3-351 of 4 June 2015 Regarding the violation of terms and conditions of the regulated activity of AB LESTO and using its right to judicial protection filed a claim to Vilnius Regional Administrative Court under the procedure established by the Law on Administrative Proceedings for the unreasonableness, unlawfulness and annulment of the Resolution on the application of sanctions, which is based on the following arguments: the sanction to AB LESTO was applied with reference to the results of the performed inspection, yet the inspection was performed by failing to comply with the requirements set forth in Article 364 (1) and (14) of the Law on Public Administration; in the inspection report the inspection commission delegated by the Commission presented a subjective evaluation of accounting data of LESTO; the inspection report does not meet the applicable criteria of necessity and legitimacy established in paragraph 52 of the Supervision Procedure and is not supported by arguments; when performing the inspection and following the provisions of the costs requirements, the Commission violated one of the fundamental principles of law lex retro non agit, therefore, illegitimately and wrongly applied sanctions to AB LESTO on the basis of the inspection report; the Resolution of the application of the sanction does not comply with the requirements stipulated in legal acts regulating the application of sanctions and also violates the terms for the application of disciplinary measures to entities established in Article 368 of the Law on Public Administration; no explanations or supporting arguments were given as to the amount of a monetary fine applied to AB LESTO, which is indicated in the Resolution on the application of sanctions and this is a violation of the terms and conditions for the application of disciplinary measures to entities established in Article 368 of the Law on Public Administration, etc. In the AB LESTO opinion, when the Commission adopted the relevant Resolutions it improperly interpreted and applied effective laws and other legal acts, exceeded its competence and violated the principles of public administration, failed to comply with the principles of supervision of activities of entities, improperly estimated costs required for AB LESTO to carry on its regulated activities and costs attributable to regulated activities. Accordingly, the Resolutions, in respect of which a complaint was filed, should be treated as unsubstantiated and unlawful. The disputed amounts were not accounted for in the financial statements. Dispute regarding investigation of activity of AB Lietuvos dujos On 25 March 2011, the Lithuanian Ministry of Energy filed a claim to Vilnius Regional Court in relation to examination of the legal entity's operations, wherein the Board Members of Lietuvos Dujos AB delegated by Gazprom OAO, and the Managing Director were indicated as the respondents. In its claim, the Lithuanian Ministry of Energy demanded initiation of examination of operations of Lietuvos Dujos AB and application of relevant requirements set forth in the claim in case the results of examination showed that operations of Lietuvos Dujos AB and/or the aforementioned Board Members and/or the Managing Director were inappropriate. Upon completion of investigation of the claim, on 3 September 2012 Vilnius Regional Court ruled in favour of the claimant to initiate examination of operations of Lietuvos Dujos AB. Lietuvos Dujos AB appealed against the ruling of the court of the first instance to the Lithuanian Court of Appeal, which on its turn upheld the decision of Vilnius Regional Court without any changes thereto. On 29 April 2013, Lietuvos Dujos AB appealed by cassation to the Lithuanian Supreme Court with request to annul the decision passed by the Lithuanian Court of Appeal on 21 February 2013, and not to proceed with the case or reject it. On 20 November 2013, the Lithuanian Supreme Court suspended a judgement until the final resolution of the issue pertaining to recognition and enforcement of the arbitrary decision passed by the Arbitration institute of the Stockholm Chamber of Commerce (Kingdom of Sweden) (hereinafter "the arbitrary decision"). Based on the aforementioned arbitrary decision, it was concluded that the courts of the Republic of Lithuania are in a position to hear the case in relation to examination of operations of Lietuvos Dujos AB; however, all matters pertaining to natural gas supply and transit to Kaliningrad District (including prices and tariffs) are within an exclusive jurisdiction of the Arbitration. The Lithuanian Supreme Court investigated the issue pertaining to recognition of the arbitrary decision and referred to the Court of Justice of the European Union with request to give a preliminary (explanatory) ruling as to interpretation and application of regulatory requirements related to recognition of the arbitrary decision. The proceedings have not been reopened as of the date of reporting, and the final outcome of the case is unclear and cannot be reasonably assessed. Dispute about the supply activity tariffs for household users On 14 July 2014, the Prosecution Service of the Republic of Lithuania filed an indictment to Vilnius City District Court where Lietuvos Dujos AB and its former employees were charged with allegedly causing damage in establishing the supply activity tariffs for household users. On 13 August 2014, Vilnius City District Court started the examination of this criminal case. The Prosecutor General requested the court to impose a fine on AB Lietuvos Dujos amounting to 25 000 minimum monthly wages or 950 thous. Eur. AB Lietuvos Dujos objected to the charges and requirements of the Prosecution Service. AB Lietuvos dujos expected the court to pass an acquittal. On 27 February 2015, Vilnius City District Court passed an acquittal whereby it acquitted AB Lietuvos Dujos as it was not established that the acts attributed were made. On 18 March 2015, the Prosecutor General appealed against the acquittal. At the present moment the case is investigated under the appeal procedure. In the opinion of AB Lietuvos Dujos, the decision of the court of the first instance is lawful and substantiated, therefore should not be changed.

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Lietuvos energija, UAB, Company‘s code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the six-month period ended 30 June 2015 All amounts in thousands of euro unless otherwise stated Dispute with Vilniaus Energija On 23 January 2015, Vilniaus Energija UAB filed a claim to respondent Lietuvos Dujų Tiekimas UAB regarding the amendment to the pricing rules (formulas for the calculation of the price of natural gas established in the agreements) established in the agreements on the natural gas supply dated 28 December 2012 and 30 December 2013 and the awarding of the overpayment for natural gas acquired. The claim amount is equal to EUR 19,131,562.67 and consists of the following two elements: the natural gas price overpayment amounting to EUR 19,087,634.96 and interest amounting to EUR 43,927.71. On 14 July 2015, Vilniaus Energija UAB filed a revised claim by indicating Lietuvos Dujos AB as a second respondent and requested the court to order Lietuvos Dujų Tiekimas UAB and Lietuvos Dujos AB jointly and severally pay the natural gas price overpayment and interest. In the opinion of Lietuvos Dujos AB, neither the legal acts nor the agreements on the natural gas supply obliged Lietuvos Dujos AB and Lietuvos Dujų Tiekimas UAB to pay to Vilniaus Energija UAB any amounts due to the change in import prices of natural gas or recalculate the natural gas price in case such changes occur; Lietuvos Dujos AB has properly fulfilled its contractual obligations under the agreements. As a result, in the opinion of the AB Lietuvos dujos management, the claim is not substantiated. The case is under investigation by the court of the first instance. Dispute with Vilniaus energija and Amilina During the first half year of 2015 two customers of UAB Lietuvos dujų tiekimas – UAB Vilniaus energija and UAB Amilina – has claimed UAB Lietuvos dujų tiekimas in Vilnius Regional court regarding the changes of pricing rules set in natural gas supply agreements and claimed for compensation of overpaid natural gas. Both claimants together require to award from UAB Lietuvos dujų tiekimas EUR 20,39 million. Lietuvos Dujų Tiekimas UAB objects to the claimant's demands and intends to defend its rights and interests at court. There are many processing orders in this case, therefore it is difficult to project the duration of the process and UAB Lietuvos dujų tiekimas can not reliably assess the outcome of this case.

Guaranties issued and received On 3 October 2014, Lietuvos energija, UAB and UAB LITGAS signed a surety and guarantee limit agreement under which the Company provided UAB LITGAS with a guarantee for amount of EUR 100 million, which may be further increased up to EUR 125 million. The guearantee is aimed to ensure UAB LITGAS credit arrangements with credit institutions and long-term liquid natural gas purchase egreements with LNG suppliers. As at 30 June 2015 UAB LITGAS has used 67,1 million Eur of surety and guarantee limit. On 17 November 2014, the Company and Swedbank AB signed a surety agreement. The surety agreement is used to secure the fulfilment of part of obligations of LITGAS UAB arising from a credit agreement with Swedbank AB. The maximum surety amount cannot exceed LTL 42 million.

Contractual commitments Based on the provisions of the agreement on natural gas supply with Gazprom OAO, 128.3 million m3 of natural gas has not been consumed compared to the established minimum natural gas consumption volume of 1 billion m3. It may be consumed over the upcoming 3 years, provided the contractual payment and natural gas consumption commitments have been fulfilled. Natural gas not consumed had no impact on financial position of UAB Lietuvos dujų tiekimas in 2015, however UAB Lietuvos dujų tiekimas is obliged to pay 26,8 million Eur, i.e. to pay an advance for natural gas quantity not consumed in 2014. In May 2014 AB Lietuvos dujos and OAO Gazprom agreed on reduction of imported natural gas price for the period from 1 January 2013 to 31 December 2015. Impact of natural gas import price reduction for the period from 1 January 2013 to 30 April 2014 is related to household and non-household gas consumers. Natural gas import price difference will be attributed to non-household consumers through 2015-2016 year or longer period, whereas to household consumers – through 2015-2016 year period.

21 Events after the end of reporting period As at 2 July 2015 UAB LITGAS and Swedbank AB has signed amendment to the credit agreement, according to the amendment credit line limit was reduced from 83,33 million Eur to 70,0 million Eur. As at 4 July 2015 share capital of UAB Vilniaus kogeneracinė jėgainė was increased up to 1 003 thous. Eur by issuing 3 450 000 of ordinary shares. For new share emission 250 thous. Eur were paid at the date of approval of these financial statements. In July 2015 UAB LITGAS and Statoil ASA has signed memorandum regarding the establishment of joint company, which purpose would be development of liquid natural gas supply activity in low quantities. It is planned, that the new company will be established in Lithuania this year and will supply ships and terminals in Baltic Sea with liquid natural gas and will provide fuel by trucks to clients on earth. As at 3 August 2015 UAB Lietuvos dujų tiekimas, AB Lietuvos dujos and OAO Gazprom has signed the agreement, according to this agreement UAB Lietuvos dujų tiekimas has formally took over all rights and obligations, related to gas supply agreement signed in 1999 between OAO Gazprom and AB Lietuvos dujos. As at 19 August 2015 the Company has signed shares acquisition agreement with UAB Kauno energetikos remontas and acquired 100% of Gotlitas, UAB ordinary shares. Shares acquisition price – 61 thous. Eur.

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Profile for "Lietuvos energija", UAB

LE FA 2015 06 30 consolidated ENG  

LE FA 2015 06 30 consolidated ENG  

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