2014 iiq_consolidated and company's condensed interim financial information (unaudited)

2014 LIETUVOS ENERGIJA UAB

CONSOLIDATED AND COMPANY’S

CONDENSED INTERIM FINANCIAL INFORMATION(unaudited)

for a six-month period

ended 30 June 2014

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REVIEW REPORT

CONDENSED INTERIM FINANCIAL INFORMATION

Condensed interim statement of financial position

Condensed interim statement of profit and loss and other comprehensive income

Condensed interim statement of changes in equity

Condensed interim statement of cash flows

Notes to the condensed interim financial information

TABLE OF CONTENTS

Translation note:

This condenced 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.

AUDITOR‘S REPORT

5CONSOLIDATED AND COMPANY’S CONDENSED INTERIM FINANCIAL INFORMATION (unaudited)for a six-month period ended 30 June 2014

NotesGroup Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

ASSETS

Non-current assets

Intangible assets 4 333 981 336 017 - -

Property, plant, and equipment 5 7 671 512 7 318 650 25 33

Prepayments for non-current assets 188 132 - -

Investment property 126 809 121 626 - -

Subsidiaries and other investments 6 - - 3 535 726 2 763 355

Investments in associates 26 818 28 800 - -

Amounts receivable after one year 7 844 809 712 888 825 131 690 000

Long-term investments 8 16 585 57 302 16 585 57 302

Other non-current assets 21 065 17 850 - -

Deferred income tax assets 7 144 1 160 124 71

Total non-current assets 9 048 911 8 594 425 4 377 591 3 510 761

Current assets

Inventories 9 73 662 34 614 - -

Prepayments 10 276 113 16 292 89 8

Trade receivables 334 666 304 437 2 2

Other receivables 99 017 85 641 20 348 38 537

Other current assets 8 227 - -

Prepaid income tax 9 087 10 190 - -

Short-term investments 8 189 122 385 189 122 385

Cash and cash equivalents 11 303 654 558 396 3 268 309 974

1 096 396 1 132 182 23 896 470 906

Non-current assets held for sale 492 618 266 266

Total current assets 1 096 888 1 132 800 24 162 471 172

TOTAL ASSETS 10 145 799 9 727 225 4 401 753 3 981 933

Condensed interim statement of financial position (unaudited)as of 30 June 2014All amounts in LTL thousands unless otherwise stated

(continued on the next page)


EQUITY AND LIABILITIES

Equity

Share capital 12 4 179 849 4 067 164 4 179 849 4 067 164

Reserves 13 868 190 1 456 119 189 -

Retained earnings (deficit) 1 238 396 30 194 153 622 (87 060)

Equity attributable to owners of the parent 6 286 435 5 553 477 4 333 660 3 980 104

Non-controlling interest 292 380 699 228 - -

Total equity 6 578 815 6 252 705 4 333 660 3 980 104

Liabilities

Non-current liabilities

Non-current borrowings 14 859 244 805 826 - -

Finance lease liabilities 111 36 - -

Grants and subsidies 1 084 034 1 091 511 - -

Deferred income tax liability 405 473 409 339 - -

Provisions 15 12 726 4 588 - -

Deferred income 185 267 189 523 - -

Other non-current amounts payable and liabilities 55 397 77 559 - -

Total non-current liabilities 2 602 252 2 578 382 - -

Current liabilities

Current portion of long-term debts 14 362 344 302 656 - -

Current borrowings 14 36 785 71 562 4 900 -

Current portion of finance lease liabilities 360 8 - -

Trade payables 210 494 268 561 402 409

Advance amounts received 109 916 69 470 - -

Current income tax liabilities 26 759 7 765 25 -

Provisions 15 27 741 12 437 - -

Other current amounts payable and liabilities 190 333 163 679 62 766 1 420

Total current liabilities 964 732 896 138 68 093 1 829

Total liabilities 3 566 984 3 474 520 68 093 1 829

TOTAL EQUITY AND LIABILITIES 10 145 799 9 727 225 4 401 753 3 981 933

The accompanying notes form an integral part of this condensed interim financial information.

NotesGroup Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013


Group NotesGroup Company

2014 IH 2014 IIQ 2013 IH 2013 IIQ 2014 IH 2014 IIQ 2013 IH 2013 IIQ

RevenueSales revenue 1 328 040 635 407 1 383 578 651 800 - - - -

Other operating income 62 514 33 731 50 808 26 589 4 2 4 2

Total revenue 1 390 554 669 138 1 434 386 678 389 4 2 4 2

Operating expensesPurchase of electricity and related services (725 268) (318 271) (762 748) (321 784) - - - -

Purchase of gas and fuel oil (84 199) (67 611) (96 393) (53 526) - - - -

Depreciation and amortisation (219 332) (110 847) (248 024) (122 750) (9) (5) (8) (4)

Wages and salaries and related expenses (114 528) (56 089) (114 543) (56 209) (4 762) (2 661) (3 348) (1 518)

Repair and maintenance expenses (39 931) (23 258) (29 703) (14 058) - - - -

Other expenses 16 (61 301) (29 090) (95 012) (45 723) (2 149) (1 264) (1 252) (606)

Total operating expenses (1 244 559) (605 166) (1 346 423) (614 050) (6 920) (3 930) (4 608) (2 128)Operating profit / (loss) 145 995 63 972 87 963 64 339 (6 916) (3 928) (4 604) (2 126)

Negative goodwill on acquisition of Lietuvos Dujos AB 19 154 203 154 203 - - - - - -

Share of result of investment under equity method 19 149 194 149 194 - - - - - -

Re-measurement of investment under equity method 19 (97 988) (97 988) - - - - - -

Finance income 17 14 265 9 301 10 411 5 447 247 757 244 618 116 734 113 069

Finance costs 18 (15 572) (10 044) (13 735) (8 207) (221) (213) - -

Share of results of other associates (301) - 348 - - - -

Profit / (loss) before income tax 349 797 268 639 84 987 61 579 240 620 240 477 112 130 110 943

Current year income tax expense (24 534) (9 776) (21 108) (10 591) (25) (25) - -

Deferred income tax income / (expense) 4 229 1 287 13 078 7 903 87 84 (439) (439)

Net profit / (loss) for the period 329 492 260 150 76 957 58 891 240 682 240 536 111 691 110 504

Condensed interim statement of profit and loss and other comprehensive income (unaudited)for a six-month period ended 30 June 2014All amounts in LTL thousands unless otherwise stated

(continued on the next page)


Attributable to:

Owners of the parent 318 480 257 214 70 711 55 468 240 682 240 536 111 691 110 504

Non-controlling interest 11 012 2 936 6 246 3 423 - - - -

Other comprehensive income / (loss)Items that will not be reclassified to profit or loss

Gain (loss) on revaluation of non-current assets - - (65) - - -

Total items that will not be reclassified to profit or loss - - (65) - - - - -Items that will be reclassified to profit or loss

Change in fair value of available-for-sale financial assets 189 189 - - 189 189 - -

Total items that will be reclassified to profit or loss 189 189 - - 189 189 - -Total other comprehensive income / (loss) 189 189 (65) - 189 189 - -Total comprehensive income (loss) for the period 329 681 260 339 76 892 58 891 240 871 240 725 111 691 110 504

Attributable to:

Owners of the parent 318 669 257 403 70 649 55 468 240 871 240 725 111 691 110 504

Non-controlling interest 11 012 2 936 6 243 3 423 - - - -



Group Company30 Jun 2014

30 Jun 2013

30 Jun 2014

30 Jun 2013

Cash flows from operating activitiesNet profit (loss) for the period 329 492 76 957 240 682 111 691

Adjustments for non-monetary items:Depreciation and amortisation 4,5 239 596 268 452 8 8Revaluation of property, plant and equipment 5 - 77 - -Impairment of assets (reversal of impairment) (6 127) (20) - -Share of the results of associates and joint ventures 301 (348) - -Income tax expense 20 305 8 030 (62) 439(Depreciation) of grants (20 264) (20 427) - -Increase (decrease) in provisions 23 442 (7 660) - -(Gain) / loss on disposal / write-off of property, plant and equipment 4 710 6 218 - -Result on business acquisition 19 (205 568) - - -Elimination of results of financing and investing activities:Interest income 17 (6 905) (7 708) (6 768) (7 479)Interest expense 18 14 724 15 534 211 -Other finance (income) / costs (6 504) (4 502) (240 989) (109 255)

Changes in working capital:(Increase) decrease in trade receivables and other amounts receivable 19 965 67 962 (8 408) 181(Increase) decrease in inventories, prepayments andother current assets (11 401) 26 673 (81) 72Increase (decrease) in amounts payable, deferred income and advan-ce amounts receive (99 619) (94 881) 880 566Income tax (paid) (22 641) (17 511) - -

Net cash generate from / (used in) operating activities 273 506 316 846 (14 527) (3 777)Cash flows from investing activities

(Acquisition) of PP&E and intangible assets (176 990) (148 417) - (5 776)Disposal of PP&E and intangible assets 1 104 4 511 - -Loans (granted), loan repayments received (99 935) 202 (103 131) -Change in time deposits - 53 733 - 50 713Acquisition of subsidiaries (associates) - - (10) (5)Grants received 6 942 4 433 - -Bonds acquired - (153 002) - (153 002)Bonds disposed 162 908 52 064 162 908 52 064Interest received 2 321 2 314 1 997 1 271Dividends received 6 643 - 240 551 109 255Acquisition of LESTO AB shares from minority shareholders 6 - - (117 887) -Acquisition of Lietuvos Dujos AB shares 19 (354 763) - (481 357) -

Net cash flows from / (used in) investing activities (451 770) (184 162) (296 929) 54 520Cash flows from financing activities

Proceeds from borrowings 730 720 129 948 50 491 -Repayments of borrowings (617 615) (138 494) (45 591) -Finance lease payments (435) (177) - -Interest paid (16 064) (15 536) (150) -Dividends paid (21 246) (18 148) - -Acquisition of LESTO AB shares from minority shareholders 6 (117 887)Other cash flows from financing activities - (10) - -

Net cash flows from / (used in) financing activities (42 527) (42 417) 4 750 -Increase (decrease) in cash and cash equivalents(including overdraft) (220 791) 90 267 (306 706) 50 743

Cash and cash equivalents (including overdraft) at the beginningof the period 487 688 (3 215) 309 974 57 765

Cash and cash equivalents (including overdraft) at the endof the period 266 897 87 052 3 268 108 508

Condensed interim statement of cash flows (unaudited)for a six-month period ended 30 June 2014All amounts in LTL thousands unless otherwise stated



Group No-tes

Equity attributable to owners of the Group Non-con-trolling interest

TotalShare capital

Legalreserve

Revaluation reserve

Other reserves

Retainedearnings Subtotal

Balance at 1 January 2013 (restated) 4 067 164 75 467 802 934 689 922 (207 569) 5 427 918 711 864 6 139 782Revaluation of property, plant and equipment, net of deferred income tax effects - - (62) - - (62) (3) (65)Total other comprehensive income (loss) for the period - - (62) - - (62) (3) (65)Net profit (loss) for the period (restated) - - - - 70 711 70 711 6 246 76 957Total comprehensive income (loss) for the period - - (62) - 70 711 70 649 6 243 76 892Transfer of revaluation reserve to retained earnings(transfer of depreciation, net of deferred income tax) - - (37 186) - 37 186 - - -Transfer to reserves and movement in reserves - 1 595 - (38 453) 36 858 - - -Dividends - - - - - - (18 818) (18 818)Changes in non-controlling interest on the group‘s restructuring - 12 164 - (2 162) (1 986) (6 036) (8 022)Balance at 30 June 2013 4 067 164 77 074 765 850 651 469 (64 976) 5 496 581 693 253 6 189 834

Balance at 1 January 2013 4 067 164 77 074 727 576 651 469 30 194 5 553 477 699 228 6 252 705Change in fair value of available-for-sale financial assets,net of deferred income tax effects - - - 189 - 189 - 189Total other comprehensive income (loss) for the period - - - 189 - 189 - 189Net profit (loss) for the period - - - - 318 480 318 480 11 012 329 492Total comprehensive income (loss) for the period - - - 189 318 480 318 669 11 012 329 681Transfer of revaluation reserve to retained earnings(transfer of depreciation, net of deferred income tax) - - (40 642) - 40 642 - - -Transfer to reserves and movement in reserves 13 - 1 250 - (651 555) 650 305 - - -Dividends - - - - - - (26 131) (26 131)Increase in share capital 12 112 685 - - - - 112 685 - 112 685Acquisition of shares from minority shareholders 6 - 5 792 97 044 (7) 198 775 301 604 (419 491) (117 887)Acquisition of subsidiary 19 - - - - - - 27 762 27 762Balance at 30 June 2014 4 179 849 84 116 783 978 96 1 238 396 6 286 435 292 380 6 578 815

Condensed interim statement of changes in equity (unaudited)for a six-month period ended 30 June 2014All amounts in LTL thousands unless otherwise stated



Company Notes Share capital Legal reserve Other reserves Retained earnings Total

Balance at 1 January 2013 4 067 164 - - (200 328) 3 866 836Net profit (loss) for the period - 111 691 111 691Balance at 30 June 2013 4 067 164 - - (88 637) 3 978 527

Balance at 1 January 2014 4 067 164 - - (87 060) 3 980 104Increase in share capital 12 112 685 - - - 112 685Change in fair value of available-for-sale financial assets, net of deferred income tax effects - - 189 - 189Net profit (loss) for the period - - - 240 682 240 682Balance at 30 June 2014 4 179 849 - 189 153 622 4 333 660



This financial information contains unaudited condensed interim financial information of Lietuvos Energija UAB (hereinafter referred to as “the Company”) and its subsid-iaries (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 compa-ny 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 in-stitution the Centre of Registers. The Company’s code 301844044, VAT payer’s code LT10004278519. The Com-pany has been established for an unlimited period.

Lietuvos Energija UAB is a parent company, which is re-sponsible for the management and coordination of activ-ities of the Group companies engaged in electric power

and heat production and supply, electric power import and export, distribution and trade, as well as in service and development of electric energy industry.

The Company analyses the activities of the Group com-panies, 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, commu-nication and other.

Lietuvos Energija UAB seeks to ensure effective operation of the Group companies, implementation of goals related to the Group’s activities set forth in the National Energet-ic 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 Government of the Republic of Lithuania.

1 General information

Company’s shareholder30 June 2014 31 December 2013

Share capital Ownershipinterest, % Share capital Ownership

interest, %

Republic of Lithuania represented by the Lithuanian Ministry of Finance 4 179 849 100 4 067 164 100

Notes to condensed interim financial information (unaudited)for a six-month period ended 30 June 2014All amounts in LTL thousands unless otherwise stated


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

Company name Registered office address

Effectiveownership

interestat 30 June 2014, %

Share capital (‘000 LTL)

at 30 June 2014Profile of activities

Lietuvos Energijos Gamyba AB

Elektrinės str. 21,Elektrėnai 96,1 635 084 Electricity generation, supply, import,

export and trade

LESTO AB Žvejų str. 14,Vilnius 94,4 603 945 Electricity supply and distribution to

end users

Lietuvos Dujos AB Aguonų str. 24,Vilnius 96,6 290 686 Supply and distribution of natural gas

to end users

NT Valdos UAB Geologų str. 16,Vilnius 94,7 295 408 Operation of real estate, other related

activities and provision of services

Duomenų Logistikos Centras UAB

A. Juozapavičiaus str. 13, Vilnius 79,6 58 907

Maintenance of informationtechnologies andtelecommunications

ELEKTROS TINKLO PASLAUGOS UAB

Motorų str. 2,Vilnius 94,4 18 904

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

Kauno Energetikos Remontas UAB

Chemijos str. 17,Kaunas 96,1 14 245 Repairs of energy equipment,

production of metal structures

LITGAS UAB Gedimino av. 33-2, Vilnius 66,7 3 000 Supply of liquid natural gas via

terminal and trade in natural gas

Gotlitas UAB R.Kalantos str. 119, Kaunas 96,1 1 450 Accommodation services, trade

Energijos Tiekimas UAB Jeruzalės str. 21,Vilnius 96,1 750 Supply of electric power and

natural gas

Public Institution Republican Centre of Training for Energy Specialists

Jeruzalės str. 21,Vilnius 79,6 294

Professional development andcontinuing training of energy specialists

Geton Energy OÜ Narva mnt 5,10117 Tallinn 96,1 121 Supply of electric power

Geton Energy SIA Bezdelingu 12,LV-1048, Riga 96,1 99 Supply of electric power

Technologijų ir Inovacijų Centras UAB

A. Juozapavičiaus str. 13, Vilnius 88,1 10 Provision of IT, telecommunication

and other services

VAE SPB UAB Žvejų str. 14,Vilnius 100,0 10 Business consultations and other

management activities

As of 30 June 2014, the Group had 5,639 employees (31 December 2013: 4,378) and the Company had 67 employees (31 December 2013: 53).

The management of Lietuvos Energija UAB approved this financial information on 27 August 2014.


2 Summary of significant accounting policies

This condensed interim financial information for a six-month period ended 30 June 2014 has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

For a better understanding of data contained in the con-densed interim financial information, this financial infor-mation should be read in conjunction with the consoli-dated and the Company’s financial statements for the year ended 31 December 2013, which were prepared in accordance with International Financial Reporting Stan-dards 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 2013.

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.

Accounting policies applied to significant transactions within the Group in relation to the Group‘s restructuring are set out below (as described in Notes 6 and 19).

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, vari-able returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. 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 subsidi-ary is the fair values of the assets transferred in a bargain purchase, the equity interests issued, and the liabilities as-sumed at the bargain purchase date. Acquisition-related costs are expensed as incurred. Identifiable net assets, li-abilities and contingent liabilities acquired in the acquiree, which meet IFRS 3 Business Combinations criteria, are rec-ognised 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 inter-est 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 ac-quired 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 rec-ognised amounts of net assets, liabilities and contingent liabilities.

Changes in ownership interests in subsidiaries with-out change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity trans-actions – 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 re-corded in equity. Gains or losses on disposals to non-con-trolling interests are also recorded in equity.

New standards, amendments and interpretations

The newly issued standards, amendments and interpre-tations that are effective from 1 January 2014 have been presented in the Company‘s and the Group‘s audited fi-nancial statements for the year ended 31 December 2013. The newly issued standards, amendments and interpreta-tions that are effective from 1 January 2014 and relevant for the Company‘s and the Group‘s condensed interim fi-nancial information for a six-month period ended 30 June 2014 are set out below

IFRS 10 Consolidated financial statements (issued in May 2011). IFRS 10 changes the definition of con-trol so that the same criteria are applied to all entities to determine control. This definition is supported by extensive application guidance. This standard had no impact on the measurement of transactions and bal-ances in the Group’s consolidated financial informa-tion.

IFRS 11 Joint arrangements (issued in May 2011). Changes in the definitions have reduced the number of types of joint arrangements to two: joint operations and joint ventures. The existing policy choice of pro-portionate consolidation for jointly controlled entities has been eliminated. Equity accounting is mandatory for participants in joint ventures. This standard had no


impact on the measurement of transactions and bal-ances; the Group applied this standard to the transac-tions conducted during 2014.

IFRS 12 Disclosure of interest in other entities (is-sued in May 2011). This standard applies to entities that have an interest in a subsidiary, a joint arrange-ment, an associate or an unconsolidated structured entity. IFRS 12 sets out the required disclosures for entities reporting under the two new standards: IFRS 10 Consolidated financial statements and IFRS 11 Joint arrangements. This standard had no impact on the measurement of transactions and balances; the Com-pany and the Group considered the requirements of this standard when making disclosures in this financial information.

IAS 27 Separate financial statements (revised in May 2011). Its objective is to prescribe the accounting and disclosure requirements for investments in sub-sidiaries, joint ventures and associates when an entity

prepares separate financial statements. The guidance on control and consolidated financial statements was replaced by IFRS 10 Consolidated financial statements. This standard had no impact on the measurement of transactions and balances; the Company and the Group considered the requirements of this standard when making disclosures in this financial information.

IAS 28 Investments in associates and joint ventures (revised in May 2011). The amendment of IAS 28 sup-plemented IAS 28 with the requirement to account for joint ventures using the equity method, because this method is applicable to both, joint ventures and as-sociates. Save for this, other guidelines remained un-changed. The Group/Company is currently assessing the impact of this standard on its financial statements. The Group applied this standard to the transactions conducted during 2014.

3 Critical accounting estimates and judgements used in the preparation of the financial statements

Accounting estimates and judgments are continuously reviewed and are based on historical experience and oth-er 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 con-tingencies. Changes in the underlying assumptions, esti-mates and judgements 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 fi-nancial statements for the year ended 31 December 2013.

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. The fair val-ue of most items of property, plant and equipment due to its specific nature was measured using a depreciated replacement cost approach as at 31 December 2008.

If the value of assets is measured based on a depreciated replacement cost method, International Valuation Stan-dards require that an economic depreciation test is per-

formed. Accounting standards require a periodical review of property, plant and equipment for impairment. When the carrying amount of property, plant and equipment in the statement of financial position is higher than its val-ue in use or fair value, less selling expenses, the carrying amount should be reduced. In other words, the carrying amount of property, plant and equipment recorded in the statement of financial position should be written down to the higher of the present value of future benefits ex-pected by the Group from the use of the assets and the proceeds expected on disposal of the assets.

The previous version of the Lithuanian Law on Electric-ity effective as at 31 December 2008 stipulated that the price caps for electricity transmission services were deter-mined based on the value of assets used in licensed activ-ities of the service provider, with the value of such assets established with reference to data reported in the service provider’s financial statements (Regulated Assets Base).

According to the amendment to the above-mentioned Law effective from 1 June 2009, the price caps for elec-tricity transmission services are to be determined based on the value of assets used in licensed activities of the service provider, with the value of such assets being es-timated and approved by the National Control Commis-sion for Prices and Energy (NCCPE) in accordance with the principles for determination of the value of assets used in licensed activities of the service provider that had been drafted by the Commission and approved by the Govern-ment.


According to the Government’s Resolution No. 1142 of 9 September 2009 On the methodology for determi-nation of the value of assets used in licensed activities of the electricity service provider, the determination of the price caps for electricity transmission services is to include the value of assets used in licensed activities of the service provider, which is equal to the book value (carrying amount) of property, plant and equipment as at 31 December 2002 increased by the amount of capital expenditures implemented and agreed with NCCPE and reduced by the depreciation amount calculated pursu-ant to the procedure stipulated in the Lithuanian Law on Corporate Income Tax.

For the above-mentioned reasons, the values of property, plant and equipment reported in this financial information may significantly differ from those that would have been determined if the valuation of assets had been performed by independent valuers as required by International Valua-tion and Accounting Standards. It is probable that such val-uation would have a negative impact on the Group’s result of operation and on the shareholders’ equity reported in the financial information as of 30 June 2014.

The Group companies expect to perform valuation of as-sets as of 31 December 2014.

Revaluation of assets

As at 31 December 2013, independent valuation of as-sets was performed at the Group in respect of Lietuvos Energijos Gamyba AB (assets carried at revalued amount), ELEKTROS TINKLO PASLAUGOS UAB and NT Valdos UAB (buildings and structures). The valuation was carried out by independent valuation companies.

As at 31 December 2012, independent valuation of assets was performed at the Group in respect of NT Valdos UAB. The valuation was carried out by independent valuation company and the Group’s internal valuation experts.

As at 31 December 2011, valuation of property, plant and equipment in respect of Kauno Energetikos Remontas UAB was performed using the comparable price and in-come methods.

In 2010, independent property valuers carried out reval-uation of non-current assets transferred as in-kind contri-bution to the formation of the share capital of Technologi-jų ir Inovacijų Centras UAB, Duomenų Logistikos Centras UAB and NT Valdos UAB. In 2013, Duomenų Logistikos Centras UAB and NT Valdos UAB performed valuation of selected items of assets and determined that there was no significant difference between the carrying amount and the fair value of property, plant and equipment.

Considering the date of the last revaluation of these as-sets and the periods of their acquisition, in the opinion

of the management, the fair value of the Group’s prop-erty, plant and equipment stated at revalued amounts as at 30 June 2014 did not differ significantly from their carrying amount.

Impairment of assets

The Group makes an assessment, at least annually, wheth-er there are any indications that the carrying amount of property, plant and equipment has been impaired.

As of 30 June 2014 and 31 December 2013, the impair-ment test was performed for the property, plant and equipment of the Reserve Power Plant and Combined Cycle Block (classified in the category of assets of pow-er plants), and it was determined that the recoverable amount of the assets of power plants exceeded their carrying amount of LTL 2,066 m (31 December 2013: LTL 2,090 m), and consequently, no impairment was rec-ognised thereon.

The impairment test for property, plant and equipment was carried out as of 30 June 2014 with reference to the assumptions and methods described in the financial statements for the year ended 31 December 2013.

Valuation of investments in subsidiaries

Although the shares of the Company’s subsidiaries LESTO AB and Lietuvos Energijos Gamyba AB are traded on Vilni-us 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 invest-ments in subsidiaries at the reporting date. Due to signifi-cant uncertainties, as described in Note 3 ‘Revaluation and impairment of assets’, related to the impact on future cash flows of the Group companies of amendments to legal acts regulating the establishment of upper limits of prices for electricity transmission, distribution and public supply ser-vices, the Company did not carry out impairment tests for its investment in subsidiary LESTO AB as of 30 June 2014 and 31 December 2013.

As of 31 December 2013, the Company‘s management performed the impairment test and determined no impairment in respect of the investment in subsidiary Lietuvos Energijos Gamyba AB. The Company‘s manage-ment believed there were no indications of impairment of the investment in Lietuvos Energijos Gamyba AB as of 30 June 2014.

As of 30 June 2014, the Company carried out valuation/impairment test in respect of its investment in subsidiary Lietuvos Dujos AB using the discounted cash flow meth-od. Discounted cash flows were estimated in line with the effective legal acts and methods regulating distribution activities, as well as based on the most probable scenario of supply business development and the existing uncer-


tainties in gas industry sector. Discounted cash flows were calculated using a pre-tax discount rate of 7.09%, which is consistent with the rate of return used by NCCPE in reg-ulation of prices. Based on the analysis, the Company‘s management determined that there was no impairment of the investment in Lietuvos Dujos AB as of 30 June 2014.

The Company carried out impairment test in respect of its investment in subsidiary Duomenų Logistikos Centras UAB using the discounted cash flow method. Discounted cash flows were estimated in view of start of operations of a new data centre from the second half of 2014 and con-sidering insignificant growth of other income. Direct and operating expenses are expected to remain at the same level expressed as percentage (i.e. a fixed percentage of revenue). Discounted cash flows were calculated using a pre-tax discount rate of 12.35%. Based on the analysis, the Company‘s management determined that there was no impairment of the investment in Duomenų Logistikos Centras UAB as of 30 June 2014.

Cost of LITGRID AB disposal

For the purpose of implementing the provisions of the Law on Electricity, on 4 July 2012 the Lithuanian Govern-ment adopted Resolution No 826 On the establishment of a private limited liability company and investment of state-owned capital, based on which the Ministry of En-ergy was assigned to establish a private limited liability company and adopt all the decisions necessary for the transfer of shares of LITGRID AB owned by Lietuvos En-ergija UAB to the newly established private limited lia-bility company EPSO-G UAB in return for a consideration based on the market value of shares determined by inde-pendent valuers.

For the purpose of implementing the above-mentioned Resolution of the Lithuanian Government, the manage-ment initiated an independent valuation of the Compa-ny‘s shares held in LITGRID AB – an electricity transmission system operator controlled by the Company. The inde-pendent valuers determined the market value for 97.5% shares held in Litgrid AB using the income approach.

In view of the results of independent valuation, the as-sumptions used in valuation and uncertainties in relation to future changes in the methodology for the establish-ment of prices for services under regulated activities, the implementation of which is stipulated in the new pro-visions of the Lithuanian Law on Electricity adopted on 17 January 2012, the agreement on purchase and sale of shares of Litgrid AB provides for an extra charge on the final price, the realisation of which depends on possible changes in regulatory environment in future. The extra charge on the final price may be a positive or negative amount, and it largely depends on assumptions pertain-ing to regulatory environment in future periods. At the end of 2013, no decision had been made by the National Control Commission for Prices and Energy (NCCPE) as to

the application of Long-run Average Incremental Costs (LRAIC) methodology. Accordingly, the Company was not able to determine reasonable assumptions necessary to estimate the extra charge on the final price, and the extra charge on the final price estimated by the Company as at 31 December 2013 was equal to zero. At the end of 2014, the NCCPE plans to make a decision on the commence-ment of application of the LRAIC methodology. As a result of implementation of new changes in the price regulation methodology, the Company will be able to estimate the effects of possible changes in extra charge on the final price on its financial performance in 2014. As of 30 June 2014, the Company was not able to determine reasonable assumptions necessary to estimate the extra charge on the final price and estimated it as equal to zero.

Impairment of goodwill and intangible assets not subject to amortisation

The consolidated financial information includes goodwill and licences with indefinite useful life that arose on ac-quisition of VST AB in 2008. Due to significant uncertain-ties, as described in Note 3 ‘Revaluation and impairment of assets’, related to the impact on future cash flows of the Group companies of amendments to legal acts regulating the prices for electricity distribution and supply services, the Group did not carry out impairment tests for good-will and licences with indefinite useful life as at 30 June 2014 and 31 December 2013. The Group’s management believes the value of these assets could not be measured reliably as at 30 June 2014 and 31 December 2013.

Useful lives of property, plant and equipment

The estimation of the useful lives of items of property, plant and equipment is a matter of judgment based on the experience with similar assets. The economic benefits embodied in the assets are consumed principally through their use. However, other factors, such as technical or com-mercial obsolescence, often result in the diminution of the economic benefits embodied in the assets. Manage-ment 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) expect-ed 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 private customers is recognised based on the payments received, therefore, at the end of each reporting period the amount of revenue earned but not yet paid by private customers is estimated and accrued by the management of the Group. Accrued rev-enue is estimated as 1/3 of total payments for electricity


received in the last month of the reporting period. The accrued revenue is based on past experience and aver-age term of payment by customers for electricity. The management has estimated that the majority of private 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). Con-sequently, the volume of electricity consumed over the remaining 10 days is estimated proportionally based on the volume of electricity provided to the electricity sup-ply network during the whole month (the actually known variable) and the total volume of electricity declared by private customers during December, and the resulting difference multiplied by the average rate per 1 kWh.

Accounting for customer connection fees

Before 1 July 2009, the Group used to defer income re-ceived from new customer connections to the grid and recognise it as deferred income over the period of 31 years, which is the average useful life of electricity equip-ment constructed by the Group upon connection of new customers. The management of the Group believes that the period of provision of services to customers is in-definite, 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 inter-pretation, 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 deter-mined based on the management’s estimates on recov-erability and timing relating to the amounts that will not be collectable according to the original terms of receiv-ables. This determination requires significant judgement. Judgement is exercised based on significant financial dif-ficulties of the debtor, probability that the debtor will en-ter bankruptcy or financial reorganisation, and default or delinquency in payments. Current estimates of the man-agement 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 receiv-ables for impairment, the Group takes into account the

available or accessible data from external sources of infor-mation on market trends and forecasts, the possible cred-it 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 collective-ly assessed receivables for impairment, the Group takes into account the historical statistics, and reviews annu-ally 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 ap-proved 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 assess additional tax amounts and penal-ties. The Group’s management is not aware of any circum-stances that might result in a potential material liability in this respect.

Amortisation rates of licences

Indefinite useful lives were established for the licences of distribution system operator and public supply services that were acquired on a business combination in 2008, because the validity term of these licences can be extend-ed at no significant efforts or costs.

Provision for utilisation of emission allowances

The Group estimates provision for utilisation of emission allowances based on actual emissions over the report-ing 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 af-ter the year end. Based on its past experience, the Group’s management does not expect any significant differences between the estimated provisions as at 30 June 2014 and the emissions that will be approved for 2015.

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 National Commission for Control of Prices and Energy, which include breakdown of variable electric power production costs – natural gas, heavy fuel oil, emission allowance costs and costs for re-agent 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.


4 Non-current intangible assets

GroupPatents

and licen-ces

Computer software

Emission allo-wances

Other intangi-ble assets Goodwill Total

Net book amount at 1 January 2013 118 873 6 587 55 413 2 677 178 103 361 653Additions 16 1 299 1 222 1 105 - 3 642

Reclassified from / to PP&E 652 - - (29) - 623

Write-off / emission allowances utilised - - (13 895) - - (13 895)

Disposals - - (4 041) - - (4 041)

Revaluation of emission allowances - - (14 438) - - (14 438)

Amortisation charge (357) (2 252) - (29) - (2 638)

Net book amount at 30 June 2013 119 184 5 634 24 261 3 724 178 103 330 906

Net book amount at 1 January 2014 118 781 6 205 28 704 4 224 178 103 336 017Acquisition of Lietuvos Dujos AB 1 079 1 084 - 1 - 2 164

Additions 2 517 129 - 452 - 3 098

Reclassified from / to PP&E - 916 - (916) - -

Write-off / emission allowances utilised - - (10 042) - - (10 042)

Disposals - - - (13) - (13)

Revaluation of emission allowances - - 3 598 - - 3 598

Emission allowances grant received - - 1 358 - - 1 358

Amortisation charge (424) (1 728) - (47) - (2 199)

Net book amount at 30 June 2014 121 953 6 606 23 618 3 701 178 103 333 981

Fair value of financial assets and financial liabilities

The Group‘s and the Company‘s underlying financial as-sets 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 re-ceived 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, cur-rent trade and other amounts receivable, current trade and other amounts payable and current borrowings ap-proximates 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 bor-rowings with variable interest approximates their carry-ing amount in cases when margins payable on such loans are consistent with loan margins currently available in the market.


5 Property, plant and equipment

Group Land Buil-dings

Structu-resand

machi-nery

Gasdistri-bution pipeli-

nesand

equip-ment

Gas techno-logical equip-ment and

facili-ties

Assets of power

plants

Motor vehi-cles

Other PP&E

Cons-truction

inprogress

Total

Net book amount at 1 January 2013 6 190 383 536 4 228 702 - - 2 664 957 50 268 102 222 73 361 7 509 236Additions - 19 1 134 - - 555 734 2 557 115 696 120 695

Revaluation - (77) - - - - - - - (77)

Disposals - - (95) - - (164) (209) (2) - (470)

Write-offs - (124) (6 193) - - (17) - (6) (3) (6 343)

Impairment - - (25) - - - - - - (25)

Reversal of impairment - - 20 - - - - - 25 45

Reclassifications from / to - 1 717 118 192 - - 175 - 6 092 (126 176) -

Reclassified to assets, intangible assets - - - - - - - - (623) (623)

Reclassified to investment property - (3 639) (42) - - - - - - (3 681)

Reclassified from / to inventories - - (3) - - 3 878 - (6) - 3 869

Depreciation charge - (9 841) (182 172) - - (57 953) (3 661) (12 187) - (265 814)

Net book amount at 30 June 2013 6 190 371 591 4 159 518 - - 2 611 431 47 132 98 670 62 280 7 356 812

Net book amount at 1 January 2014 6 943 361 555 4 164 382 - - 2 567 102 54 059 90 780 73 829 7 318 650Acquisition of Lietuvos Dujos AB 1 36 308 4 239 362 983 14 970 - 8 846 18 429 3 663 449 439

Additions - 357 1 078 - - 188 1 151 1 352 148 679 152 805

Disposals - (100) (152) - - - (341) (511) - (1 104)

Write-offs - (190) (5 467) - - (2) (7) (15) (8) (5 689)

Reclassifications from / to - 2 556 119 231 - - 3 980 - 1 447 (127 214) -

Reclassified to assets, intangible assets - (68) (42) - - - - - - (110)

Reclassified to investment property - (5 408) (387) - - - - - - (5 795)

Reclassified from / to inventories - - - - - 713 - - - 713

Depreciation charge - (10 400) (154 787) - - (57 398) (3 694) (11 118) - (237 397)

Net book amount at 30 June 2014 6 944 384 610 4 128 095 362 983 14 970 2 514 583 60 014 100 364 98 949 7 671 512

Company Other PP&E Construction in progress Total

Net book amount at 1 January 2013 48 - 48Additions - 134 134

Depreciation charge (8) - (8)

Net book amount at 30 June 2013 40 134 174

Net book amount at 1 January 2014 33 - 33Depreciation charge (8) - (8)

Net book amount at 30 June 2014 25 - 25

As of 30 June 2014 and 2013, the Group accounted for its property, plant and equipment (except for gas distri-bution pipelines and equipment, assets of hydro pow-er plant, pumped storage power plant, combined cycle block and reserve power plant) at revalued amount.

As of 30 June 2014, the Group‘s commitments to acquire and construct property, plant and equipment totalled LTL 153 million (31 December 2013: LTL 132 million).


6 Subsidiaries and other investments

During the first half of 2014, the Company acquired 96.64% shares of Lietuvos Dujos AB. These shares were acquired in three stages:

• On 21 February 2014, the Ministry of Finance made an in-kind contribution of state-owned 51,454,638 (17.7%) shares of Lietuvos Dujos AB amounting to LTL 112,685,657 (Note 12) in order to increase the Company‘s share capital.

• On 21 May 2014, the Company and the German con-cern E.ON Ruhrgas International signed an agreement, based on which the Company acquired 113,118,140 (38.9%) shares of Lietuvos Dujos AB. The acquisition cost of shares amounted to LTL 219,008,617.

• On 19 June 2014, in line with Article 31 of the Lithu-anian Law on Securities the Company announced a mandatory non-competitive takeover bid to buy up

On 31 March 2014, the Company signed agreements for purchase/sale of shares with LESTO AB and Lietuvos Energijos Gamyba AB, under which the Company acquired 78.98%, i.e. 46,525,904 shares of Duomenų Logistikos Centras UAB. The acquisition cost of shares amounted to LTL 60,431,742. Following this transaction, the Company owns 79.64% shares of Duomenų Logistikos Centras UAB.

The Company‘s ownership interests in the Group companies as of 30 June 2014 were as follows:

Group company Acquisition cost Contribution to cover loss Carrying amount Ownership

interest, %Subsidiaries:

Lietuvos Energijos Gamyba AB 1 017 997 - 1 017 997 96,13LESTO AB 1 860 624 - 1 860 624 94,39Lietuvos Dujos AB 594 043 - 594 043 96,64Duomenų Logistikos Centras UAB 60 932 - 60 932 79,64LITGAS UAB 2 000 - 2 000 66,67Technologijų ir Inovacijų Centras UAB 5 - 5 88,10VAE SPB UAB 10 15 25 100,00

3 535 611 15 3 535 626 Investments:

NT Valdos UAB 100 - 100 0,03 100 - 100

3 535 711 15 3 535 726

Group company Acquisition cost Contribution to cover loss Carrying amount Ownership

interest, %Subsidiaries:

Lietuvos Energijos Gamyba AB 1 017 998 - 1 017 998 96,13LESTO AB 1 742 737 - 1 742 737 82,63LITGAS UAB 2 000 - 2 000 66,67Technologijų ir Inovacijų Centras UAB 5 - 5 50,00VAE SPB UAB 10 5 15 100,00

2 762 750 5 2 762 755 Investments:

Duomenų Logistikos Centras UAB 500 - 500 0,65NT Valdos UAB 100 - 100 0,03

600 - 6002 763 350 5 2 763 355

The Company‘s ownership interests in the Group companies as of 31 December 2013 were as follows:

the remaining shares of Lietuvos Dujos AB, and from the Russian company Gazprom and minority share-holders the Company acquired 116,357,288 (40.03%) of shares. The acquisition cost of shares amounted to LTL 262,348,264.

On 21 May 2014, the Company and the German concern E.ON Ruhrgas International signed an agreement, under which the Company acquired 71,040,473 (11.76%) shares of LESTO AB. The acquisition cost of shares amounted to LTL 117,886,772.

2014

Carrying amount of non-controlling interest acquired 419 491

Consideration paid to non-controlling interest (117 887)

Profit attributable to owners of the parent, recognised in equity 301 604


Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Amount receivable on disposal of LITGRID AB 725 000 690 000 725 000 690 000

Loan granted 100 131 - 100 131 -

Other 19 678 22 888 - -

Carrying amount 844 809 712 888 825 131 690 000

7 Amounts receivable after one year

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 approx-imated their fair value as of 30 June 2014. In May 2014, a loan was granted and amendments were made to the agreement for purchase/sale of LITGRID AB shares: con-sidering 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 LTL 179,546 thousand granted to EPSO-G UAB, in respect of the credit agreement signed between the bank and EP-SO-G UAB.

8 Investments and other financial assets

Long-term investments and other financial assets comprise as follows:

Short-term investments comprise as follows:

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Available-for-sale financial assets 16 585 - 16 585 -

Held-to-maturity financial assets:

Lithuanian Government bonds - 57 302 - 57 302

Carrying amount 16 585 57 302 16 585 57 302

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Held-to-maturity financial assets:

Lithuanian Government bonds - 40 131 - 40 131

Loans and amounts receivable:

Bank bonds - 81 433 - 81 433

Interest receivable 189 821 189 821

Carrying amount 189 122 385 189 122 385


As of 30 June 2014, the Group‘s and the Company‘s avail-able-for-sale financial assets comprised Lithuanian Gov-ernment securities denominated in LTL with redemption dates maturing in 2016. The weighted average annual interest rate on securities was 1.67% as of 30 June 2014.

In 2014, the Group and the Company sold prior to maturity some of its securities that were classified as held-to-matu-rity financial assets as of 31 December 2013, and classified the remaining securities as available-for-sale financial as-sets 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 2014, 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 secu-rities available from one of the three Lithuanian banks as at 30 June 2014. The nominal value of investments was multiplied by the best bid price (including accrued cou-pons) available as of 30 June 2014.

Fair value of investments

As of 31 December 2013, the fair value of Lithuanian Government bonds was equal to LTL 98,284 thousand and it is attributable to Level 1 in the fair value hierar-chy. The fair value of debt securities was estimated with reference to the highest average bid price (including accrued coupons) for relevant debt securities available from three Lithuanian banks as at 31 December 2013. The nominal value of investments was multiplied by the best bid price (including accrued coupons) available as of 31 December 2013.

As of 31 December 2013, the fair value of bank bonds was equal to LTL 81,587 thousand and it was estimated with reference to interest rate payable on redemption of bonds prior to maturity and the period for which the bank bonds were held by the Company.

As of 30 June 2014, the investments were accounted for at fair value.

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Raw materials, consumables and spare parts 26 580 20 881 - -

Goods for resale (including natural gas) 32 968 - - -

Electricity meters 2 591 3 257 - -

Heavy fuel oil 20 740 20 740 - -

Other 5 414 4 222 - -

Total 88 292 49 100 - -Less: write-down to net realisable value (14 631) (14 486) - -

Carrying amount 73 662 34 614 - -

9 Inventories

Movement on the account of write-down of inventories to net realisable value during the period ended 30 June 2014 and 2013 was as follows:

Group Company

Carrying amount at 1 January 2013 17 341 -Additional impairment 1 898 -

Reversal of impairment (4 753) -

Carrying amount at 31 December 2013 14 486 -

Carrying amount at 1 January 2014 14 486 -Additional impairment 772 -Reversal of impairment (627) -Carrying amount at 31 December 2014 14 631 -


10 Prepayments

As of 30 June 2014, prepayments amounted to LTL 276,113 thousand (31 December 2013: LTL 16,292 thousand), whereof prepayments of LTL 250,522 thousand were relat-ed to retrospective reduction of natural gas import price for Lietuvos Dujos AB by OAO Gazprom for the period from

1 January 2013 to 31 March 2014. This amount of prepay-ments will be realised by the end of 2014 by offsetting it against amounts payable of OAO Gazprom, accordingly, it was classified as current assets.

11 Cash and cash equivalents

Cash and cash equivalents and bank overdraft include the following for the purpose of the cash flow statement:

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Cash and cash equivalents 303 654 558 396 3 268 309 974

Bank overdraft (36 757) (70 708) - -

Carrying amount 266 897 487 688 3 268 309 974

12

13

Share capital

Reserves

Based on Order No. 1K-060 of 21 February 2014 On in-crease of share capital of Lietuvos Energija UAB and amendment to the Finance Minister‘s Order No. 1K-251 of 16 July 2013 On amendments to the Articles of Associa-tion of Visagino Atominė Elektrinė UAB and formation of the Supervisory Board, the Ministry of Finance (“the Min-istry“) made a decision to increase the Company‘s share capital by LTL 112.7 million. On 21 February 2014, the Ministry and the Company signed the Agreement for Sub-scription of Shares, under which the Company assumed a commitment to provide 112,685,657 ordinary registered shares, whereas the Ministry assumed a commitment to subscribe for the shares and cover their full issue price by an in-kind contribution representing state-owned shares of Lietuvos Dujos AB.

The movement in other reserves pertains to the transfers made by the subsidiary Lietuvos Energijos Gamyba AB from the reserve related to assets and from the reserve intended for investments. Transfers to retained earnings

On 6 March 2014, the share capital of Lietuvos Energija UAB was increased from 4 billion 067 million to 4 billion 180 million. The nominal value and issue price of newly is-sued shares was equal to LTL 1. The value of the Ministry‘s 17.7% shareholding in Lietuvos Dujos AB was determined with reference to the provisions of the Law on Compa-nies, and was equal to the weighted average 6 months‘ market price of LTL 112,685,657.

As of 30 June 2014, the Company‘s share capital totalled LTL 4,179,849,289 (31 December 2013: LTL 4,067,163,632). As of 31 December 2013 and 30 June 2014, the share cap-ital was divided into ordinary registered shares with the nominal value of LTL 1 each. All the shares have been fully paid up.

were made on the basis of the decision of the General Shareholders‘ Meeting in 2014. The amount of transfers attributable to the Company‘s shareholders was equal to LTL 651,555 thousand.


Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Non-currentBank borrowings 859 244 805 826 - -

Current Current portion of long-term loans 362 344 302 656 - -

Other borrowings - - 4 900 -

Bank overdraft 36 757 70 708 - -

Interest payable 28 854 - -

Total borrowings 1 258 373 1 180 044 4 900 -

14 Borrowings

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Non-current 12 726 4 588 - -

Current 27 741 12 437 - -

Carrying amount 40 467 17 025 - -

15 Provisions

GroupCommitments re-lating to emission

limits

Provisions for em-ployee benefits

Provisions for onerous contracts

Other pro-visions Total

At 1 January 2013 13 895 3 227 - 305 17 427Increase over the period 2 506 5 590 - - 8 096

Utilised during the period - (1 788) - (73) (1 861)

Decrease due to changes in assumptions (13 895) - - - (13 895)

At 30 June 2013 2 506 7 029 - 232 9 767

Non-current borrowings analysed by maturity:

The loan agreements contain certain financial and non-fi-nancial covenants that the individual Group companies are obliged to comply with. In the opinion of manage-ment, as at 31 December 2013 and 30 June 2014 the Group complied with these covenants.

As at 30 June 2014 and 31 December 2013, the fair val-ue of borrowings approximated their carrying amount,

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

Between 1 and 2 years 119 189 113 352 - -

Between 2 and 5 years 477 875 590 329 - -

Over 5 years 262 180 102 145 - -

Total 859 244 805 826 - -

except for Lietuvos Energijos Gamyba AB borrowings with the carrying amount of LTL 548,625 thousand and LTL 555,390 thousand, respectively. The fair values of these borrowings as at 30 June 2014 and 31 December 2013 were approx. LTL 518,940 thousand and LTL 609,920 thousand, respectively. The fair values were estimated us-ing a discount rate of 2.60% (31 December 2013: 2.9%).

Tęsinys kitame puslapyje


On 7 May 2014, Lietuvos Dujos AB entered into arrange-ment with natural gas supplier OAO Gazprom for a signif-icant reduction of the import price for natural gas for the period from 1 January 2013 to 31 December 2015. Based on this arrangement, gas import price calculation formula was adjusted for the Company on a retrospective basis for the period from 1 January 2013 to 31 March 2014.

Lietuvos Dujos AB and NCCPE agreed that the tariffs of natural gas for household consumers for the period from the 2nd half of 2014 through to 2016 will be reduced by the effects of reduced gas import price, and the Group accounted for LTL 23.9 million provision for onerous con-tracts for the share of reduced price effects for 2015.

At 1 January 2014 9 745 6 894 - 386 17 025Increase over the period 1 515 193 - 179 1 887

Utilised during the period (10 190) (684) - (106) (10 980)

Decrease due to changes in assumptions 643 - - - 643

Acquisition of Lietuvos Dujos AB - 7 964 23 928 - 31 892

At 30 June 2014 1 713 14 367 23 928 459 40 467

Group Company

30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013

Utility services 3 544 3 724 134 73

Telecommunications and IT services 5 632 6 173 403 253

Business trips 606 729 72 134

Consultation services 1 969 3 349 550 2

HR development 605 824 53 49

Expenses of small-value inventory items 1 115 1 075 - -

PR and marketing 821 1 122 133 34

Lease 4 700 4 072 282 231

Transport 7 045 6 816 230 277

Customer service 3 888 4 229 - -

Taxes 8 715 10 078 45 52

Subcontractor works and materials 15 258 10 682 - -

Impairment of amounts receivable 2 178 3 174 - -

Write-off of PP&E 5 689 6 343 - -

Revaluation of emission allowances and provision expenses (5 298) 25 913 - -

Impairment of PP&E - (20) - -

Inventory write-down (91) 963 - -

Other expenses 4 925 5 766 247 147

61 301 95 012 2 149 1 252

16 Other expenses

Group Company

30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013

Interest income 6 905 7 708 6 768 7 479

Dividends received 6 643 1 240 551 109 255

Foreign exchange positive effect 2 - - -

Other finance income 715 2 702 438 -

14 265 10 411 247 757 116 734

17 Finance income


Group Company

30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013

Interest expenses 14 724 15 534 211 -

Foreign exchange negative effect 10 15 1 -

Other finance costs 838 (1 814) 9 -

15 572 13 735 221 -

18 Finance costs

19 Business combinations

Lietuvos Energija UAB initiated expansion to gas indus-try sector, which was continued by the Group company LITGAS (engaged in supply of liquefied natural gas (LNG) and trade in natural gas). This expansion was intensive-ly pursued in the second quarter, and was supported in February 2014 with a designated supplier who is expect-ed to ensure uninterrupted operations of LNG terminal in Lithuania. As the Ministries of Finance and Energy have implemented the Lithuanian Government Resolution No. 120 of 12 February 2014 On the investment of state-owned assets and increase of share capital of the companies, with effect from 21 February 2014 Lietuvos Energija UAB be-came a holder of 17.7% shares of Lietuvos Dujos AB.

Core line of business of Lietuvos Dujos AB is purchase (import) and sale of natural gas, provision of distribution services, and rational development of natural gas distri-bution infrastructure.

With a shareholding of 56.6% in Lietuvos Dujos AB the Company announced a mandatory non-competitive takeover bid to buy up the remaining shares, which was accomplished on 16 June 2014. The Company acquired 107,734,925 (one hundred and seven million, seven hun-dred and thirty-four thousand, nine hundred and twen-ty-five) shares of Lietuvos Dujos AB from OAO Gazprom and 8,622,363 (eight million, six hundred and twenty-two thousand, three hundred and sixty-three) shares of Lietu-vos Dujos AB from minority shareholders.

In June 2014, the Company acquired control over Lietu-vos Dujos AB. The acquisition was carried out in three stages that are described in Note 6.

The shareholding of 17.7% acquired by the Company in February 2014, entitled the Company to participate at the Board of Lietuvos Dujos AB. Accordingly, this investment was recognised as investment in associate using the equi-ty method. Additional shareholding of 38.9%, which was acquired in May 2014, did not vest with any additional control rights. This investment met the definition of joint ventur, because significant decisions related to the ac-tivities of Lietuvos Dujos AB could be made under joint agreement with another shareholder. The investment was further accounted for using the equity method, as set out below:

Acquisition cost of investment (17,7%) 112 686Fair value of net assets acquired 100 152

Identified goodwill 12 534

Share of results of investments under equity method for March-May 2014 46 249

Acquisition cost of investment (38,9%) 219 009Fair value of net assets acquired 321 795

Identified goodwill posted to share of results of investments under equity method 102 786Share of results of investments under equity method for June 2014 159

Share of results of investments under equity method 149 194Value of investment under equity method before acquisition of control 480 889

Fair value of investment before acquisition of control 382 901

Consideration paid on mandatory takeover bid 262 348

Total cost of acquisition of control 645 249

Following a mandatory takeover bid, the Company holds 96.6% shares of Lietuvos Dujos AB, and minority share-holders hold 3.4% shares.


The following assets and liabilities of Lietuvos Dujos AB were identified on acquisition with the following fair val-ues at the date of acquisition:

The Group recognised LTL 97,988 thousand loss on re-measurement of investment in Lietuvos Dujos AB be-fore acquisition of control at fair value through profit or loss. The Company determined the fair value using the discounted cash flow method in respect of supply and

Fair value

Property, plant and equipment 449 439

Intangible assets 2 164

Other non-current assets 6 180

Current assets 350 819

Cash 126 594

Grants -

Deferred revenue -

Other non-current liabilities (7 964)

Current liabilities (100 018)

Net assets acquired 827 214Non-controlling interest (27 762)Goodwill on acquisition (154 203)

Total cost of acquisition of control 645 249

distribution activities; valuation assumptions are de-scribed in Note 3 Valuation of investments in subsidiaries.

The fair value of property, plant and equipment was de-termined with reference to value in use based on dis-counted cash flow method.

Deferred revenue and grants were written off on acquisi-tion. The fair value of current assets and current liabilities approximated their carrying amount.

Non-controlling interest was estimated on a proportion-ate (pro rata) basis.

Acquisition-related costs were insignificant and they were included in other expenses in the statement of profit and loss and other comprehensive income.

The consolidated statement of profit and loss and other comprehensive income includes revenue of Lietuvos Du-jos AB dating from 20 June 2014 in amount of LTL 25,043 thousand, and profit (loss) in amount of LTL 0.

Had Lietuvos Dujos AB been controlled from 1 Janu-ary 2014, the Group’s consolidated revenue would have amounted to LTL 2,065,792 thousand, and profit would have amounted to LTL 413,096 thousand.

20 Income tax expenses

Income tax expenses comprise current income tax and deferred income tax.

Income tax at a rate of 15% is applied to profit for 2014 (the same as in 2013) in accordance with the Lithuanian regulatory legislation on taxation.

21 Dividends

In 2013 and the first half of 2014 the Company did not pay any dividends.

During the General Shareholders‘ Meeting of LESTO AB held on 30 June 2013, the decision was made to pay out dividends of LTL 102,670 thousand from profit for appro-priation. The Company received dividends of LTL 84,834 thousand.

During the General Shareholders‘ Meeting of Lietuvos Energijos Gamyba AB held on 30 April 2013, the decision was made to pay out dividends of LTL 25,403 thousand from profit for appropriation. The Company received divi-dends of LTL 24,421 thousand.

During the General Shareholders‘ Meeting of LESTO AB held on 4 April 2014, the decision was made to pay out

dividends of LTL 114,749 thousand from profit for appro-priation. The Company received dividends of LTL 94,815 thousand.

During the General Shareholders‘ Meeting of Lietuvos En-ergijos Gamyba AB held on 4 April 2014, the decision was made to pay out dividends of LTL 150,000 thousand from profit for appropriation. The Company received dividends of LTL 144,197 thousand.

During the General Shareholders‘ Meeting of Duomenų Logistikos Centras UAB held on 30 April 2014, the deci-sion was made to pay out dividends of LTL 1,933 thou-sand from profit for appropriation. The Company received dividends of LTL 1,539 thousand.


22 Transactions with related parties

As at 31 December 2013 and 30 June 2014, the parent company was the Republic of Lithuania represented by the Lithuanian Ministry of Finance. For the purpose of dis-closure 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, associates and man-agement.

The following transactions were conducted with related parties:

Sales of goods and services

Purchase of goods and services

Group Company

30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013

LESTO AB - - 4 4

Technologijų ir Inovacijų Centras UAB - - 11 -

EPSO-G UAB 5 476 5 526 5 476 5 526

Group’s associates and joint ventures 6 882 271 - -

12 358 5 797 5 491 5 530

Group Company

30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013

LESTO AB - - 19 141 28

Lietuvos Energijos Gamyba AB - - 41 479 -

NT Valdos UAB - - 595 464

Technologijų ir Inovacijų Centras UAB - - 410 268

Group’s associates and joint ventures - 2 832 - -

- 2 832 61 625 760

Amounts receivable from related parties

Amounts payable to related parties

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

LESTO AB - - 2 2

Technologijų ir Inovacijų Centras UAB - - 11 102 -

EPSO-G UAB 833 004 727 469 833 004 727 469

Group’s associates and joint ventures 20 478 77 - -

853 482 727 546 844 108 727 471

Group Company

30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013

LESTO AB - - 19 101 -

Lietuvos Energijos Gamyba AB - - 41 292 -

NT Valdos UAB - - 143 194

Technologijų ir Inovacijų Centras UAB - - 87 124

- - 60 623 318


Management in the table above includes heads of administration and their deputies.

* excluding Lietuvos Dujos AB data.

Group Company

30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013

Salaries and other benefits to management: 4 523 4 492 1 042 393

Whereof: termination benefits and paymentsto board members 483 163 176 -

Number of management staff 56* 51 9 4

23 Events after the end of the reporting period

Increase of share capital of Technologijų ir Inovacijų Centras UAB

On 10 July 2014, the share capital of Technologijų ir Ino-vacijų Centras UAB was increased by LTL 19,990,000. The Company acquired 11,105,556 shares, which were paid in May 2014 as additional cash contribution. Nominal value per share is equal to LTL 1. Payment for the shares was conducted as follows: amount of LTL 8,105,556 was paid as cash contribution, whereas amount of LTL 3,000,000 was offset against the loan repayable by Technologijų ir Inovacijų Centras UAB. On 11 July 2014, the Company‘s amounts receivable decreased, whereas investments in subsidiaries increased by LTL 11 million, respectively.

Reduction of share capital of Duomenų Logistikos Centras UAB

On 17 July 2014, the share capital of Duomenų Logis-tikos Centras UAB was reduced to make payments to shareholders. Before reduction of share capital, the Com-pany held 46,910,850 shares, and following annulment of 35,836,194 shares the Company held the remaining 11,074,656 shares. On 31 July 2014, Duomenų Logistikos Centras UAB paid LTL 30 million to the Company, and the remaining amount of LTL 30 million was paid in August.

Establishment of Verslo Aptarnavimo Centras UAB

On 21 July 2014, the Company and other Group compa-nies signed a memorandum n the establishment of Verslo Aptarnavimo Centras AB. The purpose of the newly estab-lished company is to provide the Company‘s shareholders – the contracting authorities – with the services necessary to ensure operations of the Company‘s shareholders – the contracting authorities (to satisfy the needs and fulfil the functions of shareholders – the contracting authorities). The newly established company was registered with the Register of Legal Entities on 30 July 2014, and its autho-rised share capital amounts to LTL 100,000. The Company acquired 50% of its shares.

Lietuvos Dujos AB Board decision

On 21 July 2014, the Board of Lietuvos Dujos AB approved the separation of the Company‘s distribution and supply activities, whereby Lietuvos Dujos AB is to sell part of its business, i.e. natural gas supply business together with the accompanying assets, rights and obligations.

On 21 July 2014, a decision was made that the Compa-ny is likely to incur an obligation to adjust gas tariffs for non-household consumers for the period from 1 Janu-ary 2015 to 31 December 2016 by the amount of effects of reduced import price of natural gas (up to LTL 281.1 million). The final decision on the amount of effects of reduced import price of natural gas attributable to non-household consumers will be made upon receipt of conclusions from the work group formed by the Ministry of Energy and after additional analysis of this issue.

During the Extraordinary General Shareholder‘s Meeting of Lietuvos Dujos AB held on 22 July 2014, profit for ap-propriation for the year 2013 was approved and a deci-sion was made to pay dividends of LTL 53,280 thousand (LTL 0.183 per ordinary registered share with nominal val-ue of LTL 1) and transfer LTL 328,013 thousand from other reserves to retained earnings.

Increase of share capital of LITGAS UAB

During the General Shareholders‘ Meeting of LITGAS UAB held on 27 June 2014, a decision was made to increase the share capital of LITGAS UAB by additional contribu-tions of shareholders from LTL 3 million up to LTL 45 mil-lion, by issuing new ordinary registered shares with the nominal value of LTL 1 each and total value of LTL 42 mil-lion. On 8 July 2014, the Company and LITGAS UAB signed the Agreement for Purchase of Shares, under which the Company is to acquire newly issued shares of LITGAS UAB with the total value of LTL 28 million. Following the trans-action, the Company‘s shareholding in LITGAS UAB will amount to LTL 30 million.

Lietuvos Energija UAB Žvejų str. 14, Vilnius

www.le.lt

2014 iiq_consolidated and company's condensed interim financial information (unaudited)

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