2014 IIQ_Consolidated and Company's condensed interim financial information (unaudited)

Page 1

2014

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


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.

TABLE OF CONTENTS

3

REVIEW REPORT

5

CONDENSED INTERIM FINANCIAL INFORMATION

5

Condensed interim statement of financial position

7

Condensed interim statement of profit and loss and other comprehensive income

9

Condensed interim statement of cash flows

10

Condensed interim statement of changes in equity

12

Notes to the condensed interim financial information


AUDITOR‘S REPORT


AUDITOR‘S REPORT


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

Notes

Group 30 Jun 2014

Company

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 Investment property Subsidiaries and other investments

6

Investments in associates Amounts receivable after one year

7

Long-term investments

8

188

132

-

-

126 809

121 626

-

-

-

-

3 535 726

2 763 355

26 818

28 800

-

-

844 809

712 888

825 131

690 000

16 585

57 302

16 585

57 302

21 065

17 850

-

-

7 144

1 160

124

71

9 048 911

8 594 425

4 377 591

3 510 761

9

73 662

34 614

-

-

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

-

-

8

189

122 385

189

122 385

11

303 654

558 396

3 268

309 974

1 096 396

1 132 182

23 896

470 906

492

618

266

266

1 096 888

1 132 800

24 162

471 172

10 145 799

9 727 225

4 401 753

3 981 933

Other non-current assets Deferred income tax assets Total non-current assets Current assets Inventories Prepayments

Short-term investments Cash and cash equivalents Non-current assets held for sale Total current assets TOTAL ASSETS

(continued on the next page)

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

5


Notes

Group 30 Jun 2014

Company

31 Dec 2013

30 Jun 2014

31 Dec 2013

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 Total equity

292 380

699 228

-

-

6 578 815

6 252 705

4 333 660

3 980 104

859 244

805 826

-

-

111

36

-

-

1 084 034

1 091 511

-

-

405 473

409 339

-

-

12 726

4 588

-

-

185 267

189 523

-

-

55 397

77 559

-

-

2 602 252

2 578 382

-

-

Liabilities Non-current liabilities Non-current borrowings

14

Finance lease liabilities Grants and subsidies Deferred income tax liability Provisions

15

Deferred income Other non-current amounts payable and liabilities Total non-current liabilities Current liabilities Current portion of long-term debts

14

362 344

302 656

-

-

Current borrowings

14

36 785

71 562

4 900

-

360

8

-

-

Current portion of finance lease liabilities Trade payables

210 494

268 561

402

409

Advance amounts received

109 916

69 470

-

-

Current income tax liabilities

26 759

7 765

25

-

27 741

12 437

-

-

190 333

163 679

62 766

1 420

964 732

896 138

68 093

1 829

Provisions Other current amounts payable and liabilities Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

15

3 566 984

3 474 520

68 093

1 829

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.

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

6


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

Group

Notes

Group 2014 IH

2014 IIQ

Company

2013 IH

2013 IIQ

2014 IH

2014 IIQ

2013 IH

2013 IIQ

Revenue Sales revenue

1 328 040

Other operating income Total revenue

635 407

1 383 578

651 800

-

-

-

-

62 514

33 731

50 808

26 589

4

2

4

2

1 390 554

669 138

1 434 386

678 389

4

2

4

2

(725 268)

(318 271)

(762 748)

(321 784)

-

-

-

-

Operating expenses Purchase of electricity and related services

(84 199)

(67 611)

(96 393)

(53 526)

-

-

-

-

Depreciation and amortisation

Purchase of gas and fuel oil

(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 Other expenses

16

Total operating expenses Operating profit / (loss)

(39 931)

(23 258)

(29 703)

(14 058)

-

-

-

-

(61 301)

(29 090)

(95 012)

(45 723)

(2 149)

(1 264)

(1 252)

(606)

(1 244 559)

(605 166)

(1 346 423)

(614 050)

(6 920)

(3 930)

(4 608)

(2 128)

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)

-

-

(301)

-

348

-

-

-

-

349 797

268 639

84 987

61 579

240 620

240 477

112 130

110 943

(24 534)

(9 776)

(21 108)

(10 591)

(25)

(25)

-

-

4 229

1 287

13 078

7 903

87

84

(439)

(439)

329 492

260 150

76 957

58 891

240 682

240 536

111 691

110 504

Share of results of other associates Profit / (loss) before income tax Current year income tax expense Deferred income tax income / (expense) Net profit / (loss) for the period

(continued on the next page)

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

7


Attributable to: Owners of the parent Non-controlling interest

318 480

257 214

70 711

55 468

240 682

240 536

111 691

110 504

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 Total items that will not be reclassified to profit or loss

-

-

(65)

-

-

-

-

(65)

-

-

-

-

-

189

189

-

-

189

189

-

-

Items that will be reclassified to profit or loss Change in fair value of available-for-sale financial assets Total items that will be reclassified to profit or loss

189

189

-

-

189

189

-

-

Total other comprehensive income / (loss)

189

189

(65)

-

189

189

-

-

329 681

260 339

76 892

58 891

240 871

240 725

111 691

110 504

318 669

257 403

70 649

55 468

240 871

240 725

111 691

110 504

11 012

2 936

6 243

3 423

-

-

-

-

Total comprehensive income (loss) for the period Attributable to: Owners of the parent Non-controlling interest

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

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

8


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

Group Cash flows from operating activities Net profit (loss) for the period Adjustments for non-monetary items: Depreciation and amortisation Revaluation of property, plant and equipment Impairment of assets (reversal of impairment) Share of the results of associates and joint ventures Income tax expense (Depreciation) of grants Increase (decrease) in provisions (Gain) / loss on disposal / write-off of property, plant and equipment Result on business acquisition Elimination of results of financing and investing activities: Interest income Interest expense 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 receive Income tax (paid) Net cash generate from / (used in) operating activities Cash flows from investing activities (Acquisition) of PP&E and intangible assets Disposal of PP&E and intangible assets Loans (granted), loan repayments received Change in time deposits Acquisition of subsidiaries (associates) Grants received Bonds acquired Bonds disposed Interest received Dividends received Acquisition of LESTO AB shares from minority shareholders Acquisition of Lietuvos Dujos AB 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 LESTO AB shares from minority shareholders Other cash flows from financing activities 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 period Cash and cash equivalents (including overdraft) at the end of the period

30 Jun 2014

4,5 5

19 17 18

6 19

6

30 Jun 2013

Company 30 Jun 30 Jun 2014 2013

329 492

76 957

240 682

111 691

239 596 (6 127) 301 20 305 (20 264) 23 442 4 710 (205 568)

268 452 77 (20) (348) 8 030 (20 427) (7 660) 6 218 -

8 (62) -

8 439 -

(6 905) 14 724 (6 504)

(7 708) 15 534 (4 502)

(6 768) 211 (240 989)

(7 479) (109 255)

19 965

67 962

(8 408)

181

(11 401)

26 673

(81)

72

(99 619) (22 641) 273 506

(94 881) (17 511) 316 846

880 (14 527)

566 (3 777)

(176 990) 1 104 (99 935) 6 942 162 908 2 321 6 643 (354 763) (451 770)

(148 417) 4 511 202 53 733 4 433 (153 002) 52 064 2 314 (184 162)

(103 131) (10) 162 908 1 997 240 551 (117 887) (481 357) (296 929)

(5 776) 50 713 (5) (153 002) 52 064 1 271 109 255 54 520

730 720 (617 615) (435) (16 064) (21 246) (117 887) (42 527)

129 948 (138 494) (177) (15 536) (18 148)

50 491 (45 591) (150) -

-

(10) (42 417)

4 750

-

(220 791)

90 267

(306 706)

50 743

487 688

(3 215)

309 974

57 765

266 897

87 052

3 268

108 508

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

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

9


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

Notes

Balance at 1 January 2013 (restated) Revaluation of property, plant and equipment, net of deferred income tax effects Total other comprehensive income (loss) for the period Net profit (loss) for the period (restated) Total comprehensive income (loss) for the period Transfer of revaluation reserve to retained earnings (transfer of depreciation, net of deferred income tax) Transfer to reserves and movement in reserves Dividends Changes in non-controlling interest on the group‘s restructuring Balance at 30 June 2013 Balance at 1 January 2013 Change in fair value of available-for-sale financial assets, net of deferred income tax effects Total other comprehensive income (loss) for the period Net profit (loss) for the period Total comprehensive income (loss) for the period 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 Acquisition of shares from minority shareholders Acquisition of subsidiary Balance at 30 June 2014

13 12 6 19

Equity attributable to owners of the Group Share capital 4 067 164 -

Legal Revaluation reserve reserve 75 467 802 934 (62) (62) (62)

Other reserves 689 922 -

Retained Subtotal earnings (207 569) 5 427 918 (62) (62) 70 711 70 711 70 711 70 649

Non-controlling interest

Total

711 864 6 139 782 (3) (65) (3) (65) 6 246 76 957 6 243 76 892

4 067 164

1 595 12 77 074

(37 186) 164 765 850

(38 453) 651 469

37 186 36 858 (2 162) (1 986) (64 976) 5 496 581

(18 818) (18 818) (6 036) (8 022) 693 253 6 189 834

4 067 164

77 074

727 576

651 469

30 194 5 553 477

699 228 6 252 705

-

-

-

189 189 189

112 685 4 179 849

1 250 5 792 84 116

(40 642) 97 044 783 978

(651 555) (7) 96

318 480 318 480

189 189 318 480 318 669

40 642 650 305 112 685 198 775 301 604 1 238 396 6 286 435

11 012 11 012

189 189 329 492 329 681

(26 131) (26 131) 112 685 (419 491) (117 887) 27 762 27 762 292 380 6 578 815

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

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

10


Company

Notes

Balance at 1 January 2013 Net profit (loss) for the period Balance at 30 June 2013 Balance at 1 January 2014 Increase in share capital Change in fair value of available-for-sale financial assets, net of deferred income tax effects Net profit (loss) for the period Balance at 30 June 2014

12

Share capital

Legal reserve

Other reserves

Retained earnings

4 067 164 4 067 164

-

-

-

4 067 164 112 685 4 179 849

-

Total

-

(200 328) 111 691 (88 637)

3 866 836 111 691 3 978 527

189 189

(87 060) 240 682 153 622

3 980 104 112 685 189 240 682 4 333 660

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

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

11


Notes to condensed interim financial information (unaudited) for a six-month period ended 30 June 2014 All amounts in LTL thousands 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, 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. 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 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 Government of the Republic of Lithuania.

30 June 2014 Company’s shareholder Share capital Republic of Lithuania represented by the Lithuanian Ministry of Finance

4 179 849

31 December 2013

Ownership interest, %

Share capital

100

Ownership interest, %

4 067 164

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

100

12


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

Company name

Registered office address

Effective ownership interest at 30 June 2014, %

Share capital (‘000 LTL) at 30 June 2014

Profile 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

Maintenance of information 58 907 technologies and telecommunications

ELEKTROS TINKLO PASLAUGOS UAB

Motorų str. 2, Vilnius

94,4

Construction, repair and maintenance 18 904 of grid and related equipment, connection of customers to the grid

Kauno Energetikos Remontas UAB

Chemijos str. 17, Kaunas

96,1

14 245

LITGAS UAB

Gedimino av. 33-2, Vilnius

66,7

3 000

Gotlitas UAB

R.Kalantos str. 119, Kaunas

96,1

1 450 Accommodation services, trade

Energijos Tiekimas UAB

Jeruzalės str. 21, Vilnius

96,1

750

Public Institution Republican Centre of Training for Energy Specialists

Jeruzalės str. 21, Vilnius

79,6

Professional development and 294 continuing 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).

Repairs of energy equipment, production of metal structures Supply of liquid natural gas via terminal and trade in natural gas

Supply of electric power and natural gas

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

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

13


2

Summary of significant accounting policies

This condensed interim financial information for a sixmonth 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 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 2013, 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 2013. Income tax

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

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).

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.

Business combinations

New standards, amendments and interpretations

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 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.

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

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

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.

IFRS 10 Consolidated financial statements (issued in May 2011). IFRS 10 changes the definition of control 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 balances in the Group’s consolidated financial information. 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 proportionate consolidation for jointly controlled entities has been eliminated. Equity accounting is mandatory for participants in joint ventures. This standard had no

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

14


impact on the measurement of transactions and balances; the Group applied this standard to the transactions conducted during 2014. IFRS 12 Disclosure of interest in other entities (issued in May 2011). This standard applies to entities that have an interest in a subsidiary, a joint arrangement, 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 Company 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 subsidiaries, joint ventures and associates when an entity

3

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 supplemented IAS 28 with the requirement to account for joint ventures using the equity method, because this method is applicable to both, joint ventures and associates. Save for this, other guidelines remained unchanged. 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.

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 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 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 financial 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 value 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 Standards 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 value 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 expected 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 Electricity effective as at 31 December 2008 stipulated that the price caps for electricity transmission services were determined based on the value of assets used in licensed activities 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 electricity 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 estimated and approved by the National Control Commission 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 Government.

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

15


According to the Government’s Resolution No. 1142 of 9 September 2009 On the methodology for determination 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 pursuant 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 Valuation and Accounting Standards. It is probable that such valuation 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 assets as of 31 December 2014. Revaluation of assets As at 31 December 2013, independent valuation of assets 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 income methods. In 2010, independent property valuers carried out revaluation of non-current assets transferred as in-kind contribution to the formation of the share capital of Technologijų 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 assets and the periods of their acquisition, in the opinion

of the management, the fair value of the Group’s property, 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, whether 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 impairment 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 power 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 recognised 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 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. Due to significant 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 services, 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 management 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 method. 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-

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

16


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 regulation 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 considering 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 Government 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 Energy 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 Energija UAB to the newly established private limited liability company EPSO-G UAB in return for a consideration based on the market value of shares determined by independent valuers. For the purpose of implementing the above-mentioned Resolution of the Lithuanian Government, the management initiated an independent valuation of the Company‘s shares held in LITGRID AB – an electricity transmission system operator controlled by the Company. The independent 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 assumptions used in valuation and uncertainties in relation to future changes in the methodology for the establishment of prices for services under regulated activities, the implementation of which is stipulated in the new provisions 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 pertaining 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 commencement 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 acquisition of VST AB in 2008. Due to significant 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 prices for electricity distribution and supply services, the Group did not carry out impairment tests for goodwill 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 commercial obsolescence, often 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 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 revenue is estimated as 1/3 of total payments for electricity

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

17


received in the last month of the reporting period. 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 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). Consequently, the volume of electricity consumed over the remaining 10 days is estimated proportionally based on the volume of electricity provided to the electricity supply 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 received 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 equipment 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 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 assess additional tax amounts and penalties. The Group’s management is not aware of any circumstances 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 extended 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 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 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 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.

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

18


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.

4

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.

Non-current intangible assets Group

Net book amount at 1 January 2013 Additions Reclassified from / to PP&E

Patents and licences

Computer software

Emission allowances

Other intangible assets

Goodwill

Total

118 873

6 587

55 413

2 677

178 103

361 653

16

1 299

1 222

1 105

-

3 642

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)

(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

336 017

Acquisition of Lietuvos Dujos AB

1 079

1 084

-

1

-

2 164

Additions

2 517

129

-

452

-

3 098

Amortisation charge

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

(424)

(1 728)

-

(47)

-

(2 199)

121 953

6 606

23 618

3 701

178 103

333 981

Amortisation charge Net book amount at 30 June 2014

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

19


5

Property, plant and equipment

Group

Land

Gas Gas distri- technobution logical Assets Motor pipeli- equipof power vehines ment plants cles and and equip- faciliment ties

Structures and machinery

Buildings

Net book amount at 1 January 2013 6 190 383 536 4 228 702

-

Construction in progress

Other PP&E

- 2 664 957 50 268 102 222

Total

73 361 7 509 236

Additions

-

19

1 134

-

-

555

734

2 557

115 696

Revaluation

-

(77)

-

-

-

-

-

-

-

120 695 (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)

-

3 878

-

(6)

-

3 869

Reclassified from / to inventories

-

Depreciation charge

-

(3)

-

-

(9 841) (182 172)

-

-

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 7 318 650

Acquisition of Lietuvos Dujos AB

1

36 308

Additions

-

357

4 239 362 983 1 078

-

(57 953) (3 661) (12 187)

- (265 814)

14 970

-

8 846

18 429

3 663

449 439

-

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

Net book amount at 1 January 2013 Additions

Construction in progress

Total

48

-

48

-

134

134

Depreciation charge

(8)

-

(8)

Net book amount at 30 June 2013

40

134

174

Net book amount at 1 January 2014

33

-

33

Depreciation 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 distribution pipelines and equipment, assets of hydro power 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).

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

20


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 concern 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.

the remaining shares of Lietuvos Dujos AB, and from the Russian company Gazprom and minority shareholders 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.

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

2014 Carrying amount of non-controlling interest acquired Consideration paid to non-controlling interest Profit attributable to owners of the parent, recognised in equity

419 491 (117 887) 301 604

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 Subsidiaries: Lietuvos Energijos Gamyba AB LESTO AB Lietuvos Dujos AB Duomenų Logistikos Centras UAB LITGAS UAB Technologijų ir Inovacijų Centras UAB VAE SPB UAB Investments: NT Valdos UAB

Acquisition cost

Contribution to cover loss

Carrying amount

Ownership interest, %

1 017 997 1 860 624 594 043 60 932 2 000 5 10 3 535 611

15 15

1 017 997 1 860 624 594 043 60 932 2 000 5 25 3 535 626

96,13 94,39 96,64 79,64 66,67 88,10 100,00

100 100 3 535 711

15

100 100 3 535 726

0,03

The Company‘s ownership interests in the Group companies as of 31 December 2013 were as follows: Group company Subsidiaries: Lietuvos Energijos Gamyba AB LESTO AB LITGAS UAB Technologijų ir Inovacijų Centras UAB VAE SPB UAB Investments: Duomenų Logistikos Centras UAB NT Valdos UAB

Acquisition cost

Contribution to cover loss

Carrying amount

Ownership interest, %

1 017 998 1 742 737 2 000 5 10 2 762 750

5 5

1 017 998 1 742 737 2 000 5 15 2 762 755

96,13 82,63 66,67 50,00 100,00

500 100 600 2 763 350

5

500 100 600 2 763 355

0,65 0,03

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

21


7

Amounts receivable after one year Group 30 Jun 2014

Company 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 Carrying amount

19 678

22 888

-

-

844 809

712 888

825 131

690 000

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 2014. 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.

8

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 EPSO-G UAB.

Investments and other financial assets

Long-term investments and other financial assets comprise as follows: Group 30 Jun 2014 Available-for-sale financial assets

Company 31 Dec 2013

16 585

30 Jun 2014 -

31 Dec 2013

16 585

-

Held-to-maturity financial assets: Lithuanian Government bonds Carrying amount

-

57 302

-

57 302

16 585

57 302

16 585

57 302

Short-term investments comprise as follows: Group 30 Jun 2014

Company 31 Dec 2013

30 Jun 2014

31 Dec 2013

Held-to-maturity financial assets: Lithuanian Government bonds

-

40 131

-

40 131

-

81 433

-

81 433

Loans and amounts receivable: Bank bonds Interest receivable Carrying amount

189

821

189

821

189

122 385

189

122 385

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

22


As of 30 June 2014, the Group‘s and the Company‘s available-for-sale financial assets comprised Lithuanian Government 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-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 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 securities 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 coupons) available as of 30 June 2014.

9

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 hierarchy. 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.

Inventories Group 30 Jun 2014

Company

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 Heavy fuel oil Other Total Less: write-down to net realisable value Carrying amount

2 591

3 257

-

-

20 740

20 740

-

-

5 414

4 222

-

-

88 292

49 100

-

(14 631)

(14 486)

-

-

73 662

34 614

-

-

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 Carrying amount at 1 January 2013

Company 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)

-

14 631

-

Carrying amount at 31 December 2014

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

23


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 related to retrospective reduction of natural gas import price for Lietuvos Dujos AB by OAO Gazprom for the period from

11

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

Cash and cash equivalents

Cash and cash equivalents and bank overdraft include the following for the purpose of the cash flow statement: Group 30 Jun 2014 Cash and cash equivalents

Company 31 Dec 2013

303 654

558 396

30 Jun 2014

31 Dec 2013

3 268

309 974

Bank overdraft

(36 757)

(70 708)

-

-

Carrying amount

266 897

487 688

3 268

309 974

12

Share capital

Based on Order No. 1K-060 of 21 February 2014 On increase 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 Association of Visagino Atominė Elektrinė UAB and formation of the Supervisory Board, the Ministry of Finance (“the Ministry“) 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 Subscription 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.

13

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 issued 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 Companies, 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 capital was divided into ordinary registered shares with the nominal value of LTL 1 each. All the shares have been fully paid up.

Reserves

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

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.

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

24


14

Borrowings Group 30 Jun 2014

Company 31 Dec 2013

30 Jun 2014

31 Dec 2013

Non-current Bank borrowings

859 244

805 826

-

-

362 344 -

302 656

-

-

-

4 900

-

36 757

70 708

-

-

28

854

-

-

1 258 373

1 180 044

4 900

-

Current Current portion of long-term loans Other borrowings Bank overdraft Interest payable Total borrowings

Non-current borrowings analysed by maturity: Group 30 Jun 2014

Company 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 using a discount rate of 2.60% (31 December 2013: 2.9%).

The loan agreements contain certain financial and non-financial covenants that the individual Group companies are obliged to comply with. In the opinion of management, 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 value of borrowings approximated their carrying amount,

15

Provisions Group 30 Jun 2014

Non-current

Company 31 Dec 2013

12 726

30 Jun 2014

4 588

31 Dec 2013 -

-

Current

27 741

12 437

-

-

Carrying amount

40 467

17 025

-

-

Group At 1 January 2013 Increase over the period Utilised during the period Decrease due to changes in assumptions At 30 June 2013

Commitments relating to emission limits

Provisions for employee benefits

Provisions for onerous contracts

Other provisions

13 895

3 227

-

305

17 427

2 506

5 590

-

-

8 096

Total

-

(1 788)

-

(73)

(1 861)

(13 895)

-

-

-

(13 895)

2 506

7 029

-

232

9 767

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

25


At 1 January 2014

9 745

6 894

-

386

17 025

Increase over the period

1 515

193

-

179

1 887

(10 190)

(684)

-

(106)

(10 980)

643

-

-

-

643

Utilised during the period Decrease due to changes in assumptions Acquisition of Lietuvos Dujos AB At 30 June 2014

-

7 964

23 928

-

31 892

1 713

14 367

23 928

459

40 467

On 7 May 2014, Lietuvos Dujos AB entered into arrangement with natural gas supplier OAO Gazprom for a significant 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.

16

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 contracts for the share of reduced price effects for 2015.

Other expenses Group 30 Jun 2014

Company

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

253 134

Business trips

606

729

72

1 969

3 349

550

2

605

824

53

49

1 115

1 075

-

-

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

-

-

Consultation services HR development Expenses of small-value inventory items PR and marketing

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

-

-

(5 298)

25 913

-

-

-

(20)

-

-

(91)

963

-

-

Revaluation of emission allowances and provision expenses Impairment of PP&E Inventory write-down Other expenses

17

4 925

5 766

247

147

61 301

95 012

2 149

1 252

Finance income Group 30 Jun 2014

Company

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

2

-

-

-

Foreign exchange positive effect Other finance income

715

2 702

438

-

14 265

10 411

247 757

116 734

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

26


18

Finance costs Group 30 Jun 2014

Interest expenses

30 Jun 2013

30 Jun 2014

30 Jun 2013

14 724

15 534

211

-

10

15

1

-

838

(1 814)

9

-

15 572

13 735

221

-

Foreign exchange negative effect Other finance costs

19

Company

Business combinations

Lietuvos Energija UAB initiated expansion to gas industry 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 intensively pursued in the second quarter, and was supported in February 2014 with a designated supplier who is expected 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 became 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 distribution infrastructure.

In June 2014, the Company acquired control over Lietuvos 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 equity 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 activities 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%)

112 686

Fair value of net assets acquired

100 152

Identified goodwill

12 534

Share of results of investments under equity method for March-May 2014 Acquisition cost of investment (38,9%)

46 249 219 009

Fair value of net assets acquired

321 795

Identified goodwill posted to share of results of investments under equity method

102 786

Share of results of investments under equity method for June 2014

159

Share of results of investments under equity method

149 194

Value of investment under equity method before acquisition of control

480 889

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 hundred and thirty-four thousand, nine hundred and twenty-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 Lietuvos Dujos AB from minority shareholders.

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

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

27


The following assets and liabilities of Lietuvos Dujos AB were identified on acquisition with the following fair values at the date of acquisition: 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 Current liabilities Net assets acquired

(7 964) (100 018) 827 214

Non-controlling interest

(27 762)

Goodwill on acquisition

(154 203)

Total cost of acquisition of control

645 249

The Group recognised LTL 97,988 thousand loss on re-measurement of investment in Lietuvos Dujos AB before 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

20

The fair value of property, plant and equipment was determined with reference to value in use based on discounted cash flow method. Deferred revenue and grants were written off on acquisition. The fair value of current assets and current liabilities approximated their carrying amount. Non-controlling interest was estimated on a proportionate (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 Dujos 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 January 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.

Income tax expenses

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

21

distribution activities; valuation assumptions are described in Note 3 Valuation of investments in subsidiaries.

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.

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 appropriation. 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 dividends 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 appropriation. The Company received dividends of LTL 94,815 thousand. During the General Shareholders‘ Meeting of Lietuvos Energijos 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 decision was made to pay out dividends of LTL 1,933 thousand from profit for appropriation. The Company received dividends of LTL 1,539 thousand.

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

28


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 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, associates and management. The following transactions were conducted with related parties:

Sales of goods and services Group 30 Jun 2014 LESTO AB

Group’s associates and joint ventures

30 Jun 2013 -

Technologijų ir Inovacijų Centras UAB EPSO-G UAB

Company 30 Jun 2014 -

30 Jun 2013 4

4

-

-

11

-

5 476

5 526

5 476

5 526

6 882

271

-

-

12 358

5 797

5 491

5 530

Purchase of goods and services Group 30 Jun 2014

Company 30 Jun 2013

30 Jun 2014

30 Jun 2013

LESTO AB

-

-

19 141

Lietuvos Energijos Gamyba AB

-

-

41 479

28 -

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 Group 30 Jun 2014

Company 31 Dec 2013

30 Jun 2014

31 Dec 2013

LESTO AB

-

-

2

Technologijų ir Inovacijų Centras UAB

-

-

11 102

-

833 004

727 469

833 004

727 469

EPSO-G UAB Group’s associates and joint ventures

2

20 478

77

-

-

853 482

727 546

844 108

727 471

Amounts payable to related parties Group 30 Jun 2014

Company 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

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

29


Group 30 Jun 2014 Salaries and other benefits to management:

Company 30 Jun 2013

30 Jun 2014

30 Jun 2013

4 523

4 492

1 042

393

Whereof: termination benefits and payments to board members

483

163

176

-

Number of management staff

56*

51

9

4

Management in the table above includes heads of administration and their deputies. * excluding Lietuvos Dujos AB data.

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 Inovacijų 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 Logistikos Centras UAB was reduced to make payments to shareholders. Before reduction of share capital, the Company 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.

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 Company is likely to incur an obligation to adjust gas tariffs for non-household consumers for the period from 1 January 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 appropriation for the year 2013 was approved and a decision was made to pay dividends of LTL 53,280 thousand (LTL 0.183 per ordinary registered share with nominal value of LTL 1) and transfer LTL 328,013 thousand from other reserves to retained earnings.

Establishment of Verslo Aptarnavimo Centras UAB

Increase of share capital of LITGAS UAB

On 21 July 2014, the Company and other Group companies signed a memorandum n the establishment of Verslo Aptarnavimo Centras AB. The purpose of the newly established 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 authorised share capital amounts to LTL 100,000. The Company acquired 50% of its shares.

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 contributions of shareholders from LTL 3 million up to LTL 45 million, by issuing new ordinary registered shares with the nominal value of LTL 1 each and total value of LTL 42 million. 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 transaction, the Company‘s shareholding in LITGAS UAB will amount to LTL 30 million.

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

30


Lietuvos Energija UAB Žvejų str. 14, Vilnius www.le.lt


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