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LITGRID AB
The Company’s financial statements, annual report and
independent auditor’s report for the year ended
31 December 2022
CONFIRMATION OF RESPONSIBLE PERSONS
16 March 2023, Vilnius
Following the Law on Securities of the Republic of Lithuania and the Rules on Information
Disclosure approved by the Bank of Lithuania, we, Rokas Masiulis, Chief Executive Officer of LITGRID
AB, Darius Zagorskis, Head of the Finance Planning and Analysis Division, Acting Director of the Finance
Department of LITGRID AB and Asta Vičkačkienė, Head of the Accounting Division of LITGRID AB, hereby
confirm that, to the best of our knowledge, the attached financial statements of LITGRID AB for the year
2022 prepared in accordance with the International Financial Reporting Standards adopted by the
European Union give a true and fair view of the Company’s assets, liabilities, financial position, profit and
loss and cash flows; the annual report for the year 2022 presents a fair overview of the business
development and performance, the Company’s financial position together with the description of its
exposure to key risks and contingencies.
Rokas Masiulis
Chief Executive Officer
(The document is signed by a qualified electronic signature)
Darius Zagorskis
Head of the Finance Planning and Analysis Division,
Acting Director of the Finance Department
(The document is signed by a qualified electronic signature)
Asta Vičkačkienė
Head of the Accounting Division
(The document is signed by a qualified electronic signature)
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
3
Translation note
This version of the accompanying documents 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 the accompanying
documents takes precedence over this translation.
TABLE OF CONTENTS
Annual report 4
The Company’s statement of financial position 105
The Company’s statement of comprehensive income 106
The Company’s statement of changes in equity 107
The Company’s statement of cash flows 108
Notes to the Company’s financial statements 109
Independent auditor’s report 149
The financial statements were approved on 16 March 2023.
Rokas Masiulis
Chief Executive Officer
(The document is signed by a qualified electronic signature)
Darius Zagorskis
Head of the Finance Planning and Analysis Division,
Acting Director of the Finance Department
(The document is signed by a qualified electronic signature)
Asta Vičkačkienė
Head of the Accounting Division
(The document is signed by a qualified electronic signature)
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
4
The Company’s performance
Report for 2022
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
5
Litgrid’s key performance indicators:
2022 m.
2021 m.
Revenue, EUR million
420.4
270.9
149.5
55.2
EBITDA, EUR million
-36.5
46.2
-82.7
Profit/(loss) for the
period, EUR million
-49.5
20
-69.5
Return on equity*
-25.5 %
9.1 %
Quantity of electricity
transmitted, GWh
10 234
10 936
-703
-6.4
ENS**(Energy Not Supplied
due to interruptions)
10.617 MWh
3.356 MWh
AIT** (Average Interruption
Time)
0.356 min.
0.112 min.
**Criteria extended by the National Energy Regulatory Council in 2022 to include cases when the ENS and AIT indicators are
attributed to responsibility of the electricity transmission operator (the ENS and AIT indicators for 2022 were set to be below
27.251 MWh and 0.934 min., respectively (below 6.3 MWh and 0.29 min., respectively, for 2021).
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
6
Statement of the Chairman of the Board
Dear all
I have no doubt that many years from now on we will remember 2022 as one of the most important years in the
history of Lithuanian energy. It was a very meaningful and important year in Lithuania's move towards energy
independence.
The thoughts and attention of many turned daily to Ukraine and the images of the ongoing war there. I am pleased
with the Company's significant contribution to helping rebuild Ukraine's war-torn electricity grid and providing light
and heat to a country in active war zone. We supported the fighting and suffering in Ukraine not only in thoughts and
hearts.
Despite many challenges, Litgrid successfully ensured the stability of the country's electricity system last year and
continued the synchronisation projects with the Continental European networks at the planned pace.
To accelerate the implementation of its ambitious renewable energy targets, Litgrid established a Renewable Energy
Resource Centre in 2022 to coordinate the connection of new renewable energy power plants and battery projects
into the electricity transmission grid. I hope that this will bring us all significantly closer to our goal of maximising the
amount of energy generated from renewable sources.
In 2022, the long-term objectives defined in the company's strategy were also successfully pursued, with a strong
focus on preserving the environment and reducing climate change. As a result of Litgrid's adherence to the EPSO-G
Sustainability Policy, the company's team is planning its activities responsibly, making significant changes to its habits
and renewing its fleet of vehicles. A great achievement in procurement - three quarters of last year's procurement
deals were green.
In a climate of uncertainty, the Litgrid team demonstrated that the foundations of Lithuania's energy independence,
which have been strengthened over the years, are very solid. Thank you to everyone who stood together during this
important and significant year. And
In the conditions of uncertainty, the Litgrid team demonstrated that the foundations of Lithuania's energy
independence, which have been strengthened for many years, are extremely strong. Thank you to everyone who
has been together in these significant and important year. I invite you to continue working together with the same
focus in the future.
Tomas Varneckas,
Chairman of the Board of Litgrid
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
7
Statement of the CEO of Litgrid
Dear all,
I am proud to present to you Litgrid's 2022 Annual Report. In 2022, Litgrid's team achieved the key objectives of the
strategic synchronisation projects with the continental European grid, ensured reliable electricity transmission,
fostered innovation, and improved the conditions for the development of renewable energy sources.
Last year was a challenging year, as the war and the energy crisis affected all areas of our business. Despite this,
we have consistently delivered on the work that is essential for Lithuania's energy independence. We have
maintained a fast pace in the implementation of synchronisation projects - we signed an agreement for additional EU
funding, started the construction of strategic projects such as the 330 kV lines Darbėnai-Bitėnai and Kruonio HAE-
Bitėnai and the Neris substation, and prepared the infrastructure for the connection of the two synchronous
compensators. We have completed the last spatial planning works and all the public procurement of onshore
construction projects - major and important milestones which we have successfully implemented.
On the security side, in response to Russia's aggression against Ukraine, we have reduced the capacity of system
interconnections with Russia in March 2022. Imports of electricity from Russia have been completely cut off since
May, and since June the Baltic countries have started to balance the system on their own.
The amount of electricity transmitted through Lithuania's transmission grids decreased last year compared to 2021.
In 2022, the electricity transmitted to meet the country's needs amounted to 10.234 TWh, a 6.4% decrease compared
to 10.936 TWh in 2021.
The overall availability of the interconnectors with Sweden (NordBalt) and Poland (LitPol Link) was 98.26% and
98.34% respectively. The main impact on the availability of the interconnectors was due to planned works such as
the annual maintenance of NordBalt and the implementation of the synchronisation projects with the continental
European grids.
In the area of innovation, Litgrid opened an experimental 1 MW battery to science and business and implemented
the first joint tests with universities and companies. At the end of the year, Litgrid became the first grid operator in
Europe to use a battery for system control functions, winning the prestigious Platts Global Energy Awards.
In order to accelerate the implementation of the ambitious renewable energy targets, Litgrid has established a
Renewable Energy Resource Centre to coordinate the connection of new renewable energy power plants and battery
projects to the electricity transmission grid.
Taking into account the projects already initiated by RES developers, the capacity of wind farms on the
transmission grid is expected to increase from 803 MW to around 2.200 MW by 2025. With the implementation
of the amendments to the Renewable Energy Law and the Electricity Law adopted in 2022, the development
of wind and solar power plants will accelerate at a remarkably high pace by 2030. Litgrid estimates that in
2030 the consumption and export capacity of the Lithuanian electricity market will allow for at least 4,400
MW of solar and 5.000 MW of wind generation capacity to be connected, a total of 6 times more than today.
We are preparing for this challenge already.
We keep our focus on sustainable development as well. We conduct our operations in accordance with the principles
of sustainability in the execution of our activities and commitments. As the CEO, I am particularly partial to the idea
that we are responsible for a safe, sustainable environment and a safe and healthy working environment for our
employees. In our day-to-day operations, we have taken many steps to reduce Litgrid's impact on environment- we
are installing solar power plants at substations and we will generate our own electricity for our own use from a
renewable source, we are replacing our fleet of cars, and we are upgrading our equipment with new, safer equipment.
I firmly believe that the Litgrid team will successfully achieve all its goals and overcome any challenges.
Sincerely
Rokas Masiulis
Litgrid CEO
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
8
1. BASIC DETAILS
The annual report has been prepared for the period ended 31 December 2022.
1.1. The issuer and its contact details:
Name LITGRID AB (Litgrid or the Company)
Legal form Public limited liability company
Date and place of registration 16 November 2010, the Register of Legal Entities of the Republic of Lithuania
Company code 302564383
Registered office address Karlo Gustavo Emilio Manerheimo g. 8, LT-05131, Vilnius
LEI code 529900CTIUKTEFNNH157
Registry State registry centre
Address for correspondence Karlo Gustavo Emilio Manerheimo g. 8, LT-05131, Vilnius
Telephone +370 707 02171
Email info@litgrid.eu; www.litgrid.eu
Litgrid is part of the EPSO-G group of companies:
EPSO-G UAB is a state-owned group of energy transmission and exchange companies. The rights and obligations of the
shareholder of holding company EPSO-G UAB are implemented by the Ministry of Energy of the Republic of Lithuania. EPSO-G
UAB owns 97.5 % of shares of Litgrid.
Shares of other companies owned by Litgrid:
Name
TSO Holding AS (former name
Nord Pool Holding AS)
RCC
Country of incorporation
Kingdom of Norway
The Republic of Estonia
Registered office address
PO Box 121,
NO-1325 Lysaker, Norway
Harju maakond, Tallinn, Mustamäe
linnaosa, Kadaka tee 42, 12915
Litgrid’s shareholding
39,6 of shares and voting rights
attached thereto
33,3 of shares and voting rights
attached thereto
Major changes
Litgrid sold its shareholding in
TSO Holding to EPSO-G UAB
on 30 November 2022
The Baltic Regional Coordination
Center established on 3 May 2022
Minor
shareholders
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
9
1.2. Activities of Litgrid
Litgrid, the Lithuanian electricity transmission system operator (the TSO), secures stable operation of the national electricity
system, controls electricity flows and creates conditions for competition in the open electricity market.
Main activities of Litgrid. The Company is responsible for maintaining the balance between electricity consumed and produced
in the Lithuanian electricity system and reliable transmission of electricity, it implements strategic national electricity projects. Its
vision and strategic operating guidelines are based on the long-term goals identified in the National Energy Independence Strategy
(the NEIS).
The most important activity areas and responsibilities of the Lithuanian TSO include the maintenance of the country’s
electricity infrastructure and its integration with the electricity infrastructure of Western and Northern Europe; development of the
electricity market and participation in the creation of a single electricity market of the Baltic States and the European countries;
and integration of the electricity systems of Lithuania and continental Europe for synchronous operation. In implementing the
programme on the synchronisation with the European continental networks, the Company carries out 19 projects of strategic
importance approved by the Government of the Republic of Lithuania.
As the Company systematically carries out its daily
functions, ensures uninterrupted and smooth operation of
the electricity transmission system and implements projects
of national importance, it aims to create value for its
customers – the Lithuanian society.
Litgrid not only transmits electricity via high-voltage lines, but
also takes care of the reliability of the operation of the entire
transmission network: it is important for us that electricity is
uninterruptedly supplied to electricity consumers and that all
breakdowns are eliminated as soon as possible. Reliability
of electricity supply guarantees the growth of the economy.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
10
2. BUSINESS ENVIRONMENT
2.1. Business model
Litgrid is a Lithuanian-wide electricity transmission system operator. The Company maintains high-voltage electricity transmission
networks and secures the stable operation of the country’s electricity system, manages electricity flows, and creates conditions
for competition in the free electricity market, it is responsible for the integration of the Lithuanian electricity system into the
European electricity infrastructure and the single electricity market.
Electricity transmission is an intermediate link between electricity generation and distribution to consumers. The voltage of
transmission networks is high or very high (110-440 kV). Electricity transmission networks consist of electricity transmission lines
with substations. Electricity lines are connected in the electricity substations that contain the switchyards of a higher and lower
voltage and the transformers linking them. In the substation transformers voltage is reduced to the voltage of distribution networks.
Electricity transmission is a licensed activity. Prices of the electricity transmission service are regulated by the National Energy
Regulatory Council (NERC) that sets the price caps for these services.
2.2. Services provided by electricity transmission system operator Litgrid
Electricity transmission over high voltage (110-400 kV) electrical installations
The electricity transmission service is electricity transmission over high voltage (400, 330, 300 and 110 kV) electrical installations.
The transmission system operator transmits electricity from producers to consumers that are connected to the transmission
network, and to the operators of the distribution networks.
The main activities of the TSO include the management of the high voltage electricity transmission network and securing reliable,
effective, high-quality, transparent and safe transmission of electricity.
System services
To maintain reliable system operations, Litgrid purchases from energy generating companies the services for the capacity reserve
assurance at the electricity generation facilities, reactive power and voltage management, and emergency, disruption prevention
and response services, isolated work ensurance and provides consumers with system services. The capacity reserve is needed
when electricity production suddenly and unexpectedly falls or its consumption increases.
Trade in imbalance and balancing electricity
Litgrid ensures a balance between production and consumption of electricity in the country. Imbalance electricity is electricity that
is consumed or produced outside of established electricity consumption or production schedules. Litgrid organises trade in
imbalance electricity, buys and sells imbalance electricity that is necessary to ensure the country’s electricity production and
consumption balance.
Balancing electricity is electricity that is bought and/or sold on instruction of the transmission system operator as electricity
necessary for performing the function of balancing the country’s electricity consumption and production. Litgrid organises trading
in balancing electricity by auction. The auction participants are suppliers of balancing energy and TSOs of other countries
possessing technical facilities that enable them to quickly change the electricity generation and consumption conditions and having
concluded a relevant agreement with Litgrid.
Services under public service obligation (PSO) scheme
Public service obligations (PSO) in the electricity sector are services that ensure and enhance the national energy security and
promote integration and use of electricity produced from renewable energy sources. The list of PSO services, their providers and
procedures for the provision of PSO services are approved by the Government of the Republic of Lithuania, or an institution
authorised by it, having regard to the public interests in the electricity sector. PSO funds are funds that are paid to the providers
of PSO services.
Until the end of 2022 Litgrid provided such VSO services: balancing of energy produced using the reusable sources of energy,
balancing.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
11
Litgrid also provides services of granting and removal of guarantees of origin
A guarantee of origin is a certificate proving that energy is produced from renewable sources or in the process of cogeneration.
The guarantee of origin is valid for 12 months from the date of its issue.
Guarantees of origin can be of two types:
Guarantee of the origin of renewable energy sources that verifies the origin and quantity of electricity. A guarantee of
origin is proof that all or part of energy has been produced from renewable energy sources.
Guarantee of the origin of efficient cogeneration that verifies the origin and quantity of electricity produced during the
process of high-efficiency cogeneration.
2.3. Customers of the transmission system operator
Litgrid’s direct customers are the electricity transmission network’s users and suppliers of imbalance and balancing electricity.
The users of the transmission network are as follows:
Distribution network operators ESO, Dainavos Elektra UAB;
Electricity consumers whose electrical installations are connected to the electricity transmission network and who
purchase electricity for use;
Electricity producers connected to the electricity transmission network.
The suppliers of imbalance and balancing electricity include the electricity producers and suppliers.
2.4. Operating indicators of electricity transmission and the network’s reliability
In accordance with the requirements approved by the NERC for reliability and quality of service of electricity transmission, the
following indicators are used to determine the transmission reliability level: ENS (energy not supplied), i.e. the quantity of electricity
not transmitted due to interruptions, and AIT (average interruption time), i.e. the average interruption duration in electricity
transmission.
TSO’s operating indicators
2022
2021
2020
Quantity of electricity transmitted, million kWh
10 234
10 936
10 277
Technological costs in the transmission network, %
3,09
2.67
2.88
ENS (Energy Not Supplied due to interruptions),
MWh *
10.617
3.356
6.21
AIT (Average Interruption Time), min. **
0.356
0.112
0.21
* Only due to the operator’s fault or due to undetermined causes.
**Criteria extended by the National Energy Regulatory Council in 2022 to include cases when the ENS and AIT indicators are attributed to
responsibility of the electricity transmission operator (the ENS and AIT indicators for 2022 were set to be below 27.251 MWh and 0.934 min.,
respectively (below 6.3 MWh and 0.29 min., respectively, for 2021).
2.5. Electricity interconnections
The reliably functioning interconnections are an essential part of the system enabling it to operate together with the energy systems
of other Western and Northern European countries and to develop a single European market.
Import and export flows of the interconnections with Sweden and Poland NordBalt and LitPol Link increased by 24.5 percent in
2022.
LitPol Link is a double-circuit transmission line from Alytus in Lithuania to Elk in Poland and the Alytus back-to-back converter.
The LitPol Link interconnection was available to the market 98.29% of the time throughout 2022. Scheduled works for the
implementation of the project on the expansion of the interconnection had a major impact on the unavailability of the LitPol Link
interconnection.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
12
The NordBalt electricity interconnection is one of the longest submarine cables in the world, the operation of which significantly
increases safety of energy supply to Lithuania and the Baltic States. The NordBalt interconnection was available to the market
98.26% of the time throughout 2022. Scheduled repair works had a major impact on the unavailability of the NordBalt
interconnection.
2.6. Maintenance of the electricity network
In Lithuania, Litgrid’s employees maintain 6966,8 km of high-voltage lines, 259,3 km km of cables and 236 transformer substations
and switchyards, two HVDC converter stations.
To maintain a stable service life of overhead lines and ensure a stable operation of installations, during the 2022 repairs of main
installations, verification of operation of relay protection and automation equipment, all scheduled works were carried out in 22
transformer substations and switchyards with the voltage of 110-330-400 kV. Scheduled maintenance works for overhead lines
with the voltage of 110 kV and higher were performed (194 km in total) and 93 towers were replaced during the repair, the height
of the cables in 32 places was increased at road and other junctions.
In order to protect overhead lines their routes covering an area of 752 hectares were cleaned, 30,052 trees posing threat to a
reliable functioning of lines were removed.
Regular repair and maintenance of the transmission network’s objects have a direct impact on reliability of operation of the
electricity system and electricity transmission. Scheduled works within the transmission network are carried out at the intervals
established by the legal acts of the Republic of Lithuania, however when assessing the quantity and scope of works the actual
condition of installations as well as the need to secure reliable operation of the network and efficient use of funds are taken into
consideration.
Aiming to enhance reliability of operation of autotransformers in the main transmission network’s installations a new investment
project Introduction of New Automated Monitoring Systems (AMS) was initiated in 2022 which is focused on the monitoring the
operation of autotransformers. This will involve the installation of five new AMSs at the main objects of the transmission network,
including the NordBalt and LitPol Link converter stations.
Flying steerable drones are successfully used by the Company for the identification of locations of breakdown in overhead lines
and causes of breakdowns. Drones are equipped with high-resolution cameras that detect even small-scale faults in line wires,
supporting structures and other elements of lines without disconnecting the lines. Overhead line engineers regard this new tool
as a time-saving measure that also helps improve reliability of operation of lines. Three properly equipped drones are used for
inspections of overhead lines, transformer substations and switchyards. Trained employees of the Company implement the
objectives of increasing the reliability of operation of lines and prompt detection of faults.
According to the data of December 2022, out of 1,276 operated transmission system devices, 75.6% of them were controlled
remotely (about 965 units of connected equipment).
2.7. International cooperation and membership in organisations
The Company actively participates in the international activities, cooperates with the transmission system operators of the Baltic
region and Europe on a daily basis, implements the Company’s strategic and innovation projects with the assistance of foreign
partners.
In 2022, the Company’s business activities covered a very large number of geographical areas. The study for integration of the
offshore wind power was carried out in cooperation with the Japanese transmission system operator Tepco Power Grid.
Cooperation was started with the US National Renewable Energy Laboratory regarding the implementation of the study on the
decarbonisation of the Lithuanian energy system in 2023. A pilot innovation project on a variable capacity of the transmission line
was initiated in cooperation with Slovenian company Operato and the project on the testing of a satellite scanning solution was
implemented together with Finish company HeadPower.
In 2022, Litgrid initiated bilateral cooperation formats. Cooperation with colleagues from Denmark, Belgium, Ireland, Spain, the
Netherlands is carried out in the fields of sustainability, integration of renewable energy sources, and offshore wind development.
With regard to the synchronisation programme the projects are implemented together with colleagues from Poland, Latvia and
Estonia.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
13
ENTSO-E (European Network of Transmission System Operators for Electricity)
The Company actively participates in the activities of ENTSO-E which represents 39 electricity transmission system operators
from 35 countries.
The Company’s representatives are involved, as permanent members, in the activities of ENTSO-E’s committees and work groups
that at the expert level implement joint projects ensuring smooth operation of the European transmission network, prepare and
examine legal acts, methodologies and other documents regulating the operation of the electricity system that are relevant to the
EU Member States and establish uniform operation conditions and rules for the European TSOs.
Participation in the activities of ENTSO-E strengthens cooperation with other European transmission network operators and it’s
crucial for Litgrid not only in implementing one of the priority tasks of the Lithuanian energy sector, i.e. integration into the
synchronous zone of continental Europe, but also in developing the offshore grid for electricity transmission in a sustainable and
integrated manner and ensuring effective implementation of the European offshore wind strategy.
BEMIP (Baltic energy market interconnection plan)
The objective of the BEMIP is to create operational and integrated electricity and gas markets, ensure necessary energy
infrastructure aiming to create a competitive, sustainable, safe electricity market in the Baltic Sea region.
Electricity-related commitments of Lithuania to BEMIP are implemented by Litgrid through the implementation of the projects
ensuring integration to the synchronous zone of continental Europe and performance of preparatory works for offshore wind
development in Lithuania.
Steering Committee for the Baltic Sea Transmission System Development
In 2020, the Company together with other six transmission system operators of the Baltic Sea region signed the cooperation
memorandum on offshore wind energy development in the region. Within the framework of cooperation the Steering Committee
for the Baltic Sea Transmission System Development was established which, with the help of the target working groups, will focus
on assurance of adequacy of the electricity transmission system of the Baltic Sea region, integrity of the development of the
onshore and offshore grid for electricity transmission, and will aim to develop common principles for the planning of the Baltic Sea
network and to conduct studies allowing to form a common vision for offshore wind network development in the region
Liutauras Varanavičius, Director of the Strategy Department of Litgrid, holds the position of the Vice-Chairman of this committee.
Baltic Regional Coordination Centre (RCC)
On 1 July 2022, the Baltic Regional Coordination Centre (RCC) started its activities and provides the grid security services to
the electricity transmission system operators of the Baltic States – Lithuanian Litgrid, Estonian Elering and Latvian AST. The
RCC was established by three electricity transmission system operators of the Baltic States according to the requirements of the
Clean Energy Package of the European Union. The Baltic RCC is one of six regional coordination centres operating in Europe.
The RCC implements five main tasks: calculation of the capacity of electricity lines between the countries, assessment of
reliability, adequacy of the systems, planning of disconnections of lines and development of a common model of the network.
This ensures smooth work in the countries which continue to strengthen their efforts in preparation for synchronisation and after
its implementation will maintain close relationship when operating in the single network of continental Europe.
The Company’s interests are also represented at the following associations:
The Polish-Lithuanian Chamber of Commerce
CIGRE
The Lithuanian Power Association
EnergyTech group
As a member of the above-mentioned associations Litgrid maintains closer cooperation with the regional and national partners,
ensures the representation of the Company’s interests, more effective implementation of the strategic projects and communication
with the related parties and stakeholders on issues relevant to the Company.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
14
3. OPERATING AND REGULATORY ENVIRONMENT
The strategic goal of Litgrid is the integration into the European market. The Company’s activities are also affected by the
development trends of the country’s economy, objectives and targets of the European Union.
3.1. Energy sector environment in the EU
Europe's biggest energy challenge for 2022 is reliable gas supply. Inevitably, the electricity market has become hostage to the
gas market, with electricity prices reaching all-time highs. The biggest contributor to the rise in electricity prices has been the
surge in fossil fuel prices. Gas prices have risen due to the uncertainty of gas supplies to Europe as Europe faces gas shortages
due to the Russian hostilities, the alternatives being more expensive liquefied natural gas imported by ship, increased supplies
from existing partners and increased consumption of other fossil fuels used for electricity generation.
The average annual price of electricity in European countries has passed the 200 €/MWh mark, with a peak of 288 €/MWh in Italy.
High electricity prices prevailed in countries where fossil-based electricity generation dominates. The Baltic Sea region and
Norway were notable for lower prices, with average prices ranging from €24/MWh in the north of Norway to €235/MWh in
Germany. This high price differential in the region is due to insufficient capacity between the northern and southern trading zones,
especially in Scandinavia, where the northern zones are dominated by low consumption and where most of the generation from
hydropower and other renewable sources is concentrated. In contrast, the south of Sweden and Norway has the highest
consumption and is dominated by export links to continental Europe
Fig.. 3.1 Average electricity prices in Europe in 2022 based on day-ahead auction results (source:
ENTSO-E transparency).
Already in the summer of 2021, gas prices started to rise, and in the last days
of December they passed the €100/MWh mark, i.e. a 14-fold increase
compared to mid-2020. Towards the end of the winter of 2021, the gas market
normalised and prices started to fall, but the price dynamics changed abruptly
due to a sharp change in the price level on 24 February. The Russian military
action in Ukraine on 24 February 2424, and the price increase was further
fuelled by the summer reduction and the final disruption of supply to Germany
via the Nordstream 1 pipeline in September. In Lithuania, gas prices have kept
pace with gas prices in Europe, with the Lithuanian price index above the 200
€/MWh mark in August-September.
The situation was particularly complicated by the extremely hot and dry
summer weather across Europe, which made it difficult to replace gas-fired
power plants with other thermal plants. The extremely low river water levels
posed many challenges for cooling thermal power plants and transporting coal
by river. The prevailing summer weather led to a reduction in wind generation,
which could not be compensated by limited water resources. The situation
was saved by the arrival of windy and rainy autumn weather towards the end of the year and the very successful filling of gas
reservoirs, which brought gas prices back to the level of the first half of the year.
The first half of 2022 was a very volatile year in the market for emission allowances. At the start of the year, the price of allowances
approached the historic level of €100/t, when the market was pricing 1 tonne of CO2 equivalent at €97.5/t. This surge in allowance
prices is due to the reform of the European CO2 trading system and the EU's increasingly ambitious environmental requirements.
The gas crisis in Europe led to speculation about the prospects for emission allowances, with prices falling by 40%, but as Europe
showed its determination to further accelerate the transition to green energy, the price of emission allowances has stabilised at
around €80/t. In the second half of the year, allowance prices also fluctuated considerably, falling below €65/t, before regaining
the €80/t level towards the end of the year.
At the end of May 2022, the Nord Pool Exchange suspended the electricity trading permits of UAB Inter RAO Lietuva. "The
suspension of Inter RAO Lietuva's imports on the electricity exchange resulted in Lithuania's commercial imports from third
countries falling to zero.
In 2022, Lithuania's domestic generation accounted for one third of the country's electricity consumption, of which 60% was from
renewable sources. Wind power plants accounted for the largest share of Lithuania's consumption, 12%, while hydro and pumped
storage plants accounted for almost a tenth of consumption, and fossil fuels and other renewables accounted for 8% and 4%
respectively. The remaining 67% was imported electricity. The largest share, 45%, was imported via NordBalt, 38% via the Latvian
interconnectors and 10% via Litpol Link. Third countries accounted for 7% of electricity imports.
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In 2022, the Nordbalt link was used for imports for a record period. As electricity prices across Europe started to rise in the
summer, there was a significant gap with the Nordic trading zones, resulting in maximum export flows from north to south. This
had an impact on the capacity utilisation of the Nordbalt interconnector, which peaked at 597 consecutive hours in July-August
and 901 hours in September-October. The total number of hours with flows equal to the 700 MW threshold was 4126 hours per
year.
Europe had very low gas reserves at the beginning of 2022, which started to be replenished from spring onwards, in the absence
of gas supply disruptions from Russia. To ensure that all EU Member States are ready for winter, the European Commission has
obliged Member States to fill their gas storage to at least 80% by 1 November 2022. Effective measures to reduce overall gas
consumption and an increase in imports from alternative suppliers have enabled Europe to meet and even exceed its targets
ahead of schedule. At the end of November, the overall storage fill rate reached 95%.
3.2. Regulatory environment in Lithuania
Electricity transmission activities carried out by Litgrid are licensed activities. The licence grants exclusive rights to provide
transmission services in Lithuania, thus the prices of services are regulated by the state. The regulatory function and supervision
of the licensed activities in Lithuania are performed by the National Energy Regulatory Council.
The decisions taken by the regulator directly affect Litgrid's financial performance, the funds available for necessary operating
costs, investments to ensure the reliability of the electricity transmission system, as well as the ability to finance strategic and
other development projects with own or borrowed funds. The price of the electricity transmission service shall be regulated by
setting a price cap for the five-year regulatory period and a component for the acquisition of ancillary services on top of the price
of the transmission service. The price cap shall be adjusted each year in response to changes in the volume of services, inflation
and other objective factors beyond the control of the operator and may be adjusted no more than twice a year.
The price cap shall take into account the reasonable indispensable costs of the regulated activity and a reasonable return on
investment, calculated as the product of the rate of return on investment (WACC) and the value of the regulated assets (RAB).
4. THE COMPANY’S STRATEGY AND STRATEGIC PRIORITIES,
PLANNING
4.1. Strategy
A client-focused organisation and a centre of competences for the energy sector, state-of-the-art technological and digital
solutions, sustainable energy development that will double the current generation volume of electricity, and opportunities for
market participants to exchange electricity freely at a competitive price. These are the goals set out in the Litgrid’s strategy that
was approved by the Company’s Board in January 2023. The strategy establishes the Litgrid’s long-term vision of becoming one
of the smartest electricity transmission system operators in Europe.
Litgrid plans to expand its activities by focusing on several priority areas. One of the most important priorities is the fight against
climate change through the development and adaptation of the transmission system for electricity generation from renewable
energy sources and the reduction of the impact of Litgrid’s own infrastructure on the environment.
Energy independence of Lithuania is another objective set for Litgrid which is being achieved through the implementation of the
programme on the country’s energy system synchronisation with the continental European networks. Following the completion of
this project in 2025, Lithuania will again be able to independently control the frequency of the electricity system after more than
80 years.
The Company is launching a digital transformation programme and implements a culture and ecosystem of data-driven solutions.
One of the components of this change is a service portal that will bring together customers and enable more efficient digital
delivery of services.
Recent large investments in impeccable customer experience made in other industries and companies set significantly higher
expectations of our customers with regard to our communication. Therefore, with the purpose of the implementation of our vision
we direct large attention to the improvement of customer experience and aim to work following the best global practices for
customer experience management.
As Lithuania pursues its ambitious renewable energy targets and the implementation of the Breakthrough Package, the tense
geopolitical situation and high electricity prices have further accelerated the development of renewable energy sources in the
country. The Breakthrough Package, adopted by the Lithuanian Parliament in spring 2022, has led to a greater involvement of
Litgrid, which has decided to concentrate its competences in renewable energy capacity planning, development, grid connection
and data analytics in a single unit, which will work efficiently with both shareholders and customers - developers of solar, wind
and battery farms in the country. At the end of 2022, Litgrid established a Renewable Energy Resource Centre. The specialised
centre coordinates the connection of new power plants and battery projects to the Lithuanian electricity transmission grid and is
expected to make a significant contribution to smoother RES development in Lithuania in the future.
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The strategy also pays particular attention to the development of the organisation. Litgrid aims to become an efficient exchange
platform that enables and encourages market participants and consumers to exchange electricity freely, to choose to produce or
consume climate-neutral energy, and to receive it at a competitive price.
The Litgrid’s strategy is available at https://www.litgrid.eu/index.php/apie-litgrid/strategija-vizija-misija-ir-vertybes/452
4.2. Stakeholders
Litgrid addresses such key stakeholders:
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4.3. Strategic priorities
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4.4. Measures for the implementation of the strategy
The Company’s strategy is reviewed and updated annually referring to the National Energy Independence Strategy (NEIS), the
Company’s activities and amendments to the legal acts regulating the electricity sector, the strategy of EPSO-G, a holding
company of the group, significant events in the Lithuanian and foreign electricity systems and electricity markets, works performed
during the year as well as by assessing new external circumstances beyond the Company’s control.
The Litgrid’s strategy comprises a ten-year (long-term) implementation period based on the main and long-term objectives in the
electricity sector laid down in the NEIS. Each year the Company updates and prepares a ten-year development plan of the
transmission network which is an integral part of the strategy.
In order to regularly assess the efficiency and application of the measures selected by the Company, the Company’s operational
plan is reviewed after the end of each quarter. The implementation of the strategic objectives and the operational plan,
performance of the divisions and employees are monitored. The measures stipulated in the operational plan are included in the
operating objectives of the divisions and personal performance objectives of employees, the achievement of which at the end of
the year determines a variable part of remuneration.
The strategic planning and control mechanism at the Company is based on the Integrated Planning and Monitoring Policy of the
EPSO-G Group of Companies which is applied in the activities of Litgrid to a full extent.
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4.5 Long-term development plan of the electricity transmission networks
According to the Law on Electricity of the Republic of Lithuania, an electricity transmission system operator manages electricity
transmission networks, ensures the operation, development, maintenance and long-term capacity of these networks to meet
justified electricity transmission needs, and is also responsible for the interconnection of the electricity system of the Republic of
Lithuania with electricity systems of other countries, performs balancing and dispatch control of the electricity system and has a
corresponding operating licence.
In 2022, Litgrid prepared the Plan for the Development of 400-110 kV Networks of the Lithuanian Electricity System for 2022–
2031. The plan presents forecasts of electric power and energy consumption needs, capacities of power plants (generation
facilities), assessment of the electricity system adequacy, forecast of electric power and energy balances of the electricity market
and system, as well as information on the electricity transmission network, its development and restoration, innovations introduced
and planned investments.
The ten-year network development plan stipulates that:
● Investments required for the development of the electricity transmission network may total to around EUR 2.03 billion
in2022-2031. More than a half of the planned investments will be allocated for an effective development and systemic
renewal of the network, physical and information security, development of the information systems as well as research
and innovations. The other part of the investments (around 40%) is earmarked for the implementation of the strategic
national projects. The implementation of the projects laid down in the ten-year network development plan will ensure
reliable and stable operation of the Lithuanian electricity system, even distribution of power flows in the eastern and
western directions of the Lithuanian electricity system, timely restoration and rational development of the transmission
network, retention of the electricity quality and system reliability indicators (AIT and ENS) at the set level, consistent
optimisation and modernisation of the electricity infrastructure, possibilities for the integration of renewable energy
sources as stipulated in the state’s objectives, provision of information to responsible institutions on the prospects of
generation adequacy at the national and regional level;
● During the preparation for connection to Europe, the following synchronisation-related projects will be implemented and
completed: construction of the submarine electricity link with Poland Harmony Link, construction and reconstruction of
internal electricity transmission lines with the length of around 430 km, installation of two new 330 kV switchyards,
reconstruction of the 330 kV Neris substation, installation of new synchronous compensators, modernisation of control
systems (relating to the frequency stability assessment, automatic generation control of the electricity system, renewal
of the control system of the NordBalt high-voltage direct current interconnection to ensure frequency management,
Statera and other systems);
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● In addition to the network’s development for connection to Europe, Litgrid plans to build new lines with the length of more
than 300 km to secure the reliability of the electricity transmission network. The construction of the new 330 kV Darbėnai-
Mūša-Panevėžys transmission line will account for the largest part of this length. The need for this line was identified
following the assessment of the security aspects of the Lithuanian electricity system under the scenarios of emergency
synchronous operation with Poland or isolated operation, particularly after desynchronisation and disconnection of all
lines with Russia and Belarus; the need to connect the eastern and western parts of the Lithuanian electricity system in
order to increase national energy security, to enable the integration of offshore wind and onshore renewable energy
sources, which has a particularly high potential in the western part of the system, and to maintain and increase the level
of integration in the electricity market with Latvia. There are also plans to complete, continue or start the reconstructions
of about 116 330-110 kV substations between 2022 and 2031;
● It is projected that the total electricity consumption will increase by 4% annually on average over the next ten years and
in 2031 it will reach 18.7 TWh (the actual value was 12.8 TWh in 2022). The electrification of the transport sector will
cause the biggest increase in demand for electricity over the next decade (in particular, electrification of railway lines,
development of electric cars, increase in the number of heat pumps) and the electrolysis (hydrogen production) industry,
which is projected to increase electricity consumption even 13% by 2030;
● The number of electric cars may exceed 280 thousand in 2031 in the country (according to the National Action Plan in
the Area of Energy and Climate) and they will consume around 600 kWh of electricity per year. Based on Litgrid’s
estimates, a rising number of electric cars is not expected to cause difficulties with regard to the transmission system –
the transmission system will be prepared for this;
● In line with the provisions of the hydrogen energy strategy adopted by the EU, the aim is to develop hydrogen generation
projects in Lithuania that would contribute to balancing the surplus electricity from renewable energy sources. Having
assessed the long-term development plans of industrial companies and the development of the hydrogen electrolysis at
the national level, Litgrid estimates that the electricity consumption forecast will show an additional increase of around
2.23 TWh from 2030 due to these factors;
● Particular attention is paid to the assessment of the network’s ability to adapt for the integration of renewable energy
sources and introduction of energy storage technologies.;
● As the volume of renewable energy sources increases, it is planned that in order to achieve national RES development
goals, the share of RES in the total consumption may reach up to 94% in 2030; If the national RES development targets
of 7 GW (3.6 GW from onshore wind power plants, 1.4 GW from offshore wind power plants in the Baltic Sea, 2 GW from
solar power plants) are successfully met, Lithuania’s deficit balance would turn into surplus;
● For contributing to the implementation of the objectives of the green energy policy, it is planned to use the Baltic Sea
regional cooperation in developing offshore wind energy and international energy transmission. Therefore, Litgrid pays
special attention to the connection of offshore wind farms to the onshore transmission network.
The Ten-Year Electricity Transmission Network Development Plan of Litgrid is available at the Company’s website at:
https://www.litgrid.eu/index.php/tinklo-pletra/lietuvos-elektros-perdavimo-tinklu-10-metu-pletros-planas-/3850
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5. IMPLEMENTATION OF STRATEGIC PROJECTS
One of the fundamental directions of the implementation of the National Energy Independence Strategy of the Republic of
Lithuania adopted by the decision of the Parliament on 21 June 2018 establishes the connection of the electricity system of the
Republic of Lithuania to the continental European networks for operation in a synchronised mode (the “Synchronisation”).
Following a full-fledged integration of Lithuania into the European electricity system in 2025, the European system management
standards will be introduced in the electricity sector ensuring management of electricity flows based on market principles and
participation in maintaining the system’s frequency.
A timely implementation of the synchronisation programme in the most economically efficient manner is one of the most important
objectives of Litgrid.
The synchronous operation with the continental European networks will ensure:
reliable operation of energy systems and secure transmission of electricity;
coordinated actions in facility maintenance and network development planning;
common rules for the management of energy systems – network codes which will be applied uniformly in all
countries in the European Union;
availability of electricity from energy systems of Western Europe.
In July 2021, the Government of the Republic of Lithuania approved the list of the energy projects carried out in implementing the
synchronisation of the electricity system. Litgrid is responsible for the implementation of 19 out of 21 projects included in this list.
According to the requirements of the Republic of Lithuania Law on the Protection of Objects of Importance to Ensuring National
Security, before the conclusion of transactions that comply with the requirements of this law, in all cases Litgrid informs the
Commission for Coordination of Protection of Objects of Importance to Ensuring National Security about such transactions. Such
transactions are concluded only upon the receipt of the commission’s conclusions.
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5.1. The status of the implementation of the main strategic
The stage of completion of the strategic projects under the synchronisation programme reached 51.5% in 2022
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5.2. Strategic infrastructure projects
Reconstruction of the 330/110/10 kV Neris transformer substation
The aim of the project is to reconstruct the Neris transformer substation to enable the planned connection of one of three
synchronous compensators to the transmission network and the launch of operation of to be constructed 330 kV Vilnius-Neris
electricity transmission line. This is one of the most important projects related to the synchronisation with the continental European
networks that strengthens the country’s network for electricity transmission.
Documents permitting the construction were received in May 2022 and already in June reconstruction works of the substation
under the construction contract were started and are planned to be completed in 2025.
Construction of the 330 kV Kruonis PSHP-Bitėnai electricity transmission line
The aim of the project is to strengthen the electricity transmission network in the western part of Lithuania and to ensure its reliable
operation by forming a new 330 kV transmission line, which is important for the smooth synchronous operation of the Lithuanian
electricity system with the continental European electricity networks.
The project covers the reconstruction of a part of the already existing line Jurbarkas-Bitėnai by replacing a single-circuit line with
a double-circuit line, the construction of a new section between the line Jurbarkas-Bitėnai and the line Kruonis PSHP-Sovetsk and
the reconstruction of the Bitėnai transformer substation.
A document permitting the reconstruction of the section Jurbarkas-Bitėnai was received in January 2022. Reconstruction works
are carried out from March and are planned to be completed in 2023.
In November 2022, all necessary documents permitting the construction of the new section of the 330 kV overhead line from
LN531 to LN447 were received, and preparation of the operational project was started.
In March 2022, a contract was concluded for the design and construction works for the purpose of the reconstruction of the Bitėnai
transformer substation, which is necessary for the connection of the 330 kV line Kruonis PSHP-Bitėnai to be built in 2025. The
technical project of the reconstruction of the Bitėnai transformer substation was prepared and submitted for examination at the
end of 2022.
Construction of the 330 kV Darbėnai-Bitėnai electricity transmission line
The aim of the project is to strengthen the electricity transmission network in the western part of Lithuania and to ensure its reliable
operation by forming a new 330 kV transmission line, which is important for the smooth synchronous operation of the Lithuanian
electricity system with the continental European electricity networks.
In March 2022, reconstruction works of the Grobinė-Klaipėda overhead line (replacement of a single-circuit overhead line with a
double-circuit line) were started and are expected to be completed in 2023. Moreover, in November 2022, all documents
permitting the remaining construction and reconstruction works of the Darbėnai-Bitėnai overhead line were received, the
operational projects are being prepared.
Installation of new synchronous condensers in the Lithuanian electricity system
The aim of the project is to implement the necessary measures for the synchronisation with the continental European networks:
installation of three synchronous condencers, thus ensuring the required quantity of inertia and the dynamic stability of the system
in the most efficient way.
In 2022, the technical project of the Telšiai synchronous condenser was prepared and submitted for examination, design works
of the Alytus synchronous condensers are being finalised, power transformers designated for the Alytus, Telšiai and Neris
synchronous condenser stations were manufactured.
In addition, after the reconstruction in 2022 for the purpose of the connection of synchronous condensers the 330 kV Telšiai and
Alytus transformer substations were put into operation and the statements on the completion of their construction were received.
Construction of the 330 kV Mūša switchyard
The project’s aim is to strengthen the electricity transmission network of Western Lithuania and ensure its reliable operation by
building a new 330 kV Mūša switchyard and connecting to it three overhead lines to Telšiai, Šiauliai and Viskali.
In September 2022, the agreement on the design and construction of the 330 kV Mūša switchyard was signed. The works
programme was approved by the end of the year and design works were started that are planned to be completed in September
2023.
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Construction of a new 330 kV Vilnius-Neris electricity transmission line
The project’s aim is to strengthen the electricity hub in Vilnius by ensuring the reliability of electricity supply after the
synchronisation with the continental European networks and meeting an increasing demand for electricity in the capital, by
constructing the 330 kV electricity transmission line linking the Vilnius and Neris 330 kV transformer substations. To this purpose,
a part of the existing 330 kV overhead line Vilnius-Molodečno will be reconstructed and a section of the new line to the Neris 330
kV substation will be constructed.
In September 2022, the agreement on the design and construction of the 330 kV Vilnius-Neris electricity transmission line was
signed. The works programme was approved by the end of the year and design works were started that are planned to be
completed in July 2023.
Construction of the 330 kV Darbėnai switchyard
The project’s aim is to enhance the reliability of the transmission network and security of electricity supply during the synchronous
operation of the Lithuanian electricity system with the continental European networks by building a new 330 kV Darbėnai
switchyard and connecting to it three overhead lines with the voltage of 330 kV to Bitėnai, Klaipėda, Grobinė and the direct current
interconnection to Harmony Link.The interconnections with the wind power parks will also be designed at the 330 kV switchyard.
In 2022, a document permitting the construction of a section of the overhead line was received, construction works were started
and the preparation of the technical project for a part on the Darbėnai switchyard was finalised.
Construction of the Harmony Link interconnection
The project’s aim is to ensure the integration of the electricity market after the synchronisation with the continental European
networks by constructing a new submarine HVDC link (Harmony link) with Poland. The Harmony Link interconnection will ensure
commercial trade in electricity after the synchronisation of the Baltic States with the continental European networks.
Negotiations regarding the procurement for the main converter and the cable for Harmony link were finalised in 2022. Final
proposals from the participants in the procurement for the cable were received, the proposal of the converter was still pending in
2023.
Litgrid AB implements the project together with the Polish electricity transmission system operator PSE
5.3. Strategic non infrastructure projects
Installation of Automatic Generation Management (AGM)
The aim of the project is to automatically activate the frequency restoration reserves and restore the system frequency and power
balance by installing an automatic generation management system.
On 28th January 2022, a contract was signed with the Supplier of the dispatching control and AGV software to upgrade the
system.
Final report of the AGV study prepared and submitted to the Baltic operators on 13
th
July 2022.
Contracts with contractors for the purchase of hardware signed on 28th October 2022.
Isolated operation test of the power system of the Republic of Lithuania
An isolated operation test of the Lithuanian Electricity System (hereinafter EES) was planned for September 2022, during which
the Lithuanian EES was planned to be disconnected from the IPS/UPS system. The test will test the quality of the frequency
control systems of the power plants and DC-DC converters in maintaining the frequency in the Lithuanian EES and was postponed
to 2023.
On 25 January 2022, a contract was signed for the study required for the test to investigate the impact of potential disturbances
on the stability of the power system, to identify the critical grid parameters, to select the optimal frequency control parameters for
the DC links, to investigate the logic schemes for the generator frequency control, and to carry out naturalistic tests on the
generator control systems.
On 16 September 2022, following an assessment of the situation on the electricity market, a decision was taken to postpone the
isolated operation test of the Lithuanian electricity system and to carry it out in the second quarter of 2023.
Installation of the Frequency Stability Assessment System (FSAS).
The aim of the project is to install a system to ensure the frequency stability of the Baltic electricity system in the event of an
unforeseen disconnection from the continental European grids and in the event of islanding of the Baltic electricity system.
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The final FSAS study report was prepared and submitted to the Baltic operators on 8 September 2022. Based on the result, the
preparation of the FSAS technical specification and procurement documents has started.
Development of a new energy balance and ancillary services management system
In May 2019, Litgrid, together with the Estonian and Latvian TSOs, signed the Baltic Power System Connection Agreement with
the Continental European Power Grids, which sets out the technical requirements (hereafter referred to as the Catalogue
Requirements) that need to be implemented in order to ensure the reliable operation of the Baltic Power Systems and the
Continental European Synchronous Area. The most of the balance and system service management processes will be upgraded
prior to the final synchronisation with the Continental European grids.
As part of the implementation of the European Commission Regulation 2017/2195 of 23 November 2017 laying down guidelines
for electricity balancing, Litgrid will update the processes related to balancing and imbalance accounting and balance
management.
On 29 July 2022, a contract was signed with the supplier for the development of the new energy balance and ancillary services
management system and programming work has started.
5.4. Development of infrastructure projects in 2022
Litgrid’s activities contribute to the development of green energy in Lithuania and, in its role as the electricity transmission network
operator, Litgrid implements projects for the connection of renewable energy sources to the transmission network. These projects
result in the connection of green electricity producers to the transmission network, enabling electricity consumers to use clean
and sustainable energy.
In 2022, Litgrid was engaged in the development of 11 projects on the connection of the wind power parks with a capacity of 651
MW; not less than 47 projects on the connection of the RES producers (wind) are planned to be started.
Four projects on the reconstruction of electricity transmission overhead lines were under implementation by Litgrid in 2022. In
2023, the Company plans to start 27 new projects on the reconstruction of overhead lines, which will contribute to the stability and
reliability of the electricity transmission network and will ensure the necessary capacities for connecting RES to the transmission
network.
The implementation of the projects on the connection of consumers to the transmission network contributes to the development
of the electrification of the infrastructure of the Lithuanian railways. The projects on the electrification of the Lithuanian railways
that comprise connections to the electricity transmission network and securing electricity supply are one of the activity directions
of Litgrid in the upcoming year. The implementation of these projects will smooth the transition from fossil fuels to the use of
renewable energy sources, ensure rational consumption of electricity and use of green energy thereby contributing towards the
achievement of the objectives laid down in the European Green Deal.
There are also plans to complete, continue or start the implementation of the projects on the reconstruction of 116 substations
with the voltage of 330-110 kV between 2022 and 203. In 2022, the projects on the reconstruction of six transformer substations
were started, works related to the projects on the reconstruction of 30 transformer substations were continued and projects on the
reconstruction of 11 transformer substations were completed.
There has been a significant increase in the total number of the reconstruction projects carried out by Litgrid and it is expected to
reach 106 (RES connection projects) in 2024
5.5. Financing of strategic projects
In March 2022, the European Commission confirmed that a financial support of EUR 170 million was granted to the second part
of the second phase of the synchronisation of the Baltic States with the continental European networks (Litgrid’s share is EUR
30.7 million . The support was granted under the Connecting Europe Facility (CEF) for the period 2021-2027 in the field of trans-
European energy infrastructure and the grant agreement was concluded in June.
This latest phase of funding will be allocated for the implementation of the projects on the network’s upgrade, frequency
management tools and information systems and will allow the Baltic States operate independently on the same frequency as
Poland and the rest of Europe in 2025. The value of the projects to be funded is EUR 41 million for Lithuania, EUR 49 million for
Latvia, EUR 37 million for Estonia and EUR 111 million for Poland. Four projects are financed in Lithuania: the construction of
the Darbėnai substation, the reconstruction of the 330 kV Klaipėda-Grobinė transmission line on the border with Latvia, information
technology systems for the transmission system, and the modernisation of the control system for the Lithuania-Sweden
interconnection NordBalt.
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With the grant approved for 2022, the total amount of the EITP synchronisation programme funds for Lithuania will amount to
nearly EUR 460 million. The previously initiated projects received funding of EUR 23.5 million from the EU Structural Funds.
5.6. Project portfolio
Stable, reliable operation of the electricity system, capacity and energy balances depend not only on the behaviour of market
participants, but also on the establishment of proper parameters of the operation of the power plants being connected, coordination
of the operation of the power plants and timely expansion.
Litgrid, as the Lithuanian TSO, plans the operation of the electricity system in the long-term by assessing the requirements for
electricity supply and safety, reliability, quality, efficiency, consumption, management and environmental protection. The ten-year
plan for the development of the 400-110 kV networks of the Lithuanian electricity system is being developed for that purpose
which, among other objectives, aims to project the transmission network’s development directions, restoration volumes,
preliminary investments in the expansion and restoration of the network by drafting a long-term investment plan. The project
portfolio is defined in the investment plan. The portfolio comprises projects that are necessary for the achievement of the strategic
objectives of the state, assurance of the reliability of the transmission network and electricity supply, update or introduction of
information technologies, or projects that are initiated by users of the transmission network.
Dozens of new projects are planned to be started over the period of 10 years, i.e. 22 projects per year on average. More than
half a hundred projects are planned to be performed every year, i.e. their number will exceed 100 after 2025. Every year the
average of 89 projects are planned to be implemented.
Based on the long-term project portfolio, a short-term (one year) project portfolio is prepared at the Company.
5.7. Inovation, research and development
The Company’s actions in the field of innovations aim to contribute to the effective implementation of the strategy of Litgrid and
the National Energy Independence Strategy. This objective is being achieved by developing an effective ecosystem of innovations
where innovative ideas are initiated, experts’ time is allocated for their analysis and testing, they are implemented and introduced
to daily activities.
The Company’s activities in the field of innovations are conducted in accordance with the Guidelines for Scientific Research and
Experimental Development and Innovative Activities of the EPSO-G UAB Group approved by the Board of EPSO-G UAB (the
“SREDI Guidelines”).
The purpose of the SREDI Guidelines is to ensure continuity and efficiency, competitiveness or facilitation of competition of the
companies of the UAB EPSO-G group through research, innovation and new solutions, as well as to contribute to the
implementation of the National Energy Independence Strategy and the creation of added value for the society.
The SREDI Guidelines set out the common concepts of scientific research and experimental development, and innovations and
innovative activities across the Group, common directions and priorities of the SREDI activities, classification principles and
recommendations for the transmission system operators regarding the allocation of funds for the SREDI activities that are not
attributed to the regulated activities.
Development of the ecosystem of innovations
The System of Scientific Research and Experimental Development and Innovations (SREDI) was introduced at the Company.
The system establishes the key principles of an environment favourable to creativity and introduction of innovations and presents
innovation processes. Innovation activities are directed towards the implementation of objectives and tasks laid down in the
Climate Change Strategy and the National Energy Independence Strategy as the reliable operation of the electricity system without
innovations is hard to imagine or even impossible when moving away from the power plans using fossil fuels to renewable energy
sources and creating a competitive economy of the country in the region of the Baltic, Scandinavian and Central and Eastern
European countries.
Along with the implementation of the EPSO-G functional action plan for innovations, to which the Company acceded on 18
February 2022, in 2022 the Company implemented the following activities stipulated in this plan:
An innovation workshop on the Virtual Connectivity Map;
Organised an innovation workshop on challenges relevant to Litgrid employees;
Developed rules for conducting benefit-cost analysis of innovation for individual projects and developed a template and
examples. Developed principles for calculating the return on the whole portfolio. Criteria for selecting innovative
projects have been updated based on the experience of previous years;
Mentors of innovative projects implemented in 2021 have been evaluated and rewarded in accordance with the
innovation promotion procedures adopted by the EPSO-G group;
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
27
Successful implementation of the variable line capacity pilot project included in the company's annual targets, and the
first results obtained and evaluated;
A model of a 1 MW battery as an innovation platform has been developed and publicised, and the pilot project
Investigation of synergies between the virtual power management of the Kaunas Hydroelectric Power Plant (KHPP)
unit and the 1 MW energy storage system has been implemented;
A project initiated in 2021 with Vilniaus Šilumos Tinklais and EPSO-G on the development of a cross-sectoral Power-
to-Heat (P2H) concept was carried out as planned. A P2H study was carried out with the consultant EDIS LAB, which
verified the baseline calculation methodology and developed a model for the assessment of P2X projects;
EV stacking pilot completed;
Study on the application of innovative measures in the integration of RES power plants has been carried out and a
methodology for identifying optimal solutions has been developed;
ENTSO-E and ESA cooperation pilot project on the use of satellite imagery for airline maintenance implemented;
Public communication of innovative projects;
10 new innovation projects initiated and 9 innovation projects brought to life in the framework of R&D&I activities and
priorities.
Raising the innovation ecosystem - Innovation Workshop
In April 2022, specialists from different areas of the Company participated in an innovation workshop on the development of the
Virtual Connectivity Map (VCM). Through creative thinking, the teams identified the main challenges in developing such a system
and paved the way for the start of the project. A needs analysis was carried out, a list of initial deliverables was gathered, a vision
for the map was requested and the scope of the vision was approved by Litgrid's Project Development Committee. The concept
and the Phase I Action Plan were approved on 22 December 2022.
In August 2022, the Innovation Unit conducted an internal survey of the company's employees to identify the challenges faced by
the company. We started to analyse the most complex challenges during the Innovation Workshop on 19 October 2022. The three
topics covered were renewable energy management, company resource accounting and the need for a tool to work with
contractors. The ideas generated will be further developed and potentially become innovative projects in the course of 2023.
One of the ideas generated has already turned into a project entitled "Renewable Energy Management System":
As the number of RES in the transmission grid increases and the methodology for calculating their connection changes, there is
a risk that elements of the transmission grid may become overloaded and that over-generation may affect the system imbalance.
There is a need to manage these resources properly. A control system is to be put in place to manage renewable energy sources
in real time and to create the possibility of curtailing these sources in the day-ahead market.
Developing an innovation ecosystem - an innovation platform
In early 2022, we opened the 1MW Battery Energy Storage System (BESS) innovation platform to the public. The aim of the
platform is to enable science, business, manufacturers and the market as a whole to benefit from the 1MW BEKS by testing
innovative ideas that bring benefits to both Litgrid and the stakeholder. We have created an open and transparent model for the
use of the 1MW battery for new, innovative projects. During 2022, we initiated the following projects:
Collaboration with KTU to model and demonstrate a hybrid thermal storage system with BEKS;
Cooperation with Ignitis Gamyba to study the technical feasibility of frequency balancing of the Kaunas HPP;
Collaboration with Green Genius to investigate the performance of the BEKS under simulated electricity market
conditions and to assess the technical feasibility of the BEKS working in conjunction with a RES source.
The 1MW BEKS has even been recognised in two prestigious international energy awards:
The Smarter E Award in Munich, where it won the Outstanding Project category.
The Platts Global Energy Awards in New York won the Grid Edge category.
Innovation portfolio
During 2022, the company managed its innovation portfolio in line with the priorities defined by the RDI:
Intelligent and efficient asset management (7 projects):
Use of four-legged robots in Litgrid's operations
Study on the reconstruction of substations using advanced digital technologies and elimination of SF6 gas
ENTSO-E and ESA cooperation pilot project on the use of satellite imagery for airline maintenance
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
28
Scanning of electricity grids and creation of a digital database of spatial data.
Pilot project on lightweight structural supports
Study to investigate the performance of BEKS under simulated electricity market conditions and to assess the technical
feasibility of BEKS working in conjunction with a RES source
Intelligent and efficient system management and monitoring (13 projects in total)
Use of 1 MW BEKS to optimise active power loss costs
1 MW BEKS and KHE co-operation pilot
Integrated relay protection testing system in electricity substations
Variable line capacity pilot project
Solution for IEC61850 protocol analysis, simulation, rapid problem detection and complex testing across the substation
Power quality monitoring system
RES integration study (part of 110 kV network)
Integration of EVs into the electricity grid
Development of OneNet flexible services
Renewable energy management system
Study on the most suitable locations for the development of high power EV charging stations
Modelling and demonstration of a hybrid thermal storage system with BEKS
Study to assess the supply of frequency regulation services on the electricity grid and the participation model in the
balancing market
ITT and digitalisation (5 projects)
Virtual Connection Map
Implementation of a centralised IED (Intelligent Electronic Device) database with a suite of advanced applications
Digitisation of RAA telecommand transmission between substations
Specialised IT system for data collection
Application of an artificial intelligence algorithm for troubleshooting IT systems
Radical and breakthrough innovations completed in 2022:
TEPCO study "Offshore Grid Planning and Design for the Introduction of Offshore Wind Power in Lithuania"
ENTSO-E and ESA cooperation pilot project on the use of satellite imagery for airline maintenance
Variable Line Capacity Pilot Project
ENTSO-E and ESA cooperation pilot project on the use of satellite imagery for overhead line maintenance
Project initiated in Q2 2020.
Project completed in 2022 Q3.
The aim of the project is to use satellite imagery from space to identify vegetation defects in the airline protection zone and to
develop vegetation rate modelling, as well as to record the activities taking place in the airline protection zone. The project has
resulted in a WEB-based tool developed by a Finnish supplier, which allows to see all identified changes in vegetation and
construction sites in the airline protection zones (within the scope of the pilot). "Litgrid has decided not to apply this tool to the
whole overhead line network until the accuracy of change detection improves. A revision of the technology is foreseen in Q3 2023.
Variable line capacity pilot project
Project initiated in 2021 Q4.
Project completed in 2022 Q4.
The aim of the project is to determine the potential of the technology for Litgrid's needs. Variable Line Capacity technology allows
to calculate the effective capacity of overhead lines up to 24 hours in advance based on weather forecast data. Sensors suspended
on the overhead line measure wire temperature and ambient temperature, solar gain, humidity, wind speed and direction. The
collected real-time parameters are used to train a mathematical model. The project has resulted in an average increase in
overhead line capacity of about 57% between October and November, and a direct correlation of capacity with wind turbine
generation. These results suggest that the technology will be a useful tool for the integration of renewable energy sources into the
transmission grid. We will continue observations until Q4 2023, after which we will draw final conclusions on the wider use of the
technology.
In 2022, EUR 270 thousand from Litgrid's Innovation Budget was used to implement innovative projects.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
29
6. FINANCIAL INFORMATION
The Company’s key financial indicators
2022
2021
2020
Financial indicators, EUR thousand
Revenue from electricity sales
418,953
267,258
206,399
Other income (including dividend income)
1,398
3,637
2,012
EBITDA*
(36,513)
46,206
51,789
Profit/(loss) before income tax
(58,347)
24,101
30,881
Profit/(loss) for the period
(49,484)
20,013
26,603
Cash flows from operating activities
(52,627)
66,373
27,103
Ratios
EBITDA margin
-8.7%
17.1%
25.0%
Operating profit margin
-13.7%
9.2%
14.9%
Annual return on equity (ROE)
-25.5%
9.1%
12.9%
Annual return on assets (ROA)**
-8.2%
4.4%
6.7%
Shareholders’ equity / Assets
23.2%
45.2%
52.6%
Financial liabilities / Equity
24.2%
29.6%
36.6%
Liquidity ratio
0.81
1.01
0.59
Total assets turnover ratio**
0.70
0.60
0.53
Adjusted financial indicators, EUR thousand
***
Profit for the period
10,628
14,583
10,195
EBITDA
34,207
39,817
32,487
Annual return on equity (ROE)
4.7%
6.7%
5.1%
*EBITDA = operating profit + depreciation and amortisation + impairment expenses of assets + write-off expenses of assets –
dividend income;
**calculated based on the average at the beginning of the year and at the end of the year.
*** Adjusted profitability indicators are calculated due to temporary regulatory deviations from a regulated profitability approved
by the NERC.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
30
Revenue
Revenue earned by Litgrid in 2022 increased by 55.2% compared to 2021 and amounted to EUR 420.4 million.
Revenue from electricity transmission amounted to EUR 72.5 million, which is a 9.4% decline compared to 2021 resulting from a
3.2% lower average actual electricity transmission price and a 6.4% lower quantity of transmitted electricity due to decline in
consumption and rise in the number of producers-consumers (prosumers) generating electricity from renewable energy sources
that were connected to the distribution network. The total quantity of electricity transmitted for domestic consumption was equal
to 10,234 million kWh. The NERC established a 5.1% lower price cap for the transmission service for 2022. One of the main
reasons for the establishment of a lower price cap was that permitted revenue for 2022 was reduced by EUR 15.3 million (or EUR
5.3 million more than in 2021), i.e. by a part of the Company’s investment return (profit) for 2018-2020 in excess of the amount
permitted by the NERC.
Sales volumes of imbalance and balancing electricity declined by 1%, however revenue from imbalance and balancing electricity
increased 2.4 times to EUR 175.1 million due to 2.5 times higher average sale price. Change in revenue does not affect the
Company’s profitability because according to the regulated imbalance pricing the current year revenue compensates expenses,
including the Company’s internal expenses, attributable to this activity according to the description of the regulation accounting.
Revenue from additional (previously named system) services increased by 49.7% and amounted to EUR 137.2 million. Higher
revenue from additional services resulted from a 61.5% increase in the acquisition component of additional services (formerly
named the price of system services), while a volume declined by 7.3%. According to the regulated pricing of the additional
services, revenue must compensate expenses, including the Company’s internal expenses, attributable to this activity according
to the description of the regulation accounting. Difference between revenue and expenses for the N-year is taken into
consideration when determining the acquisition component of additional services for the N+2 year.
Other income related to the transmission activity include:
Fee for electricity imported from or exported to countries other than the EU and inter-EU transit compensation revenue
from ITC fund (ITC income – income resulting from participation in the European Inter-Transmission Operator
Compensation Mechanism): EUR 1.6 million and reactive energy income: EUR 1.6 million. This income group is
assessed when determining the price of the transmission service and calculating the actual return on investments in the
transmission service.
Revenue from PSO services amounting to EUR 28.9 million. Change in this revenue does not affect the Company’s
profitability because the current year revenue compensates expenses, including the Company’s internal expenses,
attributable to this activity according to the description of the regulation accounting.
Revenue from congestion management services amounting to EUR 1.9 million. Change in this revenue does not affect
the Company’s profitability because revenue compensates expenses incurred in ensuring the use of allocated capacity
of the interconnections.
Income from administration of guarantees of electricity origin amounting to EUR 0.1 million.
83.4
80.1
72.5
21.2
71.7
175.1
86.7
91.7
137.2
15.1
23.8
34.1
2.0
3.6
1.4
.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
2020Y
2021Y
2022Y
Company's revenue structure, million euros
Rent and other revenue
Other electricity-related revenue
Additional services revenue
Balancing energy revenue
Transmission revenue
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
31
Other income decreased by 61.6% to EUR 1.4 million due to a EUR 2.1 million decrease in default charges calculated in respect
of the contractors for delays in the performance of works.
Expenses
The Company’s operating expenses totalled EUR 477.8 million in 2022, which is 94.2% more compared to 2021.
Expenses of purchase of electricity and related services accounted for a major portion of the Company‘s operating expenses:
EUR 420.1 million (87.9% of the Company’s total expenses). These expenses increased 2.2 times compared to 2021. Expenses
for additional services increased 2.5 times to EUR 111.6 million. Imbalance and balancing electricity expenses increased 2.5
times and amounted to EUR 174.8 million due to 2.5 times higher average purchase price.
Expenses of compensating for electricity purchase technological losses in the transmission network increased 2.5 times and
amounted to EUR 99.6 million due to 2.1 times higher average purchase price of electricity and 17.2% higher technological losses.
Transit (ITC) expenses totalled EUR 3.4 million, expenses for provision of PSO services equalled EUR 28.8 million and expenses
of ensuring the allocated capacity of the interconnections totalled EUR 1.9 million.
Depreciation and amortisation expenses declined 3.5% and amounted to EUR 20.6 million. Repair and maintenance expenses of
the electricity network increased by EUR 0.7 million due to a larger scope of annual scheduled repair and maintenance works
performed that are carried out under the multi-annual work plan and rise in prices of services. Increase in remuneration expenses
by EUR 3.2 million compared to 2021 was affected by a 16.2% increase in the average number of employees due to the
implementation of the synchronisation project and a higher average salary. Other expenses increased by EUR 2.6 million.
20.8
71.1
174.8
81.7
61.9
111.6
15.2
40.2
99.6
10.6
21.3
34.1
20.4
21.3
20.6
11.2
12.4
15.6
9.4
8.1
8.8
8.1
9.8
12.8
.0
100.0
200.0
300.0
400.0
500.0
600.0
2020Y
2021Y
2022Y
Company's cost structure, million euros
Other costs without asset
revaluation
Electricity network repair and
maintenance costs
Wages & related costs
Depreciation
Other electricity-related costs
Costs of compensating losses in the
grid
Additional services costs
Balancing energy costs
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
32
Profit and return indicators
EBITDA for 2022 decreased by EUR 82.7 million compared to 2021 and amounted to EUR -36.5 million. The Company’s net
losses for 2022 totalled EUR 49.9 million, whereas net profit of EUR 20 million was earned in 2021.
The main reasons for decrease in the Company’s EBITDA were as follows:
Increase in expenses of compensating technological losses by EUR 59.4 million;
Decrease in transmission revenue by EUR 7.6 million;
Decrease in the balance of revenue and expenses of additional services by EUR 4.3 million;
Decrease in the result of other transmission activity by EUR 2.5 million;
Decrease in other income by EUR 2 million;
Increase in operating expenses by EUR 6.8 million.
The adjusted profitability indicators are calculated due to temporary regulatory deviations from a regulated profitability approved
by the NERC. The adjusted indicators are calculated by assessing a revenue adjustment for the prior periods, which has already
been approved by the NERC’s decision when establishing regulated prices for the reporting period, and by assessing deviation
of an actual profitability from a reporting period profitability permitted (regulated) by the NERC, which will be assessed when
establishing regulated prices for the upcoming year by the NERC.
51.8
46.2
-36.5
26.6
20.0
-49.5
-60.0
-40.0
-20.0
.0
20.0
40.0
60.0
2020Y 2021Y 2022Y
EBITDA and net profit, million euros
EBITDA Net profit
32.5
39.8
34.2
10.2
14.6
10.6
.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2020Y 2021Y 2022Y
Corrected EBITDA and net profit, million euros
Corrected EBITDA Corrected net profit
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
33
Adjusted EBITDA for 2022 was calculated by making the following adjustments to actual EBITDA:
addition of EUR 4.4 million. This is a result of additional services for 2020 (revenue less expenses), by which revenue
from additional services for 2022 was reduced;
subtraction of EUR 29.9 million. This is a result of additional services for 2022, by which revenue from additional services
for 2024 should be reduced;
addition of EUR 15.3 million. This is a part of the return on investments made in 2018-2020 in the transmission activity
in excess of the permitted amount, by which transmission revenue for 2022 was reduced;
addition of EUR 81 million. This is a projected difference between an actual and permitted return on transmission activity
investments for 2022, by which transmission revenue for the upcoming year should be increased. Calculated by the
Company, not yet approved by the Auditor and the Council (EUR 13.4 million added in 2021, EUR 14.3 million deducted
in 2020).
The main reasons for decrease in the Company’s adjusted EBITDA were as follows (in 2021 compared to 2020 increased):
EUR 3 million lower capital costs (return on investment, including OPEX savings which increased the return on
investment + depreciation costs + costs for the write-off of tangible fixed assets, which are included in regulated operating
income) are the main reason for the decrease in the regulated rate of return on investment from 5.34% to 4.03% in 2021.
EUR 3.4 million higher capital costs compared to 2020: EUR 1.2 million higher return on investment due to the increase
in the rate of return on investment from 5.01% to 5.34%, EUR 2.2 million higher depreciation and asset retirement costs);
EUR 2.2 million lower non-regulated operating income (mainly interest and contractors' penalties) and income-cost
imbalance (EUR 2.6 million higher non-regulated operating income and income-cost imbalance in 2021 compared to
2020);
EUR 0.4 million increase in uncompensated operating costs through regulated revenues (EUR 1.4 million decrease in
uncompensated operating costs in 2021 compared to 2020).
Adjusted net profit = actual net profit + EBITDA adjustments x (1-15% income tax).
In 2022, the ROE and ROA ratios decreased from 9.1% and 4.4% and to -25.5% and -8.2%, respectively, compared to 2021.
12.9%
9.1%
-25.5%
6.8% 4.4%
-8.2%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
2020Y 2021Y 2022Y
Return ratios, %
Return on equity (last 12 months) Return on assets (last 12 months)
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
34
Adjusted ROE = adjusted net profit/((actual equity at the beginning of the period + actual equity at the end of the period + EBITDA
adjustments x (1-15% income tax))/2.
Balance sheet and cash flows
During the year the Company’s assets increased by EUR 228.7 million (46.7%) and amounted to EUR 718.5 million as at 31
December 2022. Non-current assets representing 53.4% of the Company’s total assets increased by EUR 16.6 million (4.5%),
the main reason – investment in assets was higher than depreciation costs.
Current assets increased by EUR 212.1 million (2.7 times). Trade receivables increased by EUR 3 million, grants receivable from
the European Union declined by EUR 9.6 million, other amounts receivable and deferred expenses increased by EUR 1.1 million,
loans granted (fee funds linked to the Group account and loaned to EPSO-G) increased by EUR 188.4 million, and other financial
assets and cash and cash equivalents increased by EUR 0.7 million.
Shareholders’ equity decreased by EUR 54.5 million (24.6%) during the year and accounted for 23.2% of the total assets at the
end of 2022.
As at 31 December 2022, the Company’s financial liabilities to credit institutions amounted to EUR 40.4 million (declined by EUR
25.2 million during the year, of which current financial liabilities declined by EUR 8.1 million). Financial liabilities to equity ratio
was 24.2%. Borrowings repayable within one year accounted for 15.2% of the total borrowings.
Other non-current liabilities increased by EUR 9.4 million (9.9%), of which a non-current portion of accumulated funds balance of
congestion revenue decreased by EUR 24.2 million, advance amounts received rose by EUR 32.3 million.
Current liabilities, excluding a current portion of non-current borrowings, increased by EUR 299,1 million (3.8 times), whereof a
current portion of accumulated congestion revenue increased by EUR 266.6 million (of which EUR 142.3 million were allocated
for the reduction of the transmission tariff for 2023), advance amounts received were EUR 25.2 million higher, whereas other
current amounts payable and liabilities increased by EUR 7.3 million mostly due to trade payables (In December of 2022 trade
costs were higher than in December of 2021)
Congestion revenue received during 2022 amounted to EUR 267.3 million, of which EUR 1.9 million were used for ensuring the
availability of allocated capacities and EUR 23 million were allocated for the funding of investments. Accumulated congestion
revenue balance amounted to EUR 350.5 million as at 31 December 2022, of which EUR 118 million were temporarily used for
the financing of the Company’s activities and EUR 232 million were linked to the EPSO-G Group account.
The Company’s net cash flows (excluding cash flows from financing activities and from loans granted by the Company and their
repayments) totalled EUR 218.5 million in 2022. The cash balance amounted to EUR 0.5 million at the end of 2022.
Investments in non-current assets
In 2022, investments of transmission system operator LITGRID (works performed and assets acquired, irrespective of payment
deadlines) amounted to EUR 56.2 million, of which 41% were earmarked for the implementation of strategic electricity projects of
national significance, and 59% for the reconstruction and development of the electricity transmission network and ensuring the
continuity of the Company’s activities. Major investments were allocated for the following projects:
Reconstruction of the 330 kV overhead line Lietuvos Elektrinė–Alytus (LN 330) co-financed by the EU Structural Funds:
EUR 14.3 million;
Reconstruction of the 330/110/10 kV Neris transformer substation and the 110 kV switchyards: EUR 3.3 million.
5.1%
6.7%
4.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2020Y 2021Y 2022Y
Corrected return ratios, %
Corrected return ratios, %
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
35
Projects co-financed under the Connecting Europe Facility (CEF) of the European Union:
Construction of the 330 kV Darbėnai-Bitėnai electricity transmission line: EUR 7.3 million;
Construction of the 330 kV Kruonis PSHP-Bitėnai electricity transmission line: EUR 6.8 million;
Installation of new synchronous compensators in the Lithuanian electricity system: EUR 2.7 million.
7. COMPANY TARGETS AND THEIR IMPLEMENTATION
The implementation of the Strategy is measured through the implementation of the Company's 3-year business plan and the
Company's annual objectives, which prioritise measures in line with the priorities identified in the Company's Strategy.
The evaluation of the achievement of the objectives is carried out by the Company's Board of Directors and the CEO reports to
the Board of Directors on the achievement of the objectives. The financial and non-financial performance targets set for the
Company are identical to those set for the CEO of Litgrid. The assessment of the achievement of the objectives determines the
variable remuneration of all employees and the CEO.
Achievement of the 2022 targets is 94.85%, with the targets to be approved by the Board in the first quarter of 2023.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
36
Implementation of the operational plan
The company's medium-term 3-year action plan is based on the Lean tool Hoshin Kanri, known in the business world.
As at the end of 2022, 95% of the measures in the 3-year action plan have been implemented to the extent and within the
timeframe envisaged. All targets of the 3 year 2022 business plan have been achieved except for the return on equity target
which is exceeded due to the higher than planned cost of compensating for technological losses:
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
37
8. REMUNERATION POLICY AND EMPLOYEES
8.1. EMPLOYEES
A team of highly competent employees enables the Company to successfully achieve its goals. It consists of 391 professionals,
95% of whom have a university degree. 76% of the workforce is male and 24% female, with an average age of 42 years. Three
quarters of Litgrid's team are experienced male and female engineers who are essential to the smooth operation of the
transmission system operator. The average length of service in the energy system is 8.9 years.
The employee turnover rate is 9.3% in 2022, compared to 8.2% in 2021 and 11.7% in 2020 and 2019. The voluntary turnover rate
has dropped to 7.1% from 7.2% in 2021, compared to 9% in 2019 and 2020.
8.1. Remuneration policy and additional benefits
Litgrid has an Employee Compensation, Performance Management and Development Policy that applies to all employees.
Litgrid's remuneration system is a combination of financial and non-financial remuneration elements. The elements of the
remuneration package are monthly remuneration, financial incentives, one-off bonuses, fringe benefits and non-financial
remuneration.
The basis of Litgrid's remuneration system is the company's job structure (job map), which consists of positions divided into levels
according to the nature of the work, the required competence, the complexity/complexity of the problems and issues to be solved,
the level of responsibility, and the remuneration scales for each level of position. 
The core principles of reward management are internal equity and external competitiveness.
The package of fringe benefits for Litgrid employees is focused on these areas:
Ensuring the employee's working conditions and well-being;
Attention to the employee's personal events, family and social activities;
Investment in employee development.
Litgrid is proud to provide employees with non-financial rewards that include:
Meaningful company performance, stability and a sense of security;
A professional team and a working environment that promotes efficiency;
A values-based organisational culture;
Interesting, challenging work content, international projects and unique experiences;
Recognition and growth..
8.2. Hybrid work
From May 2022. Litgrid employees can choose a hybrid (mixed) working model, where the number of days required to work in the
office is not fixed, but managers and employees are expected to be actively involved in certain organisational processes, events,
and initiatives, common guidelines are set for maintaining and increasing teamwork and employee engagement, and the
Emotional Pulse Indicator, turnover and engagement dynamics of new employees are measured.
In April 2022, employees who are able to perform their job functions well and without hindrance while working abroad can take
advantage of the possibility to telework from abroad for an agreed period of time. In 2022, 6 staff members took advantage of this
option.
8.3. Employee engagement survey
Litgrid aims to become an organisation that creates the best employee experience and to become an employer of choice. To
achieve these goals, each year we use the Employee Engagement Survey to measure employees' engagement with the
organisation through their relational and emotional connection to it. It measures factors such as engagement and empowerment,
work performance and conditions, communication and corporate image, talent management and career opportunities, rewards
and fringe benefits, etc. The tool provides extended results which, when analysed, lead to targeted initiatives that increase
employee engagement and contribute to fostering a culture of continuous improvement. It is a valuable tool to help build the
employer image of those who work here and those who will work here.
The last survey carried out had an engagement rate of 80 per cent. This is a high rating not only for Lithuania, but also for high-
performing global organisations.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
38
8.4. Professional training and development
A progressive organisation is unthinkable without top-level professionals, thanks to whom Litgrid can call itself a competence
centre. The company strives to provide its employees with the opportunity to learn and develop, to broaden their knowledge and
horizons, and to participate as effectively as possible in the implementation of Litgrid's strategic goals. All employees are given
the opportunity to acquire or update the knowledge and skills necessary to perform their direct work. Both the individual employee
and the organisation are committed to the development of competences relevant to the employee and the organisation's activities,
and the development system includes not only formal training, but other forms of development and learning.
Staff have been able to attend conferences, seminars, lectures, mandatory, qualifying and generic competency training. The ratio
of investment in the different competency areas is the same as in previous years, with 70% for training in the professional
qualification profile and 30% for strengthening general, leadership and managerial competences. In 2022, about 50% of the staff
members were distance learners (in 2021, about 90%). This trend in the organisation of training reflects the market practices
developed during the Covid-19 pandemic and the hybrid working model in the organisation. Participating remotely means fewer
journeys and less carbon dioxide (CO2) and other pollutants being emitted into the atmosphere, thus contributing to the reduction
of negative environmental impacts. It also enables staff to balance their educational and work goals more effectively and to
maintain a better work-life balance.
8.5. Performance management
Litgrid has an Employee Compensation, Performance Management and Development Policy applicable to all employees.
Employee performance management is one of Litgrid's most important management and effective leadership techniques, helping
to achieve the organisation's objectives and to build clear, positive relationships between managers and employees, enabling
employees to plan for their development and career progression, and to increase motivation.  A performance management system
links the organisation's overarching goals and objectives to the individual performance and achievements of each staff member.
The chosen performance management approach enables Litgrid's core values of cooperation, progress and professionalism to
be fostered by agreeing on common principles and expectations for value-based behaviour to achieve goals. This allows Litgrid
to maintain a high level of communication, cooperation and a performance-oriented culture.
8.6. Selection and integration
Litgrid has a Selection Policy that applies to all selections in the company.
Litgrid pays great attention to professional recruitment and a smooth start of employment. In 2021, the meaningful "New Colleague
Day" initiative was relaunched, where recently joined colleagues get to know each other and listen to presentations on key topics
related to Litgrid's operations and organisational culture.
In order to attract new members of the power engineering team, cooperation with Kaunas Technical University was especially
strengthened to increase the level of practical knowledge of students and to present Litgrid as a potential employer for the
development of acquired competences.
Despite the challenges posed by the pandemic, the recruitment process has been and continues to be successfully conducted
remotely. In 2022, 90 employees joined the Litgrid team (55 in 2021 and 51 in 2020).
Particular attention has been paid to the induction of new employees. Time is taken to get to know colleagues by meeting in the
office, creating an informal, friendly and sustainable atmosphere, and strengthening new employee engagement.
Taking into account the labour market situation and in order to attract motivated, competent candidates to Litgrid and to motivate
employees who have recommended candidates, a recommendation procedure has been introduced as of 2022: a one-off payment
is made to the employee who has recommended a candidate, who is hired and completes a probationary period.
Litgrid invites its employees to actively participate in internal recruitment and to develop their competences. There were 41 internal
recruitments in 2022 and 55 in 2021 (in 2021 we had a structural change which brought many career opportunities).
8.7. Cooperation with universities
Litgrid cooperates with higher education institutions. In 2022, Litgrid participated in the Career Days, where a representative of
the company gave a presentation on the transformation taking place in the energy sector, future plans and trends to which Litgrid
contributes. Other colleagues shared their career experiences with the students, presenting their job positions and inviting them
to do internships.
Group-wide, academic institutions were given the opportunity to receive support for student incentive scholarships. Litgrid has
signed a support agreement with Kaunas Technical University, whose first and second year students will be granted incentive
scholarships until 2025 according to an agreed and approved methodology and selection criteria. In 2022, 7 students received
incentive scholarships. Last year, special attention was paid to sharing know-how on energy topics, and Litgrid employees
travelled to universities by teleconference and contact to lecture on topics relevant to their studies and complementing them with
practical examples.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
39
Litgrid welcomes motivated trainees who want to gain knowledge and learn from professionals in their field. In 2022, a
comprehensive internship programme has been developed, allowing students to learn not only about the operations of the unit
where they are interning, but also to get to know, see and perform real tasks in other Litgrid's core business units. In 2022, the
company had 11 such young professionals.
8.9. Staff interchangability
Due to the specific nature of Litgrid's operations and the competences of employees acquired over time, the company has
identified critical positions that have a significant impact on business continuity and are difficult to replace. To this end, Litgrid
carries out a job evaluation, which identifies critical positions requiring shift preparation, and develops and implements shift
preparation plans for critical positions and managers. Each year, the company strives to develop the necessary competences to
ensure that business continuity is always guaranteed when needed.
8.10. Equal opportunities
The more positive the emotional environment at work, the less stressful it is, the more likely it is that productivity will improve,
workers' health and safety will improve, and everyone - employers, workers and society - will benefit. Litgrid is therefore boldly
embarking on this path of equal opportunities to create and foster a safe and inclusive work environment where every employee
is respected and valued, regardless of their age, social status, gender, beliefs, religion, sexual orientation and many other aspects.
Equal opportunities is one of our priorities and we make every effort to implement equal opportunities within the organisation.
In 2022, Litgrid is very active on the topic of equal opportunities, and the Equality Embassy, a group of active employees formed
in 2021 on a voluntary basis, is a major contributor to this. The most important things done in 2022 are: various lectures and
trainings for managers and employees; November has been declared as Equal Opportunities Month with an event and various
forms of information on equal opportunities for employees; Litgrid has been presented as an Equal Opportunities Employer in job
advertisements since 2022. In 2022, the priorities and indicators for equal opportunities for the period 2023-2025 were adopted
and Litgrid has set an important target of 0 justified cases of discrimination in its 2023-2025 strategy.
Litgrid's activities are guided by the principles of non-discrimination in all areas: in recruitment, selection and dismissal procedures,
by objective, non-stereotyped criteria; in the design of the working environment and by providing equal working conditions for all
employees. The aim is to create an open, flexible and inclusive working environment in the hope that this will help all Litgrid
employees to successfully balance work and family commitments. Employee sports and volunteering initiatives are encouraged
and supported. Every employee's ideas are listened to and encouraged.
The principles of fairness and gender equality are applied in the formulation and implementation of the remuneration policy.
Following the adoption of equal opportunities measures, Litgrid is committed to responding swiftly and effectively to everyday
incidents of unwanted behaviour and to ensuring a level playing field for all employees and job applicants. The aim is to ensure
that equal opportunities are not just on paper, but that the Litgrid community is modern, caring, tolerant and open.
8.11. Trade unions and collective agreements
Litgrid cooperates closely with the company's trade union for electricity transmission network workers. On 18 February 2022,
Litgrid signed a renewed Collective Agreement, the benefits of which are available to all Litgrid employees. The collective
agreement includes:
A long-term collective agreement confirming the existence of high level, harmonious and balanced relations;
an agreement on a system of fringe benefits for the company's employees, ensuring socially responsible and market-
competitive working conditions, employee engagement, guarantees and the implementation of the company's strategy.
The collective agreement agrees on the benefits to be received by employees, such as additional holiday days and longer annual
leave, material support for major life events, "sick days", social responsibility day, funds to promote and support sports, health
and cultural activities, for the general education and training of employees, for the mobilisation of the collective/team, for the
promotion of the company's values, and for supplementary occupational health and safety conditions and measures.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
40
Employee remuneration:
Average salary 2018-2022 , EUR
2022
2021
2020
2019
2018.
CEO
11,855
9,406
13,729
12,980
12,291
Top management
8,732
8,957
8,697
8,560
8,249
Middle management
5,143
4,778
4,482
4,326
4,041
Experts and specialists
3,269
3,041
2,792
2,556
2,403
Total
3,680
3,421
3,167
2,972
2,818
2022
2021
2020
2019
2018
Company profit/loss in thousand EURr
(49,484)
20,013
26,603
2,959
(38,090)
Dynamics of average salaries with variable part and without:
Titles
2022
2021
Average
monthly
salary
(Eur)
Variable
part for
2021 (Eur)
Avera
ge
salary
with
variabl
e part
(Eur)
Average
salary
change
without
variable
part .
Average
salary
change
with
variable
part
Average
salary
(Eur)
Variable
part for
2020 (Eur)
Salary
plus
variabl
e part
(Eur)
CEO
9,583
2,272
11,855
2
26
9,406
-
9,406
TOP management
7,209
1,523
8,732
2
3
7,088
1,869
8,957
Middle and senior
managers
4,503
640
5,143
9
9
4,117
661
4,778
Experts and
specialists
2,911
358
3,269
9
10
2,659
382
3,041
Total
3,253
427
3,680
9
10
2,984
437
3,421
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
41
9. INFORMATION ON THE SHARE CAPITAL AND THE
SHAREHOLDERS AND THEIR RIGHTS
Since 22
nd
December 2010, Litgrid’s shares are traded on the Secondary List on the NASDAQ OMX Vilnius exchange, ISIN code
of securities: LT0000128415.
Litgrid has not acquired its own shares. During the reporting period Litgrid neither acquired nor disposed of its own shares.
The share capital of Litgrid amounts to EUR 146,256,100.2, and it is divided into 504,331,380 ordinary registered shares with the
nominal value of EUR 0.29 each.
EPSO-G UAB (Gedimino pr. 20, LT-01103 Vilnius, company code 302826889), a company wholly owned by the Ministry of Energy
of the Republic of Lithuania, controls 97.5% of Litgrid ’s shares. EPSO-G UAB possesses a decisive vote in making decisions at
the general meeting of shareholders.
The Company has not received any information on mutual agreements between the shareholders due to which restrictions on
transfer of securities and/or voting rights may be imposed. There are no restrictions regarding voting rights at the Company.
SEB Bankas AB was the provider of accounting and related services for Litgrid ’s securities from september 15th 2020.
Data on trading in Litgrid securities on the regulated markets:
Rodiklis
2020
2021
2022
Opening price, EUR
0,59
0.58
0.805
Highest price, EUR
0.63
0.89
0.805
Lowest price, EUR
0.49
0.575
0.63
Closing price, EUR
0.585
0.795
0.7
Turnover, units
680 371
894 468
435 981
Turnover, EUR million
0.39
0.67
0.33
Capitalisation, EUR million
259.51
400.94
353.03
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
42
9.1. Turnover and prices of Litgrid’s shares during the reporting period, in EUR:
https://nasdaqbaltic.com/statistics/lt/instrument/LT0000128415/trading
9.2 Benchmark of LGD1L,OMX Baltic Benchmark GI (OMXBBGI) and OMX Vilnius (OMXV)
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
43
9.3. Dividends
18 August 2017 The Board of Litgrid has adopted a decision to apply the dividend policy of UAB EPSO-G Group, approved by
the decision of the Board of Directors of UAB EPSO-G on 14 July 2017 (renewed 7
th
February 2020), to Litgrid in full. EPSO-G's
Dividend Policy regulates the procedure for setting, paying and declaring dividends for all the companies in the group, sets clear
guidelines for the expected return on equity and investment for existing and potential shareholders, while ensuring sustainable
long-term growth of corporate value, timely implementation of nationally important strategic projects, and purposefully building
trust in the entire group of energy transmission and exchange companies.
At Litgrid's Ordinary General Meeting of Shareholders held on 20 April 2022, it was resolved to pay a dividend of EUR 0.01 per
share, for a total dividend of EUR 5 043 314.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
44
10. Governance
10.1. The Company’s management bodies
The company's management bodies are set out in the Articles of Association and comprise the General Meeting of Shareholders, the
Board of Directors and the company's sole director, the Chief Executive Officer.
The Company's Articles of Association provide that, given that the Company belongs to a group of companies and that the Board of
Directors of the Parent Company oversees the functioning of the internal control system and the management of risks at the Group level,
the Company's General Meeting of Shareholders and the Board of Directors may take into account the suggestions and feedback of the
Board of Directors of the parent company on matters within the competence of the relevant body of the Company. The audit committee
established in the parent company shall act as the audit committee of the group as a whole, inter alia by performing the functions of the
audit committee of the company.
The Remuneration and Nomination Committee and the Audit Committee of the parent company, EPSO-G UAB, shall act as the audit
committee of the group as a whole. The Audit Committee also performs the functions of the Company's Audit Committee. Until 1
December 2022, the Group also had an Innovation and Development Committee.
10.2. Management principles
The basic principles of corporate governance are set out in the Civil Code of the Republic of Lithuania, the Law on Joint-Stock Companies
and the company's Articles of Association. The Company's General Meeting of Shareholders decides on amendments to the Company's
Articles of Association and authorised capital, on the conversion of shares, elects the Board of Directors and the auditor, approves the
annual financial statements and the distribution of profits, decides on major transactions and on other issues. The Board of Directors
determines the organisational structure of the Company, elects the Chief Executive Officer, approves the business strategy, budget,
investments, decides on major transactions and other important management issues. The Chief Executive Officer is the company's sole
governing body and organises the company's activities and concludes the company's transactions. The powers of the Company's organs
are detailed in the Company's Articles of Association.
The Company complies with the Code of Corporate Governance for Listed Companies.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
45
10.3. Articles of association
The Articles of Association of Litgrid shall be amended in accordance with the procedure established by the Law on Joint Stock
Companies of the Republic of Lithuania. During the reporting period, the Company's Articles of Association have not changed
(available at www.litgrid.eu).
10.4. General meeting of shareholders
The General Meeting of Shareholders is the company's supreme governing body. The competence of the General Meeting of
Shareholders, the rights of shareholders and their exercise are provided for in the ABA and the company's Articles of Association.
The competence, convening and decision-making procedures of the General Meeting of Shareholders shall be laid down by the Law,
other legal acts and the Articles of Association.
10.5. The Board
The Board of the Company consisting of five members, is elected for a four-year term. The term of office of the Board begins at the end of
the General Meeting of Shareholders that elected the Board and ends on the day of the Ordinary General Meeting of Shareholders to be
held in the year of the end of the term of office of the Board.
If the Board or a member of the Board is revoked, resigns or for other reasons ceases to hold office before the end of the term of office, a
new Board or a member of the Board shall be elected for the remaining term of office. According to the requirements of the amended new
Articles of Association, the election of the members of the Board ensures that the Board consists of at least 2 (two) independent members,
determining their independence taking into account the requirements of the applicable legislation; it is ensured that at least 3 (three)
members of the Board are not related to the employment relationship with the Company, and if possible, the aim is not to appoint
employees of the Company to the Board.
The Board elects the Chairman of the Board from its members. In its activities, the Board follows the laws, other legal acts, the Articles of
Association, the decisions of the General Meeting of Shareholders and the Rules of Procedure of the Board.
The Board is a collegial management body of the Company. The competence of the Board, the decision-making procedure and the
procedure for election and removal of members shall be established by laws, other legal acts and the Articles of Association. The Board
is accountable to the General Meeting of Shareholders.
31 December 2022 Members of Litgrid's Management Board, CEO and CFO:
CVs of the members of the Board and the Company’s Chief Executive Officer (information is also published on the website at www.litgrid.eu).
Position
Name
Start date
End date
Number of
the
issuer’s
shares held
Chairman of the Board
Tomas Varneckas
2022 04 20
Elected Chairman of
the Board 29 12 2022
-
Independent Board member
Domas Sidaravičius
2016 07 29
-
Chairman of the Board
Algirdas Juozaponis
2018 09 07
2022 12 22
-
Board member
Mindaugas Keizeris
2022 12 22
-
Board member
Gediminas Karalius
2022 04 20
-
Independent Board member
Artūras Vilimas
2020 04 20
2022 11 04
-
Board member
Jūratė
Marcinkonienė
2020 04 20
2022 04 20
-
CEO
Rokas Masiulis
2021 02 22
-
CFO
Vytautas Tauras
2019 03 01
76 shares
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
46
10.6.2. The areas of the activities of the Board
The Board of the Company considers and approves the Strategy, three-year action plan, 10-year development plan, the budget, charity
and sponsorship, other Company’s documents of strategic importance. The Board makes decisions for the Company to start a new type
of activity or to terminate a specific activity, when it does not contradict the purpose of the Company's activity. Also, the decisions related
to the issuance of bonds, transfer of shares held by the Company to other persons, decisions on financial transactions with a value of more
than EUR 3 million must be approved by the Board. The Board also resolves other issues assigned to it in the Company's Articles of
Association.
10.6.3. The Board
Tomas Varneckas
Chairman of the Board
Head UAB „EPSO-G“ infrastructure (company code 302826889, Gedimino
avenue. 20, 01103 Vilnius).
T. Varneckas does not hold shares of Litgrid.
Mindaugas Keizeris
Board member
UAB UAB EPSO-G CEO (įm. kodas 302826889, Gedimino avenue. 20,
01103 Vilnius).
M. Keizeris does not hold shares of Litgrid.
Gediminas Karalius
Board member
The ministry of Energy, senior advisor to Energey security group.
G. Karalius does not hold shares of Litgrid.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
47
Domas Sidaravičius
Independent board member
Other position: Tuvlita UAB Strategy and development director (reg. code
1105840917, Lentvario g. 7A, LT-02300, Vilnius).
D. Sidaravičius does not hold shares of Litgrid.
10.7. Board activities and self evaluation
In line with the guidelines for the annual performance evaluation of the Group's collegiate bodies approved by EPSO-G's
Remuneration and Nomination Committee, Litgrid's Board of Directors completed its performance evaluation for 2022 at the
beginning of 2023.
The summarised assessments of each of the Board members were discussed at the Board's performance evaluation session,
which identified areas for improvement and set out directions for improving business processes, with an action plan for 2023:
organise a strategy session to map out how we envision the company's performance in 2030, to seek to obtain concentrated,
structured information of high quality on the Company's current issues, to always receive prepared material at least 7 days before
a regular Board meeting, and to receive feedback from members at the end of each regular Board meeting on the timeliness and
quality of material.
In accordance with the Guidelines for the annual performance evaluation of the Group's collegiate bodies, the overall assessment
of the performance of all the Group's collegiate bodies shall be summarised by the Remuneration and Nomination Committee of
the EPSO-G and submitted to the Board of Directors together with a report.
In total 26 Board meetings were held in 2022.
Participation statistics of board meetings in 2022:
Attended
Did not attend
Attendance of the meetings of the Board of LITGRID AB in 2022 and decisions taken:
Nr.
Date
Algirdas
Juozaponis
Jūratė
Marcinkonienė
Domas
Sidaravičius
Artūras
Vilimas
Gediminas
Karalius
Tomas
Varneckas
Mindaugas
Keizeris
1.
Jan 10
(not
ordinary)
Not yet
elected
Not yet
elected
Not yet
elected
2.
Jan 13
(not
ordinary)
Not yet
elected
Not yet
elected
Not yet
elected
3.
Jan 21.
Not yet
elected
Not yet
elected
Not yet
elected
4.
Feb 4
Not yet
elected
Not yet
elected
Not yet
elected
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
48
Nr.
Date
Algirdas
Juozaponis
Jūratė
Marcinkonienė
Domas
Sidaravičius
Artūras
Vilimas
Gediminas
Karalius
Tomas
Varneckas
Mindaugas
Keizeris
(not
ordinary)
5.
Feb 8
(Not
ordinary)
Not yet
elected
Not yet
elected
Not yet
elected
6.
Feb 11.
(Not
ordinary)
Not yet
elected
Not yet
elected
Not yet
elected
7.
March 4
Not yet
elected
Not yet
elected
Not yet
elected
8.
March 24.
Not yet
elected
Not yet
elected
Not yet
elected
9.
April 8
(Not
ordinary)
Not yet
elected
Not yet
elected
Not yet
elected
10.
April 19.
(Not
ordinary)
Not yet
elected
Not yet
elected
Not yet
elected
11.
April 28
Was recalled
Not yet
elected
12.
May 20
Was recalled
Not yet
elected
13.
May 30
(Not
ordinary)
Was recalled
Not yet
elected
14.
June 17
Was recalled
Not yet
elected
15.
July 1.
((Not
ordinary)
Was recalled
Not yet
elected
16.
July 22
Was recalled
Not yet
elected
17.
July 29
((Not
ordinary)
Was recalled
Not yet
elected
18.
Aug 12 d.
Was recalled
Not yet
elected
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
49
Nr.
Date
Algirdas
Juozaponis
Jūratė
Marcinkonienė
Domas
Sidaravičius
Artūras
Vilimas
Gediminas
Karalius
Tomas
Varneckas
Mindaugas
Keizeris
(Not
ordinary)
19.
Sept 22
Was recalled
Not yet
elected
20.
Oct 21.
Was recalled
Resigned
Not yet
elected
21.
Nov .
(Not
ordinary)
Was recalled
Resigned
Not yet
elected
22.
Nov 18
Was recalled
Resigned
Not yet
elected
23.
Nov 30
(neeilinė)
Was recalled
Resigned
Not yet
elected
24.
Dec 2
(neeilinė)
Was recalled
Resigned
Not yet
elected
25.
Dec 15
Was recalled
Resigned
Not yet
elected
26.
Dec 29.
Resigned
Was recalled
Resigned
Key decisions taken by the Litgrid Board in 2022:
10 January. Litgrid's 2030 Strategy and the Strategic Priorities 3-5 of Litgrid's 2022-2024 Operational Plan for Electricity
Transmission System Operator Litgrid and the objectives of the 2022 Operational Plan were approved. The creation of fixed
assets through the conclusion of a design and contract works contract for the reconstruction of the 330/110/10 kV Jonava TP with
the joint stock company Kauno Tiltai was approved, the material terms of the contract were approved and an Extraordinary General
Meeting of Shareholders was convened.
13 January. The conclusion of an agreement with UAB EPSO-G for the repayment of tax losses transferred in 2019 is approved
and the essential terms of the agreement are agreed.
21 January. To approve the creation of fixed assets by concluding a design and contract work contract for the reconstruction of
the Varduva 110 kV switchyard with UAB TETAS, a company incorporated and operating under the laws of the Republic of
Lithuania, legal entity code 300513148, with registered office at Senamiesčio g. 102 B, LT-35116 Panevėžys. Contract price € 4
350 000 excluding VAT. The submission of the updated methodology for the determination and allocation of interconnection
capacity with third parties to VERT for approval was approved. The UAB EPSO-G Group's Occupational Health and Safety Policy,
Environmental Policy and Share Sale Transactions Policy are signed. Litgrid CEO's 2022 targets, target weights and measurement
indicators approved.
4 February. The decision was taken to seek to acquire all of the shares of TSO Holding AS to be sold by Energinet and Fingrid
(18.8% and 18.8% respectively, for a total of 37.6%). The signing of the shareholders' agreement of Baltic RCC OÜ was approved
and its material terms were confirmed. Approval was given to deviate from the terms of the standard connection service contract
by including an additional clause in the transmission service contract with LTG Infra AB.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
50
8 February. The conclusion of the Supplementary Agreement to the Purchase and Sale Agreement for the purchase and sale of
the Isolated Power System Operation Service for the preparation of the Isolated Operation Service with the related party Ignitis
Production AB was approved, and the essential terms of the Agreement were approved.
11 February. The creation of fixed assets concluding of a contract for the design and works for the extension of the Bitėnai TP
330 kV switchyard with UAB Stiemo was approved..
4 March. Litgrid's CEO's report on the implementation of the 2021 performance targets is approved. Signed up to the UAB EPSO-
G Group's Equal Opportunities Policy, Sustainability Policy and Procurement Policy.
24 March. Approval was given for the submission of the updated methodology for the identification and allocation of
interconnection capacity with third parties to VERT for approval. Litgrid's Annual Report 2021 was approved. Approval of Litgrid's
set of financial statements for 2021. A decision was taken to propose to the General Meeting of Shareholders to allocate a total
of EUR 175,000 from the 2021 profit to donations, i.e. not more than the amount provided for in Article 9(1) of the Law of the
Republic of Lithuania on Charity and Donations. The draft distribution of Litgrid's profit for 2021 was approved. Approved Litgrid's
remuneration report for 2021, which is part of Litgrid's annual report for 2021. The Ordinary General Meeting of Shareholders is
convened. A decision was taken not to apply to the contractor AB Kauno Tiltai late payment interest due to objective circumstances
beyond the control of the contractor. The independence of the independent members of the Board of Directors, A. Vilimas and D.
Sidaravičius, was assessed.
8 April. Approved the creation of fixed assets by concluding a design and contract works contract for the 330 kV Vilnius-Neris
PPA with Žilinskis ir Co, UAB, approved the material terms of the contract and convened a General Meeting of Shareholders.
19 April. In view of the assessment of the achievement of the objectives set by the Litgrid Board for the CEO for 2021, the
assessment of the values and leadership principles, the CEO was awarded a one-off annual variable remuneration for 2021.
28 April. Approved the action plan for the implementation of the recommendations of the internal audit of Litgrid's procurement in
2021. Decision on voting at the Ordinary General Meeting of Shareholders of TSO Holding AS on 28 April 2022. The Group of
companies of EPSO-G UAB has joined the policy on prevention of corruption. The new version of Litgrid's list of risks for 2022
was approved.
20 May. Action plan for the implementation of Litgrid's 2022 Project Management Internal Audit Recommendations approved. The
appointment of members of the Supervisory Board of Baltic RCC OÜ was approved. The updated version of the Articles of
Association of Baltic RCC OÜ was approved. The terms and conditions of the Agreement No.1 "On the amendment of the Contract
No. 21VP-SUT-10 "Reconstruction of the 330 kV single-circuit OL Klaipėda-Grobinė into a double-circuit" dated 15.01.2021" were
approved. Approval was given to the signing on 23-03-2021 of the contract No 21VP-SUT-40 330 kV for the design and contracting
works for the reconstruction of the single-circuit overhead line Jurbarkas-Bitėnai (LN 531) into a double-circuit line, which was
concluded with a group of suppliers consisting of UAB Empower-Fidelitas (legal entity code: 123855155, registered office address:
Galinės g. 8, Galinė, LT-14247 Vilniaus r.) and EMPOWER AS (legal entity code: 11445550, registered office address: K. A.
Hermanni 8a, 10121 Tallinn, Estonia), the material terms of the transaction were amended and an extraordinary general meeting
of shareholders was called..
30 May. Approved the purchase of SCADA/EMS upgrade services with integrated AGV module from GE Energy Management
Services, LLC and approved the material terms of the SCADA/EMS upgrade services with integrated AGV module service
contract. The conclusion of contracts with EPSO-G UAB and Energy Cells, UAB for the transfer of tax losses for 2021 was
approved and the material terms of the contracts were approved. The differentiated prices for electricity transmission services for
2022, calculated on the basis of the transmission service price cap and the system service price approved by the State Energy
Regulatory Council, were established and the procedure for their application was approved.
On 17 June. Litgrid's list of risks for 2022 was approved in a new version. Approval was given to grant EUR 42 000 to Kaunas
University of Technology and EUR 8 000 to Klaipėda University. Agreement No 5 "On the amendment of the contract No 20VP-
SUT47 of 30 April 2020 for the design and construction works for the reconstruction of the 330 KV overhead line Lietuvos E-
Alytus (LN 330)" with AB Kauno Tiltai and UAB LITENERGOSERVIS was approved and an Extraordinary General Shareholders'
Meeting was convened. The proposed agenda for the Extraordinary Shareholders' Meeting is also approved.
1 July. Approval of the Development Plan for the 400-110 kV Networks of the Lithuanian Power System for 2022-2031.
22 July. Standard terms and conditions of Litgrid's standard service agreement for the connection of the consumer's electrical
equipment / relocation (reconstruction) of the operator's electrical equipment are approved. The support policy of the UAB EPSO-
G group of companies is signed. Agreement No 1 "On the amendment of the Contract No 21VP-SUT-220 of 25 November 2021
for the construction of the 330 kV overhead line Darbėnai-Bitėnai" was approved and the Extraordinary General Meeting of
Shareholders was convened. The amendment to the cooperation agreement No 20SUT-236 for the implementation of Phase II
of the Baltic Synchronisation Project, signed on 31.12.2020, was approved, and the substantive terms of the agreement were
confirmed.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
51
29 July. Approval of Supplementary Agreement No 3 to the Agreement of 31 December 2021. The conclusion of the Isolated
Power System Operation Service Purchase and Sale Agreement No 21SUT-286 of 20 December 2021 (for the preparation of the
Isolated Operation Service) with the related party Ignitis Production AB and the material terms of the transaction were approved.
12 August. Approved the creation of fixed assets by concluding a design and contract works contract for the construction of the
330 kV Mūša switchyard with Žilinskis ir Co, UAB and approved the material terms of the contract, approved the creation of fixed
assets by concluding a design and contract works contract for the construction of the 330 kV Vilnius-Neris substation with Žilinskis
ir Co, UAB and approved the material terms of the contract, approved the creation of fixed assets by concluding the design and
contract works contract for the reconstruction of the 330/110/10 kV Kruonis HAE 330 kVdistribution plant with the joint stock
company Kaunotiltai and approved the material terms of the contract. The Extraordinary General Meeting of Shareholders is
convened.
With a view to the meeting of 20 April 2022. "Litgrid's General Meeting of Shareholders, which approved a total support amount
of EUR 175,000 for the year under review, and in accordance with the Group's Support Policy, p. 2.1.3, 3.1. In addition, taking
into account the situation regarding the military invasion of Ukraine by the Russian Federation and the request received from the
Ukrainian company Ukrenergo, a decision was taken to provide this company with support (both directly and through other
charitable and aid institutions or organisations) for the provision of equipment in the field of energy, and a total amount of EUR
125,000 was approved for the above purposes.
22 September. The updated list of Litgrid's confidential, commercial/production secret information is approved. The conclusion of
the Information Security Management Service (ISMS) transaction between Litgrid and the related party Baltic RCC OÜ was
approved and the material terms of the contract were confirmed. The decision to buy back from Energinet and Fingrid the 18,8 %
and 18,8 % respectively, for a total of 37,6 % (5 760 units) of the shares of TSO Holding AS was adopted and the material terms
of the agreements were approved. The Project Management Policy and the Selection Policy of the EPSO-G Group of UAB have
been signed. Approved the action plan for the implementation of the recommendations of the internal audit on the connection of
renewable resources. Litgrid's updated organisational governance structure was approved.
21 October. Joins the EPSO-G Group's Remuneration, Performance Appraisal and Development Policy and Equal Opportunities
Policy. Approved the inclusion of additional (non-standard) services in the tripartite service contracts for the connection of electrical
equipment to electricity transmission grids / relocation (reconstruction) services to be signed with LTG Infra AB for the transmission
networks of Litgrid that are being reconstructed during the implementation of the Rail Baltica project. Differentiated prices for
electricity transmission services for 2023 have been set and the procedure for their application has been approved. The draft
Litgrid 2030 Strategy was approved and approved for submission to the Public Enterprise Management Coordination Centre for
review. The decision was taken not to apply to the consultant ILF CONSULTINGENGINEERS POLSKA Spolka z.o.o. EUR 102
319,52 in liquidated damages for objective reasons beyond the control of the Contractor. The creation of fixed assets through the
conclusion of a design and contract for the design and contracting works for the "Installation of the temporary interconnector for
the 330/110/10 kV Kruonis HAE 330 kV switchyard" with the joint stock company Kauno Tiltai was approved, and the essential
terms of the Contract were approved.
On 9 November, a decision was adopted to sell 39.6%, i.e. 6 066 units, of the shares of the company "Kauno Kauno Kauno
Vilas". TSO Holding AS shares to the parent shareholder UAB EPSO-G by concluding a share sale and purchase agreement,
under the following material terms and conditions. Agreed by Agreement No 4 'Concerning the Agreement of 10 September 2021
on the following "The Extraordinary General Meeting of Shareholders was convened to approve the amendment of the Design
and Construction Contract No 21VP-SUT-156 for the "Reconstruction of the 330/110/10 kV Neries TP" with Žilinskis ir Co, UAB.
The conclusion of the Management Holding Services Agreement with EPSO-G, UAB was approved and the essential terms of
the Agreement were confirmed.
18 November. The amendment of the contract price by Agreement No 7 "Concerning the Contract No 21VP-SUT-10 of 15 January
2021 "Reconstruction of the 330 kV single-circuit overhead line Klaipėda-Grobinė into a double-circuit overhead line" was
approved. The creation of fixed assets through the conclusion of a design and contract for the design and contract works for the
"Reconstruction of the 110/10 kV Zokniai substation" with UAB Tetas was approved, and the essential terms of the contract were
approved.
30 November. The Extraordinary General Meeting of Shareholders was convened to set the remuneration levels for the members
of the Litgrid Management Board and to set the Management Board's operating budget for 2023 and the following years.
2 December. The conclusion of a purchase and sale agreement for the provision of the isolated standby power system operation
service with the related party Energy Cells, UAB was approved, and the material terms of the agreement were confirmed.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
52
15 December. Litgrid's list of risks and management measures plan for 2023 is approved. Agreement No. 1 "On the amendment
of the Contract No. 22VP-SUT-34 of 2 March 2022 "Bitėnai TP 330 kV Switchyard Expansion Works" was approved as an
amendment to an essential term of the transaction. Approval of the creation of fixed assets by concluding the design and contract
works contract for the "Connection of the third 410-345-10 kV autotransformer AT-41 at Alytus TP" with the Supplier Group
consisting of UAB Connecto Lietuva and AS Connecto Eesti was approved. The treasury and financial risk management policy of
the UAB EPSO-G group of companies has been joined. Amendments to the material special terms of the Loan and Borrowing
Agreement of 26 February 2021 between Litgrid and UAB EPSO-G were approved. The Personal Data Protection Policy and the
Supplier Code of Conduct of the UAB EPSO-G Group were signed.
29 December Mr Varneckas is elected Chairman of the Board. The conclusion of the Electricity Generating Facilities Availability
Service with the related party Ignitis gamyba AB was approved and the essential terms of the contract were confirmed. The
conclusion of the Electricity Generation Facilities Availability Service with UAB Kauno Termofikacijos elektrinė, a non-affiliated
party, was approved, and the essential terms of the contract were confirmed. The conclusion of the supplementary service contract
for the regulation of voltage regulation in the loss state with Ignitis Production AB was approved, the essential terms of the contract
were confirmed.
10.6.4. Areas of activities of the CEO
The CEO is the sole governing body of the Company. The CEO organizes the activities of the Company, manages it, acts on behalf of the
Company and has the right to conclude transactions unilaterally. The competence of the CEO, the procedure of election and revocation
shall be established by laws, other legal acts and the Articles of Association.
Rokas Masiulis
CEO
Other positions: independent board member at „Connect Pay“ UAB
(reg, nr. 304696889 Algirdo g. 48, LT-03218 Vilnius).
R. Masiulis does not hold Litgrid shares.
10.6.5. Governance and control
The requirements for the governance of the Company are set forth by the Lithuanian Government’s resolutions on the governance
of state-owned or state-controlled companies, insofar as they apply to the EPSO-G group companies, and the Governance Code,
insofar as the Company’s Articles of Association do not state otherwise.
In accordance with the Integrated Planning and Monitoring Policy of the EPSO-G Group of Companies, which was approved at
the meeting of the Board of the Company No 12 held on 19 May 2017 and which is directly applied at the Company in its entirety,
the Company is preparing the strategy of the Company for a period of 5–10 years. The period of the strategy must coincide with
the period of the parent company’s strategy. The prepared strategy of the Company currently covers the period of 10 years up to
2028. The implementation of the strategic objectives set out in the strategy of the Company is ensured by the Company’s
performance, control, and risk management systems. The strategy of the Company is approved and its implementation is
controlled by the Board. The Board of the Company prepares (updates) and approves the operational plan for a period of 3 years
before the end of the current year. A monthly strategy implementation supervision system is introduced at the Company and is
linked with the Company’s administrative staff remuneration system. The composition of the Company’s Board is disclosed on the
Company’s website.
The Company’s activities of the transmission system operator are regulated by the national regulatory authority, i.e. the National
Energy Regulatory Council. Within its competence, the Council performs the functions of the state regulation in the electricity
sector in the Republic of Lithuania, by ensuring, inter alia, the supervision of and control over the performance of regulated
activities in the energy sector, as well as the proper implementation of the rights and duties of electricity undertakings and
consumers.
The strategy and operational plan of the Company are implemented by and the activities of the Company’s administrative staff
are organised by the Company’s Chief Executive Officer. The Company’s administrative management personnel consists of the
Chief Executive Officer, the Finance Department Director, the System Department Director, the Transmission Network
Department Director, the Strategic Infrastructure Department Director, the Strategy Department Director, and the ITT and
Administration Department Director. The composition of the Company’s management is disclosed on the Company’s website.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
53
Corporate governance accommodates the principles of good governance practice and the policies on the governance of state-
controlled companies. The Board of the Company approves the following policies, the implementation of which is to be ensured
by the administrative staff of the Company: corruption prevention, remuneration, remuneration for activities in the management
bodies of the group companies, assessment of employees' performance, project management, integrated planning and
monitoring, corporate governance, accounting, support, dividends, transport, technological property, transparency and
communication, protection of sensitive information, management of interests of collegial management bodies, executives and
employees, treasury management and financial risks, risk management, social responsibility and other policies, the content of
which is published on the Company’s website.
The internal control systems of the Company are supported by the organisational structure, management culture and implemented
good governance practices, as well as process management which is currently being implemented. It should be noted that the
supervisory functions are carried out by the Board of EPSO-G UAB, meanwhile recommendations, proposals and conclusions on
matters which are key to the Company’s activities are provided by the Remuneration and Nomination Committee and the Audit
Committee. The internal control system is initiated by the Company’s Board and implemented by the administrative staff, assisted
by the Audit Committee of EPSO-G UAB, the external independent audit, and divisions supporting the principal activity. The
procedures and policies effective at the Company ensure the reliability of accounting and financial reporting, the compliance of
the Company’s activities with legal acts, operational efficiency, and achievement of operational objectives.
The Minister of Energy of the Republic of Lithuania by Order No 1-212 of 7 September 2015 approved the Corporate Governance
Guidelines for the State-Owned Group of Energy Companies (the “Guidelines”).
The Guidelines establish uniform principles of corporate governance to be applied to the entire EPSO-G group of companies and
prescribe the purpose of the group of companies, its operational objectives, corporate governance organisation model,
governance structure, as well as the system for accountability, supervision and control of operations. These Corporate
Governance Guidelines are intended to support and further improve the procedures and policies of good governance practice
applied at the Company.
Good governance practice of the EPSO-G group of companies upon the approval of the Guidelines by the Minister of Energy, the
company controlling the EPSO-G group of companies is improving the governance practice in its operations and the operations
of the group of companies, with reference to the recommendations set forth in the Governance Code and by implementing the
recommendations of the international organisations, such as the OECD, intended to enhance the governance of state-controlled
companies. The basis for the practical realisation of these Guidelines was created on 17 December 2015, with the approval of the
newly revised Articles of Association of EPSO-G (the “Articles of Association of EPSO-G”), as the company controlling the entire
EPSO-G group of companies, by the Ministry of Energy, which is the owner of the shares of EPSO-G. The newly revised Articles
of Association of EPSO-G laid down the foundations for the establishment of the new management bodies at the level of EPSO-
G, i.e. the Board, the Audit Committee, and the Remuneration and Nomination Committee, which, in turn, perform certain
supervisory and management functions at the level of the entire group of companies.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
54
11. REMUNERATION REPORT
11.1. Employees
A team of highly competent employees helps the company to achieve its goals. It consists of 391 professionals, 95% of whom
have a university degree. The increase in headcount is due to the acceleration of synchronisation and the pooling of critical
competencies. Reinforcements in the areas of digitisation and innovation, which are part of the strategic objectives.
76% of the workforce is male and 24% female, with an average age of 42 years. Three quarters of Litgrid's team members are
experienced engineers who are crucial to the smooth operation of the transmission system operator. The average length of service
in the energy system is 10 years.
The staff turnover rate is 8% in 2022, compared to 8.2% in 2021 and 11.7% in 2020.
Average remuneration in 2018-2022, Eur
2022
2021
2020
2019
2018
CEO
11885
9403
13 729
12 980
12 291
Top management
8732
8957
8 697
8 560
8 249
Middle management
5143
4778
4 482
4 326
4 041
Experts and specialists
3269
3041
2 792
2 556
2 403
In total
3680
3421
3 167
2 972
2 818
Information on the Remuneration Policy, the Employee Performance Appraisal Policy, the remuneration paid and the company's
objectives is available on Litgrid's website.
11.2. Remuneration of collegial management bodies
The principles of remuneration of members of the management bodies of the EPSO-G group of companies are laid down in the
Guidelines for the determination of remuneration for activities in the bodies of group companies, approved by a decision of the
sole shareholder of EPSO-G UAB.
On 17 December 2019, Litgrid's Extraordinary General Meeting of Shareholders adopted resolutions on the establishment of the
annual remuneration budget for the remuneration of independent members of the Management Board and the costs related to
the performance of functions in the Management Board, as well as on the standard terms of the agreement with independent
members of the Management Board on the performance of their activities in the Management Board of Litgrid.
The Company follows the remuneration policy for the CEO and the Board of Directors, updated on 20 April 2020
(https://www.litgrid.eu/uploads/files/dir523/dir26/dir1/16_0.php)
No remuneration was paid to the Board members delegated by the shareholder in 2022.
Remuneration of the Board members, Eur:
2022
2021
2020
2019
2018.
Domas Sidaravičius (from 2016.07)
17 107
16 800
16 800
8 820
9025
Tomas Varneckas (from 2022.12.29)
-
-
-
-
-
Mindaugas Keizeris (from 2022.12.29
-
-
-
-
-
Algirdas Juozaponis (from 2018.09)
-
-
-
-
-
Artūras Vilimas (from 2020.04 to 2022.11)
22 370
21 000
14 197
-
-
Gediminas Karalius (from 12.2022)
607
-
-
-
-
Viso
40 084
37 800
37 414
18 307
12 225
No other bonuses, royalties or other benefits were paid to the members of the Board.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
55
Fixed and variable remuneration for the Chief Executive Officer is determined by the Board of Directors, and for the most senior
executives by the Chief Executive Officer, in accordance with a remuneration policy approved by the Board. The variable
remuneration is paid once a year to the CEO and the senior management after the Board has approved the achievement of the
company's objectives.
The male:female ratio on the 2022 Board was 100% male.
12. SPECIAL OBLIGATIONS
There are no special obligations for Litgrid.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
56
12. RISK FACTORS
12.1. Risk factors, their management and audit
The Company's activities are guided by the "Risk Management Policy of the UAB EPSO-G Group" approved by the Board of
Directors' Decision No VLD-19-02 of 25 January 2019 (link).
"The Board of Litgrid, in order to ensure an efficient and unified risk management process, by its Decision No. 7.1 of 8 March
2019 (Minutes No. 5), decided to apply the provisions of the Policy to the Company's activities. In order to elaborate on the
provisions of the Policy, the Board of Directors of UAB EPSO-G, by its Decision No VLD-20-02 of 7 February 2020, approved the
"Risk Management Methodology of UAB EPSO-G" (hereinafter referred to as the "Methodology"), which details the processes of
risk management both at the Company's level and at the Group level.
"The Methodology was approved by Litgrid's Management Board Decision No. 7 of 24 April 2020 (Minutes No. 7), which is also
used to guide the Company's risk management activities and information exchange with EPSO-G UAB. The risk management
model (Policy and Methodology) applied by the Company is based on the COSO ERM (Committee of Sponsoring Organisations
of the Treadway Commission Enterprise Risk Management) methodology, which is recognised in international practice, and on
the standard AS/NZS ISO 31000:2009 (Risk management - Principles and guidelines), which defines the guidelines and
responsibilities for the identification, assessment and management of risks.
Responsibilities of the Company’s bodies in the risk management system
The EPSO-G Board
The Audit Committee
Assesses management of risks, is
responsible for an effective risk
management system at the
Group.
An advisory committee of the
EPSO-G Board – oversees
management of risks at the Group
level, assesses effectiveness of
the risk management system.
The Chief Executive Officer of EPSO-G
Organises the implementation of the Risk Management Policy and other
decisions of the Board, within the area of his/her competence aims to
achieve a proper management of risks of the companies.
Risks at the Group level
Risks at the level of the Group companies
The Board
The Audit Committee
Responsible for a proper
management of risks at the
company.
An advisory committee of the
Board – oversees management of
risks.
The Chief Executive Officer
Responsible for the implementation of risk management measures
Risk management helps Litgrid meet its strategic objectives and:
to increase the stability of Litgrid's operations and ensure the efficiency of its processes;
Ensure the provision of correct information to decision makers, shareholders and other stakeholders;
increase public and state confidence in Litgrid and protect the company's reputation;
anticipate threats and implement threat management measures in a coordinated manner to prevent threats from
occurring or to reduce their negative impact and/or probability of occurrence.
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57
In order to ensure that the Company's objectives are met, a process of risk identification and assessment is carried out at a fixed
time each year and risk management measures are planned. In addition, existing and new risks are monitored on a quarterly
basis, and additional risk management measures are planned on an operational basis if necessary (continuous monitoring of the
implementation of the measures planned to manage risks). "Litgrid determines its risk appetite and tolerance limits and
continuously monitors the values of key risk indicators.
Risk management process
Litgrid's 2022 risk map has a high and medium risk distribution - 3 (three) risks exceeded the company's appetite limits.
Risk No.
Risk title
Description
Risk level
1
Delay in the critical work stream
"Ensuring preparation for full
synchronisation with continental
European grids"
The company has to ensure that
Lithuania's electricity system is ready for
full synchronisation with the continental
European grids on schedule.
The risk may materialise if at least one
of the measures or actions foreseen in
the Action and Measures Plan of the
power system synchronisation project is
not carried out in the timeframe
envisaged. Synchronisation projects are
subject to a zero tolerance for the risk of
project delays.
Extreem level of risk
7
Upside risk to the investment
value of Synchronisation
Programme projects
There is a risk that the total investment costs
of synchronisation projects will be higher
than planned. The deviation of the total
investment costs may be due to:
- price inflation;
- shortages of certain commodities (metal,
timber, reinforcement) on the market.
- lack of competition in purchasing..
Extreem risk level
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58
10
Delay in the critical workflow
"Ensuring the readiness of the
Lithuanian electricity system for
isolated operation"
Certain activities/projects carried out by
Litgrid are included in the critical
workflow. Delays of projects identified in
the critical work stream may have a
negative impact on the overall critical
work stream.
Very high risk level
Risk management map for 2022:
In 2022, in response to the changing environment (Russian invasion of Ukraine, the ongoing Covid-19 pandemic, disruptions in
commodity supply chains and rising inflation), the company made 23 changes to the risks in the company's risk register in the
period 2022 (adjustments to the causes of risks, risk management measures, risk monitoring indicators, with more ambitious
indicator values, and adjustments to the probability of risks and impact values), 2 new risks were added and 3 risks were managed.
ANNUAL REPORT
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59
In 2022, the Company has also focused on monitoring and managing the risks identified in the table below.
Risk Nr.
Risk name
Risk level
37
Risk of lack of competition between suppliers in public
procurement
Medium level
12
Risk of non-compliance with personal data protection
requirements
Medium level
24
Disclosure of confidential information due to cyber-attack or
mismanagement
Medium level
38
Lack of appropriately skilled professionals
Medium level
14
Risk of disconnection of the NordBalt interconnector
Medium level
20
Failure to ensure power quality and the N-1 criteria in the
management of the electricity system
Medium level
44
Disruption of the operation of facilities of national security
importance due to malicious acts of third parties
Medium level
19
Damage to the environment and/or third parties caused by Litgrid's
activities
Medium level
39
Risk of non-compliance with regulatory legislation
Medium level
The Company continuously monitors the market situation and analyses the latest information, external and internal factors and
their potential impact on the Company's business. It also makes every effort to ensure uninterrupted energy supply and business
continuity. Although additional risks arise, the Company has taken the necessary steps to manage them.
12.2. Information security
Based on the findings of external audits, Litgrid's organisational and technical information security measures are in line with
globally recognised best practices. In 2022, a maintenance audit of information security management was carried out and the
ISO/IEC 27001:2017 certificate was renewed (granted in 2021). The certification covered risk management, security policies,
standards and procedures, physical and environmental security, access control, communication and operations management,
incident management, business and business continuity, resource and asset management, and regulatory compliance.
In 2022, an audit of the information security requirements for members of ENTSO-E, the international organisation of electricity
transmission system operators, was also carried out, and ENTSO-E's assessment of the results of the audit confirmed that Litgrid's
measures comply with the cybersecurity requirements for ENTSO-E members.
The National Cyber Security Centre (NCSC) has been the subject of intensive cooperation to ensure cyber security in 2022. The
NSCC carried out a review of the technological electricity transmission systems and assessed Litgrid's cyber security status
positively. Since the beginning of the war in Ukraine, LITGRID has been exchanging information with the NSCC on the
cybersecurity situation in order to manage the increased risks. The company successfully participated in the cyber security
exercise "Cyber Shield 2022" organised by the NCSC, as well as represented Lithuania together with the NCSC in the international
exercise "WEST ZONE RANSOMWARE RESILIENCE EXERCISE"
Litgrid consistently and purposefully conducts cyber security education for its employees. E-learning courses have been
developed and completed for all employees, a month-long "October - Cyber Security Month" initiative was organised in October,
and periodic phishing tests reflect the increasing awareness of employees in the field of cyber security. Special attention is paid
to the competences of IT and cybersecurity professionals and, in addition to the above-mentioned exercises with the NCSC, in
2022, professionals trained in exercises organised by our US partners, ENTSO-E, and the Polish transmission system operator.
Cybersecurity specialists also obtained individual certificates as professionals in their field.
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(All amounts are in EUR thousands unless otherwise stated)
60
13.SUSTAINABILITY REPORT
Basis information and the scope of reporting
In preparing the annual Sustainability Report (the Report), LITGRID AB (hereinafter referred to as the Company, Litgrid) has
followed the recommendations of the Global Reporting Initiative (GRI), which help to assess the Company's performance in terms
of relevant economic, environmental, employee, human rights, market and public relations indicators, the Law on Corporate
Reporting of the Republic of Lithuania and the European Union's Non-Financial Information Disclosure Directive, and the Bank of
Lithuania's recommendations.
This report is available on the Company's and NASDAQ Stock Exchange's websites and is accessible to all stakeholders:
shareholders, business partners, investors, employees and their trade union, media representatives, social partners, citizens and
local communities, and other relevant organisations. Last year's report is available on the company's website:
https://www.litgrid.eu/index.php/apie-litgrid/darni-veikla/468
This report presents Litgrid's work and achievements in the field of sustainable development in 2022.
For questions or comments and suggestions on how to improve the Sustainability Report, please contact jurga.eivaite@litgrid.eu
This report is unaudited and is available in both Lithuanian and English.
Information on the operating model
Litgrid is the electricity transmission system operator in Lithuanian. The company is responsible for maintaining the balance of
electricity consumed and generated in the Lithuanian electricity system and for reliable transmission of electricity, carries out
strategic electricity projects in Lithuania, and bases its vision and strategic operational guidelines on the long-term goals set out
in the National Energy Independence Strategy (hereinafter - NENS).
Litgrid, as the electricity transmission system operator, plays a key role in ensuring Lithuania's smooth and reliable transition to a
RES-intensive energy system, enabling the decarbonisation of the sector, initiating system interconnection projects and facilitating
the exchange of climate neutral energy.
Litgrid aims to achieve the transformation of the energy sector by striking a balanced balance between environmental, social and
economic objectives.
Detailed information on activities, services, environment, regulatory environment, objectives and strategy is provided in the Annual
Report.
13.1. General information on sustainability at Litgrid
Litgrid plays an important role in ensuring Lithuania's smooth and reliable transition to an energy system integrating large amounts
of renewable energy sources (RES).
Litgrid aims to achieve the transformation of the electricity sector by striking a sustainable balance between environmental, social
and economic objectives.
All companies in the EPSO-G Group strive to integrate sustainability principles into their operations and processes. Litgrid also
aims to contribute directly to the United Nations Sustainable Development Goals by focusing on ensuring access to clean and
modern energy, combating climate change, developing modern infrastructure and innovation, safe and decent working conditions,
employee well-being and a sustainable supply chain.
The main thrusts of sustainable development stem from the activities defined in the Group's long-term strategy to 2030.
In the environmental field, the empowerment of climate-neutral energy by reducing the environmental impact of
activities;
Social - building a progressive, sustainable organisation;
Governance - transparent management and development of the company.
Litgrid's sustainability performance is disclosed in the context of a group-wide impact materiality analysis. This analysis, carried
out in 2022 on a Group-wide basis, included three steps: identification of the most significant environmental, social and governance
impacts; survey of stakeholders and Group management; and identification of the most significant operational impacts. The
survey, implemented in early 2022, involved 645 respondents, including employees, suppliers, customers, business partners,
local communities, associations, trade unions, the Ministry of Energy, investors, and managers and board members of the Group
companies.
Litgrid's Sustainability Policy, approved by the Board of Directors in 2022, stipulates that the Group commits to review
environmental, socio-economic impacts and sustainability priority topics on a regular basis, but at least once every two years,
through a materiality assessment, ensuring stakeholder involvement.
ANNUAL REPORT
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The survey carried out at the beginning of 2022 involved 232 respondents, including employees, suppliers, customers, business
partners, local communities, associations, trade unions, the Ministry of Energy, investors, and the Group's managers and board
members.
Materiality matrix of sustainability themes:
Environmental sustainability themes:
Reducing environmental impacts and GHG emissions in operations - reducing environmental impacts (air, water, soil
quality), pollution and GHG emissions (CO2, CH4, SF6, etc.) in the company's operations.
Biodiversity and ecosystem conservation - protection of terrestrial and aquatic wildlife, natural vegetation and habitats
of high ecological value in the course of operations.
Sustainable and efficient use of resources in the company's operations - use of green energy in the company's
operations, efficient use of water and other resources.
Waste minimisation, responsible segregation and management - minimising the amount of waste generated by the
activities, ensuring safe and proper management of hazardous and non-hazardous waste.
Facilitating the growth of RES - ensuring efficient grid connection of renewable energy producers, smooth operation of
the Energy Guarantee System.
Adapting energy systems to decarbonisation - adapting the transmission grid to reliably transport new and increased
volumes of renewable energy sources.
Social sustainability themes:
Ensuring human rights and equal opportunities for employees - Ensuring human rights, creating a culture based on
equal opportunities and non-discrimination within the company.
Ensuring the professional development of employees - providing professional and personal development opportunities
for employees, actively developing the necessary competences.
Employee well-being and job satisfaction - creating an environment that enhances employee well-being and
satisfaction and ensures work-life balance.
Occupational health and safety - ensuring that the Company's and its contractors' employees comply with safety
requirements when carrying out their work, and actively ensuring the good health of employees.
Dialogue and involvement of local communities - actively informing local communities about the activities taking place
in their environment, fostering a culture of dialogue and community involvement.
Customer satisfaction - quality of customer service, improvement of customer-oriented services.
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Social action, volunteering and social partnerships - promotion of volunteering, educational activities and targeted
cooperation with NGOs, academia and government.
Sustainability themes in governance:
Transmission network reliability and security - ensuring the safe, reliable and efficient operation of energy transmission
systems.
Transparent governance and creating an anti-corruption environment - following standards of transparency and
business ethics, not tolerating corruption and actively combating all forms of corruption.
Cybersecurity and data protection - Ensuring the security of critical data, building a cyber-attack-resistant IT
infrastructure and creating an organisational culture.
Sustainable value for the economy and financial return for the State - Achieving financial return targets set by
shareholders, ensuring return on investment, economic and social returns.
Innovation, research, digitalisation - Creating an organisational culture that fosters innovation and ensuring adequate
funding for innovation.
Sustainable supply chain management - Increasing the share of public procurement of goods and services that meet
environmental and sustainability standards, actively encouraging contractors, suppliers and other partners to follow
recognised environmental, anti-corruption and social standards.
The sustainability objectives have been set by assessing the main environmental, social and economic impacts of the Group's
businesses, as well as the actions set out in the Group's long-term business strategy, the implementation of which will help to
ensure the transformation of the energy sector and the transition to climate-neutral energy. The EPSO-G Group's long-term
sustainability targets for 2030 include the following indicators:
Area
KPI’s
Environmental
• - Reduction of operational GHG emissions by 2/3 (compared to 2019)
• - 0 significant environmental incidents in operations
• - Enabling conditions for connecting green energy producers to infrastructure
Social
• - 0 cases of human rights violations or discrimination
• - 0 serious or fatal accidents
• - Customer satisfaction - at least 80 according to the GCSI methodology
Governance
• - 0 cases of corruption
• - VCC Good Governance Index - A+
• - 100% of public procurement is green
• - Reliable and safe operation of electricity and gas transmission systems
• - Sustainability criteria integrated into supplier requirements
13.2. Sustainability and risk management
At EPSO-G Group companies, sustainability principles are integrated into business processes, and the management of
sustainability areas by competency covers all levels.
The Board of Directors is responsible for setting, reviewing and monitoring long-term strategic sustainability objectives and
indicators. The Board also approves policies on the environment, equal opportunities, health and safety, anti-corruption,
remuneration, performance measurement and development. Within its remit, the Board also approves the company's annual
objectives, which include sustainability-related objectives.
"EPSO-G's Board of Directors also approves a list of risks at Group level, which includes risks related to sustainability, such as
the risk of non-compliance with occupational health and safety requirements, the risk of lack of adequate skills, the risk of turnover,
the risk of motivation, the risk of damage caused by natural phenomena, etc. The results of the monitoring of the implementation
of the identified risks and the risk management plan are regularly communicated to the Group's corporate managers, the corporate
and Group Boards of Directors, and the Audit Committee, in accordance with the remit of each of them.
The Group Sustainability Development Manager is responsible for monitoring and coordinating the achievement of the Group's
sustainability objectives. Meanwhile, within the Group companies, the relevant environmental, social and governance objectives
are delegated to individual functional units within the EPSO-G Group companies (e.g. environmental, occupational safety, human
resources, risk and compliance management, etc.) according to their respective competences. "Litgrid has employees responsible
for ensuring equal opportunities within the company, as well as a self-initiated "Equal Opportunities Embassy", which organises
training and activities for employees.
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Litgrid has policies that cover environmental, social and governance management.
Litgrid sees sustainable development as an integral and inseparable part of its operations. The company follows the following
policies:
Corporate governance policy. Its purpose is to ensure good corporate governance practices within the group by
establishing uniform corporate governance principles across the group and ensuring interaction between the parent
company and other group companies.
Sustainability Policy. The Sustainability Policy defines the key directions and principles for the development of
sustainability to guide the development of the Group's corporate activities and to create a progressive organisational
culture. The implementation of this Policy is the responsibility of the Group's Chief Executive Officers and the
Sustainability Functional Area Mentors.
Occupational Safety and Health Policy. This Policy defines the general principles of occupational safety and health
and the main guidelines for its implementation. The aim of the Policy is to ensure the health of employees in the workplace
and to create a healthy, safe and productive working environment.
Equal opportunities policy. The Equal Opportunities Policy defines the key principles that are applied in the Group's
companies to ensure that the principles of equal opportunities and non-discrimination are respected in all areas of the
employment relationship. The implementation of the provisions of the Equal Opportunities Policy is the responsibility of
the managers of each Group company.
Environmental Policy. This policy defines the key environmental principles that are applied in the Group to reduce the
environmental impact of its activities and to establish a culture based on the principles of sustainable development within
the Group and its environment.
Transparency and Communication Policy. Its aim is to facilitate more effective communication with each other and
with external stakeholders: the public, shareholders, market regulators, etc.
Anti-corruption policy. Its objective is to set out the main principles and requirements for the prevention of corruption
within the Group and the guidelines for ensuring compliance with these principles and requirements, the implementation
of which creates the preconditions and conditions for the implementation of the highest standards of transparent business
conduct.
Remuneration, performance appraisal and development policies. The aim is to establish clear and transparent
principles and a reward system for the Group's employees, based on which payroll costs can be managed effectively
and employees can be motivated to achieve the objectives set for the organisation.
Accounting policy. Its purpose is to ensure that stakeholders are able to assess the performance and prospects of
group companies and to make appropriate economic decisions.
Dividend policy. Its objective is to set clear benchmarks for the expected return on equity and investment for existing
and potential shareholders, while ensuring sustainable long-term growth in corporate value, the timely implementation
of nationally important strategic projects, and thus consistently building confidence in the entire group of transmission
and exchange companies.
Interest management policy. The objective is to establish a unified and best practice interest management system
within the Group, which will ensure objective and impartial decision-making within the Group companies, as well as
create an environment that is not conducive to corruption and enhance confidence in the Group companies.
Policy for the development and exploitation of technological assets. The objective is to consistently apply cost-
benefit principles to the management and development of electricity infrastructure, to introduce advanced technologies,
and to manage and develop the transmission infrastructure in a socially responsible manner, taking into account
occupational health and safety and environmental requirements.
Support policy. The aim is to ensure that the support provided is publicly available and does not lead the public to
question its appropriateness or the transparency of the allocation process.
Codes of ethics and supplier codes of conduct. Their purpose is to establish uniform general guidelines for behaviour
in dealing and cooperating with internal and external stakeholders: service users, contractors, business partners,
shareholders, state and municipal authorities, the public, etc. The provisions of the Code are based not only on the
employer's duty, but also on the employee's personal understanding that good behaviour enhances the reputation and
value of the company, as well as the Group as a whole, and reduces the likelihood of reputational risk. The provisions of
the Code are directly derived from the Group's values, leadership principles and complement the related operational
policies.
Litgrid undertakes to review environmental, socio-economic impacts and sustainability priority topics on a regular basis, but at
least once every two years, together with the Group companies, through a materiality analysis, ensuring stakeholder involvement.
Group companies report annually on the implementation of their sustainability activities through separate public sustainability
reports.
Long-term sustainability objectives are integrated into the operational strategy approved by the Board until 2030.
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13.3. Sustainability in environment protection
In the environmental field, Litgrid's main objective is to enable climate-neutral energy and to reduce environmental impacts and
greenhouse gas emissions from its operations. "In the environmental policy approved by Litgrid's Board of Directors, the company
has committed itself to monitoring the environmental impact of its operations, and to introducing state-of-the-art technologies and
measures to reduce significant environmental impacts. When operating, expanding or modernising the infrastructure of energy
systems, the company undertook to ensure the protection of biodiversity, and to implement environmental management systems
in its operations and to ensure that these systems comply with the requirements set.
All EPSO-G Group companies have the objective of ensuring zero tolerance to environmental pollution and zero environmental
incidents. "Litgrid also aims to oblige contractors and other business partners to take responsibility for the environmental impact
of their activities and to strive to reduce it. The company also takes a precautionary approach by carrying out environmental impact
assessment procedures, either in accordance with legal requirements or on its own initiative, before undertaking projects that may
have a significant impact on the environment, biodiversity or society.
The implementation of the environmental policy is the responsibility of the environmental staff, who ensure that environmental
aspects are identified in a timely manner, environmental objectives are set, plans are developed, tasks are set to improve the
environmental status and sufficient resources are allocated to their implementation, results are monitored periodically, and the
processes, technologies and working methods used are audited.
During 2022, no breaches of environmental legislation were recorded and no fines were imposed. Nor were there any significant
environmental incidents reported during the year under review, either by the company's employees or by contractors.
13.3.1. Monitoring and reducing GHG emissions.
Climate change is one of the greatest human challenges of this century and requires the involvement of both the public and private
sectors and everyone to limit the average increase in the Earth's temperature to 1.5 degrees Celsius. Litgrid has carried out a
GHG emissions inventory. The inventory assessed direct (Scope 1) and indirect (Scope 2) GHG emissions resulting from the
activities and impacts of the Group's companies. Scope 2 emissions were calculated using a "market based approach".
The base (reference) year from which the Group plans to reduce GHG emissions is 2019, which is the year in which none of the
Group's companies were affected by the operational restrictions resulting from COVID-19, which also affected Litgrid's operations.
2019, kgCO2e
2020, kgCO2e
2021, kgCO2e
2022, kgCO2e
Scope 1
Scope 2
Scope 1
Scope 2
Scope 1
Scope 2
Scope 1
Scope 2
Litgrid
757380,3
221027861,8
388165,4
200455993
661047,97
194484654
813472
209505433
Total
221785242,1
200844158,4
195145701,9
210318905
Decrease
compared
to base
year %
0 – base year
-9,4 %
-12,0 %
-5,2 %
Comparing the 2022 GHG data with the 2021 data, there is an increase in emissions from electricity transmission network
activities. The increase in Scope 2 GHG emissions is due to increased losses in the electricity transmission network. These losses
are largely due to higher disconnections and reconstruction works on the network and higher fuel costs for transport.
Actions and initiatives
In 2022, Litgrid prepared a plan of emission reduction measures until 2030 based on the GHG inventory data. The main measures
focus on the most GHG-emitting sources in the operations and include investments in the development of RES production for
own use and the use of green energy, as well as the electrification of the vehicle fleet.
13.3.2. Preserving biodiversity and ecosystems
Litgrid is committed to protecting biodiversity when operating, expanding or upgrading the infrastructure of energy systems by
carrying out biodiversity monitoring where necessary and, in the event of unavoidable objective circumstances, by planning and
implementing the necessary mitigation or compensation measures.
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Litgrid continued to apply bird protection measures in 2022 for the infrastructure it manages. The aim is to reduce the mortality of
migratory birds, to improve the environmental conditions for migratory birds by monitoring bird fatalities near the HV transmission
network and to respond accordingly. Special bird guards have been installed on 110 kV OL pylons to prevent birds from gliding
over the insulators with "fork" type devices, and the top insulators in the festoons have been replaced with larger diameter ones.
These measures reduce the possibility of short-circuiting when large birds (white storks) land, thus reducing mortality.
During the bird nesting season, Litgrid takes measures to minimise interference during maintenance and construction works and
to delay the cleaning of the lines. On the recommendation of ornithologists, due to the disturbance of birds during the breeding
season, the execution of line clearing works shall be restricted from 1 May to 31 July, and this shall be responsibly assessed prior
to the scheduling of project works.
"Litgrid takes a precautionary approach by carrying out environmental impact assessments when undertaking significant
development projects.
In 2022, the following actions were carried out in the course of these projects to monitor the impact on protected species:
During the reconstruction of the 330 kV power transmission line Lietuvos elektrinė-Vilnius, environmental impact
monitoring was carried out, consisting of monitoring of environmental components, i.e. birds and natural habitats.
In 2022, bird monitoring was carried out during the spring season on the Obeniai-Karkučiai (1.7 km), Asakiai-Veličkava
(2.3 km) routes under the overhead transmission line and in the vicinity, and no birds were observed or killed. During the
autumn survey, the remains of thrush feathers were detected on the Asakiai-Veličkava route at pylon 16. The body of
the bird was not found and the cause of death cannot be determined.
In 2022, the projected vegetation cover in the damaged areas under the overhead transmission line pylons was 80-95
%. There are no extant habitats in the immediate vicinity that meet the criteria for EU habitat of conservation concern
6270* 'Species-rich grassland and grazed grassland' (in 2021, the fields that were not under cereal crops had a projected
vegetation cover of 0-30%).
In the construction of the 110 kV Pagėgiai-Bitėnai transmission line, the monitoring programme covers the following
environmental components: soil (only in 2021), landscape (only in 2021), wildlife (birds).
No bird contacts with overhead power lines and no bird mortalities were observed in 2022. In 2021, a mute swan was in
contact with the wires but the bird survived. No significance of the power line for bird populations has been identified.
In 2021, the observed sites were undergoing normal renaturalisation. The landscape monitoring in 2021 concluded that
the analysis site is too small to have a visual impact on the skyline.
No significant adverse effects on any protected species of animals, birds or plants have been recorded in 2022.
13.3.3. Sustainable and efficient use of resources in operations
"Litgrid strives to create an organisational culture based on the philosophy of conservation of nature and other resources. In the
Group's environmental policy, the companies are committed to using certified green electricity in their administrative activities, to
expanding the use of RES sources to meet the technological energy needs of the transmission network infrastructure, to prioritising
and expanding the use of clean transport, and to consistently reducing the use of polluting fuels and energy efficiency measures.
"Litgrid has already started installing solar power plants in transformer substations under reconstruction. The energy they generate
will be used in the transformer substations themselves. By 2023, 21 transformer substations under reconstruction will be equipped
with solar power plants. The energy generated by the installed solar plants will be sufficient to fully or partially meet the needs of
the transformer substations, depending on the solar irradiation, and will increase the reliability of the power supply. The installed
capacity of the solar power plants is expected to reach up to 15 kW in each of the transformer substations.
The Lithuanian electricity transmission system operator has renewed its car fleet, replacing its predominantly internal combustion
cars with electric and hybrid vehicles. Employees will move to 72 electric and rechargeable hybrid cars. This decision is one of
the steps towards the company's commitment to reduce its greenhouse gas emissions by two-thirds by 2030.
"Litgrid will lease 28 electric cars and 44 plug-in hybrids. Until now, 99% of the company's fleet has been made up of vehicles
powered by internal combustion engines. In the renewed fleet, such vehicles will account for 11 per cent.
The use of electric vehicles will reduce the company's CO2 emissions by an average of 102 tonnes per year. The switch to less
polluting vehicles will result in about 30,000 litres less fuel consumption per year than would be required to maintain the same
fleet of internal combustion engine vehicles.
13.3.4. Waste reduction, responsible sorting and management
Litgrid's activities are guided by the principles of pollution prevention and aim to reduce the amount of waste generated in its
operations and to ensure safe and responsible waste management.
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Significant amounts of waste are generated during the construction, reconstruction or repair of electricity transmission networks.
In its administrative activities, the company sorts household, glass, paper and plastic waste, with special bins for sorting; separate
bins in offices have been eliminated. The company contracts with specialised companies for the safe treatment and disposal of
waste generated by its production activities.
Hazadous waste
Non hazardous waste
Paper, glass, plastics
2022
136,622 t.
2113,722 t
n.d.
2021
175,25 t.
2693,3141 t.
n.d.
2020
202,54 t.
1043,54 t.
n.d.
Litgrid consistently checks suppliers for environmental compliance. Number of cases of non-compliance detected during suppliers'
environmental inspections, preventive actions taken:
Year
Non compliance cases
Warnings issued
Significant non complienaces
2022
6
2
0
2021
5
0
0
2020
n.d.
n.d.
No verification of contractors'
compliance with environmental
requirements
In 2022, the company's operations complied with environmental requirements and the company received no penalties in 2022.
13.3.5. Facilitating the growth of RES
Well-developed electricity grids within the country, ensuring reliable and secure operation of the transmission system, as well as
well-developed infrastructural links with neighbouring countries, provide favourable conditions for increasing electricity
transmission flows, thus developing a liquid regional market and creating an attractive infrastructure for investment in energy
production. By exploiting these opportunities, the company aims to create the preconditions for a more efficient use of the available
capacity of the electricity transmission system.
Litgrid, the electricity transmission system operator, has set a target to ensure that there are 0 cases of restriction of RES-
generated electricity supply to the transmission grid each year due to breaches of the legislation and/or the terms of the connection
agreements. In 2022, Litgrid's target was 0 cases.
Actions and initiatives
2022 was a historic year for green energy in Lithuania. For the first time, the share of electricity generated by renewable energy
plants accounts for around 60% of the total electricity generated in the country. In 2021, 48% of the country's electricity was
generated by renewable energy plants.
The increase in the number of renewable power plants connected to the transmission and distribution grids has led to a significant
increase in the amount of clean energy produced by both wind and solar power plants. Compared to 2021, clean energy production
in Lithuania's wind farms increased by 11.6% and in solar farms by 74%.
"According to Litgrid's data, 273.7 MW of solar, 142.8 MW of wind and 3.3 MW of other renewable energy (biomass/biogas)
generation capacities were connected to the Lithuanian electricity grid in 2022. In total, the installed capacity of renewable energy
sources in Lithuania increased by 419.8 MW to 1572.5 MW in 2022.
13.4. Social sustainability
Litgrid's social ambition is to create a progressive, sustainable culture. Inherent elements of this culture include: caring for the
well-being and development of employees, fostering a culture of safe work, promoting equal opportunities, building open and
mutually trusting relationships with local communities, and ensuring customer satisfaction with the services provided. The
company aims to become an organisation that is perceived by the majority of its suppliers, producers, consumers, employees,
communities and other stakeholders as a sustainable organisation.
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Employee remuneration by group, ratio between men and women:
Titles
Remuneration based on sex
Average salary without variable part
Men
Women
Men:women
CEO
9,583
-
-
Top management
7,209
-
-
Mid level management
4,514
4,469
1:0,99
Experts and specialists
2,954
2,776
1:0,94
Total
3,317
3,051
1:0,92
Staff on parental leave/parental leave:
Men
Women
Number of employees on parental
leave in 2022
-
-
Number of workers returning from
parental leave in 2022
1
1
Number of employees returning
from parental leave who have been
with the company for more than 12
months
1
0
Voluntary staff turnover is 8% (9% in 2021). Information on the Remuneration Policy, the Employee Performance Appraisal Policy,
remuneration paid and the company's objectives is available on Litgrid's website..
13.4.1. Staff training and continuous performance improvement
The company aims to provide its employees with opportunities to learn and develop, to broaden their knowledge and horizons,
and to participate as effectively as possible in the implementation of Litgrid's strategic goals. All employees are given the
opportunity to acquire or update the knowledge and skills necessary to perform their direct work. Both the individual employee
and the organisation are committed to the development of competences relevant to the employee and the organisation's activities,
and the development system includes not only formal training, but other forms of development and learning.
The company does not organise centralised retraining programmes and recruits employees on a targeted basis according to the
company's needs and functions. In cases of internal career progression or recruitment of a less experienced professional, where
there is a need to acquire additional competences, an individual learning plan is drawn up by the employee together with his/her
line manager, and a training programme is organised to strengthen management skills for employees promoted from professional
to managerial positions.
Based on the company's competency model, we focus on strengthening general, managerial and leadership competencies, and
periodic assessments of these competencies allow us to monitor our progress for both employees and managers. In key areas of
the company's operations, we assess not only current professional competences, but also future functional competences that will
Age of emplyees
2022 Dec 31
st
.
<20-30 years
41
30-40 years
119
40-50 years
91
50-60 years
54
>70 years
30
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be required for the company's long-term operations. Engineering employees participate in refresher training and acquire the
necessary knowledge and skills related to energy engineering, equipment and technologies used in the company's operations.
The Company periodically develops the digital literacy competences of all its employees.
The average annual number of training hours per employee in 2022 was 25 hours (3.2 days).
The performance and career progression of all the Company's employees is regularly reviewed at least once a year. Employee
performance is evaluated on different dimensions and at different intervals, depending on the nature of the employee's activities
and responsibilities. An annual performance appraisal, which takes place once a year, in which the employee and the manager
discuss and evaluate the achievement of the employee's annual objectives and competences, and the manager determines the
overall result of the performance appraisal. Project-based performance appraisal, which assesses the results achieved by staff
members in projects or phases of projects, based on established indicators.
13.4.2. Ensuring human rights and equal opportunities for employees
Litgrid aims to actively contribute to the implementation of the human rights and equal opportunities goals of the United Nations
2030 Agenda for Sustainable Development and the equal opportunities obligations set out in national laws.
Litgrid prohibits any form of discrimination and does not tolerate mobbing, psychological violence, bullying or abuse of position.
Group companies respect and protect the rights of every employee, treat them with respect and fairness, provide safe working
conditions that meet their needs, promote their personal and professional development, and do not discriminate against
employees in any form.
The CEO of Litgrid is responsible for the implementation of the Equal Opportunities Policy.
"Litgrid has in force since October 2022 the Description of Procedures for the Prevention of Discrimination, Violence and/or
Harassment and Sexual Harassment, which sets out the main principles of the prevention of discrimination, violence and/or
harassment and sexual harassment in the Company and the procedures for their implementation. It provides for:
An Employee who wishes to make a formal report of Discrimination, Violence and/or Harassment or Sexual Harassment, or any
Employee who observes or receives information about possible Discrimination, Violence and/or Harassment or Sexual
Harassment, may make a report in the following ways:
1. To a dedicated email address - pranesk@epsog.lt;
2. By completing the online reporting form on the website https://pranesk.epsog.lt;
3. By sending the information by post to the Company's registered office;
4. Directly to the employee directly responsible for equal opportunities or, in his/her absence, to a substitute employee.
The Company shall allow the person to submit the report both anonymously, in particular in cases where the identification of the
person is not necessary for the investigation of the Report (e.g., reporting harassment of another person by specifying the person
who has been harassed or assaulted and the alleged violator of the present Schedule of Procedure), and by disclosing his/her
identity.
All reports received shall be recorded and must be investigated. The internal investigation shall be carried out within the shortest
possible time, but not more than 30 calendar days from the date of receipt of the report, with the possibility of an extension of
another 30 calendar days. The findings of the internal investigation committee, as approved by the internal investigation
committee, shall be submitted to the company's head of management, who shall decide whether to open an investigation into the
breach of labour law or to take other measures, if necessary. The persons concerned (the victim and the complainant) shall be
informed in writing of the conclusion. Depending on the nature of the breach, the employee may be subject to disciplinary action
for breach of his/her duties.
There were no cases of discrimination recorded by Litgrid in 2022.
13.4.3. Providing professional development for staff
The Company continuously encourages and creates opportunities for employees to develop their skills and qualifications. The
aim is to develop employees' professional (functional) and generic (values-based) competences. In order to maintain and enhance
the quality of management processes, a strong focus is placed on developing the competences of managers.
Staff development is based on the 70-20-10 principle, whereby 70% of development, improvement and learning activities take
place through the staff member's work experience, 20% through interaction and collaboration with colleagues and managers with
diverse experiences and competences, and 10% through structured training events.
Staff development activities are planned in relation to strategy, values, performance appraisal, competency model, shift planning,
assessment of professional and technical skills.
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13.4.5. Employee well-being and job satisfaction
Litgrid is building an open, progressive and sustainable organisation, where professional partnership between employer and
employees prevails, each employee has opportunities for self-development, grows with the organisation and is able to take
responsibility for his/her own decisions.
Employees are paid a performance-related salary and incentives for achieving challenging targets. The company also provides
employees with health and welfare benefits.
"A uniform remuneration policy based on the principles of responsibility and accountability is in place and operational in EPSO-G
Group companies. The aim is to manage the Group's payroll costs effectively and to create motivational incentives so that the
level of remuneration is directly linked to the achievement of the objectives set for the company and for each employee.
This means that performance appraisals are taken into account in determining remuneration. Therefore, the remuneration of
managers and employees consists of two parts: fixed and variable. The fixed part depends on the level of responsibility of the
post, which is determined according to a methodology used in international practice. The variable part of the remuneration is paid
when the individual targets set in the annual appraisal are achieved and the company reports to the shareholder and the board
on the achievement of the annual company targets. The CEO's objectives are aligned with those of the Company. They are
evaluated by the Board.
Principles of remuneration policy:
The principles of the remuneration policy are the same for all employees (including managers).
The remuneration pool is approved by the boards of directors. The Remuneration and Nomination Committee monitors
the balance between controlling salary costs and rewarding employees who perform their duties properly.
The remuneration of EPSO-G managers and staff consists of two components: fixed and variable.
The fixed part depends on the level of responsibility of the post. It is determined according to a methodology that is
recognised and widely used in international practice.
The variable part of the remuneration is paid when the individual targets set in the annual appraisal are achieved and
the company reports to the Board on the achievement of the annual company targets.
Annual targets for managers and employees are set in accordance with the EPSO-G Group's performance appraisal
policy.
No variable remuneration is paid to an employee when performance does not meet expectations according to the
established evaluation criteria or when the company's operational and financial performance is judged to be
unsatisfactory,
Variable remuneration is not a bonus. It may not exceed 20-30% of the fixed remuneration.
The amount of the variable remuneration shall be budgeted in the Company's budget and accounted for in the financial
result, which shall be audited and made public.
The variable remuneration of the Chief Executive Officer of the Company depends on the achievement of the objectives
set out in the Company's strategy, which are published on the Company's website.
No variable remuneration is paid to members of the collegiate bodies.
Employees are paid severance payments in accordance with the procedure laid down in the Labour Code and
employment contracts.
Severance payments shall not exceed the amounts laid down by the legislation of the Republic of Lithuania, except in
exceptional cases where, for objective reasons, higher payments are agreed. The payment of such benefits and the
grounds for their payment must be reported to the relevant Board of Directors of the Group company at its next meeting.
The amount of the employment, remuneration, including severance pay, of the most senior executives shall be
determined by the Board of Directors of the company.
It is foreseen that, in exceptional cases, an incentive payment not exceeding the amount set out in the policy may be
granted for exceptional performance not covered by the employee's annual targets. This must be reported to the relevant
Board of Directors of the group company at its next meeting.
No prior agreements shall be made on the amount of severance payments, except for the CEOs of companies whose
terms of employment are determined by the Board.
The Remuneration Policy does not provide for any remuneration that entitles an executive officer, a member of a
collegiate body or an employee to shares, share options or to remuneration based on changes in the share price or other
financial instruments.
To promote employee engagement and loyalty, non-financial emotional rewards. Indirect rewards include employee
events, recognition and appreciation for outstanding performance.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
70
Litgrid has a trade union and a collective agreement, which sets out working, remuneration, social, economic and professional
conditions and guarantees that are not regulated by law or other normative legal acts. The collective agreement provides
employees with additional financial guarantees (benefits in the event of accidents, sickness, death of relatives, support for the
birth of a child, support for raising three or more children or a child with disabilities), additional days of leave (for the birth of a
child, death of a relative, etc.), and other guarantees.
Unionised workers and the proportion of workers covered by a collective agreement:
Members of trade union
Number of emplyees having benefits of
agreement
99
100%
13.5. Employees safety and Health
One of the most important strengths of Litgrid as a whole is its experienced and competent employees, whose safe working
environment, well-being and health are a prerequisite for the implementation of the strategy and goals.
The Occupational Safety and Health Policy, approved by the EPSO-G Board of Directors in 2021 and applicable to all Group
companies, sets out the aim of ensuring safe and healthy working conditions for employees in their workplaces, preventing work-
related injuries and occupational diseases, and creating a company-wide culture of fostering a safe and healthy working
environment that commits every employee to strive for and contribute to this.
Litgrid strives to ensure that no serious or fatal accident occurs each year in the course of its operations, either among its
employees or among contractors and subcontractors hired to carry out the work.
Accidents at work in Litgrid and contractors' and subcontractors' companies, 31 December 2022:
Year
Light accidents
Injuries
Deadly accidents
2022
0
0
0
2021
0
0
0
2020
0
0
0
"Litgrid places great emphasis on raising the competence of its employees in occupational safety issues. This includes not only
mandatory briefings for both employees and hired contractors, but also additional training, certification of employees, risk
assessment at remote workplaces, preparation of safety and health manuals, technology cards, installation of collective safety
equipment, provision of personal safety equipment, organisation and periodic briefings.
Number of workers trained in occupational safety, fire safety, first aid, including certifications:
262 employees trained in 2020; 526 employees trained in 2021; 743 employees trained in 2022.
The average number of training hours per worker in 2022 is 4 hours.
"Litgrid cares about the health of its employees and constantly promotes healthy lifestyles and activity, organising sports and
activities, with a gym in the office.
Litgrid employees are subject to periodic health checks according to a schedule, they are vaccinated against tick-borne
encephalitis in accordance with the approved list of positions, they have the opportunity to get a flu vaccination if they wish, and
they are given the opportunity to take the Covid rapid test if they need it. Defibrillators are installed in the company's buildings.
13.6. Dialogue and involvement of local communities
"Litgrid and contractors inform local communities in advance about projects in their neighbourhood. During the implementation of
the projects, the timing of works is coordinated with the residents. The aim is to minimise inconvenience to residents throughout
the project.
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71
Litgrid, which is implementing projects important for synchronisation with the continental European grid, also continued its series
of meetings with stakeholders in 2022, holding 9 meetings with the administrations and elders of 8 municipalities, some of them
with residents. These meetings were aimed at presenting the projects, the phases and timeframes of future works, and providing
information to the population. 18 meetings were held in 2021 with the communities where land-use planning works were carried
out.
13.7. Client orientation
One of Litgrid's key objectives is to increase customer orientation in order to create a customer-oriented organisation. Group-wide
customer satisfaction surveys based on GCSI and NPS methodologies will be conducted for the first time in 2021. The results of
the survey showed that Litgrid achieved the highest customer satisfaction score among the Group companies, with 84 points,
according to the GCSI (Global Customer Satisfaction Index) methodology. This score places it among the market leaders, which
are companies with a GCSI score above 80.
The GCSI index consists of a score from 0 to 100, calculated by assessing three criteria: overall satisfaction with the company,
its compliance with expectations and its comparison with an imaginary ideal company. The survey confirmed that customer
satisfaction with Litgrid's services is increasing:
Litgrid
GSCI results
KPI
2021
79
≥ 70%
2022
84
≥ 70%
13.8. Community action, volunteering and social partnerships
Contributing to causes that are important to society or the local community, the company continued to encourage voluntary, unpaid
involvement of employees in charitable activities in 2022. Employee volunteering is encouraged and is allocated 1 day per year
in accordance with the collective agreement applicable to all employees.
The company organised a traditional forest planting event, employees volunteered in the initiatives of the Food Bank, and
volunteers from Litgrid organised the accommodation and integration of the families of Ukrainian electricity transmission system
employees in Lithuania.
In 2022, Litgrid organised a traditional forest planting event where, together with Litgrid colleagues, the families of the employees
of the Ukrainian electricity transmission system company Ukrenergo planted a forest under the auspices of the company. Since
the beginning of the war, Litgrid has organised the accommodation of 100 people in Vilnius, helping them to integrate and deal
with the daily challenges of moving to another country.
Following a request for assistance from the Ukrainian electricity transmission system operator, the Lithuanian Electricity
Transmission System Operator provided support for equipment for the restoration of the electricity grid in Ukraine: it shipped 110-
330 kV primary equipment, current and combined transformers, insulators, current transformers and splitters, and a 330/110 kV
autotransformer. The equipment available in Lithuania is technologically suitable for the reconstruction of the Ukrainian grid,
making Lithuania one of the most important suppliers of equipment to the war-torn country.
13.9. Anticorruption environment
Litgrid implements strategic projects of importance to Lithuania, the success of which depends on the trust of the state, the public
and the shareholder. Recognising this, the company has put in place measures that could help manage corruption risks that may
arise in its operations. Litgrid implements these measures in compliance with the requirements of the legislation of the Republic
of Lithuania and in accordance with the EPSO-G Group's Corruption Prevention Policy. It defines key principles, the most
important of which are:
Leadership of managers and involvement of employees - managers are directly responsible for the implementation of
corruption prevention measures, and by their example and communication they instil a culture of zero tolerance to
corruption in their employees. Employees actively participate in corruption prevention training and are responsible for
applying corruption prevention policies in their daily work;
Adherence to the highest standards of transparency and integrity;
periodic assessment and management of corruption-related risks;
Implementation of targeted corruption prevention measures such as balancing public and private interests and managing
conflicts of interest, implementing procedures to ensure the credibility of staff, implementing internal whistleblowing
channels, restrictions on the acceptance and provision of gifts, requirements for transparent and ethical behaviour
towards employees and business partners, ensuring transparent public procurement and other measures.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
72
Litgrid annually approves a Corruption Prevention Plan (CPP), which aims to consistently and efficiently improve the company's
transparency system, to ensure the implementation of prevention and control measures and the continuity of the existing ones,
by positively influencing the company's most sensitive areas of activity and by increasing the transparency of the company.
Each measure in the Action Plan is evaluated according to a set of evaluation criteria and an outcome.
Key measures implemented in 2022:
Legislation drafted/updated: Description of the Procedure for the Anti-Corruption Behaviour of Staff / Description of the
Procedure for the Establishment of Internal Channels for Reporting Irregularities and Ensuring Their Functioning /
Description of the Procedures for Internal Investigations;
adherence to the Corruption Prevention Policy of UAB EPSO-G Group and the Supplier Code of Conduct, which Litgrid
applies in full. The provisions of the Supplier Code of Conduct will be implemented in Litgrid's operations by 31 December
2024;
Identification and assessment of the likelihood of corruption has been carried out in the area of preparation and issuance
of connection conditions;
Preventive procurement checks and analysis of complaints received;
a survey to assess the anti-corruption culture of the company's employees, the results of which show that the anti-
corruption awareness of the employees has been increasing year by year and remains very high: 97% of employees
have a negative attitude towards persons who pay bribes. / Know where to go to report a case of corruption - 95% / Know
what to do if they are offered a bribe or are otherwise confronted with corruption - 99% / Are aware of the company's
corruption prevention measures - 92% / Would report corruption if they were confronted with it - 96%.
More detailed information on the results of the implemented measures can be found on the company's website.
Corruption risk assessment
In order to properly manage corruption risk, Litgrid periodically identifies and assesses corruption risk factors and plans
management measures, including determining the likelihood of corruption occurrence. On the basis of the assessment of
corruption risk factors, a corruption risk map is prepared and integrated into the Company's risk management plan.
Ethics Committee
"Litgrid has established an Ethics Committee and has a Code of Ethics and Conduct (available on the Company's website,
www.litgrid.eu), whose value framework is adhered to as a matter of principle not only internally, but also in cooperation with third
parties.
Declaration of private interests and management of conflicts of interest
The Company places particular emphasis on the management of conflicts of interest. The Company implements measures to
prevent conflicts of interest and to control the declaration of private interests as part of its policy on the management of the
interests of the members of the collegial bodies, managers and employees of the UAB EPSO-G group of companies, in
accordance with the Law of the Republic of Lithuania on the Harmonisation of Public and Private Interests (the "Law on the
Harmonisation of Interests") and the policy on the management of the interests of the members of the collective organs of the
EPSO-G group: All employees of the Company who are required by law to declare their interests have made public declarations
of interests in accordance with the requirements of the Law on Harmonisation of Interests; content analysis of the declarations of
interests submitted (internal declarations as well as those submitted to the SCEC) has been carried out and preliminary
recommendations have been made to heads of departments and employees; preventive checks have been carried out to assess
the implementation of the provisions of the Law on Harmonisation of Interests (no breaches have been found). Staff training and
individual counselling provided where necessary.
Screening of staff and contractors/suppliers
In order to ensure that the Company employs only persons of impeccable repute, the measures provided for in the Laws on the
Prevention of Corruption of the Republic of Lithuania and on the Protection of Objects Important to the National Security of the
Republic of Lithuania are implemented to ensure the reliability of personnel (lists of positions for which applicants are screened in
accordance with the procedure laid down by law have been approved and made publicly available; the responsible authorities
have been contacted for each position (85 persons have been contacted); and the screening of contractors/suppliers has been
carried out in accordance with the procedure provided for by the law). Risks arising from nepotism and cronyism are managed
and there are no persons related by kinship/marriage who are linked by a relationship of direct subordination or control.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
73
Receiving and giving gifts
"At Litgrid, we do not tolerate any gifts given in connection with employment or position, except for gifts permitted under the EPSO-
G Group's Corruption Prevention Policy. Employees are prohibited from accepting any gifts of money, gift vouchers or alcoholic
beverages, including gifts of low value, if the circumstances in which they are given or accepted could lead to a misunderstanding
or contradiction and create the appearance of a conflict of interest.
Line of trust
The Company has established and operates a Helpline which encourages both employees and other interested parties to come
forward with information on possible, ongoing or anticipated breaches, and allows them to report breaches anonymously or
confidentially.
The Company has implemented the principles of the Law on the Protection of Whistleblowers of the Republic of Lithuania by
creating internal reporting channels, updating its internal legal framework and introducing technical measures to ensure full
compliance with the requirements of the Law. A report on the information received through the internal reporting channels and the
actions taken is periodically submitted to the parent company EPSO-G.
Information on infringements can be submitted via the following helpline channels:
The helpline received 28 reports in 2022. 1 report was received for a breach of the company's communication ethics, mobbing.
The investigation into the violation was closed following a request by the person who made the report. 27 reports were of a
promotional nature or received for testing purposes and therefore no further action was taken.
Staff education on anti-corruption and ethics
The involvement of the Company's employees in corruption prevention activities is improved by other means. Employees improve
their knowledge through internal Company and STT e-learning. 99% of the Company's employees have completed the STT e-
learning in 2022. Training on corruption prevention is organised for new colleagues who have joined Litgrid, and employees also
participate in the STT Transparency Academy events (mentoring, etc.). Internal communication is also a major focus, informing
about changes, reminding about internal procedures, etc.
13. 9. Sustainable supply chain management
The Company's procurement is primarily based on transparency, ethical behaviour, equity, promotion of competition and
proportionality, enhancing transparency in procurement processes and strengthening anti-corruption measures.
The updated procurement policy also integrates green procurement criteria. The Company aims to reduce its environmental
impact and is therefore committed to prioritising green procurement, in line with the Green Procurement Objectives set out in the
Resolution of the Government of the Republic of Lithuania on the Establishment and Implementation of Green Procurement
Objectives, and is committed to achieving the following:
- At least 50% of green procurement in 2022 (75% achieved).
- At least 100% of green procurement deals every year from 2023.
The Company has awarded contracts for a total amount of €162,306 thousand excluding VAT in 2022, where environmental
requirements were imposed on suppliers. Construction of the 330 kV switching station Mūša (EUR 15 361 thousand excluding
VAT), cabling and installation of a fibre optic cable in the 110 kV double-circuit OL Šiauliai-Gubernija II, Šiauliai-Meškuičiai section
between Šiauliai TP and Zokniai TP (EUR 5 879 thousand excluding VAT).
The company booked EUR 2 511 thousand of operating costs (OPEX) and EUR 6 750 thousand of investment costs (CAPEX) in
2022 under the contracts concluded in 2021 and 2022, where suppliers were subject to environmental requirements.
The implementation of the ESG policy will not have a significant impact on the financial indicators, as under Lithuanian regulation
all reasonable costs of the company's regulated activities are reimbursed through the revenue from regulated activities.
Email:
pranesk@litgrid.eu
Send by mail
Fill in form online
https://www.litgrid.eu/index.php/apie-
litgrid/pasitikejimo-linija/32290
Provide information to
prevention personnel
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
74
13.10. Stakeholders and their involvement
In designing and implementing sustainable development actions, Litgrid seeks the full involvement of stakeholders and promotes
transparent and fair cooperation with consumers, producers and suppliers, the public, the owner, employees, the media and other
interested parties.
Stakeholders
We oblige
How we cooperate
Clients
• - Building professional
and trusted partnerships
for mutual benefit.
• - Group companies initiate and organize timely
information events for their clients, taking into account
the complexity of their services and economic
expectations.
• - Developing services and/or solutions to meet
customer needs.
Employees
• - To work in a targeted
way to ensure that the
Group's uniform
corporate culture and
remuneration policies
promote employee
engagement and
motivation in the
achievement of the
objectives of the
strategy;
• - We conduct employee engagement surveys and
adjust action plans accordingly;
• - We follow the same reward and social responsibility
policies for employees;
• - We hold at least quarterly meetings between
managers and employees to discuss issues of
importance to employees.
• - Improving the methods and content of internal
communication.
Shareholders
• - Ensure that Group
employees are
sufficiently and timely
informed about the
Group's values,
objectives, activities and
developments.
• - We hold regular meetings to discuss topical issues;
• - At least quarterly, we report on our financial and
non-financial performance against the objectives set
out in the "Shareholder Expectations Letter".
• - We ensure the communication of the most important
news from the Group's companies on a Group-wide
basis in the Daily News column published every
working day.
• - Ensure the sustainable
management of the
Group, its growth and
long-term benefits;
• - We are members of the governing bodies of group
companies;
• - We apply the functional leadership operating model.
• - We develop and implement uniform operational
policies across the Group, enabling us to coordinate
our actions in implementing good governance
practices.
Group
companies
• - Provide relevant, fair
and timely information to
enable shareholders to
assess the Group's
performance and
prospects and to make
appropriate decisions;
• - We aim to establish and regularly maintain a
businesslike relationship based on mutual trust;
• - Initiate and participate in professional meetings
and/or conferences to present the objectives of the
strategy
Foreign partners
- energy
transmission
and biofuel
exchange
operators
• - Provide relevant
information in a clear
and accessible format to
provide a reliable basis
for assessing the
performance, results and
benefits to society of the
Group's companies.
• - We initiate meetings as needed to discuss relevant
issues;
• - Presenting or speaking on topical issues in the
committees of the LRS and at the meetings of the
LRC;
• - Participate in inter-institutional working groups.
State
representatives
• - Ensure consistent
compliance with legal
• - Providing the information needed to carry out the
regulator's functions in a timely manner;
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75
requirements within the
Group;
• - Cooperate in the implementation of new market
mechanisms;
• - Initiate meetings to discuss relevant issues.
Contractors
• - Establish a culture of
open and transparent
dialogue with the
regulator.
• - We organize annual information events for potential
contractors;
• - We make procurement plans and consultations
public in advance to ensure greater competition
between market players.
Suppliers of
services and
goods
• - Work with professional
and ethical contractors.
• - We consult with market players and carry out market
research;
• - Publishing plans for planned purchases.
Non-
governmental
organizations
(NGOs)
• - Competitively source
quality services from
reputable suppliers;
• Together with the Ornithological Society we are
implementing measures to reduce environmental
impact.
Trade Unions
• - Communicating and
cooperating with
environmental and
transparency
organizations to identify
public needs and
solutions.
• - By enabling trade unions and/or works councils to
operate.
• - By concluding a collective agreement with trade
unions and/or works councils.
• - Discussing the implementation of the collective
agreement at periodic meetings with workers and/or
their representatives.
• - Informing and consulting trade union and/or works
council representatives in decisions relating to labor
relations.
General public
and media
• - Ensure constructive
and positive social
dialogue between
employer and employee
representatives.
• -- We follow the Group's transparency and
communication policy;
• - We maintain a constructive relationship with the
energy media by providing sufficient information to
assess the Group's financial and non-financial
performance and the projects under way.
Local
communities
• - To create added value
for society, business and
the competitiveness of
the national economy;
• - Group companies share their experience on spatial
planning;
• - Information events for local communities.
• - Adjustments are made to the project implementation
based on valid comments received at the meetings.
10. GRI list
Index
Topics
Pages
102-47
List of key topics
63
102-50
Reporting period
61
102-51
Date of last report
61
102-52
Reporting cycle
61
102-53
Contact person for questions about
the report
61
102-54
Indication of compliance of reports
with GRI standards
61
102-55
List of GRI indicators
77
102-56
External verification
63
103-2
Disclosure of management's
approach to managing material
sustainability topics
7
ANNUAL REPORT
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76
103-3
Assessment of management's
approach to material sustainability
topics
7
205-2
Communication and training on anti-
corruption policies and procedures
73
205-3
Confirmed corruption incidents and
actions taken
74
305-1
Direct GHG emissions
66
304-2
Significant impacts of activities,
products and services on biodiversity
67
306-1
Waste generation and significant
waste-related impacts
67
306-2
Management of significant waste-
related impacts
68
306-3
Waste generated by type
68
307-1
Non-compliance with environmental
laws and regulations
68
401-1
Recruitment and turnover of staff
69
308-1
Suppliers subject to environmental
inspections
74, 75
401-2
Benefits for full-time staff that are not
available to temporary or part-time
staff
71
403-1
Occupational health and safety
management system
71
403-2
Hazard identification, risk assessment
and incident investigation
72
403-3
Occupational health services
72
403-4
Occupational health and safety
training
72
403-9
Work-related injuries
72
404-1
Average number of hours of training
per worker per year
72
404-2
Employee skills development and
career transition assistance programs
72
403-3
Proportion of staff whose
performance and career progression
is regularly reviewed
72
405-1
Diversity of management bodies and
staff
55, 68
406-1
Incidents of discrimination and actions
taken to address them
73
413-1
Activities related to local community
involvement, impact assessment,
development programmes
72
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
77
14. SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
As the Company is executing its duties in accordance with the applicable laws regulating the securities market, it publishes
information on significant events and other regulated information on the EU-wide basis. This information is available on the website
of the Company (www.litgrid.eu) and on the website of NASDAQ Vilnius stock exchange (www.nasdaqbaltic.com).
Summary of Litgrid operations and achievements during 2022
January
The electricity transmission prices set by Litgrid and approved by the National Energy Regulatory Council came into force with
effect from 1 January 2022. As from 1 January 2022, the average price for electricity transmission services was approved at 0.684
ct/kWh (5.1% lower compared to 2021), and the price for system services at 0.589 ct/kWh (22.7% lower).
On 14 January 2022 the Police Department and the Lithuanian electricity transmission system operator Litgrid signed a long-term
memorandum of cooperation. Both organisations will cooperate more closely in ensuring the local energy security by the following
means: joint exercises will take place; the police will patrol more actively near important infrastructure facilities, and information
will be exchanged.
As from 21 January 2022, the Lithuanian electricity transmission system operator Litgrid started implementing the project for
installation of synchronous compensators (i.e. solutions designed to improve the system reliability and promote the green energy
development), where it will be provided with engineering consulting services by Italian company CESI SpA. The experts from this
company with expertise in implementing and supervising the projects of synchronous compensators, will help the Company ensure
a smooth construction process involving technically extremely complex devices in Lithuania. The value of the contract for the
provision of engineering consulting services in relation to the installation of synchronous compensators is EUR 0.9 million (VAT
excl.).
As from 28 January 2022, Litgrid launched a pilot study on isolated operation. The study is conducted by Turkish company EPRA
Elektrik Enerji İnş. ve Tic. Ltd. Şti., which was awarded the contract as a result of the public procurement procedure, and the
contract value is EUR 287 thousand.
On 31 January 2022, Litgrid informed the market that from 22 February 2022 it will start applying the updated version of
methodology for setting and allocating inter-system capacities with third countries, which was approved by the National Energy
Regulatory Council on 31 January 2022.
February
On 11 February 2022, EPSO-G (a group of energy transmission and exchange companies) announced about the election of
candidates to the position of Board members of Litgrid. A total of two members will be elected to the Board of Litgrid. They will
replace the employees of the parent company (EPSO-G) who have been holding the position of the Board members until now;
and one civil servant will be elected to the Board, thereby implementing the requirements of the Lithuanian Law on the Protection
of Objects of Importance to Ensuring National Security. The Law establishes that at least one civil servant must be appointed to
the collegial supervisory or management body elected by the general meeting of shareholders of companies from the first and
second categories of importance to ensuring national security.
March
On 2 March 2022, the electricity transmission system operators from the Baltic States made a joint decision to reduce commercial
electricity imports through the existing connections with Russia.
As the new decision regarding the capacity levels came into force, the total electricity imports to the Baltic States from Russia
must not exceed 300 MW as from 3 March 2022. Accordingly, the inter-system capacity between Lithuania and Russia and
between Latvia and Russia must not exceed 150 MW.
On 15 March 2022, the Lithuanian electricity transmission system operator Litgrid together with Rail Baltica joint venture RB Rail
AS signed a memorandum of cooperation in the implementation of Rail Baltica project. Based on the memorandum, the parties
agreed on the main principles for mutual cooperation during the implementation of the project.
On 16 March 2022, the Lithuanian electricity transmission system operator Litgrid installed new or relocated the existing power
autotransformers at ten transformer substations. The electricity transmission network has been strengthened in the regions with
a growing volume of transmitted energy, whereas elsewhere it has been optimized, and the expected useful life of the main
substation equipment has been extended. The total investment value of the autotransformer renewal project is EUR 35.5 million.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
78
April
On 14 April 2022, a survey commissioned by Litgrid revealed that 4 out of 5 residents support the national strategic goal to
disconnect from the Russian-controlled energy system. Overall, 79% of population support Lithuania's goal to achieve energy
independence and disconnect from the BRELL system. Compared to the results of the previous survey conducted last year in
autumn, support for energy independence increased by even 18%. At the same time, there was a significant decrease in the
number of respondents who disagreed and were uncertain about the aforementioned national strategic goals.
At the Extraordinary General Meeting of Shareholders held on 20 April 2022, new candidates were approved for the position of
the Board members: Tomas Varneckas and Gediminas Karalius were elected as the Board members of Litgrid.
Litgrid's Board consists of 5 members elected for the term of office of 4 years: two Board members delegated by the parent
company EPSO-G, two independent Board members, and one Board member as a civil servant.
May
On 10 May 2022, the project of the Lithuanian electricity transmission system operator Litgrid – the first 1 MW battery connected
to the electricity transmission network in the Baltic States – achieved recognition at a global level: it was among the finalists in the
Outstanding project category at the biggest European renewable energy awards ‘The Smarter E Award’. The innovative battery
at Vilnius substation was connected to the grid at the end of last year, and this year Litgrid specialists have successfully completed
its testing. They concluded that the battery with power of 1 MW and storage capacity of 1 MWh can contribute to the control of
electricity system parameters.
On 10 May 2022, the National Energy Regulatory Council approved the updated version of Litgrid AB methodology for setting and
allocating inter-system capacities with third countries.
On 20 May 2022, the electricity exchange operator Nord Pool decided to discontinue the trading of the Russian electricity by Inter
RAO group companies, which are the only ones importing electricity from Russia to the Baltic States.
The trading used to be carried out by the sole supplier – Inter RAO group. The decision to discontinue the trading was made by
the electricity exchange operator Nord Pool on 20 May 2022. As from 22 May 2022, the Russian energy in the Baltic States was
replaced by the local generation and imports from the Western and Nordic countries.
June
As at 1 June 2022, the electricity transmission system operators in the Baltic States – Litgrid in Lithuania, Augstprieguma Tikls in
Latvia, and Elering in Estonia – are jointly balancing the electricity system and at the same time maintaining the balance with the
Russian electricity system that meets the BRELL standards.
On 1 June 2022, Litgrid completed the transaction with Transporent UAB and Mobility Lietuva UAB, based on which the electricity
transmission system operator will lease 28 electric cars and 44 plug-in hybrid cars.
So far, 99% of the Company's car fleet comprised vehicles powered by internal combustion engines. Such cars will make up 11%
of the renewed car fleet. This transaction is one of the steps towards implementing the Company's commitment to reduce
greenhouse gas emissions by two thirds by the year 2030.
As from 29 June 2022, the operators from nine countries of the Baltic Sea region will cooperate to ensure the adequacy of the
electricity system across the region. Such decision was made by management of the electricity transmission system operators
Litgrid in Lithuania, AST in Latvia, Elering in Estonia, Energinet in Denmark, Fingrid in Finland, Svenska Kraftnät in Sweden,
Statnett in Norway, PSE in Poland, and 50Hertz in Germany, during the meeting of leaders of electricity transmission system
operators from the Baltic Sea region held on 28 June 2022 in Tallinn.
July
On 1 July 2022, Litgrid submitted to the National Energy Regulatory Council a ten-year development plan for 110-440 kV networks
of the Lithuanian electricity system.
As from 1 July 2022, the Baltic Regional Coordination Centre (RCC) has been launched to provide network security services to
the electricity transmission system operators in the Baltic States: Litgrid in Lithuania, Elering in Estonia, and AST in Latvia. The
RCC will operate as an independent body. The RCC was established by the electricity transmission system operators from the
three Baltic States, in accordance with the requirements set forth in the EU Clean Energy Package.
The RCC headquarters are located in Tallinn, the capital of Estonia, while its regional units operate in Latvia and Lithuania. The
Baltic RCC is one of the six regional coordination centres operating in Europe.
The network security services are provided by Nordic RSC in the Nordic countries, TSC Net and Coreso in the Central Europe,
and Selene and SCC in the Southern Europe.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
79
26 July 2022 Litgrid completed one of the most important projects for synchronisation with the continental European grid - the
installation of an automatic generation management system (AGM). This is an important step not only for a country seeking energy
independence, but also for electricity market participants, who will have additional opportunities to earn money by providing power
reserve services.
Litgrid has signed a software purchase agreement with GE Energy Management Services, LLC, a US company. In parallel, Litgrid
is preparing to launch a tender for the upgrade of its computer system management infrastructure. The total planned investment
for the project will amount to approximately EUR 4.2 million.
August
8 August 2022 Litgrid signed a contract for the implementation of a new energy balance and ancillary services management
system. The state-of-the-art software will enable the implementation of the conditions for the exchange of electricity consumption
and production data necessary for synchronisation with continental Europe.
The tender for the software was awarded to the Czech company Unicorn. The total value of the project is €1.65 million. The project
is part-financed by the Connecting Europe Facility.
26 August 2022 Litgrid appealed to the State Energy Regulatory Council to return to consumers the congestion revenues the
company generated in 2022. These revenues will be returned through investments in infrastructure upgrades and synchronisation
projects and will not be included in the transmission tariff for 2023 and beyond. This will allow for the continued reliable operation
of the electricity network without shifting the planned investments onto the shoulders of consumers.
September
29 September 2022 Litgrid, the Lithuanian electricity transmission system operator, has completed the spatial planning phase for
the construction of the Harmony Link international maritime link with Poland and the 330 kV Darbėnai switchyard. Following the
completion of these works, Litgrid has implemented two more milestones of the synchronisation action and measure plan approved
by the Government.
October
As Lithuania pursues its ambitious renewable energy goals and implements the Breakthrough Package, the Lithuanian electricity
transmission operator Litgrid is setting up a Renewable Energy Centre. The dedicated centre will coordinate the connection of
new renewable energy power plants and battery projects to the Lithuanian electricity transmission grid.
7 October 2022. Litgrid, the system operator of Lithuania's electricity transmission grid, joined the international public procurement
platform DevelopmentAid on 2007. The new system will increase competition among suppliers and attract more international
partners to help Litgrid deliver more than €2 billion worth of infrastructure and grid improvement projects over the next decade.
19 October 2022 Litgrid, Lithuania's electricity transmission system operator, has started trials of artificial intelligence and sensor
technologies that could contribute to the development of renewable energy sources in the country. Special devices installed on
overhead lines measure weather conditions and predict potential line capacity. This technology is expected to allow around 30%
more wind and solar electricity to be transmitted over the same overhead power lines in the future.
The variable capacity technology was installed for the first time in the Baltic States on a currently heavily loaded 110 kV line in
western Lithuania, linking transformers in Palanga and Vydmantai.
Special equipment mounted on the line's poles monitors air temperature, wind direction, wind speed, solar intensity, humidity and
line temperature. The information collected is used to continuously improve the model used to calculate the capacity of the
overhead line.
21 October 2022 Mr Vilimas, an independent member of Litgrid's Management Board, announced his resignation for personal
reasons as of 5 November.
November
4 November 2022 Litgrid, the Lithuanian electricity transmission system operator, has carried out scheduled annual maintenance
work on the NordBalt electricity link between Lithuania and Sweden.
On 11 November 2022, a pilot project between Litgrid, the Lithuanian electricity transmission system operator, and Fluence, an
energy storage technology company, to connect a 1 MW battery to the transmission grid was nominated for a prestigious award.
The project, completed last year, was shortlisted for the Platts Global Energy Awards and won the award.
Litgrid's pilot project, using Fluence equipment, is one of the first in the world where a battery that stores electricity has become
an integral part of the transmission grid - a device managed by the system operator. Most of the energy storage currently used in
transmission grids is owned by electricity generators or consumers and is not widely used for system management.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
80
December
2 December 2022 Algirdas Juozaponis, Chairman of the Board of Litgrid, the Lithuanian electricity transmission system operator,
has decided to step down from the Board of Litgrid and leave the EPSO-G group of companies, as well as to step down as CFO
of EPSO-G as of January.
22 December 2022 The Extraordinary General Meeting of Shareholders of Lithuanian electricity transmission system operator
Litgrid has elected Mindaugas Keizeris, CEO of the EPSO-G group of energy transmission and exchange companies, as a
member of the Board of Directors.
29 December 2022 Tomas Varneckas, Head of Infrastructure at EPSO-G, is elected Chairman of the Board of Litgrid.
15. MATERIAL EVENTS IN 2022
(https://nasdaqbaltic.com/statistics/lt/news?num=100&page=1&issuer=LGD&filter=1 )
EVENTS
12.29
Concerning the opinion of the Audit Committee
12.29
Tomas Varneckas was elected as the Chairman of the Board of LITGRID AB
12.22
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
12.07
Supplement to the agenda of the Extraordinary General Meeting of Shareholders dated 22 December
2022
12.07
Concerning the opinion of the Audit Committee
12.02
Algirdas Juozaponis, the Chairman of the Board of LITGRID AB, leaves EPSO-G group
11.30
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
11.30
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
11.30
LITGRID AB sold its 39.6% stake in TSO Holding to EPSO-G UAB
11.25
Concerning the opinion of the Audit Committee
11.09
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
11.08
Concerning the opinion of the Audit Committee
11.04
LITGRID AB publishes its results for the nine-month period of 2022
10.31
LITGRID AB signed agreements with Energinet and Fingrid regarding acquisition of shareholding in TSO
Holding
10.21
Regarding the resignation of Artūras Vilimas from the position of the Board member of LITGRID AB
09.16
Concerning the opinion of the Audit Committee
09.16
LITGRID AB intends to acquire two share packages in TSO Holding from Fingrid and Energinet
09.05
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
08.16
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
08.12
Concerning the opinion of the Audit Committee
08.04
LITGRID AB publishes its results for the first half of 2022
07.27
Concerning the opinion of the Audit Committee
07.25
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
07.12
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
06.17
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
06.13
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
06.09
Nasdaq event ‘CEO Meets Investors 2022‘
05.25
Concerning the opinion of the Audit Committee
05.20
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
05.05
Regarding the contract for designing and construction of 330 kV power transmission line Vilnius-Neris
05.05
LITGRID publishes its results for the three-month period of 2022
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
81
05.02
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
04.22
Ex-dividend date
04.22
LITGRID AB procedure for the payment of dividends for 2021
04.20
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
04.08
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
04.08
EPSO-G UAB‘s proposal regarding nomination of the Board members of LITGRID AB
03.25
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
03.18
LITGRID AB publishes its audited financial statements and annual report for 2021
02.08
Regarding additional arrangement to the contract on purchase/sale of isolated operation services for
electricity system
02.04
LITGRID AB publishes its unaudited condensed financial statements for the 12-month period of 2021
02.04
Concerning the opinion of the Audit Committee
02.02
Decisions taken at the Extraordinary General Meeting of Shareholders of LITGRID AB
01.11
Concerning the opinion of the Audit Committee
01.11
Calling of the Extraordinary General Meeting of Shareholders of LITGRID AB
16. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
3 February 2023 Litgrid, the Lithuanian electricity transmission system operator, has published an update of its strategy until 2030.
In addition to the objectives set out above, it focuses on meeting the expectations of renewable energy generators, reducing
greenhouse gas emissions and improving customer satisfaction.
The strategy, adopted in 2021 and updated in 2023, maintains the objectives of strategic synchronisation, implementation of
offshore wind projects, data openness and financial sustainability.
17. TRANSPARENCY REPORT
Litgrid complies with the Business Transparency and Communication Policy of the EPSO-G UAB Group (approved by the Board
of Litgrid AB on 23 October 2017 in its entirety), which considers in detail the requirements set forth in the Transparency Guidelines
and defines their applicability to the companies of the EPSO-G group.
The implementation of the Transparency Guidelines is largely ensured by LitgriD AB through disclosure of information in the
annual report and on the official website of the Company and through notices on the NASDAQ stock exchange, where information
is disclosed in the format that is acceptable and comprehensible to the stakeholders.
Article 3 of Resolution No 1052 of 14 July 2010 of the Government of the Republic of Lithuania On the approval of the Description
of Guidelines for Ensuring the Transparency of State-owned Enterprises (the Transparency Guidelines) stipulates that a state-
owned enterprise (the “SOE”) complies with the provisions of the Corporate Governance Guidelines for the Companies Listed on
Nasdaq Vilnius AB that are related to public disclosure of information.
Structured information on implementation of the Transparency Guidelines is presented below:
The following information must be published/other requirements must be implemented on the official website of
Litgrid AB www.litgrid.eu:
Company’s name, code, registered address, and a register in which data on the Company is
compiled and stored
Implemented
Legal form, in case Litgrid AB is restructured, reorganised (the way of reorganisation is to be
indicated), under liquidation, in the process of bankruptcy or bankrupt
Not applicable
Information on the authority representing the State, i.e. the Ministry of Energy, and link to its official
website
Implemented
Goals, vision and mission of the activities
Implemented
Structure
Implemented
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
82
2
When information is treated as a commercial (industrial) secret or as confidential information of the SOE, the SOE is allowed not to disclose
such information; however, in its annual report the SOE must indicate such non-disclosure and provide the reasons for non-disclosure.
Data on the chief executive officer*
Implemented
Data on the chairperson and members of the board*
Implemented
Data on the chairperson and members of the supervisory board*
Not applicable
Names of the committees, data on their chairpersons and members*
Not applicable
* The following data must be provided: name, surname, start date of the term of office, other executive positions in other
legal entities, education, qualification, and professional experience; indication of whether a member of a collegial body
has been elected or appointed as an independent member.
Sum of the nominal values (in euros and cents) of shares and interest (in percentage) held by the
State in the share capital of Litgrid AB under the title of ownership
Implemented
Information on initiatives and measures of social responsibility, significant ongoing or planned
investment projects
Implemented
If Litgrid AB is a member of other legal entities (not applicable to subsidiaries and second-tier
subsidiaries), the name, code, and register in which data on the Company is compiled and stored,
registered address, and official websites of such legal entities
Implemented
A set of Litgrid AB annual financial statements, Litgrid AB annual report, as well as an auditor’s
report on Litgrid AB annual financial statements must be placed on Litgrid AB official website within
10 working days from the date of approval of the set of annual financial statements
Implemented
The sets of Litgrid AB interim financial statements and Litgrid AB interim reports must be placed on
the official website not later than within 2 months after the end of the reporting period
Implemented
The following documents must be provided/other requirements must be implemented on the official website of
Litgrid AB www.litgrid.eu:
Articles of Association of Litgrid AB
Implemented
Operational strategy or its summary in cases when the operational strategy contains confidential
information or information that is treated as a commercial (industrial) secret
Implemented
Remuneration policy that covers determination of remuneration for CEO and members of the
collegial bodies and the committees of Litgrid AB
Implemented
Annual and interim reports of Litgrid AB
Implemented
Data disclosure is performed in accordance with the requirements of Lithuanian legal acts and good
practice
Implemented
The sets of annual and interim financial statements for at least 5 years and the auditor’s reports on
the annual financial statements
Implemented
The above-mentioned documents must be provided in a PDF format with a technical possibility to
be printed out
Implemented
The following information must be provided/other requirements must be implemented in the sets of financial
statements:
Litgrid AB keeps its accounting records in a way that ensures preparation of the financial statements
in accordance with the International Accounting Standards
Implemented
Litgrid AB prepares a set of financial statements for the period of 6 months
Implemented
In addition to the annual report, Litgrid AB prepares an interim report for the period 6 months
Implemented
In addition to the content requirements set in the Law on Financial Reporting by Undertakings of the Republic
of Lithuania, the following information must be disclosed in the annual report of Litgrid AB
1
:
Brief description of the business model of Litgrid AB
Implemented
Information on significant events occurring during the financial year and after the end of the financial
year (until the date of preparation of annual report) that had material impact on the activities of Litgrid
Implemented
Results of implementation of the objectives set in the operational strategy
Implemented
Profitability, liquidity, asset turnover, and debt ratios
Implemented
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
83
17. Litgrid AB NOTICE OF COMPLIANCE WITH THE CORPORATE
GOVERNANCE CODE FOR THE COMPANIES LISTED ON NASDAQ OMX AB
In line with Article 23(3) of the Law on Securities of the Republic of Lithuania and paragraph 24.5 of the Listing Rules of Nasdaq
Vilnius AB, public limited liability company Litgrid AB (the “Company”) discloses its compliance with the Corporate Governance
Code for the Companies Listed on Nasdaq Vilnius and its specific provisions or recommendations. In case of non-compliance
with this Code or some of its provisions or recommendations, the specific provisions or recommendations that are not complied
with must be indicated, the reasons of such non-compliance must be specified and other explanatory information indicated in this
form must be presented.
Free-form summary of the Company’s corporate governance report
Litgrid AB is part of the EPSO-G UAB group of companies (the “Group”). The Company’s corporate governance structure and
the governance model are established by the Company’s Articles of Association, the Corporate Governance Guidelines of the
EPSO-G Group of Companies approved by the Ministry of Energy (the ME), the sole shareholder of the parent company EPSO-
G UAB, on 24 April 2018 and the Corporate Governance Policy of the EPSO-G Group of Companies. All the above-mentioned
documents are published on the Company’s website and the website of EPSO-G UAB.
Chart 1. Main scheme of the implementation of corporate governance at the Group level.
Implementation of special obligations
Implemented
Implementation of the investment policy, ongoing and planned investment projects, and investments
implemented during the reporting year
Implemented
Implementation of the risk management policy applied by Litgrid AB
Implemented
Implementation of the dividend policy
Implemented
Implementation of the remuneration policy
Implemented
Total annual wage bill, average monthly salary by category of employees and/or business units
Implemented
The SOEs that are not required to prepare the social responsibility report, are recommended to
provide information related to environmental, social and personnel, human rights, anti-corruption
and anti-bribery matters in their annual report or annual activity report
Implemented
The consolidated annual report includes the following information: structure of the group, name,
code and register in which data on the company is compiled and stored, registered address of each
of the group companies, interest (percentage) held in the share capital of a subsidiary, financial and
non-financial performance during the financial year
Not applicable
The interim report of Litgrid AB includes the following information: analysis of financial performance
during the reporting period, information on significant events occurring during the reporting period,
profitability, liquidity, asset turnover and debt ratios and changes therein compared to the respective
period in the previous year
Implemented
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
84
Being part of the Group does not deny the Company’s independence. The Company operates independently aiming to achieve the
objectives set in the Company’s Articles of Association and has the obligation to independently assess whether compliance with the
Group’s corporate governance documents does not harm interests of the Company, its creditors, shareholders or other stakeholders.
The corporate governance structure established in the Company’s Articles of Association is as follows:
The General Meeting of Shareholders;
The Board (five members, two of whom are independent members, the other three members are nominated by the
shareholder EPSO-G UAB);
The committees operating at the Group level:
The Remuneration and Nomination Committee (mainly composed of independent members);
The Audit Committee (mainly composed of independent members).
The Chief Executive Officer.
The Group has a centralised internal audit function. In order to ensure the independence of the internal audit, it is established that
the head of the internal audit function is appointed and dismissed by the Board of EPSO-G UAB, which is mainly composed of
independent members. The internal audit is also accountable to the Audit Committee, which is also mainly composed of
independent members. The internal audit recommendations are analysed by the Company’s Board, which also approves the plan
of measures for the implementation of audit recommendations.
On the basis of the Risk Management Policy of the EPSO-G UAB Group of Companies, the uniform risk management system of
the Group is implemented at the Company according to the COSO ERM standards applicable in the international practice setting
out risk identification, assessment and management principles and responsibilities. Risk management coordination is performed
at the Group level.
The aim of the Group’s operating policies is to introduce a consistent and effective management system of the organisation helping
employees successfully implement important strategic projects and create value to residents and businesses of the country in a
transparent and effective manner. To ensure the effectiveness of the operating policies, the Company annually reports on the
progress of the implementation of the operating policies.
On the basis of the Compliance Management Policy of the EPSO-G UAB Group of Companies, the uniform compliance
management system of the Group is implemented at the Company. Compliance management coordination is performed at the
Group level.
The policies that are currently effective at the Company are published on corporate website www.litgrid.eu.
Structured table:
PRINCIPLES/RECOMMENDATIONS
YES/NO/
NOT
APPLICABLE
COMMENTARY
Principle 1: General meeting of shareholders, equitable treatment of shareholders, and shareholders’ rights.
The corporate governance framework should ensure the equitable treatment of all shareholders. The corporate
governance framework should protect the rights of shareholders.
1.1. All shareholders should be provided with access to the infor-
mation and/or documents established in the legal acts on equal
terms. All shareholders should be furnished with equal opportunity
to participate in the decision-making process where significant
corporate matters are discussed.
YES
Pursuant to the Law on Companies
of the Republic of Lithuania and
Chapter IX of the Company’s Articles
of Association, information on
general meetings of shareholders
being convened, their draft decisions
and decisions made is published on
the Company’s website and on
NASDAQ OMX Vilnius stock
exchange in the Lithuanian and
English languages.
1.2. It is recommended that the company’s capital should consist
only of the shares that grant the same rights to voting, ownership,
dividend and other rights to their holders.
YES
Paragraphs 13–15 of the Company’s
Articles of the Association define that
all shares of the Company are
ordinary registered shares with the
nominal value of EUR 0.29 each. All
shares are intangible and recorded
in the personal securities accounts of
the shareholders managed by the
securities account manager
contracted to manage the share
accounting.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
85
1.3. It is recommended that investors should have access to the
information concerning the rights attached to the shares of the new
issue or those issued earlier in advance, i.e. before they purchase
shares.
YES
Please refer to the commentary in
paragraph 1.2.
Chapter IV of the Company’s Articles
of Association also establishes
shareholders’ rights and obligations.
1.4. Exclusive transactions that are particularly important to the
company, such as transfer of all or almost all assets of the company
which in principle would mean the transfer of the company, should
be subject to approval of the general meeting of shareholders.
YES
Paragraph 38 of the Company’s
Articles of Association specifies the
cases when the Board’s decision
regarding the transfer of the
Company’s assets is subject to the
approval of the General Meeting of
Shareholders.
1.5. Procedures for convening and conducting a general meeting
of shareholders should provide shareholders with equal
opportunities to participate in the general meeting of shareholders
and should not prejudice the rights and interests of shareholders.
The chosen venue, date and time of the general meeting of
shareholders should not prevent active participation of
shareholders at the general meeting. In the notice of the general
meeting of shareholders being convened, the company should
specify the last day on which the proposed draft decisions should
be submitted at the latest.
YES
Each time the General Meeting of
Shareholders is convened, the
general rights of the shareholders
are published on the Company’s
website.
1.6. With a view to ensure the right of shareholders living abroad
to access the information, it is recommended, where possible, that
documents prepared for the general meeting of shareholders in
advance should be announced publicly not only in Lithuanian
language but also in English and/or other foreign languages in
advance. It is recommended that the minutes of the general
meeting of shareholders after the signing thereof and/or adopted
decisions should be made available publicly not only in Lithuanian
language but also in English and/or other foreign languages. It is
recommended that this information should be placed on the
website of the company. Such documents may be published to the
extent that their public disclosure is not detrimental to the company
or the company's commercial secrets are not revealed.
YES
Please refer to the commentary in
paragraph 1.1.
1.7. Shareholders who are entitled to vote should be furnished
with the opportunity to vote at the general meeting of shareholders
both in person and in absentia. Shareholders should not be
prevented from voting in writing in advance by completing the
general voting ballot.
YES
A standard notice on convening of
the General Meeting of Shareholders
always indicates a possibility for
shareholders to vote in writing by
filling in the attached form of a voting
ballot.
1.8. With a view to increasing the shareholders’ opportunities to
participate effectively at general meetings of shareholders, it is
recommended that companies should apply modern technologies
on a wider scale and thus provide shareholders with the conditions
to participate and vote in general meetings of shareholders via
electronic means of communication. In such cases, the security of
transmitted information must be ensured and it must be possible to
identify the participating and voting person.
NO
A standard notice on convening of
the General Meeting of Shareholders
always indicates that the
participation and voting by electronic
means of communication will not
take place. So far there is no need to
vote by electronic means of
communication. Upon requests by
the shareholders, the introduction of
such a voting option would be
considered.
1.9. It is recommended that the notice on the draft decisions of the
general meeting of shareholders being convened should specify
new candidatures of members of the collegial body, their proposed
remuneration and the proposed audit company if these issues are
included into the agenda of the general meeting of shareholders.
Where it is proposed to elect a new member of the collegial body,
it is recommended that the information about his/her educational
background, work experience and other managerial positions held
(or proposed) should be provided.
YES
A standard notice on convening of
the General Meeting of Shareholders
always indicates draft decisions
containing information required by
the Law on Companies of the
Republic of Lithuania, including
candidatures of members of new
collegial bodies, their proposed
remuneration, a proposed audit
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
86
company and its proposed
remuneration.
Information on the collegial body
member who is proposed to be
elected is not released publicly,
however, the standard notice on
convening of the General Meeting of
Shareholders always specifies that
the shareholders may additionally
familiarise with documents related to
the agenda of the meeting, draft
decisions, a general voting ballot at
the premises of LITGRID AB at the
registered office during specifically
indicated hours.
1.10. Members of the company’s collegial management body,
heads of the administration
2
or other competent persons related to
the company who can provide information related to the agenda of
the general meeting of shareholders should take part in the general
meeting of shareholders. Proposed candidates to member of the
collegial body should also participate in the general meeting of
shareholders in case the election of new members is included into
the agenda of the general meeting of shareholders.
YES/NO
Relevant competent persons who
can provide information related to
the agenda of the General Meeting
of Shareholders always attend the
General Meeting of Shareholders.
Meanwhile the proposed candidates
to the members of the collegial body
not always attend the General
Meetings of Shareholders.
Principle 2: Supervisory board
2.1. Functions and liability of the supervisory board
The supervisory board of the company should ensure representation of the interests of the company and its shareholders,
accountability of this body to the shareholders and objective monitoring of the company’s operations and its management
bodies as well as constantly provide recommendations to the management bodies of the company.
The supervisory board should ensure the integrity and transparency of the company’s financial accounting and control system.
2.1.1. Members of the supervisory board should act in good faith,
with care and responsibility for the benefit and in the interests of the
company and its shareholders and represent their interests, having
regard to the interests of employees and public welfare.
NOT
APPLICABLE
The Supervisory Board is not formed
at the Company.
2.1.2. Where decisions of the supervisory board may have a
different effect on the interests of the company’s shareholders, the
supervisory board should treat all shareholders impartially and
fairly. It should ensure that shareholders are properly informed
about the company’s strategy, risk management and control, and
resolution of conflicts of interest.
NOT
APPLICABLE
-
2.1.3. The supervisory board should be impartial in passing
decisions that are significant for the company's operations and
strategy. Members of the supervisory board should act and pass
decisions without an external influence from the persons who
elected them.
NOT
APPLICABLE
-
2
For the purposes of this Code, heads of the administration are the employees of the company who hold top level management positions.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
87
2.1.4. Members of the supervisory board should clearly voice their
objections in case they believe that a decision of the supervisory
board is against the interests of the company. Independent
3
members of the supervisory board should: a) maintain
independence of their analysis and decision-making; b) not seek or
accept any unjustified privileges that might compromise their
independence.
NOT
APPLICABLE
-
2.1.5. The supervisory board should oversee that the company’s
tax planning strategies are designed and implemented in
accordance with the legal acts in order to avoid faulty practice that
is not related to the long-term interests of the company and its
shareholders, which may give rise to reputational, legal or other
risks.
NOT
APPLICABLE
-
2.1.6. The company should ensure that the supervisory board is
provided with sufficient resources (including financial ones) to
discharge their duties, including the right to obtain all the necessary
information or to seek independent professional advice from
external legal, accounting or other experts on matters pertaining to
the competence of the supervisory board and its committees.
NOT
APPLICABLE
-
2.2. Formation of the supervisory board
The procedure of the formation of the supervisory board should ensure proper resolution of conflicts of interest and effective
and fair corporate governance.
2.2.1. The members of the supervisory board elected by the
general meeting of shareholders should collectively ensure the
diversity of qualifications, professional experience and
competences and seek for gender equality. With a view to maintain
a proper balance between the qualifications of the members of the
supervisory board, it should be ensured that members of the
supervisory board, as a whole, should have diverse knowledge,
opinions and experience to duly perform their tasks.
NOT
APPLICABLE
-
2.2.2. Members of the supervisory board should be appointed for
a specific term, subject to individual re-election for a new term in
office in order to ensure necessary development of professional
experience.
NOT
APPLICABLE
-
2.2.3. Chair of the supervisory board should be a person, whose
current or past positions constituted no obstacle to carry out
impartial activities. A former manager or management board
member of the company should not be immediately appointed as
chair of the supervisory board either. Where the company decides
to depart from these recommendations, it should provide
information on the measures taken to ensure impartiality of the
supervision.
NOT
APPLICABLE
-
3
For the purposes of this Code, the criteria of independence of the members of the supervisory board are interpreted as the criteria of unrelated
parties defined in Article 31(7) and (8) of the Law on Companies of the Republic of Lithuania.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
88
2.2.4. Each member should devote sufficient time and attention to
perform his duties as a member of the supervisory board. Each
member of the supervisory board should undertake to limit his other
professional obligations (particularly the managing positions in
other companies) so that they would not interfere with the proper
performance of the duties of a member of the supervisory board.
Should a member of the supervisory board attend less than a half
of the meetings of the supervisory board throughout the financial
year of the company, the shareholders of the company should be
notified thereof.
NOT
APPLICABLE
-
2.2.5. When it is proposed to appoint a member of the supervisory
board, it should be announced which members of the supervisory
board are deemed to be independent. The supervisory board may
decide that, despite the fact that a particular member meets all the
criteria of independence, he/she cannot be considered independent
due to special personal or company-related circumstances.
NOT
APPLICABLE
-
2.2.6. The amount of remuneration to members of the supervisory
board for their activity and participation in meetings of the
supervisory board should be approved by the general meeting of
shareholders.
NOT
APPLICABLE
-
2.2.7. Every year the supervisory board should carry out an
assessment of its activities. It should include evaluation of the
structure of the supervisory board, its work organisation and ability
to act as a group, evaluation of the competence and work efficiency
of each member of the supervisory board, and evaluation whether
the supervisory board has achieved its objectives. The supervisory
board should, at least once a year, make public respective
information about its internal structure and operational procedures.
NOT
APPLICABLE
-
Principle 3: Management board
3.1. Functions and liability of the management board
The management board should ensure the implementation of the company’s strategy and good corporate governance with due
regard to the interests of its shareholders, employees and other interest groups.
3.1.1. The management board should ensure the implementation
of the company’s strategy approved by the supervisory board if the
latter has been formed at the company. In such cases where the
supervisory board is not formed, the management board is also
responsible for the approval of the company’s strategy.
YES
Paragraph 36 of the Company’s
Articles of Association defines that
the Company’s Board approves the
Company’s strategy. In addition, in
carrying out its supervisory function
the Board regularly reviews reports
on the implementation of the
strategy.
3.1.2. As a collegial management body of the company, the
management board performs the functions assigned to it by the Law
and in the articles of association of the company, and in such cases
where the supervisory board is not formed in the company, it
performs inter alia the supervisory functions established in the Law.
By performing the functions assigned to it, the management board
should take into account the needs of the company’s
shareholders, employees and other interest groups by respectively
striving to achieve sustainable business development.
YES
Paragraph 7.3 of the Company’s
Articles of Association provides that
the Company’s Board performs
supervisory functions.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
89
3.1.3. The management board should ensure compliance with the
laws and the internal policy of the company applicable to the
company or a group of companies to which this company belongs.
It should also establish the respective risk management and control
measures aimed at ensuring regular and direct liability of managers.
YES
Point (xi) of Paragraph 36 of the
Company’s Articles of Association
defines that the Company’s Board
deliberates the documents of the
group of companies (guidelines,
policies, procedures, etc.) and
decides on the scope of their
application by the Company.
In addition, by separate decisions,
the Board instructs the CEO to
provide regular reports on the indi-
cators to be followed by the Board
(e.g. the Company’s strategy, activity
plan, budget, etc.).
3.1.4. Moreover, the management board should ensure that the
measures included into the OECD Good Practice Guidance
4
on
Internal Controls, Ethics and Compliance are applied at the
company in order to ensure adherence to the applicable laws, rules
and standards.
YES
The Company applies the following
various documents in its activities
that ensure implementation of the
highest level internal control, ethics
and compliance management tools:
- internal audit is accountable to
the Board which is formed from
external members (2 members
are independent);
- the Audit Committee is mainly
composed of independent
members to whom internal audit
is also accountable;
- The Company applies the Code
of Conduct and the Corruption
Prevention Policy of the EPSO-
G UAB Group of Companies, the
Sponsorship and Charity Policy
of the EPSO-G UAB Group of
Companies, the Policy of
Management of Interests of the
EPSO-G UAB Group of
Companies, the Risk
Management Policy of the
EPSO-G UAB Group of
Companies, the Transparency
and Communication Policy of the
EPSO-G UAB Group of
Companies, the Compliance
Management Policy of the
EPSO-G UAB Group of
Companies, etc.
3.1.5. When appointing the manager of the company, the
management board should take into account the appropriate
balance between the candidate’s qualifications, experience and
competence.
YES
Paragraph 54 of the Company’s
Articles of Association establishes
that the Company’s CEO is
appointed by the Board taking into
account the recommendations of the
Remuneration and Nomination
Committee.
4
Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti-
bribery/44884389.pdf
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
90
Paragraph 56 of the Company’s
Articles of Association defines that in
assessment of suitability of the
candidate for the position of the CEO
the Board shall consider his/her
compliance with the requirements
specified by these Articles of As-
sociation and the legal acts, and
therefore may require that the
candidate submit documents
supporting this compliance and/or
contact competent authorities for
obtaining necessary information
about the candidate.
3.2. Formation of the management board
3.2.1. The members of the management board elected by the
supervisory board or, if the supervisory board is not formed, by the
general meeting of shareholders should collectively ensure the
required diversity of qualifications, professional experience and
competences and seek for gender equality. With a view to maintain
a proper balance in terms of the current qualifications possessed by
the members of the management board, it should be ensured that
the members of the management board would have, as a whole,
diverse knowledge, opinions and experience to duly perform their
tasks.
YES
The selection of the members of the
Company’s Board is carried out in
compliance with the procedure set
by the Government of the Republic
of Lithuania. Paragraph 28 of the
Company’s Articles of Association
stipulates that in the process of
selection of the Board members it is
ensured that the Board consists of at
least 2 (two) independent members.
Their independence is established in
accordance with the criteria laid
down in the Corporate Governance
Code and the Policy of Management
of Interests of Members of Collegial
Bodies, Executives and Employees
of the Group of Companies (the
“Policy of Management of Interests”)
as well as the requirements set forth
by other applicable legal acts. It is
ensured that at least 3 (three)
members of the Board have no
employment relationship with the
Company and, when possible, it is
aimed that employees of the
Company are not appointed to the
Board and that the Board members
have competences taking into
account the areas of responsibility
and functions of the Board.
The selection of Company’s Board
members is carried out by the
Remuneration and Appointment
Committee in accordance with the
approved matrix of the Board
competences.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
91
The Board members carry out an
assessment of their activities every
year. In addition, the Remuneration
and Nomination Committee
evaluates the performance of the
Board on an annual basis and
provides recommendations on
performance improvement.
3.2.2. Names and surnames of the candidates to become
members of the management board, information on their
educational background, qualifications, professional experience,
current positions, other important professional obligations and
potential conflicts of interest should be disclosed without violating
the requirements of the legal acts regulating the handling of perso-
nal data at the meeting of the supervisory board in which the
management board or individual members of the management
board are elected. In the event that the supervisory board is not
formed, the information specified in this paragraph should be
submitted to the general meeting of shareholders. The
management board should, on yearly basis, collect data provided
in this paragraph on its members and disclose it in the company’s
annual report.
YES
The indicated information is
published and updated on the
Company’s website.
This information is not repeatedly
disclosed in the Annual Report,
however the Annual Report contains
the information on the chairperson of
the Board, the CEO, the chief
accountant and the head of the
Internal Audit Unit.
3.2.3. All new members of the management board should be
familiarised with their duties and the structure and operations of the
company.
YES
The members of the Board are in-
troduced to the structure and ac-
tivities of the Company during the
first sitting. The key corporate
documents of the Company are
shared.
3.2.4. Members of the management board should be appointed for
a specific term, subject to individual re-election for a new term in
office in order to ensure necessary development of professional
experience and sufficiently frequent reconfirmation of their status.
YES
Paragraph 27 of the Company’s
Articles of the Association defines
that the Board is a collegial
management body of the Company
consisting of 5 members. The Board
members are elected for a term of 4
years by the General Meeting of
Shareholders, for which the Board is
accountable, taking into account
recommendations of the
Remuneration and Nomination
Committee. A member of the Board
may continuously serve maximum 2
subsequent full terms of office, i.e.
no longer than 8 years in a row.
3.2.5. Chair of the management board should be a person, whose
current or past positions constitute no obstacle to carry out impartial
activity. Where the supervisory board is not formed, the former
manager of the company should not be immediately appointed as
chair of the management board. When a company decides to
depart from these recommendations, it should furnish information
on the measures it has taken to ensure the impartiality of
supervision.
YES
Paragraph 29 of the Company’s
Articles of Association provides the
criteria according to which a person
cannot be elected as a member of
the Board.
One of the measures for ensuring
the impartiality of the chairperson of
the Board is established in
paragraph 46 of the Company’s
Articles of Association which states
that the chairperson of the Board
cannot be elected from among the
Company’s employees elected to the
Company’s Board.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
92
3.2.6. Each member should devote sufficient time and attention to
perform his duties as a member of the management board. Should
a member of the management board attend less than a half of the
meetings of the management board throughout the financial year of
the company, the supervisory board of the company or, if the
supervisory board is not formed at the company, the general
meeting of shareholders should be notified thereof.
YES
The Company’s minutes record the
attendance and voting of the Board
members during a decision-making
process.
As it is specified in paragraph 52 of
the Company’s Articles of the
Association, each year the Board
members perform an assessment of
their activities, the results of which
are submitted to the shareholders
and the Remuneration and
Nomination Committee. The
participation of the Board members
in the sitting is disclosed in the
annual report.
3.2.7. In the event that the management board is elected in the
cases established by the Law where the supervisory board is not
formed at the company, and some of its members will be
independent
5
, it should be announced which members of the
management board are deemed as independent. The management
board may decide that, despite the fact that a particular member
meets all the criteria of independence established by the Law,
he/she cannot be considered independent due to special personal
or company related circumstances.
YES
The Company’s website and the
annual report contain information
about the members of the
Company’s Board specifying the
independent members.
3.2.8. The general meeting of shareholders of the company should
approve the amount of remuneration to the members of the
management board for their activity and participation in the
meetings of the management board.
YES
Paragraph 34 of the Company’s
Articles of Association provides that
the General Meeting of Shareholders
may adopt a decision regarding the
payment of remuneration to the
Board members.
3.2.9. The members of the management board should act in good
faith, with care and responsibility for the benefit and the interests of
the company and its shareholders with due regard to other
stakeholders. When adopting decisions, they should not act in their
personal interest; they should be subject to no-compete
agreements and they should not use the business information or
opportunities related to the company’s operations in violation of the
company’s interests.
YES
Taking into account the objective to
monitor the absence of conflicts of
interest of the members of the
Company’s Board, each year the
members of the Board renew their
declarations of interests.
In addition, paragraph 33 of the
Company’s Articles of Association
stipulates that the Board members
may have another job or occupy
another position compatible with
their activities in the Board, including
but not limited to executive positions
in other legal entities, a job in a state
or statutory service, duties at the
Company and other legal entities (in
conformity with restrictions set by
Article 29 of the Articles of
Association), as well as in legal
entities, where the Company or the
parent company acts as a
participant, only by providing a prior
notice to the Company’s Board.
5
For the purposes of this Code, the criteria of independence of the members of the board are interpreted as the criteria of
unrelated persons defined in Article 33(7) of the Law on Companies of the Republic of Lithuania.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
93
The Company has adopted the
Policy of Management of Interests of
Members of Collegial Bodies,
Executives and Employees of the
EPSO-G Group of Companies.
The Board members have signed
commitments to protect confidential
information.
No-compete agreements are not
concluded with the members of the
Board. The need for such
agreements was not established
because the Company conducts a
monopoly business.
3.2.10. Every year the management board should carry out an
assessment of its activities. It should include evaluation of the
structure of the management board, its work organisation and ability
to act as a group, evaluation of the competence and work efficiency
of each member of the management board, and evaluation whether
the management board has achieved its objectives. The
management board should, at least once a year, make public
respective information about its internal structure and working
procedures in observance of the legal acts regulating the
processing of personal data.
YES
The Board carries out an assess-
ment of its activities every year and
prepares a performance im-
provement plan on its basis.
In addition, the Remuneration and
Nomination Committee and the Audit
Committee acting at the level of the
EPSO-G UAB group of companies
evaluate annually decisions made by
the Board and provide
recommendations on performance
improvement
The results of the assessment of the
Board’s performance are presented
in the Company’s annual report.
Principle 4: Rules of procedure of the supervisory board and the management board of the company
The rules of procedure of the supervisory board, if it is formed at the company, and of the management board should ensure
efficient operation and decision-making of these bodies and promote active cooperation between the company’s management
bodies.
4.1. The management board and the supervisory board, if the latter
is formed at the company, should act in close cooperation in order
to attain benefit for the company and its shareholders. Good
corporate governance requires an open discussion between the
management board and the supervisory board. The management
board should regularly and, where necessary, immediately inform
the supervisory board about any matters significant for the company
that are related to planning, business development, risk
management and control, and compliance with the obligations at
the company. The management board should inform the
supervisory board about any derogations in its business
development from the previously formulated plans and objectives
by specifying the reasons for this.
NOT
APPLICABLE
The Supervisory Board is not formed
at the Company.
4.2. It is recommended that meetings of the company's collegial
bodies should be held at the respective intervals, according to the
pre-approved schedule. Each company is free to decide how often
meetings of the collegial bodies should be convened but it is
recommended that these meetings should be convened at such
intervals that uninterruptable resolution of essential corporate
governance issues would be ensured. Meetings of the company’s
collegial bodies should be convened at least once per quarter.
YES
Paragraph 45 of the Company’s
Articles of Association stipulates that
the Board takes its decisions at the
Board’s meetings that are usually
convened as often as it is necessary
for the Board to be able to properly
perform its functions and take
decisions attributed to its
competence, however not less than
12 times during a calendar year.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
94
At the beginning of each year, the
Company’s Board approves the
schedule for the current year
meetings and the activity plan
(preliminary questions for a
respective meeting of the Board).
4.3. Members of a collegial body should be notified of the meeting
being convened in advance so that they would have sufficient time
for proper preparation for the issues to be considered at the meeting
and a fruitful discussion could be held and appropriate decisions
could be adopted. Along with the notice of the meeting being
convened all materials relevant to the issues on the agenda of the
meeting should be submitted to the members of the collegial body.
The agenda of the meeting should not be changed or supplemented
during the meeting, unless all members of the collegial body present
at the meeting agree with such change or supplement to the
agenda, or certain issues that are important to the company require
immediate resolution.
YES
According to the Regulations of the
Board, the material is submitted to
the Board five working days before
the date of the ordinary meeting.
4.4. In order to coordinate the activities of the company’s collegial
bodies and ensure effective decision-making process, the chairs of
the company’s collegial supervision and management bodies
should mutually agree on the dates and agendas of the meetings
and close cooperate in resolving other matters related to corporate
governance. Meetings of the company’s supervisory board should
be open to members of the management board, particularly in such
cases where issues concerning the removal of the management
board members, their responsibility or remuneration are discussed.
NOT
APPLICABLE
The Supervisory Board is not formed
at the Company.
Principle 5: Nomination, remuneration and audit committees
5.1. Purpose and formation of committees
The committees formed at the company should increase the work efficiency of the supervisory board or, where the supervisory
board is not formed, of the management board which performs the supervisory functions by ensuring that decisions are based
on due consideration and help organise its work in such a way that the decisions it takes would be free of material conflicts of
interest.
Committees should exercise independent judgment and integrity when performing their functions and provide the collegial body
with recommendations concerning the decisions of the collegial body. However, the final decision should be adopted by the
collegial body.
5.1.1. Taking due account of the company-related circumstances
and the chosen corporate governance structure, the supervisory
board of the company or, in cases where the supervisory board is
not formed, the management board which performs the supervisory
functions, establishes committees. It is recommended that the
collegial body should form the nomination, remuneration and audit
committees
6
.
YES
The Company has the Remuneration
and Nomination Committee formed
by the Board of EPSO-G UAB acting
in accordance with the regulations
approved by the body that forms it;
and the Audit Committee operating
at the Group level formed by the sole
6
The legal acts may provide for the obligation to form a respective committee. For example, the Law on the Audit of
Financial Statements of the Republic of Lithuania provides that public-interest entities (including but not limited to public
limited liability companies whose securities are traded on a regulated market of the Republic of Lithuania and/or of any other
Member State) are under the obligation to set up an audit committee (the legal acts provide for the exemptions where the
functions of the audit committee may be carried out by the collegial body performing the supervisory functions).
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
95
5.1.2. Companies may decide to set up less than three
committees. In such case, companies should explain in detail why
they have chosen the alternative approach, and how the chosen
approach corresponds with the objectives set for the three different
committees.
YES
shareholder EPSO-G UAB and
acting in accordance with the
regulations approved by the body
that forms it.
Given that the issues of remunera-
tion and nomination are closely
related and experts with the same
qualifications are required to deal
with these issues, it was decided to
form a single Remuneration and
Nomination Committee.
5.1.3. In the cases established by the legal acts the functions
assigned to the committees formed at companies may be
performed by the collegial body itself. In such case, the provisions
of this Code pertaining to the committees (particularly those related
to their role, operation and transparency) should apply, where
relevant, to the collegial body as a whole.
NOT
APPLICABLE
Please refer to the commentary in
paragraph 5.1.1.
5.1.4. Committees established by the collegial body should
normally be composed of at least three members. Subject to the
requirements of the legal acts, committees could be comprised only
of two members as well. Members of each committee should be
selected on the basis of their competences by giving priority to
independent members of the collegial body. The chair of the
management board should not serve as the chair of committees.
YES
Chapters 7.8 and 7.9 of the Articles
of Association of EPSO-G UAB
regulate the formation of the
committees within the EPSO-G
group of companies and the areas of
their competence. The
aforementioned Articles of
Association stipulate that the
Remuneration and Nomination
Committee and the Audit Committee
shall consist of not less than three
members.
It is ensured that from among three
members there is at least one
independent member in the
Remuneration and Nomination
Committee and at least two indepen-
dent members in the Audit Com-
mittee.
Not all members of the Remune-
ration and Nomination Committee
and the Audit Committee are
appointed from the Board of EPSO-
G. One member to each of the
committees is appointed on the basis
of competence when performing the
external selection of an independent
member of the committee.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
96
5.1.5. The authority of each committee formed should be
determined by the collegial body itself. Committees should perform
their duties according to the authority delegated to them and
regularly inform the collegial body about their activities and
performance on a regular basis. The authority of each committee
defining its role and specifying its rights and duties should be made
public at least once a year (as part of the information disclosed by
the company on its governance structure and practice on an annual
basis). In compliance with the legal acts regulating the processing
of personal data, companies should also include in their annual
reports the statements of the existing committees on their
composition, the number of meetings and attendance over the year
as well as the main directions of their activities and performance.
YES
The authority of the committees is
determined in the Articles of
Association of EPSO-G UAB and
under the decision of the body for-
ming the committee – the
Regulations of the Remuneration
and Nomination Committee are
approved by the decision of the
Board of EPSO-G UAB, and the
Regulations of the Audit Committee
are approved by the decision of the
sole shareholder EPSO-G UAB, as it
is permitted by the Requirements for
Members of the Audit Committee
approved by the Bank of Lithuania
(Article 5).
The Regulations of the committees
are published on the EPSO-G
website. Information about the
composition, activities of the
committees and other information is
presented in the consolidated
Group’s annual report.
5.1.6. With a view to ensure the independence and impartiality
of the committees, the members of the collegial body who are not
members of the committees should normally have a right to
participate in the meetings of the committee only if invited by the
committee. A committee may invite or request that certain
employees of the company or experts would participate in the
meeting. Chair of each committee should have the possibility to
maintain direct communication with the shareholders. Cases where
such practice is to be applied should be specified in the rules
regulating the activities of the committee.
YES
The Regulations of the Committees
provide for the right of the members
of the Committees to invite, at their
discretion, to their meetings the
members of the bodies of the
companies of the EPSO-G UAB
group of companies, employees,
representatives, candidates for cer-
tain positions or other persons and to
obtain from them the necessary
explanations within their compe-
tence as well as require for that
purpose that necessary actions
would be carried out needed for the
performance of the functions of the
Committees.
5.2. Nomination committee
5.2.1. The key functions of the nomination committee should be the
following:
1) to select candidates to fill vacancies in the membership of
supervisory and management bodies and the administration and
recommend the collegial body to approve them. The nomination
committee should evaluate the balance of skills, knowledge and
experience in the management body, prepare a description of the
functions and capabilities required to assume a particular position
and assess the time commitment expected;
2) assess, on a regular basis, the structure, size and composition
of the supervisory and management bodies as well as the skills,
knowledge and activity of its members, and provide the collegial
body with recommendations on how the required changes should
be sought;
3) devote the attention necessary to ensure succession planning.
YES
The Remuneration and Nomination
Committee of EPSO-G UAB serves
as the advisory body to the Board of
EPSO-G UAB and to the Company’s
Board. The main functions of the
Committee are as follows:
-
assistance in the selection of
candidates for members of the
bodies in all entities of the group of
companies;
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
97
-
provision of recommendations for
the entities of the group of
companies on the appointment of
members of the management
bodies, conclusion of contracts
with them and determination of
remuneration for them;
-
provision of recommendations on
the policies of the group of compa-
nies that govern the remuneration
policy and employee performance
assessment;
-
provision of recommendations on
the planning system of succession
of critical positions.
5.2.2. When dealing with issues related to members of the
collegial body who have employment relationships with the
company and the heads of the administration, the manager of the
company should be consulted by granting him/her the right to
submit proposals to the Nomination Committee.
YES
The Regulations establish that the
right of initiative to convene the
Remuneration and Nomination
Committee is exercised by the
boards or general managers of the
group of companies that also
propose the agenda of the meeting
by submitting issue-related materials
and draft resolutions.
Currently, this provision is not
practically relevant, as employees of
the Company are not included in the
composition of the Board.
5.3. Remuneration committee
The main functions of the remuneration committee should be the
following:
1) submit to the collegial body proposals on the remuneration
policy applied to members of the supervisory and
management bodies and the heads of the administration
for approval. Such policy should include all forms of remu-
neration, including the fixed-rate remuneration,
performance-based remuneration, financial incentive
schemes, pension arrangements and termination
payments as well as conditions which would allow the
company to recover the amounts or suspend the
payments by specifying the circumstances under which it
would be expedient to do so;
2) submit to the collegial body proposals regarding individual
remuneration for members of the collegial bodies and the
heads of the administration in order to ensure that they
would be consistent with the company's remuneration
policy and the evaluation of the performance of the
persons concerned;
3) review, on a regular basis, the remuneration policy and its
implementation.
YES
Please refer to the commentary in
paragraph 5.2.1.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
98
5.4. Audit committee
YES
The Audit Committee of EPSO-G
UAB serves as the advisory body to
the Board of EPSO-G UAB and to
the Company’s Board. The main
functions of the Committee are as
follows:
-
supervision of the preparation of
the financial statements of the
companies of the Group and
performance of their audit;
-
responsibility for ensuring
compliance with the principles of
independence and objectivity by
the auditors and audit firms of
the companies of the Group;
-
responsibility for the supervision
of the internal control, risk
management and internal audit
systems, effectiveness of opera-
tional processes of the
companies of the Group;
-
responsibility for control of
provision of non-audit services
by the auditor and/or audit firm of
the companies of the Group;
-
ensurance of the functioning of
the complaints system and
complaints handling;
-
evaluation of transactions with
related parties.
5.4.1. The key functions of the audit committee are defined in the
legal acts regulating the activities of the audit committee
7
.
5.4.2. All members of the committee should be provided with
detailed information on specific issues of the company’s accounting
system, finances and operations. The heads of the company’s
administration should inform the audit committee about the
methods of accounting for significant and unusual transactions
where the accounting may be subject to different approaches.
5.4.3. The audit committee should decide whether the participation
of the chair of the management board, the manager of the company,
the chief finance officer (or senior employees responsible for
finance and accounting), the internal and external auditors in its
meetings is required (and, if required, when). The committee should
be entitled, when needed, to meet the relevant persons without
members of the management bodies present.
YES
The Regulations of the Audit
Committee stipulate that the
members of the Committee, at their
own discretion, may invite to their
meetings the members of the bodies
of the companies of the group, their
employees, representatives,
candidates for certain positions or
other persons, and obtain from them
the necessary explanations within
their competence, as well as require
for that purpose that necessary
actions would be taken for the
performance of the functions of the
Committee.
7
Issues related to the activities of audit committees are regulated by Regulation No 537/2014 of the European Parliament and
the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities, the Law on the Audit
of Financial Statements of the Republic of Lithuania, and the Rules Regulating the Activities of Audit Committees approved by
the Bank of Lithuania.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
99
5.4.4. The audit committee should be informed about the internal
auditor’s work programme and should be furnished with internal
audit reports or periodic summaries. The audit committee should
also be informed about the work programme of external auditors
and should receive from the audit firm a report describing all
relationships between the independent audit firm and the company
and its group.
YES
The Audit Committee is regularly, at
least quarterly, informed about the
internal audit reports and at least
once every six months, with the
internal audit plan and it may provide
recommendations with regard to
them to the boards of the companies
of the EPSO-G UAB group.
The Audit Committee organises
meetings with the external auditors
to discuss the auditors’ work
program and uncertainties arising
during the audit, and after the
performance of the external audit,
their conclusions and
recommendations are discussed
with the external auditors. Each year
before the start of annual audits the
audit firm submits its declaration of
independence to the Audit
Committee and to the companies.
5.4.5. The audit committee should examine whether the company
complies with the applicable provisions regulating the possibility of
lodging a complaint or reporting anonymously his/her suspicions of
potential violations committed at the company and should also
ensure that there is a procedure in place for proportionate and
independent investigation of such issues and appropriate follow-up
actions.
YES
The Regulations of the Audit
Committee stipulate that the Audit
Committee ensures the effective
functioning of the complaints system
and the proportionate and
independent investigation of sub-
mitted complaints. In the
implementation of this function, the
Chairperson of the Audit Committee
is immediately informed about
significant complaints received. In
addition, the Audit Committee is
regularly reported on all complaints
received by the companies of the
EPSO-G UAB group, their investi-
gation and decisions made on the
basis of the findings of investigations
carried out.
5.4.6. The audit committee should submit to the supervisory board
or, where the supervisory board is not formed, to the management
board its activity report at least once in every six months, at the time
that annual and half-yearly reports are approved.
YES
The Regulations of the Audit
Committee stipulate that the Audit
Committee shall submit a quarterly
activity report to the Board.
In addition, it shall submit a
consolidated activity report to the
Ordinary General Meeting of
Shareholders and to the Board of
EPSO-G UAB.
Principle 6: Prevention and disclosure of conflicts of interest
The corporate governance framework should encourage members of the company’s supervisory and management bodies to
avoid conflicts of interest and ensure a transparent and effective mechanism of disclosure of conflicts of interest related to
members of the supervisory and management bodies.
The corporate governance framework should recognise the rights of stakeholders established in the laws and encourage active
cooperation between the company and stakeholders in creating the company value, jobs and financial sustainability. In the
context of this principle, the concept “stakeholders” includes investors, employees, creditors, suppliers, clients, local community
and other persons having certain interests in the company concerned.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
100
Any member of the company’s supervisory and management body
should avoid a situation where his/her personal interests are or may
be in conflict with the company’s interests. In case such a situation
did occur, a member of the company’s supervisory or management
body should, within a reasonable period of time, notify other
members of the same body or the body of the company which
elected him/her or the company’s shareholders of such situation of
a conflict of interest, indicate the nature of interests and, where
possible, their value.
YES
This obligation is set out in
paragraphs 57-58 of the Company’s
Articles of Association, the
regulations of the management
bodies and the Policy of Mana-
gement of Interests of Members of
Collegial Bodies, Executives and
Employees of the EPSO-G Group of
Companies.
Principle 7: Remuneration policy of the Company
The remuneration policy and the procedure for review and disclosure of such policy established at the company should prevent
potential conflicts of interest and abuse in determining remuneration of members of the collegial bodies and heads of the
administration, in addition it should ensure the publicity and transparency of the company’s remuneration policy and its long-
term strategy.
7.1. The company should approve and post the remuneration policy
on the website of the company; such policy should be reviewed on
a regular basis and be consistent with the company’s long-term
strategy.
YES
The Company applies the Guidelines
on the Establishment of Re-
muneration for the Activity at the
Bodies of EPSO-G UAB and the
Companies of the EPSO-G UAB
Group of Companies, which are
approved by the sole shareholder of
EPSO-G UAB and available in a
public domain.
The Company applies the Remu-
neration Policy of the EPSO-G UAB
Group of Companies and the
Employee Performance Assessment
Policy of the EPSO-G UAB Group of
Companies in full. The
Remuneration Policy is available in a
public domain.
7.2. The remuneration policy should include all forms of
remuneration, including the fixed-rate remuneration, performance-
based remuneration, financial incentive schemes, pension
arrangements and termination payments as well as the conditions
specifying the cases where the company can recover the disbursed
amounts or suspend the payments.
YES
All possible forms of remuneration of
the collegial bodies and employees
are established in the Guidelines on
the Establishment of Remuneration
for the Activity at the Bodies of
EPSO-G UAB and the Companies of
the EPSO-G UAB Group of
Companies and the Remuneration
Policy of the EPSO-G UAB Group of
Companies. Both these documents
are available in a public domain.
7.3. With a view to avoid potential conflicts of interest, the
remuneration policy should provide that members of the collegial
bodies which perform the supervisory functions should not receive
remuneration based on the company’s performance.
YES
The Company applies the Guidelines
on the Establishment of
Remuneration for the Activity at the
Bodies of EPSO-G UAB and the
Companies of the EPSO-G UAB
Group of Companies that regulate a
fixed remuneration for members of
the collegial bodies. The members of
the Board do not receive
remuneration based on the Compa-
ny’s performance.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
101
7.4. The remuneration policy should provide sufficient information on
the policy regarding termination payments. Termination payments
should not exceed a fixed amount or a fixed number of annual
wages and in general should not be higher than the non-variable
component of remuneration for two years or the equivalent thereof.
Termination payments should not be paid if the contract is
terminated due to inadequate performance.
YES/NO
The Remuneration Policy of the
EPSO-G UAB Group of Companies
stipulates that the companies of the
Group do not conclude advance
agreements on the amounts of
termination benefits (except for the
CEOs whose terms of employment
are determined by the Board). The
amounts of benefits related to the
termination of employment
relationships are determined by
taking into account the mandatory
minimum amounts of such benefits
established by the norms of labour
law, except for exceptional cases
when there are objective reasons for
the agreement on higher benefits.
The relevant Board of the Group
company shall be informed of the
disbursement of such benefits and
the grounds for their payment at its
forthcoming meeting.
7.5. In the event that the financial incentive scheme is applied at the
company, the remuneration policy should contain sufficient
information about the retention of shares after the award thereof.
Where remuneration is based on the award of shares, shares
should not be vested at least for three years after the award thereof.
After vesting, members of the collegial bodies and heads of the
administration should retain a certain number of shares until the end
of their term in office, subject to the need to compensate for any
costs related to the acquisition of shares.
NOT
APPLICABLE
Such schemes are not applied at the
Company.
7.6. The company should publish information about the
implementation of the remuneration policy on its website, with a key
focus on the remuneration policy in respect of the collegial bodies
and managers in the next and, where relevant, subsequent financial
years. It should also contain a review of how the remuneration
policy was implemented during the previous financial year. The
information of such nature should not include any details having a
commercial value. Particular attention should be paid on the major
changes in the company’s remuneration policy, compared to the
previous financial year.
YES
General information on the
implementation of the Company’s
Remuneration Policy and average
salary levels of individual employee
groups are publicly disclosed in
the Company’s annual report.
According to Article 25(5) of the Law
of Energy of the Republic of
Lithuania, the Company discloses
remuneration established to the
members of the Company’s
management bodies and other
benefits related to the functions of
the members of the management
bodies.
Information on remuneration of
employees is published on the
Company’s website on a quarterly
basis.
7.7. It is recommended that the remuneration policy or any major
change of the policy should be included on the agenda of the
general meeting of shareholders. The schemes under which
members and employees of a collegial body receive remuneration
in shares or share options should be approved by the general
meeting of shareholders.
YES
The remuneration of the members of
the Company’s Board is determined
by the General Meeting of
Shareholders of the Company.
Such schemes are not applied at the
Company.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
102
Principle 8: Role of stakeholders in corporate governance
The corporate governance framework should recognise the rights of stakeholders entrenched in the laws or mutual agreements
and encourage active cooperation between the company and stakeholders in creating the company value, jobs and financial
sustainability. In the context of this principle, the concept “stakeholders” includes investors, employees, creditors, suppliers,
clients, local community and other persons having certain interests in the company concerned.
8.1. The corporate governance framework should ensure that the
rights and lawful interests of stakeholders are protected.
YES
The Company has adopted the
Transparency and Communication
Policy of the EPSO-G UAB Group of
Companies, which establishes goals
to increase awareness and unders-
tanding of stakeholders about the
activities of the EPSO-G UAB group
of companies and individual group
companies; to ensure employee
engagement; to create and maintain
sustainable relationship with
stakeholders based on mutual
respect.
8.2. The corporate governance framework should create
conditions for stakeholders to participate in corporate governance
in the manner prescribed by law. Examples of participation by
stakeholders in corporate governance include the participation of
employees or their representatives in the adoption of decisions that
are important for the company, consultations with employees or
their representatives on corporate governance and other important
matters, participation of employees in the company’s authorised
capital, involvement of creditors in corporate governance in the
cases of the company's insolvency, etc.
YES
The Company, together with the
representatives of the Company’s
employees, conducts consultations,
negotiations and briefings on the
processes for improving efficiency of
the Company’s activities. Under the
Company’s collective agreement
signed with the representatives of
the Company’s employees, the
Company informs the
representatives of the trade unions
about projected changes in the
Company, the Company’s financial
position, etc.
Stakeholders can take part in the
corporate governance to the extent
permitted by law.
8.3. Where stakeholders participate in the corporate governance
process, they should have access to relevant information.
YES
Please refer to commentary in
paragraphs 8.1. and 8.2.
8.4. Stakeholders should be provided with the possibility of
reporting confidentially any illegal or unethical practices to the
collegial body performing the supervisory function.
NO
The Company’s website contains the
Company’s Code of Conduct that
indicates the Trust Line contacts.
The Audit Committee operating at
the level of the EPSO-G group of
companies ensures the functioning
of the system of lodging complaints
and their handling. It is expected that
a system will be developed in the
near future to provide information to
the Audit Committee operating at the
Group level.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
103
Principle 9: Disclosure of information
The corporate governance framework should ensure the timely and accurate disclosure of all material corporate issues,
including the financial situation, operations and governance of the company.
9.1. In accordance with the company’s procedure on confidential
information and commercial secrets and the legal acts regulating
the processing of personal data, the information publicly disclosed
by the company should include but not be limited to the following:
YES
The Transparency and Communication
Policy of the EPSO-G UAB Group of
Companies has been adopted by the
Company. Information indicated in this
Policy is presented in the Company’s
annual report and on the Company’s
website.
9.1.1. operating and financial results of the company;
YES
9.1.2. objectives and non-financial information of the company;
YES
9.1.3. persons holding a stake in the company or controlling it
directly and/ or indirectly and/or together with related persons as
well as the structure of the group of companies and their
relationships by specifying the final beneficiary;
YES
9.1.4. members of the company’s supervisory and management
bodies who are deemed independent, the manager of the company,
the shares or votes held by them at the company, participation in
corporate governance of other companies, their competence and
remuneration;
YES
9.1.5. reports of the existing committees on their composition,
number of meetings and attendance of members during the last
year as well as the main directions and results of their activities;
YES
9.1.6. potential key risk factors, the company’s risk management
and supervision policy;
YES
9.1.7. the company’s transactions with related parties;
YES
9.1.8. main issues related to employees and other stakeholders (for
instance, human resource policy, participation of employees in
corporate governance, award of the company’s shares or share
options as incentives, relationships with creditors, suppliers, local
community, etc.);
YES
9.1.9. structure and strategy of corporate governance;
YES
9.1.10. initiatives and measures of social responsibility policy and
anti-corruption fight, significant current or planned investment
projects.
This list is deemed minimum and companies are encouraged not to
restrict themselves to the disclosure of information included into this
list. This principle of the Code does not exempt companies from
their obligation to disclose information as provided for in the
applicable legal acts.
YES
9.2. When disclosing the information specified in Item 9.1.1 of
recommendation 9.1, it is recommended that the company which is
a parent company in respect of other companies should disclose
information about the consolidated results of the whole group of
companies.
YES
EPSO-G UAB, as a parent company,
discloses consolidated information in the
consolidated annual report.
ANNUAL REPORT
(All amounts are in EUR thousands unless otherwise stated)
104
9.3. When disclosing the information specified in Item 9.1.4 of
recommendation 9.1, it is recommended that the information on the
professional experience and qualifications of members of the
company’s supervisory and management bodies and the manager
of the company as well as potential conflicts of interest which could
affect their decisions should be provided. It is further recommended
that the remuneration or other income of members of the company's
supervisory and management bodies and the manager of the
company should be disclosed, as provided for in greater detail in
Principle 7.
YES
This information is disclosed in the
Company’s annual report and on the
Company’s website.
9.4. Information should be disclosed in such manner that no
shareholders or investors are discriminated in terms of the method
of receipt and scope of information. Information should be disclosed
to all parties concerned at the same time.
YES
The Company publishes information
through the information system of the
Vilnius Securities Exchange in Lithuanian
and English at the same time. The
Company publishes information prior to or
after a trading session at Vilnius Securities
Exchange and presents it at the same time
to all markets in which the Company’s
securities are traded. The Company does
not disclose information that may
influence the price of its securities in any
comments, interviews or by any other
means until such information is published
in the information system of the securities
exchange.
Principle 10: Selection of the company’s audit firm
The company’s audit firm selection mechanism should ensure the independence of the report and opinion of the audit firm.
10.1. With a view to obtain an objective opinion on the company’s
financial condition and financial results, the company’s annual
financial statements and the financial information provided in its
annual report should be audited by an independent audit firm.
YES
An independent auditor is appointed by
the General Meeting of Shareholders.
10.2. It is recommended that the audit firm would be proposed to
the general meeting of shareholders by the supervisory board or, if
the supervisory board is not formed at the company, by the
management board of the company.
YES
The Audit Committee operating at the
Group level is actively involved in the
selection process of an auditor. The Audit
Committee provides a recommendation to
the Company’s Board on the auditor’s
nomination. The final decision is made by
the General Meeting of Shareholders
convened by the Board, which also
proposes draft decisions.
10.3. In the event that the audit firm has received remuneration from
the company for the non-audit services provided, the company
should disclose this publicly. This information should also be
available to the supervisory board or, if the supervisory board is not
formed at the company, by the management board of the company
when considering which audit firm should be proposed to the
general meeting of shareholders.
YES
The audit firm provides non-audit services
in accordance with the EPSO-G UAB
policy on the procurement of non-audit
services by EPSO-G UAB group of
companies from an audit firm or from any
other firm that is part of the audit firm
network. The latter policy is approved by
the Audit Committee.
The provision of non-audit services is
supervised by the Audit Committee
operating at the Group level, which, as
mentioned in paragraph 10.2, is actively
involved in the selection process of an
auditor. Therefore, the Audit Committee,
when submitting a recommendation to the
Board on the auditor, has all the
necessary information on the auditors.
THE COMPANY’S STATEMENT OF FINANCIAL POSITION
(All amounts are in EUR thousands unless otherwise stated)
105
Notes
At 31 December
At 31 December
2022
2021
ASSETS
Non-current assets
Intangible assets
5
5,484
4,952
Property, plant and equipment
6
361,718
338,051
Right-of-use assets
7
5,592
4,509
Investments in a joint venture
45
-
Deferred income tax assets
25
11,085
18,994
Financial assets
9
-
781
Total non-current assets
383,924
367,287
Current assets
Inventories
10
3
7
Prepayments
1,622
1,127
Trade receivables under contracts with customers
11
61,080
50,463
Trade receivables
12
2,558
10,200
Other amounts receivable
13
892
9,969
Prepaid income tax
25
28 598
-
Loans granted
8
232,008
43,594
Other financial assets
14
7,361
5,359
Cash and cash equivalents
15
499
1,819
Total current assets
334,621
122,538
TOTAL ASSETS
718,545
489,825
EQUITY AND LIABILITIES
Equity
Share capital
16
146,256
146,256
Share premium
16
8,579
8,579
Legal reserve
17
14,626
14,626
Other reserves
17
47,003
32,034
Retained earnings/(deficit)
17
(49,484)
20,013
Total equity
166,980
221,508
Liabilities
Non-current liabilities
Non-current borrowings
20
34,285
51,452
Lease liabilities
21
5,299
4,414
Congestion management revenue
22
64,095
88,267
Provisions
23
941
352
Other non-current amounts payable and liabilities
24
34,392
2,270
Total non-current liabilities
139,012
146,755
Current liabilities
Current portion of non-current borrowings
20
6,143
14,225
Current portion of lease liabilities
21
403
180
Trade payables
26
70,146
59,454
Current portion of congestion management revenue
22
287,400
20,820
Advance amounts received
27
35,506
10,328
Income tax payable
-
3,162
Provisions
23
648
2,507
Other current amounts payable and liabilities
28
12,307
10,886
Total current liabilities
412,553
121,562
Total liabilities
551,565
268,317
TOTAL EQUITY AND LIABILITIES
718,545
489,825
The accompanying notes are an integral part of the financial statements.
THE COMPANY’S STATEMENT OF COMPREHENSIVE INCOME
(All amounts are in EUR thousands unless otherwise stated)
106
CONFIDENTIAL INFORMATION
Notes
2022
2021
Revenue
Revenue from electricity transmission and related services
29
418,953
267,258
Other income
30
1,355
3,330
Dividend income
43
307
Total revenue, other and dividend income
420,351
270,895
Operating expenses
Expenses for imbalance and balancing electricity
31
(203,588)
(91,007)
Expenses for electricity ancillary (system) services
31
(111,633)
(61,860)
Expenses for electricity technological needs
31
(99,576)
(40,165)
Expenses for electricity and related services
(5,309)
(1,428)
Depreciation and amortisation
5,6,7
(20,582)
(21,337)
Wages and salaries and related expenses
(15,601)
(12,365)
Repair and maintenance expenses
(8,771)
(8,058)
Telecommunications and IT system expenses
(2,214)
(1,952)
Transport expenses
(301)
(190)
Write-off expenses of property, plant and equipment
(461)
(127)
Reversal of impairment of inventories and amounts receivable
55
97
Impairment of investments
9
-
(307)
Other expenses
(9,833)
(7,364)
Total operating expenses
(477,814)
(246,063)
Operating profit/(loss)
(57,463)
24,832
Finance income
63
21
Finance costs
(947)
(752)
Profit/(loss) before income tax
(58,347)
24,101
Income tax
Current year income tax income/(expenses)
25
16,772
(9,576)
Deferred income tax income/(expenses)
25
(7,909)
5,488
Total income tax
8,863
(4,088)
Profit/(loss) for the period
(49,484)
20,013
Other comprehensive income that will not be reclassified to profit or loss
-
-
Total comprehensive income/(expenses) for the period
(49,484)
20,013
Basic and diluted earnings/(deficit) per share (in EUR)
(0.098)
0.040
The accompanying notes are an integral part of the financial statements.
THE COMPANY’S STATEMENT OF CHANGES IN EQUITY
(All amounts are in EUR thousands unless otherwise stated)
107
CONFIDENTIAL INFORMATION
Share
Other
Retained
Share capital
premium
Legal reserve
reserves
earnings/(deficit)
Total
Balance at 1 January 2021
146,256
8,579
14,626
23,144
25,432
218,037
Comprehensive income/(expenses) for the
period
-
-
-
-
20,013
20,013
Transfer to reserves
17
-
-
-
8,890
(8,890)
-
Dividends
18
-
-
-
-
(16,542)
(16,542)
Balance at 31 December 2021
146,256
8,579
14,626
32,034
20,013
221,508
Balance at 1 January 2022
146,256
8,579
14,626
32,034
20,013
221,508
Comprehensive income/(expenses) for the
period
-
-
-
-
(49,484)
(49,484)
Transfer to reserves
17
-
-
-
14,969
(14,969)
-
Dividends
18
-
-
-
-
(5,044)
(5,044)
Balance at 31 December 2022
146,256
8,579
14,626
47,003
(49,484)
166,980
The accompanying notes are an integral part of the financial statements.
THE COMPANY’S STATEMENT OF CASH FLOWS
(All amounts are in EUR thousands unless otherwise stated)
108
CONFIDENTIAL INFORMATION
Notes
2022
2021
Cash flows from operating activities
Profit/(loss) for the period
(49,484)
20,013
Adjustments for non-cash items:
Depreciation and amortisation expenses
5,6,7
20,582
21,337
Impairment of financial assets
-
307
Impairment/(reversal of impairment) of assets
(55)
(97)
Loss on disposal of financial assets
9
121
-
Income tax expenses/(income)
25
(8,863)
4,088
(Gain)/loss on disposal/write-off of property, plant and equipment
461
127
Elimination of results of financing and investing activities:
Interest income
(20)
(11)
Interest expenses
678
749
Dividend income
(43)
(307)
Other finance costs/(income)
226
(7)
Changes in working capital:
(Increase)/decrease in trade receivables and other amounts receivable
(22,423)
(28,210)
(Increase)/decrease in inventories, prepayments and other current
726
(9)
assets
Increase/(decrease) in amounts payable, grants, deferred revenue and
advance amounts received
22,456
39,583
Changes in other financial assets
(2,002)
21,161
Income tax (paid)
(14,987)
(12,351)
Net cash inflow/(outflow) from operating activities
(52,627)
66,373
Cash flows from investing activities
(Acquisition) of property, plant and equipment and intangible assets
(74,157)
(57,457)
Grants received
19
72,086
22,496
Loans granted to related parties
8
(188,414)
(43,594)
Loan repayments received
8
-
1,000
Congestion management revenue received
22
272,502
44,505
Acquisition of a joint venture
1
(45)
-
Interest received
-
29
Dividends received
43
307
Financial assets acquired
9
(13,090)
-
Financial assets disposed
9
13,786
-
Net cash inflow/(outflow) from in investing activities
82,711
(32,714)
Cash flows from financing activities
Repayments of borrowings
(25,249)
(14,225)
Settlement of lease liabilities
21
(362)
(333)
Interest paid
(757)
(817)
Dividends paid
(5,036)
(16,498)
Net cash (outflow) from financing activities
(31,404)
(31,873)
Increase/(decrease) in cash and cash equivalents
(1,320)
1,786
Cash and cash equivalents at the beginning of the period
15
1,819
33
Cash and cash equivalents at the end of the period
15
499
1,819
The accompanying notes are an integral part of the financial statements.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
109
1. General information
LITGRID AB (the “Company”) is a public limited liability company registered in the Republic of Lithuania. The address of its
registered office is Karlo Gustavo Emilio Manerheimo g. 8, LT-05131, Vilnius, Lithuania. The Company was established as a result
of the unbundling of Lietuvos Energija AB operations. The Company was registered with the Register of Legal Entities on 16
November 2010. The Company’s code is 302564383.
LITGRID AB is an operator of electricity transmission system, operating electricity transmissions in the territory of Lithuania and
ensuring stability of operation of the whole electric power system. The Company is also responsible for the integration of the
Lithuanian electric power system into the European electricity infrastructure and the single electricity market.
On 27 August 2013, the National Energy Regulatory Council (the “NERC”) granted a licence to the Company to engage in
electricity transmission activities for an indefinite term.
The principal objectives of the Company’s activities include ensuring stability and reliability of the electricity system in the territory
of the Republic of Lithuania within the areas of its competence, creation of objective and non-discriminatory conditions for the use
of the transmission networks, management, use and disposal of electricity transmission system assets and its appurtenances.
As at 31 December 2022, the Company’s authorised share capital amounted to EUR 146,256,100.20 and it was divided into
504,331,380 ordinary registered shares with the nominal value of EUR 0.29 each. All shares are fully paid.
As at 31 December 2022 and 31 December 2021, the Company’s shareholder structure was as follows:
The Company’s shareholders
Number of
shares held
shares held
(%)
EPSO-G UAB
491,736,153
97.5
Other shareholders
12,595,227
2.5
Total
504,331,380
100.0
The ultimate controlling shareholder of EPSO-G UAB (company code 302826889, address: Gedimino pr. 20, Vilnius) is the
Ministry of Energy of the Republic of Lithuania.
As from 22 December 2010, the shares of the Company are listed on the additional trading list of NASDAQ OMX Vilnius Stock
Exchange, issue ISIN code LT0000128415.
The Company’s investments in the joint venture were as follows:
Shareholding
Shareholding
Address of the
as at
as at
company’s registered
31 December
31 December
Company name
office
2022
2021
Provision of services ensuring safety
Profile of activities
Kadaka tee 42, EE-
and reliability of the electricity system
Baltic RCC OÜ
12915
Tallinn Eesti
33.33%
-
and
coordination
between
the
transmission network operators of
the Baltic region
As at 31 December 2022, the Company had 389 (31 December 2021: 335) employees.
2. Summary of principal accounting policies
The principal accounting policies adopted in the preparation of the Company’s financial statements for the year ended 31
December 2022 are summarised below.
2.1 Basis of preparation
The Company’s financial statements for the year ended 31 December 2022 have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and meet them.
The financial statements have been prepared on a historical cost basis, except for property, plant and equipment which is recorded
at revalued amount, less accumulated depreciation and estimated impairment losses, and financial assets measured at fair value
through other comprehensive income.
Amounts in these financial statements are presented in thousands of euro (EUR), unless otherwise stated.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
110
The statement of cash flows is prepared indirectly.
The Company's financial year coincides with the calendar year.
The Company’s management approved these financial statements on 16 March 2023. The shareholders of the Company have a
statutory right to approve or not to approve these financial statements and require that management prepare a new set of financial
statements.
Accounting policies adopted in the preparation of the financial statements are consistent with those of the previous financial year
except as follows:
a) Adoption of new and/or amended IFRS and interpretations of the International Financial Reporting Interpretations
Committee (IFRIC)
For the year ended 31 December 2022 the Company for the first time have been adopted these IFRS and their amendments and
IFRIC:
Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework
– narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January
2022).
• The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from
selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such items,
together with the costs of producing them, are now recognised in profit or loss. An entity will use IAS 2 to measure the
cost of those items. Cost will not include depreciation of the asset being tested because it is not ready for its intended
use. The amendment to IAS 16 also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it
assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to
this assessment. An asset might therefore be capable of operating as intended by management and subject to
depreciation before it has achieved the level of operating performance expected by management.
• The amendment to IAS 37 clarifies the meaning of ‘costs to fulfil a contract’. The amendment explains that the direct cost
of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate
directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous contract is established,
an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets
dedicated to that contract.
• IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what
constitutes an asset or a liability in a business combination. It was also clarified that the acquirer should not recognise
contingent assets, as defined in IAS 37, at the acquisition date.
• The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial
liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to
third parties will not be included in the 10% test.
• Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor
relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the
treatment of lease incentives.
• IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent.
• The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed.
This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis.
The Company’s management has assessed that these amendments will have no impact on the Company’s financial statements.
Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 31 March 2021 and effective for annual periods
beginning on or after 1 April 2021). In May 2020 an amendment to IFRS 16 was issued that provided an optional practical
expedient for lessees from assessing whether a rent concession related to COVID-19, resulting in a reduction in lease payments
due on or before 30 June 2021, was a lease modification. An amendment issued on 31 March 2021 extended the date of the
practical expedient from 30 June 2021 to 30 June 2022.
The Company’s management has assessed that these amendments will have no significant impact on the Company’s financial
statements because of a rent concession related to COVID-19 do not apply to the Company.
b) Standards, amendments and interpretations that have been endorsed by the European Union, but are not yet
effective and have not been early adopted by the Company
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021 and
effective for annual periods beginning on or after 1 January 2023). IAS 1 was amended to require companies to disclose their
material accounting policy information rather than their significant accounting policies. The amendment provided the definition of
material accounting policy information. The amendment also clarified that accounting policy information is expected to be material
if, without it, the users of the financial statements would be unable to understand other material information in the financial
statements. The amendment provided illustrative examples of accounting policy information that is likely to be considered material
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
111
to the entity’s financial statements. Further, the amendment to IAS 1 clarified that immaterial accounting policy information need
not be disclosed. However, if it is disclosed, it should not obscure material accounting policy information. To support this
amendment, IFRS Practice Statement 2, ‘Making Materiality Judgements’ was also amended to provide guidance on how to apply
the concept of materiality to accounting policy disclosures.
The Company’s management intends to review the accounting policy disclosures.
Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual periods
beginning on or after 1 January 2023). The amendment to IAS 8 clarified how companies should distinguish changes in accounting
policies from changes in accounting estimates.
The Company’s management is currently assessing the impact of these amendments on its financial statements.
Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued on 7 May
2021 and effective for annual periods beginning on or after 1 January 2023). The amendments to IAS 12 specify how to account
for deferred tax on transactions such as leases and decommissioning obligations. In specified circumstances, entities are exempt
from recognising deferred tax when they recognise assets or liabilities for the first time. Previously, there had been some
uncertainty about whether the exemption applied to transactions such as leases and decommissioning obligations – transactions
for which both an asset and a liability are recognised. The amendments clarify that the exemption does not apply and that entities
are required to recognise deferred tax on such transactions. The amendments require companies to recognise deferred tax on
transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences.
The Company’s management is currently assessing the impact of these amendments on its financial statements.
IFRS 17 Insurance contracts (issued on 18 May 2017 and amended on 1 January 2021 and effective for annual periods
beginning on or after 1 January 2023). IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting
for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare the financial
performance of insurance companies, which would otherwise be similar. IFRS 17 is a single standard establishing recognition,
measurement, presentation and disclosure requirements for all types of insurance contracts, including reinsurance contracts that
an insurer holds. The standard requires that similar principles are applied to reinsurance contracts held and to investment contracts
containing a discretionary participation feature.
Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on
or after 1 January 2023). The amendments include a number of clarifications intended to ease implementation of IFRS 17, simplify
some requirements of the standard and transition.
For the Company’s management assessment the amendment of IFRS 17 will have no significant impact on the Company’s
financial statements since it is not engaged in any insurance activities.
2.2 Assets held for sale
The Company classifies non-current assets and disposal groups as held for sale, if their carrying amount is recovered through a
disposal rather than through continuing use. Such non-current assets and disposal groups classified as held for sale are measured
at the lower of carrying amount and fair value, less costs to sell.
An asset or disposal group can qualify for recognition as held for sale only when the sale is highly probable and as asset or
disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that
it is unlikely that the sale will be withdrawn. Management must be committed to implement a probable sale within one year after
the date of the reclassification. Assets and liabilities classified as held for sale are presented separately in the statement of financial
position as current items.
2.3 Investments in a joint venture
Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial
and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers).
2.4 Property, plant and equipment and intangible assets
Assets with the useful life over one year are classified as property, plant and equipment.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
112
All property, plant and equipment is shown at revalued amounts, based on periodic (at least every 5 years) property valuations,
less the amounts of accumulated depreciation, recognised grants and impairment losses. Any accumulated depreciation and
impairment losses at the date of revaluation are eliminated against gross carrying amount of the asset and net amount is restated
to the revalued amount of the assets.
Increases in the carrying amount arising on the first revaluation of property, plant and equipment are credited to the revaluation
reserve directly in equity and decreases are recognised in profit or loss. During the first revaluation each object of the asset and
the item within that object were evaluated by indicating the remaining useful life established for that item of the asset.
Decreases in the carrying amount arising on the subsequent revaluation of property, plant and equipment that offset previous
increases of the same asset are charged against the revaluation reserve directly in equity, and all other decreases are charged
to profit or loss. Increases in the value of property plant and equipment are allocated in proportion to the net book amount of each
item of the asset by indicating the remaining useful life established for that item, by eliminating capitalised interest, assets of funds
of new consumers from 2015 to 2018 accounted for as revenue, assets depreciated to residual value through the reduction of the
items’ accumulated impairment of the previous years.
Revaluation increases in the value of property plant and equipment that offset previous decreases are recognised in profit or loss.
All other increases in the carrying amount arising on subsequent revaluations of property, plant and equipment are credited to
revaluation reserve. Decreases in the value of property plant and equipment are allocated in proportion to the net book amount
of each item of the asset by indicating the remaining useful life established for that item, by eliminating capitalised interest, assets
of funds of new consumers from 2015 to 2018 accounted for as revenue, assets depreciated to residual value through the
reduction of accumulated increases of the previous years which were accounted for as a revaluation reserve.
Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the statement of
comprehensive income and depreciation based on the asset’s original cost is transferred from revaluation reserve to retained
earnings taking into account the effect of deferred income tax. After the sale or write-off of a property unit, any balance of the
revaluation reserve related to this property is transferred to retained earnings.
Construction work in progress represents non-current fixed assets under construction. The cost of such assets includes design,
construction works, plant and equipment being installed, and other directly attributable costs.
Property, plant, and equipment is recorded at acquisition (production) cost, less grants received/receivable for the acquisition of
property, property, plant, and equipment. Grants comprise financing from the EU support funds, a portion of congestion
management revenue designated for the financing of investments, payments for the expenses incurred during the connection of
producers to the transmission network and performance of works for the relocation/reconstruction of the transmission network’s
installations initiated by
Intangible assets
Intangible assets are initially recognised at cost. Intangible assets are recognised only when it is probable that future economic
benefits associated with these assets will flow to the Company and the value of assets can be measured reliably. After initial
recognition, intangible assets are carried at cost, less accumulated amortisation and accumulated impairment losses, if any.
Goodwill at initial recognition is measured as a positive difference between the historical cost and acquired net asset value and
after the initial recognitions it is carried at acquisition value less accumulated impairment, if any.
Depreciation and amortisation
Depreciation of property, plant and equipment and amortisation of intangible assets, except for land, construction work in progress,
statutory servitudes and protection zones of the transmission network, is calculated using the straight-line method over estimated
useful lives of the asset. The estimated useful lives, residual values and depreciation/amortisation method are reviewed by the
Company at each year-end to ensure that they are consistent with the expected pattern of economic benefits from these assets.
The effect of changes in estimates, if any, is accounted for on a prospective basis.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
113
Estimated useful lives of property, plant and equipment and intangible assets are as follows:
Categories of property, plant and equipment and intangible assets
Useful lives (in years)
Buildings
20 – 75
Structures and machinery, whereof
- Constructions of transformer substations
30
- Structures, machinery and equipment, whereof:
- 400, 330, 110, 35 kV electricity transmission lines
40 – 55
- 400, 330, 110, 35, 6-10 kV switchyard’s electrical installations
30 – 35
- 400, 330, 110, 35, 6-10 kV capacity transformers
35
- electricity and communication devices
20 – 25
- electrical installations, whereof:
15 – 35
- relay security and automation equipment
15 – 35
- technological and dispatch control equipment
8
- other equipment
5 – 20
Other property, plant and equipment, whereof:
- computer hardware and communication equipment
3 – 10
- inventory, tools
4 – 10
Intangible assets, whereof:
3 – 4
- statutory servitudes and protection zones of the transmission network
Not subject to amortisation
Statutory servitudes and protection zones of the transmission network have an indefinite useful life because the right to use the
established zones is unlimited in time.
Gain or loss on disposal of non-current assets is calculated as the difference between the proceeds from sale and the book value
of the disposed asset and is recognised in the statement of comprehensive income of the reporting year.
Subsequent repair costs incurred when performing major improvements are included in the carrying amount of property, plant and
equipment, only when it is probable that future economic benefits associated with these costs will flow to the Company and these
costs can be measured reliably. Repair costs for the asset category of overhead lines and cables are accounted for as component
of item of assets by estimating the useful life of the new asset. The carrying amount of the replaced part is derecognised. All other
repair and maintenance costs are recognised as expenses in the statement of comprehensive income during the financial period
in which they are incurred.
2.5 Impairment of property, plant and equipment and intangible assets
At each reporting date, the Company reviews the carrying amounts of property, plant and equipment (including right-of-use assets)
and intangible assets to determine whether there are any indications that those assets have suffered an impairment loss. If any
such indication exists, the recoverable value of the asset is estimated in order to determine the extent of the impairment loss (if
any).
The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. In assessing value in use, the
expected future cash flows are discounted to their present value using the discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying value, the carrying value
of the asset (cash-generating unit) is reduced to its recoverable value. An impairment loss is recognised immediately in profit or
loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a decrease of
revaluation reserve.
Where an impairment loss subsequently reverses, the carrying value of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying value does not exceed the carrying value that would have
been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a revaluation increase (without exceeding the amount of previous
impairment).
Each year the Company estimates the recoverable amount of intangible assets with indefinite life in order to estimate the
impairment of such assets (if any).
2.6 Financial assets
As a result of the adoption of IFRS 9 Financial instruments, the Company classifies its financial assets into the following three
new categories:
- financial assets subsequently measured at amortised cost;
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
114
- financial assets subsequently measured at fair value through other comprehensive income; and
- financial assets subsequently measured at fair through profit or loss.
Subsequent to initial recognition, financial assets are classified into the afore-mentioned categories based on the business model
the Company applies when managing its financial assets. The business model applied to the group of financial assets is
determined at a level that reflects how all groups of financial assets are managed together to achieve a particular business
objective of the Company. The intentions of the Company’s management regarding separate instruments has no effect on the
applied business model. The Company may apply more than one business model to manage its financial assets.
The business model for managing financial assets is a matter of fact and not merely an assertion. It is typically observable through
the activities that the Company undertakes to achieve the objective of the business model.
The Company recognises a financial asset in its statement of financial position when, and only when, the Company becomes
party to the contractual provisions of the instrument. The purchase or sale of financial assets is recognised and derecognised, as
applicable, using the trade date accounting.
At initial recognition, the Company measures financial assets at fair value, except for trade receivables that do not have a
significant financing component. At initial recognition, the Company measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the
financial asset.
Transaction costs comprise all fees and commission that the Company would not have paid if it had not entered into an agreement
on the financial instrument.
If the fair value of the financial asset at initial recognition differs from the transaction price, the difference is recognised in profit or
loss.
In view of the business model applied for managing the group of financial assets, the accounting for financial assets is as follows:
Financial assets measured at amortised cost
Cash and cash equivalents comprise cash balances in the Company’s bank accounts and their equivalents in various currencies
the use of which is not restricted. Cash equivalents comprise short-term, highly liquid investments that are readily convertible to
known amounts of cash with original maturities of three months or less and that are subject to an insignificant risk of change in
value.
Loans granted by the Company and amounts receivable are accounted for under the business model the purpose of which is to
hold financial assets in order to collect contractual cash flows that can contain cash flows related to the payment of the principal
amount and interest inflows.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than 12 months after the date of the statement of financial
position. These are classified as non-current assets.
Loans and receivables are initially recognised at cost (the fair value of consideration receivable) and subsequently carried at
amortised cost using the effective interest rate method. Gains or losses are recognised in the statement of comprehensive income
when the loans and receivables are derecognised, impaired or amortised
Financial assets measured at fair value through profit or loss
The Company measures financial assets, which are stated at fair value in subsequent periods, through profit or loss, using the
business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
The Company does not have any financial assets held for trading and acquired for the purpose of selling in the near term and
attributes to this category only financial assets arising from the disposal of business or investments classified as non-equity
contingent consideration.
Financial assets measured at fair value through other comprehensive income
The Company had equity securities that were classified under the category of financial assets measured at fair value through
comprehensive income.
Effective interest method
The effective interest method is used in the calculation of the amortised cost of a financial asset and in the allocation of interest
income over the relevant period in the statement of comprehensive income.
The effective interest rate is the rate that exactly discounts estimated future cash inflows through the expected life of the financial
asset to the gross carrying amount of the financial asset that shows the amortised cost of the financial asset, before adjusting for
any loss allowance. When calculating the effective interest rate, the Company estimates the expected cash flows by considering
all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
115
consider the expected credit losses. The calculation includes all fees and points paid or received between parties to the contract
that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. There is a presumption
that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, when it is
not possible to reliably estimate the cash flows or the expected life of a financial instrument (or group of financial instruments), the
Company uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial
instruments).
Expected credit losses
Credit losses incurred by the Company are calculated as the difference between all contractual cash flows that are due to the
Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls),
discounted at the original effective interest rate. The Company estimates cash flows by considering all contractual terms of the
financial instrument through the expected life of that financial instrument, including cash flows from the collateral held or other
credit enhancements that are integral to the contractual terms.
Expected credit losses show the weighted average of credit losses with the respective risks (probability) of a default occurring as
the weights.
Lifetime expected credit losses are the expected credit losses that result from all possible default events over the period from the
date of initial recognition of a financial asset to the subsequent date of settlement of the financial asset or ultimate write-off of the
financial asset.
The Company seeks for lifetime expected credit losses to be recognised before a financial instrument becomes past due. Typically,
credit risk increases significantly before a financial instrument becomes past due or other lagging borrower-specific factors (for
example, a modification or restructuring) are observed. Consequently, when reasonable and supportable information that is more
forward-looking than past due information is available without undue cost or effort, it must be used to assess changes in credit
risk.
Expected credit losses are recognised by taking into consideration individually or collectively assessed credit risk of loans granted
and trade receivables. Credit risk is assessed based on all reasonable and verifiable information including future oriented
information.
The lifetime expected credit losses of trade receivables are assessed based on the individual assessment basis. The Company’s
management decides on the performance of the assessment on an individual basis reflecting the possibility of obtaining
information on the credit history of a particular borrower, its financial position as at the date of assessment, including forward-
looking information that would allow to timely determine whether there has been a significant increase in the credit risk of that
particular borrower, thus enabling making judgement on the recognition of lifetime expected credit losses in respect of that
particular borrower.
The lifetime expected credit losses of trade receivables are recognised at the recognition of amounts receivable.
When granting the loan, the Company assesses and recognises 12-month expected credit losses. In subsequent reporting
periods, in case there is no significant increase in credit risk related to the borrower, the Company adjusts the balance of 12-
month expected credit losses in view of the outstanding balance of the loan at the assessment date. Having determined that the
financial position of the borrower has deteriorated significantly compared to the financial position that existed upon the issue of
the loan, the Company records all lifetime expected credit losses of the loan. The latest point at which the Company recognises
all lifetime expected credit losses of the loan granted is identified when the borrower is late to pay a periodic amount or the total
debt for more than 30 days. In case of other evidence available, the Company accounts for all lifetime expected credit losses of
the loan granted regardless of the more than 30 days past due presumption. Loans for which lifetime expected credit losses were
calculated are considered credit-impaired financial assets.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of
that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following
events:
a) significant financial difficulties of the borrower;
b) a breach of contract, such as failure to pay the debt or regular payment in due time;
c) a concession granted to the borrower due to economic or contractual reasons relating to the borrower’s financial difficulties,
which otherwise would not be granted by the lender;
d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
e) the disappearance of an active market for that financial asset because of financial difficulties;
f) financial assets are purchased or granted at a deep discount that reflects the incurred credit losses.
The combined effect of several events that may occur simultaneously or subsequently throughout the term of validity of the
agreement on the financial assets may have caused financial assets to become credit-impaired.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
116
The lifetime expected credit losses of loans receivable and trade receivables is recognised in profit or loss through the contrary
account of doubtful receivables.
The Company derecognises loans receivable and trade receivables when it loses the right to receive contractual cash flows from
financial assets.
Derecognition of financial assets
The Company derecognises financial assets in case of the following:
- the rights to receive cash flows from the asset have expired;
- the Company has retained the right to receive cash flows from the asset, but has assumed an obligation to pay them in full
without material delay to a third party under a “pass through” arrangement; or
- the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the
risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset:
- if the Company has not retained control, it shall derecognise the financial asset and recognise separately as assets or
liabilities any rights and obligations created or retained in the transfer;
- if the Company has retained control, it shall continue to recognise the financial asset to the extent of its continuing
involvement in the financial asset.
Whether the Company has retained control of the transferred asset depends on the transferee's ability to sell the asset. If the
transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability
unilaterally and without needing to impose additional restrictions on the transfer, the Company has not retained control. In all other
cases, the Company has retained control.
2.7 Inventories
Inventories are initially recorded at acquisition cost. Subsequent to initial recognition, inventories are stated at the lower of cost
and net realisable value. Acquisition cost of inventories includes acquisition price and related taxes that are not subsequently
recovered from tax administration authorities and costs associated with bringing inventory into their current condition and location.
Cost is determined on the first-in, first-out (FIFO) basis. Net realisable value is the estimated selling price, less the estimated costs
of completion and selling expenses.
Inventories required to be stored as a reserve and the management does not expected these inventories to be used over the
normal business cycle of the Company or 12 months are classified as non-current assets. Depreciation is calculated for reserve
inventories that are classified as non-current assets. The depreciation rate applied reflects an expected useful life of such
inventories.
2.8 Trade payables and other financial liabilities, borrowings
Financial liabilities, borrowings
Financial liabilities, including borrowings, are recognised initially at fair value, less transaction costs.
In subsequent periods, financial liabilities are measured at amortised cost using the effective interest rate method. Interest
expense is recognised using the effective interest rate method as disclosed in paragraph 2.6 of the notes to the financial
statements.
If a financing agreement concluded before the date of the statement of financial position proves that the liability was non-current
as of the date of the statement of financial position, that financial liability is classified as non-current.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is settled, cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as derecognition of the original liability and the recognition of
a new liability. The difference in the respective carrying amounts of financial liabilities is recognised in the statement of
comprehensive income.
Trade payables
Trade payables represent commitments to pay for goods and services acquired from suppliers in the ordinary course of business.
Trade payables are classified as current liabilities if the term of their settlement is not longer than one year; otherwise they are
included in non-current liabilities.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
117
2.9 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period
in which dividends are approved by the Company’s shareholders.
If dividends for equity holders (as laid down in IAS 32 Financial instruments: Disclosure and presentation) are recognised and
declared after the date of the statement of financial position, the Company is not required to recognise these dividends as liabilities
as at the date of the statement of financial position.
If dividends are recognised and declared after the date of the statement of financial position but before the date when the
management is authorised to issue financial statements, in such a case dividends are not recognised as a liability as at the date
of the statement of financial position because they do not meet the criteria of a present obligation according to IAS 37. Such
dividends are disclosed in notes to the financial statements based on IAS 1 Presentation of financial statements.
2.10 Foreign currency
Items included in the Company’s financial statements are measured using the national currency of the primary economic
environment in which the entity operates, i.e. the euros. All financial information presented in the euros has been rounded to the
nearest thousand unless otherwise stated. Due to rounding effects, some of the tabular amounts may not add up.
Foreign currency transactions are recorded in the euros using the exchange rates of the euro against foreign currencies prevailing
at the dates of transactions as established by the European Central Bank and the Bank of Lithuania. Monetary assets and liabilities
are translated into the euros using the exchange rate prevailing at the date of preparation of financial statements. Gains and
losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities are recognised
as the profit or loss of the reporting period.
2.11 Grants
Asset-related grants
The government and the EU grants received in the form of non-current assets or designated for the purchase of non-current are
treated as asset-related grants. Public service obligation (“PSO”) service fees allocated to the Company for the preparation and
implementation of the strategic projects and a portion of congestion management revenue, which is designated to finance
investments, are recognised as asset-related grants.
These grants are accounted for by reducing by the carrying amount of respective non-current assets. In the statement of
comprehensive income grants are recognised over the useful life of the asset by reducing depreciation expenses.
Grants received in advance related to the acquisition of non-current assets are stated as non-current liabilities until the moment
of acquisition of such assets.
Grants receivable are included in other amounts receivable when the agreement whereby the European Commission commits to
finance the strategic projects provides firm evidence confirming that the financing will be received.
Income-related grants
Grants received as a compensation for expenses or unearned income of the current or previous reporting period, also, all grants,
which are not grants related to assets, are defined as grants related to income. Income-related grants are recognised as used in
parts to the extent of expenses incurred during the reporting period or unearned income to be compensated by that grant.
Income-related grants are recognised in profit or loss by increasing other income over the period in which the grant is received or
when there is reasonable assurance that the grant will be received and that the Company complies with the conditions for the
allocation of the grant established in the grant agreement.
2.12 Connection of new consumers and producers
The connection of producers is accounted for similarly to the principle applicable to grants by offsetting the acquisition cost of
assets created for the connection of the producer against the compensation receivable from the connected producer. In case of
relocation works of the electricity transmission network when major improvements are performed and when the assets are created
by the Company, the grant principle is applied and the cost of the created assets is offset against the amount of compensations
receivable from the customer, and when the assets are created by the customer and transferred to the Company free of charge,
the assets received from the third parties are offset against the value of the assets. If the major improvement was not performed
during the relocation and the asset was created by the Company, such asset is not recognised, i.e. compensation income from
the customer and expenses for the creation of such asset are accounted for. When no major improvement is performed and the
asset is created by the customer, the asset received from the customer free of charge is not recognised and accounted for in off-
balance sheet accounts.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
118
Revenue received from connection of new consumers is accounted for by the Company over the useful life of the created asset
because the connection of a new consumer is related to further consumption and related revenue.
2.13 Lease liabilities
Initial measurement of lease liability
The amount of the initial measurement of lease liability is calculated as the present value of lease payments not paid at the
commencement date.
Lease payments are discounted using the incremental borrowing rate, which is applied when the contractual interest rate is not
known. The incremental borrowing rate is determined by the rate at which the Company would be able to borrow funds for the
purpose of acquiring certain assets for a respective period.
At the commencement date, lease payments included in the measurement of a lease liability include:
- fixed lease payments less any lease incentives receivable;
- variable lease payments that depend on an index or a rate;
- amounts expected to be payable by the Company under residual value guarantees;
- the exercise price of the purchase option, if exercise of that option by the Company is reasonably certain;
- fines for the termination of the lease, if it is assumed that the Company will exercise the option to terminate the lease during
the lease term.
Subsequent measurement of lease liability
Subsequent to initial recognition, changes in the value of the Company’s lease liability are reflected by:
- increasing the value of the liability by the amount of interest charged;
- reducing the carrying amount by the lease payments made;
- remeasuring the liability for lease modifications or revised payments.
Remeasurement of lease liability
Subsequent to initial recognition, the lease liability is remeasured to reflect changes in lease payments. The Company treats
remeasurements as adjustments to the right-of-use assets. If the carrying amount the right-of-use assets is reduced to zero and
the lease liability is reduced as well, the Company recognises any remaining amount of the remeasurement in profit or loss.
Revised discount rate
The Company remeasures the lease liability by discounting the revised lease payments using the revised discount rate if the lease
term changes. The Company calculates the revised lease payments on the basis of the revised lease term or whenever there is
a change in the option to purchase the leased property, depending on events and circumstances, in the context of the option to
purchase.
In the event of a change in the lease term or a change in the assessment of a purchase option, the Company sets the revised
discount rate as the lessee's incremental borrowing rate at the remeasurement date.
Unchanged discount rate
The Company determines the revised lease payments for the remaining lease term on the basis of the revised contractual
payments.
When discounting revised rents, the Company uses the unchanged discount rate unless lease payments change due to changes
in variable interest rates. In this case, the Company uses a revised discount rate that reflects changes in the interest rate.
Lease modifications
The Company treats a lease modification as a separate lease if both of the following conditions are met:
- the modification increases the scope of the lease by adding the right to use one or more underlying assets;
and
- the consideration for the lease increases by an amount equivalent to the stand-alone price for the increase in scope and
any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.
For a modification that is not a separate lease, at the effective date of the modification the Company:
- allocates the consideration in the modified contract;
- establishes the term of the modified lease; and
- remeasures the lease liability by discounting the revised lease payments using the revised discount rate.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
119
When a lease modification is not accounted for as a separate lease, the Company accounts for the adjustment to the lease liability:
- by decreasing the carrying amount of the right-of-use assets to reflect the full or partial termination of the lease due to lease
modifications by which the scope of the lease is reduced. Any gain or loss related to a full or partial termination of the lease is
recognised by the Company in profit or loss;
- by making a corresponding adjustment to the right-of-use asset for all other lease modifications.
The Company presents lease liabilities separately from other liabilities in the statement of financial position. Interest expenses
related to lease liabilities are reported separately from the depreciation of the right-of-use assets. Interest expenses related to
lease liabilities is a component of finance costs which is presented in the statement of comprehensive income.
2.14 Provisions
Provisions are recognised only when the Company has a legal obligation or irrevocable commitment as a result of past event,
and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. If the effect of the time value of money is material, the amount of provision
is discounted using the effective pre-tax discount rate set based on the interest rates for the period and taking into account specific
risks associated with the provision as appropriate. Where discounting is used, the increase in the provision due to the passage of
time is recognised as borrowing costs.
2.15 Employee benefits
(a) Social security contributions
The Company pays social security contributions to the state Social Security Fund (the “Fund”) on behalf of its employees based
on the defined contribution plan in accordance with the local legal requirements. A defined contribution is a plan under which the
Company pays fixed contributions into the Fund and will have no legal or constructive obligations to pay further contributions if
the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period.
Social security contributions are recognised as expenses on an accrual basis and included in payroll expenses.
(b) Bonus plans
The Company recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that
has created a constructive obligation.
(c) Pension benefits to employees of retirement age
According to the laws of the Republic of Lithuania and the Collective Agreement effective at LITGRID AB, each employee leaving
the Company at the retirement age is entitled to a one-off benefit. A liability for such payments is recognised in the balance sheet
and it reflects the present value of these payments at the date of the financial statements. At each reporting date, the long-term
employee benefit obligation is estimated with reference to actuary valuations using the projected relative unit method. The present
value of the defined long-term employee benefit obligation is determined by discounting the estimated future cash flows using the
effective interest rates as set for government debentures denominated in a currency in which payments to employees are expected
to be made and with maturity similar to that of the related liability.
2.16 Congestion management revenue
The Company acquires the right to congestion management revenue when different electricity market prices occur in Lithuania,
Sweden, Poland and Latvia as a result of insufficient capacity of electricity lines. Revenue that was received as a result of price
differences at different bidding areas is distributed equally by the power exchange operator (Nord Pool AS) to the transmission
system operators of the countries which operate the interconnections.
Regulation (EU) No 2019/943 of the European Parliament and of the Council of 5 June 2019 on conditions for access to the
network for cross-border exchanges in electricity stipulates that congestion management revenue may be used in the following
order of priority:
a) When revenue is used for guaranteeing availability of the allocated capacity of the interconnections, it is recognised as
income in the period during which the related expenses are incurred. In case of unplanned disconnection of the electricity
interconnection and when the trade in the interconnection’s capacities has already been completed at the electricity
exchange (i.e. when they have already been allocated), the operators of the line ensure that the capacities traded are
available to the market participants. In such a case, the operators incur costs that arise as a result of the price difference
between the price of electricity traded by the operators and the price of balancing and (or) imbalance electricity
purchased/sold by the Company.
b) When revenue is used for maintaining or increasing the interconnections’ capacities, congestion management revenue
is accounted for using the accounting policies applicable to grants, i.e. initially congestion management revenue is
recognised as liability and recorded by reducing the value of the asset concerned, and subsequently it is recognised by
reducing depreciation expenses of the related asset over the useful life of that asset.
Land
99 years
Motor vehicles
from 2 to 4 years
Buildings
from 2 to 3 years
Other property, plant and equipment
from 2 to 3 years
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
121
Revenue is recognised when it is probable that economic benefits associated with a transaction will flow to the Company, and
when a reliable estimate of the amount of revenue can be made. Revenue is measured at the fair value of the consideration
received or receivable, net of value added tax and discounts.
Revenue from electricity transmission and related services
This group of the Company’s revenue comprises revenue from electricity transmission, provision of system services, trade in
imbalance and balancing electricity, congestion revenue, revenue from connection of new consumers, PSO services and other
revenue related to electricity transmission and system services.
Revenue from contracts with customers comprises revenue from electricity transmission, system services, trade in imbalance and
balancing electricity and revenue from connection of new consumers, PSO services and other related revenue. The Company
recognises revenue from contracts with customers over the reporting period in which the performance obligation is satisfied, i.e.
the control of the good is transferred or the service is provided, except for revenue from connection of new consumers which is
recognised by the Company over the useful life of the created asset (Note 2.12).
When recognising other income related to electricity transmission and system services the Company takes into consideration the
terms of contracts signed with customers and all significant facts and circumstances, including the nature, amount, timing and
uncertainty relating to cash flows arising from the contract with the customer. The main sale contracts are signed for the term of
one year and coincide with the reporting period. All subsequent value adjustments for previous periods are not made, and contract
modifications are rare.
Prices of the electricity transmission services are regulated by the NERC which establishes the upper limits of the prices for the
transmission service. Specific prices and tariffs for the transmission services are established by the Company’s Board within the
limits approved by the NERC. When establishing prices for the next year, deviations of the current year (the year not yet ended)
and deviations of the previous year (the year that already ended) and various forecasts for the upcoming year are assessed, i.e.
they increase or decrease the prices for the next year, i.e. the prices are not adjusted retrospectively. All possible price adjustments
in the future periods for excess profit/higher loss incurred in the previous/current years are not treated as a variable part of the
price under IFRS 15. Such decrease (due to excess profit earned) or increase (due to higher expenses incurred) in future revenue
does meet the general accounting criteria for the recognition of liabilities or assets because it depends on the Company’s
operations in the future and is treated as the regulated assets or liabilities and therefore, in the opinion of the Company’s
management, it does not fall within the scope of IFRS 15.
The Company purchases system services from the producers and later provides this service to the distribution network operators
and electricity consumers using the tariff established by the NERC. The Company recognises the gross amounts of revenue as it
acts as a principal in the provision of system services.
PSO service funds are the fees paid to the suppliers of electricity under the public service obligations scheme, with the list of such
suppliers established by the Lithuanian Government or other institution authorised by it. The annual quantities of PSO funds are
established by the NERC.
PSO service funds allocated by the NERC are accounted for by the Company as grants related to income as they are designated
to compensate for the loss of revenue from services provided by electricity producers using renewable energy sources. Such
grants are recognised as income:
- PSO service funds allocated by the NERC to the Company for balancing electricity produced from the renewable energy
resources.
- when the NERC allocates PSO service funds to the Company for the connection of electricity generation installations using
wind, biomass, solar energy or hydro energy in the process of electricity generation to transmission networks, for the
optimisation, development and/or reconstruction of transmission networks in relation to acceptance and transmission of
electricity from producers using the renewable energy resources.
Other income
Interest income is recognised on accrual basis considering the outstanding balance of debt and the applicable interest rate.
Interest received is recorded in the statement of cash flows as cash flows from investing activities.
Gain from disposal of property, plant and equipment, lease income, income from default charges and fines collected from the
contractors as a result of late fulfilment of works, including property, plant and equipment under construction, are recognised by
the Company as other income.
Default charges and fines collected from the contractors as a result of late fulfilment of works are calculated upon the completion
of a project or a stage thereof and upon notifying a supplier, and they are offset against the supplier’s debt. In case of a legal
dispute over the amount of default charges or fines and when it is more likely than unlikely that the amounts of default charges or
fines will be reduced or annulled, provisions are recognised.
Dividend income is recognised when the right to receive payment is established.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
122
Recognition of expenses
Expenses are recognised in the statement of comprehensive income as incurred by the accrual method.
2.21 Borrowing costs
Borrowing costs that are directly attributable to the production, getting ready for use or sale of an asset that necessarily takes a
substantial period of time to produce, get ready for its intended use or sale, are capitalised as part of the cost of that asset until
the asset is ready for use or sale in full. Interest income related to temporary investment of borrowed funds until their use for the
acquisition of the assets is deducted from the acquisition cost of the assets.
Other borrowing costs are recognised as expenses in the statement of comprehensive income as incurred.
2.22 Income tax
Income tax expenses for the period comprises the current year income tax and deferred income tax expenses.
Income tax
Income tax expenses for the current year are calculated on the current year profit before tax, as adjusted for certain non-deductible
expenses/non-taxable income. Income tax is calculated using the tax rate effective as at the date of issue of the financial
statements. Income tax rate was 15% in 2022 and 2021.
Tax losses can be carried forward for indefinite period, except for the losses incurred as a result of disposal of securities and/or
derivative financial instruments. Such carrying forward is disrupted if the Company changes its activities due to which these losses
were incurred except when the Company does not continue its activities due to reasons which do not depend on the Company
itself. The losses from disposal of securities and/or derivative financial instruments can be carried forward for 5 consecutive years
and only be used to reduce the taxable income earned from the transactions of the same nature. Tax losses carried forward can
be used to reduce the taxable income earned during the reporting year by maximum of 70%. In addition, the Company can take
over tax losses of the group companies, if the requirements laid down in the Law on Corporate Income Tax are met.
Deferred income tax
Deferred income tax is accounted for using the balance sheet liability method. Deferred income tax assets and deferred tax liability
are recognised for future tax purposes to reflect differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred income tax liabilities are recognised on all temporary differences that will increase
the taxable profit in future, whereas deferred income tax assets are recognised to the extent it is probable that they will reduce
the taxable profit in future. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting, nor taxable profit or
loss.
The Company reviews the carrying amount of a deferred income tax assets at each reporting date and reduces it to the extent
that it is no longer probable that sufficient taxable profit will be available to allow the benefit of a part or all of that deferred income
tax assets to be utilised. Deferred income tax assets and liabilities are estimated using the tax rate that has been applied when
calculating income tax for the year when the related temporary differences are to be realised or settled.
Deferred income tax assets and liabilities are offset only where they relate to income taxes assessed by the same fiscal authority
or where there is a legally enforceable right to offset current tax assets and current tax liabilities.
Current income tax and deferred income tax
Current income tax and deferred income tax are recognised as income or expenses and included in profit or loss for the reporting
period, except for the cases when tax arises from a transaction or event that is recognised directly in equity or in other
comprehensive income, in which case taxes are also recorded in equity and in other comprehensive income respectively.
2.23 Earnings per share
Earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary
registered shares issued.
The Company has no dilutive share options, therefore, basic and diluted earnings per share do not differ.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
123
2.24 Related parties
Parties are considered to be related if:
a) A person or a close member of that person’s family is related to a reporting entity if that person:
1) has control or joint control of the reporting entity;
2) has significant influence over the reporting entity; or
3) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity;
b) An entity is related to a reporting entity if any of the following conditions applies:
1) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow
subsidiary is related to the others);
2) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which
the other entity is a member);
3) Both entities are joint ventures of the same third party;
4) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
5) The entity is controlled or jointly controlled by a person identified in point a;
6) A person identified in subpoint 1) of point a has a significant influence over the entity or is a member of the key management
personnel of the entity (or of a parent of the entity);
7) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting
entity or to the parent of the reporting entity.
2.25 Contingencies
Contingent liabilities are not recognised in the financial statements. They are disclosed in the financial statements unless the
possibility of an outflow of resources embodying economic benefits is remote.
A contingent asset is not recognised in the financial statements but disclosed when an inflow of income or economic benefits is
probable.
2.26 Events after the reporting period
Events after the reporting period that provide additional information about the Company’s position at the date of the financial
statements (adjusting events) are disclosed in the financial statements. Events after the reporting period that are not adjusting
events are disclosed in the notes when material.
2.27 Inter-company offsetting
For the purpose of the financial statements, assets and liabilities, income and expenses are not offset, except for the cases when
such offsetting is specifically required by an individual standard.
2.28 Fair value measurement
Fair value is the amount for which, at the measurement date, an asset or a service could be exchanged, or a liability settled,
between knowledgeable, willing parties in an arm's length transaction. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability, or in
the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most
advantageous market must be available to the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest
and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable;
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
124
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
in the market.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether
transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
Valuations are performed by the management at each reporting date. For the purpose of fair value disclosures, the Company has
determined classes of assets and liabilities on the basis of the nature, characteristics and risks of assets or liabilities and the level
of the fair value hierarchy as explained above.
In the financial statements as at 31 December 2022 and 2021, the Company did not have any significant assets or liabilities
measured or re-measured at fair value measured at fair value through other comprehensive income: financial assets (Notes 2.6
and 9) and property, plant and equipment (Notes 2.4 and 6).
The Company’s principal financial assets not at fair value comprise cash and cash equivalents, trade and other receivables, trade
and other payables and borrowings. Fair value , and assets is defined as the price that would be received to sell an asset in an
orderly transaction between market participants at the measurement date. The fair value of a financial asset is not less than the
amount discounted from the first day, on which payment may be required.
3. Accounting estimates and assumptions
Significant accounting estimates and assumptions
The preparation of financial statements according to International Financial Reporting Standards requires management to make
estimates and assumptions that affect the accounting policies applied, the reported amounts of assets, liabilities, income and
expenses, and the disclosures of contingencies. Actual results may differ from those estimates. The significant management
estimates and assumptions and the main sources for uncertainties used in the preparation of these financial statements that might
cause substantial changes in the carrying amounts of the related assets and liabilities in the next financial year are described
below:
Valuation of property, plant and equipment
As described in Note 6, the Company tested the value of property, plant and equipment to determine whether it is consistent with
its fair value. The determination of the assets’ fair value is mainly affected by assumptions used in assessing the transmission
service income for the future periods. The assumptions used in determining the fair value of property, plant and equipment are
described in more detail in the above-mentioned note.
Depreciation rates of property, plant and equipment
The useful life of property, plant and equipment is determined separately for each item (component) of the asset by estimating
future economic benefit in view of the expected period of use in the Company’s activities, the intensity of use, the environment of
use, changes in the asset’s original standard performance over its entire useful life, technological and economic progress morally
outdating the asset, legal and similar factors restricting the useful life of property, plant and equipment.
Useful lives are reviewed annually to ensure that the depreciation period would correspond to the expected useful life of property,
plant and equipment. The effect of changes in estimates, if any, is accounted for on a prospective basis.
Congestion management revenue and deferred income tax assets
Based on the accounting policies described in Note 2.16, accounting for congestion management revenue depends on the
purpose for which revenue is used. These purposes are described in Regulation (EU) No 2019/943 of the European Parliament
and of the Council of 5 June 2019 on the internal market for electricity. Based on the NERC’s decision and the assessment of the
Company, a congestion revenue balance as at 31 December 2022 will be used to:
1) reduce the transmission tariff for 2023 by recognising the amount of EUR 142.3 million as transmission revenue in year
2023;
2) finance the synchronisation projects agreed with the NERC.
Deferred income tax assets arising from congestion revenue received in 2014 - 2017 and due to taxation with profit tax at the year
as they received will be realised over the useful life of the asset acquired using congestion revenue.
In the long term, regulation ensures the Company’s profitability, therefore, in the management’s opinion, deferred income tax
assets will be realised in the future by reducing income tax payable.
The congestion management revenues received from 2018 are subject to profit tax at the time of use of congestion management
revenues, so there is no difference between financial and tax accounting.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
125
4. Impact of war in Ukraine on key accounting estimates and assumptions
On 24 February 2022, Russia started a military aggression against Ukraine. The effects of the war on the Company’s financial
performance in 2022 included a significant increase in technological loss expenses incurred by the Company due to rise in
electricity prices in the market. It should be noted that this impact is of a short-term nature as the regulator will compensate
incurred losses in the subsequent periods. Moreover, as the contractors no longer use materials or components imported from
Russia, Belarus or Ukraine, the values of certain investment projects have increased as a result of the war. In addition to other
financing sources, the Company meets a higher demand for investment funds by using congestion management revenue which
has increased significantly due to high market prices of electricity.
The impact of the war could be observed in the future in case of the disconnection from the BRELL ring. If this occurs, it is probable
that expenses for ancillary (system) services could increase. However, if that were to happen, the impact on the Company’s
financial indicators would be of a short-term nature, because higher expenses incurred for ancillary (system) services, similarly
as currently incurred higher expenses for compensation of technological losses, would be compensated by including them in the
prices of the regulated services for the subsequent years.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
126
5. Intangible assets
Statutory
Other
servitudes and
Patents and
Computer
intangible
protection
licences
software
assets
zones*
Total
At 31 December 2020
Acquisition cost
600
7,087
127
3,674
11,488
Accumulated amortisation
(489)
(4,713)
(38)
-
(5,240)
Net book amount
111
2,374
89
3,674
6,248
Net book amount at 31 December 2020
111
2,374
89
3,674
6,248
Acquisitions
21
1,025
-
-
1,046
Reclassification to/from PP&E
-
-
37
-
37
Reclassification between categories
4
(182)
178
-
-
Value adjustment due to change in assumptions
-
-
-
(1,188)
(1,188)
Amortisation charge
(75)
(1,059)
(57)
-
(1,191)
Net book amount at 31 December 2021
61
2,158
247
2,486
4,952
At 31 December 2021
Acquisition cost
625
7,930
342
2,486
11,383
Accumulated amortisation
(564)
(5,772)
(95)
-
(6,431)
Net book amount
61
2,158
247
2,486
4,952
Net book amount at 31 December 2021
61
2,158
247
2,486
4,952
Acquisitions
86
2,546
2,632
Write-offs
(298)
(298)
Reclassification to/from PP&E
89
89
Reclassification between categories
239
(239)
-
Value adjustment due to change in assumptions
(795)
(795)
Amortisation charge
(70)
(941)
(85)
(1,096)
Net book amount at 31 December 2022
316
3,315
162
1,691
5,484
At 31 December 2022
Acquisition cost
950
10,028
342
1,691
13,011
Accumulated amortisation
634)
(6,713)
(180)
-
(7,527)
Net book amount
316
3,315
162
1,691
5,484
* Assets related to statutory servitudes amounted to EUR 1,100 thousand as at 31 December 2022 (31 December 2021:
EUR 840 thousand) and assets related to protection zones amounted to EUR 591 thousand as at 31 December 2022
(31 December 2021: EUR 1,646 thousand)
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
127
6. Property, plant, and equipment
Other
Structures
property,
Constructio
and
plant and
n work in
Land
Buildings
machinery
equipment
progress
Total
At 31 December 2020
Acquisition cost
908
18,907
312,238
13,594
24,009
369,656
Accumulated amortisation
-
(1,020)
(32,994)
(3,700)
-
(37,714)
Accumulated impairment
-
-
(233)
-
-
(233)
Net book amount
908
17,887
279,011
9,894
24,009
331,709
Net book amount at 31 December 2020
908
17,887
279,011
9,894
24,009
331,709
Acquisitions
-
54
903
778
51,242
52,977
Change in prepayments for PP&E
-
-
-
-
3,641
3,641
Write-offs
-
-
(1,965)
-
-
(1,965)
Reclassification to inventories
-
-
-
(171)
47
(124)
Reclassification to intangible assets
-
-
-
-
(37)
(37)
Reclassification between categories
(388)
1,823
23,883
1,063
(26,381)
-
Off-set of connection revenue against non-
current assets
-
(54)
(958)
(74)
-
(1,086)
Off-set of grants against non-current assets
-
-
-
-
(27,210)
(27,210)
Depreciation charge
-
(551)
(17,379)
(1,924)
-
(19,854)
Net book amount at 31 December 2021
520
19,159
283,495
9,566
25,311
338,051
At 31 December 2021
Acquisition cost
520
20,731
333,194
15,189
25,311
394,945
Accumulated amortisation
-
(1,572)
(49,466)
(5,623)
-
(56,661)
Accumulated impairment
-
-
(233)
-
-
(233)
Net book amount
520
19,159
283,495
9,566
25,311
338,051
Net book amount at 31 December 2021
520
19,159
283,495
9,566
25,311
338,051
Acquisitions
1,092
804
54,318
56,214
Change in prepayments for PP&E
18,225
18,225
Write-offs
(1,299)
(1,299)
Reclassification to inventories
(71)
(71)
Reclassification to intangible assets
(89)
(89)
Reclassifications between grant categories
(4,878)
(465)
5,343
-
Reclassification between categories
656
11,782
1,091
(13,529)
-
Off-set of connection revenue against non-
current assets
(914)
(50)
(964)
Off-set of grants against non-current assets
(29,182)
(29,182)
Depreciation charge
(640)
(16,599)
(1,928)
(19,167)
Net book amount at 31 December 2022
520
19,175
272,679
8,997
60,347
361,718
At 31 December 2022
Acquisition cost
520
21,387
338,384
16,517
60,347
437,155
Accumulated amortisation
(2,212)
(65,705)
(7,520)
-
(75,437)
Accumulated impairment
-
-
Net book amount
520
19,175
272,679
8,997
60,347
361,718
Write-offs mainly represent derecognition of replaced parts of the assets during reconstruction.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
128
Prepayments for property, plant, equipment (PPE):
2022
2021
Carrying amount at the beginning of the period
4,547
906
Prepayments paid for PPE over the period
23,056
6,828
Transfer to construction work in progress
(4,831)
(3,187)
Carrying amount at the end of the period
22,772
4,547
Interest capitalised at the Company during the period ended 31 December 2022 amounted to EUR 36 thousand (EUR 46 thousand
during the period ended 31 December 2021). The annual interest rate of capitalisation was 1.46% during the period ended 31
December 2022 (1.14% during the period ended 31 December 2021).
In 2022, investments of transmission system operator LITGRID (works performed and assets acquired, irrespective of payment
deadlines) amounted to EUR 56.2 million, of which 41% were earmarked for the implementation of strategic electricity projects of
national significance, and 59% for the reconstruction and development of the electricity transmission network and ensuring the
continuity of the Company’s activities. In 2021, major investments were made in the strategic projects of national significance
(around 62%) and in the projects on the restoration and modernisation of the electricity transmission network (around 26%).
The company's property, plant and equipment are shown at revalued amounts. The company performed the last revaluation of its
property, plant and equipment at 31 December 2018, it was performed with internal resources and without using the services of
an independent external evaluator. No regulatory decisions that could materially affect the value of the assets were adopted in
2022.
The Company performed the valuation of property, plant and equipment as at 31 December 2022 and 31 December 2021 and
established that the carrying amount of the assets within the materiality limits corresponds to their fair value. The valuation
corresponded to Level 3 of the fair value hierarchy (Note 2.28), it was performed using the Company’s internal resources and not
engaging an independent external valuer. The Company estimated the fair value of the assets as at 31 December 2022 and 31
December 2021 under the income method using the discounted cash flows calculation technique. The value of assets was
determined as the present value of net future cash flows.
The company’s activity is regulated. The property operates as an integral electrical grid. The fair value of the electrical grid is
appraised using the income approach, but its assessment excludes all activities related to the transmission network development
(and not related to the present assets being assessed), i.e. investments in development projects, connection of new
consumers/producers, grants to development projects.
The value of the assets as at 31 December 2022 was calculated using the following main assumptions:
• The updated LRAIC model for the establishment of the regulated asset base and the cost of capital is applied in the regulatory
pricing from 2022. The cost of capital comprises depreciation expenses of the regulated assets and return on investments, which
is calculated by multiplying the regulated asset base by the rate of return on investments. Over the regulatory period of five years,
the cost of assets under optimisation (planned to be restored) is determined using the present (restored) value and investments
in the optimised assets over the regulatory period of five years are consistent with the value of assets being restored, which is
calculated under the LRAIC model. The cost of capital of the assets that are not optimised is determined using historic cost.
Furthermore, taking into consideration available financing sources and aiming to retain a sustainable level of the Company’s debt,
an additional component was established for the financing of investments increasing the level of revenue from the regulated
activities.
• The amounts of investments until 2031 are taken from the ten-year investment plan adjusted according to the actual data with
all development investments eliminated from it.
• All operating expenses attributable to the regulated activities are compensated through transmission revenue, except for the
compensation of remuneration expenses, the compensation assumption of which is 94%.
• The calculation of cash flows for the years 2023-2025 included a difference between the permitted and actual return on
transmission activity investments for the years 2021-2022 as well as the estimation of efficient saving of operating expenses that
increases the permitted investment return (a regulated loss to be refunded through a higher transmission price and revenue) and
the refund of the result of ancillary (system) services in excess of the amount permitted by the NERC to the network consumers
(a lower component and revenue of additional services).
• The rate of return on investments (ROI before tax) is equal to 4.09% for 2023-2026 (equivalent to a 3.48% after tax) and from
2027 it is the same as the discount rate, i.e. 5.5% (are equal to WACC 4.68% after tax). In the calculations of the assets’ value as
at 31 December 202, the rate of return on investments (ROI before tax) was equal to 4.03% for 2022-2026 (equivalent to a 3.42%
after tax), and from 2027 it is the same as the discount rate, i.e. 4.09% (are equal to WACC 3.48% after tax).
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
129
• Net cash flows generated from the assets were discounted using the discount rate (WACC after tax) equal to 4.68%, which was
calculated by the Company. As at 31 December 2021, net cash flows generated from the assets were discounted using the
discount rate (WACC after tax) equal to 3.48%, which was calculated by the Company.
As at 31 December 2022, the Company’s commitments for the acquisition of property, plant and equipment to be fulfilled in the
upcoming periods amounted to EUR 417,269 thousand (31 December 2021: EUR 150,653 thousand).
The table below presents the net book amounts of the Company’s property, plant and equipment, which would have been
recognised had the historical cost method been used, excluding prepayments but including grants, and negative revaluations that
would represent impairment, as at 31 December 2022 and 31 December 2021:
Other
Structures
property,
Construction
and
plant and
work in
Land
Buildings
machinery
equipment
progress
Total
At 31 December 2022
520
19,175
272,679
8,997
37,575
338,946
At 31 December 2021
520
19,159
283,495
9,566
20,764
333,504
Property, plant, and equipment is stated at acquisition cost, less grants received/receivable for the acquisition of property, property,
plant, and equipment. Grants comprise financing from the EU support funds, a portion of congestion management revenue
designated for the financing of investments, payments for the expenses incurred during the connection of producers to the
transmission network and performance of works for the relocation/reconstruction of the transmission network’s installations
initiated by customers.
Had the value of property, plant and equipment not been reduced by the amount of grants, its carrying amount would have been
EUR 354,323 thousand higher as at 31 December 2022 (31 December 2021: EUR 334,322 thousand). The following table shows
information on property, plant and equipment, the value of which was reduced by the amount of grants received/receivable:
2022
2021
Carrying amount at the beginning of the period
334,322
315,178
Acquisitions
30,146
28,296
Depreciation charge
(9,889)
(9,141)
Write-offs
(256)
(11)
Carrying amount at the end of the period
354,323
334,322
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
130
7. Right-of-use assets
As indicated below, the Company leases land, office premises, motor vehicles and other property, plant and equipment. The lease
terms of the lease contracts (except for the lease of land) is 2-4 years. The lease terms of the land lease contracts is 99 years.
When recognising right-of-use assets and lease liabilities and determining the lease terms the Company assessed extension and
early termination options of the lease contracts. As the useful life of the right-of-use assets is longer than the lease term,
depreciation is calculated from the commencement date of the lease till the end of the lease term.
The Company’s right-of-use assets comprise as follows:
Other property,
Motor
plant and
Land
Buildings
vehicles
equipment
Total
At 31 December 2020
Acquisition cost
4,465
47
714
127
5,353
Accumulated depreciation
(90)
-
(370)
(98)
(558)
Net book amount
4,375
47
344
29
4,795
Net book amount at 31 December 2020
4,375
47
344
29
4,795
Acquisitions
-
-
6
-
6
Depreciation charge
(45)
(16)
(202)
(29)
(292)
Net book amount at 31 December 2021
4,330
31
148
-
4,509
At 31 December 2021
Acquisition cost
4,465
47
720
127
5,359
Accumulated depreciation
(135)
(16)
(572)
(127)
(850)
Net book amount
4,330
31
148
-
4,509
Net book amount at 31 December 2021
4,330
31
148
-
4,509
Acquisitions
1,402
1,402
Write-offs
(661)
(127)
(788)
Depreciation charge
(45)
(16)
(258)
(319)
Depreciation (write-offs)
661
127
788
Net book amount at 31 December 2022
4,285
15
1,292
-
5,592
At 31 December 2022
Acquisition cost
4,465
47
1,461
-
5,973
Accumulated depreciation
(180)
(32)
(169)
-
(381)
Net book amount
4,285
15
1,292
-
5,592
By way of a public tender and following the criteria for green procurement, motor vehicles were leased in 2022.
8. Loans granted
At 31
At 31
December 2022
December 2021
Loan to EPSO-G UAB (under the cashpool agreement)
232,008
43,594
Carrying amount
232,008
43,594
After the issuing of the permission by the NERC, the Company and EPSO-G UAB concluded the group account (cashpool)
agreement (with a 0% fixed interest rate) on 26 February 2021. The agreement establishes the possibility to temporarily use free
congestion management revenue for inter-company lending and borrowing purposes. The agreement was valid until 26 February
2022 and contained two possible extensions of 12 months each. In 2022, the agreement was extended until 26 February 2023
and a fixed interest rate was applied from 20 December 2022. The agreement was extended on 26 February 2023 (Note 41).
Under the group account (cashpool) agreement the Company’s positive funds balance transferred to the disposal of EPSO-G
UAB is accounted for as amounts receivable (loans granted) in the statement of financial position and is not included in the line
item of cash and cash equivalents.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
131
9. Financial assets
The Company’s financial assets measured at fair value through comprehensive income comprised shares of TSO Holding AS:
2022
2021
Carrying amount at 1 January
781
1 089
Financial assets acquired
13,090
-
Financial assets disposed*
(13,871)
-
Change in impairment
(308)
Carrying amount at 31 December
-
781
* transfer price EUR 13,786 thousand, and EUR 85 thousand the disposal of the previously held 2% shareholding.
In November 2022, 2% of shares of TSO Holding held by the Company at the beginning of the year and 37.6% of shares
additionally acquired by the Company in October 2022 all 39.6% were transferred by the Company to parent company EPSO-G
UAB for the same price of the one share. The transactions on additional acquisition and disposal of shares did not affect the
Company’s results of operations for 2022, whereas the disposal of the previously held 2% shareholding resulted in a loss of EUR
85 thousand.
Dividends received by the Company from TSO Holding AS in 2022 amounted to EUR 43 thousand (2021: EUR 308 thousand).
10. Inventories
The Company’s inventories comprise as follows:
At 31
December 2022
At 31
December 2021
Materials, spare parts and other inventories
166
180
Less: impairment
(163)
(173)
Carrying amount
3
7
Movements in write-down allowance for inventories in 2022 and 2021 are indicated below:
2022
2021
Carrying amount at 1 January
173
160
Change in impairment
(10)
13
Carrying amount at 31 December
163
173
In 2022, the Company reversed and in 2021, it established additional provisions for inventory write-down to net realisable value
in relation to inventories stored at the warehouse and not moving or slow-moving inventories and accounted for in operating
expenses in the statement of comprehensive income.
The Company’s inventories recognised as expenses in 2022 amounted to EUR 254 thousand (2021: EUR 316 thousand).
11. Trade receivables under contracts with customers
Trade receivables under contracts with customers comprise as follows:
At 31
At 31
December
December
2022
2021
Amounts receivable for electricity transmission and related services
58,414
49,776
Accumulated amounts receivable for electricity services
2,666
732
Less: expected credit losses of trade receivables
-
(45)
Carrying amount
61,080
50,463
As at 31 December 2022, amounts receivable for electricity transmission and related services increased compared to 31
December 2021 because the price of ancillary (system) services increased 2.7 times in December 2022 and the volume decreased
by 14% compared to December 2021.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
The fair value of trade receivables under contracts with customers approximates their carrying amount.
In 2021, the Company reversed EUR 45 thousand of expected credit losses with regard to amounts paid (31 December 2020:
EUR 110 thousand).
In 2022, the Company did not recognise any expected credit losses related to trade receivables under contracts with customers.
At 31 December 31 there were no amounts past due (at 31 December 31 2021: EUR 45 thousand and a 100% impairment was
formed for them).
The Company applies a simplified credit risk assessment approach as required by IFRS 9 and accounts for loss allowances for
lifetime credit losses from initial recognition of amounts receivable. To determine credit losses of amounts receivable the Company
applies the individual assessment and a loss coefficient matrix. The loss coefficient matrix is based on historical data for a period
exceeding 36 months on settlements of debts by customers. The loss coefficients may be adjusted in view of macroeconomic
forecasts. The loss coefficients are classified into separate groups of receivables on the basis of credit risk characteristics and
overdue period.
12. Trade receivables
Trade receivables comprise as follows:
At 31
At 31
December
December
2022
2021
Amounts receivable for electricity transmission and related services
17
143
Congestion management revenue receivable
649
3,741
PSO funds receivable
354
3,189
Accumulated amounts receivable for electricity transmission
1,477
3,074
Other trade receivables
61
53
Carrying amount
2,558
10,200
The fair value of trade receivables approximates their carrying amount.
In 2022, the Company did not recognise any expected credit losses related to trade. At 31 December 31 there were no amounts
past due (at 31 December 31 2021: there were no).
13. Other amounts receivable
Other amounts receivable comprise as follows:
At 31
At 31
December 2022
December 2021
Grants receivable
302
9 900
Other amounts receivable
613
92
Less: impairment of other receivables
(23)
(23)
Carrying amount
892
9 969
The fair value of other amounts receivable approximates their carrying amount.
At 31 December 31 other amounts receivable past due were EUR 23 thousand (at 31 December 31 2021: EUR 23 thousand). A
100% impairment was formed for them.
14. Other financial assets
At 31
At 31
December 2022
December 2021
Funds deposited for guarantees
5,000
3000
Deposits received (Note 28)
2,334
2359
Other financial assets
27
Carrying amount
7,361
5,359
The fair value of other financial assets as at 31 December 2022 and 2021 approximated their carrying amount.
132
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
133
15. Cash and cash equivalents
At 31
At 31
December 2022
December 2021
Cash at bank
499
1,819
Carrying amount
499
1,819
The fair value of cash and cash equivalents approximates their carrying amount.
16. Share capital and share premium
As at 31 December 2022 and 31 December 2021, the Company’s share capital amounted to EUR 146,256 thousand and it was
divided into 504,331,380 units of ordinary registered shares with the nominal value of EUR 0.29 each. All the shares have been
fully paid.
Share premium represents a difference between the nominal value of shares and consideration received for shares, they were
formed in 2010 and amount to EUR 8,579 thousand.
Capital management
Capital consists of the equity capital disclosed in the statement of financial position.
According to the Law on Companies of the Republic of Lithuania, the equity of the Company must account for at least ½ of the
amount of the authorised share capital. The Company complied with this requirement as at 31 December 2022 and 31 December
2021. No other external capital requirements have been imposed on the Company. Dividends are allocated pursuant to the
approved dividend policy, under which dividends payable are directly linked with the effective use of the company’s equity, i.e. the
higher benefits created by the Company for the shareholders are, the larger portion of profit can be allocated by the Company for
a further development or implementation of other significant projects.
The Company’s main objectives when managing capital are to safeguard the Company’s ability to continue as a going concern.
In order to maintain or change the capital structure, the amount of dividends to be paid to the shareholders may be adjusted,
capital may be returned to the shareholders, or new shares may be issued.
17. Legal reserve, reserve for changes in fair value of financial assets and other reserves
Legal reserve
A legal reserve is a compulsory reserve under the Lithuanian legislation. The legal reserve should not be less than 10 per cent of
the authorised share capital and can only be used to cover the Company’s losses only. The legal reserve accumulated by the
Company complies with the requirements of the legal acts of the Republic of Lithuania and represent 10 per cent of the authorised
share capital.
Other reserves
Other reserves are formed based on the decision of shareholders and can be redistributed on the distribution of the next year’s
profit.
The Ordinary General Meeting of Shareholders of LITGRID AB held on 20 April 2022 approved the proposed profit appropriation
and resolved to transfer EUR 14,794 thousand from profit to be appropriated to other reserves and EUR 175 thousand to be
appropriated to reserve for support.
The Ordinary General Meeting of Shareholders of LITGRID AB held on 20 April 2021 approved the proposed profit appropriation
and resolved to transfer EUR 8,890 thousand from profit to be appropriated to other reserves.
18. Dividends
The Ordinary General Meeting of Shareholders of LITGRID AB held on 20 April 2022 adopted the decision to pay dividends of
EUR 5,043 thousand. Dividends per share amounted to EUR 0.01.
The Ordinary General Meeting of Shareholders of LITGRID AB held on 20 April 2021 adopted the decision to pay dividends of
EUR 16,542 thousand. Dividends per share amounted to EUR 0.0328.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
134
19. Grants
The grants at the Company are mainly designated for the acquisition of non-current assets. Movements in grants in 2022 and
2021 were as follows:
Opening balance at 1 January
2022
2021
Grants receivable (Note 13)
9,900
3,191
Grants received in advance (non-current liabilities) (Note 24) *
(1,677)
(1,677)
Grants received in advance (current liabilities) (Note 27) *
(9,705)
(4,787)
(1,482)
(3,273)
Recognised grants
Transfer to property, plant and equipment (Note 6)
30,146
28,296
Grants used for compensation of expenses
8
-
30,154
28,296
Grants received
Grants received in the form of monetary funds (cash flow statement)
72,086
22,496
Congestion revenue transferred to grants (Note 22)
22,992
2,954
Grants received during the previous years
26
(31)
95,104
25,419
Grants received in the form of assets **
964
1,086
Closing balance at 31 December
Grants receivable (Note 13)
302
9,900
Grants received in advance (non-current liabilities) (Note 24) *
(32,802)
(1,677)
Grants received in advance (current liabilities) (Note 27) *
(34,896)
(9,705)
(67,396)
(1,482)
* a grant received in advance is accounted for as non-current or current liabilities until the moment of the acquisition of such assets (Note 2.11).
** the asset is created by the client and transferred to the Company free of charge, i.e. the assets received from the third parties are offset against
the value of the assets (Note 2.12).
20. Borrowings
The Company’s borrowings comprise as follows:
At 31
At 31
December 2022
December 2021
Non-current borrowings
Bank borrowings
34,285
51,452
Current borrowings
Current portion of non-current borrowings
6,143
14,225
Total borrowings
40,428
65,677
Non-current borrowings grouped by maturity profile:
At 31
At 31
December 2022
December 2021
From 1 to 2 years
6,143
14,225
From 2 to 5 years
14,142
19,227
After 5 years
14,000
18,000
Total
34,285
51,452
As at 31 December 2022 and 2021, no assets were pledged as collateral by the Company.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
135
As at 31 December 2022, the weighted average interest rate on the Company’s borrowings was 0.94% (31 December 2021:
0.97%).
As at 31 December 2022, the outstanding balance of the Company’s borrowings with the fixed interest rate amounted to EUR
40,428 thousand (31 December 2021: EUR 46,571 thousand).
As at 31 December 2022 and 2021, the Company had no unwithdrawn borrowings or overdrafts.
Under the loan agreement signed by the Company with the European Investment Bank, the Company is committed to comply
with the net debt to EBITDA ratio, which should not exceed 6.5 and with the interest coverage ratio, which should be above 3,
these ratios are calculated two times per year at 31 December and at 30 June. The outstanding balance of a borrowing, which is
subject to this requirement, amounted to EUR 40,428 thousand as at 31 December 2022 (31 December 2021: the outstanding
balance of a borrowing, which is subject to this requirement, EUR 46,571 thousand (European Investment Bank) and EUR 19,106
thousand (Nordic Investment Bank), which was repaid as at 31 December 2022). As at 31 December 2022, the Company did not
comply with the requirements laid down in the loan agreement. However, at the Company’s request European Investment Bank
sent a notification in December 2022, whereby it informed that the Bank waives its right to demand that Company repay the loan
prior to its maturity, if the Company does not comply with the requirements as at 31 December 2022 and as at 30 June 2023, on
this basis, the part of borrowing is classified as non-current. As at 31 December 2021, the Company complied with the
requirements laid down in the loan agreements.
Reconciliation of net debt balances and cash flows from financing activities in 2022 and 2021:
At 31
At 31
December
December
2022
2021
Cash and cash equivalents
499
1,819
Non-current borrowings
(34,285)
(51,452)
Lease liabilities
(5,299)
(4,414)
Current portion of non-current borrowings
(6,143)
(14,225)
Interest charged on borrowings
(49)
(92)
Current portion of lease liabilities
(403)
(180)
Net debt
(45,680)
(68,544)
Cash and cash equivalents
499
1,819
Borrowings with a fixed interest rate
(46,179)
(51,257)
Borrowings with a variable interest rate
(19,106)
Net debt
(45,680)
(68,544)
Cash
Borrowings
Other
Leases
Total
financing
Net debt as at 31 December 2020
33
(80,017)
-
(4,857)
(84,841)
Increase (decrease) in cash and cash equivalents
1,786
-
-
1,786
New leases
-
-
(6)
(6)
Lease payments
-
-
269
269
Repayment of a borrowing
-
14,225
-
14,225
Interest charged
(8)
(722)
(64)
(794)
Interest paid
8
745
64
817
Net debt as at 31 December 2021
1,819
(65,769)
-
(4,594)
(68,544)
Increase (decrease) in cash and cash equivalents
(1,320)
(1,320)
New leases
(1,402)
(1,402)
Lease payments
294
294
Repayment of a borrowing
25,249
25,249
Interest charged
(621)
(25)
(68)
(714)
Interest paid
664
25
68
757
Net debt as at 31 December 2022
499
(40,477)
-
(5,702)
(45,680)
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
136
21. Lease liabilities
The Company’s lease liabilities and their movements:
2022
2021
Carrying amount at the beginning of the period
4,594
4,857
Leases
1,402
6
Expenses of interest charged
68
64
Lease payments (principal and interest)
(362)
(333)
Carrying amount at the end of the period
5,702
4,594
Non-current lease liabilities
5,299
4,414
Current lease liabilities
403
180
Total liabilities
5,702
4,594
The Company’s lease liabilities comprise as follows:
At 31
At 31
December 2022
December 2021
Current portion
403
180
Repayment terms of non-current liabilities:
From 1 to 2 years
373
44
From 2 to 3 years
370
22
From 3 to 5 years
275
46
After 5 years
4,281
4,302
Total
5,702
4,594
The Company’s short-term lease (up to 12 months) and low-value lease (up to EUR 4 thousand) expenses amounted to
EUR 175 thousand in 2022 (2021: EUR 172 thousand).
The Company had no leases with variable payments not included in the value of lease liabilities .
22. Congestion management revenue
At 31
At 31
December
December
2022
2021
Non-current portion of congestion management revenue included in liabilities
64,095
88,267
Current portion of congestion management revenue included in liabilities
287,400
20,820
Total congestion management revenue
351,495
109,087
2022
2021
Congestion management revenue at 1 January
109,087
62,519
Congestion management revenue received during the period
267,296
50,112
Transfer to property, plant and equipment
(22,992)
(2,954))
Congestion management revenue recognised as income during the period
(1,896)
(,590)
Congestion management revenue at 31 December
351,495
109,087
The principles of receipt and use of congestion management revenue are set out in Note 2.16. As at 31 December 2022, the
unused balance of congestion management revenue presented as part of liabilities amounted to EUR 351,495 thousand. The
projected use is specified in Note 3. The current portion of liabilities is expected to be settled (used) within 12 months.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
137
23. Provisions
At 31
At 31
December 2022
December 2021
Provisions for pension benefits to employees (Note 2.15)
654
275
Provisions for servitude liabilities
468
277
Provisions for registration of protection zones
367
1,646
Provisions for settlement of current liabilities (Note 39)
100
661
Carrying amount
1,589
2,859
Non-current provisions
941
352
Current provisions
648
2,507
Movements in provisions were as follows:
Provisions for
Provisions for
pension benefit
Provisions for
registration of
obligations to
servitude
protection
Provisions for
employees
liabilities
zones
litigations and claims
Total
Carrying amount at 31 December 2020
218
1,250
1,909
15
3,392
Calculated
-
Revised estimate
57
(925)
(263)
646
(485)
Payments made
(48)
(48)
Carrying amount at 31 December 2021
275
277
1,646
661
2,859
Calculated
100
100
Revised estimate
379
260
(1,055)
(416)
Payments made
(69)
(224)
(661)
(954)
Carrying amount at 31 December 2022
654
468
367
100
1,589
The assumptions applied when calculating provisions for pension benefit obligations to employees were as follows: long-term
salary growth rate in 2022 – 4% (2021: 4%), discount rate in 2022 – 0.83% (2021: 0.37%), employee turnover rate in 2022 – 8.7%
(2021: 11.14%), benefit rate in 2022 – the amount of 2-4 monthly average salaries (2021: the amount of 2 monthly average
salaries).
As at 31 December 2022, the provision for statutory servitudes amounted to EUR 468 thousand (assumptions applied: number of
applications expected to be received – 1,213, average compensation amount per application – EUR 231, discount rate – 1.24%),
and as at 31 December 2021, the provision amounted to EUR 277 thousand (assumptions applied: number of applications
expected to be received – 830, average compensation amount per application – EUR 229, discount rate – 0.62%).
As at 31 December 2022, the provision for protection zones amounted to EUR 367 thousand (assumptions applied: expected
value of services according to purchases effected, discount rate – 1.24%), and as at 31 December 2021, the provision amounted
to EUR 1,646 thousand (assumptions applied: expected value of services according to effected purchases, discount rate – 0.62%).
Reasons for decrease in the provision for protection zones were as follows:
1) The actual price for the performance of works was established following the completion of the procurement for services
of the development of plans in 2022;
2) The registration of special land use conditions in the cadastre was no longer required following the amendments to the
provisions of the Lithuanian Law on Special Land Use Conditions No XIII-2166 of 6 June 2019.
As at 31 December 2021, the provision for litigations was made the provision for dispute in the case with Šiaulių Energija UAB.
Considering that Article 279(1) of the Lithuanian Civil Procedure Code stipulates that rulings passed by the court of appeal instance
come into effect from the date of their adoption, the obligation for the Company to execute the ruling in the case with Šiaulių
Energija UAB arose on 24 March 2022. Under the court’s ruling, the claimant was paid a loss compensation, procedural interest
and litigation expenses. The part of an amount was received by the Company from an insurance company as compensation for
damage. Šiaulių Energija UAB the claimant was accounted in the statement of comprehensive income in year 2022 for EUR 162
thousand (2021: EUR 661 thousand).
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
138
As at 31 December 2021, the provision for litigations was made the provision for dispute in the case with Žilinskis ir CO UAB. On
30 May 2022, Žilinskis ir CO UAB filed a claim with Vilnius Regional Court for the annulment of the decision of LITGRID AB
regarding the use of a bank guarantee and of the claim to Luminor Bank AS Lithuania division, and for the awarding of an amount
of EUR 100 thousand. Case-law is not well-developed in this area, therefore a provision of EUR 100 thousand was established
as at 31 December 2022.
24. Other non-current amounts payable and liabilities
At 31
At 31
December 2022
December 2021
Advance amounts received from connection of new consumers
1,115
-
Non-current trade payables
321
430
Deferred revenue
154
163
Grants received in advance*
32,802
1,677
Carrying amount
34,392
2,270
*Grants received in advance mainly consist of funds received from the CEF (Connecting Europe Facility) fund for the
implementation of the synchronisation programme. Expenditures for which a grant was received are planned to be incurred in
2023 and the grant is planned to be recognised in 2024.
25. Current and deferred income tax
Income tax expenses comprise as follows:
2022
2021
Income tax expenses of the current year
-
11,395
Income tax expenses of the previous year
(16,772)
(1,819)
Deferred income tax income/(benefit)
(8,275)
(7,307)
Deferred income tax income/(benefit) of the previous year
16,184
1,819
Income tax expenses/(benefit) of the current year
(8,863)
4,088
Since 2014 when calculating income tax, the Company recognises congestion management revenue as taxable income in the
year in which it is accounted for, although only a part of congestion management revenue has been recognised as income or has
been used as a reduction of depreciation expenses in the same period. At the end of 2020, the Company revised the income tax
return for 2018, in which it eliminated congestion management revenue from taxable income and aimed to reduce the income tax
for 2018 by an amount of EUR 1,819 thousand. During 2022, the Company also revised the returns for 2019 and 2021.
The State Tax Inspectorate started a tax inspection on 28 March 2022, which was completed on 6 March 2023. On the basis of
the received decision of the State Tax Inspectorate, the Company understands that the State Tax Inspectorate has agreed that
with effect from 2018 uniform accounting policies should be applied to congestion management revenue for financial reporting
and tax purposes. A change in the recognition of congestion management revenue as taxable income resulted in a reduction of
the prior year income tax expenses of EUR 16,184 thousand and in a respective increase of deferred income tax expenses due
to the assets that were previously recognised on the reduction of congestion management revenue. Consequently, a significant
income tax overpayment related to previous and current reporting year and amounting to EUR 28,598 thousand arose following
a change in the moment of taxation of congestion management revenue.
The Company calculated income tax expenses for 2022 by recognising congestion revenue received as income not subject to
tax.
Other adjustments
During the revision of the income tax returns for the year 2019, the Company also returned to EPSO-G UAB a tax loss of EUR
2,567 thousand that had been taken over from it and transferred a refunded consideration of EUR 385 thousand representing
15% of the returned amount to the State Tax Inspectorate as income tax payable.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
139
The movement in deferred income tax assets and liabilities prior to offsetting the balances related to the same fiscal authority was
as follows:
Deferred income tax assets
mpairment of
revalued
property,
Statutory
plant and
servitudes
equipment
and
and financial
Impairment of
Congestion
protection
assets
assets
revenue
zones
Tax loss
Other
Total
At 31 December 2020
1,381
147
13,079
474
-
497
15,578
Recognised in profit and loss
44
(9)
5,532
(186)
-
180
5,561
At 31 December 2021
1,425
138
18,611
288
-
677
21,139
Recognised in profit and loss
(179)
(45)
(16,233)
(163)
8,305
(51)
(8,366)
At 31 December 2022
1,246
93
2,378
125
8,305
626
12,773
Deferred income tax liabilities
ncrease in
value of
revalued
property,
Statutory
plant and
servitudes
Effect of
equipment
Differences in
Tax relief on
and
capitalis
and financial
depreciation
acquisition
protection
ation of
assets
rates
of PP&E
zones
interest
Total
At 31 December 2020
-
186
(1,426)
(551)
(281)
(2,072)
Recognised in profit and loss
-
(392)
138
178
3
(73)
At 31 December 2021
-
(206)
(1,288)
(373)
(278)
(2,145)
Recognised in profit and loss
-
418
(87)
119
7
457
At 31 December 2022
-
212
(1,375)
(254)
(271)
(1,688)
Deferred income tax assets, net, at 31 December 2021
21,139
Deferred income tax assets, net, at 31 December 2022
12,773
Deferred income tax liability, net, at 31 December 2021
(2,145)
Deferred income tax liability, net, at 31 December 2022
(1,688)
Deferred income tax, net, at 31 December 2021
18,994
Deferred income tax, net, at 31 December 2022
1,085
The analysis of movements in deferred income tax assets and liabilities over time is as follows:
At 31
At 31
December 2022
December 2021
Deferred income tax assets:
Deferred income tax assets to be realised after more than 12 months
4,285
20,990
Deferred income tax assets to be realised within 12 months
8,488
149
Total
12,773
21,139
Deferred income tax liabilities:
Deferred income tax liabilities to be settled after more than 12 months
(1,314)
(2,032)
Deferred income tax liabilities to be settled within 12 months
(374)
(113)
Total
(1,688)
(2,145)
The table below presents reconciliation of income tax expenses reported in the statement of comprehensive income to income
tax expenses calculated at a statutory income tax rate on profit before income tax:
At 31
December 2022
At 31
December 2021
Profit/(loss) before income tax
(58,347)
24,101
Income tax calculated at a rate of 15%
(8,752)
3,615
Income tax expenses/(benefit) for the previous year
(378)
41
Effect of non-allowable deductions and non-taxable income
267
432
Income tax expenses/(benefit) recognised in profit or loss
(8,863)
4,088
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
140
26. Trade payables
At 31
At 31
December 2022
December 2021
Amounts payable for electricity
53,737
42,280
Amounts payable for repair works, services
4,900
7,691
Amounts payable for property, plant and equipment
11,509
9,483
Carrying amount
70,146
59,454
The fair value of trade payables approximates their carrying amounts.
27. Advance amounts received
At 31
At 31
December 2022
December 2021
Deferred revenue
13
11
Advance amounts received from new consumers and producers*
568
581
Grants received in advance
34,896
9,705
Other advance amounts received
29
31
Carrying amount
35,506
10,328
*Advance amounts received from new consumers and producers include advance amounts received from new consumers and
producers for connection to electricity networks and for electricity infrastructure relocation services.
28. Other amounts payable
At 31
At 31
December
December
2022
2021
Non-financial liabilities
Employment-related liabilities
303
227
Accrued expenses relating to vacation reserve
1,442
1,131
VAT payable
4,055
3,762
Real estate tax payable
622
512
Total non-financial liabilities
6,422
5,632
Financial liabilities
Dividends payable
522
514
Interest payable
49
92
Accrued other expenses
2,580
2,014
Deposits received*
2,334
2,359
Fee payable to the regulator
394
258
Other amounts payable and current liabilities
6
17
Total financial liabilities
5,885
5,254
Total carrying amount of financial and non-financial liabilities
12,307
10,886
* Deposits received consist of deposits received from customers under imbalance purchase - sale contracts.
The fair value of other amounts payable approximates their carrying amoun t.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
141
29. Revenue from electricity transmission and related services
Revenue from contracts with customers
2022
2021
Revenue from electricity transmission and related services
Electricity transmission services
72,516
80,070
Trade in balancing/imbalance electricity
175,145
71,720
Electricity ancillary (system) services
137,175
91,653
Revenue from other sales of electricity and related services
2,025
2,618
Total revenue from electricity transmission and related services
386,861
246,061
Other income from contracts with customers
Income from administration of guarantees of origin
129
126
Total other income
129
126
Total revenue from contracts with customers
386,990
246,187
Revenue not attributable to contracts with customers
PSO services*
28,893
19,978
Congestion revenue
1,896
590
Other electricity-related services
1,161
495
Revenue from connection of producers and relocation of electrical installations
13
8
Total revenue not attributable to contracts with customers
31,963
21,071
Total revenue
418,953
267,258
All revenues are recognised over – time.
Revenue from electricity transmission and related services increased by 56.8% in 2022 compared to 2021.
Revenue growth resulted mainly from a EUR 103.4 million (2.4 times) increase in revenue from imbalance and balancing energy due to 2.5 times
higher average sale price, although the volume sold was 1% lower.
Revenue from electricity ancillary (system) services increased by EUR 45.5 million (49.7%) as a result of a 61.7% increase in an average price.
Revenue from PSO services (balancing of electricity produced from renewable energy sources) increased by EUR 8.9 million as a result of a 86%
increase in the price, although the volume sold declined by 36.1%.
30. Other income
2022
2021
Income from lease of assets
534
512
Interest on late payment and default charges (Note 2.20)
696
2,786
Other income
125
32
Total
1,355
3,330
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
142
31. Significant changes in operating expenses
2022
2021
Expenses for purchase of imbalance and balancing electricity
203,588
91,007
Expenses for electricity ancillary (system) services
111,633
61,860
Expenses for electricity technological needs
99,576
40,165
Due to an increase in the average purchase price, expenses for imbalance and balancing electricity rose 2.2 times in 2022 compared to 2021 and
amounted to EUR 203.6 million.
Expenses for electricity ancillary (system) services increased by 80.5% in 2022 compared to 2021 and totalled EUR 111.6 million.
Expenses of compensating for electricity purchase technological losses in the transmission network increased 2.5 times in 2022 compared to
2021 and amounted to EUR 99.6 million due to 2.1 times higher average purchase price of electricity and 17.2% higher technological losses.
32. Segment information
The Company is engaged in the provision of electricity transmission and related services and its business activities are organised
as a single segment. The main indicator for the segment’s profit or loss is a net profit. All non-current assets of the Company are
allocated in Lithuania where the Company conducts its business activities. In 2022, revenue from the Lithuanian clients accounted
for 82% of the Company’s total revenue (89% in 2021).
In 2022 and 2021, the Company’s revenue by geographical location of customers:
2022
2021
Lithuania
344,221
242,169
Estonia
43,862
10,176
Sweden
15,840
7,231
Poland
5,846
5,823
Latvia
1,448
2,192
Norway
7,838
2,304
Other countries
1,253
693
Total
420,308
270,588
The Company’s revenue from the major clients in 2022:
Company name
2022
Energijos Skirstymo Operatorius AB
200 602
Ignitis UAB
48 486
Ignitis Gamyba AB
27 705
The Company’s revenue from the major clients in 2021:
Company name
2021
Energijos Skirstymo Operatorius AB
158 956
Ignitis UAB
23 756
Ignitis Gamyba AB
13 687
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
143
33. Related-party transactions
EPSO-G UAB was the parent company as at 31 December 2022 and 2021. The parent entity of this company was the Republic
of Lithuania represented by the Ministry of Energy of the Republic of Lithuania. For the purposes of the related-party disclosure
the Republic of Lithuania excludes central and local government authorities. The disclosures comprise transactions with the
companies of the EPSO-G UAB group, associates and all entities controlled by or under a significant influence of the state
(transactions with these entities are disclosed only if the amount of the transactions exceeds EUR 100 thousand during a calendar
year) and with the management, and balances arising from these transactions.The list of entities controlled by or under a
significant influence of the state, with which the transactions are disclosed, is presented at address: https://vkc.sipa.lt/apie-
imones/vvi-sarasas/.
The Company’s related parties in 2022 and 2021 were as follows:
- The Company’s parent EPSO-G, which is wholly owned by the Ministry of Energy of the Republic of Lithuania:
- The companies of the EPSO-G UAB group:
- Amber Grid AB (jointly controlling shareholders);
- TETAS UAB (jointly controlling shareholders);
- Energy Cells UAB (jointly controlling shareholders);
- BALTPOOL UAB (jointly controlling shareholders).
- The companies of Ignitis Grupė UAB
- Other state-owned entities:
- State Enterprise Ignalina Nuclear Power Plant
- State Enterprise Centre of Registers
- Other state-owned companies or those under significant influence.
- Management.
Transactions with related parties are carried out in accordance with the public procurement requirements or the tariffs approved
by the legal acts.
The Company’s transactions conducted with related parties in 2022 and balances arising from these transactions as at 31
December 2022 were as follows:
Amounts
Related parties
Amounts
payable and
receivable and
accrued
EPSO-G UAB group companies
accrued revenue
expenses
Loans granted
Purchases
Sales
Other sales
EPSO-G UAB
25
79
232,008
242
-
13,850*
TETAS UAB
365
2,046
-
9,702
180
-
BALTPOOL UAB
354
-
-
-
12,279
-
ENERGY CELLS UAB
123
48
-
38
200
-
State-owned companies
Energijos Skirstymo Operatorius AB
33,059
985
-
4,039
200,591
-
Ignitis Gamyba AB
3,712
25,387
-
181,932
27,705
-
Ignitis Grupės Paslaugų Centras UAB
27
-
-
-
295
-
Ignitis UAB
10,138
-
-
11,176
48,486
-
Vilniaus Kogeneracinė Jėgainė UAB
8
100
-
579
212
-
Kauno Kogeneracinė Jėgainė UAB
-
81
-
771
194
-
Transporto Valdymas UAB
-
-
-
123
-
-
State Enterprise Lithuanian Road
Administration
-
321
-
-
-
-
STATE ENTERPRISE IGNALINA
NUCLEAR POWER PLANT
159
-
-
-
1,152
-
LTG Infra AB
127
15
-
-
652
-
State Enterprise Centre of Registers
-
205
-
240
-
-
48,097
29,267
232,008
208,842
292,011
13,785
The Company’s transactions with the state-owned enterprises mainly comprise sales of electricity transmission, balancing,
imbalance and electricity ancillary (system) services, purchase of electricity. EPSO-G UAB provides management services,
TETAS UAB provides services under construction contracts, Baltpool UAB transfers PSO funds allocated to the Company.
* - Income from financing activities comprised as follows: sale of shares of TSO Holding AS to EPSO-G UAB (EUR 13,785
thousand); compensation of expenses related to the sale of shares of TSO Holding AS to EPSO-G UAB (EUR 45 thousand); and
interest charged to EPSO-G UAB on the loan granted (EUR 20 thousand).
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
144
Dividends paid to related parties
2022
2021
EPSO-G UAB
4,917
16,129
Total
4,917
16,129
The Company’s transactions conducted with related parties in 2021 and balances arising from these transactions as at 31
December 2021 were as follows:
Related parties
Amounts
Amounts payable
receivable and
and accrued
Loans
EPSO-G UAB group companies
accrued revenue
expenses
granted
Purchases
Sales
Other sales
EPSO-G UAB
-
53
43,594
628
-
-
TETAS UAB
618
958
11,522
89
13
BALTPOOL UAB
3,189
-
-
203
10,527
-
State-owned companies
Energijos Skirstymo Operatorius AB
20,543
273
-
3,907
159,142
-
Ignitis Gamyba AB
4,620
19,003
-
82,846
13,687
-
Ignitis Grupės Paslaugų Centras UAB
30
-
-
-
278
-
Ignitis UAB
13,543
-
-
3,151
23,756
-
Vilniaus Kogeneracinė Jėgainė UAB
-
175
-
243
396
-
Kauno Kogeneracinė Jėgainė UAB
-
43
-
262
125
-
Transporto Valdymas UAB
-
18
-
181
-
-
Projektų Ekspertizė UAB
-
46
-
103
-
-
State Enterprise Lithuanian Road Administration
-
321
-
-
-
-
State Enterprise Ignalina Nuclear Power Plant
94
10
-
128
923
-
LTG Infra AB
69
-
-
-
499
-
42,706
20,900
43,594
103,174
209,422
13
Dividends paid to related parties
2021
2020
EPSO-G UAB
16,129
3,983
Total
16,129
3,983
Payments to key management personnel
2022
2021
Employment-related payments*
803
802
Whereof: Termination benefits*
37
Number of key management personnel (average annual)
7
7
* - including social security contributions paid by the employer.
No loans, guarantees or any other benefits were paid or calculated, nor any assets were transferred to the Company’s
management in 2022 and 2021.
Key management personnel consists of the Company’s heads of administration, directors of the departments and members of the
collegial management bodies. In 2022, payments to the members of the collegial management bodies amounted to EUR 40
thousand (2021: EUR 38 thousand).
34. Basic and diluted earnings per share
In 2022 and 2021, the Company’s basic and diluted earnings/(deficit) per share were as follows:
2022
2021
Profit/(loss) for the period attributable to the Company’s shareholders (EUR thousands)
(49,449)
20,013
Weighted average number of shares (units)
504,331,380
504,331,380
Basic and diluted earnings/(deficit) per share (in EUR)
(0.098)
0.040
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
145
35. Additional information on cash flows
Change in the Company’s payables for non-current assets amounting to EUR 1,964 thousand (2021: EUR 841 thousand) and
capitalised interest amounting to EUR 36 thousand (2021: EUR 46 thousand) were taken into account when calculating cash
flows from investing activities in 2022.
36. Financial risk factors
The Company is exposed to financial risks in its operations. In managing these risks, the Company seeks to mitigate the effect of
factors which could make a negative effect on the financial performance of the Company. Financial risk management is conducted
by the Company’s Finance Planning and Analysis Division in accordance with the Treasury and Financial Risk Management Policy
of the EPSO-G UAB Group approved by the Board of LITGRID AB which is published on the website of EPSO-G UAB
www.epsog.lt.
Financial instruments by category (as per the statement of financial position):
Financial assets
At 31
At 31
December 2022
December 2021
Trade receivables under contracts with customers (Note 11)
61,080
50,463
Trade receivables (Note 12)
2,558
10,200
Other amounts receivable (Note 13)
892
9,969
Loans granted (Note 8)
232,008
43,594
Other financial assets (Note 14)
7,361
5,359
Cash and cash equivalents (Note 15)
499
1,819
Financial assets measured at amortised cost
304,398
121,404
Other financial assets
Financial assets measured at fair value through other comprehensive income (Note 9)
-
781
Total financial assets
304,398
122,185
Financial liabilities
At 31 December
At 31 December
2022
2021
Borrowings (Note 20)
40,428
65,677
Lease liabilities (Note 21)
5,702
4,594
Trade payables (Note 26)
70,146
59,454
Dividends payable (Note 28)
522
514
Accrued other expenses and deferred revenue (Note 28)
2,580
2,014
Guarantee on the fulfilment of obligations (Note 28)
2,334
2,359
Total
121,712
134,612
Credit risk
As at 31 December 2022 and 31 December 2021, credit risk was related to the following line items:
At 31
At 31
December 2022
December 2021
Financial assets, excluding assets measured at fair value through other comprehensive income
304,398
121,404
The Company has a significant credit risk concentration, because exposure to credit risk is shared among 10 main customers,
amounts receivables from which accounted for about 95% of the Company’s total trade and other receivables as at 31 December
2022 (31 December 2021: 94%). As at 31 December 2022, amounts receivable from the major customer, i.e. distribution network
operator Energijos Skirstymo Operatorius AB, accounted for 54% of the Company’s total amounts receivable (31 December 2021:
36%).
When entering into imbalance contracts with participants of the electricity market, the Company requires to pay a cash deposit of
the established amount ( note 14 and note 28) or to provide a bank guarantee in accordance with terms and conditions set out in
the imbalance contract.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
146
The Company holds unused cash and cash equivalents at the banks assigned with a credit rating not lower than AA-. The table
below shows the long-term credit ratings of the parent banks of the banks at which the Company holds cash and cash equivalents
(Note 15):
Swedbank
A+
SEB
AA-
OP Corporate Bank
AA-
Trade and other receivables are mainly from the state-owned entities and large manufacturers with no history of significant
defaults.
The Company has granted the loan to EPSO-G UAB, which is wholly owned by the state and has a Baa1 investment rating
assigned by rating agency Moody’s Investors Service.
Liquidity risk
The main objective of the Company’s liquidity policy is to ensure funding of its operations, i.e. to ensure that the Company will
have sufficient cash and/or committed credit facilities and overdrafts to meet its contractual obligations at any time. The liquidity
risk is managed by making forecasts of cash flows of the Company.
The Company’s cash flows from operations were negative in 2022, therefore its exposure to liquidity risk became more significant.
The Company’s current ratio (total current assets / total current liabilities) and quick ratio ((total current assets – inventories) / total
current liabilities) as at 31 December 2022 were 0.71 (31 December 2021: 1). As described in Note 2.16, the Company may use
congestion management revenue when necessary. The next year’s liquidity will be ensured by the next year’s operating profit and
congestion funds received which, when necessary, will be used for the financing of the activities, and by obtaining additional
borrowings from financial institutions.
The table below summarise the contractual maturity dates of the Company’s financial liabilities. This information has been
prepared based on undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be
required to pay. Balances of trade and other amounts payable with repayment terms up to 12 months are equal to their carrying
amounts, because the impact of discounting is insignificant.
Up to 3
Between
Within the
Within
After five
Total
months
4 months
second
third – fifth
years
liabilities
and 1 year
year
year
At 31 December 2022
Trade and other amounts
payable
75,582
-
-
-
-
75,582
Borrowings
-
6,509
6,452
14,757
14,267
41,985
Lease liabilities
120
345
442
850
7,587
9,344
75,702
6,854
6,894
15,607
21,854
126,911
At 31 December 2021
Trade and other amounts
payable
64,341
-
-
-
-
64,341
Borrowings
1,262
13,559
14,675
19,989
18,415
67,900
Lease liabilities
75
165
107
253
7,671
8,271
65,678
13,724
14,782
20,242
26,086
140,512
Market risk
a) Interest rate risk
The Company’s income, expenses and cash flows from operating activities are substantially independent of changes in market
interest rates. From November 2022, the Company has non-current borrowings bearing fixed interest rates.
b) Foreign exchange risk
To manage the foreign exchange risk, the Company enters into purchase/sale contracts only in the euros.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
147
37. Fair value of financial assets and financial liabilities
The Company’s principal financial assets and liabilities not carried at fair value are trade and other amounts receivable, cash and
cash equivalents, loans, trade and other amounts payable and other financial assets.
The following methods and assumptions are used to estimate the value of each category of financial instruments that are not
measured at fair value:
• The carrying amount of current trade and other amounts receivable, other financial assets, cash and cash equivalents, loans
to the related parties, current trade payables and other amounts payable approximates their fair value (Level 3).
• The fair value of non-current borrowings is based on the quoted market price for the same or similar issues or on the current
rates available for borrowings with the same maturity profile. The fair value of the Company’s non-current borrowings with fixed
interest rates was approximately EUR 4,681 thousand lower than their carrying amount as at 31 December 2022 (31 December
2021: EUR 2,959 thousand).
38. Regulation of prices and the Company’s profitability
The electricity transmission service result for 2018-2021 (difference between permitted and actual investment return) accrued as
at 31 December 2022 and already approved by the NERC is negative totalling EUR (4.1) million, and it has already been assessed
(revenue has been increased) when establishing the transmission service price for 2023.
The electricity transmission service result for 2022 is negative due to a significant increase in electricity market prices in 2022
leading to higher expenses for compensating for electricity purchase technological losses in the transmission network and it has
not yet been approved by the NERC. When establishing the price for 2024-2025, it should be assessed by increasing the price of
and revenue from the electricity transmission service.
The result of ancillary (system) services for 2021 (difference between revenue and expenses which is to be refunded) accrued as
at 31 December 2022 and already approved by the NERC totals EUR 27.1 million, and it has already been assessed (revenue
has been reduced) when establishing the acquisition component of ancillary (system) services for 2023.
The result of ancillary (system) services for 2022 is positive and has not yet been approved by the NERC. When establishing the
price for 2023, it should be assessed by reducing the price of and revenue from the services.
39. Litigations
A legal dispute with Šiaulių Energija UAB is ongoing from 12 March 2020, during which Vilnius Regional Court passed the ruling
on 6 April 2021 whereby it obligated to the Company to indemnify losses, procedural interest and compensate litigation expenses.
As at 31 December 2021, the Company established a provision of EUR 661 thousand for a possible claim.
On 24 March 2022, the Court of Appeal passed a final ruling and ordered the Company to indemnify a loss of EUR 1,360 thousand,
procedural interest and compensate litigation expenses. Under the ruling of the Court of Appeal the total amount awarded was
paid to Šiaulių Energija UAB as according to Article 279(1) of the Lithuanian Civil Procedure Code rulings passed by the court of
appeal instance come into effect from the date of their adoption. At the present moment, LITGRID AB has fully executed the ruling
of the Court of Appeal of Lithuania.
The appeal in cassation of LITGRID AB was accepted on 3 June 2022. The case is under investigation by the court of cassation
instance regarding the annulment of the ruling of the court of appeal for the amount of EUR 1,360 thousand. The Company cannot
predict the course of the case, it has fully executed its obligations, therefore no provisions were established in respect of this case
as at 31 December 2022 (Note 23).
In the procurement Purchase of construction works of the 330 kV Vilnius-Neris electricity transmission line conducted by LITGRID
AB, the contractor refused to sign the contract. Consequently, the proposal guarantee, i.e. a bank guarantee for the amount of
EUR 100 thousand, was used. On 30 May 2022, Žilinskis ir CO UAB filed a claim with Vilnius Regional Court for the annulment
of the decision of LITGRID AB regarding the use of a bank guarantee and of the claim to Luminor Bank AS Lithuania division, and
for the awarding of an amount of EUR 100 thousand.
Case-law is not well-developed in this area, therefore a provision of EUR 100 thousand was established as at 31 December 2022
(Note 23).
On 24 January 2023, Vilnius Regional Court finalised the investigation of the case and rejected the claim. On 23 February 2023
Žilinskis ir CO UAB has applied the appeal against the decision to the Court of Appeal of Lithuania.
NOTES TO THE COMPANY’S FINANCIAL STATEMENTS
(All amounts are in EUR thousands unless otherwise stated)
148
40. Services provided by the audit firm
Non-audit services provided to the Company by the audit firm in 2022 amounted to EUR 18 thousand (2021: EUR 21 thousand).
41. Events after the reporting period
On 26 February 2023 the company extended the borrowing agreement with UAB "EPSO-G" for the second time until 26 February
2024, applying from 1 March 2023 variable interest rate linked to ESTR (euro short-term rate).
______
PricewaterhouseCoopers UAB, J. Jasinskio str. 16B, 03163 Vilnius, Lithuania
+370 (5) 239 2300, lt_vilnius@pwc.com, www.pwc.lt
Company code 111473315, registered with the Legal Entities’ Register of the Republic of Lithuania
Independent auditor’s report
To the shareholders of LITGRID AB
Report on the audit of the financial statements
Our opinion
In our opinion, the financial statements give a true and fair view of the financial position of
LITGRID AB (the “Company”) as at 31 December 2022 and of the Company’s financial performance
and cash flows for the year then ended in accordance with International Financial Reporting Standards
as adopted by the European Union.
Our opinion is consistent with our additional report to the Audit Committee dated 16 March 2023.
What we have audited
The Company’s financial statements comprise:
● the statement of financial position as at 31 December 2022;
● the statement of comprehensive income for the year then ended;
● the statement of changes in equity for the year then ended;
● the statement of cash flows for the year then ended; and
● the notes to the financial statements, which include significant accounting policies and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Company in accordance with the International Code of Ethics for
Professional Accountants (including International Independence Standards) issued by the
International Ethics Standards Board for Accountants (IESBA Code) and the Law of the Republic of
Lithuania on the Audit of Financial Statements that are relevant to our audit of the financial statements
in the Republic of Lithuania. We have fulfilled our other ethical responsibilities in accordance with the
IESBA Code and the Law of the Republic of Lithuania on the Audit of Financial Statements.
To the best of our knowledge and belief, we declare that non-audit services that we have provided to
the Company are in accordance with the applicable law and regulations in the Republic of Lithuania
and that we have not provided non-audit services that are prohibited under Article 5(1) of Regulation
(EU) No 537/2014 considering the exemptions of Regulation (EU) No 537/2014 endorsed in the Law
of the Republic of Lithuania on the Audit of Financial Statements.
The non-audit services that we have provided to the Company, in the period from 1 January 2022 to
31 December 2022, are disclosed in note 40 to the financial statements.
Our audit approach
Overview
Materiality
● Overall materiality: EUR 2,975 thousand
Key audit matters
● Value of Property, plant and equipment
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we considered where management made
subjective judgements; for example, in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including, among other
matters, consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Company, the
accounting processes and controls, and the industry in which the Company operates.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Company materiality for the financial statements as a whole as set out in the table
below. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements,
if any, both individually and in aggregate on the financial statements as a whole.
Overall Company materiality
EUR 2,975 thousand (EUR 2,670 thousand)
How we determined it
1% of the average revenue for the last three years
Rationale for the materiality
benchmark applied
We chose revenue as the benchmark for the Company
because it is the measure against which the performance of
the Company is assessed by the regulatory bodies as well as
external creditors and other stakeholders. The Company’s
results depend on approved tariffs for regulated activities,
therefore the Company‘s profit before tax fluctuate widely
year over year, whereas its revenue is more stable and
growth-oriented indicator which can be compared to other
market participants. Since electricity prices were significantly
increasing in the market in 2022, we chose the average
revenue for the last three years as the benchmark to
determine the materiality levels.
We chose 1%, which is within the range of acceptable
quantitative materiality thresholds.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit above EUR 200 thousand, as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Value of Property, plant and equipment
(refer note 2.4 and 6)
The Company applies the revaluation model
for subsequent recognition of property, plant
and equipment (‘PPE’). As at 31 December
2022 the carrying value of PPE amounted to
EUR 361,718 thousand, being its fair value at
the date of the revaluation less subsequent
accumulated depreciation and less subsequent
accumulated impairment losses.
The management has assessed whether the
carrying value of PPE does not materially differ
from that which would be determined using fair
value at the end of the reporting period. The
Company used the income approach using the
discounted cash flows technique and
concluded that carrying amount of the PPE is
the reasonable approximation of the fair value
and therefore no valuation adjustments have
been recognised as at 31 December 2022.
We focused on this area due to significance of
the PPE balance for the statement of financial
position and because the management’s
assessment of values of PPE is an area of
significant management judgements.
We understood and evaluated management’s
policies, processes and controls in determination
of fair value of PPE.
We have examined management’s valuation
methodology and their assessment of incurred
changes in tariff setting regulations.
We obtained the cash flow models used by the
management to assess the value of assets. We
checked the models and tested that they are
mathematically accurate and that the results are
accurately compared to the carrying values of
assets. We examined the management’s
assumptions which have material impacts on
valuation results: rate of return on regulated
assets and discount rate, expected capital
expenditures, additional tariff component to
finance investments, values of regulated assets
and values of assets at historic cost. As
appropriate, we traced them to Company’s
internal budgets and investment plans, or market
information.
We involved our internal valuation specialists to
assist us in discount rate and terminal value
assessment and in an overall assessment of
model’s methodology.
Also, we assessed sensitivity of the cash flow
model to changes in the rate of return, discount
rate, additional tariff component to finance
investments and to changes in congestion
income.
We considered whether the overall estimate is
reasonable and whether the management
judgement that no valuation adjustments are
needed is appropriate to the circumstances.
We have considered the adequacy of disclosures
in Notes 2.4 and 6.
Reporting on other information including the annual report
Management is responsible for the other information. The other information comprises the annual
report, including the corporate governance report and the remuneration report and social responsibility
(sustainability) report (but does not include the financial statements and our auditor’s report thereon).
Our opinion on the financial statements does not cover the other information, including the annual
report.
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
With respect to the annual report, including the corporate governance report and the remuneration
report, we considered whether the annual report, including the corporate governance report and the
remuneration report, includes the disclosures required by the Law of the Republic of Lithuania on
Financial Reporting by Undertakings.
Based on the work undertaken in the course of our audit, in our opinion:
● the information given in the annual report, including the corporate governance report and the
remuneration report, for the financial year for which the financial statements are prepared, is
consistent with the financial statements; and
● the annual report, including the corporate governance report and the remuneration report, has
been prepared in accordance with the Law of the Republic of Lithuania on Financial Reporting by
Undertakings.
The Company presented the social responsibility (sustainability) report as a part of the annual report.
In addition, in light of the knowledge and understanding of the Company and its environment obtained
in the course of the audit, we are required to report if we have identified material misstatements in the
annual report which we obtained prior to the date of this auditor’s report. We have nothing to report in
this regard.
Responsibilities of management and those charged with governance for the financial
statements
Management is responsible for the preparation of the financial statements that give a true and fair
view in accordance with International Financial Reporting Standards as adopted by the European
Union, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
● Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
● Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
● Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Company
to cease to continue as a going concern.
● Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence and have communicated with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
Report on other legal and regulatory requirements
Report on the compliance of the format of the financial statements with the requirements of the
European Single Electronic Reporting Format
We have been engaged based on the amendment to our audit agreement by the management of the
Company to conduct a reasonable assurance engagement for the verification of compliance with the
applicable requirements of the European single electronic reporting format of the Company’s financial
statements, including the annual report, for the year ended 31 December 2022 (the “Single Electronic
Reporting Format of the financial statements”).
Description of a subject matter and applicable criteria
The Single Electronic Reporting Format of the financial statements has been applied by the
management of the Company to comply with the requirements of art. 3 and 4 of the Commission
Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of
the European Parliament and of the Council with regard to regulatory technical standards on the
specification of a single electronic reporting format (the “ESEF Regulation”). The applicable
requirements regarding the Single Electronic Reporting Format of the financial statements are
contained in the ESEF Regulation.
The requirements described in the preceding sentence determine the basis for application of the
Single Electronic Reporting Format of the financial statements and, in our view, constitute appropriate
criteria to form a reasonable assurance conclusion.
Responsibility of the management and those charged with governance
The management of the Company is responsible for the application of the Single Electronic Reporting
Format of the financial statements that complies with the requirements of the ESEF Regulation.
This responsibility includes the selection and application of appropriate markups in iXBRL using ESEF
taxonomy and designing, implementing and maintaining internal controls relevant for the preparation
of the Single Electronic Reporting Format of the financial statements which is free from material non-
compliance with the requirements of the ESEF Regulation.
Those charged with governance are responsible for overseeing the financial reporting process, which
should also be understood as the preparation of financial statements in accordance with the format
resulting from the ESEF Regulation.
Our responsibility
Our responsibility was to express a reasonable assurance conclusion whether the Single Electronic
Reporting Format of the financial statements complies, in all material aspects, with the ESEF
Regulation.
We conducted our engagement in accordance with International Standard on Assurance
Engagements 3000 (Revised) ‘Assurance Engagements other than Audits and Reviews of Historical
Financial Information’ (“ISAE 3000 (R)”). This standard requires that we comply with ethical
requirements, plan and perform procedures to obtain reasonable assurance whether the Single
Electronic Reporting Format of the financial statements complies, in all material aspects, with the
applicable requirements.
Reasonable assurance is a high level of assurance, but it does not guarantee that the service
performed in accordance ISAE 3000 (R) will always detect the existing material misstatement
(significant non-compliance with the requirements).
Summary of the work performed
Our planned and performed procedures were aimed at obtaining reasonable assurance that the
Single Electronic Reporting Format of the financial statements was applied, in all material aspects, in
accordance with the applicable requirements and such application is free from material errors or
omissions. Our procedures included in particular:
• obtaining an understanding of the internal control system and processes relevant to the
application of the Single Electronic Reporting Format of the financial statements, including the
preparation of the XHTML format and marking up the financial statements;
• verification whether the XHTML format was applied properly;
• evaluating the completeness of marking up the financial statements using the iXBRL markup
language according to the requirements of the implementation of single electronic format as
described in the ESEF Regulation;
• evaluating the appropriateness of the Company’s use of XBRL markups selected from the ESEF
taxonomy and the creation of extension markups where no suitable element in the ESEF
taxonomy has been identified; and
• evaluating the appropriateness of anchoring of the extension elements to the ESEF taxonomy.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
conclusion.
Conclusion
In our opinion, the Single Electronic Reporting Format of the financial statements for the year ended
31 December 2022 complies, in all material aspects, with the ESEF Regulation.
Appointment
We were first appointed as auditors of the Company on 24 April 2015 and had an uninterrupted
engagement appointment of 3 years. After a 2-year break our appointment was renewed on 18
September 2020, representing a total period of engagement appointment of 6 years. Our appointment
to audit the financial statements for the year ended 31 December 2022 was approved by the
shareholder’s resolution on 11 July 2022.
The key audit partner on the audit resulting in this independent auditor’s report is Rasa Radzevičienė.