AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE

FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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CONTENT

STATEMENT OF FINANCIAL POSITION ............................................................................................................................................................................. 3

STATEMENT OF COMPREHENSIVE INCOME .................................................................................................................................................................. 5

STATEMENT OF CHANGES IN EQUITY .............................................................................................................................................................................. 6

CASH FLOW STATEMENT........................................................................................................................................................................................................ 8

EXPLANATORY NOTES TO FINANCIAL STATEMENTS ................................................................................................................................................ 9

CONFIRMATION OF RESPONSIBLE PERSONS .............................................................................................................................................................56

2022 YEAR AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT ...........................................................................................................57

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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STATEMENT OF FINANCIAL POSITION

	Notes		Group	Company
		31-12-2022	31-12-2021	31-12-2022	31-12-2021
ASSETS
Non-current assets
Intangible assets		793	456	645	279
Property, plant and equipment	3	145,800	150,686	145,683	150,565
Right-of-use assets	3	328,515	338,256	328,495	338,232
Other financial assets		575	-	465	-
Investment in subsidiaries	5	-	-	4,578	4,578
Investment in associates		261	226	261	226
Deferred tax asset	21	5,106	3,616	5,106	3,616
Total non-current assets		481,050	493,240	485,233	497,496
Current assets
Inventories	6	2,120	1,798	2,120	1,796
Trade receivables and other receivables	7	14,741	11,643	13,972	10,636
Contract assets	8	328	612	328	612
Other financial assets	9	3,271	3,271	3,271	3,271
Cash and cash equivalents	10	72,423	61,517	66,848	57,148
Total current assets		92,883	78,841	86,539	73,463
Total assets		573,933	572,081	571,772	570,959

(Cont’d on the next page)

Explanatory notes are an integral part of these financial statements.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

STATEMENT OF FINANCIAL POSITION (CONT’D)

		Group		Company
	Notes	31-12-2022	31-12-2021	31-12-2022	31-12-2021
EQUITY AND LIABILITIES
Equity
Share capital	1, 11	110,315	110,315	110,315	110,315
Share premium		4,002	4,002	4,002	4,002
Reserves	11	29,633	94,604	29,633	94,604
Foreign currency translation reserve		131	(82)	-	-
Retained earnings		(4,981)	(64,126)	(6,654)	(64,971)
Total equity		139,100	144,713	137,296	143,950
Non-current amounts payable and liabilities
Non-current employee benefits	12	569	707	569	707
Loans	13	137,451	116,044	137,451	116,044
Deferred government grants	2.21	5,468	5,771	5,468	5,771
Lease liabilities	13	220,122	243,430	220,108	243,412
Total non-current amounts payable and liabilities		363,610	365,952	363,596	365,934
Current amounts payable and liabilities
Current employee benefits	12	62	49	62	49
Loans	13	5,689	3,879	5,689	3,879
Lease liabilities	13	46,126	43,675	46,118	43,668
Trade payables and other liabilities	14	5,871	3,695	5,721	3,513
Derivatives		-	15	-	15
Payroll related liabilities	15	3,437	2,669	3,252	2,517
Provisions	16	5,663	3,596	5,663	3,596
Contract liabilities	24	4,375	3,838	4,375	3,838
Total current amounts payable and liabilities		71,223	61,416	70,880	61,075
Total equity and liabilities		573,933	572,081	571,772	570,959

Explanatory notes are an integral part of these financial statements.

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AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 5

STATEMENT OF COMPREHENSIVE INCOME

	Notes	Group		Company
		2022	2021	2022	2021
Revenue from contracts with customers	17	77,818	61,811	74,722	58,633
Cost of sales	18	(57,703)	(53,109)	(56,706)	(52,144)
Gross profit (loss)		20,115	8,702	18,016	6,489
Operating expenses	19	(8,432)	(61,928)	(7,526)	(61,160)
Other income and (expenses)		510	61	510	61
Profit (loss) from operating activities		12,193	(53,165)	11,000	(54,610)
Income from financial activities	20	1,221	1,987	1,058	1,969
Expenses from financial activities	20	(20,347)	(24,557)	(20,327)	(24,456)
Share of the associate‘s profit or (loss)		33	(32)	33	(32)
Profit (loss) before tax		(6,900)	(75,767)	(8,236)	(77,129)
Income tax (expenses)	21	996	11,756	1,504	12,212
Profit (loss) for the year		(5,904)	(64,011)	(6,732)	(64,917)
Other comprehensive income
Items that will not be subsequently reclassified to profit or (loss)		-	-	-	-
Items that are or may be reclassified subsequently
to profit or (loss)		-	-	-	-
Actuarial gain (loss)		92	(63)	92	(63)
Exchange differences on translation of foreign operations		213	(10)	-	-
Related taxes		(14)	9	(14)	9
Total other comprehensive income		291	(64)	78	(54)
Total comprehensive income (loss), net of tax		(5,613)	(64,075)	(6,654)	(64,971)
Profit attributable to:
The shareholders of the Company		(5,904)	(64,011)	(6,732)	(64,917)
Non-controlling interests		-	-	-	-
Total comprehensive income (loss)
attributable to:
The shareholders of the Company		(5,613)	(64,075)	(6,654)	(64,971)
Non-controlling interests		-	-	-	-
Basic and diluted earnings (losses), in EUR	22	(0.02)	(0.17)	-	-

Explanatory notes are an integral part of these financial statements.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

STATEMENT OF CHANGES IN EQUITY

GROUP

		Share		Share	Legal	Reserve	Other	Foreign	Retained	Total
	Notes	capital		shares (-) premium	reserve	for own	reserves	currency	earnings
						shares		translation
								reserve
Balance as at 31 December 2020		110,505	4,002	(267)	11,048	15,929	41,970	(72)	33,211	216,326
Net profit (loss) for the year		-	-	-	-	-	-	-	(64,011)	(64,011)
Other comprehensive income (loss)		-	-	-	-	-	-	(10)	(54)	(64)
Total comprehensive income (loss)		-	-	-	-	-	-	(10)	(64,065)	(64,075)
Dividends declared	23	-	-	-	-	-	-	-	(7,538)	(7,538)
Decrease in share capital	1, 11	(190)	-	267	-	-	-	-	(77)	-
Transfer between reserves		-	-	-	3	-	25,654	-	(25,657)	-
Balance as at 31 December 2021		110,315	4,002	-	11,051	15,929	67,624	(82)	(64,126)	144,713
Net profit (loss) for the year		-	-	-	-	-	-	-	(5,904)	(5,904)
Other comprehensive income (loss)		-	-	-	-	-	-	213	78	291
Total comprehensive income (loss)		-	-	-	-	-	-	213	(5,826)	(5,613)
Transfer between reserves		-	-	-	-	-	(64,971)	-	64,971	-
Balance as at 31 December 2022		110,315	4,002	-	11,051	15,929	2,653	131	(4,981)	139,100

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AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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STATEMENT OF CHANGES IN EQUITY (CONT’D)

COMPANY

Notes

capital

premium

Own

shares (-)

Legal

reserve

Reserve for

own shares

Other

reserves

Retained

earnings

Total

Balance as at 31 December 2020

110,505

4,002

(267)

11,048

15,929

41,970

33,272

216,459

Net profit (loss) for the year

(64,917)

Other comprehensive income (loss)

(54)

Total comprehensive income (loss)

(64,971)

Dividends declared

(7,538)

Decrease in share capital

1, 11

(190)

267

(77)

Transfer between reserves

25,654

(25,657)

Balance as at 31 December 2021

110,315

4,002

11,051

15,929

67,624

(64,971)

143,950

Net profit (loss) for the year

(6,732)

Other comprehensive income (loss)

Total comprehensive income (loss)

(6,654)

Transfer between reserves

(64,971)

64,971

Balance as at 31 December 2022

110,315

4,002

11,051

15,929

2,653

(6,654)

137,296

Explanatory notes are an integral part of these financial statements.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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CASH FLOW STATEMENT

Explanatory notes are an integral part of these financial statements.

			Group	Company
Cash flows from operating activities	Notes	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Net profit (loss)		(5,904)	(64,011)	(6,732)	(64,917)
Adjustments for non-cash items:
Depreciation and amortization	3	22,664	25,646	22,566	25,565
Impairment of non-current assets		27	54,338	27	54,338
Change in vacation reserve		(49)	(312)	(44)	(319)
Change in provisions	16	2,067	1,887	2,067	1,887
Change in non-current liabilities for employees	12	(32)	18	(32)	18
Contract assets	8	175	1,048	285	1,048
Income tax expenses	21	(996)	(11,756)	(1,503)	(12,212)
Share of (profit) or loss of equity-accounted investees		(33)	32	(33)	32
Change in allowance for doubtful trade and other receivables	7	12	(711)	12	(711)
Interest income	20	(31)	(13)	(31)	(13)
Interest expenses	20	2,796	2,279	2,796	2,278
(Gain) or loss of derivative financial instruments	20	(15)	(1,898)	(15)	(1,898)
Currency impact from lease liabilities	20	17,380	22,073	17,380	22,073
Other non-cash adjustments		1,423	943	1,152	923
		39,484	29,563	37,895	28,092
Changes in working capital
(Increase) decrease in inventories	6	101	617	100	600
Decrease (increase) in trade and other accounts
receivable	7	(2,607)	(1,610)	(3,127)	(1,392)
Increase (decrease) in trade and other payables		7,130	(4,377)	7,590	(4,231)
Increase (decrease) in contract liabilities	24	537	28	537	28
Increase (decrease) in payroll related liabilities	15	(797)	(672)	(781)	(735)
		43,848	23,549	42,214	22,362
Income tax (paid)		(359)	(440)	-	-
Interest received		31	13	31	13
Net cash flows from (used in) operating activities		43,520	23,122	42,245	22,375
Cash flows from investing activities
(Acquisition) of property, plant, equipment and intangible assets	3	(4,823)	(9,030)	(4,761)	(8,989)
Income from sales of non-current assets		186	27	186	27
Short term deposits (placed)/received		-	24,000	-	24,000
(Acquisition) of other investments		(2)	(2)	(2)	(27)
Grants, subsidies received	2.21	89	302	89	302
Net cash flows from (used in) investing activities		(4,550)	15,297	(4,488)	15,313
Cash flows from financing activities
Dividends (paid)	23	-	(7,538)	-	(7,538)
Loans received	13	26,829	26,829	26,829	26,829
Loans paid	13	(3,901)	(3,492)	(3,901)	(3,492)
Interest and fee related to loans (paid)	13	(759)	(255)	(759)	(255)
Guarantee fees (paid)	13	(606)	(146)	(606)	(146)
Lease liabilities (paid)	13	(47,901)	(41,459)	(47,895)	(41,455)
Interest on leasing liabilities paid	13	(1,726)	(1,917)	(1,725)	(1,916)
Net cash flows from (used in) financing activities		(28,064)	(27,978)	(28,057)	(27,973)
Net increase (decrease) in cash flows		10,906	10,441	9,700	9,715
Cash and cash equivalents on 1 January	10	61,517	51,076	57,148	47,433
Cash and cash equivalents on 31 December	10	72,423	61,517	66,848	57,148

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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EXPLANATORY NOTES TO FINANCIAL STATEMENTS

1 GENERAL INFORMATION

AB Klaipėdos nafta (hereinafter “the Parent Company” or “the Company”) is a public limited liability company registered in the Republic of

Lithuania . The address of its registered office is as follows: Burių str. 19, 92276 Klaipėda, Lithuania. These consolidated financial statements

comprise the Company and its subsidiaries (together referred to as “the Group”).

The subsidiaries are these:

• UAB SGD logistika, a subsidiary (hereinafter “the subsidiary UAB SGD logistika”). The address is as follows: Burių g. 19, 92276 Klaipėda,

Lithuania.

• UAB SGD terminalas, a subsidiary (hereinafter “the subsidiary UAB SGD terminalas”). The address is as follows: Burių g. 19, 92276

Klaipėda, Lithuania.

• UAB SGD SPB, a subsidiary of UAB SGD logistika (hereinafter “the subsidiary UAB SGD SPB”). The address is as follows: Burių g. 19,

92276 Klaipėda, Lithuania.

• KN Acu Servicos de Terminal de GNL LTDA (hereinafter “the subsidiary KN Acu Servicos de Terminal de GNL LTDA”). The address is as

follows: F66 Fazenda Saco Dantas s/n, Distrito Industrial, Area 1 and Area 2, 28200-000 São João da Barra, State of Rio de Janeiro

The associates are these:

• Sarmatia Sp. z o.o. – as at 31 December 2022 and 2021 the Group and the Company owns 1% of the authorised capital of the

international pipeline company. As a result of associate financial performance 100% impairment for investment to Sarmatia Sp. z o.o

was accounted for as at 31 December 2022 and 2021. The Group and the Company is entitled to appoint one of five board members

to the management of Sarmatia Sp. z o.o., thus it can have significant influence. Therefore, this investment was classified as an associate

and measured using the equity method. The unaudited equity of the associate as at 31 December 2022 amounts to EUR (35) thousand

(EUR 5 thousand as at 31 December 2021).

• BALTPOOL UAB – as at 31 December 2022 and 2021 the Group and the Company owns 33% of BALTPOOL UAB shares and their voting

rights at the General Meeting of the Shareholders of BALTPOOL UAB. The unaudited equity of the associate as at 31 December 2022

is EUR 784 thousand (EUR 771 thousand as at 31 December 2022).

The main activities of the Group and the Company include operation of oil terminal, oil products transhipment services and other related

services, as well as operation of the liquefied natural gas terminal (hereinafter referred to as “LNGT”) primarily dedicated to receive and store

liquefied natural gas, regasify it and supply it to Gas Grid.

National Energy Regulatory Council (hereinafter referred to as “NERC”) issued Natural Gas Regasification License to the Company on

27 November 2014.

As of 11 January 2021 a new version of the Company's Articles of Association was registered within the Register of Legal Entities of the Republic

of Lithuania following the decrease of the authorised capital of the Company. As of 26 August 2020 the Ministry of Finance of the Republic of

Lithuania granted the Company permission to decrease the authorised capital of the Company by cancelling 655,808 units of Company’s

acquired own shares which each nominal value EUR 0.29. As at 31 December 2022 and 31 December 2021 authorised capital was equal to EUR

110,315,009.65 and divided into 380,396,585 units of shares, which grant 380,396,585 votes.

During the year of 2022 and 2021 the Company has not acquired any own shares.

The Company’s shares are listed in the Baltic Main List on the NASDAQ Vilnius Stock Exchange (ISIN code LT0000111650, abbreviation KNF1L).

As at 31 December 2022 and 31 December 2021 the shareholders of the Company were:

		31 December 2022			31 December 2021
	Number of		Part of	Number of	Part of
	shares held		ownership	shares held	ownership
State of Lithuania represented by the Ministry of Energy	(thousand)	(%)		(thousand)	(%)
(Gediminas av. 38/2, Vilnius, 302308327)		275,687	72.47	275,687	72.47
UAB koncernas Achemos grupė (Vykinto st. 14, Vilnius, 156673480)		39,663	10.43	39,663	10.43
Other (less than 5% each)		65,047	17.10	65,047	17.10
Total		380,397	100.00	380,397	100.00

The average number of employees of the Group in 2022 was 360 (388 in 2021).

The average number of employees of the Company in 2022 was 328 (355 in 2021).

The financial statements of the Group and the Company are presented in Euro and all values are rounded to the nearest thousand (EUR 000),

except when otherwise indicated.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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2 ACCOUNTING PRINCIPLES

These financial statements of the Group and the Company have been prepared on a historical cost basis unless otherwise stated in the

accounting policies below.

The financial year of the Group and the Company coincides with the calendar year.

The numbers in tables may not coincide due to rounding of particular amounts to EUR thousand. Such rounding differences are not material

to these financial statements.

2.1. Basis for preparation of the financial statements

Statement of compliance

Annual financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards

(IFRS) as adopted by the European Union (hereinafter the EU). They were authorized for issuance by the management on 23 March 2023 and

are subject to the approval of the shareholders. The shareholders of the Company have the power to reject these financial statements and

request for the new ones to be prepared.

IFRSs and their interpretations, announced and adopted by the European Union, effective for the current reporting period

The following new Standards, amendments to Standards and new Interpretations approved by the International Accounting Standards Board

(IASB) and adopted by the EU are applicable for the reporting period:

• Property, Plant and Equipment – Proceeds before Intended Use (Amendments to IAS 16);

• Onerous Contract – Costs of Fulfilling a Contract (Amendment to IAS 37);

• Annual Improvements to IFRS Standards 2018-2021;

• Reference to the Conceptual Framework (Amendments to IFRS 3).

The Group and the Company anticipates that the adoption of these standards, revisions and interpretations had no material impact on the

financial statements.

Standards and Interpretations in issue not yet adopted

At the date of authorisation of these financial statements the following standards, amendments to existing standards and interpretations were

issued, however the Group and the Company does not plan to adopt these standards early.

• Deferred tax related to assets and liabilities arising from Single Transaction (Amendments to IAS 12)

• Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

• IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance

• Initial Application of IFRS 17 and IFRS 9 – Comparative Information (Amendments to IFRS 17)

• Definition of Accounting Estimates (Amendments to IAS8)

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice statement 2)

• Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback

The Group and the Company has elected not to adopt these standards, revisions and interpretations. The Group and the Company anticipates

that the adoption of these standards, revisions and interpretations will have no material impact on the financial statements of the Group and

the Company in the period of initial application.

2.2. Foreign currency

Functional currency

The amounts shown in these consolidated and separate financial statements are measured and presented in local currency, euro (EUR), which

is the functional currency of the Group and the Company.

The Group and the Company have decided to use EUR as a functional currency considering the structure of revenue, costs, equity, and debt

instruments. Despite the fact that lease liabilities are denominated in US dollars, the major part of revenues and cost are denominated in EUR.

Most of the Group’s and the Company’s sales prices and costs are influenced by competitive forces, acting in Lithuania and in the Euro-zone

countries. The equity of the Company is formed in EUR.

Transactions and balances

Foreign currency transactions are converted into the functional currency using the exchange rates prevailing at the dates of the transactions.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the conversion of monetary assets and liabilities

denominated in foreign currencies using the exchange rate available at the reporting date are recognised in the statement of profit or loss

and comprehensive income as finance income or expenses.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are converted using the exchange rate

available at the date of the transaction.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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2 ACCOUNTING PRINCIPLES (CONT’D)

Group companies

On consolidation, the assets and liabilities of foreign operations are translated into euros at the rate of exchange prevailing at the reporting

date and their statements of profit or loss and comprehensive income are translated at average exchange rates observed during reporting

period. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a

foreign operation, the component of other comprehensive income relating to that particular foreign operation is reclassified to profit or loss

and comprehensive income.

2.3. Going concern

The management of the Group and the Company assessed the going-concern assumptions, during the preparation of the Group’s and the

Company’s Consolidated financial statements. The management believes that no events or conditions, including those related to the war in

Ukraine, give rise to doubt about the ability of the Group to continue in operation in the next reporting period. This conclusion is drawn based

on knowledge of the Group and the Company, the estimated economic outlook and identified risks and uncertainties in relation thereto.

Furthermore, this conclusion is based on a review of the expected developments in liquidity and capital, current credit facilities available

including contractual and expected maturities and covenants. Consequently, it has been concluded that it is reasonable to apply the

going-concern concept as the underlying assumption for the financial statements.

For further details on the impact of the war in Ukraine to Annual report.

2.4. Basis for consolidation

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company or the Group obtains control and

continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same

reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and

losses resulting from intra-group transactions and dividends are eliminated in full.

Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance. A change

in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a

subsidiary, it:

• Derecognises the assets (including goodwill) and liabilities of the subsidiary;

• Derecognises the carrying amount of any non-controlling interest;

• Derecognises the cumulative translation differences, recorded in equity;

• Recognises the fair value of the consideration received;

• Recognises the fair value of any investment retained;

• Recognises any surplus or deficit in profit or loss;

• Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained

earnings, as appropriate.

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the

consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each

business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of

the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree

is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will

be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to

be an asset or liability, will be recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. If

the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.

Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-

controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net

assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any

accumulated impairment losses.

2.5. Operating segments

Operating segment is a separated business constituent part, the business risks and profitability of which differ from other business constituent

parts. Chief executive officer of the Group is responsible for making strategic decisions for distribution of the Company’s resources and

evaluation of activity’s results of the segments.

The management of the Group has identified the following segments (Note 4):

▪ LNGT – LNG terminal in Klaipėda which receives and stores liquefied natural gas, regasifies and supplies it to Gas Main pipeline;

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 12

2 ACCOUNTING PRINCIPLES (CONT’D)

▪ OT – Oil terminal in Klaipėda and Subačius oil terminal in Kupiškis who are providing oil products transhipment, services of long-term

storage of oil products and other services related to oil products transhipment;

▪ comLNG – LNG commercial activities – includes LNG reloading station and execution of other LNG projects.

2.6. Investment in subsidiaries and associates

Investments in subsidiaries are carried at cost, less impairment in separate financial statements of the Company. The Company determines at

each reporting date whether there is any objective evidence that the investment in the subsidiary is impaired. If this is the case the Company

calculates the amount of impairment as the difference between the recoverable amount of the subsidiary and it’s carrying value and recognises

the amount in the profit (loss) in the statement of comprehensive income.

The Group and the Company accounts for investments in associates using the equity method. An associate is an entity in which the Group and

the Company has significant influence, but no control over the financial and operating policies. Significant influence is presumed to exist when

the Group and the Company holds between 20% and 50% of the voting rights of another company.

Under the equity method the investment in the associate is carried in the Statement of Financial position at cost plus post acquisition changes

in the Group’s and the Company’s share of the associate’s net assets. Goodwill relating to the associate is included in the carrying amount of

the investment and is neither amortised nor individually tested for impairment.

The share of profit (loss) of an associate is shown on the face of the statement of comprehensive income (loss).

The financial statements of the associate are prepared for the same reporting period as the Group and the Company. Where necessary,

adjustments are made to bring the accounting policies in line with those of the Group and the Company. After application of the equity

method the Group and the Company determines whether it is necessary to recognise an additional impairment loss on the investment in

associate. The Group and Company determines at each reporting date whether there is any objective evidence that the investment in the

associate is impaired. If this is the case the Group and the Company calculates the amount of impairment as the difference between the

recoverable amount of the associate and its carrying value and recognises the amount in the caption “Share of the associate‘s profit or (loss)”

in the statement of comprehensive income.

Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s

and the Company’s interest to investee. Unrealized losses are eliminated the same way as unrealized gains, but only to the extent that there

is no evidence of impairment.

2.7. Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at

cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either

finite or indefinite. The Group and the Company did not have assets with indefinite useful lives (as at 31 December 2022 and 31 December

2021). Intangible assets with finite lives are amortized over the useful economic lives of 3-15 years and assessed for impairment whenever

there is an indication that the intangible asset may be impaired. Amortisation periods and methods for intangible assets with finite useful lives

are reviewed at least at each financial year-end. Calculation of amortization is discontinued as at the first day of the next month after the

disposal of asset or when the whole acquisition cost is expensed or reclassified as a part of another asset.

Costs associated with maintaining computer software programs are recorded as an expense as incurred.

2.8. Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The initial cost of property, plant and

equipment comprises its purchase price, including non-refundable purchase taxes, capitalised borrowing costs and any directly attributable

costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after property, plant and equipment

have been put into operation, such as repair and maintenance costs, are normally charged to profit or loss in the period the costs are incurred.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major

components) of property, plant and equipment.

The useful lives, residual values and depreciation method are reviewed periodically to ensure that the period of depreciation and other

estimates including borrowing costs are consistent with the expected pattern of economic benefits from items of property, plant and

equipment. In case external and (or) internal impairment indications exist at the date of the statement of financial position, the Group and the

Company perform detailed impairment testing in order to ensure that property, plant and equipment are accounted for at value not higher

than their recoverable amount.

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Description	Estimated useful life
Property, plant and equipment
Buildings and structures	10-60
Machinery, plant and equipment	5-55
Other non-current assets	4-15

2.9. Financial instruments

Financial instruments – initial recognition and subsequent measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another

entity.

i) Financial assets

Initial recognition and measurement

The Group and the Company qualify financial assets to one of the following categories:

- measured at amortised cost;

- measured at fair value through other comprehensive income (FVOCI) – debt instruments;

- measured at fair value through other comprehensive income (FVOCI) – equity instruments;

- measured at fair value through profit or loss (FVTPL).

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s

and the Company’s business model for managing them. Except for trade receivables that do not contain a significant financing component,

the Group and the Company initially 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. Trade receivables that do not contain a significant financing component are measured at the transaction price

determined under IFRS 15.

For a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely

payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed

at an instrument level.

The Group’s and the Company’s business model for managing financial assets refers to how the Company manages its financial assets to

generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial

assets, or both.

A regular way purchases or sales of financial assets are recognised on the trade date, i.e., the date that the Company commits to purchase or

sell the asset.

Subsequent measurement

After initial recognition, the Group and the Company measures a financial asset at:

• Amortised cost;

• Fair value through OCI with recycling of cumulative gains and losses upon derecognition (debt instruments). The Company did not

have such items as at 31 December 2022 and 2021;

• Fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments). The Company

did not have such items as at 31 December 2022 and 2021;

• Fair value through profit or loss. The Company did not have such items as at 31 December 2022 and 2021.

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.9. Financial instruments (cont’d)

Financial assets at amortised cost (debt instruments)

This category is the most relevant to the Group and the Company. The Group’s and the Company’s financial assets at amortised cost

includes trade, other current and non-current receivables and contract assets. The Group and the Company measures financial assets at

amortised cost if both of the following conditions are met and is not designated as of FVTPL:

• The financial asset is held within a business model with the objective to hold financial assets to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains

and losses are recognised in the statement of comprehensive income when the asset is derecognised, modified or impaired.

Impairment of financial assets

Further disclosures relating to impairment of financial assets are also provided in the following notes:

• Trade receivables and contract assets (Notes 7 and 8).

The Group and the Company performs the assessment for all debt instruments on an individual basis. The management considers a financial

asset in default (credit impaired) when contractual payments are long overdue due or when indications exist that the debtors or a group of

debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will

enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated

future cash flows, such as changes in arrears or economic conditions that correlate with defaults. The lifetime expected credit losses of loans

receivable and trade receivables is recognised in profit or loss through the contrary account of doubtful receivables A financial asset is written

off when there is no reasonable expectation of recovering the contractual cash flows.

ii) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss (FVTPL) or at amortised costs.

Financial liability is classified as of FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition.

Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign

exchange gains and losses are recognised in profit or loss in the statement of other comprehensive income.

The Group’s and the Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and

finance lease liabilities, as well as derivative financials instruments.

iii) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently

enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, i.e. to realize the assets and settle

the liabilities simultaneously.

iv) Derivative financial instruments and hedge accounting

The Group and the Company holds derivative financial instruments to hedge its foreign currency risk exposures. Embedded derivatives are

separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met. Derivatives

are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally

recognised in profit or loss in the statement of other comprehensive income.

2.10. Derecognition of financial instruments

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e.,

removed from the Group’s and the Company’s statement of financial position) when:

i) The contractual rights to receive cash flows from the asset have expired; or

ii) The Group and the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay

the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the

Group/Company has transferred substantially all the risks and rewards of the asset, or (b) the Group/Company has neither

transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.10. Derecognition of financial instruments (cont’t)

When the Group and the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through

arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained

substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group and the Company continues to recognise

the transferred asset to the extent of its continuing involvement. In that case, the Group and the Company also recognises an associated

liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company

has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount

of the asset and the maximum amount of consideration that the Group and the Company could be required to repay (amount of the guarantee).

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. 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 a derecognition of the original liability and the recognition of a new liability at fair

value, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

2.11. Employee benefits

Social security contributions

The Group and the Company pays social security contributions to the State Social Security Fund (hereinafter the Fund) on behalf of its

employees based on the legally defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a

plan under which the Group and 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 related to employee service in the current and

prior period. The social security contributions are recognised as an expense on an accrual basis and are included within staff costs.

Non-current employee benefits

The past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. Any

gains or losses appearing as a result of curtailment and/or settlement are recognised in the statement of comprehensive income as incurred.

The past service costs are recognized in the statement of comprehensive income as incurred.

The above-mentioned employee benefit obligation is calculated based on actuarial assumptions, using the projected unit credit method.

Obligation is recognized in the statement of financial position and reflects the present value of these benefits on the preparation date of the

statement of financial position. Present value of the non-current obligation to employees is determined by discounting estimated future cash

flows using the discount rate which reflects the interest rate of the Government bonds of the same currency and similar maturity as the

employment benefits. Actuarial gains and losses are recognized in the statement of other comprehensive income as incurred.

2.12. Inventories

Inventories are stated at the lower of cost and net realisable value. Net realizable value is estimated taking the selling price in the ordinary

course of business, less the costs of completion, marketing and distribution. The cost of inventories consists of purchase price, transport, and

other costs directly attributable to the cost of inventories. The costs of inventories are determined by the first-in, first-out (FIFO) method.

2.13. Cash and cash equivalents

Cash includes cash in bank accounts. Cash equivalents are 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 (Note 10).

For the purposes of the cash flow statement, cash and cash equivalents comprise cash, deposits held at call with banks, and other short-term

highly liquid investments with maturities of less than three months.

2.14. Short term deposits

Short term deposits include short-term bank deposits at the commercial banks with maturity of more than 3 months. Initially short-term bank

deposits are recognised at cost. Subsequently short-term deposits are stated at acquisition cost less any allowance for impairment.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.15. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of

time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the

period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

The borrowing costs, which represent a part of the cost price of a qualifying asset, the Group and the Company begins to capitalize from the

start of construction. Capitalization start is considered to be the day when the company meets the following conditions for the first time: incurs

costs in respect of the asset, incurs borrowing costs, carries out activities required to prepare the asset for its intended use or sale.

The Group and the Company discontinues the capitalization of borrowing costs when virtually all the activities necessary to prepare a qualifying

asset for its intended use or sale have been completed. Commonly, an asset is prepared for its intended use or sale when its physical

construction has been completed, even if the routine administrative work is still carried out. Although small changes are still possible, such as

finishing of the asset in accordance with the instructions of a purchaser or user, it indicates that, essentially, all the activities have already been

completed.

During the year 2022 and 2021 the Group and the Company did not capitalize borrowing costs due to the reason that all outstanding

borrowings were related to assets which were not qualifying for borrowing costs capitalization in accordance with IAS 23.

2.16. Lease

At inception of contract, a Group and the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the

contract conveys the right to control the use if an identified asset for a period of time in exchange in consideration.

The Group and the Company as a lessee

At commencement or on modification of a contract that contains a lease component the Group and the Company allocates the consideration

in the contract to each lease component on the basis of its relative stand-alone prices.

The Group and the Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is

initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the

commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore

the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term,

unless the lease transfers ownership of the underlying asset to the Group and the Company by the end of the lease term or the cost of the

right-of-use asset reflects that the Group and the Company will exercise a purchase option. In that case the right-of-use asset will be

depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition,

the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted

using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group‘s and the Company’s incremental borrowing

rate. Generally, the Group and the Company uses its incremental borrowing rate as the discount rate.

The Group and the Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources

and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

- Fixed payments, including in-substance fixed payments;

- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as of the commencement date;

- Amounts expected to be payable under a residual value guarantee; and

- The exercise price under a purchase option that the Group and the Company is reasonably certain to exercise, lease payments in an

optional renewal period if the Group and the Company is reasonably certain to exercise an extension option, and penalties for early

termination of a lease unless the Group and the Company is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in the future lease

payments arising from a change in an index or rate, if there is a change in the Group‘s and the Company’s estimate of the amount expected

to be payable under a residual value guarantee, if the Group and the Company’s changes its assessment of whether it will exercise a purchase,

extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is

recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group and the Company presents right-of-use assets that do not meet the definition of investment property in `Right-of-use assets’ and

lease liabilities in `lease liabilities` in the statement of financial position.

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.16. Lease (cont’d)

Short-term leases and leases of low-value assets

The Group and the Company has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term

leases, including IT equipment. The Group and the Company recognises the lease payments associated with the leases as an expense on a

straight-line basis over the lease term.

The Group and the Company as a lessor

At inception or on modification of a contract that contains a lease component, the Group and the Company allocates the consideration in the

contract to each lease component based on their relative stand-alone prices.

When the Group and the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group and the Company makes an overall assessment of whether the lease transfers substantially all the risks and

rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.

As part of this assessment, the Group and the Company considers certain indicators such as whether the lease is for a major part of the

economic life of the asset.

When the Group and the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It

assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the

underlying asset. If a head lease is a short-term lease to which the Group and the Company applies the exemption described above, then it

classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, then the Group and the Company applies IFRS 15 to allocate the consideration

in the contract.

2.17. Income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid

to the taxation authorities, also including adjustments in respect of prior years. The tax rates used to compute the amount are those that are

enacted by the date of the Statement of Financial position.

Income tax charge is based on profit for the year and considers deferred taxation. Income tax is calculated based on the Lithuanian tax

legislation.

The standard corporate income tax rate in the Republic of Lithuania is 15% as at 31 December 2022 and 31 December 2021. The Group’s

subsidiary KN Açu Serviços de Terminal de GNL Ltda applies Brazilian Tax System and subsidiary´s administration has elected the Real Profit

Regime that is calculated on quarterly basis. The official rates are 25% for Income tax and 9% Social Contribution on Net Profit.

As to Law on Corporate Income Tax of the Republic of Lithuania starting from 1 January 2014 deductible tax losses carried forward can be

used to reduce the taxable income earned during the reporting year by maximum 70%. 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 Group and the Company stops its activities due to which these losses were incurred except when the Group and 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.

Deferred income tax is recognized in respect to temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary

differences are expected to reverse based on tax rates enacted or substantively enacted at reporting date.

A deferred tax asset is recognised in the Statement of Financial position to the extent the management of the Group and the Company believes

it will be realised in the foreseeable future, based on taxable profit forecasts. If it is believed that part of the deferred tax asset is not going to

be realised, this part of the deferred tax asset is not recognised in the financial statements.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against

current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

2.18. Dividends

Dividends are recorded in the financial statements when they are declared by the Annual General Shareholders’ Meeting.

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.19. Basic and diluted earnings per share

Basic earnings per share are calculated by dividing the net profit attributable to the shareholders by the weighted average of ordinary

registered shares issued. Provided that the number of shares changes without causing a change in the economic resources, the weighted

average of ordinary registered shares is adjusted in proportion to the change in the number of shares as if this change took place at the

beginning of the previous period presented. Since there are no instruments reducing profit (loss) per share, there is no difference between the

basic and diluted earnings per share (Note 22).

2.20. Provisions

General

Provisions are recognised when the Group and the Company has a present legal or constructive obligation in respect of past events and it is

probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Where the Group

and the Company expects the provision to be reimbursed the reimbursement is recognised as a separate asset but only when the

reimbursement is virtually certain. Expenses related to provisions are recorded in the statement of comprehensive income.

Greenhouse gas (GHG) emissions

The Company applies a 'net liability' approach in accounting for the emission rights received. It records the emission allowances granted to it

at a nominal (null) amount, as it is allowed by IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”. Liabilities

for emissions are recognised only as emissions are made (i.e. provisions are never made on the basis of expected future emissions) and only

when the reporting entity has made emissions in excess of the rights held. Costs of allowances are recorded under cost of sales caption in the

other comprehensive income.

2.21. Deferred government grants

Asset-related grants

Asset-related government and the European Union grants and third-party compensations comprise grants received in the form of non-current

assets or intended for the acquisition of non-current assets. Grants are initially recognised at fair value of the asset received and subsequently

accounted for in the statement of comprehensive income by reducing the depreciation charge of related asset over the expected useful life of

the asset.

The Group and the Company	2022	2021
Balance as at 1 January	5,771	5,817
Received during the year	89	302
Reclassification	(4)	-
Amortisation	(388)	(348)
Balance as at 31 December	5,468	5,771

Amortisation of grants related to assets of EUR 388 thousand for 2022 (EUR 348 thousand for 2021) has been included into cost of sales in the

statement of comprehensive income.

The Group and the Company has no unfulfilled conditions or contingencies attached to these grants as at 31 December 2022 and as at 31

December 2021.

Income-related grants

Government and the European Union grants received as a compensation for the expenses or unearned income of the current or previous

reporting period, also, all other grants, which are not asset-related grants, are treated as income-related grants. The income-related grants are

recognised as used in parts to the extent of the expenses incurred during the reporting period or unearned income to be compensated by

that grant. These grants are recognised in the statement of comprehensive income, net of related expenditure.

2.22. Revenue recognition

Revenue from Contracts with Customers

The Group and the Company recognizes revenue at the time and to the extent that the transfer of goods or services to customers would reflect

an amount that the Group and the Company expects to receive in exchange for those goods or services. In applying this Standard, the Group

and the Company considers the terms of the contract and all relevant facts and circumstances. Revenue is recognized using the 5-step model:

Step 1 – Identification of the contract with the customer.

The contract acknowledges an agreement between two or more parties (subject to purchase / sale conditions) that creates enforceable rights

and enforceable obligations (not applicable if a joint venture agreement is signed).

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.22. Revenue recognition (cont’d)

A contract that is subject to IFRS 15 is recognized only if the following criteria are met:

• the parties have approved the contract (in writing, orally or in accordance with other usual business practices) and are bound by the

obligations under the contract,

• there is a possibility to identify the rights of each party in respect of the goods and / or services to be transferred,

• there is a possibility of identifying the payment terms provided for the goods and / or services to be transferred,

• the contract is of a commercial nature,

• there is a possibility of getting a reward in return for the goods and / or services that will be transferred to the customer.

Contracts with the customer may be combined or separated into several contracts, while retaining the criteria of the former contracts. Such

interconnection or separation is considered a change of contract.

Step 2 – Identification of operational commitments in the contract.

The contract establishes a commitment to deliver goods and / or services to the customer. When goods and / or services can be distinguished,

liabilities are recognized separately. Each commitment is identified in one of two ways:

• the product and / or service is separate, or

• a set of individual goods and / or services that are essentially the same and passed on to the customer in a uniform model.

Step 3 – Determination of a transaction price.

The Group and the Company considers the terms of the transaction and the usual business practices. The transaction price is the amount of

consideration that the Group and the Company expects to receive after delivering promised goods and services to the Customer, except for

amounts collected on behalf of third parties. The fee provided for in a contract with a client may include fixed amounts, variable amounts, or

both.

Step 4 – The transaction price is attributable to the contractual performance obligations.

The Group and the Company attributes the portion of the transaction price to each operating obligation in an amount that reflects the amount

of consideration to which the Group and the Company expects to be entitled in exchange for the promised goods or services transferred to

the customer. The transaction price is allocated to each operating obligation based on the relative individual selling prices of the good or

service promised in the contract. If the contract does not specify the price of the service or product separately (for example, one price for two

products), the Group and the Company determines it. Similar transactions are treated equally.

Step 5 – Revenue is recognised when the Group and the Company performs operating obligations.

Revenue is recognised when the operating obligation is settled by the transfer of goods or services to the customer (i. e. the customer acquires

control over the mentioned goods or services). Revenue is recognized as an amount equal to the transaction price that was determined for

the respective operating obligation. The recognised amount of revenue is attributed to the settled liability that can be settled at a particular

point of time or over a period.

Revenue is recognized when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated

with the transaction will flow to the Company, and when specific criteria have been met for each type of income. The Company relies on

historical results, considering the customer type, the transaction type and the terms of each agreement.

Revenue is recognised by classifying it as per customer contracts, other income and finance income.

Revenue from contracts with clients is only recognized when the control of goods or services is transferred to the client to the extent that

reflects the remuneration which the Group and the Company expects to receive in return for these goods or services.

The Group and Company has following main revenue streams (Note 17):

- Income from LNGT services (57% from total sales revenue in 2022, 56% in 2021)

One performance obligation exists – to ensure the compensation of for all fixed operating costs of LNGT infrastructure. The Group and the

Company acts as a principal in service provision. Revenues are recognized at the over the point of time when the services were rendered based

on amount collected from the users of the natural gas transmission system due to the following reasons:

✓ The Group and the Company has a present right to payment for the rendered LNGT services;

✓ Significant risks and rewards of ownership have been transferred to the client;

✓ The client has accepted the service.

- Oil products transhipment services (34% from total sales revenue in 2022, 33% in 2021)

One performance obligation exists – to provide oil product loading service for which the loading rate is specified. Company acts as a principal

in service provision. Revenues are recognized over time due to the following reasons:

✓ By providing the services of loading of oil products, the Group and the Company does not create an alternative use of the assets,

which it could sell as goods.

✓ The Group and the Company shall have the unconditional refund right for the performed share of production. In the event the client

does not perform or is behind the schedule in performing his obligations, the Company, having notified the client, has the right to

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.22. Revenue recognition (cont’d)

suspend the provision of services and/or to detain the oil products within the terminal until the client’s obligations are fulfilled. All

the consequences and losses arising from the detention of oil products and/or suspension of the provision of services shall be borne

by the client.

✓ With the client’s delay in dispatching the oil products from the terminal, additional storage fees shall be applied. This way the Group

and the Company shall not only compensate the expenses of storage of oil products, but also obtain income.

✓ In the event the client terminates the agreement in a unilateral manner, he usually must pay the take-or-pay fee, if such was specified

in the contract, or the difference in the oil product quantity between the planned minimum annual amount of reload and the

reloaded amount.

Calculation of percentage of completeness of performance obligation already satisfied at year end is calculated in the following way. The

Group and the Company recognises revenues from oil transhipment considering the level of fulfilment of a service. The level of service provided

is measured as percentage of transhipment cost expenses from the total cost of services. In the case reliable evaluation of the service

agreement is impossible, the revenues are recognised only as a part of expenses incurred that can be recoverable. Service provided at certain

level of completion is already received and consumed by the customer and the customer benefits from it (it would not incur the whole loading

service cost in service reperformance case), therefore management believes that percentage of completion accounting method applied by the

Group and the Company is in line with IFRS 15 requirements.

- Income from other LNG terminal activities (7% from total sales revenue in 2022, 3% in 2021). Main source of other LNG

terminal activities income:

• Small-scale LNG reloading station in Klaipėda:

Small-scale LNG reloading station activities have one performance obligation exists – to provide LNG reloading station services. Company

acts as a principal in service provision. Revenues are recognized over the point of time when services are rendered.

✓ The Group and the Company has a present right to payment for the rendered LNG reloading station services;

✓ Significant risks and rewards of ownership have been transferred to the client;

✓ The client has accepted the service.

• Operation of LNG terminal in Açu port in Brazil:

Operation of LNG terminal in Açu port in Brazil has one performance obligation exists – to provide LNG terminal management and operation

services. Company acts as a principal in service provision. Revenues are recognized over the point of time based on services provided.

✓ The Group and the Company has a present right to payment for the rendered LNG terminal operation services;

✓ Significant risks and rewards of ownership have been transferred to the client;

✓ The client has accepted the service.

- Other activities

Revenues from other activities consist of sales of goods and other services rendered (mainly storage of oil products, consulting services). The

Group and the Company acts as a principal in service provision. Revenues from sales of goods are recognized when the control of the goods

is passed to customer (at point in time), revenues from other services – when the services are provided (over the point in time).

Revenues are recorded in the statement of comprehensive income under the item “Revenues from contracts with customers”, and the assets

resulting from contracts with customers are accounted for as short-term assets under the item “contract assets” in the statement of financial

position. Related costs are accounted for in the statement of comprehensive income under the item “Cost of sales”.

Due to the Group’s and the Company’s business nature the management did not make any other significant accounting judgments, estimates

or assumptions relating to revenue from contracts with customers recognition except for take or pay transactions described below.

Take-or-Pay

The Company calculates monthly, quarterly or annual Take-or-Pay fees to certain customers once the loading quantities specified in the

contract with customer are not achieved. Since the most probable loading quantity is agreed with the customer in the contract and only due

to certain unforeseen circumstances arisen in the market, the loading quantity cannot be reached. Take-or-Pay is calculated at the period-end.

There is no significant impact on financial statements for year ended 31 December 2022 as no significant Take-or-Pay transactions occurred

in 2022 and 2021.

Contract assets – accrued income

Contract assets mean the right to the remuneration for goods or services, which were delivered or provided to the client, but not invoiced yet.

If the Company renders services to the Client before the Client pays for these services or before the payment term, the contractual assets are

calculated by the amount equal to the earned contingent remuneration. The assets resulting from contracts with clients, i.e. the accumulated

income, after all the contractual obligations are fulfilled and the invoice is issued, are recognised as a trade receivable.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.22. Revenue recognition (cont’d)

Contract liabilities – prepayments received

Contract liabilities include advances received from customers for services to be delivered in the future. Contract liabilities also include interest

and fees paid by AB Ambergrid on behalf of AB Achema (as disclosed in Note 25).

Income from liquefied natural gas terminal services regulated by National Energy Regulatory Council

Income from LNGT services is regulated by NERC. Based on LNG terminal law clause 5.2, all users of the natural gas transmission system,

including final consumers, are obliged to pay the additional Security Supplement together with their other payments for the natural gas

transmission service.

The revenue of the LNG terminal activity comprises from:

i) LNG regasification service fixed part which is collected through additional Security Supplement;

ii) LNG regasification service variable part;

iii) LNG reloading service. Regasification and reloading revenue are collected directly from the clients after services are provided

based on quantities. For the actual tariffs see the LNGT services in the annual report. The LNG Security Supplement is collected

by the transmission service operator (hereinafter referred to as “TSO”) either directly from the user or from suppliers of natural

gas in case the user has no direct contractual obligations with the TSO. The additional Security Supplement is calculated by

NERC on an annual basis in proportion to the planned natural gas consumption capacities as set out in National legislation in

relation to gas market.

Prices set for the LNGT services for the year 2022 and 2021:

• LNG regasification service price fixed part is approved by NERC based on the LNG revenue cap. LNG revenue cap is set by NERC and

adjusted annually according to the necessary costs of the LNG terminal and determined return on investment. The fixed part of the

price is included into the additional Security Supplement to the natural gas transmission price, whether the Company is not able to

cover the set revenue level from LNG regasification service price variable part directly from LNG terminal users.

• LNG regasification service price variable part is calculated based on the upper limit of LNG revenue divided by LNG terminal capacity

per unit:

- price of variable part for May-December 2022 set by the resolution No. O3E-437 on 31 March 2022, was 1.19 EUR/MWh;

- price of variable part for January-April 2022 set by the resolution No. O3E-1496 on 16 November 2021, was 0.41 EUR/MWh;

- price of variable part for the year 2021 set by resolution No. O3E-1207 on 23 November 2020, was 0.41 EUR/MWh.

• NERC on 16 November 2021 adopted decision on reloading service prices for the year 2022. Differentiated LNG reloading tariff was

set based on size of LNG cargos to be reloaded:

- Small scale cargos up to 15,000 m3 LNG – 0.56 EUR/MWh (0.53 EUR/MWh in 2021);

- Medium scale cargos from 15,000 up to 50,000 m3 LNG – 0.44 EUR/MWh (0.41 EUR/MWh in 2021).

Large scale cargos from 50,000 m3 LNG – 0.31 EUR/MWh (0.30 EUR/MWh in 2021).

Sales of goods

Revenues from sales of goods are recognised upon delivery and transfer of risks of products and customer acceptance.

Interest income

Interest income is recognised in profit (loss) on accrual basis (using the effective interest rate method).

Dividend income

Dividend income represents gross dividends from investment and recognised when the shareholder’s rights to receive payment is established.

Rent income

Rent income is recognised over the lease term on a straight-line basis.

Income from fines and penalties

Income from fines and penalties is recognized when the Company has evidence that fines and penalties will be received and the probability

that it would not be received is low or when money is already received.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

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2 ACCOUNTING PRINCIPLES (CONT’D)

2.23. Expenses recognition

Expenses are recognised based on accrual and revenue and expense matching principles in the reporting period when the income related to

these expenses was earned, irrespective of the time the money was spent. In those cases when the costs incurred cannot be directly attributed

to the specific income and they will not bring income during the future periods, they are expensed as incurred.

The amount of expenses is usually accounted for as the amount paid or due, excluding VAT. In the cases when a long period of payment is

established and the interest is not distinguished, the amount of expenses shall be estimated by discounting the amount of payment using the

market interest rate.

2.24. Impairment of non-financial assets

The Group and the Company reviews at least at each reporting date the carrying amounts of non-financial assets, excluding inventories and

deferred income tax assets, to assess whether an indication of impairment exists. If such indication exists, the Company estimates the asset’s

recoverable amount.

Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount of an asset may

not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the profit

(loss). Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised

for the asset no longer exist or have decreased. The reversal is accounted in the same caption of the profit (loss) as the impairment loss.

Recoverable amount of an asset or cash-generating unit is its value in use or fair value less costs to sell depending on which is greater. In

assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current

market assessments of the time value of money and the risks specific to the asset.

For impairment testing the asset that cannot be assessed individually is grouped into the minimum asset’s group generating cash inflows

during continuous use and that is independent from other asset or asset’s groups generating cash flows (cash generating unit or CGU).

Where the carrying amount of an asset exceeds its recoverable amount the impairment loss is recognised in the profit (loss). Impairment losses

related to the value of CGU are proportionally attributed to decrease the carrying amount of the asset, prescribed to the unit (unit group).

Previously recognised impairment losses are reversed only if there is any indication that such losses no longer exist or have decreased. The

reversal is limited so that the carrying amount of the asset does not exceed the carrying amount that would have been determined net of

depreciation or amortisation had no impairment loss been recognised for the asset in prior years. The reversal is accounted in the same caption

of the profit (loss) as the impairment loss.

2.25. Use of estimates and judgements

The preparation of the financial statements in accordance with IFRS as adopted by the EU, requires management to make judgements,

estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and

expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be

reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities

that are not readily apparent from other sources. Actual results may differ from the estimates. Estimates and underlying assumptions are

reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Significant accounting judgements

Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the

financial statements is included in the following notes:

- Lease term: whether the Group and the Company is reasonably certain to exercise the option to purchase FSRU (Note 13);

- Provision for acquisition of emission allowances (Note 16);

- The deferred tax (Note 21).

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL 
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022 
(all amounts are in EUR thousand unless otherwise stated) 
 
www.kn.lt | 23 
 
2   ACCOUNTING PRINCIPLES (CONT’D) 
2.25.  Use of estimates and judgements (cont’d) 
Assumptions and estimation uncertainties 
Information about assumptions and estimation uncertainties as at 31 December 2022 that have a significant risk of resulting in a material 
adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the following notes:  
-  Impairment evaluation of property, plant and equipment and right of use asset: key assumptions underlying recoverable amounts 
of identified cash generating units (Note 3); 
-  Useful life of property, plant and equipment and intangible assets (Note 3); 
-  Residual value and useful life of FSRU (Note 3); 
-  Impairment evaluation of investments to subsidiaries: key assumptions underlying recoverable amounts (Note 5); 
-  Net realisable value of inventory (Note 6) 
-  Assessment of expected credit losses and impairment losses on receivable amounts: key assumptions determining the impairment 
allowance (Note 7); 
-  Recognition of deferred tax assets: availability of future taxable profit against which deductible temporary differences and tax losses 
carried forward can be utilized (Note 21); 
-  Measurement of non-current employee benefits: key actuarial assumptions (Note 12); 
-  Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow 
of resources (Note 25). 
2.26.  Contingencies 
Contingent liabilities are  not  recognised in  the financial statements.  They  are  disclosed 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 economic benefits is probable.  
2.27.  Financial guarantee contracts 
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a 
loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial 
guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance 
of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present 
obligation at the reporting date and the amount recognised less cumulative amortisation. 
2.28.  Subsequent events 
Subsequent events that  provide  additional information  about  the  Company’s position at  the date  of the statement  of  financial  position 
(adjusting events) are reflected in the financial statements. Subsequent events that are not adjusting events are disclosed in the notes if 
material (Note 27).  
2.29.  Offsetting 
When preparing the financial statements, assets, and liabilities, as well as income and expenses are not set off, except the cases when certain 
International Financial Reporting Standard specifically allows such set-off.
2.30.  Fair value 
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants 
at the measurement date (Note 24). 
However, the objective of a fair value measurement in both cases is the same: to estimate the price at which an orderly transaction to sell the 
assets or to transfer the liability would take place between market participants at the measurement date under current market conditions (i.e., 
an ultimate price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).  
In determining the fair value of non-financial assets, market participant’s ability to derive economic benefit from the assets in using it in the 
highest and best use or selling the asset to another market participant, who would use it according to the highest and best use, is considered. 
In determining the fair value, a business entity should determine all the following: 
▪  the specific assets or liability, the fair value of which is determined (together with the appropriate unit of account); 
▪  when non-financial asset is valuated, the valuation assumption, which is fit for the purpose of determining the fair value (along with the 
corresponding highest and best use of the non-financial asset); 
▪  the principal (or most advantageous) market for the assets or liability; 

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 24

2 ACCOUNTING PRINCIPLES (CONT’D)

2.30. Fair value (cont’d)

▪ the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that

represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy

within which the inputs are categorised.

The objective of using a valuation technique is to estimate the price at which an orderly transaction to sell the assets or to transfer the liability

would take place between market participants at the measurement date under current market conditions. Three widely used valuation

techniques are the market approach, the cost approach and the income approach.

Market approach. A valuation technique that uses prices and other relevant information generated by market transactions involving identical

or comparable (i.e., similar) assets, liabilities or a group of assets and liabilities, such as a business.

Cost approach. A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset

(often referred to as current replacement cost).

Income approach. Valuation techniques that convert future amounts (e.g., cash flows or income and expenses) to a single current (i.e.,

discounted) amount. The fair value measurement is determined based on the value indicated by current market expectations about those

future amounts.

Fair value hierarchy. To increase consistency and comparability in fair value measurements and related disclosures, the IFRS 13 establishes a

fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value.

Level 1 inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the

measurement date.

Level 2 inputs. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly or indirectly.

Level 3 inputs. Level 3 inputs are unobservable inputs for the asset or liability.

For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group and the Company

determines whether transfers have occurred between levels in the hierarchy by re-assessing classification (based on the lowest level input that

is significant to the fair value measurement as a whole) at the end of each reporting period.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022 (all amounts are in EUR thousand unless otherwise stated) www.kn.lt \| 25 3 PROPERTY, PLANT AND EQUIPMENT GROUP	Land	Buildings	Machinery,	Other non-	Construction	Total
		and	plant and	current	in progress
Acquisition cost		structures	equipment	assets
Balance as at 31 December 2020	38	181,656	188,888	25,606	5,956	402,144
Acquisitions	-	374	250	613	7,473	8,710
Advance payments	-	-	-	-	225	225
Retirements and disposals	-	(39)	(232)	(204)	-	(475)
Transfer from construction in progress	-	81	185	41	(307)	-
Transfer from construction in progress to intangible assets	-	-	-	-	(98)	(98)
Effect of foreign currency translation	-	-	1	-	-	1
Balance as at 31 December 2021	38	182,072	189,092	26,056	13,249	410,507
Acquisitions	-	82	355	689	3,002	4,128
Advance payments	-	-	-	4	-	4
Retirements and disposals	-	(8)	(77)	(837)	-	(922)
Transfer from construction in progress	-	164	3,804	489	(4,457)	-
Reclassification	-	10	(10)	-	(524)	(524)
Effect of foreign currency translation	-	-	5	15	-	20
Balance as at 31 December 2022	38	182,320	193,169	26,416	11,270	413,213
Accumulated depreciation and impairment:
Balance as at 31 December 2020	-	84,084	101,418	14,201	596	200,299
Depreciation for the year	-	4,308	5,494	1,606	-	11,408
Retirements and disposals	-	(9)	(168)	(172)	-	(349)
Impairment for the year (reversal)	-	26,796	16,308	1,885	3,473	48,462
Effect of foreign currency translation	-	-	1	-	-	1
Balance as at 31 December 2021	-	115,179	123,053	17,520	4,069	259,821
Depreciation for the year	-	2,977	4,180	1,325	-	8,482
Retirements and disposals	-	(8)	(77)	(630)	-	(715)
Impairment for the year (reversal)	-	-	-	-	27	27
Reclassifications	-	39	881	112	(1,204)	(172)
Effect of foreign currency translation	-	-	(8)	(22)	-	(30)
Balance as at 31 December 2022	-	118,187	128,029	18,305	2,892	267,413
Net book value as at 31 December 2020	38	97,572	87,470	11,405	5,360	201,845
Net book value as at 31 December 2021	38	66,893	66,039	8,536	9,180	150,686
Net book value as at 31 December 2022	38	64,133	65,140	8,111	8,378	145,800

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022 (all amounts are in EUR thousand unless otherwise stated) www.kn.lt \| 26 3 PROPERTY, PLANT AND EQUIPMENT (CONT’D) COMPANY	Land	Buildings	Machinery,	Other non-	Construction	Total
		and	plant and	current	in progress
Acquisition cost		structures	equipment	assets
Balance as at 31 December 2020	38	181,656	188,856	25,498	5,956	402,004
Acquisitions	-	374	236	602	7,473	8,685
Advance payments	-	-	-	-	225	225
Retirements and disposals	-	(39)	(232)	(204)	-	(475)
Transfer from construction in progress	-	81	185	41	(307)	-
Transfer from construction in progress to intangible assets	-	-	-	-	(98)	(98)
Balance as at 31 December 2021	38	182,072	189,045	25,937	13,249	410,341
Acquisitions	-	82	340	686	3,002	4,110
Advance payments	-	-	-	4	-	4
Retirements and disposals	-	(8)	(77)	(837)	-	(922)
Transfer from construction in progress	-	164	3,804	489	(4,457)	-
Reclassification	-	10	(10)	-	(524)	(524)
Balance as at 31 December 2022	38	182,320	193,102	26,279	11,270	413,009
Accumulated depreciation and impairment:
Balance as at 31 December 2020	-	84,084	101,415	14,190	596	200,285
Depreciation for the year	-	4,308	5,486	1,584	-	11,378
Retirements and disposals	-	(9)	(168)	(172)	-	(349)
Impairment for the year (reversal)	-	26,796	16,308	1,885	3,473	48,462
Balance as at 31 December 2021	-	115,179	123,041	17,487	4,069	259,776
Depreciation for the year	-	2,977	4,159	1,274	-	8,410
Retirements and disposals	-	(8)	(77)	(630)	-	(715)
Impairment for the year (reversal)	-	-	-	-	27	27
Reclassifications	-	39	881	112	(1,204)	(172)
Balance as at 31 December 2022	-	118,187	128,004	18,243	2,892	267,326
Net book value as at 31 December 2020	38	97,572	87,441	11,308	5,360	201,719
Net book value as at 31 December 2021	38	66,893	66,004	8,450	9,180	150,565
Net book value as at 31 December 2022	38	64,133	65,098	8,036	8,378	145,683

The Group’s and the Company’s depreciation of property, plant and equipment amounts to EUR 8,482 thousand and EUR 8,410 thousand for

the year 2022, respectively (EUR 11,408 thousand and EUR 11,378 thousand – in 2021). In 2022 the depreciation EUR 388 thousand was reduced

by amortisation of related grant (EUR 348 thousand – in 2021). EUR 8,376 thousand and EUR 8,303 thousand of depreciation charge has been

included into cost of sales of the Group and the Company, respectively (EUR 11,199 thousand and EUR 11,169 thousand – in 2021). The

remaining amount EUR 107 thousand (EUR 209 thousand – in 2021) has been included into operating expenses in the Statement of

comprehensive income of both, the Group and the Company.

Part of the Group’s and the Company’s property, plant and equipment with the acquisition cost of EUR 42,529 thousand as at 31 December

2022 was completely depreciated (EUR 40,537 thousand on 31 December 2021), however, it was still in operation.

The Group’s and the Company‘s property, plant and equipment attributed to Liquefied natural gas terminal (net book value amounted to

EUR 38,132 thousand) was pledged to the Ministry of Finance of Republic of Lithuania for the state guarantee, given to European Investment

Bank (hereinafter – EIB) and Nordic Investment Bank (hereinafter – NIB) as at 31 December 2022 (net book value amounted to EUR 40,353

thousand as at 31 December 2021).

The Group’s and the Company's property, plant and equipment attributed to Subačius oil terminal, with net book value amounting to EUR

4,277 thousand, was pledged to the Ministry of Finance of the Republic of Lithuania for the state guarantee, given to NIB as at 31 December

2022 (net book value of pledged property, plant and equipment amounted to EUR 4,483 thousand as at 31 December 2021).

Impairment of property, plant and equipment and right of use asset attributed LNG reloading station assets

The management of the Group and the Company has assessed the internal and external indications of impairment for property, plant and

equipment attributed to LNG reloading station as at 31 December 2022.

During 2022, significant changes in economic environment and financial markets took place in both regional and global scale. Taking into

account all external factors it was presumed that increase in market interest rates and other factors could significantly impact the weighted

average cost of capital used for discounting of LNG reloading station CGU‘s future pre-tax cash flows.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 27

3 PROPERTY, PLANT AND EQUIPMENT (CONT’D)

As at 31 December 2022 the management of the Group and the Company did not identify any other negative significant events or changes in

the circumstances that would indicate potential impairment of assets attributed to LNG reloading station. CGU’s future cash-flows have been

reviewed in the light of current market conditions and management’s expectations for the future performance along with reassessment of

WACC used for discounting future pre-tax cash flows.

As at the end of the year 2022 the management of the Group and the Company performed an impairment test of property, plant and

equipment attributed to LNG reloading station project by comparing discounted future cash flows forecasted for period till year 2045 (end of

estimated useful life of assets) to carrying amounts of this cash generating unit (CGU). The main assumptions used to perform the test were:

- Fixed and variable income as to long-term agreement with client (signed in 2019 for the period of 2020-2024).

- Possible LNG market development after 2024, according to which reloaded LNG volume is assumed to increase 4 times by the year

2030, when the maximum CGU’s technical capacity is reached.

- Possible operating expenses based on actual activity expenses and inflated by 2% p.a. starting from 2024.

- Discount rate estimated as weighted average cost of capital (WACC) that as of 31 December 2022 was equal to 11.27% (pre-tax, real

prices).

Long-term results, e.g. after the end of the rent period were based on the management judgement, strategic partners assumptions, available

LNG market development studies and other publicly available data sources.

Based on impairment test results no impairment recognized for property, plant and equipment and right-of-use asset attributed to LNG

reloading station as at 31 December 2022.

Net book value of property, plant and equipment and right of use asset attributed to LNG reloading station amounted to EUR 23,635 thousand

as at 31 December 2022 (EUR 24,787 thousand as at 31 December 2021).

Sensitivity analysis of LNG reloading station assets value in use within an impairment test carried out as of 31 December 2022

The major elements impacting the amount of the value in use of LNG reloading station assets within the individual CGU are operation extent

– fixed and variable income as to long-term agreement with client (signed in 2019 for the period of 2020-2024) and long-term income, based

on possible LNG market development after 2024 along with the discount rate applied.

The sensitivity of changes of the elements mentioned above on the impairment are presented below.

Difference between the recoverable amount of CGU and its carrying value, EUR thousand

		Change in discount rate
	(1.0) p.p.	(0.5) p.p.	0.0 p.p.	+0.5 p.p.	+1.0 p.p.
(20.0)%	(1,923)	(2,637)	(3,305)	(3,930)	(4,514)
(10.0)%	416	(410)	(1,182)	(1,904)	(2,581)
0.0%	2,755	1,818	941	121	(647)
10.0%	3,886	2,918	2,012	1,163	367
20.0%	4,632	3,648	2,726	1,862	1,051

Change in

reloading

quantities

Future financial projections are based on several assumptions, a part of which related to macroeconomic factors such as: gas prices, regional

and global market demands, global LNG business development will remain beyond the control of the Group and the Company. Changes in

mentioned assumptions can affect impairment test results of non-current assets and may result to changes in the financial position and

financial results of the Group and the Company. Accordingly, the CGU of LNG reloading station remains very sensitive to further impairment

losses (or reversal of impairment losses) in the future reporting.

Impairment of property, plant and equipment and right of use asset attributed to Klaipėda oil terminal assets

During 2022, significant changes in economic environment and financial markets took place in both regional and global scale. Taking into

account all external factors it was presumed that increase in market interest rates and other factors could significantly impact the weighted

average cost of capital used for discounting of CGU‘s future pre-tax cash flows.

As at 31 December 2022 the management of the Group and the Company did not identify any other negative significant events or changes in

the circumstances that would indicate potential impairment to assets attributed to Klaipėda oil terminal. CGU’s future cash-flows have been

reviewed in the light of current market conditions and management’s expectations for the future performance along with reassessment of

WACC used for discounting future pre-tax cash flows..

CGU’s cash-flows were projected for the period of 2023-2047 based on estimated remaining useful life of key assets. Additionally, segment is

operating in asset-heavy and stable industry, relying on long-term contracts, allowing to execute long term cash flow projections. Overall oil

product transshipment was expected to maintain stable level by 2025, compared to current transshipment levels, and drop by 21 percent after

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 28

3 PROPERTY, PLANT AND EQUIPMENT (CONT’D)

expected implementation of AB Orlen Lietuva investment into deeper crude oil processing and consequently lower transshipment of

high-sulphur residue products, which currently makes a signification portion of oil products, transhipped via Klaipėda oil terminal. Oil product

transshipment during the period of 2027-2030 was expected to remain at the similar level and start gradually decreasing by on average 1.4

percent p.a. afterwards. Oil product storage and tank reservation related income was expected to maintain similar level, compared to current

situation, and assume to double in 2026, mainly due to significant increase in reservation/ storage rates based on current market situation and

increase redundant storage capacities after transshipment decrease. 2% steady growth afterwards is projected, mainly due to indexation of

tariffs. Restorative and maintenance investments into Klaipėda oil terminal assets were assumed to reach EUR 52,721 thousand during the

forecasted period.

Cash flows up to 2026, used in the assessment, were projected based on the assumption made by the management that AB Orlen Lietuva

investment would be finished till that date, significantly impacting scope of CGU activity and cash flows in subsequent periods. Operating

assumptions used in cash flow calculations are projected based on global oil market forecast from the year 2030, meanwhile, income and

expense assumptions for the remaining periods are projected based on long term 2% growth rate, which is aimed inflation target in order to

maintain price stability over the medium term, according to the decision of ECB Governing Council.

To determine the value in use of CGU, future pre-tax cash flows are calculated and discounted with a pre-tax discount rate that represents

current market valuation of time value of money as well as the significant risks allocated to related assets.

The discount rate was calculated as the weighted average cost of capital using data based on listed oil/ gas distribution sector company

performance during 2022 as to publicly available data, as well as other commonly used indicators such as – risk-free rate of Lithuanian

government bonds, country risk premium, corporate credit spread and effective tax rate that reflects market that CGU is generally based in.

To reflect risks and uncertainty arising from the Company’s business environment, additional risk premium of 1.48% was estimated and added

directly to pre-tax WACC estimate.

Accordingly, pre-tax discount rate was estimated at 10.27% and used for determining value in use of CGU as at 31 December 2022 (31

December 2021 – 6.65%).

Taking into account the changes in impairment testing assumptions, the result of impairment testing of Klaipėda oil terminal’s assets did not

indicate any potential impairment as at 31 December 2022.

Sensitivity analysis of Klaipėda oil terminal assets value in use within an impairment test carried out as of 31 December 2022

The major elements impacting the amount of the value in use of Klaipėda oil terminal assets within the individual CGU are income generated

from terminal operation and the discount rate applied.

The sensitivity of changes of the elements mentioned above on the impairment are presented below.

Difference between the recoverable amount of CGU and its carrying value, EUR thousand

		Change in discount rate
	(1.0) p.p.	(0.5) p.p.	0.0 p.p.	+0.5 p.p.	+1.0 p.p.
(10.0)%	(7,107)	(10,832)	(14,311)	(17,562)	(20,605)
(5.0)%	3,360	(878)	(4,835)	(8,534)	(11,996)
0.0%	13,827	9,076	4,640	493	(3,387)
5.0%	24,294	19,030	14,115	9,521	5,222
10.0%	34,761	28,984	23,590	18,549	13,831

Change in income

projection (other

assumptions held

constant)

The Group and the Company has additionally assessed annual investments and income level from key client as major elements impacting

value in use of Klaipėda oil terminal assets. Under the base scenario EUR 52,721 thousand of capital investments are assumed during the

valuation period. It is estimated that a 10% proportional increase in annual capital expenditure would reduce NPV of CGU by EUR 2,669

thousand, meanwhile, a 10% decrease would result in an increase by EUR 2,669 thousand.

In case of reloading quantities from main client would not significantly change from 2026 EUR 28,898 thousand positive impact to value in use

would be identified.

Future financial projections are based on several assumptions, a part of which relate to macroeconomic factors such as: commodity prices,

regional and global market demands, global oil business development will remain beyond the control of the Group and the Company. Changes

in mentioned assumptions can affect impairment test results of non-current assets and may result to changes in the financial position and

financial results of the Group and the Company.

Net book value of property, plant and equipment and right of use asset attributed to Klaipėda oil terminal amounted to EUR 88,933 thousand

as at 31 December 2022 (EUR 85,451 thousand as at 31 December 2021).

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022 (all amounts are in EUR thousand unless otherwise stated) www.kn.lt \| 29 3 PROPERTY, PLANT AND EQUIPMENT (CONT’D) Right-of-use assets GROUP	Land	Buildings	Machinery,	Other non-	Total
		and	plant and	current
Acquisition cost		structures	equipment	assets
Balance as at 31 December 2020	21,420	965	392,961	44	415,390
Acquisitions / disposals	1,172	100	74	1	1,347
Balance as at 31 December 2021	22,592	1,065	393,035	45	416,737
Acquisitions / disposals	3,789	792	-	-	4,581
Effect of foreign currency translation	-	4	-	-	4
Balance as at 31 December 2022	26,381	1,861	393,035	45	421,322
Accumulated depreciation and impairment:
Balance as at 31 December 2020	1,110	638	56,550	39	58,337
Depreciation for the year	510	274	13,539	6	14,329
Impairment for the year (reversal)	5,759	45	11	-	5,815
Balance as at 31 December 2021	7,379	957	70,100	45	78,481
Depreciation for the year	538	237	13,550	-	14,325
Effect of foreign currency translation	-	-	1	-	1
Balance as at 31 December 2022	7,917	1,194	83,651	45	92,807
Net book value as at 31 December 2020	20,310	327	336,411	5	357,053
Net book value as at 31 December 2021	15,213	108	322,935	-	338,256
Net book value as at 31 December 2022	18,464	667	309,384	-	328,515

COMPANY

	Land	Buildings	Machinery,	Other non-	Total
		and	plant and	current
Acquisition cost		structures	equipment	assets
Balance as at 31 December 2020	21,420	965	392,961	44	415,390
Acquisitions / disposals	1,172	71	74	1	1,318
Balance as at 31 December 2021	22,592	1,036	393,035	45	416,708
Acquisitions / disposals	3,789	792	-	-	4,581
Balance as at 31 December 2022	26,381	1,828	393,035	45	421,289
Accumulated depreciation and impairment:
Balance as at 31 December 2020	1,110	638	56,550	39	58,337
Depreciation for the year	510	269	13,539	6	14,324
Impairment for the year (reversal)	5,759	45	11	-	5,815
Balance as at 31 December 2021	7,379	952	70,100	45	78,476
Depreciation for the year	538	230	13,550	-	14,318
Balance as at 31 December 2022	7,917	1,182	83,650	45	92,794
Net book value as at 31 December 2020	20,310	327	336,411	5	357,053
Net book value as at 31 December 2021	15,213	84	322,935	-	338,232
Net book value as at 31 December 2022	18,464	646	309,385	-	328,495

The Group’s and the Company’s depreciation of right-of-use asset amounts to EUR 14,325 thousand and EUR 14,318 thousand for the year

2022, respectively (EUR 14,329 thousand and EUR 14,324 thousand in 2021). EUR 14,088 thousand of depreciation charge has been included

into cost of sales of both, the Group and the Company (EUR 14,052 thousand in 2021) and the remaining amount of EUR 218 thousand and

EUR 211 thousand has been included into operating expenses in the Statement of comprehensive income of the Group and the Company,

respectively (EUR 277 thousand and EUR 272 thousand in 2021).

Since right of use assets do not generate separate cash flow, the management of the Group and the Company has assessed the internal and

external indications of impairment of right-of-use assets along with other tangible assets as common CGU as at 31 December 2022 and 31

December 2021. The impairment related to Klaipėda oil terminal business segment for EUR 5,815 thousand accounted as at 31 December 2021

and has been included into operating expenses in the Statement of comprehensive income of both, the Group and the Company. The

management did not identify additional impairment of the right-of-use assets as at 31 December 2022.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 30

4 INFORMATION ABOUT SEGMENTS

The management of the Group and the Company has identified the following segments:

• LNGT – LNG terminal in Klaipėda which receives and stores liquefied natural gas, regasifies and supplies it to Gas Main pipeline;

• OT – Oil terminal in Klaipėda and Subačius oil terminal in Kupiškis who are providing oil products transhipment, services of long-term

storage of oil products and other services related to oil products transhipment;

• comLNG – LNG commercial activities – includes LNG reloading station and execution of other LNG projects.

The Group includes its investments in subsidiaries and associates to the specific segments according to which activities these entities are

involved in: UAB SGD logistika, UAB SGD SPB and KN Açu Servicos de Terminal de GNL LTDA – comLNG, UAB SGD terminalas – LNGT,

BALTPOOL UAB and Sarmatia Sp. z. o. o. – OT.

As at 31 December 2022, there were five customers each of which generated revenues exceeding 10% of total Company’s revenues and in

total amounted to EUR 55,683 thousand:

Customer A – EUR 16,059 thousand (OT – EUR 16,059 thousand);

Customer B – EUR 11,047 thousand (LNGT – EUR 11,047 thousand);

Customer C – EUR 10,527 thousand (LNGT – EUR 10,527 thousand);

Customer D – EUR 9,141 thousand (LNGT – EUR 9,141 thousand);

Customer E – EUR 8,909 thousand (LNGT – EUR 8,909 thousand).

As at 31 December 2021, there were three customers each of which generated revenues exceeding 10% of total Company’s revenues and in

total amounted to EUR 45,079 thousand:

Customer A – EUR 27,732 thousand (LNGT segment);

Customer B – EUR 12,841 thousand (OT segment);

Customer C – EUR 4,506 thousand (OT segment).

Main indicators of the segments of the Company included in the statement of comprehensive income and statement of financial position for

the financial year 2022 and 2021 are described below:

Group

For the year ended 31 December 2022	LNGT	OT	comLNG	Total
Revenues from contracts with customers	44,614	27,817	5,387	77,818
Profit (loss) before income tax	(10,571)	3,186	485	(6,900)
Segment net profit (loss)	(9,128)	3,220	4	(5,904)
Interest revenue	31	-	72	103
Loan interest expense	966	-	7	973
Interest on financial lease liabilities	1,423	365	43	1,831
Depreciation and amortisation	2,487	4,646	1,206	8,339
Depreciation of right-of-use-assets	13,740	436	149	14,325
Impairment of non-current asset (reversal)	-	12	15	27
Acquisitions of tangible and intangible assets	123	4,200	40	4,363
Segment total assets*	362,642	113,183	25,685	501,510
Loan and related liabilities	143,202	(20)	(42)	143,140
Lease liabilities	245,600	18,567	2,081	266,248
Segment total liabilities	400,387	26,329	8,117	434,833

For the year ended 31 December 2021	LNGT	OT	comLNG	Total
Revenues from contracts with customers	34,831	21,427	5,553	61,811
Profit (loss) before income tax	(20,584)	(55,700)	517	(75,767)
Segment net profit (loss)	(16,510)	(47,563)	62	(64,011)
Interest revenue	-	13	-	13
Loan interest expense	481	-	-	481
Interest on financial lease liabilities	1,484	303	13	1,800
Depreciation and amortisation	3,172	6,737	1,408	11,317
Depreciation of right-of-use-assets	13,745	464	120	14,329
Impairment of non-current asset (reversal)	-	54,338	-	54,338
Acquisitions of tangible and intangible assets	210	8,764	97	9,071
Segment total assets*	377,049	106,872	26,643	510,564
Loan and related liabilities	119,985	(20)	(42)	119,923
Lease liabilities	270,594	14,872	1,639	287,105
Segment total liabilities	398,655	20,782	7,931	427,368

*Segment total assets – total assets of the Group, excluded Cash and cash equivalents and short-term deposits at the period end.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

4 INFORMATION ABOUT SEGMENTS (CONT’D)

Reconciliation of information on reportable segments to the amounts reported in the financial statements

I. Revenues	2022	2021
Total revenues for reportable segments	77,818	61,811
Consolidated revenue	77,818	61,811
II. Profit (loss) before tax	2022	2021
Total profit (loss) before tax for reportable segments	(6,900)	(75,767)
Consolidated profit (loss) before tax from continuing operations	(6,900)	(75,767)
III. Net profit (loss)	2022	2021
Total net profit (loss) for reportable segments	(5,904)	(64,011)
Consolidated net profit (loss)	(5,904)	(64,011)
IV. Interest on financial lease liabilities	2022	2021
Total interest on financial lease liabilities for reportable segments	1,831	1,800
Consolidated interest on financial lease liabilities	1,831	1,800
V. Depreciation and amortization	2022	2021
Total depreciation and amortization for reportable segments	8,339	11,317
Consolidated depreciation and amortization	8,339	11,317
VI. Depreciation of ROU assets	2022	2021
Total depreciation of ROU assets for reportable segments	14,325	14,329
Consolidated depreciation of ROU assets	14,325	14,329
VII. Acquisitions of tangible and intangible assets	2022	2021
Total acquisitions of tangible and intangible assets for reportable segments	4,363	9,071
Consolidated acquisitions of tangible and intangible assets	4,363	9,071
VIII. Assets*	2022	2021
Total assets for reportable segments	501,510	510,564
Consolidated total assets	501,510	510,564
IX. Loan and related liabilities	2022	2021
Total loan and related liabilities for reportable segments	143,140	119,923
Consolidated loan and related liabilities	143,140	119,923
X. Lease liabilities	2022	2021
Total lease liabilities for reportable segments	266,248	287,105
Consolidated financial lease liabilities	266,248	287,105
XI. Liabilities	2022	2021
Total liabilities for reportable segments	434,833	427,368
Consolidated total liabilities	434,833	427,368

*Segment total assets – total assets of the Company, excluding Cash and cash equivalents and short-term deposits at the period end.

www.kn.lt | 31

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 32

4 INFORMATION ABOUT SEGMENTS (CONT’D)

The Group’s and Company’s customers are both Lithuanian and foreign. Sales revenue by geography is as follows:

Majority of property, plant and equipment is located in Lithuania and only less than 1% - in Brazil.

5 INVESTMENT IN SUBSIDIARIES

The Company

	31-12-2022	31-12-2021
Cost of shares of UAB SGD logistika	4,540	4,540
Cost of shares of UAB SGD terminalas	38	38
	4,578	4,578

The Company indirectly controls subsidiaries UAB SGD SPB and KN Açu Servicos de Terminal de GNL LTDA.

UAB SGD logistika

The subsidiary was registered on 20 November 2015. The main activity – expansion of operation of international LNG terminal activities, LNG

transportation activities, other economic activities.

The authorised capital of UAB SGD logistika is equal to EUR 4,540 thousand and is divided into 4,540 thousand units of shares, which grant

4,540 thousand votes. Nominal value per share – EUR 1.00.

As KN has been appointed as the operator of a liquefied natural gas (LNG) terminal in the Brazilian Port of Açu, on 13th of December 2019,

UAB SGD logistika together with UAB SGD SPB established KN Acu Servicos de Terminal de GNL LTDA. As to the long-term contract with Gas

Natural Açu (GNA), KN, through its subsidiary, assumes the responsibility for the provision of safe, reliable and efficient operations, including

maintenance of the jetty and its installations, gas pipeline and gas metering stations as well as supporting the commissioning of the LNG

Terminal.

The management of the Company has reassessed indications of impairment of investment to subsidiary – no indications as at 31 December

2022. As at 31 December 2021, the Company performed the impairment test of investment to subsidiary UAB SGD logistika by comparing

discounted future cash flows forecasted for the project, implemented by established KN Açu Serviços de Terminal de GNL Ltda to carrying

value of investment. Impairment test was prepared for the period until the year 2035, based on valid agreement with GNA. The main

assumptions used to perform the test were income level, which is based on different main project phases and agreed in the long-term contract,

possible operating costs, which were estimated based on actual LNG terminal operation business activity expenses and adjusted as to local

inflation and discount rate, estimated as weighted average cost of capital (WACC) of listed oil/ gas distribution sector companies, operating

in emerging markets (including Brazil) as to publicly available data for 2022 that as at 31 December 2021 was assumed to be 8.9%.

Based on impairment test results no impairment should be recognized for investment to UAB SGD logistika as at 31 December 2022.

Unaudited financial position of UAB SGD logistika is as follows:

	UAB SGD logistika
	2022	2021
Non-current assets	151	151
Current assets	4,665	4,012
Current liabilities	1	1
Equity	4,815	4,162

Unaudited comprehensive income of UAB SGD logistika is, as follows:

	UAB SGD logistika
	2022	2021
Income	721	154
(Expenses)	(68)	(34)
Profit (loss)	653	120

	Group		Company
	2022	2021	2022	2021
Lithuanian clients	55,814	53,272	55,863	53,272
Foreign clients	22,004	8,539	18,859	5,361
	77,818	61,811	74,722	58,633

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 33

5 INVESTMENT IN SUBSIDIARIES (CONT’D)

UAB SGD terminalas

The subsidiary of AB Klaipėdos nafta – UAB SGD terminalas (Burių str. 19, 92276 Klaipėda, 304139242) was established and registered on 27

December 2018. UAB SGD terminalas objective is to perform activities of operating and managing a whole structure of LNG terminal in

Klaipėda. The subsidiary is currently inactive. In 2021 the share capital of subsidiary was increased by EUR 25 thousand.

Unaudited financial position of UAB SGD terminalas is as follows:

	UAB SGD terminalas
	2022	2021
Current assets	24	27
Current liabilities	1	-
Equity	23	27

Unaudited comprehensive income of UAB SGD terminalas is, as follows:

	UAB SGD terminalas
	2022	2021
Income	-	-
(Expenses)	(4)	(4)
Profit (loss)	(4)	(4)

6 INVENTORIES

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Oil products for sale	263	23	263	23
Diesel fuel for the LNG Terminal purpose	257	234	257	234
Emission allowances	133	-	133	-
Fuel for transport and other equipment	47	48	47	48
Liquefied natural gas	46	47	46	47
Spare parts, construction materials and other inventories	1,374	1,446	1,374	1,444
	2,120	1,798	2,120	1,796

As of 31 December 2022, the Group and the Company accounted the write-off of inventories in the amount of EUR 92 thousand that have

been written down to the net realizable value. No write down to net realisable value accounted as at 31 December 2021.

In 2022 the Group and the Company recognised inventories for EUR 5,549 thousand (in 2021: EUR 3,218 thousand) in cost of sales and

EUR 37 thousand in operating expenses (in 2021: EUR 30 thousand). Inventories recognised as costs during the year were included into

following captions under costs of sales and operating expenses:

Inventories recognised under cost of sales:	2022	2021
Natural gas	3,942	2,184
Oil products	1,019	599
Repair and maintenance of assets	223	205
Emission allowances	168	-
Services for tankers	125	136
Transport	52	40
Work safety costs	19	53
Other	1	1
Inventories recognised as operating expenses:	5,549	3,218
Expenses for transport	36	20
Other	1	10
	37	30

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

7 TRADE RECEIVABLES AND OTHER RECEIVABLES

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Trade receivable	11,879	9,411	11,336	8,939
Prepayments	796	553	765	523
Other receivables	2,066	1,679	1,871	1,174
	14,741	11,643	13,972	10,636

Trade and other receivables are non-interest bearing and are generally settled on 2 - 15 days payment terms.

Trade receivable disclosed below:

	Group		Company
	8,521	7,435	8,521	7,435
Receivables from LNG terminal activities	8,521	7,435	8,521	7,435
Receivables for transhipment of oil products and other related services	4,261	2,902	4,261	2,902
Receivable for operating and management services	620	585	77	113
Less: impairment allowance	(1,523)	(1,511)	(1,523)	(1,511)
	11,879	9,411	11,336	8,939

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Receivables from third-party customers	6,801	2,067	6,221	1,580
Receivables from related parties (Note 26)	5,078	7,344	5,115	7,359
	11,879	9,411	11,336	8,939

The Group and the Company has recognized impairment allowance in the amount of EUR 1,523 thousand on 31 December 2022 (EUR 1,511

thousand on 31 December 2021).

Change in allowance for trade receivables for 2022, amounting to EUR 12 thousand (for 2021 – reverse of allowance accounted amounting to

EUR (711) thousand) has been included into operating expenses in the statement of the comprehensive income. A part of impaired trade

receivables in 2021 was covered by paying back or taking over the client’s surplus of fuel oil – total covered amount EUR 122 thousand.

Remaining part was reversed after credit invoices to two clients were issued by the decision of the management.

Movements in the allowance for impairment in respect of trade receivables

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Group and Company	31-12-2022	31-12-2021
Balance at 1 January	1,511	2,222
Impairment of the year	12	-
Reversal of impairment	-	(711)
Balance at 31 December	1,523	1,511

The age analysis of trade receivables of the Group and the Company as at 31 December 2022 and 2021 is as follows:

Group
		Trade receivables past due but not impaired
Trade neither past due		Less than	30 – 59	60 – 89	90 – 179	180 – 279	280 – 359	More than	Total
nor impaired		30 days	days	days	days	days	days	360 days
2022	6,999	896	6	3	-	3,975	-	-	11,879
2021	5,341	2,770	1,300	-	-	-	-	-	9,411

Company
		Trade receivables past due but not impaired
Trade neither past due		Less than 30	30 – 59	60 – 89	90 – 179	180 – 279	280 – 359	More than	Total
nor impaired		days	days	days	days	days	days	360 days
2022	6,456	896	6	3	-	3,975	-	-	11,336
2021	4,869	2,770	1,300	-	-	-	-	-	8,939

www.kn.lt | 34

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 35

7 TRADE RECEIVABLES AND OTHER RECEIVABLES (CONT’D)

All receivable amounts from the liquefied natural gas terminal services are pledged to UAB Hoegh LNG Klaipėda for 10 years period from 2014

(agreement concluded on 2 March 2012, Note 25).

Other receivables disclosed below:

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Excise duty receivable	983	354	983	354
VAT receivable	860	820	860	820
Other receivable taxes	195	505	-	-
Other receivables	28	-	28	-
Total	2,066	1,679	1,871	1,174

(1) Other receivable taxes related to subsidiary KN Acu Servicos de Terminal de GNL Ltda receivable social security taxes (INSS). Any employee

on a Brazilian payroll is subject to social security contributions. According to the current legislation, the monthly social security contribution in

Brazil is due on the total amount of the remuneration at rates of 7.5% up to 14%.

8 CONTRACT ASSETS

The Group and the Company

Current contract assets:	31-12-2022	31-12-2021
Accrued rent income (1)	-	349
Accrued income (2)	328	263
	328	612

(1) Subačius fuel storage reservoirs rent agreement signed with the Lithuanian petroleum products Agency in 2012 for the duration of 10

years is treated. The rent tariffs are different for the first 5 years and for the remaining period. Therefore, the income is recognized on a

straight-line basis over the term of an agreement, i.e., the income is calculated on average tariff of all agreement term (10 years). As at

31 December 2022 agreement amount is fully depreciated, balance as at 31 December 2021 amounted to EUR 349 thousand.

(2) Accrued income for storage of oil products as of 31 December 2022 and 31 December 2021 calculated as percentage of completion

based on expenses incurred from the total estimated cost of contracted services. Upon completion of transshipment of oil products and

acceptance by the customer, the amounts initially recognized as contract assets are reclassified as trade receivables.

9 OTHER FINANCIAL ASSETS

The Group and the Company

	31-12-2022	31-12-2021
Excise duty guarantee receivable	3,271	3,271
	3,271	3,271

In 2020 the Group and the Company paid a guarantee to the Excise Administration Department for tax which may arise from the movement

of excise goods under suspension of excise duty. The additional excise duty guarantee paid in September 2021 for EUR 2,000 thousand. The

guarantee agreement is without a fixed term.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 36

10 CASH AND CASH EQUIVALENTS

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Cash at banks	72,423	61,517	66,848	57,148

Cash and cash equivalents are not pledged as at 31 December 2022 and 31 December 2021.

Calculated values of cash and cash equivalents are denominated in the following currencies showed in EUR:

	Group		Company
Currency	31-12-2022	31-12-2021	31-12-2022	31-12-2021
EUR	66,687	60,827	61,909	57,145
USD	4,939	3	4,939	3
BRL	797	687	-	-
	72,423	61,517	66,848	57,148

Management of the Group and the Company considered potential impairment losses on cash held in banks as per IFRS 9 requirements.

Assessment is based on official Standard & Poor’s long–term credit ratings:

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
A+	26,784	6,061	22,006	2,379
A-	17,000	-	17,000	-
AA-	27,842	27,337	27,842	27,337
BBB+	-	27,432	-	27,432
BB-	797	687	-	-
	72,423	61,517	66,848	57,148

Based on management’s assessment performed and best estimate cash and its equivalents are presented at fair value and no indications of

cash impairment exist as at 31 December 2022 and 31 December 2021.

11 ISSUED CAPITAL AND RESERVES

As of 11 January 2021, a new version of the Company's Articles of Association was registered within the Register of Legal Entities of the

Republic of Lithuania following the decrease of the authorised capital of the Company, which is now equal to EUR 110,315,009.65 and divided

into 380,396,585 units of shares, which grant 380,396,585 votes. The Ministry of Finance of the Republic of Lithuania granted the Company

permission to decrease the authorised capital of the Company by cancelling 655,808 units of Company’s acquired own shares which each

nominal value EUR 0.29. All shares are paid. 72.47% of the shares (275,687,444 shares) are owned by the State of Lithuania, represented by the

Ministry of Energy.

The Company has not acquired any own shares and has arranged no deals regarding acquisition or transfer of its own shares during the year

2022 and 2021.

A legal reserve is a compulsory reserve under Lithuanian legislation. Annual transfers of not less than 5% of net profit, calculated in accordance

with International Financial Reporting Standards, are compulsory until the reserve reaches 10% of the share capital. The legal reserve is fully

formed as at 31 December 2022 and 31 December 2021.

Other (distributable) reserves are formed based on the decision of the General Shareholders’ Meeting on profit distribution. These reserves

can be used only for the purposes approved by the General Shareholders’ Meeting. The largest portion of the Company’s other reserves are

formed for investments.

12 NON-CURRENT EMPLOYEE BENEFITS

Provisions for non-current employee benefits represent payable amounts calculated in accordance with the Lithuanian laws. Each employee

at retirement age is entitled to receive a payment of 2-6 monthly salaries upon retirement. As at 31 December 2022 and 31 December 2021

the Company and the Group has recognised employee benefits related to the length of service of employees, which is described in collective

agreement. Depending on time spent in the Company, the employer is entitled to a higher benefit payment than the one prescribed by the

law.

As at 31 December 2022 and 31 December 2021, the Company and the Group reclassified a portion of non-current employee benefits under

short term liabilities.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

12 NON-CURRENT EMPLOYEE BENEFITS (CONT’D)

On 31 December 2022 the liabilities related to the defined benefit obligations to the employees terminating the employment on the normal

retirement date were EUR 631 thousand (EUR 756 thousand – in 2021) as follows:

Group and Company	2022	2021
Start of period	756	675
Calculated per year	(93)	99
Paid per year	(32)	(18)
End of period	631	756
Current	62	49
Non-current	569	707

The main preconditions applied to assess long-term employee benefit liability are presented below:

Group and Company
	31-12-2022	31-12-2021
Discount rate	1.94%	0.11%
Staff turnover rate	8.46%	8.30%
Future salary increases	4.90%	4.80%

13 LOANS AND LEASE LIABILITIES

Loans

The Group and the Company
	31-12-2022	31-12-2021
Nordic Investment Bank’s loan (b, c)	96,102	70,733
European Investment Bank’s loan (a)	46,703	49,175
Guarantee payment to the Ministry of Finance to the Republic of Lithuania	(130)	(132)
Payable loan interest	465	147
	143,140	119,923

(a) A credit contract dated at 9 July 2013 was concluded by the Company with European Investment Bank (EIB) to grant a credit up to EUR

87,000 thousand to implement LNGT project. According to the contract, EIB financed up to 50% of necessary funds for the project

implementation. According to the contract, credit tenor is up to 20 years (5 years grace period, 15 years linear repayment scheme applied),

interest rate is variable comprising bank margin with inclusion of 3 months EURIBOR rate, and whose margin was submitted by the EIB in

payment offers. The contract also provided that minimum credit tranche was EUR 15,000 thousand, and the whole credit sum had to be paid

out to the Company over no more than 6 tranches.

The performance of 100% Company’s contractual financial liabilities is ensured by the State Guarantee and aligned with EU commission. The

Finance ministry of the Republic of Lithuania being issuer of the state aid guarantee has pledge on all property, plant and equipment created

during LNGT project (Note 3).

Above credit was facilitated in several tranches:

i. First tranche. On 20 December 2013, the 1st tranche amounting to EUR 15,000 thousand was received with full principal amortization

till 20 December 2033. The principal repaid by EUR 984 thousand as of 31 December 2022. First tranche loan balance as at 31 December

2022 – EUR 10,766 thousand (as at 31 December 2021 – EUR 11,746 thousand).

ii. Second tranche. On 28 November 2014, the 2nd tranche amounting to EUR 15,000 thousand was received with full principal

amortization till 28 November 2034. The principal repaid by EUR 984 thousand as of 31 December 2022. Second tranche loan balance

as at 31 December 2022 – EUR 11,751 thousand (as at 31 December 2021 – EUR 12,730 thousand).

iii. Third tranche. On 15 December 2017, the 3rd tranche amounting to EUR 24,700 thousand was received with full principal amortization

till 20 September 2034. The principal repaid by EUR 515 thousand as of 31 December 2022. Third tranche loan balance as at 31

December 2022 – EUR 24,186 thousand (as at 31 December 2021 – EUR 24,700 thousand).

The Company complied with covenants prescribed in the loan agreement as at 31 December 2022 and as at 31 December 2021.

www.kn.lt | 37

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

13 LOANS AND LEASE LIABILITIES (CONT’D)

(b) On 27 November 2014, the Company has concluded the Credit Agreement with the Nordic Investment Bank (NIB) regarding granting a

credit of up to EUR 34,755 thousand for the implementation of the LNGT project (the same). According to the contract, credit tenor was up to

20 years (5 years grace period, 15 years linear repayment scheme applied, interest: floating, which rate was provided in the NIB disbursement

offer (a fixed margin + 6 months EURIBOR). The Loan contract also provided that the minimal payable amount of credit was

EUR 7,000 thousand, and all the credit had to be paid out to the Company in no more than 5 tranches.

On 10 November 2015 there was signed NIB loan agreement amendment to reduce the loan principle to EUR 22,000 thousand.

On 31 August 2017, the Company withdrew the amount of EUR 22,000 thousand. Resulting in requirement of full principal amortization till 19

June 2034. The principal repaid by EUR 1,452 thousand as of 31 December 2022. NIB loan balance as at 31 December 2022 – EUR 16,615

thousand (as at 31 December 2021 – EUR 18,074 thousand).

The performance of 100% Company’s contractual financial liabilities is ensured by the State Guarantee and aligned with EU commission. The

Finance ministry of the Republic of Lithuania being issuer of the state aid guarantee has pledge on property, plant and equipment created

during LNGT project.

(c) On 19 November 2019, the Company concluded the Credit Agreement with the Nordic Investment Bank (NIB) regarding granting a credit

of up to EUR 134,145 thousand for restructuring of the lease payments of the FSRU. According to the Loan contract, the term of the credit was

up to 25 years (5 years grace period, 20 years linear repayment scheme), interest: floating (a fixed margin + 6 months EURIBOR). The Loan

contract also provides that the minimal payable amount of credit is EUR 5,000 thousand with the annual tranche cap EUR 26,829 thousand

(making total 5 annual tranches). Loan balance as at 31 December 2021 – EUR 79,487 thousand (as at 31 December 2021 – EUR 52,658

thousand).

The performance of 100% Company’s contractual financial liabilities is ensured by the State Guarantee and aligned with EU commission. The

Finance ministry of the Republic of Lithuania being issuer of the state aid guarantee has following collateral structure: Subačius oil terminal

and all existent and future receivables from security supplement till 2044. Pledge of receivables from security supplement is postponed till 31

January 2025 as performance bank guarantee of EUR 20,000 thousand is issued for 5 years tenor in favour of the Finance ministry of the

Republic of Lithuania for credit support. For issuance of the state guarantee, likewise historically, a guarantee administration payment of 0.1%

to the Ministry of Finance to the Republic of Lithuania was incurred.

On 31 March 2022, the Company withdrew the amount of EUR 6,707 thousand, followed by three consecutive tranches on 30 June 2022, 30

September 2022 and 31 December 2022 respectively, each amounting to EUR 6,707 thousand. The principal repaid by EUR 1,452 thousand as

at 31 December 2022. The withdrawal schedule in 2021 was the same as in 2022: on 31 March 2021, the Company withdrew the amount of

EUR 6,707 thousand, followed by three consecutive tranches on 30 June 2021, 30 September 2021 and 31 December 2021 respectively, each

amounting to EUR 6,707 thousand. Total withdrawn amount by 31 December 2022 was EUR 79,487 thousand (EUR 53,658 thousand as at 31

December 2021).

LEASE LIABILITIES

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Lease liabilities	266,248	287,105	266,226	287,080

Lease liabilities as at 31 December 2022 can be specified as follows:

Group

	FSRU lease	Land rent	Jetty rent	Other*	Total
Long term lease liabilities	195,022	19,231	5,392	477	220,122
Short term lease liabilities	45,353	443	77	253	46,126
	240,375	19,674	5,469	730	266,248

Company

	FSRU lease	Land rent	Jetty rent	Other*	Total
Long term lease liabilities	195,022	19,231	5,392	463	220,108
Short term lease liabilities	45,353	443	77	245	46,118
	240,375	19,674	5,469	708	266,226

Lease liabilities as at 31 December 2021 can be specified as follows:

Group

	FSRU lease	Land rent	Jetty rent	Other*	Total
Long term lease liabilities	222,380	15,966	5,011	73	243,430
Short term lease liabilities	43,119	352	75	129	43,675
	265,499	16,318	5,086	202	287,105

www.kn.lt | 38

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 39

13 LOANS AND LEASE LIABILITIES (CONT’D)

Company

	FSRU lease	Land rent	Jetty rent	Other*	Total
Long term lease liabilities	222,380	15,966	5,011	55	243,412
Short term lease liabilities	43,119	352	75	122	43,668
	265,499	16,318	5,086	177	287,080

* Other comprises of lease of transport vehicles, office rent. The interest rate for lease liabilities varies from 0.5% to 2% as at 31 December 2022 and as at 31 December 2021. The main characteristics of rent agreements by asset group, as well as the movement of the lease liability can be presented as follows: GROUP, denominated in euros
			Carrying							Carrying
		Year of	amount as at		Interest		Reclassifi-	Additional	Exchange	amount as at
	Currency	maturity	31-12-2021	Interests	payments	Payments	cation*	disbursement	rate effect	31-12-2022
FSRU lease	USD	2024	265,499	1,322	(1,334)	(47,133)	4,640	-	17,380	240,374
Land rent	EUR	2055	16,320	396	(299)	(396)	(136)	3,789	-	19,674
Jetty rent	EUR	2065	5,086	100	(81)	(86)	450	-	-	5,469
Other	EUR	2022-2022	200	13	(12)	(286)	25	791	-	731
			287,105	1,831	(1,726)	(47,901)	4,979	4,580	17,380	266,248

COMPANY, denominated in euros
			Carrying							Carrying
		Year of	amount as at		Interest		Reclassifi-	Additional	Exchange	amount as at
	Currency	maturity	31-12-2021	Interests	payments	Payments	cation*	disbursement	rate effect	31-12-2022
FSRU lease	USD	2024	265,499	1,322	(1,334)	(47,133)	4,640	-	17,380	240,374
Land rent	EUR	2055	16,320	396	(299)	(396)	(136)	3,789	-	19,674
Jetty rent	EUR	2065	5,086	100	(81)	(86)	450	-	-	5,469
Other	EUR	2022-2022	175	11	(11)	(280)	23	791	-	709
			287,080	1,829	(1,725)	(47,895)	4,977	4,580	17,380	266,226

* Reclassifications of lease liabilities include impact of changes in unpaid invoices for leases as at 31 December 2022 and 31 December 2021.

As at 31 December 2022 and 31 December 2021 the Group and the Company did not have residual value guarantees related to lease

agreements or leases not yet commenced to which the Group and the Company is committed. Only one agreement, FSRU lease, contains

purchase option, which is described below.

Floating Storage and Regasification Unit (FSRU) lease

On 2nd March 2012 the Company has signed the 10 years Build, Operate and Transfer (BOT) lease contract with Hoegh LNG Ltd. regarding

LNG Floating Storage and Regasification Unit (FSRU) with a purchase option. FSRU has arrived at the Seaport of Klaipėda at 27th October 2014

and has been taken over by the Company on 27th November 2014. There have been no changes in the BOT lease contract with Hoegh LNG

Ltd. regarding LNG Floating Storage and Regasification Unit (FSRU) in the year 2022 and 2021. The terms and condition of the BOT lease

contract do not provide any restrictions on the Company’s activities, associated with dividends, additional borrowings or additional rent.

FSRU operating lease payments include such elements:

• Charter Hire Element

• OPEX Element (Services, spares, consumables, insurance in FSRU mode, ship radio and communication)

• Management Fee

• Crew Costs or Maritime personnel expenses

At the lease period end the Group and the Company has an option to purchase FSRU Independence. On 25 February 2021 the General

Shareholders’ Meeting approved the decision to acquire the floating storage regasification unit “Independence”.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 40

13 LOANS AND LEASE LIABILITIES (CONT’D)

RECONCILIATION OF MOVEMENTS OF LIABILITIES TO CASH FLOWS ARISING FROM FINANCING ACTIVITIES

In accordance with IAS 7 Disclosure Initiative requirements, the following table provides disclosure that enable users of financial statements

to evaluate changes in liabilities arising from financing activities (loans taken), including both changes arising from cash flows and non-cash

changes:

		Group	Company
Non-current interest-bearing loans and borrowings, including	Loans	Lease liabilities	Loans	Lease liabilities
interest payable as at 1 January 2021	96,510	305,619	96,510	305,619
Additional loan disbursements (Cash flows)	26,829	27	26,829	-
Loan repayments (Cash flows)	(3,492)	-	(3,492)	-
Repayment of lease liabilities (Cash flows)	-	(41,459)	-	(41,455)
Interest and loan administration fee charged	481	1,800	479	1,798
Interest and loan administration fee paid (Cash flows)	(255)	(1,917)	(255)	(1,916)
Guarantee payments (Cash flows)	(146)	-	(146)	-
The effect of changes in foreign exchange rates	-	22,073	-	22,073
Reassessment of lease liabilities	-	1,319	-	1,319
Other payments / reclassifications	(4)	(357)	(2)	(358)
Non-current interest-bearing loans and borrowings, including
interest payable as at 1 January 2022	119,923	287,105	119,923	287,080
Additional loan disbursements (Cash flows)	26,829	-	26,829	-
Reclassification	-	(595)	-	(595)
New leases	-	650	-	650
Loan repayments (Cash flows)	(3,901)	-	(3,901)	-
Repayment of lease liabilities (Cash flows)	-	(47,901)	-	(47,895)
Interest and loan administration fee charged	973	1,831	964	1,829
Interest and loan administration fee paid (Cash flows)	(759)	(1,726)	(759)	(1,725)
Guarantee payments (Cash flows)	(606)	-	(606)	-
The effect of changes in foreign exchange rates	-	17,380	-	17,380
Other payments / reclassifications	681	4,979	690	4,977
Non-current interest-bearing loans and borrowings, including
interest payable as at 31 December 2022	143,140	261,723	143,140	261,701

14 TRADE PAYABLES AND OTHER LIABILITIES

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Trade payables	3,596	3,053	3,564	3,045
Other payables and current liabilities	2,275	642	2,157	468
	5,871	3,695	5,721	3,513

Trade payables disclosed below:

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Other payments related FSRU	1,640	322	1,640	322
Payable to contractors	184	740	184	740
Payable for railway services	99	86	99	86
Payable for gas services	-	313	-	313
Other trade payables	1,673	1,335	1,641	1,327
Total	3,596	3,053	3,564	3,045

On 31 December 2022 trade payables of EUR 912 thousand were denominated in USD (on 31 December 2021 – EUR 3 thousand).

Trade payables are non-interest bearing and are normally settled on 30-day payment terms.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 41

14 TRADE PAYABLES AND OTHER LIABILITIES (CONT’D)

Other payables and current liabilities disclosed below:

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Accrued expenses and liabilities	909	327	909	327
Received guarantee payment (1)	880	-	880	-
Real estate tax payable	126	90	126	90
Other taxes payable	120	205	-	31
Other liabilities	240	20	242	20
	2,275	642	2,157	468

(1) Received guarantee payment related to particular client‘s fulfillment of payment obligations. Guarantee payment will be returned

after the execution of the contract. The term of the contract is at the first quarter of 2023.

Other liabilities are non-interest bearing and have an average payment term of one month.

15 PAYROLL RELATED LIABILITIES

	Group		Company
	31-12-2022	31-12-2021	31-12-2022	31-12-2021
Accrual of annual bonuses	1,711	977	1,631	930
Accrued vacation reserve	769	818	715	759
Salaries payable	500	451	500	450
Social insurance payable	265	262	228	217
Income tax payable	190	158	176	158
Other deductions	2	3	2	3
Total	3,437	2,669	3,252	2,517

16 PROVISIONS

Greenhouse gas emission allowances in advance is distributed for the periods covering the next few years. The first period started from 2005

and ended in 2007, the second period started from 2008 and ended in 2012, the third period started from 2013 and ended in 2021, and the

current period started from 2022 and will end in 2025. Companies that participate in the project from 2005 are obliged to report about real

extent of pollution of each calendar year. When available allowances are not sufficient to cover actual pollution, then a penalty should be paid

for each ton of excess carbon dioxide.

Emission rights are accounted for when evaluating the deficit between the emission allowances allocated under the national allocation plan

for emission allowances and the actual pollution for the particular year. The quantity of used emission allowances is audited by external

auditors each year.

As at 31 December 2022, the Group and the Company has accounted for a provision of EUR 5,663 thousand regarding the emission made

which exceed available emission rights (as at 31 December 2021 – EUR 3,596 thousand).

Movement of provision in 2022:

Balance as at 31 December 2021	(3,596)
Purchase of emission allowances	133
Emission allowances used	3,413
Additional provision made	(5,613)
Balance as at 31 December 2022	(5,663)

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 42

17 REVENUE FROM CONTRACTS WITH CUSTOMERS

	Group		Company
Income from LNGT regasification services collected	2022	2021	2022	2021
directly from LNGT users (1)	33,586	6,795	33,586	6,795
Sales of oil transhipment services	25,137	19,066	25,137	19,066
Income from LNGT services included in security
supplement (2)	10,729	27,732	10,729	27,732
Other sales related to LNG terminals activity	5,407	5,636	2,262	2,255
Other sales related to transhipment	1,023	1,066	1,023	1,066
Sales of inventories	1,669	1,303	1,669	1,304
Sales of consulting services	267	213	316	415
	77,818	61,811	74,722	58,633

(1) The significant factor, which has influenced the increase in Group’s and Company‘s revenue in 2022, is higher regasification volumes

compared to the previous year.

Income from LNGT services contains income from LNG regasification service and LNG reloading service. The tariffs of this services are

adjusted annually and regulated by NERC. Regasification and reloading income are collected directly from the clients after services are

provided based on quantities.

In 2022 the Company has implemented regasification model in order to reduce the additional security supplement price for the natural

gas consumers. Regasification tariff which is actual just for the LNG terminal users from May, 2022 was increased according to the upper

limit of the Company’s LNG revenue. After these changes it was possible to decrease the security supplement and to collect all revenue

directly from LNG terminal users.

(2) Security supplement – security of supply fee applied to natural gas transmission price paid by Lithuanian natural gas consumers. LNG

terminal additional security supplement tariff is applied to Terminal users, who regasify gas via LNG terminal and use gas transmission

system. LNG terminal additional security supplement tariff is set by NERC by the resolutions annually and is dedicated to cover operating

costs of LNG terminal, its infrastructure and tie-in, independently from gas volumes regasified and submitted to gas transmission system.

Security supplement income is lower in 2022 compared to 2021 due to implemented regasification model when regasification tariff was

increased and security supplement from May 2022 was 0 EUR.

18 COST OF SALES

		Group	Company
	2022	2021	2022	2021
Depreciation of right-of-use asset	(14,088)	(14,052)	(14,088)	(14,052)
Wages, salaries and social security	(8,217)	(7,720)	(7,587)	(7,177)
Depreciation and amortisation (incl. amortisation of grants)	(8,198)	(11,076)	(8,107)	(11,001)
Expenses related to FSRU rent (OPEX element, management, crew cost)	(7,471)	(5,641)	(7,471)	(5,641)
Tax on environmental pollution and Emission allowances	(5,686)	(4,274)	(5,686)	(4,274)
Natural gas	(3,942)	(2,184)	(3,942)	(2,184)
Electricity	(1,831)	(1,314)	(1,831)	(1,314)
Port charges	(1,536)	(1,541)	(1,536)	(1,541)
Railway services	(1,240)	(934)	(1,240)	(934)
Cost of oil products sold	(1,019)	(599)	(1,019)	(599)
Other	(4,475)	(3,774)	(4,199)	(3,427)
Total	(57,703)	(53,109)	(56,706)	(52,144)

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 43

19 OPERATING EXPENSES

	Group		Company
	2022	2021	2022	2021
Wages, salaries and social security	(5,298)	(4,963)	(4,933)	(4,667)
Consulting and legal costs (2)	(598)	(930)	(501)	(839)
Telecommunication and IT expenses	(395)	(384)	(330)	(355)
Depreciation of right-of-use asset	(237)	(277)	(230)	(272)
Administration of bank accounts	(209)	(277)	(201)	(270)
Salaries and other related expenses to governing bodies	(185)	(161)	(185)	(161)
Operating tax expense	(179)	(227)	(85)	(68)
Depreciation and amortization	(141)	(241)	(141)	(240)
Training costs	(134)	(87)	(134)	(81)
Impairment of assets (1)	(27)	(54,338)	(27)	(54,338)
Impairment (reversal) of doubtful receivables	(12)	711	(12)	711
Other	(1,017)	(754)	(747)	(580)
	(8,432)	(61,928)	(7,526)	(61,160)

(1) Impairment of non-current assets. Reconciliation of impairment recognised under operating expenses in 2021:

Property, plant and equipment	48,462
Right of use assets	5,815
Intangible assets	61
Total impairment recognised under operating expenses	54,338

(2) Remuneration to auditors. Consulting and legal costs contain EUR 70 thousand and EUR 55 thousand expenses incurred for financial

statutory audit performed by external auditor of the Group and the Company for the year ended 31 December 2022, respectively (EUR

69 thousand and EUR 55 thousand – for the year ended 31 December 2021, respectively). Remuneration to the independent audit firms

for regulated activity review services amounts to EUR 13 thousand for both, the Group and the Company, (EUR 13 thousand – for the

year ended 31 December 2021).

20 INCOME (EXPENSES) FROM FINANCIAL AND INVESTMENT ACTIVITIES – NET

	Group		Company
	2022	2021	2022	2021
Gain from lease liabilities	949	-	949	-
Interest income	103	13	31	13
Fines income	56	30	56	30
Gain from derivatives	-	1,898	-	1,898
Other financial income	113	46	22	28
Financial activity income, total	1,221	1,987	1,058	1,969
Losses from currency exchange on the lease liabilities	(17,380)	(22,073)	(17,380)	(22,073)
Interest on the lease liabilities	(1,831)	(1,800)	(1,829)	(1,798)
Interest expenses	(973)	(481)	(965)	(479)
Losses from currency exchange	(88)	(174)	(81)	(105)
Loss from financial derivatives	(72)	-	(72)	-
Fines and penalties expenses	-	(19)	-	-
Other financial activity expenses	(3)	(10)	-	(1)
Financial activity expenses, total	(20,347)	(24,557)	(20,327)	(24,456)

21 INCOME TAX

	Group		Company
	2022	2021	2022	2021
Current income tax expense	(508)	(456)	-	-
Deferred tax (expenses) income	1,504	12,212	1,504	12,212
Income tax (expense) income recorded in the profit
(loss)	996	11,756	1,504	12,212

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

21 INCOME TAX (CONT’D)

Reconciliation between income tax expense of the Group and Company and the result of taxable income of the Group and the Company

multiplied by income tax rate for the years 2022 and 2021 is as follows:

Group	2022	2022	2021	2021
Accounting profit (loss) before tax		(6,900)		(75,767)
Applying 15% profit tax	15.00%	(1,035)	15.00%	(11,365)
Effect of tax rates in foreign jurisdictions	(3.88)%	268	(0.35)%	264
Tax effect of:
Tax-exempt income	0.16%	(11)	0.00%	-
Non-deductible expenses of income tax	(1.41)%	97	(0.06)%	48
Income tax recognised in other comprehensive income	0.20%	(14)	0.00%	-
Adjustments in respect of prior years	4.90%	(338)	0.90%	(680)
Other	(0.54)%	37	0.03%	(23)
	14.43%	(996)	15,52%	(11,756)

Company	2022	2022	2021	2021
Accounting profit (loss) before tax		(8,236)		(77,129)
Applying 15% profit tax	15.00%	(1,235)	15.00%	(11,569)
Tax effect of:
Tax-exempt income	0.13%	(11)	0.00%	-
Non-deductible expenses of income tax	(0.91)%	75	(0.04)%	31
Income tax recognised in other comprehensive income	0.17%	(14)	0.00%	-
Adjustments in respect of prior years	4.10%	(338)	0.88%	(680)
Other	(0.23)%	19	(0.01)%	6
	18.26%	(1,504)	15.83%	(12,212)

Movements of deferred tax balances:

Group and Company	Balance as at 31 December 2022
	Net		Recognised		Recognised				Deferred
	balance at		in profit or Recognised		directly in			Deferred	tax
2022	1 January		loss	in OCI	equity	Other	Net	tax assets	liabilities
Non-current asset (right-of-use asset)	(8,533)	(2,317)	-		-	-	(10,850)	-	(10,850)
Accelerated depreciation for tax purposes	197	(10)	-		-	-	187	187	-
Vacation reserve	114	(7)	-		-	-	107	107	-
Accrued annual bonuses	139	105	-		-	-	244	244	-
Emission allowances	539	310	-		-	-	849	849	-
Other temporary differences	60	17	-		-	-	77	77	-
Impairment of non-current assets	8,034	4	-		-	-	8,038	8,038	-
Long-term employee benefit liability	113	(6)	(14)		-	-	93	93	-
Associates’ equity method	5	(5)	-		-	-	-	-	-
Different depreciation rates of non-current
assets	(763)	(654)	-		-	-	(1,417)	-	(1,417)
Accrued income	(53)	52	-		-	-	(1)	-	(1)
Accrued taxable losses	5,657	3,904	-		-	-	9,561	9,561	-
Investment incentive of non-current assets
under the law previously in force	(1,893)	111	-		-	-	(1,782)	-	(1,782)
Tax assets (liabilities) before set-off	3,616	1,504	(14)		-	-	5,106	19,156	(14,050)
Set-off of tax	-	-	-		-	-	-	(14,050)	14,050
Net tax assets (liabilities)	3,616	1,504	(14)		-	-	5,106	5,106 -

www.kn.lt | 44

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 45

21 INCOME TAX (CONT’D)

Group and Company Balance as at 31 December 2021

	Net	Recognised		Recognised				Deferred
	balance at in profit or Recognised			directly in			Deferred	tax
2021	1 January	loss	in OCI	equity	Other	Net		tax assets liabilities
Non-current asset (right-of-use asset)	(7,715)	(818)	-	-	-	(8,533)	-	(8,533)
ccelerated depreciation for tax purposes	207	(10)	-	-	-	197	197	-
Vacation reserve	162	(48)	-	-	-	114	114	-
Accrued annual bonuses	96	43	-	-	-	139	139	-
Emission allowances	256	283	-	-	-	539	539	-
Other temporary differences	59	1	-	-	-	60	60	-
Impairment of non-current assets	38	7,996	-	-	-	8,034	8,034	-
Long-term employee benefit liability	101	3	9	-	-	113	113	-
Associates’ equity method	-	5	-	-	-	5	5	-
Different depreciation rates of non-current
assets	(752)	(11)	-	-	-	(763)	-	(763)
Accrued income	(146)	93	-	-	-	(53)	-	(53)
Accrued taxable losses	1,094	4,563	-	-	-	5,657	5,657	-
Investment incentive of non-current assets
under the law previously in force	(2,005)	112	-	-	-	(1,893)	-	(1,893)
Tax assets (liabilities) before set-off	(8,605)	12,212	9	-	-	3,616	14,858	(11,242)
Set-off of tax	-	-	-	-	-	-	(11,242)	11,242
Net tax assets (liabilities)	(8,605)	12,212	9	-	-	3,616	3,616	-

As at 31 December 2022 the Group and the Company did not recognise as deferred tax asset in total amounting to EUR 319 thousand: EUR

229 thousand from allowance of trade accounts receivable and EUR 96 thousand from Group companies’ tax losses carried forward (UAB “SGD

logistika”, UAB “SGD SPB”, UAB “SGD terminalas”). As at 31 December 2021 the Group and the Company did not recognise as deferred tax

asset in total amounting to EUR 319 thousand: EUR 227 thousand from allowance of trade accounts receivable and EUR 92 thousand from

Group companies’ tax losses carried forward (UAB “SGD logistika”, UAB “SGD SPB”, UAB “SGD terminalas”).

As at 31 December 2022 and 31 December 2021 the Company’s management’s judgement was not to recognize as deferred tax asset

amounting up to EUR 263 thousand from the investment incentive in the amount of up to EUR 1,756 thousand, whose expiry date is 2024, up

to EUR 2,828 thousand from the investment incentive in the amount of up to EUR 18,850 thousand, whose expiry date is 2023 as the

management does not expect to use the investment incentive to set off against taxable profit in the future.

In the Statement of Financial position deferred income tax asset and deferred income tax liability are set-off as they both are related to the

same tax authority.

While assessing deferred income tax asset and liability components as at 31 December 2022 and 2021 the Company has used the domestic

Lithuanian income tax rate of 15%. The Group’s subsidiary KN Açu Serviços de Terminal de GNL Ltda applies Brazilian Tax System and

subsidiary´s administration has elected the Real Profit Regime that is calculated on quarterly basis. The official rates for Income tax rate is 25%

and Social Contribution on Net Profit is 9%.

22 BASIC AND DILUTED EARNINGS (LOSSES) PER SHARE

Basic earnings per share are calculated by dividing net profit (loss) of the Group by the weighted average number of ordinary shares

outstanding. Diluted earnings per share equal to basic earnings per share as the Group has no instruments issued that could dilute shares

issued.

Basic and diluted earnings per share are as follows:

	Group
	2022	2021
Net profit (loss) attributable to shareholders	(5,904)	(64,011)
Weighted average number of outstanding ordinary shares (thousand)	380,397	380,416
Earnings and reduced earnings (in EUR)	(0.02)	(0.17)

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 46

23 DIVIDENDS

	2022	2021
Dividends declared	-	(7,538)
Weighted average number of shares (thousand)	380,397	380,416
Dividends declared per share (expressed in EUR per share)	-	0.02

The General Meeting of the Shareholders held on 22 April 2022 approved allocation of profit (loss) for the year 2021 – no dividends were declared. The General Meeting of the Shareholders held on 30 April 2021 approved profit appropriation for the year 2020 and allocated to the Shareholders dividends in the amount of EUR 7,538 thousand for 2021. The outstanding amount of declared dividends to the shareholders, who were not reached from the stated addresses, is accounted as current amounts payable and liabilities in the Statement of financial position as at 31 December 2022. As at 31 December 2022, the outstanding number of dividends not paid during the previous financial year amounted to EUR 157 thousand (EUR 164 thousand as at 31 December 2021). 24 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT Credit risk The Group and The Company have significant concentration of trading counterparties. Trade receivables from the main customers are as follows: - Client A accounted for approximately 31% as at 31 December 2022 (about 69% as at 31 December 2021) of total Group trade receivables; - Client B – on 31 December 2022 accounted for approximately 17% (0% as at 31 December 2021) of the total Group’s and Company’s receivables from all its customers; - Client C – on 31 December 2022 accounted for approximately 11% (about 14% as at 31 December 2021) of the total Group’s and Company’s receivables from all its customers. - Client D – on 31 December 2022 accounted for approximately 11% (about 6% as at 31 December 2021) of the total Group’s and Company’s receivables from all its customers. The average payment term for the main customer mentioned above varies from 12 to 20 calendar days, whereas the usual payment terms for all other customers is 5 days. A possible credit risk for the Group’s and the Company’s customers is managed by a continuous monitoring of outstanding balances. The Group’s and Company’s procedures are in force to ensure on a permanent basis that services are provided to reliable customers and do not exceed an acceptable credit exposure limit. The Group and the Company trades only with reputable third parties, so there is no requirement for collateral. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, if any, in the Statement of Financial position. Consequently, the Group and the Company considers that its maximum exposure is reflected by the amount of trade receivables, net of allowance for doubtful accounts and cash and other short-term deposits recognized at the date of Statement of Financial position. In the management’s opinion there were no reasonably likely circumstances, which would raise additional obligations to the Group and the Company. The following table provides information about the exposure to credit risk for trade receivables from the customers: Group	Gross carrying	Loss	Credit
31-12-2022	amount	allowance	impaired
Current (not past due)	6,999	-	No
1-30 days past due	896	-	No
31-59 days past due	6	-	No
60-89 days past due	3	-	No
90-179 days past due	-	-	No
180-279 days past due	3.975	-	No
More than 280 days past due	1,523	(1,523)	Yes
	13,402	(1,523)

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

24 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)

Company	Gross carrying	Loss	Credit
31-12-2022	amount	allowance	impaired
Current (not past due)	6,456	-	No
1-30 days past due	896	-	No
31-60 days past due	6	-	No
60-89 days past due	3	-	No
90-179 days past due	-	-	No
180-279 days past due	3,975	-	No
More than 280 days past due	1,523	(1,523)	Yes
	12,859	(1,523)

Group	Gross carrying	Loss	Credit
31-12-2021	amount	allowance	impaired
Current (not past due)	5,341	-	No
1-30 days past due	2,770	-	No
31-60 days past due	1,300	-	No
More than 60 days past due	1,511	(1,511)	Yes
	10,922	(1,511)

Company	Gross carrying	Loss	Credit
31-12-2021	amount	allowance	impaired
Current (not past due)	4,869	-	No
1-30 days past due	2,770	-	No
31-60 days past due	1,300	-	No
More than 60 days past due	1,511	(1,511)	Yes
	10,450	(1,511)

Interest rate risk

The Group’s and the Company’s income and operating cash flows are influenced by changes in market interest rates, which are linked to

EURIBOR base. Overall, 44% of loan portfolio is exposed to floating interest rate risk no hedging derivative instruments were used. Thus, such

standing has implications on financial results.

EIB facility with 3 tranches is exposed to 3 months EURIBOR with zero-floor applicable on EURIBOR base. In contrast, NIB facilities are exposed

to 6 months EURIBOR with no zero-floor applicable on EURIBOR base.

	Maturity	Carrying	Carrying
	date	amount as at	amount as at	Interest rate	Floating interest rate exposure
EIB loan:		31-12-2022	31-12-2021	fixed margin + 3 months	Negative total interest rate is
1st tranche	20-12-2023	10,766	11,746	EURIBOR	set at zero
2nd tranche	28-11-2034	11,751	12,730	fixed margin + 3 months	Negative total interest rate is
				EURIBOR	set at zero
3rd tranche	20-09-2034	24,186	24,700	fixed margin + 3 months	Negative total interest rate is
NIB loan:				EURIBOR	set at zero
				fixed margin + 6 months	Negative interest is accrued
Reloading station	19-06-2034	16,615	18,074	EURIBOR	and offset on the repayment
					date as part of the loan
FSRU loan	31-12-2044	79,487	52,658	fixed	No exposure to floating interest
					rate
		142,805	119,908

Fixed margin varies from 0,066% to 0,78% as at 31 December 2022.

The Group and the Company is constantly assessing its possibilities to hedge interest rate risks on its loans. Thus, the loans related with

long-term LNG terminal solution with high probability in future are expected to be with partially or fully fixed interests.

www.kn.lt | 47

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 48

24 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)

The Group’s and the Company’s excess liquidity in forms of money and time deposits are distributed across the accounts of major Lithuanian

banks, which are granted with Standard Poor’s or equivalent long-term term borrowing BBB- or better external rating according to the foreign

rating agencies. Partner bank’s rating is assessed either on a stand-alone or applying a bank group logic into which exposure is present. Also,

the Group and the Company is monitoring recommendation of the Central Bank of Lithuania.

Retrospectively, risk related to the funds security in banks was limited, because the Group and the Company carried out transactions with the

banks that have high ratings provided by the foreign rating agents.

As at 31 December 2022 increase/decrease in EURIBOR interest rate by 10 basis points would increase/decrease yearly interest expenses

amount by EUR 63 thousand (as at 31 December 2021 – EUR 28 thousand).

Exchange rate risk

The Group and the Company is exposed to foreign currency fluctuations primarily related to the U.S. dollar. Foreign exchange risk arises from

future commercial transactions as well as recognized liabilities including impact arising from IFRS 16 “Leases”.

Because the highest part of lease payments is denominated in US dollars, as a result changes in exchange rates occur in the statement of

comprehensive income, the Group and the Company incurred the currency exchange loss amounting to EUR 17,380 thousand for 2022 arising

from IFRS 16 “Leases” and loss amounting to EUR 22,073 thousand for 2021.

Summary of exchange rates as at 31 December 2022 and 31 December 2021 to EUR:

	Exchange rate as	Average exchange	Exchange rate as	Average exchange
	at 31-12-2022	rate in 2022	at 31-12-2021	rate in 2021
USD	1.0666	1.0538	1.1334	1.1833
BRL	5.6386	5.4424	6.3734	6.3773

Group (denominated in euro)

31-12-2022	EUR	USD	BRL	Total
Cash and cash equivalents	66,687	4,939	797	72,423
Trade receivables	11,336	-	543	11,879
Lease liabilities	(25,851)	(240,375)	(22)	(266,248)
Trade payables	(2,652)	(912)	(32)	(3,596)
Total	49,520	(236,348)	1,286	(185,542)

Company (denominated in euro)

31-12-2022	EUR	USD	BRL	Total
Cash and cash equivalents	61,909	4,939	-	66,848
Trade receivables	11,336	-	-	11,336
Lease liabilities	(25,851)	(240,375)	-	(266,226)
Trade payables	(2,652)	(912)	-	(3,564)
Total	44,742	(236,348)	-	(191,606)

Group (denominated in euro)

31-12-2021	EUR	USD	BRL	Total
Cash and cash equivalents	60,827	3	687	61,517
Trade receivables	8,925	-	486	9,411
Lease liabilities	(21,581)	(265,499)	(25)	(287,105)
Trade payables	(3,026)	(3)	(24)	(3,053)
Total	45,145	(265,499)	1,124	(219,230)

Company (denominated in euro)

31-12-2021	EUR	USD	BRL	Total
Cash and cash equivalents	57,145	3	-	57,148
Trade receivables and other receivables	8,939	-	-	8,939
Lease liabilities	(21,581)	(265,499)	-	(287,080)
Trade payables and other liabilities	(3,042)	(3)	-	(3,045)
Total	41,461	(265,499)	-	(224,038)

As at 31 December 2022 increase in USD currency rate by 10 basis points would increase yearly loss from currency exchange amount by

EUR 237 thousand (as at 31 December 2021 – EUR 234 thousand).

As at 31 December 2022 increase in BRL currency rate by 10 basis points would increase yearly income from currency exchange amount by

EUR 7 thousand (as at 31 December 2021 – EUR 1 thousand).

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022 (all amounts are in EUR thousand unless otherwise stated) www.kn.lt \| 49 24 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D) Liquidity risk The Company’s and Group’s policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of committed credit facilities to meet its commitments at a given date in accordance with its strategic plans. The Group’s liquidity (total current assets / total current liabilities) and quick ratios ((total current assets - inventories) / total current liabilities) as at 31 December 2022 were 1.30 and 1.27, respectively (1.28 and 1.25 as at 31 December 2021). The Company’s liquidity (total current assets / total current liabilities) and quick ratios ((total current assets - inventories) / total current liabilities) as at 31 December 2022 were 1.22 and 1.19, respectively (1.20 and 1.17 as at 31 December 2021). The Group’s and Company’s objective is to maintain a balance between continuity of funding and flexibility. The Groups and the Company's activities generate sufficient amount of cash, therefore, the managements' main responsibility is to monitor that the liquidity ratio of the Company is close or higher than 1. The table below summarizes the maturity profile of the Group’s and Company’s financial liabilities as at 31 December 2022 assessed on contractual undiscounted payments: Group	Carrying	On	Less than 3	3 to 12	1 to 5	More than 5	Total
	amount	demand	months	Months	years	years
Trade and other payables	5,871	-	5,849	22	-	-	5,871
Lease liabilities	266,248	-	14,085	42,182	188,737	32,574	277,578
Loan and interest	143,140	-	1,414	5,632	25,696	118,174	150,916
Balance as at 31 December 2022	415,259	-	21,348	47,836	214,433	150,748	434,365

Company	Carrying	On	Less than 3	3 to 12	1 to 5	More than 5	Total
	amount	demand	months	Months	years	years
Trade and other payables	5,721	-	5,699	22	-	-	5,721
Lease liabilities	266,226	-	14,082	42,175	188,721	32,574	277,552
Loan and interest	143,140	-	1,414	5,632	25,696	118,174	150,916
Balance as at 31 December 2022	415,087	-	21,195	47,829	214,417	150,748	434,189

The table below summarizes the maturity profile of the Group’s and Company’s financial liabilities as at 31 December 2021 assessed on contractual undiscounted payments: Group	Carrying	On	Less than 3	3 to 12	1 to 5	More than 5	Total
	amount	demand	months	Months	years	years
Trade and other payables	3,695	-	3,346	349	-	-	3,695
Lease liabilities	287,105	-	14,116	42,267	229,839	29,045	315,267
Loan and interest	119,923	-	630	3,439	27,969	92,379	124,417
Derivatives	15	-	-	15	-	-	15
Balance as at 31 December 2021	410,738	-	18,092	46,070	257,808	121,424	443,394

Company	Carrying	On	Less than 3	3 to 12	1 to 5	More than 5	Total
	amount	demand	months	Months	years	years
Trade and other payables	3,513	-	3,164	349	-	-	3,513
Lease liabilities	287,080	-	14,106	42,251	229,813	29,045	315,215
Loan and interest	119,923	-	630	3,439	27,969	92,379	124,417
Derivatives	15	-	-	15	-	-	15
Balance as at 31 December 2021	410,531	-	17,900	46,054	257,782	121,424	443,160

EUR 184 thousand of the EUR 10,356 thousand of Group’s trade and other payables as at 31 December 2022 (EUR 740 thousand of the EUR

3,513 thousand amount as at 31 December 2021) are the retention amounts under contracts, which are paid for when all work under a contract

has been completed. There is no possibility to forecast these payment terms.

Fair value of financial assets and liabilities

The Company’s and Group’s principal financial instruments not carried at fair value are trade and other receivables, trade and other payables,

non-current and current borrowings.

Fair value is stated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 50

24 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)

Fair value of financial assets and liabilities (cont’d)

The following methods and assumptions are used to estimation the fair value of each class of financial assets and liabilities as at 31 December

2022:

Group		Carrying amount	Financial			Fair value
			liabilities
	Fair value -	Financial	at
	hedging	assets at	amortised
Financial assets not measured at fair value	instruments	amortised cost	cost	Total	Level 1	Level 2	Level 3	Total
Trade receivables	-	11,879	-	11,879
Cash	-	72,423	-	72,423
Contract assets	-	328	-	328
	-	84,630	-	84,630
Financial liabilities not measured at fair value
Loan and interest	-	-	(143,140)	(143,140)	-	(143,140)		(143,140)
Financial lease liabilities			(266,248)	(266,248)
Trade payables	-	-	(3,596)	(3,596)
	-	-	(412,984)	(412,984)

Company		Carrying amount	Financial			Fair value
			liabilities
	Fair value -	Financial	at
	hedging	assets at	amortised
Financial assets not measured at fair value	instruments	amortised cost	cost	Total	Level 1	Level 2	Level 3	Total
Trade receivables	-	11,336	-	11,336
Cash	-	66,848	-	66,848
Contract assets	-	328	-	328
	-	78,512	-	78,512
Financial liabilities not measured at fair value
Loan and interest	-	-	(143,140)	(143,140)	-	(143,140)		(143,140)
Financial lease liabilities			(266,226)	(266,226)
Trade payables	-	-	(3,564)	(3,564)
	-	-	(412,930)	(412,930)

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 51

24 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)

The following methods and assumptions are used to estimation the fair value of each class of financial assets and liabilities as at 31 December

2021:

Group		Carrying amount	Financial			Fair value
			liabilities
	Fair value -	Financial	at
	hedging	assets at	amortised
Financial assets not measured at fair value	instruments	amortised cost	cost	Total	Level 1	Level 2	Level 3	Total
Trade receivables	-	9,411	-	9,411
Cash	-	61,517	-	61,517
Contract assets	-	612	-	612
	-	71,540	-	71,540
Financial liabilities measured at fair value
Derivatives	(15)	-	-	(15)	-	(15)	-	(15)
	(15)	-	-	(15)
Financial liabilities not measured at fair value
Loan and interest	-	-	(119,923)	(119,923)	-	(119,923)	-	(119,923)
Financial lease liabilities	-	-	(287,105)	(287,105)
Trade payables	-	-	(3,053)	(3,053)
	-	-	(410,081)	(410,081)

Company		Carrying amount	Financial			Fair value
			liabilities
	Fair value -	Financial	at
	hedging	assets at	amortised
Financial assets not measured at fair value	instruments	amortised cost	cost	Total	Level 1	Level 2	Level 3	Total
Trade receivables	-	8,939	-	8,939
Cash	-	57,148	-	57,148
Contract assets	-	612	-	612
	-	66,699	-	66,699
Financial liabilities measured at fair value
Derivatives	(15)	-	-	(15)	-	(15)	-	(15)
	(15)	-	-	(15)
Financial liabilities not measured at fair value
Loan and interest	-	-	(119,923)	(119,923)	-	(119,923)	-	(119,923)
Financial lease liabilities			(287,080)	(287,080)
Trade payables	-	-	(3,045)	(3,045)
	-	-	(410,048)	(410,048)

No transfers occurred between levels in the hierarchy by re-assessing categorization as at 31 December 2022 compared to 31 December 2021.

Capital management

The primary objectives of the Company’s capital management are to ensure that the Company complies with externally imposed capital

requirements. Capital includes equity attributable to equity holders.

The Company manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of its

activities. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to

shareholders or issue new shares.

In 2021 the decrease on authorized capital of the Company was amounting to EUR 190 thousand.

The Company must keep its equity at least up to 50% of its share capital, as imposed by the Law on Companies of Republic of Lithuania as at

31 December 2022 and as at 31 December 2021.

The Company’s activities are financed using its equity and loan capital.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 52

25 COMMITMENTS AND CONTINGENCIES

The Tax Authorities have not performed full-scope tax investigations at the Company and the Group. The Tax Authorities may inspect

accounting, transaction and other documents, accounting records and tax returns for the current and previous 3 calendar years at any time,

and where appropriate, for the current and previous 5 or 10 calendar years and impose additional taxes and penalties. Management of the

Group and The Company is not aware of any circumstances which would cause calculation of additional significant liabilities due to unpaid

taxes.

The Customs of the Republic of Lithuania and the Tax Authorities have granted to the Company the exemption from the obligation to provide

guarantees for possible tax liabilities. The total amount of exemptions amounts to EUR 371,000 thousand as at 31 December 2022 (EUR 363,000

thousand as at 31 December 2021).

Material contractual liabilities (acquisition of property, plant and equipment) amounted to EUR 791 thousand as at 31 December 2022

(EUR 1,884 thousand as at 31 December 2021).

The Company has an agreement on assignment of claim rights and a maximum pledge agreement with UAB Hoegh LNG Klaipėda which

maximum amount of USD 50,000 thousand per one year as at 31 December 2022 and as at 31 December 2021. The said agreements are

intended to secure obligations of the Company to Hoegh LNG Klaipėda under the Time Charter Party (Lease of a Floating Storage and

Regasification Unit in conjunction with maintenance and operation services) agreement concluded on 2 March 2012.

The Company takes out part of NIB loan on a quarterly basis, fulfilling the legal obligation to reduce the security supplement until the

acquisition of the Floating Storage Regasification Unit (FSRU) and to spread the costs of the LNG terminal over the expected period of its

operation. The revenue cap of LNG terminal is reduced by the part of the loan taken. In accordance with the provision of the NERC

Methodology, it is foreseen after the acquisition of the FSRU, the reduced income in 2020-2024 will be compensated in order to cover the

loan repayments according to the loan schedule over the period 2025-2044.

Legal disputes

▪ In January 2023 PGNiG Supply & Trading GmbH, both users of the LNG terminal, submitted claims to the Company for a compensation

in the amounts of USD 874 thousand and USD 725 thousand, because during loading operations in December 2022, the LNG carrier

ordered by PGNiG Supply & Trading GmbH experienced demurrage while loading liquefied natural gas to the Floating Storage

Regasification Unit (FSRU). The demurrage of LNG carrier ordered by PGNiG Supply & Trading GmbH arose due to a technical

malfunction of the equipment of the FSRU as of November 25, 2022, where the capacity of LNG regasification was partially limited,

which in turn led to the fact that the mentioned LNG carrier exceeded the laytime while loading the LNG cargo. The Company considers

that the claims of PGNiG Supply & Trading GmbH are unreasonable, because in the event of such malfunction, the Company as the

operator has the right to switch the working modes of operations and limit LNG terminal services without being responsible for losses

of the LNG terminal user.

The management of the Company evaluates that the outflow of these claims are not probable and the Company believes that there

will be no significant additional costs related to this case, wherefore no deferrals have been formed in the preparation of the financial

statements of 31 December 2022.

▪ The Company is defending an action brought in 2014 by UAB “Naftos grupė“, which allegedly incurred loss in the amount of EUR 5

million and additionally aims to recover the surplus of oil products allegedly owned by UAB “Naftos grupė“ and stored by the Company.

Competition Council is involved in the process, however there is a lack of evidence for the Court and the case is suspended until the

criminal case (described in the next bullet point) is resolved.

Based on judgement of legal advisors, the management of the Company believes that the defence against the action will be successful,

no provisions for this ongoing case have been formed in the preparation of the financial statements of 31 December 2022.

▪ The Company is a civil plaintiff in a criminal case on the accusations against the former managers of the Company and against

companies UAB “Naftos grupė“ and UAB “Artilona”.

In 2017 the court of the first instance issued a verdict to award the payment of EUR 20.9 million and 5% annual interest in favour of

the Company and, additionally, to cover the court representation costs. However, all accused persons appealed against the first

instance court decision and the case was transferred to the appellate instance, Court of Appeal of Lithuania. Currently, the case is still

on-going.

Since the Company is a plaintiff in the case, no significant additional costs related to this case will be incurred.

▪ Since 2015 the Company is involved as a third interested party in the legal cases with AB Achema, which has submitted 13 complaints

regarding the resolutions of the NERC to the court. AB Achema requests the court to annul NERC resolutions related to the additional

security component of natural gas supply transmission price.

As a result of this dispute, AB Amber Grid calculates fine and interest for AB Achema for overdue payments for security component.

As at 31 December 2022 the amount of the fine and interest calculated by AB Amber Grid and paid to the Company amounts to EUR

4,002 thousand (as at 31 December 2021 – EUR 3,837 thousand). The Company does not recognise the received payments for fines

and interest as income until a court decision is rendered. Payments received are presented under Contract liabilities caption in the

statement of financial position.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 53

25 COMMITMENTS AND CONTINGENCIES (CONT’D)

In the opinion of the Company's management, the Company will not incur any significant additional costs related to this case,

therefore no provisions for this ongoing case have been formed in the preparation of the financial statements of 31 December 2022.

▪ Vilnius Commercial Arbitration Court resolved the case based on the claim filed by the Company regarding the judgment of a debt

of EUR 1,529 thousand (EUR 1,409 thousand debt and EUR 120 thousand interest) from the VERUM PLUS AG. The claim has been

satisfied. Bankruptcy proceedings to the VERUM PLUS AG has been initiated, however, the process has been suspended, because

the defendant appealed the bankruptcy case.

In the opinion of the Company's management, the proceedings from this case are not probable, wherefore no assets for this ongoing

case have been formed in the preparation of the financial statements of 31 December 2022.

▪ In July 2021 a civil claim of the prosecutor of the Klaipėda Regional Prosecutor Office was received in defense of the public interest

concerning the annulment of the decisions of the Company's bodies and employees’ Shares Granting Contracts, and the application

of restitution. The Company is involved in the case as a defendant.

In December 2022 the Court of Appeal of Lithuania issued a decision in a civil case and satisfied Prosecutor's claim. Although the

court satisfied the prosecutor's claim, the decision is basically in favor of the Company.

It should be noted that the Court of Appeal of Lithuania by its decision made conclusions inter alia that:

- by paying part of the bonuses to employees not in cash but in the form of shares, the Company violated the relevant provisions

of the Law on Companies;

- by granting shares to employees, the Company did not transfer the state property;

- no harm is made to the Company and its shareholders;

- employees who received bonuses in the form of shares cannot be considered unfair;

- shares granted as bonuses to employees in accordance with employment contracts concluded with them are considered as

remunerative transactions;

- restitution is not applicable, as its application would not meet the proportionality criterion.

In the Company's opinion, although the Lithuanian Court of Appeal satisfied the claim, the court's decision basically supported the

position expressed by the Company regarding the absence of harm and the fact that employees were not given the shares of the

state but instead purchased by the Company from private individuals, whereas the demands of the prosecutor's office regarding the

application of restitution and compensation of damages were not satisfied. It should be noted that the outcome of the case does

not cause significant financial consequences for the Company and its employees, since restitution is not applicable and there is no

need for the employees to return shares or compensate for damages.

26 RELATED PARTY TRANSACTIONS

A related party is a person or entity that is related to the Company and the Group:

1) A person or a close member of that person's family is related to the Company and the Group:

• has control or joint control over the Company;

• has significant influence over the Company; or

• is a member of the key management personnel of the Company and the Group.

2) An entity is related to the Company and the Group, if any of the following conditions applies:

• The entity and the Company / Group are members of the same group (which means that each parent, subsidiary and fellow

subsidiary is related to the others).

• 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).

• One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

• The entity is controlled or jointly controlled by a person identified in (1).

• The entity is a post-employment defined benefit plan for the benefit of employees of either the Company / Group or an entity

related to the Company / Group. If the Company is itself such a plan, the sponsoring employers are also related to the reporting

entity.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 54

26 RELATED PARTY TRANSACTIONS (CONT’D)

Transactions with Lithuanian State controlled enterprises and institutions, and other related parties

Group:		Purchases	Sales	Receivables	Payables
Klaipeda State Seaport Authority	2022	2,503	-	-	458
	2021	2,442	-	-	257
AB "Amber Grid"	2022	-	10,729	3,975	-
	2021	-	27,732	7,005	-
UAB „Ignitis“	2022	-	10,530	1,103	-
	2021	4	1,930	339	-
Public Institution Lithuanian Energy Agency	2022	-	3,365	-	-
	2021	-	3,329	-	-
Energijos skirstymo operatorius, AB	2022	287	-	-	35
	2021	429	-	-	55
AB LTG CARGO	2022	1,430	-	-	99
	2021	966	-	-	86
Other related parties	2022	59	-	-	3
	2021	31	-	-	1
Transactions with related parties, in total:	2022	4,279	24,624	5,078	595
	2021	3,872	32,991	7,344	399

Company:		Purchases	Sales	Receivables	Payables
Klaipeda State Seaport Authority	2022	2,503	-	-	458
	2021	2,442	-	-	257
AB "Amber Grid"	2022	-	10,729	3,975	-
	2021	-	27,732	7,005	-
UAB „Ignitis“	2022	-	10,530	1,103	-
	2021	4	1,930	339	-
Public Institution Lithuanian Energy Agency	2022	-	3,365	-	-
	2021	-	3,329	-	-
Energijos skirstymo operatorius, AB	2022	287	-	-	35
	2021	429	-	-	55
AB LTG CARGO	2022	1,430	-	-	99
	2021	966	-	-	86
KN Acu Servicos de Terminal de GNL Ltda	2022	-	151	37	-
	2021	-	294	15	-
Other related parties	2022	59	-	-	3
	2021	31	-	-	1
Transactions with related parties, in total:	2022	4,279	24,775	5,115	595
	2021	3,872	33,285	7,359	399

Other related parties are following: UAB Tetas, VĮ Registrų centras, Vilniaus metrologijos centras, AB, UAB Nordic Metrology Science, UAB GET

Baltic, VĮ Regitra, Smiltynės perkėla, AB, Lietuvos paštas, AB, The Association of Lithuanian Stevedoring Companies, Association Baltic Institute

of Corporate Governance, Lithuanian maritime cluster, LTG Infra, AB, UAB "LTG Link", Kelių priežiūra, AB.

• Purchases from State Klaipėda State Seaport Authority include land rent, jetty usage and FSRU port fee.

• Sales to AB Amber Grid include income from additional security supplement to the price of natural gas’ transmission. Sales to AB Amber

Grid do not include interest and fines for AB Achema for delayed payments of the security component to the upper ceiling of the natural

gas transmission price. These amounts are recognized and accounted for as contract liabilities (as at 31 December 2022 – EUR 4,002

thousand, as at 31 December 2021 – EUR 3,837 thousand) (Note 25).

• Purchases from UAB Ignitis include purchases of natural gas. Sales to UAB Ignitis include income from LNG regasification and reloading

services as well as income from customs brokerage services.

• In 2022 and 2021 sales to Public Institution Lithuanian Energy Agency include income from rent of tanks.

• Purchases from AB LG Cargo comprise purchase of railway services.

• Purchases from AB Energijos skirstymo operatorius include acquisition of electricity power.

• Sales to KN Acu include consulting services and bank guarantees.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 55

26 RELATED PARTY TRANSACTIONS (CONT’D)

Management salaries and other payments

The Company's management consists of the Chief Executive Officer (CEO) and Directors.

The Groups’ management consists of the Chief Executive Officer (CEO), Directors and Directors of subsidiaries.

		Group	Company
	2022	2021	2022	2021
Payroll related costs	689	648	598	570
Number of managers	10	10	6	6

During 2022 and 2021 the management of the Group and the Company did not receive any loans, guarantees, and no other payments or

property transfers occurred.

27 SUBSEQUENT EVENTS

No significant events have occurred after the date of financial statements that would require disclosure or amendment in the financial

statements.

AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL

STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2022

(all amounts are in EUR thousand unless otherwise stated)

www.kn.lt | 56

CONFIRMATION OF RESPONSIBLE PERSONS

23 March 2023

Following Article 22 of the Law on Securities of the Republic of Lithuania and the Rules on Preparation and Submission of Periodic and

Additional Information of the Lithuanian Securities Commission, we, Darius Šilenskis, Chief Executive Officer of AB Klaipėdos nafta, Mindaugas

Kvekšas, Chief Financial Officer of AB Klaipėdos nafta, and Rasa Tamaliūnaitė, Chief Accountant, hereby confirm that to the best of our

knowledge the above-presented consolidated and separate Financial Statements of AB Klaipėdos nafta for the year 2022, prepared in

accordance with the International Financial Reporting Standards as adopted to be used in the European Union, give a true and fair view of the

assets, liabilities, financial position and profit or loss and cash flows of AB Klaipėdos nafta.

Chief Executive Officer Darius Šilenskis

Chief Financial Officer Mindaugas Kvekšas

Chief Accountant Rasa Tamaliūnaitė

2022

AB KLAIPĖDOS NAFTA

CONSOLIDATED ANNUAL

REPORT

FOR THE FINANCIAL YEAR ENDING ON 31 DECEMBER 2022

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 58

CONTENT

GENERAL INFORMATION ABOUT THE GROUP AND THE COMPANY ............................................................................................. 59

A FOREWORD OF THE CEO ........................................................................................................................................................................................... 63

BUSINESS CONTINUITY – THE IMPACT OF RUSSIAN WAR IN UKRAINE, OPERATIONS IN, DEPENDENCE ON,

OR OTHER EXPOSURE TO RUSSIAN/BELARUSSIAN OR UKRAINIAN ECONOMIES................................................................ 65

INFORMATION ABOUT THE GROUP AND THE COMPANY AND ITS ACTIVITIES .................................................................... 67

THE CORPORATE STRATEGY........................................................................................................................................................................................ 75

SIGNIFICANT EVENTS OF THE REPORTING PERIOD ................................................................................................................................... 80

SIGNIFICANT EVENTS OCCURRED AFTER THE END OF THE REPORTING PERIOD ................................................................ 81

BUSINESS ENVIRONMENT AND MARKET .......................................................................................................................................................... 82

FINANCIAL RESULTS OF GROUP’S ACTIVITY ................................................................................................................................................... 88

CONSOLIDATION ................................................................................................................................................................................................................ 89

FINANCIAL RESULTS OF THE GROUP’S AND THE COMPANY’S ACTIVITY .................................................................................. 90

ALTERNATIVE PERFORMANCE MEASURES ........................................................................................................................................................ 92

FINANCIAL RESULTS.............................................................................................................................................................................................................. 93

INVESTMENTS .................................................................................................................................................................................................................... 100

ACTIVITY PLANS AND FORECASTS ...................................................................................................................................................................... 101

INFORMATION ABOUT THE SHAREHOLDERS AND SHARES OF THE COMPANY ................................................................. 102

INFORMATION ABOUT THE EMPLOYEES OF THE GROUP ................................................................................................................... 107

GROUP’S SOCIAL RESPONSIBILITY ...................................................................................................................................................................... 112

RISK FACTORS AND RISK MANAGEMENT ............................................................................................................................................................... 117

OTHER INFORMATION ................................................................................................................................................................................................. 121

AB KLAIPĖDOS NAFTA REPORT ON REMUNERATION

.................................................................................................................... 122

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

.................................................................................................................................... 126

Abbreviations:

KN – AB Klaipėdos nafta

KOT – Klaipėda oil terminal

SOT – Subačius oil terminal

OT – Oil terminals

LNGT – regulated LNG activities

comLNG – commercial LNG activities

LNG terminal – Klaipėda LNG terminal

BDP – Segment of LNG related business development and consulting

OP – Oil Products

HFO – Heavy Oil Products

LP – Light Products

NERC – National Energy Regulatory Council

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 59

GENERAL INFORMATION ABOUT THE GROUP AND THE COMPANY

1. REPORTING PERIOD

AB Klaipėdos nafta Consolidated Annual Report for the

year 2022 is prepared for the period from 1 January 2022

until 31 December 2022.

Annual Report for the year 2022 also includes Governance

Report and Report on Remuneration for the year 2022.

2. CONFIRMATION OF RESPONSIBLE PERSONS

Referring to the Article 22 of the Law on Securities of the

Republic of Lithuania and the Rules on Preparation and

Submission of Periodic and Additional Information of the

Bank of Lithuanian, Responsible Persons Darius Šilenskis,

Chief Executive Officer of AB Klaipėdos nafta, Mindaugas

Kvekšas, Chief Financial Officer of AB Klaipėdos nafta, and

Rasa Tamaliūnaitė, Chief Accountant of

AB Klaipėdos nafta, hereby confirm that to the best of our

knowledge the Annual Report of AB Klaipėdos nafta for

2022 includes a fair review of the development and

performance of the business and the present state of the

Company together with the description of the main risks

and uncertainties that are encountered.

3. PERSONS RESPONSIBLE FOR THE INFORMATION SUBMITTED IN THE ANNUAL REPORT

JOB TITLE

FULL NAME

TELEPHONE NUMBER

AB Klaipėdos nafta, Chief Executive Officer

Darius Šilenskis

+370 52 127 733

AB Klaipėdos nafta, Chief Financial Officer

Mindaugas Kvekšas

+370 46 391 772

AB Klaipėdos nafta, Chief Accountant

Rasa Tamaliūnaitė

+370 61 888 260

4. ISSUER INFORMATION AND CONTACT DETAILS

Name of the Company: AB Klaipėdos nafta (hereinafter – the Company, KN or Issuer)

Legal status: Stock Company

Authorized share capital: 110,315,009 EUR

Date and place of registration: 27 September 1994, State Enterprise Centre of Registers

Company code: 110648893

Address: Burių street 19, 92276 Klaipėda

Telephone numbers: +370 46 391772

Fax numbers: +370 46 311399

E-mail address: info@kn.lt

Internet site: www.kn.lt

5. INFORMATION ON SUBSIDIARIES AND CONTACT DETAILS:

Name of the Company: UAB SGD terminalas

Legal status: Private Limited Liability Company

Authorized share capital: 37,500 EUR

Date and place of registration: 27 December 2018, State Enterprise Centre of Registers

Company code: 304977459

Address: Burių street 19, 92276 Klaipėda

Telephone numbers: +370 46 391772

Fax numbers: +370 46 311399

E-mail address: info@kn.lt

Internet site: www.kn.lt

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 60

Name of the Company: UAB SGD logistika

Legal status: Private Limited Liability Company

Authorized share capital: 4,540,000 EUR

Date and place of registration: 20 November 2015, State Enterprise Centre of Registers

Company code: 304139242

Address: Burių street 19, 92276 Klaipėda

Telephone numbers: +370 46 391772

Fax numbers: +370 46 311399

E-mail address: info@kn.lt

Internet site: www.kn.lt

6. INFORMATION ON SUBSIDIARIES OF UAB SGD LOGISTIKA AND CONTACT DETAILS:

Name of the Company: UAB SGD SPB

Legal status: Private Limited Liability Company

Authorized share capital: 25,000 EUR

Date and place of registration: 9 October 2019, State Enterprise Centre of Registers

Company code: 305278800

Address: Burių street 19, 92276 Klaipėda

Telephone numbers: +370 46 391772

Fax numbers: +370 46 311399

E-mail address: info@kn.lt

Internet site: www.kn.lt

Name of the Company: KN Acu Servicos de Terminal de GNL LTDA

Legal status: Limited Liability Company

Authorized share capital: 642,600 BRL (Brazilian reals)

Date and place of registration: 13 December 2019, State Register of Legal Entities of Rio de Janeiro

Company code: NIRE 33.210.894.765; CPNJ 35.785.170/0001-03

Address: F66 Fazenda Saco Dantas s/n, Distrito Industrial, Area 1 and Area 2, 28200-000 São João

da Barra, State of Rio de Janeiro

Telephone numbers: +370 46 391772

Fax numbers: +370 46 311399

E-mail address: info@kn.lt

Internet site: www.kn.lt

7. GROUP STRUCTURE AND MAIN TYPES OF ACTIVITY

Structure of AB Klaipėdos nafta Group (hereinafter – Group) on 31 December 2022:

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 61

The Group’s Capital on 31 December 2022:

NAME OF THE COMPANY

TYPE OF SHARE

NUMBER OF

SHARES (UNIT)

SHARE FACE

VALUE

TOTAL FACE

VALUE

AB Klaipėdos nafta

Common registered shares

380,396,585

0.29 EUR

110,315,009 EUR

UAB SGD terminalas

Common registered shares

37,500

1.00 EUR

37,500 EUR

UAB SGD logistika

Common registered shares

4,540,000

1.00 EUR

4,540,000 EUR

UAB SGD SPB

Common registered shares

25,000

1.00 EUR

25,000 EUR

KN Acu Servicos de Terminal

de GNL LTDA

Common registered shares

642,600

1.00 BRL

642,600 BRL

BRL – Brazilian real.

The companies of the Group and their main activities:

NAME OF THE COMPANY

ADDRESS

OWNERSHIP

PART, %

ACTIVITIES

AB Klaipėdos nafta

Burių street 19,

92276 Klaipėda

100

The business activity of AB Klaipėdos nafta can be

divided into three segments: Oil terminals,

regulated LNG activities, and commercial LNG

activities. Oil terminals include activities of Klaipėda

Oil terminal and Subačius Oil terminal. Regulated

LNG activities stand for Klaipėda LNG terminal.

Commercial LNG activities include small-scale LNG

station in Klaipėda, operation of LNG terminal in

Açu port in Brazil, and other business development

projects.

UAB SGD terminalas

Burių street 19,

92276 Klaipėda

100

Operation (management) and development of the

infrastructure of the liquefied natural gas terminal

in Klaipeda, other economic activities. The

subsidiary is currently not operating.

UAB SGD logistika

Burių street 19,

92276 Klaipėda

100

Expansion of operation of international LNG

terminal activities, LNG transportation activities,

other economic activities.

UAB SGD SPB

Burių street 19,

92276 Klaipėda

100 owned by

UAB SGD

logistika

Expansion of operation of international LNG

terminal activities by investing and establishing

project companies in Lithuania and foreign

countries (holding activities).

KN Açu Serviços de

Terminal de GNL LTDA

(KN Acu)

F66 Fazenda Saco

Dantas s/n,

Distrito Industrial,

Area 1 and Area 2,

28200-000 São

João da Barra,

State of Rio de

Janeiro

90 owned by

UAB SGD

logistika and 10

owned by UAB

SGD SPB

LNG terminal operation and maintenance services

in the port of Açu, Brazil, including the technical and

commercial operation of the installation of the

quay and its facilities, gas pipeline and gas

metering stations.

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8. AGREEMENTS WITH INTERMEDIARIES OF PUBLIC SECURITIES TRADING

The Company has an agreement with Financial Markets Department of AB SEB Bankas for accounting of the Company’s

securities and related services.

AB SEB BANK FINANCIAL MARKETS DEPARTMENT:

Company code

112021238

Address

J. Balčikonis street 7, LT-08247 Vilnius, Lithuania

Telephone

1528

E-mail

info@seb.lt

Website

www.seb.lt

9. AGREEMENTS WITH BROKERAGES FOR PUBLIC ISSUE

The Company’s shares are traded on the regulated market; they are listed in the Baltic Main List of the Stock Exchange of AB

NASDAQ Vilnius.

THE MAIN DATA ABOUT THE SHARES OF THE COMPANY:

ISIN code

LT0000111650

Abbreviation

KNF1L

Share emission

380,396,585

The Company's shares have been listed on the Nasdaq

Vilnius Secondary List since 16

January of 1996 and since

April of 2016 the Company's shares are listed on the

Nasdaq Vilnius Main List.

The securities of the subsidiary companies are not publicly

traded.

Details of the shares and shareholders are provided in the

2022 Annual Report’s chapter “Information about the

shareholders and shares” of the Company”.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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A FOREWORD OF THE CEO

Dears,

The year 2022 was marked by the radical changes in

almost all business segments of KN as well as in our

competitive environment. Russia's war against Ukraine

has led to an unprecedented energy price crisis in Europe

accompanied by the record high inflation in the region.

For KN, these challenges, in addition to the threats, also

created several additional revenue opportunities in

almost all business segments, which helped to partially

mitigate the unpredictably high increase in energy costs.

We successfully took part in diversification of supply of oil

products to Ukraine. The need for Europe to diversify

Gazprom’s supplies created us new opportunities in

global LNG development. We contribute to the Germany’s

aspirations of energy independence as KN was selected to

provide the operational services of the first floating LNG

terminal project in Wilhelmshaven. Finally, FSRU

Independence became a cornerstone of energy security

for the whole region, as well as the prime example of how

energy-dependencies can be healed for Western Europe

countries.

In a recent few years KN focused heavily on operational

transformation by implementing wide list of processes,

safety, efficiency improvement measures and tools (f. e.

ISO standardization, LEAN, risk and business continuity

management, improvement of control environment,

project management practices etc.). It helped us to

mitigate the worst possible effect of suffered crises and

disruptions in our businesses and generated tangible

returns.

The ability to seize opportunities as they arise, our focus

on diversification of product portfolio (number of handled

oil products at KN oil terminals increased from 8 in 2018

to 14 in 2022) and outstanding efforts in energy efficiency

have contributed to improved financial performance in all

business segments.

The increased complexity of KN operations went hand in

hand with continuous safety improvements in all our

terminals. One of the Company's key strategic objectives

is the continuous improvement of the safety and health

system by ensuring compliance and enhancing safety

culture to achieve a rate of zero significant safety

incidents and accidents. I am delighted to summarize that

we finished the year without any critical accidents, also

just in the beginning of January 2023, our LNG terminal

facility in Klaipėda hit the milestone of 3000 days without

the accidents. For the last couple years, the Company was

going through the cultural shift towards building of a safe

and healthy working environment, fostering a culture of

occupational safety and health, and enhancing

employees' awareness in this area.

Year 2022 was also marked as a breakthrough year in

establishing foundation for the Company’s long-term

future. We have entered number of strategic partnerships

in areas of greener energy components, including but not

limited to renewable energy generation, carbon capture

storage and / or utilisation (CCS/CCU), R&D in the field of

green hydrogen production. These are the key business

lines to be further discussed and developed in our new

long-term corporate strategy.

Looking ahead to the 2023, the context is likely to remain

unchanged in terms of both the geopolitical and

macroeconomic environment in which KN operates. Thus,

it will remain critically important to support and closely

monitor all safety areas and parameters, keeping extra

focus on ongoing improvement processes and

investments as well as further promoting safety

behavioural and cultural changes within entire

organization. Furthermore, as far as the current outlook

suggests , energy supply and demand will remain topical

in 2023: global tensions in gas production (supply) and

demand will keep energy costs at record highs and we will

be under the continuous pressure on managing variable

costs of KN operations, especially energy costs at the

terminals, and to move to the next level of automation

and productivity.

Also, following the sustainability path, we will continue

with the projects of supplying managed oil and gas

terminals with self-produced green energy, and continue

implementation of processes and technological upgrades

to reduce volatile organic compounds (VOC) and CO2

emissions of our operations by at least 15%. These

directions are extremely important for achieving one of

the main goals of the segment's future strategy that is

climate-neutral operations.

Another critically important direction in the oil segment

will be viable investment and development of the

infrastructure for future, new product flows, which will

enable further diversification of our portfolio of customers

and services to ensure return the benefits created by this

segment to shareholders.

Ensuring reliable regasification operations and availability

of infrastructure for customers will remain the main

priorities in Klaipeda LNG segment. The commitments

made and the importance of the terminal's availability will

be critical to ensuring the energy independence of the

entire region. In 2023, we will choose O&M service

provider for the FSRU Independence, and we will begin

accumulating FSRU operating experience on board, which

we did not have until now. One of the most important and

sustainable ongoing projects in the Klaipėda LNG

segment will remain the Klaipėda LNG terminal

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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electrification project which is a subject to significantly

reduce C02 emissions and increase effectiveness of overall

terminal activity. Parallelly, the possibility of Klaipėda LNG

terminal capacity expansion is under development with

currently ongoing season procedure. Decision regarding

expansion and its scope will be made after evaluation of

results of the procedure.

In the global arena, KN will continue our strategic

ambition to expand the number of LNG terminals where

KN has got a role (acting as O&M service provider, co-

investor, or both). During the strategy development

process, we will revise our resources, competitiveness, and

value proposition. We might come out with different

solutions and strategic ambitions.

There is a lot of ambition and hope embedded in 2023.

Globally – for peace and back to normality. For KN the

main goal will be to navigate through the uncertainty with

a willingness to embrace change, to adapt and transform

ourselves for the long-term future. And that will be the

most significant organizational milestone for our

Company in 2023. We have launched the preparations for

the renewal of our corporate strategy at the end of 2022,

and the strategy upgrade will be in full swing in the first

half of 2023. The preparation of a new KN strategy,

aligned with the directions and policies of the energy

transformation of Lithuania, the EU and globally, will

undoubtedly become a kick-starter of our ambitious

journey to 2050.

As Charles Darwin once said, it is not the strongest, nor

the most intelligent that survives. It is the one that is most

adaptable to change. And that is the crucial task of every

business leader in this uncertain and vulnerable

environment.

Regards,

Darius Šilenskis

Chief Executive Officer

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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BUSINESS CONTINUITY – THE IMPACT OF RUSSIAN WAR IN UKRAINE,

OPERATIONS IN, DEPENDENCE ON, OR OTHER EXPOSURE TO

RUSSIAN/BELARUSSIAN OR UKRAINIAN ECONOMIES

On 24

of February 2022, Russia has launched a full-scale

war against Ukraine, which has led to an economic

slowdown, high energy price shocks and inflation in both

Lithuania and other European countries.

The management of the Group and the Company has

evaluated the potential impact of operations in,

dependence on, and other exposure to

Russian/Belarussian or Ukrainian economies, and the

Group’s and the Company’s ability to continue as a going

concern as at the date of the issue of the consolidated

financial statements for the year ended 31 December

2021.

The Group and the Company had not been trading with

entities in Russia/Belarus and entities associated with

them, sanctioned as a result of the war in Ukraine as of

31 December 2022 and no trading activities have been

planned for 2023 with entities registered and related with

aforementioned countries. The Group and the Company

has no trading relationships with Belarus since February

2021 and no trading relationships with Russian entities.

Therefore, no significant impact to the Group’s and the

Company’s accounts receivables as at 31 December 2021

and for the future cashflows.

The Group and the Company do not have material

contracts/sales with entities in Russia/Belarus or Ukraine

and does not receive key supplies or services from these

countries.

However, the Group's and the Company's results were

significantly affected by increase in the cost of raw

materials such as gas and electricity. Unpredictable shocks

in the prices of energy resources may also affect the future

results of the Group and the Company. Furthermore,

sanctions imposed on persons from Russia/Belarus could

have an indirect effect on the Group’s and Company’s

business.

The Group and the Company do not have significant

contracts that may no longer be enforceable (e.g., due to

force majeure) in the foreseeable future.

The Group and the Company do not have significant

indirect exposure through trade with entities in other

countries which may have significant exposure to

Russia/Belarus or Ukraine.

On 3 March 2022, the Company announced that

acceptance of Novatek's cargo at the Klaipėda LNG

terminal is suspended. In Company’s view, Gennady

Nikolayevich Timchenko, included in the EU sanctions list

(EU Council Regulation 2022/336 implementing

Regulation No. 269/2014), can be considered a

controlling person of the Novatek group under the EU

law. According to the available data, Novatek group

companies supply LNG cargo to LNG terminal users. The

sanctions imposed prohibit entities from engaging in

activities the object or effect of which is to circumvent

restrictive measures.

Although the Group and the Company do not have

contracts with Novatek or its related entities, the

Company contacted Klaipėda LNG terminal clients on its

own initiative and asked to ensure compliance with the

sanctions in their operations. In the absence of

information that Klaipėda LNG terminal users are

complying with the sanctions in respect of LNG cargoes

scheduled to be unloaded at the Klaipėda LNG terminal,

acceptance of Novatek's cargo at the Klaipėda LNG

terminal is suspended.

As at the date of the issue of the consolidated financial

statements for the year ended 31 December 2022 the

Group and the Company have not identified any other

links in any way to organisations (including banks) or

other individuals targeted for sanctions, or other

politically exposed people in the region.

As LNG activity is regulated, sanctions introduced have no

impact on payments and liquidity/access to capital for the

Group and the Company.

The Group and the Company should not suffer potential

material impacts (quantitative or qualitative) of sanctions

introduced to Russia/Belarus and sanctioned individuals.

From April 2022, Lithuania's gas transmission system

started operating without Russian gas imports. All of

Lithuania's gas needs are met through the Klaipėda

Liquefied Natural Gas (LNG) terminal.

In September 2022 4 LNG terminal capacity packages of 6

TWh/year (24 TWh) were allocated to Klaipėda LNG

terminal users from Lithuania, Latvia and Poland for a ten-

year period until 2033, starting from 1

of January, 2023.

The renewed LNG terminal capacity allocation model will

allow to allocate around 60% of the total LNG terminal

capacity over the next 10 years to long-term contract

users. Allocating capacity ten years in advance ensures

that the market will be able to meet not only the gas

demand of Lithuanian consumers, but also transmission

to other European countries and storage in the Latvian

gas storage facility.

The remaining capacity of the LNG terminal will be

allocated through an annual capacity allocation

procedure. It is expected that the annual capacity

allocation will give priority to the nominated supplier and

to meeting the current year's gas demand of the LNG

terminal's customers. The allocation of spot market

capacity will take into account the need for gas imports to

ensure the isolated operation of the electricity system

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when necessary and, in the absence of such a need, to

meet gas demand on a case-by-case basis.

As the Group and the Company operate the Klaipėda LNG

terminal, it is stated that organization is in potential scope

of malicious activities on the internet because of the

importance of infrastructure to Lithuanian gas

independence. Management is in charge that appropriate

measures should be taken to respond to dynamic change

of the situation in cyber space. Government institutions

evaluate the readiness of the most important entities for

cyber defence and give additional instructions what is the

most important to implement and check as well as

provide threat intelligence communication channels for

preventive cyber defence.

The Group and the Company do not outsource

operational business processes (e.g., IT services) to

Ukrainian or Russian/Belarussian service providers.

The Company’s management has concluded that under

current circumstances at the date of financial statements

there is no significant doubt on the Group’s and the

Company‘s ability to continue as a going concern in the

foreseeable future.

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INFORMATION ABOUT THE GROUP AND THE COMPANY AND ITS ACTIVITIES

AB Klaipėdos nafta is the Company of strategic

importance for the energy security of Lithuania and the

surrounding region, which ensures the import of liquefied

natural gas into Lithuania and neighbouring countries, the

storage of the obligatory oil product reserve of the

Republic of Lithuania, as well as reliable and efficient

transhipment of oil products in Klaipėda port. Besides the

activities mentioned above, the Company has started

small scale LNG activities in 2017 and in 2020 became the

operator of LNG terminal in Açu Port in Brazil, becoming

the Group.

Currently, the Group's activities can be divided into three

main segments: commercial LNG activities, regulated LNG

activities, and oil terminals. The Management of the

Group and the Company evaluates the financial results of

each segment and sets separate strategic goals.

MAIN ACTIVITIES:

INFORMATION ABOUT INVESTMENT INTO ASSOCIATES

The Company has investments into the following associate companies as at 31 December 2022:

NAME OF THE

COMPANY

ADDRESS

OWNERSHIP

PART, %

ACTIVITIES

UAB BALTPOOL

9 A. Juozapavičiaus str.,

LT-09311, Vilnius

Development of activity of energy resources

(biofuel, gas) exchange, administration of

Public Interest Services (PIS) funds.

Sarmatia Sp. z o.o.

ul. Nowogrodzka 68,

Prima court, 02-014

Warsaw, Poland

Analysis and engineering of possibilities to

construct oil pipeline between Asian states

and the Baltic Sea.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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OIL TERMINALS

Oil terminals segment (OT) includes activities of Oil

Terminal in Klaipėda and Oil Terminal in Subačius which

are providing services of oil products transhipment, long-

term storage of oil products, and other services related to

oil products transhipment.

KLAIPĖDA OIL TERMINAL

The Company is one of the largest oil transhipment

terminals in the Baltic States. The terminal’s main activity

is to tranship oil products delivered by rail tanks into

tankers.

CHARACTERISTICS OF KLAIPĖDA OIL TERMINAL

Location

Territory of AB Klaipėdos nafta oil terminal, address: Burių street 19,

Klaipėda

Oil product tanks

51 tanks

Volume of the tanks

571 thousand m

total volume

The capacity of the oil terminal

8 - 10 million t / year

Jetty berths

2 (in 2019 started to modernize the jetty berths and construct an additional

multi-functional berth. After the reconstruction will be completed the

terminal will be capable to service three oil tankers simultaneously instead of

two. The total length of all three berths after reconstruction will be about

750 m)

Harbour entrance depth:

14.5 m

Max. draught at the jetty

13.5 m

Max. length of serviced tankers

Up to 275.0 m

Railway

Two double-track rail tank loading racks:

•

Two tracks for petroleum products that do not require maintaining of specific

temperature conditions (up to 2 x 30 tank wagons are services

simultaneously);

•

Two tracks for oil products that require maintaining of specific temperature

conditions (up to 2 x 32 tank wagons are services simultaneously);

•

One of the tracks is adapted to oil products of all types;

•

124 tank wagons can be loaded at the same time.

Road tanker loading

4 loading points at the same time

Modern laboratory

Equipped to inspect main quality parameters of oil products

Total capacity of three boilers of own

boiler station

100 MWh

The Company’s Oil Terminal handles these oil and

chemical industry products:

• Light Products (hereinafter – LP):

Different types of diesel fuel.

Different types of gasoline.

Jet fuel.

• Heavy Oil Products (hereinafter – HFO):

Different types of fuel oil.

Technological fuel.

Vacuum gas oil (VGO).

Crude oil.

Bitumen.

• Bio-fuels:

Ethanol.

Fatty acid methyl ester.

Hydrotreated vegetable oil.

• Other products of the chemical industry:

Monoethylene glycol.

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The processes of oil products transhipment service in the

Company’s oil terminal mainly include the following

operations: i) reloading of oil products from rail tanks, ii)

temporary storage of oil products in the terminal’s shore

tanks and iii) loading oil products into tankers.

To supply the clients with imported oil products delivered

to Klaipėda seaport by tankers, the Company is using

trucks loading station located in its terminal.

Klaipėda Oil terminal provides the following services:

• Transhipment of crude oil and oil products from rail

tanks into tankers.

• Transhipment of crude oil and oil products from

tankers into rail tanks.

• Reloading of crude oil and oil products into trucks.

• Accumulation and storage of crude oil and oil

products.

• Collection of wastewaters from sea vessels which is

contaminated with oil products.

• Mooring services.

• Inspection of quality parameters of oil products.

• Adding bio-additives and marking substances to oil

products.

• Blending of heavy and light oil products.

• Supply of fuel and water to vessels.

SUBAČIUS OIL TERMINAL

After the approval of the share emission agreement with

the Republic of Lithuania on 11 June 2012, the Company

has started to manage Subačius oil terminal (hereinafter –

SOT). After the takeover of Subačius oil terminal

infrastructure the Company’s activity and services have

been diversified and expanded including services of long-

term oil product storage.

SUBAČIUS OIL TERMINAL'S CHARACTERISTICS

Location

In Kunčiai village, Kupiškis district

Volume of the tanks

Total 66 tanks

Volume of the tanks

Almost 338 m

thousand total volume

Railway

The rail trestle which can simultaneously handle 14 rail tanks

Road trucks loading

Modern loading station of auto trucks

Modern laboratory

Able to detect the main quality parameters of oil products

Subačius oil terminal provides the following services:

• Storage of oil product (fuel) stocks of the Lithuanian

State to ensure the national energy security under the

relevant legal acts.

• Long-term storage of oil products (gasoline, diesel

fuel).

• Short-term storage and handling of oil products

(gasoline and diesel fuel) to the customers.

• Adding bio-additives and marking substances to oil

products.

The results of activities of Subačius oil terminal for 2022

are present in the Explanatory note “Information about

segments” of the Company’s audited financial statements

for 2022.

The infrastructure of Subačius oil terminal is continuously

upgraded to ensure proper provision of high-quality

services to customers, as well as safe and reliable

operation of the facility.

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REGULATED LNG ACTIVITIES

Regulated LNG activities (LNGT) segment includes activity

of LNG terminal in Klaipėda which receives, and stores

liquefied natural gas, regasifies, and supplies it to main

gas pipeline.

KLAIPĖDA LNG TERMINAL

Ensuring long-term operation of Klaipėda LNG terminal

At the end of 2019 Board of KN took necessary decisions

regarding implementation of measures for ensuring long-

term (until 2044) activities of the Klaipeda LNG Terminal,

including principal decision on the FSRU acquisition after

2024. At the end of 2019, Parliament approved state

guarantee for Stage I (optimization of LNG security

supplement) and Stage II (purchase of FSRU) of the long-

term LNG supply project, which enabled AB Klaipėdos

nafta to sign agreement with NIB on the loan for the

purpose of Stage I. Consequently, security supplement

reduction (by almost 40% since 2020) was proposed to

National Energy Regulation Council (NERC). Based on

NERC decision security supplement has been reduced and

is applicable to all gas consumers starting January 2020.

Loan agreement for Stage II (FSRU acquisition) has been

signed with NIB on 2020-03-09. On 2020-11-20 the

European Commission (EC) approved the state aid to be

provided in the form of state guarantee for the FSRU

acquisition loan. By this, principal issues related to FSRU

acquisition financing are solved. Preparatory work for

FSRU selection and purchase has been started.

In accordance with the Law on LNG Terminal, which

provides that LNG activities must be carried out until at

least 2044-12-31 and the LNG terminal operator acquires

FSRU and becomes an operator no later than 2024-12-31.

During 2021, KN focused on FSRU selection. Following an

extensive market investigation and an open tender for the

acquisition of FSRU, the existing purchase option to

acquire FSRU “Independence” has proven to be the most

economically advantageous solution for KN. In October

2022, KN has informed the Norwegian company Höegh

LNG of its decision to execute the right of FSRU

Independence buy-out option. As the following steps, the

FSRU operation and maintenance activity shall be

ensured. KN decided to hire experienced technical

manager for the FSRU’s operation and maintenance

(O&M) service provision and launched open tender for

FSRU O&M service acquisition in the second half of 2022.

The technical manager for FSRU expected to be selected

by mid of 2023.

In 2022, six users from Estonia, Poland, Norway and

Lithuania have been using services of LNGT in Klaipeda.

54 LNG carriers have arrived at the LNGT and 32.26 TWh

of LNG have been regasified and reloaded during 2022

(record year from the start of operation, increasing by

96.47% from year before). In 2022, Lithuania's natural gas

consumption was about 15.58 TWh, 78.7% from all

imported natural gas in Lithuania’s transmission system

operator AB “Amber Grid” system were from Klaipeda

LNGT.

In 2022, the average utilization of Klaipeda’s LNGT was

72% (vs 37% year ago); in comparison, based on data from

GIE ALSI, the average European utilization of LNG

terminals was 64% (vs 39% year ago).

The LNGT complements and extends the existing natural

gas supply infrastructure of the country, creates

opportunities for supply diversification, allowed to cut

imports from Russia, ensures the security of natural gas

supply and fulfils the EU Directive N-1 Infrastructure

Standard, i.e., creates preconditions for Lithuania to

independently supply itself with the natural gas needed

to meet the demand of the first necessity.

Infrastructure of the Liquefied Natural Gas Terminal

LNG Terminal of AB Klaipėdos nafta is based on a Floating

Storage with Regasification Unit (FSRU) technology. The

terminal is connected to the gas transmission network of

the natural gas transmission system operator

AB Amber Grid by an 18-kilometre connecting gas

pipeline. LNG Terminal functions – receive liquefied

natural gas from LNG carriers, store them, regasify, and

supply liquefied natural gas to transmission network or

reload into other LNG carriers.

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LNG terminal infrastructure

LNG Floating Storage with Regasification Unit

The LNG floating storage with regasification unit is an LNG

tanker (Independence), which at the Klaipėda Seaport

receives liquefied natural gas from the LNG vessels – LNG

carriers, which are moored at the FSRU. According to the

schedules of the Terminal users, LNG is passed through

special equipment to return the LNG to a gaseous state

and supply it to the gas transmission system. In 2012 10-

year lease (with purchase option) (starting from December

2014) of LNG floating storage with regasification unit has

been signed with Norwegian company Höegh LNG Ltd.

The builder of this ship is South Korean shipyard Hyundai

Heavy Industries Co. Ltd.

TECHNICAL CHARACTERISTICS OF THE FSRU INDEPENDENCE*

Klaipeda seaport jetty

157

The volume of the tanks

170,000 m³

Maximum LNG filling level

98% at 70 kPag

Maximum LNG loading capacity

9,000 m³/h LNG

Maximum LNG reloading capacity

5,000 m³/h LNG when LNG regasification is performed during LNG

reloading

FSRU capabilities

3.75 billion m³ of natural gas per year (10.24 million m³ per day)

Minimum operative LNG heel

3,500 m

LNG

Maximum gas flow into the gas pipeline

10.24 million m³ per day

*Terminal’s technical specifications are given according to the current normative conditions: combustion/measurement temperature -

25/0 °C, pressure - 1.01325 bar.

Jetty and its facilities

There is a permanently moored FSRU at the jetty, which

receives LNG from the LNG carriers that deliver them.

Special offshore equipment includes high pressure

platform, service platform, mooring and berthing

dolphins, catwalks, fire extinguishing towers, control

room, fire protection equipment, service cranes and high-

pressure gas loading arms, and other necessary

equipment and systems.

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Connecting pipeline of the LNG terminal

The terminal is connected to the gas transmission

network of the natural gas transmission system operator

AB “Amber Grid” by an 18-kilometre-long and 700 mm

diameter connecting gasoline. A gas metering station is

built at the point of connection to the transmission

network.

Services of the LNG terminal

The Terminal provides the following services: i) LNG

regasification, ii) LNG reloading. The LNG regasification

service consists of the following related services:

• Acceptance of LNG cargo from the LNG carrier that

arrived, physical (up to 60 days) and virtual (up to 12

months) storage of the cargo and LNG regasification

in the rate specified in the Terminal user schedule.

The LNG reloading service consists of the following

related services:

• Acceptance of LNG cargo from the LNG carrier that

arrived, physical and virtual storage of the cargo and

reload (re-export) of LNG to an LNG carrier of not less

than 5,000 m

The following prices apply to the services provided by

the terminal:

• The fixed part of the price of the LNG regasification

service is approved annually by the National Energy

Regulatory Council. This part of the price is included

in the additional component of the natural gas supply

security to the transmission price, whether the

Company is not able to collect the set revenue level

from LNG regasification service price variable part

directly from LNG terminal users.

• The variable part of the price of the LNG

regasification service is paid by the users of the LNG

terminal for the regasified gas volume. Tariffs are

approved annually by NERC. LNG regasification

service price variable part is calculated based on the

upper limit of LNG revenue divided by LNG terminal

capacity per unit.

SERVICES OF THE TERMINAL

SERVICE PRICE

NERC DECREE

LNG regasification service price* (2022)

0.41 EUR/MWh (until 1 May 2022)

excluding VAT

1.19 EUR/MWh (from 1 May 2022)

excluding VAT

16 November 2021 No. O3E-1496

31 March 2022 No. O3E-437

LNG regasification service price (2023)

1.41 EUR/MWh

31 May 2022 No. O3E-799

LNG reloading service price* (2022):

- Small scale LNG cargo, up to 15,000 m

- Medium scale LNG cargo, from 15,000

to 50,000 m

inclusive

- Large scale LNG cargo, from 50,000 m

0.56 EUR/MWh excluding VAT

0.44 EUR/MWh excluding VAT

0.31 EUR/MWh excluding VAT

16 November 2021 No. O3E-1495

LNG reloading service price (2023):

- Small scale LNG cargo, up to 15,000 m

- Medium scale LNG cargo, from 15,000 m

to 50,000 m

inclusive

- Large scale LNG cargo, from 50,000 m

0.62 EUR/MWh excluding VAT

0.48 EUR/MWh excluding VAT

0.35 EUR/MWh excluding VAT

25 November 2022 No. O3E-1620

* Terminal users transporting natural gas through the internal outlet of the natural gas transmission system shall also pay the

additional security component of the natural gas supply price to the natural gas transmission price set by the NERC.

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The LNG terminal fully ensures the third-party access

requirements in accordance with EU laws. The terminal’s

activities are organized in observance with the

Regulations for Use of the Liquefied Natural Gas Terminal

(hereinafter – Terminal regulations), adopted after public

consultations with market participants and approved by

NERC. The terminal’s capacities are allocated to the users

on the same conditions in the way of public and

transparent capacity allocation procedures or on Spot

capacity allocation procedure in case of free capacities

left. LNGT ensures multiuser environment, i. e. allows

several terminal users to use LNG regasification services

simultaneously at the same time based on mandatory

borrowing/lending conditions.

Detailed information on LNGT services and operating

model could be found in the Terminal regulations or on

www.kn.lt.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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COMMERCIAL LNG ACTIVITIES

Commercial LNG activities (comLNG) segment includes

activities of small-scale LNG reloading station in Klaipėda,

operation of LNG terminal in Açu port in Brazil, and other

business development projects and consultations.

KLAIPĖDA SMALL SCALE LNG TERMINAL

During 2022, 9 cargoes were delivered to Klaipėda small-

scale LNG terminal (hereinafter – LNG reloading station or

ssLNG). The entire LNG cargo was loaded to LNG Trucks

and distributed to consumers in Latvia, Estonia, and

Poland. A total of 658 LNG trucks were loaded at Klaipėda

Small scale terminal in 2022 (record year from the start of

operation in 2017).

AB Klaipėdos nafta has opened an onshore LNG reloading

station in the autumn of 2017. The purpose of the LNG

reloading station project is to develop small-scale LNG

infrastructure in the Baltic States and Poland, which not

only increases energy security for areas that are further

away from the gas pipeline, but also provides the benefits

of alternative and clean energy to a significant number of

consumers. This infrastructure also contributes to

ensuring the availability of LNG as a clean fuel for shipping

and heavy road transport.

On April 1

, 2020, the Polish oil and gas company PGNiG

(on November 2

2022, PGNiG S.A. became part of the

ORLEN Group) commenced commercial operations at KN-

operated Klaipeda Small scale LNG terminal. The

capacities of the station were allocated to PGNiG for a

five-year period.

The LNG reloading station is designed to receive cargo

from small-scale LNG carriers, store LNG, load LNG into

LNG Trucks, ISO containers or bunker LNG-powered

vessels.

The LNG reloading station is a commercial project of the

Company financed by the Company and partly by the

European Union support funds under the CEF-Transport

program for the implementation of the HEKLA

and Blue

Baltics

projects.

Completion of the project – 30 June 2018.

Completion of the project – 16 April 2020.

TECHNICAL CHARACTERISTICS OF THE LNG RELOADING STATION

Klaipeda seaport jetty

Technology

Five pressure tanks

Volume of the tanks

5 x 1,000 m

Fill level

86%

LNG receiving speed (from ship)

up to 1,250 m

Daily loading capacity for LNG Trucks

Loading of LNG Trucks

2 LNG Truck loading bays (possible simultaneous loading)

LNG Truck loading speed

up to 100 m

Bunkering speed

up to 500 m

Utilization of boil of gas

Gas pipeline connection to the Company’s boiler house

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LNG TERMINAL IN AÇU PORT IN BRAZIL

In 2020 KN became the operator of liquefied natural gas

(LNG) terminal at Açu Port, Brazil. Under the contract

concluded with Gas Natural Açu (GNA), a joint venture of

Prumo Logistica, BP and Siemens, KN as the operator of

the LNG Terminal is responsible for the smooth operation

of the LNG Terminal, including the technical and

commercial operation of the installation of the quay and

its facilities, gas pipeline and gas metering stations. KN

established a company KN Açu Serviços de Terminal de

GNL Ltda., which is responsible for the execution of this

project in Brazil, has gathered a team of local

professionals, and has begun the activities in 2020. The

contract is concluded for a period of 13 years and can be

extended with a mutual agreement.

THE CORPORATE STRATEGY

On 13

February 2020 the Supervisory Council of the

Company approved the corporate strategy of KN until

2030, which analysed the Company’s business

environment factors and established common strategic

goals for the entire Group. However, shortly after, the

environment, in which the Group operates, began to

change significantly starting October 2020, when the EU

imposed several packages of sanctions on Belarus. On

June 24, 2021, the Council Regulation (EU) 2021/1030 was

introduced, due to which no more transit of oil product

flows from Belarus were possible. The Company started to

adapt the oil business segment to the changing

environment, acting with no Belarus cargoes from the

beginning of 2021. Finally, the COVID pandemic, the

outbreak of the war in Ukraine in 2022, and the

acceleration of the pace of the green transformation

determined that initially approved strategy no longer

reflects the changed business and geopolitical

environment in which KN operates.

Due to aforementioned circumstances, some of the goals,

in particular for the oil business segment of the Group, are

no longer relevant and need revision. Accordingly, the

Group’s management in 2021 started and throughout

2022 continued to review the strategy. At the beginning

of 2023 KN has selected international experts for

consulting on the development of the Company’s new

long-term operational strategy. Selected strategic

consultants will assist in further assessing the strategic

directions already developed by KN managers, analyse

internal and external environmental factors, and based on

the best management practices and the latest standards,

will help to draft a strategy that will best meet the

business expectations.

KN newly developed long-term strategy will cover the

period of 2023–2050 but will be divided into three distinct

phases: short-term (2023-2030), or the current evolution;

medium-term (2030–2040) focusing on the role of KN in

the transitional energy market; and long-term (2040–

2050), which will cover the planning of the company's

activities for its journey towards full climate neutrality.

The long-term strategy will have to cover the four main

activities of KN – the current oil terminal services, the LNG

terminal business in Klaipėda port and in the region, the

global LNG business development through operation and

maintenance services and investments in LNG terminal

projects and the new business lines such as hydrogen and

alternative energy carriers, carbon-dioxide capture, and

storage, etc.

Meanwhile, in this annual report we report KN’s progress

based on the goals laid out in the corporate strategy

approved on 13 February 2020.

Despite the changing business environment, the mission

of the Group and the Company remains to ensure safe,

reliable, and efficient access to global energy markets by

sustainable development, investment, and operation of

multi-functional liquid energy terminals worldwide.

Changing energy markets and energy transition also

acquired new competencies in management of LNG

floating terminal in Klaipėda has led to the major change

in the Company’s vision and mission. From being local

and regional player, providing one type of service, the

Company for 2020-2030 targeted to diversify its activities,

to expand provided services and be less dependent on

one source of income. As a result, the Company continued

to develop four business lines: international LNG projects,

oil and refined products handling services, management

of Klaipeda LNG floating terminal and small-scale LNG

reloading services.

The Company identified the biggest potential for growth

and net profit generation in LNG business development

and investments into LNG import terminals

internationally. AB Klaipėdos nafta believed that floating

LNG import-based solutions would account for almost a

half of the new regasification capacity in the decade

FSRU AT THE PORT OF AÇU. COURTESY BY GNA

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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ahead and has seen the possibility to achieve that by 2030

the profit from oil product handling services would be

identical to that from LNG business development projects.

Company’s initial vision for the oil business segment was

to expand the range of products that could be handled

and increase the operational excellence through investing

in environmentally sustainable and more efficient

technologies as well as digitalization. Increased capacities

would enable the Company to meet changing demands

and improve quality of services provided.

The strategy of state-regulated Klaipeda LNG terminal

activity was seen to maintain operation after 2024

ensuring long-term access to LNG import for the country

and constantly increase flexibility of the usage of the

terminal in order to increase the net value for gas

consumers.

The growing demand for LNG which is transported by

road and ships to the off-grid locations in the Baltics and

northern Poland, the growing pressure to reduce global

emissions and the promotion of LNG as a cleaner energy

source would give the LNG distribution station a

significant role in the Company’s portfolio. AB Klaipėdos

nafta together with its strategic partners aimed to

stimulate LNG market creation and to increase share of

this much cleaner fuel consumption in marine and heavy

transport as well as off-grid industry within a region.

The Strategy anticipated significant attention of the

Company’s management to be dedicated towards the key

asset of the Company – people, focus on direct and

indirect business impact on the society – social

responsibility, major digitalization, and innovation

directions of activities, carried out by the Company.

MAIN BUSINESS LINES INITIALLY ANTICIPATED BY 2030

KLAIPĖDA LNG HUB

• Assure the region’s access to the

global LNG market at least till 2044 and

benefit for Lithuanian consumers

through commercial activities.

• Assure highest quality bunkering and

truck loading services, contribute to

innovation development through the

LNG cluster.

INTERNATIONAL LNG PROJECTS

• See the net profit from international

LNG projects higher than from oil

products transhipment services, which

is the largest portion today.

• Become the preferred partner for new

LNG import terminal projects globally.

• Be within the top three leading

floating LNG import terminal

companies.

OIL TERMINALS

•

Handle any oil product without

limitation to transhipment mode,

provide smart throughput, storage and

blending services.

• Be fully capable of working with

products that go beyond traditional oil

or petroleum products range.

• Invest in sustainable and more

efficient technologies and processes to

reduce emissions from our activities.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

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OIL BUSINESS

By 2030 we aim to become the region’s top and most

efficient oil throughput and storage hub of liquid

petroleum, petrochemical products, and refining

feedstock for regional and global refineries, traders, and

other customers.

WHAT WE PLAN TO ACHIEVE BY 2030:

A. Sustain and increase volumes and profitability of oil

terminals under consideration of changes to the market

structure.

B. Enter market for transhipment of petrochemicals and

other new products.

C. Ensure environmentally sustainable activities of KN oil

infrastructure.

• Full compliance with environmental regulations and

reduction of emissions

D. Ensure secure, reliable, and efficient operation of oil

terminal.

• No critical accidents.

STRATEGIC DIRECTIONS OF OIL BUSINESS

Oil business strategy is to ensure high rate of profitability

and attractiveness by:

• Investing into expanding of technological capacities,

acceptance of larger tankers, and ship to ship loading

and blending operations.

• Reducing the number of personnel and related costs

by automatization and digital measures.

• Handling niche products like petrochemicals, alcohols,

octane boosters, and other.

KLAIPĖDA LNG HUB

We aim to provide access to global LNG markets and

competitive gas prices for traders and consumers in the

Baltic Sea region and beyond, and to become the main

small-scale LNG import terminal in the Baltic States and

Poland.

WHAT WE PLAN TO ACHIEVE BY 2030:

A. To become regional LNG hub that increases liquidity

and flexibility of the interconnected natural gas systems.

• Ownership of FSRU, full O&M.

• Implemented long term LNG import solution.

• >30% FSRU revenues from international

counterparties.

• Provision of quality LNG services under the

sustainable business model and for the benefit of the

whole region.

B. Profitable small-scale terminal with a proven value in

the growing regional small-scale LNG (ssLNG) market.

ACTIONS TO BE MADE

KN will continue growing its market share and make

impact by:

• Generating revenue from long-term agreements to

small-scale terminal by upstream partnering with

strong players in the market who could ensure stable

supplies to the reloading station on competitive

prices.

• Becoming effective and efficient terminal for the

partners, being available when necessary and capable

to do significant number of loads.

• Improving business environment in Lithuanian LNG

market by continuing spreading awareness in the

market, cooperating with institutions and other

players, promoting LNG-in-favour legislations,

cooperating with Port Authorities to improve

OIL BUSINESS

DIRECTIONS

GROWTH &

COMPETITIVENESS

ENVIRONMENTAL

SUSTAINABILITY &

SECURITY

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bunkering conditions and start bunkering operations

in the Port of Klaipėda.

INTERNATIONAL LNG PROJECTS

We aim to become the preferred partner for new LNG

import terminal projects globally and be within the top

three leading floating LNG import terminal companies by

2030.

WHAT WE PLAN TO ACHIEVE BY 2030:

A. Operator of at least 5 LNG terminals by 2030

B. Shareholder in at least 4 LNG terminals by 2030

LNG VALUE CHAIN AND KN BUSINESS

While natural gas is globally abundant cleanest burning

fossil fuel and a highly competitive source of energy,

many energy-hungry countries are at a considerable

distance from the extraction locations.

KN draws on the experience in developing and advising

more than ten new LNG import projects in Europe, Latin

America, and Asia since 2015 and has a track record of on-

time and on-budget delivery of floating LNG terminal.

Company seeks to:

• Engage in early development to capture new

projects.

• Monitor and respond to public and private tenders

for LNG import terminal development and O&M

services.

• Develop and strengthen partner network of FSRU

owners, LNG traders, suppliers, and other relevant

counterparties.

• Develop market facing innovative solutions and

concepts.

• Actively seek and evaluate acquisition opportunities.

REGASIFICATION

DISTRIBUTION

SHIPPING

EXPLORATION

AND

PRODUCTION

TREATMENT

AND

LIQUEFACTION

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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STATUS OF ACHIEVEMENT OF STRATEGIC GOALS

The view of the management and evaluation of possibilities to achieve 2020-2030 strategic goals based on assumptions as

at 31 December 2022:

* Achievement of this goal is at risk due to the absence of Belarus cargo and global energy crisis due to Russia's invasion of

Ukraine.

STRATEGIC GOALS

STATUS

OIL TERMINALS

Increase volumes and profitability of oil terminals.

At risk for achievement *

Enter the market for transhipment of petrochemicals and other new

products and increase their share from overall oil business revenue

In line with expectations

Full compliance with environmental regulations and reduction of

emissions

In line with expectations

No critical accidents, secure, reliable, and efficient operations

In line with expectations

KLAIPĖDA LNG HUB

Ownership of FSRU, full O&M

In line with expectations

Implemented long term LNG import solution

In line with expectations

>30% FSRU revenues from international counterparties

In line with expectations

Provision of quality LNG services

In line with expectations

Profitable small-scale terminal

In line with expectations

INTERNATIONAL LNG PROJECTS

Operator of at least 5 LNG terminals by 2030

In line with expectations

Shareholder in at least 4 LNG terminals by 2030

In line with expectations

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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SIGNIFICANT EVENTS OF THE REPORTING PERIOD

January 2022. AB Klaipėdos nafta received a formal

notice by the independent Board member Bjarke Pålsson

regarding his resignation from the position as the Board

member of KN from 1

February 2022.

January 2022. The Supervisory Council elected Guy

Mason, Edvinas Katilius, Alfonso Morriello, and Jūratė

Lingienė as independent Board members for a new

four-year term of office. New Board will take office on 25

of April 2022.

January 2022. KN successfully transhipped the first

bulk bitumen from storage tanks to a tanker. Arranging

the transhipment of bulk bitumen from storage tanks to a

tanker is a novelty in the Port of Klaipėda. Tanker BITHAV,

moored at the Company’s berth, was loaded with almost

5,000 t of bitumen used in construction and road paving.

February 2022. Laura Garbenčiūtė-Bakienė has

submitted a notice of resignation from the Audit

Committee of the Company as of 25 February 2022.

February 2022. Extraordinary General Meeting of

Shareholders of the Company approved the decision by

KN to acquire the floating storage regasification unit

(FSRU) Independence. The price for the FSRU

Independence shall be 153.5 million USD, excluding VAT.

The agreement of FSRU Independence purchase shall be

accomplished no later than 6

December 2024.

March 2022. KN informed that acceptance of Novatek

cargoes at the LNG terminal is suspended from the end of

March.

March 2022. Customers have fully booked the LNG

terminal's regasification capacity for the current gas year,

i.e., until 30 September 2022. According to the latest

customer requests, a total of 23.9 TWh of Klaipėda LNG

terminal capacity has been allocated for the current gas

year.

March 2022. National Energy Regulatory Council set

prices for fixed and variable components of liquefied

natural gas regasification services effective from the 1

May 2022: 1.19 EUR/MWh for the variable tariff

component and 0 EUR/(MWh/day/year) for the fixed tariff

component.

April 2022. Lithuania renounces Russian gas imports

meaning that all Lithuanian gas demand will be satisfied

through the Klaipeda LNG terminal.

April 2022. KN published the Social Responsibility

Report of 2021. Report is prepared following the

international Global Reporting Standards (GRI).

April 2022. Šiauliai Regional Court dismissed a civil

claim of the prosecutor of the Klaipėda Regional

Prosecutor's Office in a civil case regarding the shares of

AB Klaipėdos nafta granted to employees. On 11 May, an

appeal in a civil case has been lodged by the prosecutor.

April 2022. Newly elected independent Board

members of AB Klaipėdos nafta started a four-year term

of office.

May 2022. The first delivery of liquefied natural gas

for PGNiG (part of the ORLEN Group from November 2nd

2022), which is the leader of the Polish gas market, via

Klaipėda LNG terminal. Delivery of almost 150,000 m

LNG is a step forward to strengthen national energy

security and build partnerships.

May 2022. Karolis Švaikauskas is elected as a Board

Member of the Company. Karolis Švaikauskas also serves

as the Head of the Energy Competitiveness Group of the

Lithuanian Ministry of Energy of the Republic and is a

Board member of Amber Grid.

May 2022. National Energy Regulatory Council set

the upper limit for the revenue of liquefied natural gas for

2023. The upper limit is EUR 45.3 million and is 44.3%

higher than the upper limit of year 2022 (EUR 31.4 million).

May 2022. National Energy Regulatory Council

approved amendments to the Regulations of use of LNG

Terminal applicable from 2023.

May 2022. Edvinas Katilius becomes the Chairman of

the Board.

May 2022. KN has completed the annual LNG

terminal capacity allocation for the last quarter of 2022.

During the period from 1 October to 31 December 2022,

five customers will use the booked 9.66 TWh of LNG

terminal regasification capacity.

May 2022. National Energy Regulatory Council set

the price of 1.41 EUR/MWh for the variable component of

liquefied natural gas regasification service for 2023.

July 2022. KN and the companies of the largest Polish

oil group ORLEN, ORLEN Neptun I and Energa

Wytwarzanie, signed a letter of intent on the possibility of

cooperation in the provision of operation and

maintenance (O&M) services for wind farms in the Baltic

Sea.

August 2022. National Energy Regulatory Council

(NERC) has published updated data for the natural gas

sector for calculation of weighted average cost of capital,

i. e. rate of return on investments of regulated activities

(WACC). According to NERC data, the WACC calculated

for the Company in 2023 will be 4.16% (4.14% in 2022).

October 2022 In accordance with the Time Charter

Party and upon the set deadline AB Klaipėdos nafta has

notified HÖEGH group companies that the Company

exercises an option right to acquire the floating storage

regasification unit (FSRU) Independence. After fulfilling all

the option conditions specified in the Time Charter Party,

the Company will acquire the FSRU no later than 6

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December 2024. Until then the Company will continue to

lease the FSRU under the same conditions.

October 2022 An Extraordinary General Meeting of

Shareholders of the Company was convened.

Extraordinary General Meeting of Shareholders has

adopted the following resolutions: 1) to approve the

amendment of Remuneration Policy, 2) for the 4 years

cadence of Supervisory Council members of AB Klaipėdos

nafta to elect: Mantas Šukevičius, Robertas Vyšniauskas,

and Dovilė Kavaliauskienė, 3) to determine fixed monthly

remuneration for the members of Supervisory Council of

AB Klaipėdos nafta, 4) to approve standard contract form,

regarding the activity of the member of Supervisory

Council of AB Klaipėdos nafta.

November 2022 The newly elected Supervisory

Council of AB Klaipėdos nafta on its first meeting elected

independent Supervisory Council member Robertas

Vyšniauskas as a Chairman of Supervisory Council.

November 2022. By the decision of Supervisory

Council of AB Klaipėdos nafta, as of 1

of December 2022

the independent member of the Audit Committee Žana

Kraučenkienė was revoked.

November 2022. By the decision of Supervisory

Council of AB Klaipėdos nafta, as of 24

of November

2022 until the end of term of office of Company’s acting

Supervisory Council Robertas Vyšniauskas and Mantas

Šukevičius are elected as independent Company’s Audit

Committee members. It was also decided to form the

Remuneration and Nomination Committee and as of 24

of November 2022 until the end of term of office of

Company’s acting Supervisory Council to elect Dovilė

Kavaliauskienė and Robertas Vyšniauskas as Company’s

Remuneration and Nomination Committee members.

December 2022. The Court of Appeal of Lithuania

satisfied the claim of the prosecutor of the Klaipėda

Regional Prosecutor's Office in a civil case regarding the

shares of AB Klaipėdos nafta granted to employees. The

Court of Appeal of Lithuania issued a decision which

annulled a decision of 8 April 2022 of Šiauliai Regional

Court and adopted a new decision, i. e. satisfied the claim

of the Klaipėda Regional Prosecutor's Office defending

the public interest and:

- annulled the shares granting rules approved by the

minutes of the extraordinary general meeting of

shareholders of the Company of 8 November 2018;

- annulled the respective decisions of the minutes of

the Board of the Company of 9 October 2018 that

approved the program of granting shares to

employees in accordance with the set rules;

- annulled the share granting agreements of 26 April

2019 from the moment of their conclusion.

More information about the decision of the Court of

Appeal of Lithuania can be found on www.kn.lt.

December 2022. AB Klaipėdos nafta and public

institution Lithuanian Energy Agency has signed a

contract on storage, accumulation, and administration

services of Lithuanian state-owned light oil products

(diesel fuel and petrol) in Company’s Subačius oil

terminal. This contract came into force on 1st of January

2023 and is valid for the period of 10 (ten) years.

SIGNIFICANT EVENTS OCCURRED AFTER THE END OF THE REPORTING PERIOD

February 2023. By the decision of Supervisory

Council of AB Klaipėdos nafta, as of 22 February 2023,

until the end of term of office of Company’s acting

Supervisory Council, Šarūnas Radavičius was elected as an

independent member of the Audit Committee of the

Company. In addition, Supervisory Council decided, to

elect Živilė Valeišienė as an independent member of

Remuneration and Nomination Committee of the

Company until the end of term of office of Company’s

acting Supervisory Council.

March 2023. The Company received the Letter of

expectations of the shareholder of the Ministry of Energy

of the Republic of Lithuania, which owns 72.47% of the

Company's shares.

More information about the Letter of expectations can be

found on www.kn.lt.

INFORMATION ABOUT PUBLIC ANNOUNCEMENTS

Following the requirements of the Law of the Republic of

Lithuania, all main events concerning the Company and

information about the time and venue of the General

Meeting of Shareholders are published on the website of

the Company www.kn.lt and in AB NASDAQ Vilnius

(www.nasdaqomxbaltic.com) Stock Exchange.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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BUSINESS ENVIRONMENT AND MARKET

OIL TERMINALS’ BUSINESS ENVIRONMENT AND

MARKET

The Company’s oil products’ transhipment activities are

mostly affected by:

- Company's infrastructure (number of jetties,

water depth at jetties) and suprastructure for

transhipment and storage of oil products

(number of tanks, pipelines, trestles, etc.).

- Oil terminals’ economic attractiveness from

logistical point of view (both transhipment tariffs

and costs of the entire logistic chain).

- Macroeconomic, geopolitical environment in the

regional and global oil refining and trade

markets, overall market situation.

Main KN Oil business clients – crude oil refineries, traders,

and producers operating in the regional and global oil

and petroleum product markets. Strategic oil refinery

(hereinafter – Refinery) in the region, part of which oil

products are transhipped through Company's oil

terminals are in southeast direction – it is Mažeikiai plant

in Lithuania (managed by AB ORLEN Lietuva).

Main Company’s competitors are oil terminals operating

along the eastern coast of the Baltic Sea.

Company’s oil terminals activity results in 2022 were

mainly affected by geopolitical, demand/supply factors

and costs of energy resources issues.

Global fuel consumption grew in 2022 and exceeded the

volumes of 2021. However,

- global refining capacities reduced during the

pandemic,

- geopolitical situation began to change rapidly at

the beginning of the year triggering restrictions

on the delivery of oil products to the EU from

Russia, due to the starting war in Ukraine,

which,

- led to tightening supply of oil products,

- increased the need for production of European

oil refineries (esp. diesel) – a significant part of

them worked at full capacity in the second

quarter of this year, with refining margins

growing to new post-pandemic highs,

- created the demand of new routes for fuel

delivery to Ukraine from Western partners.

These circumstances pushed up the demand for the

services of KN Oil terminals:

- 2022 Oil Terminals segment revenues exceeded

2021 by 29.8% – and were primarily influenced

by increased transhipment volumes, as the

demand for oil products storage services was

limited by prevailing backwardation trends

(especially diesel and gasoline),

- encouraged initiatives to explore new

transhipment routes and become a part of the

logistics chain of fuel supply to new customers

in southwest directions – Company started

transhipment of diesel delivered by ship to the

port of Klaipėda into tank containers for further

transportation by railway,

- in 2022 KN terminal was in high demand as oil

products import hub, notably for fuel oil, which

– in response to all-time highs of gas prices – was

used as alternative heating generation source in

city infrastructure at the start of the winter

season of 2022.

According to the statistical data, during 2022 ports of the

eastern Baltic Sea coast transhipped approximately 90.1

million tons of oil products, i.e., 2.7 million tons or 2.8%

less compared to 2021.

During 2022, port of Klaipėda handled about 4.8 million

tons of oil products, i.e., 0.4 million tons or 9.6% more

than in 2021.

Russian’s ports share in total eastern Baltic Sea coast oil

product transhipment market increased from 78% to 80%,

the share of Klaipėda port increased from 4.7% to 5.3%.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 83

* Figures are based on Klaipėda Port Authority data

* Figures based on Klaipėda Port Authority data

32.3

16.7

11.9

11.5

5.5

4.4

8.0

2.2

0.4

33.8

15.4

12.4

10.2

6.3

4.8

5.4

1.4

0.4 0.3

Ust-Luga Primorsk Vysotsk St

Petersburg

Ventspils Klaipėda Tallinn and

other

Estonian

ports

terminals

Riga Kaliningrad Liepaja

Millions of tons

2021 2022

+4.7%

(11.5)%

+4.2%

(8.0)%

+13.4%

+9.6%

(32.5)%

(37.9)%

+10.4%

(27.9)%

DYNAMICS OF OIL PRODUCTS TRANSHIPMENT AT THE EASTERN BALTIC SEA COAST PORTS IN 2021 – 2022

68.4

6.9

13.8

7.3

70.6

6.3

11.0

5.7

72.7

8.0

7.7

4.4

72.0

5.4

7.9

4.8

Russia Estonia Latvia Lithuania

Millions

2019 2020 2021 2022

DYNAMICS OF OIL PRODUCTS TRANSHIPMENT AT THE EASTERN BALTIC SEA COAST PORTS, 2019 – 2022

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 84

TRANSHIPMENT OF OIL PRODUCTS

During 2022 the Company’s Klaipėda and Subačius Oil

terminals transhipped 4,267 kt of oil products compared to

3,651 kt during 2021. The transhipment of both terminals for

2022 is 16.9% higher than during 2021. The increase was a

result of the global and regional factors mentioned in the

section “Oil Terminals’ Business Environment and Market”.

In 2022, bitumen transhipment was started using tanks that

were reconstructed from 2021 (a total of 8.4 thousand m

). As

a result, in the end of 2022 Klaipėda oil terminal took about

22% of the bitumen transhipment market in the terminals of

the Baltic countries and the Gulf of Finland (Russia).

The diversification of oil products transhipped via Klaipėda oil

terminal also increased by the start of the loading of Lithuanian

crude oil in the first half of 2022.

Biofuels transhipment in KOT continued to grow: in 2022 4%

more biofuels were transhipped than in 2021, where ethanol

was the main driver due to its restored delivery from Ukraine

by tank trucks.

Loading of petrochemical products intensified and in 2022 was

about 3.0 times higher than in 2022, due to new clients

attracted.

Transhipment of oil products (diesel and gasoline) to tank

trucks in 2022 was 20% higher compared to 2021.

Intensified transhipment activity also contributed to increased

demand for the storage services of handled oil products –

revenue from the rent of shore tanks in 2022 increased 45%

compared to 2021.

In order to further expand the scope of activities and diversify

products portfolio in Klaipėda and Subačius Oil terminals, the

Company continues to develop business relationships with

international and regional market players.

* Figures based on KN data

6,694

5,749

5,149

3,651

4,267

2018 2019 2020 2021 2022

Transit Export Others

TRANSHIPMENT IN OIL TERMINALS, THOUSAND TONES

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 85

OVERVIEW OF KLAIPĖDA LNG TERMINAL OPERATING ENVIRONMENT

During 2022 NERC adopted the following resolutions

related to the operating environment of Klaipėda LNGT:

• On 25 November 2022, decree no. O3E-1621 NERC

approved fixed component of the LNG regasification

price to be included in the security component

payable by natural gas consumers is set at 0 EUR

(MWh/day/year)

• On 31 May 2022, decree no. Q3E-799 – NERC

approved LNG regasification variable part to 1.41

EUR / MWh

• On 25 November 2022, decree no. O3E-1620 – NERC

has set prices for liquefied natural gas reloading

services, effective from 1 January 2023. This

resolution established differentiated LNG reloading

prices based on the methodology for setting state

regulated prices in the natural gas sector.

• NERC adopted several decisions regarding approval

of updated editions of Regulations for use of

Liquefied Natural Gas Terminal. Latest edition of the

Regulations for use of Liquefied Natural Gas Terminal

was approved by National Energy Regulatory Council

on 1st of December 2022 by decree No. O3E-1649

(latest and amended editions of the Regulations

could be found on www.kn.lt.

Other relevant 2022 events related to the operation of the

LNGT:

• KN informed LNGT users that from 3

of March

acceptance of Russian cargoes at the LNGT is

suspended. Accordingly, Government of the Republic

of Lithuania adopted resolution which came into

force on 17

of March 2022 stating that in order to

ensure safe and reliable operations of LNGT, operator

cannot reserve or use capacity for natural gas supply

from countries which pose a threat to national

security of the Republic of Lithuania in accordance

with the National Security Strategy.

• As of 12

of July 2022 amendment to the Law on

Natural Gas of the Republic of Lithuania came into

force which included prohibition to reserve or use

capacity of LNGT for natural gas supply from

countries which in accordance with the National

Security Strategy of Lithuania pose a threat to

national security and to ensuring the national security

interests.

LNGT capacity allocated for the gas year 2022 and 2022 Q4 (period from 1 October 2021 to 31 December 2022):

ALLOCATED CAPACITY

AMOUNT OF ALLOCATED CAPACITY, GWh*

PERIOD

LNG regasification

capacity**

8,892

1 October 2021 – 30 September 2022

1 October 2021 – 31 October 2021

1 October 2021 – 30 November 2021

1 October 2021 – 31 October 2021

122

1 November 2021 – 31 December 2021

1 November 2021 – 30 November 2021

113

5 January 2022 – 28 February 2022

15 February 2022 – 31 March 2022

9 January 2022 – 28 January 2022

309

1 February 2022 – 31 March 2022

949

15 February 2022 – 12 April 2022

105

15 April 2022 – 2 May 2022

20 February 2022

1 April 2022

1,000

7 March 2022 – 30 April 2022

4,000

1 April 2022 – 30 September 2022

998

1 May 2022 – 31 May 2022

2,000

1 July 2022 – 31 August 2022

4,968

1 June 2022 – 24 September 2022

300

5 August 2022 – 15 September 2022

9,596

1 October 2022 – 31 December 2022

*Combustion / measurement temperature 25/0 °C, pressure 1.01325 bar, natural gas gross calorific value 11.90 kWh/nm3, expansion

factor 1: 578 m3 LNG / nm3 of gas).

**During Gas Year LNG regasification capacity may be changed to LNG reloading capacity.

Total 24,167 GWh LNG regasification capacities of LNGT

were allocated for the Gas Year 2022 (period from 1

October 2021 to 30 September 2022) and 9,596 GWh for

2022 Q4. In 2022 KN has allocated long-term capacity

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 86

until the end of 2032. LNGT users from Lithuania, Latvia

and Poland have been granted 4 LNGT capacity

packages of 6 TWh/year (24 TWh) each for a period of

ten years starting from 1

January 2023. Following the

renewal of the LNGT capacity allocation mechanism this

year, in ten years approximately 60% of the LNGT total

capacity per year is allocated to terminal users with long-

term contracts. During the Annual Capacity allocation

procedure, the LNGT regasification capacity of 9 TWh

has been allocated to five Terminal users for the 2023

gas year.

32,095 GWh of LNG have been regasified and

transmitted to AB “Amber Grid” transmission system in

2022. It should be noted that in 2022, six users from

Estonia, Poland, Norway, and Lithuania have been using

LNGT in Klaipeda. Starting from the Terminal Gas Year

2023 new terminal user from Latvia will start to use

services of the Terminal.

During 2022 the Klaipeda LNGT:

• Performed 54 ship-to-ship operations (71 ship-to-

ship operations in 2021).

• 2,173.2 thousand tonnes of LNG were received

(1,122.4 thousand tonnes in 2021).

• 2.796 billion nm

of natural gas were regasified and

supplied to the natural gas transmission system

(1.436 billion nm

in 2021).

• 11.4 thousand tonnes LNG were reloaded into small

scale LNG carriers (5.6 thousand tonnes were

reloaded in 2021).

• Accepted LNG origin was 65% from USA, 30% from

Norway, 3% from Egypt and 2% from Russia (no more

Russia related cargo accepted from March 2022).

The need for LNG terminal capacity depends on several

key criteria:

• Joint gas demand of Lithuania and other Baltic

States.

• Pricing offered by competing natural gas supply

sources (gas supplied by pipeline or other LNG

terminals in the region) and quantity of gas

supplied.

• Limitations of the Lithuanian natural gas

infrastructure (transmission system capacity);

• Supply of LNG in the global market.

• LNG prices in the region and worldwide.

• Duration and terms of gas supply contracts.

• Availability and freight costs of LNG carriers.

• In 2022 one of the highest impacts for increasing

the usage of LNGT capacities was halted Russian

natural gas imports to Lithuania.

0.9 1.0

1.8

1.6

2.3

1.8

1.3

1.4

1.5

0.9

1.1

0.9

0.6

1.1

1.7

2.8

3.5

3.6

2.8

3.2

3.1

2021 2022

LNG REGASIFICATION AND RELOADING, TWh

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 87

GAS PIPELINES PROJECTS IN THE BALTIC STATES

Energy projects implemented in the Baltic region would

enable the development of the LNG market and more

efficient use of the available capacity of the LNG terminal.

On 1

May 2022, the GIPL gas transmission pipeline

between Lithuania and Poland started commercial

operations.

KLAIPEDA LNG TERMINAL CAPACITY EXPANSION

KN as the operator of Klaipeda LNGT together with gas

transmission system operator AB “Amber Grid” seek to

evaluate possibilities to expand current Klaipeda LNGT

regasification capacity as well capacity of gas transmission

system in relevant entry and exit points and create

possibility to book additional LNG import capacity in the

future. The implementation of the project should create

additional LNG import capacity of up to 2.5 bcm/year

preliminary starting from 2nd half of 2026.

As the first step of the project, KN and AB “Amber Grid”

seek to assess the market participants’ demand of

Expanded Capacity. Therefore, the Operators announced

joint process of Open Season procedure at Klaipeda LNGT

and Lithuanian gas transmission system. Procedure

started with non-binding phase and afterwards will

continue with the binding phase (if sufficient demand for

additional capacity would be identified during the non-

binding phase).

Non-binding phase of Open Season Procedure started on

19th of December 2022 and will last until 1st of February

2023. Publication on Non-binding phase of Open Season

Procedure could be found on www.kn.lt. Announcement

of the decision to conduct the binding phase of the Open

Season Procedure will follow afterwards and be published

by 1

of March 2023.

9.2

20.1

21.9

16.6

32.4

2018 2019 2020 2021 2022

TOTAL LNG REGASIFICATION AND RELOADING,

TWh

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 88

FINANCIAL RESULTS OF GROUP’S ACTIVITY

35.2

32.1

31.4

21.4

27.8

64.4

70.9

43.4

34.8

44.6

100.0

104.4

80.1

61.8

77.8

2018 2019 2020 2021 2022

Commercial LNG activities Regulated LNG activities

Oil terminals Total

SALES REVENUE, MEUR

11.6

7.6

34.0

(64.0)

(5.9)

12.7

11.5

(47.2)

8.9

2018 2019 2020 2021 2022

Net profit (loss) Adjusted net profit (loss)

NET PROFIT (LOSS), MEUR

17.4

20.8

29.2

8.7

20.1

26.4

71.0

48.2

26.1

35.0

2018 2019 2020 2021 2022

Gross profit EBITDA

GROSS PROFIT AND EBITDA, MEUR

202

581

560

493

481

293

663

652

572

574

2018-12-31 2019-12-31 12/31/2020 12/31/2021 12/31/2022

Non-current assets Current assets

Total assets

ASSETS, MEUR

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 89

CONSOLIDATION

The financial results of the Group consist of the financial

results of the parent company AB Klaipėdos nafta and its

directly and indirectly controlled subsidiaries. According

to IFRS 10, the parent company controls an entity when

the parent company is exposed to, or has rights to,

variable returns from its involvement with the entity and

has the ability to affect those returns through its power

over the entity. Control is generally obtained by holding

more than one half of the voting rights. Subsidiaries are

fully consolidated from the date on which control is

transferred to the Group.

The financial statements of subsidiaries have been

prepared using uniform accounting policies and for the

same reporting period as that covered by the financial

statements of the Group. On consolidation, all inter-

company transactions, balances, and unrealized gains

and/or losses on transactions among the Group

companies are eliminated.

On consolidation, the revenue and expenses are

translated into euros at an average exchange rate

observed during reporting period. The assets and

liabilities of foreign operations are translated into euros at

the rate of exchange prevailing at the reporting date. The

exchange differences arising on translation for

consolidation are recognised in other comprehensive

income.

CONSOLIDATED FINANCIAL RESULTS OF THE GROUP INCLUDE THE FOLLOWING COMPANIES:

NAME OF THE COMPANY

ADDRESS

OWNERSHIP PART, %

AB Klaipėdos nafta

Burių street 19, 92276 Klaipėda

100

UAB SGD terminalas

Burių street 19, 92276 Klaipėda

100

UAB SGD logistika

Burių street 19, 92276 Klaipėda

100

UAB SGD SPB

Burių street 19, 92276 Klaipėda

100 owned by UAB SGD logistika

KN Açu Serviços de Terminal de GNL LTDA

(KN Acu)

F66 Fazenda Saco Dantas s/n,

Distrito Industrial, Area 1 and Area 2,

28200-000 São João da Barra, State

of Rio de Janeiro

90 owned by UAB SGD logistika and

10 owned by UAB SGD SPB

More information about the structure of the Group and its subsidiaries can be found in the Annual Report section “General Information

About the Group and the Company”.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 90

FINANCIAL RESULTS OF THE GROUP’S AND THE COMPANY’S ACTIVITY

THE KEY FINANCIAL RATIOS OF THE GROUP (IN EUR THOUSAND, IF NOT INDICATED OTHERWISE)

* adj. – adjusted financial indicators/data are recalculated and presented by eliminating from net profit (loss) the following amounts: (1) the

impact of unrealised foreign currency exchange rates (forex) arising from IFRS 16 requirements, (2) respective impact of deferred income tax

arising from forex and (3) impact of financial derivatives.

THE GROUP

2022

adj.*

2021

adj.*

2020

adj.*

2019

adj.*

2018

Transhipment of oil products,

thousand t

4,267

3,651

5,149

5,749

6,694

LNG regasification and

reloading, GWh

32,446

16,569

21,987

20,237

9,213

Investments of non-current

assets

4,559

9,080

7,163

22,051

13,156

FINANCIAL FIGURES

Sales

77,818

61,811

80,114

104,363

99,998

EBITDA (APM)

34,987

26,108

48,168

70,979

26,406

EBIT

(APM)

12,193

(53,165)

19,379

14,316

11,865

Net profit (loss)

(5,904)

8,869

(64,011)

(47,178)

33,958

11,454

7,561

12,731

11,577

PROFITABILITY

Return on assets (ROA) (APM)

(1.0)%

1.5%

(10.5)%

(7.7)%

5.2%

1.7%

1.6%

2.7%

3.9%

Return on equity (ROE)

(APM)

(4.2)%

6.0%

(35.5)%

(27.5)%

16.7%

5.8%

3.9%

6.5%

5.9%

Return on Capital Employed

(ROCE)

(APM)

4.4%

4.2%

0.2%

6.9%

7.3%

5.1%

5.0%

4.2%

EBITDA margin (APM)

45.0%

42.2%

60.1%

68.0%

26.4%

EBIT margin (APM)

15.7%

(86.0)%

24.2%

13.7%

11.9%

Net profit margin (APM)

(7.6)%

11.4%

(103.6)%

(76.3)%

42.4%

14.3%

7.2%

12.2%

11.6%

FINANCIAL STRUCTURE

Debt ratio (D/E)

(APM)

313%

284%

295%

296%

201%

219%

248%

241%

50%

Debt ratio (D/E) – excluding IFRS

16 liabilities (APM)

121%

110%

97%

60%

65%

50%

49%

50%

Debt to EBITDA (APM)

Debt (excluding IFRS 16) to

EBITDA (APM)

Debt service coverage ratio

(DSCR)

(APM)

Gross liquidity ratio (current

ratio) (APM)

1.30

1.28

1.47

1.27

4.87

MARKET VALUE RATIOS

Price-Earnings Ratio (P/E)

(15.4)

10.3

(1.8)

(2.5)

3.6

10.7

18.3

10.9

13.4

Earnings per share (EPS)

(0.016)

0.023

(0.168)

(0.124)

0.089

0.030

0.020

0.033

0.030

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 91

THE KEY FINANCIAL RATIOS OF THE COMPANY (IN EUR THOUSAND, IF NOT INDICATED OTHERWISE)

* adj. – adjusted financial indicators/data are recalculated and presented by eliminating from net profit (loss) the following amounts: (1) the

impact of unrealised foreign currency exchange rates (forex) arising from IFRS 16 requirements, (2) respective impact of deferred income tax

arising from forex and (3) impact of financial derivatives.

THE COMPANY

2022

adj.*

2021

adj.*

2020

adj.*

2019

adj.*

2018

Transhipment of oil products,

thousand t

4,267

3,651

5,149

5,749

6,694

LNG regasification and reloading,

GWh

32,446

16,569

21,987

20,237

9,213

Investments of non-current assets

4,559

9,080

7,163

22,051

13,156

FINANCIAL FIGURES

Sales

74,722

58,633

77,474

104,138

99,998

EBITDA (APM)

33,696

24,582

47,291

71,396

26,406

EBIT

(APM)

11,000

(54,610)

18,532

14,733

11,865

Net profit (APM)

(6,732)

8,041

(64,917)

(48,084)

33,495

10,991

7,947

13,117

11,577

PROFITABILITY

Return on assets (ROA) (APM)

(1.2)%

1.4%

(10.6)%

(7.9)%

5.1%

1.7%

2.7%

3.9%

Return on equity (ROE)

(APM)

(4.8)%

5.5%

(36.0)%

(28.1)%

16.4%

5.6%

4.1%

6.7%

5.8%

Return on Capital Employed

(ROCE)

(APM)

4.0%

3.8%

(0.4)%

6.6%

7.0%

5.2%

5.1%

4.2%

EBITDA margin (APM)

45.1%

41.9%

61.0%

68.6%

26.4%

EBIT margin (APM)

14.7%

(93.1)%

23.9%

14.1%

11.9%

Net profit margin (APM)

(9.0)%

10.8%

(110.7)

(82.0)%

43.2%

14.2%

7.6%

12.6%

11.6%

FINANCIAL STRUCTURE

Debt ratio (D/E)

(APM)

316%

287%

297%

298%

201%

218%

247%

241%

50%

Debt ratio (D/E) – excluding IFRS

16 liabilities (APM)

123%

111%

97%

98%

60%

65%

50%

49%

50%

Debt to EBITDA (APM)

Debt (excluding IFRS 16) to EBITDA

(APM)

Debt service coverage ratio (DSCR)

(APM)

Gross liquidity ratio (current ratio)

(APM)

1.22

1.20

1.41

1.21

4.87

MARKET VALUE RATIOS

Price-Earnings Ratio (P/E)

(13.5)

11.3

(1.8)

(2.4)

3.6

11.1

17.4

10.5

13.4

Earnings per share (EPS)

(0.018)

0.021

(0.171)

(0.126)

0.088

0.029

0.021

0.034

0.030

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 92

ALTERNATIVE PERFORMANCE MEASURES

MEASURE

CALCULATION

Debt (excluding IFRS 16) to EBITDA

(total current and non-current liabilities at the end of the period –

current and non-current IFRS lease liabilities) / EBITDA

Debt ratio (D/E)

total current and non-current liabilities at the end of the period / total

equity at the end of the period

Adjusted debt ratio (D/E)

(total current and non-current liabilities) / total adjusted equity at the

end of the period

Debt ratio (D/E) – excluding IFRS 16 liabilities

(total current and non-current liabilities at the end of the period – total

current and non-current IFRS 16 lease liabilities) / total equity at the end

of the period

Adjusted Debt ratio (D/E) – excluding IFRS 16

liabilities

(total current and non-current liabilities at the end of the period – total

current and non-current IFRS 16 lease liabilities) / total adjusted equity

at the end of the period

Debt service coverage ratio (DSCR)

EBITDA / (total current loan obligations at the end of the period +

interest expenses of the period)

Debt to EBITDA

total current and non-current liabilities at the end of the period /

EBITDA

EBIT

earnings before taxes – financial activity income + financial activity

expenses

Adjusted EBIT

earnings before interest and taxes – unrealised foreign exchange rates

impact – impact of financial derivatives

EBIT margin

EBIT / revenue

Adjusted EBIT margin

adjusted EBIT / revenue

EBITDA

earnings before taxes – financial activity income + financial activity

expenses + depreciation and amortization expenses + impairment

expenses and reversals

EBITDA margin

EBITDA / revenue

Gross liquidity ratio (current ratio)

total current assets at the end of the period / total current liabilities at

the end of the period.

Net profit margin

net profit (loss) for the period / revenue

Adjusted net profit margin

adjusted net profit (loss) for the period / revenue

Return on assets (ROA)

net profit (loss) of the last twelve months / (assets at the end of the

period + assets at the beginning of the period) / 2

Adjusted return on assets

adjusted net profit (loss) of the last twelve months / (assets at the end

of the period + assets at the beginning of the period) / 2

Return on Capital Employed (ROCE)

(EBITDA – depreciation and amortization expenses) / (total equity +

total long-term loans and deferred government grants at the end of the

period)

Return on equity (ROE)

net profit (loss) of the last twelve months / (equity at the end of the

period + equity at the beginning of the period) / 2

Adjusted return on equity

adjusted net profit (loss) of the last twelve months / (adjusted equity at

the end of the period + adjusted equity at the beginning of the period)

/ 2

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 93

FINANCIAL RESULTS

KN uses alternative performance measures (APM) to

provide better understanding of the Group and the

Company business operations. Currently, net profit (loss)

of the Group and the Company is affected by material

non-cash items. Therefore, the adjusted financial

indicators are recalculated and presented by eliminating

from net profit (loss) the following amounts: (1) the

impact of unrealised foreign currency exchange rates

(forex) arising from IFRS 16 requirements, (2) respective

impact of deferred income tax arising from forex and (3)

impact of financial derivatives.

Since 2019, KN’s financial results have been affected by

IFRS 16 “Leases” – a new standard which came into effect

on 1 January 2019 and by the reduction of LNG security

supplement from 1 January 2020 by EUR 26.8 million per

annum. These changes have significantly affected KN’s

statement of financial position, statement of

comprehensive income, and financial indicators. When

the standard has become effective, the lease obligations

are recognized in the statement of financial position as an

asset and a liability (right-of-use assets and a lease

liability). As most lease payments are denominated in

USD, the negative impact of unrealized USD/EUR

exchange rate in amount of EUR 17,380 thousand has

been recognized in the statement of comprehensive

income in 2022 (in 2021 – a negative impact of EUR 22,073

thousand). However, it is a non-cash item, which has no

impact to the Group’s and the Company’s actual earnings.

The reduction of the LNG security supplement reduced

revenue of the Group and the Company for 2020-2022 in

amount of EUR 26.8 million per annum. The LNG security

supplement reduction is financed by NIB loans; therefore,

the cash flows of the Group and the Company are not

affected. The reduced revenue will be returned to the

Company over the period of operation of the LNG

terminal.

The calculation of adjusted net profit (loss) of the Group and the Company is presented below:

INCREASE/(DECREASE) IN EUR THOUSAND

31-12-2022

THE GROUP

THE COMPANY

Net profit (loss)

(5,904)

(6,732)

Unrealised foreign exchange rates impact

17,380

Deferred tax impact from unrealised forex

(2,607)

Net profit (loss) adjusted

8,869

8,041

8,869

(17,380)

2,607

(5,904)

Net profit (loss) adjusted Unrealised foreign exchange rates impact

Deferred tax impact from unrealised forex Net profit (loss)

IMPACT OF IFRS 16 ON GROUP'S NET PROFIT (LOSS) IN 2022, EUR THOUSAND

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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www.kn.lt | 94

The main reasons for the increase of the Group’s

adjusted net profit by EUR 56,047 thousand compared

to 2021 are – EUR 50,783 thousand higher adjusted net

profit from Oil terminals, EUR 5,322 thousand higher

adjusted net profit from regulated LNG activities and

commercial LNG activities net profit is EUR 58 thousand

lower. For detailed explanations see below:

• Adjusted net profit from Oil terminals is higher by

EUR 50,783 thousand mainly due to (1) in 2021 an

impairment of Klaipėda Oil terminal was recognized

in amount of EUR 54.3 million and a respective

deferred income tax asset impact of EUR 8.1 million;

(2) EUR 6.4 million higher sales revenue from oil

product transhipment and storage services

compensated EUR 2.6 million higher variable costs

(natural gas, electricity, railway services).

• Adjusted net profit from regulated LNG activities

(EUR 5,645 thousand) is EUR 5,322 thousand higher

due to higher revenue – main reasons: (1) higher

regasification revenue by EUR 26.7 million due to

increased demand and regasification tariff from 0.41

EUR/MWh to 1.19 EUR/MWh; (2) received revenue

related to the natural gas consumer’s liability for

previous periods after the court decision in amount

of EUR 1.1 million; (3) higher revenue from AB Amber

Grid by EUR 0.5 million due to recalculated actual

consumption capacities of previous period (2022 –

EUR 1.1 million, 2021 – EUR 0.6 million); (4) lower

revenue from the fixed part of LNG regasification

service fee by EUR 18.5 million due to implemented

LNG terminal capacity allocation and tariffication

model when KN part in security supplement from

May 2022 was decreased to 0 EUR/MWh/day/year; (i)

higher expenses of tax on environmental pollution

expenses by EUR 1.6 million; (ii) EUR 1.8 million

higher expenses of FSRU costs due to negative

impact of USD/EUR exchange rate and unplanned

heat exchangers repair and EUR 0.1 million higher

other expenses; (iii) positive impact by EUR 0.9 million

from financial activities mainly due to FSRU lease

payment discount booked in 2022; (iv) changes in

deferred income tax balance have a EUR 1.9 million

negative impact on adjusted net profit (loss) of LNGT

comparing to 2021.

• The adjusted net profit from commercial LNG

activities is EUR 58 thousand lower due to 3.5% or

EUR 84 thousand lower sales revenue from

commercial LNG activities in 2022.

(1,023)

29,169

(16,510)

(9,128)

5,812

(47,563)

3,220

2020

2021

2022

Commercial LNG activities Regulated LNG activities Oil Terminals

THE GROUP'S PROFIT BY BUSINESS SEGMENTS, TEUR

(1,023)

6,665

323

5,645

5,812

(47,563)

3,220

2020 adjusted

2021 adjusted

2022 adjusted

Commercial LNG activities Regulated LNG activities Oil Terminals

THE GROUP'S ADJUSTED PROFIT BY BUSINESS SEGMENTS, TEUR

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 95

SALES REVENUE

The Group’s sales revenue in 2022 (EUR 77,818

thousand) is 25.9% or EUR 16,007 thousand higher

compared to 2021 (EUR 61,811 thousand).

The Company’s sales revenue in 2022 (EUR 74,722

thousand) is 27.4% or EUR 16,089 thousand higher

compared to 2021 (EUR 58,633 thousand). The main

reason is 28.1% or EUR 9,783 thousand higher revenue

from regulated LNG activities and 29.8% or EUR 6,390

thousand higher sales from oil terminals operations.

The total revenue of the regulated LNG activities in

2022 amounts to EUR 44,614 thousand and is EUR 9,783

thousand or 28.1% higher compared to 2021. The activity

of LNG terminal is regulated and has a price cap;

therefore, return from LNG activity does not depend on

regasification volume. For more information, concerning

regulated revenues refer to the article “Regulated profit of

LNG terminal”.

Sales revenue from oil terminals in 2022 amounts to

EUR 27,817 thousand and is EUR 6,390 thousand or 29.8%

higher compared to 2021 (EUR 21,427 thousand). The

increase of revenue was due to 16.9% or 616 kt higher

transhipment of oil products.

Sales revenue from commercial LNG activities in 2022

(EUR 5,387 thousand) is 3.0% or EUR 166 thousand lower

than in 2021 (EUR 5,553 thousand).

Sales revenue by geography is provided bellow. Sales revenue from foreign clients is revenue from the clients not registered

in Lithuania.

EXPENSES

2022 and 2021 cost of sales and operating expenses for the Group and the Company:

2022

2021

CHANGE

2022 VS 2021

2022

2021

CHANGE

2022 VS 2021

GROUP

+/-

COMPANY

+/-

Cost of sales

57,703

53,109

4,594

8.7%

56,706

52,144

4,562

8.7%

Operating expenses

8,432

61,928

(53,496)

(86.4)%

7,526

61,160

(53,634)

(87.7)%

Total costs

66,135

115,037

(48,902)

(42.5)%

64,232

113,304

(49,072)

(43.3)%

Total cost of sales of the Group of 2022 comprises

EUR 57,703 thousand and is higher by 8.7% or by EUR

4,594 thousand comparing to 2021 (EUR 53,109

thousand), due to EUR 2,581 thousand higher variable

costs (natural gas, electricity, railway services), due to EUR

1,830 thousand higher expenses related to FSRU rent

27,817

44,614

5,387

Oil terminals Regulated LNG activities

Commercial LNG activities

2022

THE GROUP'S SALES REVENUE, TEUR

53,272

55,863

53,272

55,814

5,361

18,859

8,539

22,004

The Company, 2021

The Company, 2022

The Group, 2021

The Group, 2022

Lithuanian clients Foreign clients

SALES REVENUE BY GEOGRAPHY, TEUR

21,427

34,831

5,553

2021

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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(OPEX element, management, crew cost) and due to EUR

1,412 thousand higher emission allowances and tax on

environmental pollution. Total depreciation and

amortisation expenses attributable to cost of sales are

lower by EUR 2,878 thousand. Total cost of sales of the

Company of 2022 comprises EUR 56,706 thousand and is

higher by 8.7% or by EUR 4,562 thousand compared to

2021 (EUR 52,144 thousand). The main reasons and the

figures are the same as per above explanation for the

Group’s cost of sales. Depreciation and amortisation

expenses attributable to cost of sales are lower by EUR

2,894 thousand.

The Group’s operating expenses of 2022 comprise EUR

8,432 thousand and are 7.3 times or by EUR 53,496

thousand lower compared to 2021 (EUR 61,928

thousand). The main reason for the decrease in Group’s

operating expenses is impairment of assets recognised in

2021 in amount of EUR 54,338 thousand. Impairment of

doubtful receivables reversal amounts to EUR 711

thousand for 2021 giving negative effect of changes in

Group’s operating expenses of 2022 by EUR 723

thousand. The Company’s operating expenses of 2022

comprise EUR 7,526 thousand and are 8.1 times or

EUR 53,634 thousand lower compared to 2021 (EUR

61,160 thousand). The main reasons and the figures are

the same as per above explanation for the Group’s

operating expenses.

The listing of the Group’s major expenses is presented below:

2022

2021

CHANGE

2022 VS 2021

LNGT

comLNG

TOTAL

LNGT

comLNG

TOTAL

+/-

Depreciation of right-of-use asset

436

13,740

149

14,325

464

13,745

120

14,329

(4)

(0.0)%

Wages, salaries, and social

security

8,059

3,202

2,254

13,515

7,608

2,845

2,230

12,683

832

6.6%

Depreciation and amortization

4,647

2,486

1,206

8,339

6,737

3,172

1,408

11,317

(2,978)

(26.3)%

Expenses related to FSRU rent

(OPEX element, management,

crew cost)

7,471

5,641

1,830

32.4%

Variable costs (natural gas,

electricity, railway services)

6,950

7,013

4,384

4,432

2,581

58.2%

Emission allowances and tax on

environmental pollution

174

5,512

5,686

439

3,835

4,274

1,412

33.0%

Port charges

1,536

1,541

(5)

(0.3)%

Repair and exploitation expenses

609

317

102

1,028

558

159

101

818

210

25.7%

Cost of oil products sold

1,019

599

420

70.1%

Contribution for National Energy

Regulatory Council (NERC)

477

595

(118)

(19.8)%

Work safety costs

154

194

209

235

(41)

(17.4)%

Impairment of assets

54,338

(54,311)

(100.0)%

Reversal of trade debtors

impairment

(711)

723

(101.7)%

Other cost of sales and operating

expenses

2,478

1,843

1,172

5,493

2,244

1,658

1,044

4,946

547

11.1%

Total costs

24,550

36,640

4,945

66,135

76,869

33,227

4,941

115,037

(48,902)

(42.5)%

In 2022 regulated LNG activity expenses amount to

EUR 36,640 thousand and are higher by EUR 3,413

thousand or by 10.3% compared to 2021 (EUR 33,227

thousand). Major part of regulated LNG activity expenses

is depreciation of right-of-use asset expenses, which

amount to EUR 13,740 thousand and are lower by EUR 5

thousand comparing to 2021. Expenses related to FSRU

rent (OPEX element, management, crew cost) amount to

EUR 7,471 thousand that are higher by 32.4% or by EUR

1,830 thousand comparing to 2021, emission allowances

and tax on environmental pollution amount to EUR 5,512

thousand and are higher by 43.7% or by EUR 1,677

thousand. Contribution for National Energy Regulatory

Council expenses decreased by EUR 118 thousand. Other

LNG terminal’s expenses amount to EUR 9,440 thousand

and are higher by 0.3% or by EUR 29 thousand comparing

to 2021 (EUR 9,411 thousand).

In 2022 the total amount of Oil terminal’s expenses

amount to EUR 24,550 thousand (2021 – EUR 76,869

thousand) and are 3.1 times or EUR 52,319 thousand

lower due to EUR 54,326 thousand lower impairment of

assets expenses. The Oil terminals variable costs (gas,

electricity, railroad costs) are higher by 58.5% or by EUR

2,566 thousand. OT’s depreciation and amortization

expenses are lower by EUR 2,090 thousand due to (1) the

impact of fully depreciated assets and the impact of oil

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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terminal’s impairment recognised in 2021, resulting lower

depreciation expenses, giving lower depreciation and

amortisation expenses by EUR 1,819 thousand compared

to 2021, and (2) depreciation and amortization expenses

were lower by EUR 271 thousand due to decrease in

acquisitions of assets and revision of assets’ useful life.

Impairment of doubtful receivables reversal amounts to

EUR 711 thousand for 2021 giving negative effect of

changes in Oil terminals expenses of 2022 by EUR 723

thousand. The cost of oil products sold increased Oil

terminal’s expenses by EUR 420 thousand. Other Oil

terminal’s expenses amount to EUR 11,911 thousand and

are higher by 3.4% or by EUR 389 thousand comparing to

2021 (EUR 11,522 thousand).

In 2022 the total amount of commercial LNG activity

expenses amounted to EUR 4,945 thousand and are

higher by EUR 4 thousand (2021 – EUR 4,941 thousand).

Subsidiary’s KN Acu Servicos de Terminal activity

expenses are higher by EUR 50 thousand or by 2.6%. The

main reasons of increased expenses are higher staff costs

and personal expenses.

REGULATED PROFIT OF LNG TERMINAL

LNG terminal, its infrastructure and connection

implementation as well as exploitation costs fully or

partially are included into the natural gas transmission

service price in accordance with the rules and guidance’s

set by NERC based on the regulations set in the Energy

Law, Natural Gas Law and other laws of the Republic of

Lithuania related with energy prices regulation.

The total level of LNG terminal revenue is confirmed by

NERC based on the approved methodology of

Government regulated prices in the natural gas sector

(hereinafter – Methodology). According to the

Methodology, the level of LNG terminal revenue is

calculated for upcoming year by summing 2 components:

1) Estimated necessarily costs for the LNG terminal

exploitation and operational assurance; 2) Estimated

return on investment of LNG terminal infrastructure.

The revenue of the LNG terminal activity comprises of 3

components:

Fixed part of LNG regasification service price is approved

annually by NERC. This part of the price is included into

the additional Security Supplement added to the gas

transmission price.

Variable part of LNG regasification service price is

received for the regasified volume directly from LNG

terminal users. The regasification tariff is approved

annually by NERC.

LNG reloading service revenue for reloaded LNG quantity.

The tariff of the LNG reloading service is also approved

annually by NERC.

Revenue from LNG regasification (variable part) and LNG

reloading service revenue is recognized at the moment

during which the services were provided according to the

tariffs approved by NERC.

The tariff of LNG Security Supplement is set annually by

NERC based on the amount required to be collected

(estimated LNG terminal revenue) and proportionally

allocated for the forecasted gas consumption capacities.

LNG security supplement is paid by the users of natural

gas transmission system, including the end users,

together with the other payments for the natural gas

transmissions services. The payments are collected by the

transmission service operator (hereinafter – TSO) either

directly from users or from suppliers of natural gas in case

the user has no direct contractual obligations with the

TSO.

Actual LNG Security Supplement contributions and

payments may differ from planned ones (calculated at the

approval of Security Supplement) due to the variation of

consumption capacities or other differences.

The differences between the net profit of LNG terminal

segment (non-regulated) and the profit of the regulated

activity are determined by different calculation principles.

Financial accounting is in accordance with IFRS, while the

result of regulated activities is calculated in accordance

with the methodology approved by NERC.

LNG operating expenses are recognized in the relevant

period when they are incurred.

The regulated profit of LNG terminal is calculated by

adjusting the determined return on investment by income

and expenses not attributable for the regulated activity in

terms of regulation (which influence financial results).

During the 1st regulatory period (2014-2019) a surplus

has been calculated by NERC after the third and the fifth

regulatory years. The surplus after third full regulatory

year (2014-2017) has reduced the level of LNG terminal

revenue for 2019 and surplus after fifth regulatory year

(2014-2019) reduces the level of LNG terminal revenue for

2021. The identified surplus has reduced LNG terminal

revenue for 2019 by EUR 787 thousand and revenue for

2021 by EUR 2,589 thousand.

For the 2nd regulatory period (2020-2024) NERC has

calculated the surplus of regulated profit after two periods

(2020-2021) and has reduced the level of LNG terminal

revenue for 2023 by EUR 568 thousand. Moreover, due to

significant net excess income earned in 2020, the

Company’s LNG terminal revenue for 2022 has already

been reduced by EUR 7,105 thousand.

According to the changes of Methodology, Company

accumulates collected additional income from variable

and fixed parts of LNG regasification price to reduce the

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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security supplement in the future periods when costs of

LNG terminal will not be collected directly by LNG

terminal users and accordingly KN part of the security

supplement will be positive.

Assess the impact of regulated activities, the Company in

management accounting calculates normalized profit.

Normalized profit is adjusted for temporary regulatory

differences.

LNG REGULATED ACTIVITY TEMPORARY REGULATORY DIFFERENCES

2014-2019

surplus*

2020*

2021*

2022**

Regulated Asset Base (RAB)

47,047

44,176

41,304

Weighted Average Cost of Capital (WACC)

2.90%

3.46%

4.14%

Return on Investments (ROI) (RAB x WACC)

1,364

1,528

1,710

Total temporary regulatory adjustment

(7,366)

2,646

812

1) adjustment related to prior years: payback of excess net income /

(compensation of excess net cost)

(130)

2,254

7,105

2) adjustment related to the current year: (excess net income) / excess net

cost

(2,954)

(7,235)

392

(6,293)

Payback / (compensation) in:

Year 2020

365

Year 2021

2,589

Year 2022

7,105

Year 2023

625

(57)

Year 2024

(6,491)

Year 2025

(13)

Surplus of income to the current year

12,797

Total amount to be compensated / (paid back) in future periods as at the

end of the year

(2,954)

(10,319)

(7,674)

(6,861)

* Adjusted after NERC revision

** Inspection of the regulated activity has not been completed yet

IMPACT OF IFRS 16 AND CAPITALISATION OF PURCHASE OPTION

As at 31 December 2019 the Group and the Company has

capitalized purchase option under the lease agreement.

According to IFRS 16 requirements, lessee should

remeasure lease liability of each agreement upon the

occurrence of either a significant event or a significant

change in circumstances at each financial statements’

date. It is the duty of the management to re-evaluate the

probability to realise the purchase option at each financial

statements’ date in the upcoming reporting periods and

in circumstances if any changes occur, it must be reflected

in the financial statements respectively. During the year

2022 no significant events and circumstances have

occurred that would have the impact and respectively no

changes in finance lease accounting under IFRS 16

requirements have been made as at 31 December 2022.

During the year of 2019 the following significant events

have happened that determined the need to reassess the

probability of realizing the purchase option:

• On 1st March 2019 amendments of the Republic of

Lithuania Law on Liquefied Natural Gas Terminal No

XI-2053 Article 5 and 9 (further – the Law) entered

into force stipulating obligation to the Company as a

Liquefied Natural Gas terminal operator to acquire

ownership of FSRU (by selecting the most economic

option) not later than by 31st December 2024;

• On 19th September 2019 European Commission has

approved state aid consent regarding LNG security

supplement reduction;

• On 24th October 2019 the Board of the Company has

adopted a decision to acquire FSRU no later than by

31 December 2024 with the conditions that 1) loan to

finance the purchase is arranged and 2) Parliament

approves the State guarantee for the loan;

• On 19th December 2019 a binding offer from NIB to

finance the 100% purchase price of FSRU (up to

160 MMEUR) has been received;

• On 19th December 2019 Parliament has approved

granting State guarantees for NIB loans for LNG

security supplement reduction and purchase of FSRU;

• On 20th December 2019 a loan agreement with NIB

has been signed for the LNG security supplement

reduction.

While evaluating the probability to realize the purchase

option the management of the Company has considered

a number of economic, size and FSRU technological

circumstances, which has shown that:

• Currently used FSRU is economically most favourable

when compared to the 1) availability; 2) price factors

of the same size and functionality of new and used

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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FSRUs and conversions of LNG carriers and 3)

possible additional investments needed for any other

FSRU;

• In terms of size the industry is currently being

equipped by modern 170-180 tm3 FSRUs and LNG

carriers, enabling to unload to FSRU full cargo of

conventional size LNG carriers (140-180 tm3) and not

limiting LNG suppliers’ interest in using the terminal;

• Current terminal size and parameters are needed in

order to meet N-1 criteria for energy security, i.e. to

ensure gas supply in the event of failure of the largest

supply infrastructure during highest daily demand;

• Technologically currently used FSRU has the

technology that is still regarded as advanced/not

obsolete in comparison with other developments and

can easily accept “green gases” and remain functional

in the context of the EU “green policy” decisions in a

long term;

• In 2020 implemented dry-dock has confirmed that

currently used FSRU is in good condition and is

designed to be operative for at least 25 more years.

• On 20th November 2020 European Commission has

approved state aid consent regarding acquisition of

LNG floating and storage unit. The decision of the

European Commission secures Company’s ability to

make a withdrawal of funds under the Loan

agreement concluded between the Company and

Nordic Investment Bank on 9 March 2020.

• During 2021, KN, as part of a project of long-term

LNG import infrastructure solution, organised

intensive discussions with market participants, a

market consultation on the procurement documents

and launched a public international tender for the

acquisition of the FSRU in mid-year.

As at 31 December 2022 the mentioned conditions are

still applicable and have not changed. Furthermore:

• In February 2022 the Board of KN has taken a

decision on the acquisition of the FSRU

Independence at the end of its lease agreement.

• On 25th of February 2022 Extraordinary General

Meeting of Shareholders has adopted the resolution

and approved the decision of the AB Klaipėdos nafta

Board to acquire the floating storage regasification

unit (FSRU) Independence.

• Company has notified Höegh group companies that

KN exercises an option right to acquire

Independence. After fulfilling all the option

conditions specified in the Time Charter Party, the

Company will acquire the FSRU no later than 6

December 2024. Until then the Company will

continue to lease the FSRU under the same

conditions.

Therefore, from the current point of view, the

management of the Company is reasonably certain that

the purchase option of lease contract will be realized. As

a result, no changes in purchase option accounting as at

31 December 2022 have been made.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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INVESTMENTS

The most important investment projects of 2022:

NO.

PROJECT

INVESTMENTS IN

2022 (INCL.

PREPAYMENTS)

PROJECT DESCRIPTION

Modernization of

jetty No. 1 and No.

1.7 MEUR

Reconstruction of berth No. 1 phase I construction works have been

completed.

Extreme situation

management plan

related investments

0.4 MEUR

Investments intended to ensure Company's operational continuity

during extreme situations. During 2022, diesel generators were

purchased to provide the electricity needed for operational

processes, boiler burner adaption to combined operation

implemented and the emergency lighting equipment installed.

Tanker truck

loading bay

reliability and safety

improvement

0.3 MEUR

Project for the improvement of Klaipėda oil terminal tanker truck

loading bays’ safety requirements and loading processes. During

2022, construction, pipeline installation and other works were carried

out.

Solar power plant

installation in

Subačius oil

terminal

0.2 MEUR

Installation of 300 kW photovoltaic solar power plant at the Subačius

oil terminal, which will help reduce some of the Company's electricity

costs.

Automated

sampling and

analysis system

installation

0.1 MEUR

Project for the installation of an automated system for sampling and

analysis of process water, steam and condensate used in the

Klaipėda oil terminal boiler house. The project has been finished

during the year 2022.

Bitumen storage

and handling

reconstruction

project

0.1 MEUR

Reconstruction and adaptation of two existing storage tanks for

bitumen loading. Project has been finished during the year 2022,

infrastructure up and running.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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ACTIVITY PLANS AND FORECASTS

On 13th February 2020 the Supervisory Council of the

Company has approved corporate strategy of KN until

2030. The main directions of the strategy are international

LNG projects, strengthening the competitiveness of oil

terminals and developing Klaipėda as an LNG service

centre in the Baltic region. KN corporate strategy until

2030 is available at: 2030.kn.lt/en.

For the Group and the Company subsequent years after

the approval of the corporate strategy presented many

challenges:

• the COVID pandemic, resulting in global oil product

demand decrease which led directly to decrease in oil

terminals’ operation extent;

• sanctions to Belarus introduced by Council

Regulations (EU) 2021/1030 on June 24th, 2021, no

more transit of oil product flows from Belarus were

possible. As a result projections of future cash flows

of Klaipėda Oil Terminal were revised and impairment

of KOT was recognised in 2021;

• global energy crisis and rapid inflation growth mostly

due to Russia’s initiated full-scale war against Ukraine

had an impact on profitability of the Group and the

Company in 2022;

The management of the Group and the Company

anticipates a continuity of demand for the lease/

reservation of oil terminal storage volumes for medium

and long-term storage/ reloading of products. Contracts

for such services, including contracts for the lease of

petrol tanks, which allowed the Group and the Company

to employ infrastructure used for transhipment of oil

products from Belarus, are already concluded. The

management of the Group and the Company see this as a

stable alternative to the handling of oil products.

Reacting to the decrease in transhipment of oil products,

energy price shock and inflation the Company has

reviewed its investment plans for 2022 and 2023,

deferring investments that are not related to business

continuity or efficiency.

Furthermore, the Group’s management in 2021 started

and throughout 2022 continued to review the strategy.

The renewed strategy will have to cover current main

activities of KN – the current oil terminal services, the LNG

terminal business in Klaipėda port and in the region, the

global LNG business development through operation and

maintenance services and investments in LNG terminal

projects as well as KN’s direction to the new business lines

such as hydrogen and alternative energy carriers, carbon-

dioxide capture, and storage, etc.

The revision and articulation of the new KN strategy is

expected in the first half of 2023.

It has been clear that the Company will have to transform

its activities faster than it has been expected in the initial

strategy assumptions (for more details on the strategic

goals please see the section “the corporate strategy” of

the 2022 annual report).

Without being tied to the outcome of the long-term

strategy review, the Company is already taking actions to

the transformation of its activities by undertaking projects

related to cost reduction and operational efficiency as well

as continuing to focus on diversifying the portfolio of

services and products in oil terminals activities and

activities in international LNG projects or other business

lines.

The Group and the Company aims at having several

equivalent activities that contribute to the return for the

shareholders, thus reducing the potential short-term

negative impacts on one or another business segments.

Therefore, innovations and exploring new business

opportunities, diversification of business activities are

high on the agenda for 2023, as well as environmental,

social and governance aspects of business management.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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INFORMATION ABOUT THE SHAREHOLDERS AND SHARES OF THE COMPANY

SHAREHOLDERS AND SHARES OF THE COMPANY

The Company’s shares are traded on the regulated

market; they are listed in the Baltic Main List of the Stock

Exchange of AB NASDAQ Vilnius.

SHAREHOLDERS OF THE COMPANY

As at 31 December 2022 all the shares of the Company

were owned by 5,388 shareholders (on 31 December 2021

– 4,926)

. All shares of the Company are of one class

ordinary registered shares granting their owners

(shareholders) equal rights. One ordinary registered share

of the Company grants one vote in the General meeting

of Shareholders.

An ordinary registered share of the Company shall grant

the following economic rights to its owners

(shareholders):

1. To receive a part of the Company’s profit

(dividends);

2. To receive funds of the Company in the event the

Authorized Capital of the Company is being

reduced in order to pay funds of the Company

to the shareholders;

3. To receive a part of the assets of the Company in

case of liquidation;

4. To receive shares free of charge if the Authorized

Capital is increased out of the funds of the

Company (except in the cases specified by the

imperative norms of the valid laws);

5. To have the preferential right in acquiring shares

or convertible bonds issued by the Company

except in cases when the General Shareholders’

Meeting by a qualified majority of votes that

shall not be less than 3/4 of the participating and

voting shares for solution of this matter, resolves

to withdraw the preferential right in acquiring

the Company’s newly issued shares or

convertible bonds for all the shareholders;

6. To lend to the Company in the manner provided

by law, however, when borrowing from its

shareholders the Company has no right to

pledge its assets to the shareholders. When the

Company borrows from its shareholder, the

interest rate may not be higher than the average

According to AB SEB bankas data.

interest rate offered by commercial banks of the

location where the Lender has his place of

residence or business, which was in effect on the

day of conclusion of the Loan Agreement. In

such a case the Company and its shareholders

shall be prohibited from negotiating a higher

interest rate;

7. Other economic rights established by the laws.

An ordinary registered share of the Company shall grant

the following non-economic rights to its owner

(shareholder):

1. To attend the General Shareholders’ Meetings

and to vote according to voting rights carried by

their shares (unless otherwise provided for by

the laws);

2. To receive information on the Company to the

extent allowed by the imperative norms of the

valid laws;

3. To file a claim with the court for reparation of

damage resulting from misconduct by the

Manager of the Company and Board members

or noncompliance with their obligations

prescribed by the laws and the Articles of

Association of the Company as well as in other

cases laid down by laws.

4. The right to vote at General Shareholders’

Meetings may be withdrawn or restricted in

cases established by laws, also in case share

ownership is contested;

5. Other non-economic rights established by the

laws and the Articles of Association of the

Company.

The Company has not been informed about mutual

agreements of its shareholders which could limit the

transfer of securities and (or) right of vote.

THE MAIN DATA ABOUT SHARES OF THE COMPANY:

ISIN code

LT0000111650

Abbreviation

KNF1L

Share emission

380,396,585

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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Major shareholders of the Company having more than 5% of shares (each) of the Company as at 31 December 2022 and

2021:

SHAREHOLDER’S NAME (COMPANY’S NAME,

ADDRESS, COMPANY CODE OF REGISTRATION)

31 DECEMBER 2022

31 DECEMBER 2021

NUMBER OF

OWNED SHARES

(UNIT)

PART OF

AUTHORIZED

CAPITAL (%)

NUMBER OF

OWNED SHARES

(UNIT)

PART OF

AUTHORIZED

CAPITAL (%)

The Republic of Lithuania, represented by the

Ministry of Energy of the Republic of Lithuania

(Gediminas Ave. 38/2, Vilnius, 302308327)

275,687,444

72.47%

275,687,444

72.47%

UAB koncernas “ACHEMOS GRUPĖ“ (Vykinto

st. 14, Vilnius, 156673480)

39,662,838

10.43%

39,662,838

10.43%

Other (each owning less than 5%)

65,046,303

17.10%

65,046,303

17.10%

Total

380,396,585

100.00%

380,396,585

100.00%

SHAREHOLDERS STRUCTURE BY CATEGORIES AND BY THE REGIONS:

88% 90% 92% 94% 96% 98% 100%

31-12-2021

31-12-2022

Lithuania Estonia USA Latvia United Kingdom Cyprus Other countries

SHAREHOLDER STRUCTURE BY REGION

72.47%

0.58%

11.65%

15.30%

31-12-2022

Lithuanian Government Financial institutions incl. funds Other companies Natural persons

SHAREHOLDER STRUCTURE BY CATEGORY

72.47%

1.05%

11.43%

15.05%

31-12-2021

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 104

Dynamics of KNF1L share price at NASDAQ Vilnius during 2018 – 2022:

2022

2021

2020

2019

2018

Highest share price in EUR

0.308

0.359

0.414

0.444

0.574

Lowest share price in EUR

0.203

0.298

0.301

0.357

0.386

Price per share at the beginning of the

period in EUR

0.308

0.322

0.361

0.410

0.510

Price per share at the end of the

period in EUR

0,240

0.307

0.320

0.362

0.410

Average share price in EUR

0.265

0.320

0.351

0.393

0.502

Traded volume, pcs.

8,541,326

19,004,133

23,934,244

5,908,666

6,936,769

Turnover in EUR thousand

2,220

6,110

7,928

2,296

3,552

Capitalisation in EUR thousand

91,295

116,782

121,920

137,875

156,049

Earnings per share (EPS)*

0.021

(0.126)

0.029

0.034

0.030

* Calculated using adjusted net profit (loss).

200

400

600

800

1,000

1,200

1,400

0.00

0.10

0.20

0.30

0.40

0.50

Volume in thousand pcs.

Price per share in EUR

Share price in EUR Volume (thousands units)

TRADING IN KNF1L SHARES ON NASDAQ VILNIUS STOCK EXCHANGE IN 2020-2022

50%

70%

90%

110%

130%

150%

170%

OMXBBGI OMXV KNF1L

KNF1L SHARE PRICE COMPARISON WITH OMX VILNIUS AND OMX BALTIC BENCHMARK GI IN 2020-2022

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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AUTHORIZED SHARE CAPITAL OF THE COMPANY

The Company’s authorized share capital did not change

during 2022 and amounted to EUR 110,315 thousand as

at 31 December 2022. All the shares of the Company are

fully paid. The authorized capital is divided into

380,396,585 ordinary shares with a nominal value of 0.29

Eur. During 2022 the Company did not acquire any of its

own shares.

DIVIDENDS

On 22

April 2022, the ordinary General Meeting of

Shareholders was held which approved the audited

financial statements and profit (loss) appropriation for the

year 2021. In 2022 the Company has not paid any

dividends (in 2021 the Company paid EUR 7,538 thousand

dividends or EUR 0.0198 for one share).

Below is the historical information about dividends paid in the period for the prior financial year:

2022

2021

2020

2019

2018

Dividends paid in EUR thousand

7,538

7,947

11,577

17,031

Dividends per one share in EUR

0.0198

0.0209

0.0304

0.0447

Net profit (loss) per 1 share in EUR

(0.12)

0.03

0.02

0.03

0.04

Dividends for net profit (of previous FY), %

70%

100%

DIVIDEND POLICY

On 28

July 2021 the Board of AB Klaipėdos nafta has

approved the renewed Dividend Policy. The Dividend

Policy provides that the Board of the Company shall, in

accordance with the Company's audited financial

statements which are prepared in accordance with IFRS,

present the draft decision of dividends allocation to the

Company’s shareholders for approval. The amount of

dividends is proposed taking into account the Company's

return on equity for the reporting period.

The Company sets the goal to increase the shareholders’

value and pay stable dividends. The main objectives for a

Dividend Policy are:

• compliance with the applicable laws of the

Republic of Lithuania, secondary legislation, the

Articles of Association, and internal documents

of the Company.

• assurance of the Company’s shareholders

interests.

• commitment to high corporate governance

standards.

• enhance of the Company’s market value.

• definition of the Company’s procedures relating

to transparent publication and payment of

dividends.

AB Klaipėdos nafta Dividend Policy is based on the

existing legislation of the Republic of Lithuania (regulation

effective starting since 28

December 2021 (Lithuanian

Government Resolution of 6th June, 2012 No. 655 on

approval of the description of the procedure for the

exercise of the state property and non-property rights in

state-owned entities (hereinafter – the Resolution) – the

regulation has replaced the Lithuanian Government

Resolution of 14

January, 1997 No. 20 on the dividends

for the state-owned shares, however all the principles and

regulations on dividends allocation are valid and have

been placed into Resolution), the Company's Articles of

Association and other Company's internal documents.

According to the art. 4.4. of the Company’s Dividend

Policy the amount of dividends for the years 2021-2024 is

calculated by eliminating from the Company’s

distributable net profit (loss) unrealised foreign exchange

rates impact and other unrealised gains (losses). The

Company’s return on equity is calculated based on the

data of the set of audited annual financial statements, net

profit (loss) of the reporting period by eliminating the

impact of unrealised foreign exchange rates and other

unrealised gains (losses) divided by the average equity at

the beginning and end of this period. Equity at the

beginning of the reporting period is adjusted by

estimating the impact of unrealised foreign exchange

rates and other unrealised gains (losses) accumulated

before the reporting period. Equity at the end of the

reporting period is adjusted by estimating the impact of

unrealised foreign exchange rates and other unrealised

gains (losses) of the reporting period and those

accumulated before the reporting period.

According to the art. 4.5 of the Company’s Dividend

Policy, the Board of the Company shall consider the

following on a yearly basis:

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 106

• the financial indicators for assessment of the

Company's current financial position (net debt /

EBITDA, DSCR, ISCR, Equity ratio).

• the Company's performance of the current period, in

order to ensure the scope of funds needed for the

smooth operation.

• the scope of equity and loan necessary for strategic

and investment projects’ implementation.

• any financial and non-financial liabilities for the

Company investors.

• the stock market situation related to dividend

income.

• implementation of the Company’s Strategy;

• a change in plans of strategic, investment projects,

their scope or their financing.

According to the art. 4.7. of the Company’s Dividend

Policy dividends for the financial year should be allocated

as follows:

• Not lower than 85% from the Company’s

distributable profit if ROE of the financial reporting

year is not higher than 1 per cent.

• Not lower than 80% from the Company’s

distributable profit if ROE of the financial reporting

year is higher than 1% but not higher than 3% .

• Not lower than 75% from the Company’s

distributable profit if ROE of the financial reporting

year is higher than 3% but not higher than 5%.

• Not lower than 70% from the Company’s

distributable profit if ROE of the financial reporting

year is higher than 5% but not higher than 10%.

• Not lower than 65% from the Company’s

distributable profit if ROE of the financial reporting

year is higher than 10% but not higher than 15%.

• Not lower than 60% from the Company’s

distributable profit if ROE of the financial reporting

year is higher than 15%.

Dividend rate, as a rule, should not be less than presented

in the article 4.7. of the Company’s Dividend Policy,

however, based on criteria in article 4.5., lower dividend

rate could be proposed.

The full Company’s Dividend Policy is available on

Company’s website.

AGREEMENTS WITH INTERMEDIARIES OF PUBLIC SECURITIES TRADING

The Company has an agreement with Financial Markets Department of AB SEB Bankas for accounting of the Company’s

securities and related services.

AB SEB BANK FINANCIAL MARKETS DEPARTMENT:

Company code

112021238

Address

J. Balčikonis street 7, LT-08247 Vilnius, Lithuania

Telephone

1528

E-mail

info@seb.lt

Website

www.seb.lt

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

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INFORMATION ABOUT THE EMPLOYEES OF THE GROUP

PERSONNEL

The Company's main asset is its employees who are the

most important link to the achievement of Company’s

goals. Company's personnel policy is focused on the

development of teamwork, constant progress in

professional development and process efficiency, the

optimal use of work resources, training of qualified staff,

and development of the Company’s culture that

empowers personal growth, cooperation, succession

planning, and creates additional value for the company

and its stakeholders.

Number of the Group employees at the end of the year:

31-12-2022

31-12-2021

CHANGE, %

AB Klaipėdos nafta

326

342

(4.7)

UAB SGD terminalas

UAB SGD logistika

UAB SGD SPB

KN Acu Servicos de Terminal de GNL LTDA

(3.7)

Total

358

375

(4.5)

Remarks:

- The number of employees does not include employees on maternity/paternity leave.

The breakdown of the number of the Group and the Company employees by gender as at 31 December 2022:

FEMALES

MALES

AB Klaipėdos nafta

25.5%

243

74.5%

UAB SGD terminalas

50.0%

UAB SGD logistika

50.0%

UAB SGD SPB

50.0%

KN Acu Servicos de Terminal

de GNL LTDA

23.1%

76.9%

Total

25.7%

266

74.3%

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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The average age of the Group’s employees – 43.7 years. Detailed information about employees’ age, work experience, and

education is provided in figures bellow in years.

Education of the Group’s employees by categories:

EMPLOYEE

CATEGORY

EMPLOYEES

31-12-2022

UNIVERSITY

VOCATIONAL

SECONDARY

AND OTHER

EMPLOYEES

31-12-2021

UNIVERSITY

VOCATIONAL

SECONDARY

AND OTHER

Managers

Specialists

188

165

192

169

Workers

118

125

Total

358

226

375

235

1) The managers of the Company include: Chief Executive Officer (CEO), Directors and Heads of Divisions

44.0

42.0

41.0

49.4

43.7

43.0

40.8

48.6

Total Managers Specialists Workers

2021 2022

AVERAGE AGE OF THE EMPLOYEES OF THE GROUP

9.9

6.6

8.4

13.7

9.5

7.4

8.0

12.9

Total Managers Specialists Workers

2021 2022

DISTRIBUTION OF GROUP'S EMPLOYEES BY WORK

EXPERIENCE, YEARS

139

147

139

136

18-24 25-39 40-54 55-64 65 and more

2021 2022

NUMBER OF THE GROUP'S EMPLOYEES BY AGE GROUPS

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

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PAYROLL SYSTEM AND REMUNERATION POLICY

The Company seeks to create motivating, efficient, fair,

transparent, and easy to understand compensation

system which aims to attract, retain, and motivate

employees whose skills and work results help the

Company to successfully develop and implement its

mission and achieve strategic business objectives.

Therefore, in September of 2016 the Employee

Remuneration Policy has been formed and approved. In

September of 2017 The Procedure of Remuneration

System Formation has been approved.

The Employee Remuneration Policy defines the principles

of determination and payment of remuneration as well as

the incentives of employees. The Remuneration policy

applies to all employees of the Company.

The goals of the Remuneration Policy are to:

• Establish clearly understandable, fair, and transparent

procedures for the determination and payment of

remuneration as well as the incentives of employees,

aiming to ensure the Company’s competitiveness in

the labour market;

• Encourage the employees to achieve the objectives

set in the corporate strategy, to create value added

and increase the returns to shareholders while

fostering the values of the Company.

The remuneration of the employee may consist of the

following components: a fixed component, i. e. a monthly

salary (or a wage) and a variable component payable for

either short-term performance results or the annual

results of the Company’s/the employee’s performance.

The Company’s remuneration system is based on job

structure framework, created using the Hay Methodology

by determining the weight of each position (to ensure fair

remuneration for work within the Company). The amount

of the monthly remuneration for the position is

determined by assessing the level of knowledge and work

experience required to perform the functions of each

position, the complexity of the functions, the degree of

responsibility and management level, the impact / risk on

the Company's performance, working conditions. In order

to ensure the competitiveness of the remuneration of the

Company's employees and to promote the achievement

of results, the remuneration (fixed and variable

remuneration components) focuses on the range of the

50th and 75th per centiles of the remuneration market of

foreign capital companies operating in Lithuania.

Employees in the same position can receive different

monthly pay depending on qualifications, experience,

capabilities, and functions and responsibilities assigned to

the employee. The variable component is set according to

the procedure laid down in the Remuneration Policy.

Employee’s base salaries are usually reviewed once a year

taking into account: Lithuanian labour market trends; the

Company's performance results; The results of the

evaluation of the Company's employees; demand – supply

situation for jobs important to the company in the labour

market.

In fourth quarter of 2022 a new Collegial advisory body to

Supervisory Council has been established – the

Remuneration and Nomination Committee.

Detailed information on the remuneration system of the

Company's management is provided in 2022

AB Klaipėdos nafta Report on Remuneration.

The breakdown of employee related expenses (EUR thousand) of the Group:

2022

2021

CHANGE, %

AB Klaipėdos nafta

12,520

11,845

5.7

UAB SGD terminalas

33.3

UAB SGD logistika

33.3

UAB SGD SPB

33.3

KN Acu Servicos de Terminal de GNL LTDA

983

829

18.6

Total

13,515

12,683

6.6

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Employees according to categories:

EMPLOYEE CATEGORY

AVERAGE NUMBER OF EMPLOYEES

GROUP

CHANGE,

COMPANY

CHANGE,

2022

2021

2022

2021

Managers

(6.9)

(2.1)

Specialists

183

201

(9.0)

159

179

(11.2)

Workers

123

129

(4.7)

123

129

(4.7)

Total

360

388

(7.2)

328

355

(7.6)

The managers of the Company include: Chief Executive Officer (CEO), Directors and Heads of Divisions

The Company’s 2022 average monthly salary of all employees is 7.6% higher compared to 2021 (2022 – 2,765 EUR/month,

2021 – 2,570 EUR/month).

EMPLOYEE CATEGORY

AVERAGE MONTHLY SALARY (GROSS), EUR

GROUP

CHANGE,

COMPANY

CHANGE,

2022

2021

2022

2021

Managers

5,501

5,061

8.7

5,621

5,459

3.0

Specialists

2,646

2,445

8.2

2,745

2,553

7.5

Workers

1,794

1,614

11.2

1,794

1,614

11.2

Total

2,728

2,506

8.9

2,765

2,570

7.6

1) The Company‘s managers include: Chief Executive Officer (CEO), Directors and Heads of Divisions. The following sums were calculated

for the remuneration to the Group‘s managers in 2022: EUR 3,651 thousand, in that amount taxes paid by the employer included EUR

186 thousand (when in 2021 were EUR 3,684 thousand from which EUR 177 thousand of taxes paid by the employer). The average annual

salary of manager of the Group amounted to EUR 67.6 thousand in 2022 (in 2021 – EUR 63.5 thousand).

2) The average monthly salary is calculated according to the average monthly wage calculation procedure as stated in the State

companies’ employees’ average monthly salary calculation procedure approved by the Government of Lithuania on 23 August 2002,

resolution No. 1341 and its subsequent changes.

2022 average monthly salary (gross) of employees by gender, EUR:

EMPLOYEE CATEGORY

GROUP

COMPANY

2022

TOTAL

MALE

FEMALE

TOTAL

MALE

FEMALE

Managers

5,501

5,523

5,431

5,621

5,690

5,431

Specialists

2,646

2,753

2,477

2,745

2,888

2,531

Workers

1,794

1,824

1,233

1,794

1,824

1,233

Total

2,728

2,706

2,795

2,765

2,734

2,860

1) The Company‘s managers include: Chief Executive Officer (CEO), Directors and Heads of Divisions.

2) The average monthly salary is calculated according to the average monthly wage calculation procedure as stated in the State

companies’ employees’ average monthly salary calculation procedure approved by the Government of Lithuania on 23 August 2002,

resolution No. 1341 and its subsequent changes.

EMPLOYEE PERFORMANCE EVALUATION AND ANNUAL BONUS ALLOCATION

The Company has implemented the procedures for

annual employee performance evaluation and annual

bonus allocation. These bonuses depend on the

achievement of the goals set directly for the person,

service director or for the Company. Annual employee

performance review together with periodic and frequent

one to one meetings throughout the year are one of the

most effective management and leadership techniques

that increase employee engagement and help to achieve

the organizational goals. Such practice creates

collaborative and positive relationships between

managers and their subordinates that allow to make it

clear with employees while planning their careers,

increasing their motivation, and promoting continuous

improvement in their professional field.

Employees of all categories – workers, specialists, and

managers – are assessed and rewarded annual bonus for

achieving pre-set annual goals (WHAT) and evaluation on

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

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their compliance to Company’s values (HOW). In 2020

implementation of Asaichi methodology being one of the

three LEAN tools initiated in the Company brought even

better performance management when KPIs have been

reviewed and actioned with personal accountability daily.

Annual performance review meetings, on the other hand,

allow to reflect on the entire year through the lens of

competence development, safety-minded behaviour,

learning opportunities, career-advancement, and

aspirations.

EMPLOYEE SELECTION AND RECRUITMENT

The Teamtailor platform (Applicant tracking system) was

implemented to ensure a more efficient recruitment of

employees as well as more convenient tool for hirings

managers. Since April 2020 the Company implemented

Employee Selection and Recruitment procedure whose

purpose is to standardize the employee selection process

and ensure efficient and effective procedures for

organizing the selection of KN personnel (employees and

trainees) in order to successfully achieve the objectives of

KN – to select employees who recognize the values of KN

and have the greatest potential to achieve the objectives

set for them.

In order to ensure that the objectives set out in KN’s

strategy are met, an assessment and planning of staffing

needs is carried out. Each year management of the

Company draws up a staffing plan for the upcoming year.

The plan takes into account the workload of staff, the

need for new positions (due to organizational changes or

legal requirements), staff mobility (transition from one

staff position to another) and natural change (retirement,

parental leave, etc). The main steps of the recruitment

process include the evaluation of need for employee,

determination of required competencies, search and

attraction of potential candidates, job interviews, final

decision, and preparation of the offer.

PRINCIPLES OF EMPLOYEE COMPETENCE DEVELOPMENT

KN education system is designed to promote the

development of employees both independently and

through the learning processes of strategically important

knowledge and skills that are part of the curricula. All

employees are given the opportunity to participate in the

programs. The implementation of KN education system is

based on 6 principles: link with business strategy,

cooperation between departments, identification of

needs based on assessment of employees' competencies,

measurement of learning effectiveness, integration of

education with other processes and selection of

appropriate educational tools.

In 2022 no less than 15% of annual learning and

development budget was allocated to fund employees

with various formal studies at different universities.

For the last three years Company conducts 360-degree

feedback study for managers. Following the method, KN

Managers receive feedback on their behaviour according

to the Company’s values and leadership competencies

from people who work with them. Based on survey results

Managers create their Personal development plans and

thus grow to be even better leaders for their teams. In

2022 KN leadership standard training was conducted for

new managers. Also, in 2022 the Company focused on

development of sales and negotiation, project

management competencies and cooperation between

departments in order to improve the focus on the client.

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GROUP’S SOCIAL RESPONSIBILITY

From the perspective of KN, to be a successful and

responsible member of the society in the long-term

perspective, the principles of business sustainability shall

go hand in hand with the way we operate. Every

organisation can create both positive and negative

impacts through its activities, and we aim to be a model

of a business that creates a positive impact. Based on KN

vision, mission, corporate values and corporate strategy,

KN is focusing its efforts on economic, social and

environmental sustainability.

In 2022 Sustainability policy, which will guide Company’s

development in future, has been adopted in the Group. In

accordance with the policy, KN is guided by the following

sustainability principles:

• Driving profit responsibly.

• Aiming for enhanced operational efficiency and

productivity through thoughtful natural resource

utilization, emissions, and waste reduction.

• Pursue circular economy principles in the KN's

activities.

• Creating healthy, safe, collaborative, and diverse

work environment.

• Fostering a culture of engagement in sustainability

through employee education and engagement, and

• Assisting our customers on cleaner energy transition,

considering Lithuania’s and EU, as well as other

markets where the KN is present, goals for the climate

neutral economy.

Stakeholder dialogue is one of our principles of open and

responsible operation, which enables us to identify the

key issues that matter to the stakeholders. KN is guided

by the Stakeholder Policy adopted by the Company in

2021, which is published transparently on KN's website.

The Company's activities, including stakeholder relations,

are guided by the highest standards of good governance

practices. Our main stakeholders are: employees,

shareholders, business partners, customers, communities

and society in general, decision-makers at national and

regional level. Topics relevant to our target groups include

the safety of our operations, economic impact,

environmental performance improvement and good

corporate governance practices.

As a Company, which is important not only for Klaipėda

and Kupiškis districts, but also nationally in terms of its

activities and size, we can use our influence to contribute

to different aspects of social responsibility – not only by

promoting dialogue with communities in Klaipėda, but

also by contributing to the promotion of the use of

liquefied natural gas (LNG) as a cleaner fossil-fuel

alternative, and by sharing our know-how inside and

outside the organisation.

The areas of impact of KN have so far been determined

by the nature of the Company's activities and long-term

strategy, business risks and opportunities. In addition, in

in 2022 KN has finalized a materiality assessment, which

will contribute to the further development of its

sustainability practices.

ECONOMIC RESPONSIBILITY

KN is a company of strategic importance for the energy

security of Lithuania and the surrounding region, ensuring

the ability to import oil products and liquefied natural gas

to Lithuania and neighbouring countries, keeping the

storage of the mandatory reserve of petroleum products

of the Republic of Lithuania, and the reliable and efficient

transhipment of petroleum products at the port of

Klaipėda. The Company is also responsible for the

operation and maintenance of the LNG terminal at the

Port of Açu in Brazil, which supplies natural gas and

electricity to the Brazilian market, and in 2022 was

appointed as commercial operator of the LNG terminal in

Wilhelmshaven, Germany. We understand the direct and

indirect role of our activities through taxation,

employment policies, educational initiatives, business

innovation and other contributions to sustainable

economic growth in the regions where we operate.

Given the strategic function of the Company, KN has the

objective to enhance shareholder value and represent

best business practices. The Company continuously

strengthens its corporate governance competencies and

implements the highest governance standards and

principles to create tangible benefits for the country and

its people. The Company is consistently listed among

major taxpayers according to the Lithuanian State Tax

Inspectorate.

KN supports free and fair competition in the market, while

striving to provide the highest quality commercial

solutions to its clients.

The Company does not tolerate corruption of any kind or

its manifestations and is committed to open competition,

ethical business conditions and adequate transparency

and publicity in its operations. The Group is guided by a

principle of zero corruption tolerance. It explicitly and

publicly declares its rejection of bribery, fraud, extortion,

the creation of unofficial accounts, the execution of

unofficial and improperly documented transactions, the

recording of fictitious expenses, the use of false

documents and other forms of corruption as referred to

in the United Nations Convention Against Corruption. In

2022 the Company updated and enhanced its anti-bribery

and anti-corruption policy.

The Company has control mechanisms in place that are

designed to identify, assess, and monitor potential

corruption risk factors. In assessing corruption risks, KN

analyses the activities and processes of each business

segment, compiling a list of corruption risks.

Once a year, KN carries out an assessment of the

likelihood of corruption occurrence. In 2022 the process

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of control of third parties in the acceptance of ordered

works and services was analysed to assess the probability

of the occurrence of corruption.

Corruption risk is also assessed in the development of

international projects, looking at both external and

internal factors, as well as the level of corruption risk in

the country. Additional control measures include due

diligence procedures for business partners,

anti-corruption clauses in contracts, application of KN's

anti-bribery and anti-corruption policy and Code of

Conduct in subsidiaries and in relations with business

partners.

In 2021-2022 KN participated in the Transparency

Academy, an exchange project on good anti-corruption

practices, initiated by the Special Investigation Service.

The project was concluded at the end of 2022 with a

certificate of the Transparency Academy handed to KN. As

a result of this project, KN corruption resilience level was

found to be as high as 88% in 2022. This is 22% higher

than in 2021, when the corruption resilience level was

66%.

Part of the rating is influenced by the risk management

system within the Company, and KN achieved the

maximum rating by assessing all corporate functions,

establishing a prioritised list of risks, and reporting

regularly to the Board, thereby managing and mitigating

the risks identified. Other measures implemented in the

Company, such as the risk register in the document

management system, the streamlining of the stakeholder

verification process, and the periodic audits of the various

Company's functions, have also contributed to the

improved rating.

In 2022, KN provided anti-corruption training to KN

employees on the regulation of the declaration of private

interests, potential conflicts of private interests and their

management, the concept and manifestations of

corruption in Lithuania. External anti-corruption training

on the topic of reporting violations (Speak-Up) was also

conducted. In 2022, there were no cases of corruption in

the Company.

In 2022 a separate section "Corruption prevention" has

been created on the Company's internal website, which

provides employees with relevant information related to

the process of declaring private interests in the PINREG

system, as well as relevant links to internal documents and

procedures related to corruption prevention,

implemented anti-corruption measures, links to

anti-corruption training on the Special Investigation

Service e-learning platform and training conducted by the

Transparency Academy.

RESPONSIBILITY TOWARDS EMPLOYEES

The main asset of KN is its employees, who are the most

important link in achieving the Company's objectives.

They are at the heart of our technology activities. The

Company's Personnel policy is focused on fostering

teamwork and unity, continuous learning and progress,

optimal use of human resources, strengthening employee

competencies and developing an engaged culture that

creates greater added value and enables personal and

Company growth.

We promote employee diversity and an inclusive working

environment. Achieving long-term success requires

diverse ideas, perspectives, and talents, and we support

diversity as an important asset and a key resource for

innovation and competitiveness, enabling each of us to

fully participate and contribute to the success of KN and

to help ensure that the business operates efficiently and

takes advantage of the right growth opportunities. The

Company evaluates, promotes, and compensates based

on qualifications, experience, competencies, and

performance, not on bias or personal preference. We

reject all forms of discrimination. Besides KN Code of

Conduct is in place for number of years. In 2022 KN

established Violence and harassment prevention policy

that defines measures and cases decisions ensuring that

employees do not experience hostile, unethical,

humiliating, aggressive, insulting, offensive actions by

which the honor and dignity, physical or psychological

integrity of the employees are attacked or aimed at to

intimidate, humiliate or put employees in a helpless and

powerless position

We are guided by the values of KN and adhere to the

principles of respect, cooperation, professionalism, and

progress. Our values guide how we operate anywhere in

the world and what we expect from ourselves, our

colleagues, our customers, our management, and other

key stakeholders. Each quarter employees nominate and

select Values Hero of the quarter. Also, for a number of

years each October the Company celebrates World Values

Day by arranging activities on this day emphasizing KN

values.

We foster an environment where every employee is

treated equally, respected, and empowered to reach their

potential.

The Company's remuneration system is based on a work

structure developed using the Hay methodology and by

comparing salary values with foreign-capital companies in

the Lithuanian market, to ensure that every KN employee

is rewarded fairly and competitively. The Company's

objective is to ensure the competitiveness of the

employees' remuneration in the market, internal fairness

of remuneration and to eliminate the possibility of

discrimination on any grounds (age, gender, etc.). In the

end of 2022 additional advisory body to the Board was

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established. The Remuneration and Nomination

Committee acts as an advisory body to the Company's

Supervisory Council, making recommendations on the

Company's remuneration policy, proposing to the

Company the criteria for assessing the performance of its

executives, and making other recommendations relating

to remuneration. The Remuneration and Nomination

Committee is composed of 3 members, of which 1 is

independent and 2 are delegated members of the

Supervisory Council. The members are appointed until the

end of the term of office of the current Supervisory

Council.

The Company provides a working environment that meets

strict standards of safety and well-being. As a terminal

operator, KN provides and maintains a health and safety

management system aimed at ensuring safety

performance based on legislation and industry best

practice, with clear commitments, targets, and

responsibilities. The Company's objective is to create an

environment in which occupational health and safety risks

are controlled to prevent injuries, accidents, and

occupational diseases, and to identify, assess and control

risks arising from unsafe conditions, occupational injuries

and illnesses related to work processes or the working

environment. It also focuses on educating workers so that

they better understand their role in reducing negative

environmental impacts and so that the health and safety

of themselves and others is the highest value of every

worker.

In 2022 DNV performed an annual audit as a formal part

of the ISO certification process with the aim to maintain

certification of the management system. The key objective

of the audit was to determine the conformity of the

management system with the standards – ISO 9001:2015;

ISO 14001:2015; ISO 45001:2018. Nonconformities

haven’t been identified during this audit.

One of the Company's key strategic objectives is the

continuous improvement of the safety and health system

by ensuring compliance and enhancing the safety culture

to achieve a rate of 0 (zero) significant safety incidents and

accidents. In 2021 KN has established clearly measurable

indicators to monitor safety and health, which are process

safety incident, LTIR – frequency of workplace accidents,

and IR – frequency of near misses or potential safety

incidents. The above indicators are relative indicators of

occupational safety and health (OSH) performance and by

using these indicators the Company can benchmark its

OSH performance against other companies both in

Lithuania and worldwide.

Further strengthening organizational Safety culture safety

perception survey has been performed by DuPont

sustainable solutions, founder of Bradley curve, which is a

part of KN safety strategy. The survey has defined safety

level in the Company and identified areas for

improvement.

Accordingly, in 2022, a strong focus was placed on the

importance of a safe and healthy working environment,

fostering a culture of occupational safety and health, and

enhancing employees' awareness of the need to protect

themselves and to comply with safe working

requirements. The Company has placed great emphasis

on the recording of near misses, which is a widely used

accident prevention system in the global practice. In 2022,

the Company succeeded in achieving the target set for the

frequency of near misses and near misses. In 2022 there

were no critical incidents in the Company.

Another area of focus for KN in 2022 was promoting the

well-being and wellness of its employees:

• From 16 September 2022 to 16 October 2022, the

Company ran an activity called "KN Moves Again!",

which encouraged employees to collect kilometres

by walking or running. 55 colleagues took part in the

challenge and together they walked over 12.5 million

steps.

• Celebrating the European Mobility Week, KN

organised a hike along the Baltic Sea coast. More

than 50 colleagues took part in it.

• For several years, the Company has organised

periodic meetings with various interesting people. In

2022, the meetings have focused on physical and

mental health, psychological resilience and healthy

lifestyles. Stress management training was organised

for all KN staff. On 9 September, the virtual meeting

"Strong immunity and overcoming fatigue through

nutrition and lifestyle" was led by the therapeutic

nutritionist Ingrida Kuprevičiūtė. In autumn two

lectures were given by physiotherapists Viktorija

Tarasenko and Loreta Skardžiuvienė. They talked

about the damage that sedentary work can do to the

body and shared tips on how to exercise easily at

work. Employees were also given the opportunity to

attend free therapeutic exercise sessions once a

week.

• On 30 September, first medical aid training session

was held to teach first aid for various injuries, external

cardiac massage, artificial respiration, how to stop

bleeding, and how to help a choking person. A lot of

attention was paid to psychological preparedness for

various emergencies. After the training, Dainius

Judžentis, an instructor at the Lithuanian Military

Academy, gave a lecture on psychological resilience,

which consists of physical, emotional, mental, and

spiritual resilience.

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SOCIAL RESPONSIBILITY

As part of our international operations, we strive for

sustainability and take social and environmental

responsibility. We work to maintain strong and

long-lasting relationships with the local communities

where KN operates and strive to be a good business

partner through our business initiatives. KN has been

engaging in a dialogue with neighbouring communities

for a few years. In 2022 KN's social activities focused on

further fostering relations with them. During the year, KN

implemented several meaningful initiatives with

communities:

• The tradition of regular meetings was maintained,

and several regular meetings were held to discuss

topics of interest to the communities and to answer

questions from community representatives.

• On May 11, KN organised a civil protection training

for neighbouring communities. The training provided

an overview of possible emergencies, guidance on

actions taken in the event of an accident at the

terminal, and detailed information on

communication channels with public during such

incidents.

• At the end of May KN team, together with local

community, have planted 15 black pine trees in the

residential area of Vitė in Klaipeda.

• In May, on the occasion of the International

Neighbours' Day, KN contributed to the local Vitė

community Festival. The Company provided a

children's area where the little ones could play

various games, jump on trampolines and participate

in other fun activities.

• For Christmas, the Company decorated a Christmas

tree in one of the Melnragė community's main

squares.

KN has not been indifferent to the war in Ukraine. The

Company set up a Ukraine Support Steering Group to

organise fundraising campaigns, inviting all KN

employees to join.

Employees donated various hygiene products, utensils

and stationery to Ukrainian families fleeing the war in

Klaipėda. The collected items were handed over to the

Ukrainian Support Centre in Melnrage and to the

organisation "Save the Children". Also, KN joined the

initiative to help children from Ukraine in Klaipėda to

prepare for the new school year, additionally some

stationary was also donated by KN employees.

To help her not to lose the source of income, this year the

KN Christmas card was entrusted to the Ukrainian artist

based in Klaipėda.

ENVIRONMENTAL RESPONSIBILITY

The Company's objective is to avoid, mitigate and manage

the environmental and social impacts of our activities. We

strive to be a good neighbour and member of society and

to look after the interests of the communities directly or

indirectly affected by the Company's activities. We feel

responsible for our ecological footprint, and we strive to

minimise the Company's potential negative

environmental impacts.

Environmental protection is one of the priority areas of

KN's corporate social responsibility. Both in the routine

operations of existing oil and LNG terminals and in the

planning of new activities, KN complies with the principles

of environmental protection set out in the National

Environmental Strategy, the conditions set out in the

environmental permits, and the norms set out in the

environmental regulations and standards.

The Company aims to be socially responsible in a

result-oriented rather than a declarative manner. In view

of the global concern about climate change, the Company

feels responsible for its ecological footprint and therefore

aims to balance the Company's impact on the

environment through clearly defined indicators. In 2021,

KN has clearly defined environmental targets to reduce

volatile organic compound (VOC) emissions by 35% by

2024 and 45% by 2030 compared to the current period.

We have also set ourselves clear targets to reduce the

direct CO2 emissions from Klaipėda Oil Terminal's

operations by increasing energy efficiency through

rational use of energy resources. The aim is to reduce

these emissions by 20% by 2024 and by 50% by 2030. We

are doing our utmost to ensure that the environmental

impact is measured and controlled.

One of KN's strategic objectives is to ensure that KN

terminals operate in an environmentally sustainable

manner and are fully compliant with environmental

requirements. The company has clearly identified the

significant environmental aspects, their impact on the

environment, control, and management measures. KN

strives to improve its environmental performance by

continuously monitoring the environmental impact of its

activities and by aiming at pollution prevention, waste

minimisation, water and energy efficiency, and efficient

use of raw materials.

We are proactive in monitoring our impact on

environmental quality, assessing our impact on the

environment, and not just seeking to meet norms or

requirements. KN regularly monitors air pollution from

stationary sources and the quality of wastewater

discharged into the natural environment. The data

collected is available on the Company's website.

The public can obtain real-time information on loading

operations in real time by calling a dedicated line,

available on Company’s website.

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The Company is constantly looking for new technical

solutions to reduce waste emissions, introducing them

and carrying out regular testing and maintenance.

As of 2018 KN is implementing an Environmental Action

Plan, which sets out measures and a commitment to

continue to operate sustainably and ensure the highest

environmental standards. Once fully implemented, the

action plan will contribute to the reduction of volatile

organic compound (VOC) emissions, ensuring minimal

emissions to the environment and more efficient

neutralisation of VOCs.

In order to optimise its operations, in the last quarter of

2022 KN has set energy savings as its main focus, planning

to save at least 47.5 GWh of energy on a cumulative basis

by 31 December 2030. This would be equivalent to the

electricity consumed by about 24,500 average households

per year or 68 tankers of oil.

KN signed the Energy Savings Agreement with the

Ministry of Energy of Lithuania, setting out specific

measures and deadlines to improve Company’s energy

efficiency.

Among other foreseen measures, a solar power plant is

being completed and will be operational later in 2023 at

the Subačiaus oil terminal. It is planned that the generated

solar energy will meet the entire electricity demand of the

Subačius terminal. Furthermore, a feasibility study is

currently being carried out for an electricity

interconnection with the LNG terminal to reduce CO2

emissions from the Klaipėda LNG terminal.

KN has been focusing on employee engagement in the

environmental activities and their education:

• For several years, the Company has been aligning its

internal initiative to such environmental initiatives as

Spring Clean-Up Campaign Darom 2022. The main

goal of this campaign is to remove self-generated

landfills, collect hazardous waste and clean green

areas. KN employees are invited to team up and to

clean the premises close to its territory in Klaipėda.

• The Company also celebrates the World Environment

Day. In 2022 all employees were invited to attend a

lecture on sustainability on World Environment Day.

• In October an internal Sustainability Day was

organized at the Company, where employees among

other topics were presented with KN Environmental

policy, goals and action plan in this area, also were

invited to discuss climate change with Dr. Justinas

Kilpys, climate scientist.

In 2020, KN's environmental management system got

certified for ISO 14001:2015 standard, which was

confirmed by an audit in 2022.

DEVELOPMENT FOR THE SUSTAINABLE FUTURE

KN is actively involved in the debate on the future of fossil

fuels and the transition to a more climate neutral

economy. KN actively participates in various conferences

and seminars to share its know-how in the area of LNG

terminals and discuss the future of energy.

In view of the changes in the energy sector globally, KN is

making every effort to find both additional opportunities

to exploit its infrastructure and know-how, as well as

alternatives for the new activities.

Among them, new areas of development and potential to

create value in the wind energy sector by providing O&M

services are further explored.

Also, in November 2022, the international project

“CarbonNeutralLNG” was launched in Nuremberg,

Germany, where KN is also participating. The three-year

project will aim for its participants to collaborate on the

development of a hybrid process chain involving the

production of hydrogen from biomass and its conversion

to synthetic methane using a variety of chemical and

biological processes. By taking part in this project, KN

expects to gain a lot of useful experience in working with

the new generation of gas mixtures, to develop and

expand competences in the application of hydrogen

technologies, the transportation and geological storage

of CO2 in Europe and the production of synthetic

methane. During the course of the project, research in the

laboratories should be applied to carry out small

demonstration projects, where their economic usefulness

is also assessed.

Furthermore, KN together with “Akmenės cementas” and

AB ORLEN Lietuva have signed letters of intent for a joint

feasibility study to assess the potential and feasibility of

liquefied carbon dioxide (CO2) capture and storage

technology for industrial companies in the country. The

feasibility study will analyse the potential to reduce

atmospheric emissions through the whole carbon dioxide

management value chain concept in Lithuania and the

applicability of this solution to companies with

unavoidably high greenhouse gas (GHG) emissions from

their business processes. The feasibility study will

contribute to the analysis launched by KN, “Larvik

shipping” (LS) and “Mitsui O.S.K.” Lines Ltd. (MOL) in 2021.

***

KN Group's full Corporate Social Responsibility Report for

2022, prepared in accordance with the Global Reporting

Initiative (GRI) guidelines, will be published on www.kn.lt

and on the Nasdaq Vilnius platforms on the date

scheduled in the Investor Calendar.

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RISK FACTORS AND RISK MANAGEMENT

The Company’s Board has approved Risk Management

Policy that regulates risk management, defines risk

management principles and responsibilities, functions

and responsibilities of the Chief Risk Officer as well as sets

risk appetite and tolerance limits. The risk management

system is developed in accordance with the ISO 31000

guidelines. The list of principal risks and the risk

management plan are provided to and approved by the

Company’s Board each quarter. The Board actively

participates in the principal risk management process by

continuously monitoring the risk level changes and the

risk management measures’ action plans. The Company’s

high-level management is responsible for shaping the

personnel’s attitude towards risk management, setting

the risk management goals in the managed area,

implementation of the control measures, implementation

and monitoring the efficiency of the risk management

measures. The medium level managers are responsible for

implementation of the risk management process and

provision of the results, as well as for reliability,

correctness, and impartiality of information.

The Audit Committee reviews financial reporting process

as well as audit execution process and oversees internal

control environment, risk management and internal audit

framework.

In 2022 the Company developed risk methodology

defining risk process in organization. For internal ranking

purposes the Company has extensive risk ranking

methodology, for communication purposes below we

provide simplified version.

Risk probability:

Low – there should be several events for risk to

materialize.

Medium – there is 50% chance of risk to materialize.

High – almost certain that risk will materialize in 3-year

period.

Risk impact:

Low – risk could have impact to operations without impact

to yearly plans.

Medium – risk could have impact to company’s

short-term plans implementation.

High – risk could have major impact to company’s

strategy implementation.

Risk level:

Low – risk managed if cost of management do not

outweigh possible impact.

Medium – in most cases risk managed or monitored, but

there could be decision to monitor risk.

High – risk actively manged with possible exception made

by the Board (In some cases strategy review process could

be initiated to reduce level of risk).

Risk matrix

Impact

Medium

High

Low

Medium

High

Low

Medium

Probability

COMMENTS ON THE RISK CATEGORIES OF THE GROUP

AND THE COMPANY ARE PROVIDED BELOW:

Risk No 1. Business risk – client concentration risk

Risk impact: High

Risk probability: Low

Risk level: Medium

The Company works with several big clients in the area of

oil products transhipment. One of the clients contributes

significant portion of oil product transhipment via

operated oil terminals and income flows.

The Company continuously looks for other potential

clients, flows of shipments and alternative activities. Also,

the Company reviews existing expenses and constantly

searches for costs optimization possibilities.

The Company is striving to manage its business risks by

diversifying its income sources and widening the range of

services, communicating and cooperating with potential

clients, who are interested in blending services, storage

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and transhipment of petrochemical products such as

monoethylene glycol, ethanol, methanol and loading of

new product bitumen. The Company also operates

liquefied natural gas (LNG) terminal, consults and

participates in international investment projects related

with the development of LNG terminals, provides

small-scale LNG services.

During 2020 political risk materialized, and one of the

largest clients BNK (UK) Limited, which belongs to the

largest exporters of Belarusian oil products – ZAT

Belaruskaja neftenaja kampanija, announced a temporary

suspension of transhipment. Moreover, starting from 24th

June 2021, sanctions to Belarus were introduced

by Council Regulation (EU) 2021/1030 – no more transit

of oil product flows from Belarus are possible and are not

expected in the future. Due to these external operational

risks, KN will have to implement long-term strategic

decisions to adapt to new geopolitical circumstances.

Consequently, a revision of long-term corporate strategy

has been initiated and will be completed during 2023.

Risk No 2. Operational risk – major incidents causing

environmental and infrastructure damage.

Risk impact: Medium

Risk probability: Medium

Risk level: Medium

Operational risk is considered as risk directly related to the

increase of losses, caused by the external factors (for

example, natural disasters, illegal acts of the third parties,

etc.) or internal factors (for example, ineffective activity

and management, improper and inefficient utilization of

funds, internal control deficiencies, ineffective procedures,

human error, malfunctions of information systems, cyber

security control gaps, unduly allocation of functions or

responsibilities, etc.).

Due to nature of high-risk activities risk could not be

considered low impact.

To manage internal operational risk, the Company

implemented required organizational measures and

procedures as well as information systems to be used for

support of business processes that collectively ensure

proper functioning of internal control system and duly

cooperation with the third parties concerned. The

Company applies the following means of internal control:

separation of decision making and controlling functions,

control of transactions and accountancy, limitation of

decision-making powers and control of their execution,

collegial decision making in crucial issues, etc.

In addition KN constantly updates and reviews it’s

insurance program in order to ensure loss minimization in

case of accident.

Internal operational risk management is significantly

influenced by the standards, which are implemented and

maintained in the Company – Quality ISO 9001:2015,

Environmental Protection ISO 14001:2015, Occupational

Health and Safety ISO 45001:2018. These standards

impose requirements for the control of processes

according to the most significant risks and management

system audits, which ensure that the described controls

and processes operate in practice.

The Company strives to minimize legal compliance risk

and assure that its operations are compliant with the

applicable legal requirements and standards.

Infrastructure, as well as management and safety

processes, cooperation with the third parties and control

system has been positively evaluated by the

representatives of potential clients of the terminals.

In order to manage better operational risks, KN has

established a compliance function and periodically

updates it’s compliance status. In 2022 the Company

actively implemented tool’s for compliance

Risk No 3. Reputational damage to Company’s name

Risk impact: Medium

Risk probability: Medium

Risk level: Medium

KN values and considers it’s reputation in various areas:

external public perception, stakeholder and internal

reputation as employer. The Company pays special

attention to the stakeholders. It openly provides

information to the institutions, public organizations and

the general society, and has been focusing on

strengthening relations with communities for years.

The Company is also involved in educational initiatives,

such as hosting company tours at KN Oil terminal for

students and pupils, presenting its operations and

providing knowledge related to petroleum products,

logistics, laboratory work, etc.

KN reputation is highly depended on public’s perception

of LNG terminal economical value to Lithuania. Therefore,

the Company constantly performs public perception

analyses and in 2022 noticed major improvement in

positive public opinion influenced by geopolitical events.

Regarding general perception of the Company there are

no major events that could influence reputation in long

term.

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Risk No 4. Cyber risk

Risk impact: High

Risk probability: Medium

Risk level: High

Cyber risk refers to the potential for unauthorized access,

use, disclosure, disruption, modification, or destruction of

information and systems by cyber criminals or malicious

actors. Due to geopolitical situation company initiated

additional measures to strengthen detection and recovery

capabilities.

Company’s regular activities include vulnerability

management, conducting regular security assessments

and penetration testing, and providing employee training

on the best practices of cybersecurity.

Risk No 5. Fraud prevention

Risk impact: Medium

Risk probability: Low

Risk level: Low

The Company pays substantial attention to minimizing

corruption risk and implements relevant internal

processes. During 2022, KN was involved in the project

"Skaidrumo Akademija", which was initiated by the

President of the Republic of Lithuania (organiser – Special

Investigation Service of the Republic of Lithuania). The

aim of participating in this project is to introduce

additional and improved existing measures to prevent

corruption in KN. In further periods KN will no longer

participate as KN made sufficient improvement according

to methodology.

One of the instruments for the prevention of

infringements is the Whistleblowing channel, which is

open for all natural persons and legal entities: both

existing and former KN employees, former and potential

KN clients, contractors, suppliers, and community. It

provides possibility to directly inform the collegial

managing bodies of KN.

Risk No 6. Environmental risk

Risk impact: Medium

Risk probability: Low

Risk level: Low

In 2022, the Company continued to engage actively with

representatives of neighbouring communities, holding

meetings to present the progress of the ongoing

Environmental Action Plan and to respond to relevant

questions of concern to communities. KN also openly

shares environmental data with the public – KN website

provides environmental monitoring data of Klaipeda Oil

Terminal, information on the progress of the

environmental action plan. With a consistent focus on the

environment and open dialogue with communities, KN

has achieved a steady annual decline in requests from

communities and institutions on environmental issues,

with 4 requests received in 2022, compared to 18 in 2020

and 12 in 2021.

Risk No 7. Project risk

Risk impact: Medium

Risk probability: Low

Risk level: Low

Investment project management is an important part of

the Company’s business. In order to effectively manage

projects, the implementation of the project management

methodology and project monitoring was initiated

according to the PRINCE2 standard. In addition in 2022

Project management officer position was initiated.

The Company is looking for opportunities in international

LNG investment projects. Also, Company is involved in the

analysis and search of carbon capture and storage

technologies and is actively participating in the

development of hydrogen platform technologies. To

attain the economic value that investment projects are

supposed to generate it is important to assure that the

projects are implemented within the defined budget and

timeframe. The Company’s Board has set 10% tolerance

limit for deviations; therefore, the Company’s

management constantly monitors implementation

statuses of the important projects, related risks, and their

mitigation measures.

Risk No 8. Foreign Exchange Rate Risks

Risk impact: Low

Risk probability: Medium

Risk level: Low

Due to the specifics of the business, the Group and the

Company are exposed to the risk of EUR/USD foreign

exchange rate fluctuations due to FSRU lease payments in

US dollars and to the risk of EUR/BRL foreign exchange

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 120

rate due to activity of subsidiary KN Acu in Brazil. Whereas

FSRU lease payments are compensated by NERC as to

regulated activity principles, therefore, the impact is

considered low. KN Acu exposure to currency risk is also

considered low due to insignificant related transaction

amounts.

In 2021, the Group and the Company used futures

contracts to hedge against changes in EUR/USD exchange

rates. In 2022 no such financial instruments were used.

When derivatives are realized, the result is recorded in the

profit (loss) statement of each calendar month. For 2022

no income or loss on the fair value change of derivatives

was recorded (in 2021 the Group and the Company

accounted EUR 1,898 thousand income on the fair value

change of derivatives).

Risk No 9. Credit Risks

Risk impact: Medium

Risk probability: Low

Risk level: Medium

A possible credit risk of the Group’s and the Company’s

customers is managed by a continuous monitoring of

outstanding balances. The Group’s and the Company’s

procedures are in force to ensure on a permanent basis

that services are provided to reliable customers and do

not exceed an acceptable credit exposure limit. The

Company trades only with reputable third parties, so there

is no requirement for collateral. More information about

the exposure to credit risk for trade receivables from the

customers can be found in the Note 24 of the Explanatory

Notes in the financial statements.

Risk No 10. Interest Risks

Risk impact: Medium

Risk probability: Low

Risk level: Medium

The Group’s and the Company’s income and operating

cash flows are influenced by changes in market interest

rates, which are linked to EURIBOR base. Overall, 44% of

loan portfolio is exposed to floating interest rate risk; no

hedging derivative instruments were used. Thus, such

standing has implications on financial results.

EIB facility with 3 tranches is exposed to 3 months

EURIBOR with zero-floor applicable on EURIBOR base. In

contrast, NIB facilities are exposed to 6 months EURIBOR

with no zero-floor applicable on EURIBOR base.

The Group and the Company is constantly assessing its

possibilities to hedge interest rate risks on its loans. Thus,

the loans related to long-term LNG terminal solution with

high probability in future are expected to be with partially

or fully fixed interests.

The Group’s and the Company’s excess liquidity in forms

of money and time deposits are distributed across the

accounts of major Lithuanian banks, which are granted

with Standard Poor’s or equivalent long-term term

borrowing BBB- or better external rating according to the

foreign rating agencies. Partner bank’s rating is assessed

either on a stand-alone or applying a bank group logic

into which exposure is present. Also, the Group and the

Company is monitoring recommendation of the Central

Bank of Lithuania.

More information about the interest risk can be found in

the Note 24 of the Explanatory Notes in the financial

statements.

Risk No 11. Liquidity Risks

Risk impact: Medium

Risk probability: Low

Risk level: Medium

The Company’s and the Group’s policy is to maintain

sufficient cash and cash equivalents or have available

funding through an adequate amount of committed

credit facilities to meet its commitments at a given date in

accordance with its strategic plans.

The Group’s gross liquidity (APM) and quick ratios (APM)

as at 31 December 2022 were 1.30 and 1.27, respectively

(1.28 and 1.25 as at 31 December 2021).

The Company’s gross liquidity (APM) and quick ratios

(APM) as at 31 December 2022 were 1.22 and 1.19,

respectively (1.20 and 1.17 as at 31 December 2021).

The Group’s and Company’s objective is to maintain a

balance between continuity of funding and flexibility. The

Group’s and the Company's activities generate sufficient

amount of cash; therefore, the Management's main

responsibility is to monitor that the liquidity ratio of the

Company is close to or higher than 1.

More information about the management of liquidity risk

can be found in the Note 24 of the Explanatory Notes in

the financial statements.

AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 121

OTHER INFORMATION

The activity of the Company is based on the Articles of

Association, Civil Code and other laws and sub legislative

acts of the Republic of Lithuania. Changes in the Articles

of Association can be made by the General Meeting of

Shareholders.

TRANSACTIONS WITH RELATED PARTIES

The Company did not have any transactions or

agreements with the members of its Supervisory Council

and the Board. More information regarding transactions

with related Parties is presented in the Explanatory note

to the Company’s financial statements for 2022. In 2022

there were no changes in type of transactions with related

parties, which could have made impact on the financial

activity of the Group and the Company. All transactions

with the related parties have been performed under

market conditions (following the arm’s length principle).

PARTICIPATION IN ASSOCIATIONS

The Company has been acting as a member of the

following associations as at the end of the year:

• Klaipėda Chamber of Commerce, Industry and Crafts,

http://www.kcci.lt/

• Association of Lithuanian Stevedoring Companies,

www.ljkka.lt

• Lithuanian Confederation of Industrialists, www.lpk.lt

• Gas Infrastructure Europe (GIE) association Gas LNG

Europe (GLE) group, www.gie.eu.com

• Lithuanian LNG cluster, www.lngcluster.eu

• Lithuanian Shipowners Association, www.llsa.lt

• Lithuanian Hydrogen Platform

• LNG platform, www.sgdplatforma.lt

• Baltic Innovation Hub, https://baltictechpark.com

• The American Chamber of Commerce in Lithuania,

www.amcham.lt

• Klaipėda Association of Industrialists, www.kpa.lt

INFORMATION ABOUT THE AUDIT

April 2021. Extraordinary General Meeting of

Shareholders of the Company adopted the following

resolutions: UAB KPMG Baltics has been elected as an

auditor for the Financial Statements and Regulated

Activities Statements of the Company and assessment of

its Annual Report for the years 2021 and 2022. The

shareholders authorized the General Manager of the

Company to conclude the Agreement for provision of 2

years auditing services (financial audit of both the

Company and the subsidiary KN Acu Servicos de Terminal

de GNL LTDA, and the regulated natural gas activity

report) for total amount of EUR 164 thousand (excl. VAT).

UAB Ernst & Young Baltic performed the audit for the

years 2014-2018. UAB KPMG Baltics performed the audit

for the years 2008-2013, 2019-2020.

The proposal regarding approval of the audit company is

provided by the Board of the Company to the General

Meeting of Shareholders based on the public

procurement procedures.

2022

AB KLAIPĖDOS NAFTA

REPORT ON REMUNERATION

AB KLAIPĖDOS NAFTA REPORT ON REMUNERATION

For the financial year ending on 31 December 2022

www.kn.lt | 123

REPORT ON REMUNERATION

Remuneration principles of the Company’s governing and

supervisory bodies are determined by the Remuneration

policy approved in General shareholders meeting in

October 2022. Full remuneration policy can be found on

Company’s website.

Remuneration for activities in the collegial bodies of the

Company may be paid to the members of the collegial

body of the Company who are independent or not.

The personal data of the members of the Company’s

governing and supervisory bodies is included in the report

on remuneration for the following purposes:

• to increase the transparency of the Company;

• to improve the accountability of the members of

the governing bodies;

• to supervise the remuneration of the governing

bodies.

Members of collegial governing and supervisory bodies

of the Company are only eligible for receiving fixed

monthly compensation.

The remuneration to be paid must:

• promote the creation of long-term and

sustainable value of the Company, to be fair and

understandable.

• comply with the workload of the individual

organs of the Company and their members.

• be competitive with the salary levels in the labour

market of the respective field.

• ensure the indemnification of the liability

assumed by the individual members of the

Company bodies.

• promote the attraction of high-level

professionals in their field to the management of

the Company.

REMUNERATION OF THE SUPERVISORY COUNCIL IN 2022

TITLE

MONTHLY SALARY FOR

2022, EUR

TOTAL FOR 2022, EUR

MONTHLY SALARY FOR

2021, EUR

TOTAL FOR 2021, EUR

Member 1

1,140.59

4,448.30

1,140.59

13,687.08

Member 2

856.92

3,341.99

856.92

10,283.04

Member 3

0.00

Member 4

3,318.67

7,904.72

Member 5

2,110.00

5,023.81

Member 6

2,637.00

6,278.57

TOTAL

26,997.39

23,970.12

October 2022 extraordinary General Meeting of

Shareholders has adopted the following resolutions: 1) to

approve the amendment of Remuneration Policy, 2) for

the 4 years cadence of Supervisory Council members of

AB Klaipėdos nafta to elect: Mantas Šukevičius, Robertas

Vyšniauskas, and Dovilė Kavaliauskienė, 3) to determine

fixed monthly remuneration for the members of

Supervisory Council of AB Klaipėdos nafta, 4) to approve

standard contract form, regarding the activity of the

member of Supervisory Council of AB Klaipėdos nafta.

In 2022 the total remuneration for the members of the

Supervisory Council amounted to EUR 27.0 thousand

(2021 – EUR 24.0 thousand). Members of the Supervisory

Council were not granted with any loans, guarantees,

assets, premiums, tantiemes, shares or salary for service at

any other company of the Group for the year 2022. They

are not eligible for any variable part of remuneration or

for recovery of it.

AB KLAIPĖDOS NAFTA REPORT ON REMUNERATION

For the financial year ending on 31 December 2022

www.kn.lt | 124

REMUNERATION OF THE BOARD OF THE COMPANY IN 2022

TITLE

MONTHLY SALARY FOR

2022, EUR

TOTAL FOR 2022, EUR

MONTHLY SALARY FOR

2021, EUR

TOTAL FOR 2021, EUR

Member 1

2,400.00

9,000.00

2,400.00

28,800.00

Member 2

2,095.00

2,205.26

2,095.00

25,140.00

Member 3

2,095.00

7,856.25

2,095.00

25,140.00

Member 4

2,095.00

18,855.00

Member 5

2,202.82

26,430.47

2,095.00

Member 6

0.00

Member 7

2,548.27

27,907.11

Member 8

2,252.51

18,574.22

Member 9

2,252.51

18,574.22

Member 10

1,811.55

9,108.60

TOTAL

119,656.13

100,030.00

The newly elected Board of AB “Klaipėdos nafta” took

office in 2022 April. Board members, Edvinas Katilius and

Guy Mason were appointed at the end of the previous

term, and from April 2022 they are elected to serve

alongside other Board members until April 2026.

In 2022 the total remuneration for the members of the

Board amounted to EUR 119.7 thousand (2021 – EUR

100.0 thousand). In 2022 members of the Board were not

granted any shares, did not receive any loans, guarantees,

assets, premiums, tantiemes or any other benefits for

work as members of the Bord or salary for service at any

other company of the Group. They are not eligible for any

variable part of remuneration or for recovery of it.

REMUNERATION OF THE AUDIT COMMITTEE IN 2022

TITLE

MONTHLY SALARY FOR

2022, EUR

TOTAL FOR 2022, EUR

MONTHLY SALARY FOR

2021, EUR

TOTAL FOR 2021, EUR

Member 1

1,140.59

4,448.30

1,140.59

13,587.79

Member 2

856,92

1,668.74

856.92

10,382.33

Member 3

856,92

9,426.12

856.92

10,283.04

Member 4

1,319.00

1,648.75

Member 5

1,319.00

1,648.75

TOTAL

18,840.66

34,253.16

On 24th of November 2022, until the end of term of

office of Company’s acting Supervisory Council, Robertas

Vyšniauskas and Mantas Šukevičius were elected as

Company’s Audit Committee members.

In 2022 the total remuneration for the independent

members of the Audit Committee amounted to EUR 18.8

thousand (in 2021 – EUR 34.3 thousand). In 2022 members

of the Audit Committee have not received any loans,

guarantees or assets, unpaid bonuses, tantiemes and

other benefits or salary for service at any other company

of the Group, were not granted any shares of the

Company. They are not eligible for any variable part of

remuneration or for recovery of it.

REMUNERATION OF THE REMUNERATION AND NOMINATION COMMITTEE IN 2022

TITLE

MONTHLY SALARY

FOR 2022, EUR

TOTAL FOR 2022, EUR

MONTHLY SALARY

FOR 2021, EUR

TOTAL FOR 2021, EUR

Member 1

660.00

825.00

Member 2

TOTAL

660.00

825.00

On 24

of November 2022, until the end of term of office

of Company’s acting Supervisory Council, Dovilė

Kavaliauskienė and Robertas Vyšniauskas were elected as

Company’s Remuneration and Nomination Committee

members.

AB KLAIPĖDOS NAFTA REPORT ON REMUNERATION

For the financial year ending on 31 December 2022

www.kn.lt | 125

In 2022 the total remuneration for the independent

members of the Remuneration and Nomination

Committee amounted to EUR 0.8 thousand. According to

Remuneration Policy Member 2 has not received any

compensation since the same person is already receiving

compensation as a member in Audit Committee. In 2022

members of the Remuneration and Nomination

Committee have not received any loans, guarantees or

assets, unpaid bonuses, tantiemes and other benefits or

salary for service at any other company of the Group, were

not granted any shares of the Company. They are not

eligible for any variable part of remuneration or for

recovery of it.

REMUNERATION OF THE CEO OF THE COMPANY IN 2022

The CEO of the Company is rewarded according to

provisions set in the Remuneration policy approved by the

Board of the Company and the Company’s Procedure for

rewarding bonuses to AB Klaipėdos nafta top

management employees.

The monthly salary of the CEO of the Company was set to

EUR 9,600 in August of 2022 (the monthly salary until July

of 2022 was EUR 9,200). Following the Remuneration

policy, the CEO is also eligible for receiving annual bonus

depending on the results of the Company and

achievement of the annual goals. The maximum bonus in

case all goals are achieved consists of 4 monthly salaries.

In 2022 variable pay for the CEO, was EUR 767 (monthly

equivalent of yearly bonus) (2021 – EUR 1,227 (monthly

equivalent of yearly bonus).

CHANGES IN THE COMPANY RESULTS AND AVERAGE MONTHLY SALARY OF ALL EMPLOYEES

2022

adj.**

2021

adj.**

2020

adj.**

2019

adj.**

Sales

74,722

58,633

77,474

104,138

Net profit (loss)

(6,732)

8,041

(64,917)

(48,084)

33,495

10,991

7,947

13,117

Average monthly

salary (gross), EUR

2,765

2,570

2,574

2,282

* Remuneration of Members of governing and supervisory bodies are not included.

** adj. – adjusted financial indicators/data are recalculated and presented by eliminating from net profit (loss) the following amounts: (1)

the impact of unrealised foreign currency exchange rates (forex) arising from IFRS 16 requirements, (2) respective impact of deferred

income tax arising from forex, and (3) impact of financial derivatives.

The Company’s 2022 average monthly salary of all

employees is 7.6% higher compared to 2021 (2022 – 2,765

EUR/month, 2021 – 2,570 EUR/month).

Average monthly salary of all employees of the Company

has been gradually growing for the last few years. Average

monthly salaries per employee category for 2021-2022

are provided below.

AVERAGE MONTHLY SALARIES OF THE EMPLOYEES OF THE GROUP AND THE COMPANY

EMPLOYEE CATEGORY

AVERAGE MONTHLY SALARY (GROSS), EUR

GROUP

CHANGE,

COMPANY

CHANGE,

2022

2021

2022

2021

Managers

5,501

5,061

8.7

5,621

5,459

3.0

Specialists

2,646

2,445

8.2

2,745

2,553

7.5

Workers

1,794

1,614

11.2

1,794

1,614

11.2

Total

2,728

2,506

8.9

2,765

2,570

7.6

1) The Company‘s managers include: Chief Executive Officer (CEO), Directors and Heads of Divisions. The following sums were calculated

for the remuneration to the Group‘s managers in 2022: EUR 3,651 thousand, in that amount taxes paid by the employer included EUR

186 thousand (when in 2021 were EUR 3,684 thousand from which EUR 177 thousand of taxes paid by the employer). The average annual

salary of manager of the Group amounted to EUR 67.6 thousand in 2022 (in 2021 – EUR 63.5 thousand).

2) The average monthly salary is calculated according to the average monthly wage calculation procedure as stated in the State

companies’ employees’ average monthly salary calculation procedure approved by the Government of Lithuania on 23 August 2002,

resolution No. 1341 and its subsequent changes.

2022

AB KLAIPĖDOS NAFTA

GOVERNANCE REPORT

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 127

CONTENT

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT INFORMATION ...................................................................................................................... 128

MANAGEMENT OF THE COMPANY .............................................................................................................................................................................. 129

OTHER GOVERNANCE INFORMATION ........................................................................................................................................................................ 139

INFORMATION ON COMPLIANCE WITH TRANSPARENCY GUIDELINES ...................................................................................................... 140

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 128

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT INFORMATION

AB Klaipėdos nafta aims to make its corporate

management and internal processes in a way to ensure

transparent, effective, and profitable activities and its

activities retain the trust of our stakeholders. The internal

control processes and management practices

implemented within the Company are in line with the best

management practice principles. This report provides

main information and principles regarding management

and related processes.

The Company’s management structure and managing

and supervisory bodies are described in detail in article

“Management of the Company of the annual report”. This

paragraph also contains information regarding corporate

management and organizational scheme, connection with

the other bodies and short description of the functions of

the each managing body.

In order for the management and supervision bodies of

the Company to exactly and clearly understand the

targets, directions and objectives the corporate strategy is

being prepared with purpose to foreseen long term

strategic goals and tasks. The Supervisory Council of the

Company is responsible for the approval of the strategy.

AB Klaipėdos nafta strategic goals are described in the

paragraph “The Corporate Strategy”. KN corporate

strategy until 2030 is available at: 2030.kn.lt.

The Company, acting in compliance with Article 21(3) of

the Law of the Republic of Lithuania on Securities and

paragraph 24.5 of the Listing Rules of AB NASDAQ Vilnius,

discloses how it complies with the Corporate Governance

Code for the Companies listed on NASDAQ Vilnius as well

as its specific provisions or recommendations in the

paragraph “AB Klaipėdos nafta Compliance with the

Corporate Governance Code”.

Company’s annual report of the year 2022 along with

Company’s governance report and explanatory notes of

the year 2022 financial statements are published in

AB Klaipėdos nafta official website (http://www.kn.lt) and

in AB NASDAQ Vilnius (www.nasdaqomxbaltic.com) Stock

Exchange.

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 129

MANAGEMENT OF THE COMPANY

MANAGEMENT STRUCTURE

The Company follows the Law on Stock Companies, the

Law on Securities, Articles of Association of the Company,

and other legal acts of the Republic of Lithuania during its

operation.

The Company’s Articles of Association are registered in

the Register of Legal Entities and indicate the following

management bodies:

• The General Meeting of Shareholders

• The Supervisory Council

• The Board

• Chief Executive Officer (CEO, General

Manager)

ORGANIZATIONAL AND MANAGEMENT STRUCTURE OF THE COMPANY:

The General Meeting of Shareholders is the supreme

management body of the Company. Competences of the

General Meeting of Shareholders of the Company,

Shareholders’ rights, their implementation are identified

in the Law on Stock Companies and in the Article of

Association of the Company.

The Company’s CEO or authorised Head of any other

department of the Company always participates in the

Shareholders Meetings while the member of the

Supervisory Council and the CFO participate depending

on the questions addressed.

In the last ordinary general meeting of Shareholders of

the Company the following representatives of the

Company took part: Company’s CEO, Chairman of the

Supervisory Council, Chairman of the Board, Chief

Administrative and Corporate Governance Officer, Head

of the Legal Unit, Chief Financial Officer.

The Supervisory Council is a collegial supervisory body

which consists of 3 (three) members (at least 2 (two) being

independent), elected for the period of four years in the

General Meeting of Shareholders according to the

procedure established by the Law on Stock Companies.

The number of the terms of office a member may serve

on the Supervisory Council is not limited. The Supervisory

Council is a collegial body supervising the activities of the

Company, its status, competence, and functions have

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 130

been defined by the Law on Stock Companies and the

Articles of Association of the Company. Functions, rights

and duties of the Supervisory Council are detailed in the

Rules of Procedure of the Supervisory Council. The

Supervisory Council by its decision has formed an Audit

Committee, which consists of 3 (three) members elected

for the office term of the Supervisory Council. The

Regulation of the Audit Committee of AB Klaipėdos nafta,

approved by the Company’s Supervisory Council, regulate

functions, rights, and duties of the Audit Committee. The

key responsibilities of the Committee are to assist the

Supervisory Council in fulfilling its oversight

responsibilities in relation to financial reporting, the

effectiveness of the system of risk management and

internal control, monitoring the independence of both the

internal and external auditors and assessing their

performance and effectiveness. The Company’s head of

internal audit is functionally subordinate to the Audit

Committee and administratively subordinated to the CEO.

By the decision of the Supervisory Council of the

Company the members of Audit committee have been

elected until the end of office of the current Supervisory

Council. The Audit Committee is composed of 3

members, of which 1 is independent and 2 are

delegated members of the Supervisory Council. The

members are appointed until the end of the term of

office of the current Supervisory Council.

The Supervisory Council by its decision has formed

Remuneration and Nomination Committee, which

consists of 3 (three) members, elected for the office term

of the Supervisory Council. The Regulation of the

Remuneration and Nomination Committee of

AB Klaipėdos nafta, approved by the Company’s

Supervisory Council, regulate functions, rights, and duties

of the Remuneration and Nomination Committee. The

Remuneration and Nomination Committee acts as an

advisory body to the Company's Supervisory Council,

making recommendations on the Company's

remuneration policy, proposing to the Company the

criteria for assessing the performance of its executives,

and making other recommendations relating to

remuneration. The Remuneration and Nomination

Committee is composed of 3 members, of which 1 is

independent and 2 are delegated members of the

Supervisory Council. The members are appointed until

the end of the term of office of the current Supervisory

Council.

The Board is a collegial management body of the

Company consisting of 5 (five) members, who are elected

by the Supervisory Council for the period of 4 (four) years

with the requirement that at least 3 (three) members are

independent. The number of the terms of office a member

may serve on the Board is not limited. . The mandate of

the Board members has been determined by the Law on

Companies and the Articles of Association of the

Company.

The Chief Executive Officer (CEO) is a single person

managing body of the Company. The CEO is the main

person managing and representing the Company. The

duties and competence of the CEO have been determined

by the Law on Stock Companies and the Articles of

Association of the Company.

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 131

MEMBERS OF THE SUPERVISORY COUNCIL AS AT 31 DECEMBER 2022

Robertas Vyšniauskas (independent member)

Chairman of the company’s Supervisory Council. Elected to the Supervisory Council on the 20

October 2022 by the Extraordinary General Meeting of Shareholders for a four-year term.

Education: Mykolas Romeris University, Faculty of Law, Master of Law (2010); Mykolas Romeris

University, Faculty of Law, Bachelor of Law (2004).

Participation in activities of other companies and organisations: since 2020, independent

member of the board of directors (until 09.11.2020) and general manager of UAB “Valstybės

investicinis kapitalas”; since 2020, independent member of the board of UAB “Vilniaus vystymo

kompanija”; since 2019, independent member of the board and member of the audit

committee of UAB “EPSO-G”; since 2019, lecturer at VŠĮ “Vilniaus universitetas”.

Robertas Vyšniauskas does not hold shares of AB “Klaipėdos nafta”.

Dovilė Kavaliauskienė (member)

Member of the Supervisory Council of the Company. Elected to the Supervisory Council on the

20th October 2022 by the Extraordinary General Meeting of Shareholders for a four-year term.

Education: Vilnius University, Faculty of Law, Master of Law (2016); Baltic Institute of Corporate

Governance, Corporate Governance Training for Public Sector (2022).

Participation in activities of other companies and organisations: since 2021, adviser to the Law

and Personnel Group of the Ministry of Energy of the Republic of Lithuania; from 2020 to 2021,

adviser to the Law and Personnel Division of the Ministry of Energy; from 2018 to 2020, adviser

to the Law Division of the Ministry of Energy; 2018, deputy head of the Law Division of the

Ministry of Energy; from 2016 to 2018 chief specialist, Electricity Energy Division, Ministry of

Energy; 2014, Legal Consultant, VšĮ „Vilniaus universiteto teisės klinika.

Dovilė Kavaliauskienė does not hold shares of AB “Klaipėdos nafta”.

Mantas Šukevičius (independent member)

Member of the Supervisory Council of the Company. Elected to the Supervisory Council on the

20th October 2022 by the Extraordinary General Meeting of Shareholders for a four-year term.

Education: Vilnius University, Faculty of Economics, Bachelor of Economics (Banking) (1997);

Vilnius University, Institute of International Relations and Political Science, Bachelor of Political

Science (1998); Vilnius University, Institute of International Relations and Political Science,

Master of European Union Studies (2000).

Participation in activities of other companies and organisations: since 2022, independent

member of the board of VĮ “Oro navigacija”; since 2022, independent member of the

supervisory board of JSCB “Qishloq Qurilish Bank”; since 2021, member of the board of UAB

“Victory Funds”; since 2020, director of MB “Buteo Invest”; since 2018, chairman of the

management board of AB “Detonas”.

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 132

There were 10 meetings of Supervisory Council in 2022, which were attended by all Supervisory Council members. 8 of the

meetings were held by the previous Supervisory Council and 2 by the newly elected Supervisory Council.

SUPERVISORY COUNCIL ACTIVITY IN 2022

On 27 April 2022 the term of office of the previous

Supervisory Council with the members Eimantas Kiudulas,

Karolis Švaikauskas and Žaneta Kovaliova ended. The

Supervisory Council of the new term of office has been

elected and started its activities on 20 October 2022.

Newly elected Supervisory Council of the Company on its

first meeting elected independent Supervisory Council

member Robertas Vyšniauskas as a Chairman of

Supervisory Council.

During 2022 the Supervisory Council supervised the

activities of the Board and the CEO of the Company,

supervised implementation of annual internal audit plan.

Supervisory Council formed Audit Committee and

Remuneration and Nomination Committee, also

announced the selection of candidates for independent

Audit Committee member and Remuneration and

Nomination Committee and addressed other matters

assigned within its powers.

In addition to its regular tasks, the Supervisory Council in

2022 was also actively involved in the discussions about

the Company’s corporate governance and internal control

system functioning as well as risk management

improvement.

During 2022, the Supervisory Council carried out a

supervision on the preparation of the Company's strategy

for 2023-2050, as well as in accordance with its

competence provided suggestions and recommendations

in the process of preparation of quarterly financial

statements.

NAME

POSITION IN THE COMPANY

THE INDEPENDENCE

CRITERIA

CADENCE COMMENCEMENT

DATE

Eimantas Kiudulas

Chairman of the Supervisory

Council

Independent

From 27 April 2018 until 27 April

2022

Karolis Švaikauskas

Member of the Supervisory

Council

From 10 April 2020 until 27 April

2022

Žaneta Kovaliova

Member of the Supervisory

Council

Independent

From 20 November 2020 until

27 April 2022

Robertas Vyšniauskas

Chairman of the Supervisory

Council

Independent

From the 20 October 2022

Dovilė Kavaliauskienė

Member of the Supervisory

Council

From the 20 October 2022

Mantas Šukevičius

Member of the Supervisory

Council

Independent

From the 20 October 2022

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 133

MEMBERS OF THE AUDIT COMMITTEE AS AT 31 DECEMBER 2022

Robertas Vyšniauskas (independent member)

Member of the Company's Audit Committee, elected by decision of the Supervisory Council

from 24 November 2022 until the end of the term of office of the Company's current Supervisory

Council.

Education: Mykolas Romeris University, Faculty of Law, Master of Law (2010); Mykolas Romeris

University, Faculty of Law, Bachelor of Law (2004).

Participation in activities of other companies and organisations: since 2020, independent

member of the board of directors (until 09.11.2020) and general manager of UAB “Valstybės

investicinis kapitalas”; since 2020, independent member of the board of UAB “Vilniaus vystymo

kompanija”; since 2019, independent member of the board and member of the audit committee

of UAB “EPSO-G”; since 2019, lecturer at VŠĮ “Vilniaus universitetas”

Robertas Vyšniauskas does not hold shares of AB “Klaipėdos nafta”.

Mantas Šukevičius (independent member)

Member of the Company's Audit Committee, elected by decision of the Supervisory Council

from 24 November 2022 until the end of the term of office of the Company's current Supervisory

Council.

Education: Vilnius University, Faculty of Economics, Bachelor of Economics (Banking) (1997);

Vilnius University, Institute of International Relations and Political Science, Bachelor of Political

Science (1998); Vilnius University, Institute of International Relations and Political Science,

Master of European Union Studies (2000).

Participation in activities of other companies and organisations: since 2022, independent

member of the board of VĮ “Oro navigacija”; since 2022, independent member of the supervisory

board of JSCB “Qishloq Qurilish Bank”; since 2021, member of the board of UAB “Victory Funds”;

since 2020, director of MB “Buteo Invest”; since 2018, chairman of the management board of

AB “Detonas”.

On 24

of November 2022 until the end of term of office of Company’s acting Supervisory Council, Robertas Vyšniauskas

and Mantas Šukevičius were elected as Company’s Audit Committee members. The Company also announced the selection

of one independent member to the Audit Committee.

During the year 2022, 8 Audit Committee meetings have been arranged where all Audit Committee members have

participated. 7 of the meeting were held by the previous Audit Committee and 1 by the newly elected Audit Committee.

NAME

POSITION IN THE

COMPANY

THE INDEPENDENCE

CRITERIA

CADENCE COMMENCEMENT

DATE

Žaneta Kovaliova

Chairperson of the Audit

Committee

Independent

From 8 December until 27 April

2022

Laura Garbenčiūtė-Bakienė

Member of the Audit

Committee

Independent

From 21 August 2018 until 25

February 2022

Žana Kraučenkienė

Member of the Audit

Committee

Independent

From 3 December 2018 until 1

December 2022

Robertas Vyšniauskas

Member of Audit Committee

Independent

From the 24 November 2022

Mantas Šukevičius

Member of Audit Committee

Independent

From the 24 November 2022

AB KLAIPĖDOS NAFTA GOVERNANCE REPORT

For the financial year ending on 31 December 2022

www.kn.lt | 134

AUDIT COMMITTEE ACTIVITY IN 2022

During the year 2022, the Committee closely monitored

the financial reporting process and audit of consolidated

financial statements of the Group. The Committee

assessed whether appropriate accounting policies have

been adopted throughout the accounting period,

assessed the effectiveness of the financial statement audit

process.

The Committee also monitored internal control and risk

management system, reviewed and assessed the

effectiveness of the group's risk assessment and

management system, discussed significant changes in the

internal control system.

The Audit Committee also considered the external and

internal audit plans of 2022, their results, and the

assessments of the Group's internal control, including the

control of financial statements, Committee also

monitored the independence of the auditors.

MEMBERS OF THE REMUNERATION AND NOMINATION COMMITTEE AS AT 31 DECEMBER 2022