AB KAUNO ENERGIJA

THE SET OF THE CONSOLIDATED FINANCIAL STATEMENTS

AND THE COMPANY'S SEPARATE FINANCIAL STATEMENTS

FOR 2021 PREPARED IN ACCORDANCE WITH

INTERNATIONAL FINANCIAL REPORTING STANDARDS AS

ADOPTED BY THE EUROPEAN UNION PRESENTED

TOGETHER WITH THE CONSOLIDATED ANNUAL REPORT

AND THE INDEPENDENT AUDITOR'S REPORT

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

CONTENTS

Page

INDEPENDENT AUDITOR'S REPORT

3 – 7

Management's approval of the financial statements

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS

FOR 2021

9 – 54

Statements of financial position

9 – 10

Statements of profit (loss) and other comprehensive income

11 – 12

Statements of Changes in Equity

Cash Flow Statements

14 – 15

Notes to the set of financial statements

16 – 54

CONSOLIDATED ANNUAL REPORT

55 – 138

INDEPENDENT AUDITOR‘S REPORT

To the shareholders of Kauno energija AB:

Report on the Audit of the Separate and the Consolidated Financial Statements

Opinion

We have audited the separate financial statements of Kauno energija AB (hereinafter –„the Company”) and the

consolidated financial statements of Kauno energija AB and its subsidiaries (hereinafter –„the Group”), which

comprise the separate statement of financial position of the Company and the consolidated statement of financial

position of the Group as at 31 December 2021, the separate income and other comprehensive income statement

and the consolidated income and other comprehensive income, the separate statement of changes in equity and

the consolidated statement of changes in equity, the separate statement of cash flows and the consolidated

statement of cash flows for the year then ended, and the notes to the separate and consolidated financial

statements, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying separate and consolidated financial statements present fairly, in all material

respects, the unconsolidated financial position of the Company and the consolidated financial position of the Group

as at 31 December 2021, and their respective unconsolidated and consolidated financial performance and their

respective unconsolidated and consolidated cash flows for the year then ended in accordance with International

Financial Reporting Standards, as adopted by the European Union.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under

those standards are further described in the Auditor’s Responsibilities for the Audit of the Separate and

Consolidated Financial Statements section of our report. We are independent of the Company and the Group in

accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional

Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the Law on

Audit of Financial Statements of the Republic of Lithuania and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other matters

The separate financial statements of the Company and the consolidated financial statements of the Group for the

year ended 31 December 2020 were audited by another auditor, who expressed an unqualified opinion on those

financial statements on 29 March 2021.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of

the separate and consolidated financial statements of the current period. These matters were addressed in the

context of our audit of the separate and consolidated financial statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on these matters. Each audit matter and our respective

response are described below.

The key audit matter

How the matter was addressed in our audit

Property, plant and equipment (in separate and consolidated financial statements, see Note 4 in the financial

statements)

The amortised cost of property, plant and equipment

accounted for by the Company and the Group in the

statement of financial position amounted to EUR

151,855 thousand and EUR 155,243 thousand

respectively.

Determining the value of property, plant and

equipment requires significant management

judgement based on assets useful lives. The key

assumptions used are described in Note 2.8

“Property, plant and equipment”.

Assessment of useful life of property, plant and

equipment requires subjective assumptions from the

Company and the Group, changes to which can

determine significant change in depreciation

expenses and result for the period, thereof.

We conducted these audit procedures:

We have considered the appropriateness of the

Company’s and the Group’s accounting policy, related

to the assessment of useful life of property, plant and

equipment and whether this policy complies with

applicable financial reporting standards.

We have reviewed the appropriateness of controls

implemented by the Company and the Group in

determining and adjusting useful life of property, plant

and equipment.

We have considered completeness and appropriateness

of related property, plant and equipment disclosures in

the Company’s separate and the Group’s consolidated

financial statements.

For this reason, we believe this area to be a key

audit matter.

Valuation of investment into subsidiaries (only in separate financial statements, see Note 5 in the financial

statements)

Investments into subsidiaries are stated at EUR

3,498 thousand in the financial statements.

The Company accounts for these investments under

amortised cost model. As disclosed in the Note 1 to

the financial statements, one of the subsidiaries has

generated a loss in 2021 and that indicates that the

value of the investment might be impaired.

For this reason the Company has prepared an

impairment test of it’s investment into subsidiary

Petrašiūnų katilinė AB using a discounted cashflow

method.

Determining the recoverable value of the investment

requires significant the Company’s judgements and

assumptions related to the future cashflows, growth

forecasts, discount rate and their adjustments in the

valuation. Changes in the mentioned assumptions

might significantly impact the valuation output. For

this reason, we believe this area to be a key audit

matter.

We conducted these audit procedures:

We have considered the appropriateness of the

valuation method used by the Company and evaluated

it in terms of other valuation methods used for similar

assets under the relevant financial reporting standards.

We have reviewed they key assumptions used in the

valuation model – we have considered the key inputs,

such as revenue, expense and capital expenditure

forecast rates, discount rate used and overall

appropriateness of the subsidiary’s financial data used

with respect to our understanding of the subsidiary’s

activity, it's market and future prospects.

We have reviewed the mathematical accuracy of the

applied discounted cash flow valuation model.

We have considered completeness and appropriateness

of related disclosures related to investments in

subsidiaries in the Company’s separate financial

statements.

Amortised cost of trade receivables (in separate and consolidated financial statements, see Note 8 in the

financial statements)

Trade receivables, stated at amortised cost by the

Company and the Group amounted to EUR 11,662

thousand and EUR 11,529 thousand respectively as

at 31 December 2021.

The Company and the Group recognises trade

receivables at amortised cost based on IFRS 9 –

Financial instruments requirements. Based on IFRS

9, the Company and the Group evaluates

impairment losses for trade receivables based on

expected credit losses (ECL) that are determined

through modelling methods and are calculated

based mostly on historic data on losses and changes

in credit risk, based on available quantitative and

qualitative data, for example probability of default

and expected losses at such default.

Determining these parameters requires significant

judgements from the management of the Company

and the Group, therefore we believe this area to be

a key audit matter.

We conducted these audit procedures:

We have considered the appropriateness of the

Company’s and the Group’s accounting policy, related

to the valuation of trade receivables and whether this

policy complies with applicable financial reporting

standards.

We have reviewed the main controls related to the

process of recovery of bad debts and the process of

impairment calculation.

We have reviewed the key data used in the ECL model,

evaluated the main assumptions used by the

management and their appropriateness in terms of

available historical and forward looking information.

We have considered completeness and appropriateness

of related valuation of trade receivables disclosures in

the Company’s separate and the Group’s consolidated

financial statements.

Other Information

The other information comprises the information included in the Group’s annual report, including Corporate

governance report, Remuneration report, Corporate social responsibility report but does not include the separate

and consolidated financial statements and our auditor’s report thereon. Management is responsible for the other

information.

Our opinion on the separate and consolidated financial statements does not cover the other information and,

except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion

thereon, except as specified below.

In connection with our audit of the separate and consolidated financial statements, our responsibility is to read

the other information and, in doing so, consider whether the other information is materially inconsistent with the

separate and consolidated financial statements, or our knowledge obtained in the audit or otherwise appears to

be materially misstated. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact. We have nothing to report in this

regard.

In addition, our responsibility is to consider whether information included in the Group’s annual management

report, including Corporate governance report and Remuneration report, for the financial year for which the

separate and consolidated financial statements are prepared is consistent with the separate and consolidated

financial statements and whether annual management report, including Corporate governance report and

Renumeration report, has been prepared in compliance with applicable legal requirements. Based on the work

carried out in the course of audit of the separate and consolidated financial statements, in our opinion, in all

material respects:

• The information given in the Group’s annual management report, including Corporate governance report and

Remuneration report, for the financial year for which the separate and consolidated financial statements are

prepared is consistent with the separate and consolidated financial statements; and

• The Group’s annual management report, including Corporate governance report and Remuneration report,

have been prepared in accordance with the requirements of the Law on Consolidated Financial Reporting by

Groups of Undertakings of the Republic of Lithuania and the Law on Financial Reporting by Undertakings of the

Republic of Lithuania.

We also need to check that the Corporate social responsibility report has been provided. If we identify that the

Corporate social responsibility report has not been provided, we are required to report that fact. We have nothing

to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Separate and

Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the separate and consolidated financial

statements in accordance with International Financial Reporting Standards, as adopted by the European Union,

and for such internal control as management determines is necessary to enable the preparation of separate and

consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate and consolidated financial statements, management is responsible for assessing the

Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to

going concern and using the going concern basis of accounting unless management either intends to liquidate

the Company and the Group’s or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting

process.

Auditor’s Responsibilities for the Audit of the Separate and Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the separate and consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an

auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these

separate and consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional

scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the separate and consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain

audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a

material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Company’s and the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based

on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may

cast significant doubt on the Company’s and the Group’s ability to continue as a going concern. If we conclude

that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related

disclosures in the separate and consolidated financial statements or, if such disclosures are inadequate, to

modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s

report. However, future events or conditions may cause the Company and the Group to cease to continue as

a going concern.

• Evaluate the overall presentation, structure and content of the separate and consolidated financial statements,

including the disclosures, and whether the separate and consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

activities within the Group to express an opinion on the consolidated financial statements. We are responsible

for the direction, supervision and performance of the group audit. We remain solely responsible for our audit

opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including any significant deficiencies in internal control that we

identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical

requirements regarding independence, and communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of

most significance in the audit of the separate and consolidated financial statements of the current period and are

therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation

precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a

matter should not be communicated in our report because the adverse consequences of doing so would

reasonably be expected to outweigh the public interest benefits of such communication.

Other Regulatory and Supervisory Requirements

By the decision of the shareholder meeting on 16 September 2021 we were elected to audit the separate and

consolidated financial statements of the Company and the Group. The total uninterrupted term of appointment

is 1 year.

We confirm that our audit opinion expressed in the Opinion section of our report is consistent with the audit

report for the separate and consolidated financial statements presented to the Company and the Group and its

Audit Committee.

We confirm that to the best of our knowledge and belief, we have not provided any prohibited non-audit services

referred to in Article 5(1) of the Regulation (EU) No 537/2014 of the European Parliament and of the Council.

Report on Compliance with the Requirements of European Single Electronic Format Technical

Regulation Standard (ESEF RTS)

The Company and the Group have prepared separate and consolidated financial statements for the year ended

31 December 2021 in accordance with the requirements of the European single electronic format technical

regulation standard (hereinafter – ESEF RTS) established on 17 December 2018 in the Commission Delegated

Regulation (EU) 2019/815.

We have undertaken a reasonable assurance engagement on the iXBRL tagging of the separate and the

consolidated financial statements included in the digital file named “abkaunoenergija-2021-12-31-en.zip”

prepared by Kauno energija AB.

Management responsibility for the digital files prepared in compliance with the ESEF Regulation requirements

Management is responsible for preparing digital files that comply with the ESEF RTS. This responsibility includes:

• the selection and application of appropriate iXBRL tags using judgement where necessary;

• ensuring consistency between digitised information and the separate and the consolidated financial statements

presented in human-readable format; and

• the design, implementation and maintenance of internal control relevant to the application of the ESEF RTS.

Auditor’s responsibility

In accordance with the requirements of the legislations of the European Union, our responsibility is to express an

opinion on whether the electronic tagging of the separate and the consolidated financial statements complies in

all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable

assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised),

Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by

the International Auditing and Assurance Standards Board.

A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain

evidence about compliance with the ESEF RTS. The nature, timing and extent of procedures selected depend on

the practitioner's judgment, including the assessment of the risks of material departures from the requirements

set out in the ESEF RTS, whether due to fraud or error. A reasonable assurance engagement includes:

• obtaining an understanding of the tagging and the ESEF RTS, including of internal control over the tagging

process relevant to the engagement;

• obtaining sufficient appropriate evidence as to the operating effectiveness of relevant controls over the

tagging process when the assessment of the risks of material misstatement include an expectation that such

internal controls are operating effectively or procedures other than testing controls cannot alone provide

sufficient appropriate evidence;

• reconciling the tagged data with the audited separate and consolidated financial statements of the Company

and the Group for the year ended 31 December 2021;

• evaluating the completeness of the Company’s and the Group’s tagging of the separate and the consolidated

financial statements;

• evaluating the appropriateness of the Company’s and Group’s use of iXBRL elements selected from the ESEF

taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been

identified;

• and evaluating the use of anchoring in relation to the extension elements.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

In our opinion, the separate and the consolidated financial statements included in the annual financial report of

Kauno energija AB for the year ended 31 December 2021 provided in the file named “abkaunoenergija-2021-12-

31-en.zip” are tagged, in all material respects, in compliance with the ESEF RTS.

The audit engagement partner for this independent auditor's report is Romanas Skrebnevskis.

Auditor Romanas Skrebnevskis

Auditor’s certificate No. 000471

ROSK Consulting UAB

Audit company’s certificate No. 001514

Vilnius, Lithuania

6 April 2022

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Statements of financial position

The Group

The Company

Notes

2021-12-31

2020-1231

2021-12-31

2020-12-31

ASSETS

Fixed assets

Intangible fixed assets

117

Property, plant and equipment

Land and buildings

6 115

7 145

5 731

6 015

Buildings

121 810

109 278

121 348

108 824

Machinery and equipment

15 514

18 741

14 263

16 947

Vehicles

445

388

445

375

Plant and tools

1 997

2 238

1 996

2 236

Constructions in progress and

prepayments

8 089

12 191

8 072

12 191

Investment property

1 273

401

160

Total property, plant and

equipment

155 243

150 382

151 855

146 748

Right of use assets

1 207

1 266

1 006

1 060

Non-current financial assets

Investments in subsidiaries

3 498

2 064

Amounts receivable after one year

111

Other financial assets

5,6

409

518

409

Financial fixed assets, total

186

409

4 016

2 473

Non-current assets, total

156 713

152 174

156 954

150 398

Current assets

Inventories and prepayments

Inventories

1 756

1 361

1 407

1 328

Prepayments

4 407

573

4 055

485

Total inventories and

prepayments

6 163

1 934

5 462

1 813

Amounts receivable within one

year

Trade receivables

11 529

6 727

11 662

6 727

Loans to the Group companies

443

Other amounts receivable

1 833

243

1 794

194

Amounts receivable within one

year, total

13 362

6 970

13 456

7 364

Cash and cash equivalents

3 696

1 800

2 782

1 675

Assets held for sale

Current assets, total

23 221

10 729

21 700

10 852

Assets, total:

179 934

162 903

178 654

161 250

(continued on the next page)

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Statements of financial position (continued)

The Group

The Company

Notes

2021-12-31

2020-12-31

2021-12-31

2020-12-31

EQUITY AND LIABILITIES

Property

Capital

74 476

Legal reserve

7 447

Other reserves

3 000

2 900

3 000

2 900

Current year profit

(152)

457

Profit (loss) of the previous years

4 750

5 002

4 910

4 953

Total retained profit (loss)

4 822

4 850

5 367

5 010

Total equity

89 745

89 673

90 290

89 833

Amounts payable and liabilities

Amounts payable after one year

Financial debts

32 658

23 534

32 658

22 967

Lease (finance lease)

1 316

1 336

1 113

1 127

Deferred profit tax liabilities

5 633

5 541

5 924

5 743

Grants and subsidies

32 715

29 966

32 229

29 319

Employee benefit obligations

465

375

455

375

Long-term trade payables

Amounts payable after one year,

total

72 787

60 752

72 379

59 531

Accounts payable within one year

Financial debt and leasing

11,12

3 014

3 012

2 445

2 434

Trade creditors

11 376

6 802

10 701

6 852

Employee related liabilities

649

600

632

589

Received prepayments

570

645

464

644

Tax payable

609

387

588

367

Derivative financial instruments

Employee benefit obligations

122

124

122

124

Other provisions

577

647

577

647

Accrued costs and deferred income

210

147

187

121

Other amounts payable and liabilities

275

108

269

108

Amounts payable within one year,

total

17 402

12 478

15 985

11 886

Total accounts payable and

liabilities

90 189

73 230

88 364

71 417

Total equity and liabilities

179 934

162 903

178 654

161 250

The following notes to financial statements are an integral part of these financial statements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Statement of profit (loss) and other comprehensive income

The Group

Notes

2021

2020.

Operating income

Sales revenue

50 963

42 030

Other operating income

4 543

1 600

Total operating income

55 506

43 630

Operating expenses

Fuel and purchased energy

(32 998)

(20 924)

Salaries, social insurance

(7 376)

(6 430)

Depreciation and amortisation

(7 333)

(7 444)

Repair and maintenance

(680)

(951)

Change in impairment of receivables

587

Taxes, other than income tax

(2 130)

(1 814)

Electricity

(1 265)

(1 230)

Raw materials and goods used

(1 065)

(505)

Water

(1 086)

(1 117)

Change in realisable value of inventories and

impairment of fixed assets

(207)

Other costs

(1 984)

(2 079)

Other operating expenses

(434)

(318)

Operating expenses, total

(55 713)

(42 997)

Operating profit (loss)

(207)

633

Other interest and similar income

673

183

Loss from disposal of securities

(208)

333

Interest and other similar expenses

(117)

(365)

Income from financing and investment activities, net

value

348

151

Profit before taxation

141

784

Income tax

(20)

Deferred income tax income (loss)

(120)

(156)

Profit for the reporting period

628

Other provisions to be reclassified subsequently to profit

or loss

(780)

Gross income

(152)

Profit attributable to:

Owners of the Company

628

Non-controlling interests

Total comprehensive income attributable to:

Owners of the Company

(152)

Non-controlling interests

Earnings per share (EUR)

0,00

0,01

The following notes to financial statements are an integral part of these financial statements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Statements of profit (loss) and other comprehensive income (continued)

The Company

Comments

2021

2020.

Operating income

Sales revenue

50 981

42 036

Other operating income

3 808

1 486

Total operating income

54 789

43 522

Operating expenses

Fuel and purchased energy

(33 223)

(21 622)

Salaries, social insurance

(7 265)

(6 314)

Depreciation and amortisation

(6 756)

(6 879)

Repair and maintenance

(658)

(916)

Change in impairment of receivables

587

Taxes, other than income tax

(2 074)

(1 786)

Electricity

(1 160)

(1 121)

Raw materials and goods used

(545)

(496)

Water

(1 081)

(1 114)

Change in realisable value of inventories and

impairment of fixed assets

(207)

Other costs

(2 020)

(2 039)

Other operating expenses

(441)

(232)

Operating expenses, total

(54 585)

(42 697)

Operating profit (loss)

204

825

Other interest and similar income

671

181

Loss from disposal of securities

(208)

333

Interest and other similar expenses

(100)

(337)

Income from financing and investment activities,

net value

363

177

Profit before taxation

567

1 002

Income tax

Deferred income tax income (loss)

(181)

(165)

Profit for the reporting period

386

837

Other provisions to be reclassified subsequently to

profit or loss

(780)

Gross income

457

Earnings per share (EUR)

0,01

0,02

The following notes to financial statements are an integral part of these financial statements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Statement of Changes in Equity

The Group

Notes

Capital

Legal

reserve

Other

reserves

Retained

earnings

Total

Balance on 31

December 2019

74 476

7 447

2 900

5 002

89 825

Profit for the reporting

period

628

Other comprehensive

income

(780)

Balance on 31

December 2020

74.476

7.447

2.900

4 850

89 673

Formed reserves

3 000

(3 000)

Reversed reserves

(2 900)

2 900

Profit for the reporting

period

Other comprehensive

income

Balance on 31

December 2021

74 476

7 447

3 000

4 822

89 745

The Company

Notes

Capital

Legal

reserve

Other

reserves

Retained

earnings

Total

Balance on 31

December 2019

74 476

7 447

2 900

4 953

89 776

Profit for the reporting

period

837

Other comprehensive

income

(780)

Balance as at 31

December 2020

74 476

7 447

2 900

5 010

89 833

Formed reserves

3 000

(3 000)

Reversed reserves

(2 900)

2 900

Profit for the reporting

period

386

Other comprehensive

income

Balance on 31

December 2021

74 476

7 447

3 000

5 367

90 290

The following notes to financial statements are an integral part of these financial statements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Cash Flow Statements

The Group

The Company

2021

2020

2021

2020

Cash flows from (to) operating activities

Comprehensive income

(152)

457

Adjustments to non-cash items:

Depreciation and amortisation

9 416

9 365

8 734

8 622

Write-offs and changes in impairment of

receivables

(587)

(18)

(587)

(29)

Interest expenses

117

389

100

362

Change in fair value of derivative financial

instruments

(6)

Loss (gain) on sale and write-down of fixed

assets and securities

(74)

(495)

(74)

(495)

Grants and subsidies (amortisation)

(1 750)

(1 578)

(1 589)

(1 416)

Change in realisable value of inventories and

impairment of fixed assets

(51)

207

(51)

207

Change in employee benefits obligation

117

115

Profit tax expense

140

173

181

182

Change in accruals

150

(98)

144

(93)

Change in provision liabilities

647

(70)

647

Elimination of other results from financing and

investing activities

(673)

(177)

(1 726)

(181)

Adjustment to total non-cash items

6 704

8 526

5 062

7 921

Changes of working capital:

Decrease (increase) in inventories

(319)

(28)

(14)

Decrease (increase) in prepayments

(3 834)

582

(3 570)

612

Decrease (increase) in trade receivables

(4 502)

1 806

(4 635)

1 806

Decrease (increase) in other amounts

receivable

(1 590)

532

(1 600)

563

Increase (decrease) in long-term trade debts

(111)

(4)

Increase (decrease) in trade debtors and

advances received

5 246

(96)

5 142

(255)

Decrease (increase) in employee related

liabilities

(368)

(326)

Increase (decrease) in taxes payable

222

(80)

221

(35)

Decrease (increase) in received prepayments

(75)

(180)

Increase (decrease) in other current liabilities

161

Changes in total working capital

(4 887)

2 389

(4 446)

2 351

Net cash flows from operating activities

1 889

10 763

1 073

10 329

(continued on the next page)

The following notes to financial statements are an integral part of these financial statements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Cash flow statements (continued)

The Group

The Company

2021

2020.

2021

2020.

Cash flows from (to) investing activities

Acquisition of intangible fixed assets and

property, plant and equipment

(14 667)

(21 198)

(14 236)

(21 198)

Sale of property, plant and equipment

563

606

563

606

Interest received on overdue receivables

621

177

621

181

Acquisition of investments

(407)

(1 000)

(407)

Net (used) cash flows from investing

activities

(13 483)

(20 822)

(14 052)

(20 818)

Cash flows from (to) financing activities

Loans received

12 000

15 000

12 000

15 000

Loans repaid

(2 833)

(10 858)

(2 255)

(10 291)

Interest paid

(116)

(394)

(101)

(377)

Lease payments

(60)

(137)

(57)

(137)

Subsidy received

4 499

6 029

4 499

6 029

Net cash flows from (used in) financing

activities

13 490

9 640

14 086

10 224

Net increase (decrease) in cash flows

1 896

(419)

1 107

(265)

Cash and cash equivalents at the beginning

of the period

1 800

2 219

1 675

1 940

Cash and cash equivalents at the end of the

period

3 696

1 800

2 782

1 675

(end)

The following notes to financial statements are an integral part of these financial statements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

Explanatory notes to financial statements

1. General information

AB Kauno energija (hereinafter referred to as the Company) is a public limited liability company registered in the

Republic of Lithuania. It’s headquarters address: Raudondvario pl. 84, Kaunas, Lithuania. Data about the

Company is collected and stored in the Registry of Legal Entities.

The Company is engaged in the supply of heat and hot water, production and sale of electricity and maintenance

of collector-tunnels. The Company also provides heating system maintenance services. The Company was

registered on 1 July 1997, following the reorganisation of AB Lietuvos energija. The Company's shares are traded

on the Baltic Additional Trading List of the Nasdaq Vilnius Stock Exchange.

As at 31 December 2021 and 31 December 2020 the Company's shareholders were:

2021-12-31

2020-12-31

Number of held

shares, units

Ownership

(%)

Number of

held shares,

units

Ownership

(%)

Kaunas city municipality

39 736 058

92.84

39 736 058

92.84

Kaunas district municipality

1 606 168

3.75

1 606 168

3.75

Jurbarkas district municipality

746 405

1.74

746 405

1.74

Other small shareholders

713 512

1.67

713 512

1.67

42 802 143

100.00

42 802 143

100.00

The Company's authorised capital is equal to EUR 74 475 728.82 and is divided into 42 802 143 ordinary shares

with a nominal value of EUR 1.74 each. As at 31 December 2020 and 31 December 2021 the Company had no

treasury shares. As at 31 December 2020 and 31 December 2021, all shares were fully paid up.

On 31 December 2021 the Company and its subsidiaries UAB GO Energy LT and AB Petrašiūnų katilinė form a

group (the Group):

Company

home address

Part of the

Company-

owned

Cost of

investment

Profit (loss)

for the

reporting

period

Equity

Company's

main

activities

UAB GO Energy

Savanorių pr.

347, Kaunas

100 per

cent.

2 763

111

2 621

Innovative

energy

projects,

consultations,

Lease

AB Petrašiūnų

katilinė

R. Kalantos g.

49, Kaunas

100 per

cent.

1 894

(348)

188

Heat

production

The Company's shareholding in Group companies remained unchanged during 2021.

The average listed number of employees of the Group in the reporting period was 380 (396 in 2020). The average

list number of employees of the Company in the reporting period was 355 (381 in 2020).

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

1. General information (continued)

Legal regulation

Pursuant to the Law of the Republic of Lithuania on the Heat Sector, the Company's activities are licensed and

regulated by the State Energy Regulatory Council (hereinafter referred to as the Council). On 26 February 2004

the Council granted the Company a heat supply licence. The licence is valid for an unlimited period but may be

revoked by an appropriate decision of the Council depending on compliance with certain conditions. The Council

also sets price caps for heat supply. On 13 September 2018 the Council, by its Resolution No. O3E-283,

established new components of the basic heat price for the Company, which were in force during the audited

period. In accordance with the price-setting methodology, the Council recalculates the price components after the

first year of the basic price and the rate is adjusted prospectively. The recalculated components became applicable

on 1 November 2020.

By resolution No O3E-351 of 2 September 2019, the Council set new heat base price components for AB

Petrašiūnų katilinė, which will be valid until 30 September 2024.

Economic activities

By decision of the Extraordinary General Meeting of Shareholders of the Company on 2 October 2015 “On the

acquisition of Palemonas heat facilities” and the decision of the Board of Directors of the Company of 20 July

2017 “On the Acquisition of the Heat facilities of Palemonas Settlement” on 8 January 2020 AB Kauno energija

and UAB Fortum Heat Lietuva concluded an agreement on the purchase and sale of the heat facilities of

Palemonas in Kaunas, whereby AB Kauno energija acquired from UAB Fortum Heat Lietuva a boiler house with

heat supply networks and related equipment and commenced the heat supply activities in Palemonas on 1 February

2020.

The Company's production capacities consist of the Petrašiūnai power plant, 4 boiler houses in Kaunas integrated

network, 7 regional boiler houses in Kaunas district, 1 in Jurbarkas, 14 isolated network and 26 local (household)

boiler houses in Kaunas city, as well as 8 boiler houses for water heating in Sargėnai district. The Group's

production capacity consists of the Company's production capacity and 1 boiler house of the subsidiary in Kaunas.

In September 2021 at the boiler house of the integrated network at A. Juozapavičiaus pr. 23A, a gas boiler of 1.6

MW was dismantled. The Group's total thermal capacity on 31 December 2021 was approximately 683 MW (of

which 48 MW are condensing economizers), and the total power generation capacity of the entire Group is

approximately 683 MW (of which 48 MW are condensing economizers). The total installed thermal capacity of

the Company is approximately 664 MW (of which 48 MW are condensing economizers), electrical capacity is

8.75 MW, of it in Petrašiūnai power plant – 314.6 MW thermal capacity (of which 17.8 MW is condensing

economizer) and 8 MW of electrical capacity, 39.4 MW of thermal capacity in Jurbarkas (including 4.4 MW – a

condensing economizer). The total power generation capacity of the Company as a whole is approximately 673

MW (of which 48 MW are condensing economizers).

The Company makes investments after taking into account the economic situation, the competitive environment

and the availability of financing. Investment plans are approved by the shareholders and coordinated by the Board.

The Company's management approved these financial statements on 6 April 2022. The Company's shareholders

have a statutory right to approve these financial statements or disapprove them and require the management to

draft new financial statements.

2. Summary of significant accounting policies

2.1. Confirmation of Conformity

The separate and consolidated financial statements presented (hereinafter referred to as financial statements) are

prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European

Union (EU), and interpretations thereof. Standards have been issued by the International Accounting Standards

Board (IASB) and interpretations have been issued by the International Financial Reporting Interpretations

Committee (IFRIC).

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.2. Basis of preparation of the financial statements

These financial statements are prepared on an historical cost basis, except for financial assets and liabilities for

which changes in fair value are recognised as profit or loss. Historical cost is essentially based on the fair value

of the consideration paid for an asset.

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

All amounts in these financial statements are recorded and presented in euro (rounded to the nearest thousand

euro, unless otherwise stated) – the functional and presentation currency of the Group and the Company.

2.3. Adaptation of new and/or amended standards

(a) New and/or amended standards and interpretations effective from 1 January 2021:

The following standards, amendments to the existing standards and interpretations issued by the International

Accounting Standards Board (IASB) and adopted by the European Union (further – EU) are effective for the

current period and were adopted by the Company and the Group:

• Amendments to IFRS 4 “Insurance Contracts” – deferral of IFRS 9” (effective for annual periods

beginning on or after 1 January 2021);

• Amendment to IFRS 16 Leases Covid-19 Related Rent Concessions (effective for annual periods

beginning on or after 1 January 2020);

• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform – Phase

2 (effective for annual periods beginning on or after 1 January 2021).

The application of these standards, amendments and interpretations had no material impact on the financial

statements of the Company and the Group.

(b) Standards, amendments and interpretations to existing standards issued by the IASB, adopted by EU, but

not yet effective:

As at the date of these consolidated financial statements, the Company and the Group have not early adopted the

following new and revised IFRS standards, amendments and interpretations that have been issued but are not yet

effective:

• Amendments to IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment, IAS 37

Provisions, Contingent Liabilities and Contingent Assets; and Annual Improvements 2018-2020

(effective for annual periods beginning on or after 1 January 2022);

• Amendments to IFRS 16 Leases: Covid-19 Related Rent Concessions beyond 30 June 2021 (effective for

annual periods beginning on or after 1 April 2021);

• IFRS 17 Insurance Contracts; including amendments to 17 IFRS (effective for annual periods beginning

on or after 1 January 2023);

• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement No 2: Disclosure

of Accounting policies (effective for annual periods beginning on or after 1 January 2023);

• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of

Accounting Estimates (effective for annual periods beginning on or after 1 January 2023).

The management of the Company and the Group does not expect that the adoption of these standards,

amendments and interpretations will have a material impact on the separate and consolidated financial statements

of the Company and the Group in future periods.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.3. Adaptation of new and/or amended standards (continued)

have not yet been endorsed by EU:

IFRSs currently endorsed by EU are not significantly different from the standards endorsed by the IASB, except

the standards, amendments and interpretations that were not endorsed by EU (the effective dates are applicable to

IFR to full extent). These standards, amendments and interpretations are listed below:

• Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or

Non-current and Classification of Liabilities as Current or Non-current – Deferral of Effective Date

(effective for annual periods beginning on or after 1 January 2023);

• Amendments to IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single

Transaction (applicable for annual periods beginning on or after 1 January 2023);

• Amendments to IFRS 17 Insurance Contracts: Initial application of IFRS 17 and IFRS 9 – Comparative

Information (effective for annual periods beginning on or after 1 January 2023);

The management of the Company and the Group does not expect that the adoption of these standards, amendments

and interpretations will have a material impact on the separate and consolidated financial statements of the

Company and the Group at the time of its first adoption.

2.4. Consolidation principles

Consolidation principles

The consolidated financial statements of the Group include AB Kauno energija and its subsidiaries. The financial

statements of the subsidiaries are for the same reporting period as those of the Parent Company. The consolidated

financial statements are prepared on the basis of uniform accounting principles for similar transactions and other

events in similar circumstances.

Businesses acquired or disposed of during the year are included in the consolidated financial statements from the

date of the transfer of control or until the date on which control is lost. Intercompany transactions, balances and

unrealised gains and losses are eliminated on consolidation. The gross income of subsidiaries is attributable to the

owners of the enterprise and to the non-controlling interest, even if the result of the non-controlling interest is

negative.

A subsidiary is an undertaking controlled, directly or indirectly, by its parent undertaking. Typically, a company

is controlled when the Group directly or indirectly owns more than 50 percent of the company's share capital

carrying the voting rights and/or when it is able to control the financial and operating activities so as to obtain

benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial

statements at the beginning and end of the control dates.

Changes in the Group's equity interest in subsidiaries

Changes in the Group's equity interest in subsidiaries that do not result in a loss of control of the Group by the

subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interest and non-

controlling interest are adjusted to reflect changes in their respective interests in subsidiaries. Any difference

between the adjustment for the non-controlling interest and the fair value of the consideration paid or received is

recognised directly in equity and attributable to the owners of the entity.

When the Group loses control of a subsidiary, the gain or loss on disposal is calculated as the difference between

(i) the sum of the fair value of the consideration received and the aggregate of the fair value of any retained

interest; and (ii) the previous carrying amounts of the subsidiary's assets (including goodwill) and liabilities and

non-controlling interests.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.4 Consolidation principles (continued)

When a subsidiary's assets are accounted for by remeasuring the fair value amount and the related gain or loss has

been included in comprehensive income and accumulated in equity, the amounts previously included in other

comprehensive income and accumulated in equity are accounted for in the same way as the disposal of the related

asset (i.e. reclassified to profit or loss or transferred directly to retained earnings, as specified in the relevant

IFRS). The fair value of the remaining investment in the former subsidiary at the date of the loss of control is

treated as the fair value at initial recognition for subsequent accounting purposes in accordance with IFRS 9

Financial Instruments, or, if appropriate, as the acquisition cost of the investment in an associate or jointly

controlled entity at initial recognition.

2.5. Investments in subsidiaries

In the statement of financial position of the company, investments in subsidiaries are accounted for using the

acquisition cost method. Dividends received from subsidiaries are recognised in profit or loss and other

comprehensive income.

IAS 36 “Impairment of Assets” applies impairment criteria to determine whether it is necessary to recognise

impairment losses in respect of the Company's investment in a subsidiary. When necessary, the full carrying

amount of an investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset

by comparing its recoverable amount (the higher of its value in use and its fair value less costs to sell) with its

carrying amount. Any impairment losses recognised shall form part of the carrying amount of the investment.

Any reversal of an impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable

amount of the investment subsequently increases.

2.6. Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated

impairment losses. Amortisation is recognised on a straight-line basis over the estimated useful lives. The useful

life and depreciation method are reviewed at each reporting date, prospectively recording any changes in the

estimate assessment. The amortisation calculation shall be discontinued from the first day of the month following

the disposal of the asset or when the total cost of the acquisition of an intangible asset is transferred to cost or to

the value of another asset. Intangible assets with an indefinite useful life acquired separately are carried at cost

less impairment losses.

Derecognition of intangible assets

An intangible asset is derecognised when it is sold or when no future economic benefit is expected from the use

or sale of the asset. Gains or losses arising from the derecognition of an intangible asset, calculated as the

difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss

when the asset is derecognised.

Licenses

Amounts paid for licenses are capitalized and amortized over the term of validity (3 to 4 years)..

Software

The new software acquisition costs are capitalized and recognized as an intangible fixed asset if these costs are

not an integral part of the hardware. Software is amortized over a period no longer than 3 years.

Costs incurred in order to restore or maintain the future economic benefits that the Company expects from the

originally assessed standard of performance of existing software systems are recognised as an expense when the

restoration or maintenance work is carried out.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.7. Accounting for emission allowances

Emission allowances received shall be accounted for using the net commitment method. Under this approach, the

Group and the Company account for emission allowances at nominal value.

Commitments to acquire additional emission allowances are recognised when they arise (e.g. commitments are

not accounted for on the basis of expected future emissions) and are accounted for only when the actual emissions

of the Group and the Company exceed the amount of available emission allowances.

Under the net commitment approach, the Group and the Company assess the lack of emission allowances by

comparing the quantity of emission allowances available with the actual annual emissions.

Sales of emission allowances are recorded at the amount of the sales transaction. Any differences between the fair

value of the sale and the carrying amount of the allowances held shall be recognised as profit or loss, regardless

of whether there is an actual or expected shortfall in the allowances at the time of the transaction. Where the sale

of emission allowances results in an actual shortfall of emission allowances, the financial position reports shall

recognise additional liabilities, including profits or losses that affect the relevant costs.

2.8. Property, plant and equipment

Property, plant and equipment is carried at acquisition cost, which does not include routine maintenance costs,

less accumulated depreciation and estimated impairment losses, if any. The cost of acquisition includes the cost

of replacing property, plant and equipment when they are incurred, provided that these costs qualify for the

recognition of the asset.

Property classified as construction in progress, under construction for production, supply or administrative

purposes, or for other purposes not yet determined, is carried at acquisition cost less impairment losses. The cost

includes professional fees and capitalised borrowing costs of long run assets in accordance with the accounting

policies of the Group and the Company. Depreciation of these assets shall begin using the same method of

depreciation as for other immovable property when the property is ready for its intended use.

Depreciation is recognised in such a way that, over the useful life of the asset, its cost (excluding land and

construction in progress) less its residual value is written off on a straight-line basis. The estimated useful lives,

residual values, and depreciation methods are reviewed at each year-end, with any changes in the accounting

estimate accounted for prospectively.

The useful service lives are reviewed every year to ensure that the period of depreciation is consistent with the

expected useful life of the long-term tangible asset.

Depreciation is computed on a straight-line basis over the following estimated useful lives:

Years

Buildings

15 – 50

Investment property

Buildings

15 – 70

Machinery and equipment

5 – 20

Vehicles

4 – 10

Plant and tools

3 – 16

Land is not depreciated.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.8. Property, plant and equipment (continued)

An asset is recognised as non-current when it has a useful life of more than one year and the acquisition cost

exceeds EUR 144.81.

Property, plant and equipment acquired under finance leases are depreciated over their useful lives using the same

useful lives as own assets.

Property, plant and equipment are derecognised when they are sold or when no future economic benefits are

expected from the use or sale of the asset. Any gain or loss arising on the sale or write-down of an item of property,

plant and equipment is calculated as the difference between the net disposal proceeds and the carrying amount of

the asset and is recognised in profit or loss in the profit (loss) statement and other comprehensive income.

Subsequent repair costs are added to the cost of an asset if it is probable that future economic benefits will flow

to the Group and the Company from the expenditure and the cost of the expenditure can be measured reliably.

The carrying amount of the modified portion is derecognised. All other repair costs are recognised as an expense

that affects profit or loss for the period when they are incurred.

Construction-in-progress is stated at cost. This includes the cost of construction, plant and equipment and other

directly attributable costs. Depreciation is not charged on construction in progress until the asset is placed in

service or is ready for use.

Fixed assets held for sale

Property, plant and equipment, or groups of assets held for sale consist of assets and liabilities that are expected

to be recovered primarily through sale and not through continuing use, are classified as held for sale. Immediately

before classifying an asset as held for sale, the asset (or parts of a pool of held for sale assets) is measured in

accordance with the applicable International Financial Reporting Standards as adopted by the European Union.

Impairment losses on assets held for sale measured at the time of initial classification and subsequent gains and

losses related to the revaluation of assets shall be included in profit or loss. Revenue from the reversal of

depreciation is not recognised at a higher amount than accumulated impairment losses.

When property, plant and equipment is recorded as held for sale, depreciation is no longer charged.

2.9. Impairment of property, plant and equipment and intangible assets other than goodwill

At each date of preparation of the statement of financial position, the Group and the Company shall review the

residual value of property, plant and equipment and intangible assets to determine whether there is any indication

that these assets are impaired. If any such indication exists, the Group and the Company assesses the recoverable

amount of the asset in order to be able to assess the impairment loss (if any). Where it is impossible to assess the

recoverable value of assets, the Group and the Company estimates the recoverable amount in the cash-generating

group to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, the assets

of the Group and the Company are also allocated to separate income-generating groups of assets, or alternatively,

they are allocated to the lowest income-generating group of assets for which a reasonable and consistent basis of

allocation can be identified.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.9. Impairment of property, plant and equipment and intangible assets other than goodwill (continued)

The recoverable amount is the higher of fair value less costs to sell and value in use. When estimating value in

use, expected future cash flows are discounted to their present value using a pre-tax discount rate that is based on

current market conditions, the existing time value of money and the risks associated with the asset that were not

taken into account when estimating future cash flows.

If the estimated recoverable amount of the asset (or cash-generating asset group) is less than its carrying amount

of this asset, the carrying amount of the asset is reduced to the recoverable value of this asset (or cash-generating

asset group). Impairment losses are recognised immediately through profit or loss. The Group and the Company

have one group of income-generating assets for the heat business.

If after the recognition of impairment loss the value of the asset increases, the carrying amount of the asset (cash-

generating asset group) is increased to the newly estimated recoverable amount, but so that the increase does not

exceed the carrying value of the asset (cash-generating asset group) if impairment losses previous years had not

been recognized. Reversals of impairment losses are recognised immediately in profit or loss.

2.10. Financial assets

The Group and the Company classify their financial assets in the following groups:

• Financial assets that are measured at fair value in subsequent periods, with the change in fair value recognised

in other comprehensive income or profit or loss; and

• Financial assets measured at amortised cost.

The classification depends on the entity's financial asset management model and the contractual cash flow

conditions.

Recognition and initial measurement

Trade receivables are initially recognised when they arise. On initial recognition, all other financial assets and

financial liabilities are recognised when the Group and the Company become a party to the contractual provisions

of the instrument. Financial assets (other than trade receivables without a significant financing component) or

financial liabilities are initially measured at fair value plus, if the instrument is not measured at fair value through

profit or loss, transaction costs directly attributable to the acquisition or issue. Trade receivables without a

significant financing component are initially recognised at transaction price.

Classification and subsequent assessment

At initial recognition, financial assets are classified and measured as follows:

• Amortised cost;

• At fair value through profit or loss.

Financial assets are not reclassified in subsequent periods unless the Group and the Company change their

financial asset management model. In this case, all related financial assets shall be reclassified on the first day of

the first reporting period following the change in business model.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.10. Financial assets (continued)

A financial asset is measured at amortised cost if it meets both of the following criteria and is not classified as an

asset measured at fair value through profit or loss:

• The entity intends to hold the asset for contractual cash receipts;

• And contractual cash flows on specific dates include only payments of principal and interest on the amount

due.

Write-off

The carrying amount of a financial asset is written down, in whole or in part, if there is no realistic prospect of its

recovery. This usually occurs when the Group and the Company determine that the debtor does not have sufficient

assets or sources of income to generate sufficient cash flows to repay the amounts written off. However, financial

assets that are written off may be recovered to meet debt collection requirements imposed by the Group and the

Company.

Assessment of significantly increased credit risk

The Group and the Company assess the probability of default at the initial recognition of financial assets and at

each balance sheet date, taking into account whether there has been a significant increase in credit risk since initial

recognition. In order to assess whether there has been a significant increase in credit risk, the Group and the

Company compare the risk of default on assets at the date of preparation of the statements with the risk of default

on initial recognition. In analysing whether credit risk has increased significantly, the following factors shall be

assessed:

• Significant changes in the internal credit rating;

• Significant changes in the external credit rating (if any);

• Actual or foreseeable material adverse changes in the business environment, financial or economic situation

which may materially affect the ability of the customer to meet its obligations;

• Actual or anticipated significant changes in the client's performance.

Based on the Group's and the Company's debt recovery statistics, management considers that the credit risk has

increased from the time of initial recognition only if the contractual payments are delayed by more than 30 days.

Write-off policy

Financial assets are written off when there is no reasonable expectation of recovery, for example, because of the

debtor's refusal to comply with a repayment plan and the absence of collateral or other security. After the

foreclosure, the Group continues to pursue debt collection to recover the debt. Any amounts recovered are

recognised in profit or loss.

TKN valuation – trade receivables and other contract assets

The Group and the Company apply a simplified approach to the calculation of lifetime expected credit losses over

the lifetime of a loan, using the provisioning matrix for all trade receivables and other receivables. In order to

calculate expected credit losses using the provisioning matrix, trade receivables and other receivables are

classified into separate groups according to the general characteristics of credit risk. The amounts of each group

are analysed on the basis of the number of days past due and a loss indicator shall be assigned to each group of

amounts past due. Loss ratios are calculated using management's expert judgement using statistical recovery

information for the last 2 years. Such information shall be adjusted, if necessary, in the light of forward-looking

information. The table below provides information on the expected credit losses calculated for the Group and the

Company for each group of overdue amounts.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.10. Financial assets (continued)

As trade receivables and other receivables generally do not include collateral or other credit protection, the

expected loss ratio corresponds to the probability of default.

Trade receivables:

Not

overdue

Overdue in days

The Group

from 1

to 30

from

31 to 90

from

91 to

180

from

181 to

270

from

271 to

360

from 361

up to 720

than

721

Expected credit

loss rate %

100

Company

Expected credit

loss rate %

100

Expected lifetime credit losses on trade receivables and other receivables shall be calculated using the simplified

approach in accordance with the requirements of IFRS 9.

2.11. Derivative financial instruments

The Group and the Company use derivative financial instruments such as interest rate swaps to hedge interest rate

risk. Such derivatives are recognised at fair value on the trade date and remeasured at fair value in subsequent

periods. Derivative financial instruments are accounted for as financial assets when their fair value is positive and

as financial liabilities when their fair value is negative.

Any gain or loss arising from a change in the fair value of derivatives during the year is accounted for directly in

profit or loss.

The fair value of interest rate swaps is determined by reference to the market value of similar instruments.

2.12. Inventories

Inventories are stated at the lower of cost or net realisable value. Net realisable value refers to the estimated selling

price of inventories less any estimated selling costs. The cost of inventories is calculated using the FIFO method.

The cost of inventories is reduced by discounts and write-downs received from suppliers during the reporting

period and applied to inventories held in stock.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.13. Provisions

A provision is recorded when, as a result of a past event, the Company has a present obligation (legal or

constructive) and it is probable that the Group and the Company will be required to settle the obligation, and a

reliable estimate of the amount of the obligation can be made.

The amount recognised as a provision is the best estimate at the end of the reporting period of the consideration

that will be required to settle the present obligation, taking into account the risks and uncertainties arising from

the obligation. When a provision is valued using the estimated cash flows to cover a liability, its carrying value is

the present value of these cash flows.

Where it is expected that part or all of the economic benefits needed to cover the provision will be recovered from

a third party, the amount receivable is covered by the asset if it is certain that the compensation will be received

and that the amount receivable can be measured reliably.

2.14. Cash and cash equivalents

Money consists of money in bank accounts and in cash, and money on the road. Cash equivalents are short-term,

highly liquid investments that are readily converted to known amounts of cash. The term of such investments does

not exceed three months, and the risk of value changes is very insignificant.

2.15. Employee benefits

Recognition of post-employment benefits is recognised as an expense when the employees have performed the

service that entitles them to the benefits.

The post-employment benefit liabilities recognised in the statement of financial position reflect the present value

of the defined benefit obligations in the collective agreement, adjusted by unrecognised actuarial gains or losses

and unrecognised past service costs, and reduced by the fair value of the plan assets. Any assets arising from this

calculation may not exceed the cost of unrecognised actuarial losses and past service plus the present value of

repayments and reductions in future plan contributions. Actuarial gains or losses are recorded in the statement of

other comprehensive income.

2.16. Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset

the preparation of which for the intended use or sale takes a long time are included in the cost of the asset until

the asset is prepared for the intended use or sale.

Investment income earned on a temporary investment of a specific amount borrowed that has not yet been used

for a qualifying asset shall be deducted from the borrowing costs allowed for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.17. Financial liabilities and equity instruments

The Group and the Company recognise financial liabilities at the acquisition cost of the liabilities.

The Group and the Company classify financial liabilities into the following categories:

• Measured at amortised cost,

• Measured at fair value through profit or loss,

• Hedging financial instruments.

Derecognition of financial liabilities

The Group and the Company derecognise financial liabilities when, and only when, the obligations of the Group

and the Company are discharged, cancelled or expire.

The Group and the Company classify trade debts, financial debts, leasing liabilities, interest liabilities and other

payables as financial liabilities measured at amortised cost.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.18. Leases

The Group and the Company are the lessee

At the commencement date, the lessee shall measure the lease liability at the present value of the lease payments

outstanding at that date, including the following:

• Fixed charges (including those assimilated to fixed charges) less any rental incentives receivable;

• Variable rents that depend on an index or rate initially measured using an index or rate at the start date;

• The amounts that the tenant should pay under the liquidation value guarantees;

• Penalties for terminating the lease if it is assumed that the tenant will exercise its option to terminate the lease

during the lease term.

Lease payments are discounted using the interest rate specified in the lease agreement, if that rate can be easily

determined. If that rate cannot be easily determined, the lessee shall use internally calculated borrowing rate.

The interest rate specified in the lease is the interest rate that results in the present value of the lease payments and

the unguaranteed residual value being equal to the sum of the fair value of the leased asset and any initial direct

costs incurred by the lessor.

The lease liability is measured at amortised cost using an imputed interest rate consistent with the discount rate

used to discount the lease payments. Interest expense relating to a lease liability is allocated over the lease term

and recognised in profit or loss.

The cost of an asset held under right of use at initial recognition comprises:

• The amount of the initial measurement of the lease liability;

• Any lease payments made on or before the commencement date less any lease incentives received;

• Any primary direct costs incurred by the lessee; and

• An estimate of the cost of restoring the asset.

Thereafter, the lessee shall measure the right-of-use asset at cost less any accumulated depreciation and any

accumulated impairment losses. If, before the end of the lease period, the ownership of the leased asset is

transferred to the tenant, or if the price of the asset managed under the right of use indicates that the tenant will

exercise the right to purchase, the tenant shall calculate the depreciation of the asset managed under the right of

use from the beginning to the end of the useful life of the leased asset. Alternatively, the lessee shall calculate the

depreciation of the right-of-use asset from the commencement date to the earlier of: the end of the useful life of

an asset held under a right-of-use arrangement, or the end of a lease term.

Payments relating to short-term leases or leases of low-value assets are recognised as an expense through profit

or loss on a straight-line basis. Short-term leases are considered to be leases with a term of 12 months or less.

Low-value assets include tools and small items of office furniture.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.19. Grants and subsidies

Government grants are not recognised until there is sufficient assurance that the Group and the Company will

comply with the requirements associated with them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the period in which the Group and

the Company recognise the related reimbursement of the costs for which they are intended. Government grants,

the principal condition whereof is that the Group and the Company should purchase, construct or otherwise

acquire non-current assets, are recognised as deferred income in the statement of financial position and are

recognised in a systematic and rational manner in profit or loss over the useful life of the related assets.

Grants that are received in the form of long-term assets, plant and equipment or intended to purchase, constructed

or otherwise acquire the same, are considered to be asset-related grants. The Company classifies assets acquired

free of charge in this group of grants.

Assets received for no consideration are carried at fair value on initial recognition.

Receivables for reimbursement of expenses or income foregone during the reporting period or prior period, as

well as all other grants not attributable to grants related to assets, shall be treated as grants that reduce costs. Grants

related to revenue are recognised as part of the utilised portion to the extent that costs are incurred during the

period (by reducing the proportion of costs incurred) or to the extent of the estimated foregone revenue for which

the grant is intended to compensate.

The unused balance of the grant is shown in the Grants (deferred income) line of the statement of financial

position.

2.20. Income tax

Income tax expense reflects current year tax and deferred tax.

Current year's tax

Tax of the current year is payable based on taxable profit for the year. Taxable profit differs from the profit

reported in the statement of comprehensive income because of the income or expense that is taxable or deductible

in the following year and the income or expense that is never taxable or deductible. Income tax is calculated using

tax rates that have been enacted by the balance sheet date. In 2021, the Group and the Company are subject to a

corporate income tax of 15 percent (15 percent in 2020).

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the

financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax

liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to

the extent that it is probable that taxable profits will be available against which deductible temporary differences

can be utilized. Such assets and liabilities are not recognised if the temporary differences relate to goodwill, or to

the initial recognition of assets or liabilities (other than in a business merger) that are not affected by either taxable

or financial profit at the time they arise (transactions).

Deferred tax liabilities are recognised to offset temporary tax differences. Deferred income tax assets are

recognised for deductible temporary differences only to the extent that it is probable that sufficient taxable profit

will be available to realise the benefit of the temporary differences and is expected to be realised in the foreseeable

future.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to

the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the

asset to be recovered by the Group and the Company.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.20. Profit tax (continued)

Deferred tax assets and liabilities are measured using the tax rates that will apply to the Group and the Company

in the year in which those temporary differences are expected to be recovered or settled, based on tax rates (and

tax laws) that have been or will be approved before the end of the reporting period. The measurement of deferred

tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group and

the Company expect, at the reporting period, to recover or to settle the carrying amount of its assets and liabilities.

Current and deferred tax for the period

Current and deferred tax is accounted for in profit or loss unless they relate to items recognised in other

comprehensive income or directly in equity (in other comprehensive income or directly in equity). In such a case,

the tax is also recognised outside profit or loss, or when it arises on initial recognition of the business combination.

In the case of a business combination, the tax effect is included in the accounting for the business combination.

2.21. Basic and diluted earnings per share

The basic and diluted earnings per share shall be calculated by dividing the profit for the reporting period

attributable to shareholders by the weighted average of the ordinary shares issued. There is no difference between

basic and diluted earnings per share.

2.22. Recognising of income

The Group and the Company recognise revenue to reflect the transfer of the committed goods or services to the

purchasers in an amount that is consistent with the consideration that the entity expects to receive in exchange for

the said goods or services, less value added tax, discounts and rebates. An entity shall recognise revenue on the

basis of this core guiding principle in the following steps:

Step 1: identification of the contract (s) with the buyer – the contract is an agreement between two or more parties

that defines their enforceable rights and obligations.

Step 2: identification of performance obligations under the contract – obligations under the contract to transfer

the goods or services to the buyer. If these goods or services can be distinguished, such liabilities are treated as

operating liabilities, which are accounted for separately.

Step 3: the transaction price is determined – the transaction price is equal to the contracted amount of consideration

that the entity expects to receive in exchange for the goods or services transferred to the buyer. The transaction

price may consist of a fixed amount of consideration paid by the buyer, but may sometimes also include variable

consideration or consideration other than cash. The transaction price is also adjusted for the time value of money

if the contract includes a significant funding component, as well as for any consideration payable to the buyer.

Step 4: The transaction price is attributable to the contracted performance obligation – as a rule, an entity attributes

the transaction price to each performance obligation on the basis of the relative stand-alone selling prices of each

good or service contracted to be transferred. If data on individual selling prices are not observable in the market,

the entity makes an estimate.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.22. Recognition of income (continued)

Step 5: revenue is recognised when the entity discharges the performance obligation by transferring the committed

goods or services to the buyer (i.e. when the buyer obtains control of those goods or services). The amount of

revenue recognised is equal to the amount attributed to the settled performance obligation. An operating liability

may be settled at a certain point in time or over a certain period of time.

Revenue is recognised when the amount of revenue can be measured reliably and when it is probable that the

Group and the Company will receive the economic benefits associated with the transaction and specific criteria

have been met for each type of revenue as described below. The Group and the Company rely on historical results,

taking into account the type of client, the type of transaction and the characteristics of each arrangement.

Revenue is recognised using the methods described below:

Revenue from sales of heat and hot water

Revenue from the sale of heat is recognised on the basis of bills issued to residential customers and other

customers for heat and hot water heating. Consumers are billed once a month according to the readings of the heat

meter. At the end of the period, revenue not invoiced but services rendered is accrued on an accrual basis.

Income from the sales of goods

Proceeds from the sale of goods are recognized when all of the following conditions are met:

• The Group and the Company transferred ownership control to the buyer;

• The Group and the Company do not maintain either continuing management of goods sold at the level normally

associated with ownership or effective control;

• The amount of such revenue can be measured reliably;

• It is probable that the Group and the Company will obtain the economic benefits associated with the

transaction, and the costs incurred in connection with the transaction; whether

• The costs to be incurred can be reliably estimated.

Financing elements

The Group and the Company do not have, and do not expect to have, any contracts where the period between the

provision of goods or services and payment by the customer exceeds one year. For this reason, the Group and the

Company do not account separately for the financing element.

Other income

Interest is recognized as income when it is received.

Dividend income from investments is recognised when the shareholders' right to receive payment is established

(if it is likely that the economic benefits associated with the item will flow to the Group and the Company and the

amount of the income can be measured reliably).

Interest income is recognized when it is probable that the Group and the Company will receive economic benefits

and the amount of revenue can be measured reliably. Interest income is accrued over the period, according to the

outstanding part and the applicable effective interest rate that exactly discounts estimated future cash receipts

through the expected life of the financial asset to that asset up to the net carrying amount on initial recognition.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.23. Expense recognition

Expenses are recognised on the basis of the accrual and comparability principles in the reporting period in which

the related income is earned, regardless of the time of spending the cash. In those cases when costs incurred cannot

be directly attributed to the specific income and they will not generate income during the future periods, they are

recognised as incurred.

Amount of costs is usually accounted in the amount paid and payable, excluding VAT. When long period of

settlement is provided, and interest is not distinguished, the amount of costs is assessed by discounting the

settlement amount at the market interest rate.

2.24. Foreign currency transactions

For the purpose of preparing the financial statements of individual Group entities, transactions in currencies other

than the Company's functional currencies (foreign currencies) are accounted for at the exchange rates prevailing

at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign

currencies are converted at the daily exchange rate of that day. Non-monetary items are carried at fair value and

denominated in a foreign currency are converted at the exchange rate at the date of fair value measurement. Non-

monetary units carried at the cost of acquiring a foreign currency are not converted.

The presentation currency is the euro (EUR). Operations denominated in foreign currency shall be converted into

euro at the official rate of the European Central Bank on that date. Monetary assets and liabilities are converted

into euro at the exchange rate at the date of the statement of financial position.

Exchange differences arising from operations in foreign currencies shall be included in profit or loss at the time

when they arise. Gains and losses arising from exchange rate changes in the conversion of monetary assets or

liabilities into euro shall be included in profit or loss when they arise.

2.25. Application of estimates in preparation of financial statements

In preparing the financial statements, management is required to make certain judgements, estimates and

assumptions that affect the amounts of income, expenses, assets and liabilities that are disclosed and the disclosure

of uncertainties at the date of preparation of the report. However, the uncertainty of these assumptions and

estimates may affect the results, which may require significant future adjustments to the carrying amounts of

assets or liabilities.

Estimates and assumptions

The main assumptions and other significant sources of measurement uncertainty that affect the future at the date

of preparation of the statements of financial position and which give rise to material risks and which may require

a material adjustment to the carrying amounts of assets or liabilities in the next financial year are discussed below:

Property, plant and equipment – useful life

The main assumptions used to determine the useful lives of property, plant and equipment are:

• The expected life of the asset,

• Anticipated technical, technological or other obsolescence due to service innovation or changes in services,

• Legal or similar restrictions on the use of assets, such as the date of validity of finance lease agreements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.25. Application of assessments in preparation of financial statements (continued)

Investments in subsidiaries – impairment losses

To assess the recoverability of investments in subsidiaries, the Company's management calculates the recoverable

amount of the investment by discounting the future cash flows of the subsidiaries to their present value using a

weighted average discount rate on capital costs reflecting current market assumptions about the time value of

money (Note 5).

Realisable value of inventories

Since 2011, the Company's management forms a 100% impairment charge on inventories (from 2017, except for

the process fuels) acquired earlier than one year ago (Note 7).

Impairment of receivables

The Group and the Company recognise a loss allowance for expected credit losses (ECL) on financial assets

measured at amortised cost as follows: trade receivables, other receivables and accrued income. Loss ratios are

calculated using management's expert judgement using statistical recovery information for the last 2 years.

In determining whether the credit risk of a financial asset has increased significantly since initial recognition and

in assessing the amount of the ECL, the Group and the Company consider reasonable and supportable information

that is relevant and accessible without excessive cost or effort. This information includes both quantitative and

qualitative data and analysis based on the Group's historical experience and reasoned credit assessment, including

prospective information.

Provisions for losses on financial assets measured at amortised cost are deducted from the total carrying amount

of such assets. The provision for impairment losses is presented in the profit or loss and included in operating

expenses as an impairment charge.

Deferred profit tax assets

Deferred income tax assets are recognised for all unused tax losses, with a statement of what is expected to be the

tax profit before the losses are offset. Significant management judgements are required to determine the amounts

of deferred income tax assets that may be recognised based on estimates of the expected future amounts and

periods of taxable profits and based on future tax planning strategies (Note 22).

Fair value of financial instruments

Fair value is the amount for which an asset or service could be exchanged, or a liability settled between

knowledgeable, willing parties. Fair value of financial assets and financial liabilities is valued based on quoted

market prices, discounted cash flow models or option pricing models, depending on the circumstances.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

2. Summary of significant accounting policies (continued)

2.25. Application of assessments in preparation of financial statements (continued)

In determining the fair value of assets or liabilities, the Company uses available market data, as much as possible.

The fair values are presented in three levels of the fair value hierarchies on the basis of the variables used in the

valuation methods:

• Level 1: prices quoted at active markets of similar assets or liabilities (unadjusted);

• Level 2: other variables except the quoted prices of assets and liabilities included in Level 1 that are observed

directly (i.e., as prices), or indirectly (i.e., derived from prices);

• Level 3: variables of assets and liabilities not based on the observable market data (non-observable variables).

Where for the purpose of measuring the fair value of assets or liabilities the variables may be attributed to the

different levels of the fair value hierarchy, the hierarchy level of the fair value to which the entire fair value

established is attributed shall be established on the basis of the lowest level variable material for the measurement

of the entire fair value.

The Company recognizes the transfers between the fair value hierarchy levels at the end of the reporting period

in which the change occurred.

2.26. Contingencies

Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of

an outflow of resources generating economic benefits is small.

A contingent asset is not recognised in the financial statements but is disclosed when an inflow of economic

benefits is probable.

2.27. Events after the date of the balance sheet

Post-reporting events that provide additional information about the situation of the Group and the Company at the

date of preparation of the statements of financial position (adjusting events) are reflected in the financial

statements. Events after the date of the balance sheet that are not corrective events, are described in the notes

when they are significant.

2.28. Mutual settlements and comparative numbers

When preparing the financial statements, assets and liabilities, income and expenses are not offset unless the

specific International Accounting Standards specifically require such offsetting.

2.29. Segment reporting

Segment information shall be reported in the same manner as other internal reporting to the chief operating

decision maker. The chief operational decision maker responsible for allocating resources and assessing the

performance of the segments is the Board, which takes strategic decisions.

The Group and the Company operates in a single segment, therefore additional segment related disclosures are

not provided in these financial statements.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

3. Intangible fixed assets and right of use assets

Movements in intangible fixed assets during the reporting period and prior periods:

The Group

The Company

Right-of-

use assets

Acquired

rights and

software

Right-of-use

assets

Acquired

rights and

software

Acquisition value:

Balance on 31 December 2019

1 319

1 451

1 105

1 450

Acquisitions

Relocation from construction in

progress

Balance as at 31 December 2020

1 351

1 547

1 137

1 546

Acquisitions

Relocation from construction in

progress

Balance on 31 December 2021

1 351

1 563

1 137

1 562

Amortization:

Balance on 31 December 2019

1 379

Amortisation per year

Balance as at 31 December 2020

1 430

1 429

Amortisation per year

Balance on 31 December 2021

144

1 486

131

1 485

Book value:

Balance on 31 December 2019

1 283

1 073

Balance as at 31 December 2020

1 266

117

1 060

117

Balance on 31 December 2021

1 207

1 006

The amortisation charge for intangible assets is included under operating expenses in the profit (loss) and other

comprehensive income.

Part of the Company's and the Group’s fixed intangible assets with an acquisition value as at 31 December 2021

was 1 343 thousand euro (on 31 December 2020: EUR 1 370 thousand), was fully amortised, but still used in the

business operations.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

4. Property, plant and equipment

Details of the Group's and Company's property, plant and equipment:

The Group

Land

and

buildin

Building

Machin

ery and

equipm

ent

Vehicles

Plant and

tools

Constructio

ns in

progress and

prepayments

Investment

property

Total

Acquisition value:

Balance on 31

December 2019

18 132

179 710

60 275

1 962

12 997

7 360

679

281 115

Acquisitions

197

138

325

20 618

21 357

Sold and written off

assets

(134)

(319)

(191)

(151)

(40)

(835)

Transfer to intangible

assets

(95)

Reclassifications

13 225

2 168

298

(15 692)

Impairment losses (-)

Balance as at 31

December 2020

18 100

192 616

62 449

1 957

13 580

12 191

679

301 572

Acquisitions

212

234

102

13 783

333

14 665

Sold and written off

assets

(346)

(326)

(85)

(268)

(474)

(297)

(1 796)

Transfer to intangible

assets

(14)

Reclassifications

(601)

17 362

(12)

388

(17 871)

729

Impairment losses (-)

Balance on 31

December 2021

17 222

209 657

62 581

1 912

13 596

8 089

1 444

314 501

Accumulated depreciation:

Balance on 31

December 2019

10 563

79 366

40 283

1 563

10 647

260

142 682

Depreciation during the

year

477

4 292

3 601

158

734

9 280

Sold and written off

assets

(85)

(320)

(176)

(152)

(39)

(772)

Balance as at 31

December 2020

10 955

83 338

43 708

1 569

11 342

278

151 190

Depreciation during the

year

391

4 688

3 417

134

641

9 301

Sold and written off

assets

(239)

(179)

(58)

(236)

(384)

(137)

(1 233)

Balance on 31

December 2021

11 107

87 847

47 067

1 467

11 599

171

159 258

Book value:

Balance on 31

December 2019

7 569

100 344

19 992

399

2 350

7 360

419

138 433

Balance as at 31

December 2020

7 145

109 278

18 741

388

2 238

12 191

401

150 382

Balance on 31

December 2021

6 115

121 810

15 514

445

1 997

8 089

1 273

155 243

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

4. Property, plant and equipment (continued)

The Company

Land

and

buildin

Buildin

Machin

ery and

equipm

ent

Vehicles

Plant and

tools

Constructio

ns in

progress and

prepayments

Investment

property

Total

Acquisition value:

Balance on 31 December

2019

15 839

178 878

55 092

1 624

12 930

7 360

297

272 020

Acquisitions

197

138

325

20 618

21 357

Sold and written off assets

(134)

(319)

(191)

(151)

(40)

(835)

Transfer to intangible

assets

(95)

Reclassifications

13 225

2 168

298

(15 692)

Impairment losses (-)

Balance as at 31

December 2020

15 807

191 784

57 266

1 619

13 513

12 191

297

292 477

Acquisitions

131

234

102

13 766

14 234

Sold and written off assets

(346)

(326)

(85)

(268)

(474)

(297)

(1 796)

Transfer to intangible

assets

(14)

Reclassifications

17 291

106

388

(17 871)

Impairment losses (-)

Balance on 31 December

2021

15 616

208 754

57 418

1 586

13 529

8 072

304 975

Accumulated depreciation:

Balance on 31 December

2019

9 539

79 052

37 417

1 237

10 583

131

137 959

Depreciation during the

year

338

4 228

3 078

158

734

8 542

Sold and written off assets

(85)

(320)

(176)

(151)

(40)

(772)

Balance as at 31

December 2020

9 792

82 960

40 319

1 244

11 277

137

145 729

Depreciation during the

year

332

4 625

2 894

133

640

8 624

Sold and written off assets

(239)

(179)

(58)

(236)

(384)

(137)

(1 233)

Balance on 31 December

2021

9 885

87 406

43 155

1 141

11 533

153 120

Book value:

Balance on 31 December

2019

6 300

99 826

17 675

387

2 347

7 360

166

134 061

Balance as at 31

December 2020

6 015

108 824

16 947

375

2 236

12 191

160

146 748

Balance on 31 December

2021

5 731

121 348

14 263

445

1 996

8 072

151 855

The amounts of the Group's and the Company's depreciation expenses were included in operating expenses in the

profit (loss) and other comprehensive income (under depreciation and amortisation and other expenses).

Part of the Group's property, plant and equipment with an acquisition value of EUR 66 161 thousand as at 31

December 2021 (on 31 December 2020: EUR 60,667 thousand), EUR 66 036 thousand for the Company, was

fully depreciated (on 31 December 2020: EUR 60,551 thousand), but still used in business operations.

The Group and the Company have recorded assets not yet ready for use of EUR 339 thousand in the plant and

tools group as at 31 December 2021 (on 31 December 2020: EUR 90 thousand).

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

4. Property, plant and equipment (continued)

On 31 December 2020 and 31 December 2021 the Group's and the Company's construction in progress consists

mainly of the reconstruction and overhaul of boiler plants and heat supply networks.

As at 31 December 2021, property, plant and equipment with a residual value equal to the Group's EUR 11 945

thousand (on 31 December 2020: EUR 11,896 thousand), and the Company's EUR 9 300 thousand (on 31

December 2020: EUR 9 381 thousand), was pledged to banks as a collateral for the loans (Note 11).

5. Investments in subsidiaries and loans to group companies

On 31 December 2021, an expert assessment of the management of investments in UAB GO energy LT was

carried out. The Company assessed the growth of the subsidiary's financial indicators, the portfolio of future

orders, a 3-year strategic plan and changes in these variables to conclude that no indications of impairment were

identified.

On 31 December 2021, the impairment test for investment in AB Petrašiūnų katilinė that was initially made on

31 December 2018 was revised in accordance with the requirements of IAS 36. Investment into AB Petrašiūnų

katilinė is tested periodically on the basis of cash flows, discounted over a period of 5 years, using the growth rate

of income and costs with a minimum sensitivity analysis carried out to assess the impact of changing assumptions

on the value calculated.

The value of the shares was determined on the basis of projected cash flows for a period of 5 years together with

the perpetual (terminal) value.

2021-12-31

2020-12-31

Investments in

subsidiaries

Acquisit

ion price

Impairment

Book

value

Acquisit

ion price

Impairment

Book

value

UAB GO Energy LT

2 764

(258)

2 506

1 330

(258)

1 072

AB Petrašiūnų katilinė

1 894

(902)

992

1 894

(902)

992

Total:

4 658

(1 160)

3 498

3 224

(1 160)

2 064

The impairment of the investment in AB Petrašiūnų katilinė of EUR 902 thousand and the investment in UAB

GO Energy LT of EUR 258 thousand recorded at 31 December 2020 remained unchanged following impairment

testing as at 31 December 2021.

The cash flow projections used in the calculations are based on the results of AB Petrašiūnų katilinė in 2021, long-

term business plans, signed contracts and management's expectations regarding changes in the regulatory

environment in the short and medium term. The terminal value (cash flows over a period of more than five years)

was calculated by applying a constant growth factor of 1%. The Company also used the following key assumptions

when forecasting the cash flows:

• With the Kaunas CHP plant coming into operation from 2020 and increased competition among heat producers

in the warm season, the planned increase in the heat generation capacity is approximately 10%. The decrease in

the Company's heat sales revenue, which has already been assessed following the impairment test carried out in

2018, does not result in any impairment of the investment;

• Biofuel prices are projected to increase by 1% annually from 2022 onwards;

• The projected costs are expected to increase year on year by the level of the projected annual inflation;

• In view of the decrease in production, the fixed tangible assets will not be fully depreciated over a fixed period

of 15 years, and therefore the most significant investments in fixed tangible assets are only foreseen in 2025, with

ongoing repairs each year.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

5. Investments in subsidiaries and loans to Group companies (continued)

Loans to the companies of the group of companies

As at 31 December 2021 the Company has granted a working capital credit of EUR 443 thousand to its subsidiary

AB Petrašiūnų katilinė. The interest rate is 6 months Euribor plus 1.2 %. The loan maturity date is 31 December

2023. The outstanding portion of the loan is included in the item Other financial assets in the Statement of

Financial Position.

6. Other financial assets

Other financial assets include unquoted ordinary shares. As at 31 December 2020, the balance consisted of 47,376

shares of UAB Šilumos ūkio servisas and 75,460 shares of UAB Kauno miesto paslaugų centras. As at 31

December 2020, the increase in the value of other financial assets was set at EUR 208 thousand for the Company's

investments in the shares of UAB Šilumos ūkio servisas, which is included in the item Loss from disposal of

securities of the Group's and Company's profit (loss) and other comprehensive income, and amounted to EUR

334 thousand at the end of 2020. On 30 December 2021 the Company sold all of its 47 376 shares held in UAB

Šilumos ūkio servisas for EUR 173 thousand, resulting in a loss of EUR 161 thousand.

On 4 December 2020, the Company signed an agreement on the establishment of UAB Kauno miesto paslaugų

centras. The share of the Company's subscribed shares accounted for 22 per cent, the number of ordinary registered

shares subscribed was 75 460 units. The value of the share is EUR 1. UAB Kauno miesto paslaugų centras was

registered on 15 January 2021.

The Group

The Company

Other financial assets:

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Investments into other entities

409

Value of loans to subsidiaries

443

409

518

409

7. Inventories

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Technological fuel

1 254

1 125

1 177

1 093

Spare parts

927

623

655

623

Materials

300

431

300

430

2 481

2 179

2 132

2 146

Less: write-down to net realisable value at

the end of the period

(725)

(818)

(725)

(818)

Carrying amount of inventories

1 756

1 361

1 407

1 328

The write-down of the Group's and the Company's inventories to net realisable value as at 31 December 2021

amounted to EUR 725 thousand. (on 31 December 2020: EUR 818 thousand). The change in the write-down of

inventories to net realisable value in 2020 and 2021 is included in the Group's and the Company's statements of

profit (loss) and other comprehensive income under the item of costs of changes in the realisable value of

inventories and fixed assets.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

8. Amounts receivable within one year

Change in impairment of doubtful receivables in 2020 and 2021 in the Group's and the Company's statements of

profit (loss) and other comprehensive income is included in the item of change in impairment of receivables.

Impairment of doubtful receivables is measured at expected credit losses.

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Trade receivables

16 473

12 736

16 596

12 736

Less: expected credit losses

(4 944)

(6 009)

(4 934)

(6 009)

11 529

6 727

11 662

6 727

Change in the Group's and Company's expected credit losses on trade receivables:

The Group

The Company

Balance on 31 December 2019

6 887

Recognised (reversed) probable credit losses

(17)

Written off

(861)

Balance as at 31 December 2020

6 009

Recognised (reversed) probable credit losses

(558)

(568)

Written off

(507)

Balance on 31 December 2021

4 944

4 934

During 2021, the Group and the Company wrote off bad debts in amount of EUR 507 thousand and EUR 507

thousand, respectively (in 2020: EUR 861 thousand and EUR 861 thousand).

The Group's and the Company's receivables from customers are interest-free and normally have a maturity of 30

days or as agreed individually.

On 31 December 2020 and 31 December 2021 the Group's and the Company's other receivables consisted of taxes

receivable from the State, debt owed by municipalities for compensation to low-income families, receivables for

inventories sold (scrap metal, heating system equipment) and services rendered (collector maintenance services,

etc).

Other receivables of the Group and the Company consisted of:

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Taxes

1 085

1 051

Amount of VAT to be refunded

Other

981

523

981

522

Less: expected credit losses

(315)

(296)

(315)

(335)

1 833

243

1 794

194

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

8. Amounts receivable within one year (continued)

Movement in impairment in value of other receivables of the Group and the Company:

The Group

The Company

Balance on 31 December 2019

300

350

Recognition of expected credit losses

(1)

(12)

Written off

(3)

Balance as at 31 December 2020

296

335

Recognition of expected credit losses

(20)

Balance on 31 December 2021

315

The Group's and the Company's other receivables are interest-free and are generally due within 30 to 45 days.

No impairment is recognised on not overdue receivables as management considers the risk that debtors will not

be able to meet their obligations to be low.

9. Cash and cash equivalents

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Cash on the road

166

109

166

110

Cash in the bank

3 530

1 691

2 616

1 565

3 696

1 800

2 782

1 675

Funds in the Group’s bank accounts with a balance of EUR 708 thousand at 31 December 2021 (EUR 366

thousand on 31 December 2020) and the Company's EUR 549 thousand (on 31 December 2020: EUR 287

thousand), are pledged to banks as a collateral for loans (Note 11).

10. Changes in equity

Statutory

The statutory reserve is required under the legislation of the Republic of Lithuania. At least 5% of net profits,

calculated in accordance with International Financial Reporting Standards, must be transferred to the reserve

annually until it reaches 10% of the authorised capital. The statutory reserve may not be distributed as dividends

but can be used to cover future losses.

Other reserves

By the decision of shareholders of 30 April 2021, the Company cancelled other reserves (EUR 2 900 thousand)

and transferred EUR 3 000 thousand from retained earnings to other reserves, i.e. a reserve of EUR 2 950 thousand

for the execution of investments and a reserve of EUR 50 thousand for charity.

Annual allowances

No annual payments were made in 2021 and 2020.

Dividends

In 2019 and 2020, the result was left in retained earnings.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

11. Financial debts

All loans of the Group and the Company are accounted for and repaid in euro. At the end of the year, the

weighted average interest rate on outstanding loans (as a percentage) was:

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Long-term

0.73

0.36

0.72

0.33

On 7 August 2020, the Company signed a EUR 55 million loan agreement with the European Investment Bank.

The signing of the agreement was approved by the Extraordinary General Meeting of Shareholders of AB Kauno

energija on 4 August 2020.

The loan will be used to finance the Company's investment programme and to refinance loans over the next 5

years. Over the next 5 years, the Company plans to invest in the deployment of innovative heating and cooling

plants using renewable energy sources, the digitalisation of processes, as well as the modernisation of pipelines

and the construction of new pipelines.

On 24 August 2020, a loan tranche of EUR 15 million was taken out. The Company used part of the loan to

refinance the existing loans. On 16 August 2021, a loan tranche of EUR 12 million was taken out. The Company

used part of the loan to refinance the existing loans.

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Long-term financial debts (loans):

32 658

23 534

32 658

22 967

Payable between 2 and 5 years

10 380

8 499

10 380

7 932

Payable after 5 years

22 278

15 035

22 278

15 035

Current portion of long-term loans

2 876

2 309

35 534

26 410

34 967

25 276

Group's detailed information on loans as at 31 December 2021:

Credit institution

Date of

contract

Amount,

thousands EUR

Maturity

Balance as at

2021.12.31 in

thousands

EUR

Due in 2022 in

thousands

EUR

Ministry of Finance*

2010-04-09

2 410

2034-03-15

1 217

Ministry of Finance*

2010-10-26

807

2034-03-15

500

Luminor**

2021-08-22

3 403

2022-04-29

567

EIB***

2021-08-16

12 000

2036-08-18

12 000

Ministry of Finance*

2014-01-15

793

2034-12-01

541

Ministry of Finance*

2014-03-31

7 881

2034-12-01

5 376

413

EIB***

2020-08-07

15 000

2035-08-24

13 750

1 000

AB SEB bank

2016-12-22

4 127

2024-11-30

1 583

723

35 534

2 876

* Ministry of Finance of the Republic of Lithuania; ** Luminor Bank AS Lithuanian branch; *** European

Investment Bank.

Luminor Bank AS, by granting a loan to the Group on 22 August 2012, has required the Group's subsidiary AB

Petrašiūnų katilinė to comply with the following financial ratios: an equity ratio (including support provided by

the Lithuanian Business Support Agency) of at least 40%, a DSCR of at least 1.3, and a total financial debt to

EBITDA ratio of at least 3.0. AB Petrašiūnų katilinė does not comply with all the indicators set by the Bank, but

no financial sanctions were imposed.

The Company has provided a guarantee to the bank in respect of this loan as described in note 24.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

11. Financial debts (continued)

Details of the Company's loans as at 31 December 2021:

Credit institution

Date of

contract

Amount,

thousands EUR

Maturity

Balance as at

2021.12.31 in

thousands

EUR

Due in 2022

in thousands

EUR

Ministry of Finance*

2010-04-09

2 410

2034-03-15

1 217

Ministry of Finance*

2010-10-26

807

2034-03-15

500

EIB***

2021-08-16

12 000

2036-08-18

12 000

Ministry of Finance*

2014-01-15

793

2034-12-01

541

Ministry of Finance*

2014-03-31

7 881

2034-12-01

5 376

413

EIB***

2020-08-07

15 000

2035-08-24

13 750

1 000

AB SEB bank

2016-12-22

4 127

2024-11-30

1 583

723

34 967

2 309

* Ministry of Finance of the Republic of Lithuania; ** Luminor Bank AS Lithuanian branch; *** European

Investment Bank.

AB SEB bank has determined that the Company must comply with the net financial debt to EBITDA ratio set for

the quarter, which must not exceed 4.5. Under the loan agreements, the Company's equity ratio (total equity/total

assets) must be at least 35%. The European Investment Bank's requirements also stipulate that the Company must

comply with both of these indicators.

On 31 December 2020 and 31 December 2021, the Company has complied with the terms of the aforementioned

agreements.

Loan agreements contain certain restrictions. The Company may not grant dividends, issue and/or obtain new

loans, make grants, sell or lease mortgaged assets without a written consent of the banks. Such written consents

were obtained from the banks.

The Group's and the Company's intangible assets (Note 4), funds in bank accounts (Note 9) and right-of-use assets

related to land lease were pledged to banks as a collateral for loans.

12. Lease

Finance leases and lease liabilities of the Group and the Company:

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Within one year

after one year

Total financial lease obligations

183

140

183

140

Lease liabilities are accounted for as:

– short-term

– long-term

1 229

1 256

1 026

1 047

Total lease liabilities

1 272

1 300

1 066

1 082

Under the lease agreements, the leased assets of the Group and the Company consist of vehicles and land. Vehicle

rental term is 3-4 years, and land leases are 26-84 years.

The Group and the Company, having considered all the circumstances, decided not to adjust the discount rate and

not to recalculate the value of the previously determined right-of-use assets and liabilities.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

12. Lease (continued)

In accordance with IFRS 16, the Group and the Company recognised depreciation and interest costs associated

with the lease in question instead of operating lease costs. For the 12-month period ended 31 December 2021, the

Group recognised depreciation costs of 49 thousand euro and lease interest of 36 thousand euro, the Company

recognised depreciation costs of 45 thousand euro and lease interest of 31 thousand euro.

13. Grants and subsidies

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Opening balance at the beginning of the

reporting period

29 966

25 519

29 319

24 710

Received during the period

4 499

6 025

4 499

6 025

Amortization

(1 750)

(1 578)

(1 589)

(1 416)

Closing balance at the end of the reporting

period

32 715

29 966

32 229

29 319

During 2021, the Group has recognised depreciation (amortisation) of grants in amount of EUR 1,730 thousand

relating to property, plant and equipment and EUR 20 thousand relating to costs (in 2020 – EUR 1,548 thousand

and EUR 30 thousand), The Company – EUR 1,569 thousand and EUR 20 thousand respectively. (in 2020 – EUR

1,386 thousand and EUR 30 thousand).

14. Employee benefit liability

Every worker who leaves their job and reaches retirement age is entitled to receive between 0.5 and 4 months'

salary, in accordance with the laws of the Republic of Lithuania and the Collective Agreement.

The Group's and the Company's employee benefit liability was as follows:

The Group

The Company

2021

2020.

2021

2020.

Employee benefit commitment at the beginning of the

period

499

710

499

710

Paid

(242)

(326)

(242)

(326)

Formed

330

115

320

115

Employee benefit obligation at the end of the period:

587

499

577

499

Long-term portion

465

375

455

375

Short-term portion

122

124

122

124

When calculating long-term employee benefits, the Group and the Company assessed the mortality rate in

Lithuania, discount rate, retirement age, age and turnover of employees, salary growth, inflation rate and other

factors.

The key assumptions used to determine the planned benefit obligation of the Group and the Company are set out

below:

2021-12-31

2020-12-31

Discount rate

0.161 percent.

0.258 percent.

Staff turnover rate

14.813 percent.

11.181 percent.

Planned annual salary increase

4.150 percent.

3.100 percent.

The actuarial gains and losses related to these liabilities are presented under the operating expenses, in Salaries,

social insurance line and in the Statements of Financial Position under Employee benefit obligations.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

15. Derivative financial instruments

On 16 December 2016 the Group signed an interest rate swap agreement. Under the agreement, the Group is

obliged to pay the bank a fixed interest rate (0.21%) and the bank will pay the Group a variable interest rate linked

to the 6-month EURIBOR. As of 31 December 2020, the nominal value of the transaction is EUR 567 thousand.

This derivative is carried at fair value, which the Bank has estimated at 31 December 2021 at EUR 2 thousand

(on 31 December 2020: EUR 6 thousand). The change in the market value of the transaction in 2020 and 2021 is

included under other interest and similar income in the Group's profit (loss) and other comprehensive income

statement because, in management's judgement, the financial instrument is not designated as a hedge.

16. Other provisions

The cost of the heat production capacity reservation service is included in the basic heat price as one of the

components in accordance with the methodology established by the Board. As a result of the installation of new

generation facilities and the modernisation of existing generation facilities by the Company in recent years, the

thermal capacity reservation service has not been purchased from 2020 onwards, and consequently no thermal

capacity reserve costs are incurred. At the end of 2019, the Company applied to the Board to exclude the costs of

the power reserve from the heat price, but the Board only approved the recalculation of the heat price from

November 2020. The Company made a provision from the beginning of the year to reimburse the unrecovered,

but over-priced, costs of the power reserve, and from the beginning of the autumn 2020 heating season started to

reimburse the provision for this accumulated overpayment through a reduction in the price to consumers. The

Company has made a power reserve tax provision of EUR 959 thousand in 10 months of 2020 to cover future

price reduction obligations. In October to December 2020, EUR 312,000 was returned to consumers as a result of

price cuts. During the months of January and August 2021, the remaining part of EUR 647 thousand was returned

to consumers.

In 2021, the Company was granted a settlement fee from Kaunas klinikos, related to additional purchases of power

reserve, which Kauno klinikos will have to compensate in future periods. This amicable settlement agreement

was confirmed by the Kaunas District Court on 2 June 2021. The Company will have to compensate these

additionally received power reserve income to it’s customers, therefore, it has formed a provision of EUR 577

thousand as at 31 December 2021.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

17. Sales income

The Group and the Company are engaged in the supply of thermal energy, maintenance of building heating and

hot water supply systems, electricity generation, and other activities. These activities are closely interlinked and,

for management purposes, the Group and the Company are considered to be organised in a single segment – the

supply of thermal energy.

The Group's and the Company's activities are seasonal, with the majority of revenue generated during the heating

season, which starts in October and ends in April.

Sales revenues by the Group and the Company activities are presented below:

The Group

The Company

2021

2020

2021

2020

Heat supply

47 125

37 147

47 133

37 153

Hot water supply

3 014

2 935

3 024

2 935

Maintenance of hot water metering devices

456

433

456

433

Maintenance of collectors

348

268

348

268

Maintenance of heating and hot water systems in

buildings

Cooling supply

Sale of tradable emission allowances

1 236

50 963

42 030

50 981

42 036

Sales revenues by consumer groups of the Group and the Company are presented below:

The Group

The Company

2021

2020

2021

2020

Residents

38 640

31 815

38 640

31 815

Other users

5 138

5 144

Budgetary organisations financed from the state

budget

3 579

2 785

3 579

2 785

Budgetary organisations financed from

municipal budgets

2 447

1 791

2 447

1 791

Institutions financed by territorial sickness funds

957

340

957

340

Industrial users

202

161

220

161

50 963

42 030

50 981

42 036

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

18. Other costs

The Group

The Company

2021

2020

2021

2020

Equipment inspection and testing

177

183

177

181

Maintenance of collectors

361

381

361

381

Money collection costs

143

157

143

157

Ash recovery costs

162

141

162

131

Information Technologies costs

Consulting Services

132

Employee-related costs

124

Invoicing costs

Membership fee

100

Maintenance of fixed assets and related

services

Transport costs

Debt collection costs

Insurance

Communication costs

Costs for advertising

Audit costs

Rental of equipment and machinery

Sponsorship

Other costs

268

326

304

311

1 984

2 079

2 020

2 039

19. Other operating income and expense

The Group

The Company

2021

2020

2021

2020

Other operational incomes

Inventories sold

829

554

242

554

Miscellaneous services rendered

387

402

240

288

Compensation received

Revenue from previous periods

Profit from the sale of fixed assets

117

495

117

495

Other

3 205

112

3 204

112

4 543

1 600

3 808

1 486

The Group

The Company

Other operational expenses

2021

2020

2021

2020

Cost of miscellaneous services rendered

(166)

(285)

(166)

(199)

Inventories sold

(35)

(2)

(35)

(2)

Cost of previous periods

(20)

(15)

(20)

(15)

Sale of fixed assets, write-off

(164)

Other

(49)

(16)

(56)

(16)

(434)

(318)

(441)

(232)

The Group and the Company lease real estate, supply technical water, perform maintenance of heating equipment

and provide transport services.

Other operating income was accounted for on 4 March 2021. The case on award of compensation for heat reserve

power won in the Court of Appeal of Lithuania (Case No: e2A-151-370/2021) for the amount of EUR 2 519

thousand. In addition, a settlement agreement was concluded, in which the compensation for the amount of EUR

570 thousand was agreed. For more information, see Note 25.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

20. Other interest and similar income

The Group

The Company

2021

2020

2021

2020

Default interest received on overdue

receivables

622

177

622

177

Change in market value of derivatives

Gains on transactions in securities

Interest

673

183

671

181

21. Losses on disposal of securities, interest and other similar expenses

The Group

The Company

2021

2020

2021

2020

Interest

(117)

(365)

(100)

(337)

Loss on disposal of securities

(208)

Impairment of non-current financial assets

333

(325)

(32)

(308)

(4)

22. Income tax

As at 31 December 2020 and 31 December 2021, deferred income tax assets and liabilities were accounted for

using 15 percent rate. All changes in deferred income tax are accounted for in the Group's and Company's

Statements of Profit (Loss) and Other Comprehensive Income.

The reported income tax expense for the year can be reconciled with the income tax expense resulting from

the application of the regulatory corporate income tax rate to profit before tax:

The Group

The Company

2021

2020

2021

2020

Profit before tax, before accrual of employee

benefits

778

784

645

1 002

Gains (losses) on the accrual of employee benefits

(78)

(117)

(78)

(115)

Income tax (expense) calculated on profit before

accrual of employee benefits at the statutory rate

(117)

(118)

(97)

(150)

Income tax (expense) calculated on the accrual of

employee benefits at the statutory rate

(18)

(17)

Effect of permanent and temporary differences

210

104

Change in unrecognised deferred income tax assets

(245)

(102)

(306)

(102)

Adjustment of income tax for previous periods

Income tax (expense) accounted in statement of

comprehensive income

(140)

(156)

(181)

(165)

Effective corporate tax rate (%)

17.99

22.07

28.06

18.16

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

22. Profit tax (continued)

The Group

The Company

2021

2020

2021

2020

Components of income tax expense

Profit tax income (expense) of the reporting year

(20)

Deferred profit tax income (expense)

(120)

(156)

(181)

(165)

Income (expense) from income taxes recognised in

the statement of other comprehensive income

(140)

(156)

(181)

(165)

All changes in deferred income tax are accounted for in the Group's and Company's Statements of Profit (Loss).

As at 31 December 2021, deferred income tax consisted of:

The Group

The Company

2021

2020

2021

2020

Deferred income tax assets

Tax losses

4 023

2 974

3 936

2 947

Accruals

Change in value of assets

1 051

(31)

849

(31)

Deferred income tax assets

5 160

3 028

4 869

3 000

Deferred income tax liabilities

Depreciation differences

(10 793)

(8 550)

(10 793)

(8 550)

Investment allowance

(19)

Revaluation of assets transferred to a subsidiary

(174)

Deferred income tax liabilities

(10 793)

(8 569)

(10 793)

(8 743)

Deferred income tax, net value

(5 633)

(5 541)

(5 924)

(5 743)

Deferred tax assets arising from tax losses are recognised because the Group's and the Company's management

expects that they will be realised in the foreseeable future, taking into account forecasts of taxable profits.

Additional deferred tax asset has been recognised in 2021 after reviewing income tax declarations from previous

years and re-evaluating taxable losses and temporary depreciation differences.

23. Basic and diluted earnings per share

The Group's basic and diluted earnings per share calculations are presented below:

The Group

The Company

2021

2020

2021

2020

Profit for the reporting period

628

386

837

Number of shares (thousands), beginning of

period

42 802

Number of shares (thousands), end of period

42 802

Weighted average number of ordinary shares in

issue (thousands)

42 802

Basic and diluted earnings per share (EUR)

0.00

0.01

0.02

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

24. Financial assets and liabilities and risk management

Credit risk

The Group and the Company are not exposed to significant concentrations of credit risk as they deal with a large

number of customers.

The Group

The Company

Number of unique customers (units)

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Natural persons

117 557

116 807

117 514

116 807

Other legal entities

2 800

2 681

2 782

2 682

Legal entities financed from municipal and state

budgets

530

521

526

521

120 887

120 009

120 822

120 010

Receivables due from customers of the Group and the Company by customer groups:

The Group

The Company

Number of unique customers (units)

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Natural persons

12 941

11 293

12 916

11 293

Other legal entities

1 810

813

1 959

813

Legal entities financed from municipal and state

budgets

1 722

630

1 721

630

Recognition of expected credit losses

(4 944)

(6 009)

(4 934)

(6 009)

11 529

6 727

11 662

6 727

As at the date of the financial statements, for trade and other receivables that are neither past due nor impaired,

management believes that there is no indication that the debtors will not meet their payment obligations as the

receivable balances are under constant control. The Group and the Company consider that the maximum risk is

equal to the amount of trade receivables and other receivables less recognized impairment losses at the date of

preparation of the statements of financial position (Note 8).

Cash and cash equivalents in banks rated on a long-term basis *:

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

AA-

1 270

869

1 111

791

A+

2 237

730

1 482

682

Unrated bank

3 530

1 691

2 616

1 565

*- external borrowing ratings by Standard & Poor's agency.

The credit risk arising from the Group's and the Company's other financial assets consisting of cash and cash

equivalents and available-for-sale financial investments bears the risk from The Group's and the Company's

potential the default of the counterparties, with the maximum potential exposure being equal to the carrying

amount of these instruments.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

24. Financial assets and liabilities and risk management (continued)

Interest rate risk

Long-term loans of the Group and the Company, except those signed with the Ministry of Finance of the Republic

of Lithuania, have a variable interest rate (1, 3, 6 and 12 months EURIBOR). The Group and the Company are

exposed to interest rate risk. As at 31 December 2020 and 31 December 2021, the Group has an interest rate swap

to manage its floating interest rate risk on the EUR 3 403 thousand credit agreement with Luminor Bank AB dated

22 August 2012, as described in Note 15.

Liquidity risk

Liquidity risk is such risk, that upon maturity, the Company or the Group will not be able to meet it’s financial

obligations. Liquidity risk is considered to be low, as the Group and the Company carries out it’s activity in a

regulated heating market. 30 day payments terms are set for heat producers. The Group’s and the Company’s

financial assets and liabilities based on their non-discounted payment terms are described in the table

The Group

On demand

Under 3

months

3 months –

1 year

1 – 5

years

After 5

years

Total

Trade receivables

13 362

111

13 473

Cash and cash

equivalents

3 696

Trade payables

(11 376)

Received loans

(719)

(2 157)

(7 067)

(25 591)

(35 534)

Lease payments

(35)

(104)

(255)

(1 061)

(1 455)

2021-12-31

4 928

(2 261)

(7 211)

(26 652)

(31 196)

The Company

On demand

Under 3

months

3 months –

1 year

1 – 5

years

After 5

years

Total

Trade receivables

13 456

443

13 899

Cash and cash

equivalents

2 782

Trade payables

(10 701)

Received loans

(577)

(1 732)

(7 204)

(25 454)

(34 967)

Lease payments

(34)

(102)

(247)

(866)

(1 249)

2021-12-31

4 926

(1 834)

(7 008)

(26 320)

(30 236)

Foreign currency risk

All purchases, sales and financial debts of the Group and the Company are denominated in euro, therefore, there

is no significant foreign currency risk.

Capital management

The main objective of capital management is to ensure that the Group and the Company meet the external capital

requirements and that they maintain appropriate capital ratios in order to sustain their business and maximise the

benefits for shareholders.

The Group and the Company manages its capital structure and makes adjustments to it in the light of changes in

economic conditions and in accordance with their operational risk characteristics. In order to maintain or change

the capital structure, the Group and the Company may issue new shares; repay the capital to the shareholders.

There were no changes to the capital management objectives, policy or process as of 31 December 2020 and 31

December 2021.

The Law on Companies of the Republic of Lithuania requires that the Group's and the Company's shareholders'

equity shall not be less than 50% of its share capital. The Group and the Company meet the requirements of the

Law on Companies of the Republic of Lithuania with respect to equity capital. There are no other externally

imposed capital requirements for the Group and the Company.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

24. Financial assets and liabilities and risk management (continued)

The Group and the Company measure capital using the ratio of liabilities to equity. Equity consists of ordinary

shares, reserves and retained earnings attributable to equity holders of the parent company. The Group's and the

Company's management have not set a specific target ratio for the ratio of liability to equity, however, the

following current indicators are considered to be sufficiently good performance indicators:

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Non-current liabilities (including deferred taxes

and grants and subsidies)

72 787

60 752

72 379

59 531

Current liabilities

17 402

12 478

15 985

11 886

Liabilities, total:

90 189

73 230

88 364

71 417

Equity

89 745

89 673

90 290

89 833

Ratio of liabilities* to equity (%)

100.49

81.66

97.87

79.50

*Liabilities include all non-current (including deferred income tax liability and grants (deferred income)) and

current liabilities.

Market risk

External risk factors affecting the Group's and the Company's core business: the economic crisis, rising fuel prices,

unfavourable legislation and regulations from the government and other authorities, local government decisions,

pricing policies for products sold, inflation and the general economic downturn reducing the income of heat

consumers, cyclical nature of operations, environmental requirements.

25. Commitments and contingencies not included in the balance sheet

On 22 June 2019 the Company has submitted a claim to Lietuvos sveikatos mokslų universiteto ligoninės Kauno

klinikos (hereinafter referred to as Kauno klinikos) for compensation of EUR 5,120,680 for the period from 2010

to May 2019 for the heat reserve capacity provided by the Company to Kaunas Clinics. Kauno klinikos did not

agree with the claim, therefore the Company filed a lawsuit against Kauno klinikos for the unpaid compensation

for the heat reserve capacity until June 2019 (the total debt, together with the accrued interest, amounted to EUR

5,204,131). The Kaunas Regional Court examined the case and on 8 June 2020 adopted a decision to partially

satisfy the claim, i.e. to order Kauno klinikos to pay the Company EUR 2 515 622 in compensation for the reserve

capacity, 6 per cent interest per annum on the amount ordered from the date the case was brought to court (29

July 2019) until the full execution of the court judgement, and EUR 3,534 of litigation costs.

The amount received from Kauno klinikos is recorded in the statement of profit (loss) under Other operating

income. In order to reach a final settlement of the dispute regarding the newly incurred debt in the period from 1

June 2019 to 1 March 2021, the Parties concluded an amicable settlement agreement on 25 May 2021, under

which Kauno klinikos agreed to pay EUR 570 041 in compensation for the provision of the reserve power

assurance service by the Company during this period, to be paid in equal instalments over 2 years. This amicable

settlement agreement was confirmed by the ruling of the Kaunas District Court on 2 June 2021.

On 25 September 2020, the Board adopted Resolution No O3E-880 “On unilateral determination of heat price

components of AB Kauno energija”, unilaterally determining the Company's heat price components

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

25. Commitments and contingencies not included in the balance sheet (continued)

for the 2nd year of validity of the base price, in accordance with Clause 771 of the Heat Price Determination

Methodology, Valstybinė energetikos reguliavimo tarnyba (VERT) has included additional interest in amount of

EUR 509 530 that has to be returned to the Company’s customers due to the fact that the return of the Company’s

additionally received revenues was delayed for a period longer than one year (i.e. 4 years).

Disagreeing with the calculation of interest, the Company filed a complaint with the Vilnius Regional

Administrative Court, but the court dismissed the Company's complaint by the decision of 22 April 2021. In view

of the above, the Company lodged an appeal with the Supreme Administrative Court of Lithuania, which is still

pending.

DNSB Rotušės 10 has filed a claim against the Company for the removal of the heat supply network from the

building at Rotušės a. 10, Kaunas, and for compensation for damages in the amount of EUR 86 139.74.

The case is currently undergoing mediation proceedings with a view to amicable settlement of the dispute. The

Company has no objection to the removal of the heat supply network at the expense of the claimant and does not

admit any damage.

The court has ordered the Department of Cultural Heritage to submit its findings on the potential damage, upon

receipt of which the mediation process will be renewed.

Leases and contracts for the purchase of works

The Group's and the Company's future obligations under the purchase contracts in force at 31 December 2021

amount to EUR 22 626 thousand.

Guarantees

On 28 November 2016, the Company provided a guarantee of EUR 3 913 thousand to Luminor Bank AS for the

obligations of the subsidiary AB Petrašiūnų katilinė to the bank under the credit agreement of EUR 3 403 thousand

dated 22 August 2012. On 28 November 2016, the Company provided a guarantee of EUR 95 thousand to Luminor

Bank AS for the obligations of its subsidiary UAB Petrašiūnų katilinė to the bank under the derivative transaction

described in Note 11. The residual value of the loan to AB Petrašiūnų katilinė was EUR 567 thousand as at 31

December 2021.

26. Related party transactions

The parties are considered to be related if one party can control the other party or has significant influence over the

other party in making financial or operational decisions.

On 4 December 2020, the Company and other companies controlled by Kaunas City Municipality signed an

agreement on the establishment of UAB Kauno miesto paslaugų centras (Note 6).

In 2020 and 2021, the Group and the Company did not have any significant transactions with other companies

controlled by Kaunas City Municipality, except for the purchase or provision of utility services. Transactions with

Kaunas City Municipality and companies controlled by Kaunas City Municipality were carried out at market prices.

A list of countries related to Kaunas City Council can be found here:

http://www.kaunas.lt/administracija/struktura-ir-kontaktai/pavaldzios-imones-ir-istaigos/.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

26. Related party transactions (continued)

In 2020 and 2021, the Group's and the Company's transactions with Jurbarkas City Municipality, Kaunas City

Municipality and companies financed and controlled by Kaunas City Municipality, and their debts and liabilities

as at the end of the periods were as follows:

31 December 2021

Purchases

Sales

Amounts

receivable

Amounts

payable

Kaunas City Municipality,

companies financed and fully

managed by it

897

3 120

826

206

Jurbarkas district municipality

132

31 December 2020

Purchases

Sales

Amounts

receivable

Amounts

payable

Kaunas City Municipality,

companies financed and fully

managed by it

1 269

2 512

619

268

Jurbarkas district municipality

167

Sales include the amounts of reimbursements for housing heating costs, cold water and sewage costs, and hot water

costs for financially challenged residents.

The Group and the Company have made an impairment allowance of EUR 253 thousand as at 31 December 2021

(on 31 December 2020: EUR 253 thousand) in respect of receivables from companies financed from municipal

budgets. Receivables are not secured by collateral or other instruments and will be settled in cash. No guarantees

have been obtained for receivables.

On 31 December 2020 and 31 December 2021 the Company's transactions with subsidiaries and the balance sheet

balances at the end of the period were as follows:

AB Petrašiūnų katilinė

Purchases

Sales

Amounts

receivable

Amounts

payable

31 December 2021

746

644

31 December 2020

1 177

443

220

UAB GO Energy LT

Purchases

Sales

Amounts

receivable

Amounts

payable

31 December 2021

31 December 2020

Receivables from AB Petrašiūnų katilinė consist of a loan. No provision for expected credit losses has been made

for the loan granted.

AB Petrašiūnų katilinė produces and sells heat energy to AB Kauno energija. UAB GO Energy LT provides real

estate management services to AB Kauno energija and participates in unregulated energy development projects

together with its parent company.

AB KAUNO ENERGIJA, company code 235014830, Ateities pl. Raudondvario pl. 84, Kaunas, Lithuania

SET OF CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR 2021

(in thousands euro, unless specified otherwise)

26. Related party transactions (continued)

Management's salary and other benefits

On 31 December 2021 the Group's and the Company's management consists of 3 and 1 persons (3 and 1 at 31

December 2020) respectively.

The Group

The Company

2021-12-31

2020-12-31

2021-12-31

2020-12-31

Wages and salaries charged to the

management

Reimbursements of employee

benefits calculated for the

management

During 2020 and 2021, there were no loans, guarantees, other disbursements or accruals to the management of

the Group and the Company, or transfers of assets.

27. Events after the date of the balance sheet

On 28 October 2021 the Boards of AB Kauno energija and AB Petrašiūnų katilinė (of which AB Kauno energija

is the sole shareholder) decided to initiate the reorganisation of AB Kauno energija and AB Petrašiūnų katilinė by

merger, merging AB Petrašiūnų katilinė with AB Kauno energija, with AB Petrašiūnų katilinė ceasing to operate

as a legal entity after the reorganisation, and to call for general meetings of shareholders of both companies to be

held for the purpose, with a view to approving the reorganisation. The reorganisation of the companies was

completed on 2 March 2022.

According to the management's expert assessment, due to the war in Ukraine, it is expected that the supply of the

main raw materials for heat production, i.e. biofuel and gas, will not be disrupted, the number of heat consumers

will not decrease, and the solvency of heat consumers will not be significantly affected by the increase in the heat

prices. This is confirmed by the available indicators for February and March. In addition to that, the heating season

is coming to an end and heating bills will decrease accordingly. It is therefore expected that the war in Ukraine

will have no direct or indirect impact on the Company's and Group’s activities.

There have been no other events after the reporting date that could have a material effect on the financial

statements or that should be disclosed in the financial statements.

***

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

CONTENTS

1. Reporting period of the consolidated annual report ................................................................................ 57

2. Companies composing the group of companies and their contact details ............................................... 57

3. Nature of core activities of the companies composing the group of companies ..................................... 57

4. Issuer’s agreements with credit institutions ............................................................................................. 58

5. Trade in securities of companies composing the group of companies in regulated markets ................... 58

6. Overview of the condition, performance, and development of the group of companies ......................... 59

6.1. Overview of the condition, performance, and development of the group of companies ......................... 59

6.2. Description of exposure to key risks and uncertainties the company confront with and their impact on

activity results .................................................................................................................................................. 63

7. Analysis of financial and non-financial performance results, information related to environmental

issues ................................................................................................................................................................ 66

8. References and additional explanations .................................................................................................. 71

9. Significant events after the end of the reporting period .......................................................................... 72

10. Plans and forecasts of activities of the group of companies .................................................................... 72

11. Information on research and development activities ............................................................................... 73

12. Information on own shares acquired and held by the issuer .................................................................... 74

13. Information on the aims of financial risk management, hedging instruments in use .............................. 74

14. Information on the issuer’s subsidiary undertakings ............................................................................... 74

15. Structure of authorized capital ................................................................................................................. 75

16. Data on shares issued by the issuer ......................................................................................................... 75

17. Information on the issuer’s shareholders ................................................................................................. 77

18. Employees ............................................................................................................................................... 79

19. Procedure for amending the issuer’s statutes .......................................................................................... 81

20. Issuer’s management bodies .................................................................................................................... 82

21. Information on significant agreements .................................................................................................... 87

22. Information on agreements of the issuer and its managerial body members or employees .................... 87

23. Information on major transactions with related parties ........................................................................... 87

24. Information on harmful transactions concluded on behalf of the issuer during the reporting period ..... 87

25. Information on compliance with the governance code of companies and the company’s corporate social

initiatives and policies ...................................................................................................................................... 87

26. Data on publicised information ............................................................................................................... 88

Annex 1 – AB Kauno Energija Remuneration Report for 2021......................................................................90

Annex 2 – Company’s report on the compliance with the Governance Code for the companies listed on the

Stock Exchange Nasdaq Vilnius.............…………………………………………………….……............… 92

Annex 3 – AB Kauno Energija Corporate Social Responsibility Report ........................................................112

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

1. Reporting period of the Consolidated Annual Report

Reporting period for which the AB Kauno Energija Consolidated Annual Report has been prepared is

January 1, 2021 – December 31, 2021.

2. Companies consisting the Group of companies and their contact details

AB Kauno Energija (hereinafter – the Company or the Issuer) prepares both the Company’s and the

Consolidated Financial Statements. The group of companies (hereinafter referred to as the Group) consists of

AB Kauno Energija and its subsidiaries – UAB GO Energy LT and AB Petrašiūnų Katilinė in which the Issuer

directly controls 100 per cent of the shares of these companies.

Main details of the Company:

Name of the Company: AB Kauno Energija

Legal-organizational form: Public Limited Liability Company

Headquarters’ address Raudondvario av. 84, 47179 Kaunas

Code of legal entity: 235014830

Telephone (8 37) 305 650

Fax (8 37) 305 622

E-mail: info@kaunoenergija.lt

Webpage www.kaunoenergija.lt

Registration date and place August 22, 1997, Kaunas, Order No 513

VAT payer code LT350148314

Main information about the subsidiaries:

Company name AB Petrašiūnų Katilinė

Legal-organizational form Limited Liability Company

Headquarters address R. Kalantos str. 49, 52303 Kaunas

Code of legal entity 304217723

Telephone +370 687 48413

Registration date and place April 1, 2016, Kaunas

Company name UAB Go Energy LT

Legal-organizational form Limited Liability Company

Headquarters’ address Savanorių pr. 347, 49423 Kaunas

Code of legal entity 303042623

Telephone (8 37) 305 693

E-mail kent@kaunoenergija.lt

Registration date and place April 16, 2013, Kaunas

3. Nature of core activities of the companies composing the group of

companies

The nature of core activities of the Group is manufacture and rendering of services. The Company is the parent

company of the Group. The Company generates and supplies heat to consumers (for the purposes of heating

and hot water production) in the cities of Kaunas and Jurbarkas and in Kaunas district Akademija town,

Ežerėlis town, Domeikava village, Garliava town, Girionys village, Neveronys village, Raudondvaris village,

(hereinafter referred to as Kaunas district).

Also, following provisions of the Law on Heat Sector, the Company supplies hot water (is engaged in hot

domestic water supplier activities) from May 1, 2010 for consumers in the cities of Kaunas and Jurbarkas and

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Kaunas district, who chose the Company as a hot water supplier. As of December 31, 2021, the Company

supplied hot water to 733 residential buildings in Kaunas and Kaunas district, and 7 in Jurbarkas city.

In addition, the Company maintains engineering structures (collectors – manifolds) and operates heat and

electricity production facilities. The Group and the Company carries out a supervision of indoor heat and hot

water supply systems, maintenance of heat unit equipment, repairs of heat units and other heating equipment,

provides premises rental services under agreements. The Group and the Company are engaged in licensed

activity in accordance with the licenses held. On February 26, 2004 the National Commission for Energy

Control and Prices (hereinafter – the Commission) issued a heat supplier licence to the Company. The licence

is valid indefinitely. Maintenance of indoor heat and hot water supply systems is pursued following the

provisions of Article 20 of The Law on Heat Sector of the Republic of Lithuania.

The vision of the Group and the Company is to be an innovative, competitive, and added value for shareholders

creating Company engaged in heat and cooling generation and their centralized supply, maintenance of indoor

heating and hot water systems.

Values of the Group and the Company:

• More than 50 years of experience in heat production and supply.

• Responsibility towards consumers for reliable heat and hot water supply.

• High qualification of employees allowing to reach the highest efficiency indicators.

• Ability to apply innovative solutions in everyday activities.

Strategic goals of the Group and the Company:

AB Kauno Energija is the most advanced and innovative district heating (hereinafter – DH) company in

Lithuania.

Principled guidelines of Company’s heat economy strategy are as follows:

• Increase of safety and reliability of heat supply – the Company intends to formulate an expert

assessment of safety / vulnerability of heat supply system, to implement update and modernization of

system of parameters data transfer, collection and evaluation, to implement optimization of the

network hydraulic mode and increase of speed of parameters reaction / change, to reconstruct and

optimize sections of termofication pipelines and elements (average age of DH pipelines reaches

approximately 30 years), to implement update and development of the system of DH network water

reserve – emergency replenishment, to implement technical solutions and / or use a good practice

increasing reliability and safety, ensuring stability of thermofication mode;

• to actively participate in formation of policy of Kaunas city supply with heat and in increase of

Company’s desirability and in expansion of district heating market.

• formation of good practice and its publicizing.

4. Issuer’s agreements with credit institutions

On September 13, 2018 the Issuer Service Agreement with AB SEB Bankas (company code 112021238,

Gedimino pr. 12, Vilnius).

5. Trade in securities of companies composing the Group of companies in

regulated markets

20,031,977 (twenty million thirty-one thousand nine hundred seventy-seven) of the Issuer’s ordinary registered

shares (VP ISIN code LT0000123010) with the total nominal value equal to EUR 34,855,639.98 (thirty-four

million eight hundred fifty-five thousand six hundred thirty-nine euro and 98 cents) were listed in the

secondary trade list of Nasdaq Vilnius Baltic stock exchange as of December 31, 2021. The beginning of listing

of the Company’s shares is December 28, 1998.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

6. Overview of the condition, performance, and development of the Group

of companies

6.1. Overview of the condition, performance, and development of the Group of companies

The Company performed its activities of the year 2021 with a main focus on development of capacities of

production facilities and increase of reliability of DH network, considering Strategic guidelines of centralized

heat supplies of Kaunas city.

When planning its activities, the Company also considers the AB Kauno Energija Strategy for the Heating

System Development for the years 2007–2020 developed in 2016 by the Lithuanian Energy Institute under

initiative of the Company. On February 7, 2019 the Supervisory Board of the Company approved the

“Adjustment report of AB Kauno Energija Strategy, implementing the directions of the development of the

energy sector until 2021”.

The Company covers a major part of heat production and supply market in the cities of Kaunas and Jurbarkas

and Kaunas district. Group’s generation capacities consist of Company’s boiler-houses capacities and

subsidiary’s AB Petrašiūnų Katilinė capacities in Kaunas city. Company’s generation capacities consist of

Petrašiūnai power plant, 4 boiler-houses in Kaunas integrated network, 7 district boiler-houses in Kaunas

district, 1 boiler-house in Jurbarkas city, 14 boiler-houses of isolated networks and 26 local gas burning boiler-

houses in Kaunas city (25 of them are gas burned and 1 of them – burned with pellets), also 8 local water

heating boiler-houses in Sargėnai catchment. In September 2021, a gas boiler of 1.6 MW was dismantled at

the integrated grid boiler house at A. Juozapavičiaus pr. 23A. Total installed heat generation capacities of the

Group consist of approx. 683 MW, and total energy generation capacity of the Group is approx. 692 MW

(including 48 MW capacities of condensational economizers). Total installed heat production capacity of the

Company consists of approx. 664 MW (including 48 MW capacities of condensational economizers),

electricity generation capacities – 8.75 MW. From them 314.6 MW of heat generation capacities (including

17.8 MW capacities of condensational economizers) and 8 MW of electricity production capacities are in

Petrašiūnai power plant. 39.4 MW of heat generation capacities (including 4.4 MW capacities of

condensational economizer) is in Jurbarkas city. Total Company’s power generation capacity is 673 MW

(including 48 MW of condensational economizers’ capacities).

30 per cent of heat supplied to consumers in the year 2021 was produced in Company’s heat production

facilities. The rest of required quantity of heat was purchased from independent heat producers (hereinafter –

IHP) in monthly auctions, according to legal acts. Starting from May 2018 an electronic heat purchasing

auctions are arranged by the Energy Stock Exchange operator UAB Baltpool. Electronic auctions are carried

out in accordance with the Regulations of the Heat Auctions approved by the National Energy Regulatory

Council. The Schedule of the Procedure and Conditions for the Purchase of Heat from Independent Heat

Producers, the Methodology for Determining Heat Prices, the Rules for the Provision of Information on

Energy, Drinking Water Supply and Wastewater Treatment, Sewage and Surface Water Treatment Companies,

a Summary of Conditions of Usage of Heat Transfer Networks, and a schedule of the Procedure for Publicly

Disclosed Information were changed respectively.

Fuel used by the Company for heat production in the year 2021 is presented in Chart 1.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Chart 1

The Company purchased heat during the year 2021 from 12 IHP in Kaunas and Kaunas district as follows:

from UAB Kauno Termofikacijos Elektrinė, UAB Idex Taika, UAB Idex Taika Elektrinė, UAB Lorizon

Energy, UAB Ekoresursai, AB Petrašiūnų Katilinė, UAB Aldec General, UAB ENG, UAB Idex Biruliškių,

UAB “Ekopartneris”, UAB Foksita and UAB Kauno Kogeneracinė Jėgainė. Total purchases consisted of

1105 thousand MWh of heat, i.e., 70 per cent of heat supplied to the.

Amounts of heat purchased from IHP and produced with Company’s equipment during the period of the years

2017–2021 are presented in chart 2, thousand MWh:

Chart 2

Heat purchase and production, thous. MWh

The Company supplied this produced and purchased heat with integrated and local heat supply networks to

3,744 businesses and organizations as well as to 118,468 households, in total – to 122,212 consumers (objects

by addresses) as of December 31, 2021.

19.69

29.43

23.91

21.1

33.4

80.06

70.42

75.84

78.61

64.4

0.25

0.15

0.25

0.29

2.2

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2017 y. 2018 y. 2019 y. 2020 y. 2021 y.

Fuel structure, per cent

Natural gas Solid biofuel Biogas and other fuels

564.5

571.7

515.6

442.4

483.8

890.4

872.9

847.6

869.4

1104.7

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2017 y. 2018 y. 2019 y. 2020 y. 2021 y.

Heat productions in own facilities Heat purchsased from IHP

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Chart 3

Investments

Investments are made in accordance with Company’s investment plan for the year 2021, which has been

approved by decision No T-162 of Kaunas City Municipality Council of April 20, 2021 “Regarding investment

plan of AB Kauno Energija for the year 2021 and its financing” (hereinafter – Investment plan). The Company

makes investments based on an assessment of the economic situation, the competitive environment and the

availability of financing. Investment plans are approved by the Board of Directors and coordinated by the

Kaunas City Municipal Council.

The Company implements trunk pipeline replacement projects co-financed by the European Union structural

funds, optimizes pipeline diameters, connects new objects to the DH network and modernises heat production

facilities according to Investment plan.

On November 16, 2018 the Company signed a contract with the Lithuanian Business Support Agency

(hereinafter – LBSA) for the financing of the project “Development of Kaunas city district heating network in

the Aleksotas catchment” (code 04.3.2-LVPA-K-102-04-0001) under the Measure No. 04.3.2-LVPA-K-102

“Modernization and development of heat supply networks” of Priority 4 “Promotion of Energy Efficiency and

Renewable Energy Production” of the EU Funds Investment Action Program for 2014–2020. The value of the

project is EUR 3.8 million, incl. EUR 1.9 million of EU Structural support.

On November 16, 2018 the Company signed two contracts with the LBSA to finance the projects “Biofuel

Boiler Installation in Raudondvaris Boiler House” and “Biofuel Boiler Installation in Jurbarkas Boiler House”.

A 1.5 MW capacity biofuel-fired boiler is installed in Raudondvaris. The value of the project is EUR 0.5

million, incl. EUR 0.3 million of European Union Structural support. A 4.6 MW capacity biofuel-fired boiler

is installed in Jurbarkas. The value of the project is EUR 0.8 million, incl. EUR 0.5 million of European Union

Structural support. These projects were accomplished in 2021.

Two agreements were signed in 2020 on the allocation of support from the Climate Change Program funds for

the following Company’s projects:

• “Use of an Absorption Heat Pump and Installation of a Solar Light Power Plant at Petrašiūnai Power Plant”.

A subsidy was allocated for this project. Using it, the Company’s Petrašiūnai power plant will be equipped

with a 499.8 kW photovoltaic solar power plant and a 2400 kW absorption heat pump. The value of the project

is 1.523 million. EUR 0.457 million Eur.

• “Installation of Solar Photovoltaic Power Plants (4 units) in boiler-houses of AB Kauno Energija”. The

value of the project is EUR 0.080 million, financial support is EUR 0.024 million.

96.94%

3.06%

Repartition of Company's heat consumers by groups

Units of residential households (inhabitants)

Other consumers

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Implementation of these projects will reduce the fuel and electricity consumption and will create preconditions

for heat price reduction.

2022 February 10 The company has signed a grant agreement with the Environmental Project Management

Agency of the Ministry of Environment of the Republic of Lithuania for the financing of the project

“Utilization of Solar Heat Energy in the Neveronių DH System” by providing a subsidy for the financing of

projects with the funds of the climate change program. Up to 0.086 million will be allocated for this project.

EUR subsidy, financing up to 25 percent of the project eligible costs.

The dynamics of consumers’ heating capacities connections to Company’s DH network and disconnections

from them in 2017–2021 is shown in Chart 4.

Chart 4

Dynamics of consumer’s connections and disconnections

A total capacity of objects disconnected from DH network in 2021 was approx. 0.35 MW. Disconnection of

heat equipment from centralized heat supply networks and the change of heating method is pursued following

the order determined by the Civil Code of the Republic of Lithuania, the Law on Heat Sector of the Republic

of Lithuania, the Law on Construction of the Republic of Lithuania and sub statutory legal acts implementing

these Laws.

Company’s investments by funding sources of the years 2017–2021 are presented in Chart 5.

Chart 5

2.96

0.86

0.31

0.95

0.35

13.66

4.22

14.63

14.14

7.12

2017 y. 2018 y. 2019 y. 2020 y. 2021 y.

Capacities disconnected, MW Capacities connected, MW

3.001

2.597

12.111

3.883

2.685

6.080

1.486

1.082

10.538

6.834

3.318

8.799

6.922

4.497

12.399

4.083

21.992

21.343

14.016

2017 y. 2018 y. 2019 y. 2020 y. 2021 y.

Implementation of investments by funding sources, million

euro

Company funds Loans Different funds Total

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

6.2. Description of exposure to key risks and uncertainties the Company confront with and their

impact on activity results

External risk factors affecting the Company’s core business:

• Increase in competition between heat producers in Kaunas.

• Increase in final (i.e., including all expenditures) price of natural gas and biofuel.

• Ever-changing legal environment.

• Heat production pricing policies.

Competition environment risk factors.

To operate effectively and reliably in creation the added value for shareholders, the Company is facing threats

specific to the sphere of its activity, but also takes advantage of opportunities to work efficiently and effectively

by exploiting the available potential. One of the biggest threats that the Company may face is a relatively high

price for heat purchased from IHP, who are ranked as private business units committed to profit generation.

Purchase of heat is pursued following valid law and the Description of procedure for purchase of heat from

independent suppliers of heat approved by NERC. In turn, the Company invests extensively in modernization

and construction of its own manufacturing facilities, to reduce the comparative costs of heat production. Thus,

it takes advantage of the regulatory environment and reduces the energy purchase price.

Together with coming of new IHP the Company faced additional technical, economical, legal and other issues

that needs to solve: management of heat supply network and balancing of power of these producers in case of

emergency stop of them, retaining of optimum working parameters of the network, regulation, change and

applying of heat purchase from IHP order.

Commercial risk factors

The Company is a major supplier of the heat produced centrally to the city of Kaunas, part of Kaunas district

and the city of Jurbarkas. To retain this market, it is necessary to implement modern and efficient heat

production technologies in own production facilities and to focus on production at the lowest cost, benefiting

from private differences of different types of fuel.

Company’s heat sales are directly dependent on heat demand, i.e., heat consumption, which is mostly affected

by the average outdoor air temperature, the amount of investment of consumers in energy-saving and rational

use of heat and the pace of development of the heat sales.

Changes in fuel prices and the price of heat, produced by IHP have an impact on cost of Company’s heat and

electricity production.

Company’s performance is affected by the decrease in sales due to reduced and further reducing heat demand

(in pursuance of residential buildings renovation and by installing a heat saving equipment), due to consumer’s

disconnections from DH network (due to the various reasons). Risks can be mitigated by Company’s current

and further investments in heat and electricity production facilities, using renewable energy sources, reducing

heat production expenditures and the price heat, purchased from IHP as well as the price of heat supplied for

consumers, and continually reasonably informing customers on the benefits of DH network systems (safety,

reliability, correlation with one sort of fuel, fuel conversion, local pollution sources in residential areas, total

environmental pollution, etc.) in comparison with autonomous heating.

Operational risk

Detailed information on the risk management policy and credit, exchange rate, interest rate and liquidity risks

are provided in an Explanatory Notes of AB Kauno Energija Consolidated and Company’s Financial

Statements.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

During the year 2021 in comparison with the year 2020 heat consumers’ debts decreased by approx. 20% and

consisted of EUR 4.934 million. Decrease was affected by application of effective methods of debts

administration.

To recover these debts as soon as possible, the Company actively uses a variety of legal debt management

measures, such as pre-trial actions, judicial recovery, and cooperation with law Companies. In addition, when

a debt becomes big, a restriction of heat supplies is applied as a prevention measure (if there are technical

possibilities and according to the law).

On January 2, 2018 the Kaunas Unified Service Center “Mano Kaunas” started its operations in Statybininkų

str. 3, Kaunas, at the premises of UAB Kauno Švara. Here residents can get immediate information /

consultation about Kaunas city services provided by municipality owned companies – AB Kauno Energija,

UAB Kauno Švara, UAB Kauno Autobusai, UAB Kauno Butų ūkis, UAB Kauno Gatvių Apšvietimas and

UAB Kauno Vandenys, as well as conclude contracts, pay invoices, requests, certificates, etc.

Activities of the Company are cyclical. During the heating season (October – April) a major operating income

is earned. During the non-heating season, the Company’s revenues are at their lowest since only heat for hot

water is used. In addition, during the non-heating season, the Company incurs more costs because it must

prepare for the upcoming heating season, i.e., to carry out the repairs and reconstruction of heat supply

networks and heat production facilities.

Legal conformity risk

Energy activities are governed by the Law on Heat Sector, the Law on Energy, the Law on Electricity, the Law

on Natural Gas, the Law on Drinking Water Supply and Wastewater Management, Government resolutions,

Heat supply and consumption rules, Methodology of heat prices and payments for heat of NCC and other

legislation. Their amendments affect the heating industry.

With new amendments of articles 2, 3, 20, 22, 28, 31, and 32 of the Law on Heat Sector No XI-1608 of the

Republic of Lithuania that came in affect from November 1, 2011 in accordance with Article 7, the heat and

hot water prices may not include any costs related with the indoor building heating (including heat units), and

hot water systems. In implementing the legislation, from November 1, 2011 all these costs directly reduce the

profit of the Company.

Legal conformity risk is a risk of increase in losses and (or) loss of prestige, an (or) decrease in confidence,

which can be determined by the external environment factors (for example, violation of external legal acts,

non-compliance of requirements of supervising institutions, etc.) or internal factors (for example, violation of

internal legal acts and ethical standards, cases of employee’s abuse, etc.).

Technical and process factors

The biggest process risks are so shaded with the condition of heating systems. Company’s trunk pipelines are

an average about 30 years old. Modernization rate of them is determined by lack of funds – it is necessary to

reconstruct more than 13.5 km of pipelines per year to condition of age of heat supply system and the minimum

investments should consist of approximately 6 million euros. Hydraulic testing identifies their weakest points.

Every year, about 200 points where cracks occur are identified during the tests. Upon discovery of defects,

pipes are exposed and promptly repaired.

Mains of heating networks in the most worn-out places are reconstructed using support from the EU Structural

Funds. New industrially (polyurethane foam insulation in polyethylene shell) insulated pipes not requiring

concrete channels are mounted in the reconstructed sections of the heat supply network. Heat loss is very low

in reconstructed sections (process level), while the pipelines no longer pose a threat of rupture and ensure

reliable heat supply to consumers.

One of the technical risk factors for heat generation facilities is their age. Some of heat generation facilities

are already renewed now. Every year boiler repairs, and preventive work is carried out during the non-heating

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

season. They are necessary to make secure heat supplies and reliability, i.e., securing of heat production

facilities and fuel reserves.

More detailed information on Company’s production facilities modernization is provided in chapters on

operations and development.

Ecological factors

With respect to the Company, they may be divided into those affecting the Company and affected by the

Company’s operations.

In order not to adversely impact the environment and comply with the pollution limits, vibration and noise

values, the Company is guided by the requirements of the Kyoto Protocol, the Helsinki Commission

(HELCOM) and environmental constraints of Helsinki Convention, as well as the European Parliament and

Council Directive 2001/80/EB of regulating energy emissions and Lithuanian environmental normative

document LAND 43-2013 for the use of natural resources, and releases and emissions of air pollutants to the

environment in its activities. Main sources of pollution of the Company: burning fossil fuel in the Company's

heat sources, production of heat and wastewater, are used in the industrial processes.

The Company pays taxes for atmospheric and water pollution. If allowable emission rate limits or annual limits

are exceeded, the Company would pay the fines under the applicable laws of the Republic of Lithuania. The

Company was not imposed any penalties in the year 2021.

Main Company’s emission reduction measures: modernization of heat generation facilities, heat transfer loss

reduction by replacing the existing pipes with the pipes with polyurethane foam insulation, installation of new

technology and improvement of existing technological equipment, use of less polluting fuels, and continuous

emission monitoring (the fuel balance in the 1 half of the year 2021 was dominated by the solid biofuel –

64.4 %, natural gas – 33.4 %, other fuels – 2.29 %).

Additional efforts by the company to reduce CO2 emissions:

• Green procurement. We choose suppliers not only on the basis of the price and the quality of goods, services

or works, but also on the basis of the reduced impact they have on the environment.

• The Company is currently implementing an environmental management system (ISO 14001:2015). It

assists in the systematic management of the direct and long-term environmental impact of the activities and

consistently addresses the relevant environmental issues of the Company. With this system in place, we will

be able to increase green procurement.

• We are renewing our fleet of vehicles giving preference to electric and hybrid cars. We have purchased 3

electric cars in 2021.

• We sort waste generated in production and administrative activities and transfer it to waste managers in

accordance with the established procedure. We have also refused rubbish bins in the offices in the

administration building and dispose rubbish in the sorting bins in the common corridors. This encourages

employees to recycle and has reduced the amount of bins and bags (plastics) used.

• The company is taking the initiative to inform the public about energy-saving measures in order to reduce

air pollution. We regularly raise the awareness of the public by writing informative articles about renewable

energy sources, their benefits for nature and people, informing what modern technologies are used by our

company and how they contribute to climate change mitigation.

• Employees of the Company are also encouraged to come to work with less polluting vehicles, to cooperate

as much as possible and to travel to work with a single vehicle for several colleagues.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

7. Analysis of financial and non-financial performance results, information

related to environmental issues

Company’s sales revenue of the year 2021 was EUR 50,981 thousand and in comparison, with the year 2020

increased by 21.3 per cent (in the year 2020 it consisted of EUR 42,036 thousand). Sales revenue of the Group

of the year 2021 was EUR 50,963 thousand (in the year 2020 it consisted of EUR 42,030 thousand).

This change was mainly affected by the increase in the amount of heat sold by 23.4 percent in comparison with

the year 2020. The average price of heat sold increased by 2.3 percent (in the year 2021 it was 3.63 ct/kWh,

and in the year 2020 – 3.55 ct/kWh).

Comprehensive income of the Group in the year 2021 is EUR 72 thousand, the Company’s – EUR 457

thousand. Comprehensive income increased by EUR 224 and 400 thousand respectively in comparison with

the year 2020.

Comparison of financial indicators of the Group of the year 2021 with the indicators of the years 2017–2020

is presented in Table 1.

Table 1

Indicator of the Group

2017

2018

2019

2020

2021

Revenue from sales, thousand euros

59,680

61,316

54,649

42,030

50,963

1.1

Including: Heat energy

56,084

57,387

49,711

37,147

47,125

1.2

Cooling supply

1.3

Maintenance of indoor heating and hot

water supply systems, heating

substation facilities

1.4

Income from the maintenance of

collectors

250

251

268

348

1.5

Hot water supply including cold water

price

2,981

3,260

3,228

2,935

3,014

1.6

Income from maintenance of hot

water meters

355

408

422

433

456

1.7

Revenue from the sale of trading

emission allowances

1,025

1,236

Profit, thousand euros

6,861

3,963

933

-152

EBITDA (earnings before interest,

taxes, depreciation and amortization),

thousand euros

15,861

12,417

8,816

8,202

7,541

Profitability of core business, per cent

(operating profit / sales and services)

* 100

11.7

6.4

1.2

-5.7

-0.6

Net profitability, per cent (net profit /

sales and services) *100

11.5

6.5

1.7

-0.4

0.1

Assets, thousand euros

149,158

148,266

154,096

162,903

179,934

Equity, thousand euros

89,343

89,967

89,829

89,673

89,745

Return on equity (ROE), per cent

(net profit / average equity) *100

8.2

4.7

1.1

-0.2

0.1

Return on assets (ROA), per cent

(net profit / average assets) *100

4.8

2.8

0.6

-0.1

0.0

Asset turnover ratio

(sales and services / assets)

0.40

0.41

0.36

0.26

0.28

Return on tangible assets, per cent

(net profit / average value of tangible

assets) *100

5.4

3.2

0.7

-0.1

0.1

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Indicator of the Group

2017

2018

2019

2020

2021

Debt ratio (liabilities /assets)

0.40

0.39

0.42

0.45

0.50

Debt-to-equity ratio (liabilities /

equity)

0.7

0.6

0.7

0.8

1.0

General liquidity ratio (short-term

assets / short-term liabilities)

1.22

1.58

1.03

0.86

1.33

Quick ratio ((short-term assets-

inventory) / short-term liabilities)

1.13

1.47

0.92

0.75

1.23

Cash ratio (cash in hand and at bank /

short-term liabilities)

0.42

0.60

0.16

0.14

0.21

Net earnings per share (net profit /

average weighted number of shares in

issue)

0.16

0.09

0.02

0.01

0.00

Equity per share, euros

2.09

2.1

Last share market price of the year

/net profit /number of shares at year-

end (P / E ratio)

7.36

10.80

45.97

-232.31

656.89

Share capital, thousand euros

74,476

Share capital-to-assets ratio

0.5

0.49

0.46

0.41

Return on equity (capital), per cent

(net profit / capital and reserves) *100

8.8

4.9

1.1

-0.2

0.1

Dividend pay-out ratio (dividend per

share / earnings per share)

0.49

0.28

0.0

Comparison of financial indicators of the Company of the year 2021 with the indicators of the years 2017–

2020 is presented in Table 2.

Table 2

Indicator of the Company

2017

2018

2019

2020

2021

Revenue from sales, thousand euros

59,692

61,328

54,659

42,036

50,981

1.1

Including: Heat energy

56,096

57,399

49,721

37,153

47,133

1.2

Cooling supply

1.3

Maintenance of indoor heating and hot

water supply systems, heating

substation facilities

1.4

Income from the maintenance of

collectors

250

251

268

348

1.5

Hot water supply including cold water

price

2,981

3,260

3,228

2,935

3,024

1.6

Income from maintenance of hot water

meters

355

408

422

433

456

1.7

Revenue from the sale of trading

emission allowances

1,025

1,236

Profit, thousand euros

6,046

4,414

747

457

EBITDA (earnings before interest,

taxes, depreciation and amortization),

thousand euros

14,391

12,227

7,946

7,811

7,170

Profitability of core business, per cent

(operating profit / sales and services) *

100

12.2

6.8

0.7

-2.8

0.2

Net profitability, per cent (net profit /

sales and services) *100

10.1

7.2

1.4

0.1

0.8

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Indicator of the Company

2017

2018

2019

2020

2021

Assets, thousand euros

145,002

145,402

151,595

161,250

178,654

Equity, thousand euros

89,024

90,099

89,776

89,833

90,290

Return on equity (ROE), per cent

(net profit / average equity) *100

7.05

5.12

0.87

0.07

0.43

Return on assets (ROA), per cent

(net profit / average assets) *100

4.32

3.1

0.5

0.0

0.2

Asset turnover ratio

(sales and services / assets)

0.41

0.42

0.36

0.26

0.29

Return on tangible assets, per cent

(net profit / average value of tangible

assets) *100

4.9

3.7

0.6

0.0

0.3

Debt ratio (liabilities /assets)

0.39

0.38

0.41

0.44

0.49

Debt-to-equity ratio (liabilities / equity)

0.6

0.7

0.8

1.0

General liquidity ratio (short-term

assets / short-term liabilities)

1.48

1.65

1.07

0.91

1.36

Quick ratio ((short-term assets-

inventory) / short-term liabilities)

1.38

1.54

0.95

0.80

1.27

Cash ratio (cash in hand and at bank /

short-term liabilities)

0.51

0.62

0.14

0.17

Net earnings per share (net profit /

average weighted number of shares in

issue)

0.14

0.10

0.02

0.01

Equity per share, euros

2.08

2.11

2.1

2.11

Last share market price of the year / net

profit / number of shares at year-end (P

/ E ratio)

8.35

9.70

57.3

619.5

103.49

Share capital, thousand euros

74,476

Share capital-to-assets ratio

0.51

0.49

0.46

0.42

Return on equity (capital), per cent (net

profit / capital and reserves) *100

7.8

5.4

0.9

0.1

0.5

Dividend pay-out ratio (dividend per

share / earnings per share)

0.56

0.25

0.0

The more detailed analysis of financial indicators of the Group and the Company is provided in the

Consolidated and Company’s financial statements for the year 2021.

Environmental impact on operations

The Company’s performance can be affected by changes in sales turnovers caused by changed heat demand,

which can be caused by consumer investments in the renovation of buildings, heat saving and rational

consumption, average higher of lower outdoor temperature during the heating season, changes in fuel prices,

heat purchase price from IHP.

Company’s reconstructed heat production facilities changing fossil fuel to biofuel will make a serious

competition with their costs of production to IHP, operating in Kaunas.

The dynamics of heat price of the Company in the years 2017–2021 is provided in Chart 6.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Chart 6

Constituents of Company’s heat price structure of December of the years 2017–2021 are provided in Chart 7.

Chart 7

The prices of heat and hot water are calculated and approved in accordance with the Methodology for the

determination of heat prices, approved by the resolution of NERC No. O3-96 of July 8, 2009. Constituents of

a base heat price are determined for a period of 3-5 years. In the case of regulated pricing services (products),

the mechanism of long-term prices applies to heat pricing, i.e., for the base period, the base heat price (price

constituents) is determined, which is adjusted for the second and subsequent years by setting the recalculated

heat price (price constituents).

On September 25, 2020 the NERC determined unilaterally by the Resolution No. O3E-880 the heat price

constituents of AB Kauno Energija for the second year of validity of the basic heat price. The constant

constituent of the heat price, valid until October 30, 2020 amounted to 1.81 ct/kWh, and the new constant

constituent that entered into force from November 1, 2020 and is currently in force is 1.88 ct/kWh.

4.83

4.99

4.57

3.55

3.63

2017 y. 2018 y. 2019 y. 2020 y. 2021 y.

Average price of heat, supplied by AB Kauno energija,

ct/kWh

3.25

3.09

2.58

1.55

2.98

1.53

1.42

1.33

1.41

0.42

0.39

0.47

2017.12 2018.12 2019.12 2020.12 2021.12

Structural constituents of the heat price, ct/kWh

Variable component Constant component Profit

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Chart 8

The Company recalculates values of heat price variable constituents and final heat prices every month,

considering changes in prices of fuel and purchased heat.

Details of variable heat price constituent valid on December 2021 are provided in Chart 9.

Chart 9

Information related to environmental issues

In carrying out their activities, the Group and the Company seek to prudently use natural resources, install

fewer polluting technologies, and follow the environmental legislation and apply preventive measures to

minimize the negative impact on the environment.

Current Expenses

of repair and

maintenance; 0.17

Depreciation

(amortization);

0.42

Personnel

expenses; 0.64

Return on

Investments; 0.47

Tax expenses;

0.12

Expenses of sales

and marketing;

0.01

Administrative

expenses; 0.02

Financial

expenses;

0.02

Other

distributable

expenses; 0.01

Heat price constant constituent, euro ct/kWh

Fuel for

technology;

34.50%

Expenses of

purchased heat;

42.86%

Expenses of

transfer

technological

losses; 20.22%

Electric

energy for

technology;

1.89%

Water for

technology;

0.27%

Expenses of

heat, used for

self purposes;

0.27%

Heat price variable constituent in December 2021, per cent

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Waste management

The Group and the Company have organized the waste collection, sorting, and disposal of them to waste

managers, i.e., to licensed waste management businesses. In 2021, the Group and the Company disposed for

recycling 2,528 tons of various waste (absorbents, filter materials, packages containing hazardous chemicals

or that are contaminated with them, paper and carton, insulation materials containing asbestos, used tyres,

bituminous mixes, batteries and accumulators, fluorescent lamps, concrete, bottom ash, iron, and steel.

Wastewater management

In accordance with the schedule agreed with the Environmental Protection Agency (EPA), the Group and the

Company constantly monitor that the effluent discharges from stationary sources are within the permissible

limits set out in the integrated pollution prevention and control permits.

Air pollution

The measurement laboratory of stationary air pollution sources of the Group and the Company, in possession

with the permit issued by the EPA and following the schedule agreed with EPA, continuously monitors the

emissions to the atmosphere from stationary sources to would not exceed the permissible limits established in

integrated pollution prevention and control permits. Company’s Šilkas, Ežerėlis, Girionys and Noreikiškės

boiler-houses, and starting from 2015 – Inkaras boiler-house and Petrašiūnai power-plant use biofuel, thus

reducing atmospheric pollution.

The comparison of the amount of pollutants emitted into the atmosphere in 2021 from the Company’s

stationary facilities with the amount of the years 2017–2020 is presented in table 3 below.

Table 3

Period

Particulates, t

Nitrogen

oxides, t

Carbon

monoxide, t

Sulphur

dioxide, t

Hydrocarbons, t

Other

pollutants, t

2021

72.9579

196.5479

781.2462

158.4375

1.2315

0.2966

2020

98.6841

217.8864

884.9974

102.9845

1.1430

0.2801

2019

86.0888

253.4443

1090.2436

0.2746

1.1978

0.4313

2018

48.7984

283.0412

1082.9366

31.6210

1.1982

0.1509

2017

79.7242

285.6461

1236.7667

145.0571

1.1982

0.4297

Cyclones for smoke cleaning from particulates are installed in Šilkas, Ežerėlis, Girionys, Noreikiškės, Inkaras

boiler-houses and Petrašiūnai power-plant. Their working efficiency is checked every year. The Company is

involved in the greenhouse gas emissions trading system.

8. References and additional explanations

Main financial data of the Group and the Company are provided in the Consolidated and Company’s Financial

Statements of AB Kauno Energija for the year 2021.

The financial statements are prepared in accordance with the International Financial Reporting

Standards as adopted by the European Union and their interpretations. Standards have been issued by

the International Accounting Standards Board and interpretations have been issued by the

International Financial Reporting Interpretations Committee.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Internal control over consolidated statements

When preparing its consolidated financial statements, the Company combines the itemised financial statements

of the Company and its subsidiaries, by summing up the items of assets, liabilities, equity, revenue, and

expenses. Afterwards, it eliminates the book value of the Company’s investment in the subsidiary and

Company’s share of equity in the subsidiary; amounts on balance sheets, transactions, income and expenses

inside the Group (for this purpose, it prepares a reconciled report of all transactions, income and expenses for

the period); difference in depreciation of contribution in kind measured at market value as compared to its

book value.

For composing of the consolidated financial statements of the Group, the financial statements of the Company

and subsidiaries are composed for the same date.

It’s controlled if the accounting policy of the Company and its subsidiaries for accounting of similar

transactions is the same. The subsidiaries’ income and expenses are included into the Consolidated Financial

Statements as of the date of acquisition.

9. Significant events after the end of the reporting period

On 2021-11-26, the Board of AB Kauno energija, which performs the functions of the sole shareholder of AB

Petrašiūnų katilinė, adopted a decision to approve the reorganisation of the limited lability company Petrašiūnų

katilinė by way of merger, by merging the limited lability company Petrašiūnų katilinė (company code

304217723), which after the reorganisation will cease its as a legal entity, to the limited lability company

Kauno energija (company code 235014830), which is participating in the reorganisation.

On 2 March 2022, the reorganisation process was completed, AB Petrašiūnų katilinė was deregistered and

merged with the Company.

On April 6, 2022 the audit of the set of Financial Statements for 2021 has been completed. It was performed

by audit company UAB ROSK Consulting. A candidacy of the company performing audit of the Financial

Statements of the Company for 2021 was nominated to the General Meeting of Shareholders by the

Management Board of the company following the results of the procurement carried out in 2021. This Annual

Report of the Company is presented together with the audited set of Financial Statements for 2021 and an

independent auditor’s report on it. The Company's management approved these financial statements on 6

April 2022. The Company's shareholders have a statutory right to approve these financial statements or

disapprove them and require the management to draft new financial statements.

10. Plans and forecasts of activities of the group of companies

Inasmuch investments allow continual business development and profitability, the aims of the Group’s and the

Company’s investment program for the year 2021 is further increase in volumes of heat production and

effectiveness, expansion of heat selling market, through increase of use of biofuel for heat production,

development of heat transmission and distribution increasing safety and reliability, developing services of

maintenance of engineering systems and further improvement of consumers services quality.

In compliance with the provisions of the plan for the facilities on the implementation of the National

Renewable Energy Development Strategy, in order to implement the Company’s key business objectives and

the provisions of the National Energy Independence Strategy related to the assurance of technical requirements

for reliability of heat facilities and heat supply networks, to guarantee the quality keeps apply to consumers,

Kaunas city municipality decided to approve Company’s investment plans with the decision No. T-162

“Regarding Investment Plans of AB Kauno Energija for the Year 2021 and Their Financing” on April 20,

2021.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

In 2021 the implementation of Company’s investment program will involve further modernization of boiler-

houses owned by the Company automating the production process and installing condensational economizers;

reconstruction of heat networks; replacement of heat meters. It’s important to notice, that implementation of

these measures will allow to reduce losses of heat transmission and to perform optimization of heat supply to

the consumers and to ensure heat supplies reliability.

11. Information on research and development activities

In September 2021 the Company performs its rebranding. The new Company’s brand is associated with

constant movement, which requires constant, never-ending energy. The circles on the new sign symbolize the

Perpetuum mobile model, known to many, in which a side ball, when it strikes the inside, transfers the energy

of motion to another side ball. And so, it goes on constantly.

The new Company’s brand is this:

Company’s representatives are constantly invited to work in committees of preparation of Energy Engineering

studies programs of Kaunas University of Technology and in groups of external and self-evaluation. Working

in these groups and committees Company’s representatives analyse aims of programs and goals of studies,

composition of training plans, appropriateness of staff, material basis, process, and evaluation of studies, as

well as program management. Performing external and self-evaluation, committees apply recommendations

for improvement of program structures and implementation process, to satisfy the needs of employers and to

meet the requirements of national and European legal acts in the field of higher education.

The Company together with the Lithuanian Energy Institute took part in READY project (“Resource efficient

cities implementing advanced smart city solutions”) supported by European Commission. 23 companies from

Denmark, Sweden, Austria, France, and Lithuania took part in it. Project is finished in 2021. Experiences in

implementing the latest energy efficiency measures were shared among participants pf the project.

Starting from 2018 the Company together with 9 more European companies and research institutions and with

the Innovation and Network Program Institution (INEA), which manages infrastructure and research programs

in the EU transport, energy and telecommunications sectors, takes part in the international research project

“Flexible combined heat and power generation from renewable energy sources” (FLEXCHX). The essence of

the project is to ensure biomass power-plants to work in a full load the whole year. The goal of the project is

to create a flexible energy production process, which could be used in various Europe’s energy production

facilities in the future, using high effectiveness at the minimal expenditures.

On January 15, 2019 the European Commission has proposed EUR 1.66 million support for project No. 847056

“Residential Building Energy Renovations with On-Bill Financing” (Ren-on-Bill). The application for

financing of the project was submitted under the Horizon 2020 program. The Company participates in the

project as a partner with 8 other companies from Lithuania, Italy, Germany, Belgium, and Spain. The project

is coordinated by Creara Consultores SL (Spain). EUR 71.5 thousand of EU support is allocated for the

Company. The aim of the Ren-on-Bill project is to increase investment in residential renovation by promoting

the use of OBF (On-Bill Financing) utility schemes based on cooperation between energy suppliers and

financial institutions.

The Company, which supplies district heating to Kaunas, responding to the changes of the warming climate,

enters a new district cooling market, which is still poorly tested in Lithuania. District cooling is the production

and supply of district cooling by converting heat energy into cool and using the existing district heating

infrastructure. One of the latest technologies to produce cooling from heat is absorption heat pumps. During a

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

rather sophisticated technological process in them, heat energy is converted into cool, which is supplied to the

premises by other devices. One of such absorption heat pumps was also acquired by the Company.

The first project of the Company entering the cooling supply market is two refrigerating machines

with a total power of 1576 kW, which will supply the Mokslo Sala science museum, being built on

the island of Nemunas in Kaunas, with cooling facilities. The coolness of the Mokslo Sala island,

with an area of 11.5 thousand square meters, will be produced by absorption heat pumps. This

innovative technology, which is still in its infancy in Lithuania, converts the heat energy from the

heat network's cogeneration water into cooling through a rather complex technological process. An

important factor is that absorption-type machines do not use greenhouse gases.

12. Information on own shares acquired and held by the Issuer

The Company does not hold the shares of its own. The Company’s subsidiaries have not purchased any of the

Company’s shares. Neither the Company nor its subsidiaries purchased or sold own shares during the reporting

period.

13. Information on the aims of financial risk management, hedging

instruments in use

All relevant information on this issue is provided in Explanatory Notes to the Consolidated Financial

Statements for the year 2021 of AB Kauno Energija.

14. Information on the Issuer’s subsidiary undertakings

The name of Company’s subsidiary UAB Kauno Energija NT was changed by the decision of company’s

shareholders. Starting from August 19, 2020 the name of the company is UAB GO Energy LT. Other details

of the company remain unchanged, all concluded contracts remain valid.

The authorised capital of UAB GO Energy LT registered in the Register of Legal Entities on June 30, 2021 is

2,762,958 euros and it is divided into 95,406 ordinary registered shares with par value of 28.96 euros each.

UAB GO Energy LT has no holdings directly or indirectly managed in other companies.

Activities of UAB GO Energy LT include the real estate development, management, leases, purchase, and

sale.

As of December 31, 2021, company UAB GO Energy LT had 23 employees.

Comparison of financial indicators of UAB GO Energy LT of the year 2021 with the indicators of the years

2017–2020 is provided in Chart 10.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Chart 10

Authorized capital of AB Petrašiūnų Katilinė registered at the Register of Legal Entities as of December 31,

2021 is EUR 231,696 and it is divided to 800 ordinary registered shares at par value of EUR 289.62 each.

AB Petrašiūnų katilinė holds no shares directly or indirectly managed in other companies.

Activities of AB Petrašiūnų Katilinė include production of heat.

AB Petrašiūnų Katilinė had 6 employees as of December 31, 2021.

Comparison of financial indicators of AB Petrašiūnų Katilinė of the year 2021 with the indicators of the years

2017–2020 is provided in Chart 11.

Chart 11

15. Structure of authorized capital

The authorised capital of the Company registered in the Register of Legal Entities of the Republic of Lithuania

as of December 31, 2021 is EUR 74,475,728.82 (seventy-four million four hundred seventy-five thousand

seven hundred twenty-eight euros and 82 cents).

Structure of authorized share capital of the Issuer by types of shares is specified in Table 4.

133

272

-138

125

146

-21

126

123

139

125

738

607

111

-200

-100

100

200

300

400

500

600

700

800

Turnover from sales Sales costs Comprehensive income

Activity results of GO Energy LT, thous. euros

2017 y. 2018 y. 2019 y. 2020 y. 2021 y.

1 813

1 858

-17

1 957

2 007

-94

2 398

1 959

346

1 177

1 217

-51

746

1 146

-348

-500

500

1 000

1 500

2 000

2 500

3 000

Turnover from sales Sales costs Comprehensive

income

Activity results of AB Petrašiūnų katilinė, thous. euros

2017 m. 2018 m. 2019 m.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Table 4

Type of shares

Number of

shares, units

Nominal

value,

euros

Total nominal

value, euros

Municipal share

in the authorised

capital, per cent

Share of private

shareholders in

the authorised

capital, per cent

Ordinary

nominal shares

42,802,143

1.74

74,475,728.82

98.33

1.67

16. Data on shares issued by the Issuer

The authorised capital of AB Kauno Energija was registered on May 18, 2015 by the decision of General

Meeting of Shareholders held on April 28, 2015 and amounts to EUR 74,475,728.82 (seventy-four million

four hundred seventy-five thousand seven hundred twenty-eight euros and 82 cents) and it is divided to

42,802,143 (forty-two million eight hundred and two thousand one hundred forty-three) ordinary shares of par

value of 1.74 euros each.

There are no limitations on the transfer of securities.

Main characteristics of shares released into free circulation of securities (as of December 31, 2021).

Securities registration No A01031430

ISON code of securities LT0000123010

Number of shares 20 031 977 ordinary nominal shares

Nominal value EUR 1.74

Total nominal value of shares EUR 34,855,639.98

Main characteristics of shares issued and registered for non-public trading (as of December 31, 2021).

ISON code of securities LT0000128407

Number of shares 22,770,166 ordinary nominal shares

Nominal value EUR 1.74

Total nominal value of shares EUR 39,620,088.84

History of trade in Company’s securities in the years 2017–2021 is provided in Table 5.

Table 5

Indicator

2017

2018

2019

2020

2021

Opening price, euro

0.592

1.18

1.01

0.98

0.82

Highest price, euro

1.180

1.24

1.32

1.03

1.19

Lowest price, euro

0.571

0.905

0.77

0.80

Last price, euro

1.180

0.98

0.925

1.11

Circulation, units

229,220

147,516

40,868

89,524

149,664

Circulation, million euro

0.19

0.16

0.04

0.07

0.15

Historical data on share prices (in euro) and turnovers in the years 2017 – 2021 is provided in Chart 12.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Chart 12

Comparison of Company’s share price with the index of own sector (utility services) and OMX Vilnius

index is given in Chart 13.

Chart 13

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

17. Information on the Issuer’s shareholders

The number of Company’s shareholders as of December 31, 2021 was 630.

Information on Shareholders of the Issuer who owned more than 5 per cent of the authorised capital of the

Company registered on May 18, 2015 (42,802,143 ordinary nominal shares) as of December 31, 2021 is

provided in Table 6 and Chart 14.

Table 6

Full name of shareholder

(company name, type,

headquartered dress, code)

Number of ordinary

nominal shares

owned by the

shareholder, units

Owned

share in

the

authorised

capital,

per cent

Share of votes

carried by

owned shares.

per cent

Share of votes

owned by the

shareholder

together with

acting entities, per

cent

Kaunas City Municipality

Laisvės al. 96, 44251 Kaunas

Code 111106319

39,736,058

92.84

Other shareholders

3,066,085

7.16

Total:

42,802,143

100

Chart 14

The distribution of the Company’s shareholders by groups at the end of the reporting period is presented in

Table 7.

92.84%

3.75%

1.74%

1.67%

Structure of shareholders as of December 31, 2021

Kaunas city municipality Kaunas district municipality

Jurbarkas district municipality Other shareholders

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Table 7

Group

Number of shares

owned by the group,

pcs.

Available share of

the authorized

capital, per cent of

the total number of

Local authorities

42 088 631

98.33

Households

500 720

1.17

Other shareholders

212 792

0.50

Total

42 802 143

100

17.1. The shareholders, who owned more than 5 per cent of the shares (20,031,977 ORS) issued for public

trading (reg. No. A01031430, VP ISIN code – LT0000123010) as of December 31, 2021 are listed in Table 8.

Table 8

Name

Type of shares

Number of

shares,

units

Total

nominal

value of

shares, euros

Percentage of

shares from

those released

into the public

circulation

Share of

the

authorised

capital

(%)

Kaunas City Municipality

Laisvės al. 96, 44251 Kaunas

Code 111106319

Ordinary

registered shares

16,965,892

29,520,652

84.69

39.64

Kaunas District Municipality

Savanorių pr. 371, 49500

Kaunas,

Code 111100622

Ordinary

registered shares

1,606,168

2,794,732

8.02

3.75

Other shareholders

Ordinary

registered shares

1,459,917

2,540,256

7.29

3.41

Total:

20,031,977

34,855,640

100

46.80

17.2. The shareholders, who owned more than 5 per cent of the shares (22,770,166 ORS) issued for non-public

trading (VP ISIN code – LT0000128407) as of December 31, 2021 are listed in Table 9.

Table 9

Name

Type of shares

Number of

shares,

units

Total

nominal

value of

shares, Euro

Percentage of

shares from

those released

into the public

circulation

Share of

the

authorise

d capital

(%)

Kaunas City Municipality

Laisvės al. 96, 44251

Kaunas

Code 111106319

Ordinary

registered

22,770,166

39,620,089

100

53.20

None of the shareholders of the Issuer holds any special rights of control. The rights of all shareholders are the

same; they are specified in article 4 of the Law on Companies of the Republic of Lithuania. The number of

shares carrying votes at the General Meeting of Shareholders of the Company is 42,802,143 units.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

The Company has not been notified on the limitations of voting rights or any other mutual agreements of

shareholders which may limit the transfer of securities and / or voting rights.

In 2017, the dividends from the profit of the year 2016 were allocated and paid to the shareholders of the

Issuer. Dividend per share was 0.106 euro, in total – 4.537 million euro. The profit was allocated to the statutory

reserve, other reserves, and bonuses for employees. A total of 0.1 million euros was allocated for sponsorship.

In 2018, the dividends from the profit of the year 2017 were allocated and paid to the shareholders of the

Issuer. Dividend per share was 0.078 euro, in total – 3.339 million euro. The profit was allocated to the statutory

reserve, other reserves, and bonuses for employees. A total of 0.1 million euros was allocated for sponsorship.

In 2019, the dividends from the profit of the year 2018 were allocated and paid to the shareholders of the

Issuer. Dividend per share was 0.025 euro, in total – 1.070 million euro. The profit was allocated to the statutory

reserve, other reserves, and bonuses for employees. A total of 0.05 million euros was allocated for sponsorship.

In 2020, no dividends from the profit of 2019 were allocated and paid to the Issuer’s shareholders.

In 2021, no dividends from the profit of 2020 were allocated and paid to the Issuer’s shareholders.

18. Employees

379 employees were employed in the Group as of December 31, 2021. Changes in the number of employees

of the Group in year 2017 – 2021 are provided in Table 10.

Table 10

Actual number of

employees

Group

31/12/2017

Group

31/12/2018

Group

31/12/2019

Group

31/12/2020

Group

31/12/2021

Total:

513

441

402

365

379

management

specialists

272

238

214

203

212

workers

235

200

185

159

164

Changes in number of employees of the Company in year 2017 – 2021 are provided in Table 11.

Table 11

Actual number of

employees

Company

31/12/2017

Company

31/12/2018

Company

31/12/2019

Company

31/12/2020

Company

31/12/2021

Total:

501

427

389

354

350

management

specialists

269

234

210

200

197

workers

228

192

178

153

152

Education of employees of the Group as at the end of the reporting period.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Table 12

Education

Group

31/12/2017

Group

31/12/2018

Group

31/12/2019

Group

31/12/2020

Group

31/12/2021

Secondary incomplete

Secondary

185

156

139

124

176

College

Higher

248

220

201

191

164

Total:

513

441

402

365

379

Education of employees of the Company as at the end of the reporting period.

Table 13

Education

Company

31/12/2017

Company

31/12/2018

Company

31/12/2020

Company

31/12/2020

Company

31/12/2021

Secondary incomplete

Secondary

181

151

135

121

156

College

Higher

242

213

194

185

155

Total:

501

427

389

354

350

Company’s management pays a lot of attention on increase in work efficiency, working conditions

improvement, supply with latest working tools, professional development, planning of internal activities and

control implementation, also for improvement of consumer service quality. Executive and professional

qualification levels suit their positions, and work experience and practical knowledge of subject of other

employees makes them possible to work in their positions. Staff turnover in the Group and the Company is

inconsiderable.

To increase work efficiency, the Company conducts an annual work performance evaluation of structural units’

managers, the main goal of which is to evaluate the employee’s qualifications and abilities of functions

performance assigned in job regulations, to properly evaluate employees' activities, provide feedback on the

goals execution in order to increase employee loyalty, satisfaction with conducted work, encouraging them to

improve. The result of this process is information allowing better coordination of the Company's activities and

for encouraging employees to improve their working activities.

The Company actively cooperates with educational institutions and enables high school students to apply

theoretical knowledge and gain practical skills. When there is a need for new employees, the most active and

best students are given the opportunity to get a job in the Company.

The salary of employees of the Issuer consists of the constant part of salary, variable part of salary, benefits

and allocations paid according to the Labour Code of the Republic of Lithuania and other laws, Collective

agreement of the Company, and bonuses. Bonuses are paid from net profit, if the General Meeting of

Shareholders allocates part of the profit for the bonuses of the Company employees.

8. The collective agreement provides for special rights and obligations of the issuer's employees or part of

them. In accordance with the Company's new Collective agreement effective from 1 January 2019 and

subsequent amendments thereto:

1. For continuous employment within the Company employees are granted additional paid leave.

2. The record of service of employees who worked in Lithuanian energy system companies and who were

redeployed to the Company according to the corporate employer agreement, i.e., when the transfer was carried

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

out according to the Labour Code or the Law on Employment Contract, is considered uninterrupted and those

employees are granted an additional paid leave for an uninterrupted record of service within the Company.

3. At the agreement of the employer and employee, the employee may be granted unpaid leave for family

related issues and other important reasons.

4. Company’s employees are entitled to additional paid leave.

The employer obligates:

1. To ensure the conditions of preventive health check and, if necessary, to provide free health services at

the Company’s occupational health unit.

2. In the event of the death of an employee, the Company grants a benefit in the amount of 4 minimum

monthly salaries of the Republic of Lithuania (hereinafter referred to as the MMS), free transport, or covers

transport costs (the benefit is granted to the person burying the deceased);

3. In the event of the death of the employee's close relative (parent (adoptive parent), child (adoptive

child) or spouse), the Company grants the employee an MMS benefit, free transport or covers transport costs;

4. In the event of the birth of one or more children, the Company grants the employee a gift in the amount

of 50 per cent MMS for each child;

5. Upon registration of the marriage, the employee is granted a gift in the amount of 50 per cent MMS;

6. A cash gift of EUR 50 is granted when an employee reaches the age of 25, 35, 45, 55, 65, and a cash

gift of EUR 100 when the employee reaches the age of 20, 30, 40, 50, 60, 70;

7. In other cases, when the employee needs financial support (in case of losses due to natural disasters

and other reasons beyond the control of the employee), the Company grants a benefit of up to 3 MMS;

8. In the event of a serious illness or accident, a benefit of up to 5 MMS is granted. The sickness benefit

is paid once a year (within 12 months).

19. Procedure for amending the Issuer’s Statutes

The Statutes of the Issuer say that the General Meeting of Shareholders of the Company has the exceptional

right to amend the Statutes other than the exceptions provided in the Law on Companies of the Republic of

Lithuania. The resolution on the amendment of the Company’s Statutes 2/3 qualified majority of votes of the

members participating in the meeting of shareholders is needed.

The Statutes of the Company were amended on October 22, 2020 by the decision of the General Meeting of

Shareholders. The new wording of the Statutes was registered on November 25, 2020 in the Register of Legal

Entities of the Republic of Lithuania. It can be found on Company’s website at www.kaunoenergija.lt.

20. Issuer’s management bodies

According to the Statutes of the Company, the management bodies of the Company include the General

Meeting of Shareholders, a collegial management body – the Supervisory Board, a collegial management body

– the Management Board, and a sole management body – General Manager.

Decisions of the General Meeting of Shareholders made on the issues within the competence of the General

Meeting of Shareholders provided for in the Statutes of the Company are binding to its shareholders, the

Supervisory Board, the Management Board, and the General Director, and to other employees of the Company.

All persons who are the shareholders of the Company on the date of the General Meeting of Shareholders have

the right to attend the Company’s General Meeting of Shareholders personally or by proxy or be represented

by persons with whom they had entered into the agreement on the transfer of the voting right. The record date

of the meeting of the Company is the fifth working day before the General Meeting of Shareholders or the fifth

working day before the repeat General Meeting of Shareholders. A person attending the General Meeting and

entitled to vote shall provide a document which is a proof of his personal identity and sign the registration list

General

Meeting of

Shareholders

Supervisory

Board

Management

Board

General

Director

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

of the Meeting of Shareholders. A person who is not a shareholder shall additionally provide a document

attesting to his right to vote at the General Meeting of Shareholders.

3 (three) General Meeting of Shareholders was convoked in the year 2021. Company’s General Manager and

the Chief Finance Officer attended it. Issuers’ shareholders can ask questions and can get answers or

explanations from Company’s managers and speakers.

The collegial management body – Supervisory Board is elected by the General Meeting of Shareholders

according to the procedure specified in the Law on Companies of the Republic of Lithuania. The Supervisory

Board consists of 7 (seven) members. The Supervisory Board is elected for a term of 4 (four) years. The

Supervisory Board elects the chairman of the Supervisory Board from among its members. The General

Meeting of shareholders may remove from office the entire Supervisory Board or its individual members

before the expiry of the term of office of the Supervisory Board. Where individual members of the Supervisory

Board are elected, they shall be elected only until the expiry of the term of office of the current Supervisory

Board.

The Supervisory Board elects and dismisses the Management Board members and supervises the activities of

the Board and the General manager of the Company; submits its comments and proposals to the General

Meeting of Shareholders on the Company’s operating strategy, set of annual financial statements, draft of

profit / loss allocation and the annual report of the Company as well as the activities of the Board and the

General Manager of the Company; submits proposals to the Board and the General Manager of the Company

to revoke their decisions which are in conflict with laws and other legal acts, the statutes of the Company or

decisions of the General Meeting of Shareholders; addresses other issues assigned to the scope of powers of

the Supervisory Board by decisions of the General Meeting of Shareholders regarding the supervision of the

activities of the Company and its management bodies. The Supervisory Board shall not be entitled to assign

or delegate the functions assigned to the scope of its powers by the Law on Companies of the Republic of

Lithuania and the statutes of the Company to other bodies of the Company.

The Supervisory Board, following the resolution No. 1K-18 of August 21, 2008 of the Securities Commission

of the Republic of Lithuania “Regarding The Requirements For Audit Committees”, as well as “Guidelines

For The Application Of Requirements For Audit Committees” which were approved by the decision of the

Securities Commission of November 28, 2008 approves the internal rules of procedure for forming the Audit

Committee and elects the Audit Committee members.

The Supervisory Board of the Company approved on May 21, 2019 a new wording of the internal rules of

procedure of the Audit Committee of the Company.

The Management Board is a collegial management body of the Company. The Management Board is

comprised of 5 (five) members. The Management Board is elected for the period of 4 (four) years by the

Supervisory Board. The Supervisory Board can remove from office the entire Management Board incorpore

or its individual members before the expiry of their term. If individual members of the Management Board are

elected, they shall serve only until the expiry of the term of office of the current Management Board. The

Management Board elects the chairman of the management Board from among its members.

The General Manager is the manager of the Company. The manager of the Company is a sole person

management body of the Company organising its activities. Authority and responsibilities of the administration

members of the Company are established by the order of the General Manager.

20.1. Data on the committees in the Company

The members of Audit Committee appointed by the decision No. 2019-4 of the Supervisory Board of May 21,

2019:

Full name

Position

Beginning of term

End of term*

Mr. Mindaugas Šimkus

Independent member of Audit

Committee

May 21, 2019

April 26, 2023

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Full name

Position

Beginning of term

End of term*

Mr. Artūras Aladaitis

Member of Audit Committee

December 6, 2019

February 23, 2022

Ms. Violeta

Kavaliauskienė

Independent member of Audit

Committee

November 25, 2021

April 26, 2023

* The term of office of the Audit Committee coincides with the term of office of the Supervisory Board of the

Company.

In carrying out its activities, the Audit Committee follows the internal rules of procedure of the Company’s

Audit Committee approved by decision No 2019-4 of May 21, 2019 of the meeting of the Supervisory Board

of the Company. The Audit Committee performs its functions provided for in article 52 of the Law on Audit

of the Republic of Lithuania. The Audit Committee performed the monitoring of the process of financial

statements audit performed by independent auditor in the year 2021.

20.2. Information on the members of the Company’s Supervisory Board:

Members of the Supervisory Board of the Company as of December 31, 2021:

Full name

Position

Beginning of term

End of term

Mr. Antanas Etneris

Chairman of the Supervisory

Board

April 26, 2019

April 26, 2023

Mrs. Rūta Šimkaitytė -

Kudarauskienė

Deputy chairman of the

Supervisory Board

April 2, 2020

April 26, 2023

Mr. Konstantinas Pesenka

Member of the Supervisory Board

April 26, 2019

April 26, 2023

Mr. Mindaugas Šimkus

Member of the Supervisory Board

April 26, 2019

April 26, 2023

Mr. Saulius Lazauskas

Member of the Supervisory Board

April 2, 2020

April 26, 2023

Mr. Justas Limanauskas

Member of the Supervisory Board

April 2, 2020

April 26, 2023

Company’s Supervisory Board comprised of five independent members and of one member of Kaunas City

Municipality administration, as he partially represents the controlling shareholder, i.e., Kaunas City

Municipality, holding 92.84 per cent of the Company’s voting shares.

2 session of the Supervisory Board was held during the year 2021. More than ½ of the members of the

Supervisory Board attended the session.

Mr. Antanas Etneris

Mr Antanas Etneris, director of UAB Wisewood (code 302527538, Ringuvos str. 74, LT-45245 Kaunas),

director of UAB Mana Grupė (code 303991865, Kruonio str. 16, Kaunas), director of UAB Airhotel (code

302598948, Oro Uosto str. 2, Karmėlava, LT-54460 Kaunas distr.), member of the Board of UAB Stoties

Turgus, member of the Board of UAB Kauno Vandenys.

Holds no shares of the company. Hodls the shares of the companies UAB Wisewood, UAB Mana Ranga, UAB

Mana Grupė, UAB Airhotel, UAB Dramart, UAB Ukraineičių 4, UAB Vėjo Dukra, UAB Plėtros Fondas, UAB

Aguonų Projektai, UAB My Group.

Mrs. Rūta Šimkaitytė-Kudarauskienė

Head of the Legal and Consulting Department of Kaunas City Municipality (company code 111106319,

Laisvės av. 96, LT-44251 Kaunas); Director of UAB Centrinis Knygynas (company code 133607044, Laisvės

av. 81, LT-44297 Kaunas).

Holds no shares of the Company. No interest in the capital of other Lithuanian companies.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Mr. Saulius Lazauskas

General Director of UAB Kauno Švara (company code 132616649, Statybininkų str. 3, LT-50124 Kaunas),

Member of the Board of UAB Kauno Vandenys, Member of the Board of PI Kaunas Region Waste

Management Centre”.

Holds no shares of the Company. No interest in the capital of other Lithuanian companies.

Mr. Justas Limanauskas

Director of the budgetary institution Parkavimas Kaune (company code 134929849, Puodžių str. 24-1, LT-

44295 Kaunas); director of the budgetary institution “S. Dariaus and S. Girėno Aerodromas” (company code

135087311, Veiverių str. 132, LT-46337 Kaunas).

Holds no shares of the company. No interest in the capital of other Lithuanian companies.

Mr. Konstantinas Pesenka

Member of the Management Board of UAB Windex Group (code 303522864, Draugystės str. 17-1, Kaunas),

chairman of the Management Board of UAB Kauno Vandenys.

Holds no shares of the Company. No interest in the capital of other Lithuanian companies.

Mr. Mindaugas Šimkus

Head of economics of UAB Vičiūnų Grupė (code 303211678, V. Krėvės av. 97, LT-50369 Kaunas), member

of the Board of UAB Kauno Švara, member of the Board of UAB Kauno Vandenys.

Holds no shares of the Company. No interest in the capital of other Lithuanian companies.

20.3. Information on the members of the Company’s Management Board

Members of Company’s Management Board as of December 31, 2021:

Full name

Position

Beginning of term

End of term

Nerijus Mordas

Chairman of the Management Board

May 21, 2019

May 21, 2023

Paulius Keras

Deputy chairman of the Management

Board

May 21, 2019

May 21, 2023

Algimantas Stasys Anužis

Member of the Management Board

May 21, 2019

May 21, 2023

Karolis Šiugžda

Member of the Management Board

May 21, 2019

May 21, 2023

Karolis Dekeris

Member of the Management Board

May 21, 2019

December 31,

2021

24 sessions of Company’s Management Board were held in the year 2021. More than 2/3 members of the

Management Board attended all the sessions.

Mr. Nerijus Mordas

Chief finance officer of UAB Vičiūnų Grupė (code 303211678, V. Krėvės av. 97, LT-

50369 Kaunas). Member of Company’s Management Board from June 1, 2015.

Holds no shares of the Company. No interest in the capital of other Lithuanian

companies.

Mr. Nerijus Mordas charged EUR 20.4 thousand of remuneration under agreement of

activity of member of the Management Board. No bonuses estimated, nor any assets

were transferred or guarantees issued during the reporting period.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Mr. Paulius Keras

Deputy Director of Kaunas city municipality (code 111106319, Laisvės av. 96, LT-

44251 Kaunas). Member of the Management Board of the Company from May 21, 2019.

Holds no shares of the Company. No interest in the capital of other Lithuanian

companies.

Mr. Paulius Keras charged EUR 12.2 thousand of remuneration under agreement of

activity of member of the Management Board. No bonuses estimated, nor any assets were transferred or

guarantees issued during the reporting period.

Mr. Algimantas Stasys Anužis

Member of the Council of Kaunas Chamber of Commerce, Industry and Crafts, president

of Lithuanian Veterans Basketball League.

Member of Company’s Management Board from June 1, 2015.

Holds no shares of the Company. No interest in the capital of other Lithuanian

companies.

Mr. Algimantas Stasys Anužis charged EUR 12.2 thousand of remuneration under

agreement of activity of member of the Management Board. No bonuses estimated, nor any assets were

transferred or guarantees issued during the reporting period.

Mr. Karolis Šiugžda

Lawyer of UAB Vičiūnų Grupė (code 303211678, V. Krėvės av. 97, LT-50369 Kaunas),

lawyer of UAB Groward Group (code 302764932, V. Krėvės av. 97, LT-50369 Kaunas).

Member of Company’s Management Board from May 21, 2019.

Holds no shares of the Company. No interest in the capital of other Lithuanian

companies.

Mr. Karolis Šiugžda charged EUR 12.2 thousand of remuneration under agreement of

activity of member of the Management Board. No bonuses estimated, nor any assets were transferred or

guarantees issued during the reporting period.

Mr. Karolis Dekeris

Marketing Director of UAB Kauno Autobusai (code 133154754, Raudondvario rd. 105,

LT-47185 Kaunas).

Member of Company’s Management Board from May 21, 2019 to December 31, 2021.

Holds no shares of the Company. No interest in the capital of other Lithuanian companies.

Mr. Karolis Šiugžda charged EUR 12.2 thousand of remuneration under agreement of

activity of member of the Management Board. No bonuses estimated, nor any assets were

transferred or guarantees issued during the reporting period.

20.4. Information on the General Manager and Chief accountant of the Company:

Mr. Tomas Garasimavičius

General Director of the Company from March 30, 2020. Education - higher university, Vilnius University in

2003, Bachelor of Political Science, Vilnius University in 2005, Master of Political Science, Creighton

University, USA 2005, Master of Political Science. Workplaces during the last 10 years and positions: Head

of the Sustainable Energy Development Division of Energetikos Agentūra, PI (June 2010 – December 2012),

Adviser to the Prime Minister of the Republic of Lithuania on Energy (December 2012 – December 2016),

Member of the Supervisory Board of UAB Lietuvos Energija (July 2013 – July 2017), Member of the

Nomination and Remuneration Committee of the Supervisory Board of UAB Lietuvos Energija (July 2013 –

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

July 2017), Member of the Risk Management Supervisory Committee of the Supervisory Board of UAB

Lietuvos Energija (September 2013 – July 2017), Member of the Support Fund Council of UAB Lietuvos

Energija (September 2014 – September 2017), Adviser to the Prime Minister of the Republic of Lithuania on

Energy and the Environment (January 2017 – March 2018), Adviser to the Mayor of Kaunas city on Energy

(June 2018 – March 2020).

Holds no shares of the Company. No interest in the capital of other companies.

Mrs. Inga Šliačkuvienė

Company’s chief accountant from August 1, 2019 to December 23, 2021. Education – higher university,

Kaunas University of Technology, Faculty of Economics and Management – Bachelor of Economics.

Workplaces during the last 10 years and positions: Company’s Senior Accountant (from August 2009), Deputy

Chief Accountant of the Company (from May 2014).

Rita Plančiūnienė

Chief Accountant of the Company from 14 March 2021. Education – higher university degree, Vytautas

Magnus University, Master's degree in Accounting and Finance. Workplaces in the last 10 years, and job

positions: Chief Accountant at UAB Agrochema since 2011, Chief Economic and Financial Officer at UAB

Agrochema since November 2013, Chief Financial Officer at UAB Agrochema plius since December 2018,

Chief Financial Officer at UAB Doresta from April 2021 to March 2022.

Company’s General Manager and the Chief Accountant charged 130.88 thousand euros of remuneration in the

year 2021, and the average amount per member is 65.44 thousand euros. No other assets had been transferred;

no guarantees granted.

21. Information on significant agreements

There are no significant agreements that would come into force, change or termination in case of change in

controls of Issuer (their impact as well, except cases when due to the character of agreements the disclosure of

them would make a significant harm).

22. Information on agreements of the Issuer and its managerial body

members or employees

There are no agreements of the Issuer or its managerial body members or employees (which provide for

compensation in case of their resignation or termination of employment on no grounds or in case their

employment is terminated due to changes in controls of the Issuer).

23. Information on major transactions with related parties

There were no larger individual transactions. More detailed information is provided in the Note 25 of the

Explanatory Notes to the Financial Statements.

24. Information on harmful transactions concluded on behalf of the Issuer

during the reporting period

There are no harmful transactions concluded on behalf of the Issuer during the reporting period (not complying

with the Company's objectives, normal market conditions, detrimental to the interests of shareholders and other

interest groups etc.) which were or are likely to have an adverse effect on the Issuer's activities and (or)

performance in the future, as well as information on transactions entered into in a conflict of interest between

the Issuer’s management, controlling shareholders or other related parties' obligations to the Issuer and their

private interests and (or) other duties.

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

25. Information on compliance with the Governance Code of Companies

and the Company’s corporate social initiatives and policies

Information on compliance with the corporate governance code is provided in Annex 1 to this Annual Report.

Annual reports on the Company’s corporate social initiatives and policies are provided in Annex 2 to this

Annual Report named AB Kauno Energija Report on Social Responsibility and it is announced on the

Company’s website.

26. Data on publicised information

In performing its obligations under the applicable legislation regulating the securities market, the Issuer has

announced the following information starting from January 1, 2021 over the GlobeNewswire news distribution

service, in which notices are disseminated within the European Union. This information was also posted on

the website of the Issuer. All the information is available on website of Nasdaq Vilnius

(http://www.nasdaqbaltic.com/market/?lang=lt) and Issuer’s website (http://www.kaunoenergija.lt).

Title

Announcement

category

Language

Time

Notice of public limited liability company Kauno energija

on the reorganisation terms drawn up

Notification on

material event

EN, LT

23/12/2021

07:31

Resolution of the sole shareholder of AB Petrašiūnų

katilinė on approval of the reorganisation

Notification on

material event

EN, LT

26/11/2021

16:00

Resolutions of the Extraordinary General Meeting of

Shareholders of AB Kauno Energija

General

meeting of

shareholders

EN, LT

25/11/2021

16:00

Convocation of the Extraordinary General Meeting of

Shareholders of AB Kauno Energija

General

meeting of

shareholders

EN, LT

29/10/2021

17:01

On initiating the reorganisation of AB Kauno energija and

AB Petrašiūnų katilinė by merger

Notification on

material event

EN, LT

29/10/2021

16:39

Business activity results of the 1 half of the year 2021

Interim

information

EN, LT

28/10/2021

17:00

AB Kauno Energija half-yearly reports and unaudited

financial statements for the 1 half of the year 2021

Half-Yearly

information

EN, LT

30/09/2021

16:00

Resolutions of the Extraordinary General Meeting of

Shareholders of AB Kauno Energija

General

meeting of

shareholders

EN, LT

16/09/2021

16:00

Convocation of the Extraordinary General Meeting of

Shareholders of AB Kauno Energija

General

meeting of

shareholders

EN, LT

19/08/2021

12:40

Business activity results of the 1 half of the year 2021

Notification on

material event

EN, LT

30/07/2021

16:00

Audited annual information of AB Kauno Energija for the

year 2020

Annual

information

EN, LT

30/04/2021

13:15

Resolutions of the General Meeting of Shareholders of

AB Kauno Energija

General

meeting of

shareholders

EN, LT

30/04/2021

13:11

Activity results of the 1 quarter of the year 2021

Interim

information

EN, LT

30/04/2021

13:02

Regarding the approval of the Supervisory Board of

AB Kauno Energija for the audited results

Notification on

material event

EN, LT

23/04/2021

14:31

AB KAUNO ENERGIJA CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2021

Title

Announcement

category

Language

Time

Notice of public limited liability company Kauno energija

on the reorganisation terms drawn up

Notification on

material event

EN, LT

23/12/2021

07:31

Resolution of the sole shareholder of AB Petrašiūnų

katilinė on approval of the reorganisation

Notification on

material event

EN, LT

26/11/2021

16:00

Resolutions of the Extraordinary General Meeting of

Shareholders of AB Kauno Energija

General

meeting of

shareholders

EN, LT

25/11/2021

16:00

Convocation of the Extraordinary General Meeting of

Shareholders of AB Kauno Energija

General

meeting of

shareholders

EN, LT

29/10/2021

17:01

On initiating the reorganisation of AB Kauno energija and

AB Petrašiūnų katilinė by merger

Notification on

material event

EN, LT

29/10/2021

16:39

Business activity results of the 1 half of the year 2021

Interim

information

EN, LT

28/10/2021

17:00

AB Kauno Energija half-yearly reports and unaudited

financial statements for the 1 half of the year 2021

Half-Yearly

information

EN, LT

30/09/2021

16:00

Resolutions of the Extraordinary General Meeting of

Shareholders of AB Kauno Energija

General

meeting of

shareholders

EN, LT

16/09/2021

16:00

Convocation of General Meeting of Shareholders of

AB Kauno Energija, agenda and the resolution projects

General

meeting of

shareholders

EN, LT

01/04/2021

09:20

Activity results of 12 months of the year 2020

Interim

information

EN, LT

28/01/2021

17:20

AB Kauno Energija became a participant of another legal

entity

Notification on

material event

EN, LT

15/01/2021

18:09

Annex 1

AB KAUNO ENERGIJA

REMUNERATION REPORT FOR 2021

GENERAL INFORMATION ON THE REMUNERATION REPORT

The Remuneration Report of AB Kauno Energija (hereinafter – the Company) has been prepared for the

reporting financial period of 2021, which coincides with the calendar year. The Remuneration Report

(hereinafter - the Report) was prepared in accordance with the Law on Financial Statements of Entities of the

Republic of Lithuania, the Remuneration Policy of AB Kauno Energija (hereinafter - the Remuneration Policy)

and other legal acts.

On April 30, 2020 the General Meeting of Shareholders approved the Remuneration Policy of AB Kauno

Energija. This Remuneration Policy applies to the General Director and members of the Management Board

and Supervisory Board of the Company insofar as it relates to the payment of monetary remuneration for

activities in the management and / or supervisory bodies of the Company. The Remuneration Report shall

include information on remuneration of each member of the management and supervisory bodies, information

on other (un) received benefits, other data.

INFORMATION ON THE REMUNERATION RECEIVED BY MEMBERS OF THE

MANAGEMENT AND SUPERVISORY BODIES

According to the Remuneration Policy approved by the Company’s General Meeting of Shareholders, the

specific remuneration is paid only to the Company’s General Director and members of the Management Board.

Members of the Supervisory Board do not receive remuneration.

Report on the remuneration of the Company’s General Director in 2021

The remuneration accrued and paid to the Company’s General Director during 2021, determined by the

Management Board, complied with the remuneration forms provided for in the Remuneration Policy (Item

3.1). The amount of remuneration for the General Director of the Company was determined by the decision of

the Management Board No. 2021-1-4 of January 25, 2021. As a reward for excellent performance, remarkable

efforts in carrying out the assigned duties and initiatives, by the decision No 2021-5-6 as of 31 March 2021,

the Management Board of the Company granted a bonus equal to his three months average salary.The General

Director of the Company was paid with EUR 73.6 thousand remuneration during 2021 (the General Director

started working for the Company on March 30, 2020).

The Head of the Company – the General Director - did not receive any remuneration from the companies

referred to the group of companies, as defined in the Law on Consolidated Financial Statements of Companies

of the Republic of Lithuania. The salary of the Head of the Company was paid in accordance with the

procedure, scope and terms provided for in the Employment Contract, the General Director did not receive

other property benefits during 2021, including the award of shares or other transactions in favour of and in the

interests of the Head.

Report on the remuneration of the members of the Management Board of the Company in 2021

The Company has 5 (five) independent members of the Management Board. During 2021 the Company

accrued EUR 69.3 thousand to independent members of the Management Board under activity agreements.

The average EUR 13.9 thousand per one independent member of the Management Board per year. The

members of the Management Board did not receive payments from the subsidiaries. Information on the

remuneration of each individual member of the Management Board is provided in the Annual Report.

No bonuses were paid to the members of the Company’s Supervisory board and Management Board.

During the reporting period, no guarantees or sureties were given to the members of the Supervisory Board,

Management Board and the Head of the Company, no assets or other property rights were transferred, no other

benefits were received from the Company.

Members of the Supervisory Board and Management Board, the General Director of the Company and

members of the Audit Committee have no significant material obligations to the Company (Issuer), just as the

Company (Issuer) has no obligations to these persons.

Guarantees and sureties and / or other measures to secure the fulfilment of the obligations of the Head of the

Company, members of the management bodies and Supervisory Board were not granted on behalf of the Issuer

during 2021, the Issuer did not grant loans and Company shares to these persons.

The remuneration paid to the Head of AB Kauno Energija, members of the Management Board and the

Supervisory Board in 2021 complied with the principles, grounds and conditions approved in the

Remuneration Policy.

FINAL PROVISIONS OF THE REMUNERATION REPORT

The Report approved by the Management Board of the Company is submitted to the General Meeting of

Shareholders, which decides whether to approve the Remuneration Report or not. Such (non) approval does

not release the Management Board from the responsibility for the decision taken.

The Remuneration Report for 2021 is an integral part of the Consolidated Annual Report and is published on

the website of the Company http://www.kaunoenergija.lt and www.nasdaqomxbaltic.com in accordance with

the procedure established by legal acts.

Annex 2

PLLC KAUNO ENERGIJA, PURSUE THE GOVERNANCE REPORT

PLLC Kauno Energija (hereinafter – the Company), following Article 21 paragraph 3 of the Law on Securities

of the Republic of Lithuania and item 24.5 of the Listing Rules of PLLC NASDAQ Vilnius, discloses its

compliance with the Corporate Governance Code for the Companies, whose securities are traded on the

regulated market, as approved by the NASDAQ Vilnius PLLC, and its specific provisions and

recommendations. If any of the provisions or recommendations of the Codex are not respected due to any

reasons, the explicable information is provided herein.

Summary of the Corporate Governance Report:

Specifics of the Company’s activities:

The Company is listed on the secondary list of the Nasdaq Vilnius Stock Exchange starting from December

28, 1998.

The main activities of the Company are production, rendering of services. The Company is the parent company

of the Group consisting of PLLC Petrašiūnų Katilinė and LLC GO Energy LT. The Company produces and

supplies heat to consumers (for heating and hot water preparation purposes) in the cities of Kaunas and

Jurbarkas and in the Kaunas district (Akademija, Ežerėlis, Domeikava, Garliavos, Girioniai, Neveronys,

Raudondvaris).

Company’s governance structure:

- The Company’s managing bodies consists of the Management Board, elected for the 4 years term of office,

and the General Manager, elected by the Management Board (for further information on the Issuer's governing

bodies and the composition of the committees please refer to the Article 20 “Issuer's bodies” of this

Consolidated Annual Report). The Management Board’s and the manager’s activities are concentrated on the

fulfilment of the Company’s strategic objectives taking count of the shareholders’ equity value increase.

- A supervisory body – the Supervisory Board acts in the Company.

The Management Board and the general Manager acts in close cooperation seeking to obtain the maximum

benefit for the Company and its shareholders. The Management Board periodically reviews and assesses

Company’s activity results.

- The Chairman of the Management Board of the Company is not and was not the Head of the Company. The

duties he holds or held in the past shall not prevent independent and impartial supervision.

- The members of the Management Board elected by the General Meeting of Shareholders are independent

and act for the benefit of the Company and its shareholders.

- The Audit Committee acts in the Company. 1 independent member act in this committee. There are no

nomination and remuneration committees in the Company.

Accountability to the Company's shareholders:

- Information on the General Manager, composition of the Supervisory and Management Boards, members

education, work experience, competence and participation in activities of other companies is disclosed and

constantly updated in Company’s periodical reports as well as website.

- The Company discloses all regulated information through PLLC Nasdaq Vilnius news distribution system.

This ensures access to the broadest public in the Republic of Lithuania and other EU countries.

The information shall be provided simultaneously in Lithuanian and English. The company publishes the

information before or after the trading session of PLLC Nasdaq Vilnius. The Company shall not disclose

information that may affect the price of the issued securities in the form of comments, interviews or in any

other manner until such information is made public through the news distribution system of PLLC Nasdaq

Vilnius.

- All shareholders of the Company have equal access to and participate in the decision-making process

important for the Company.

The procedures for convening and conducting general meetings of shareholders shall comply with the

provisions of the legal acts and shall provide equal opportunities for shareholders to participate in the meeting,

to acquaint themselves in advance with draft resolutions and decision-making materials, as well as to ask.

PRINCIPLES/ RECOMMENDATIONS

YES/NO /NOT

APPLICABLE

COMMENTARY

Principle 1: General Meeting of Shareholders, equitable treatment of shareholders, and shareholders’

rights

The corporate governance framework should ensure the equitable treatment of all shareholders. The

corporate governance framework should protect the rights of shareholders.

1.1. All shareholders should be provided with

access to the information and/or documents

established in the legal acts on equal terms.

All shareholders should be furnished with

equal opportunity to participate in the

decision-making process where significant

corporate matters are discussed.

Yes

All shareholders have equal access to the

information and / or documents provided

for in legal acts and participate in making

important decisions for the Company.

The Company provides information

through the Nasdaq Vilnius Stock

Exchange Central Regulated Information

Base in Lithuanian and English

simultaneously. The information is

published immediately at once, thus

ensuring the simultaneous provision of

information to all.

1.2. It is recommended that the Company’s

capital should consist only of the shares that

grant the same rights to voting, ownership,

dividend and other rights to all of their

holders.

Yes

The authorized capital of the Company

consists of ordinary registered shares,

which grant equal voting, ownership,

dividend and other rights to all

shareholders of the Company.

1.3. It is recommended that investors should

have access to the information concerning the

rights attached to the shares of the new issue

or those issued earlier in advance, i.e. before

they purchase shares.

Yes

The Company enables investors to

familiarize themselves with the rights

granted by the new or already issued

shares well in advance.

1.4. Exclusive transactions that are

particularly important to the Company, such

as transfer of all or almost all assets of the

Company which in principle would mean the

transfer of the Company, should be subject to

approval of the General Meeting of

shareholders.

Yes

According to the Statutes of the

Company, important transactions, such

as decisions on the execution,

assignment, lease, pledge and mortgage

of long-term assets the book value of

which exceeds EUR 3 million, an

approval of General Meeting of

Shareholders or Supervisory Board must

be received

Due to extremely important transactions,

such as the transfer of all or almost all the

Company's assets, the Company would

be guided by the Law on Companies of

the Republic of Lithuania and other legal

acts establishing requirements for the

approval of such transactions.

1.5. Procedures for convening and

conducting a General Meeting of

Shareholders should provide shareholders

with equal opportunities to participate in the

General Meeting of Shareholders and should

not prejudice the rights and interests of

shareholders. The chosen venue, date and

time of the General Meeting of Shareholders

should not prevent active participation of

shareholders at the General Meeting. In the

notice of the General Meeting of

Shareholders being convened, the Company

should specify the last day on which the

proposed draft decisions should be submitted

at the latest.

Yes

All shareholders of the Company are

informed about the date, place and time

of the General Meeting of Shareholders

in accordance with the established

procedure in advance, in accordance with

the terms established by legal acts,

announcing the General Meeting of

Shareholders, agenda, and draft

resolutions in the Central Regulated

Information Base of PLLC Nasdaq

Vilnius Stock Exchange. The Company

specifies the date of the General Meeting

of Shareholders and may propose draft

resolutions in the Notice of the General

Meeting of Shareholders to be convened

on the Company's website

www.kaunoenergija.lt In the notice of

the convention of the General Meeting of

Shareholders, the Company shall indicate

when the shareholders may supplement

the agenda of the General Meeting of

Shareholders and propose draft

resolutions.

1.6. With a view to ensure the right of

shareholders living abroad to access the

information, it is recommended, where

possible, that documents prepared for the

General Meeting of Shareholders in advance

should be announced publicly not only in

Lithuanian language but also in English

and/or other foreign languages in advance. It

is recommended that the minutes of the

General Meeting of Shareholders after the

signing thereof and/or adopted decisions

should be made available publicly not only in

Lithuanian language but also in English

and/or other foreign languages. It is

recommended that this information should be

placed on the website of the Company. Such

documents may be published to the extent

that their public disclosure is not detrimental

to the Company or the Company’s

commercial secrets are not revealed.

Yes

The documents prepared for General

Meeting of Shareholders including draft

resolutions of the meeting are available

not later than 21 day prior the date of

General Meeting of shareholders as

required by the Law on Joint stock

companies. The documents placed on the

website of NASDAQ Vilnius security

exchange and the Company website are

available in Lithuanian and English

languages. Resolutions accepted by the

General Meeting of Shareholders

including financial reports, the audit

report, annual report, amendments of the

Statutes etc. are announce in Lithuanian

and English languages are announced via

the central base of regulated information

of NASDAQ Vilnius security exchange

and the Company website

www.kaunoenergija.lt

1.7. Shareholders who are entitled to vote

should be furnished with the opportunity to

vote at the General Meeting of Shareholders

both in person and in absentia. Shareholders

should not be prevented from voting in

writing in advance by completing the General

voting ballot.

Yes

The shareholders of the Company have

the right to participate in the General

Meeting of Shareholders both personally

and through a representative, if the

person has the appropriate authorization

or the contract of transfer of voting rights

concluded with him/her in accordance

with the procedure established by legal

acts, as well as the conditions for the

shareholders to vote by filling in the

General voting bulletin as provided by

the Law on Companies of the Republic of

Lithuania.

1.8. With a view to increasing the

shareholders’ opportunities to participate

effectively at General Meetings of

Shareholders, it is recommended that

companies should apply modern

technologies on a wider scale and thus

provide shareholders with the conditions to

participate and vote in General Meetings of

Shareholders via electronic means of

communication. In such cases the security of

transmitted information must be ensured, and

it must be possible to identify the

participating and voting person.

The Company does not comply with the

provisions of this recommendation as

there is no possibility to ensure the

security of the information transmitted

and it is not possible to identify the

person who participated and voted.

1.9. It is recommended that the notice on the

draft decisions of the General Meeting of

Shareholders being convened should specify

new candidatures of members of the collegial

body, their proposed remuneration and the

proposed audit Company if these issues are

included into the agenda of the General

Meeting of Shareholders. Where it is

proposed to elect a new member of the

collegial body, it is recommended that the

information about his/her educational

background, work experience and other

managerial positions held (or proposed)

should be provided.

Yes

When announcing the General Meeting

of Shareholders, and if the agenda of the

General Meeting of Shareholders

includes the issue of electing new

members of the collegial body or electing

the audit firm, it shall disclose in the draft

resolutions the nominations of the

proposed new members of the collegial

body and the proposed election

Company.

Information about the candidates to the

members of the collegial body shall be

provided in advance by publishing this

information on the Nasdaq Vilnius Stock

Exchange website, on the website of

PLLC Kauno Energija,

www.kaunoenergija.lt, or by publishing

it to the shareholders participating in the

General Meeting during the meeting if

the shareholders, whose shares give at

least 1/20 of all votes, propose an

additional candidate during the meeting.

In its annual and six-month interim

report, the Company publicly informs

about the positions held by the collegial

body, work experience and education.

1.10. Members of the company’s collegial

management body, heads of the

administration

or other competent persons

related to the company who can provide

information related to the agenda of the

general meeting of shareholders should take

part in the general meeting of shareholders.

Proposed candidates to member of the

collegial body should also participate in the

general meeting of shareholders in case the

election of new members is included into the

agenda of the general meeting of

shareholders.

Yes

Members of the Company's collegial

body and heads of administration

participate in the General Meetings of

Shareholders. Proposed nominees for

members of the collegial body are also

present if possible, if the election of new

members is included on the agenda of the

General Meeting.

Principle 2: Supervisory Board

For the purposes of this Code, heads of the administration are the employees of the company who hold top level management

positions.

2.1. Functions and liability of the Supervisory Board

The Supervisory Board of the Company should ensure representation of the interests of the

Company and its shareholders, accountability of this body to the shareholders and objective

monitoring of the Company’s operations and its management bodies as well as constantly provide

recommendations to the management bodies of the Company.

The Supervisory Board should ensure the integrity and transparency of the Company’s financial

accounting and control system.

2.1.1. Members of the Supervisory Board

should act in good faith, with care and

responsibility for the benefit and in the

interests of the Company and its shareholders

and represent their interests, having regard to

the interests of employees and public

welfare.

Yes

According to the knowledge of the

Company all the members of the

Supervisory Board are acting in good

faith in the interests of the Company

following the Company’s but not the own

interests or interests of the third persons.

2.1.2. Where decisions of the Supervisory

Board may have a different effect on the

interests of the Company’s shareholders, the

Supervisory Board should treat all

shareholders impartially and fairly. It should

ensure that shareholders are properly

informed about the Company’s strategy, risk

management and control, and resolution of

conflicts of interest.

Yes

The Company's Supervisory Board in its

work aim to behave honestly and

impartially with all the Company's

shareholders and by the knowledge of the

Company, there was no such kind of the

contrary case. The Chairman of the

Company's Supervisory Board and the

Chairman of the Management Board

harmonizes and coordinates interaction

with Company’s General Manager and in

the name of Supervisory and

Management Boards communicates with

shareholders, informs the shareholders

about the Company’s strategy, activity

and other essential questions.

2.1.3. The Supervisory Board should be

impartial in passing decisions that are

significant for the Company’s operations and

strategy. Members of the Supervisory Board

should act and pass decisions without an

external influence from the persons who

elected them.

Yes

The Supervisory Board of the Company

acts impartially when taking decisions

that are significant for the Company's

activities and strategy.

2.1.4. Members of the supervisory board

should clearly voice their objections in case

they believe that a decision of the supervisory

board is against the interests of the company.

Independent

members of the supervisory

board should: a) maintain independence of

their analysis and decision-making; b) not

seek or accept any unjustified privileges that

might compromise their independence.

Yes

According to the information available to

the Company, all members of the

Supervisory Board act in the best

interests of the Company and

shareholders, are guided by the interests

of the Company and not by themselves or

by third parties, trying to maintain their

independence in decision making.

2.1.5. The Supervisory Board should oversee

that the Company’s tax planning strategies

are designed and implemented in accordance

with the legal acts in order to avoid faulty

practice that is not related to the longterm

Yes

In exercising its competence to supervise

the activities of the Company's

management bodies, the Supervisory

Council performs the duties specified in

For the purposes of this Code, the criteria of independence of members of the supervisory board are interpreted as the criteria of

unrelated parties defined in Article 31(7) and (8) of the Law on Companies of the Republic of Lithuania.

interests of the Company and its

shareholders, which may give rise to

reputational, legal or other risks.

the recommendation and submits its

opinion on tax planning issues.

2.1.6. The Company should ensure that the

Supervisory Board is provided with

sufficient resources (including financial

ones) to discharge their duties, including the

right to obtain all the necessary information

or to seek independent professional advice

from external legal, accounting or other

experts on matters pertaining to the

competence of the Supervisory Board and its

committees.

Yes

Based on the Company’s opinion, the

Supervisory Board are provided with

sufficient resources, including their right

to get all the necessary information,

especially from the employees of the

Company.

2.2. Formation of the Supervisory Board

The procedure of the formation of the Supervisory Board should ensure proper resolution of

conflicts of interest and effective and fair corporate governance.

2.2.1. The members of the Supervisory Board

elected by the General Meeting of

Shareholders should collectively ensure the

diversity of qualifications, professional

experience and competences and seek for

gender equality. With a view to maintain a

proper balance between the qualifications of

the members of the Supervisory Board, it

should be ensured that members of the

Supervisory Board, as a whole, should have

diverse knowledge, opinions and experience

to duly perform their tasks.

Yes

Pursuant to the Law on Companies of the

Republic of Lithuania, the Supervisory

Board is elected, and the qualification of

its members is assessed at the General

Meeting of Shareholders.

2.2.2. Members of the Supervisory Board

should be appointed for a specific term,

subject to individual reelection for a new

term in office in order to ensure necessary

development of professional experience.

Yes

The Supervisory Board is elected for the

term of 4 (four) years. The term of office

of members on the Supervisory Board is

the maximum term of office prescribed

by the Lithuanian Law on Companies.

A General Meeting of Shareholders may

remove from office both the entire

Supervisory Board and individual

members thereof before the end of their

term of office.

2.2.3. Chair of the Supervisory Board should

be a person whose current or past positions

constituted no obstacle to carry out impartial

activities. A former manager or Management

Board member of the Company should not be

immediately appointed as chair of the

Supervisory Board either. Where the

Company

decides to depart from these

recommendations, it should provide

information on the measures taken to ensure

impartiality of the supervision.

Yes

The Chairman of the Company's

Supervisory Board and the CEO of the

Company is not the same person.

The members of the Supervisory Board

and the Chairman have not been

members of the Management Board of

the Company or the CEO of the

Company.

2.2.4. Each member should devote enough

time and attention to perform his duties as a

member of the Supervisory Board. Each

member of the Supervisory Board should

undertake to limit his other professional

Yes

Members of the Supervisory Board are

active participants of the meetings of the

collegial body and devote enough time to

perform their duties as members of the

collegial body. In 2021 there were 2

obligations (particularly the managing

positions in other companies) so that they

would not interfere with the proper

performance of the duties of a member of the

Supervisory Board. Should a member of the

Supervisory Board attend less than a half of

the meetings of the Supervisory Board

throughout the financial year of the

Company, the shareholders of the Company

should be notified thereof.

(two) Supervisory Board’s meetings, and

all of them were attended by more than

2/3 of all the members of the Supervisory

Board.

2.2.5. When it is proposed to appoint a

member of the Supervisory Board, it should

be announced which members of the

Supervisory Board are deemed to be

independent. The Supervisory Board may

decide that, even though a particular member

meets all the criteria of independence, he/she

cannot be considered independent due to

special personal or Company related

circumstances.

Yes

Information on the candidates to the

Company's Supervisory Board members

(as well as information on the candidate's

compliance with the independence

requirements) is provided to the General

Meeting of Shareholders in accordance

with the Law on Companies of the

Republic of Lithuania (see commentary

on recommendation 1.9).

2.2.6. The amount of remuneration to

members of the Supervisory Board for their

activity and participation in meetings of the

Supervisory Board should be approved by the

General Meeting of Shareholders.

Not applicable

The members of the Supervisory Board

are not remunerated from the Company’s

funds. So, this provision is not relevant

for the Company.

2.2.7. Every year the Supervisory Board

should carry out an assessment of its

activities. It should include evaluation of the

structure of the Supervisory Board, its work

organization and ability to act as a group,

evaluation of the competence and work

efficiency of each member of the Supervisory

Board, and evaluation whether the

Supervisory Board has achieved its

objectives. The Supervisory Board should, at

least once a year, make public respective

information about its internal structure and

working procedures.

There was no practice of assessment of

the activity of Supervisory Board at the

Company and of informing shareholders

about that up to now because the

controlling shareholder who proposes

candidates to the Supervisory Board

exhaustively knows the experiences and

competences of each candidate.

Principle 3: Management Board

3.1. Functions and liability of the Management Board

The Management Board should ensure the implementation of the Company’s strategy and good

corporate governance with due regard to the interests of its shareholders, employees and other interest

groups.

3.1.1. The Management Board should ensure

the implementation of the Company’s

strategy approved by the Supervisory Board

if the latter has been formed at the Company.

In such cases where the Supervisory Board is

not formed, the Management Board is also

responsible for the approval of the

Company’s strategy.

Yes

The Company's Management Board

carries out the duty of implementation of

the Company's strategy approved by the

Company's Supervisory Board.

3.1.2. As a collegial management body of the

Company, the Management Board performs

the functions assigned to it by the Law and in

the Statutes of the Company, and in such

Yes

As the Supervisory Board is formed in

the Company, the Management Board

performs the functions of the Company's

collegial management body. The

cases where the Supervisory Board is not

formed in the Company, it performs inter alia

the Supervisory functions

established in the Law. By performing the

functions assigned to it, the Management

Board should consider the needs of the

Company’s shareholders, employees and

other interest groups by respectively striving

to achieve sustainable business development

obligation to consider the Company, the

shareholders, the employees and other

interest groups is established in the

agreement on performance of the

Management Board signed by each

member of the Management Board.

3.1.3. The Management Board should ensure

compliance with the laws and the internal

policy of the Company applicable to the

Company or a group of companies to which

this Company belongs. It should also

establish the respective risk management and

control measures aimed at ensuring regular

and direct liability of managers.

Yes

The Management Board ensures that the

laws and Company internal policies

applicable to the Company and its entire

group are respected. The Company also

operates a risk management and control

program. Risk management is carried out

by the management of the Company.

3.1.4. Moreover, the management board

should ensure that the measures included into

the OECD Good Practice Guidance

Internal Controls, Ethics and Compliance are

applied at the company in order to ensure

adherence to the applicable laws, rules and

standards.

Yes

The Company has a policy of internal

control and business ethics. The

Company has adopted a Business Ethics

Policy that clearly and publicly declares

a negative attitude towards bribery and

corruption. The provisions of this policy

apply to all employees, agents,

intermediaries, suppliers and

subcontractors of the Company.

3.1.5. When appointing the manager of the

Company, the Management Board should

consider the appropriate balance between the

candidate’s qualifications, experience and

competence.

Yes

When appointing the CEO of the

Company the Management Board

considers the balance of his/her

qualifications, experience and

competence as well as the opinion of the

Company's Supervisory Board.

3.2. Formation of the Management Board

3.2.1. The members of the Management

Board, elected by the Supervisory Board or,

if the Supervisory Board is not formed, by the

General Meeting of Shareholders should

collectively ensure the required diversity of

qualifications, professional experience and

competences and seek for gender equality.

With a view to maintain a proper balance in

terms of the current qualifications possessed

by the members of the Management Board, it

should be ensured that the members of the

Management Board would have, as a whole,

diverse knowledge, opinions and experience

to duly perform their tasks.

Yes

The members of the Management Board

are elected by the Supervisory Board of

the Company. The members of the

Management Board of the Company are

qualified and competent to perform their

functions, having a long experience in

management.

3.2.2. Names and surnames of the candidates

to become members of the Management

Board, information on their educational

background, qualifications, professional

experience, current positions, other

important professional obligations and

Yes

Information about candidates to the

Company’s Management Board is

provided to the shareholders together

with the documents of the shareholders’

meeting following the requirements of

the Law on Public Limited Liability

Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti-

bribery/44884389.pdf

100

potential conflicts of interest should be

disclosed without violating the requirements

of the legal acts regulating the handling of

personal data at the meeting of the

Supervisory Board in which the Management

Board or individual members of the

Management Board are elected. If the

Supervisory Board is not formed, the

information specified in this paragraph

should be submitted to the General Meeting

of Shareholders. The Management Board

should, on yearly basis, collect data provided

in this paragraph on its members and disclose

it in the Company’s annual report.

Companies of the Republic of Lithuania.

Shareholders may see the documents

prior the meeting. Information about the

members of the Management Board

(names, education, qualifications,

professional experience, participation in

the activities of other companies, other

important professional obligations) is

provided in the periodical reports.

3.2.3. All new members of the Management

Board should be familiarized with their

duties and the structure and operations of the

Company.

Yes

All new members of the Management

Board are familiarized with their duties,

Company structure and activities.

3.2.4. Members of the Management Board

should be appointed for a specific term,

subject to individual re-election for a new

term in office in order to ensure necessary

development of professional experience and

sufficiently frequent reconfirmation of their

status.

Yes

The members of the Management Board

are elected for a 4-year term. The number

of terms is unlimited. Members of the

Management Board are elected by the

General Meeting of Shareholders.

Shareholders who nominate and vote for

the Management Board follow their own

approach, which candidates are best to

represent the interests of the

shareholders.

3.2.5. Chair of the Management Board

should be a person whose current or past

positions constitute no obstacle to carry out

impartial activity. Where the Supervisory

Board is not formed, the former manager of

the Company should not be immediately

appointed as chair of the Management Board.

When a Company decides to depart from

these recommendations, it should furnish

information on the measures it has taken to

ensure the impartiality of supervision.

Yes

The Chairman of the Company’s

Management Board hasn’t been the

General Manager of the Company. His

current or past position is not an obstacle

for independent and impartial

supervision.

3.2.6. Each member should devote enough

time and attention to perform his duties as a

member of the Management Board. Should a

member of the Management Board attend

less than a half of the meetings of the

Management Board throughout the financial

year of the Company, the Supervisory Board

of the Company or, if the Supervisory Board

is not formed at the Company, the General

Meeting of Shareholders should be notified

thereof.

Yes

Each member of the collegial body fulfils

his/her functions properly: actively

participates at the meetings of collegial

body and devotes enough time to perform

his / her duties as a member of the

collegial body. The quorum of each

meeting was regulated so the

Management Board would be enabled to

accept decisions constructively.

In 2021, 24 meeting of the Management

Board had been held. All the meetings

were attended by more, than 2/3

members of the Management Board.

3.2.7. In the event that the management board

is elected in the cases established by the Law

where the supervisory board is not formed at

the company, and some of its members will

Yes

Al the members of the Management

Board are independent.

101

be independent

, it should be announced

which members of the management board are

deemed as independent. The management

board may decide that, despite the fact that a

particular member meets all the criteria of

independence established by the Law, he/she

cannot be considered independent due to

special personal or company-related

circumstances.

3.2.8. The General Meeting of Shareholders

of the Company should approve the amount

of remuneration to the members of the

Management Board for their activity and

participation in the meetings of the

Management Board.

Yes

Remuneration is paid for the work on the

Management Board to its members, by

decision of the General Meeting of

Shareholders in accordance with the Law

on Companies of the Republic of

Lithuania. The members of the

Management Board are not remunerated

for their performance and participation in

the meetings.

3.2.9. The members of the Management

Board should act in good faith, with care and

responsibility for the benefit and the interests

of the Company and its shareholders with due

regard to other stakeholders. When adopting

decisions, they should not act in their

personal interest; they should be subject to

noncompete agreements and they should not

use the business information or opportunities

related to the Company’s operations in

violation of the Company’s interests.

Yes

By the Company’s information, all

Management Board members should act

in good faith, with care and responsibility

for the benefit and in the interests of the

Company and its shareholders. They are

guided by the Company’s interests but

not their own or any third parties seeking

to maintain their independence in

decision-making, and they do not accept

any unjustified privileges that would

compromise their independence.

3.2.10. Every year the Management Board

should carry out an assessment of its

activities. It should include evaluation of the

structure of the Management Board, its work

organization and ability to act as a group,

evaluation of the competence and work

efficiency of each member of the

Management Board, and evaluation whether

the Management Board has achieved its

objectives. The Management Board should,

at least once a year, make public respective

information about its internal structure and

working procedures in observance of the

legal acts regulating the processing of

personal data.

There was no practice of assessment of

the activity of Management Board at the

Company and of informing shareholders

about that up to now because the

controlling shareholder who proposes

candidates to the Management Board

exhaustively knows the experiences and

competences of each candidate.

Principle 4: Rules of procedure of the Supervisory Board and the Management Board of the

Company

The rules of procedure of the Supervisory Board, if it is formed at the Company, and of the

Management Board should ensure efficient operation and decision-making of these bodies and

promote active cooperation between the Company’s management bodies.

4.1. The Management Board and the

Supervisory Board, if the latter is formed at

the Company, should act in close cooperation

Yes

Legal acts, Statutes and rules of

procedure governing activities of the

Company’s Supervisory and

For the purposes of this Code, the criteria of independence of the members of the board are interpreted as the criteria of unrelated

persons defined in Article 33(7) of the Law on Companies of the Republic of Lithuania.

102

in order to attain benefit for the Company and

its shareholders. Good corporate governance

requires an open discussion between the

Management Board and the Supervisory

Board. The Management Board should

regularly and, where necessary, immediately

inform the Supervisory Board about any

matters significant for the Company that are

related to planning, business development,

risk management and control, and

compliance with the obligations at the

Company. The Management Board should

inform he Supervisory Board about any

derogations in its business development from

the previously formulated plans and

objectives by specifying the reasons for this.

management bodies lay down the

principles and procedure of cooperation

between Supervisory and management

bodies of the Company and ensure that

management and Supervisory bodies

cooperate to attain the greatest possible

benefit to the Company and its

shareholders.

4.2. It is recommended that meetings of the

Company’s collegial bodies should be held at

the respective intervals, according to the pre-

approved schedule. Each Company is free to

decide how often meetings of the collegial

bodies should be convened but it is

recommended that these meetings should be

convened at such intervals that

uninterruptable resolution of essential

corporate governance issues would be

ensured. Meetings of the Company’s

collegial bodies should be convened at least

once per quarter.

Yes

The Company follows the order foreseen

in the work regulations of the

Supervisory Board and the Management

Board and the information about the

convened meeting is presented in

advance together with an agenda and all

the necessary information and documents

related to the meeting agenda.

The Supervisory Board and the

Management Board meeting agenda may

be changed or added during the meeting,

in the presence of all members of the

collegial body, or when there is an urgent

need to deal with Company’s certain key

issues.

4.3. Members of a collegial body should be

notified of the meeting being convened in

advance so that they would have enough time

for proper preparation for the issues to be

considered at the meeting and a fruitful

discussion could be held and appropriate

decisions could be adopted. Along with the

notice of the meeting being convened all

materials relevant to the issues on the agenda

of the meeting should be submitted to the

members of the collegial body. The agenda

of the meeting should not be changed or

supplemented during the meeting, unless all

members of the collegial body present at the

meeting agree with such change or

supplement to the agenda, or certain issues

that are important to the Company require

immediate resolution.

Yes

According to the Company’s Statutes and

the working procedure regulations of the

Supervisory Board and the Management

Board, the members of the collegial body

and persons that are invited to such

meetings, are informed of them in

advance. They are also provided with all

the information and materials, needed to

examine the questions, presented in the

agenda.

4.4. In order to coordinate the activities of the

Company’s collegial bodies and ensure

effective decision-making process, the chairs

of the Company’s collegial supervision and

management bodies should mutually agree

on the dates and agendas of the meetings and

close cooperate in resolving other matters

related to corporate governance. Meetings of

Yes

The chairmen of Company's Supervisory

and management bodies coordinate dates

of the meetings, their agendas and

cooperate in solving other issues of

corporate governance. The Chairman of

the Management Board and members of

the Management Board are invited to the

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the Company’s Supervisory Board should be

open to members of the Management Board,

particularly in such cases where issues

concerning the removal of the Management

Board members, their responsibility or

remuneration are discussed.

meetings of the Supervisory Board of the

Company.

Principle 5: Nomination, remuneration and audit committees

5.1. Purpose and formation of committees

The committees formed at the Company should increase the work efficiency of the Supervisory Board

or, where the Supervisory Board is not formed, of the Management Board which performs the

Supervisory functions by ensuring that decisions are based on due consideration and help organise

its work in such a way that the decisions it takes would be free of material conflicts of interest.

Committees should exercise independent judgment and integrity when performing their functions

and provide the collegial body with recommendations concerning the decisions of the collegial body.

However, the final decision should be adopted by the collegial body.

5.1.1. Taking due account of the company-

related circumstances and the chosen

corporate governance structure, the

supervisory board of the company or, in cases

where the supervisory board is not formed,

the management board which performs the

supervisory functions, establishes

committees. It is recommended that the

collegial body should form the nomination,

remuneration and audit committees

Yes/No

The Audit Committee is formed by the

Supervisory Board from March 31, 2009

and the term of office of this committee

coincides with the term of office of the

Company's Supervisory Board.

5.1.2. Companies may decide to set up less

than three committees. In such case

companies should explain in detail why they

have chosen the alternative approach, and

how the chosen approach corresponds with

the objectives set for the three different

committees.

Yes/No

The Audit Committee is an independent,

and objective committee carrying out the

functions of supervision, analysing,

evaluation and consultation in order to

improve General organization and create

value added. The main function of the

Committee is systematic and versatile

evaluation, as well as encouragement of

better risk management, and enough

control and maintenance procedures

resulting in submission of

recommendations to the Management

Board and management regarding

implementation of the objectives and

tasks, risk management procedure and

internal control functioning.

The nomination and remuneration

committees are not formed at the

Company. As the Management Board of

the Company is composed of competent

members and they perform their

activities efficiently, the Company does

The legal acts may provide for the obligation to form a respective committee. For example, the Law on the Audit of

Financial Statements of the Republic of Lithuania provides that public-interest entities (including but not limited to public

limited liability companies whose securities are traded on a regulated market of the Republic of Lithuania and/or of any

other Member State) are under the obligation to set up an audit committee (the legal acts provide for the exemptions

where the functions of the audit committee may be carried out by the collegial body performing the supervisory functions).

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not currently see the need for other

committees.

5.1.3. In the cases established by the legal

acts the functions assigned to the committees

formed at companies may be performed by

the collegial body itself. In such case the

provisions of this Code pertaining to the

committees (particularly those related to their

role, operation and transparency) should

apply, where relevant, to the collegial body

as a whole.

Not applicable

The Management Board of the Company

does not perform the functions assigned

to the Audit Committee.

5.1.4. Committees established by the

collegial body should normally be composed

of at least three members. Subject to the

requirements of the legal acts, committees

could be comprised only of two members as

well. Members of each committee should be

selected on the basis of their competences by

giving priority to independent members of

the collegial body. The chair of the

Management Board should not serve as the

chair of committees.

Yes

The Audit Committee consists of 3

members, two of whom are independent,

with at least 5 years of experience in

accounting, with relevant experience in

finance and accounting in listed

companies.

The Chairman of the Management Board

is not a member of the Committee.

5.1.5. The authority of each committee

formed should be determined by the collegial

body itself. Committees should perform their

duties according to the authority delegated to

them and regularly inform the collegial body

about their activities and performance on a

regular basis. The authority of each

committee defining its role and specifying its

rights and duties should be made public at

least once a year (as part of the information

disclosed by the Company on its governance

structure and practice on an annual basis). In

compliance with the legal acts regulating the

processing of personal data, companies

should also include in their annual reports the

statements of the existing committees on

their composition, the number of meetings

and attendance over the year as well as the

main directions of their activities and

performance.

Yes

The Audit Committee follows the

regulations of the Committee approved

by the Supervisory Board. These

Regulations establish the rules defining

the rights and duties of the Audit

Committee, the size of the Audit

Committee, the period of membership of

the Audit Committee, the requirements

for the education, professional

experience and independence principles

of the members of the Audit Committee.

The Audit Committee annually submits

an annual activity report to the General

Meeting of Shareholders, announcing the

composition of the Committee, the

number of meetings and the attendance of

the members, describing the work

performed and presenting the results.

5.1.6. With a view to ensure the

independence and impartiality of the

committees, the members of the collegial

body who are not members of the committees

should normally have a right to participate in

the meetings of the committee only if invited

by the committee. A committee may invite or

request that certain employees of the

Company or experts would participate in the

meeting. Chair of each committee should

have the possibility to maintain direct

communication with the shareholders. Cases

where such practice is to be applied should be

specified in the rules regulating the activities

of the committee.

Yes

The members of the collegial body take

decisions at the meetings of their

members, but in certain cases the

committee invites the head of the

Company and the responsible employees

of the Company to attend its meetings,

who are responsible for the areas of

activity of the issues under discussion.

The Chairman of the Audit Committee is

also provided with the opportunity to

communicate with the shareholders.

105

5.2. Nomination committee

5.2.1. The key functions of the nomination

committee should be the following:

1) to select candidates to fill vacancies in the

membership of Supervisory and management

bodies and the administration and

recommend the collegial body to approve

them. The nomination committee should

evaluate the balance of skills, knowledge and

experience in the management body, prepare

a description of the functions and capabilities

required to assume a particular position and

assess the time commitment expected;

2) assess, on a regular basis, the structure,

size and composition of the Supervisory and

management bodies as well as the skills,

knowledge and activity of its members, and

provide the collegial body with

recommendations on how the required

changes should be sought;

3) devote the attention necessary to ensure

succession planning.

The Nomination Committee is not

formed in the Company.

5.2.2. When dealing with issues related to

members of the collegial body who have

employment relationships with the Company

and the heads of the administration, the

manager of the Company should be consulted

by granting him/her the right to submit

proposals to the Nomination Committee.

See article 5.5.1

5.3. Remuneration committee

The main functions of the remuneration

committee should be as follows:

1) submit to the collegial body proposals on

the remuneration policy applied to members

of the Supervisory and management bodies

and the heads of the administration for

approval. Such policy should include all

forms of remuneration, including the fixed

rate remuneration, performance-based

remuneration, financial incentive schemes,

pension arrangements and termination

payments as well as conditions which would

allow the Company to recover the amounts or

suspend the payments by specifying the

circumstances under which it would be

expedient to do so;

2) submit to the collegial body proposals

regarding individual remuneration for

members of the collegial bodies and the

heads of the administration in order to ensure

that they would be consistent with the

Company’s remuneration policy and the

evaluation of the performance of the persons

concerned;

There is no Remuneration Committee in

the Company.

The Company has implemented a

remuneration policy that includes all

forms of remuneration, including fixed

salary, performance-based benefits and

severance payments. The Company is

approved by the Company's management

in coordination with the Trade Union

Committee operating in the Company.

106

3) review, on a regular basis, the

remuneration policy and its implementation.

5.4. Audit committee

5.4.1. The key functions of the audit

committee are defined in the legal acts

regulating the activities of the audit

committee

Yes

The Audit Committee follows the

regulations of the Audit Committee

approved by the Supervisory Board of the

Company.

The Audit Committee carries out

independent, objective monitoring,

investigation, evaluation and advisory

activities to improve the Company's

performance and create added value.

5.4.2. All members of the committee should

be provided with detailed information on

specific issues of the Company’s accounting

system, finances and operations. The heads

of the Company’s administration should

inform the audit committee about the

methods of accounting for significant and

unusual transactions where the accounting

may be subject to different approaches.

Yes

All members of the Committee are

provided with detailed information on the

specific accounting, financial and

operational characteristics of the

Company and, upon request, information

on the execution of important

transactions.

5.4.3. The audit committee should decide

whether the participation of the chair of the

Management Board, the manager of the

Company, the chief finance officer (or senior

employees responsible for finance and

accounting), the internal and external

auditors in its meetings is required (and, if

required, when). The committee should be

entitled, when needed, to meet the relevant

persons without members of the management

bodies present.

Yes

The Audit Committee decides on the

participation of other persons in its

meetings and, if necessary, the Audit

Committee invites the head of the

Company and the responsible employees

of the Company to its meetings, who are

responsible for the areas of activity of the

issues under consideration. The

Chairman of the Audit Committee is also

provided with the opportunity to

communicate with the shareholders.

5.4.4. The audit committee should be

informed about the internal auditor’s work

program and should be furnished with

internal audit reports or periodic summaries.

The audit committee should also be informed

about the work program of external auditors

and should receive from the audit firm a

report describing all relationships between

the independent audit firm and the Company

and its group.

Yes

The Audit Committee is informed about

the work performed by the Internal

Auditor and receives conclusions about

the research performed. Each year, the

Audit Committee receives reports from

external auditors describing all

relationships between the independent

auditor and the Company and its group.

5.4.5. The audit committee should examine

whether the Company complies with the

applicable provisions regulating the

possibility of lodging a complaint or

reporting anonymously his/her suspicions of

potential violations committed at the

Company and should also ensure that there is

a procedure in place for proportionate and

independent investigation of such issues and

appropriate follow-up actions.

Yes

The Company has provided employees

with the opportunity to submit

complaints or anonymous reports about

violations committed in the Company,

however the Company has not received

such complaints or reports during the

reporting period.

Issues related to the activities of audit committees are regulated by Regulation No. 537/2014 of the European Parliament and the

Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities, the Law on the Audit of

Financial Statements of the Republic of Lithuania, and the Rules Regulating the Activities of Audit Committees approved by the

Bank of Lithuania.

107

5.4.6. The audit committee should submit to

the Supervisory Board or, where the

Supervisory Board is not formed, to the

Management Board its activity report at least

once in every six months, at the time that

annual and half-yearly reports are approved.

Yes

The Audit Committee analyses and

evaluates the Company's annual and

semi-annual financial statements, makes

recommendations to the Management

Board for their approval, together with its

activity reports for that period.

Principle 6: Prevention and disclosure of conflicts of interest

The corporate governance framework should encourage members of the Company’s supervisory and

management bodies to avoid conflicts of interest and ensure a transparent and effective mechanism

of disclosure of conflicts of interest related to members of the supervisory and management bodies.

Any member of the Company’s Supervisory

and management body should avoid a

situation where his/her personal interests are

or may be in conflict with the Company’s

interests. In case such a situation did occur, a

member of the Company’s Supervisory or

management body should, within a

reasonable period of time, notify other

members of the same body or the body of the

Company which elected him/her or the

Company’s shareholders of such situation of

a conflict of interest, indicate the nature of

interests and, where possible, their value.

Yes

Members of the Company's management

bodies behave in such a way that there is

no conflict of interest with the Company.

During the reporting period, there is no

known conflict of interest between the

Company and the member of its

management body.

Principle 7: Remuneration policy of the Company

The remuneration policy and the procedure for review and disclosure of such policy established at

the Company should prevent potential conflicts of interest and abuse in determining remuneration of

members of the collegial bodies and heads of the administration, in addition it should ensure the

publicity and transparency of the Company’s remuneration policy and its long-term strategy.

7.1. The Company should approve and post

the remuneration policy on the website of the

Company, such policy should be reviewed on

a regular basis and be consistent with the

Company’s long-term strategy.

Yes/no

The Company has implemented and

operates a remuneration policy approved

by the Company's management, but it is

not published on the Company's website.

The Company will follow the

recommendations of Principle 7 when the

respective laws and other legal acts of the

Republic of Lithuania are adopted.

7.2. The remuneration policy should include

all forms of remuneration, including the

fixed-rate remuneration, performance-based

remuneration, financial incentive schemes,

pension arrangements and termination

payments as well as the conditions specifying

the cases where the Company can recover the

disbursed amounts or suspend the payments.

Yes

The Company has implemented a

remuneration policy that includes all

forms of remuneration, including fixed

salary, performance-based benefits and

severance payments. This procedure is

approved by the management of the

Company in agreement with the Trade

Union Committee.

7.3. With a view to avoid potential conflicts

of interest, the remuneration policy should

provide that members of the collegial bodies

which perform the Supervisory functions

should not receive remuneration based on the

Company’s performance.

Yes

See article 3.2.8

7.4. The remuneration policy should provide

enough information on the policy regarding

termination payments. Termination

Yes

Termination benefits shall be granted in

accordance with the provisions of

Chapter 5 of the Labour Code of the

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payments should not exceed a fixed amount

or a fixed number of annual wages and in

General should not be higher than the non-

variable component of remuneration for two

years or the equivalent thereof. Termination

payments should not be paid if the contract is

terminated due to inadequate performance.

Republic of Lithuania and the provisions

of the Collective Agreement in the

Company.

7.5. If the financial incentive scheme is

applied at the Company, the remuneration

policy should contain enough information

about the retention of shares after the award

thereof. Where remuneration is based on the

award of shares, shares should not be vested

at least for three years after the award thereof.

After vesting, members of the collegial

bodies and heads of the administration should

retain a certain number of shares until the end

of their term in office, subject to the need to

compensate for any costs related to the

acquisition of shares.

The Company does not apply a system of

financial incentives.

7.6. The Company should publish

information about the implementation of the

remuneration policy on its website, with a

key focus on the remuneration policy in

respect of the collegial bodies and managers

in the next and, where relevant, subsequent

financial years. It should also contain a

review of how the remuneration policy was

implemented during the previous financial

year. The information of such nature should

not include any details having a commercial

value. Particular attention should be paid on

the major changes in the Company’s

remuneration policy, compared to the

previous financial year.

See article 7.1.

7.7. It is recommended that the remuneration

policy or any major change of the policy

should be included on the agenda of the

General Meeting of Shareholders. The

schemes under which members and

employees of a collegial body receive

remuneration in shares or share options

should be approved by the General Meeting

of Shareholders.

See article 7.1.

Principle 8: Role of stakeholders in corporate governance

The corporate governance framework should recognize the rights of stakeholders entrenched in the

laws or mutual agreements and encourage active cooperation between companies and stakeholders in

creating the Company value, jobs and financial sustainability. In the context of this principle the

concept “stakeholders” includes investors, employees, creditors, suppliers, clients, local community

and other persons having certain interests in the Company concerned.

8.1. The corporate governance framework

should ensure that the rights and lawful

interests of stakeholders are protected.

Yes

The corporate governance framework

assures the rights of stakeholders that are

protected by law are respected. The

Company applies a Corporate Contract

8.2. The corporate governance framework

should create conditions for stakeholders to

109

participate in corporate governance in the

manner prescribed by law. Examples of

participation by stakeholders in corporate

governance include the participation of

employees or their representatives in the

adoption of decisions that are important for

the Company, consultations with employees

or their representatives on corporate

governance and other important matters,

participation of employees in the Company’s

authorized capital, involvement of creditors

in corporate governance in the cases of the

Company’s insolvency, etc.

with employees, and the contract is

signed by the CEO and Trade Union.

The Company pursues the maximum

possible transparency in its relations with

all stakeholders and the compliance with

the highest ethical requirements and

principles – in its activities, because

honest and open business activities are

one of the key elements of impeccable

business reputation.

The Company takes into account the

changing customer needs, constantly

improving its operational processes,

empowering employees, taking care of

the safety and health of its employees,

seeking to maintain a close relationship

with investors and ensure information

accessible to all, continuously updating

the information and posting it in the

“Investors” section of its website.

8.3. Where stakeholders participate in the

corporate governance process, they should

have access to relevant information.

8.4. Stakeholders should be provided with the

possibility of reporting confidentially any

illegal or unethical practices to the collegial

body performing the Supervisory function.

Principle 9: Disclosure of information

The corporate governance framework should ensure the timely and accurate disclosure of all

material corporate issues, including the financial situation, operations and governance of the

Company.

9.1. In accordance with the Company’s

procedure on confidential information and

commercial secrets and the legal acts

regulating the processing of personal data,

the information publicly disclosed by the

Company should include but not be limited

to the following:

Yes

The information contained in this

recommendation shall be disclosed in the

annual and semi-annual reports of the

Company in accordance with the

requirements of legal acts regulating data

processing and confidential information

procedures. This information is

published on the website of PLLC

Nasdaq Vilnius. Stock Exchange and on

the Company's website.

9.1.1. operating and financial results of the

Company;

9.1.2. objectives and non-financial

information of the Company;

9.1.3. persons holding a stake in the

Company or controlling it directly and/or

indirectly and/or together with related

persons as well as the structure of the group

of companies and their relationships by

specifying the final beneficiary;

9.1.4. members of the Company’s

Supervisory and management bodies who are

deemed independent, the manager of the

Company, the shares or votes held by them at

the Company, participation in corporate

governance of other companies, their

competence and remuneration;

9.1.5. reports of the existing committees on

their composition, number of meetings and

attendance of members during the last year as

well as the main directions and results of their

activities;

110

9.1.6. potential key risk factors, the

Company’s risk management and

supervision policy;

9.1.7. the Company’s transactions with

related parties;

9.1.8. main issues related to employees and

other stakeholders (for instance, human

resource policy, participation of employees

in corporate governance, award of the

Company’s shares or share options as

incentives, relationships with creditors,

suppliers, local community, etc.);

9.1.9. structure and strategy of corporate

governance;

9.1.10. initiatives and measures of social

responsibility policy and anti-corruption

fight, significant current or planned

investment projects.

This list is deemed minimum and companies

are encouraged not to restrict themselves to

the disclosure of information included into

this list. This principle of the Code does not

exempt companies from their obligation to

disclose information as provided for in the

applicable legal acts.

9.2. When disclosing the information

specified in paragraph 9.1.1 of

recommendation 9.1, it is recommended that

the Company which is a parent Company in

respect of other companies should disclose

information about the consolidated results of

the whole group of companies.

Yes

The Company discloses information on

the Company’s and the Group’s

consolidated results. The information is

disclosed in the consolidated annual

report and consolidated financial

statements.

9.3. When disclosing the information

specified in paragraph 9.1.4 of

recommendation 9.1, it is recommended that

the information on the professional

experience and qualifications of members of

the Company’s Supervisory and

management bodies and the manager of the

Company as well as potential conflicts of

interest which could affect their decisions

should be provided. It is further

recommended that the remuneration or other

income of members of the Company’s

Supervisory and management bodies and the

manager of the Company should be

disclosed, as provided for in greater detail in

Principle 7.

Yes

The information specified in the

recommendation is presented in the

Company's annual and semi-annual

reports. The Company will implement

the recommendations of Principle 7 once

the legislation governing is adopted.

9.4. Information should be disclosed in

such manner that no shareholders or investors

are discriminated in terms of the method of

receipt and scope of information. Information

should be disclosed to all parties concerned

at the same time.

Yes

The Company discloses all regulated

information through the news

distribution system of PLLC Nasdaq

Vilnius. This ensures that it is accessible

to the widest possible public. The

information is simultaneously available

in Lithuanian and English. In addition,

the Company publishes information

before or after the Nasdaq Vilnius trading

111

session so that all shareholders and

investors of the Company have equal

access to information and make

appropriate investment decisions. The

Company shall not disclose information

that may affect the price of the securities

issued by it in the comments, interviews

or other ways until such information is

made public through the Central

Regulatory Information base.

Principle 10: Selection of the Company’s audit firm

The Company’s audit firm selection mechanism should ensure the independence of the report and

opinion of the audit firm.

10.1. With a view to obtain an objective

opinion on the Company’s financial

condition and financial results, the

Company’s annual financial statements and

the financial information provided in its

annual report should be audited by an

independent audit firm.

Yes

An independent audit Company performs

auditing of the Company’s and its

subsidiaries individual and consolidated

(the group) annual financial reports in

accordance with International

Accounting Standards applicable in the

EU. An independent auditing Company

also evaluates conformity of annual

report to the audited financial statements.

10.2. It is recommended that the audit firm

would be proposed to the General Meeting of

Shareholders by the Supervisory Board or, if

the Supervisory Board is not formed at the

Company, by the Management Board of the

Company.

Yes

The Management Board proposes an

audit Company to the General Meeting of

Shareholders.

10.3. If the audit firm has received

remuneration from the Company for the non-

audit services provided, the Company should

disclose this publicly. This information

should also be available to the Supervisory

Board or, if the Supervisory Board is not

formed at the Company, by the Management

Board of the Company when considering

which audit firm should be proposed to the

General Meeting of Shareholders.

Yes

Information on remuneration to the audit

Company is made public in the decisions

of the General Meeting of Shareholders.

The audit firm provides non-audit

services only with the approval of the

Audit Committee. In 2021, the audit firm

did not receive any remuneration for the

non-audit services provided.

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Introduction

This 2021 GRI Standards Report forms part of the Kaunas Energy "Social Responsibility

Report”, which is produced annually and published in conjunction with the company's

consolidated annual report and financial statement.

The report has been prepared in accordance with GRI Standards: Core option -

providing the information required in order to understand the nature of the company

and how it manages its material topics and related economic, environmental, and

social impacts. Only those that are required for core option are listed and reported on.

GRI Standards are separated into three distinct sections: General Disclosures (GRI

102); Management Approach (GRI 103) which reports on each of the topic specific

standards; and Topic Specific Standards (GRI 200, 300, and 400).

Within the set of Topic Specific Standards, only those material topics with significance

(as defined by guidance in GRI 101: clause 1.3) are reported on in full. In the few cases

where a disclosure requires additional supporting information, an external reference

with a specific publicly available location may be included. These additional external

references may refer to other materials produced by the company such as its annual

report and full financial statements. For some material topics it is not possible to

provide a full disclosure. This is allowed under GRI 101: clause 3.2 ‘Reasons for

Omission’ and the reason for omission will be given.

The material topics chosen for this report are as follows:

GRI 204 Procurement Practices (2016)

GRI 205 Anticorruption (2016)

GRI 302 Energy (2016)

GRI 303 Water and Effluents (2018)

GRI 305 Emissions (2016)

GRI 306 Waste (2020)

GRI 307 Environmental Compliance (2016)

GRI 402 Labour / Management Relations (2016)

GRI 403 Occupational Health & Safety (2018)

GRI 404 Training and Education (2016)

GRI 405 Diversity & Equal Opportunity (2016)

GRI 406 Non-discrimination (2016)

GRI 407 Freedom of Association & Collective

Bargaining (2016)

GRI 408 Child Labour (2016)

GRI 409 Forced or Compulsory Labour (2016)

GRI 415 Public Policy (2016)

GRI 416 Customer Health and Safety (2016)

GRI 418 Customer Privacy (2016)

With this report Kaunas Energy seeks to provide non-financial corporate responsibility

information to its stakeholders: clients (users), shareholders, investors, employees,

suppliers, business and social partners and the public. This sustainability report is

produced as a stand-alone report in accordance with GRI Standards.

Please note that the report for 2022, to be produced in 2023, will use a new updated

and heavily revised version of the GRI Universal Standards. This will mean significant

changes to the format and content of next year’s report.

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GRI Content Index

GRI Standard disclosure number,

title, and publication year.

Disclosure

GRI 102: General Disclosures (2016)

Organisational profile

102-1

Name of the organisation

AB “Kauno energija” (ENG – Public Company Kaunas Energy).

102-2

Activities, brands, products,

and services

Supplier of heat energy and hot water to clients and customers in regions within Lithuania.

102-3

Location of headquarters

Raudondvario pl. 84, Kaunas, LT- 47179, LIETUVA.

102-4

Location of operations

Lithuania – specifically Kaunas, Kaunas District and Jurbarkas.

102-5

Ownership and legal form

Information presented in the annual report

102-6

Markets served

Information presented in the annual report

102-7

Scale of the organisation

Information relating to the total number of employees and the total number of operations, net revenues, and

quantity of products / services provided is all presented in the annual report in sections 3, 6, 7, 14 & 18.

102-8

Information on employees

and other workers

Figures shown are for the full year ending 31 December 2021 (They include employees of AB Kauno Energija,

UAB ‘Petrašiūnų katilinė’ and UAB ‘GO Energy LT’). All employees are employed in and within the Kaunas and

Jurbarkas region.

Total Number of Employees by Employment Contract and Gender

Total Number

Fixed-term employment contracts

Open-ended contracts

Total

Women

Men

Total

Women

Men

114

377

341

247

Total Number of Employees by Employment Type and Gender

Total Number

Full-time Employees

Part-time Employees

Total

Women

Men

Total

Women

Men

377

340

252

The major parts of the company’s activities are carried out by company employees. Although there are

external service contractors employed on projects (selected and employed through public procurement in

accordance with Lithuanian law), the percentage of work they perform is not monitored.

Since the last reporting period, there has been an increase in staff numbers of approx. 3.28%. All employee

data is compiled and processed by the company’s personnel administration department.

102-9

Supply chain

The company supplies heat to 3,744 companies and organizations and 118,468 households, in total - 122,212

consumers. Pursuant to legal acts, the company purchases heat energy from 12 independent producers

operating in Kaunas city and Kaunas district. In 2021, heat energy was purchased from the following suppliers:

1. UAB Kauno termofikacijos elektrinė;

2. UAB ‘Ekoresursai’;

3. UAB ‘ENG’;

4. UAB ‘Idex Taika’;

5. UAB ‘Idex Taika elektrinė’;

6. UAB ‘Lorizon Energy’;

7. UAB ‘Petrašiūnų katilinė’;

8. UAB ‘Aldec General’;

9. UAB ‘Idex Biruliškių’;

10. UAB ‘Ekopartneris’;

11. UAB Foksita;

12. UAB Kauno kogeneracinė jėgainė.

In 2021, the company and its subsidiaries hired 648 external suppliers, who provided various volumes of

services to the company. Of these, 634 were Lithuanian and 14 were non-Lithuanian suppliers. Local suppliers

are defined as operating in Lithuania.

102-10

Significant changes to the

organisation and its supply

chain

The company recruited new staff across a number of the departments, and carried out a review and a renewal

of key management positions. This resulted in 90 new employees starting (to replace almost the same number

leaving), and represented approx. 80% of the management team. The Marketing and Communication

Department changed substantially, with highly qualified professionals joining the team so that it now has the

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required expertise to promote the company rebrand and new logo. In addition, the Asset Management

Division is now attached to the Personnel Management Division.

These changes reflect our desire to create a modern, innovative and attractive employer and service provider.

The new logo is on the new company workwear, stationery and internet, and on the outside of our buildings

and our company cars. The management’s approach to sustainable growth has been substantially renewed,

with new services introduced to the market in line with our new visual identity

102-11

Precautionary principle or

approach

The EU policy on the environment states that it shall “aim at a high level of protection taking into account the

diversity of situations in the various regions of the Union. It shall be based on the precautionary principle and on

the principles that preventive action should be taken, that environmental damage should as a priority be rectified

at source and that the polluter should pay”.

Within this understanding, the company applies where practical the same precautionary principle in seeking

not to generate significant environmental impact, and where there is impact of any nature the company seeks

to address this quickly and clearly.

102-12

External initiatives

Kauno Energija continues to participate in the international EU funded project ‘RenOnBill’

(https://www.renonbill.eu/), which aims to encourage complex renovation of residential buildings by creating

models for paying its costs through energy bills. AB Kauno Energija participates in it as a partner with eight

other companies from Lithuania, Italy, Germany, Belgium and Spain, and the project will finish in April 2022.

There were no other external initiatives during 2021.

102-13

Membership of associations

Kauno Energija is a member of the United Nations Global Compact, as well as the following five associations:

• Responsible Business Association of Lithuania

• Lithuanian District Heating Association

• Lithuanian Electricity Association

• Kaunas Region Industrialists and Employers Association

• Lithuanian Thermal Technology Engineers Association

Strategy

102-14

Statement from senior

decision-maker

Dear customers, partners and all stakeholders,

The recent global challenges - the COVID-19 pandemic and the tense geopolitical situation at Europe's borders - have

affected everyone without exception. The impact on the energy sector has been particularly severe, with energy prices

hitting record highs. In 2021, we have managed to remain fully focused on our work, without distraction. We have

successfully managed these unplanned, long-term challenges, and Kauno Energija has continued to provide its vital

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services of supplying heat and hot water to Kaunas city, Kaunas district and Jurbarkas. In addition, we have continued our

renewal and development of more than 410 km of city heating networks, as well as offering new services to the market.

We have ensured the uninterrupted production and supply of heat and hot water in accordance with the EU Green Deal.

Approximately 90% of city heat supplied by Kauno Energija, was produced (Kauno Energija boiler houses and

independent suppliers) from biofuel - a renewable energy source. By using renewable energy sources (RES), we reduced

CO2 emissions by 268 375 tons.

We have continued our active participation in the international project RenOnBill. This project – promoting complex

renovation and energy saving initiatives for apartment buildings - was selected as 2021 finalist for the prestigious

European Union Sustainable Energy Awards.

We have streamlined the management of the company, with a substantial renewal of the chain of management, with

many highly regarded professionals in their fields joining the company.

We have implemented innovations that make production and supply more efficient: a 2.4 MW heat-absorbing heat pump

with a second-degree smoke condensing economizer has been installed in the biofuel boiler house at Petrašiūnai power

plant. This in turn has increased the boiler efficiency by about 10%, leaving less than 20 mg / m3 solids in the smoke;

eleven large scale projects were carried out for the reconstruction of heat supply pipelines; and we started to supply heat

to the Kaunas Free Economic Zone.

All of these activities and developments, allows heat to be supplied to inhabitants, and business and public sector

consumers at one of the lowest prices in Lithuania.

Developing the company's main activity – the production and supply of heat and hot water, we also focused on the

development of new Kauno Energija services for individuals and the public sector, businesses. These included Kaunas city

coverage with the LoRA ‘Internet-of-things’ network, allowing remote scanning of data from various meter devices; the

installation of two absorption heat pumps at the Science Museum (currently being constructed and due to open in 2022).

Each pump weighs 30 tons and has a capacity of 1,576 kW, able to cool 11,500 tons of heat per square metre. This is one of

the first cooling supply projects of this scale in Lithuania and this type of chilling machine does not use greenhouse gases.

Our new Kauno Energija brand was launched and used to inform public and interested groups about the changes taking

place in the company and the expanding portfolio of services

By submitting this Consolidated Corporate Social Responsibility Report, we show our commitment to continuing the

introduction of new technologies, to improving our quality of services, and to reducing environmental pollution.

Tomas Garasimavičius General Director of AB Kauno Energija

Ethics and Integrity

102-16

Values, principles,

standards, and norms of

Full information is provided on the company website under mission and vision, and values and strategic

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behaviour

objectives: https://www.kaunoenergija.lt/apie-bendrove.

The Code of Ethics is publicly disclosed within the company and is applicable to all employees, agents,

brokers, contractors, subcontractors or suppliers of the Company. A copy of this can be found on the company

website: https://www.kaunoenergija.lt/esame-atsakingi/etikos-kodeksas.

Governance

102-18

Governance structure

Committees responsible for decision-making on economic, environmental, and social topics include:

• Audit Committee: there are currently three members: one external/independent, and two from among

the company's employees. During 2021 the Audit Committee did not meet.

• Technical Board: established by order of General Director, it examines adopted resolutions and makes

recommendations to the company's General Manager on a range of economic, social and environmental

topics. During 2021, the board met 19 times.

• Occupational Health & Safety Committee: with no issues to deal with in 2021, it had no reason to meet.

Stakeholder Engagement

102-40

List of stakeholder groups

These stakeholders are those individuals or groups to whom the company considers itself accountable and

those expected to be affected by the company’s activities or provision of services:

• The company's shareholders (among them Kaunas City Municipality and Jurbarkas District Municipality).

A full list of the 630 individual shareholders is held by our financial partner SEB Bank

• The company’s managers and employees, and workers trade union

• Non-employee workers (connected to key service providers for the company), and service customers

• Business partners - including suppliers of goods, service providers, contractors, independent heat

producers.

102-41

Collective bargaining

agreements

The company has a ‘Collective Agreement’ established and in operation. It is posted on the company intranet

site and updated periodically. It applies not only to workers' trade union members, but also to all employees of

the company (100%).

102-42

Identifying and selecting

stakeholders

All stakeholders and interest groups are identified through their direct connection to the company and the

company activities. Any other interested individuals or groups are encouraged to be involved in our

engagement activities or events. With regard to suppliers of goods, service providers and works contractors,

these are selected through public procurement in accordance with Lithuanian and/or EU law.

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102-43

Approach to stakeholder

engagement

The company's shareholders receive periodical activity reports, annual reports, CSR reports, and reports on

coordinated investment projects. The company's managers and employees communicate on a daily basis on

the principle of vertical (between managers and subordinates) and horizontal (between divisions and within

divisions) communication.

Customers with queries about their service provision are dealt with by the customer service staff at the

centralised municipality service centre ‘Mano Kaunas’ via telephone, e-mail, and postal mail. Information is

also available to consumers and the media through the company and through the Kaunas City Municipality

websites. Post-COVID-19, the company hopes to increase activities with stakeholders in 2022.

102-44

Key topics and concerns

raised

Nothing reported or raised by customer representatives (including buildings administrators and systems

supervisors) during 2021.

Reporting Practice

102-45

Entities included in the

consolidated financial

statements

A list of all entities is included in the company’s consolidated financial statements or equivalent documents

(please see annual report). The company’s consolidated financial statements or related documents include the

company, and its two subsidiaries –UAB ‘GO Energy LT’ (formally UAB Kauno Energija NT) and UAB

‘Petrašiūnų Katilinė’. Within this report, ‘the company’ refers to this group of three companies.

102-46

Defining report content and

topic boundaries

Now in our sixth year of reporting under the GRI Standards, the company have chosen those material topics

that have the biggest bearing on the company’s day-to-day activities; those that constitute the biggest part of

our economic, social and environmental impact; and those which we can effectively monitor and report on.

102-47

List of material topics (and

publication year)

GRI 204: Procurement Practices (2016)

GRI 205: Anti-Corruption (2016)

GRI 302: Energy (2016)

GRI 303: Water and Effluents (2018)

GRI 305: Emissions (2016)

GRI 306: Waste (2020)

GRI 307: Environmental Compliance (2016)

GRI 402 Labour/Management Relations (2016)

GRI 403: Occupational Health and Safety (2018)

GRI 404: Training and Education (2016)

GRI 405: Diversity and Equal Opportunities (2016)

GRI 406: Non-Discrimination (2016)

GRI 407: Freedom of Association & Collective Bargaining (2016)

GRI 408: Child Labour (2016)

GRI 409: Forced or Compulsory Labour (2016)

GRI 415: Public Policy (2016)

GRI 416: Customer Health and Safety (2016)

GRI 418: Customer Privacy (2016)

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102-48

Restatements of information

There are no reasons for restatements of information during the reporting period of 2021.

102-49

Changes in reporting

None to report

102-50

Reporting period

January 1

to December 31

2021.

102-51

Date of most recent report

This is the sixth report produced under GRI Standards with the last report being for 2020.

102-52

Reporting cycle

Annual.

102-53

Contact point for questions

regarding the report

Šarūnas Bulota

Head of Marketing and Communications Department

AB “Kauno energija”

Mob. +370 695 18 136

Email: s.bulota@kaunoenergija.lt

www.kaunoenergija.lt

102-54

Claims of reporting in

accordance with GRI

Standards

This report has been prepared in accordance with the GRI Standards: Core option.

102-55

GRI content index

This report constitutes the GRI context index in full and in doing so fulfils the reporting requirements in

accordance with disclosure 102-54.

102-56

External assurance

This report has been prepared by an externally appointed organisation, procured through an open tender call

for services. The preparation of the report takes information prepared for the audited accounts and annual

report. The assurance of the quality of this GRI Standards Report is limited to following the guidelines of the

GRI Standards only. However, the completed audited accounts and annual report (upon which this GRI

Standards report is based) have been passed and assured by the company board as part of its normal quality

control of all information prepared for shareholders.

GRI 103: Management Approach (2016)

The GRI 103: Management Approach applied to GRI 204: Procurement Practices

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103-1

Explanation of the material

topic and its boundary

The monthly procurement of heat from independent heat producers represents the main procurement for

the company, and is a substantial amount representing approx. 69.9% of consumers heat demand.

The boundary is with all of the business and residential customers who receive heating using these sources,

and it is here where any potential impacts will be felt. The company seeks to minimise boundary impacts

through close management and quality control of these relationships on a regular basis. If serious impacts are

likely to occur, we can correct through improved procurement procedure month by month if necessary.

103-2

The management approach

and its components

The company’s procurement policy is now governed by the Law on Procurement of Contracting Entities in

the Field of Water Management, Energy, Transport or Postal Services. Within the provisions of this law, the

company provides a ‘Description of the Procedure for Low Value Purchases’, which is publicly available on

our website: https://www.kaunoenergija.lt/pirkimai-pardavimai/viesieji-pirkimai.

The company has an approved Gift Policy, which is publicly available on its website:

https://www.kaunoenergija.lt/esame-atsakingi/dovanos and its Anticorruption Policy which is available here:

https://www.kaunoenergija.lt/esame-atsakingi/korupcija. The company also publicises on its website a

Notice of Restrictive Practices, issued by The Competition Council of the Republic of Lithuania:

https://www.kaunoenergija.lt/esame-atsakingi/konkurencija .

Company goals and targets for procurement practices are defined in law as we are obliged to provide for the

lowest price. All heat providers have technical measurements made of their service delivery to make sure it

satisfies the conditions of the procurement contract. The company’s procurement procedures are organised

by the Procurement Commission constituted by the order of General Manager or Procurement Organiser,

subject to the procurement amount. All announcements and winning contracts are published on the national

central procurement portal: https://cvpp.eviesiejipirkimai.lt/.

A large majority of the company’s procurement consists of the purchase of heat from independent heat

producers. As such, the amendments to the Law on the Energy Resources Market (2018) had a bearing on

how the company procures its heat. The Operator of the Energy Exchange ‘UAB Baltpool’ organises heat

auctions in accordance with the procedure established by the law on heat, and the company started to

purchase all of its heat through these electronic auctions. For all heat providers in Lithuania, procurement

procedures are governed by national regulations based on legislation.

103-3

Evaluation of the

management approach

Evaluation of the management approach is systematically linked to the procurement process and

adjustments can be made through employee or client feedback, grievance mechanisms or through internal

audit procedures.

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The GRI 103: Management Approach applied to GRI 205: Anti-Corruption

103-1

Explanation of the material

topic and its boundary

The company and its subsidiaries are guided by our anticorruption policy which identifies the main

principles and requirements for the prevention of corruption in the company and its subsidiaries. The policy

includes guidelines for ensuring compliance and for implementation. This anticorruption policy is in

harmony with the laws of the Republic of Lithuania, and the company constantly works hard to minimise any

risk of corruption through a range of management and quality control measures.

103-2

The management approach

and its components

The Corruption Prevention Policy is approved by the company and publicised on the company’s website:

https://www.kaunoenergija.lt/esame-atsakingi/korupcija.

To prevent corruption, a system has been created within the company in which named or anonymous cases

of abusive or corrupt practices can be reported. This system encourages all company employees, suppliers,

and customers to report on any incidents that they feel are abusive or corrupt.

The information can be submitted by e-mail: pasitikejimo.linija@kaunoenergija.lt or by filling out the

notification form published on the company website (https://www.kaunoenergija.lt/esame-

atsakingi/korupcija). Full confidentiality and assurance of anonymity of the data is guaranteed (although,

applicants are invited but not forced to provide contact information).

Compliance with corruption prevention requirements and standards is an integral part of the company's

business ethics, and the Corruption Prevention Policy applies to all company representatives, subsidiaries,

contractors, subcontractors, suppliers and intermediaries.

103-3

Evaluation of the

management approach

Evaluation of the management approach is carried out through user feedback and improvements are

considered based on issues raised. For this category of 103-3 disclosure reporting, the company remains

committed to continually improving these methods of encouraging and collecting evaluation feedback, and

providing resources where necessary to maintain our performance.

The GRI 103: Management Approach applied to all five GRI 300 Environmental material topics

103-1

Explanation of the material

topic and its boundary

Five GRI 300 Environmental material topics have been combined for this disclosure (as per GRI 103 general

guidance clause 1.1).

Due to the particularity of activities the company uses a lot of electricity and water and has high emissions

into the air. The saving of energy and its resources is very important for the company's economic

performance. Environmental compliance is crucial if the company wants to maintain its commitment to the

environment, to stay compliant, and to continue its high level of transparency in reporting such actions.

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Emissions and environmental compliance have an impact wider than local company sites. Therefore, the

boundary for impacts for these material topics is within all company sites as well as throughout the whole

country.

103-2

The management approach

and its components

Our record of providing grievance mechanisms for internal and external feedback on our performance is a

solid part of our management approach. Internally the management systems in place to record and report on

environmental impact are very strong. Although internally the company does a good job of managing the

environmental material topic, it could still improve its management approach in external relationships with

clients / service providers.

The company has a special environmental laboratory, certified by the Lithuanian Environmental Protection

Agency. This enables the laboratory, on behalf of the company and its subsidiaries, to continuously monitor,

manage, collect, and process all relevant data on the company’s emissions into the atmosphere from

stationary sources, and to make sure they do not exceed the permissible limits established within the

integrated pollution prevention and control permits. In terms of activities to reduce emissions from energy

production, six of our suppliers’ boiler-houses use biofuels which contributes towards reducing atmospheric

pollution.

All waste from AB Kauno Energija (and that produced within the whole of the Republic of Lithuania) is

accounted for and managed in accordance with the applicable legislation. The electronic waste accounting

system GPAIS (www.gpais.eu) has been developed, and the company accounts for all its waste on this portal.

Through this, reports are submitted to the Environmental Protection Agency, and these reports can also be

accessed by our customers and other members of the public. For this 2021 report, there are no significant

waste-related impacts to report.

The company has limited information about interactions with water throughout its value chain. We do

however perform wastewater tests at both our Petrašiūnai power plant and our Ežerėlis boiler house with the

data published on our website. All standards set are done so through applicable national legislation.

Links to all decision making for these material topics are referred to in disclosure 102-18 (Governance

Structure) and all links to the principles that make up the company policies are in disclosure 102-16 (Values,

Principles, Standards and Norms of Behaviour). For targets and issues related to emissions, the company is

guided by the following:

• Kyoto Protocol

• Helsinki Commission (HELCOM) and environmental constraints of Helsinki Convention

• European Parliament and Council Directive 2001/80/EB of regulating energy emissions

• Lithuanian environmental normative document LAND 43-2013 for the use of natural resources, and

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emissions from air pollutants into the environment

• Lithuanian special requirements for large combustion plants

• Lithuanian emissions rates from average combustion plants

The company pays taxes for atmospheric and water pollution and if allowable emission rate limits or annual

limits are exceeded, the company must pay the relevant fines under Lithuanian laws. However, to date and in

all previous GRI reports, the company itself has not incurred any fines for serious breaches of any

environmental regulations across all disclosure topics covered here (although in 2021, a small administrative

fine of 45 Euros was incurred for late provision of reporting data).

Small internal improvements, such as using recycled or environmentally friendly paper for printing are easy

to implement. The company chooses to not print its sustainability report and instead, encourages e-

downloads (unless events we attend require handout copies for participants). Improvements to our

relationships with larger technical service providers, whose contracts are regulated based on national

guidelines, are more difficult to make. The company reporting procedures and data collection methodologies

are steadily improving as we increase the number of disclosures that we report on. However, we need to do

more to evaluate what happens to the internal and external waste we generate.

103-3

Evaluation of the

management approach

Evaluation of the management approach is carried out through grievance mechanisms and general user

feedback, and improvements are considered based on issues raised. For this category of 103-3 disclosure

reporting, the company remains committed to continually improving these methods of encouraging and

collecting evaluation feedback.

The GRI 103: Management Approach applied to all 11 GRI 400 Social material topics

103-1

Explanation of the material

topic and its boundary

Eleven GRI 400: Social material topics (see 102-47 above) have been combined for this disclosure (as per GRI

103 general guidance clause 1.1).

The company is strong on employee labour relations and as such, provides regular reports on progress made

in the health and safety issues for the company and its employees. Qualification and technical improvement

of employee skills is equally important to the company, and in support of this, the company provides and

promotes an annual programme of different types of trainings, seminars, and conferences for employees to

participate in.

The company respects the principles of gender equality, non-discrimination. Customer privacy, along with

freedom of association and collective bargaining agreements, is automatically part of company policy (as is

the outlawing of child labour and forced labour in the company).

Public policy is important for the company because we provide a public service and are part of city

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municipality services offered to the public, and therefore our public policies need to reflect our public profile.

The company follows a strict regime of compliance to health and safety regulations because it is tantamount

to the services we provide, the people who provide them, and those who use them.

The boundary for impacts for all these material topics, remains mainly focused on local and regional sites,

along with all stakeholders within these areas.

103-2

The management approach

and its components

Internally the company has a strong management approach for social and health and safety issues related to

employees. This includes a collective agreement for all employees, an employee’s health and safety division,

an Occupational Health and Safety Committee, and established procedures for employees to voice their

concerns, suggestions, or grievances. Links to all decision making for these material topics are referred to in

disclosure 102-18 (Governance Structure) and all links to the principles that make up the company policies

are in disclosure 102-16 (Values, Principles, Standards and Norms of Behaviour).

The Occupational Health and Safety Department reports directly to the General Manager, and its main

objectives are to:

• establish employee safety and fire safety requirements in the company;

• monitor the compliance of employees with these requirements;

• organize preventive measures to improve the health and safety of workers;

• investigate incidents and accidents related to work;

• organize exercises and trainings on the issues of health and safety of employees and fire safety, and

• advise employees.

Full instructions on all of the above are provided by the company. Responsibilities for the implementation of

employee safety have been transferred to the heads of departments, work supervisors, and those employees

who maintain and operate equipment throughout the company.

The company’s occupational health policy ensures that all employees must undergo a health check before

employment to determine the hazards identified for that job. The company has a signed service agreement to

allow a medical institution to complete this procedure. Employees are then provided with periodic health

check-ups once every two years. If an employee is unable to perform their assigned work due to ill health,

they are transferred to other jobs where they can work. Prior to any medical examination, employees sign a

confidentiality form regarding personal data usage required for this.

In 2021, there were no specific health and/or safety promotional campaigns, apart from national

requirements in line with restricting the spread of COVID-19. The company does however actively promote

the availability of its recreation complex - sauna, swimming pool – which is provided free of charge to

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employees.

Regular workplace inspections are carried out on company sites where employees are working, as well as

company sites where non-employees are working. New employees are provided with instructions on basic

health and safety company policies. Those working in manual roles are provided with a safety supervisor

during the initial employment starting period. All employees of the company are instructed once a year in

accordance with the approved instructions for the safety and health of employees and fire safety. Depending

on the complexity of the work, an account-permit, instructions and orders are issued for the work. These

documents identify hazards, risks and measures to eliminate or reduce them. For external contractors

working on the company's premises, a ‘Permit to Act’ is issued, which lists the requirements for the

performance of work, the safety measures that must be implemented, and the identification of potentially

hazardous areas. These areas, and the possible risks associated with them, are assessed in accordance with

national safety legislation.

Under the requirements of the company's occupational health and safety regulations, any employee who

notices an unsafe practice in the workplace must immediately stop work and inform their direct supervisor.

In addition, employees can make suggestions to improve the situation directly to their supervisor or the

occupational health and safety department. If a violation of any safe practice is identified that poses a real

risk of injury or injury to a nearby employee, then work is stopped immediately, and an inspection report is

filled in indicating the corrective actions and the date by which they must be implemented. The next

inspection checks whether the irregularities have been rectified and corrective action has been taken. In 2021

there were no such violations.

The company holds periodic briefings with employees on these issues, and any measures that improve the

safety situation in the company are coordinated with the company's trade union.

Employees are trained and certified periodically according to the company's established procedures. Training

is carried out in accordance with the company's annual "Employee Training Plan", which specifies for which

specific employee when and in which qualification training it is mandatory to participate. Training is planned

for the operation of energy equipment, maintenance and management of potentially hazardous equipment,

and the performance of any hazardous work. Upon successful completion of the theoretical training and

examinations, qualification certificates are issued.

In addition, special emphasis is paid to improving the qualifications of employees through their placement

on specialist work-related training programmes run by either government institutions or professional

associations and these take place annually.

The trade union within the company had 92 members as of 31 December 2021. Both the trade union and

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individual employees are free to enter associations and negotiate collectively for better working conditions or

pay.

In 2021 and in previous years, the company did not record any violation of the principles of gender equality

and non-discrimination. There were no cases of child or forced labour in 2021 not the previous years in the

company. With our policy on this issue, we can be sure of not having any cases in future reports.

103-3

Evaluation of the

management approach

Evaluation of the management approach is systematically linked to the company’s commitment to non-

financial reporting. The company encourages feedback and suggestions through employee or client feedback.

For this category of 103-3 disclosure reporting, the company remains committed to continually improving

these methods of encouraging and collecting evaluation feedback, and providing resources where necessary

to maintain our performance. It is planned for 2022 to begin providing employee feedback for annual

personal appraisals.

Topic Specific Disclosures - GRI 200: Economic

GRI 204: Procurement Practices (2016)

204-1

Proportion of spending on local

suppliers

The percentage of procurement budget that is spent on suppliers local to operations (such as percentage

of products and services purchased locally) is 99.912%; locally is defined as being within Lithuania, and

our definition of ‘significant locations of operation’ is within Lithuania.

GRI 205: Anti-corruption (2016)

205-1

Operations assessed for risks

related to corruption

Procurement procedures, which represent 99.912% of company budget spend, are the only possible risk

areas for corruption. However, with all procurement procedures being strictly regulated by the law and

our anti-corruption policy, we believe that there are no significant risks related to corruption identified

through our risk assessment of procurement procedures. In all other operations, we believe we are

equally as robust.

205-2

Communication and training

about anti-corruption policies

and procedures

The company has had a Corruption Prevention Policy since February 2017 which is published on its

website: https://www.kaunoenergija.lt/atsisiuntimas?download_id=38. Also published on its website is

the company’s statement of its position on corruption and what it is doing to help prevent it happening:

https://www.kaunoenergija.lt/esame-atsakingi/korupcija .

127

All 100% of the governance bodies have been notified of the organization's anticorruption policies and

procedures, as has 100% of the workforce (all 377 employees) across all work categories. In total, 100% of

our suppliers (12 major suppliers and 648 smaller external suppliers - detailed in disclosure 102-9) are

informed of the company’s anti-corruption policy. In addition, all contractors and suppliers participating

in public procurements are made fully aware of the company’s anti-corruption policy and procedures on

a compulsory basis.

Compliance with the Corruption Prevention Policy is an integral part of our business ethics, and as such,

it is fully applied to representatives (intermediaries) of the company. The regions covered by all of the

above are as described in disclosure 102-4. The company also has in place a Code of Ethics

https://www.kaunoenergija.lt/esame-atsakingi/etikos-kodeksas (see disclosure 102-16).

The company has in place a ‘Gift Policy’ covering the procedure of receiving, giving and dealing with

Gifts for all employees regardless of position. In order to avoid possible conflicts of interest or possible

misunderstandings, a description of procedures for receiving, giving and dealing with gifts is provided on

the company’s website: https://www.kaunoenergija.lt/esame-atsakingi/dovanos.

Specific activities in 2021 included training by the national Special Investigation Service (hereinafter -

STT) on corruption prevention, including gift policy:

• Two employees from the company’s Prevention Department attended STT trainings on an e-learning

platform, passed tests and received certificates. Topics included - the concept of corruption, conflicts

of interest, gift policy, and bribery of foreign officials.

• A list of company positions (totalling 51 different positions across 18 departments and sub-divisions)

has been approved for the compulsory declaration of any public and private interests in these roles.

This includes a list of positions for which a written request will be made to the Special Investigation

Service to provide information on persons before they are appointed.

205-3

Confirmed incidents of

corruption and action taken

No cases of corruption were identified or reported to the company during 2021.

Topic Specific Disclosures - GRI 300: Environmental

GRI 302: Energy (2016)

302-1

Energy consumed within the

organisation

Kauno Energija is a producer of heat energy, so the largest part of electricity is consumed for the

production and supply of this. Information on total fuel consumption from renewable and non-

renewable sources is available in full in the company’s annual report. Fuel usage for energy production in

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Kauno Energija in 2021 was as follows: Natural gas 33.4%; Solid biofuel – 64.4%; and other fuels – 0.22%.

UAB ‘Petrašiūnų Katilinė’ was 100% solid biofuel, and UAB ‘GO Energy LT’ used no fuel and produced no

energy in 2021.

The company purchased and consumed 11,356,331 kWh of electricity for internal needs and their internal

electricity consumption was 10,584,867 kWh. The remaining 771,464 kWh was resold.

Internal needs

For heat production and supply

1,154521 kWh

9,430,346 kWh

UAB ‘Petrašiūnų Katilinė’ purchased and consumed 626,123 kWh of electricity for internal needs, and

their internal electricity consumption was 626,123 kWh. Electricity was not resold.

Internal needs

For heat production and supply

15,027 kWh

611,096 kWh

UAB ‘GO Energy LT’ purchased and consumed 122,657 kWh of electricity for internal needs and their

total internal electricity consumption was 1,100 kWh. The remaining 121,557 was resold.

Internal needs

For heat production and supply

1,100 kWh

0,000 kWh

302-2

Energy consumed outside the

organisation

Omission of full disclosure as allowed under GRI Standard 101: clause 3.2. Currently, the company does

not have the methodologies, assumptions and/or calculation tools in place to collect and fully report on

these disclosures, but it is endeavouring to improve its data collection procedures.

302-3

Energy intensity

302-4

Reduction of energy consumption

302-5

Reductions in energy

requirements of products and

services

GRI 303: Water & Effluents (2018)

303-1

Interactions with water as a shared

These two disclosures are ‘Management Approach Disclosures’, and as such, they are reported under

129

resource

GRI103: Environmental Management Approach Disclosures.

303-2

Management of water discharge-

related impacts

303-3

Water withdrawal

In 2021, Kauno Energija withdrew 374,861 m

of water taken from the following sources:

• 25,208 m

from the municipality water-supply

• 57,519 m

from company boreholes

• 292,134 m

from Nemunas river

UAB „Petrašiūnų Katilinė” withdrew 357 m

of water from the public water-supply, and UAB “GO Energy

LT” withdrew 946 m

from the municipality water-supply.

Rates are set for withdrawals from all of the above sources, and the company does not exceed them. All

calculations are taken from direct measurements using water meters. There were no water sources

significantly affected by the company’s withdrawal of water, nor was any water taken from areas

suffering from 'water stress'.

303-4

Water discharge

21 972 m

of water flows into the sewage system, through which it enters the sewage treatment plant

and 106 603 m

of water flows into the open water bodies.

303-5

Water Consumption

Omission of full disclosure as allowed under GRI Standard 101: clause 3.2. Currently, the company does

not have the methodologies, assumptions and/or calculation tools in place to collect and fully report on

these disclosures, but it is endeavouring to improve its data collection procedures.

GRI 305: Emissions (2016)

305-1

Direct (Scope 1) GHG emissions

As the company is a producer of heat energy, it monitors emissions from these sources of production

and provides data to public and state authorities in accordance with the procedures established by law.

For 2021, we can report that total direct emissions from the company’s heat production sources was

22,203 t CO

, with gases included in these calculations being CO

only (the biological emissions of CO

metric tonnes are not counted in CO

equivalents).

According to legislation, only the emissions of boiler houses that are more than 20 MW capacity are

calculated. The company owns five boiler houses that are more than 20 MW capacity. Their individual

total GHG emissions/t CO

equivalent data for 2021 are as follows:

• Petrašiūnų elektrinė – 10,412 t CO

• “Pergalės” katilinė – 4,937 t CO

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• “Šilko” katilinė – 6,370 t CO

• Garliavos katilinė – 127 t CO

• Jurbarko katilinė – 357 t CO

For 2021, the baseline year of calculation of 2014-2018 has been used for Petrašiūnai power plant, and the

boiler houses at Pergalė, Garliava and Noreikiškės. The base year of the calculation is applied based on

the individual production sources and is chosen due to the higher median of activity data (reports and

justifications are available from the Lithuanian Environmental Protection Agency

(http://oras.gamta.lt/cms/index).

For the period 2013 to 2021, total GHG emissions/t CO

equivalent from the company’s heat production

facilities are as follows:

Year

2013

2014

2015

2016

2017

2018

2019

2020

2021

GHG Emissions

36,042

32,711

8,607

8,480

8,918

21,008

12,644

7,280

22,203

Currently, no other scope 1 emissions data is collected by the company.

The source of the emission factors and the reference to the global warming potential (GWP) rates used

(as well as standards, methodologies, and calculating tools) are all taken from the following documents:

• Directive 2003/87 / EC of the European Parliament and of the Council

• Commission Regulation No 600/2012

• Commission Regulation No 601/2012

• Standard ISO 14065.

305-2

Energy indirect (Scope 2) GHG

emissions

Omission of full disclosure as allowed under GRI Standard 101: clause 3.2. Currently, the company does

not have the methodologies, assumptions and/or calculation tools in place to collect and fully report on

these disclosures, but it is endeavouring to improve the necessary procedures.

305-3

Other indirect (Scope 3) GHG

emissions

305-4

GHG emissions intensity

305-5

Reduction of GHG emissions

In 2021 the company emitted 22,203 tonnes of greenhouse gases (CO2).

305-6

Emissions of ozone-depleting

Neither the company nor its subsidiaries produce or emits ozone-depleting substances in their

operations. The only place where such substances are used are air conditioners for room cooling, but

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substances (ODS)

these are closed systems. The air-cooling services are maintained by outsourced providers and not by the

company and its subsidiaries.

305-7

Nitrogen oxides (NOX), sulphur

oxides (SOX), and other

significant air emissions

For 2021, the decrease in emissions for some of the reported categories is again mainly due to the heat

demand in the district network. Though this may still be related to adjustments to switch over to the

EMEP calculation and reporting methodology. Full reporting of all available and relevant requirements

of this disclosure is contained in the company annual report.

Per Year, t

Particulates

Nitrogen

Oxides

Carbon

Monoxide

Sulphur

Dioxide

Hydro-

carbons

Vanadium

Pentoxide

Others

2021

72.9579

196.5479

781.2462

158.4375

1.2315

0.0000

0.2966

2020

98.6841

217.8864

884.9974

102.9845

1.1430

0.0000

0.2801

2019

89.0913

280.7396

1,261.2142

0.2746

1.1978

0.0000

0.4313

2018

48.7984

283.0412

1,082.9366

31.6210

1.1982

0.0000

0.1509

2017

79.7242

285.6461

1,236.7667

145.0571

1.1982

0.0000

0.4297

2016

53.7542

265.0797

1,155.3349

231.4719

4.2871

0.0000

0.2818

2015

43.5783

203.6775

904.8513

193.3228

20.1586

0.0000

0.2818

2014

23.613

154.570

534.443

47.158

16.294

0.0000

0.440

2013

10.5967

101.3197

299.6656

5.0747

14.9647

0.0000

0.770

2012

7.6130

54.3160

135.1510

6.0280

1.2080

0.0000

0.4397

GRI 306: Waste (2020)

306-1

Waste generation and significant

waste-related impacts

These two disclosures are ‘Management Approach Disclosures’, and as such, they are reported under

GRI103: Environmental Management Approach Disclosures.

132

306-2

Management of significant waste-

related impacts

306-3

Waste generated

The company’s waste minimisation strategy is being updated in order to be in line with the

requirements of the new GRI 306: Waste (2020). Currently the company implements a waste sorting

system on its own premises. There are facilities within our buildings to sort and collect different types of

waste such as paper, plastics, glass, and general household waste. Information on how to sort was placed

near sorting containers and it was sent to all employees by intranet and email. We currently have no

data for the amount of waste collected in this way for recycling.

Type of Materials

Tonnes

Type of Materials

Tonnes

Glass

1.04 t

Small IT and telecommunications

equipment

0.417 t

Mixed municipal waste

27.14333

Large IT equipment

0.523 t

Metal

791.45 t

Portable lead-acid batteries

0.412 t

Bottom ash, slag and boiler dust

1,584.12 t

Engine, gearbox and lubricating oil

0.35 t

Fuel oil and diesel fuel

1.484 t

Mixed construction and demolition

waste

113.16 t

Fractions not otherwise specified

2.46 t

Used tyres

1.73 t

Components removed from discarded

equipment

0.057 t

Packages containing or contaminated

with dangerous substances

1.835 t

Wastes whose collection and disposal

is subject to special requirements to

prevent infection

0.006 t

Screens, monitors and equipment

containing screens with a surface

area of more than 100 cm²

0.1 t

Absorbents, filter materials (including

oil filters not otherwise specified),

wipes, and contaminated protective

clothing

0.07 t

Laboratory chemicals (including

mixtures of laboratory chemicals,

consisting of or containing of

dangerous substances)

0.421 t

Paper and cardboard

0.864 t

Daylight lamps

0.088 t

Batteries and accumulators

0.147 t

Plastic

0.197 t

All of the above waste disposal methods are determined by local authorities and are carried out by

certified waste disposal or recycling companies registered in the Register of Waste Managers, and all

133

are under written contracts. These companies include the following: Kaunas Biological Waste Plant

(operated by Kaunas Region Waste Management Centre); UAB Kaunas Cogeneration Power Plant and

Kaunas Region Waste Management Centre (landfill operators). The waste disposal companies provide

no further information as to the disposal methods used. Kauno Energija is obliged under legislation to

transfer waste to legal waste managers, but there is no further obligation on Kauno Energija to take an

interest in how this waste is further recycled. However, our largest amount of waste generated is ash

from the combustion of biofuels, and we are considering the possibility of handing this over to farmers

to use.

306-4

Waste diverted from disposal

Omission of full disclosure as allowed under GRI Standard 101: clause 3.2. Currently, the company does

not have the methodologies, assumptions and/or calculation tools in place to collect and fully report on

these disclosures, but it is endeavouring to improve its ability to do so.

306-5

Waste directed to disposal

GRI 307: Environmental Compliance (2016)

307-1

Non-compliance with

environmental laws and

regulations

In 2021, an administrative fine was imposed for failure to provide environmental monitoring data in a

timely manner on the company’s website. A company employee received a fine of 45 Euros.

Topic Specific Disclosures - GRI 400: Social

GRI 402: Labour / Management Relations (2016)

402-1

Minimum notice periods

regarding operational changes

The minimum period within which workers and their representatives must be informed before any

change in working conditions which significantly affects workers is five working days. This term is

established by the Labour Code of the Republic of Lithuania

GRI 403: Occupational Health and Safety (2016)

403-1

Occupational health and safety

management system

These three disclosures are ‘Management Approach Disclosures’, and as such, they are reported under

GRI103: Social Management Approach Disclosures.

403-2

Hazard identification, risk

assessment, and incident

investigation

134

403-3

Occupational health services

403-4

Worker participation,

consultation, and communication

on occupational health and safety

These four disclosures are ‘Management Approach Disclosures’, and as such, they are reported under

GRI103: Social Management Approach Disclosures.

403-5

Worker training on occupational

health and safety

403-6

Promotion of worker health

403-7

Prevention and mitigation of

occupational health and safety

impacts directly linked by business

relationships

403-8

Workers covered by an

occupational health and safety

management system

The system within the company for occupational health and safety management is in line with the

national and EU legislation for health and safety requirements. This covers all employees, and those

workers who are not employees, but whose work takes part on company premises or sites.

403-9

Work-related injuries

During 2021, one employee suffered a minor work-related injury. Details of the injury are as follows:

1. Trauma (multiple fractures of the ribs) classified as mild;

2. Employee had 35 days off work (280 hours) due to the injury;

3. Injury occurred when the worker fell from a height.

A plan of preventive measures was drawn up, and according to this, service sites were inspected, and

barriers were placed where necessary in order to restrict access to hazardous areas.

Three other incidents in which workers suffered minor injuries occurred on their journey to work,

injuries that were not directly related to the workplace. During 2021 the company received no

information from contractors regarding injuries to, or accidents involving, employees at the facilities of

Kauno Energija.

403-10

Work-related ill health

There were no reported or recorded cases of work related ill-health due to access or exposure to

hazardous materials.

One worker was diagnosed with an occupational disease which may have been related to the work

performed for the company. However this connection was never confirmed (his disease may have been

135

connected with his previous employer), and as the employee has now left the company, we will not

know.

GRI 404: Training and Education (2016)

404-1

Average hours of training per

year per employee

The company has a permanent in-service training programme which includes: in-service training run

by external experts on team-building for managers and middle managers. This training takes place once

per month throughout the year. Participation is voluntary and open to each employee.

The average duration of training hours in 2021 per employee was 9 hours (a figure based only on the in-

service training programmes the company runs), a decrease of seven hours per employee based on last

year’s figures.

The gender split is approx. 230 hours for women and 3,601 hours for men. This disparity between male

and female hours is based on the fact that there are a larger number of men working in specialist

technical jobs that require specialist technical training.

The split of training hours for categories of employees is as follows: 520 hours for managers, 1,143 hours

for specialists, and 2,168 hours for workers.

404-2

Programmes for upgrading

employee skills and transition

assistance programmes

For current employees there are no special programmes, except for those employees who need to update

on a regular basis their specific qualifications necessary for holding special certificates or professional

licences. To date, the company does not record these by gender.

Transition programmes for those who are retiring (or being made redundant) do not currently exist

within the company.

404-3

Percentage of employees receiving

regular performance and career

development reviews

Omission of full disclosure allowed under GRI Standard 101: clause 3.2. Full disclosure information is not

available in the format required for this report. The company does not currently provide performance

reviews as part of its training and education for employees.

GRI 405: Diversity and Equal Opportunity (2016)

405-1

Diversity of governance bodies

and employees

The Supervisory Board has six members – five male and one female, all of whom are not employees of

the company. The Management Board has five members, all male, and all are not employees of the

company. The Audit committee currently consists of three members, one female and two males. The

company does not have information on the age of members of these three bodies.

The Occupational Health & Safety Committee has three members: two female and one male. Two

between 30 to 50, and one over 50 years old.

136

Age distribution of employees of Kauno Energija, UAB GO Energy LT and UAB Petrašiūnų katilinė:

<30

30 to 50

Over 50

Total

Men

117

137

273

Women

104

Total

158

189

377

Men

72,4%

Women

38,1%

The split between men and women at management level across the company is:

Total Managers

Women

Men

Kauno Energija

UAB “GO Energy LT”

UAB “Petrašiūnų katilinė”

The company does not have any information on persons belonging to minorities or vulnerable groups.

405-2

Ratio of basic salary and

remuneration of women to

men

There is no difference between the salaries of women and men with the same qualifications and working

in the same positions within the company.

GRI 406: Non-discrimination (2016)

406-1

Incidents of discrimination and

corrective actions taken

No cases of discrimination were recorded in the company in 2021.

GRI 407: Freedom of Association and Collective Bargaining (2016)

407-1

Operations and suppliers in

which the right to freedom of

association and collective

bargaining may be at risk

There are no risks to employees’ being able to exercise their rights to freedom of association and

collective bargaining. All employees of the company (and extended Group subsidiaries) are free to join

any association and negotiate collectively for better working conditions or pay. A trade union operates in

the company with 92 members as of December 31, 2021.

137

A collective agreement operates in the company, which covers all issues related to the employee's

working conditions as well as all issues of learning and professional development and social security.

GRI 408: Child Labour (2016)

408-1

Operations and suppliers at

significant risk for incidents of

child labour

There is no child labour in the company or its subsidiaries. There are also no company operations, or

suppliers that the company works with, that can be considered to have significant risk for incidents of

child labour.

GRI 409: Forced or Compulsory Labour (2016)

409-1

Operations and suppliers at

significant risk for incidents of

forced or compulsory labour

There is no forced or compulsory labour in the company or its subsidiaries. There are also no company

operations, or suppliers that the company works with, that can be considered to have significant risk for

incidents of forced or compulsory labour.

GRI 415: Public Policy (2016)

415-1

Political contributions

No financial or in-kind political contributions were made directly or indirectly by the company or

through its subsidiaries.

GRI 416: Customer Health and Safety (2016)

416-1

Assessment of the health and

safety impacts of product and

service categories

No significant product and service categories for which health and safety impacts are assessed for

improvement. Please note however, that in terms of employee assessment, the company has a series of

regular and routine health and safety checks and assessments made as part of its statutory legal working

practices.

416-2

Incidents of non-compliance

concerning the health and

safety impacts of products and

services

The company has had no identified or registered non-compliance with regulations and/or voluntary

codes.

GRI 418: Customer Privacy (2016)

418-1

Substantiated complaints

concerning breaches of

customer privacy and losses of

The company received no substantiated complaints from any outside parties or regulatory bodies, nor

were there any identified leaks, thefts, or losses of customer data during 2021.

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customer data