Kauno Energija

Quarterly Report • Feb 3, 2023

AB Kauno energija

Company code 235014830 Raudondvario pl. 84 Kaunas, Lithuania

COMPANY'S CONSOLIDATED CONDENSED SET OF INTERIM FINANCIAL STATEMENTS OF THE 12 MONTHS OF 2022 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION (UNAUDITED)

CONDENSED INTERIM FINANCIAL STATEMENTS

		Group			Company
	Notes	2022-12-31	2021-12-31	2022-12-31		2021-12-31
ASSETS
Fixed assets
Intangible fixed assets		98	77		98	77
Land and buildings		6 472	6 115		6 403	5 731
Buildings		127 521	121 810		127 521	121 348
Machinery and equipment		15 065	15 514		14 975	14 263
Vehicles		397	445		397	445
Plant and tools		2 761	1 997		2 761	1 996
Constructions in progress and prepayments		13 519	8 089		13 477	8 072
Investment property		1 180	1 273		-
Total property, plant and equipment		166 917	155 243		165 534	151 855
Assets managed under the right of use		956	1 207		884	1 006
Non-current financial assets
Investments in subsidiaries		-	-		2 763	3 498
Amounts receivable after one year		39	111		-	-
Other financial assets		75	75		75	518
Financial fixed assets, total		114	186		2 838	4 016
Non-current assets, total		168 085	156 713		169 354	156 954
Current assets
Stock and prepayments
Inventories	7	2 638	1 756		1 879	1 407
Prepayments		2 274	4 407		1 851	4 055
Total inventories and prepayments		4 912	6 163		3 730	5 462
Amounts receivable within one year
Trade receivables	8	17 851	11 529		17 663	11 662
Loans to the companies of the group of companies		-	-		-	-
Other amounts receivable		5 472	1 833		5 445	1 794
Amounts receivable within one year, total		23 323	13 362		23 108	13 456
Cash and cash equivalents	11	4 550	3 696		3 891	2 782
Term deposits		3 000	0		3 000	0
Current assets, total		35 785	23 221		33 729	21 700
Assets, total:		203 870	179 934		203 083	178 654

CONDENSED INTERIM FINANCIAL STATEMENTS (CONTINUED)

		Group		Company
	Notes	2022-12-31	2021-12-31	2022-12-31	2021-12-31
EQUITY AND LIABILITIES
Property
Capital	1	74 476	74 476	74 476	74 476
Legal reserve	13	7 447	7 447	7 447	7 447
Other reserves	13	3 000	3 000	3 000	3 000
Profit (loss) available for distribution
Current year profit		6 428	72	6 137	457
Profit (loss) of the previous years		4 822	4 750	4 621	4 910
Total retained profit (loss)		11 250	4 822	10 758	5 367
Total equity		96 173	89 745	95 681	90 290
Non-current amounts payable after one year and liabilities
Long-term financial debts	9	43 949	32 658	43 949	32 658
Lease (financial lease)		884	1 316	886	1 113
Deferred profit tax liabilities		5 814	5 633	5 824	5 924
Grants and subsidies		32 210	32 715	32 210	32 229
Employee benefit liabilities		374	465	363	455
Accounts payable after one year, and long-term liabilities, total		83 231	72 787	83 100	72 379
Accounts payable within one year of and other liabilities
Current year's share of long term financial debt and leasing/financial leases	9	2 892	3 014	2 890	2 445
Short-term financial debts		-	-	-	-
Trade debtors		18 563	11 376	18 483	10 701
Payroll related liabilities		692	649	686	632
Received prepayments		773	570	660	464
Tax payable		673	609	596	588
Derivative financial instruments	11
Current year's share of employee benefit obligations		90	122	89	122

(continued on the next page)

CONDENSED INTERIM FINANCIAL STATEMENTS (CONTINUED)

		Group		Company
	Notes	2022-12-31	2021-12-31	2022-12-31	2021-12-31
Other provisions	10	78	577	78	577
Accrued costs and income of future periods		336	210	322	187
Other short-term amounts payable and liabilities		369	275	366	269
Accounts payable within one year of and other liabilities, total		24 466	17 402	24 170	15 985
Total accounts payable and liabilities		107 697	90 189	107 402	88 364
Total equity and liabilities		203 870	179 934	203 083	178 654

(end)

CONDENSED INTERIM STATEMENT OF PROFIT (LOSS) AND OTHER GROSS INCOME

Group	Comments	Q4 2022	2022 from the beginning of year	Q4 2021	2021 from the beginning of year
Operating income
Sales revenue	14	38 491	87 265	20 738	50 963
Other operational incomes	16	95	1 441	678	4 543
Total operating income		38 586	88 706	21 416	55 506
Operating expenses
Fuel and purchased energy		(25509)	(57 421)	(16 880)	(32 998)
Salaries, social insurance		(2 034)	(7 905)	(1 917)	(7 376)
Depreciation and amortisation		(1 359)	(6 327)	(1 786)	(7 333)
Repair and maintenance		(284)	(867)	(218)	(680)
Change in impairment of receivables	8	(485)	111	250	587
Taxes, other than income tax		(608)	(2 249)	(588)	(2 130)
Electricity		(1 083)	(2 532)	(405)	(1 265)
Raw materials and materials		(569)	(1 417)	(748)	(1 065)
Water		(286)	(1 048)	(283)	(1 086)
Change in realisable value of inventories and impairment of fixed assets	7	58	(44)	(33)	51
Other costs	15	(739)	(2 304)	(558)	(1 984)
Other operational expenses	16	(288)	(747)	5	(434)
Operating expenses, total		(33 186)	(82 750)	(23 161)	(55 713)
Operating profit (loss)		5 400	5 956	(1 745)	(207)
Other interest and similar income	17	91	248	291	673
Value impairment of financial assets and short-term investment		258	258	(208)	(208)
Interest and other similar costs	18	(133)	(298)	(23)	(117)
Income from financing and investment activities, net value		216	208	60	348
Profit before taxation		5 616	6 164	(1 685)	141
Income tax		(245)	(245)	(20)	(20)
Deferred income tax income (loss)		11	11	-	(120)
Profit for the reporting period		5 382	5 930	(1 705)	1
Termination benefits (accrual), other provisions to be reclassified to profit or loss when certain conditions are met		498	498	648	71
Gross income		5 880	6 428	(1 057)	72
Profit for the period attributable to the Company's shareholders		5 382	5 930	(1 705)	1
Gross income attributable to the Company's shareholders		5 880	6 428	(1 057)	72
Earnings per share (EUR)	19	0,13	0,14	(0,04)	0,00

CONDENSED INTERIM STATEMENT OF PROFIT (LOSS) AND OTHER GROSS INCOME

Company	Comments	Q4 2022 2022 from the beginning of year		Q4 2021	2021 from the beginning of year
Operating income
Sales revenue	14	38 133	87 013	20 749	50 981
Other operational incomes	16	283	903	211	3 808
Total operating income		38 416	87 916	20 960	54 789
Operating expenses
Fuel and purchased energy		(25 794)	(57 847)	(16 309)	(33 223)
Salaries, social insurance		(2 011)	(7 798)	(1 857)	(7 265)
Depreciation and amortisation		(1 453)	(6 293)	(1 648)	(6 756)
Repair and maintenance		(286)	(859)	(204)	(658)
Change in impairment of receivables	8	(485)	114	242	587
Taxes, other than income tax		(579)	(2 182)	(552)	(2 074)
Electricity		(1 085)	(2 529)	(358)	(1 160)
Raw materials and materials		(224)	(682)	(175)	(545)
Water		(286)	(1 048)	(281)	(1 081)
Change in realisable value of inventories and impairment of fixed assets	7	58	(44)	(34)	52
Other costs	15	(712)	(2 418)	(593)	(2 020)
Other operational expenses	16	(288)	(754)	(237)	(441)
Operating expenses, total		(33 145)	(82 340)	(22 006)	(54 585)
Operating profit (loss)		5 271	5 579	(1 046)	204
Other interest and similar income Value impairment of financial assets and short-term	17	91	251	292	671
investment		1004	258	(208)	(208)
Interest and other similar costs	18	(134)	(296)	(24)	(100)
Income from financing and investment activities, net value		961	213	60	363
Profit before taxation		6 232	5 789	(986)	567
Income tax		(161)	(161)	-	-
Deferred income tax income (loss)		11	11	-	(181)
Profit for the reporting period		6 082	5 639	(986)	386
Termination benefits (accrual), other provisions to be reclassified to profit or loss when certain conditions are met		498	498	-	71
Gross income		6 580	6 137	(986)	457
Earnings per share (EUR)	19	0,14	0,13	(0,02)	0,01

CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY

Group	Notes	Capital	Legal reserve	Other reserves	Profit (loss) available for distribution	Total
Balance as at 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	-
Dividends		-	-	-	-	-
Profit for the reporting period		-	-	-	1	1
Other gross income		-	-	-	71	71
Balance on 31 December 2021		74 476	7 447	3 000	4 822	89 745
Formed reserves		-	-	-	-	-
Reversed reserves		-	-	-	-	-
Profit (loss) of the previous years
Profit for the reporting period		-	-	-	5 930	5 930
Other gross income		-	-	-	498	498
Balance on 31 December 2022		74 476	7 447	3 000	11 250	96 173

CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY

Company	Notes	Capital	Legal reserve	Other reserves	Profit (loss) available for distribution	Total
Balance as at 31 December 2020		74 476	7 447	2 900	5 010	89 833
Formed reserves		-	-	3 000	(3 000)	-
Reversed reserves		-	-	(2900)	2 900	-
Dividends		-	-	-	-	-
Profit for the reporting period		-	-	-	386	386
Other gross income		-	-	-	71	71
Balance on 31 December 2021		74 476	7 447	3 000	5 367	90 290
Profit for the reporting period		-	-	-	5 639	5 639
AB Petrašiūnų boiler house connection result					(746)	(746)
Other gross income		-	-	-	498	498
Balance on 31 December 2022		74 476	7 447	3 000	10 758	95 681

CONDENSED INTERIM CASH FLOW STATEMENTS

		Group		Company
	Notes	2022	2021	2022	2021
Cash flows from (to) operating activities
Gross income		6 428	72	6 137	457
Adjustments to non-cash items:
Depreciation and amortisation		8 651	9 416	8 349	8 734
Write-offs and changes in impairment of receivables		(111)	(587)	(114)	(587)
Interest costs		298	117	296	100
Change in the value of fixed-term deposits		(3000)	(6)	(3000)	-
Loss (gain) on sale and write-down of fixed assets and value of shares		(70)	(74)	(17)	(74)
Grants and subsidies (amortisation)		(1 296)	(1750)	(1 292)	(1 589)
Change in realisable value of inventories and impairment of fixed assets		44	(51)	44	(51)
Change in employee benefits liability		(91)	-	(125)	-
Change in lease liability				(227)
Profit tax expense		234	140	150	181
Change in accruals		(172)	150	10	144
Change in provision liabilities		(318)	22	(499)	(70)
Revere of other results of financing and investing activities		(248)	(673)	(503)	(1 726)
Adjustment to total non-cash items		3 921	6 704	3 072	5 062
Changes of working capital:
Decrease (increase) in inventories		(926)	(319)	(516)	(28)
Decrease (increase) in prepayments		2 133	(3 834)	2 204	(3 570)
Decrease (increase) in trade receivables		(6 211)	(4 502)	(5 696)	(4 635)
Decrease (increase) in other amounts receivable		(3 639)	(1 590)	(3 651)	(1 600)
Increase (decrease) in long-term trade debts		72	(111)	-	-
Increase (decrease) in trade debtors and advances received		7 421	5 246	8 273	5 142
Decrease (increase) in liabilities related to employment relations		43	49	54	43
Increase (decrease) in taxes payable		64	222	8	221
Decrease (increase) in received prepayments		203	(75)	196	(180)
Increase (decrease) in other current liabilities		(140)	27	97	161
Changes in total working capital		(980)	(4 887)	969	(4 446)
Net cash flows from operating activities		9 369	1 889	10 178	1 073

(continued on the next page)

CONDENSED INTERIM CASH FLOW STATEMENTS (continued)

		Group		Company
	Notes	2022	2021	2022	2021
Cash flows from (to) investing activities
Acquisition of intangible fixed assets and property, plant and equipment		(20 771)	(14 236)	(20 739)	(14 236)
Sale of property, plant and equipment		594	563	594	563
Interest received on overdue receivables		252	621	252	621
Acquisition of investments, change in value		(949)	-	(1 537)	(1 000)
Net (used) cash flows from investing activities		(20 874)	(13 483)	(21 430)	(14 052)
Cash flows from (to) financing activities
Loans received		14 000	12 000	14000	12 000
Loans repaid		(2 532)	(2 833)	(2 532)	(2 225)
Interest paid		(284)	(116)	(284)	(101)
Rent payments		(98)	(60)	(96)	(57)
Subsidy received		1273	4 499	1 273	4 499
Net cash flows from (used in) financing activities		12 359	13 490	12 361	14 086
Net increase (decrease) in cash flows		854	1 896	1 109	1 107
Cash and cash equivalents at the beginning of the period		3696	1 800	2 782	1 675
Cash and cash equivalents at the end of the period		4 550	3 696	3 891	2 782

The notes below form an integral part of these financial statements.

(end)

NOTES TO THE CONDENSED SET OF INTERIM 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. Its registered office address is 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 code 235014830. The Company's shares are traded on the Baltic Additional Trading List of the Nasdaq Vilnius Stock Exchange.

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

	2022-12-31		2021-12-31
	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. The Company had no treasury shares on 31 December 2022 and 31 December 2021 . As at 31 December 2022 and 31 December 2021, all shares were fully paid up.

The name of the Company was changed by the decision of the shareholders of the Company's subsidiary UAB Kauno energija NT. From 19 August 2020. the name of UAB Kauno energija NT is UAB GO Energy LT. Other details of the Company remain unchanged, all existing contracts remain valid.

On 2 March 2022, AB Petrašiūnų katilinė was reorganised by merging it with AB Kauno energija. AB Petrašiūnų katilinė was deregistered from the Register of Legal Entities

On 31 December 2022 the Company and its subsidiary UAB GO Energy LT form a group (the Group):

Company	Company home address	Group's shareholding	Cost of investment	Profit (loss) for the reporting period	Equity	Main activities
UAB GO Energy LT	Raudondvario pl. 84, Kaunas	100 per cent.	2 764	459	3 081	Lease

The Group's average number of listed employees during the reporting period was 383 and the Company's average number of listed employees was 354.

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 by resolution No O3E-283, the Council set new base heat price components for the Company, which will apply until 30 November 2021. 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 UAB 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 692 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 based on an assessment of the economic situation, the competitive environment and the availability of financing. Investment plans are approved by the shareholders and coordinated by the Board.

2. Basis of preparation of the financial statements

The condensed interim financial statements of the Company and the Group for the nine-month period ended 31 December 2022 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (hereinafter the IFRSs) as applicable to interim financial reporting (International Accounting Standard (IAS) 34 "Interim Financial Reporting"). This unaudited financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2021 which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. These financial statements do not include all the information necessary for the preparation of the full set of consolidated and separate financial statements. However, selected notes are included to explain events and transactions and to provide an understanding of significant changes in the Group's and the Company's financial position and financial performance.

2. Basis of preparation of the financial statements (continued)

All accounting principles applied in the preparation of the condensed interim financial information are the same as those applied in the preparation of the annual financial statements for 2021.

The new standards and amendments effective from 1 January 2022 have no material impact on the Group's and Company's financial statements.

The currency of the submission is the euro. These tatemetns are presented in thousands of euro, unless otherwise stated.

The Company's financial year coincides with the calendar year.

The management of the Company has approved the following interim financial statements as at 30 January 2023.

3. Application of assessments in preparation of financial statements

In preparing financial statements in accordance with IFRSs adopted for application in the EU, management shall make calculations and estimates of assumptions that affect the application of accounting principles and of amounts related to assets and liabilities, income and expenses. The estimates and related assumptions are based on historical experience and other factors that are consistent with current conditions and the results of which lead to conclusions about the residual values of assets and liabilities that are not available from other sources. The actual results could differ from the estimates. The estimates and related assumptions are kept under constant review. Adjustments to estimates are recognised prospectively.

The key assumptions and other significant sources of estimation uncertainty at the date of the interim statements of financial position that have a significant risk of causing a material adjustment to the carrying amounts of assets or liabilities within the next financial year are the same as those described in the most recent set of annual separate and consolidated financial statements.

4. Definition of lease

Until 1 January 2019 the Group and the Company determined at the time of signing the agreement whether the agreement meets the definition of lease in accordance with IFRIC 4 "Determining Whether an Arrangement Contains a Lease". From 1 January 2019, when an agreement is concluded, the determining whether an arrangement contains a lease or includes a lease is based on the new definition. Under IFRS 16, A contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration.

In evaluating or re-evaluating an agreement that contains a lease component, the Group and the Company allocate the contractual consideration provided for in the agreement to each of the parts of the agreement that have and do not have a lease component on the basis of their relative stand-alone prices. However, in the case of leases of immovable property where the Group and the Company are lessees, the Group and the Company have chosen not to separate the lease-free components and instead to account for the lease-free and lease-containing components together as a single lease component.

The Group and the Company, as tenant, have previously classified the lease as an operating or finance lease based on an assessment of whether the lease agreement essentially provides for the transfer of all risks and rewards of ownership. The Group and the Company recognise right-of-use assets and lease liabilities in lease agreements in accordance with the provisions of IFRS 16. These leases are shown in the balance sheet.

The Group and the Company includes the assets held under right-of-use in the right-of-use asset item on 31 December 2022 for EUR 956 thousand and EUR 884 thousand respectively (on 31 December 2021 for EUR 1.207 thousand and EUR 1.006 thousand, respectively).

Recognised lease liabilities are presented in the statements of financial position under leasing (finance lease) and long-term financial debts and leasing (finance lease) for the current year.

5. Measurement of fair value

At initial recognition, the transaction price of an acquired asset or a liability assumed in an exchange transaction entered into for a particular asset or liability is the price paid at the time the asset is acquired or the liability is assumed (the acquisition price). In comparison, the fair value of the asset or liability is the price that would be obtained from the sale of the asset or paid for the disposal of the liability (the sale/transfer price).

If the Company initially measures an asset or liability at fair value and the transaction price differs from fair value, the difference is recognised as a gain or loss unless otherwise specified in the IFRSs.

The fair value measurement is based on the assumption that a transaction for the sale of an asset or the disposal of a liability will be carried out either:

• in the underlying market for the asset or liability, or
• in absence of a principal market, the most favourable market for the asset or liability in question.

Where observable variables that are directly observable by the Company are not available at the measurement date, i.e. prices quoted (not adjusted) in active markets for identical assets or liabilities, fair value is determined by reference to adjusted observable variables that are directly observable. Adjusted variables are:

• prices quoted for similar assets or liabilities in active markets;
• prices quoted for identical or similar assets or liabilities in markets that are not active markets;
• variables other than quoted prices observed for a specific asset or liability;
• market-confirmed variables.

Where observable variables are not available (directly or indirectly), fair value shall be determined by reference to unobservable variables that the Group and the Company produce using valuation techniques.

The fair value measurement of a non-financial asset shall take into account the ability of the market participant to generate economic benefits by using the specific asset to its maximum and best value or by selling it to another market participant that will use it to its maximum and best value.

The fair value of liability reflects the impact of inactivity risk. Inactivity risk includes, but is not limited to, the entity's own credit risk. When determining the fair value of a liability, an entity shall assess the effects of its credit risk (financial position) and other factors that may affect the likelihood that the liability will or will not be met.

The Group and the Company must increase the use of relevant observable variables and reduce the use of unobservable variables in order to achieve the objective of fair value measurement by calculating the price at which a liability or equity instrument would be transferred under a legally orderly transaction between market participants at the valuation date in accordance with prevailing market conditions.

Assets and liabilities that are measured at fair value in the statement of financial position, or for which fair value is not determinable but for which disclosures are made, are classified by the Group and the Company in accordance with the fair value hierarchy, which categorises variables into three levels depending on their availability:

• Level 1 variables are quoted (unadjusted) prices for identical assets or liabilities in an active market that are available to the Company at the date of valuation;
• Level 2 variables are variables, other than quoted prices which are classified as Level 1, that are observable directly or indirectly for a specific asset or liability;
• Level 3 variables are unobserved variables applied to a specific asset or liability.

When the variables used to measure the fair value of an asset or liability may be classified in different levels of the fair value hierarchy, the entire fair value measurement result is classified in the same level of the fair value hierarchy as the lowest level variable that is significant to the entire measurement.

6. Property, plant and equipment

During the first 12 months of 2022, the Group's and the Company's acquisitions of property, plant and equipment amounted to EUR 21,293 thousand and EUR 21,261 thousand, respectively, and the residual value of property, plant and equipment sold and written off amounted to EUR 242 thousand and EUR 148 thousand.

Depreciation expense for property, plant and equipment of the Group and the Company as at 31 December 2022 amounts to EUR 9 315 thousand and EUR 8 336 thousand, respectively (31 December 2021: EUR 9 301 thousand and EUR 8 624 thousand). The amounts of the Group's and the Company's depreciation expenses were included in operating expenses in the profit and loss and other comprehensive income statements (depreciation and amortisation and other expenses).

The management of the Group and the Company has assessed internal and external indicators and has not identified any additional impairment of property, plant and equipment in 2022.

Part of the Group's property, plant and equipment with an acquisition value of EUR 75 394 thousand as at 31 December 2022 (on 31 December 2021: EUR 66 161 thousand), EUR 75 394 thousand for the Company, was fully depreciated (on 31 December 2021: EUR 66 036thousand), but still used in business operations.

On 31 December 2022 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 2022, property, plant and equipment with a residual value equal to the Group were

EUR 8,548 thousand (31 December 2021: EUR 11,945 thousand) and EUR 8,548 thousand (31 December 2021: EUR 9,300 thousand) of the Company's assets have been pledged to the banks as security for the loans.

7. Inventories

	Group		Company
	2022-12-31	2021-12-31	2022-12-31	2021-12-31
Technological fuels	1 602	1 254	1 602	1 177
Spare parts	1 459	927	700	655
Materials	346	300	346	300
	3 407	2 481	2 648	2 132
To be deducted: write-down to net realisable value at the end of the period	(769)	(725)	(769)	(725)
Carrying amount of inventories	2 638	1 756	1 879	1 407

The write-down of the Group's and the Company's inventories to net realisable value as at 31 December 2022 amounted to EUR 769 thousand. (on 31 December 2020: EUR 725 thousand). The change in the write-down of inventories to net realisable value in 2022 and 2021 is included in the Group's and the Company's Statements of Profit and Loss and Other Gross income under the item of costs of changes in the realisable value of inventories and fixed assets.

8. Amounts receivable within one year

	Group		Company
	2022-12-31	2021-12-31	2022-12-31	2021-12-31
Trade receivables	22 970	16 473	22 764	16 596
To be deducted: expected credit losses	(5 119)	(4 944)	(5 101)	(4 934)
	17 851	11 529	17 663	11 662

Change in impairment of doubtful receivables as at 31 December 2022 and 31 December 2021 in the Group's and the Company's Statements of Profit and Loss and Other Gross included in the item of impairment charges on receivables. Impairment of doubtful receivables is measured at expected credit losses.

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

On 31 December 2022 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).

The Group's and the Company's other receivables are interest-free and generally mature in

30 - 45 days.

No impairment is calculated on outstanding receivables as management does not consider that there is any indication that debtors will be unable to meet their obligations.

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.

9. Financial debts

All loans of the Group and the Company are accounted for and repaid in euro. The weighted average (percentage) of the interest rate on outstanding loans at 31 December 2022 and 31 December 2021 was as follows:

	Group		Company
	2022-12-31	2021-12-31	2022-12-31	2021-12-31
Short-term	-	-	-	-
Long-term	0,84	0,73	0,84	0,72

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 repay loans over 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 16 August 2021, a loan tranche of EUR 12 million was taken out. The Company used part of the loan to repay the existing loans. On 22 August 2022, a loan tranche of EUR 14 million was taken out. The Company used part of the loan to repay the existing loans.

9. Financial debts (continued)

Repayment terms of long-term loans:

	Group		Company
	2022-12-31	2021-12-31	2022-12-31	2021-12-31
Long-term financial debts (loans):	43 949	32 658	43 949	32 658
Payable between 2 and 5 years	17 414	10 380	17 414	10 380
Payable after 5 years	26 535	22 278	26 535	22 278
Current portion of long-term loans	2 769	2 876	2 769	2 309
	46 718	35 534	46 718	34 967

On 31 December 2022 in the statement of financial standing, the Group and the Company have recorded interest payable to financial institutions under long-term financial debts amounted to EUR 136 thousand and EUR 136 thousand respectively.

Group's detailed information on loans as at 31 December 2022:

	Credit institution	Date of contract	Amount, thousands EUR	Maturity	Balance as at 2022.12.31 in thousands EUR	Share of 2022 in thousands EUR
1	Ministry of Finance of the Republic of Lithuania *	2010-04-09	2 410	2034-03-15	1 123	94
2	Ministry of Finance of the Republic of Lithuania *	2010-10-26	807	2034-03-15	462	38
3	Luminor**	2021-08-22	3 403	2022-04-29	-	-
4	EIB***	2021-08-16	12 000	2036-08-18	12 000	453
5	Ministry of Finance of the Republic of Lithuania * Ministry of Finance of	2014-01-15	793	2034-12-01	499	42
6	the Republic of Lithuania *	2014-03-31	7 881	2034-12-01	4 963	414
7	EIB***	2020-08-07	15 000	2035-08-24	12 750	1 000
8	EIB***	2020-08-07	14 000	2035-08-24	14 000	-
9	AB SEB bank	2016-12-22	4 127	2024-11-30	921	728
					46 718	2 769

* Ministry of Finance; ** Luminor bank AS; *** European Investment Bank.

Details of the Company's loans as at 31 December 2022:

	Credit institution	Date of contract	Amount, thousands EUR	Maturity	Balance as at 2022.09.30 in thousands EUR	To be refunded in 2022, thousand EUR
1	Ministry of Finance of the Republic of Lithuania *	2010-04-09	2 410	2034-03-15	1 123	94
2	Ministry of Finance of the Republic of Lithuania *	2010-10-26	807	2034-03-15	462	38
3	Luminor**	2021-08-22	3 403	2022-04-29	-	-
4	EIB***	2021-08-16	12 000	2036-08-18	12 000	453
5	Ministry of Finance of the Republic of Lithuania *	2014-01-15	793	2034-12-01	499	42
6	Ministry of Finance of the Republic of Lithuania *	2014-03-31	7 881	2034-12-01	4 963	414
7	EIB***	2020-08-07	15 000	2035-08-24	12 750	1 000
8	EIB***	2020-08-07	14 000	2037-08-24	14 000	-
9	AB SEB bank	2016-12-22	4 127	2024-11-30	921	728
					46 718	2 769

* Ministry of Finance; ** Luminor bank AS; *** European Investment Bank.

9. Financial debts (continued)

AB SEB bankas 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.

The Company has met the target ratio of net financial debt to EBITDA on 31 December 2022 .

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 the written consent of the banks. Such written consents were obtained from the banks.

The Group's and the Company's immovable property, bank accounts and land leases were pledged to banks as collateral for loans.

10. 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. The Company formed a provision of EUR 577 thousand as of 30 June 2021 to ensure reserve capacity, part of which has been returned to customers as of 2022, for a total of EUR 498 thousand returned during 2022.

11. Cash and cash equivalents

	Group		Company
	2022-12-31	2021-12-31	2022-12-31	2021-12-31
Cash on the road	619	166	619	166
Cash in the bank	3 931	3 530	3 272	2 616
Term deposits	3 000	-	3 000	-
	7 550	3 696	6 891	2 782

The Group's bank accounts with a balance of EUR 3,931 thousand (31 December 2021: EUR 3,530 thousand) and the Company's bank accounts with a balance of EUR 3,272 thousand (31 December 2021: EUR 2,616 thousand) at 31 December 2022 and 31 December 2021, respectively, are pledged to the banks as security for loans granted.

12. Changes in equity

Statutory reserve and other reserves

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.

Dividends

In 2022, the result of 2021 was left in retained earnings.

13. 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. In 2010, some residents chose the Company as their hot water supplier. 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:

	Group		Company
	2022	2021	2022	2021
Heat supply	82 214	47 125	81 458	47 133
Hot water supply	4 895	3 014	4 643	3 024
Maintenance of hot water metering devices	487	456	487	456
Maintenance of collectors	348	348	348	348
Maintenance of heating and hot water systems in buildings	17	12	17	12
Cooling supply	10	2	10	2
Sale of tradable emission allowances	50	6	50	6
	87 265	50 963	87 013	50 981

Sales revenues by consumer groups of the Group and the Company are presented below:

	Group		Company
	2022	2021	2022	2021
Residents	65 236	38 640	65 236	38 640
Other users	8 846	5 138	8 846	5 138
Budgetary organisations financed from the state budget	6 044	3 579	6 044	3 579
Budgetary organisations financed from municipal budgets	4 203	2 447	4 203	2 447
Institutions financed by territorial sickness funds	2 182	957	2 182	957
Industrial users	754	202	502	220
	87 265	50 963	87 013	50 981

14. Other costs

Other expenses as at 31 December 2022 include:

	Group		Company
	2022	2021	2022	2021
Equipment inspection and testing	234	177	234	177
Maintenance of collectors	362	361	362	361
Money collection costs	126	143	126	143
Ash recovery costs	173	162	173	162
Information Technologies costs	80	64	80	64
Consulting Services	181	132	181	132
Employee-related costs	118	87	118	87
Invoicing costs	98	74	98	74
Membership fee	97	100	97	100
Maintenance of fixed assets and related services	86	65	86	65
Transport costs	104	90	104	90
Debt collection costs	91	52	91	52
Insurance	49	57	49	57
Communication costs	32	25	32	25
Costs for advertising	35	36	35	36
Audit costs	23	27	23	27
Rental of equipment and machinery	56	63	56	63
Sponsorship	53	1	53	1
Other costs	490	268	420	304
	2 488	1 984	2 418	2 020

15. Other operating income and expense

Other operating income includes:

	Group		Company
	2022	2021	2022	2021
Other operational incomes
Inventories sold	213	829	213	242
Miscellaneous services rendered	986	387	449	240
Compensation received		- -	-	-
Revenue from previous periods		- 5	-	5
Profit from the sale of fixed assets	11	117	11	117
Other	231	3 205	231	3 204
	1 441	4 543	904	3 808

Other operating expenses include:

	Group		Company
Other operational expenses	2022	2021	2022	2021
Cost of miscellaneous services rendered	(306)	(166)	(306)	(166)
Inventories sold	(214)	(35)	(214)	(35)
Cost of previous periods	(30)	(20)	(30)	(20)
Sale of fixed assets, write-off	(119)	(164)	(119)	(164)
Other	(78)	(49)	(85)	(56)
	(747)	(434)	(754)	(441)

15. Other operating income and expense (continued)

The Group and the Company lease real estate, supply technical water, perform maintenance of heating

equipment and provide transport services.

16. Basic and diluted earnings per share

The Group's basic and diluted earnings per share calculations are presented below:

	Group		Company
	2022	2021	2022	2021
Profit for the reporting period	5 930	1	5 639	386
Number of shares (thousands), beginning of period	42 802	42 802	42 802	42 802
Number of shares (thousands), end of period	42 802	42 802	42 802	42 802
Weighted average number of ordinary shares in issue (thousands)	42 802	42 802	42 802	42 802
Basic and diluted earnings per share (EUR)	0,14	0,00	0,13	0,01

17. Commitments and contingencies not included in the balance sheet

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 re.

18. 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.

In 2022 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:

In 2022 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 2022	Purchases	Sales	Amounts receivable	Amounts payable
Kaunas City Municipality, companies financed and fully managed by it	1 234	8 345	3 105	253
Jurbarkas district municipality	15	292	14	3

18. Related party transactions (continued	Purchases	Sales	Amounts receivable	Amounts payable
31 December 2021
Kaunas City Municipality, companies financed and fully managed by it	897	3 120	8263	206
Jurbarkas district municipality	10	132	2	2

Sales include the amounts of reimbursements for housing heating costs, cold water and sewage costs, and hot water costs for financially challenged residents.

On 31 December 2022 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 2022	839	-	-	-
31 December 2021	746	10	644	-
UAB GO Energy LT	Purchases	Sales	Amounts receivable	Amounts payable
31 December 2022	426	162	65	83
31 December 2021	77	12	43	-

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.

Management's salary and other benefits

On 31 December 2022 the Group's and the Company's management consists of 2 and 1 persons (3 and 1 at 31 December 202) respectively.

	Group		Company
	2022-12-31	2021-12-31	2022-12-31	2021-12-31
Wages and salaries charged to the management	103	89	97	78
Reimbursements of employee benefits calculated for the management	-	-	-	-

During 2022 and 2021, there were no loans, guarantees, other disbursements or accruals to the management of the Group and the Company, or transfers of assets.

19. Events after the date of the balance sheet

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.

___________________________