Annual Report (ESEF) • Apr 21, 2021
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File097900BGMO00000558722020-01-012020-12-31iso4217:EUR097900BGMO00000558722019-01-012019-12-31097900BGMO00000558722020-01-012020-12-31ifrs-full:SeparateMember097900BGMO00000558722019-01-012019-12-31ifrs-full:SeparateMember097900BGMO00000558722020-12-31097900BGMO00000558722019-12-31097900BGMO00000558722020-12-31ifrs-full:SeparateMember097900BGMO00000558722019-12-31ifrs-full:SeparateMember097900BGMO00000558722018-01-01ifrs-full:IssuedCapitalMember097900BGMO00000558722018-01-01ifrs-full:SharePremiumMember097900BGMO00000558722018-01-01ifrs-full:RevaluationSurplusMember097900BGMO00000558722018-01-01ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember097900BGMO00000558722018-01-01ifrs-full:RetainedEarningsMember097900BGMO00000558722017-12-31097900BGMO00000558722018-01-012018-12-31ifrs-full:RetainedEarningsMember097900BGMO00000558722018-01-012018-12-31097900BGMO00000558722018-12-31ifrs-full:RevaluationSurplusMember097900BGMO00000558722018-12-31ifrs-full:RetainedEarningsMember097900BGMO00000558722018-01-012018-12-31ifrs-full:RevaluationSurplusMember097900BGMO00000558722018-01-012018-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember097900BGMO00000558722018-12-31ifrs-full:IssuedCapitalMember097900BGMO00000558722018-12-31ifrs-full:SharePremiumMember097900BGMO00000558722018-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember097900BGMO00000558722018-12-31097900BGMO00000558722020-01-012020-12-31ifrs-full:RetainedEarningsMember097900BGMO00000558722020-12-31ifrs-full:RevaluationSurplusMember097900BGMO00000558722020-01-012020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember097900BGMO00000558722020-12-31ifrs-full:IssuedCapitalMember097900BGMO00000558722020-12-31ifrs-full:SharePremiumMember097900BGMO00000558722020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember097900BGMO00000558722020-12-31ifrs-full:RetainedEarningsMember097900BGMO00000558722018-01-01ifrs-full:SharePremiumMemberifrs-full:SeparateMember097900BGMO00000558722018-01-01latvijasgze:Akcijuemisijasuzcenojumsmemberifrs-full:SeparateMember097900BGMO00000558722018-01-01ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberifrs-full:SeparateMember097900BGMO00000558722018-01-01latvijasgze:Reorganisationreservememberifrs-full:SeparateMember097900BGMO00000558722018-01-01ifrs-full:RetainedEarningsMemberifrs-full:SeparateMember097900BGMO00000558722017-12-31ifrs-full:SeparateMember097900BGMO00000558722018-01-012018-12-31ifrs-full:RetainedEarningsMemberifrs-full:SeparateMember097900BGMO00000558722018-01-012018-12-31ifrs-full:SeparateMember097900BGMO00000558722018-01-012018-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberifrs-full:SeparateMember097900BGMO00000558722018-12-31ifrs-full:SharePremiumMemberifrs-full:SeparateMember097900BGMO00000558722018-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberifrs-full:SeparateMember097900BGMO00000558722018-12-31latvijasgze:Reorganisationreservememberifrs-full:SeparateMember097900BGMO00000558722018-12-31ifrs-full:RetainedEarningsMemberifrs-full:SeparateMember097900BGMO00000558722018-12-31ifrs-full:SeparateMember097900BGMO00000558722020-01-012020-12-31ifrs-full:RetainedEarningsMemberifrs-full:SeparateMember097900BGMO00000558722020-01-012020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberifrs-full:SeparateMember097900BGMO00000558722020-12-31ifrs-full:SharePremiumMemberifrs-full:SeparateMember097900BGMO00000558722020-12-31latvijasgze:Akcijuemisijasuzcenojumsmemberifrs-full:SeparateMember097900BGMO00000558722020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMemberifrs-full:SeparateMember097900BGMO00000558722020-12-31latvijasgze:Reorganisationreservememberifrs-full:SeparateMember097900BGMO00000558722020-12-31ifrs-full:RetainedEarningsMemberifrs-full:SeparateMember097900BGMO00000558722018-01-01097900BGMO00000558722018-01-01ifrs-full:SeparateMember LATVIJAS GĀZE GROUP CONSOLIDATED AND JSC "LATVIJAS GĀZE" FINANCIAL STATEMENTS FOR 2020 Prepared in compliance with the International Financial Reporting Standards as adopted by the European Union Riga 2021 2 CONTENTS CORPORATE INFORMATION .................................................................................................................................................... 3 STATEMENT OF COMPREHENSIVE INCOME ................................................................................................................. 4 BALANCE SHEET ............................................................................................................................................................................... 5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................................................................ 7 COMPANY’S STATEMENT OF CHANGES IN EQUITY .................................................................................................. 8 STATEMENT OF CASH FLOWS ................................................................................................................................................. 9 NOTES TO FINANCIAL STATEMENTS ................................................................................................................................ 10 3 FINANCIAL STATEMENTS Prepared in compliance with the International Financial Reporting Standards as Adopted by the European Union CORPORATE INFORMATION Company Latvijas Gāze, Joint Stock Company LEI code 097900BGMO0000055872 Registration number, place and date of registration Unified registration number 40003000642 Riga, Latvia, 25 March 1991 re-registered in Commercial Register on 20 December 2004 Address A.Briāna 6, Riga, Latvia, LV-1001 Major shareholders PJSC Gazprom (34.0%) Marguerite Gas II.S.a.r.l. (28.97%) Uniper Ruhrgas International GmbH (18.26%) ITERA Latvija SIA (16.0%) Financial period 1 January – 31 December 2020 Name and address of the auditor PricewaterhouseCoopers SIA Kr. Valdemāra street 21-21 Riga, LV-1010, Latvia Responsible certified auditor: Jana Smirnova Certified auditor Certificate No.188 4 STATEMENT OF PROFIT OR LOSS EUR EUR EUR EUR Earnings per share (basic and diluted) 16 0.280 0.506 0.288 0.494 STATEMENT OF COMPREHENSIVE INCOME Note Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Profit for the period 11 189 20 190 11 501 19 700 Other comprehensive income - items that will not be reclassified to profit or loss Revaluation of property, plant and equipment 9 - 74 540 - - Change in revaluation reserve of property, plant and equipment - 164 - - Remeasurement of post- employment benefit obligations 19 (348) 407 (3) 34 Total other comprehensive income (348) 75 111 (3) 34 Total comprehensive income for the period 10 841 95 301 11 498 19 734 The Financial statements were approved by the Board of the JSC “Latvijas Gāze” on 21 April 2021, and they are signed on behalf of the Board by: Aigars Kalvītis Chairman of the Board Inga Āboliņa Member of the Board Elita Dreimane Member of the Board Note Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Revenue from contracts with customers 2 190 494 314 349 142 708 265 995 Other income 3 2 8502 850 3 513 1 8281 828 1 793 Raw materials and consumables used 4 (131 301) (247 263) (129 677) (245 588) Personnel expenses 5 (26 331)26 331 (25 852) (5 277)5 277 (5 033) Depreciation, amortization and impairment of property, plant and equipment, intangible assets and right-of use assets 6 (13 519) (12 770) (1 183)1 183 (785) Other operating expenses 7 (9 250)9 250 (9 120)9 120 (3 922)3 922 (4 216)4 216 Dividends received from subsidiary - - 8 778 9 975 Operating profit 12 943 22 857 13 255 22 141 Financial expense (260) (399) (260) (173) Profit before taxes 12 683 22 458 12 995 21 968 Corporate income tax (1 494)1 494 (2 268)2 268 (1 494)1 494 (2 268)2 268 Profit for the period 11 189 20 190 11 501 19 700 5 BALANCE SHEET Note Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 ASSETS Restated Restated Non-current assets Intangible assets 8 9 177 8 137 5 057 4 799 Property, plant and equipment 9 309 971 312 650 2 534 2 729 Right-of-use assets 40 384 295 384 Investment in subsidiary 10 - - 194 534 194 534 Other debtors 12 8 32 5 6 Total non-current assets 319 196 321 203 202 425 202 452 Current assets Inventories 11 42 220 50 105 40 854 48 872 Pre-payments for inventories 8 046 5 829 8 035 5 828 Trade receivables 12 28 306 25 796 25 339 22 654 Other financial assets at amortised cost 14 1 573 3 250 1 513 3 250 Other current assets 15 1 972 7 901 1 363 7 508 Cash and cash equivalents 54 236 48 995 44 968 38 487 Total current assets 136 353 141 876 122 072 126 599 TOTAL ASSETS 455 549 463 079 324 497 329 051 The Financial statements were approved by the Board of the JSC “Latvijas Gāze” on 21 April 2021, and they are signed on behalf of the Board by: Aigars Kalvītis Chairman of the Board Inga Āboliņa Member of the Board Elita Dreimane Member of the Board 6 BALANCE SHEET (continued) Note Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 LIABILITIES AND EQUITY Restated Restated Equity Share capital 16 55 860 55 860 55 860 55 86055 860 Share premium 20 376 20 376 20 376 20 376 Reserves 188 432 195 597 204 491 204 494 Retained earnings 111 169 110 719 16 233 22 288 Total equity 375 837 382 552 296 960 303 018 Liabilities Non-current liabilities Provisions 700 - - - Borrowings 17 22 167 25 667 - - Lease liabilities - 292 187 292 Deferred income 18 18 318 18 434 - - Employee benefit obligations 19 2 305 1 757 61 57 Total non-current liabilities 43 490 46 150 248 349 Current liabilities Trade payables 20 5 725 5 489 8 202 8 249 Interest-bearing loans and borrowings 17 3 500 3 500 - - Lease liabilities 21 93 89 93 Deferred income 18 1 079 1 138 - 92 Other liabilities 21 25 897 24 157 18 998 17 250 Total current liabilities 36 222 34 377 27 289 25 684 Total liabilities 79 712 80 527 27 537 26 033 TOTAL LIABILITIES AND EQUITY 455 549 463 079 324 497 329 051 The Financial statements were approved by the Board of the JSC “Latvijas Gāze” on 21 April 2021, and they are signed on behalf of the Board by: Aigars Kalvītis Chairman of the Board Inga Āboliņa Member of the Board Elita Dreimane Member of the Board 7 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Share premium Reva- luation reserve Employee benefits revaluatio n reserve Retained earnings Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Restated Restated 31 December 2018 (restated) 55 860 20 376 126 976 103 105 881 309 196 Transactions with owners Dividends (see Note 16) - - - - (21 945) (21 945) Total transactions with owners - - - - (21 945) (21 945) Depreciation of revaluation reserve and disposal of revalued assets - - (6 593) - 6 593 - Comprehensive income Profit for the year - - - - 20 190 20 190 Other comprehensive income - - 74 704 407 - 75 111 Total comprehensive income - - 74 704 407 20 190 95 301 31 December 2019 (restated) 55 860 20 376 195 087 510 110 719 382 552 Transactions with owners: Dividends (see Note 16) - - - - (17 556) (17 556) Total transactions with owners - - - - (17 556) (17 556) Depreciation of revaluation reserve and disposal of revalued assets - - (6 817) - 6 817 - Comprehensive income Profit for the year - - - - 11 18911 189 11 189 Other comprehensive income - - - (348) - (348) Total comprehensive income - - - (348) 11 189 10 841 31 December 2020 55 860 20 376 188 270 162 111 169 375 837 The Financial statements were approved by the Board of the JSC “Latvijas Gāze” on 21 April 2021, and they are signed on behalf of the Board by: Aigars Kalvītis Chairman of the Board Inga Āboliņa Member of the Board Elita Dreimane Member of the Board 8 COMPANY’S STATEMENT OF CHANGES IN EQUITY Share capital Share premium Employee benefits revaluation reserve Reorgani- sation reserve Retained earnings Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Restated Restated 31 December 2018 (restated) 55 860 20 376 (85) 204 545 24 533 305 229 Transactions with owners Dividends (see Note 16) - - - - (21 945) (21 945) Total transactions with owners - - - - (21 945) (21 945) Comprehensive income: Profit for the year - - - - 19 700 19 700 Other comprehensive income - - 34 - - 34 Total comprehensive income - - 34 - 19 700 19 734 31 December 2019 (restated) 55 860 20 376 (51) 204 545 22 288 303 018 Transactions with owners: Dividends (see Note 16) - - - - (17 556) (17 556) Total transactions with owners - - - - (17 556) (17 556) Comprehensive income Profit for the year - - - - 11 501 11 501 Other comprehensive income - - (3) - - (3) Total comprehensive income - - (3) - 11 501 11 498 31 December 2020 55 860 20 376 (54) 204 545 16 233 296 960 The Financial statements were approved by the Board of the JSC “Latvijas Gāze” on 21 April 2021, and they are signed on behalf of the Board by: Aigars Kalvītis Chairman of the Board Inga Āboliņa Member of the Board Elita Dreimane Member of the Board 9 STATEMENT OF CASH FLOWS The Financial statements were approved by the Board of the JSC “Latvijas Gāze” on 21 April 2021, and they are signed on behalf of the Board by: Aigars Kalvītis Chairman of the Board Inga Āboliņa Member of the Board Elita Dreimane Member of the Board Group Group Company Company Note 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Cash flow from operating activities Profit before corporate income tax 12 683 22 458 12 995 21 968 Adjustments: - depreciation of property, plant and equipment and right-of-use assets 6 11 49711 497 10 870 450 315 - amortisation of intangible assets 6 2 022 1 917 733 470 - movement in provisions 1 (101) 1 (34) - income from participating interests - - (8 778)8 778 (9 975)9 975 - (profit) / losses from long-term asset exclusions 399 312 (4) 3 - interest expenses 186 398 186 172 Changes in operating assets and liabilities: - in accounts receivable 4 937 3 903 5 182 5 857 - in inventories 7 885 53 857 8 018 53 570 - in advances for inventories (2 216)2 216 (793) (2 207)2 207 (803) - in accounts payable (41) (10 915) 1 580 (10 637) Corporate income tax paid (1 494)1 494 (2 205)2 205 (1 494)1 494 (2 205)2 205 Net cash inflow from operating activities 35 859 79 701 16 662 58 701 Cash flow from investing activities Payments for property, plant and equipment 9 (7 046)7 046 (9 513) (205) (2 177)2 177 Payments for intangible assets 8 (2 242)2 242 (3 304) (943) (2 328)2 328 Proceeds from sale of property, plant and equipment 137 83 24 9 Dividends received 22 - - 8 778 9 975 Net cash outflow from investing activities (9 151)9 151 (12 734) 7 654 5 479 Cash flow from financing activities Overdraft paid - (8 386)8 386 - (8 386)8 386 Loan paid (3 500)3 500 (3 500)3 500 - - Leases paid (25)25 (25) (93) (37) Interest paid (386) (396) (186) (170) Dividends paid 16 (17 556) (21 945) (17 556) (21 945) Net cash outflow from financing activities (21 467) (34 252) (17 835) (30 538) Net cash flow 5 241 32 715 6 481 33 642 Cash and cash equivalents at the beginning of the reporting period 48 995 16 280 38 487 4 845 Cash and cash equivalents at the end of the reporting period 54 236 48 995 44 968 38 487 10 NOTES TO FINANCIAL STATEMENTS 1. Segment information In 2020 and 2019, Latvijas Gāze group consisted of two segments – the natural gas sales & trading segment and the distribution segment. The natural gas sales & trading segment comprises the purchase, trade and sale of natural gas. The JSC “Latvijas Gāze” operates the sales & trading business, which includes wholesale trading and the sale of natural gas to industrial and commercial customers as well as to households. The distribution segment provides natural gas distribution services in Latvia. The JSC “Gaso” holds an exclusive license for the distribution of natural gas on the territory of Latvia. JSC “Gaso” owns and operates all distribution assets. The information included in the operating segments corresponds to the information used by the Board of JSC “Latvijas Gāze” for the gas sales & trading segment and the Board of the JSC “Gaso” for the gas distribution segment in making operational decisions and allocating resources. Given the regulatory requirements provided in the Energy Law, segments are managed separately. The Board of each company assesses the performance of each respective segment based on EBITDA (adjusted earnings before interest, tax, depreciation and amortisation) and monitors profit before taxes. As the segments are based on legal entities, transactions between entities are eliminated (see Note 2). Group 2020 Gas trade Gas distribution Total EUR'000 EUR'000 EUR'000 EBITDA 6 000 20 462 26 462 Depreciation and amortisation (1 115) (12 404) (13 519) Financial expense (260) - (260) Profit before taxes 4 625 8 058 12 683 Group 2019 Gas trade Gas distribution Total EUR'000 EUR'000 EUR'000 EBITDA 13 587 22 040 35 627 Depreciation and amortisation (768) (12 002) (12 770) Financial expense (173) (226) (399) Profit before taxes 12 646 9 812 22 458 Company / Gas trade 2020 2019 EUR'000 EUR'000 EBITDA 14 438 22 926 Depreciation and amortisation (1 183) (785) Financial expense (260) (173) Profit before taxes 12 995 21 968 11 Group 2020 Gas trade Gas distribution Total EUR'000 EUR'000 EUR'000 Purchase of property, plant, equipment and intangible assets 1 177 11 258 12 435 Segment assets 31.12.2020 129 530 326 019 455 549 Group 2019 Gas trade Gas distribution Total EUR'000 EUR'000 EUR'000 Purchase of property, plant and equipment and intangible assets 4 111 10 068 14 179 Segment assets 31.12.2019 (restated) 134 517 328 562 463 079 Company / Gas trade 2020 2019 EUR'000 EUR'000 Restated Purchase of property, plant and equipment and intangible assets 1 177 4 111 Segment assets 31.12 324 497 329 051 Assets JSC “Latvijas Gāze” JSC "Gaso" Investment Intercompany receivables/ payables Rent Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Assets 31.12.2020 324 497 331 152 (194 534) (5 310) (255) 455 549 Assets 31.12.2019 329 051 333 729 (194 534) (5 167) - 463 079 2. Revenue from contracts with customers Group Gas trade Gas distribution 2020 Latvia Other countries Latvia Total EUR'000 EUR'000 EUR'000 EUR'000 Segment revenue 100 587 41 132 46 967 188 686 Inter-segment revenue (1 301) - - (1 301) Connection, balancing and other service fees recognised as revenue 877 112 1 057 2 046 Other revenue - - 1 063 1 063 100 163 41 244 49 087 190 494 Group Gas trade Gas distribution 2019 Latvia Other countries Latvia Total EUR'000 EUR'000 EUR'000 EUR'000 Segment revenue 242 156 21 227 49 509 312 892 Inter-segment revenue (2 184) - - (2 184) Connection, balancing and other service fees recognised as revenue 1 173 1 439 1 029 3 641 241 145 22 666 50 538 314 349 12 Company Gas trade 2020 Latvia Other countries Total EUR'000 EUR'000 EUR'000 Segment revenue 100 587 41 132 141 719 Other revenue (balancing services) 877 112 989 101 464 41 244 142 708 The Companys sales to legal entities comprised 88% and sales to household customers comprised 12% of total sales. Company Gas trade 2019 Latvia Other countries Total EUR'000 EUR'000 EUR'000 Segment revenue 242 156 21 227 263 383 Other revenue (balancing services) 1 173 1 439 2 612 243 329 22 666 265 995 The Companys sales to legal entities comprised 87% and sales to household customers comprised 13% of total sales. 3. Other income Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Net fair value gains on financial derivatives 738 276 738 276 Penalties collected from customers 747 905 669 805 Decrease in provisions for bad debts, net 90 - 154 - Other 1 275 2 332 267 712 2 850 3 513 1 828 1 793 In 2020 the “Net fair value gains on financial derivatives” includes a net amount of 738 thousand EUR originating from financial hedging activities. 3 803 thousand EUR out of this amount is attributable to operational activities during the 12 months reporting period, calculated as the sum of (5 771) thousand EUR (reverse of previous year accruals), plus the net amount received in 2020 amounting to 9 574 thousand. The remaining amount for outstanding derivatives of (3 065) thousand EUR is evaluated on a mark-to-market basis as of the balance sheet date and is attributable to 2021 operational activity. 4. Raw materials and consumables used Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Natural gas purchase 129 886 245 883 129 628 245 543 Costs of materials, spare parts and fuel 1 415 1 380 49 45 131 301 247 263 129 677 245 588 13 5. Personnel expenses Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Wages and salaries 20 031 19 544 4 028 3 835 State social insurance contributions 4 690 4 675 905 886 Life, health and pension insurance 1 324 1 319 189 178 Other personnel costs 286 314 155 134 26 331 25 852 5 277 5 033 Average number of employees 997 988 119 116 Group Group Company Company Salaries of the Council and the Board 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Wages and salaries 2 089 2 642 1 258 1 232 State social insurance contributions 478 549 269 228 Life, health and pension insurance 111 129 45 46 Other personnel costs 76 3 - - 2 754 3 323 1 572 1 506 6. Depreciation, amortization and impairment of property, plant and equipment, intangible assets and right-of use assets Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Amortisation of intangibles 2 022 1 917 733 470 Depreciation and impairment of property, plant and equipment 11 515 11 716 361 290 Depreciation of rights to use assets 21 8 89 25 Income from revaluation of property, plant and equipment - (2 617) - - Additional depreciation from revaluation of property, plant and equipment - 1 763 - - Capitalised depreciation (39) (17) - - 13 519 12 770 1 183 785 14 7. Other operating expenses Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Selling and advertising costs 799 820 550 536 Expenses related to premises (rent, electricity, security and other services) 1 411 1 382 211 331 Donations, financial support 785 938 712 753 Office and other administrative costs 1 875 1 875 853 849 Taxes and duties 1 005 985 609 611 Costs of IT system maintenance, communications and transport 1 960 1 738 952 800 Losses from exclusion and sale of property, plant and equipment - 303 - 3 Increase in provisions for bad debts, net - 541 - 216 Other costs 1 415 538 35 117 9 250 9 120 3 922 4 216 8. Intangible assets Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Cost As at the beginning of period 20 967 17 558 5 468 3 541 Additions 3 062 3 410 991 1 928 Disposals - (1) - (1) As at the end of period 24 029 20 967 6 459 5 468 Amortisation As at the beginning of period 12 830 10 914 669 200 Amortisation 2 022 1 917 733 470 Disposals - (1) - (1) As at the end of period 14 852 12 830 1 402 669 Net book value as at the end of the period 9 177 8 137 5 057 4 799 The intangible assets include fully depreciated intangible assets with a total historical cost of 7 207 thousand EUR (Group) and 56 thousand EUR (Company) (31.12.2019: 5 017 thousand EUR (Group) and 0.2 thousand EUR (Company)). The most part of intangible assets of the Group and the Company consists of software. As at 31 December 2020 the Group had payables for intangible assets for a total of 1 102 thousand EUR (as at 31 December 2019: 1 003 thousand EUR), and the Company has payables for intangible assets for a total of 330 thousand EUR (as at 31 December 2019: 282 thousand EUR). 15 9. Property, plant and equipment Group Land, buildings, constructions Machinery and equipment Other fixed assets Assets under construction Total EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Cost or revalued amount 31.12.2019 650 929 38 835 16 443 1 079 707 286 Additions 6 159 2 163 1 051 - 9 373 Transfers - - 404 (404) - Disposals (1 374) (747) (413) - (2 534) 31.12.2020 655 714 40 251 17 485 675 714 125 Depreciation 31.12.2019 358 636 23 998 12 002 - 394 636 Calculated 7 814 2 389 1 312 - 11 515 Disposals (943) (669) (385) - (1 997) 31.12.2020 365 507 25 718 12 929 - 404 154 Net book value as of 31.12.2020 290 207 14 533 4 556 675 309 971 Net book value as of 31.12.2019 292 293 14 837 4 441 1 079 312 650 As at 31 December 2020, the Group has payables for property, plant and equipment for a total of EUR 1 350 thousand. Group Land, buildings, constructions Machinery and equipment Other fixed assets Assets under construction Total EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Cost or revalued amount 31.12.2018 545 105 32 620 15 565 393 593 683 Additions 6 325 2 236 1 490 718 10 769 Revaluation 100 552 4 900 - - 105 452 Disposals (1 053) (921) (612) (32) (2 618) 31.12.2019 650 929 38 835 16 443 1 079 707 286 Depreciation 31.12.2018 323 273 20 697 11 248 - 355 218 Calculated 7 206 2 320 1 335 - 10 861 Revaluation 28 913 1 835 - - 30 748 Disposals (756) (854) (581) - (2 191) 31.12.2019 358 636 23 998 12 002 - 394 636 Net book value as of 31.12.2019 292 293 14 837 4 441 1 079 312 650 Net book value as of 31.12.2018 221 832 11 923 4 317 393 238 465 As at 31 December 2019, the Group has payables for property, plant and equipment for a total of EUR 1 395 thousand. 16 Company Land, buildings, constructions Machinery and equipment Other fixed assets Assets under construc- tion Total EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Cost or revalued amount 31.12.2019 1 811 - 1 593 1 3 405 Additions - - 186 - 186 Transfer - - 1 (1) - Disposals - - (59) - (59) 31.12.2020 1 811 - 1 721 - 3 532 Depreciation 31.12.2019 18 - 658 - 676 Calculated 72 - 289 - 361 Disposals - - (39) - (39) 31.12.2020 90 - 908 - 998 Net book value as of 31.12.2020 1 721 - 813 - 2 534 Net book value as of 31.12.2019 1 793 - 935 1 2 729 As at 31 December 2020, the Company has no payables for property, plant and equipment. Company Land, buildings, constructions Machinery and equipment Other fixed assets Assets under construction Total EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Cost or revalued amount 31.12.2018 - - 1 263 - 1 263 Additions 1 811 - 371 1 2 183 Disposals - - (41) - (41) 31.12.2019 1 811 - 1 593 1 3 405 Depreciation 31.12.2018 - - 415 - 415 Calculated 18 - 272 - 290 Disposals - - (29) - (29) 31.12.2019 18 - 658 - 676 Net book value as of 31.12.2019 1 793 - 935 1 2 729 Net book value as of 31.12.2018 - - 848 - 848 As at 31 December 2019, the Company has payables for property, plant and equipment for a total of 19 thousand EUR. The fixed assets include fully depreciated fixed assets with a total historical cost of 12 185 thousand EUR (the Group) and 443 thousand EUR (the Company) (at 31.12.2019: 8 803 thousand EUR (the Group) and 78 thousand EUR (the Company)). 17 In 2019, the Group carried out the revaluation of buildings, constructions and machinery and equipment. Included in the tables above within “Land, buildings, constructions” is the land owned by the Group and the Company with the cost and net book value of 1 559 thousand EUR (the Group) as at 31.12.2020 and 110 thousand EUR (the Company) (as at 31.12.2019: 1 680 thousand EUR (the Group) and 110 thousand (the Company)). The land is not subject to revaluation. Revaluation effect (see Note 25) In 2019, the Group carried out the revaluation of buildings, constructions, machinery and equipment of the Distribution segment. Considering the unique nature and use of the assets, revaluation was based on Level 3 data, meaning that the data are not freely observable for the relevant type of assets. The revaluation was performed by an external expert using the depreciated replacement cost method. According to this method, the initial value of assets is determined according to the prices, requirements and applied materials at the time of the valuation. The key assumptions during the revaluation process are associated with the materials cost and the cost of the average construction prices at the time of revaluation. For the determination of values, data available to the Group about similar constructions of facilities in recent years is used. A significant section of the revaluation consists of the revaluation of gas distribution pipelines. In case of an increase in the average construction cost in the country or a significant increase in the cost of materials, the replacement cost will increase, too. If the cost of construction or materials decreases, the replacement cost of the assets will decrease accordingly. No economic obsolescence test was performed as tariffs for services cover all revalued amount. In the valuation exercise, both the cost and accumulated depreciation are revalued. The asset's physical, functional and technical depreciation are taken into account as key factors. As a result of the revaluation, in 2019, the gross asset amount was increased by 105 452 thousand EUR and the accumulated depreciation was increased by 30 756 thousand EUR. As a result of the revaluation, a gain of 74 540 thousand EUR was recognised in the statement of comprehensive income, while a gain of 854 thousand EUR was included in the profit and loss account. The table below presents the approximate estimated carrying amounts for the revalued asset groups if the assets were carried at their historic cost basis: Group’s revaluated assets at net book value 31.12.2020 31.12.2019 EUR'000 EUR'000 Buildings 104 508 100 886 Machinery and Equipment 10 481 9 604 18 10. Investment in subsidiary Company EUR'000 Invested during reorganisation 01.12.2017 194 534 Balance sheet value 31.12.2020 and 31.12.2019 194 534 Shares held 31.12.2020 31.12.2019 JSC “Gaso” 100% 100% Subsidiary’s equity Subsidiary’s equity Subsidiary’s profit Subsidiary’s profit 31.12.2020 31.12.2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 JSC “Gaso” 273 411 274 067 8 466 10 465 11. Inventories Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Natural gas and fuel 40 854 48 872 40 854 48 872 Materials and spare parts 1 437 1 304 - - Allowance for slow-moving inventory (71) (71) - - 42 220 50 105 40 854 48 872 12. Trade receivables Trade receivables Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Restated Restated Long-term receivables (nominal value) 8 32 5 6 8 32 5 6 Short-term receivables (nominal value) 35 896 34 162 32 519 30 674 Allowance for impairment of short-term receivables (7 590) (8 366) (7 180) (8 020) 28 306 25 796 25 339 22 654 19 Allowance for impairment of bad and Group Group Company Company doubtful receivables 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Allowance at the beginning of the year 8 366 8 128 8 020 8 107 Expense included in profit or loss statement 91 547 - 216 Income included in profit or loss statement (181) (6) (154) - Net changes included in profit or loss statement (90) 541 (154) 216 Bad debts written off (686) (303) (686) (303) Allowance at the end of the year 7 590 8 366 7 180 8 020 Provisions for debts were made based on an assessment of financial position and business activity of certain customer segments. The final losses may differ from those currently estimated because the particular amounts are periodically revised and changes are reflected in the profit or loss statement. 13. Taxes Group Tax movement Liabilities Receivable Calculated Paid Liabilities Receivable 31.12.2019 31.12.2019 2020 2020 31.12.2020 31.12.2020 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Value added tax 3 839 - 25 296 (27 287) 1 848 - Excise tax 892 - 5 983 (5 984) 891 - Social security contributions 701 - 7 010 (7 015) 696 - Corporate income tax - - 1 494 (1 494) - - Personal income tax 338 - 3 606 (3 591) 353 - Real estate tax - - 194 (194) - - Natural resource tax 6 - 14 (9) 11 - 5 776 - 43 597 (45 574) 3 799 - Group Tax movement Liabilities Receivable Calculated Paid Liabilities Receivable 31.12.2018 31.12.2018 2019 2019 31.12.2019 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Value added tax 5 732 - 60 995 (62 888) 3 839 - Excise tax 1 139 - 7 209 (7 456) 892 - Social security contributions 620 - 6 904 (6 823) 701 - Corporate income tax - 63 2 268 (2 205) - - Personal income tax 313 - 3 572 (3 547) 338 - Real estate tax - - 181 (181) - - Natural resource tax 6 - 8 (8) 6 - 7 810 63 81 137 (83 108) 5 776 - 20 Company Tax movement Liabilities Receivable Calculated Paid Liabilities Receivable 31.12.2019 31.12.2019 2020 2020 31.12.2020 31.12.2020 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Value added tax 2 774 - 16 738 (18 613) 899 - Excise tax 887 - 5 960 (5 958) 889 - Social security contributions 101 - 1 355 (1 352) 104 - Corporate income tax - - 1 494 (1 494) - - Personal income tax 33 - 801 (780) 54 - Real estate tax - - 13 (13) - 3 795 - 26 361 (28 210) 1 946 - Company Tax movement Liabilities Receivable Calculated Paid Liabilities Receivable 31.12.2018 31.12.2018 2019 2019 31.12.2019 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Value added tax 4 867 - 51 872 (53 965) 2 774 - Excise tax 1 137 - 7 168 (7 418) 887 - Social security contributions 91 - 1 339 (1 329) 101 - Corporate income tax - 63 2 268 (2 205) - - Personal income tax 40 - 798 (805) 33 - 6 135 63 63 445 (65 722) 3 795 - * See Note 21. 14. Other financial assets at amortised cost Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Accrued income 1 313 2 105 1 253 2 105 Reserves funds 260 1 145 260 1 145 1 573 3 250 1 513 3 250 15. Other current assets Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Deferred charges 1 245 674 736 408 Derivative financial instruments 624 7 029 624 7 029 Other receivables 103 198 3 71 1 972 7 901 1 363 7 508 As at 31 December 2020 and 31 December 2019, derivative financial instruments consist of natural gas swap agreements. 21 16. Shares and shareholders 31.12.2020 31.12.2020 31.12.2019 31.12.2019 % of total share capital Number of shares % of total share capital Number of shares Share capital Registered (closed issue) shares 36.52 14 571 480 36.52 14 571 480 Bearer (public issue) shares 63.48 25 328 520 63.48 25 328 520 100.00 39 900 000 100.00 39 900 000 Shareholders Uniper Ruhrgas International GmbH (including registered (closed issue) shares 7 285 740) 18.26 7 285 740 18.26 7 285 740 Marguerite Gas II S. à r.l. 28.97 11 560 645 28.97 11 560 645 Itera Latvija SIA 16.00 6 384 001 16.00 6 384 001 PJSC "Gazprom" (including registered (closed issue) shares 7 285 740) 34.00 13 566 701 34.00 13 566 701 Bearer (public issue) shares 2.77 1 102 913 2.77 1 102 913 100.00 39 900 000 100.00 39 900 000 As at 31 December 2020 and as at 31 December 2019, the registered, signed and paid share capital consisted of 39 900 000 shares with a par value of 1.40 EUR each. All shares have equal voting rights and rights to dividends. The Company has no dilutive potential ordinary shares and therefore diluted earnings per share are the same as the basic earnings per share. Basic earnings per share are calculated by dividing the net profit attributable to the shareholders by the weighted average number of ordinary shares in issue during the year. Dividends payable are not accounted for until they are declared at the Annual General Meeting. At the Annual General Meeting in 2021, the management will propose a dividend in respect to 2020 amounting to 0.27 EUR per share. These Financial Statements do not reflect any future dividends payable, which will be accounted for in the shareholders’ equity as an appropriation of retained earnings for 2020. Total dividends paid out to shareholders in 2020 amounted to 17 556 thousand EUR (0.44 EUR per share). In 2019, total dividends paid out to shareholders amounted to 21 945 thousand EUR (0.55 EUR per share). Earnings per share/ Group Earnings per share 2020 2019 Net profit attributable to shareholders (a) EUR’000 11 189 20 190 Ordinary shares as at 1 January (number, thousand) 39 900 39 900 Ordinary shares as at 31 December (number, thousand) 39 900 39 900 Weighted average number of ordinary shares outstanding during the year (b) (number, thousand) 39 900 39 900 Basic earnings per share during the year (a/b) in EUR 0.280 0.506 22 Earnings per share / Company Earnings per share 2020 2019 Net profit attributable to shareholders (a) EUR’000 11 501 19 700 Ordinary shares as at 1 January (number, thousand) 39 900 39 900 Ordinary shares as at 31 December (number, thousand) 39 900 39 900 Weighted average number of ordinary shares outstanding during the year (b) (number, thousand) 39 900 39 900 Basic earnings per share during the year (a/b) in EUR 0.288 0.494 17. Interest-bearing loans and borrowings Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Loan from JSC "SEB banka" Long-term part of the loan 22 167 25 667 - - Short-term part of the loan (i.e. less than 12 months) 3 500 3 500 - - 25 667 29 167 - - In 2017 the Company received a long-term loan of 35 000 thousand EUR for 5 years. Under the reorganisation, the Company transferred this loan to the newly established acquiring JSC “Gaso”. The loan is due for repayment starting in April 2018. Loan interest rate is fixed % p.a. plus 6 month EURIBOR. The Company has overdraft possibility. Overdraft interest rate is fixed % p.a. plus 3 month EURIBOR. 18. Deferred income Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR’000 EUR’000 EUR’000 EUR’000 Income from residential and corporate customers’ contributions to construction of gas pipelines: Long-term part 18 318 18 434 - - Short-term part 1 079 1 046 - - Other deferred income: Short-term part - 92 - 92 19 397 19 572 - 92 23 Changes of deferred income Group Group Company Company 2020 2019 2020 2019 EUR’000 EUR’000 EUR’000 EUR’000 Balance at the beginning of the year 19 572 19 677 92 - Received from residential and corporate customers during reporting year 974 924 - 92 Included in income of reporting year (1 149) (1 029) (92) - Total transfer to next years 19 397 19 572 - 92 19. Employment and post-employment benefit obligations Group Group Company Company 2020 2019 2020 2019 EUR’000 EUR’000 EUR’000 EUR’000 Obligations at the beginning of the reporting year 1 757 2 264 57 125 Recognised in profit or loss statement 355 80 2 (32) Paid (154) (180) (1) (2) Revaluations due to changes in actuarial assumptions – other comprehensive income 347 (407) 3 (34) Obligations at the end of the reporting year 2 305 1 757 61 57 Assumptions used in calculations of obligations 2020 2019 Discount rates, % 0.0025% 0.013- 0.0845% Company’s employee rotation rate,% 13.89% 13.39% Group’s employee rotation rate,% 5.01% 6.31% Employee retirement age, years 63.75-65 63.5-65 Wage growth,% 4.00% 4.00% Contributions to private pension fund,% 5.00% 5.00% Compulsory social security contributions (employees),% 23.59% 24.09% Compulsory social security contributions (retired),% 20.77% 21.31% 24 Assumptions used in calculations Assumption changes effect on accruals of obligations Group 31.12.2020 Group 31.12.2019 Company 31.12.2020 Company 31.12.2019 Changes in assumptions Discount rate + 0.5% Accruals decrease by 0.001% 0.004% 3.95% 3.38% Employee rotation rate + 0.5% Accruals decrease by 0.26% 0.29% 0.01% 4.00% Employee retirement age +1 years Accruals decrease by 0.73% 1.39% 11.11% 12.60% Wage growth +0.5% Accruals increase by 0.23% 0.16% 3.52% 3.15% Contributions to private pension fund +0.5% Accruals increase by 0.002% 0.02% 0.34% 0.36% Compulsory social security contributions +0.5% Accruals increase by 0.12% 0.09% 0.39% 0.39% Assumptions used in calculations of obligations Assumption changes effect on accruals Group 31.12.2020 Group 31.12.2019 Company 31.12.2020 Company 31.12.2019 Changes in assumptions Discount rate -0.5% Accruals increase by 0.0001% 0.004% 4.28% 3.65% Employee rotation rate -0.5% Accruals increase by 0.26% 0.29% 0.01% 4.33% Employee retirement age -1 year Accruals increase by 0.98% 2.89% 3.69% 2.59% Wage growth -0.5% Accruals decrease by 0.18% 0.16% 3.29% 2.94% Contributions to private pension fund -0.5% Accruals decrease by 0.002% 0.02% 0.34% 0.36% Compulsory social security contributions -0.5% Accruals decrease by 0.09% 0.09% 0.39% 0.39% Accruals were calculated on the assumption that the discount rate in 2020 was 0.0025% (the Group and the Company) (in 2019 was 0.0845% (the Group) and 0.013% (the Company)), i.e., equals to the average annual rate of return of treasury securities with the initial maturity of five years and more, effective in the last two issues of such securities (source: State Treasury). The 5.01% (the Group) and 13.89% (the Company) (2019: 6.31% (the Group) and 13.39% (the Company)) assumption of employee turnover rate, in turn, resulted from a calculation methodology based on the proportion between the number of employees having left the company (on their own initiative) and the number of employees in the reporting period. The assumption of employee retirement age is based on Article 8.1 of the transitional provisions of the law “On State Pensions” (hereinafter – the Law) adopted on 2 November 1995 whereby the age of eligibility for retirement pension as per Section 11 Paragraph one of the Law, – 62 to 65 years 25 – shall increase gradually and is specified for each year individually. As of 31 December 2020, it is 64 years (as of 31 December 2019, it is 63.75 years). The assumptions concerning the increase of salaries corresponds to the estimated inflation figure for the next year, which, according to the latest forecasts by the Bank of Latvia, will be around 1.8 %. It is also assumed as only variable for up to six years and constant afterwards. And also Group’s increase in personnel expenses is taken into account. In the last few years, the Company and the Group kept it at 4%. The 5% assumption of contributions to private pension fund is based on Group’s employee agreement. The assumptions concerning the mandatory state social security contributions for employees and pensioners have been made pursuant to the general provisions of the calculation methodology using the next year’s rates of mandatory state social security contributions as per Cabinet Regulations No. 786 “Regulations on the distribution of the rate of mandatory state social security contributions among types of state social security” approved on 17.12.2020 – 23.59% and 20.77% respectively. 20. Trade payables Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR'000 EUR’000 Payables to related parties (Note 22) - - 5 132 5 167 Payables to third parties 5 725 5 489 3 070 3 082 5 725 5 489 8 202 8 249 21. Other liabilities Group Group Company Company 31.12.2020 31.12.2019 31.12.2020 31.12.2019 EUR'000 EUR'000 EUR’000 EUR’000 Prepayments received 11 872 10 843 11 813 10 793 Derivative financial instruments 3 688 1 258 3 688 1 258 Value added tax 1 848 3 839 899 2 774 Accrued costs 4 324 4 431 1 153 1 081 Excise tax 891 892 889 887 Vacation pay reserve 1 250 901 215 141 Salaries 878 839 169 151 Social security contributions 696 701 104 101 Personnel income tax 353 338 54 33 Natural resource tax 11 6 - - Other current liabilities 86 109 14 31 25 897 24 157 18 998 17 250 26 22. Related party transactions No individual entity exercises control over the Company. The Company and the Group engaged in the following transactions with entities disclosed below, which own or owned more than 20% of the shares that deemed to provide a significant influence over the Company – PJSC “Gazprom” and the companies under its control. JSC “Latvijas Gāze” subsidiary JSC “Gaso” was established in 2017. Income or expenses Group 2020 Group 2019 Company 2020 Company 2019 EUR'000 EUR'000 EUR'000 EUR'000 Income from provision of services (incl. balancing services, natural gas for own use and other) JSC “Gaso” - - 1 567 2 549 Dividend income JSC “Gaso” - - 8 778 9 975 Purchases of natural gas PJSC “Gazprom” 102 199 180 655 102 199 180 655 PJSC “Gazprom Export” 2 248 - 2 248 - Expenses on natural gas distribution and other related services JSC “Gaso” - - 32 293 35 332 Financial transactions “Gazprom Marketing and Trading Limited” 19 - 19 - Related party payables and receivables Group 31.12.2020 Group 31.12.2019 Company 31.12.2020 Company 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Receivables from related companies JSC “Gaso” - - 178 - “Gazprom Marketing and Trading Limited” 8 - 8 - Advance payments to related entities PJSC “Gazprom” 6 356 5 827 6 356 5 827 PJSC “Gazprom Export” 1 004 - 1 004 - Payables to related companies for natural gas and services JSC “Gaso” - - 5 132 5 167 27 23. Financial risk management Financial assets and liabilities Level Group 31.12.2020 Group 31.12.2019 Group 31.12.2020 Company 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Restated Restated Trade receivables 3 28 306 25 796 25 339 22 654 Accrued income 3 1 313 2 105 1 253 2 105 Derivative financial instruments 2 624 7 029 624 7 029 Reserved funds 2 260 1 145 260 1 145 Cash and cash equivalents 2 54 236 48 995 44 968 38 487 Financial assets 84 739 85 070 72 444 71 420 Borrowings 3 25 667 29 167 - - Lease liabilities 3 21 385 276 385 Accrued expenses 3 4 324 4 431 1 153 1 081 Derivative financial instruments 2 3 688 1 258 3 688 1 258 Trade payables 3 5 725 5 489 8 202 8 249 Financial liabilities 39 425 40 730 13 319 10 973 Fair value The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. In order to arrive at the fair value of a financial instrument, different methods are used: quoted prices, valuation techniques incorporating observable data, and valuation techniques based on internal models. These valuation methods are divided according with the fair value hierarchy into Level 1, Level 2 and Level 3. The level in the fair value hierarchy, within which the fair value of a financial instrument is categorised, shall be determined on the basis of the lowest level input that is significant to the fair value in its entirety. The classification of financial assets in the fair value hierarchy is a two-step process: 1. Classifying each input used to determine the fair value into one of the three levels; 2. Classifying the entire financial instrument based on the lowest level input that is significant to the fair value in its entirety. Quoted market prices - Level 1 Valuations in Level 1 are determined by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted prices are readily available and the prices represent actual and regularly occurring market transactions on an arm’s length basis. 28 Valuation techniques using observable inputs - Level 2 Valuation techniques in Level 2 are models where all significant inputs are observable for the asset or liability, either directly or indirectly. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as price) or indirectly (that is, derived from prices). The quoted market price used for derivative financial assets and liabilities held by the Group and the Company are based on observable market data including current bid and ask prices, that are estimated by trading counterparties. Valuation technique using significant unobservable inputs - Level 3 A valuation technique that incorporates significant inputs not based on observable market data (unobservable inputs) is classified in Level 3. Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. Level 3 inputs are generally determined based on observable inputs of a similar nature, historic observations on the level of the input or analytical techniques. The fair value of long-term loans from credit institutions is measured by discounting future cash flows with market interest rates. As the interest rates applied to loans from credit institutions are variable and loans received as recent transactions and do not substantially differ from the market rates, the fair value of non-current liabilities approximately corresponds to their carrying amount. Financial assets of the Group and the Company fall under Level 3, except cash and cash equivalents and derivative financial instruments, which fall under Level 2. Description of fair value measurement for buildings, constructions, equipment and machinery is disclosed in Note 25, Revaluation of buildings, constructions, equipment and machinery section. Credit risk The Group and the Company are exposed to credit risk, which is a risk of material losses arising in case of a counterparty not being able to fulfil its contractual obligations to the Group and the Company. Credit risks arise from cash and cash equivalents, as well as credit exposure to customers, including outstanding receivables. 29 Concentration of credit risk In the reporting year, Latvijas Gāze group remained exposed to a high risk of customer concentration – five largest customers together accounted for 63% of the sales volume of 2020 (43% of 2019), from which the single one largest customer accounted for more than 40% (more than 23% in 2019). Despite of that, single customer concentration in receivables is not high, as some of the biggest customers made prepayments. Credit risk management practices To minimise credit risks the Company has put in place several risk management measures. For the largest customers the Company uses individual credit risk management policies, which include several practices such as initial credit limit assessment, detailed monitoring of financial measures, as well as a regular billing practice to avoid accumulation of current debt. In case of initial doubts, clients are placed for regular monitoring at the Board level, and, if necessary, additional collaterals are required to secure the provision of services and the sale of natural gas. For smaller customers the Company has approved detailed credit risk management policies, describing the basic steps for monitoring the progress and managing legally mandatory communication with the clients before an insolvency procedure can be initiated. In case of a customer becoming doubtful, the Company establishes provisions and starts legal proceedings to collect the debt. The credit risk of the subsidiary relates mainly to its largest customers. Major part of subsidiary’s trade debtors as at 31 December 2020 paid their debts in January 2021. Receivables that are not individually assessed for impairment are classified into groups of receivables based on days overdue and are collectively assessed for impairment. The expected credit losses (ECL) model is used according to IFRS 9 for the recognition of impairment losses. There is a ‘three stage’ approach, which is based on the change in credit quality of financial assets since initial recognition. In practice, these rules mean that entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12- Trade receivables and accrued income Group 31.12.2020 Group 31.12.2019 Company 31.12.2020 Company 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Restated Restated Impaired 7 507 8 281 7 103 7 935 Not overdue 25 601 25 973 22 601 22 582 Overdue less than 90 days, but not impaired 3 916 1 958 3882 1 921 Overdue more than 90 days, but not impaired 185 341 185 341 Trade receivables and accrued income, gross 37 209 36 553 33 771 32 779 Allowance for impairment of bad and doubtful debts (7 590) (8 366) (7 180) (8 020) Trade receivables and accrued income, net 29 619 28 187 26 591 24 759 30 month ECL. For trade receivables the Group and the Company use operational simplifications specified in IFRS 9. ECL rate applied 31.12.2020 31.12.2019 Receivables from natural gas wholesales and distribution services to the gas traders 0.06% 0.04% Households 1.3% 1.27% Distribution other receivables overdue for 1-90 day 7% 21% Receivables overdue for more than 90 days 100% 100% Other recoverable receivables 0.02%-0.12% 0.11% For managing the credit risk associated with cash and cash equivalents, the Company has approved a financial asset management policy. Based on internal guidelines all credit institutions with which the Company cooperates are graded once in a quarter, taking into account their financial measures as well as non-financial indicators. Based on the assessment, limits for current accounts with one institution are defined and regularly monitored. Due to low or even negative interest rates as at 31 December 2020 and 31 December 2019, cash and cash equivalents of the Group and the Company represented only current account balances with credit institutions. As a part of an internal assessment, the Group and the Company also analyse the Moody's Investor Services credit rating of a particular credit institution or its ultimate parent. Based on such assessment, outstanding cash and cash equivalents of Latvijas Gāze group can be summarised as follows (grouped by long term rating): 13% 7% 80% 2019 Aa2 Aa3 Ba1 27% 36% 9% 28% 2020 Aa2 Aa3 Baa1 Baa3 31 The Company's cash and cash equivalents can be summarised as follows (grouped by long-term rating): Liquidity risk Liquidity risk is associated with the ability of the Group and the Company to settle their obligations within the agreed due dates. Due to the high seasonality of operations of the Group and the Company, cash inflows are also exposed to high fluctuations within the year and most of revenues are generated during the first and the fourth quarter of the year. At the same time operational costs related to maintenance works are distributed evenly through the year, while dividend payments from the prior year are usually released in the third quarter of the year. The Group and the Company use cash flow planning tools to manage liquidity risk. The Group and the Company prepare yearly, quarterly and monthly cash flows to identify operational cash flow requirements. In 2020 and 2019 the Group attracted short term credit line and used long term loan. Division of financial liabilities by maturity date, as at 31 December 2020, Group: Division of financial liabilities by maturity date, as at 31 December 2019, Group: 2021 2-5 years Total Carrying amount EUR'000 EUR'000 EUR'000 EUR'000 Borrowings 3 673 22 289 25 963 25 667 Leases 21 21 21 Trade payables and accrued costs 10 049 - 10 049 10 049 Derivative financial liabilities 3 688 - 3 688 3 688 17 431 22 476 39 721 39 425 2020 2-5 years Total Carrying amount EUR'000 EUR'000 EUR'000 EUR'000 Borrowings 3 994 25 666 29 660 29 167 Leases 89 299 388 385 Trade payables and accrued costs 9 920 - 9 920 9 920 Derivative financial liabilities 1 258 - 1 258 1 258 15 261 25 965 41 226 40 730 14% 8% 78% 2019 Aa2 Aa3 Ba1 31% 42% 11% 16% 2020 Aa2 Aa3 Baa1 Baa3 32 Division of financial liabilities by maturity date, as at 31 December 2020, Company: 2021 2-5 years Total Carrying amount EUR'000 EUR'000 EUR'000 EUR'000 Leases 90 187 277 276 Trade payables and accrued costs 9 355 - 9 355 9 355 Derivative financial liabilities 3 688 - 3 688 3 688 13 133 187 13 320 13 319 Division of financial liabilities by maturity date, as at 31 December 2019, Company: 2020 2-5 years Total Carrying amount EUR'000 EUR'000 EUR'000 EUR'000 Leases 89 299 388 385 Trade payables and accrued costs 9 330 - 9 330 9 330 Derivative financial liabilities 1 258 - 1 258 1 258 10 677 299 10 976 10 973 Capital risk management The Group’s and the Company’s objectives when managing capital are to safeguard the Group’s and the Company’s ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders and to maintain an optimal structure to reduce the cost of capital. The Group and the Company perform management of the capital, based on proportion of borrowed capital against total capital. This indicator is calculated as proportion of total liabilities, less cash and cash equivalents, to the total capital of the Group or the Company. Liabilities include all long term and short-term liabilities, but total capital includes all liabilities and equity. This indicator is used to evaluate the Group’s and the Company’s capital structure as well as their solvency. As at 31 December 2020 and 31 December 2019 the proportion of borrowed capital to total capital was as follows: Group 31.12.2020 Group 31.12.2019 Company 31.12.2020 Company 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Restated Restated Total liabilities 79 712 80 527 27 537 26 033 (Cash and cash equivalents) (54 236) (48 995) (44 968) (38 487) (Reserved funds) (260) (1 145) (260) (1 145) (Deferred income) (19 397) (19 572) - (92) Net total liabilities 5 819 10 815 (17 691) (13 691) Total equity and liabilities 455 549 463 079 324 497 329 051 Borrowed capital proportion to total capital 1.28% 2.34% (5.45%) (4.16%) 33 Market risk Market risk is the risk that changes due to market factors, such as changes in foreign exchange rates, interest rates and commodity prices can affect the Group's or Company's profits. As at 31.12.2020 the Group and the Company had a cash balance in foreign currencies of 7 thousand USD (6 thousand EUR), as at 31.12.2019 the Group and the Company had a cash balance in foreign currencies of 8 thousand USD (7 thousand EUR). The Group and the Company have no other assets or liabilities in foreign currencies. The Company faces a certain market risk arising from injecting significant gas quantities into the Inčukalns Underground Gas Storage during the injection season for sale during heating period (calendar spread risk) as well as from the mismatch between purchase and sales pricing concepts. JSC “Latvijas Gāze” prioritizes internal market risk mitigation by negotiating supply agreement terms and working with its sales portfolio to the extent it is possible. In addition, the Company mitigates price risk by entering into derivative transactions. Other financial assets and liabilities are non-interest bearing or interest rates are fixed, except for borrowings. As the Group and the Company account for all financial assets and liabilities at amortized cost, they are not subject to fair value interest rate risk. Interest rate risk The entire Group's and the Company's borrowings are subject to interest rates based on a EURIBOR rate plus a fixed premium. Interest rate risk is not material for the Group and the Company. 24. Other risk management Compliance risk Compliance risk is the risk that the Group and the Company may incur losses, be subject to legal obligations, be subject to sanctions, or be in bad standing due to the Group and the Company's 's failure to comply or violate compliance laws, regulations and standards. The Management Board of the Company and the Management Board of its Subsidiary closely monitor changes in regulatory enactments, as well as the operation of the Company's and its Subsidiary's internal control processes in order to ensure compliance with existing regulatory requirements and timely preparation of necessary future business changes. The Group and the Company use the following methods to prevent and reduce the compliance risk: develop and update regulatory documents in accordance with regulatory enactments of the Republic of Latvia; ensure the participation of the Legal Department in the development of the Group's and the Company's regulatory documents; if a finding of non-compliance is made, promptly take the necessary measures to remedy the non-compliance; 34 use standardized forms and texts for contracts, notices, terms of service and other documents intended for clients in dealings with clients or potential clients; where appropriate, train unit staff on compliance risk issues. 25. Critical accounting estimates and judgements The preparation of financial statements in conformity with IFRS requires the use of accounting estimates, which, by definition, will seldom equal the actual results. Management also needs to exercise judgment in the process of applying the Group’s and the Company’s accounting policies. This note provides information about the areas that involved higher degree of judgment or complexity which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Revaluation of buildings, constructions, equipment and machinery The management determines the fair value and the remaining useful life of buildings and constructions and equipment and machinery based on valuations performed by independent certified valuators in accordance with real estate valuation standards and based on the average construction costs relevant for the reporting year when valuation is performed, less subsequent depreciation. The Group’s internal policy is to perform the revaluations with sufficient regularity, when there are indications that the average construction costs and/or purchase prices related to the buildings, gas distribution system and equipment have changed significantly which could lead to the carrying amount of such assets differing materially from that which would be determined using fair value at the end of the reporting period, but at least once every five years. At the end of each reporting period, the management updates Its assessment about the changes in the construction costs of the assets subject to periodic revaluation, taking into account the available information such as official statistics data and prices quoted by construction companies in the procurement process. The management determines whether there are such changes in the market prices that would result into material difference between the relevant asset’s carrying amount and its fair value. All resulting fair value estimates are included in level 3 (see also Note 23). As in 2019 the average construction costs have substantially changed against the average construction prices used by an independent certified valuator when revaluating assets in 2017, the management of JSC GASO decided to carry out a revaluation of assets in order to measure the asset replacement values as at 1 August 2019. The revaluation of property, plant and equipment was carried out by independent certified valuators, measuring the initial and residual cost value of each asset under valuation, as well as the replacement value of accumulated depreciation as at 1 August 2019 for buildings, constructions, technological equipment, and vehicles for core business. Out of these categories, the items not valued were land, compensations for land, electricity installations and assets that were set to be written off in 2019 and 2020. The valuation of assets took place in compliance with the International Valuation Standards 2012 (IVS 300 Valuations for financial reporting) using the cost approach. The cost approach method used in the valuation of immovable property was based on the average construction and purchase prices in Latvia. The measurement of cost replacement values involved an analysis of the construction cost data of Latvian construction companies, the average pipeline costs for gas pipelines, as well as the information available to JSC GASO regarding the construction works carried out in recent years. The value of basic calculation unit for each specific building or 35 group of buildings depended on its structural design, the quality of works, the degree of improvement, the quality of the construction materials used, the applicability of specific construction conditions, and other factors found on site. When it came to movable property, a cost approach was used, i.e., obtaining a value indicator based on the economic principle that the buyer will not pay for the asset above the expected acquisition or development costs of an asset of identical utility. This approach is based on the principle that, where there are no issues with the time needed to develop an equivalent asset, inconveniences, risks or other factors, the market price paid by the buyer for the asset under valuation would not be greater than the acquisition or development costs of an equivalent asset. The depreciated replacement cost value of buildings and constructions was calculated based on the results of inspection and the construction value in the prices at the time of valuation based on the utility of equivalent items in line with the construction requirements and materials used at the time of valuation and considering the technical and functional loss in value over time. The findings were analysed in light of the construction time of the building or construction and the repairs required and completed. The replacement cost of accumulated depreciation for each asset was also measured, with the asset’s physical, functional and technical depreciation used as key factor. The overall loss in technical value for buildings and constructions was measured as the sum of losses in value of individual structural elements, expressed as percentage and attributed to the building or construction as a whole. With morally obsolete low-quality buildings and constructions, and constructions where full-fledged practical use is problematic, value adjustment factors were used to determine the extent of functional loss in value. Physical loss in value reflects the aging of real estate over time manifesting as, for instance, defective structural parts and workmanship or incompleteness of structure. It shows the degree of decay of construction structures and materials and, consequently, the losses in value resulting from various physical factors. Functional loss in value manifests as a loss in the market value of real estate caused by an inappropriate development plan or non-conformity of its other features to the present-day requirements. It shows the incompatibility of buildings and constructions with the existing real estate market standards and conjuncture. The replacement value was measured using the cost approach method on the basis of the average construction and purchase costs in Latvia. If the figure of average construction and purchase costs in Latvia used in valuation increased by 1%, the value of the assets revalued would increase by 6 765 thousand EUR. Conversely, if the figure of average construction and purchase costs in Latvia used in valuation decreased by 1%, the asset value would decrease by 6 765 thousand EUR. As in 2020 the average construction costs have not changed significantly compared to the average construction prices, which were taken into account by an independent certified valuator when revaluing the assets in 2019, the management of JSC GASO has decided not to revalue the assets in 2020. 36 Estimation of remaining useful life The Group and the Company annually estimate the useful life of intangible assets and property, plant and equipment and make adjustments if the forecasts differ. These estimates are based on the previous experience as well as on the industry practice and revised at the end of every reporting period. In the past, the actual useful life of assets has occasionally exceeded the estimate. Impairment of trade receivables and accrued income The loss allowance for financial assets, including trade receivables and accrued income, is based on assumptions about risk of default and the expected loss rates. The Group and the Company use their judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s and the Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. As individual assessment is not possible due to the large number of individual balances, only the significant debtors are assessed individually. Receivables that are not individually assessed for impairment are classified into groups of receivables based on days overdue and are collectively assessed for impairment. Details of the key assumptions and inputs used to estimate expected credit losses are disclosed in Note 23, Credit risk section. Determination whether the entity acts as a principal or an agent in provision of certain services The management has determined that the Group acts as an agent for natural gas transmission services and the Company acts as an agent for natural gas transmission and distribution services as they do not control the respective services before they are transferred to the customer. The following arguments support the above-mentioned conclusion: The Group (in relation to transmission services) and the Company (in relation to transmission and distribution services) neither owns nor operates any of the assets necessary to provide respective services. The customers do not perceive getting the different elements/services from different providers. From the customer´s perspective, there is no other value added apart from the only one benefit, i.e. a supply of gas (including its transmission and distribution), in particular, there are no alternative service providers, and all gas trading companies must enter into agreements with transmission and distribution operators. Any issues related to the physical transportation of natural gas through the distribution or transmission network, the measurement of natural gas transported through the systems, and repairing or modernizing pipes is fully under the control of distribution and transmission operators and cannot be influenced by gas trading companies. The moment of the transmission & distribution and the sale and transfer to the end-user are not separated due to the nature of business. Nevertheless, only the providers of transmission and distribution services are capable to track the quantities delivered and they reconcile the quantities between themselves as the infrastructure is fully under the control of transmission and distribution operators. Transmission and distribution services are subject to a regulated non-discriminatory tariff approved by a local regulatory body. Any expenditure incurred in providing these services 37 including the volume of capital expenditure which may impact future tariffs, is the responsibility of transmission and distribution operators. The end-users are charged with a transmission and distribution fixed fee calculated based on a formula: regulated tariff for distribution/transmission x quantity delivered. The Company passes on the costs for distribution and transmission services to the customers without adding any additional fees or charges. Determination whether the entity acts as a principal or agent in collecting and paying excise duty The management has determined that with regard to excise duty, the Company acts as an agent by collecting the excise duty on behalf of the government. As a result, the excise tax is deducted from the net revenue (similar to other sales taxes) rather than included in both revenue and cost of sales as such a presentation reflects the substance of the arrangements. The following considerations support the judgements made by the management: Although the “production” and “sale” (a transfer to the end-user) are not really separated due to the nature of business, the triggering event to pay the excise tax is a “delivery” to the end user. This indicates that the excise duty is paid close to the transfer to end customer and therefore it is closer in nature to a sales tax. The excise duty is clearly separate from the selling price and it is shown separately on the invoices to commercial clients. A change in the tax would result in an equivalent change in the amount passed through to the customer. Even in a non-typical situation when the gas would be given to end-user free of charge, the excise tax needs to be calculated as it follows from the requirement of the law. This is considered a strong indicator that the entity is collecting the tax on behalf of the government. One may argue that there are indicators which may support a gross treatment (e.g. the pricing is based on physical quantity, not tied to value of revenue/the selling price or a failure by customer to pay does not provide the rights to claim the tax back). Nevertheless, in the view of management, in the context of the arrangements they do not have to be regarded as superior and decisive in order to conclude on an accounting treatment with respect to the excise duty. Non-recognition of deferred tax liability Deferred tax liability is not recognised in the consolidated financial statements of the Group in relation to the taxable temporary differences associated with investment in subsidiary (arising from existence of untaxed with corporate income tax retained earnings in subsidiary, arisen after 1 January 2018) as the management has determined that subsidiary’s profit for the years ended from 31 December 2018 to 31 December 2020 will not be distributed in the foreseeable future. The management exercised significant judgement in interpreting the longevity of the period described as “foreseeable future”. In the management’s opinion, in the current business environment, it is not possible to develop reliable business plans and forecasts for a period of time exceeding 3-5 years, despite the fact that the subsidiary in question operates in a regulated industry with regulated tariffs and is a monopoly provider of natural gas transmission services in Latvia, therefore, the period of foreseeable future cannot exceed 5 years or even less. Management’s judgement is based also on the following considerations: 38 The subsidiary will first distribute the retained earnings accumulated till 31 December 2017 to take an advantage of new corporate income tax regime which permits the tax payers to distribute the said retained earnings without levying tax on such distributions (as these retained profits have been taxed under previous tax regime); It is estimated that the time period while the “previous” retained earnings are fully distributed will exceed 5 years; It is assumed that in the consecutive years, after the distribution of “previous” retained earnings, the subsidiary will distribute dividends from current earnings not exceeding annual profit amount. Control over subsidiary While the JSC "Gaso" is given a statutorily independence in terms of running the gas distribution business, the overall corporate control by JSC "Latvijas Gāze", in its capacity as a parent entity, is fully retained. The normal corporate control rights by the parent group entity over the distribution subsidiary are expressly acknowledged in Art 45(3)(3) of the Latvian Energy Law (which provision, in its turn, transposes a rule specified in Art.26(2)(c) of the Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC). Particularly, in the context of IFRS 10 “Consolidated financial statements”, the critical aspect of control is ensured by the fact that the power to appoint the Council of JSC “Gaso” lies with the Board of the JSC “Latvijas Gāze” (with the consent of the Council of the Company) acting in its capacity as sole shareholder of JSC “Gaso”. Council of JSC “Gaso”, in its turn, appoints the Board of JSC “Gaso”, which is in charge of operational activities that significantly affect the subsidiary’s returns. 26. Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied during all years presented, unless otherwise stated. Basis of preparation The consolidated and separate financial statements (financial statements) of the JSC “Latvijas Gāze” are prepared in accordance with the International Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) as adopted for use in the European Union, and are presented together in one document. The financial statements are prepared on a historical cost basis, except for derivative financial instruments that are measured at fair value and certain classes of property, plant and equipment that are carried at revalued amount, as disclosed in the notes below. All amounts shown in these financial statements are presented in thousands of Euros (EUR), unless identified otherwise. Euros (EUR) is the functional and presentational currency of the Group and the Company. 39 These financial statements have been approved for issue by the Board of Directors of the Company on 21 April 2021. In accordance with the requirements of the Commercial Law, the Company announces the Annual Shareholders' Meeting after receiving the auditor's report and the Supervisory Board's report, simultaneously sending the Annual Report to the Company's shareholders. Adjustment of opening balances In 2020 the Company migrated all its balances and settlements with household customers to a new IT system MECOMS. After migration process a difference of 1 159 thousand EUR between accounting records and detailed listing of accounts receivable from households was detected. According to the results of a detailed investigation this difference historically originated from the accounting periods before reorganisation of the Company, which took place according to the requirements included in the Energy Law to ensure operational separation of the distribution business from the sales & trading activities, at the end of 2017. Since the reorganisation sales volume has been recognised based on gas amounts in the distribution system, which was calculated by JSC GASO on a monthly basis based on the Rules of Cabinet of Ministers No 78 dated 7 February 2017 and it fully agrees to the accounting records of the Company. The detected difference was accumulated over a long period of time before the reorganisation and represents a sum of individually insignificant differences between actual gas consumption in Latvia and submitted values of gas counters, which were historically allocated to individual customers balances within the previously used IT system. As this amount of 1 159 thousand EUR relates to the periods before the earliest period reported in these financial statements, the comparative information as of 1 January 2019 and 31 December 2019 has been adjusted retrospectively. The impact of the adjustment is as follows: Group 31.12.2019 EUR’000 Company 31.12.2019 EUR’000 As originally reported Restated Change As originally reported Restated Change Accounts receivable 26 955 25 796 (1 159) 23 813 22 654 (1 159) Retained earnings (111 878) 110 719 1 159 (23 447) (22 288) 1 159 New Accounting Pronouncements Standards or interpretations effective for the first time for the annual periods beginning 1 January 2020 A number of new standards and interpretations have been published that are mandatory for annual periods beginning on or after January 1, 2020, and which did not have a significant impact on the financial position or operations of the Group and the Company: Amendments to the Conceptual Framework for Financial Reporting (effective for annual periods beginning on or after 1 January 2020). The revised Conceptual Framework includes a new chapter on measurement; guidance on reporting financial performance; improved definitions and guidance - in particular, the definition of a liability; and clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting. Definition of a business - Amendments to IFRS 3 (effective for acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020). The amendments revise definition 40 of a business. A business must have inputs and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present, including for early stage companies that have not generated outputs. An organized workforce should be present as a condition for classification as a business if are no outputs. The definition of the term ‘outputs’ is narrowed to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits. It is also no longer necessary to assess whether market participants are capable of replacing missing elements or integrating the acquired activities and assets. An entity can apply a ‘concentration test’. The assets acquired would not represent a business if substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets). Definition of materiality – Amendments to IAS 1 and IAS 8 (effective for annual periods beginning on or after 1 January 2020). The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until now has featured elsewhere in IFRS. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. Interest rate benchmark reform – Amendments to IFRS 9, IAS 39 and IFRS 7 (effective for annual periods beginning on or after 1 January 2020). These amendments provide certain reliefs in connection with interest rate benchmark reform. The reliefs relate to hedge accounting and have the effect that IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness should continue to be recorded in the income statement. Standards or interpretations effective for the first time for the annual periods beginning on or after 1 January 2021 or not yet adopted by the EU Certain new or revised standards and interpretations have been issued that are mandatory for the Group’s annual periods beginning on or after 1 January 2021, and which the Group and the Company have not early adopted. No significant impact on the financial statements of the Group and the Company is expected from these standards or interpretations. Classification of liabilities as current or non-current – Amendments to IAS 1 (effective for annual periods beginning on or after 1 January 2022, not yet adopted by the EU). Amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (effective for annual periods beginning on or after 1 January 2022, not yet adopted by the EU). Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (effective for annual periods beginning on or after 1 January 2021, not yet adopted by the EU). There are no new or revised standards or interpretations that are not yet effective that are expected to have a material impact on the Company or the Group. 41 Financial instruments Financial assets Classification The Group and the Company classify their financial assets in the following measurement categories: those to be measured subsequently at fair value (either through OCI or through profit or loss), and those to be measured at amortised cost. The classification depends on the Group’s and Company’s business model for managing the financial assets and the contractual terms of the cash flows. Recognition and de-recognition Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group and the Company commit to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group and the Company have transferred substantially all the risks and rewards of ownership. Measurement At initial recognition, the Group and Company measure a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Debt instruments Subsequent measurement of debt instruments depends on the Group’s and Company’s business model for managing the asset and the cash flow characteristics of the asset. All Group’s and Company’s debt instruments are classified in the amortised cost measurement category. Amortised cost Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income/ (expenses). Foreign exchange gains and losses and impairment losses are presented within other income /(expenses) in the statement of profit or loss. The following financial assets of the Company and Group were classified in this category: trade receivables; accrued income; reserved funds; 42 cash and cash equivalents. Equity instruments The Group and the Company have no investments in equity instruments. Derivative financial instruments Derivative financial instruments are carried at their fair value. All derivative instruments are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of derivative instruments are included in profit or loss for the reporting period. The Company and the Group do not apply hedge accounting. Impairment The Group and the Company assess on a forward-looking basis the expected credit losses (“ECL”) associated with their debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The measurement of ECL reflects: an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, time value of money and all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions. For trade receivables and accrued income without a significant financing component, the Group and the Company apply a simplified approach permitted by IFRS 9 and measure the allowance for impairment losses at expected lifetime credit losses from initial recognition of the receivables. As individual assessment is not possible due to the large number of individual balances, only the significant debtors are assessed individually. Receivables that are not individually assessed for impairment are classified into groups of receivables based on days overdue and are collectively assessed for impairment. Revenue from contracts with customers Revenue is income arising in the course of the Group’s and Company’s ordinary activities. Revenue is measured in the amount of transaction price. Transaction price is the amount of consideration to which the Group and the Company expect to be entitled in exchange of transferring control over promised goods or services to a customer, excluding the amounts collected on behalf of third parties. The Group and the Company recognise revenue when it transfers control of a good or service to a customer. 43 Sale of natural gas – wholesale The Group and the Company sell natural gas in the wholesale market. Revenue is recognized at the point in time when the product (natural gas) is delivered to the wholesaler (buyer) and he has full discretion as to the place and price of the products, and the wholesaler (buyer) has no claim for performance of the contract that could affect the acceptance of the products from the wholesaler (buyer). Delivery takes place when products are delivered to a particular location, the prescription and limitation risks are passed on to the wholesaler (buyer), and the Group and the Company have objective evidence that all acceptance-transfer criteria are met. It is considered that there is no financing element here, because the sale is made with a credit term of 10-30 days, which corresponds to the prevailing market practice. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Sale of natural gas to end users – commercial customers and households The Group and the Company sell natural gas to end users – corporate customers and households. These sales meet over the time recognition criteria as the customer receives and uses the benefits simultaneously as the gas is delivered. Revenue is recognised based on the actual quantities delivered up to the end of the reporting period, normally one month, as the gas sold is priced on a per quantity basis. Households settle their debts according to equalized payment schedules with end-dates not necessarily coinciding with calendar year-end, based on the actual consumption during previous settlement year. Management exercises judgement when estimating revenue for quantities delivered but not yet billed to these customers. This is determined using an established methodology within the Group. If the contract includes variable consideration, revenue is recognised only to the extent that it is highly probable that there will be no significant reversal of such consideration. Excise duty The excise duty is levied on the natural gas delivered to the end user and is calculated on the basis of fixed rate per quantity delivered depending upon purpose of use of natural gas by the end user. The Group and the Company act as an agent in collecting the excise duty from customers, and pay it to the government, therefore revenue is recognised net of excise tax levied on the customers. Sale of services – natural gas distribution The Group provides natural gas distribution services to the gas traders who sell the natural gas to end users. Revenue from providing services is recognised over time in the period in which the services are rendered. The management exercises judgement related to the quantity of natural gas delivered to the household end-customers of the Group, as explained in the policy “Sale of natural gas to end users – commercial customers and households” above. 44 Connection fees When connecting to the gas network, the clients must pay a connection fee based on the actual costs of infrastructure to be built in order to connect them to the network. The management has concluded that the connection fees do not represent a separate performance obligation from the ongoing provision of network distribution services, and thus the revenue from connection fees is deferred and recognised as revenue over the estimated customer relationship period, which, in management’s view, approximates 30 years. Connection fees received from customers are carried in the statement of financial position as “Deferred income” within long-term liabilities. Contract assets and contract liabilities related to contracts with customers Due to equalised invoicing and settlement arrangements with household customers, these customers routinely are in the position of over-payment in relation to their actual consumption. It is also common for households to make an advance payment for the whole year ahead, based on the actual consumption of prior settlement year. There are also corporate customers who have overpaid to the Group and the Company for the goods and services received. The balances of overpaid amounts that represent contract liabilities are offset against future consumption. They are reported within other liabilities as prepayments received. Contract asset that relates to contract with the natural gas transmission and storage operator, where the Group and the Company have undertaken commitment to store an agreed quantity of natural gas in the underground storage for particular period of time is reported as accrued income within other current assets. The revenue is receivable when all the conditions of the contract are fulfilled. Financing component The Group and the Company do not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. Consequently, the Group and the Company do not adjust any of the transaction prices for the time value of money. Property, plant and equipment Property, plant and equipment are tangibles, which are held for use in the supply of goods and in the provision of services, and used in more than one period. The Group`s and the Company’s main asset groups are buildings and constructions, which include distribution gas pipelines, as well as equipment and machinery that is mainly related to technical gas distribution. The Group’s buildings and constructions (including the gas distribution system) and equipment and machinery are recognised at fair value as determined under the policy of revaluation of fixed assets approved by the Board, less accumulated depreciation and impairment loss. Revaluation shall be made with sufficient regularity to ensure the carrying amount does not differ materially from the one, which would be determined using fair value at the end of the reporting period. All other property, plant and equipment groups (including land) are stated at historical cost, less accumulated depreciation and impairment charge. The historical cost includes expenditure directly attributable to the acquisition of the items. 45 Assets purchased, but not ready for the intended use or under installation process are classified under “Assets under construction”. This group is measured at cost less accumulated impairment losses. Subsequent costs are included in the asset’s carrying amount or recognised as separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group or the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss statement for the financial period when they incurred. Upon revaluation of property, plant and equipment, the accumulated depreciation is changed in proportion to changes in the gross value of the property, plant and equipment revalued. Increases in the carrying amount arising on revaluation of buildings, gas distribution system and equipment are credited to Revaluation reserve in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against revaluation reserve directly in equity; any further decreases are charged to the profit or loss statement. The revaluation surplus is transferred to retained earnings on the retirement or disposal of the asset. Each year, the difference between depreciation based on the revalued carrying amount of the asset charged to profit or loss and depreciation based on the asset’s original cost is reclassified from the property, plant and equipment revaluation reserve to retained earnings. Land and assets under construction are not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revaluated amounts to their residual values over their estimated useful lives, as follows: years Buildings 20 - 100 Constructions, including gas distribution system 20 - 70 Machinery and equipment 5 - 20 Other fixed assets 2 - 10 The assets’ useful lives are reviewed, and adjusted as appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains or losses on disposals are determined by comparing carrying amount with proceeds and are charged to the profit or loss statement during the period when they are incurred. Intangible assets Intangible assets primarily consist of software licences and patents. Intangible assets have a finite useful life and are carried at cost less accumulated amortisation and impairment loss. Amortisation is calculated using the straight-line method to allocate the cost of intangible assets over their useful lives. Generally, intangible assets are amortised over a period of 5 to 10 years. Impairment of non-financial assets All the Group’s and Company’s the non-financial assets, except for land, have a finite useful life. Assets subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An 46 impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets having suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Inventories Inventories are stated in the balance sheet at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. The cost of natural gas is composed of the gas purchase price and is determined using FIFO (first in first out) method. The cost of other materials, spare parts and other inventories is determined using the weighted average method. The value of outdated, slow-moving or damaged inventories has been provisioned for. Leases The Group and Company are lessee. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: fixed payments (including in-substance fixed payments), less any lease incentives receivable; variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable by the Group and the Company under residual value guarantees; the exercise price of a purchase option if the Group and the Company are reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the Group and the Company exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. Lease duration used in the calculation is based on signed agreements for external lease and 5 years for intragroup lease. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. Discount rate applied to measure lease liabilities as at 31 December 2020 and 31 December 2019 is 3.33%. 47 Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs, and restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the expected lease term on a straight-line basis. If the Group or the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. While the Group and the Company revalues its land and buildings that are presented within property, plant and equipment, they have chosen not to do so for the right-of-use buildings held by the Group or the Company. Principles of consolidation Subsidiaries are all entities over which the Group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated in consolidation. There is only one subsidiary in the consolidated group – JSC “Gaso” which was established on 1 December 2017 as a result of a reorganisation (spun-off of distribution business segment from the parent company JSC “Latvijas Gāze”). The reorganisation was determined to be a transaction among entities under common control and was recorded based on predecessor values. As a result, on the reorganisation date, the assets and liabilities with resulting entries in equity were transferred to the opening balance sheet of subsidiary based on their predecessor amounts in the books of JSC “Latvijas Gāze”. The reorganisation as such did not impact the consolidated financial statements following an establishment of Group as consolidated financial statements continued to report the natural gas trading and distribution business in one consolidated entity. Reorganisation and investment in subsidiary In the separate financial statements of the parent company, investment in subsidiary’s capital is accounted at cost less any impairment loss. The cost of investment was determined with the reference to the carrying amount in the predecessor’s (i.e., JSC “Latvijas Gāze”) books of assets and liabilities that were transferred to subsidiary AS “Gaso” as a result of reorganisation. 48 Reorganisation was determined to be a transaction between entities under common control and accounted for at predecessor values based on the following: In the course of the reorganization process, JSC “Latvijas Gāze” acquired ownership of 100% of JSC “Gaso” shares in exchange for the net assets transferred to JSC “Gaso”, thereby acquiring non-monetary assets (shares) in exchange for a combination of non- monetary and monetary assets and liabilities (i.e., JSC ”Gaso” transferable assets according to the asset allocation act). The assets and liabilities of the new group immediately after the reorganization were the same as assets and liabilities of JSC “Latvijas Gāze” immediately before the reorganization; The absolute and relative participation of JSC “Latvijas Gāze” shareholders in the net assets of the newly created group immediately after the reorganization was the same as their share in the net assets of JSC “Latvijas Gāze” immediately before the reorganization. As a result of this reorganisation the Company recognised a reorganisation reserve which arose as a result of a difference between the net assets received and transferred within reorganisation process. Dividends from the subsidiary are recognised in the separate financial statements of the Company when the right to receive the dividend is established. The dividend is recognised in the profit or loss statement. If there is objective evidence that the carrying amount of the investment in the subsidiary exceeds its recoverable amount, the impairment loss is calculated as the difference between these two amounts and recognised immediately in profit or loss. The recoverable amount of investment is the higher of its fair value less costs of disposal and it value in use. Value in use is the present value of the future cash flows expected to be derived from the investment in subsidiary. Impairment loss with regard to investment in subsidiary is reversed if the recoverable amount of investment has increased above the previously estimated recoverable amount used in measuring the recognised impairment loss, but reversal should not exceed the initial cost of investment. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker of each legal entity in the Group (i.e., the parent entity and subsidiary). Although the internal reporting formats are similar for both entities, there is no single chief operating decision-maker for the whole Group, given the legal requirements regarding operational independence of natural gas distribution operator from its vertically integrated parent company – the largest natural gas trader in Latvia. Management Board and Supervisory Board of each entity are regarded as chief operating decision-makers who are responsible for allocating resources and assessing performance of each segment. Share capital and dividend authorised Ordinary shares are classified as equity. No preference shares have been issued. Incremental external costs directly attributable to the issues of new shares are shown in equity as a deduction, net of tax, from the proceeds. Dividend distribution to the Group’s parent company’s shareholders 49 is recognized as a liability in the financial statements in the period in which the dividends are approved by the Company's shareholders. Trade and other payables These amounts represent liabilities for goods and services provided to the Group and the Company prior to the end of the reporting period which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition with an exception of personnel related accruals where the payment terms might be up to 12 months. If the payment is not due within 12 months after the reporting period, such payables are presented as non-current. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings and borrowing costs Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Fees paid for establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. Borrowings are derecognised when the obligation specified in the contract is discharged, cancelled or expired. Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. General and specific borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. All other borrowing costs are recognised in the profit or loss statement in the period in which they are incurred. Provisions Provisions are recognised when the Group or the Company have a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value according to the management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Employee benefits Wages, salaries and bonus plans Liabilities for wages and salaries, including non-monetary benefits, annual leave and bonuses that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The Group and the Company recognise a liability and expense for bonuses 50 based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group and the Company recognise liability where contractually obliged or where there is a past practice that has created a constructive obligation. The liabilities are presented as Other liabilities in the balance sheet. Social security and pension contributions The Group and the Company pay social security contributions for state pension insurance to the state funded pension scheme in compliance with the Latvian legislation. The state funded pension scheme is a fixed-contribution pension plan whereby the Group and the Company have to make payments in an amount specified by law. The Group and the Company also pay contributions to an external fixed-contribution private pension plan. The Group and the Company do not incur legal or constructive obligations to pay further contributions if the state funded pension scheme or private pension plan are unable to meet their liabilities towards employees. The social security and pension contributions are recognised as an expense on an accrual basis and are included within staff costs. Vacation pay accrual The amount of accrual for unused annual leave is determined by multiplying the average daily wage of employees for the last six months of the reporting year by the amount of accrued but unused annual leave at the end of the reporting year. Post-employment and other employee benefits Under the Collective Agreement, the Group and the Company provide certain defined benefits over employment and upon termination of employment to employees whose employment conditions meet certain criteria. The amount of benefit liability is calculated annually based on the current salary level and the number of employees who are entitled to receive those payments, as well as based on actuarial assumptions, using the projected unit credit method. The present value of the benefit obligation is determined by discounting the estimated future cash outflows using the market rates on government bonds. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation. This cost is included in employee benefit expense in the statement of profit or loss. Re-measurement gains and losses arisen from experience adjustments and changes in actuarial assumptions are recognised in other comprehensive income in the period in which they occur within separate reserve “Employee benefits revaluation reserve”. They are included in retained earnings in the statement of changes in equity and in the balance sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs. 51 Income tax The corporate income tax is calculated for distributed profits (20/80 from the net amount payable to shareholders). The tax on the distributed profit is recognised when the Company’s shareholders decide upon distribution. Corporate income tax is also paid on conditionally distributed profits (non-business related disbursements, entertainment and donation costs exceeding certain criteria and similar). Such tax is not regarded as income tax in the context of IAS 12 as it is calculated on the gross rather than net amounts, and recognised in the statement of profit or loss as other operating cost. The Group recognise deferred tax liability for taxable temporary differences associated with investment in subsidiary (arising from existence of untaxed retained earnings arisen after 1 January 2018 in subsidiary) except to the extent that it is probable that the temporary difference will not reverse in the foreseeable future, i.e., the untaxed retained earnings will not be distributed from subsidiary to the parent company in foreseeable future. In the reporting periods ended 31 December 2020 and 31 December 2019 the management of the Group did not recognise the deferred tax liability in the consolidated financial statement related to the above. Related parties Related parties are defined as the Company’s shareholders with a significant influence and the entities where these shareholders have control or joint control, as well as members of the Council and the Board of the Company or its subsidiary, their close relatives and entities in which they have a significant influence or control. 27. Remuneration of certified auditors company Group Group Company Company 2020 2019 2020 2019 EUR'000 EUR'000 EUR'000 EUR'000 Statutory audit 46 41 31 26 Non-audit services 2 1 1 1 48 42 32 27 28. Contingent liabilities The Company has a long-term agreement with PJSC Gazprom based on “take or pay” rules that determine the minimum quantity to be purchased in the respective period. If the entity is not able to consume the agreed volume, legal obligations might arise. Financial obligations arising from long-term gas purchases are calculated based on the same principles that govern internal budgeting. The resulting long-term obligations as of the balance sheet date amounted to approximately 1.93 billion EUR on 31 December 2020 and to 2.29 billion EUR on 31 December 2019. According to the Commercial law of Republic of Latvia, in the case of reorganization, the incumbent company bears solidary responsibility together with the newly established company with regard to the liabilities that originated prior to reorganisation and were transferred to the newly established company, and whose settlement date occurs within five years after the 52 reorganization date. As at 31 December 2020 and 31 December 2019, the Group and the Company are not aware of any existing liabilities that they would be liable for in relation to the above. As at 31 December 2020 as a part of financial guarantees SEB banka has reserved 260 thousand EUR (31.12.2019: 1 166 thousand EUR and in Swedbanka 30 thousand EUR). The following table summarised other contracted commitments at the end of reporting year: Commitments Group 31.12.2020 Group 31.12.2019 Group 31.12.2020 Company 31.12.2019 EUR'000 EUR'000 EUR'000 EUR'000 Contracted and unfinished 860 686 696 244 Contingent liabilities related to the corporate income tax from distributable profit of the Company When the net profit for 2020 will be distributed, corporate income tax liabilities will arise (20/80 from net amount distributed to shareholders). Dividends received from the subsidiary will not give rise to additional tax liability in the hands of the Company when distributed further to the shareholders of the Company. Assuming a proposed distribution of profit for 2020 as disclosed in Note 16 (10 773 thousand EUR or 0.27 EUR per share), taking into account the subsidiary’s dividends of 8 778 thousand EUR, the resulting corporate income tax charge will be around 498 thousand EUR, to be recognised in the Group’s and the Company’s profit or loss when the decision about distribution is approved by the shareholders. 29. Subsequent events As in May 2021 the existing overdraft agreement of the JSC “Latvijas Gāze” with OP Corporate Bank plc will expire, JSC “Latvijas Gāze” has concluded a new overdraft agreement with OP Corporate Bank plc that will be utilized to purchase natural gas during the next two natural gas injection seasons. The new overdraft limit is 30 million EUR and expires on 31 May, 2023. Apart from the above, between 31 December 2020 and the signing of these financial statements there have been no events of impact upon the Company’s or the Group’s financial position or financial results as at the balance sheet date. _________ Olga Bobrova Chief Accountant
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