LATVIJAS GĀZE GROUP CONSOLIDATED AND JSC "LATVIJAS GĀZE" UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE 6-MONTHS PERIOD ENDED 30 JUNE 2020

Prepared in compliance with the International Financial Reporting Standards as adopted by the European Union

Riga 2020

COUNCIL OF THE JSC "LATVIJAS GĀZE"	3
MANAGEMENT BOARD OF THE JSC "LATVIJAS GĀZE" 4
LATVIJAS GĀZE GROUP IN SHORT 5
STRATEGY AND OBJECTIVES 5
SHARES AND SHAREHOLDERS OF THE JSC "LATVIJAS GĀZE"	6
MANAGEMENT REPORT	8
STATEMENT OF THE BOARD RESPONSIBILITY 14
FINANCIAL STATEMENTS	15
CORPORATE INFORMATION15
STATEMENT OF PROFIT OR LOSS16
STATEMENT OF COMPREHENSIVE INCOME16
BALANCE SHEET17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 19
COMPANY'S STATEMENT OF CHANGES IN EQUITY20
STATEMENT OF CASH FLOWS21
NOTES TO FINANCIAL STATEMENTS22

COUNCIL OF THE JSC "LATVIJAS GĀZE"

(Term of office from October 9, 2019 till October 8, 2022)

Kirill Seleznev

(Кирилл Селезнев), 1974 Chairman of the Council

Since 2003, Head of Gas and Liquid Hydrocarbon Marketing and Processing Division, Member of the Management Committee at PJSC "Gazprom"

Juris Savickis, 1946 Vice-Chairman of the Council

Since 1996, President of LLC "ITERA Latvija"

Matthias Kohlenbach, 1969 Member of the Council

Since 2016 Legal Department of Uniper SE, Germany; responsible for international projects

Nicolàs Merigó Cook, 1963 Member of the Council

Since 2010, Chief Executive Officer of Marguerite Adviser S.A. (Luxemburg)

Oleg Ivanov (Олег Иванов), 1974 Member of the Council

Since 2014, Head of the Department for Gas Business Planning, Efficiency Management and Development at PJSC "NK Rosneft"

Elena Mikhaylova (Елена Михайлова), 1977 Member of the Council

Since 2012, Member of the Management Committee, Head of the Asset Management and Corporate Relations Department at PJSC "Gazprom"

Oliver Giese, 1967 Vice-Chairman of the Council

Since 2016, Senior Vice President for Infrastructure Management at Uniper SE (formerly E.ON Global Commodities SE, Düsseldorf, Germany)

David Stephen Harrison, 1970 Member of the Council

Since 2010, Member of the Board of Marguerite Adviser S.A. (Luxembourg)

Hans-Peter Floren, 1961 Member of the Council

Since 2014, Owner and Chief Executive Officer of FLORENGY AG (Essen, Germany)

Vitaly Khatkov (Виталий Хатьков), 1969 Member of the Council

Since 2015, Head of the Department for Pricing and Economic Expert Analysis at PJSC "Gazprom"

Sergey Kuznets (Сергей Кузнец), 1970 Member of the Council

Since 2015, Member of the Board of Directors, Head of the Department at PJSC "Gazprom"

MANAGEMENT BOARD OF THE JSC "LATVIJAS GĀZE"

(Term of office from August 16, 2018 till August 15, 2021)

Aigars Kalvītis, 1966 Chairman of the Board

Latvian University of Agriculture, Master's Degree in Economics

Denis Emelyanov, 1979 Vice-Chairman of the Board

Gubkin Russian State University of Oil and Gas, Faculty of Economics and Management – Economist manager; Economics and oil and gas enterprises management

Elita Dreimane, 1968 Member of the Board

University of Latvia Faculty of Law, Master's Degree of Social Sciences in Law

Inga Āboliņa, 1974 Member of the Board (Term of office from August 17, 2020 till August 16, 2023)

Stockholm School of Economics in Riga, Executive MBA

Sebastian Gröblinghoff, Member of the Board – term of office till June 30, 2020.

LATVIJAS GĀZE GROUP IN SHORT

Latvijas Gāze group is fully committed to ensuring safe and stable natural gas supplies to its customers as well as to strengthening its position as a leader in the Latvian and Baltic energy market. Latvijas Gāze group consists of two business segments:

The natural gas sales & trading segment comprises the purchase, trade and sale of natural gas. The JSC "Latvijas Gāze" (hereinafter also "Company") 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 natural gas 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. The license is valid until 6 December 2037. The JSC "Gaso" owns and operates all distribution assets necessary to provide the respective services to its approximately 400 thousand customers.

The JSC "Gaso" fully complies with the requirements of the Energy Law, which foresees a full legal, structural, and operational separation of the distribution business from the sales & trading activities. The JSC "Gaso" has an own Board of Management and Council that are fully independent from the sales & trading business of the JSC "Latvijas Gāze".

Structure of Latvijas Gāze group as of 30 June 2020

	Countries of operation	Type of business operation	Participation share
JSC "Latvijas Gāze"	Latvia, Lithuania, Estonia, Finland	Sales & trading of natural gas
JSC "Gaso"	Latvia	Distribution of natural gas	100%

STRATEGY AND OBJECTIVES

OUR OBJECTIVE

To strengthen the position of Latvijas Gāze group as a leader in the Latvian and Baltic energy market by becoming the natural gas supplier of first choice for customers and by ensuring the most stable supply of natural gas for the Baltic region.

OUR MISSION

To contribute to the Baltic region's economy by ensuring the reliable, safe and flexible supply of natural gas to households and businesses at competitive prices.

OUR VISION

To improve people's life through delivering natural gas for a variety of purposes in different segments and to promote the advancement of natural gas as a key source of energy for the benefit of society.

SHARES AND SHAREHOLDERS OF THE JSC "LATVIJAS GĀZE"

SHARES AND SHAREHOLDERS

The shares of the JSC "Latvijas Gāze" are listed on the Nasdaq Riga stock exchange since February 15, 1999, and its ticker code is GZE1R since August 1, 2004. The total number of securities has not changed since 1999.

COMPANY'S SHARE PRICE, OMX RIGA GI AND OMX BALTIC GI INDEX CHANGES (01.01.2017. – 30.06.2020.)

ISIN	LV0000100899
Ticker code	GZE1R
List	Second list
Nominal value	1.40 EUR
Total number of
securities	39 900 000

Source: Nasdaq Baltic

On 30 th of June 2020, in terms of stock market capitalization, the JSC "Latvijas Gāze" remained on the first place among the companies listed on the Nasdaq Riga Secondary List. At the end of the reporting period, the market capitalization value of the JSC "Latvijas Gāze" amounted to 414.96 million EUR and decreased by 0.95%, compared to the same period of 2019. After negative impact of coronavirus lockdown measures on stock market during March - April, domestic stock market recovered by the end of June 2020 and the share price of the Company increased by 5.05% during the first six months of 2020.

Number of securities in
public offering	25 328 520
Liquidity provider	None

Source: Nasdaq Baltic

The shares of the JSC "Latvijas Gāze" are included in four Baltic country industry indexes, which include public utilities - B7000GI, B7000PI, B7500GI, B7500PI, as well as in several geographical indexes - OMXBGI, OMXBPI, OMXRGI.

OMX RIGA (OMXR.) – a domestic index of all shares. Its basket consists of the shares of the Official and Second list of Nasdaq Riga. The index reflects the current situation and changes at Nasdaq Riga.

OMX BALTIC (OMXB.) – a Baltic-level index of all shares. Its basket consists of the shares of the Official and Second list of Baltic exchanges. The index reflects the current situation and changes on the Baltic market overall.

SHARE PRICE DEVELOPMENT AND SHARE TURNOVER (01.01.2017.-30.06.2020.)

Source: Nasdaq Baltic

INFORMATION ON SHARE TRANSACTIONS (6M 2018 – 6M 2020)

	6M 2020	6M 2019	6M 2018
Share price (EUR)
First	9.90	10.20	10.00
Highest	10.40	10.50	13.00
Lowest	8.10	10.20	9.90
Average	9.74	10.37	10.67
Last	10.40	10.50	11.50
Change (From First to Last share price)	5.05%	2.94%	15.00%
Number of transactions	794	409	413
Number of shares traded	44 087	29 969	33 203
Turnover (million EUR)	0.43	0.31	0.35
Capitalization (million EUR)	414.96	418.95	458.85

COMPOSITION OF SHAREHOLDERS ON 30.06.2020

SHARES OWNED BY MEMBERS OF THE GOVERNING BODIES OF THE JSC "LATVIJAS GĀZE"

		At the date of signing
		financial statements
Management Board		Number of shares
Chairman of the Board	Aigars Kalvītis	None
Deputy Chairman of the Board	Denis Emelyanov	None
Member of the Board	Elita Dreimane	None
Member of the Board	Inga Āboliņa	None
Council
Chairman of the Council	Kirill Seleznev	None
Deputy Chairman of the Council	Juris Savickis	None
Deputy Chairman of the Council	Oliver Giese	None
Member of the Council	David Stephen Harrison	None
Member of the Council	Vitaly Khatkov	None
Member of the Council	Oleg Ivanov	None
Member of the Council	Nicolas Merigo Cook	None
Member of the Council	Matthias Kohlenbach	None
Member of the Council	Hans-Peter Floren	None
Member of the Council	Elena Mikhaylova	None
Member of the Council	Sergey Kuznets	None

MANAGEMENT REPORT

The first half of 2020 has brought even more dynamic and challenging environment for the world and the energy industry. Mild temperatures, the lockdown measures connected to the spread of the coronavirus and low natural gas price levels were the key factors shaping the operating environment of the JSC "Latvijas Gāze". Despite several colder days during February and March, overall temperatures remained above the long-term seasonal normal temperature especially affecting natural gas demand in the heating segment. Considerably higher natural gas winter-summer spread compared to regulated storage capacity fee has led to a high storage demand leaving JSC "Latvijas Gāze" with less available storage capacity than in 2019. Furthermore, maintenance on gas transportation systems further limits possibilities to move and optimise gas flows. Despite the difficult market environment, the management considers that JSC "Latvijas Gāze" is well positioned to manage winter supply for all its customers.

Although the state of emergency that was in place since March 14, 2020 ended in Latvia on 9 June, JSC "Latvijas Gāze" decided to continue providing customer service remotely in order not to pose risks to the health of customers. This decision was made following the recommendations of the law "On measures to prevent and overcome national threats and their consequences in connection with the spread of Covid-19", which recommends only renewing in-person services if it is not possible to provide them remotely. Currently the customer service centre of JSC "Latvijas Gāze" remains closed for visitors until further notice.

JSC "Latvijas Gāze" during the first half of 2020 managed to sell 5 392 GWh of natural gas to its customers in Latvia and abroad. Especially good results were achieved in sales abroad, where sales volumes in the first six months of 2020 reached 26% of the total volume. As several larger customers had stored significant natural gas quantities in 2019, sales in Latvia during the first six months of 2020 dropped as expected.

The Group's net turnover during the first six months of the year amounted to 98.9 million EUR and was 48.2% lower in comparison to the same period in 2019. The significantly lower net turnover was attributable to lower sales prices as well as a drop in sales volumes in comparison to the first six months of 2019. Apart from that, as mentioned before, milder than usual temperatures led to lower overall natural gas demand. The Group's net profit for the first half of 2020 amounted to 16.6 million EUR, which was several times higher than for the same period of 2019, when JSC "Latvijas Gāze" suffered from losses due to lower gross profit and mark-tomarket losses on open financial derivatives. In line with IFRS accounting rules, the Group recognizes unrealized gains and losses on financial derivatives at fair value through profit and loss.

With regard to the further course of business during 2020, the JSC "Latvijas Gāze" expects that the business environment will remain challenging. Apart from that stiff competition increasing pressure on margin side even more, low market prices and the extremely limited availability of storage capacities in the Baltic region will exert pressure on the Group's sales & trading business. Possible return of the lockdown measures related to the coronavirus could lead to an additional drop in overall natural gas demand and may negatively affect the Group's financial performance in 2020. However, management of the JSC "Latvijas Gāze" also expects that the profit generated during the first half of 2020 will provide a certain financial buffer for the remaining months of the year. As in the first half of the year, the sales & trading representatives will continue their active communication with its clients regarding any liquidity difficulties as a result of the virus and work on finding solutions together.

The economic performance of the distribution business operated by the JSC "Gaso" will largely depend on the overall demand level and the respective volumes of natural gas transported through the distribution network during 2020.

JSC "Latvijas Gāze" continues to work on improvements in different areas, including customer service and modernisation of the IT systems in order to further develop Company's services.

In recent months, JSC "Latvijas Gāze" has worked on improving remote customer service.

In recent months, JSC "Latvijas Gāze" has worked diligently to improve remote customer service, providing ample opportunities to communicate with the Company and receive services remotely. Some of the improvements include a new helpline telephone number, replacing previous premium rate number, as well as expansion of remote payment options. Also submission of meter readings is possible remotely.

In order to achieve the best possible financial performance and creating sustainable value for all stakeholders, the sales & trading segment during the first half of 2020 continued to actively control and further reduce its operating expenses and applied a disciplined approach to capital expenditures. At the same time, the sales & trading segment successfully drove the further implementation of its new billing system and customer portal. The new billing system as well as the customer portal will contribute to reducing the cost of core business processes as well as to improving customer service quality.

Group`s key figures	6M 2020	6M 2019	6M 2018
Natural gas sales, GWh	5 305	7 952	5 257
Number of employees, average	994	994	996
Length of distribution lines, km	5 309	5 252	5 236

Group`s key financial figures	6M 2020	6M 2019	6M 2018
	EUR'000	EUR'000	EUR'000
Net turnover	98 904	190 980	135 453
EBITDA	25 165	11 228	28 100
EBITDA, %	25.4	5.9	20.7
EBIT	18 339	5 173	22 316
EBIT, %	18.5	2.7	16.5
Net profit	16 625	2 721	21 768
Net profit margin, %	16.8	1.4	16.1
Earnings per share, EUR	0.42	0.07	0.55
P/E	24.76	150.00	20.91
Current ratio	3.30	2.25	3.79

Latvijas Gāze Group consolidated and JSC "Latvijas Gāze"

unaudited interim condensed financial statements for the 6-months period ended 30 June 2020

Alternative Performance Measures (APM)	Formulas
EBITDA (Profit before income tax, interest, depreciation and amortization)	EBITDA = Profit of the year + Corporate income tax + Financial expense - Financial income + Depreciation, amortization and impairment of property, plant and equipment, intangible assets and right-of use assets
EBITDA,% (or EBITDA margin)	𝐸𝐵𝐼𝑇𝐷𝐴 EBITDA, % = x 100% 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑓𝑟𝑜𝑚 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡𝑠 𝑤𝑖𝑡ℎ 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
EBIT (Profit before income tax and interest)	EBIT= Profit of the year + Corporate income tax + Financial expense - Financial income
EBIT,% (or EBIT margin)	𝐸𝐵𝐼𝑇 EBIT,% = x 100% 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑓𝑟𝑜𝑚 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡𝑠 𝑤𝑖𝑡ℎ 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
Net profitability (or Commercial profitability) The indicator reflects how much the company earns from each of the EUR received from customers	𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 Net profitability, %= x 100% 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑓𝑟𝑜𝑚 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡𝑠 𝑤𝑖𝑡ℎ 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠
P/E Ratio	𝑆ℎ𝑎𝑟𝑒 𝑝𝑟𝑖𝑐𝑒 (𝑙𝑎𝑠𝑡) P/E= 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑟𝑒𝑝𝑜𝑟𝑡𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑
Current ratio (Ability to pay short-term obligations)	𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 Current ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

The management of the Group uses the above-described alternative performance measures to evaluate the Group's performance for a particular financial period as well as to make decisions and allocate resources.

GENERAL MARKET AND INDUSTRY ENVIRONMENT

After a stabilization phase during the last months of 2019, market prices significantly went down again during the first six months of the year. Although Brent SPOT price, reflecting negative effects of coronavirus on global economy, reached its lowest value at the end of April 2020, it started to move upwards from May, but still remains below the average level of 2019. At the same time the price for the GASPOOL front month index, which serves as one of the key reference prices in the Baltic region, dropped by 66% in the period January – June 2020. Together with coronavirus, unusually warm average air temperatures in North West Europe during heating months led to a worldwide drop in a natural gas demand. New Russian-Ukraine natural gas transit deal was reached at the last moment eliminating supply disruption risk, higher than usual storage levels at the end of March and the diversion of LNG cargoes initially destined for Asian markets significantly increased the amount of freely available natural gas supplies in North West Europe.

Situation regarding recovery from coronavirus remains uncertain. According to macroeconomic projections of Bank of Latvia, which were revised downwards in June 2020, Latvia's GDP growth is forecasted -7.5% in 2020. In its World Economic Outlook, the International Monetary Fund (IMF) forecasts negative global growth of -4.9% in 2020. At the same time IMF expects that global economy will return to positive growth rates already in 2021. The projected massive downturn in economic activity will also affect natural gas demand in the Baltic region.

On a regional level, strong LNG deliveries to the Klaipeda LNG Terminal reflect the currently high supply of competitively priced LNG in world markets. Lower absolute prices and the ample availability of natural gas intensified the level of competition in the Latvian and regional natural gas market during the first half of 2020. Subsequently, the pressure on sales margins increased and several customers strived to renegotiate or improve the pricing conditions in existing contracts in a quest to benefit from lower market prices. Apart from that, less favourable market conditions led to lower demand for natural gas in the power generation segment. The JSC "Latvijas Gāze" expects that a continuously high

KEY EVENTS DURING THE REPORTING PERIOD

Since January 1, 2020, natural gas users in Finland are able to choose freely their natural gas supplier and to receive natural gas from Baltic natural gas traders through the Balticconnector pipeline linking Finland and Estonia.

On March 12, 2020, the Latvian Public Utilities Commission ("PUC") approved the terms of use for the Inčukalns Underground Gas Storage (IUGS) in the storage season 2020/2021.

On March 14, 2020, the Latvian Cabinet of Ministers issued a "Declaration of Emergency Situation" in Latvia due to the Covid-19 pandemic. The state of emergency ended in Latvia on June level of LNG deliveries to the Baltic region during 2020 will further spur competition on the supply side and might even lead to a situation of temporary oversupply in the wake of weakening overall natural gas demand.

The overall level of natural gas demand in Latvia and the region during 2020 will also depend on the water levels in the river Daugava and price developments at the Nordic power exchange. Also climate change mitigation and reduction of greenhouse gas emissions will remain key topics on global agenda. Therefore the JSC "Latvijas Gāze" expects that the market environment will remain challenging during the rest of 2020.

9, 2020. In order not to pose risks to the health of customers, JSC "Latvijas Gāze" continues to provide customer service remotely and the Customer Service Centre remains closed for visitors.

The 2020 injection season for IUGS has started on May 1, 2020.

On March 17, 2020 and on May 21, 2020 the IUGS storage capacity was sold out. The demand for storage capacity exceeded available storage capacity multiple times.

On June 25, 2020 JSC "Latvijas Gāze" held its annual Meeting of Shareholders.

OPERATING RESULTS OF THE BUSINESS SEGMENTS

Distribution segment: The distribution segment operated by the JSC "Gaso" is the largest business segment within Latvijas Gāze group by its asset value. At the end of the second quarter 2020, assets of the segment were worth 333.5 million EUR, which represents 70% of the Group's total asset value. In the reporting period, the distribution segment generated a net turnover of 24.8 million EUR and EBITDA of 12.2 million EUR (decrease by 4.6% and 4.0%, compared to the same period of 2019, respectively). Distribution services are regulated and form the main source of revenues for JSC "Gaso". The drop in net turnover was mainly caused by lower utilization of the Latvian natural gas distribution system, because of unusually high temperatures during the heating months. The segment's profit before taxes amounted to 5.8 million EUR in the first half of 2020 and was by 14.5% lower, compared to the same period of 2019.

Sales & trading segment: On 30 th of June 2020, the sales & trading segment operated by the JSC "Latvijas Gāze" had an asset value of 140.2 million EUR. In the first half of 2020, the segment generated a net turnover of 73.6 million EUR, which was by 60% lower in comparison to the same period of 2019. The significantly lower net

LONG-TERM GAS SUPPLIES

In order to ensure the long-term stability of the Latvian and regional natural gas market, the JSC "Latvijas Gāze" is positioning itself as one of the leading players in the Baltic region with a portfolio consisting of long-term natural gas supplies as well as booked storage and transmission capacities.

The JSC "Latvijas Gāze" procures almost all of its natural gas under a long-term contract with the PJSC "Gazprom". The contract is subject to a take-or-pay obligation that requires the JSC "Latvijas Gāze" to buy a defined amount of natural

FINANCIAL RISK MANAGEMENT

The JSC "Latvijas Gāze" is exposed to credit, liquidity as well as market risks.

As in previous periods, the JSC "Latvijas Gāze" faced a high customer concentration risk with only a few customers accounting for a significant share of overall sales volumes. To mitigate credit default risks major customers are subject to individual credit risk management policies, which include a number of practices, such as an evaluation of credit limits, a detailed supervision of financial figures, and frequent billing cycles to avoid the accumulation of debt. For transactions with smaller customers Latvijas Gāze group has put in place detailed policies and processes that ensure the continuous monitoring of incoming customer payments and trigger respective turnover was mainly attributable to lower sales prices due to developments in global natural gas market, e.g. at the end of June 2020 market prices (Gaspool, TTF and other) fell on average by 63%, compared to June 30, 2019. The second factor was lower sales quantities, compared to the first half of 2019. During the first half of 2020 segment's EBITDA amounted to 13.0 million EUR and profit before taxes reached 12.3 million EUR, while in the same period of 2019 the segment suffered from losses – EBITDA was (1.4) million EUR and loss before taxes (1.8) million EUR.

gas on an annual basis or make a payment for the quantity not taken. Under this type of contracts prices paid for natural gas usually relate to the prices of competing energy sources (e.g. oil and oil products) and/or market reference prices (e.g. hub prices such as TTF or NBP), as dictated by market conditions. Any of the contract parties in regular intervals (usually every two years) may trigger a review of the contract conditions. In case of no agreement after a defined period, the parties may refer the case to a neutral board of arbitration that will make a binding decision.

customer communication as well as follow-up actions in case of arising credit issues. Apart from that, the Group during the first quarter 2020 implemented additional measures, that were continues the second quarter, to manage the increased credit risk resulting from the coronavirus lockdown measures. To minimize the increased risks resulting from potential liquidity issues of its customers the JSC "Latvijas Gāze" put in place additional review procedures and credit policies to protect its own financial position while still supporting customers where possible. Furthermore, the Group will take into account the impact of the virus on macroeconomic forecasts when calculating the expected credit loss for buyers and customers for 2020.

The group's liquidity risk mainly stems from the distinct seasonality of the natural gas business. To ensure security of supply for the winter months the Company usually injects significant natural gas quantities into the Inčukalns Underground Gas Storage ("IUGS") during the injection season starting in early summer. While the Company needs to ensure the availability of respective cash reserves to finance the injection of natural gas into the storage during the summer months, customers will typically consume and subsequently pay most of the natural gas only during the winter period. To actively monitor and manage the liquidity risk the Company continuously improves its internal cash planning tools and instruments. To take account of the increased importance of a systematic and rigorous cash management in a competitive and highly volatile market the Company has in place a dedicated treasury function.

On 31 March 2019, the existing overdraft agreement with the Latvian branch of OP Corporate Bank plc expired. Therefore, the JSC "Latvijas Gāze" already in autumn 2018 initiated a public procurement procedure in order to attract sufficient financing for the purchase of natural gas during the next two natural gas injection seasons. At the end of December 2018, the Company signed a new agreement with the Latvian branch of OP Corporate Bank plc on a revolving credit facility with a borrowing capacity of up to 50 million EUR. The agreement covers the period from 1 June 2019 until 31 May 2021. The closed transaction strengthens the overall liquidity of the Company and enables the implementation of a more advanced portfolio optimization strategy.

In comparison to the years before the opening of the Latvian natural gas market to competition the natural gas sales & trading segment faces more market risks. Particularly the greater variety of pricing structures requested by customers have created new risk positions. To actively manage and mitigate these risks, the Company established a separate Risk Management function. Apart from that, the Company continuously monitors and develops further its risk management policies and strategies. Although internal market risk mitigation, e.g. through negotiating supply agreement terms and working with the sales portfolio, is the preferred risk mitigation option, the Company actively uses financial hedging instruments.

TRANSACTIONS WITH RELATED PARTIES

The JSC "Latvijas Gāze" is party to a long-term natural gas sales and purchase agreement ("the Agreement") with the PJSC "Gazprom". Under the Agreement, the Company is obliged to buy a defined annual quantity based on take-or-pay terms. In case JSC "Latvijas Gāze" fails to offtake the defined minimum quantities, it may incur financial and legal obligations. The PJSC "Gazprom" holds 34% of the shares in the JSC "Latvijas Gāze"

SUBSEQUENT EVENTS

Since June 30, 2020 up to the signing of these financial statements there have been no events with effect on the financial position or financial results of the Company and the Group as at the balance sheet date.

STATEMENT OF THE BOARD RESPONSIBILITY

The Board of the Joint Stock Company "Latvijas Gāze" is responsible for the preparation of the "Latvijas Gāze" Group consolidated and the JSC "Latvijas Gāze" unaudited interim condensed financial statements for 6-months period ended 30 June 2020 (further – Financial statements), which consist of the Company's and its subsidiary's (further - Group's) and the Company's financial statements.

Financial statements for the 6-months period ended 30 June 2020 have been prepared in compliance with the International Financial Reporting Standards adopted by the European Union.

According to the information available to the management of the Company, the Financial statements provide a true and fair view of the Group's and the Company's assets, liabilities, financial position, operational results and cash flows in all key aspects. The principles of recognition and valuation of items observed in the preparation of financial information were the same as in the annual accounts.

The Financial statements were approved by the Board of the JSC "Latvijas Gāze" on 26 August 2020, and they are signed on behalf of the Board by:

Aigars Kalvītis Chairman of the Board

Inga Āboliņa Member of the Board

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
Corporate management report and Non-financial report	www.lg.lv
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 – 30 June 2020

STATEMENT OF PROFIT OR LOSS

	Note	Group 01.01- 30.06.2020	Group 01.01- 30.06.2019	Company 01.01- 30.06.2020	Company 01.01- 30.06.2019
		EUR'000	EUR'000	EUR'000	EUR'000
Revenue from contracts with customers	2	98 904	190 980	74 095	165 833
Other income		958	1 792	587	1 063
Raw materials and consumables used	3	(57 852)	(160 590)	(57 102)	(159 777)
Personnel expenses Depreciation, amortization and impairment of property, plant and equipment, intangible assets	4	(12 613)	(12 496)	(2 297)	(2 202)
and right-of use assets		(6 826)	(6 055)	(581)	(302)
Other operating expenses	5	(4 232)	(8 458)	(2 226)	(6 596)
Operating profit		18 339	5 173	12 476	(1 981)
Financial expense		(220)	(184)	(117)	(68)
Profit before taxes		18 119	4 989	12 359	(2 049)
Corporate income tax		(1 494)	(2 268)	(1 494)	(2 268)
Profit for the period		16 625	2 721	10 865	(4 317)

STATEMENT OF COMPREHENSIVE INCOME

	Group 01.01- 30.06.2020	Group 01.01- 30.06.2019	Company 01.01- 30.06.2020	Company 01.01- 30.06.2019
	EUR'000	EUR'000	EUR'000	EUR'000
Profit for the period	16 625	2 721	10 865	(4 317)
Other comprehensive income - items that will not be reclassified to profit or loss
Change in revaluation reserve of property,
plant and equipment	-	72	-	-
Total other comprehensive income	-	72	-	-
Total comprehensive income for the period	16 625	2 793	10 865	(4 317)

The Financial statements were approved by the Board of the JSC "Latvijas Gāze" on 26 August 2020, and they are signed on behalf of the Board by:

Aigars Kalvītis Chairman of the Board

Inga Āboliņa Member of the Board

BALANCE SHEET

	Note	Group	Group	Company	Company
		30.06.2020	31.12.2019	30.06.2020	31.12.2019
		EUR'000	EUR'000	EUR'000	EUR'000
ASSETS
Non-current assets
Intangible assets	6	7 908	8 137	4 851	4 799
Property, plant and equipment	7	309 573	312 650	2 593	2 729
Right-of-use assets		50	384	339	384
Investment in subsidiary	8	-	-	194 534	194 534
Other debtors		151	32	6	6
Total non-current assets		317 682	321 203	202 323	202 452
Current assets
Inventories	9	23 955	50 105	22 074	48 872
Pre-payments for inventories		12 651	5 829	12 648	5 828
Trade receivables		12 864	26 955	11 241	23 813
Other financial assets at amortised
cost		1 283	9 426	1 236	9 363
Other current assets		1 168	1 725	695	1 395
Cash and cash equivalents		104 099	48 995	84 906	38 487
Total current assets		156 020	143 035	132 800	127 758
TOTAL ASSETS		473 702	464 238	335 123	330 210

The Financial statements were approved by the Board of the JSC "Latvijas Gāze" on 26 August 2020, and they are signed on behalf of the Board by:

Aigars Kalvītis Chairman of the Board

Inga Āboliņa Member of the Board

BALANCE SHEET (continued)

	Note	Group 30.06.2020	Group 31.12.2019	Company 30.06.2020	Company 31.12.2019
		EUR'000	EUR'000	EUR'000	EUR'000
LIABILITIES AND EQUITY
Equity
Share capital		55 860	55 860	55 860	55 860
Share premium		20 376	20 376	20 376	20 376
Reserves		192 186	195 597	204 494	204 494
Retained earnings		114 358	111 878	16 756	23 447
Total equity		382 780	383 711	297 486	304 177
Liabilities
Non-current liabilities
Borrowings	10	23 625	25 667	-	-
Lease liabilities		27	292	248	292
Deferred income	11	18 199	18 434	-	-
Employee benefit obligations		1 799	1 757	57	57
Total non-current liabilities		43 650	46 150	305	349
Current liabilities
Trade payables		4 396	5 489	4 984	8 249
Interest-bearing loans and borrowings	10	3 500	3 500	-	-
Lease liabilities		25	93	93	93
Deferred income	11	1 056	1 138	-	92
Dividends unpaid		17 556	-	17 556	-
Corporate income tax		1 494	-	1 494	-
Other liabilities	12	19 245	24 157	13 205	17 250
Total current liabilities		47 272	34 377	37 332	25 684
Total liabilities		90 922	80 527	37 637	26 033
TOTAL LIABILITIES AND EQUITY		473 702	464 238	335 123	330 210

The Financial statements were approved by the Board of the JSC "Latvijas Gāze" on 26 August 2020, and they are signed on behalf of the Board by:

Aigars Kalvītis Chairman of the Board

Inga Āboliņa Member of the Board

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Reva luation reserve	Employee benefits revaluation reserve	Retained earnings	Total
	EUR'000	EUR'000	EUR'000	EUR'000	EUR'000	EUR'000
31 December 2018	55 860	20 376	126 976	103	107 040	310 355
Transactions with owners
Dividends	-	-	-	-	(21 945)	(21 945)
Total transactions with owners Depreciation of revaluation reserve	-	-	-	-	(21 945)	(21 945)
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	55 860	20 376	195 087	510	111 878	383 711
Transactions with owners:
Transferred to unpaid dividends	-	-	-	-	(17 556)	(17 556)
Total transactions with owners Depreciation of revaluation reserve	-	-	-	-	(17 556)	(17 556)
and disposal of revalued assets	-	-	(3 411)	-	3 411	-
Comprehensive income
Profit for the year	-	-	-	-	16 625	16 625
Total comprehensive income	-	-	-	-	16 625	16 625
30 June 2020	55 860	20 376	191 676	510	114 358	382 780

The Financial statements were approved by the Board of the JSC "Latvijas Gāze" on 26 August 2020, and they are signed on behalf of the Board by:

Aigars Kalvītis Chairman of the Board

Inga Āboliņa Member of the Board

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
31 December 2018	55 860	20 376	(85)	204 545	25 692	306 388
Transactions with owners Dividends Total transactions with owners	- -	- -	- -	- -	(21 945) (21 945)	(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	55 860	20 376	(51)	204 545	23 447	304 177
Transactions with owners:
Transferred to unpaid dividends	-	-	-	-	(17 556)	(17 556)
Total transactions with owners	-	-	-	-	(17 556)	(17 556)
Comprehensive income
Profit for the year	-	-	-	-	10 865	10 865
Total comprehensive income	-	-	-	-	10 865	10 865
30 June 2020	55 860	20 376	(51)	204 545	16 756	297 486

The Financial statements were approved by the Board of the JSC "Latvijas Gāze" on 26 August 2020, and they are signed on behalf of the Board by:

Aigars Kalvītis Chairman of the Board

Inga Āboliņa Member of the Board

STATEMENT OF CASH FLOWS

	Group	Group	Company	Company
	01.01-	01.01-	01.01-	01.01-
	30.06.2020	30.06.2019	30.06.2020	30.06.2019
	EUR'000	EUR'000	EUR'000	EUR'000
Cash flow from operating activities Profit before corporate income tax	18 119	4 989	12 359	(2 049)

Adjustments:
- depreciation of property, plant and
equipment and right-of-use assets	5 823	5 119	232	128
- amortisation of intangible assets	1 009	937	349	173
- losses from long-term asset exclusions	113	11	-	-
- interest expenses	220	183	117	68
Changes in operating assets and liabilities:
- in accounts receivable	26 042	9 836	21 389	6 063
- in inventories	26 150	89 203	26 798	89 639
- in advances for inventories	(6 821)	(30 918)	(6 820)	(30 928)
- in accounts payable	(10 019)	4 112	(7 126)	7 442
Corporate income tax received back	-	63	-	63
Net cash inflow from operating activities	60 636	83 535	47 298	70 599
Cash flow from investing activities
Payments for property, plant and equipment	(2 326)	(971)	(69)	(66)
Payments for intangible assets	(1 023)	(1 968)	(659)	(1 690)
Proceeds from sale of property, plant and
equipment	79	11	-	-
Net cash outflow from investing activities	(3 270)	(2 928)	(728)	(1 756)
Cash flow from financing activities
Overdraft paid	-	(8 386)	-	(8 386)
Loan paid	(2 042)	(2 042)	-	-
Leases paid	-	-	(34)	-
Interest paid	(220)	(183)	(117)	(68)
Net cash outflow from financing activities	(2 262)	(10 611)	(151)	(8 454)
Net cash flow	55 104	69 996	46 419	60 389
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	104 099	86 276	84 906	65 234

The Financial statements were approved by the Board of the JSC "Latvijas Gāze" on 26 August 2020, and they are signed on behalf of the Board by:

Aigars Kalvītis Chairman of the Board

Inga Āboliņa Member of the Board

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 6 months 2020	Gas trade	Gas distribution	Total
	EUR'000	EUR'000	EUR'000
EBITDA	12 998	12 167	25 165
Depreciation and amortisation	581	6 245	6 826
Financial expense	117	103	220
Profit before taxes	12 300	5 819	18 119

Group 6 months 2019	Gas trade	Gas distribution	Total
	EUR'000	EUR'000	EUR'000
EBITDA	(1 445)	12 673	11 228
Depreciation and amortisation	302	5 753	6 055
Financial expense	68	116	184
Profit before taxes	(1 815)	6 804	4 989

	6 months	6 months
Company / Gas trade	2020	2019
	EUR'000	EUR'000
EBITDA	13 057	(1 679)
Depreciation and amortisation	581	302
Financial expense	117	68
Profit before taxes	12 359	(2 049)

Group 6 months 2020	Gas trade	Gas distribution	Total
	EUR'000	EUR'000	EUR'000
Purchase of property, plant, equipment and intangible assets	452	3 256	3 708
Segment assets 30.06.2020	140 184	333 518	473 702

Group 6 months 2019	Gas trade	Gas distribution	Total
	EUR'000	EUR'000	EUR'000
Purchase of property, plant and equipment and intangible assets	1 756	1 183	2 939
Segment assets 30.06.2019	153 165	262 848	416 013

Company / Gas trade 6 months	2020	2019
	EUR'000	EUR'000
Purchase of property, plant and equipment and intangible assets	452	1 756
Segment assets 30.06	335 123	347 892

2. Revenue from contracts with customers

Group	Gas trade		Gas distribution
6 months 2020	Latvia	Other countries	Latvia	Total
	EUR'000	EUR'000	EUR'000	EUR'000
Segment revenue	53 416	20 199	24 799	98 414
Inter-segment revenue Connection, balancing and other service	(997)	-	-	(997)
fees recognised as revenue	407	74	525	1 006
Other revenue	-	-	481	481
	52 826	20 273	25 805	98 904

Group		Gas trade	Gas distribution
6 months 2019	Latvia	Other countries	Latvia	Total
Restated	EUR'000	EUR'000	EUR'000	EUR'000
Segment revenue	169 708	14 256	25 982	209 946
Inter-segment revenue	(21 228)	-	-	(21 228)
Connection, balancing and other
service fees recognised as revenue*	908	454	512	1 874
Other revenue	1	-	387	388
	149 389	14 710	26 881	190 980

* Revenue from balancing services is presented separately from Segment revenue compared to financial statements for the 6-months period ended 30 June 2019.

Company		Gas trade Latvia Other countries Total
6 months 2020
	EUR'000	EUR'000	EUR'000
Segment revenue	53 415	20 199	73 614
Other revenue (balancing services)	407	74	481
	53 822	20 273	74 095

Company	Gas trade
6 months 2019	Latvia	Other countries	Total
	EUR'000	EUR'000	EUR'000
Segment revenue	150 215	14 256	164 471
Other revenue	908	454	1 362
	151 123	14 710	165 833

3. Raw materials and consumables used

	Group 6 months 2020	Group 6 months 2019	Company 6 months 2020	Company 6 months 2019
	EUR'000	EUR'000	EUR'000	EUR'000
Natural gas purchase	57 268	159 950	57 078	159 755
Costs of materials, spare parts and fuel	584	640	24	22
	57 852	160 590	57 102	159 777

4. Personnel expenses

	Group 6 months 2020	Group 6 months 2019	Company 6 months 2020	Company 6 months 2019
	EUR'000	EUR'000	EUR'000	EUR'000
Wages and salaries	9 544	9 452	1 693	1 675
State social insurance contributions	2 293	2 263	414	388
Life, health and pension insurance	627	618	94	87
Other personnel costs	149	163	96	52
	12 613	12 496	2 297	2 202

5. Other operating expenses

	Group 6 months 2020	Group 6 months 2019	Company 6 months 2020	Company 6 months 2019
	EUR'000	EUR'000	EUR'000	EUR'000
Net fair value losses on financial derivatives	251	4 301	251	4 301
Selling and advertising costs Expenses related to premises	357	305	219	226
(rent, electricity, security and other services)	609	523	85	172
Donations, financial support	398	735	383	712
Office and other administrative costs	828	1 019	416	447
Taxes and duties Costs of IT system maintenance, communications and	491	526	305	287
transport	978	840	479	380
Other costs	320	209	88	71
	4 232	8 458	2 226	6 596

In 6 months 2020 Other operating expenses position includes a net amount of 251 thousand EUR originating from financial hedging activities. 521 thousand EUR out of this amount is attributable to operational activities during the 6 months reporting period. The remaining amount for outstanding derivatives of (772) thousand EUR is evaluated on a mark-to-market basis as of the balance sheet date. (468) thousand EUR is attributable to operational activity in 2020 and (304) thousand EUR is attributable to operational activity in 2021.

6. Intangible assets

	Group 6 months	Group	Company 6 months	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	780	3 410	401	1 928
Disposals	-	(1)	-	(1)
As at the end of period	21 747	20 967	5 869	5 468
Amortisation
As at the beginning of period	12 830	10 914	669	200
Amortisation	1 009	1 917	349	470
Disposals	-	(1)	-	(1)
As at the end of period	13 839	12 830	1 018	669
Net book value as at the end of the period	7 908	8 137	4 851	4 799

7. Property, plant and equipment

Group	Land, buildings, construc tions	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	1 148	494	260	1 026	2 928
Transfers	-	-	1	(1)	-
Disposals	(419)	(194)	(228)	-	(841)
30.06.2020	651 658	39 135	16 476	2 104	709 373
Depreciation
31.12.2019	358 636	23 998	12 002	-	394 636
Calculated	3 897	1 241	669	-	5 807
Disposals	(285)	(138)	(220)	-	(643)
30.06.2020	362 248	25 101	12 451	-	399 800
Net book value as of 30.06.2020	289 410	14 034	4 025	2 104	309 573
Net book value as of 31.12.2019	292 293	14 837	4 441	1 079	312 650

Latvijas Gāze Group consolidated and JSC "Latvijas Gāze"

unaudited interim condensed financial statements for the 6-months period ended 30 June 2020

Group	Land, buildings, construc tions	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

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
31.12.2019	1 811	-	1 593	1	3 405
Additions	-	-	51	-	51
Transfer	-	-	1	(1)	-
Disposals	-	-	(3)	-	(3)
30.06.2020	1 811	-	1 642	-	3 453
Depreciation
31.12.2019	18	-	658	-	676
Calculated	36	-	151	-	187
Disposals	-	-	(3)	-	(3)
30.06.2020	54	-	806	-	860
Net book value as of 30.06.2020	1 757	-	836	-	2 593
Net book value as of 31.12.2019	1 793	-	935	1	2 729

Latvijas Gāze Group consolidated and JSC "Latvijas Gāze"

unaudited interim condensed financial statements for the 6-months period ended 30 June 2020

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

8. Investment in subsidiary

	Company
	EUR'000
Invested during reorganisation 01.12.2017	194 534
Balance sheet value 30.06.2020 and 31.12.2019	194 534

Shares held	30.06.2020	31.12.2019
JSC "Gaso"	100%	100%

	Subsidiary's equity	Subsidiary's equity	Subsidiary's profit 6 months	Subsidiary's profit 6 months
	30.06.2020	31.12.2019	2020	2019
	EUR'000	EUR'000	EUR'000	EUR'000
JSC "Gaso"	279 827	274 067	5 760	7 038

9. Inventories

	Group	Group	Company	Company
	30.06.2020	31.12.2019	30.06.2020	31.12.2019
	EUR'000	EUR'000	EUR'000	EUR'000
Natural gas and fuel	22 074	48 872	22 074	48 872
Materials and spare parts	1 952	1 304	-	-
Allowance for slow-moving inventory	(71)	(71)	-	-
	23 955	50 105	22 074	48 872

10. Interest-bearing loans and borrowings

	Group	Group	Company	Company
	30.06.2020	31.12.2019	30.06.2020	31.12.2019
	EUR'000	EUR'000	EUR'000	EUR'000
Loan from JSC "SEB banka"
Long-term part of the loan	23 625	25 667	-	-
Short-term part of the loan (i.e. less than 12 months)	3 500	3 500	-	-
	27 125	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.

11. Deferred income

	Group 30.06.2020	Group 31.12.2019	Company 30.06.2020	Company 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	18 199	18 434	-	-
Short-term part	1 056	1 046	-	-
Other deferred income:
Short-term part	-	92	-	92
	19 255	19 572	-	92

Changes of deferred income

	Group 6 months 2020	Group 6 months 2019	Company 6 months 2020	Company 6 months 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	301	287	-	-
Included in income of reporting year	(618)	(512)	(92)	-
Total transfer to next years	19 255	19 452	-	-

12. Other liabilities

	Group	Group	Company	Company
	30.06.2020	31.12.2019	30.06.2020	31.12.2019
	EUR'000	EUR'000	EUR'000	EUR'000
Prepayments received	10 077	10 843	9 991	10 793
Derivative financial instruments	1 646	1 258	1 646	1 258
Value added tax	615	3 839	215	2 774
Accrued costs	2 232	4 431	280	1 081
Excise tax	167	892	167	887
Vacation pay reserve	1 303	901	141	141
Salaries	721	839	160	151
Social security contributions	1 417	701	350	101
Personnel income tax	805	338	217	33
Real estate tax	90	-	-	-
Natural resource tax	1	6	-	-
Other current liabilities	171	109	38	31
	19 245	24 57	13 205	17 250

13. Related party transactions

No individual entity exercises control over the Company. The Company and the Group had 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. Since 2017 JSC "Latvijas Gāze" has established subsidiary JSC "Gaso".

Income or expenses	Group 01.01.- 30.06.2020	Group 01.01.- 30.06.2019	Company 01.01.- 30.06.2020	Company 01.01.- 30.06.2019
	EUR'000	EUR'000	EUR'000	EUR'000
Income from provision of services
JSC "Gaso"	-	-	1 199	1 949
Expenses on natural gas purchase
PJSC "Gazprom"	24 864	67 447	24 864	67 447
Expenses on natural gas distribution and other services
JSC "Gaso"	-	-	17 593	19 715

Related party payables and receivables	Group 30.06.2020	Group 31.12.2019	Company 30.06.2020	Company 31.12.2019

Receivables from related companies
JSC "Gaso"	-	-	116	146
Advance payments to related entities
PJSC "Gazprom"	12 648	35 953	12 648	35 953
Payables to related companies for natural gas and services
JSC "Gaso"	-	-	1 790	1 477

14. 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.

Financial instruments

Financial assets Classification

The Company and the Group 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 Company's and Group'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 Company and the Group 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 Company and the Group has transferred substantially all the risks and rewards of ownership.

Measurement

At initial recognition, the Company and Group 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 and bank deposits;
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 Company and the Group assess on a forward-looking basis the expected credit losses ("ECL") associated with its 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 Company and the Group apply a simplified approach permitted by IFRS 9 and measures 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 Company's and Group's ordinary activities. Revenue is measured in the amount of transaction price. Transaction price is the amount of consideration to which the Company and the Group 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 Company and the Group recognises revenue when it transfers control of a good or service to a customer.

Sale of natural gas – wholesale

The Company and the Group 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 Company and the Group 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 Company and the Group 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 acts as an agent in collecting the excise duty from customers, and paying 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.

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.

Assets purchased, but not ready for the intended use or under installation process are classified under "Assets under construction". 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 are 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	40 - 70
Machinery and equipment	5 - 30
Other fixed assets	3 - 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 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 (accounting policy applied since 1 January 2019)

The Company is a 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 under residual value guarantees;
the exercise price of a purchase option if the group is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term reflects the group 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 30 June 2020 and 31 December 2019 is 3.33%.

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 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, it has 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.

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.

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.

As a result of this reorganisation the Group and the Company recognised a reorganisation reserve which arose as a result of a difference between the net assets received and transferred within reorganisation process.

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 decisionmaker 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 is recognized as a liability in the Group's and Company's financial statements in the period in which the dividends are approved by the 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 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 current employee benefit obligations 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 is unable to meet its 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 upon termination of employment and over the rest of life 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 or may become 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.

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 30 June 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.

15. Subsequent events

Since 30 June 2020 up to the signing of these financial statements there have been no events with effect on the financial position or financial results of the Group and the Company as at the balance sheet date.

AI Terminal

Latvijas Gaze

2233_rns_2020-08-26_1ce44975-77b2-48f3-b861-a29ec6052340.pdf

LATVIJAS GĀZE GROUP CONSOLIDATED AND JSC "LATVIJAS GĀZE" UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE 6-MONTHS PERIOD ENDED 30 JUNE 2020

Riga 2020

COUNCIL OF THE JSC "LATVIJAS GĀZE"

Kirill Seleznev

MANAGEMENT BOARD OF THE JSC "LATVIJAS GĀZE"

LATVIJAS GĀZE GROUP IN SHORT

Structure of Latvijas Gāze group as of 30 June 2020

STRATEGY AND OBJECTIVES

OUR OBJECTIVE

OUR MISSION

OUR VISION

SHARES AND SHAREHOLDERS OF THE JSC "LATVIJAS GĀZE"

SHARES AND SHAREHOLDERS

COMPANY'S SHARE PRICE, OMX RIGA GI AND OMX BALTIC GI INDEX CHANGES (01.01.2017. – 30.06.2020.)

SHARE PRICE DEVELOPMENT AND SHARE TURNOVER (01.01.2017.-30.06.2020.)

INFORMATION ON SHARE TRANSACTIONS (6M 2018 – 6M 2020)

COMPOSITION OF SHAREHOLDERS ON 30.06.2020

SHARES OWNED BY MEMBERS OF THE GOVERNING BODIES OF THE JSC "LATVIJAS GĀZE"

MANAGEMENT REPORT

In recent months, JSC "Latvijas Gāze" has worked on improving remote customer service.

GENERAL MARKET AND INDUSTRY ENVIRONMENT

KEY EVENTS DURING THE REPORTING PERIOD

OPERATING RESULTS OF THE BUSINESS SEGMENTS

LONG-TERM GAS SUPPLIES

FINANCIAL RISK MANAGEMENT

TRANSACTIONS WITH RELATED PARTIES

SUBSEQUENT EVENTS

STATEMENT OF THE BOARD RESPONSIBILITY

FINANCIAL STATEMENTS

CORPORATE INFORMATION

STATEMENT OF PROFIT OR LOSS

STATEMENT OF COMPREHENSIVE INCOME

BALANCE SHEET

BALANCE SHEET (continued)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

COMPANY'S STATEMENT OF CHANGES IN EQUITY

STATEMENT OF CASH FLOWS

NOTES TO FINANCIAL STATEMENTS

1. Segment information

2. Revenue from contracts with customers

3. Raw materials and consumables used

4. Personnel expenses

5. Other operating expenses

6. Intangible assets

7. Property, plant and equipment

8. Investment in subsidiary

9. Inventories

10. Interest-bearing loans and borrowings

11. Deferred income

Changes of deferred income

12. Other liabilities

13. Related party transactions

14. Summary of significant accounting policies

Basis of preparation

Financial instruments

Financial assets Classification

Recognition and de-recognition

Measurement

Debt instruments

Amortised cost

Equity instruments

Derivative financial instruments

Impairment

Revenue from contracts with customers

Sale of natural gas – wholesale

Sale of natural gas to end users – commercial customers and households

Excise duty

Sale of services – natural gas distribution

Connection fees

Contract assets and contract liabilities related to contracts with customers

Financing component

Property, plant and equipment

Intangible assets

Impairment of non-financial assets

Inventories

Leases (accounting policy applied since 1 January 2019)

Principles of consolidation