KN Energies AB

Quarterly Report • Feb 28, 2013

SC KLAIPEDOS NAFTA INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE YEAR 2012 PREPARED ACCORDING TO INTERNATIONAL FINANCIAL REPORTING STANDARTS, AS ADOPTED BY THE EUROPEAN UNION (UNAUDITED)

FINANCIAL STATEMENTS 3	–	17
Statement of financial position 3		– 4
Statement of comprehensive income 5
Statement of changes inequity		6
Cash flow statement		7
Explanatory notes to financial statements	8 –	17
CONFIRMATION OF RESPONSIBLE PERSONS		18

Statement of financial position

	Notes	31 December 2012	31 December 2011
ASSETS		(unaudited)
Non-current assets
Intangible assets		1,354	465
Property, plant and equipment	3	445,285	383,907
Other financial assets	7	2,008	5,352
Investment in subsidiary		1,000	-
Investment in associates		561	427
Total non-current assets		450,208	390,151
Current assets
Inventories	4	1,134	1,674
Prepayments		438	223
Trade receivables	5	13,580	4,335
Other receivables	6	4,141	2,565
Other financial assets	7	18,359	110,427
Cash and cash equivalents	8	72,700	9,983
Total current assets		110,352	129,207
Total assets		560,560	519,358
			(cont'd on the next page)

The accompanying notes, set out on pages 8-17, are an integral part of these financial statements.

Statement of financial position (cont'd)

	Notes	31 December 2012	31 December 2011
EQUITY AND LIABILITIES		(unaudited)
Equity
Share capital	1	380,606	342.000
Share premium		13,512	-
Legal reserve		22,561	19.000
Reserve for own shares		55,000	-
Other reserves		23,727	68.043
Retained earnings		41,030	71.226
Total equity		536,436	500,269
Non-current liabilities
Deferred tax liabilities		7,211	7,709
Non-current employee benefits		816	785
Total non-current liabilities		8,027	8,494
Current liabilities
Trade payables	9	7,378	4,671
Payroll related liabilities	10	3,868	2,559
Provision		449	493
Income tax payable		2,602	1,838
Prepayments received		52	49
Dividends payable		362	39
Other payable and current liabilities	11	1,386	946
Total current liabilities		16,097	10,595
Total equity and liabilities		560,560	519,358

The accompanying notes, set out on pages 8-17, are an integral part of these financial statements.

General Manager Rokas Masiulis 25 February 2013

Director of Finance and Administrative Department Mantas Bartuška 25 February 2013

Statement of comprehensive income

		2012		2011
	Notes	January -	October -	January -	October -
		December	December	December	December
		(unaudited)	(unaudited)	(audited)	(audited)
Sales	12	138,881	39,889	141,276	33,212
Cost of sales	13	(81,639)	(22,556)	(82,913)	(20,874)
Gross profit		57,242	17,333	58,363	12,338
Operating expenses		(10,795)	(5,140)	(7,260)	(2,414)
Other operating income (expenses) – net
result		108	59	42	28
Profit from operating activities		46,555	12,252	51,145	9,952
Income from financial activities	14	1,847	246	1,981	691
Expenses from financial activities		(116)	(29)	(20)	(13)
Share of the associate"s comprehensive
income		84	84	138	138
Profit (loss) before income tax		48,370	12,553	53,244	10,768
Income tax expense		(7,340)	(1,858)	(7,991)	(1,577)
Net profit (loss)		41,030	10,695	45,253	9,191
Other comprehensive income (expenses)		-	-	-	-
Total comprehensive income (expenses)/ profit (loss) attributed to
the shareholders		41,030	10,695	45,253	9,191
Basic and diluted earnings (losses) per
share, in LTL	15	0.11	0.03	0.13	0.03

The accompanying notes, set out on pages 8-17, are an integral part of these financial statements.

General Manager Rokas Masiulis 25 February 2013 Director of Finance and Administrative Department Mantas Bartuška 25 February 2013

Statement of changes in equity

	Share capital	Share premium	Legal reserve	Reserve for own shares	Other reserves	Retained earnings	Total
Balance as of 31 December 2010	342,000	-	19,000	-	68,043	25,973	455,016
Net profit for the year Other comprehensive	-	-	-	-	-	45,253	45,253
income Total comprehensive income	- -	- -	- -	- -	- -	- 45,253	- 45,253
Balance as of 31 December 2011 (audited)	342,000	-	19,000	-	68,043	71,226	500,269
Net profit for the year Other comprehensive	-	-	-	-	-	41,030	41,030
income	-	-	-	-	-	-	-
Total comprehensive income	-	-	-	-	-	41,030	41,030
Dividends paid	-	-	-	-	-	(56,981)	(56,981)
Transfers between reserves	-	-	3,561	55,000	(44,316)	(14,245)	-
Increase in share capital Balance as of 31 December	38,606	13,512	-	-	-	-	52,118
2012 (unaudited)	380,606	13,512	22,512	55,000	23,727	41,030	536,436

The accompanying notes, set out on pages 8-17, are an integral part of these financial statements.

General Manager Rokas Masiulis 25 February 2013

Director of Finance and

Administrative Department Mantas Bartuška 25 February 2013

Cash flow statement

	Notes	2012	2011
Cash flows from operating activities		(unaudited)
Net profit	15	41,030	45,253
Adjustments for noncash items:
Depreciation and amortization	3	22,898	22,782
Change in vacation reserve		438	6
Impairment and write-off of property, plant and equipment		441	66
Property, plant and equipment write-offs		255	-
Change in employee benefit liabilities		31	(141)
Change in allowance for doubtful receivables	7	(4)	(4)
Accrued emission rights		(44)	(376)
Investment into associate accounted for equity method		(84)	(138)
Accrued income Reserve of restructuring		(926) -	(756) (547)
Profit on sale of non-current assets		-	(26)
Other non-cash adjustments of expense (income)		-	12
Income tax expences		7,340	7,991
Interest income	14	(1,817)	(1,886)
		69,558	72,236
Changes in working capital:
(Increase) decrease in inventories		540	2,424
Decrease (increase) in prepayments		(215)	(31)
Decrease (increase) in trade and other accounts receivable		(9,244)	376
Decrease (increase) in other receivables		(1,834)	(594)
Increase (decrease) in trade and other payables		3,422	(460)
Decrease (increase) in prepayments received		3	(35)
Increase (decrease) in other current liabilities and payroll related liabilities		(95)	70
		62,135	73,986
Income tax (paid)		(5,235)	(7,008)
Interest received		930	530
Net cash flows from operating activities		57,830	67,508
Cash flows from investing activities
Acquisition of property, plant, equipment and intangible assets		(40,369)	(19,135)
Acquisition of Investments held-to-maturity		(429,257)	(112,619)
Sales of investments held-to-maturity		525,918	44,363
Other acquisition of investments Sale of non-current assets		(1,050) -	(260) 625
Net cash flows from investing activities		55,242	(87,026)
Cash flows from financing activities
Increase in share capital		6,627	-
Dividends paid		(56,981)	-
Net cash flows from financing activities		(50,354)	-
Net increase (decrease) in cash flows		62,718	(19,518)
Cash and cash equivalents on 1 January		9,983	29,501
Cash and cash equivalents on 31 December		72,701	9,983

The accompanying notes, set out on pages 8-17, are an integral part of these financial statements.

General Manager	Rokas Masiulis	25 February 2013
Director of Finance and Administrative Department	Mantas Bartuška	25 February 2013

AB KLAIPEDOS NAFTA INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE YEAR 2012 (all amounts are in LTL thousand unless otherwise stated) 7

Notes to the financial statements

1 General information

SC Klaipėdos Nafta (hereinafter referred to as "the Company") is a public limited liability company registered in the Republic of Lithuania. The address of its registered office is as follows: Burių str. 19, 91003 Klaipėda, Lithuania.

The main activities of the Company – oil products transshipment services and other related.

The Company was established by SC Naftos Terminalas (Lithuania) and Lancater Steel Inc. (USA) acquiring 51 and 49 percent of shares respectively. The Company was registered on 27 September 1994.

As of 31 December 2012 all the shares were owned by 1,858 shareholders. The Company"s share capital – LTL 380,606,184 (three hundred eighty million six hundred six thousand one hundred eighty-four) is fully paid. It is divided into 380,606,184 (three hundred eighty million six hundred six thousand one hundred eighty-four) ordinary shares with a par value of LTL 1. 72.32 % of the shares (275,241,290 shares) are owned by the State of Lithuania, represented by the Ministry of Energy.

The Company has not acquired any own shares and has arranged no deals regarding acquisition or transfer of its own shares during the year 2012. The Company"s shares are listed in the Baltic Secondary List on the NASDAQ OMX Vilnius Stock Exchange.

As of 31 December 2012 and 31 December 2011 the shareholders of the Company were:

	31 December 2012		31 December 2011
	Number of shares held (thousand)	Part of ownership (%)	Number of shares held (thousand)	Part of ownership (%)
Government of the Republic of Lithuania
represented by the Ministry of Energy	275,241	72.32	241,544	70.63
UAB Concern Achema Group	38,975	10.24	32,766	9.58
Other (less than 5 per cent each)	66,390	17.44	67,690	19.79
Total	380,606	100.00	342,000	100.00

The average number of employees in the year 2012 was 327 (315 – in 2011).

The Management of the Company approved these Financial Statements on 25 February 2013.

2 Accounting principles

These financial statements have been prepared on a historical cost basis.

The financial statements are presented in Litas and all values are rounded to the nearest thousand (LTL 000), except when otherwise indicated.

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (hereinafter the EU).

The Company applies the same accounting policies and the same calculation methods in preparing Interim Financial Statements as they have been used for the Annual Financial Statements of the year 2011. The principles used in preparation of financial statements were presented in more detail in the Notes to the Financial Statements for 2011.

3 Property, plant and equipment

In the year 2012 the Company has continued works in the following objects:

Liquefied natural gas terminal project. On 30 June 2011 SC Klaipėdos Nafta signed an Agreement with the Lead Adviser for preparation and implementation of liquefied natural gas (LNG) terminal"s project – the international company FLUOR. The Extraordinary General Shareholders"Meeting of SC Klaipėdos Nafta held on 27 July 2011 approved the conclusion of the Agreement. The Agreement provides for the Lead Adviser during four years to prepare the technical development plan of the Project, assist in selection of technologies, perform actions in order to get obligatory permits, solve the matters related to the safety of the project, navigation as well as other issues associated with the technical implementation of the Project. Further, the Adviser will perform works related to the economic part – will produce business model of the Terminal, financial model and develop strategy of the Terminal"s performance. The Adviser will also supervise technical realization of the Project during its entire execution period - until the end of 2014 when the Terminal will start its activities.

As of 31 December 2012 the investments into implementation of LNG Terminal"s project amounted to LTL 36,617 thousand – the major part of which was comprised of advance payments of LTL 25,103 thousand paid according to the Agreement to the Lead Adviser for preparation and implementation of liquefied natural gas terminal"s project as well as for legal and other research services.

Reconstruction of HFO (i.e. heavy fuel oil products) storage tank park, which involves demolishing of 4 storage tanks with the capacity 5,000 m³ and construction of 2 storage tanks with the capacity 32,250 m³ . The investment will increase flexibility of the Company"s reloading activities thus enabling to reload additional flows of oil products and will make the Terminal more attractive to its clients by giving them an opportunity to accumulate greater batches (up to 90 thousand tonnes) of the products. The investment amounts to LTL 29 million. The Company intends to complete construction at the end of 2013. The total value of the works performed amounted to LTL 3,869 thousand.

At the site of the universal storage tanks under construction the Company plans updating of the piping of the existing storage tanks of oil products that will provide technical possibility to accommodate part of the HFO storage tanks for reloading of LFO (i.e. light oil products).

• Utilization of carbohydrate vapours from railway trestles. On 10 June 2010 the Company started its investment project "Procurement of vapour recovery unit" after implementation of which the environment pollution will be reduced. On 29 September 2011 the Contract was concluded with "John Zink International Luxembourg SARL" regarding procurement of the equipment. The major part of the equipment under the Agreement was delivered in the third quarter of 2012, a part of construction works has been accomplished, owner-contractor agreement and contract for installation of electrical and automation equipment have been concluded. The Company has already invested LTL 5,063 thousand into this project. The total amount of investments into the project "The Procurement of vapour recovery unit" will amount about LTL 7,000 thousand.
• Updating of HFO unloading system of rail gantry track 2. The total value of the works performed amounted to LTL 5,332 thousand.
• Updating of HFO unloading system of rail gantry track 1. The total value of the works performed amounted to LTL 4,964 thousand.

According to decision No. 204, dated 15 February 2012, of the Government of the Republic of Lithuania "On the investment of state-owned property and the increase of the authorized capital of AB "Klaipėdos nafta" and Agreement on shares which was made on 11 June 2012 between the Company and the Republic of Lithuania, represented by the Ministry of Energy, the authorized capital of the Company was increased by monetary and non-monetary contributions of the shareholders. The Ministry of Energy paid to the Company for the shares by non-monetary contribution of the agreement by transferring fixed tangible assets which are located in Subacius Oil Products Terminal. The total value of transferred property, plant and equipment amounted to LTL 49,491 thousand.

The depreciation charge of the Company"s property, plant and equipment for the year 2012 amounts to LTL 22,659 thousand (LTL 22,586 thousand – in 2011). LTL 22,609 thousand of depreciation charges have been included into cost of sales (LTL 22,474 thousand – in 2011) and the remaining amount has been included into operating expenses.

4 Inventories

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Oil products for sale	362	1,503
Spare parts, construction materials and other inventories	772	171
	1,134	1,674

As of 31 December 2012 the Company accounted the allowance of LTL 6,168 thousand for the inventories (LTL 5,979 thousand in 2011), that have been written off down to the net realizable value. The Company writes allowance for the inventories down to the net realizable value if they are not used for more than 6 months.

Allowance has been accounted for construction materials and spare parts, which were not used during the reconstruction (1996 – 2005).

As of 31 December 2012 the Company stored 148,2 thousand tons of oil products delivered for transshipment in its storage tanks (143,8 thousand tons as on 31 December 2011). Such oil products are not recognized in the Company"s financial statements, they are accounted for in the off-balance sheet accounts as the Company has no ownership rights into oil products.

Oil products for sale are energy products collected in the Waste Water Treatment Facilities. On 31 December 2012 the Company stored 1,162 tons of heavy oil products collected in its Waste Water Treatment Facilities (31 December 2011 – 1,945 tons).

5 Trade receivables

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Receivables for reloading of oil products and other related services	13,580	4,335
	13,580	4,335

Trade and other receivables are non-interest bearing and are generally on 6 - 15 days terms.

On 31 December 2012 trade debts to the Company in the amount of LTL 3,012 thousand were denominated into EURO (LTL 1,926 thousand – on 31 December 2011).

6 Other receivables

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Accrued income	2,315	1,388
VAT receivable	1,715	715
Accrued interest on term deposits	46	409
Other receivables	78	66
	4,154	2,578
Less: impairment allowance for receivables	(13)	(13)
	4,141	2,565

The change in allowance for receivables has been included into operating expenses in the Statement of Comprehensive income.

7 Other financial assets

	As of 31 December 2012	As of 31 December 2011
Loans and receivables	(unaudited)
Cession of rights in Vnesekonom bank	100	100
Loan to UAB "Ţavesys"	357	361
Less: impairment allowance for receivables	(457)	(461)
Total loans and receivables	-	-

7 Other financial assets (cont'd)

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Investments held- to-maturity
Short-term deposits	12,613	44,174
Investments into the state government bonds of Lithuania	3,994	61,717
Investments into the government bonds of Lithuanian banks	3,760	4,476
Investments into the government bonds of foreign banks	-	5,412
Total investments held-to-maturity	20,367	115,779
Total other financial assets	20,367	115,779
Current part	18,359	110,427
Non-current part	2,008	5,352

Carrying values of other financial assets are denominated in the following currencies:

Currency	As of 31 December 2012	As of 31 December 2011
	(unaudited)
LTL	13,163	77,248
EUR	7,204	38,531
	20,367	115,779

On 24 January 2003 AB "Naftos terminalas", as a part of settlement for the shares acquired, transferred to the Company the right of demand for the deposit of USD 95.266 thousand (or LTL 277.243 thousand) in the liquidated Vnesekonom bank and the right to the loan provided to UAB "Zavesys". Cost of sales of the right in the liquidated Vnesekonom bank amounts to LTL 100 thousand. The Company"s Management considers the receivables subject to the acquired rights of demand to be doubtful therefore they have been accounted for by cost less 100 % of allowance.

The maximum exposure of these investments to credit risk at the reporting date was represented by carrying value of the securities and term deposits, classified as investments held to maturity.

8 Cash and cash equivalents

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Cash at bank	67,221	5,136
The state government bonds of Lithuania	5,479	3,044
Government bonds of foreign countries	-	1,803
	72,700	9,983

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

Currency	As of 31 December 2012	As of 31 December 2011
	(unaudited)
LTL	46,733	3,993
EUR	25,967	5,990
	72,700	9,983

The maximum exposure of these investments to credit risk at the reporting date was represented by carrying value of the securities and term deposits, classified as investments held to maturity.

9 Trade and other payables

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Payable to contractors	2,216	1,204
Payable for rent of land	504	514
Payable for railway services	594	336
Other trade payables	4,064	2,617
	7,378	4,671

Trade payables are non-interest bearing and are normally settled on 30-day terms. On 31 December 2012 trade payables of LTL 318 thousand were denominated into euro (LTL 610 thousand were denominated into euro – on 31 December 2011).

10 Liabilities related to labor relations

As of 31 December 2012 the Company"s liabilities, related to labour relations, were basically comprised of vacation reserve of LTL 1,750 thousand, social insurance payable for December of LTL 878 thousand and accumulation of bonus in the amount of LTL 1,200 thousand for the annual results (As of 31 December 2011 the Company"s liabilities, related to labour relations, were mainly comprised of vacation reserve of LTL 1,317 thousand and accrued bonuses in the amount of LTL 1,200 thousand for the annual results).

11 Other current liabilities

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Accrued expenses	1,056	437
Tax on real estate payable	309	485
Other	21	24
	1,386	946

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

12 Sales income

	2012	2011
	(unaudited)
Sales of oil transshipment services	131,543	132,223
Sales of heavy oil products collected in the Waste Water Treatment	3,233	5,699
Other sales related to transshipment	2,785	3,280
Revenues of sold inventories	1,320	74
	138,881	141,276

The reduction of revenues of 2012 was greatly determined by the reduced transshipment of oil products from AB "Orlen Lietuva" due to the planned capital repair works in this refinery and the seasonally reduced transshipment of oil products from Russia. In 2011 the Company"s revenues increased due to successful sales of oil products recovered from bilge waters that brought LTL 5,699 thousand.

Other sales related to reloading include moorage, sales of fresh water, transportation of crew and other sales related to reloading.

13 Cost of sales

	2012	2011
	(unaudited)
Depreciation and amortization	22,609	22,474
Natural gas	19,640	18,027
Wages, salaries and social security	17,862	17,844
Railway services	6,034	7,465
Electricity	5,316	5,478
Rent of land and quays	2,046	2,056
Cost of sold inventories	1,470	3,025
Repair and maintenance of property, plant and equipment	1,848	1,758
Tax on real estate	1,208	1,948
Insurance of assets	1,148	942
Services for tankers	596	396
Inventories for resale	547	-
Work safety costs	323	199
Emission rights expenses	(43)	96
Other	1,035	1,205
	81,639	82,913

14 Income (expenses) from financial and investment activities, net

	2012	2011
	(unaudited)
Interest income	1,817	1,886
Fines received	30	95
Financial income, total	1,847	1,981
(Losses) from currency exchange	(115)	(18)
Fines (expenses)	(1)	(2)
Financial (expenses), total	1,731	1,961

15 Earnings per share, basic and diluted

Basic earnings per share are calculated by dividing net profit of the Company by the number of the shares available. Diluted earnings per share equal to basic earnings per share as the Company has no instruments issued that could dilute shares issued:

	2012	2011
	(unaudited)
Net profit attributable to shareholders	41,030	45,253
Weighted average number of ordinary shares (thousand)	380,606	342,000
Earnings per share (in LTL)	0.11	0.13

16 Related party transactions

The parties are considered related when one party has a possibility to control the other one or has significant influence over the other party in making financial and operating decisions. The related parties of the Company and transactions with them in 2012, 2011 and 2010 were as follows:

Transactions with Lithuanian State controlled enterprises and institutions

		Purchases from related parties	Sales to related parties	Receivables from related parties	Payables to related parties
State Tax Inspectorate at the	2012	11,825	-	16	2,934
Finance Ministry of the Republic	2011	9,759	-	-	1,775
of Lithuania	2010	8,908	-	130	1,080
State Social Insurance Fund	2012	7,350	-	-	878
Board under the Ministry of Social	2011	4,762	-	-	11
Security and Labour	2010	5,334	-	-	-
State Enterprise Klaipeda State	2012	2,049	-	-	504
Seaport Authority owned by the	2011	2,056	-	-	514
State of Lithuania represented by the Ministry of transportation	2010	2,350	-	-	587
AB Lithuanian Railways owned by	2012	6,061	-	-	594
the State of Lithuania represented by the Ministry of transportation	2011	8,396	-	-	336
	2010	7,845	-	-	1,425
AB "Lesto", owned by the State of	2012	2,448	-	-	350
Lithuania represented by the Ministry of Energy	2011	2,419	-	-	296
	2010	5,159	-	-	343
Other related parties	2012	-	17	3	-
	2011	-	28	3	-
	2010	147	5	35	-
Transactions with related	2012	29,733	17		19 5,260
parties, in total:	2011	27,392	28		3 2,932
	2010	29,743	5	165	3,435

Remuneration to the Management and other payments

The Company"s Management is comprised of General Manager, Deputy General Manager, Production Director, Finance Director, Commercial Director and LNG Terminal Director.

	As of 31 December 2012	As of 31 December 2011
	(unaudited)
Labour related disbursements	1.523	1.704
Number of managers	6	6

During twelve months of 2012 and 2011 the Management of the Company did not receive any loans, guarantees, or any other payments or property transfers were made or accrued.

17 Subsequent events

On 18 January 2013, NORDEA BANK FINLAND PLC (hereinafter referred to as the Bank) was announced the winner of the tender "Procurement of the overdraft services" (hereinafter referred to as the Procurement), performed under the publicised negotiated procedure.

During the implementation of the Procurement 3 final tender offers were submitted by 17 January 2013, one of which was rejected for failure to comply with the requirements of Procurement documents. Upon evaluation of the final tender offers according to the lowest price criterion, the Bank was recognised to be the winner.

The Company has sent an invitation to the Bank to conclude a public procurement contract. The main conditions of the overdraft agreement:

• amount of the overdraft LTL 120,000 thousand;
• term of the overdraft as from the date of conclusion of the agreement until 30 June 2015, with a possibility to extend the agreement for the term of up to 12 months with not worse conditions, provided that the Bank will adopt the decisions needed for this purpose;
• upon request of the Company, the amount of the overdraft may be increased by 30%, i. e. up to LTL 156,000 thousand. For increase of amount of the overdraft no administrative fee shall be applied;
• annual interest rate floating. Base interest rate 3 months VILIBOR. Interest margin is 0.94%, which may not be changed during the whole term of validity of the agreement.
• On 22 January 2013 the Company received a letter from the Public Procurement Office regarding presentation of the documents of international procurement "Procurement of engineering, procurement and construction works for natural gas pipeline system (EPC)" performed under the negotiated procedure (hereinafter, the Procurement) for evaluation, by which, inter alia, the Company was obligated to suspend the procedure of conclusion of the contract for Procurement until the Public Procurement Office gives an evaluation of the documents and decisions presented by the Company (contracting authority).

In the opinion of the Company, temporary suspension of the procedure of conclusion of the contract for Procurement should not have an impact on the timely implementation of the liquefied natural gas terminal project.

• The following resolutions were adopted at the Extraordinary General meeting held on 25 January 2013:
• to conclude the contract for Natural Gas Pipeline System Engineering, Procurement and Construction (EPC) Works (hereinafter referred to as the Works), necessary in constructing the connection between the Liquefied Natural Gas (LNG) Terminal"s embankment within the port area of Klaipėda State Sea Port (near the northern part of Kiaulės nugara island) and Lithuanian natural gas transportation system (gas pipeline Jurbarkas–Klaipėda (part Tauragė–Klaipėda) near Klaipėda DSS-2, situated at Kiškėnai village, Dovilai eldership, Klaipėda district municipality) (hereinafter referred to as the Contract) with the winner of the Company international public tender, conducted by a way of public negotiations "Natural Gas Pipeline System Engineering, Procurement and Construction (EPC) Works", who proposed the lowest price for all the scope of works – the consortium of Kauno dujotiekio statyba, AB and Šiaulių dujotiekio statyba, UAB (hereinafter referred to as the Contractor).

The total fixed price for all the works under the Contract shall be LTL 137,999 thousand without VAT. This fixed price can increase only in the exclusive cases provided for in the Contract. The Company shall be paying the indicated fixed sum only for the indicated fixed sum only for the actual works performed under the Contract.

• all the works under the Contract shall be finished till 1 October 2014. The performance terms may only be extended in the exclusive cases set forth in the Contract.
• to establish, that the Agreement may be concluded only after the expiry of the period of deferment of 15 days which is applicable to the conclusion of the Agreement in accordance with paragraph 22 of Article 2 of the Law of the Republic of Lithuania on Public Procurement, and in case there shall be no obligations or decisions, issued by the institutions, having the relevant authorities, which would prohibit to sign the Agreement with the concrete Contractor, which has won the public procurement."

17 Subsequent events (cont'd)

On 28 January 2013 the Company received documents from the Klapėda Regional Court regarding a claim filed by German concern PPS Pipeline Systems GmbH to invalidate the decisions of the commission of international procurement "Procurement of engineering, procurement and construction works for natural gas pipeline system (EPC)" performed under the negotiated procedure (hereinafter, the "Procurement").

The claimant in its claim inter alia asked the court:

• to acknowledge, that while participating in the Procurement the consortium of AB Kauno dujotiekio statyba and UAB Šiaulių dujotiekio statyba had a non-allowed competition advantage, because of which its offer had to be rejected;
• to annul the decision of the Company"s public procurement commission, according to which the queue of offers was approved, and the offer of consortium was acknowledged as the winner;
• (to oblige the Company to approve the new queue of the offers.
• the Company will file its response to the court in due course.
• On January 2013 the Company received a notification of 29 January 2013 from the Vilnius Regional Administrative Court (hereinafter, the Court) regarding filing of a response to the complaint of AB Achema (hereinafter, Achema) concerning the resolutions of the National Control Commission for Prices and Energy (hereinafter, the NCCPE). The Company is involved in the case as a third person concerned.

In its complaint Achema asks to annul the following:

• Paragraphs 3.1 and 4 of Resolution No. O3-317 of the NCCPE "Regarding the establishment of the funds for 2013 intended for compensation, in full or in part, for expenses of the construction and operation of the liquefied natural gas terminal, its infrastructure and the connection", dated 19 October 2012. By the said paragraphs the NCCPE determined the funds for 2013, intended for compensation of the expenses (in full or in part) of the construction of the liquefied natural gas terminal (hereinafter, the LNGT), its infrastructure and the connection (LTL 113,798 thousand) and for covering of the LNGT funds administration expenses (LTL 302 thousand) and established that the NCCPE has the right to adjust such amounts of expenses in case of changes in essential circumstances, which have a significant effect on the funding and implementation of the SGDT.
• Paragraph 2 of Resolution No. O3-330 of the NCCPE "Regarding the adjustment of the upper limits of the natural gas transmission and distribution prices of AB Lietuvos Dujos and establishment of an additional and integral component of the upper limit of the natural gas transmission price (LNGT premium) for 2013." dated 26 October 2012. By the said paragraph, the NCCPE established an additional and integral component of the upper limit of the natural gas transmission price (LNGT premium), which is intended for compensation of the expenses of construction of the LNGT, its infrastructure and the connection in 2013 (LTL 37.53 for 1,000 m3 (value added tax exclusive)).
• On 6 February 2013, on the basis of Part 3 and 4 of Article 25 of the Law on Companies of the Republic of Lithuania, the Company has received from the shareholder of the company the Republic of Lithuania, represented by the Ministry of Energy of the Republic of Lithuania, proposal to elect following candidates for the supervisory board members of the company in the extraordinary general meeting of shareholders, scheduled for 11 February 2013:
• Eimantas Kiudulas, currently possessing General Manager"s position at Klaipėda Free Economic Zone Management Company;
• Romas Švedas, an independent expert, lecturer;
• Agnė Amelija Kairytė, currently acting as the Deputy of the Head of Law Division of the Ministry of Energy of the Republic of Lithuania.
• On 6 February 2013 the Company concluded the Overdraft Facility Agreement with the winner of the public procurement "Procurement of Overdraft Services" by way of negotiated procedures with publication of a tender notice Nordea Bank Finland Plc (hereinafter, the "Bank"). The Agreement shall enter into force upon the approval of the general shareholder meeting of the Company.
• On 8 February 2013 the Company received a letter from the Public Procurement Office regarding evaluation of international tender "Procurement of engineering, procurement and construction works for natural gas pipeline system (EPC)" performed under the negotiated procedure (hereinafter, the Tender).

17 Subsequent events (cont'd)

• According to the aforementioned letter of the Public Procurement Office inter alia the Company was obligated to annul the following decisions adopted by the public procurement commission of the Company:
• decisions of 3 and 5 December 2012 regarding amendment of the evaluation criteria of tender offers and respective procedural rules;
• decision of 20 December 2012 regarding opening of the envelopes with the final tender offers of the participants of the Tender;
• decision of 20 December 2012 regarding evaluation of final tender offers of the participants of the Tender, conclusion of the queue of tender offers, acknowledgement of the winner of the Tender and conclusion of the contract and respective announcements to the participants of the Tender in connection therewith.
• The following resolutions were adopted at the Extraordinary General meeting held on 11 February 2013:
• to enter into the Agreement for Assignment of the Rights of Claim with the winner of the public procurement "Procurement of Overdraft Services" by way of negotiated procedures with publication of a tender notice – Nordea Bank Finland Plc, acting in Lithuania through the Lithuanian Branch of Nordea Bank Finland Plc (hereinafter, the "Bank").

to enter into an agreement with the Bank for assignment of the rights of claim to the receivable funds intended for covering all or some of the expenses of installation of the liquefied natural gas terminal, its facilities and the connection to the Bank, this agreement for assignment of the rights of claim being intended to secure the Overdraft Agreement between the Company and the Bank, pursuant to which:

the amount of the overdraft granted under the Overdraft Agreement must be LTL 120,000 thousand. Upon the unilateral request of the Company, the amount of the overdraft may be increased by 30%, i.e. up to LTL 156,000 thousand;

the overdraft must be given for a term until 30 June 2015, with a possibility to extend the agreement for an additional term of 12 months under conditions which may not be worse;

the overdraft interest: the base interest rate – 3 months" VILIBOR and the Bank"s interest margin – no more than 0.94%;

the Company would assume the obligation not to pay dividend until obtaining of the deed of completion of construction of the liquefied natural gas terminal project.

the above stated restriction on the payment of dividends shall be applied and any sums under the Overdraft Agreement shall be paid to the Company upon the condition, that based on the Resolution of the Government of the Republic of Lithuania No.20 "On Dividends for the State-owned Shares of the Companies and Profit Taxes of the State-Owned Companies" from 14 January 1997 (including all later amendments hereto), there should be issued and enter into force the relevant Resolution of the Government of the Republic of Lithuania, by which there shall be established that the Manger of shares of the Company that belong to the State of the Republic of Lithuania, shall be entitled to take the decisions that the Company would abstain from payment of dividends until obtaining of the deed of completion of construction of the liquefied natural gas terminal project."

• to revoke the Supervisory Council of the Company in corpore.
• based on voting results the following three candidates, which had received the most votes, were elected into the Supervisory Council of the Company for the term of 4 years: Eimantas Kiudulas, Romas Švedas, Agnė Amelija Kairytė.
• On 19 February 2013 the Company, executing the obligations, indicated in the letter of 8 February 2013 of the Public Procurement Office regarding evaluation of procurement "Procurement of engineering, procurement and construction works for natural gas pipeline system (EPC)" performed under the negotiated procedure (hereinafter, the Procurement) (on the obligations of the Public Procurement Office the Company notified on 8 February 2013, by announcing the notification on material event), has renewed the Procurement procedure and has sent the invitations to the participants of the Procurement on presentation of final offers. The offers shall be evaluated according to the criterion of the most economically advantageous tender offer.

No other significant events have occurred after the date of financial statements.

Confirmation of responsible persons

Following Article 22 of the Law on Securities of the Republic of Lithuania and the Rules on Preparation and Submission of Periodic and Additional Information of the Lithuanian Securities Commission, we, Rokas Masiulis, General Manager of SC Klaipėdos Nafta, and Mantas Bartuska, Finance Director of SC Klaipėdos Nafta, hereby confirm that to the best of our knowledge the above-presented unaudited Interim condensed Financial Statements of SC Klaipėdos Nafta for for the year 2012, prepared in accordance with the International Financial Reporting Standards as adopted to be used in the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss and cash flows of SC Klaipėdos Nafta.

General Manager Rokas Masiulis

Director of Finance and Administrative Department Mantas Bartuška

AB KLAIPEDOS NAFTA INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE YEAR 2012 (all amounts are in LTL thousand unless otherwise stated) 18