Report iq

1

Consolidated interim report of the Company and the Group1 January 2014 – 31 march 2014

2

3

6

13

20

24

28

about the Group and the Company

analysis of the Group’s operating results

review of activities

Corporate governance

social responsibility

Key information about the Company and the Group

Contents

3

the parent company of the Group lietuvos energija, uaB (hereinafter referred to as lietuvos energija or the Company) is responsible for transparent management and coordination of activities of the entire Group, improvement of the efficiency with a view to providing competitive services to customers and for the socially responsible creation of the long-term value for shareholders. the Company analyses the activities of the Group, represents the Group, implements the rights and obligations of the shareholder, establishes operational guidelines and rules, and coordinates the activities in the areas of generation, commerce, finance, law, strategy and development, human resources, risk management, audit, technology, communication and other areas.

the lietuvos energija group is one of the largest state-owned groups of energy companies in the Baltic states. the main activities of the Group include electricity and heat generation and supply, sales and distribution of electricity, also service and development of the energy sector. in Q 1 of 2014, we were also engaged in the preparation for trade and supply of natural gas. the rights and obligations of the shareholder of lietuvos energija group are exercised by the ministry of finance of the republic of lithuania.

the lietuvos energija group with more than 4 300 employees manages and operates the key energy generation capacities of lithuania ensuring security of energy supply, the distribution network covering the territory of the entire country, services more than 1.6 million of customers throughout lithuania, provides electricity supply services to customers abroad, implements development projects of strategic value and pursues the goals of the national energy strategy. during the first three months of 2014, it generated 0.25 tWh of electricity and transmitted 2.21 tWh of electricity to its customers.

about the Group and the Company 1


The total value of assets owned by the Lietuvos Energija group is LTL 9 895 mln. Consolidated revenue for three months of 2014 amounted to LTL 721.4 million, while the Group’s EBITDA was LTL 195.9 million. Net profit of three months amounted to LTL 66.3 million.

4about the Group and the Company

structure of the Group

at the end of the reporting period, the lietuvos energija group consisted of 15 companies: the parent Company and 14 directly and indirectly managed companies. the main activities of the Group include the generation of electricity and heat, sales, distribution and supply of electricity. operations of the companies

The structure of the Group as at the end of reporting period (31th May 2014)

of the Group companies servicing these core activities comprise the itt, real estate, transport, repairs and construction of energy facilities, staff training and other services.

a detailed list of the Group companies is presented on p. 29 of this document.

„lietuvos energija“, uaB

aB lesto

uaB „elektros

tinklo paslaugos“

nt Valdos, uaB

uaB Vae spB

uaBlitGas

uaB duomenųlogistikos

centras

uaB technologijų

ir inovacijųcentras

„lietuvos energijosgamyba“, aB

energijos tiekimas

uaB

uaB „Kauno

energetikosremontas“

VŠĮrespublikinis

energetikųmokymųcentras

Geton energy ou

Geton energy sia

GotlitasuaB

Supervisory Board consists of 7 members (3 of them independent). Board consists of 5 members. Chief Executive Officer is the Chairman of the Board.

Board* consists of 3 members (2 from the shareholder). Chief Executive Officer is not a member of the Board.

Supervisory Board consists of 5 members (1 independent). Board consists of 5 members. Chief Executive Officer is the Chairman of the Board.

Chief Executive Officer, Board is not formed.

*In case of TIC, 5 members Board is formed; in case of VAE SPB the Board is not formed.This complies with the provision of the corporate governance guidelines approved by the Minister of Finance

5

strategy of the Group

the main goal of the strategy of the lietuvos energija group is to double the value of the Group and to become the most valuable energy company in the Baltic states by 2020. this value is understood as a sustainable balance between three elements: return on assets, improvement of competitiveness and responsibility to employees, society and the environment. the growth of return on assets of the Group will be achieved through the development - diversification of activities, development of new economically viable projects and activities, acquisition of enterprises, ensuring the efficiency of daily operations and achieving the goals set by the shareholder. the Group will contribute to the improvement of economic competitiveness by ensuring a stable supply of electricity and offering new products.

enhancement of operating efficiency. efficiency will be pursued in key activities of the Group as well as in the provision of support functions, management of assets and other resources in all Group companies. in order to achieve higher efficiency, the system of management and control of the Group companies will be integrated by setting common principles of business management, division, coordination and control of responsibilities. efficiency improvement measures covering all Group companies or identical or very similar activities at the individual company level will also be continued. active sharing of best practices between companies will be promoted and sought.

formation of new organizational culture. the aim is to create a modern, effective and dynamic organization, building its operations on common values, developing in consistent and targeted manner the successors for the required competences and key personnel, and promoting the employee involvement through the internal environment.

the main strategic directions of the Group:

ensurance of the provision of quality services to customers. Care will be taken to improve services provided to customers, create electronic (saving customer time) and new services responding to customer needs, to expand possibilities of customers’ choice and to ensure the reliability of electricity generation, distribution and supply.

diversification of activities covers the implementation of investment projects in the sector of electricity, heat and natural gas. the projects would increase the competitiveness of the Group and the sector of economy at large, as well as the energy independence of the country, also the optimisation of the production and trading portfolio, development of new activities by extending the value chain of the lietuvos energija group. these goals will be achieved using available resources and infrastructure, investing in the creation of new infrastructure and effective management through acquisitions.

MissiON –to create sustainable value in the energy sector by promoting economic and social development of the country.

VisiON – to become the highest-value energy company in the Baltic states.

Values –responsibility, cooperation, result.


6analysis of the Group’s operating results

Key operational and financial indicators

during Q 1 of 2014, the lietuvos energija group generated 0.25 tWh of electricity (the change of -18.4 per cent and -0.06 tWh as compared to the result of Q1 of 2013). reduction in the volumes of electricity produced was mainly caused by non-performance of the quota-based production in the first quarter of the year in elektrėnai complex. however, an actual decline in the reporting period was compensated by increased volumes of electricity generation at Kruonis pumped storage power plant and Kaunas hydro power plant.

during Q1 of this year, the Group’s electricity distribution to cus-tomers via medium and low voltage networks amounted to 2.21 tWh (-0.2 per cent, -0.004 tWh) and, compared to Q 1 of 2013, remained stable.

public and guaranteed electricity supply services of the lietuvos energija group was 0.91 tWh (-+5.1 per cent, +0.04 tWh) during the reporting period. the increase in the volumes of this activity

was mainly determined by higher volumes of guaranteed supply, when a few independent electricity suppliers unexpectedly terminated their operations at the end of 2013. electricity sales of the Group in the open market amounted to 0.30 tWh and remained the same as last year.

regardless of the impact of natural disasters (force majeure), during Q1 of 2014, the average outage duration for each cus-tomer served (saidi) was equal to 15.77 minutes, while the average number of long unplanned interruptions per customer (saifi) was equal to 0.19 times. during the first three months of this year, lesto electricity supply quality indicators, compared to a respective period of 2013, decreased (in Q 1 of 2013 saidi amounted to 11.68 minutes, while saifi was 0.16 times). the main reason for deteriorating indicators is related to different weather conditions in the first quarter of this year compared with last year’s first quarter.

analysis of the Group’s operating results2

7

during Q 1 of 2014, changes in the Group’s assets and equity accounted for +1.7 per cent (ltl +168.1 million) and +2.9 per cent (ltl 182.9 million). positive change in assets and equity was mainly determined by net profit generated during the reporting period and the increase of authorized capital of lietuvos energija, which took place on 6 march 2014, paid by a contribution in kind - state-owned shares of aB lietuvos dujos. 6

1 Operating expenses (OPEX) = operating expenses, excluding purchase expenses of electricity and related services, depreciation and amortization, impairment and wri-te-off of non-current tangible assets;

2 EBITDA (earnings before interest, taxes, depreciation and amortization) = profit (loss) before taxes + interest expenses - interest income - dividends received + depreciation and amortization expenses + impairment expenses + write-off of non-current tangible assets;

3 EBITDA margin = EBITDA /Revenue;

4 Net financial debt= borrowings - cash and cash equivalents - short-term investments and fixed-term deposits –a share of other non-current financial assets comprising in-vestments into debt securities;

5 Return on equity (ROE) = net profit (loss), recalculated annual expression/ equity at the end of the period

6 The transfer of 17.7 per cent of state-owned shares of this company from the Ministry of Energy to the Ministry of Finance with the right to manage, use and dispose of them was recorded on 20 February 2014.


Key indicators of the Lietuvos Energija group

Thousand LTL 3 months of 2014

3 months of 2013

Change

+/- %

Financial indicators

Generated electricity tWh 0.25 0.30 -0.06 -18.4distributed electricity via medium- and low-voltage grids tWh 2.21 2.21 0.00 -0.2public and guaranteed supply tWh 0.91 0.86 0.04 5.1sale of electricity on the market tWh 0.30 0.30 0.00 0.7

Quality indicators of electricity supplysaidi (incl. force majeure) min 51.07 14.68saifi (incl. force majeure) units 0.32 0.19

Financial indicatorsrevenue 721.416 755.997 -34.581 -4.6Costs of purchase of electricity, fuel and related services (423.585) (483.831) 60.246 -12.5

operating expenses1 (101.975) (100.688) -1.287 1.3

eBitda2 195,879 174,464 21.415 12.3

eBitda margin3 % 27.2 23.1

net profit 66.247 17.718 48.529 273.9

Thousand LTL 3 months of 2014

3 months of 2013

Change

+/- %

Financial indicators (continued)

total assets 9.895.336 9.727.225 168.111 1.7

equity 6.435.631 6.252.705 182.926 2.9

financial debt 1.278.156 1.180.088 98.068 8.3

net financial debt4 381.412 442.005 -60.593 -13.7

return on equity (roe)5 % 4.1 2.3net financial debt / eBitda 12 months % 54.4 65.0net financial debt / equity % 5.9 7.1

Key indicators of the Lietuvos Energija group (continued)

8

revenue

in Q 1 of 2014, revenue of lietuvos energija group amounted to ltl 721.4 million (a change of -4.6 per cent and ltl - 34.6 million as compared to the result of 2013). main reasons, which led to

4,7 1,1 (0,7) (7,3) (9,7)

820

lTl million

780

740

700

660

620

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3 m

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sale of electricity produced, electricity trade and supply

Other revenue

Revenue from connection of new customers

Heat energy revenue

PsO service of leG

Balancing, regulating and power reserve

Transmission

34%

1%1%2%

the reduction of revenue, was lower electricity transmission tariff set in 2014 and non-performance of quota-based generation of electricity in elektrėnai complex.

52%

5%5%

756

721

(53)30

3 months of 2014

lTl 721 million


9

operating and purchase expenses

operating expenses of the Group for Q 1 of 2014 amounted to ltl 102 million and, compared to the results of the same period of last year, remained at the same level (+1,3 per cent and ltl +1.3 million).

Expenses for the purchase of electricity, fuel and related services LTL million

-12,5%600

400

200

0

3 months 2013 3 months 2014

484424

Operating expenses LTL million

120

100

60

0

1,3%

80

40

20

102

3 months 2013 3 months 2014

101

during the reporting period, expenses for the purchase of elec-tricity, fuel and related services decreased by -12.5 per cent (ltl - 60.2 million) as compared to Q 1 of 2013. this came as a result of declined volumes of electricity production in elektrėnai complex.


10

investments

investments made by the Group in Q 1 of 2014 amounted to ltl 48.1 million (+11.3 per cent or ltl + 4.9 million). investments into the development of the distribution network were ltl 33.6 million, which was by 26.2 per cent more as compared to the investments into the electricity network made in Q 1 of 2013 (ltl 26.6 million). during Q 1 of 2014, lesto connected 3 951 new customer object - 23.7 per cent more than during the respective period of 2013.

Development of the distribution network

iTT (iT, telecommunications and management systems)

Heat energy generation capacities

Other investments

Maintenance of the distribution network

electricity generation capacities

3 months of 2014

lTl 48,1 million

70%

7%

0,01%3%

15%

4%


11

eBitda and net profit

in Q 1 of 2014, the Group’s eBitda amounted to ltl 195.9 million (+12.3 per cent, ltl +21.4 million). the growth of eBitda of the lietuvos energija group was mainly affected by more profitable commercial activities of sale and supply of electricity and increased revenues from guaranteed electricity supply. the eBitda margin of the reporting period accounted for 27.2 per cent (in Q 1 of 2013, the eBitda margin was 23.1 per cent).

net profit of the Group totalled ltl 66.3 million and, compared to the result of Q 1 of 2013 (ltl 17.7 million), increased by ltl 48.5 million. the growth of net profit of the Group essentially reflected the dynamics of the increase of eBitda. net profit results were also greatly affected by increased market price of environmental pollution permits resulting in restored impairment of environmental pollution permits.

EBITDA LTL million Net profit LTL million

+12,3 %

+274 %

3 months 2013 3 months 20133 months 2014 3 months 2014

18

66

60

70250

50

150

30

0 0

200

40

100

20

5010

174196


12

at the end of Q 1 of 2014, the Group’s net financial debt amounted to ltl 381 million (change of -13.7 per cent and ltl 60.6 million as compared to the level of debts as at the end of 2013). during the first quarter of this year, the level of the Group’s borrowings increased by ltl 98 million, yet a substantial increase in cash and current investments decreased the Group’s net financial debt by 13.7%. thus, in Q 1 of 2014, the Group maintained and strengthened its financial capacity.

financial debt

the current level of financial debt remains low both with respect to revenue earned and the capital structure. the Group’s level of financial debt, compared to average debt indicators of the european energy companies, reflects a solid financial position of the Group.

31 12 2013 31 03 2014

40 %

80 %

0 %

Net financial debt/ eBiTDa for 12 months

31 12 2013 31 03 2014

7 %

6 %

5 %

4 %

3 %

2 %

1 %

8 %

0 %

Net financial debt/ equity ratio

500

lTl million

450

400

350

300

250

200

150

100

50

0

Net

fina

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l deb

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31.

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381

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9865,0

54,4

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5,9


13

review of activities of the lietuvos energija group includes events from 1 January 2014 till the end of the reporting period (31 march 2014) and after the reporting period - till the day of the report.

ensurance of quality services the Group company lesto serving more than 1.6 million customers devotes great attention to the development and modernization of electric power grid; in light of changing needs of its customers the company is consistently expanding and improving the services provided, thus providing both economic and social benefits to society, increasing the reliability and quality of electricity supply, and facilitating more rational use of electricity.

during Q 1 of 2014, lesto connected 3 951 new consumer ob-jects, or by 23.7 per cent more than in Q 1 of 2013. also, lesto continued the redemption of electric power networks of gardeners’ communities thus ensuring a reliable and secure electricity supply, and carried out the projects of network modernization co-funded from the eu structural funds - during Q 1 the company completed works in five objects of gardeners’ communities, modernized seven transformer stations, replaced overhead power transmission lines by cable lines.

in Q1 of 2014, lesto replaced 38 504 units metrologically obsolete electricity measurement devices, installed 4 291 units of electricity

measuring devices for new customers, carried out inspections of more than 253 thousand units electricity measuring devices and works of readings control. investing into the modernization and automation of electricity measuring devices, 1 487 units of electricity measuring devices were connected to automated data reading system during Q 1 of 2014. the automation of electricity measuring devices allows for an automated presentation of bills to customers for electricity volumes used during the period, without the need for customers to declare consumed electricity volumes themselves.

the number of lesto customers using remote service channels (self-service manoelektra and customer service line 1802) continued to grow - as at 31 march 2014 there were 422 thousand users registered on self-service www.manoelektra.lt, while information over the customer service line 1802 was provided to more than 267 thousand customers, and more than 113 thousand appeals on various issues were received and resolved. the number of customers using various electronic payment methods increased as well. at the end of the reporting period, about 41 per cent of all payments for electricity consumed were made electronically.

the Group company energijos tiekimas is engaged in the creation of flexible pricing services to customers. in the beginning of 2014, the company offered to customers a pricing model linked to nord pool spot power exchange prices, which was selected by 200 enterprises.

review of activities3


14

diversification of activitiesdiversification of activities of the Group is one of the main precon-ditions for improving the value of the Group. By 2020, the Group plans to invest ltl 2-3 billion in the following areas: heat sector by constructing new or upgrading the existing co-generation power plants, supply and sales of natural gas utilising the potential of the lnG terminal, renewable energy sources and, upon the adoption of respective decisions, to participate in the implementation of the nuclear power plant project.

investments into the heat production from biofuel, analysis of wind power plant potential in Kruonis pshp

in Q 1 of 2014, lietuvos energijos Gamyba continued the develop-ment project of new heat production capacities in elektrėnai complex started back in 2011. in february, the project contractor Consortium filter and Vapor and uaB Kaunos energetikos remon-tas obtained a construction permit and started the construction of the biofuel boiler-room.

first plants producing heat from biofuel should be launched in the heating season of 2014-2015, while the completion of the construction of the entire 40 mW capacity biofuel boiler-room is planned at the end of 2014. also a new 50 mW capacity steam boiler-room, which will ensure the maintenance of heat reserves, generation of heat during peak of low temperatures and the possibility of launching the reserve units of the old power plant, will be installed. the new boiler-rooms will provide the required power and steam to the town of elektrėnai, the company Kietaviškių Gausa and the reserve power plant managed by lietuvos energijos Gamyba, and will help reduce the need for psop funds.

Complex measurements of wind speed, directions and other meteorological conditions were started in the territory of Kruonis pshp in the beginning of 2014 in order to carry out the initial assessment of the potential of the land plot for the installation of the wind power plant park. Based on measurement results lietuvos energijos Gamyba will make decisions on possible works of the installation of wind power plants.

preparation for the supply and sale of gas, expansion into the gas market

in february 2014, the Group company litGas engaged in the supply of liquefied natural gas (lnG) and sale of natural gas was approved as the designated supplier, who will have to supply the lnG terminal with the minimum necessary quantity of natural gas of 540 mCm, which is necessary for maintaining uninterrupted operations of the lnG terminal.

in Q 1 of 2014, litGas completed the first stage of direct nego-tiations with potential lnG suppliers on a long-term supply agreement for the period of 5 years. during this stage, meeting with all three selected potential suppliers were held, tender conditions and their interpretations were being cleared up, positions were being coordinated in order to receive most favourable conditions for lithuania.

on 21 february 2014, the ministry of finance of the republic of lithuania transferred to lietuvos energija 51 454 638 state-owned ordinary registered shares entitling to 17.7 per cent of votes at aB lietuvos dujos general meeting of shareholders.

on 21 may 2014, lietuvos energija uaB signed agreements with the German company e.on ruhrgas international, in accordance with which it took over 38.9 per cent of shares of public company lietuvos dujos and 11.76 per cent of shares of aB lesto. the total value of the share package amounts to ltl 336.9 million. having concluded this transaction, the Group will own more than half of shares of lietuvos dujos.

pursuant to the law on securities, having exceeded the threshold of one-third of votes after this transaction, lietuvos energija will make a take-over bid to purchase all the remaining shares of aB lietuvos dujos owned by oao Gazprom and minority shareholders.

having acquired additional 38.9 per cent of shares of lietuvos dujos, state-owned group lietuvos energija will own two companies providing services to residents and businesses - the synergy will allow offering electricity and gas consumers better services and service, coordinated activities of the companies will allow seeking for a higher efficiency and increasing operating results. the remaining shareholders of lietuvos dujos will be offered to sell their shares.


15

installation of the industrial park in Kruonis pshp territory

in Q 1 of 2014, lietuvos energijos Gamyba completed the planned works of the project for the installation of engineering equipment of the industrial park set up in the territory of Kruonis pshp. now the territory is better prepared for direct foreign investments, which will allow developing high tech activities in this appealing area equipped with all the necessary infrastructure.

in the implementation of the project, about 5 km of roads were reconstructed, also engineering infrastructure was set up: water supply with water wells and rainwater drainage networks. Works of reconstruction of the road, also the installation of rain water collector were completed in the end of december of 2013, while in february 2014 the last part of the project - set-up of a watering place - was completed. Currently, the second stage of the project is being planned.

most efficient data centre in the eastern europe started its operations

one of the largest data transmission and data centre operators in the Baltic states owned by the Group duomenų logistikos Centras started the construction of data inn - one of the most modern data centres in the Baltic states - back in 2013. this data centre is the only centre in lithuania with uptime institute tier iii certification. officially this centre was opened up on 6 may 2014. energy efficient data inn will allow reducing costs for information technologies, improving the reliability of the operations thereof and increasing the competitiveness of lithuania and its businesses in the international environment. its power usage effectiveness (pue) is as low as 1.3 and is well ahead of the global average accounting for about 1.65.

the new data centre is the first stage of the entire data inn project. Currently, its useful floor space covers 500 m², power reaches 100 kilowatts and its capacity is 100 server stands. investments into the project amount to about ltl 10 million.

design and construction works of new data inn stages and the expansion of its capacities are planned in the nearest future. the plan is to have the useful floor space of data inn expanded to 3 200 m², capacity increased to 6 000 kilowatts and 600 server

stands fitted therein upon the completion of the development. the total value of the project will amount to ltl 42 million.

surveys of syderiai geological structure

in Q 1 of 2014, analysing the possibilities for the installation of the underground natural gas storage in telšiai region, lietuvos energijos Gamyba finished processing data collected during all seismic and geological surveys, and prepared the simulation model of the storage reservoir. this model allows assessing geological suitability of the storage, its behaviour during gas pumping and extraction processes, also, setting operational parameters of the storage activities. all results received and conclusions made after the surveys were provided to the ministry of energy. in order to ensure that the Government having initiated the project is able to make a reasonable decision on further course of the project, specialists of lietuvos energijos Gamyba are carrying out the project cost-benefit analysis upon the assignment of the ministry.

preparatory works of the nuclear power plan object

at the beginning of 2014, a positive conclusion was received from snpsi on the nuclear power plant site assessment report. snpsi found no irregularities, and possible conclusions were also obtained in respect of the updated report from all coordination authorities. this conclusion completed an important stage of the project that has lasted for several years. summarizing the completed site assessment surveys and the amount of data obtained in the course thereof, it has been concluded that the sites are suitable for the construction of the power plant, moreover, most detailed geological surveys of the territory of the sites were conducted in both lithuania and the Baltic states.

enhancement of the operating efficiency

higher efficiency of activities of the Group means both higher profit and return for shareholders as well as lower tariffs for consumers. the strategy of lietuvos energija for 2014-2020 establishes that higher operating efficiency will be achieved by adapting the most advanced management practices in corporate management, planning and monitoring of activities, finance, procurement, risk managements and internal audit areas.


16

solid foundation for enhancing the operating efficiency was laid back in 2013 when management of lietuvos energija group was rearranged in accordance with a new model. the parent company lietuvos energija concentrated the coordination of the activities of the Group companies, elected the supervisory and management boards, and separated the responsibilities of management and supervisory bodies. Currently, a uniform governance and control system aimed at defining the principles of governance and control responding to common needs of the lietuvos energija group, the division of responsibilities for individual activities and processes, risk management and control, the principles of supervision and control of activities and processes at the Group and individual company level is under implementation. this system will contribute to achieving the efficiency and synergy in the activities of the Group companies and the realisation of the goals set.

trade under the Gross Bidding principle

in march of 2014, lietuvos energijos Gamyba started trading electricity on the nord pool spot exchange under the Gross Bidding principle. this means that the company carries out all its electricity purchase and sale transactions separately, which allows increasing the transparency of non-regulated market and enhancing the efficiency thereof. now lietuvos energijos Gamyba is able to easier assess benefits of fixed price transactions, which in turn creates better preconditions for enhancing the efficiency of commercial activities. at the same time the company is contributing to the development of transparent wholesale electricity market in the Baltic states.

signing a credit agreement

on 21 february 2014, lietuvos energijos Gamyba signed a credit agreement with seB bank for granting a 10-year loan of up to eur 158 million (ltl 546 million). funds will be allocated for refinancing three long-term loans, which were disbursed to the company by consortiums of banks operating in lithuania and the european Bank for reconstruction and development. this transaction contributes to the optimization of investments of strategic national company aimed at the implementation of projects in elektrėnai complex, because after the refinancing of the existing loans, regulated operating expenses of the company will decline and the administration of assumed obligations

will become easier. moreover, the decreasing credit risk of the company will allow expecting favourable funding conditions in the future.

organisational culture

lietuvos energija believes that the company’s employees constitute the key element in implementing the operating strategy of the Group. the aim is to build and maintain value-based organizational culture, motivating employees to assume responsibility, cooperate and unitedly strive for the best result.

upon the reorganization of the corporate governance model of lietuvos energija group, the focus on coordinated organizational development, human resources management, building new organization culture, efficiency of the organization of activities, enhancement and retention of competencies will be increased further more. in further development of the organization in 2014 and upcoming years, the greatest attention will be paid to the improvement of remuneration of the Group’s employees, evaluation of activities and management systems, the creation of talent identification system, improvement of leadership, management and professional competencies, the development of personnel successor system, communication and implementation of values as well as optimization of management processes of human resources.

employees

While implementing the goals set by the shareholder and pursuing socially responsible business, we aim to attract and retain skilled specialists in the Group and, ensuring mutual benefit, to engage with them in the long-term partnership relationships and joint successful future.

there were 4 3391 employees working in the Group as at 31 march 2014. the number of the lietuvos energija group employees did not experience any significant changes as compared to 31 december 2013.

1 Number of effective employment agreements.


17

Total number of employees

lietuvos energija, uaB 58aB lesto 2409lietuvos energijos Gamyba, aB 502uaB technologijų ir inovacijų Centras 161uaB duomenų logistikos Centras 19energijos tiekimas uaB 20Geton energy sia 1uaB Kauno energetikos remontas 230uaB Gotlitas 9uaB eleKtros tinKlo paslauGos 516nt Valdos, uaB 235VšĮ republikinis energetikų mokymo centras 166uaB litGas 12uaB Vae spB 1total 4 339

as at 31 march 2014, lietuvos energija had 58 employees. 91.38 per cent of employees working in the Company have a higher university education, of which 8 are doctors of science. the Company employs 2 certified professional project managers (pmp and prinCe2), 1 expert holding 2 Cfa levels, and nuclear energy specialists. employees are active members of associations and unions (tBta, eGia, lBea, faa, lsis, lGs), participants in academic society (Ktu Business Council, lei supervisory Board, Vu ff Council, technological development Committee under the agency for science, innovation and technology, etc.).

Structure of education of the Company’s employees, per cent

Higher Post-secondary secondary

10 20 30 40 50 60 70 80 90 100

6,90

1,7

91,38

Professional category Average monthly salary, LTL

Ceos 11.975top level managers 11.062mid-level managers 6.158experts, specialists, workers 3.103

Professional category Average monthly salary, LTL

Ceo 18.000top level managers 13.593mid-level managers 11.644experts, specialists 6.420

the total salary fund of the Group for January - march of 2014 was ltl 43.75 million.

The following was the average salary of the Group’s employees in January - March of 2014

the total salary fund of the Company for January - march 2014 equalled to ltl 1 573 thousand.

The following was the average salary of the Company’s employees in January - March 2014

Creation of organizational culture - together with the employees

in the beginning of 2014, new Group values were approved along with the operating strategy of the Group. intensive preparation for the implementation of values of the Group companies took place in Q 1 of 2014. having involved all Group employees, these values will be instilled in all companies of the Group. in the continuation of the project started in 2013, the goal of which is the development and implementation of new work behaviours in line with the Company’s values and key operating goals and models, events for communicating values were held for mid-level managers and employees of lietuvos energijos Gamyba.


18

in the beginning of 2014, employees of lietuvos energijos Gamyba signed a new version of the collective agreement with employer representatives, which was drawn up having held joint discussions, covering, on the basis of mutual interests, various matters of work organization, work conditions and remuneration, professional, social and economic guarantees for employees.

in Q 1 of 2014, a new version of the collective agreement was approved in the conference of lesto employees, which will ensure greater protection for lesto employees and grant them additional benefits unprovided for in the labour Code of the republic of lithuania.

development of competencies

at the beginning of 2014, the Group conducted a 360° assessment of competences of (top and mid-level) managers of all Group companies and of all employees of lietuvos energija, lietuvos energijos Gamyba and technologijų ir inovacijų Centras. the aim of this assessment was to obtain a comprehensive evaluation of competences of co-workers, direct managers and subordinates, to define the areas of improvement based on results and to set targets for upcoming years.

the lietuvos energija group takes consistent care of qualification development of its employees and ensures that employees have all the mandatory certificates provided for by laws. in Q 1 of 2014, 2 218 employees took part in lietuvos energija group trainings.

Number of participants in trainings

eT eTP KeR le NTV TiC DlC Vae sPBReMCliTGasleG lesTOeT eeeT lV

1

226 200

48 42 25 5 014092

1565

00

1200

1400

1600

1000

600

0

800

400

200

in the implementation of the eu funded project Development of Social Dialogue, lietuvos energijos Gamyba together with trade unions held cooperation and conflict management trainings for power plant employees. nt Valdos singed a joint venture agreement in accordance with which six companies - partners agreed on joint implementation of the project improvement of Professional Skills of Group Employees Seeking for Increased Competitive Advantage. representatives of Kauno energetikos remontas took part in Innovation Management and Economy training programme intended for mid and top level managers of enterprises belonging to the lithuanian Confederation of industrialists. this company also arranged eu funded first aid trainings for three groups of employees and, in cooperation with respublikinis energetikų mokymo centras, conducted an additional training and certification of employees working with lifting equipment.

the Group company lesto devotes great attention to its best employees, thus a talent management system has been developed for several years. during Q 1 of 2014, employees included into the approved list of the company’s talents took part in various educational programmes - in skills development centres and trainings. seeking for comprehensive education of the company’s talents, lesto also contributed to funding studies of 4 talents in schools of higher education in Q 1 of this year.


19

internship

in order to attract qualified specialists into the Group, lietuvos energija group actively cooperates with educational institutions and academic community. this year lietuvos energija group took part in four career day events arranged by Kaunas university of technology, Vilnius Gediminas technical university, university of management and economics (ism), riga higher school of economics (stockholm school of economics). the group company Kauno energetikos remontas signed a cooperation agreement with Kaunas technical College and participated in a career day event held by this college, in a scientific - practical conference organized by Kaunas technical College and schmalkalden university of applied sciences Interaction between Sustainable Engineering and Modern Studies in the Context of Preparation of Specialists in the Area of Technology Science, where it made a presentation on the subject Interaction between Theory and Practice. representatives of Kauno energetikos remontas also participated in international assessment of electric energy study programme at Kaunas technical College and delegated its representative to the activities of a technical committee Welding and Material Science.

the Group companies create conditions for students of schools of higher education and vocational schools to apply their theoretical knowledge and gain practical skills. during three months of 2014, 78 students had internship in Group companies lietuvos energijos Gamyba, lesto, Kauno energetikos remontas, elektros tinklo paslaugos, and the respublikinis energetikų mokymo centras. after their internship in Kauno energetikos remontas and elektros tinklo paslaugos, 4 interns were employed under a fixed term and open-ended employment agreements.


20

the lietuvos energija group, the shareholder of which is the state of lithuania, aims at ensuing efficient and transparent operations. in order to achieve this goal, the Group reorganized its governan-ce in 2013, and rearranged and improved its corporate governan-ce.

the new governance structure and model of the Group has been developed in the application of the most advanced international and national practices, following recommendations published by the organization for economic Cooperation and development, having regard to the Corporate Governance Code for companies listed on the nasdaQ omX Vilnius exchange, Guidelines on the Governance of state-owned enterprises recommended by the Baltic institute of Corporate Governance. the corporate governan-ce model of the power generation companies’ group was imple-mented in observance of the Corporate Governance Guidelines approved by the ministry of finance of the republic of lithuania of 7 June 2013 (the Guidelines are available at www.le.lt).

the main goal of corporate management is to achieve a synergy effect combining different activities of the lietuvos energija gro-up companies and directing them towards the achievement of common goals of the entire Group.

the Group’s governance structure has been formed following the principles of corporate governance and contributes to the implementation thereof. the company’s shareholder is the sta-te, holding 100% of its shares. the rights and obligations of the shareholder are implemented by the ministry of finance of the republic of lithuania, which adopts the main decisions related to the implementation of ownership rights and obligations.

Corporate governance4


21

supervisory bodies

supervisory Board

the supervisory Board is a collegiate supervisory body provided for in the articles of association of the Company and elected by the general meeting of shareholders for a term of four years. the supervisory Board of lietuvos energija consists of 7 members -

persons representing the ministry of finance, the ministry of eco-nomy, the office of the Government of the republic of lithuania, and 3 independent members. the Chairman of the supervisory Board is elected by the supervisory Board from among its mem-bers. such the model of formation of the supervisory Board com-plies with the principles of corporate governance.

the supervisory Board of lietuvos energija operating since 16 July 2013 and at the end of the reporting period (until 31 march 2014) was as follows:

Šarūnas Kliokys (born in 1959)

Chairman, independent member

Vytautas magnus univer-sity, Baltic management institute,degree in Business admi-nistration (emBa)Vilnius university,economist’s diploma.

Vilnius universitymaster’s degree in Busi-ness administration (mBa)Boston CollegeBachelor’s degree.

Vilnius universitydoctor of social sciences.

Creighton universitypolitical science master’s studies Vilnius university iirpspolitical science master’s studies Vilnius university tspmiBachelor’s degree in political science.

Vilnius Civil engineering institute post-graduate studies of technical sciencesVilnius Civil engineering institute master’s degree in Civil engineering.

ism university of management and economics Bachelor’s degree in management and Business administration mykolas romeris university master’s degree in lawVilnius pedagogical university diploma of history and political sciences.

Kaunas university of technologymaster’s degree in public administrationVilnius universitylawyer’s speciality.

– – – – – – –

Chairman of the Board of uaB ekonovusChairman of the Board and director of uaB avestisChairman of the Board of uaB Šiaulių plento grupė.

Board member of pe lie-tuvos Junior achievementpartner of united partners.

Chairman of the Board of uaB organizacijų vystymo centras Board member of the as-sociation mentor lietuvaBoard member of pe Chil-dren’s support Centre.

advisor to the prime minister of the republic of lithuania for energy.

Vice-minister of finance of the republic of lithuania.

Vice-minister of energy of the republic of lithuania.

Vice-minister of econo-my of the republic of lithuania.

educational background

Workplace, position

participation in the capital of the Com-pany and Group companies , %

Antanas Danys (born in 1975)

independent member

Dr. Virginijus Lepeška (born in 1955)

independent member

Tomas Garasimavičius(born in 1978)

member

Aloyzas Vitkauskas(born in 1954)

member

Žydrūnė Juodkienė(born in 1974)

member

Rasa Noreikienė(born in 1959)

member


22

the main functions and responsibilities of the supervisory Board cover the following areas: election and recall of members of the Board, supervision of activities of the Board and the Ceo, provisi-on of feedback on the Company’s strategy, a set of financial state-ments, allocation of profit (loss), and annual report for the general meeting of shareholders. the supervisory Board also addresses other matters attributed to its competence.

the supervisory Board is functioning at the Group level, .e. where appropriate, it addresses the issues related to the activities of the Company, its subsidiaries or their management and supervisory bodies.

Committees of the supervisory Board

for the purpose of effective fulfilment of its functions and duties, the supervisory Board forms committees. the committees of the supervisory Board provide their conclusions, opinions and propo-sals to the supervisory Board according to their competence. the committee shall consist of at least three members, of whom at last one member must be a member of the supervisory Board and at least one independent member.

the following committees function in lietuvos energija:

• Risk Management Supervision Committee is responsible for the submission of conclusions or proposals to the supervisory Board on the functioning of management and control system in the Group and (or) main risk factors and implementation of risk management or prevention measures;

• Audit Committee is responsible for the submission of objec-tive and impartial conclusions or proposals to the supervisory Board on the functioning of the audit and control system in the Group;

• Nomination and Remuneration Committee is responsible for the submission of conclusions or proposals on the matters of nomination, recall or promotions of the Board members of

the supervisory Board, also for the assessment of activities of the Board and its members for issuing the respective opinion. the functions of the Committee also cover the formation of the common remuneration polity at the Group level, esta-blishment of the amount and composition of remuneration, incentive principles, etc.

Where appropriate, other committees may also be formed ad hoc (for example, for addressing specific matters, preparation, super-vision and coordination of strategic projects, etc.).

detailed description of supervisory bodies of the Company and listed companies of the Group is provided on p. 30-33.


23

management bodies

Board

the Board is a collegiate management body provided for in the articles of association of the Company. members of the Board are elected for the term of four and recalled by the supervisory Board on the proposal of the nomination and remuneration Committee.

the Board comprising 5 members elects from its members the Chairman of the Board -the Chief executive officer of the Compa-ny. members of the Board acting according to their competence must ensure the proper performance of the Company’s activities/ supervision of respective areas at the Group level.

the Board of lietuvos energija operating since 22 July 2013 and at the end of the reporting period (until 31 march 2014) was as follows:

Dr. Dalius Misiūnas (born in 1978)

lund universitydoctor’s degree in technological scienceslund universitymaster’s degree in industrial electrical engineering and automatics Kaunas university of technologyBachelor’s degree in electrical engineering.

Vilnius universitymaster’s degree in hydrogeology and engineering Geology.

ism university of management and economics doctoral studies of social sci-ences, Course of economics ism university of management and economics, Bi norwegian Business schoolmaster’s degree in manage-mentVilnius universitymaster’s degree in economics.

Vilnius universityinternational Business master’s degreeVilnius universityBusiness administration and management Bachelor’s degree.

Vilnius university, international Business schoolinternational Business finance master’s degreeVilnius university, international Business schoolinternational Business Bachelor’s degree.

– – – – –

lietuvos energija, uaB, Board Chairman, Ceolietuvos energijos Gamyba, aB, supervisory Board Chairmanassociation eurelectric , mem-ber of the Board of directorsnational lithuanian electricity associationpresidentKtu alumni associationpresident.

lietuvos energija, uaB Board member, organisati-onal development Council directorlesto aB, supervisory Board memberuaB technologijų ir inovacijų centras, Chairwoman of the BoarduaB elektros tinklo paslau-gos, Board member.

lietuvos energija, uaB Board member, finance and treasury service director lesto aB, supervisory Board Chairmannt Valdos uaB, Board memberuaB Kauno energetikos remontas, Board memberuaB litGas, Board member.

lietuvos energija, uaB, Board member, strategy and deve-lopment service directoruaB elektros tinklo paslaugos, Board memberenergijos tiekimas uaB, Board member.

lietuvos energija, uaB, Board member, production and service directornt Valdos, uaB, Board memberenergijos tiekimas uaB, Board memberuaB Kauno energetikos remontas, Board memberuaB litGas, Board member.

educational background

Workplace, position, parti-cipation in ac-tivities of other enterprises and organisations

participation in the capital of the Company and Gro-up companies, %

Ilona Daugėlaitė(born in 1970)

Darius Kašauskas (born in 1972)

Mindaugas Keizeris(born in 1980)

Liudas Liutkevičius(born in 1980)


24

the lietuvos energija group devotes special attention to the so-cial responsibility and seeks to ensure that activities of the Gro-up are based on principles of responsible activities enshrined in the Global Compact initiated by the united nations. the Global Compact includes the implementation of 10 principles of res-ponsible activities and encourages companies to avoid damage to the environment, community and other businesses, and to join their efforts with the united nations, public authorities and non-governmental organizations in dealing with social and envi-

the association investor’s forum, which has been assessing and awarding companies, organizations and media representatives having contributed to the improvement of the country’s climate and business environment the most for the third consecutive year, declared lesto the most responsible company in 2013. the Gro-up company was awarded for its implemented social and public educational projects, targeted aspirations to foster relationships with its customers, promote transparency and conscious and res-ponsible energy consumption.

ronmental issues, thereby contributing to the development of the society and economic growth. the Global Compact is based on the principles of human rights, employee rights, environmental and anti-corruption principles.

the model of socially responsible business of the lietuvos energi-ja group is implemented through targeted and consistent activi-ties in the following areas:

in Q 1 of 2014, lesto was elected a member of the lithuanian association of responsible Business (laVa) Congress. the mission of laVa is to promote the development of responsible activities as a condition of sustainable development in lithuania. Collegiate bodies - a 3-member Council, a 7-member Congress and general meeting of members - lead the association.

social responsibility5

environmental protection

Relationships with employees and the society

Market operations


25

environmental protectionthe lietuvos energija group encourages the use of work equip-ment reducing costs and pollution as well as sustainable use of natural resources, is actively looking for ways for minimising the impact of energy objects on people and the environment, and in-vesting in the environmentally friendly modern technologies. By implementing various environmental projects, the Group compa-nies aim at minimising adverse effects of energy objects on peo-ple and the environment and encouraging the participation of the society in different initiatives related to environmental protection.

Waste management and sorting, moderate use of resources

Waste sorting initiatives are carried out in the lietuvos energija group companies; there are special sorting containers intended for sorting plastic and paper. in cooperation with the associati-on of purchasers of electronic equipment, lesto also collects energy-saving light bulbs, small electronic devices and batteries at customer service centres, special containers for the disposal of small electronic devices and batteries were also set up in lietu-vos energijos Gamyba divisions in elektrėnai, Kruonis, Kaunas and Vilnius. since 2013, the Group company uaB Kauno energetikos remontas has been participating in the environmental project We sort Waste in the Company aimed at sorting and collecting waste of electronic equipment, domestic appliances and accumulators generated in the process of operations of the companies and in households of their employees, reducing the discharge of such waste into the environment, educating and informing the society about waste sorting.

the Group’s company lesto keeps encouraging its customers to give up paper bills and pay-books. more than 90 per cent of busi-ness customers of lesto already use electronic bills.

the environmental management system complying with require-ments of lst en iso 14001:2005 has been implemented in objects of lietuvos energijos Gamyba. also, subdivisions of lietuvos ener-gijos Gamyba are implementing the requirements for the atmos-pheric, surface water, groundwater and oil pollution monitoring

and protection measures provided for in the integrated pollution prevention and Control (ippC) permits.

in Q 1 of 2014, the lithuanian power plant handed over for utili-zation 350 t of sewage sludge hazardous waste, 168.7 t of liquid fuel ash, 1180 t of construction debris, sold 163.8 t of electrical scrap, 691.7 t of ferrous metal scrap, 2.8 t of copper, 7.7 t of alumi-nium waste. during the first quarter of this year, about 60 mCm of household waste was generated, which was removed by a speci-alized company.

during Q 1 of 2014, the Kruonis psp handed over for utilization 4.018 t of hazardous waste, 0.574 t of non-hazardous waste, and sold 5.12 t of ferrous scrap. in Q 1 of 2014, about 8.32 of household waste was generated in the company; a specialized company re-moves collected household waste.

during Q 1 of 2014, Kaunas hpp handed over for utilization 0.02 t of hazardous waste. a specialized company removes household waste collected in the territory of the object on the basis of a si-gned agreement; about 1.62 t of household waste was generated during the quarter.


26

initiatives for the societythe Group companies have actively contributed to the event of the traditional days of energy professionals organized by the na-tional lithuanian electricity association (nlea). on 17-18 april 2014, free educational events took place in the lithuanian energy and technology museum - field trips for the public, concert of the group Saulės Kliošas. during the field trips, visitors were able to get familiar with the lithuanian energy system and relevant issues related thereto, find out more about the profession of an energy specialist.

in order to contribute to educating the society, especially the young generation, on energy-related issues lietuvos energijos Gamyba willingly allows free field trips to objects managed by it: the combined-cycle unit, Kruonis pumped storage power plant and Kaunas hydroelectric power plant. during the first quarter of 2014, 15 field trips were arranged, more than 250 representatives from various organizations and educational institutions, students and pupils visited the power plants.

together with elektrėnai library lietuvos energijos Gamyba has been arranging traditional events for the community of elektrėnai region, where its core activity is based. a meeting with singing actors, a father and son duo saulius and Jokūbas Bareikis, held in march of 2014 was already the sixth event in this cycle. the Com-pany aims to gather the city and region community as well as its employees in one place providing them with an opportunity of meeting well-known, interesting and original people.

long-term projects

large scale long-term social responsibility projects for children, youth and general public implemented by the Group company lesto are characterized by active involvement of communities and different social groups, and ideas of safety, energy efficiency and conservation of the environment. the implementation of the-se projects was actively continued in Q 1 of 2014.

operation 2020. this project is aimed at promoting responsible behaviours with power grid installations, raising awareness of pe-ople about safe behaviour with electrical equipment and minimi-

sing negative consequences arising from irresponsible or malicio-us behaviour of residents.

in 2014, lesto has been continuing its active cooperation with the association of the Wardens of municipalities of lithuania, attended its meetings and conferences. the greatest support in fighting against thefts is the sense of community of residents - re-ports of residents help to quickly identify offenders, repair dama-ged transformers before they get burnt and supply of electricity to residents is interrupted. in Q 1 of 2014, upon the intensification of thefts from distribution grid installations in districts of panevė-žys, pasvalys and Biržai, searches were conducted in active coo-peration with police and local residents, 5 persons were arrested, and pre-trial investigations were initiated. in the assessment of identified theft cases it can be stated that 50 per cent of thefts are disclosed with the help of residents.

to the extent required. the project is aimed at the development of reasonable energy use traditions of the society.

Green Protocol and Energy Efficiency Conference for Business. for the fourth year companies are invited to join the Green proto-col. this is the only agreement of such nature in the country ini-tiated by lesto, whereby companies and organizations confirm that they have been introduced with the ideas of conservation of the environment promoting reasonable use of electric energy, approve these ideas and promise to apply them in practice. about 230 participants from more than 160 national companies seeking to get familiar with most relevant energy consumption efficien-cy trends and latest solutions allowing to decrease energy costs attended the annual conference on the rational use of energy held on 14 february 2014. a nomination of a Green ambassador, which can be awarded to an employee of the Green protocol com-pany, who had promoted energy saving ideas in the company in the most creative and effective way, involved other employees or encouraged the implementation of innovative technologies, was introduced in the conference for the first time.

National education programme Sustainable School. in order to promote awareness of school communities and contribute to the creation of a sustainable, energy efficient and environmentally friendly lithuanian society, lesto and the lithuanian youth Cen-


27

tre together with partners invited the country’s educational insti-tutions to participate in an all-year-long educational programme sustainable school. 70 educational institutions geographically located in various regions of lithuania participating in the pro-gramme will carry out the first study of ecological footprint in li-thuania designed specifically for schools. an ecological footprint is a measure, which shows the quantity of planet resources requ-ired for meeting the needs of human consumption. the aim of the sustainable school project is to contribute to the creation of communities of sustainable educational institutions able to effi-ciently manage and use the resources combining the environ-mental protection, social justice and economic development. pi pakuočių tvarkymo organizacija, uaB schneider electric lietuva, uaB mano Būstas and the national Consumer federation have been assisting in the implementation of this project.

electromagic. this educational initiative of lesto is aimed at rai-sing awareness of children and youth about the benefits, threats and safety of electric energy. the purpose of this initiative is to teach youth safe behaviour with electricity and electrical equip-ment, stimulate their interest in responsible use of electricity, en-vironmental protection and ideas of sustainable development.

Various initiatives aimed at educating children about safe beha-viour with electricity are continued in 2014. in the beginning of this year, pre-school and school-age children were invited to take part in the board game design competition aimed at deepening electricity-related knowledge of physics; the game develops lo-gical thinking skills, encourages the knowledge of electricity and technology world and, among all other things, develops creativi-ty and drawing skills. the project electromagic.lt was also intro-duced in a new way of interactive lessons aimed at school-age children. lesto representatives held the first interactive lesson electrified ideas for seventh grade students of Vilnius Jesuit high school. during the lesson, not only did children learn about safe and unsafe methods of the use of electricity, but also played ga-mes and quizzes encouraging efficient use of electricity. students having the best knowledge of rational consumption were awar-ded special prices, while all remaining students in the class recei-ved manuals on the rational use of electricity a Book of recipes published by lesto.


28


6

the interim report of lietuvos energija and its subsidiaries is pre-pared in observance of resolution no. 1052 of the Government of the republic of lithuania of 14 July 2010 on the approval of the Guidelines for ensuring the transparency of activities of sta-te-owned enterprises and appointment of the Coordinating au-thority, and published on the Company’s website at www.le.lt.

on 13 february 2013, the Company’s shares were transferred to the ministry of finance by the right of trust.

as at 31 march 2014, the Company’s share capital totalled ltl 4 179 849 289 (as at 31 december 2013 it was ltl 4 067 163 632). on 31 december 2013 and 31 march 2014 the authorised capital was divided into ordinary registered shares of ltl 1 par value per share. all shares are fully paid up.

Company’s name lietuvos energija, uaB

Company’s code 301844044

authorised capital ltl 4 179 849 289

paid up authorized capital ltl 4 179 849 289

address Žvejų str. 14, lt-09310, Vilnius, lithuania

phone (8 5) 278 2998

fax (8 5) 278 2115

e-mail [email protected]

Website www.le.lt

legal form private limited liability Company

date and place of registration

28 august 2008, in the register of legal entities

register, where data about the Company are collected and kept

register of legal entities, se Centre of registers

Shareholders of the Company Share capital (LTL thousand) %

republic of lithuania represented by the ministry of finance of the republic of lithuania

4 179 849 100


29

Company Head office address of the Company

Effective shareholding, 31

31 03 2014 (%)

Authorised capi-tal (LTL thou.)

31 03 2014 Main activity

lietuvos energijos Gamyba, aB elektrinės str. 21, elektrėnai 96.1 635.084 electricity generation, supply, import,

export and trade

aB lesto Žvejų str. 14, Vilnius 82.6 603.945 electricity supply and distribution to consumers

nt Valdos, uaB Geologų str. 16, Vilnius 88.0 314.001 disposal of real property, other related activities and provision of services

uaB duomenų logistikos centras a. Juozapavičiaus str. 13, Vilnius 79.3 58.907 itt maintenance services

uaB technologijų ir inovacijų centras a. Juozapavičiaus str. 13, Vilnius 85.8 10 provision of itt and other services

VšĮ respublikinis energetikų moky-mo centras

a. Jeruzalės str. 21, Vilnius 79.6 294

professional development and continuing vocational education and training of energy sector specialists

uaB eleKtros tinKlo paslauGos motorų str. 2, Vilnius 82.6 18.904Construction, repairs, technical maintenance of power grids and related installations, connection of consumers to power grids

uaB Kauno energetikos remontas Chemijos str. 17, Kaunas 96.1 14.245 repairs of electric installations, manufacture of metal structures

Gotlitas uaB r. Kalantos str. 119, Kaunas 96.1 1.450 accommodation services, trade

energijos tiekimas uaB Jeruzalės str. 21, Vilnius 96.1 750 supply of electricity and natural gas

Geton energy oŪ narva mnt 5, 10117 tallinn 96.1 121 supply of electricity

Geton energy sia Bezdelingu 12, lV-1010 rīga 96.1 99 supply of electricity

uaB Vae spB Žvejų str. 14, Vilnius 100 10 advisory business and other management activities

uaB litGas Gedimino av. 33-2, Vilnius 66.7 3.000 supply lnG via terminal and trade in

natural gas

information on subsidiaries, branches and representative offices

at the end of the reporting period (31 march 2014) lietuvos energija, uaB directly or indirectly controlled the following companies:


30

Key events related to changes in the Group having occurred before the report date

• in the implementation of resolution no. 120 of the Govern-ment of the republic of lithuania on investing the state pro-perty and increasing the Companies’ authorised Capital of 12 february 2014, the ministry of finance of the republic of lithuania transferred to lietuvos energija ,uaB 51 454 638 sta-te-owned registered ordinary shares of public company lietu-vos dujos with a par value of ltl 1, entitling to 17.7 per cent of votes at the general meeting of shareholders of aB lietuvos dujos (21 february 2014).

• appointed new Board members of uaB duomenų logistikos centras - production and service director at lietuvos energija, uaB liudas liutkevičius and strategy and development di-rector at lietuvos energija, uaB mindaugas Keizeris (18 march 2014).

• the meeting of shareholders of nordic energy link as (herei-nafter - nel), the shareholder of which is lietuvos energija, uaB, made a decision to liquidate nel. the company esta-blished in 2004 had a task to implement the project of connec-ting energy systems of the Baltic states and finland by laying an electricity cable estlink 1. the cable was transferred to es-tonian and finish transmission system operators elering and fingrid on 30 december 2013, thus shareholders of nel made a decision on the liquidation of the company, as provided for in the incorporation agreement of nel. lietuvos energijos Ga-myba, aB owns a package of 25 per cent of shared of nel (19 march 2014).

• lietuvos energija, uaB acquired from Group companies lietu-vos energijos Gamyba, aB and aB lesto their owned packa-ges of 54.04 per cent and 24.94 per cent, respectively, of shares of uaB duomenų logistikos Centras. having concluded this transaction, lietuvos energija, uaB now owns 79.34 per cent of shares of uaB duomenų logistikos Centras (31 march 2014).

• remigijus Štaras was elected as an independent Board mem-ber of energijos tiekimas, uaB (1 april 2014).

• nerijus stasiulionis was elected as an independent Board member of uaB Kauno energetikos remontas (2 april 2014).

• uaB duomenų logistikos centras director of sales department tomas Vitkus was appointed as a Ceo at interim of uaB duo-menų logitikos centras (17 april 2014).

• Vilius nikitinas was elected as an independent Board member of uaB eleKtros tinKlo paslauGos (17 april 2014).

• lina paukštė was elected as an independent Board member of nt Valdos, uaB (17 april 2014).

• Kęstutis Betingis was elected as an independent Board mem-ber of uaB litGas (18 april 2014).

• aurimas Bakas was elected as an independent member of the Board of uaB duomenų logistikos Centras (30 april 2014).

• rimvydas Štilinis was appointed as a Ceo at interim of uaB Vae spB (10 may 2014).

• lietuvos energija, uaB signed agreements with the German company e.on ruhrgas international, whereby it took over 38.9 per cent of shares of public company lietuvos dujos and 11.76 per cent of shares of aB lesto (21 may 2014).

Full name, position

Participa-tion in the capital of

the Compa-ny and of the Group

companies, %

Period of tenure Workplace

dr. dalius misiūnasChairman

- 05-08-2013- 05-08-2017

Ceo and Chairman of the Board of lietuvos energija, uaB

pranas Vilkasindependent member

- 05-08-2013-05-08-2017

-

liudas liutkevičius member

- 05-08-2013- 05-08-2017

production and services director of lietuvos energija, uaB

supervisory bodiesas of 31 march 2014, the supervisory Board of lietuvos energijos Gamyba, aB comprised:


31

Full name, position

Number of shares held in the Com-pany and in the

Group companies

Workplace

rasa noreikienėChairwoman of the Committee

- ministry of economy of the republic of lithuania, Vice-minister

danielius merkinas independent member

- uaB nordnet, finance director

aušra Vičkačkienėmember

- ministry of finance of the republic of lithuania, asset management department director

Gintaras adžgauskasmember

- director of the lithuanian member Committee, World energy Council

Committees of the supervisory Board

as of 31 march 2014, the supervisory Board committees formed in the Company, as a parent company of the Group, included the audit, risk management supervision, nomination and remune-ration Committees.

audit Committee

Main functions of the Committee:

• monitoring the process of preparation of financial statements of the Company and Group companies, with a special focus on the adequacy and consistency of used accounting methods;

• monitoring the efficiency of the internal control and risk ma-nagement systems of the Company and Group companies, analysis of the need for, and adequacy of, these systems and perform the review of the existing internal control manage-ment systems;

• monitoring the adherence to the principles of independence and objectivity by the certified auditor and audit company, provision of related recommendations, as well as proposals for the selection of an audit company;

• monitoring the audit performance processes of the Company and Group companies, examining the effectiveness of audit and response of the administration to the recommendations provided by the audit company in the management letter;

• monitoring the effectiveness of the internal audit function of the Company and Group companies, analysis of the need for, and adequacy of, this function, provision of recommendations on the need for, effectiveness of, the internal audit function, and on other internal audit related matters;

• providing proposals for the internal audit plans of the Compa-ny and Group companies, recommendations for the regulati-ons of the internal audit units of the Company and Group com-panies, appointment and dismissal of the head of a structural unit performing the functions of the internal audit, approval of his (her) job description, imposition of incentives and pe-nalties;

• monitoring the compliance of activities of the Company and Group companies with laws and other legal acts of the repu-blic of lithuania, articles of association and business strategy;

• assessment and analysis of other issues attributed to the com-petence of the Committee by decision of the supervisory Bo-ard;

• performance of other functions related to the functions of the Committee set forth by legal acts of the republic of lithuania and in the Corporate Governance Code of companies listed on nasdaQ omX Vilnius stock exchange.

Full name, position

Participation in the capital of the Com-pany and of the Group

companies, %


darius KašauskasChairman

- 31-07-2013- 31-07-2017

finance and treasury director of lietuvos energija, uaB

petras povilas Čėsnaindependent member

- 30-09-2013- 31-07-2017

liteXpo Board Chairman

ilona daugėlaitėmember

- 31-07-2013- 31-07-2017

organisational deve-lopment director of lietuvos energija, uaB

as of 31 march 2014, the supervisory Board of aB lesto comprised:


32

Full name, position


Group companies

Workplace

aloyzas Vitkauskas Chairman of the Committee

- ministry of finance of the republic of lithuania, Vice-minister

Virginijus lepeška independent member

- Board Chairman of uaB organizacijų vystymo centras

tomas Garasimavičiusmember

- advisor to the prime minister of the republic of lithuania for energy

Main functions of the Committee

• assess and provide proposals on the long-term remuneration policy of the Company and Group companies (the main fixed part of the remuneration, performance based remuneration, pension insurance, other guarantees and forms of remunera-tion, compensations, severance pays, other parts of the remu-neration package), other principles of compensation for costs related to the individual’s performance;

• assess and provide proposals on the policy of bonuses of the Company and Group companies;

• monitor the compliance of the policy of remunerations and bonuses of the Company and Group companies with the inter-national practice and good governance practice recommen-dations, and provide respective proposals for the improve-ment of the policy of remunerations and bonuses;

• provide proposals concerning bonuses upon distribution of distributable profit (losses) of the Company and Group com-panies of the respective financial year;

• assess the terms and conditions of agreements of the Com-pany and Group companies with members of management bodies of the Company and Group companies;

• assess the procedures of recruitment and selection of candi-dates to members and senior management of the Company and Group companies and establishment of the qualification requirements;

• perform regular reviews of the structure, size, composition and activities of the management and supervisory bodies of the Company and Group companies;

Main functions of the Committee:

• monitor the identification, assessment and management of ri-sks relevant for the accomplishment of goals of the Company and Group companies;

• assess the adequacy of internal control procedures and risk management measures to the identified risks;

• assess the status of implementation of risk management me-asures;

• monitor the implementation of risk management process;

• analyse financial possibilities for the implementation of risk management measures;

• assess the risks and risk management plan of the Company and Group companies;

• assess the regular risk identification and assessment cycle;

• Control the establishment of risk registers, analyse their data and provide proposals;

• monitor the drafting of risk management related internal do-cuments;

• perform other functions attributed to the competence of the Committee by decision of the supervisory Board.

risk management supervision Committee

Full name, position


Group companies

Workplace

antanas danys Chairman of the Committee

- pe lietuvos Junior achievement, Board member

raimundas petrauskas independent member

- Ceo of schmitz Cargobull Baltic, uaB

donatas Kaubrys independent member

- director of dovirma, uaB

Žydrūnė Juodkienėmember

- ministry of energy of the republic of lithuania, Vice-minister

tomas Garasimavičiusmember

- advisor to the prime minister of the republic of lithuania for energy

nomination and remuneration Committee


33

management bodiesas of 31 march 2014, the Board of lietuvos energijos Gamyba, aB comprised:

manager: Juozas Bartlingas, Chief executive officer of lietuvos energijos Gamyba, aB

manager: aidas ignatavičius, Chief executive officer of aB lesto

as of 31 march 2014, the Board of aB lesto comprised:• upervise how members of management bodies and employe-es of the Company and Group companies are notified of the professional development possibilities and how they upgrade their skills regularly;

• supervise and assess the implementation of measures ensu-ring the continuity of operations of the management bodies and employees of the Company and Group companies;

• perform other functions attributed to the competence of the Committee by decision of the supervisory Board.

Full name, position



companies, %


Juozas BartlingasChairman

- 17-09-2013-17-09-2017

Ceo of lietuvos energijos Gamyba, aB

adomas Birulismember

- 17-09-2013-17-09-2017

Business development department directorof lietuvos energijos Gamyba, aB

eglė Čiužaitėmember

- 17-09-2013-17-09-2017

finance and legal department director of lietuvos energijos Gamyba, aB

darius Kucinasmember

- 17-09-2013-17-09-2017

production department director of lietuvos energijos Gamyba, aB

Vidmantas salietismember

- 17-09-2013-17-09-2017

Wholesale electricity trade department director of lietuvos energijos Gamyba, aB

Full name, position



companies, %


aidas ignatavičiusChairman

- 17-09-2013-17-09-2017

Ceo of aB lesto

andrius Bendikasmember

- 17-09-2013-17-09-2017

finance and administration depart met director of aB lesto

dalia andrulionienėmember

- 17-09-2013-17-09-2017

personnel and Communication division director of aB lesto

sergejus ignatjevasmember

- 17-09-2013-17-09-2017

Customer service division director of aB lesto


34

Lietuvos Energijos Gamyba, AB

on 1 september 2011, the shares of lietuvos energijos Gamyba were included into the main list of the nasdaX omX Vilnius stock exchange. the Company’s shares are traded on nasdaQ omX Vilnius stock exchange (hereinafter referred to as the Vse).

as at 31 march 2014, the Company had issued 635 083 615 ordina-ry registered shares of ltl 1 par value.

issue isin code: lt0000128571.

AB LESTO

ordinary registered shares of lesto have been listed on the main list of the nasdaX omX Vilnius stock exchange since 17 January 2011.

as at 31 march 2014, the Company had issued 603 944 593 ordina-ry registered shares of ltl 1 par value.

issue isin code lt0000128449.

information about agreements with intermediaries of public trading in secu-ritieslietuvos energija has not concluded any agreements with inter-mediaries of public trading companies, because its securities are not traded on the stock exchange.

Group companies:

Lietuvos Energijos Gamyba, AB

lietuvos energijos Gamyba has concluded the securities acco-unting agreement on the accounting of securities issued by the issuer and management of personal securities accounts with swe-dbank, aB.

AB LESTO

the authorized manager of securities accounts of lesto is swed-bank, aB.

trading in securities of the Group companies on regulated mar-kets.

Chief executive officer 30 may 2014 Dr. Dalius Misiūnas


Documents

Report iq