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Latvenergo Group Consolidated
and Latvenergo AS Annual Report
| 2023
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Latvenergo Group Consolidated and Latvenergo AS Annual Report
Financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS)
This is pdf format of the annual report further converted to the ESEF report to be considered as the official annual report prepared in accordance with the respective requirements
Contents
3 Key Figures
5 Management Report
12 Financial Statements
12 Statement of Profit or Loss
12 Statement of Comprehensive Income
13 Statement of Financial Position
14 Statement of Changes in Equity
15 Statement of Cash Flows
16 Notes to the Financial Statements
62 Independent Auditors’ Report
Notes to the Financial Statements
16 No. 1. Corporate information
16 No. 2. Summary of material accounting policies
20 No. 3. Financial risk management
23 No. 4. Critical accounting estimates and judgements
27 No. 5. Operating segment information
30 No. 6. Revenue
32 No. 7. Other income
32 No. 8. Raw materials and consumables
33 No. 9. Personnel expenses
33 No. 10. Other operating expenses
33 No. 11. Finance income and costs
34 No. 12. Income tax
34 No. 13. Intangible assets
36 No. 14. Property, plant and equipment
41 No. 15. Leases
43 No. 16. Non–current financial investments
44 No. 17. Inventories
45 No. 18. Receivables from contracts with customers and other receivables
47 No. 19. Cash and cash equivalents
47 No. 20. Share capital
48 No. 21. Reserves, dividends and earnings per share
49 No. 22. Changes in liabilities arising from financing activities
49 No. 23. Borrowings
50 No. 24. Derivative financial instruments
52 No. 25. Fair values and fair value measurement
55 No. 26. Trade and other payables
55 No. 27. Provisions
56 No. 28. Deferred income
57 No. 29. Related party transactions
61 No. 30. Commitments and contingent liabilities
61 No. 31. Events after the reporting year
FINANCIAL CALENDAR
Interim Condensed Financial Statements:
For the 3 months of 2024 (unaudited) – 31.05.2024
For the 6 months of 2024 (unaudited) – 30.08.2024
For the 9 months of 2024 (unaudited) – 29.11.2024
22
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Key figures
In order to ensure an objective and comparable presentation of the financial results, Latvenergo Group and Latvenergo AS uses various financial figures and ratios that are derived from the financial statements.
Latvenergo Group
Operational figures 2023 2022 2021 2020 2019
Total electricity supply, incl.: GWh 8,659 7,346 9,260 8,854 9,259
- Retail* GWh 6,208 5,452 6,706 6,394 6,505
- Wholesale** GWh 2,450 1,894 2,554 2,460 2,754
Total natural gas supply, incl.: GWh 1,554 1,040 1,026 516 303
- Retail GWh 896 930 1,026 516 303
- Wholesale GWh 658 110 – – –
Electricity generated GWh 5,132 3,822 4,517 4,249 4,880
Thermal energy generated GWh 1,698 1,777 2,072 1,702 1,842
Number of employees 3,497 3,316 3,153 3,295 3,423
Moody’s credit rating Baa2 (stable) Baa2 (stable) Baa2 (stable) Baa2 (stable) Baa2 (stable)
EUR’000
Financial figures 2023 2022 2021 2020 2019***
Revenue 2,034,425 1,841,801 1,065,219 773,391 841,636
EBITDA 601,769 360,209 198,813 277,894 243,526
Operating profit 404,596 193,961 81,890 121,350 100,365
Profit before tax 388,529 184,545 74,930 112,699 92,072
Profit for the year 350,917 183,874 71,623 116,309 94,359
Dividends paid to equity holder of the Parent Company 152,538 70,160 98,246 127,071 132,936
Assets 4,127,922 3,855,330 3,475,890 3,358,835 3,864,941
Non–current assets 3,377,267 3,078,635 2,894,502 2,976,192 2,798,712
Equity 2,963,080 2,356,419 2,123,448 2,118,242 2,265,487
Borrowings 629,696 875,918 795,029 743,199 882,671
Net debt
1)
511,240 763,161 697,950 555,876 563,959
Net cash flows generated from operating activities**** 575,682 126,499 67,250 281,647 289,826
Adjusted funds from operations (FFO)
2)
513,678 338,977 176,143 249,534 259,237
Capital expenditure 193,349 121,666 126,728 168,855 229,427
Based on the most commonly used financial figures and ratios in the industry, the Latvenergo Group
Strategy for 2022-2026 (see also the Management Report – section Further development, and
Sustainability Report), as well as the binding financial covenants set in the Group’s loan agreements,
Latvenergo Group has set here and therefore uses the following financial figures and ratios:
y profitability measures – EBITDA; EBITDA margin; operating profit margin; profit before tax margin;
profit margin; return on assets (ROA); return on equity (ROE); adjusted ROE excluding distribution;
return on capital employed (ROCE)
y capital structure measures – net debt
1)
; adjusted FFO
2)
/net debt; equity–to–asset ratio; net debt /
EBITDA; net debt / equity; current ratio
y a dividend policy measure – dividend pay–out ratio
* Including operating consumption
** Including sale of energy purchased within the mandatory procurement on the Nord Pool
*** Figures and ratios for 2019 - 10 June 2020 are presented by excluding discontinuing operations (unbundling transmission system asset ownership)
**** Comparative figures recalculated, presenting changes in current intangible assets (CO
2
emission rights) in net cash flows from operating activities as
changes in current assets
1) Net debt = borrowings at the end of the reporting year – cash and cash equivalents at the end of the reporting year
2) Adjusted funds from operations (FFO) = Net cash flows generated from operating activities – (changes in inventories and current intangible assets+
changes in receivables from contracts with customers and other receivables+ changes in other financial investments) – changes in trade and other liabilities–
compensation from the state-on-state support for the installed capacity of CHPPs
Financial ratios 2023 2022 2021 2020 2019 Formulas
EBITDA margin 30% 20% 19% 36% 29% EBITDA / revenue
Operating profit margin 19.9% 10.5% 7.7% 15.7% 11.9% Operating profit / revenue
Profit before tax margin 19.1% 10.0% 7.0% 14.6% 10.9% Profit before tax / revenue
Profit margin 17.2% 10.0% 6.7% 15.0% 11.2% Profit for the year / revenue
Adjusted FFO / net debt 81% 46% 28% 45% 48% Adjusted FFO / ((net debt at the beginning of the reporting year + net debt at the end of the reporting year) /2)
Equity–to–asset ratio 72% 61% 61% 63% 59% Equity at the end of the reporting year / assets at the end of the reporting year
Net debt / EBITDA 1.1 2.0 3.2 2.0 2.2 (Net debt at the beginning of the reporting year + net debt at the end of the reporting year) / 2 / EBITDA
Net debt / equity 0.17 0.32 0.33 0.26 0.25 Net debt at the end of the reporting year / equity at the end of the reporting year
Current ratio 2.2 1.2 1.4 1.5 1.2 Current assets at the end of the reporting year / current liabilities at the end of the reporting year
Return on assets (ROA) 8.8% 5.0% 2.1% 3.2% 2.5% Profit for the year / ((assets at the beginning of the reporting year + assets at the end of the reporting year) / 2)
Return on equity (ROE) 13.2% 8.2% 3.4% 5.3% 4.1% Profit for the year / ((equity at the beginning of the reporting year + equity at the end of the reporting year) / 2)
Adjusted ROE excluding distribution 19.9% 16.3% 5.5% 7.7% 4.8%
(Group's profit for the year – Sadales tīkls AS profit for the year) / ((Group's equity at the beginning of the reporting year – Sadales tīkls
AS equity at the beginning of the reporting year + Group's equity at the end of the reporting year – Sadales tīkls AS equity at the end
of the reporting year) / 2)
Return on capital employed (ROCE)*** 11.9% 6.3% 2.9% 4.2% 3.4%
Operating profit / ((equity at the beginning of the reporting year + equity at the end of the reporting year) / 2) + (borrowings at the
beginning of the reporting year + borrowings at the end of the reporting year) / 2)
Dividend pay–out ratio 73% 88% 63% 126% 62% Dividends paid to equity holder of the Parent Company / profit of the Parent Company in the previous year
33
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Latvenergo AS
Operational figures 2023 2022 2021 2020 2019
Total electricity supply, incl.: GWh 6,090 4,700 5,304 5,318 5,502
- Retail* GWh 3,830 3,540 3,999 4,235 4,211
- Wholesale** GWh 2,261 1,161 1,305 1,083 1,290
Total natural gas supply, incl.: GWh 1,435 905 804 453 294
- Retail GWh 777 795 804 453 294
- Wholesale GWh 658 110 – – –
Electricity generated GWh 5,115 3,800 4,495 4,215 4,832
Thermal energy generated GWh 1,457 1,531 1,800 1,475 1,603
Number of employees at the end of the
reporting year 1,414 1,329 1,269 1,267 1,328
Moody’s credit rating Baa2 (stable) Baa2 (stable) Baa2 (stable) Baa2 (stable) Baa2 (stable)
EUR’000
Financial figures 2023 2022 2021 2020 2019
Revenue 1,397,179 1,231,015 592,785 385,612 437,529
EBITDA 473,295 280,325 85,275 197,889 112,651
Operating profit 362,267 198,812 52,367 111,630 45,108
Profit before tax 362,660 209,362 79,520 154,848 101,227
Profit for the year 331,561 209,362 79,520 154,848 101,227
Dividends paid to equity holder of the Parent Company 152,538 70,160 98,246 127,071 132,936
Assets 3,474,032 3,305,536 2,915,587 2,760,155 3,136,958
Non–current assets 2,672,436 2,434,746 2,215,793 2,307,985 2,615,113
Equity 2,608,014 2,018,694 1,761,070 1,746,436 1,949,287
Borrowings 618,179 863,938 782,322 733,392 872,899
Net debt
1)
*** 511,016 763,670 689,904 548,511 555,348
Net cash flows generated from operating activities**** 423,244 258,419 291,049 436,615 352,535
Capital expenditure 64,452 30,040 29,545 50,999 48,269
* Including operating consumption
** Including sale of energy purchased within the mandatory procurement on the Nord Pool
*** Figures and ratios for 2019 - 10 June 2020 are presented by excluding discontinuing operations (unbundling transmission system asset ownership)
**** Comparative figures recalculated, presenting changes in current intangible assets (CO
2
emission rights) in net cash flows from operating activities as
changes in current assets
1) Net debt = borrowings at the end of the reporting year – cash and cash equivalents at the end of the reporting year
Financial ratios 2023 2022 2021 2020 2019 Formulas
EBITDA margin 33.9% 22.8% 14.4% 51.3% 25.7% EBITDA / revenue
Operating profit margin 25.9% 16.2% 8.8% 28.9% 10.3% Operating profit / revenue
Profit before tax margin 26.0% 17.0% 13.4% 40.2% 23.1% Profit before tax / revenue
Profit margin 23.7% 17.0% 13.4% 40.2% 23.1% Profit for the year / revenue
Equity–to–asset ratio 75% 61% 60% 63% 62% Equity at the end of the reporting year / assets at the end of the reporting year
Net debt / equity 0.20 0.38 0.39 0.31 0.29 Net debt at the end of the reporting year / equity at the end of the reporting year
Current ratio 3.5 1.5 1.8 2.3 1.8 Current assets at the end of the reporting year / current liabilities at the end of the reporting year
Return on assets (ROA) 9.8% 6.7% 2.8% 5.3% 3.2% Profit for the year / ((assets at the beginning of the reporting year + assets at the end of the reporting year) / 2)
Return on equity (ROE) 14.3% 11.1% 4.5% 8.4% 5.1% Profit for the year / ((equity at the beginning of the reporting year + equity at the end of the reporting year) / 2)
Return on capital employed (ROCE)*** 11.9% 7.3% 2.1% 4.4% 1.7%
Operating profit / ((equity at the beginning of the reporting year + equity at the end of the reporting year) / 2) + (borrowings at the
beginning of the reporting year + borrowings at the end of the reporting year) / 2)
Dividend pay–out ratio 73% 88% 63% 126% 62% Dividends paid to equity holder of the Parent Company / profit of the Parent Company in the previous year
44
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Management Report
Latvenergo Group (the Group) is one of the largest power suppliers and energy generators in the Baltics,
operating in electricity and thermal energy generation and trade, natural gas trade, supply of products
and services related to electricity consumption and energy efficiency, and electricity distribution services.
Latvenergo Group – one of the largest power suppliers in the Baltics
The parent company of Latvenergo Group is Latvenergo AS which is a power supply utility operating in
electricity and thermal energy generation and trade, natural gas trade, as well as supply of products and
services related to electricity consumption and energy efficiency in Latvia.
Latvenergo Group divides its operations into two operating segments: generation and trade; and distribution.
Operating Environment
In 2023, both the Nord Pool system price and the electricity price in Latvia decreased by 58% compared
to the previous year. In the European Union (EU), the reduction in electricity prices was mainly affected
by lower natural gas prices and increased electricity generation through renewable energy resources.
According to Ember data, in 2023, the installed capacity of wind power plants (WPP) and solar power
plants(SPP) in the European Union (EU) increased by 75 GW. Consequently, the development of wind
power stations in the EU increased by 13% in 2023, while the development of solar power stations
increased by 17%, collectively accounting for 27% of total electricity generation in 2023. Improved
hydrological conditions also contributed to a 15% increase in hydroelectric power generation. Additionally,
there was a decrease in electricity demand of approximately 2–3%. The electricity market was also
stabilized with the help of the European Commission’s REPowerEU plan, in response to the difficulties
in the world energy market caused by the Russian invasion of Ukraine. The REPowerEU plan envisions
implementing energy-saving measures, diversification of energy sources to reduce dependence on
Russian fossil fuels and accelerated development of renewable energy resources.
Electricity and natural gas prices decreased
Average electricity price in Nord Pool regions, EUR/MWh (monthly)
Region 2023 2022 Δ, %
System price 56.4 135.9 (58%)
Latvia 93.9 225.9 (58%)
Lithuania 94.4 229.2 (59%)
Estonia 90.8 192.0 (53%)
Poland 111.7 166.7 (33%)
Sweden 49.3 100.3 (51%)
Finland 56.5 153.5 (63%)
Denmark 84.3 213.7 (61%)
Norway 56.5 117.0 (52%)
Germany 95.2 235.5 (60%)
France 96.9 275.9 (65%)
Great Britain 108.0 239.4 (55%)
In 2023, the average price of natural gas at the TTF (front month) reached 49 EUR/MWh, which is 63%
lower than a year earlier. Slower global economic growth, along with high liquefied natural gas (LNG)
imports, increased RES output and reduced natural gas consumption, contributed to an increase in
the natural gas reserve fill rate in EU gas storage facilities. In 2023, the average fill rate of natural gas
storage facilities, according to Gas Infrastructure Europe data, was 79% (in 2022, it was 61%). Until
the end of March 2024, the REPowerEU plan continued, aiming for voluntary measures to reduce gas
consumption by 15% in the EU territory.
Latvenergo AS has not imported natural gas from Russia since 24 February 2022, switching to supplies
of LNG from other countries. Until 2032, Latvenergo AS has secured the rights to receive for regular
natural gas deliveries at the Klaipeda LNG terminal at a volume of 6 TWh per year.
The average price of CO
2
emission allowances (EUA DEC futures) was 5% higher compared to the
year 2022, reaching 85.3 EUR / t. However, at the end of the year, there was a downward trend in
prices, affected by the reduction in natural gas prices and slower economic development. The European
Parliament’s decision to allocate additional quotas for financing REPowerEU, aimed at reducing Europe’s
dependence on Russian energy resources, led to an increased supply of quotas in the short term. The
climate goal of the European Commission to reduce CO
2
emissions by 55% by 2030 compared to the
levels of 1990 remains relevant.
100
200
300
400
500
Jan 2022 Apr 2022 Jul 2022 Oct 2022 Jan 2023 Apr 2023 Jul 2023 Oct 2023
Energy resource prices
EUR/MWh, EUR/t
Electricity: Nord Pool Latvia Natural gas: TTF CO
2
emmission allowances
55
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Operating Results
Generation
Latvenergo Group is one of the largest electricity producers in the Baltics. In 2023, Latvenergo Group
produced 1/3 of the total electricity generated in the Baltics. Moreover, 73% of the electricity was
generated from renewable energy sources (in 2022: 70%). The total amount generated by Latvenergo
Group’s power plants comprised 5.1 TWh of electricity and 1.7 TWh of thermal energy.
The Daugava HPPs generated the second largest amount of electricity in the last 25 years
The Daugava HPPs generated the largest amount of electricity since 2017 and the second largest amount
in the last 25 years – 3.7 TWh, which is 39% more than in 2022. The amount of power generated at the
Daugava HPPs was impacted by 56% higher water inflow in the Daugava River. According to data from
the Latvian Environment, Geology and Meteorology Centre, the average water inflow in the Daugava River
in 2023 was 789 m
3
/s, while a year earlier it was 506 m
3
/s.
The amount generated at the Latvenergo AS CHPPs increased by 23%, reaching 1.4 TWh. The increase
was influenced by relatively low generation in the previous year, which was then affected by high natural
gas prices. The operation of the CHPPs is adjusted to the conditions of the electricity market and heat
demand.
The amount of thermal energy generated did not significantly change, reaching 1.7 TWh.
3,725 GWh
+39%
1,385 GWh
+23%
2023
100
200
300
400
500
600
700
800
900
Jan 2022 Apr 2022 Jul 2022 Oct 2022 Jan 2023 Apr 2023 Jul 2023 Oct 2023
Electricity generation at Daugava HPPs and Latvenergo AS CHPPs
GWh
Latvenergo AS CHPPs Daugava HPPs
Trade
At the end of the reporting year, the number of electricity customers was more than 845 thousand,
including almost 227 thousand foreign customers. The electricity customer portfolio shows a positive
3% increase mainly due to the increase in the number of customers within households in Lithuania.
Under the Elektrum brand, Latvenergo Group has become the second-largest electricity supplier in the
household customer segment in Lithuania.
Retail electricity trade increased by 14%
In 2023, the Group supplied 6.2 TWh of electricity to its customers in the Baltics, which is 14% more than
a year earlier. The increase in electricity sales volume was mainly impacted by the growth in sales volume
in the business customer segment, as well as the increase in sales volume in the household market in
Lithuania.
The overall amount of retail electricity trade outside Latvia accounted for about 38%. The electricity trade
volume in Latvia was 3.8 TWh, while in Lithuania it was 1.9 TWh and in Estonia it was 0.5 TWh.
Meanwhile, the number of natural gas customers has more than doubled, comprising more than
49thousand at the end of December. The Group’s natural gas sales in the Baltics decreased by4%,
reaching 896 GWh. The decrease is associated with a general decline in natural gas consumption in the
Baltic market. In total, 1.6 TWh of natural gas was sold, which is almost half as much as in 2022.
In the reporting year, we continued to develop retail activities of other products and services related to
electricity consumption and energy efficiency. The number of contracts for the installation of solar panels
and trade of solar park components in the Baltics exceeded 1,600. The total installed solar panel capacity
Completed in 2023
6.2 TWh
of electricity
sold to Baltic
retail customers.
0.9 TWh
of natural gas
sold to Baltic
retail customers.
More than
1,600 contracts
were concluded for
the installation
of solar panels
in the Baltics.
More than
44.3 thousand
electric vehicle charges
were made at the
Elektrum Drive electric
car charging stations.
66
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
(including remote solar parks) provided to Latvenergo Group’s retail customers in the Baltics exceeded
70MW at the end of December; thus, Latvenergo is one of the leading providers of this service in the
Baltics. Almost 3/4 of panels are installed for customers outside Latvia.
Steady growth in the number of Elektrum Insured product line customers in the Baltics continued,
reaching about 130 thousand.
In the reporting year, we further strengthened our leading position in the electric vehicle charging
station market in Latvia. The Elektrum Drive electric car charging network in the Baltics grew, reaching
400charging ports. In 2023, 44.3 thousand electric vehicle charges were made, comprising 880 MWh,
resulting in savings of 530 tonnes of CO
2
emissions. By using the Elektrum Drive application, charging is
also possible within the e-mobi network in Latvia and at LIDL charging stations in Lithuania – providing
customers access to a total of 571 charging points.
Distribution
Distribution segment provides electricity distribution services in Latvia. Sadales tīkls AS is the largest state
distribution system operator, covering approximately 99% of the territory of Latvia. Distribution system
tariffs are approved by the Public Utilities Commission (PUC).
As of 1 July 2023, the new distribution tariffs of Sadales tīkls AS have come into effect, with the tariff
calculation increasing the proportion of the fixed tariff, providing a more appropriate solution to the actual
maintenance cost structure of the distribution network. With the introduction of the new tariff, the financial
results of the distribution segment have improved.
Under the law on measures to reduce the extraordinary rise in energy prices, from 1 September 2023 to
31December 2023, a 60% reduction was applied to the fixed component of the electricity distribution
tariff (maintenance fee for power) for all households. This reduction was compensated through funds
allocated from the state budget.
To ensure a more sustainable approach and predictability of changes for customers in the future, from
1January 2024 to 31 December 2025, the increase in the capacity payments of the electricity distribution
tariff for household users will be applied gradually. The difference between the approved tariff and the one
applied to customers will be compensated from dividends of Latvenergo AS paid in the state budget.
Considering the possibilities of obtaining financing, as well as the increase in energy resource prices in
the last two years, microgeneration development in the country has been stimulated significantly. In 2022,
the volume of new microgenerator connections to the distribution grid reached its peak, and in 2023,
overall customer activity remained high. At the end of the reporting year, the total generation capacity
of microgenerators and generators connected to the distribution system reached 550 MW. In 2023, the
capacity of microgenerators connected to the distribution grid reached almost 70 MW, while the total
generation capacity of connected generators increased by 137 MW.
Unfavourable weather conditions significantly affected SAIDI (System Average Interruption Duration Index)
and SAIFI (System Average Interruption Frequency Index) indicators in 2023. However, excluding mass
damage, the reliability and quality of electricity supply have been increasing each year, and over the last
five years, SAIFI has decreased by 16%, and SAIDI by 21%.
Financial Results
In 2023, Latvenergo Group’s revenue reached EUR 2,034.4 million, which was EUR 192.6million or
10% more than a year earlier. This was mainly impacted by EUR 135.8 million higher energy sales
revenues mainly due to a 14% greater amount of electricity sold in retail, higher sales prices, a 39%greater
amount of power generated at the Daugava HPPs and an increase in revenue in the distribution segment
of 42.1million EUR, following the introduction of the new distribution tariffs by Sadales tīkls AS starting
from 1July 2023.
Latvenergo Group’s EBITDA increased by 67%
Latvenergo Group’s EBITDA increased by EUR 241.6 million, which is 67% more than a year earlier,
reaching EUR 601.8 million. This was mainly positively impacted by the greater amount of power
generated at the Daugava HPPs, lower electricity and natural gas purchase prices and an increase in
revenue in the distribution segment. The Group’s profit for the reporting year reached EUR 350.9 million.
77
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Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
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– Independent Auditors’
Report
Investments
In 2023, the total amount of investment comprised EUR 193.3 million, which is 59% or EUR 71.7million
more compared to the previous year, and the largest increase was generated by investments in the
development projects of solar power plants.
In the reporting year, investments in distribution comprised EUR 99.6 million, which is half of the Group’s
total investments. The majority of funds are invested in the construction and reconstruction of power lines
and transformers, thereby ensuring high-quality network services, technical performance, and operational
safety. The purpose of investments in the distribution segment is to promote the quality and security of
the energy supply, reduce the frequency and duration of power supply disruptions caused by planned
and unplanned maintenance, and ensure the appropriate voltage quality.
Latvenergo Group purposefully develops renewable generation capacity in the Baltic region
In the reporting year, EUR 34.9 million was allocated towards the development of Elektrum solar parks,
which is almost 1/5 of Latvenergo Group’s total investments. Also, the Daugava HPPs’ hydropower unit
reconstruction continued. In 2023, EUR8.2 million was invested in the Daugava HPPs’ hydropower
unit reconstruction. 8hydro units included in the programme have already been reconstructed as of
31December 2023.
As per Latvenergo Group’s strategic plan for 2022-2026, there will be a substantial increase in
investments towards expanding the Group’s renewable energy production capacity. This will lead to a
significant reduction in greenhouse gas emissions and contribute to Latvia’s goal of achieving climate
neutrality by 2050.
In the reporting year, 3 solar parks with a total capacity of 18.7 MW were put into operation in Lithuania.
By the end of the reporting year, we had 6 Elektrum solar parks in operation with a total capacity of
almost 30 MW in Lithuania. The solar park capacity in Lithuania will be distributed in three revenue
streams: selling capacity to customers, leasing capacity to customers, and supplying generated energy
to customers. Meanwhile, in Latvia, the first solar park with a total capacity of 11.7 MW is expected to be
operational in May 2024. In the Baltic region, the Group has solar and wind park projects in the project or
construction stage with a total capacity of about 400 MW, including seven SPP projects in Latvia, with a
total capacity of 40 MW, that were added to the Group’s RES generation capacity portfolio in early 2024.
Also, the development of a new WPP project has been initiated in Lithuania, in the Akmenes district,
with a capacity of up to 15 MW. Solar and wind parks are expected to be gradually commissioned in
2024–2025.
Funding
Latvenergo Group finances its investments from its own resources and external long-term borrowings,
which are regularly sourced in financial and capital markets in a timely manner. Planning the sourcing
of borrowings in a timely manner is also crucial to ensure loan refinancing risk management and debt
repayment in due time.
On February 22, 2023, Latvenergo AS concluded the third bond programme in the amount of
EUR200 million by issuing six-year green bonds with a total nominal value of EUR 50 million with a
maturity date of February 22, 2029, and a fixed interest rate (coupon) and yield of 4.952% per year. The
bonds are listed on Nasdaq Riga AS.
The bonds were issued in the format of green bonds, according to the Green Bond Framework of
Latvenergo AS. The independent research centre CICERO Shades of Green has rated the updated
Latvenergo AS Green Bond Framework as Dark Green (the highest category), indicating the compliance
of the planned projects with long-term environmental protection and climate change mitigation objectives,
as well as good governance and transparency.
As of 31 December 2023, the Group’s borrowings amount to EUR 629.7 million, all of which are
long-term loans (31 December 2022: EUR 875.9 million, including long-term loans in the amount of
EUR756.2million). The loan portfolio includes long-term loans from commercial banks and international
financial institutions, as well as green bonds in the amount of EUR 200 million.
External funding sources are purposefully diversified in the long run, thus creating a balance between
lender categories in the total loan portfolio. In the reporting year, all the binding financial covenants set in
Latvenergo Group’s loan agreements were met.
82
54
154
93
107
2029 2030-2034
70
70
Latvenergo Group’s long-term debt repayment schedule
MEUR
2027 20282023 20252024 2026
182
Loans Repaid in the reporting yearGreen Bonds
88
About Latvenergo Group
Corporate Governance
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Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
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Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Corporate Governance
Along with the financial results of Latvenergo Group, also the Corporate Governance Report of
Latvenergo AS for 2023 is published. It is based on the Corporate Governance Code, which was
published in 2020 by the Corporate Governance Advisory Board established by the Ministry of Justice.
Evaluating both the governance system of the capital company and its compliance with the principles
in 2023, the Management Board considers that Latvenergo AS complies in all material aspects with all
the principles set out in the Code, except for the criterion of gender representation on the company’s
Supervisory Board. For detailed information see the Sustainability Report 2023.
Non-financial Report
Latvenergo Group has prepared a non-financial report in accordance with the Law on the Financial
Instruments Market.
For detailed information on corporate social responsibility (CSR) activities, description of the policies and
procedures in relation to those matters, the outcome of the policies, risks and risk management, and non-
financial key performance indicators, please see the Sustainability Report 2023 which is available on the
Latvenergo website. The report is prepared in accordance with the GRIStandards requirements.
Non-financial report is in accordance with the GRI Standards
The sustainability report addresses such topics as corporate social responsibility, economic performance,
product responsibility, society, employees and the work environment, environmental protection, etc.
Further Development
In March 2022, Latvenergo Group’s medium-term strategy for 2022–2026, with new strategic operational
and financial objectives, was approved by the Supervisory Board of Latvenergo AS.
New strategic objectives comprise:
•
expand and diversify the generation portfolio with green technologies;
•
strengthen the position of Elektrum as the most valuable energy trader in the Baltics;
•
develop electrification of the transport sector;
•
ensure a sustainable and economically viable distribution service and improve the security and quality
of electricity supply.
Along with the strategy approval, Latvenergo Group’s financial targets have been set. The targets are
divided into four groups – profitability, capital structure, dividend policy and other.
The financial targets are set to ensure:
•
ambitious, yet achievable profitability, which is consistent with the average ratios of benchmark
companies in the European energy sector and provides for an adequate return on the business risk;
•
an optimal and industry-relevant capital structure that limits potential financial risks;
•
an adequate dividend policy that is consistent with the planned investment policy and capital structure
targets;
•
an investment grade credit rating to secure funding for the strategy’s ambitious investment programme.
Target group Ratio Year 2026
Profitability Return on equity (ROE) excluding Distribution* > 7%
Capital structure Adjusted FFO / Net Debt ratio > 25%
Dividend policy Dividend payout ratio > 64%
Other Moody's credit rating Maintain an investment grade credit rating
* The profitability of the regulated services provided by the Group is determined by the Public Utilities Commission. The most significant share in the Group’s
regulated services is the distribution service. When evaluating the fulfilment of the ROE target, the Group’s return indicator will be assessed, excluding the
regulated return on the distribution service – ROE excluding distribution.
More information on the 2023 targets and the new strategy can be found in the Sustainability Report2023.
Financial Risk Management
The activities of Latvenergo Group and Latvenergo AS are exposed to a variety of financial risks: market
risks, credit risk, and liquidity and cash flow risk. Latvenergo Group’s Financial Risk Management Policy
focuses on eliminating the potential adverse effects from such risks on financial performance. In the
framework of financial risk management, Latvenergo Group and Latvenergo AS use various financial risk
controls and hedging to reduce certain risk exposures.
a) Market risks
I) Price risk
Price risk might negatively affect the financial results of Latvenergo Group and Latvenergo AS due
to falling revenue from generation and a mismatch between short run electricity production costs or
electricity and natural gas purchase costs at floating market prices and retail sales at fixed prices.
The main sources of Latvenergo Group’s and Latvenergo AS exposure to price risk are the floating
market prices of electricity on the Nord Pool power exchange in Baltic bidding areas and fluctuations in
natural gas price procured for CHPPs’ fuel and retail purposes. The financial results of the Group and
the Parent Company may be negatively affected by the volatility of the electricity market price, which
depends on the weather conditions in the Nordic countries, global prices of resources, and the influence
99
About Latvenergo Group
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Annual Report
– Key Figures
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Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
of local factors (water availability and ambient air temperature) on electricity generation opportunities.
Movement in natural gas price due to changing demand–supply factors and seasonal fluctuations may
have a negative effect on the difference between fixed retail electricity prices in contracts with customers
and variable generation costs at CHPPs.
The Latvenergo Group and Latvenergo AS enter into long–term fixed price customer contracts for
hedging price risk of electricity generation. In order to hedge the price risk caused by mismatch between
retail sales at fixed prices and floating market prices, the Latvenergo Group and LatvenergoAS use
electricity and natural gas financial derivatives, and enter into fixed price contracts for natural gas
supply. The impact of price risk on generation is hedged gradually – price has been fixed for 60-65% of
projected electricity output prior to the upcoming year. Further hedging of risk is limited by the seasonal
generation pattern of the Daugava HPPs. The price fixing level reached 71% of the annual production
volume by the end of December.
II) Interest rate risk
Latvenergo Group’s and Latvenergo AS interest rate risk mainly arises from non–current borrowings at
variable interest rates. They expose the Group and the Parent Company to the risk that finance costs
might increase significantly when the reference rate surges. The borrowings from financial institutions
have a variable interest rate, comprising 6–month EURIBOR and a margin. The Group’s Financial
Risk Management Policy stipulates maintaining more than 35% of its borrowings as fixed interest rate
borrowings (considering the effect of interest rate swaps and issued bonds) with a duration of 1–4 years.
Considering the effect of interest rate swaps and bonds with a fixed interest rate, 46% of the Group’s
and 47% of the Parent Company’s non–current borrowings had a fixed interest rate with an average
duration of 2.1 years for the Group and 2.1 years for the parent Company as of 31 December 2023.
III) Currency risk
Foreign currency exchange risk arises when future transactions or recognised assets or liabilities are
denominated in a currency other than the functional currency, which is the EUR.
To manage the foreign currency exchange risk for liabilities arising from natural gas purchases, the
Financial Risk Management Policy envisages use of foreign exchange forward contracts. During 2023,
five EUR/USD forward foreign currencies exchange contracts in the amount of USD 153.5 thousand with
an execution date of 22 February and 26 April 2023 were fulfilled, concluded in 2022 in order to limit the
currency risk of the payments in US dollars planned in the natural gas purchase agreement concluded
in2022. As of 31 December 2023 there were no outstanding foreign exchange forward contracts.
As of 31 December 2023, all borrowings of Latvenergo Group and Latvenergo AS are denominated
in euros, and during the reporting year, there was no substantial exposure to foreign currency risk as
regards the Group’s and the Parent Company’s investments in non–current or current assets.
b) Credit risk
Credit risk is managed at the Latvenergo Group level. Credit risk arises from cash and cash equivalents,
derivative financial instruments and deposits with banks, and receivables. Credit risk exposure of
receivables is limited due to the large number of Group customers as there is no significant concentration
of credit risk with any single counterparty or group of counterparties with similar characteristics.
Credit risk related to cash and deposits with banks is managed by balancing the placement of financial
assets in order to simultaneously choose the best offers and reduce the probability of incurrence of loss.
No credit limits were exceeded during the reporting year, and the management does not expect any
losses due to the occurrence of credit risk.
c) Liquidity risk and cash flow risk
Latvenergo Group’s liquidity and cash flow risk management policy is to maintain a sufficient amount of
cash and cash equivalents and the availability of long and short–term funding through an adequate amount
of committed credit facilities in order to meet existing and expected commitments and compensate for
fluctuations in cash flows due to the occurrence of a variety of financial risks. On 31 December 2023,
Latvenergo Group’s liquid assets (cash and cash equivalents – short–term deposits up to 3 months)
reached EUR 118.5 million (31 December 2022: EUR 112.8 million), while the Latvenergo AS liquid assets
reached EUR 107.2 million (31/12/2022: EUR 100.3 million).
The Group and the Parent Company continuously monitor cash flow and liquidity forecasts, which
comprise the undrawn borrowing facilities and cash and cash equivalents.
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Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Events after the reporting year
The Ministry of Economics and Latvenergo AS were ordered to draw up an assessment on the most
optimal solution for the structure of Latvenergo AS Group, considering the possibility of merging the
existing and planned renewable energy projects of Latvenergo AS Group into one subsidiary.
Latvijas valsts meži AS was permitted to terminate its participation in Latvijas vēja parki SIA, the joint
venture of Latvijas valsts meži AS and Latvenergo AS, by alienating all shares (20%) of Latvijas vēja
parkiSIA owned by Latvijas valsts meži AS for the benefit of Latvenergo AS.
In order to implement the installation of the total new RES (RES - renewable energy sources) capacity of
2,300MW provided for by the strategy of Latvenergo Group, the Ministry of Economics was instructed
to draw up a draft order on the authorisation for determining a different amount of dividends to be
paid by Latvenergo AS to the State budget as of 2027 in the medium-term Latvenergo AS Strategy
for2026–2030, bringing the amount of dividends to be paid by Latvenergo AS to the State budget in line
with the average dividend payout ratio of European energy sector market participants and to submit the
aforementioned draft order to the Cabinet of Ministers for consideration.
All other significant events that would materially affect the financial position, financial performance or cash
flows of the Latvenergo Group and Latvenergo AS after the reporting year are disclosed in Note 31 of the
Group’s and the Parent Company’s Financial Statements.
Statement of management responsibility
Based on the information available to the Management Board of Latvenergo AS, the Group consolidated
financial statements and the Company financial statements for the year ended 31 December 2023 have
been prepared in accordance with the International Financial Reporting Standards as adopted by the
EU and in all material aspects present a true and fair view of the financial position, profit and loss and
cash flows of Latvenergo Group and Latvenergo AS. Information provided in the Management Report
is accurate.
Profit distribution
According to the Law “On state budget for 2024 and budgetary framework for 2024, 2025 and 2026”
the expected amount of dividends to be paid by Latvenergo AS for the use of state capital in 2024 (for
the reporting year 2023) is 64% of the profit for the reporting year, but not less than EUR 199.3 million,
corporate income tax calculated and paid in accordance with the laws and regulations. The distribution of
net profit and amount of dividends payable is subject to a resolution of the Latvenergo AS Shareholders
Meeting.
This document is signed with a secure digital signature and contains a time stamp
Mārtiņš Čakste Guntars Baļčūns
Chairman of the Management Board of Latvenergo AS Member of the Management Board of Latvenergo AS
1111
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Financial Statements
Statement of Profit or Loss

|  |  | Group |  | Parent Company | EUR’000
|  |  Notes | 2023 | 2022 | 2023 | 2022
Revenue |  | 6 | 2,034,425 | 1,841,801 | 1,397,179 | 1,231,015
Other income |  | 7 | 31,896 | 31,174 | 28,343 | 28,690
Raw materials and consumables |  | 8 | (1,248,320) | (1,333,708) | (846,986) | (891,138)
Personnel expenses |  | 9 | (141,882) | (116,993) | (63,366) | (52,812)
Other operating expenses |  | 10 | (74,350) | (62,065) | (41,875) | (35,430)
EBITDA*  |  |  | 601,769 | 360,209 | 473,295 | 280,325
Depreciation, amortisation and impairment of intangible assets, property, plant and equipment (PPE) and | 13 | a,14a, |  |  |  |
right-of-use assets |  | 15 | (197,173) | (166,248) | (111,028) | (81,513)
Operating profit  |  |  | 404,596 | 193,961 | 362,267 | 198,812
Finance income |  | 11 | 9,226 | 1,414 | 24,747 | 10,767
Finance costs |  | 11 | (25,293) | (10,830) | (25,278) | (10,802)
Dividends from subsidiaries |  | 16 | – | – | 924 | 10,585
Profit before tax  |  |  | 388,529 | 184,545 | 362,660 | 209,362
Income tax |  | 12 | (37,612) | (671) | (31,099) | –
Profit for the year |  |  | 350,917 | 183,874 | 331,561 | 209,362
Profit attributable to:  |  |  |  |  |  |
- Equity holder of the Parent Company |  | 21 c | 349,749 | 183,443 | 331,561 | 209,362
- Non–controlling interests |  |  | 1,168 | 431 | – | –
Basic earnings per share (in euros) |  | 21 c | 0.443 | 0.232 | 0.420 | 0.265
Diluted earnings per share (in euros) |  | 21 c | 0.443 | 0.232 | 0.420 | 0.265

* See Alternative Performance Measures in Note 2 for the definition of this Alternative Performance Measure
The notes on pages 16 to 61 are an integral part of these Financial Statements
Statement of Comprehensive Income

|  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
Profit for the year |  | 350,917 | 183,874 | 331,561 | 209,362
Other comprehensive income / (loss) to be reclassified |  |  |  |  |
to profit or loss in subsequent periods, net of tax: |  |  |  |  |
- gains / (losses) from change in hedge reserve | 21 a, 24 | 99,380 | (109,483) | 99,380 | (109,483)
Net other comprehensive income / (loss) to be reclassified to profit or loss in subsequent periods |  | 99,380 | (109,483) | 99,380 | (109,483)
Other comprehensive income not to be reclassified to profit or loss in subsequent periods, net of tax: |  |  |  |  |
- gains on revaluation of non–current assets | 14 a, 21 a | 312,061 | 227,695 | 312,061 | 227,695
- (losses) / gains on remeasurement on defined benefit |  |  |  |  |
plan | 21 a, 27 | (2,709) | 645 | (1,144) | 210
Net other comprehensive income not to be reclassified to profit or loss in subsequent periods |  | 309,352 | 228,340 | 310,917 | 227,905
Other comprehensive income for the year |  | 408,732 | 118,857 | 410,297 | 118,422
TOTAL comprehensive income for the year |  | 759,649 | 302,731 | 741,858 | 327,784
Attributable to: |  |  |  |  |
- Equity holder of the Parent Company |  | 758,481 | 302,300 | 741,858 | 327,784
- Non–controlling interests |  | 1,168 | 431 | – | –

The notes on pages 16 to 61 are an integral part of these Financial Statements
This document is signed with a secure digital signature and contains a time stamp
Mārtiņš Čakste Guntars Baļčūns
Chairman of the Management Board of Latvenergo AS Member of the Management Board of Latvenergo AS
Liāna Ķeldere
Accounting director of Latvenergo AS
1212
About Latvenergo Group
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Annexes to
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Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Statement of Financial Position

|  |  | Group  | Parent Company | EUR’000
|  Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
ASSETS |  |  |  |  |
Non-current assets  |  |  |  |  |
Intangible assets | 13 a | 57,326 | 51,789 | 21,647 | 18,397
Property, plant and equipment | 14 a | 3,301,051 | 3,005,370 | 1,505,411 | 1,242,660
Right–of–use assets | 15 | 11,219 | 10,526 | 4,710 | 5,066
Investment property | 14 b | 2,309 | 2,297 | 2,261 | 2,222
Non-current financial investments | 16 | 42 | 40 | 671,720 | 647,320
Non–current loans to related parties | 29 e | 863 | – | 463,030 | 510,468
Other non-current receivables | 18 c | 447 | 482 | 447 | 482
Deferred income tax assets | 12 | 800 | – | – | –
Derivative financial instruments | 24 | 3,210 | 8,131 | 3,210 | 8,131
Total non-current assets |  | 3,377,267 | 3,078,635 | 2,672,436 | 2,434,746
Current assets |  |  |  |  |
Inventories | 17 | 183,798 | 295,638 | 146,045 | 261,586
Current intangible assets | 13 b | 23,051 | 31,664 | 23,051 | 31,664
Receivables from contracts with customers | 18 a | 224,922 | 314,109 | 161,674 | 233,192
Other current receivables | 18 b, c | 50,081 | 17,521 | 52,280 | 36,451
Deferred expenses |  | 2,388 | 2,408 | 2,156 | 2,191
Current loans to related parties | 29 e | – | – | 161,268 | 202,840
Derivative financial instruments | 24 | 7,959 | 2,598 | 7,959 | 2,598
Other current financial investments | 19 | 140,000 | – | 140,000 | –
Cash and cash equivalents | 19 | 118,456 | 112,757 | 107,163 | 100,268
Total current assets |  | 750,655 | 776,695 | 801,596 | 870,790
TOTAL ASSETS |  | 4,127,922 | 3,855,330 | 3,474,032 | 3,305,536

|  |  | Group  | Parent Company | EUR’000
|  Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
EQUITY AND LIABILITIES  |  |  |  |  |
EQUITY  |  |  |  |  |
Share capital | 20 | 790,368 | 790,368 | 790,368 | 790,368
Reserves | 21 a | 1,681,852 | 1,282,683 | 1,320,419 | 910,683
Retained earnings  |  | 483,016 | 276,242 | 497,227 | 317,643
Equity attributable to equity holder of the Parent Company |  | 2,955,236 | 2,349,293 | 2,608,014 | 2,018,694
Non-controlling interests  |  | 7,844 | 7,126 | – | –
Total equity  |  | 2,963,080 | 2,356,419 | 2,608,014 | 2,018,694
LIABILITIES  |  |  |  |  |
Non-current liabilities  |  |  |  |  |
Borrowings | 23 | 536,316 | 574,754 | 527,082 | 561,551
Lease liabilities | 15 | 9,015 | 8,648 | 3,607 | 4,206
Deferred income tax liabilities | 12 | 5,475 | 667 | – | –
Provisions | 27 | 18,240 | 15,566 | 8,565 | 7,552
Deferred income from contracts with customers | 28 I) a | 138,506 | 133,116 | 668 | 735
Other deferred income | 28 I) b, c | 112,509 | 121,180 | 94,263 | 115,798
Other non-current liabilities |  | – | 265 | – | –
Total non-current liabilities |  | 820,061 | 854,196 | 634,185 | 689,842
Current liabilities |  |  |  |  |
Borrowings | 23 | 93,380 | 301,164 | 91,097 | 302,387
Lease liabilities | 15 | 2,391 | 2,027 | 1,217 | 960
Trade and other payables | 26 | 202,733 | 165,274 | 115,300 | 133,768
Deferred income from contracts with customers | 28 II) a | 21,304 | 29,330 | 67 | 13,714
Other deferred income | 28 II) b, c | 24,973 | 24,901 | 24,152 | 24,152
Derivative financial instruments | 24 | – | 122,019 | – | 122,019
Total current liabilities  |  | 344,781 | 644,715 | 231,833 | 597,000
Total liabilities |  | 1,164,842 | 1,498,911 | 866,018 | 1,286,842
TOTAL EQUITY AND LIABILITIES  |  | 4,127,922 | 3,855,330 | 3,474,032 | 3,305,536

The notes on pages 16 to 61 are an integral part of these Financial Statements
This document is signed with a secure digital signature and contains a time stamp
Mārtiņš Čakste Guntars Baļčūns
Chairman of the Management Board of Latvenergo AS Member of the Management Board of Latvenergo AS
Liāna Ķeldere
Accounting director of Latvenergo AS
1313
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Statement of Changes in Equity


|  |  |  | Group |  |  |  |  |  | Parent Company | EUR’000
|  |  |  | Attributable to equity holder of the Parent Company |  |  |  |  | Company | Attributable to equity holder of the Parent |
|  | Share | Reserves | Retained | Total | Non- | TOTAL | Share | Reserves | Retained | TOTAL
|  | capital |  | earnings |  | controlling |  | capital |  | earnings |
| Notes |  |  |  |  | interests |  |  |  |  |
As of 31 December 2021 |  | 790,368 | 1,175,355 | 151,430 | 2,117,153 | 6,295 | 2,123,448 | 790,368 | 795,731 | 174,971 | 1,761,070
Non-controlling interests’ contributions to share capital |  | – | – | – | – | 400 | 400 | – | – | – | –
Dividends for 2021 | 21 b | – | – | (70,160) | (70,160) | – | (70,160) | – | – | (70,160) | (70,160)
Disposal of non-current assets revaluation reserve | 21 a | – | (11,529) | 11,529 | – | – | – | – | (3,470) | 3,470 | –
Total transactions with owners and other changes in equity |  | – | (11,529) | (58,631) | (70,160) | 400 | (69,760) | – | (3,470) | (66,690) | (70,160)
Profit for the year |  | – | – | 183,443 | 183,443 | 431 | 183,874 | – | – | 209,362 | 209,362
Other comprehensive income for the year | 21 a | – | 118,857 | – | 118,857 | – | 118,857 | – | 118,422 | – | 118,422
Total comprehensive income for the year |  | – | 118,857 | 183,443 | 302,300 | 431 | 302,731 | – | 118,422 | 209,362 | 327,784
As of 31 December 2022 |  | 790,368 | 1,282,683 | 276,242 | 2,349,293 | 7,126 | 2,356,419 | 790,368 | 910,683 | 317,643 | 2,018,694
Dividends for 2022 | 21 b | – | – | (152,538) | (152,538) | (450) | (152,988) | – | – | (152,538) | (152,538)
Formed other reserves | 21 a | – | 50 | (50) | – | – | – | – | – | – | –
Disposal of non-current assets revaluation reserve | 21 a | – | (9,613) | 9,613 | – | – | – | – | (561) | 561 | –
Total transactions with owners and other changes in equity |  | – | (9,563) | (142,975) | (152,538) | (450) | (152,988) | – | (561) | (151,977) | (152,538)
Profit for the year |  | – | – | 349,749 | 349,749 | 1,168 | 350,917 | – | – | 331,561 | 331,561
Other comprehensive income for the year | 21 a | – | 408,732 | – | 408,732 | – | 408,732 | – | 410,297 | – | 410,297
Total comprehensive income for the year |  | – | 408,732 | 349,749 | 758,481 | 1,168 | 759,649 | – | 410,297 | 331,561 | 741,858
As of 31 December 2023 |  | 790,368 | 1,681,852 | 483,016 | 2,955,236 | 7,844 | 2,963,080 | 790,368 | 1,320,419 | 497,227 | 2,608,014

The notes on pages 16 to 61 are an integral part of these Financial Statements
This document is signed with a secure digital signature and contains a time stamp
Mārtiņš Čakste Guntars Baļčūns
Chairman of the Management Board of Latvenergo AS Member of the Management Board of Latvenergo AS
Liāna Ķeldere
Accounting director of Latvenergo AS
1414
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Statement of Cash Flows

|  | Group |  | Parent Company | EUR’000
|  Notes | 2023 | 2022 | 2023 | 2022
Cash flows from operating activities |  |  |  |  |
Profit before tax |  | 388,529 | 184,545 | 362,660 | 209,362
Adjustments: |  |  |  |  |
- Depreciation, amortisation and impairment of intangible assets, property, plant and equipment (PPE) and | 13 a, |  |  |  |
right-of-use assets | 14a, 15 | 197,173 | 166,248 | 111,028 | 81,513
- Loss / (income) from disposal of non-current assets | 2 | 6,629 | 3,984 | (373) | (2,485)
- Interest expense | 11 | 24,961 | 10,493 | 24,981 | 10,508
- Interest income | 11 | (6,149) | (27) | (21,670) | (9,380)
- Fair value (gain) / loss on derivative financial instruments | 8 | (23,079) | 9,022 | (23,079) | 8,753
- Dividends from subsidiaries | 16 | – | – | (924) | (10,585)
- (Decrease) / increase in provisions | 27 | (35) | 480 | (130) | 222
- Unrealised loss on currency translation differences | 11 | 4 | 29 | – | 5
Interest paid |  | (23,638) | (9,098) | (23,402) | (8,909)
Interest paid on leases | 15 | (114) | (88) | (37) | (26)
Interest received |  | 5,506 | 27 | 5,270 | 27
Paid corporate income tax |  | (32,119) | (2,648) | (31,099) | –
Funds from operations (FFO)* |  | 537,668 | 362,967 | 403,225 | 279,005
Decrease / (increase) in inventories and current intangible assets | 2 | 120,445 | (110,925) | 124,155 | (97,717)
Decrease / (increase) in receivables from contracts with customers and other receivables |  | 57,353 | (89,847) | 76,230 | (95,101)
Increase in other current financial investments | 19 | (140,000) | – | (140,000) | –
Increase / (decrease) in trade and other liabilities |  | 216 | (35,696) | (57,714) | (49,662)
Impact of non-cash offsetting of operating receivables |  |  |  |  |
and liabilities from subsidiaries, net | 29 e | – | – | 17,348 | 221,894
Net cash flows generated from operating activities |  | 575,682 | 126,499 | 423,244 | 258,419

|  | Group |  | Parent Company | EUR’000
|  Notes | 2023 | 2022 | 2023 | 2022
Cash flows from investing activities |  |  |  |  |
Loans issued to related parties | 29 e | (863) | – | – | (225,482)
Repayment of loans to related parties | 29 e | – | – | 68,272 | –
Purchase of intangible assets and PPE | 2 | (181,515) | (118,210) | (61,263) | (28,570)
Dividends received from subsidiaries | 16 | – | – | 924 | 156
Investments in subsidiaries | 16 | – | – | (28,399) | (2,102)
Net cash flows used in investing activities |  | (182,378) | (118,210) | (20,466) | (255,998)
Cash flows from financing activities |  |  |  |  |
Repayment of issued debt securities (bonds) | 23 | – | (100,000) | – | (100,000)
Proceeds on issued debt securities (bonds) | 23 | 50,000 | 100,000 | 50,000 | 100,000
Proceeds on borrowings from financial institutions | 23 | 2,000 | 207,846 | – | 200,013
Repayment of borrowings from financial institutions | 23 | (301,090) | (129,118) | (295,276) | (123,801)
Received financing from European Union |  | 16,245 | 4 | 2,625 | –
Lease payments | 15 | (1,772) | (1,583) | (694) | (623)
Proceeds from non-controlling interests’ contributions to share capital |  | – | 400 | – | –
Dividends paid to non-controlling interests | 21 b | (450) | – | – | –
Dividends paid to equity holder of the Parent Company | 21 b | (152,538) | (70,160) | (152,538) | (70,160)
Net cash flows (used in) / generated from financing activities |  | (387,605) | 7,389 | (395,883) | 5,429
Net increase in cash and cash equivalents |  | 5,699 | 15,678 | 6,895 | 7,850
Cash and cash equivalents at the beginning of the year | 19 | 112,757 | 97,079 | 100,268 | 92,418
Cash and cash equivalents at the end of the year | 19 | 118,456 | 112,757 | 107,163 | 100,268

The notes on pages 16 to 61 are an integral part of these Financial Statements
* See Alternative Performance Measures in Note 2 for the definition of this Alternative Performance Measure
This document is signed with a secure digital signature and contains a time stamp
Mārtiņš Čakste Guntars Baļčūns
Chairman of the Management Board of Latvenergo AS Member of the Management Board of Latvenergo AS
Liāna Ķeldere
Accounting director of Latvenergo AS
1515
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Notes to the Financial Statements
1. Corporate information
All shares of public limited company Latvenergo, parent company of Latvenergo Group (hereinafter –
Latvenergo AS or the Parent Company) are owned by the Republic of Latvia and are held by the
Ministry of Economics of the Republic of Latvia. The registered address of the Parent Company is
12 Pulkveža Brieža Street, Riga, Latvia, LV–1230. According to the Energy Law of the Republic of
Latvia, Latvenergo AS is designated as a national economy object of State importance and, therefore,
is not subject to privatisation.
Latvenergo AS is power supply utility engaged in electricity and thermal energy generation, as well as
sales of electricity and natural gas. Latvenergo AS is one of the largest corporate entities in the Baltics.
Subsidiaries included in Latvenergo Group (hereinafter – the Group), participating interest in
subsidiaries, associated companies and other non–current financial investments are disclosed in
Note 16.
Latvenergo AS and its subsidiaries Sadales tīkls AS and Enerģijas publiskais tirgotājs SIA are also
shareholders with 48.15% interest held in company Pirmais Slēgtais Pensiju Fonds AS (Latvenergo
AS holds 46.30% of interest) that manages a defined–contribution corporate pension plan in Latvia.
The Management Board of Latvenergo AS:
Since 26 January 2024 the Management Board of Latvenergo AS was comprised of the following
members: Mārtiņš Čakste (Chairman of the Board), Dmitrijs Juskovecs, Guntars Baļčūns, Harijs
Teteris and Ilvija Boreiko.
Since 3 January 2022 till 26 January 2024 the Management Board of Latvenergo AS was comprised
of the following members: Mārtiņš Čakste (Chairman of the Board), Dmitrijs Juskovecs, Guntars
Baļčūns, Harijs Teteris and Kaspars Cikmačs until 24 September 2023.
The Supervisory Board of Latvenergo AS:
Since 1 March 2024 the Supervisory Board of Latvenergo AS was comprised of the following
members: Aigars Laizāns (Chairman since 8 March 2024), Kaspars Rokens (Deputy Chairman), Toms
Siliņš and Gundars Ruža.
Since 11 June 2020 till 1 March 2024 the Supervisory Board of Latvenergo AS was comprised of
the following members: Ivars Golsts (Chairman), Kaspars Rokens (Deputy Chairman), Aigars Laizāns,
Toms Siliņš and Gundars Ruža.
The Supervisory body – Audit Committee:
Since 3 February 2021 and re-elected for a term of three years from 3 February 2024, Audit Committee
was comprised of the following members: Svens Dinsdorfs, Torbens Pedersens (Torben Pedersen),
Ilvija Grūba, Toms Siliņš and Gundars Ruža.
The Latvenergo Group’s and Latvenergo AS auditor is the certified audit company Ernst & Young
Baltic SIA (40003593454) (licence No. 17) and certified auditor in charge is Diāna Krišjāne, certificate
No. 124.
The Management Board of Latvenergo AS has approved the Latvenergo Group and Latvenergo AS
Financial statements 2023 on 23 April 2024. The Financial Statements are subject to Shareholder’s
approval in the Shareholder’s Meeting.
2. Summary of material accounting policies
The principal accounting policies applied in the preparation of these Financial Statements as a whole are
set out below, while remaining accounting policies are described in the notes to which they relate. These
policies have been consistently applied to all the years presented, unless otherwise stated.
The Financial Statements of the Latvenergo Group and Latvenergo AS are prepared in accordance with
the International Financial Reporting Standards as adopted for use in the European Union (IFRS). Due to
the European Union’s endorsement procedure, the standards and interpretations not approved for use in
the European Union are also presented in this note as they may have impact on the Financial Statements
in the following periods if endorsed.
The Financial Statements are prepared under the historical cost convention, except for some financial
assets and liabilities (including derivative financial instruments and non-current financial investments)
measured at fair value and certain property, plant and equipment carried at revalued amounts as disclosed
in the accounting policies presented below.
The Financial Statements for 2023 include the financial information in respect of the Latvenergo Group
and Latvenergo AS for the year ended 31 December 2023 and comparative information for 2022. Where
it has been necessary, comparatives for 2022 are reclassified using the same principles applied for
preparation of the Financial Statements for 2023.
The Group and the Parent Company has reclassified individual positions in the statement of cash flows for
the year 2022 for CO
2
emission rights, presenting changes in current intangible assets in net cash flows
from operating activities.
16
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
The Latvenergo Group’s and Latvenergo AS Financial Statements have been prepared in euros (EUR)
currency and all amounts shown in these Financial Statements except non-monetary items are presented
in thousands of EUR (EUR’000).
All figures, unless stated otherwise are rounded to the nearest thousand. Certain monetary amounts,
percentages and other figures included in this report are subject to rounding adjustments. On occasion,
therefore, amounts shown in tables may not be the arithmetic accumulation of the figures that precede
them, and figures expressed as percentages in the text and in tables may not total 100 percent.
The preparation of the Financial Statements in conformity with IFRS requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Although these estimates are based on the Management’s best knowledge
of current events and actions, actual results ultimately may differ from those. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the
Financial Statements are disclosed in Note 4.
Alternative Performance Measures
In order to ensure a fair presentation of the Group’s and the Parent Company’s operations, the Group
and the Parent Company uses Alternative Performance Measures that are not defined in IFRS or in the
Accounting Law of the Republic of Latvia. The Alternative Performance Measures are described below,
including their definitions and how they are calculated.
The Group and the Parent Company believes that these measures provide valuable supplementary
information for stakeholders and the management. These financial measures should not be seen as a
substitute for measures that are defined according to IFRS and these are not comparable with measures
used by other companies.
EBITDA – operating profit before depreciation, amortisation and impairment of intangible assets, property,
plant and equipment and right-of-use assets (Earnings Before Interest, Tax, Depreciation and Amortisation)
Funds from operations (FFO) = Net cash flows from operating activities – changes in inventories and
current intangible assets – changes in receivables from contracts with customers and other receivables –
changes in other current financial investments – changes in trade and other liabilities – Impact of non-cash
offsetting of operating receivables and liabilities from subsidiaries, net.
Capital expenditure – additions of property, plant and equipment, intangible assets and investment
properties, including assets from the acquisition of subsidiaries.
European Single Electronic Format (ESEF) reporting
The Group and the Parent Company are required to file annual report in the European Single Electronic
Format (ESEF) using the XHTML format and to tag the consolidated financial statements including notes
using Inline eXtensible Business Reporting Language (iXBRL). The prepared financial statements comply
with 2023 taxonomy. Where a financial statement line item or text block is not defined in the ESEF
taxonomy, an extension to the taxonomy has been created.
Adoption of new and/or changed IFRS, International Accounting Standards (IAS) and
International Financial Reporting Interpretations Committee (IFRIC) interpretations
a) Standards issued and that are effective, approved by the European Union, and are relevant
for the Group’s and the Parent Company’s operations
The adopted policies correspond to the accounting policies of the previous financial year, except for the
following IFRS amendments, which The Group and the Parent Company has adopted starting from 1
January 2023:
•
IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of
Accounting policies (Amendments)
The amendments are effective for annual periods beginning on or after 1 January 2023. The amendments
provide guidance on the application of materiality judgements to accounting policy disclosures. In
particular, the amendments to IAS 1 replace the requirement to disclose ‘significant’ accounting policies
with a requirement to disclose ‘material’ accounting policies. The Group’s and the Parent Company’s
management reviewed its accounting policies disclosure and made updates to the information disclosed
in Notes of the financial statements.
•
IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of
Accounting Estimates (Amendments)
The amendments become effective for annual reporting periods beginning on or after 1 January 2023
with earlier application permitted and apply to changes in accounting policies and changes in
accounting estimates that occur on or after the start of that period. The amendments introduce a new

Reclassification of individual positions in the Statement of Cash Flows for the year ended 31 December 2022: |  | Group |  |  | Parent Company | EUR’000
| 2022 before reclassification | Reclassification | 2022 after reclassification | 2022 before reclassification | Reclassification | 2022 after reclassification
Cash flows from operating activities |  |  |  |  |  |
- Loss from disposal of non-current assets | 43,229 | (39,245) | 3,984 | 36,760 | (39,245) | (2,485)
Funds from operations (FFO) | 402,212 | (39,245) | 362,967 | 318,250 | (39,245) | 279,005
Decrease / (increase) in inventories and current intangible assets | (103,526) | (7,399) | (110,925) | (90,318) | (7,399) | (97,717)
Net cash flows from operating activities | 173,143 | (46,644) | 126,499 | 305,063 | (46,644) | 258,419
Cash flows from investing activities |  |  |  |  |  |
Purchase of intangible assets and PPE | (164,854) | 46,644 | (118,210) | (75,214) | 46,644 | (28,570)
Net cash flows used in investing activities | (164,854) | 46,644 | (118,210) | (302,642) | 46,644 | (255,998)

17
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
definition of accounting estimates, defined as monetary amounts in financial statements that are subject
to measurement uncertainty. Also, the amendments clarify what changes in accounting estimates are
and how these differ from changes in accounting policies and corrections of errors. The Group’s and
the Parent Company’s management assessed that these amendments didn’t have an impact on the
accounting policies and the disclosure of accounting estimates in the financial statements.
•
IAS 12 ‘Income Taxes’ and its amendments related to International Tax Reform - Pillar Two
Model Rules (Amendments)
The amendments are effective immediately upon issuance, but certain disclosure requirements are
effective later. The Organisation for Economic Co-operation and Development’s (OECD) published the
Pillar Two model rules in December 2021 to ensure that large multinational companies would be subject
to a minimum 15% tax rate. On 23 May 2023, the IASB issued International Tax Reform—Pillar Two
Model Rules – Amendments to IAS 12. The amendments introduce a mandatory temporary exception
to the accounting for deferred taxes arising from the jurisdictional implementation of the Pillar Two model
rules and disclosure requirements for affected entities on the potential exposure to Pillar Two income
taxes. The Amendments require, for periods in which Pillar Two legislation is (substantively) enacted but
not yet effective, disclosure of known or reasonably estimable information that helps users of financial
statements understand the entity’s exposure arising from Pillar Two income taxes. To comply with these
requirements, an entity is required to disclose qualitative and quantitative information about its exposure
to Pillar Two income taxes at the end of the reporting period. The disclosure of the current tax expense
related to Pillar Two income taxes and the disclosures in relation to periods before the legislation is
effective are required for annual reporting periods beginning on or after 1 January 2023, but are not
required for any interim period ending on or before 31 December 2023.
Article 50 of global minimum tax Directive (EU) 2022/2523 of 14 December 2022 allows member states
that have 12 (twelve) or fewer ultimate parent entities (UPEs) of in-scope multinational enterprises
(MNEs) groups to hold off on applying the Income Inclusion Rule (IIR) and Undertaxed Profit Rule (UTPR)
for 6 (six) consecutive fiscal years starting on December 31. The Ministry of Finance of Republic of Latvia
postponed the implementation of the Pillar Two rules by 6 (six) years starting from 31 December 2023 as
allowed by exception. Considering the status of endorsement, the Group and the Parent Company has
not identified material impact on its’ financial statements.
b) Standards and its amendments issued and approved by the European Union, but not yet
effective and are not applicable before the date of entry into force, but are relevant for the
Group’s and the Parent Company’s operations
•
IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or
Non-current (Amendments)
The amendments become effective for annual reporting periods beginning on or after 1 January 2024
with earlier application permitted, and amendments must be applied prospectively in accordance with
IAS 8. The purpose of the amendments is to clarify IAS 1 principles for classifying liabilities as current or
non-current. The Group and the Parent Company will assess the impact of these amendments on the
classification of their liabilities and financial statements and does not expect that they may have a material
effect on the Group’s and the Parent Company’s financial position.
c) Standards and its amendments which have not yet issued, not yet approved by the
European Union and not relevant for the Group’s and the Parent Company’s operations
•
IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments Disclosure - Supplier Finance
Arrangements (Amendments)
•
IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (Amendments)
•
Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates
and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture
d) Standards issued and which became effective, approved by the European Union, and which
are not relevant for the Company’s operations
•
IFRS 17 Insurance Contracts
•
IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(Amendments)
•
IFRS 16 Leases: Lease Liability in a Sale and Leaseback (amendments)
Basis of consolidation
a) Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity where the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the activities of the entity.
Subsidiaries’ financial reports are consolidated from the date on which control is transferred to the Parent
Company and are no longer consolidated from the date when control ceases. General information about
entities included in consolidation and its primary business activities are disclosed in Note 16.
The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of
an acquisition is measured, as the fair value of the assets given, equity instruments issued, and liabilities
incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed
to the Statement of Profit or Loss as incurred. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date.
Intercompany transactions, balances, and unrealised gains on transactions between the Group’s entities
are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the
asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
b) Transactions with non–controlling interests and owners
The Group treats transactions with non–controlling interests as transactions with equity owners of the
economic entity. Changes in a Parent’s ownership interest in a subsidiary that do not result in the Parent
losing control over the subsidiary are equity transactions (i.e. transactions with owners in their capacity
as owners).
18
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Foreign currency translation
a) Functional and presentation currency
Items included in the Financial Statements are measured using the currency of the primary economic
environment in which the Group’s entity operates (“the functional currency”). The Financial Statements
have been prepared in euros (EUR), which is the Parent Company’s functional currency, and presented in
thousands of EUR. All figures, unless stated otherwise are rounded to the nearest thousand.
b) Transactions and balances
All transactions denominated in foreign currencies are translated into functional currency at the exchange
rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated into functional currency using the exchange rate at the last day of the reporting
year. The resulting gain or loss is charged to the Statement of Profit or Loss. Non-monetary items that are
measured in terms of historical cost in a foreign currency are translated using the exchange rates at the
dates of the initial transactions.
Financial assets and liabilities
Financial Assets
The Group and the Parent Company classify its financial assets under IFRS 9 in the following measurement
categories:
•
those to be measured subsequently at fair value (either through other comprehensive income or
through profit or loss), and
•
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows. Assets that are held for collection of contractual cash flows where
those cash flows represent solely payments of principal and interest are measured at amortised cost.
The Group and the Parent Company reclassify debt investments only when their business model for
managing these assets changes.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s and the Parent Company’s
business model for managing the asset and the cash flow characteristics of the asset. The Group and the
Parent Company classify all of their debt instruments:
•
at Amortised cost: Assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are subsequently measured at amortised
cost using the effective interest (EIR) method and are subject to impairment. Any gain or loss arising
on de-recognition is recognised directly in profit or loss. Impairment losses are presented as separate
item ‘Expected credit losses (including reversals) on financial instruments’ in the statement of profit
or loss position ‘Other operating expenses’ (Note 10).
Equity instruments
The Group and the Parent Company subsequently measure all equity investments at fair value. Dividends
from such investments continue to be recognised in profit or loss when the Group’s and the Parent
Company’s right to receive payments is established.
Impairment losses (and reversal of impairment losses) on equity investments measured at fair value
through other comprehensive income (FVOCI) or financial instruments at fair value through profit or loss
(FVPL) are not reported separately from other changes in fair value.
Financial Liabilities
Financial liabilities are classified as measured at amortised cost or FVPL. A financial liability is classified
as at FVPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVPL are measured at fair value and net gains or losses, including any
interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at
amortised cost using the effective interest method. Interest expense and foreign exchange gains and
losses are recognised in profit or loss.
Impairment
The Group and the Parent Company assess on a forward-looking basis the expected credit loss associated
with their debt instruments carried at amortised cost. The impairment methodology applied depends
on whether there has been a significant increase in credit risk. Rules for estimating and recognising
impairment losses are described in Note 4 b.
The Group and the Parent Company have applied two expected credit loss models: counterparty model
and portfolio model.
Counterparty model is used on individual contract basis for deposits, investments in State Treasury bonds,
loans to subsidiaries and cash and cash equivalents. The expected credit losses according to this model
for those are based on assessment of the individual counterparty’s risk of default based on Moody’s
12 months corporate default and recovery rates if no significant increase in credit risk is identified. The
circumstances indicating a significant increase in credit risk is significant increase in Moody’s default and
recovery rates (by 1 percentage point) and counterpart’s inability to meet payment terms (overdue 30
days or more, insolvency or bankruptcy, or initiated similar legal proceedings and other indications on
inability to pay). If significant increase in credit risk is identified, calculated lifetime expected credit loss is
recognised.
For estimation of expected credit loss for unsettled revenue on mandatory procurement public service
obligation (PSO) fee, individually significant other receivables and other receivables of energy industry
companies and related parties the Group and the Parent Company apply the simplified approach and
record lifetime expected losses based on corporate default and recovery rates.
Portfolio model is used for trade receivables by grouping together receivables with similar risk
characteristics and the days past due and defined for basic business activities. For trade receivables
grouped by portfolio model the Group and the Parent Company apply the simplified approach and record
lifetime expected losses on receivables based on historically observed default rates, adjusted for forward-
looking estimates, if any significant exists.
Derivative financial instruments
Derivative financial instruments are carried as financial assets when the fair value is positive and as
financial liabilities when the fair value is negative. The Group and the Parent Company have decided to
continue to apply hedge accounting requirements of IAS 39. Accounting principles for derivative financial
instruments are disclosed in Note 24.
19
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

Financial assets that are exposed to financial risks disclosed in the table below by measurement categories: |  |  | Group |  |  | Parent Company | EUR’000
|  | Financial assets | Derivatives used for hedging | Financial instruments at fair | Financial assets | Derivatives used for hedging | Financial instruments at fair
| Notes | at amortised cost |  | value through profit or loss | at amortised cost |  | value through profit or loss
Financial assets as of 31 December 2023 |  |  |  |  |  |  |
Receivables from contracts with customers | 18 a | 224,922 | – | – | 161,674 | – | –
Other current financial receivables | 18 b | 47,972 | – | – | 51,225 | – | –
Loans to related parties | 29 e | 863 | – | – | 624,298 | – | –
Derivative financial instruments | 24 I | – | 5,297 | 5,872 | – | 5,297 | 5,872
Cash and cash equivalents | 19 | 118,456 | – | – | 107,163 | – | –
Financial assets as of 31 December 2022 |  | 392,213 | 5,297 | 5,872 | 944,360 | 5,297 | 5,872
Receivables from contracts with customers | 18 a | 314,109 | – | – | 233,192 | – | –
Other current financial receivables | 18 b | 17,089 | – | – | 36,253 | – | –
Loans to related parties | 29 e | – | – | – | 713,308 | – | –
Derivative financial instruments | 24 I | – | 450 | 10,279 | – | 450 | 10,279
Cash and cash equivalents | 19 | 112,757 | – | – | 100,268 | – | –
|  | 443,955 | 450 | 10,279 | 1,083,021 | 450 | 10,279

Financial liabilities that are exposed to financial risks disclosed in the table below by measurement categories: |  |  | Group |  |  | Parent Company | EUR’000
|  | Financial liabilities | Derivatives used for hedging | Financial instruments at fair | Financial liabilities | Derivatives used for hedging | Financial instruments at fair
| Notes | at amortised cost |  | value through profit or loss | at amortised cost |  | value through profit or loss
Financial liabilities as of 31 December 2023 |  |  |  |  |  |  |
Borrowings | 23 | 629,696 | – | – | 618,179 | – | –
Lease liabilities | 15 | 11,406 | – | – | 4,824 | – | –
Trade and other financial current payables | 26 | 136,014 | – | – | 87,078 | – | –
Financial liabilities as of 31 December 2022 |  | 777,116 | – | – | 710,081 | – | –
Borrowings | 23 | 875,918 | – | – | 863,938 | – | –
Derivative financial instruments | 24 I | – | 99,154 | 22,865 | – | 99,154 | 22,865
Lease liabilities | 15 | 10,675 | – | – | 5,166 | – | –
Trade and other financial current payables | 26 | 107,811 | – | – | 99,902 | – | –
|  | 994,404 | 99,154 | 22,865 | 969,006 | 99,154 | 22,865

3. Financial risk management
3.1. Financial risk factors
The Group’s and the Parent Company’s activities expose them to a variety of financial risks: market risk
(including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s and
the Parent Company’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the Group’s and the Parent Company’s
financial performance. The Group and the Parent Company use derivative financial instruments to hedge
certain risk exposures.
Risk management (except for price risk) is carried out by the Parent Company’s Treasury department
(the Group Treasury) according to the Financial Risk Management Policy approved by the Parent
Company’s Management Board. The Group Treasury identifies, evaluates and hedges financial risks in
close co–operation with the Group’s operating units / subsidiaries. The Parent Company’s Management
Board by approving the Financial Risk Management Policy provides written principles for overall risk
management, as well as written policies covering specific areas, such as interest rate risk, foreign
exchange risk, liquidity risk, and credit risk, use of financial instruments and investment of excess liquidity.
Price risk management is carried out by the Parent Company’s Electricity Trading department according
to Electricity Wholesale Regulation approved by the Parent Company’s Management Board.
20
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
a) Market risk
I) Foreign currencies exchange risk
As of 31 December 2023 and 31 December 2022 the Group and the Parent Company had borrowings
denominated only in euros (Note 23). Their revenues and most of the financial assets and liabilities
were denominated in euros. Accordingly, neither the Group nor the Parent Company were subject to a
significant foreign currencies exchange risk.
Foreign currencies exchange risk arises when future transactions or recognised assets or liabilities are
denominated in a currency that is not the Group’s and the Parent Company’s functional currency.
The Group’s Treasury Financial Risk Management Policy is to hedge all anticipated cash flows (capital
expenditure and purchase of inventory) in each major foreign currency that might create significant
currency risk.
During 2023, five EUR/USD forward foreign currencies exchange contracts in the amount of
USD 153,5 thousand with an execution date of 22 February and 26 April 2023 were fulfilled, concluded
in 2022 in order to limit the currency risk of the payments in USD planned in the natural gas purchase
agreement concluded in 2022. As of 31 December 2023 there were no outstanding foreign exchange
forward contracts.
II) Interest rate risk
As the Group and the Parent Company have significant floating interest–bearing assets and liabilities
exposed to interest rate risk, the Group’s, and the Parent Company’s financial income and operating
cash flows are substantially dependent on changes in market interest rates.
During 2023 if euro interest rates had been 50 basis points higher with all other variables held constant,
the Group’s income from the cash reserves held at bank for the year would have been EUR 737 thousand
higher (2022: EUR 687 thousand) and the Parent Company’s income from the cash reserves held at
bank for the year would have been EUR 715 thousand higher (2022: EUR 678 thousand).
The Group’s and the Parent Company’s cash flow interest rate risk mainly arises from long–term
borrowings at variable rates. They expose the Group and the Parent Company to a risk that finance
costs might increase significantly when interest rates rise up. The Group’s policy is to maintain more
than 35% of its borrowings as fixed interest rates borrowings (considering the effect of interest rate
swaps and issued bonds) with duration between 1–4 years.
The Group and the Parent Company analyse their interest rate risk exposure on a dynamic basis.
Various scenarios are simulated taking into consideration refinancing, renewal of existing positions and
hedging. Based on these scenarios, the Group and the Parent Company calculate the impact on profit
and loss as well as on cash flows of a defined interest rate shift.
Generally, the Group and the Parent Company raise long–term borrowings from financial institutions at
floating rates and based on the various scenarios, the Group and the Parent Company manage their
cash flow interest rate risk by using floating–to–fixed interest rate swaps. Such interest rate swaps have
the economic effect of converting borrowings from floating rates to fixed rates. Thereby fixed rates are
obtained that are lower than those available if the Group and the Parent Company borrowed at fixed
rates directly. Under the interest rate swaps, the Group and the Parent Company agree with other parties
to exchange, at specified intervals (primarily semi–annually), the difference between fixed contract rates
and floating–rate interest amounts calculated by reference to the agreed notional amounts.
To hedge cash flow interest rate risk, the Group and the Parent Company have entered into interest rate
swap agreements with total notional amount of EUR 118 million (2022: EUR 133 million) (Note 24 II).
46 % of the Group’s and 47 % the Parent Company’s long-term borrowings as of 31 December 2023
(31/12/2022: 36 % and 36 % respectively) had fixed interest rate (considering the effect of the interest
rate swaps) and average fixed rate duration was 2.1 years for the Group and 2.1 years for the Parent
Company (2022: 1.8 years for the Group and 1.9 years the Parent Company).
If interest rates on euro denominated long-term borrowings at floating base interest rate (after
considering hedging effect) had been 50 basis points higher with all other variables held constant
over the period until the next annual report, the Group’s profit for the year and equity would have been
EUR 1,914 thousand lower (over the next 12 months period after 31/12/2022: EUR 2,536 thousand),
the Parent Company’s profit for the year and equity would have been EUR 1,857 thousand lower (over
the next 12 months period after 31/12/2022: EUR 2,474 thousand).
As of 31 December 2023, if short–term and long–term euro interest rates had been 50 basis points higher
with all other variables held constant fair value of interest rate swaps would have been EUR 1,213 thousand
higher (31/12/2022: EUR 1,623 thousand higher), which would have been attributable to the Statement
of Comprehensive Income as hedge accounting item. However, if short–term and long–term euro interest
rates had been 50 basis points lower with all other variables held constant fair value of interest rate
swaps would have been EUR 1,246 thousand lower (31/12/2022: EUR 1,671 thousand lower), which
would have been attributable to the Statement of Comprehensive Income as hedge accounting item and
an ineffective portion recognised in the Statement of Profit or Loss.
III) Price risk
Price risk is the risk that the fair value and cash flows of financial instruments will fluctuate in the future
due to reasons other than changes in the market prices resulting from interest rate risk or foreign
exchange risk. The purchase and sale of goods produced, and the services provided by the Group and
the Parent Company under the free market conditions, as well as the purchases of resources used in
production is impacted by the price risk.
The most significant price risk is related to purchase of electricity and natural gas and usage of natural
gas inventories. To hedge the risk related to changes in the price of electricity and natural gas the
Parent Company during 2023 and 2022 has purchased electricity forward and natural gas forward
contracts (Note 24 III, IV).
b) Credit risk
Credit risk is managed at the Group level. Credit risk arises from cash and cash equivalents, derivative
financial instruments at fair value through profit or loss (FVPL), other financial assets carried at amortised
cost, including outstanding receivables. Credit risk concentration in connection with receivables is
limited due to broad range of the Group’s and the Parent Company’s customers. The Group and the
Parent Company have no significant concentration of credit risk with any single counterparty or group
of counterparties having similar characteristics, except receivables from state for unsettled revenue
on mandatory procurement PSO fee, loans to and receivables from subsidiaries and receivables from
transmission system operator (Augstsprieguma tīkls AS). When assessing the credit risk for the loans to
subsidiaries the Parent Company considers that Latvenergo AS has granted loans to subsidiaries in which
it holds all the shares, and accordingly monitors the operations and financial situation of the subsidiaries
(borrowers). Impairment loss has been deducted from gross amounts in the statement of financial position.
21
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
The maximum credit risk exposure related to financial assets (see table below) comprises of carrying
amounts of cash and cash equivalents (Note 19), receivables from contracts with customers and other
receivables (Note 18), derivative financial instruments (Note 24) and loans to related parties (Note 29 e).

Assessment of maximum possible exposure to credit risk |  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Receivables from contracts with customers | 18 a | 224,922 | 314,109 | 161,674 | 233,192
Other current financial receivables | 18 b | 47,972 | 17,089 | 51,225 | 36,253
Loans to related parties | 29 e | 863 | – | 624,298 | 713,308
Cash and cash equivalents | 19 | 118,456 | 112,757 | 107,163 | 100,268
Derivative financial instruments | 24 | 11,169 | 10,729 | 11,169 | 10,729
|  | 403,382 | 454,684 | 955,529 | 1,093,750

Under IFRS 9 the Group and the Parent Company measure the probability of default upon initial
recognition of a receivable, except receivables from contracts with customers, and at each balance sheet
date consider whether there has been a significant increase of credit risk since the initial recognition (see
Notes 2 and 18 b).
For banks and financial institutions, independently rated parties with own or parent bank’s minimum rating
of investment grade are accepted. Otherwise, if there is no independent rating, management performs
risk control to assess the credit quality of the financial counterparty, considering its financial position,
past co–operation experience and other factors. After performed assessment individual credit limits
are set based on internal ratings in accordance with principles set by the Financial Risk Management
Policy. Depending on set credit limits, the cash held in one bank or financial institution cannot exceed
fifty percent of total balance of cash. The basis for estimating the credit quality of individually significant
financial assets not past due is credit ratings assigned by the rating agencies or, in their absence, the
earlier credit behaviour of clients and other parties to the contract.
Credit risk related to cash and short–term deposits with banks is managed by balancing the placement
of financial assets in order to maintain the possibility to choose the best offers and to reduce probability
to incur losses. Credit risk assessment related to receivables from contracts with customers and other
financial receivables is described in Notes 4 b and 18.
The table below shows the balance of cash and cash equivalents by financial counterparties at the end
of the reporting period:

|  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Investment level credit rating* | 118,456 | 112,757 | 107,163 | 100,268
| 118,456 | 112,757 | 107,163 | 100,268
* Investment level credit rating assigned to the parent companies of banks. |  |  |  |

The table represents exposure to banks and financial counterparties broken down per rating class
according to Moody’s rating scale. The expected credit losses are not significant (below 1%) as the majority
of cash and cash equivalents are held at banks and financial institutions belonging to financial groups with
investment level credit rating and financial assets are considered to have good credit worthiness.

|  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Aa3 | 79,177 | 66,596 | 79,602 | 55,722
Baa1 | 17,344 | 43,644 | 16,461 | 43,154
Baa2 | 21,110 | 1,363 | 11,100 | 1,362
Baa3 | 825 | 1,154 | – | 30
| 118,456 | 112,757 | 107,163 | 100,268

Set limits of credit exposure to the financial counterparties were not exceeded during the reporting period,
and the Group’s and the Parent Company’s management do not expect any losses arising from a potential
default of financial counterparty, as assessed that financial counterparties’ credit risk are in Stage 1.
The Group and the Parent Company invest only in listed debt instruments with very low probability of
default (State Treasury bonds).
c) Liquidity risk
Latvenergo Group’s liquidity and cash flow risk management policy is to maintain sufficient amount
of cash and cash equivalents (Note 19) and the availability of long and short-term funding through an
adequate amount of committed credit facilities in order to meet existing and expected commitments and
compensate for fluctuations in cash flows due to the occurrence of a variety of financial risks.
The table below analyses the Group’s and the Parent Company’s financial liabilities into relevant maturity
groupings based on the settlement terms. The amounts disclosed in the table are the contractual
undiscounted cash flows. Contractual undiscounted cash flows originated by the borrowings are
calculated considering the actual interest rates at the end of the reporting period.
22
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
4. Critical accounting estimates and judgements
Estimates and judgments are regularly evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The Group and the Parent Company make estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The Group and the Parent Company considers climate-related matters in estimates and assumptions,
where appropriate. Latvenergo Group is making targeted investments to develop a portfolio of
zero-emission and low-emission plants and to contribute to climate change mitigation. The Group
implements technologies and measures that reduce, prevent or adapt to climate change. For more
information please see Latvenergo Group Sustainability report, section Environmental Topics. Even
though climate-related risks might not currently have a significant impact on measurement, useful lives
of property, plant and equipment or impairment of non-financial assets, the Group is closely monitoring
relevant changes and developments, such as new climate-related legislation.
The Management of the Group and the Parent Company has assessed the situation at the end of the
reporting period and has determined that the events related to Russian military action in Ukraine and
related sanctions against Russia and Belarus, have not created a significant negative impact on the
Group’s and the Parent Company’s financial results, considering the nature and continuity of services
provided by the Group and the Parent Company. The Management of the Group and the Parent

Liquidity analysis (contractual undiscounted gross cash flows) |  |  |  | Group |  |  |  |  | Parent Company |  | EUR’000
|  | Less than | From 1 to | From 3 to | Over 5 years | TOTAL | Less than | From 1 to | From 3 to | Over 5 years | TOTAL
| Notes | 1 year | 2 years | 5 years |  |  | 1 year | 2 years | 5 years |  |
As of 31 December 2023 |  |  |  |  |  |  |  |  |  |  |
Borrowings from financial institutions |  | 105,333 | 119,825 | 158,276 | 99,286 | 482,720 | 102,632 | 117,339 | 152,874 | 96,710 | 469,555
Issued debt securities (bonds) |  | 5,146 | 5,153 | 162,925 | 52,483 | 225,707 | 5,146 | 5,153 | 162,925 | 52,483 | 225,707
Lease liabilities* |  | 2,455 | 2,336 | 3,539 | 4,337 | 12,667 | 1,284 | 1,281 | 1,461 | 1,193 | 5,219
Trade and other current financial payables | 26 | 136,014 | – | – | – | 136,014 | 87,078 | – | – | – | 87,078
As of 31 December 2022 |  | 248,948 | 127,314 | 324,740 | 156,106 | 857,108 | 196,140 | 123,773 | 317,260 | 150,386 | 787,559
Borrowings from financial institutions |  | 195,441 | 105,399 | 239,038 | 135,056 | 674,934 | 193,094 | 99,201 | 234,010 | 131,758 | 658,063
Issued debt securities (bonds) |  | 2,670 | 2,670 | 108,010 | 50,137 | 163,487 | 2,670 | 2,670 | 108,010 | 50,137 | 163,487
Overdraft from financial institutions |  | 119,478 | – | – | – | 119,478 | 119,478 | – | – | – | 119,478
Current borrowings from related parties |  | – | – | – | – | – | 3,317 | – | – | – | 3,317
Derivative financial instruments |  | 1,499 | – | – | – | 1,499 | 1,499 | – | – | – | 1,499
Lease liabilities* |  | 2,023 | 1,798 | 2,939 | 4,581 | 11,341 | 876 | 866 | 1,847 | 1,554 | 5,143
Trade and other current financial payables | 26 | 107,811 | – | – | – | 107,811 | 99,902 | – | – | – | 99,902
|  | 428,922 | 109,867 | 349,987 | 189,774 | 1,078,550 | 420,836 | 102,737 | 343,867 | 183,449 | 1,050,889
* The carrying amount of the lease (discounted) for the Group is EUR 11,406 thousand and for the Parent Company EUR 4,824 thousand (31 December 2022: Group – EUR 10,675 thousand, Parent Company – EUR 5,166 thousand) (Note 15) |  |  |  |  |  |  |  |  |  |  |

3.2. Capital management
The Group’s and the Parent Company’s objectives when managing capital are to safeguard the Group’s
and the Parent Company’s ability to continue as a going concern as well as to ensure necessary financing
for investment program and to avoid breaches of covenants (no breaches in 2023 nor 2022), which are
linked to capital structure and are stipulated in the majority of loan agreements.
In order to maintain or adjust the capital structure, the Group and the Parent Company may evaluate
the amount and timing of raising new debt due to investment programs or initiate new investments in
the share capital by shareholder. To comply with loan covenants, the Group and the Parent Company
monitor capital on the basis of the capital ratio.
This ratio is calculated by dividing the equity by the sum of total assets. According to the Group’s
strategy and defined loan covenants as per loan agreements the capital ratio shall be maintained at least
at 30% level.

The capital ratio figures were as follows: |  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Total equity | 2,963,080 | 2,356,419 | 2,608,014 | 2,018,694
Total assets | 4,127,922 | 3,855,330 | 3,474,032 | 3,305,536
Capital Ratio | 72% | 61% | 75% | 61%

23
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Company continuously takes the necessary actions to ensure both the continuation of the operations
of the electricity distribution system operator and the availability of the services provided to customers,
and the Management does not foresee significant operational disruptions in the future that could affect
the continuation of the Group’s and the Parent Company’s operations and the valuation of assets and
liabilities. The assumptions of the Group’s and the Parent Company’s Management are based on the
information available at the date of approval of the financial statements. The impact of future events
on the Group’s and the Parent Company’s future operations may differ from the current assessment.
The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below:
a) Estimates concerning property, plant and equipment
I) Useful lives of property, plant and equipment
The Group and the Parent Company make estimates concerning the expected useful lives and residual
values of property, plant and equipment. These are reviewed at the end of each reporting period and
are based on the past experience as well as industry practice. For the assets that are planned to be
reconstructed, the remaining useful life is determined to be till the date of reconstruction. Previous
experience has shown that the actual useful lives have sometimes been longer than the estimates.
Values of fully depreciated property, plant and equipment are disclosed in Note 14 a. Quantifying an
impact of potential changes in the useful lives is deemed impracticable, therefore sensitivity analysis is
not disclosed.
II) Recoverable amount of property, plant and equipment
The Group and the Parent Company perform impairment tests for items of property, plant and equipment
when the events and circumstances indicate a potential impairment. For the items of PPE are defined
separate cash–generating units. According to these tests’ assets are written down to their recoverable
amounts, if necessary. When carrying out impairment tests management uses various estimates for
the cash flows arising from the use of the assets, sales, maintenance and repairs of the assets, as
well as in respect of the inflation and discount rates. The estimates are based on the forecasts of the
general economic environment, consumption and the estimated sales price of electricity. If the situation
changes in the future, either additional impairment could be recognised, or the previously recognised
impairment could be partially or fully reversed. Such factors as high maintenance and reconstruction
costs, significant changes in expected discount rates, low load of several auxiliaries, comparatively
substantial maintenance expense, limited facilities to sell property, plant and equipment in the market
and other essential factors have an impact of decreasing of the recoverable amounts. Impairment
charges recognised during the current reporting year are disclosed in Note 14 c.
III) Revaluation
Revaluation for part of the Group’s and the Parent Company’s property, plant and equipment are
performed by independent, external and certified valuation experts by applying the depreciated
replacement cost model or income method. Valuation has been performed according to international
standards on property valuation, based on current use of property, plant and equipment that is
estimated as the most effective and best use of these assets, also by determining the most appropriate
valuation method for each group of revaluated property, plant and equipment. As a result of valuation,
revaluated value is determined for hydropower plants and distribution system asset groups.
Using depreciated replacement cost model, depreciated replacement cost is the difference between
the cost of replacement or renewal of similar asset at the time of revaluation and the accumulated loss
of an asset’s value that encompasses physical deterioration, functional (technological) obsolescence
and economic (external) obsolescence. Physical depreciation is determined proportionally to the age
of the property, plant and equipment item. In assessment of property, plant and equipment items for
which a reconstruction is planned in the near future additional functional depreciation is determined.
Remaining useful lives of property, plant and equipment items after revaluation are revised according to
estimated total depreciation.
Income method is based on the identification and analysis of generation capacity, forecasting of
electricity trade prices, analysis of historical generation and operating expenses and forecast of future
costs, capital expenditure, net cash flows, as well calculation of discount and capitalisation rates,
based on market data.
PPE are revalued regularly but not less frequently than every five years. Revaluation may be performed
more frequently if there are significant and sustained changes in the civil engineering construction
costs, significant changes in expected discount rates or electricity prices. The revaluation process is
initiated if the changes in the civil engineering construction costs exceeds 10% for two consecutive
quarters since the previous revaluation, according to data of the Central Statistical Bureau, and are
expected long lasting changes in the costs or due to significant and sustained changes (at least in year
period) in discount rates and energy prices.
For detailed most recent revaluation results see Note 14 c.
b) Impairment of financial assets
The Group and the Parent Company have the following types of financial assets that are subject to the
expected credit loss model:
•
non–current and current loans to related parties
•
other non–current receivables
•
other financial investments (debt instruments)
•
receivables from contracts with customers
•
other current receivables
•
cash and cash equivalents.
The loss allowances for financial assets are based on assumptions about risk of default and expected
loss rates. The Group and the Parent Company use judgement in making these assumptions and
selecting the inputs to the calculation of expected credit losses, based on the Group’s and the Parent
Company’s past history, existing market conditions as well as forward looking estimates at the end of
each reporting period.
The Group and the Parent Company apply two expected credit loss models: portfolio model and
counterparty model (Note 2 and 18).
Using the portfolio model the Group and the Parent Company apply the IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime expected loss allowance for trade receivables
of basic business activities (electricity, natural gas and heat and supporting services sales, IT and
telecommunication services sales). To measure expected credit losses these receivables have been
grouped based on shared credit risk characteristics and the days past due. The Group and the Parent
Company therefore have concluded that the expected loss rates for these receivables are a reasonable
24
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
approximation of the credit risk exposure. The expected loss rates are based on the payment profiles of
sales and the corresponding historical credit losses experienced. When calculating the expected credit
losses, the current and forward-looking information on macroeconomic factors that affect the ability of
customers to cover receivables has been taken into account, the Group and the Parent Company have
assessed that the influence of these factors is not significant.
Counterparty model is used on individual contract basis for non–current and current loans to related
parties, other financial investments and cash and cash equivalents. If no significant increase in credit
risk is identified, the expected credit losses according to this model are based on assessment of
the individual counterparty’s or counterparty’s industry risk of default and recovery rate assigned by
Moody’s credit rating agency for 12 months expected losses rates. The circumstances indicating
a significant increase in credit risk is significant increase in Moody’s default and recovery rates
(by 1 percentage point) and counterparty’s inability to meet payment terms (overdue 30 days or more).
If significant increase in credit risk is identified, lifetime expected credit loss is calculated. The Group
and the Parent Company considers a financial asset in default and lifetime expected credit losses are
recognised when contractual payments are overdue 90 days or more, exists counterparty’s insolvency
or bankruptcy, initiated similar legal proceedings and other internal or external indications on inability to
pay outstanding contractual amounts.
Counterparty model is also used for other non–current and current financial receivables, individually
significant receivables, receivables of energy industry companies and related parties by calculating
lifetime expected losses based on corporate default and recovery rates.
None of the Group’s and the Parent Company’s other financial investments measured at amortised
cost (investments in State Treasury bonds) have significant increase in credit risk and therefore are
considered to have low credit risk (Moody’s credit rating – A3) and are in Stage 1, the loss allowance
therefore was immaterial and wasn’t recognised.
While cash and cash equivalents are also subject to the expected credit loss requirements of IFRS 9,
the identified expected credit loss was immaterial, also considering fact that almost all of cash and
cash equivalents are held in financial institutions with the credit rating grade of the institution or its
parent bank at investment grade credit rating (mostly ‘A level’ credit rating) (Stage 1).
c) Estimates concerning revenue recognition from contracts with customers
I) Recognition of mandatory procurement PSO fees
The Group and the Parent Company have applied significant judgement for use of agent principle for
recognition of mandatory procurement PSO fee (see also Note 6).
Management has considered the following indicators that the Group and the Parent Company are
acting as agents because they:
•
do not have control over the mandatory procurement PSO fee before transferring to the customer,
•
have duty for including the mandatory procurement PSO fee in invoices issued to the end customers
but are not entitled for revenues from mandatory procurement PSO fee. These fees are determined
by state support mechanism and are covered by all electricity end-users in proportion to their
electricity consumption,
•
have no discretion in establishing mandatory procurement PSO fees price, either directly or
indirectly.
II) Recognition of distribution system services and transmission system services (Parent
Company)
Management has evaluated that it does not have influence and control over distribution system services
and transmission system services, therefore the Parent Company acts as an agent. In particular,
Management has considered the following indicators that the Parent Company is acting as an agent
because it:
•
does not control provision of distribution system and transmission system services,
•
includes the distribution system and transmission system services in invoices issued to the
customers on behalf of distribution system operator or transmission system operator and receives
payment, but is not entitled to the respective revenues,
•
has no discretion in distribution system or transmission system services price, either directly or
indirectly (see also Note 6).
III) Recognition of connection service fees to distribution system (Group)
Connection fees to distribution system are not considered as separate (distinct) performance obligations,
as are not distinct individually or within the context of the contract. Sales of distribution services are
provided after customers have paid for the network connection; therefore network connection fees and
sales of distribution services are highly interdependent and interrelated.
Income from connection and other income for reconstruction of distribution system assets on demand
of clients are deferred as an ongoing service is identified as part of agreement to provide distribution
system services to customers and accounted as deferred income (contract liabilities) from contracts
with customers under IFRS 15 (see Note 6 and 28). Connection fees are recognised as income over
the estimated customer relationship period. Based on Management estimate, 20 years is the estimated
customer relationship period, which is estimated as period after which requested power output for
connection object could significantly change due to technological reasons.
Thus period over which revenue is recognised is based on Management estimate, as it is reasonably
certain that assets, whose costs are partly reimbursed by connection service fees, will be used to
provide distribution system services for a longer period than the term stated in agreement with the
customer (Note 6).
IV) State support for trade of energy, sales of distribution services and heat for end-users
In accordance with state support regulations in Latvia, Lithuania, and Estonia for reducing energy
prices, are granted support for end-users for trade of energy, sales of distribution services and heat.
These regulations do not change agreements on the scope of provided services and do not change the
approved distribution system tariffs and energy prices, and respectively do not change the Group’s and
the Company’s revenue recognition principles, but the process of receiving the transaction fees and
the payer for the services, therefore not classified as government grant to the Group and the Parent
Company (Note 6).
d) Recognition and reassessment of provisions
As of 31 December 2023, the Group had set up provisions for post–employment benefits and
termination benefits totalling EUR 18.2 million (31/12/2022: EUR 15.6 million) and the Parent Company
in amount of EUR 8.6 million (31/12/2022: EUR 7.6 million) (Note 27). The amount and timing of the
settlement of these obligations is uncertain. A number of assumptions and estimates have been used
25
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
to determine the present value of provisions, including the amount of future expenditure, inflation
rates, and the timing of settlement of the expenditure. The actual expenditure may also differ from the
provisions recognised as a result of possible changes in legislative norms, technology available in the
future to restore environmental damages, and expenditure covered by third parties. For revaluation of
provisions for post–employment obligations probabilities of retirement in different employees’ aging
groups as well as variable demographic factors and financial factors (including expected remuneration
increase and determined changes in benefit amounts) have been estimated. The probabilities and other
factors were determined on the basis of previous experience.
e) Evaluation of effectiveness of hedging instruments
The Group and the Parent Company have concluded significant number of forward and future contracts
and swap agreements to hedge the risk of the changes in prices of electricity and natural gas as well as
interest rate fluctuations to which cash flow risk hedge accounting is applied and the gains and losses from
changes in the fair value of the effective hedging instruments and items secured against risk are included
in respective equity reserve. The evaluation of the effectiveness of the hedging is based on Management’s
estimates with regard to future purchase transactions of electricity and natural gas and signed variable
interest loan agreements. When hedging instruments turn out to be ineffective, gains/losses from the
changes in the fair value are recognised in the Statement of Profit or Loss (Note 25).
f) Recognition of one-off compensation in relation to cogeneration power plants
In October 2017, the Parent Company applied for a one-off compensation from the state, at the same
time opting out of the receipt of 75% of the guaranteed annual payments for installed electrical capacity
in combined heat and power plant CHPP–1 and CHPP–2. The one-off compensation was calculated
as 75% of the discounted future guaranteed payments for installed electrical capacity. Conditional
grant part recognised as deferred income in the Group’s and the Parent Company’s statement of
financial position (Note 28) and to be allocated to income on a straight–line basis until fulfilling obligation
till the end of the support period – 23 September 2028 (Note 7).
g) Deferred tax recognition
The untaxed profits of the subsidiaries are subject to deferred tax charge in the Consolidated Financial
Statements to the extent that the Parent Company as a shareholder will decide in a foreseeable future
on distribution of this profit through dividends which will be taxed on distribution with tax rate 20/80
of net expense (Note 12). Management of the Parent Company has made judgement on the expected
timing and extent of the distribution profits of subsidiaries and recognised in the Group’s Consolidated
Financial Statements deferred tax liability related to profit of its subsidiaries to be distributed.
h) Recognition of financial security for participating in commodities exchange
The management of the Parent Company estimates that the Parent Company has no intention to
discontinue trade operations in Nasdaq Commodities exchange, considering that electricity and natural
gas financial transactions are part of the Parent Company’s activities, and therefore financial collateral
for securing the operations in Nasdaq Commodities exchange should not be estimated as liquid asset
and should be recognised as non–current or current financial receivables (Note 18).
i) Fair values
The fair value of the financial assets and liabilities is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair values are estimated based on market prices and discounted cash flow models as appropriate.
The fair value of financial instruments traded in active markets is based on quoted market prices at the
end of reporting period. The quoted market prices used for financial assets held by the Group and the
Parent Company are the actual closing prices. The fair value of financial instruments that are not traded
in active market is determined by using valuation techniques. The Group and the Parent Company use
a variety of methods and make assumptions that are based on market conditions existing at end of
reporting period. Estimated discounted cash flows are used to determine fair value for the remaining
financial instruments.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
•
Level 1: fair value of assets is based on quoted prices (unadjusted) in active markets for identical
assets or liabilities
•
Level 2: fair value of assets is based on other observable market data, directly or indirectly
•
Level 3: fair value of assets is based on non–observable market data.
The following methods and assumptions were used to estimate the fair values:
a) the fair values of revalued property, plant and equipment are equal to revalued amounts, that
are based on periodic valuations by external independent valuers or by the Group’s or the Parent
Company’s management, less subsequent accumulated depreciation, and subsequent accumulated
impairment losses (Level 3),
b) The management of the Group and the Parent Company assessed that the fair values of cash
and short–term deposits, receivables, trade payables, bank overdrafts and other current liabilities
approximate their carrying amounts largely due to the short–term maturities of these instruments (Level
3),
c) Non-current financial investments in Pirmais Slēgtais Pensiju Fonds AS are valued at acquisition
cost not at fair value because the Group and the Parent Company are only a nominal shareholder in
the Pension Fund that is a non–profit company, and all risks and benefits arising from Pension Fund
activities and investments in the pension plan are taken and accrued by the members of the Pension
Fund pension plan (Level 3),
d) The fair values of borrowings with floating interest rates approximate their carrying amount, as their
actual floating interest rates approximate the market price of similar financial instruments available to
the Group and the Parent Company, i.e., the floating part of the interest rate corresponds to the money
market price while the added part of the interest rate corresponds to the risk premium the lenders in
financial and capital markets require from companies of similar credit rating level (Level 2),
e) The fair value of loans to subsidiaries with fixed rates calculations are based on discounted cash
flows using discount factor of respective maturity EUR swap rates increased by average market margin
of short–term financing (Level 2),
f) The Group and the Parent Company enter into derivative financial instruments with various
counterparties, financial institutions, and energy utility company, with investment grade credit ratings.
The fair value of derivative financial instruments is determined by using various valuation methods and
models with market observable inputs. The models incorporate the credit quality of counterparties,
26
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
The profit measure monitored by the chief operating decision maker primarily is EBITDA, but it also
monitors operating profit. In separate financial statements operating profit excludes the dividend
income and interest income from subsidiaries. The subsidiaries operate independently from the Parent
Company under the requirements of EU and Latvian legislation and their businesses are different from
that of the Parent Company. Therefore, the Parent Company’s chief operating decision maker monitors
the performance of the Parent Company and makes decisions regarding allocation of resources based
on the operating results of the Parent Company.
The Group divides its operations into two main operating segments – generation and trade, and
distribution. The Parent Company divides its operations into one main operating segment – generation
and trade.
In addition, corporate functions, that cover administration and other support services, are presented in
the Group and the Parent Company as separate segment.
Corporate functions provide management services to subsidiaries as well as provides IT and
telecommunication, rental services to external customers.
Generation and trade comprises the Group’s electricity and thermal energy generation operations,
which are organised into the legal entities: Latvenergo AS and Liepājas enerģija SIA; electricity and natural
gas trade (including electricity and natural gas wholesale) in the Baltics carried out by Latvenergo AS,
Elektrum Eesti OÜ (including its subsidiaries – Energiaturu Võrguehitus OÜ, HN põld ja mets 1 OÜ)
and Elektrum Lietuva, UAB (including its subsidiary – Klaipėda unlimited sun, UAB), development of
wind farms provided by Latvijas vēja parki SIA, as well as administration of the mandatory procurement
process provided by Enerģijas publiskais tirgotājs SIA.
The operations of the distribution operating segment relate to the provision of electricity
distribution services in Latvia and is managed by the subsidiary Sadales tīkls AS (the largest distribution
system operator in Latvia).
The following table presents revenue, financial results and profit information and segment assets and
liabilities of the Group’s and the Parent Company’s operating segments. Inter–segment revenue is
eliminated on consolidation and reflected in the ‘adjustments and eliminations’ column. All transactions
between segments are made based on the regulated tariffs, where applicable, or on an arm’s length
principle.
foreign exchange spot and forward rates. The fair values of interest rate swaps are obtained from
corresponding bank’s revaluation reports and fair values of financial instruments as specified by banks
are recognised in financial statements. To make sure the fair values of interest rate swaps are accurate
in any material aspect, the Group and the Parent Company makes its own interest rate swaps fair
value calculations by discounting financial instruments future contractual cash flows using 6 months
Euribor swap rate curve. The fair value of electricity forward and future contracts and natural gas swap
contracts is calculated as discounted difference between actual market and settlement prices for the
volume set in the agreements. If counterparty is a bank, calculated fair values of financial instruments
are compared to bank’s revaluation reports and the bank’s calculated fair values of the financial
instruments are used in the financial reports; In case of electricity forward and future contracts and
natural gas swap contracts are concluded with counterparties, fair values as calculated by the Group
and the Parent Company are recognised in Financial Statements (Level 2),
g) The fair value of the bonds issued are calculated by discounting their future cash flows using the
market quoted yield to maturity rates of the respective bonds as of the end of the reporting year as
discount factor (Level 2),
h) The fair value of investment properties is determined using the income method, by discounting
expected future cash flows. In 2023, the nominal pre–tax discount rate used to determine the fair
value of investments is 7.24% (2022: 5.92%) as included in the electricity distribution and transmission
system service tariff calculation methodology (Level 3).
5. Operating segment information
For segment reporting purposes, the division into operating segments is based on internal management
structure, which is the basis for the reporting system, performance assessment and the allocation of
resources by the operating segment decision maker – management of the Group’s company operating
in each of segments. The Management Board of the Parent Company reviews financial results of
operating segments.
27
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

|  |  | Group |  |  |  |  |  | Parent Company |  | EUR'000
| Generation | Distribution | Corporate | TOTAL | Adjustments | TOTAL | Generation | Corporate | TOTAL | Adjustments | TOTAL
| and trade |  | functions | segments | and | Group | and trade | functions | segments | and | Parent
|  |  |  |  | eliminations |  |  |  |  | eliminations | Company
2023 |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  |  |  |  |
External customers | 1,683,894 | 342,460 | 8,071 | 2,034,425 | – | 2,034,425 | 1,362,802 | 34,377 | 1,397,179 | – | 1,397,179
Inter-segment | 40,806 | 869 | 55,437 | 97,112 | (97,112) | – | 4,648 | 31,931 | 36,579 | (36,579) | –
TOTAL revenue | 1,724,700 | 343,329 | 63,508 | 2,131,537 | (97,112) | 2,034,425 | 1,367,450 | 66,308 | 1,433,758 | (36,579) | 1,397,179
Results |  |  |  |  |  |  |  |  |  |  |
EBITDA | 480,181 | 111,853 | 9,735 | 601,769 | – | 601,769 | 459,763 | 13,532 | 473,295 | – | 473,295
Depreciation, amortisation and impairment of intangible assets, property, plant and equipment and right-of-use assets | (102,660) | (82,233) | (12,280) | (197,173) | – | (197,173) | (98,586) | (12,442) | (111,028) | – | (111,028)
Segment profit before tax | 377,521 | 29,620 | (2,545) | 404,596 | (16,067) | 388,529 | 361,177 | 1,090 | 362,267 | 393 | 362,660
Segment assets at the end of the year | 1,940,641 | 1,800,405 | 127,578 | 3,868,624 | 259,298 | 4,127,922 | 1,775,511 | 155,340 | 1,930,851 | 1,543,181 | 3,474,032
Segment liabilities at the end of the year | 221,067 | 221,656 | 16,570 | 459,923 | 705,549 | 1,164,842 | 192,896 | 18,266 | 211,162 | 654,856 | 866,018
Other disclosures |  |  |  |  |  |  |  |  |  |  |
Capital expenditure | 76,848 | 99,608 | 18,254 | 194,710 | (1,361) | 193,349 | 46,198 | 18,254 | 64,452 | – | 64,452
2022 |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  |  |  |  |
External customers | 1,533,150 | 300,610 | 8,041 | 1,841,801 | – | 1,841,801 | 1,199,418 | 31,597 | 1,231,015 | – | 1,231,015
Inter-segment | 26,421 | 578 | 50,823 | 77,822 | (77,822) | – | 2,175 | 29,192 | 31,367 | (31,367) | –
TOTAL revenue | 1,559,571 | 301,188 | 58,864 | 1,919,623 | (77,822) | 1,841,801 | 1,201,593 | 60,789 | 1,262,382 | (31,367) | 1,231,015
Results |  |  |  |  |  |  |  |  |  |  |
EBITDA | 275,216 | 71,268 | 13,725 | 360,209 | – | 360,209 | 266,131 | 14,194 | 280,325 | – | 280,325
Depreciation, amortisation and impairment of intangible assets, property, plant and equipment and right-of-use assets | (73,208) | (81,087) | (11,953) | (166,248) | – | (166,248) | (69,418) | (12,095) | (81,513) | – | (81,513)
Segment profit before tax | 202,008 | (9,819) | 1,772 | 193,961 | (9,416) | 184,545 | 196,713 | 2,099 | 198,812 | 10,550 | 209,362
Segment assets at the end of the year | 1,833,099 | 1,791,684 | 117,750 | 3,742,533 | 112,797 | 3,855,330 | 1,700,079 | 144,561 | 1,844,640 | 1,460,896 | 3,305,536
Segment liabilities at the end of the year | 359,253 | 181,201 | 12,804 | 553,258 | 945,653 | 1,498,911 | 366,212 | 14,078 | 380,290 | 906,552 | 1,286,842
Other disclosures |  |  |  |  |  |  |  |  |  |  |
Capital expenditure | 20,659 | 84,633 | 16,374 | 121,666 | – | 121,666 | 13,666 | 16,374 | 30,040 | – | 30,040

28
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

The Group’s and the Parent Company’s revenue from external customers (Note 6) |  |  | Group |  |  |  | Parent Company |  | EUR'000
| Generation | Distribution | Corporate | TOTAL | TOTAL | Generation | Corporate | TOTAL | TOTAL
| and trade |  | functions | segments | Group | and trade | functions | segments | Parent
|  |  |  |  |  |  |  |  | Company
2023 |  |  |  |  |  |  |  |  |
Revenue from contracts with customers recognised over time: |  |  |  |  |  |  |  |  |
Trade of energy and related supply services | 1,432,815 | 3,395 | – | 1,436,210 | 1,436,210 | 1,157,028 | – | 1,157,028 | 1,157,028
Distribution system services | – | 319,643 | – | 319,643 | 319,643 | – | – | – | –
Heat sales | 213,540 | 136 | – | 213,676 | 213,676 | 193,224 | – | 193,224 | 193,224
Sales of goods and energy related solutions | 31,652 | – | – | 31,652 | 31,652 | 10,842 | – | 10,842 | 10,842
Other revenue | 5,887 | 19,209 | 6,670 | 31,766 | 31,766 | 1,708 | 31,307 | 33,015 | 33,015
Total revenue from contracts with customers | 1,683,894 | 342,383 | 6,670 | 2,032,947 | 2,032,947 | 1,362,802 | 31,307 | 1,394,109 | 1,394,109
Other revenue: |  |  |  |  |  |  |  |  |
Lease of other assets | – | 77 | 1,401 | 1,478 | 1,478 | – | 3,070 | 3,070 | 3,070
Total other revenue | – | 77 | 1,401 | 1,478 | 1,478 | – | 3,070 | 3,070 | 3,070
TOTAL revenue, including | 1,683,894 | 342,460 | 8,071 | 2,034,425 | 2,034,425 | 1,362,802 | 34,377 | 1,397,179 | 1,397,179
Latvia | 948,591 | 342,447 | 7,844 | 1,298,882 | 1,298,882 | 969,462 | 30,531 | 999,993 | 999,993
Outside Latvia | 735,303 | 13 | 227 | 735,543 | 735,543 | 393,340 | 3,846 | 397,186 | 397,186
2022 |  |  |  |  |  |  |  |  |
Revenue from contracts with customers recognised over time: |  |  |  |  |  |  |  |  |
Trade of energy and related supply services | 1,352,745 | 3,349 | – | 1,356,094 | 1,356,094 | 1,052,486 | – | 1,052,486 | 1,052,486
Distribution system services | – | 278,169 | – | 278,169 | 278,169 | – | – | – | –
Heat sales | 150,548 | 146 | – | 150,694 | 150,694 | 133,634 | – | 133,634 | 133,634
Sales of goods and energy related solutions | 25,252 | – | – | 25,252 | 25,252 | 12,247 | – | 12,247 | 12,247
Other revenue | 4,600 | 18,874 | 6,141 | 29,615 | 29,615 | 1,051 | 28,240 | 29,291 | 29,291
Total revenue from contracts with customers | 1,533,145 | 300,538 | 6,141 | 1,839,824 | 1,839,824 | 1,199,418 | 28,240 | 1,227,658 | 1,227,658
Other revenue: |  |  |  |  |  |  |  |  |
Lease of other assets | 5 | 72 | 1,900 | 1,977 | 1,977 | – | 3,357 | 3,357 | 3,357
Total other revenue | 5 | 72 | 1,900 | 1,977 | 1,977 | – | 3,357 | 3,357 | 3,357
TOTAL revenue, including | 1,533,150 | 300,610 | 8,041 | 1,841,801 | 1,841,801 | 1,199,418 | 31,597 | 1,231,015 | 1,231,015
Latvia | 884,723 | 300,610 | 7,726 | 1,193,059 | 1,193,059 | 890,216 | 29,470 | 919,686 | 919,686
Outside Latvia | 648,427 | – | 315 | 648,742 | 648,742 | 309,202 | 2,127 | 311,329 | 311,329

29
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Revenue from major customer in 2023 for the Group amounted to EUR 188,630 thousand and for the
Parent Company EUR 188,918 thousand (2022: EUR 171,919 thousand and EUR 171,912 thousand)
arising from sales by the generation and trade segment.
6. Revenue
Accounting policy
Revenue from contracts with customers (IFRS 15)
Revenue from contracts with customers in scope for IFRS 15 encompasses sold goods or services provided as
output of the entity’s ordinary activities.
In evaluating whether collectability of an amount of consideration is probable, the Group and the Parent
Company use portfolio approach practical expedient for all energy and related supply services, distribution
system services and heat sales customers. Group and the Parent Company reasonably expect that the effects
on the financial statements from applying these requirements to the portfolio would not differ materially from
applying the requirements to the individual contracts within the portfolio. Collectability is assessed individually
for other customers.
The Group and the Parent Company consider only the customer’s ability and intention to pay that amount of
consideration when it is due.
Major distinct performance obligations identified in the contracts with customers by the Group and the Parent
Company include sale of energy and related supply services, provision of distribution system services and
sale of heat. The Group has assessed that connecting a customer to the distribution network as a separate
performance obligation is not distinct within the context of the contract due to being highly interrelated to sales
of distribution services (Note 4 c III).
Where contracts with customers include variable consideration, the Group and the Parent Company estimate
at contract inception the variable consideration expected over the life of the respective contracts and update
that estimate each reporting period. A constrained variable consideration is identified in relation to sales of
distribution system services.
The Group and the Parent Company recognise revenue when (or as) it satisfies a performance obligation to
transfer a promised good or service to a customer. Revenue is recognised when customer obtains control of
the respective good or service.
The Group and the Parent Company use output method to measure progress towards complete satisfaction of
a performance obligations. Revenue from sale of energy and related supply services, provision of distribution
system services and sale of heat are recognised over time as a continuous delivery of these goods and services
is made over the term of the respective contracts.
Payment terms for goods or services transferred to customers according to contract terms are within 20 to
45 days from the provision of services or sale of goods. Invoices are mostly issued monthly.
State support for trade of energy, sales of distribution services and heat
In accordance with state support regulations in Latvia, Lithuania, and Estonia for reducing energy prices are
granted support for end-users for trade of energy, sales of distribution services and heat. These regulations do
not change agreements on the scope of provided services and do not change the approved distribution system
tariffs and energy prices, and respectively do not change the Group’s and the Company’s revenue recognition
principles, but the process of receiving the transaction fees and the payer for the services. The Group and the
Company has the right to receive the full fee for the provided services: from customer at a reduced price within
the specified period of time and the payment for the reduction in price receive from the state.
Adjustments and eliminations
Finance income and expenses, fair value gains and losses on financial assets, interest rate swaps
(derivative financial instruments) and deferred taxes are not allocated to individual segments as the
underlying instruments are managed on a group basis. Taxes and certain financial assets and liabilities,
including loans and borrowings are not allocated to those segments as they are also managed on a
group basis.
Capital expenditure consists of additions of property, plant and equipment, intangible assets and
investment properties including assets from the acquisition of subsidiaries.

Reconciliation of profit before tax |  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
EBITDA |  | 601,769 | 360,209 | 473,295 | 280,325
Depreciation, amortisation and impairment of intangible assets, PPE and right-of-use assets |  | (197,173) | (166,248) | (111,028) | (81,513)
Segment profit before tax |  | 404,596 | 193,961 | 362,267 | 198,812
Finance income | 11 | 9,226 | 1,414 | 24,747 | 10,767
Finance costs | 11 | (25,293) | (10,830) | (25,278) | (10,802)
Dividends received from subsidiaries | 16 | – | – | 924 | 10,585
Profit before tax |  | 388,529 | 184,545 | 362,660 | 209,362

Reconciliation of assets |  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Segment operating assets |  | 3,868,624 | 3,742,533 | 1,930,851 | 1,844,640
Non–current financial investments and joint ventures | 16 | 42 | 40 | 671,720 | 647,320
Loans to related parties | 29 e | – | – | 624,298 | 713,308
Other current financial investments |  | 140,000 | – | 140,000 | –
Prepayment for income and other taxes |  | 800 | – | – | –
Cash and cash equivalents | 19 | 118,456 | 112,757 | 107,163 | 100,268
Total assets |  | 4,127,922 | 3,855,330 | 3,474,032 | 3,305,536

Reconciliation of liabilities |  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Segment operating liabilities |  | 459,293 | 553,258 | 211,162 | 380,290
Deferred income tax liabilities |  | 5,475 | 667 | – | –
Borrowings | 23 | 629,696 | 875,918 | 618,179 | 863,938
Provisions and other payables |  | 70,378 | 69,068 | 36,677 | 42,614
Total liabilities |  | 1,164,842 | 1,498,911 | 866,018 | 1,286,842

Non–current assets that consist of intangible assets, property, plant and equipment and investment
properties are located in the Group’s country of domicile – Latvia.
30
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Trade of energy and related supply services
Revenue from electricity and natural gas sales are recognised on the basis of meter readings. Revenue from
other energy and related supply services are recognised on the basis of goods delivered or provided services and
prices included in contracts with customers. Revenues from trade of electricity in Nord Pool power exchange are
based on the calculated market prices in accordance with contract terms, therefore ‘right to invoice’ practical
expedient is used to recognise revenue from such contracts as the amount corresponds directly with the value of
the performance completed to date. NACE code – 35.11, 35.14 (Parent Company).
Sales of distribution system services (the Group)
Revenues from electricity distribution services are based on regulated tariffs that are subject to approval by the
Public Utilities Commission and regulations by Cabinet of Ministers of the Republic of Latvia ‘Regulations on
electricity trade and usage’. The Group recognises revenue from sales of distribution system services at the end
of each month based on the automatically made meter readings or customers’ reported meter readings, on the
period in which the services are rendered. Revenue is recognised in the amount for which the Group has right
to invoice.
Heat sales
Revenue from sales of thermal energy is recognised at the end of each month based on the meter readings and
corresponds to the invoiced amount. NACE code – 32.99 (Parent Company).
Sales of goods and energy related solutions
Revenue from sales of goods and completed customers’ orders is recognised at the moment when the asset and
property rights are transferred to the customer (e.g. sales and installation of solar panels and heat pumps). NACE
code – 47.91 (Parent Company).
Sales of IT & telecommunication services
Revenues derived from information technology services (internet connection services, data communication
services), open electronic communication network and telecommunication services to customers. Revenues
are recognised upon usage of services listed in telecommunications billing system. Revenue is recognised in the
amount for which the Group and the Parent Company have right to invoice. NACE code – 62.03 (Parent Company).

| IFRS | Group |  | Parent Company | EUR’000
| applied | 2023 | 2022 | 2023 | 2022
Revenue from contracts with customers: |  |  |  |  |
Trade of energy and related supply services | IFRS 15 | 1,436,210 | 1,356,094 | 1,157,028 | 1,052,486
Distribution system services | IFRS 15 | 319,646 | 278,169 | – | –
Heat sales | IFRS 15 | 213,676 | 150,694 | 193,224 | 133,634
Sales of goods and energy related solutions | IFRS 15 | 31,652 | 25,252 | 10,842 | 12,247
Other revenue | IFRS 15 | 31,763 | 29,615 | 33,015 | 29,291
TOTAL revenue from contracts with customers |  | 2,032,947 | 1,839,824 | 1,394,109 | 1,227,658
Other revenue: |  |  |  |  |
Lease of other assets | IFRS 16 | 1,478 | 1,977 | 3,070 | 3,357
TOTAL other revenue |  | 1,478 | 1,977 | 3,070 | 3,357
TOTAL revenue |  | 2,034,425 | 1,841,801 | 1,397,179 | 1,231,015

In Latvia, Lithuania, and Estonia, according to the state support mechanism for reducing the prices
of energy, end-users have been granted state support. This state support was provided for electricity,
distribution system services, consumed natural gas and for heat. The support did not change tariffs and
energy prices (and thus gross revenue is recognised for the Group and the Company) rather the process
of receiving the transaction fees, part from the end-users and part from the state budget. Allocated state
support for the end-users in 2023 is EUR 124,376 thousand for the Group (2022: EUR 179,707 thousand).
The Group’s and the Parent Company’s revenue from contracts with customers based on the timing of
revenue recognition:

| Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Goods and services transferred over time | 1,906,710 | 1,760,646 | 1,191,969 | 1,159,820
Goods and services transferred at a point in time | 126,237 | 79,178 | 202,140 | 67,838
TOTAL revenue from contracts with customers | 2,032,947 | 1,839,824 | 1,394,109 | 1,227,658

The Group and the Parent Company derive revenue from contracts with customers from Latvia and
outside Latvia – Estonia, Lithuania, Nordic countries.

| Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Latvia | 1,297,409 | 1,191,082 | 997,107 | 916,437
Outside Latvia | 735,538 | 648,742 | 397,002 | 311,221
TOTAL revenue from contracts with customers | 2,032,947 | 1,839,824 | 1,394,109 | 1,227,658

Accounting policy
The Group and the Parent Company have assessed that in providing Mandatory procurement PSO fees it is acting
as an agent due to lack of control over PSO fee (Note 4 c I). The Parent Company has also concluded that it is
acting as an agent in the provision of distribution system services and transmission system services because the
Parent Company has no control over these services (Note 4 c II).
Mandatory procurement PSO fees
Revenue from mandatory procurement PSO fees in the Group is recognised on net (agent) basis. PSO fee is
managed within the context of mandatory procurement process by subsidiary Enerģijas publiskais tirgotājs SIA
(hereinafter – EPT) and is the difference (residual) between the revenue from the sale of electricity in Nord Pool
power exchange by market price, received mandatory procurement PSO fee, received government grant for
compensating the increase of mandatory procurement costs and the related costs – costs of purchased electricity
under the mandatory procurement from electricity producers, as well as guaranteed fees for installed electrical
capacity in cogeneration plants. EPT is acting as an agent in administration of the mandatory procurement process
and receives revenue from mandatory procurement administration services (agent fee), which is recognised over
time in the Group’s Statement of Profit or Loss as other revenue from contracts with customers.
PSO fees are included in invoices issued by trader (Parent Company – Latvenergo AS) and by distribution system
operator (Sadales tīkls AS) and are paid by customers together with unite invoice for electricity and distribution
or transmission system services. System operators have the obligation to collect revenues of PSO fees from
customers or traders and further to transfer these revenues to EPT. PSO fees are based on regulated tariffs that
are subject to approval by the Public Utilities Commission. Due to lack of influence and control over PSO fees, the
Group and the Parent Company consider themselves an agent in these transactions. Therefore, PSO fees received
31
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
from electricity end-users and transferred to EPT are recognised in the Statement of Profit or Loss in net amount by
applying the agent accounting principles.
Distribution system and transmission system services (Parent Company)
The Parent Company on behalf of distribution system operator (DSO) and transmission system operator (TSO)
issues unite invoice including the fees for the distribution system or transmission system services and transfers
these fees to DSO or TSO accordingly.
Distribution system services and transmission system services are based on regulated tariffs that are subject to
approval by the Public Utilities Commission. The Parent Company considers itself an agent in these transactions,
therefore, the fees for distribution system and transmission system services received from customers and
transferred to DSO and TSO are recognised in the Statement of Profit or Loss in net amount by applying the agent
accounting principles.

Gross amounts invoiced to customers by applying agent accounting principle, |  |  |  |
recognised on net basis under trade of energy and related supply services | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Mandatory procurement PSO fees* | (152) | 7,931 | (4) | 8,767
Distribution system services | 46,049 | 30,780 | 154,873 | 90,892
Transmission system services | 1,601 | 706 | 1,616 | 720
Insurance intermediation | 1,775 | 1,468 | 1,674 | 1,440
TOTAL revenue recognised applying agent accounting principle | 49,273 | 40,885 | 158,159 | 101,819
* Starting from 1 May 2023 the mandatory procurement PSO fees payment for electricity end–users has been cancelled. In 2022, in accordance with state |  |  |  |
support mechanism for reducing the prices of energy, the government granted support to all end–users for mandatory procurement PSO fees by 100% of the fee. In 2023, from distribution system operator received updated information regarding customers consumption in 2022, accordingly made recalculations |  |  |  |
of previous period. |  |  |  |

Net effect in revenue from applying agent accounting principle is 0.
Accounting policy
Revenue from contracts with customers
Connection fees to distribution system (the Group)
Connection fees to distribution system are non-refundable upfront fees paid by customers to secure connection to
the distribution network, such fees are not distinct performance obligations as are highly interrelated with distribution
system services. Connection fees partly reimburse for the cost of infrastructure to be built needed to connect the
respective customer to the network. Connection fees to distribution system fee is calculated in accordance with
Latvian regulatory authority (Public Utilities Commission) stated methodology.
Revenue from connection fees to distribution system are initially recognised as deferred income (contract liabilities)
and recognised over the estimated customer relationship period of 20 years (Note 4 c III).

Deferred income from contracts with customers |  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Non–current deferred income from connection fees | 28 I, a | 137,838 | 132,381 | – | –
Current deferred income from connection fees | 28 II, a | 16,510 | 15,386 | – | –
Non-current other deferred income | 28 I, a | 668 | 735 | 668 | 735
Current other deferred income | 28 II, a | 4,794 | 13,944 | 67 | 13,714
TOTAL liabilities |  | 159,810 | 162,446 | 735 | 14,449

Movement in deferred income from contracts with customers (non–current and |  |  |  |  |
current part) |  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
At the beginning of the year |  | 162,446 | 152,050 | 14,449 | 869
Received connection fees for connection to distribution system | 28 | 23,015 | 11,840 | – | –
Recognised deferred income | 28 | 4,357 | 13,647 | – | 13,647
Credited to the Statement of Profit or Loss |  | (30,008) | (15,091) | (13,714) | (67)
At the end of the year |  | 159,810 | 162,446 | 735 | 14,449

7. Other income

|  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
Compensation from the state on state support for the installed capacity of CHPPs | 4 f | 23,990 | 23,990 | 23,990 | 23,990
Fines and penalties |  | 2,994 | 2,457 | 1,702 | 1,539
Net gain on sale of assets held for sale and property, plant |  |  |  |  |
and equipment |  | 1,458 | 2,955 | 560 | 2,702
Compensations and insurance claims |  | 2,463 | 816 | 1,898 | 294
Other operating income |  | 991 | 956 | 193 | 165
TOTAL other income |  | 31,896 | 31,174 | 28,343 | 28,690

8. Raw materials and consumables

|  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
Energy costs: |  |  |  |  |
Electricity and costs of related supply services |  | 378,502 | 708,114 | 89,028 | 374,581
Electricity transmission services costs | 29 a | 82,376 | 72,583 | 2,834 | 2,999
Natural gas and other energy resources costs |  | 774,012 | 517,052 | 761,061 | 492,537
(Gains) / losses on fair value changes on energy futures, forwards, and swaps | 24 I | (23,198) | 10,096 | (23,198) | 9,827
|  | 1,211,692 | 1,307,845 | 829,725 | 879,944
Raw materials, spare parts and maintenance costs |  | 36,628 | 25,863 | 17,261 | 11,194
TOTAL raw materials and consumables used |  | 1,248,320 | 1,333,708 | 846,986 | 891,138

The decrease in electricity costs was significantly caused by lower Nord Pool spot prices (-58% in the
LV price zone), while the increase in natural gas costs was influenced by the volume of delivered and used
natural gas, which was more than a third higher than in 2022.
32
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
9. Personnel expenses

| Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Wages and salaries | 111,418 | 89,184 | 48,413 | 39,838
State social insurance contributions | 23,927 | 19,800 | 11,276 | 9,242
Expenditure of employment termination | 1,435 | 3,044 | 710 | 846
Pension costs – defined contribution plan | 4,647 | 4,892 | 2,233 | 2,219
Benefits defined in the Collective Agreement and other benefits system costs | 2,916 | 1,572 | 1,158 | 667
Capitalised personnel expenses | (2,461) | (1,499) | (424) | –
TOTAL personnel expenses, including remuneration to the management | 141,882 | 116,993 | 63,366 | 52,812
Remuneration to the management: |  |  |  |
Wages and salaries | 2,925 | 2,694 | 1,158 | 1,047
State social insurance contributions | 623 | 593 | 267 | 246
Expenditure of employment termination | 14 | – | – | –
Pension costs – defined contribution plan | 21 | 18 | 10 | 6
Benefits defined in the Collective Agreement and other benefits system costs | 21 | 22 | – | –
TOTAL remuneration to the management* | 3,604 | 3,327 | 1,435 | 1,299
* Remuneration to the Group’s management includes remuneration to the members of the Management Boards of the Group entities, the Supervisory Board, and the Supervisory body (Audit Committee) of the Parent Company. Remuneration to the Parent Company’s management includes remuneration to the members of the Parent Company’s Management Board, the Supervisory Board, and the Supervisory body (Audit Committee). |  |  |  |

The Group and the Parent Company make monthly contributions to a closed defined contribution pension
plan on behalf of their employees. The plan is managed by the non–profit public limited company Pirmais
Slēgtais Pensiju Fonds, with the participation of the Group companies amounting for 48.15% (Parent
Company – 46.30%) of its share capital. A defined contribution plan is a pension plan under which the
Group and the Parent Company pay contributions into the plan. The Group and the Parent Company
have no legal or constructive obligations to pay further contributions if the plan does not hold sufficient
assets to pay all employees benefits relating to employee service in the current and prior periods. The
contributions amount to 5% of each pension plan member’s salary. The Group and the Parent Company
recognise the contributions to the defined contribution plan as an expense when an employee has
rendered services in exchange for those contributions.

| Group |  | Parent Company | Number of employees
| 2023 | 2022 | 2023 | 2022
Number of employees at the end of the year | 3,497 | 3,316 | 1,414 | 1,329
Average number of employees during the year | 3,456 | 3,214 | 1,388 | 1,289

10. Other operating expenses

| Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Selling expenses and customer services | 10,370 | 10,178 | 4,196 | 3,775
Information technology maintenance | 6,838 | 5,726 | 6,343 | 5,371
Transportation expenses | 6,845 | 6,483 | 1,884 | 1,823
Environment protection and work safety | 11,121 | 8,893 | 10,112 | 7,771
Real estate maintenance and utilities expenses | 5,461 | 5,740 | 4,275 | 3,775
Lease of real estate and property, plant and equipment | 182 | 90 | 39 | 48
Telecommunications services | 2,802 | 2,565 | 2,287 | 2,148
Real estate tax | 928 | 941 | 619 | 651
Public utilities regulation fee | 1,763 | 1,513 | 1,093 | 699
Audit fee | 127 | 103 | 55 | 46
Expected credit losses (including reversals) on financial instruments | 6,944 | 2,879 | 2,868 | 2,351
Net losses from disposal of PPE | 6,855 | 5,379 | 147 | 41
Other expenses | 14,114 | 11,575 | 7,957 | 6,931
TOTAL other operating expenses | 74,350 | 62,065 | 41,875 | 35,430

In addition to audit services, in 2023 and 2022 auditors did not provide any other services.
11. Finance income and costs

a) Finance income |  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
Interest income |  | 6,146 | 27 | 5,913 | 27
Interest income on loans to related parties |  | 3 | – | 15,757 | 9,353
Interest income on interest rate swaps |  | 3,068 | 279 | 3,068 | 279
Gains on fair value changes on interest rate swaps | 24 | 9 | 1,074 | 9 | 1,074
Net gain on issued debt securities (bonds) |  | – | 34 | – | 34
TOTAL finance income |  | 9,226 | 1,414 | 24,747 | 10,767

b) Finance costs |  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
Interest expense on borrowings from financial institutions |  | 21,340 | 7,989 | 21,439 | 8,066
Interest expense on issued debt securities (bonds) |  | 4,786 | 2,679 | 4,786 | 2,679
Interest expense on assets lease |  | 162 | 136 | 83 | 80
Losses on fair value changes on interest rate swaps |  | 128 | – | 128 | –
Capitalised borrowing costs | 14 a | (1,328) | (310) | (1,328) | (310)
Net losses on redemption of other financial investments |  | 21 | – | 21 | –
Net losses on currency exchange rate fluctuations |  | 4 | 29 | – | 5
Other finance costs |  | 180 | 307 | 149 | 282
TOTAL finance costs |  | 25,293 | 10,830 | 25,278 | 10,802

33
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
12. Income tax
Accounting policy
Corporate income tax
Latvia
Corporate income tax is paid on distributed profits. Both distributed profits and deemed profit distributions are
subject to the tax rate of 20% of their gross amount, or 20/80 of net expense. Corporate income tax on dividends
is recognised in the statement of profit or loss as expense in the reporting period when respective dividends are
declared, while as regards other deemed profit distribution items, at the time when expense is incurred in the
reporting year.
Lithuania
Current corporate income tax is applied at the rate of 15% on taxable income generated by a company during the
taxation period. Income tax expense for the period comprises current income tax and deferred income tax. Current
income tax charges are calculated on current profit before tax using the tax rate 15% in accordance with applicable
tax regulations as adjusted for certain non–deductible expenses/non–taxable income and are based on the taxable
income reported for the taxation period.
Estonia
In accordance with the effective Estonian Income Tax Act, dividends are taxed at the rate of 20/80 of the amount
distributed as the net dividend. From 2019, a lower tax rate on dividends of 14/86 were entered into force in
Estonia for regular dividend payments – the more favourable tax rate can be applied to a dividend distribution that
amounts to up to three preceding years’ average dividend distribution that has been taxed. This means that a
resident company will be able to both apply a lower tax rate of 14/86 and a standard tax rate of 20/80.
The income tax calculated on dividends is recognised as the income tax expense of the period in which the
dividends are declared irrespective of the period for which the dividends are declared or the period in which the
dividends are ultimately distributed.
Deferred income tax
Latvia and Estonia
Deferred tax liabilities are recognised in the consolidated financial statements on undistributed profits of the
subsidiaries, which will be subject to taxation upon distribution in foreseeable future. No other deferred tax assets
and liabilities are recognised.
Lithuania
Deferred income tax is provided in full, using the liability method on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is
determined using tax rates (and laws) that have been enacted by the end of reporting period and are expected to
apply when the related deferred income tax asset is realised, or the deferred income tax liability settled. Deferred
income tax assets are recognised to the extent that it is probable that future taxable profit of the respective Group
entity will be available against which the temporary differences can be utilised.

| Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Current income tax | 33,604 | 2,880 | 31,099 | –
Deferred income tax | 4,008 | (2,209) | – | –
TOTAL income tax | 37,612 | 671 | 31,099 | –

| 2023 | Group | 2022 | EUR’000
| Assets | Liabilities | Assets | Liabilities
Deferred income tax at the beginning of the year | – | 667 | 79 | 2,955
Deferred income tax on foreseeable profit distributions of subsidiaries | – | 4,808 | – | (2,288)
Deferred income tax relating to temporary differences | 800 | – | (79) | –
Deferred income tax at the end of the year | 800 | 5,475 | – | 667

13. Intangible assets
a) Intangible assets
Accounting policy
Intangible assets are measured on initial recognition at historical cost. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and accumulated impairment losses.
Assets under development are recognised in Statement of Financial Position within intangible assets and measured
at cost until the intangible assets are completed and received.
Usage rights, licenses and software are shown at historical cost less accumulated amortisation and accumulated
impairment losses. Amortisation is calculated using the straight–line method to allocate the cost of usage rights,
licenses, and software over their estimated useful lives. Computer software development costs recognised as
assets are amortised over their estimated useful lives, not exceeding a period of use defined in agreement or five
years.
Connection usage rights are the payments for the rights to use the transmission or distribution system’s power grid.
Connection usage rights are measured at cost net of amortisation and accumulated impairment that is calculated
on straight–line basis to allocate the cost of connection usage rights to the residual value over the estimated period
of relationship with a supplier (connection installer).
Goodwill is initially measured at cost. If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group and the Parent Company re–assesses whether it has correctly identified all
of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts
to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets
acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Group’s and the Company’s cash–generating units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
34
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

|  |  | Group |  |  |  |  | Parent Company | EUR'000
| Goodwill | Usage rights | Software | Assets under | TOTAL | Usage rights | Software | Assets under | TOTAL
|  | and licences |  | development |  | and licences |  | development |
As of 31 December 2021 |  |  |  |  |  |  |  |  |
Cost | 2,546 | 60,617 | 56,449 | 683 | 120,295 | 10,817 | 53,370 | 500 | 64,687
Accumulated amortisation | – | (23,983) | (42,755) | – | (66,738) | (6,393) | (40,888) | – | (47,281)
Net book amount | 2,546 | 36,634 | 13,694 | 683 | 53,557 | 4,424 | 12,482 | 500 | 17,406
Year ended 31 December 2022 |  |  |  |  |  |  |  |  |
Additions | – | – | – | 4,559 | 4,559 | – | – | 4,387 | 4,387
Transfers | – | 253 | 3,998 | (4,251) | – | 48 | 3,960 | (4,008) | –
Amortisation charge | – | (3,152) | (3,175) | – | (6,327) | (461) | (2,935) | – | (3,396)
Closing net book amount as of 31 December 2022 | 2,546 | 33,735 | 14,517 | 991 | 51,789 | 4,011 | 13,507 | 879 | 18,397
As of 31 December 2022 |  |  |  |  |  |  |  |  |
Cost | 2,546 | 60,871 | 59,252 | 991 | 123,660 | 10,865 | 56,135 | 879 | 67,879
Accumulated amortisation | – | (27,136) | (44,735) | – | (71,871) | (6,854) | (42,628) | – | (49,482)
Net book amount | 2,546 | 33,735 | 14,517 | 991 | 51,789 | 4,011 | 13,507 | 879 | 18,397
Year ended 31 December 2023 |  |  |  |  |  |  |  |  |
Additions | – | – | – | 11,983 | 11,983 | – | – | 6,717 | 6,717
Transfers | – | 10 | 5,406 | (5,416) | – | 10 | 5,065 | (5,075) | –
Amortisation charge | – | (3,157) | (3,289) | – | (6,446) | (463) | (3,004) |  | (3,467)
Closing net book amount as of 31 December 2023 | 2,546 | 30,588 | 16,634 | 7,558 | 57,326 | 3,558 | 15,568 | 2,521 | 21,647
As of 31 December 2023 |  |  |  |  |  |  |  |  |
Cost | 2,546 | 60,878 | 63,729 | 7,558 | 134,711 | 10,875 | 60,270 | 2,521 | 73,666
Accumulated amortisation | – | (30,290) | (47,095) | – | (77,385) | (7,317) | (44,702) | – | (52,019)
Net book amount | 2,546 | 30,588 | 16,634 | 7,558 | 57,326 | 3,558 | 15,568 | 2,521 | 21,647

As of 31 December 2023, cost of fully depreciated Intangible assets which are still in use for the Group
amounted to EUR 21,721 thousand (31/12/2022: EUR 21,280 thousand) and for the Parent Company
amounted to EUR 21,268 thousand (31/12/2022: EUR 21,025 thousand).
b) Current intangible assets (Greenhouse gas emission allowances)
Accounting policy
Emission rights for greenhouse gases (or allowances) are recognised at purchase cost when the Group or
the Parent Company is able to exercise the control. Subsequently carried at cost less any impairment losses.
Allowances received from the Government free of charge are recognised at zero cost. In those cases, when the
quantity of emitted greenhouse gases exceeds the quantity of allowances allocated by the state free of charge,
the Group and the Parent Company purchase additional allowances.
The Group and the Parent Company has presented the assets related to purchased emission allowances
net of the provisions for CO
2
emissions, given that historically the Group and the Parent Company has
determined the CO
2
emissions precisely.
On 26 March 2024, the State Environmental Service of the Republic of Latvia made a decision, verifying
the emissions for the prior year and the Group and the Parent Company surrendered the quantity of the
emission allowances equivalent to their CO
2
emissions in 2023.

| Group |  | Parent Company |
| 2023 | 2022 | 2023 | 2022
| Number of | Number of | Number of | Number of
| allowances | allowances | allowances | allowances
At the beginning of the year | 1,116,363 | 1,248,869 | 1,099,264 | 1,231,852
Allowances allocated free of charge* | 79,673 | 145,019 | 70,737 | 137,074
Purchased allowances | 479,000 | 632,966 | 479,000 | 632,966
Written off verified allowances | (654,694) | (906,491) | (653,604) | (902,628)
Sold allowances | – | (4,000) | – | –
At the end of the year | 1,020,342 | 1,116,363 | 995,397 | 1,099,264
including estimated allowances used during the reporting year (unverified) | (699,297) | (653,800) | (699,297) | (653,800)
Allowances available at the end of the year | 321,045 | 462,563 | 296,100 | 445,464
* The number of allowances received by the Group and the Parent Company from the Government free of charge, in accordance with the law “On Pollution” |  |  |  |
and Directives of the Ministry of Environmental Protection and Regional Development of the Republic of Latvia. Therefore, their carrying amount as of 31 December 2023 was nil (31/12/2022: nil). |  |  |  |

35
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

Current intangible assets | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Net book amount at the beginning of the year | 31,664 | 24,266 | 31,664 | 24,266
Additions | 37,624 | 46,643 | 37,624 | 46,643
Disposals | (46,237) | (39,245) | (46,237) | (39,245)
Closing net book amount at the end of the year | 23,051 | 31,664 | 23,051 | 31,664

14. Property, plant and equipment
a) Property, plant and equipment
Accounting policy
Property, plant and equipment (PPE) are measured on initial recognition at cost. Following initial recognition PPE
are stated at historical cost or revalued amount less accumulated depreciation and accumulated impairment
loss, if any.
If an item of PPE consists of components with different useful lives and acquisition costs of such components
are significant concerning the PPE value, these components are accounted as separate items.
Land is not depreciated. Depreciation on the other assets is calculated using the straight–line method to allocate
their cost over their estimated useful lives, as follows:

Type of property, plant and equipment (PPE) | Estimated useful life, years
Buildings and facilities | 15 – 100
Assets of Hydropower plants: |
- hydropower plants' buildings and facilities, | 25 – 100
- hydropower plants' technology equipment and machinery | 10 – 40
Distribution system electricity lines and electrical equipment: |
- electricity lines | 30 – 50
- electrical equipment of transformer substations | 30 – 35
Technology equipment and machinery | 3 – 40
Other property, plant and equipment | 2 – 25

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. Those are included
in the Statement of Profit or Loss. If revalued property, plant and equipment have been sold, appropriate
amounts are reclassified from revaluation reserve to retained earnings.
All PPE under construction are stated at historical cost and comprise of costs of construction of assets. The
initial cost includes construction and installation costs and other direct costs related to construction of PPE.
General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets
are added to the cost of those assets, until such time as the assets is substantially ready for their intended use.
Borrowing costs consist of interest and other costs that the Group or the Parent Company incur in connection
with the borrowing of funds. Borrowing costs are capitalised to PPE proportionally to the part of the cost of
PPE under construction over the period of construction. Assets under construction are not depreciated until
the relevant assets are completed and ready for intended use, impairment test is performed when there is
indication for impairment, either individually or at the cash-generating unit level. The amount of any impairment
loss identified is measured as the difference between the asset’s carrying amount and the recoverable amount
that is higher of the asset’s the fair value less costs to sell and value in use.
The Group and the Parent Company classifies non–current assets as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than through continuing use, and sale is considered
highly probable. Non–current assets held for sale are measured at the lower of their carrying amount and fair
value less costs to sell.
Transfers are made from (or to) property, plant and equipment to (or from) investment property only when there
is a change in use and it does not change the carrying amount of the property transferred and do not change
the cost measurement method of that property.
Impairment charge or reversed charge is included in the Statement of Profit or Loss under “Depreciation,
amortisation and impairment of intangible assets, PPE and right–of–use assets”.
36
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
The Group and the Parent Company have recognised impairment on capital expenditure projects for
which operations have not taken place in the last 12 months and it is not known whether they will be
completed within next 2 years, and a decision has not been taken on termination of the project.

Net book amounts and movements of property, plant and equipment by groups, including groups of revalued categories are as follows: |  |  |  | Group |  |  |  |  |  |  | Parent Company |  | EUR’000
| Land, | Assets | Distribution | Technology | Other PPE | Assets | Property, | Land, | Assets | Technology | Other PPE | Assets | Property,
| buildings | of Hydro | system | equipment |  | under | plant and | buildings | of Hydro | equipment | under | plant and
| and | Power Plant | electricity | and |  | construction | equipment | and | Power Plant | and |  | construction | equipment
| facilities |  | lines and | machinery |  |  | TOTAL | facilities |  | machinery |  | TOTAL
|  |  | electrical |  |  |  |  |  |  |  |  |  |
|  |  | equipment |  |  |  |  |  |  |  |  |  |
As of 31 December 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Cost or revalued amount | 427,180 | 2,044,719 | 3,031,424 | 661,828 | 168,431 | 63,334 | 6,396,916 | 346,175 | 2,044,719 | 630,116 | 101,775 | 48,075 | 3,170,860
Accumulated depreciation and impairment | (232,797) | (1,268,369) | (1,400,001) | (556,946) | (111,865) | (284) | (3,570,262) | (211,059) | (1,268,369) | (540,775) | (83,684) | – | (2,103,887)
Net book amount | 194,383 | 776,350 | 1,631,423 | 104,882 | 56,566 | 63,050 | 2,826,654 | 135,116 | 776,350 | 89,341 | 18,091 | 48,075 | 1,066,973
Year ended 31 December 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Additions | – | – | – | – | – | 117,108 | 117,108 | – | – | – | – | 25,653 | 25,653
Transfers | 7,343 | 23,237 | 68,872 | 1,366 | 14,037 | (114,855) | – | 2,225 | 23,237 | 1,021 | 8,563 | (35,046) | –
Reclassified to investment property, net | (823) | – | – | – | – | – | (823) | (315) | – | – | – | – | (315)
Reclassified to non–current assets for sale | – | – | – | – | (8) | – | (8) | – | – | – | (8) | – | (8)
Disposals | (321) | (47) | (6,751) | (110) | (114) | (52) | (7,395) | (266) | (47) | (36) | (46) | (15) | (410)
Increase of assets as a result of revaluation | – | 227,695 | – | – | – | – | 227,695 | – | 227,695 | – | – | – | 227,695
Reversed impairment charge as a result of revaluation | – | 417 | – | – | – | – | 417 | – | 417 | – | – | – | 417
(Impairment)/reversed impairment charge (Note14 c I) | (2,567) | – | – | 8,613 | – | (8,459) | (2,413) | (2,567) | – | 8,613 | – | (8,410) | (2,364)
Depreciation | (13,395) | (29,562) | (68,887) | (30,915) | (13,106) | – | (155,865) | (9,648) | (29,562) | (29,688) | (6,083) | – | (74,981)
Closing net book amount as of 31 December 2022 | 184,620 | 998,090 | 1,624,657 | 83,836 | 57,375 | 56,792 | 3,005,370 | 124,545 | 998,090 | 69,251 | 20,517 | 30,257 | 1,242,660
As of 31 December 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Cost or revalued amount | 430,936 | 2,522,235 | 3,049,406 | 661,918 | 174,442 | 65,536 | 6,904,473 | 345,690 | 2,522,235 | 630,073 | 102,954 | 38,667 | 3,639,619
Accumulated depreciation and impairment | (246,316) | (1,524,145) | (1,424,749) | (578,082) | (117,067) | (8,744) | (3,899,103) | (221,145) | (1,524,145) | (560,822) | (82,437) | (8,410) | (2,396,959)
Net book amount | 184,620 | 998,090 | 1,624,657 | 83,836 | 57,375 | 56,792 | 3,005,370 | 124,545 | 998,090 | 69,251 | 20,517 | 30,257 | 1,242,660
Year ended 31 December 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Additions | – | – | – | – | – | 181,108 | 181,108 | – | – | – | – | 57,735 | 57,735
Acquisition of a subsidiary | 183 | – | – | 71 | – | 3 | 257 | – | – | – | – | – | –
Transfers | 6,611 | 6,889 | 84,967 | 6,937 | 16,697 | (122,101) | – | 1,653 | 6,889 | 1,975 | 10,559 | (21,076) | –
Reclassified to investment property, net | (612) | – | – | – | – | – | (612) | (58) | – | – | – | – | (58)
Reclassified to non–current assets for sale | – | – | – | – | (39) | – | (39) | – | – | – | (18) | – | (18)
Disposals | (281) | (4) | (7,971) | (135) | (137) | (87) | (8,615) | (456) | (3) | (117) | (8) | (73) | (657)
Increase of assets as a result of revaluation | – | 312,061 | – | – | – | – | 312,061 | – | 312,061 | – | – | – | 312,061
Reversed impairment charge as a result of revaluation | – | 1,108 | – | – | – | – | 1,108 | – | 1,108 | – | – | – | 1,108
Impairment charge (Note14 c I) | (3,142) | – | – | (19,167) | – | (123) | (22,432) | (3,142) | – | (19,167) | – | (14) | (22,323)
Depreciation | (13,305) | (40,544) | (69,946) | (30,091) | (13,269) | – | (167,155) | (9,552) | (40,545) | (28,652) | (6,348) | – | (85,097)
Closing net book amount as of 31 December 2023 | 174,074 | 1,277,600 | 1,631,707 | 41,451 | 60,627 | 115,592 | 3,301,051 | 112,990 | 1,277,600 | 23,290 | 24,702 | 66,829 | 1,505,411
As of 31 December 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Cost or revalued amount | 436,256 | 2,842,752 | 3,080,841 | 668,461 | 182,656 | 124,459 | 7,335,425 | 346,561 | 2,842,752 | 631,707 | 105,830 | 75,254 | 4,002,104
Accumulated depreciation and impairment | (262,182) | (1,565,152) | (1,449,134) | (627,010) | (122,029) | (8,867) | (4,034,374) | (233,571) | (1,565,152) | (608,417) | (81,128) | (8,425) | (2,496,693)
Net book amount | 174,074 | 1,277,600 | 1,631,707 | 41,451 | 60,627 | 115,592 | 3,301,051 | 112,990 | 1,277,600 | 23,290 | 24,702 | 66,829 | 1,505,411

As of 31 December 2023, cost of fully depreciated PPE which are still in use for the Group amounted to
EUR 347,207 thousand (31/12/2022: EUR 231,622 thousand) and for the Parent Company amounted to
EUR 307,910 thousand (31/12/2022: EUR 188,460 thousand).
37
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
Carrying amounts of revalued categories of property, plant and equipment groups at revalued amounts
and their cost basis are as follows:

|  | Group | EUR’000
|  | Revalued property, plant and equipment groups
| Assets of | Distribution | TOTAL
| Hydropower | system | revalued PPE
| plants (the | electricity lines
| Parent | and electrical |
| Company) | equipment |
At revalued amounts |  |  |
As of 31 December 2023 |  |  |
Revalued | 2,842,752 | 3,080,841 | 5,923,593
Accumulated depreciation | (1,565,152) | (1,449,134) | (3,014,286)
Revalued net book amount | 1,277,600 | 1,631,707 | 2,909,307
As of 31 December 2022 |  |  |
Revalued | 2,522,235 | 3,049,406 | 5,571,641
Accumulated depreciation | (1,524,145) | (1,424,749) | (2,948,894)
Revalued net book amount | 998,090 | 1,624,657 | 2,622,747
At amounts stated on historical cost basis |  |  |
As of 31 December 2023 |  |  |
Cost | 479,618 | 1,628,116 | 2,107,734
Accumulated depreciation | (209,160) | (569,891) | (779,051)
Net book amount | 270,458 | 1,058,225 | 1,328,683
As of 31 December 2022 |  |  |
Cost | 474,331 | 1,575,174 | 2,049,505
Accumulated depreciation | (199,859) | (524,748) | (724,607)
Net book amount | 274,472 | 1,050,426 | 1,324,898

Assets of Hydropower plants
Assets of Hydropower plants were revalued in 2023. The revaluation was performed by an independent,
external and certified valuation expert by applying the income method or the replacement cost model.
Income method is based on average perennial water inflow in each HPP, power exchange forecasts of
electricity prices, analysis of historical generation and operating expenses, forecast of expenses based
on publicly available state statistics, forecast of capital expenditure, forecast of net cash flows, as well
as discount and capitalisation rate calculation based on market data.
Considering that the estimated replacement cost of the assets exceeded the value determined by
using income method, the value of each of the hydropower plant assets item’s estimated depreciated
replacement cost was reduced to recognise the economic depreciation. The replacement cost was
determined according to technical characteristics of property, plant and equipment, current technical
requirements, and the cost of replacement of functional analogue less physical, functional, and
economic depreciation.
As a result of revaluation in 2023 the carrying amounts of property, plant and equipment of hydropower
plants increased by EUR 313,169 thousand. Increase of property, plant and equipment in the amount
In 2023 the Group and the Parent Company have capitalised borrowing costs in the amount of
EUR 1,328 thousand (2022: EUR 310 thousand) (see Note 11). Rate of capitalised borrowing costs was
of 2.23% (2022: 1.43%).
Information about the pledged property, plant and equipment is disclosed in Note 23 I
b) Property, plant and equipment revaluation
Accounting policy
Revaluations have been made with sufficient regularity to ensure that the carrying amount of property, plant and
equipment items subject to valuation does not differ materially from that which would be determined using fair value
at the end of reporting period.
The following hydropower plants and distribution system assets (property, plant and equipment) are revalued
regularly but not less frequently than every five years:
a) Assets of Hydropower plants:
•
hydropower plants’ buildings and facilities,
•
hydropower plants’ technology equipment and machinery;
b) Distribution system electricity lines and electrical equipment:
•
electricity lines,
•
electrical equipment of transformer substations.
Increase in the carrying amount arising on revaluation is recognised in the Statement of Comprehensive income
as “Non–current assets revaluation reserve” in shareholders’ equity. Decrease in the carrying amount arising on
revaluation primarily offset previous increases recognised in ‘Comprehensive income’ and if decrease exceeds
revaluation reserve, it is recognised in the Statement of Profit or Loss.
At the date of revaluation, initial carrying amounts and accumulated depreciation are increased or decreased
proportionately with the change in the carrying amount of the asset so that the carrying amount of the asset after
the revaluation equals its revalued amount.
Non–current assets revaluation reserve is decreased and transferred to retained earnings at the moment, when
revalued asset has been written off or disposed.
Revaluation reserve cannot be distributed in dividends, invested in share capital, used for indemnity, reinvested in
other reserves, or used for other purposes.
38
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
of EUR 312,062 thousand is included in the equity as non-current assets revaluation reserve (see
Note 21 a), while reversal of previously recognised impairment in the amount of EUR 1,108 thousand
was recognised in the Statement of Profit or Loss.
The nominal pre–tax discount rate used in valuation was 8.88% (2022: 10.25%). If the pre-tax rate
would have been increased by 1% then the value of the revalued assets of hydropower plants would
have been decreased by EUR 174,063 thousand (2022: by EUR 119,182 thousand). If the pre–tax rate
would have been decreased by 1%, the value of the revalued assets of hydropower plants would have
been increased by EUR 228,159 thousand (2022: by EUR 146,219 thousand). If electricity price would
have been increased by 5%, the value of assets would have been increased by EUR 127,937 thousand
(2022: by EUR 114,722 thousand), if the prices would have been by 5% less, the value of assets would
have been decrease by EUR 127,937 thousand (2022: by EUR 114,722 thousand).
Distribution system assets
Distribution system electrical equipment was revalued as of 1 April 2020 and distribution system
electricity lines were revalued as of 1 January 2021.
External valuation expert used cost approach and assessed how components of the replacement
or renewal costs of the same property, plant and equipment items have changed since the previous
revaluation. The same approach was used in valuation of electricity lines, by assessing the control
estimate values of cost items of the electricity lines construction used for the construction of
Sadales tīkls AS electricity network. The control estimate is an estimate of the median object for the
construction or reconstruction of electricity lines, which corresponds to the median value of the price
for each group of electricity lines (property, plant and equipment), not considering the extreme costs of
construction. In the calculation of replacement costs, cost items of construction control estimates are
priced according to market prices as of 1 January 2021.
As of 31 December 2023, the management of Sadales tīkls AS has assessed internal and external
indicators to assess whether revaluation would be needed. In this assessment, the increase in the price
levels of general construction costs and electrical equipment costs accompanied with the increase of
inflation and discount rates, which are exceeding criteria determined in the Group accounting policies,
are indicators that revaluation of assets should be performed. After examining the recoverable value
of the assets, the management of Sadales tīkls AS concluded that the fair value of the assets does
not significantly differ from the assets book value on 31 December 2023. Such conclusion was mainly
driven by the “Methodology of capital costs accounting and calculation” approved by the decision
of the Public Utilities Commission as of 29 August 2022, which stipulates that the value of assets
used in calculations of regulatory asset base are included without the effect of asset revaluations after
31 December 2021. Considering the above, revaluation of assets as of 31 December 2023 does not
need to be carried out.
c) Impairment
Accounting policy
Assets that are subject to depreciation or amortisation, land and investments in subsidiaries are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs of disposal and
value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value
using a pre–tax discount rate that reflects the current market expectations regarding the time value of money
and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash–generating unit to which the asset belongs. Impairment losses
are recognised in Other comprehensive income and reversed to the asset revaluation surplus in equity for the
assets accounted at revalued amount and in the Statement of Profit or Loss within ‘amortisation, depreciation
and impairment charge expenses’ for the assets that are accounted at cost, less depreciation and impairment, or
for the assets accounted at revalued amount in case if impairment charge exceeds revaluation surplus previously
recognised on individual asset.
The key assumptions used in determining recoverable amount of the asset are based on the Group entities’ or
the Parent Company’s management best estimation of the range of economic conditions that will exist over the
remaining useful life of the asset, on the basis of the most recent financial budgets and forecasts approved by
the management for a maximum period of 10 years. Assets are reviewed for possible reversal of the impairment
whenever events or changes in circumstances indicate that impairment must be reviewed. The reversal of
impairment for the assets that are accounted at cost, less depreciation and impairment, is recognised in the
Statement of Profit or Loss. Reversal of impairment loss for revalued assets is recognised in the Statement of
Profit or Loss to the extent that an impairment loss on the same revalued asset was previously recognised in the
Statement of Profit or Loss; the remaining reversals of impairment losses of revalued assets are recognised in
Other comprehensive Income.
I) Latvenergo AS combined heat and power plants (Latvenergo AS CHPPs)
Impairment review performed for Latvenergo AS CHPPs is based on value in use calculations. The
cash–generating unit is defined as the assets of Latvenergo AS CHPPs.
In October 2017, the Parent Company applied for a one-off compensation from the state, at the same
time opting out of the receipt of 75% of the guaranteed annual payments for installed electrical capacity
in combined heat and power plant CHPP–1 and CHPP–2 (Note 4 f). The one-off compensation was
calculated as 75% of the discounted future guaranteed payments for installed electrical capacity. On
21 November 2017, the Cabinet of Ministers of the Republic of Latvia accepted an order on one–off
compensation to Latvenergo AS on guaranteed support for the installed capacity of cogeneration power
plants. Conditional grant part recognised as deferred income in the Group’s and the Parent Company’s
statement of financial position (Note 28) and to be allocated to income on a straight-line basis until
fulfilling obligation till the end of the support period – 23 September 2028. EUR 23,990 thousand
were recognised as ‘Other income’ in the Group’s and Parent Company’s statement of profit or loss
in 2023 (2022: EUR 23,990 thousand) (Note 7). Consequently, EUR 113,460 thousand remained
recognised as deferred income as of 31 December 2023 (31/12/2022: EUR 137,450 thousand) and to
be allocated to income on a straight-line basis until fulfilling obligation till the end of the support period –
23 September 2028.
As of 31 December 2023, the future discounted cash flows generated by the operation of Latvenergo AS
CHPPs are evaluated in the amount of EUR 34,351 thousand (31/12/2022: EUR 28,607 thousand). More
detailed information is given below. Consequently, the value of Latvenergo CHPPs assets is estimated
equal to the sum of deferred income and future discounted cash flows as of 31 December 2023 –
EUR 147,811 thousand (31/12/2022: EUR 166,057 thousand). The book value of Latvenergo AS CHPPs
assets as on December 31, 2023 – EUR 170,120 thousand (31/12/2022: EUR 159,827 thousand).
39
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

|  | EUR’000
| 31/12/2023 | 31/12/2022
Deferred income | 113,460 | 137,450
Future discounted cash flow value | 34,351 | 28,607
True value of assets | 147,811 | 166,057
Book value | 170,120 | 159,827
Impairment | (22,309) | 6,230

As a result of the above transactions, in 2023 additional impairment was recorded in the amount of
EUR 22,309 thousand for Latvenergo AS CHPPs (2022: reversal of impairment EUR 6,230 thousand)
and included within class of assets: ‘Land, buildings and facilities’ and ‘Technology equipment
and machinery’. The recognised impairment is included in the Statement of Profit or Loss position
“Depreciation, amortisation and impairment of intangible assets, PPE and right–of–use assets”. The
accumulated impairment as of 31 December 2023 amounted to EUR 221,491 thousand (31/12/2022:
EUR 199,181 thousand).
To ensure the carrying value is in line with recognised impairment, the future cash flows expected to be
derived from the operation of Latvenergo AS CHPPs were evaluated. Forecasted period is 2024-2028
and the terminal value appraisal as of end of 2028, evaluated as a sum of backup fuel reserves of diesel,
and the future value of heat water boilers, is included. Revenue stream forecast includes the income from
electricity and heat generation, as well as the remaining intensity of electrical capacity payments and the
support period for CHPP-2 till September 23, 2028, as it is set out in regulations by Cabinet of Ministers
of the Republic of Latvia No. 561, dated 2 September 2020. The market prices of electricity, natural gas
and emission allowances were forecasted by relying on the most recent third-party expert’s estimates.
The forecast of expenses is based on historical data, the budget approved by the management for 2024,
the service maintenance agreements and assumed long-term inflation forecasted at 2%. Nominal pre–
tax discount rate used to determine value in use of cash–generating unit by discounting cash flows is
8.875% (2022: 10.25%). The discount rate estimation has been impacted mainly by lower appraised
value of risk-free rate, market risk premium, as well as EUROSWAP rate. As a result of calculation at the
reporting year, the future discounted cash flows generated by Latvenergo AS CHPPs are evaluated as
EUR 34,351 thousand (2022: EUR 28,607 thousand). The operation of Latvenergo AS CHPPs plants can
be flexibly adjusted to the electricity market conditions and guarantees a significant baseload electricity
capacity for Latvia. CHPPs can cover Latvian electricity consumption almost completely in circumstances
where, due to certain factors, electricity imports from foreign countries are limited.
As of 31 December 2023, the Group and the Parent Company has performed a sensitivity analysis of the
fair value test of Latvenergo AS CHPPs to changes in inputs:

| Discount rate |  | Electricity price* |  | Natural gas price* | EUR'000
1 pp | 1 pp | 10% | 10% | 10% | 10%
increase | decrease | increase | decrease | increase | decrease
Possible changes of CHPPs assets value | (1,431) | 1,497 | 34,187 | (36,955) | (20,193) | 19,465
*Natural gas and electricity commodity costs are historically closely correlated |  |  |  |  |  |

II) Sadales tīkls AS distribution system assets
Impairment review performed for electricity distribution system assets in accordance with IAS 36 and
based on value in use calculations. Distribution system assets defined as the cash–generating unit. The
nominal after-tax discount market rate is used to determine the value in use of the cash flow generating
unit by discounting the cash flow.

Key assumptions used in asset valuation | 2023 | 2022
Discount rate | 7.24% | 5.92%
Long-term growth rate | 2.29% | 2.0%

In the reporting year, still tense geopolitical situation maintained high inflation rates, material price
increases and interest rate hikes. The impairment assessment also considers price forecasts for the main
revenue and cost streams as well as assumptions related to capital investment plans (also approved by
the Regulator). With consideration of previously mentioned factors, the Company’s management did
not identify an impairment loss of the distribution power grid assets in 2023 (2022: no impairment loss
identified). The assumptions of the Company’s management are based on the information available at
the time of approval of the financial statements. The impact of future events on Sadales tīkls AS future
performance may differ from the current assessment.
As of 31 December 2023, the Group has performed a sensitivity analysis of the fair value test of
Sadales tīkls AS distribution system assets to changes in inputs:

| EUR’000
| Discount rate
| 1 pp increase
Possible changes of distribution system assets value | no impairment

The Management of Sadales tīkls AS has assessed that other indicators are not sensitive as according
to regulatory framework are completely recoverable either through new tariff project or through regulatory
account during current regulatory period.
d) Investment property
Accounting policy
Investment properties are land, or a building or part of a building held by the Group or the Parent Company as the
owner to earn rentals or for capital appreciation, rather than for use in the production of goods or supply of services
or for administrative purposes, or sale in the ordinary course of business. Investment property generates cash flows
independently of the other assets held. The Group and the Parent Company apply the cost model in measurement
of investment properties and subsequently measure at acquisition cost net of accumulated depreciation and
impairment losses.
The applied depreciation rates are based on estimated useful life set for respective fixed asset categories – from
15 to 80 years.
40
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

|  |  |  | Group |  |  |  |  |  | Parent Company |  | EUR'000
|  | Investment properties for |  | Investment property held | TOTAL Investment |  |  | Investment properties for |  | Investment property held | TOTAL Investment |
|  | lease* |  | for capital appreciation | property |  |  | lease* |  | for capital appreciation | property |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022
Cost at the beginning of the year | 1,784 | 1,784 | 758 | 2,023 | 2,542 | 3,807 | 2,700 | 2,700 | 214 | 1,861 | 2,914 | 4,561
Accumulated depreciation and impairment at the beginning of the year | (211) | (199) | (34) | (292) | (245) | (491) | (691) | (674) | (1) | (285) | (692) | (959)
Net book amount at the beginning of the year | 1,573 | 1,585 | 724 | 1,731 | 2,297 | 3,316 | 2,009 | 2,026 | 213 | 1,576 | 2,222 | 3,602
Reclassified from property, plant and equipment | – | – | 612 | 823 | 612 | 823 | – | – | 58 | 315 | 58 | 315
Disposal | – | – | (7) | (31) | (7) | (31) | – | – | (1) | (1,678) | (1) | (1,678)
Sold | – | – | (581) | (1,799) | (581) | (1,799) | – | – | – | – | – | –
Depreciation | (12) | (12) | – | – | (12) | (12) | (18) | (17) | – | – | (18) | (17)
Net book amount at the end of the year | 1,561 | 1,573 | 748 | 724 | 2,309 | 2,297 | 1,991 | 2,009 | 270 | 213 | 2,261 | 2,222
Cost at the end of the year | 1,784 | 1,784 | 829 | 758 | 2,613 | 2,542 | 2,700 | 2,700 | 287 | 214 | 2,987 | 2,914
Accumulated depreciation and impairment at the end of the year | (223) | (211) | (81) | (34) | (304) | (245) | (709) | (691) | (17) | (1) | (726) | (692)
Net book amount at the end of the year | 1,561 | 1,573 | 748 | 724 | 2,309 | 2,297 | 1,991 | 2,009 | 270 | 213 | 2,261 | 2,222
* leased property, plant and equipment and real estate related to distribution and transmission system assets |  |  |  |  |  |  |  |  |  |  |  |

15. Leases
a) Right-of-use assets and lease liabilities
Accounting policy
At the time of conclusion of the contract, the Group and the Parent Company assess whether the contract is a
lease or contains a lease. A contract is a lease, or contains a lease, when the contract gives the right to control
the use of an identified asset throughout the period of time in exchange for consideration.
Leases and right–of–use assets are recognised for all long–term leases that meet the criteria of IFRS 16 (the
remaining lease term exceeds 12–months at the date of implementation of the standard).
Low value leases are not accounted fully, applying the additional exemptions for leases of land under transformer
substations and electric transport charging stations, which are considered immaterial according to IFRS 16
criteria, as well as the value of assets is immaterial.
Leases are recognised as right–of–use assets and the corresponding lease liabilities at the date when leased
assets are available for use of the Group and the Parent Company. The cost of the right–of–use an asset
consists of:
•
the amount of the initial measurement of the lease liability,
•
any lease payments made at or before the commencement date less any lease incentives received,
•
any initial direct costs.
The right–of–use the asset is recognised as a separate item in the composition of non–current assets and is
classified according to groups of property, plant and equipment.
The Group and the Parent Company account for the right–of–use assets of land, buildings, and facilities.
The right–of–use asset is amortised on a straight–line basis from the commencement date to the end of the useful
life of the underlying asset. Depreciation is calculated on a straight–line basis from the commencement date of
the lease to the end of the lease term unless an asset is scheduled to be redeemed. The right–of–use asset is
periodically reduced for impairment losses, if any, and adjusted for any remeasurement of the lease liabilities.
Assets and lease liabilities arising from leases at commencement date are measured at the amount equal to the
present value of the remaining lease payments, discounted by the interest rate implicit in the lease.
Lease liabilities are subsequently measured when there is a change in future lease payments due to changes of
an index or a rate used to determine these payments, when the Group’s and the Parent Company’s estimate
of expected payments changes, or when the Group and the Parent Company change their estimates of the
purchase option, lease term modification due to extension or termination. When a lease liability is subsequently
remeasured, the corresponding adjustment is made to the carrying amount of the right–of–use asset or
recognised in the statement of profit or loss if the carrying amount of the right–of–use asset decreases to zero.
Each lease payment is divided between the lease liability and the interest expense on the lease. Interest expense
on lease is recognised in the statement of profit or loss over the lease term to form a constant periodic interest
rate for the remaining lease liability for each period.
Lease payments related to short–term leases are recognised as an expense in the statement of profit or loss on
a straight–line basis. Short–term leases are leases with a lease term of 12 months or less at the commencement
date.
The Group and the Parent Company have recognised the right-of-use assets for land, buildings and
facilities, and on a lease of the fiber of the combined optical cable (OPGW - optical ground wire with
dual function).
41
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

Right–of–use assets |  | EUR’000
| Group | Parent Company
| Land, buildings and facilities | Land, buildings and facilities
As of 31 December 2021 |  |
Cost | 12,871 | 7,342
Accumulated depreciation | (4,559) | (2,199)
Net book amount | 8,312 | 5,143
Year ended 31 December 2022 |  |
Recognised changes in lease agreements | 4,261 | 1,094
Depreciation | (2,047) | (1,171)
Closing net book amount as of 31 December 2022 | 10,526 | 5,066
As of 31 December 2022 |  |
Cost | 16,784 | 8,436
Accumulated depreciation | (6,258) | (3,370)
Net book amount | 10,526 | 5,066
Year ended 31 December 2023 |  |
Recognised changes in lease agreements | 2,928 | 875
Depreciation | (2,235) | (1,231)
Closing net book amount as of 31 December 2023 | 11,219 | 4,710
As of 31 December 2023 |  |
Cost | 17,994 | 9,311
Accumulated depreciation | (6,775) | (4,601)
Net book amount | 11,219 | 4,710

Lease liabilities |  | EUR’000
| Group | Parent Company
As of 31 December 2021 | 8,428 | 5,226
Of which are: |  |
- Non–current | 6,540 | 4,085
- Current | 1,888 | 1,141
Year ended 31 December 2022 |  |
Recognised changes in lease agreements | 4,261 | 1,094
Payments for lease liabilities | (2,150) | (1,234)
Recognised interest liabilities | 136 | 80
As of 31 December 2022 | 10,675 | 5,166
Of which are: |  |
- Non–current | 8,648 | 4,206
- Current | 2,027 | 960
Year ended 31 December 2023 |  |
Recognised changes in lease agreements | 2,933 | 875
Payments for lease liabilities | (2,364) | (1,300)
Recognised interest liabilities | 162 | 83
As of 31 December 2023 | 11,406 | 4,824
Of which are: |  |
- Non–current | 9,015 | 3,607
- Current | 2,391 | 1,217

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or
loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period.
b) Expenses from leases (IFRS 16)
The following amounts are recognised in profit or loss:

| Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Depreciation for the right-of-use assets (land buildings and facilities) | 2,235 | 2,047 | 1,231 | 1,171
Interest expense on lease liabilities (included in finance costs) | 162 | 136 | 83 | 80
Short–term and low value lease expenses | 151 | 90 | 48 | 48
Variable lease payments not included in the lease liabilities | 112 | 31 | 82 | 31
TOTAL expenses from leases | 2,660 | 2,304 | 1,444 | 1,330

In the Statement of Cash Flows for the year ended 31 December 2023, lease payments of the Group
in amount of EUR 370 thousand and the Parent Company in amount of EUR 534 thousand have been
made by non–cash offsetting and included in cash flows from operating activities in working capital
adjustments (2022: the Group in amount of EUR 372 thousand and the Parent Company in amount
of EUR 505 thousand). Other lease payments of the Group in amount of EUR 1,886 thousand and the
Parent Company in amount of EUR 731 thousand are included in the cash flows from financing activities
(payments of principal on leases) and in cash flows from operating activities (payments of interest on
leases) (2022: the Group EUR 1,671 thousand and the Parent Company EUR 649 thousand).
c) Income from leases

|  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
Income from leases |  |  |  |  |
(the Group and the Parent Company is the lessor) | 6 | 1,478 | 1,977 | 3,070 | 3,357

Future minimum lease payments receivable under operating lease contracts by |  |  |  |
due dates (the Group and the Parent Company are the lessor) | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
< 1 year | 1,489 | 1,969 | 3,070 | 3,357
1–5 years | 2,219 | 2,198 | 8,520 | 7,794
> 5 years | 1,486 | 1,486 | 1,486 | 1,486
TOTAL rental income | 5,194 | 5,653 | 13,076 | 12,637

42
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
16. Non–current financial investments

The Parent Company’s participating interest in subsidiaries (%) and other non–current |  |  |  |  |  |
financial investments |  |  |  |  |  |
Name of the company | Country of | Business activity held |  | 31/12/2023 |  | 31/12/2022
| incorporation |  | Interest | EUR’000 | Interest | EUR’000
|  |  | held, % |  | held, %
Investments in subsidiaries: |  |  |  |  |  |
Sadales tīkls AS (18/09/2006) | Latvia | Electricity distribution | 100% | 641,450 | 100% | 641,450
Enerģijas publiskais tirgotājs SIA |  | Administration of mandatory |  |  |  |
(25/04/2014) | Latvia | electricity procurement process | 100% | 40 | 100% | 40
Elektrum Eesti OÜ (27/06/2007) | Estonia | Electricity and natural gas trade | 100% | 35 | 100% | 35
Elektrum Lietuva, UAB |  | Electricity and natural gas trade |  |  |  |
(07/01/2008) | Lithuania |  | 100% | 25,000 | 100% | 600
Latvijas vēja parki SIA |  | Development of wind parks |  |  |  |
(22/07/2022) | Latvia | and generation of electricity | 80% | 1,600 | 80% | 1,600
Liepājas enerģija SIA |  | Thermal energy generation and |  |  |  |
(06/07/2005) | Latvia | trade, electricity generation | 51% | 3,556 | 51% | 3,556
TOTAL |  |  |  | 671,681 |  | 647,281
Other non–current financial investments: |  |  |  |  |  |
Pirmais Slēgtais Pensiju Fonds AS | Latvia | Management of pension plans | 46.30% | 36 | 46.30% | 36
|  | Thermal energy generation and |  |  |  |
Rīgas siltums AS | Latvia | trade, electricity generation | 0.0051% | 3 | 0.0051% | 3
TOTAL |  |  |  | 39 |  | 39
TOTAL non-current financial investments of the Parent Company |  |  |  | 671,720 |  | 647,320

Subsidiaries’ participating interest held (%) |  |  |  |
Name of the company | Country of | Business activity held | 31/12/2023 | 31/12/2022
| incorporation |  | Interest held, % | Interest held, %
Subsidiaries of Elektrum Eesti OÜ: |  |  |  |
Elektrum Latvija, SIA |  |  |  |
(18/09/2012) | Latvia | Electricity trade | 100% | 100%
Energiaturu Võrguehitus OÜ |  |  |  |
(26/08/2021) | Estonia | Electricity microgrid services | 100% | 100%
HN põld ja mets 1 OÜ |  | Development of renewable |  |
(31/05/2023) | Estonia | energy generation | 100% | –
Subsidiaries of Elektrum Lietuva, UAB |  |  |  |
Klaipėda unlimited sun, UAB |  | Development of renewable |  |
(27/01/2023) | Lithuania | energy generation | 100% | –

The Group holds an 50% interest in a joint ventures, companies engaged in development of renewable
energy generation in Lithuania, in total amount of EUR 2 thousand.

The Group’s non–current financial investments |  |  |  |  |  |
Name of the company | Country of | Business activity held |  | 31/12/2023 |  | 31/12/2022
| incorporation |  | Interest | EUR’000 | Interest | EUR’000
|  |  | held, % |  | held, %
Other non–current financial investments |  |  |  |  |  |
Pirmais Slēgtais Pensiju Fonds AS | Latvia | Management of pension plans | 48.15% | 37 | 48.15% | 37
|  | Thermal energy generation and |  |  |  |
Rīgas siltums AS | Latvia | trade, electricity generation | 0.0051% | 3 | 0.0051% | 3
TOTAL |  |  |  | 40 |  | 40

The Group owns 48.15% of the shares of the closed pension fund Pirmais Slēgtais Pensiju Fonds AS
(Latvenergo AS – 46.30%). However, the Group and the Parent Company are only a nominal shareholder
as the Pension Fund is a non-profit company, and all risks and benefits arising from company’s
activities and investments in the pension plan are taken and accrued by the members of the Pension
Fund pension plan. For this reason, the investment in Pirmais Slēgtais Pensiju Fonds AS is valued at
acquisition cost.
As of 31 December 2023 Enerģijas publiskais tirgotājs SIA and Sadales tīkls AS jointly own one share
of Pirmais Slēgtais Pensiju Fonds AS with nominal value in the amount of EUR 1,422 (1.85% interest
held in share capital) and consequently, each entity owns 1/2 of the notional shares in the amount of
EUR 711 per share.
Accounting policy on investments in subsidiaries and non-current investments disclosed in Note 2.

Movement in non-current investments | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
At the beginning of the year | 40 | 40 | 647,320 | 645,218
Invested in share capital | – | – | 24,400 | 2,102
At the end of the year | 40 | 40 | 671,720 | 647,320

43
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
17. Inventories
Accounting policy
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business, less applicable variable selling expenses. Cost is determined using the
weighted average method, except of natural gas inventory held per Inčukalns underground gas storage where
cost is determined using FIFO method. Goods for sale are determined using FIFO or weighted average cost
method, or specific identification method.
Purchase cost of inventories consists of the purchase price, import charges and other fees and charges, freight–in
and related costs as well as other costs directly incurred in bringing the materials and goods to their present
location and condition. The value of inventories is assigned by charging trade discounts, reductions, and similar
allowances. Existence of inventories as of the end of reporting period is verified during stock–taking.
At the end of each reporting year the inventories are reviewed for any indications of obsolescence. When obsolete
or damaged inventories are identified, allowances are recognised to their recoverable amount. Additionally, during
the reporting year at least each month inspection of idle inventories is performed with the purpose to identify
obsolete and damaged inventories. Allowances for an impairment loss are recognised for those inventories.
The following basic principles are used in determining impairment losses for idle inventories:
a) Maintenance inventories for machinery and equipment of hydropower plants and thermal power plants that
haven’t turned over during last 12 months are impaired in amount of 90%, while inventories haven’t turned over
during last 6 months are impaired in amount of 45%
Business combinations and acquisition of ownership interests
During 2022, Latvijas vēja parki SIA, a joint venture of Latvenergo AS and Latvijas valsts meži AS
for the development of wind parks of strategic importance, was registered. Share capital of
Latvijas vēja parki SIA is EUR 2,000 thousand, with the 80% of ownership interest held in joint
venture by Latvenergo AS and 20% of ownership interest held by Latvijas valsts meži AS. In 2023,
the shareholders’ meeting of Latvijas vēja parki SIA decided that the company’s share capital will be
increased by EUR 5,000 thousand, and in 2023 the Parent Company made payment to the company
for the unregistered shares in company’s share capital in amount of EUR 4,000 thousand.

Summarised financial information for subsidiaries | Equity |  |  | Net profit / (loss) for the year |  | Dividends from subsidiaries* | Carrying amount of interest | EUR'000
|  |  |  |  |  |  | from investment |
Subsidiaries | 31/12/2023 | 31/12/2022 | 2023 | 2022 | 2023 | 2022 | 31/12/2023 | 31/12/2022
Subsidiaries of the Parent Company: |  |  |  |  |  |  |  |
Sadales tīkls AS | 985,972 | 970,630 | 16,906 | (20,415) | – | 10,429 | 641,450 | 641,450
Enerģijas publiskais tirgotājs SIA | 40 | 40 | – | – | – | – | 40 | 40
Elektrum Eesti OÜ | 1,031 | 1,127 | 359 | 455 | 455 | 156 | 35 | 35
Elektrum Lietuva, UAB | 29,425 | 956 | 4,069 | 656 | – | – | 25,000 | 600
Latvijas vēja parki SIA | 1,134 | 1,809 | (675) | (191) | – | – | 1,600 | 1,600
Liepājas enerģija SIA | 16,793 | 14,469 | 3,243 | 1,276 | 469 | – | 3,556 | 3,556
Total Subsidiaries of the Parent Company | 1,034,395 | 989,031 | 23,902 | (18,219) | 924 | 10,585 | 671,681 | 647,281
Subsidiaries of Elektrum Eesti OÜ: |  |  |  |  |  |  |  |
Total Elektrum Eesti OÜ interests | 3,593 | 2,936 | 657 | 541 | – | – | 6,204 | 4,754
Subsidiaries of Elektrum Lietuva, UAB: |  |  |  |  |  |  |  |
Total Elektrum Lietuva, UAB interests | 3 | – | – | – | – | – | 3,932 | –
* in 2023 dividends from subsidiaries received in cash in the amount of EUR 924 thousand (2022: EUR 156 thousand received in cash and with non–cash offset in the amount of EUR 10,429 thousand) |  |  |  |  |  |  |  |

Summarised financial information for non-controlling interests |  | Non-current assets |  | Current assets | Non-current liabilities |  | Current liabilities | EUR'000
Non-controlling interest of subsidiaries | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Latvijas vēja parki SIA (20%) | 754 | 28 | 297 | 347 | – | – | 824 | 14
Liepājas enerģija SIA (49%) | 14,632 | 14,232 | 3,815 | 5,651 | 14,815 | 9,223 | 2,959 | 3,571

44
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
b) Inventories that haven’t turned over during last 12 months are fully impaired, while inventories that haven’t
turned over during last 6 months are impaired in amount of 50%,
c) Allowances are not calculated for the fuel necessary to ensure uninterrupted operations of hydropower and
combined heat and power plants, for natural gas and scraps.

|  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Natural gas (at lower of cost and net realisable value) | 119,250 | 241,588 | 119,250 | 241,588
Raw materials and materials (at cost) | 23,377 | 18,888 | 1,205 | 1,084
Goods for sale (at lower of cost and net realisable value) | 13,809 | 12,802 | 3,916 | 3,259
Other inventories (at cost) | 19,359 | 16,585 | 18,900 | 16,055
Unfinished products and orders (at cost) | 6,490 | 5,128 | 88 | –
Prepayments for natural gas and other inventories | 4,603 | 2,027 | 4,026 | 469
Allowances for impaired inventories | (3,090) | (1,380) | (1,340) | (869)
TOTAL inventories | 183,798 | 295,638 | 146,045 | 261,586

Changes in the allowance for raw materials and materials at warehouses in amount of
EUR 1,710 thousand (2022: EUR 270 thousand) for the Group and in amount of EUR 471 thousand
(2022: EUR 134 thousand) for the Parent Company are included in the Statement of Profit or Loss
position ‘Raw materials and consumables used’.
18. Receivables from contracts with customers and other receivables
Accounting policy
Receivables from contracts with customers and other receivables are classified in groups:
a) Energy (electricity and natural gas) and related services sales, including distribution system services,
b) Heating sales,
c) Other sales (IT & telecommunication services, connection service fees and other services),
d) Receivables from subsidiaries,
e) Other financial receivables.
Receivables from contracts with customers are recognised initially when they originated. Receivables without a
significant financing component are initially measured at the transaction price and subsequently are measured at
amortised cost.
The Group and the Parent Company consider the evidence of impairment for the receivables from contracts with
customers and other receivables at both an individual and a collective level. All individually significant receivables
and receivables of energy industry companies and related parties are individually assessed for impairment. Those
found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet
individually identified. Receivables that are not individually significant are collectively assessed for impairment
using the portfolio model. Collective assessment is carried out by grouping together receivables with similar risk
characteristics and the days past due. The Group and the Parent Company have applied two expected credit loss
models: portfolio model and counterparty model.
The expected loss rates used for portfolio model are based on the payment profiles of sales over a period
of 3 years and the corresponding historical credit losses experienced within this period and are adjusted to
reflect current and forward-looking information. The Group and the Parent Company apply the IFRS 9 simplified
approach to measuring expected credit losses of the collectively assessed receivables (portfolio model) using
lifetime expected loss allowance.
For individually significant other receivables and other receivables of energy industry companies and related parties’
receivables the Group and the Parent Company apply the IFRS 9 general approach to measuring expected credit
losses (counterparty model) using expected credit loss allowance on assessment of significant increase of credit
risk. The expected credit losses according to this model are based on assessment of the individual counterparty’s
risk of default based on Moody’s corporate default and recovery rates for the Latvenergo group’s and the relevant
industry’s entities (Note 4 b).
a) Receivables from contracts with customers, net

Receivables from contracts with customers grouped by the expected credit loss |  |  |  |
(ECL) assessment model, net |  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Individually assessed receivables with lifetime ECL assessment |  |  |  |
(counterparty model) | 28,381 | 59,630 | 30,943 | 46,609
Receivables with lifetime ECL assessment by simplified approach |  |  |  |
(portfolio model) | 196,541 | 254,479 | 130,731 | 186,583
TOTAL receivables from contracts with customers | 224,922 | 314,109 | 161,674 | 233,192

|  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Receivables from contracts with customers: |  |  |  |
- Electricity, natural gas trade and related services customers |  |  |  |
(portfolio model) | 194,928 | 214,542 | 128,213 | 152,285
- Electricity and related services customers (counterparty model) | 8,273 | 36,133 | – | 14,953
- Heating customers (portfolio model) | 23,907 | 54,228 | 20,289 | 49,237
- Other receivables from contracts with customers (portfolio model) | 4,418 | 5,622 | 1,279 | 1,444
- Other receivables from contracts with customers (counterparty model) | 20,165 | 23,541 | 19,936 | 18,181
- Subsidiaries (counterparty model) | – | – | 11,057 | 13,503
Allowances for expected credit loss from contracts with customers: | 251,691 | 334,066 | 180,774 | 249,603
- Electricity, natural gas trade and related services customers |  |  |  |
(portfolio model) | (24,752) | (17,642) | (18,682) | (15,938)
- Electricity and related services customers (counterparty model) | (17) | (18) | – | –
- Heating customers (portfolio model) | (360) | (448) | (348) | (422)
- Other receivables from contracts with customers (portfolio model) | (1,600) | (1,823) | (20) | (23)
- Other receivables from contracts with customers (counterparty model) | (40) | (26) | (40) | (20)
- Subsidiaries (counterparty model) | – | – | (10) | (8)
Receivables from contracts with customers, net: | (26,769) | (19,957) | (19,100) | (16,411)
- Electricity, natural gas trade and related services customers |  |  |  |
(portfolio model) | 170,176 | 196,900 | 109,531 | 136,347
- Electricity and related services customers (counterparty model) | 8,256 | 36,115 | – | 14,953
- Heating customers (portfolio model) | 23,547 | 53,780 | 19,941 | 48,815
- Other receivables from contracts with customers (portfolio model) | 2,818 | 3,799 | 1,259 | 1,421
- Other receivables from contracts with customers (counterparty model) | 20,125 | 23,515 | 19,896 | 18,161
- Subsidiaries (counterparty model) | – | – | 11,047 | 13,495
| 224,922 | 314,109 | 161,674 | 233,192

45
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

Receivables from contracts with customers with lifetime expected credit losses (ECL) assessed on the portfolio model basis and grouped by past due days |  |  | 31/12/2023 |  | Group | 31/12/2022 |  |  | 31/12/2023 |  | Parent Company | 31/12/2022 | EUR'000
|  | Receivables | Allowances | Net | Receivables | Allowances | Net | Receivables | Allowances | Net | Receivables | Allowances | Net
Late payment delay in days | ECL rate |  | for ECL |  |  | for ECL |  |  | for ECL |  |  | for ECL |
On time | 0.20% | 186,282 | (389) | 185,893 | 248,926 | (543) | 248,383 | 123,163 | (267) | 122,896 | 183,322 | (418) | 182,904
Less than 30 days | 3% | 6,693 | (201) | 6,492 | 3,601 | (108) | 3,493 | 5,136 | (154) | 4,982 | 1,843 | (55) | 1,788
Past due 30 - 59 days | 20% | 1,154 | (231) | 923 | 1,930 | (386) | 1,544 | 795 | (159) | 636 | 1,493 | (299) | 1,194
Past due 60 - 89 days | 50% | 3,337 | (1,668) | 1,669 | 722 | (361) | 361 | 2,809 | (1,405) | 1,404 | 462 | (231) | 231
Past due 90 - 179 days | 60% | 1,806 | (1,084) | 722 | 1,079 | (648) | 431 | 426 | (255) | 171 | 713 | (428) | 285
Past due 180 - 359 days | 75% | 1,668 | (1,251) | 417 | 994 | (745) | 249 | 900 | (675) | 225 | 652 | (489) | 163
Past due more than 360 days | 100% | 10,049 | (10,049) | – | 10,179 | (10,179) | – | 7,366 | (7,366) | – | 7,929 | (7,929) | –
Individually assessed | 90% | 10,763 | (10,338) | 425 | 5,691 | (5,673) | 18 | 7,776 | (7,359) | 417 | 5,691 | (5,673) | 18
Insolvent debtors* | 100% | 1,501 | (1,501) | – | 1,270 | (1,270) | – | 1,410 | (1,410) | – | 861 | (861) | –
TOTAL |  | 223,253 | (26,712) | 196,541 | 274,392 | (19,913) | 254,479 | 149,781 | (19,050) | 130,731 | 202,966 | (16,383) | 186,583
* receivables under insolvency process and with an established payment schedule |  |  |  |  |  |  |  |  |  |  |  |  |

The expected loss rates used for portfolio model are based on the payment profiles of sales over a period
of 3 years and the corresponding historical credit losses experienced within this period. Adjusting by
forward–looking information is disclosed in Note 4 b.

Receivables from contracts with customers with lifetime expected credit losses |  |  |  |  |
(ECL) assessed on the counterparty model basis |  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Receivables of electricity and related services customers |  | 8,273 | 36,133 | – | 14,953
Allowances for expected credit loss on receivables of electricity and related services customers |  | (17) | (18) | – | –
Other receivables from contracts with customers |  | 20,165 | 23,541 | 19,936 | 18,181
Allowances for expected credit loss on other receivables |  |  |  |  |
from contracts with customers |  | (40) | (26) | (40) | (20)
Receivables from subsidiaries | 29 b | – | – | 10,779 | 11,070
Accrued income from subsidiaries | 29 c | – | – | 278 | 2,433
Allowances for expected credit loss on subsidiaries |  |  |  |  |
receivables | 29 b | – | – | (10) | (8)
TOTAL |  | 28,381 | 59,630 | 30,943 | 46,609

Allowances for impairment loss are calculated based on Moody’s credit rating agency corporate default
and debt recovery rate assigned for credit rating level - Baa2 (stable) (for receivables from related parties)
and corporate default and debt recovery rate assigned for energy utilities industry.
There is no significant concentration of credit risk with respect to receivables from contracts with
customers as the Group and the Parent Company have large number of customers except major
heating customer the net debt of which as of 31 December 2023 amounted to EUR 25,757 thousand
(31/12/2022: EUR 48,768 thousand).
The Management assumptions and methodology for estimation of impairment for receivables from
contracts with customers and evaluation of impairment risk are described in Note 4.

Movements in loss allowances for impaired receivables from contracts with |  |  |  |
customers | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
At the beginning of the year | 19,957 | 17,028 | 16,411 | 14,009
Receivables written off during the year as uncollectible | (2,048) | (2,372) | (1,789) | (2,284)
Allowances for expected credit losses | 8,860 | 5,301 | 4,478 | 4,686
At the end of the year | 26,769 | 19,957 | 19,100 | 16,411

b) Other financial receivables (assessed on the counterparty model basis) | Level of |  | Group | Parent Company | EUR’000
| SICR | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Current financial receivables: |  |  |  |  |
Uncovered costs of mandatory procurement and guaranteed fee for the installed electrical capacity of cogeneration power plants recognised as assets* | Stage 1 | 32,286 | 108 | – | –
Receivables for lease | Stage 1 | 15 | 34 | 9 | 31
| Stage 3 | 3 | 1 | 2 | 1
Other current financial receivables | Stage 1 | 12,289 | 16,084 | 2,589 | 9,347
| Stage 3 | 4,429 | 2,098 | 3,854 | 4,606
Other accrued income | Stage 1 | 586 | 280 | 586 | 280
Allowances for expected credit loss | Stage 1 | (102) | (73) | (50) | (66)
| Stage 3 | (1,534) | (1,443) | (1,237) | (1,132)
Receivables for lease from subsidiaries (Note 29 b) | Stage 1 | – | – | 26 | 13
Other financial receivables from subsidiaries (Note 29 b) | Stage 1 | – | – | 30,837 | 21,037
Other accrued income from subsidiaries (Note 29 c) | Stage 1 | – | – | 14,630 | 2,150
Allowances for expected credit loss on subsidiaries |  |  |  |  |
receivables (Note 29 b) | Stage 1 | – | – | (21) | (14)
TOTAL other financial receivables |  | 47,972 | 17,089 | 51,225 | 36,253
* by applying agent principle, uncovered costs of mandatory procurement and guaranteed fee for the installed electrical capacity of cogeneration power plants |  |  |  |  |
are recognised as assets in net amount, as difference between revenue and costs recognised under the mandatory procurement |  |  |  |  |

46
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
As of 31 December 2023 the Group and the Parent Company have no significant concentration of credit
risk with respect to other financial receivables except the Group’s receivable from State for uncovered
costs of mandatory procurement and guaranteed fee for the installed electrical capacity of cogeneration
power plants recognised as assets – EUR 32,286 thousand (31/12/2022: EUR 108 thousand) and
as of 31 December 2022 the commodities exchange – Nasdaq Commodities – the net debt of which
to the Group as of 31 December 2022 amounted to EUR 9,178 thousand. Loss allowance for other
financial receivables assessed individually and based on counterparty’s model (Note 4).

c) Other non-financial receivables |  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Non–current non–financial receivables | 447 | 482 | 447 | 482
Current non–financial receivables | 2,109 | 432 | 1,055 | 198
TOTAL non–financial receivables | 2,556 | 914 | 1,502 | 680

None of the receivables are secured with pledges or otherwise. The carrying amounts of other receivables
are assumed to approximate their fair values.
19. Cash and cash equivalents
Accounting policy
Cash and cash equivalents include cash balances on bank accounts, demand deposits at bank and other short–
term deposits with original maturities of three months or less.

|  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Cash at bank | 78,373 | 112,673 | 67,080 | 100,184
Short–term bank deposits | 40,000 | – | 40,000 | –
Other cash equivalents | 83 | 84 | 83 | 84
TOTAL cash and cash equivalents | 118,456 | 112,757 | 107,163 | 100,268

Cash at bank balances earns daily interest for the Group mostly based on floating interbank deposit
rates. Short–term deposits are placed by the Group for different periods between three and six months
depending on the immediate cash needs of the Group and cash flow forecasts. During 2023 the average
annual effective interest rate earned on short–term cash deposits was 3.60 % (in 2022: 0%).
As of 31 December 2023, the Group and the Parent Company had deposits at banks in amount of
EUR 140,000 thousand with maturity date longer than 3 months that does not comply with the principles
of recognition as cash equivalents (31/12/2022: EUR 0 thousand). These deposits are disclosed as
‘Other current financial investments’ in the Statement of Financial Position.
The carrying amounts of cash are assumed to approximate their fair values.
20. Share capital
As of 31 December 2023, the registered share capital of the Latvenergo AS is EUR 790,368 thousand
(31/12/2022: EUR 790,368 thousand) and consists of 790,368 thousand ordinary shares (31/12/2022:
790,368 thousand) with the nominal value of EUR 1 per share (31/12/2022: EUR 1 per share). All shares
have been fully paid.
47
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
21. Reserves, dividends and earnings per share

a) Reserves |  |  |  |  |  |  |  |  |  |
|  |  |  | Group |  |  |  | Parent Company |  | EUR'000
|  | Non–current | Hedge | Defined benefit | Other | TOTAL | Non–current | Hedge | Defined benefit | TOTAL
|  | assets revaluation | reserve | plan revaluation | reserves |  | assets revaluation | reserve | plan revaluation |
| Notes | reserve |  | reserve |  |  | reserve |  | reserve |
As of 31 December 2021 |  | 1,157,825 | 19,218 | (1,798) | 110 | 1,175,355 | 778,049 | 19,218 | (1,536) | 795,731
Increase of non–current assets revaluation reserve as a result of revaluation | 14 a | 227,695 | – | – | – | 227,695 | 227,695 | – | – | 227,695
Disposal of revaluation reserve | 14 a | (11,529) | – | – | – | (11,529) | (3,470) | – | – | (3,470)
Gains on re–measurement of defined benefit plan | 27 a | – | – | 645 | – | 645 | – | – | 210 | 210
Losses from fair value changes of derivative financial instruments | 24 I | – | (109,483) | – | – | (109,483) | – | (109,483) | – | (109,483)
As of 31 December 2022 |  | 1,373,991 | (90,265) | (1,153) | 110 | 1,282,683 | 1,002,274 | (90,265) | (1,326) | 910,683
Increase of non–current assets revaluation reserve as a result of revaluation | 14 a | 312,061 | – | – | – | 312,061 | 312,061 | – | – | 312,061
Disposal of revaluation reserve | 14 a | (9,613) | – | – | – | (9,613) | (561) | – | – | (561)
Losses on re–measurement of defined benefit plan | 27 a | – | – | (2,709) | – | (2,709) | – | – | (1,144) | (1,144)
Gains from fair value changes of derivative financial instruments | 24 I | – | 99,380 | – | – | 99,380 | – | 99,380 | – | 99,380
Formed statutory reserves |  | – | – | – | 50 | 50 | – | – | – | –
As of 31 December 2023 |  | 1,676,439 | 9,115 | (3,862) | 160 | 1,681,852 | 1,313,774 | 9,115 | (2,470) | 1,320,419

Non–current assets revaluation reserve, post–employment benefit plan revaluation and hedge reserves
cannot be distributed as dividends. Other reserves are maintained with the aim to maintain stability in the
operations of the Group entities.
b) Dividends
Accounting policy
Dividend distribution to the Parent Company’s shareholders is recognised as a liability in the Financial Statements in
the period in which the dividends are approved by the Parent Company’s shareholders.
In May 2023, Latvenergo AS paid dividends to the State in amount of EUR 133,991 thousand for
reporting year 2022 profit. On 18 October 2023, Extraordinary Shareholder Meeting of Latvenergo AS
took decision to pay additional dividends to the State in the amount of EUR 18,547 thousand from the
undistributed profit of the reporting year 2022.
The total amount of dividends paid for year 2022 was EUR 152,539 thousand or EUR 0.232 per share (in
2022 for 2021: EUR 70,160 thousand or EUR 0.089 per share).
According to the Law “On state budget for 2024 and budgetary framework for 2024, 2025 and 2026”
the expected amount of dividends to be paid by Latvenergo AS for the use of state capital in 2024 (for
the reporting year 2023) is 64% of the profit for the reporting year, but not less than EUR 199.3 million,
corporate income tax calculated and paid in accordance with the laws and regulations. The distribution of
net profit and amount of dividends payable is subject to a resolution of the Latvenergo AS Shareholders
Meeting.
c) Earnings per share
Accounting policy
The Group’s share capital consists of the Parent Company’s ordinary shares. All shares have been fully paid.
Basic earnings per share are calculated by dividing profit attributable to the equity holders of the
Parent Company by the weighted average number of ordinary shares outstanding (Note 20). As there
are no potential ordinary shares, diluted earnings per share are equal to basic earnings per share in all
comparable periods.

| Group |  | Parent Company |
| 2023 | 2022 | 2023 | 2022
Profit attributable to the equity holder of the Parent Company (in thousand EUR) | 349,749 | 183,443 | 331,561 | 209,362
Weighted average number of shares (thousand) | 790,368 | 790,368 | 790,368 | 790,368
Basic earnings per share (in euros) | 0.443 | 0.232 | 0.420 | 0.265
Diluted earnings per share (in euros) | 0.443 | 0.232 | 0.420 | 0.265

48
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
22. Changes in liabilities arising from financing activities
The changes in lease liabilities (Note 15):

| Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Net book amount at the beginning of the year | 10,675 | 8,428 | 5,166 | 5,226
Recognised changes in lease agreements | 2,928 | 4,261 | 875 | 1,094
Paid lease payments in cash | (1,886) | (1,671) | (731) | (649)
Paid lease payments by non-cash offset | (370) | (372) | (534) | (505)
Change in accrued liabilities | (108) | (107) | (35) | (80)
Recognised interest liabilities | 162 | 136 | 83 | 80
Closing net book amount at the end of the year | 11,401 | 10,675 | 4,824 | 5,166

In 2023, the movement for borrowings (Note 23) relates to cash flows, except the effect of accrued
but not yet paid interest – for the Group increase in the amount of EUR 2,868 thousand and for the
Parent company increase in the amount of EUR 2,834 thousand (2022: the Group – increase of
EUR 2,161 thousand, the Parent Company – increase of EUR 2,087 thousand).
In 2023, deferred income on financing from European Union funds (Note 28) consists of movement
in cash, except the credited amount to Statement of Profit or Loss – for the Group in the amount of
EUR 909 thousand and for the Parent company in the amount of EUR 142 thousand (2022: the Group –
EUR 896 thousand, the Parent Company – EUR 144 thousand).
23. Borrowings

|  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Non-current portion of non-current borrowings from financial |  |  |  |
institutions | 336,408 | 424,867 | 327,174 | 411,664
Non-current portion of issued debt securities (bonds) | 199,908 | 149,887 | 199,908 | 149,887
Total non-current borrowings from financial institutions | 536,316 | 574,754 | 527,082 | 561,551
Current portion of non-current borrowings from financial institutions | 86,625 | 177,778 | 84,491 | 175,798
Overdraft from financial institutions | – | 119,478 | – | 119,478
Accrued interest on non-current borrowings from financial institutions | 2,891 | 2,161 | 2,742 | 2,047
Accrued coupon interest on issued debt securities (bonds) | 3,864 | 1,747 | 3,864 | 1,747
Total current borrowings from financial institutions | 93,380 | 301,164 | 91,097 | 299,070
TOTAL borrowings from financial institutions | 629,696 | 875,918 | 618,179 | 860,621
Current borrowings from related parties* | – | – | – | 3,317
Total current borrowings | 93,380 | 301,164 | 91,097 | 302,387
TOTAL borrowings | 629,696 | 875,918 | 618,179 | 863,938

Movement in borrowings | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
At the beginning of the year | 875,918 | 795,029 | 863,938 | 782,322
Received borrowings from financial institutions | 2,000 | 207,846 | – | 200,013
Repaid borrowings from financial institutions | (301,090) | (129,118) | (295,276) | (123,801)
Proceeds from issued debt securities (bonds) | 50,000 | 100,000 | 50,000 | 100,000
Borrowings received from related parties* | – | – | (3,317) | 3,317
Repayment of issued debt securities (bonds) | – | (100,000) | – | (100,000)
Change in accrued interest on borrowings from financial institutions | 2,847 | 2,195 | 2,813 | 2,121
Changes in outstanding value of issued debt securities (bonds) | 21 | (34) | 21 | (34)
At the end of the year | 629,696 | 875,918 | 618,179 | 863,938

Borrowings by categories of lenders |  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
International Financial Institutions | 224,186 | 273,306 | 224,186 | 273,306
Commercial banks | 201,738 | 450,978 | 190,221 | 435,681
Issued debt securities (bonds) | 203,772 | 151,634 | 203,772 | 151,634
Total borrowings from financial institutions | 629,696 | 875,918 | 618,179 | 860,621
Related parties* | – | – | – | 3,317
TOTAL borrowings | 629,696 | 875,918 | 618,179 | 863,938
* Within the framework of the Agreement ´On Provision of Mutual Financial Resources´, as of 31 December 2023, Parent Company didn’t have current |  |  |  |
borrowing from Enerģijas publiskais tirgotājs SIA (31/12/2022: in the amount of EUR 3,317 thousand), (the information is disclosed in the Note 29. II). |  |  |  |

Borrowings from financial institutions by contractual maturity, excluding the |  |  |  |
impact of derivative instruments to the interest rate |  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Fixed rate non–current and current borrowings: |  |  |  |
- < 1 year (current portion of non–current borrowings) | 3,864 | 1,747 | 3,864 | 1,747
- 1–5 years | 149,908 | 100,000 | 149,908 | 100,000
- > 5 years | 50,000 | 49,887 | 50,000 | 49,887
Total fixed rate borrowings | 203,772 | 151,634 | 203,772 | 151,634
Floating rate non–current and current borrowings: |  |  |  |
- < 1 year (current borrowings) | – | 119,692 | – | 119,692
- < 1 year (current portion of non–current borrowings) | 89,495 | 179,704 | 87,212 | 177,610
- 1–5 years | 246,228 | 303,329 | 239,433 | 293,199
- > 5 years | 90,201 | 121,559 | 87,762 | 118,486
Total floating rate borrowings | 425,924 | 724,284 | 414,407 | 708,987
TOTAL borrowings | 629,696 | 875,918 | 618,179 | 860,621

49
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

Borrowings from financial institutions by repricing of interest, including the |  |  |  |
impact of derivative instruments |  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
- < 1 year | 344,074 | 606,983 | 332,557 | 591,686
- 1–5 years | 235,622 | 219,048 | 235,622 | 219,048
- > 5 years | 50,000 | 49,887 | 50,000 | 49,887
TOTAL borrowings | 629,696 | 875,918 | 618,179 | 860,621

As of 31 December 2023, and as of 31 December 2022 all of the Group’s and the Parent Company’s
borrowings were denominated in euros.
The fair value of current and non–current borrowings with floating interest rates approximate their carrying
amount, as their actual floating interest rates approximate the market price of similar financial instruments
available to the Group and the Parent Company, i.e., the floating part of the interest rate corresponds to
the money market price while the added part of the interest rate corresponds to the risk premium the
lenders in financial and capital markets require from companies of similar credit rating level; therefore, the
effect of fair value revaluation is not significant.
Lease liabilities of the Group and the Parent Company are disclosed in Note 15.
I) Pledges
As of 31 December 2023, the Group’s and the Parent Company’s assets are not pledged to secure the
borrowings, except the pledge on assets of Liepājas Enerģija SIA of maximum secured claims in the
amount of EUR 19 million (31/12/2022: EUR 28 million) to secure its current and non–current borrowings.
As of the end of the reporting year there has been pledged the property, plant and equipment in the net
book amount of EUR 15 million and the claims on the receivable’s accounts in the amount of EUR 4 million
(31/12/2022: EUR 21 million and EUR 7 million, respectively).
II) Un–drawn borrowing facilities
As of 31 December 2023, the un–drawn committed non–current credit facilities amount to EUR 200 million
(31/12/2022: EUR 200 million).
As of 31 December 2023, the Group had entered into six overdraft agreements with total notional
amount of EUR 236 million (31/12/2022: seven overdraft agreements of EUR 296 million) of which four
overdraft agreements were entered by the Parent Company with total notional amount of EUR 230 million
(31/12/2022: five overdraft agreements of EUR 290 million). In respect of all the overdraft agreements all
conditions precedent have been met.
At the end of the reporting year of total credit lines limits were used EUR 16.1 million in a form as bank
issued bank guarantee by the Group and by the Parent Company (31/12/2022: used EUR 123.3 million,
of which EUR 119.5 million EUR used by the Parent Company).
III) Weighted average effective interest rate
During the reporting year the weighted average effective interest rate of the Group (including interest
rate swaps) on non–current borrowings was 3.2% (2022: 1.2%), weighted average effective interest rate
for current borrowings from financial institutions was 0.48% (2022: 0.48%). As of 31 December 2023,
interest rates for non–current borrowings in euros were 6 months EURIBOR + 0.87% (31/12/2022:
+ 0.69%) for the Group and 6 months EURIBOR+ 0.86% (31/12/2022: + 0.68%) for Latvenergo AS.
As of 31 December 2023, the total notional amount of interest rate swap agreements concluded by the
Group amounted to EUR 105 million (31/12/2022: EUR 133 million) and the interest rate was fixed for
the initial periods from 7 to 10 years.
IV) Issued and outstanding debt securities (bonds)
In 2015 and in 2016 the Parent Company (Latvenergo AS) issued green bonds in the total amount of
EUR 100 million with the maturity date 10 June 2022 (ISIN code – LV0000801777) with the annual
coupon rate of 1.9%. In 2021 Latvenergo AS issued green bonds in the total amount of EUR 50 million
with the maturity date 17 May 2028 (ISIN code – LV0000802460) with the annual coupon rate of 0.5%
under the third bond programme in the total amount of EUR 200 million. Continuing bond issuance
within the framework of the third bond programme, on May 5, 2022, Latvenergo AS issued five-year
green bonds with a total nominal value of EUR 100 million, a maturity date of 5 May 2027, a fixed
annual interest rate (coupon) and a yield of 2.42% (ISIN code – LV0000870129). On February 22, 2023,
Latvenergo AS concluded the bond program by issuing six-year green bonds with a total nominal value
of EUR 50 million with a maturity date of February 22, 2029, and a fixed interest rate (coupon) and yield
of 4.952% per year (ISIN code – LV0000802684). The total nominal amount of outstanding bonds as of
31 December 2023 was EUR 200 million (31/12/2022: EUR 150 million). All issued bonds are quoted in
NASDAQ Baltic Stock Exchange. The issued debt securities (bonds) are measured at amortised cost at
the end of reporting year.
As of 31 December 2023, the carrying amount of issued debt securities (bonds) exceeds their fair value
by EUR 15.1 million (31/12/2022: by EUR 22.7 million). The fair value of debt securities (bonds) issued is
calculated by discounting their future cash flows and using the market quoted yield to maturity rates of
the respective bonds as of the end of the reporting year as discount factor (Level 2).
24. Derivative financial instruments
Accounting policy
The Group and the Parent Company use derivatives such as interest rate swaps, electricity forwards and futures,
natural gas forwards and currency exchange forwards to hedge risks associated with the interest rate and
purchase price fluctuations, respectively. The Group and the Parent Company have decided to continue to apply
hedge accounting requirements of IAS 39 for derivatives.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re–measured at their fair value. Fair values are obtained from quoted market prices and discounted cash flow
models as appropriate.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, on the nature / content of the item being hedged. Other derivatives are accounted for at fair
value through profit or loss.
The Group and the Parent Company designate certain derivatives as hedges of a particular risk associated
with highly probable forecasted transactions or variable rate borrowings. The Group and the Parent Company
document at the inception of the transaction the relationship between hedging instruments and hedged items,
as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group
and the Parent Company also document their assessment, both at hedge inception and on an on–going basis,
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash
flows of hedged items.
50
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
The fair value of the derivative instruments is presented as current or non–current based on settlement date.
Derivative instruments that have maturity of more than twelve months and have been expected to be hold for
more than twelve months after the end of the reporting year are classified as non–current assets or liabilities, by
separating current part of the derivative instrument. Derivatives are carried as assets when fair value is positive and
as liabilities when fair value is negative.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in other comprehensive income and accumulated in equity within ‘Hedging reserve’. The gain or loss
relating to the ineffective portion, if such arise, is recognised immediately in the Statement of Profit or Loss.
Amounts accumulated in equity are recognised in the Statement of Profit or Loss in the periods when the hedged
item affects profit or loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the Statement of Profit or Loss.
I) Outstanding fair values of derivatives and their classification

|  |  |  | Group |  |  | Parent Company |  | EUR’000
|  | 31/12/2023 |  | 31/12/2022 |  | 31/12/2023 | 31/12/2022 |  |
| Notes | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities
Interest rate swaps | 24 II | 5,872 | – | 10,279 | – | 5,872 | – | 10,279 | –
Energy forwards, futures, and swaps | 24 III | 5,297 | – | 450 | (120,520) | 5,297 | – | 450 | (120,520)
Currency exchange forwards | 24 IV | – | – | – | (1,499) | – | – | – | (1,499)
Total outstanding fair values of derivatives |  | 11,169 | – | 10,729 | (122,019) | 11,169 | – | 10,729 | (122,019)

|  |  | Group |  |  | Parent Company |  | EUR’000
| 31/12/2023 |  | 31/12/2022 |  | 31/12/2023 | 31/12/2022 |  |
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities
Non–current | 3,210 | – | 8,131 | – | 3,210 | – | 8,131 | –
Current | 7,959 | – | 2,598 | (122,019) | 7,959 | – | 2,598 | (122,019)
TOTAL fair values of derivative |  |  |  |  |  |  |  |
financial instruments | 11,169 | – | 10,729 | (122,019) | 11,169 | – | 10,729 | (122,019)

Gains / (losses) on fair value changes as a result of realised hedge agreements |  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
Included in the Statement of Profit or Loss | 8 |  |  |  |
Interest rate swaps | 11 a | (119) | 1,074 | (119) | 1,074
Energy forwards, futures, and swaps | 8 | 23,198 | (10,096) | 23,198 | (9,827)
Included in the other comprehensive income | 21 a | 23,079 | (9,022) | 23,079 | (8,753)
Interest rate swaps | 24 II | (4,288) | 13,517 | (4,288) | 13,517
Energy forwards, futures, and swaps | 24 III | 102,169 | (121,501) | 102,169 | (121,501)
Currency exchange forwards | 24 IV | 1,499 | (1,499) | 1,499 | (1,499)
|  | 99,380 | (109,483) | 99,380 | (109,483)
Total loss on fair value changes |  | 122,459 | (118,505) | 122,459 | (118,236)

II) Interest rate swaps
As of 31 December 2023, the Group and the Parent Company had interest rate swap agreements
with total notional amount of EUR 105 million (31/12/2022: EUR 133 million). Interest rate swaps are
concluded with 7–to–10–year initial maturities and hedged floating rates are 6 months EURIBOR. As
of 31 December 2023, fixed interest rates vary from 0.087% to 0.809% (31/12/2022 from 0.087% to
1.979%).
As at the end of the year all the outstanding interest rate swap agreements with total notional
amount of EUR 105 million were eligible for hedge accounting and were assessed prospectively and
retrospectively to test whether they are effective within the hedging period (31/12/2022: 100% with
notional amount of EUR 133 million). All contracts are designed as cash flow hedges. During the
prospective and retrospective testing, in 2023 an ineffective portion in the amount of EUR 0.12 million
(2022: EUR 1.1 million) has been identified and recognised in the Statement of Profit or Loss.

Fair value changes of interest rate swaps |  |  | Group |  |  |  | Parent Company | EUR’000
|  | 2023 |  | 2022 |  | 2023 |  | 2022
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities
Outstanding fair value at the beginning of the year | 10,279 | – | – | (4,312) | 10,279 | – | – | (4,312)
Included in Statement of Profit or Loss | (128) | 9 | – | 1,074 | (128) | 9 | – | 1,074
Included in other comprehensive Income | (4,279) | (9) | 10,279 | 3,238 | (4,279) | (9) | 10,279 | 3,238
Outstanding fair value at the end |  |  |  |  |  |  |  |
of the year | 5,872 | – | 10,279 | – | 5,872 | – | 10,279 | –

The main interest rate hedging criteria stated in the Financial Risk Management policy is to ensure
average fixed rate duration from 1 to 4 years and fixed rate portion at more than 35% of borrowings. As of
31 December 2023, 46 % (31/12/2022: 36%) of the Group’s and 47 % (31/12/2022: 36%) of the Parent
Company’s borrowings had fixed interest rates (considering the effect from the interest rate swaps), and
average remaining time to interest re–pricing was 2.1 years for the Group and 2.1 years for the Parent
Company (2022: 1.8 years for the Group and 1.9 years for the Parent Company).
III) Energy forwards, futures, and swaps
As of 31 December 2023, the Group and the Parent Company have not entered into any electricity
future contract (31/12/2022: 12 contracts with total outstanding electricity purchase volume of
70,080 MWh and notional value of EUR 8 million). As of 31 December 2023 the Group and the Parent
Company have entered into 48 natural gas price swap contracts (31/12/2022: 48 contracts) with total
outstanding natural gas purchase volume of 2,850 MWh (31/12/2022: 1,162,000 MWh) and notional
value of EUR 139 million (31/12/2022: EUR 218 million). Natural gas swap contracts are concluded with
the maturities for one month or one quarter and with termination date during the period of 1 January to
30 April 2024.
The Group and the Parent Company conclude natural gas price swap contracts with financial institutions
and other counterparties. Natural gas swap contracts are intended for hedging of the natural gas price
risk and are used for fixing the price of natural gas purchased in wholesale gas market.
51
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
34 natural gas swap contracts with total outstanding volume of 2,020,806 MWh as of 31 December 2023
are designated to comply with hedge accounting treatment (31/12/2022: 31 contracts of 934,000 MWh)
and were reassessed prospectively and retrospectively to test whether they are effective within the
hedging period. All contracts are designed as cash flow hedges. For the contracts which are fully
effective contracts fair value gains are included in other comprehensive income.

Fair value changes of energy forwards, futures, and swaps |  |  |  | Group |  |  |  | Parent Company | EUR'000
|  |  | 2023 |  | 2022 |  | 2023 |  | 2022
| Notes | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities
Outstanding fair value at the beginning of the year |  | 450 | (120,520) | 25,735 | (14,208) | 450 | (120,520) | 25,466 | (14,208)
Included in the Statement of Profit or Loss | 8 | 333 | 22,865 | 181 | (10,277) | 333 | 22,865 | 450 | (10,277)
Included in other comprehensive income |  | 4,514 | 97,655 | (25,466) | (96,035) | 4,514 | 97,655 | (25,466) | (96,035)
Outstanding fair value at the end of the year |  | 5,297 | – | 450 | (120,520) | 5,297 | – | 450 | (120,520)

IV) Currency exchange forwards
During 2023, five EUR/USD forward foreign currencies exchange contracts in the amount of
USD 153,482 thousand with an execution date of 22 February and 26 April 2023 were fulfilled, which
concluded in 2022 in order to limit the currency risk of the payments in USD dollars planned in the
natural gas purchase agreement concluded in 2022. As of 31 December 2023 there were no outstanding
foreign exchange forward contracts.

Fair value changes of forward currencies exchange contracts |  |  | Group |  |  |  | Parent Company | EUR'000
|  | 2023 |  | 2022 |  | 2023 |  | 2022
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities
Outstanding fair value at the beginning of the year | – | (1,499) | – | – | – | (1,499) | – | –
Included in other comprehensive income | – | 1,499 | – | (1,499) | – | 1,499 | – | (1,499)
Outstanding fair value at the end |  |  |  |  |  |  |  |
of the year | – | – | – | (1,499) | – | – | – | (1,499)

25. Fair values and fair value measurement
Accounting policy
The Group and the Parent Company measure financial instruments, such as, derivatives, at fair value at each
balance sheet date. Non–financial assets such as investment properties are measured at amortised cost, but some
items of property, plant and equipment at revalued amounts.
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair values are estimated based on market prices and
discounted cash flow models as appropriate.
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of
reporting period. The quoted market prices used for financial assets held by the Group and the Parent Company
are the actual closing prices.
The fair value of financial instruments that are not traded in active market is determined by using valuation
techniques. The Group and the Parent Company use a variety of methods and make assumptions that are based
on market conditions existing at end of reporting period. Estimated discounted cash flows are used to determine
fair value for the remaining financial instruments.
In this Note are disclosed the fair value measurement hierarchy for the Group’s and the Parent Company’s
financial assets and liabilities and revalued PPE.
Methods and assumptions used to estimate the fair values are disclosed in Note 4 i).
52
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

Quantitative disclosures of fair value measurement hierarchy for assets at the end of the year |  |  |  | Group |  |  |  | Parent Company | EUR'000
|  |  |  | Fair value measurement using |  |  |  | Fair value measurement using |
|  | Quoted prices | Significant | Significant | TOTAL | Quoted prices | Significant | Significant | TOTAL
|  | in active | observable | unobservable |  | in active | observable | unobservable |
|  | markets | inputs | inputs |  | markets | inputs | inputs |
Type of assets | Notes | (Level1) | (Level 2) | (Level 3) |  | (Level1) | (Level 2) | (Level 3) |
As of 31 December 2023 |  |  |  |  |  |  |  |  |
Assets measured at fair value |  |  |  |  |  |  |  |  |
Revalued property, plant and equipment | 14 c | – | – | 2,909,307 | 2,909,307 | – | – | 1,277,600 | 1,277,600
Non-current financial investments | 16 | – | – | 40 | 40 | – | – | 39 | 39
Derivative financial instruments, including: |  |  |  |  |  |  |  |  |
Interest rate swaps | 24 | – | 5,872 | – | 5,872 | – | 5,872 | – | 5,872
Energy forwards, futures, and swaps | 24 | – | 5,297 | – | 5,297 | – | 5,297 | – | 5,297
Assets for which fair values are disclosed |  |  |  |  |  |  |  |  |
Investment properties | 14 b | – | – | 2,309 | 2,309 | – | – | 2,261 | 2,261
Loans to related parties: |  |  |  |  |  |  |  |  |
- Floating rate loans | 29 e | – | – | – | – | – | 263,182 | – | 263,182
- Fixed rate loans | 29 e | – | 863 | – | 863 | – | 361,116 | – | 361,116
Current financial receivables | 18 a, b | – | – | 272,894 | 272,894 | – | – | 212,899 | 212,899
Cash and cash equivalents | 19 | – | 118,456 | – | 118,456 | – | 107,163 | – | 107,163
As of 31 December 2022 |  |  |  |  |  |  |  |  |
Assets measured at fair value |  |  |  |  |  |  |  |  |
Revalued property, plant and equipment | 14 c | – | – | 2,622,747 | 2,622,747 | – | – | 998,090 | 998,090
Non-current financial investments | 16 | – | – | 40 | 40 | – | – | 39 | 39
Derivative financial instruments, including: |  |  |  |  |  |  |  |  |
Interest rate swaps | 24 | – | 10,279 | – | 10,279 | – | 10,279 | – | 10,279
Energy forwards, futures, and swaps | 24 | – | 450 | – | 450 | – | 450 | – | 450
Assets for which fair values are disclosed |  |  |  |  |  |  |  |  |
Investment properties | 14 b | – | – | 2,297 | 2,297 | – | – | 2,222 | 2,222
Loans to related parties: |  |  |  |  |  |  |  |  |
- Floating rate loans | 29 e | – | – | – | – | – | 266,737 | – | 266,737
- Fixed rate loans | 29 e | – | – | – | – | – | 446,571 | – | 446,571
Current financial receivables | 18 a, b | – | – | 331,198 | 331,198 | – | – | 269,445 | 269,445
Cash and cash equivalents | 19 | – | 112,757 | – | 112,757 | – | 100,268 | – | 100,268

There have been no transfers for assets between Level 1, Level 2 and Level 3 during the reporting year.
53
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

Quantitative disclosures of fair value measurement hierarchy for liabilities at the end of the year |  |  |  | Group |  |  |  | Parent Company | EUR'000
|  |  |  | Fair value measurement using |  |  |  | Fair value measurement using |
|  | Quoted prices | Significant | Significant | TOTAL | Quoted prices | Significant | Significant | TOTAL
|  | in active | observable | unobservable |  | in active | observable | unobservable |
|  | markets | inputs | inputs |  | markets | inputs | inputs |
Type of liability | Notes | (Level1) | (Level 2) | (Level 3) |  | (Level1) | (Level 2) | (Level 3) |
As of 31 December 2023 |  |  |  |  |  |  |  |  |
Liabilities for which fair values are disclosed |  |  |  |  |  |  |  |  |
Issued debt securities (bonds) | 23 | – | 203,772 | – | 203,772 | – | 203,772 | – | 203,772
Borrowings from financial institutions | 23 | – | 425,924 | – | 425,924 | – | 414,407 | – | 414,407
Trade and other financial current payables | 26 | – | – | 136,014 | 136,014 | – | – | 87,078 | 87,078
As of 31 December 2022 |  |  |  |  |  |  |  |  |
Liabilities measured at fair value |  |  |  |  |  |  |  |  |
Derivative financial instruments, including: |  |  |  |  |  |  |  |  |
Energy forwards, futures, and swaps | 24 | – | 120,520 | – | 120,520 | – | 120,520 | – | 120,520
Forward currencies exchange contracts | 24 | – | 1,499 | – | 1,499 | – | 1,499 | – | 1,499
Liabilities for which fair values are disclosed |  |  |  |  |  |  |  |  |
Issued debt securities (bonds) | 23 | – | 151,634 | – | 151,634 | – | 151,634 | – | 151,634
Borrowings from financial institutions | 23 | – | 724,284 | – | 724,284 | – | 708,987 | – | 708,987
Borrowings from related parties | 23 | – | – | – | – | – | 3,317 | – | 3,317
Trade and other financial current payables | 26 | – | – | 107,811 | 107,811 | – | – | 99,902 | 99,902

There have been no transfers for liabilities between Level 1, Level 2, and Level 3 during the reporting year.
The fair value hierarchy for the Group’s and the Parent Company’s financial instruments that are measured at fair value, by using specific valuation methods, is disclosed above.
Set out below, is a comparison by class of the carrying amounts and fair values of the Group’s and the Parent Company’s financial instruments, other than those with carrying amounts which approximates their fair values:

|  | Group |  |  |  |  | Parent Company | EUR'000
|  | Carrying amount | Fair value |  |  | Carrying amount | Fair value |
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Financial assets |  |  |  |  |  |  |  |
Fixed rate loans to related parties | 863 | – | 863 | – | 361,116 | 446,571 | 343,998 | 414,187
Financial liabilities |  |  |  |  |  |  |  |
Issued debt securities (bonds) | 203,772 | 151,634 | 188,678 | 128,948 | 203,772 | 151,634 | 188,678 | 128,948

Management assessed that cash and short–term deposits, receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short–term maturities of
these instruments.
54
About Latvenergo Group
Corporate Governance
Operating Segments
Sustainability Indicators
Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
26. Trade and other payables

|  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Financial liabilities: |  |  |  |  |
Payables for suppliers |  | 94,389 | 59,392 | 56,524 | 19,283
Payables to related parties | 29 b | 9,795 | 8,191 | 16,800 | 24,026
Accrued expenses |  | 21,212 | 27,204 | 7,139 | 21,351
Accrued expenses from related parties | 29 d | – | – | 3,321 | 31,191
Other financial current payables |  | 10,618 | 13,024 | 3,294 | 4,051
TOTAL financial liabilities |  | 136,014 | 107,811 | 87,078 | 99,902
Non–financial liabilities: |  |  |  |  |
Taxes other than income tax |  | 33,681 | 38,418 | 19,055 | 27,159
Contract liabilities |  | 28,907 | 15,539 | 7,547 | 5,368
Other current payables |  | 4,131 | 3 506 | 1,620 | 1,339
TOTAL NON–FINANCIAL LIABILITIES |  | 66,719 | 57,463 | 28,222 | 33,866
TOTAL trade and other current payables |  | 202,733 | 165,274 | 115,300 | 133,768

Contract liabilities include current advances received from the customers before the transfer of related
goods or services, transferred in less than 12 months.
The carrying amounts of trade and other payables are assumed to approximate their fair values.
27. Provisions
Accounting policy
Provisions are recognised when the Group or the Parent Company have a present obligation as a result of
past event; it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation, and when a reliable estimate can be made of the amount of the obligation. Provisions are not
recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required for settling the obligation
by using pre–tax rate that reflects current market assessments of the time value of the money and the risks specific
to the obligation as a discount rate. The increase in provisions due to passage of time is recognised as interest
expense.

|  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Non-current: |  |  |  |
- post–employment benefits (recognised in profit or loss) | 14,378 | 14,413 | 6,265 | 6,395
- post–employment benefits (recognised in equity) | 3,862 | 1,153 | 2,300 | 1,157
TOTAL post–employment benefits | 18,240 | 15,566 | 8,565 | 7,552

Provisions for post–employment benefits
Accounting policy
The Group and the Parent Company provide certain post–employment benefits to employees whose employment
conditions meet certain criteria. Obligations for benefits are calculated considering the current level of salary and number
of employees eligible to receive the payment, historical termination rates as well as number of actuarial assumptions.
The defined benefit obligations are calculated annually by independent actuaries using the projected unit credit method.
The liability recognised in the Statement of Financial Position in respect of post–employment benefit plan is the present
value of the defined benefit obligation at the end of the reporting period. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using weighted average discount rate
of EIOPA risk-free interest rate, interest rates of Latvian government bonds (maturity of 5 years) and EURBMK BBB
electricity industry rate. The discount rate used is determined by reference to market yields on government bonds
due to lack of deep market on high quality corporate bonds. The Group and the Parent Company use projected unit
credit method to establish the present value of fixed benefit obligation and related present and previous employment
expenses. According to this method it has been stated that each period of service gives rise to an additional unit
of benefit entitlement and the sum of those units comprises total Group’s and the Parent Company’s obligations
of post–employment benefits. The Group and the Parent Company use objective and mutually compatible actuarial
assumptions on variable demographic factors and financial factors (including expected remuneration increase and
determined changes in benefit amounts).
Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to the Statement of Comprehensive Income in the period in which they arise. Past service costs are recognised
immediately in the Statement of Profit or Loss.

|  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
At the beginning of the year |  | 15,566 | 15,421 | 7,552 | 7,407
Current service cost |  | 253 | 1,029 | 153 | 497
Interest cost |  | 492 | 511 | 225 | 246
Post–employment benefits paid |  | (780) | (750) | (508) | (388)
Losses / (gains) on remeasurement on defined benefit plan | 21 a | 2,709 | (645) | 1,143 | (210)
At the end of the year |  | 18,240 | 15,566 | 8,565 | 7,552

Total charged / (credited) provisions are included in the Statement of Profit or Loss position ‘Personnel
expenses’ within state social insurance contributions and other benefits defined in the Collective
agreement (Note 9):

|  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
At the beginning of the year |  | 15,566 | 15,421 | 7,552 | 7,407
(Credited) / charged to the Statement of Comprehensive Income | 21 a | 2,709 | (645) | 1,143 | (210)
Charged to the Statement of Profit or Loss |  | (35) | 790 | (130) | 355
At the end of the year |  | 18,240 | 15,566 | 8,565 | 7,552

55
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– Independent Auditors’
Report
Weighted average discount rate used for discounting benefit obligations was 2.98% (2022:
3.32%), considering EIOPA risk-free interest rate, interest rates of Latvian government bonds and
EURBMK BBB electricity industry rate at the end of the reporting year. The Group’s Collective
Agreement provides indexation of employees’ wages at least at the level of inflation. Long–term
inflation determined at the level of 5.0% (2022: 6.0%) when calculating long–term post–employment
benefits. In calculation of these liabilities also the probability, determined on the basis of previous
experience, of retirement in different employees’ aging groups was also considered.
A quantitative sensitivity analysis for significant assumptions on provisions for post–employment
benefits as of the end of the year is as shown below:

Assumptions | Date of |  |  |  | Group |  |  |  |  |  | Parent Company |  | EUR’000
| valuation |  | Discount rate | Future salary changes |  | Retirement probability changes |  | Discount rate | Future salary changes |  | Retirement probability changes
|  | 1% increase | 1% decrease | 1% increase | 1% decrease | 1% increase | 1% decrease | 1% increase | 1% decrease | 1% increase | 1% decrease | 1% increase | 1% decrease
Impact on provisions for | 31/12/2023 | 2,107 | (1,754) | 2,065 | (1,754) | 2,279 | (1,912) | 943 | (782) | 924 | (781) | 1,019 | (851)
post–employment benefits | 31/12/2022 | 1,779 | (1,483) | 1,737 | (1,477) | 1,936 | (1,625) | 799 | (664) | 780 | (661) | 869 | (727)

The sensitivity analysis above has been determined based on a method that extrapolates the impact on
post-employment benefits obligation as a result of reasonable changes in key assumptions occurring
at the end of the reporting period.
Contributions are monitored on an annual basis and the current agreed contribution rate is 5%. The
next valuation is due to be completed as of 31 December 2024.

|  |  | Group |  |  |  | Parent Company |  | EUR’000
|  | Less than 1 year | From 1 to 5 years | Over 5 years | TOTAL | Less than 1 year | From 1 to 5 years | Over 5 years | TOTAL
Defined benefit obligation | 31/12/2023 | 2,831 | 3,209 | 12,200 | 18,240 | 1,896 | 1,394 | 5,275 | 8,565
| 31/12/2022 | 2,454 | 2,780 | 10,332 | 15,566 | 1,755 | 1,340 | 4,457 | 7,552

28. Deferred income
Accounting policy
Government grants are recognised where there is reasonable assurance that the grant will be received, and all
attached conditions will be complied with. Government grants are recognised as income over the period necessary
to match them with the related costs, for which they are intended to compensate, on a systematic basis. For grants
received as part of a package of financial or fiscal aid to which a number of conditions are attached, those elements
which have different costs and conditions are identified. Treatment of the different elements determine the periods
over which the grant will be earned.
In Latvia, Lithuania, and Estonia, according to the state support mechanism for reducing the prices of energy, end-
users have been granted state support. This state support was provided for electricity, distribution system services,
consumed natural gas and for heat. These regulations do not change agreements on the scope of provided
services and do not change the approved distribution system tariffs and energy prices, and respectively do not
change the Group’s and the Parent Company’s revenue recognition principles, but the process of receiving the
transaction fees and the payer for the services. The Group or the Parent Company are not considered to be a grant
receiver because the provision of services and sales of goods are still provided in full, and revenues are recognised
in accordance with IFRS 15 (Note 6).
Expected contributions to post–employment benefit plan for the year ending 31 December 2023 is
EUR 4.9 million.
In 2023 the weighted average duration of the defined benefit obligation is 19.58 years (2022 –
19.94 years).
Grants related to expense items
When a grant relates to an expense item, and it has a number of conditions attached, it is initially recognised at fair
value as deferred income. Grants are credited to income on a systematic basis over the periods that the related
costs, for which it is intended to compensate, are expensed. Management judgements related to the measurement
of government grants is disclosed in Note 4.
A government grant that becomes receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to a company with no future related costs are recognised in profit or
loss of the period in which it becomes receivable. Related income is recognised in the Statement of Profit or Loss
as ‘Other income’ (Note 7).
Grants related to assets
Property, plant and equipment received at nil consideration are accounted for as grants. Those grants are
recognised at fair value as deferred income and are credited to the Statement of Profit or Loss on a straight–line
basis over the expected lives of the related assets.
Accounting policy on recognition of deferred income from connection fees to distribution and transmission system
disclosed per Note 6.
56
About Latvenergo Group
Corporate Governance
Operating Segments
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Annexes to
the Sustainability Report
Annual Report
– Key Figures
– Management Report
– Financial Statements
Statement of Profit or Loss
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

|  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
I) Non-current deferred income |  |  |  |  |
a) contracts with customers |  |  |  |  |
From connection fees | 6 | 137,838 | 132,381 | – | –
Other deferred income |  | 668 | 735 | 668 | 735
b) operating lease |  | 138,506 | 133,116 | 668 | 735
Other deferred income |  | 300 | 321 | 300 | 321
c) other |  | 300 | 321 | 300 | 321
On grant for the installed electrical capacity of CHPPs |  | 89,470 | 113,460 | 89,470 | 113,460
On financing from European Union funds |  | 22,702 | 7,329 | 4,456 | 1,973
Other deferred income |  | 37 | 70 | 37 | 44
|  | 112,209 | 120,859 | 93,963 | 115,477
TOTAL non-current deferred income |  | 251,015 | 254,296 | 94,931 | 116,533
II) Current deferred income |  |  |  |  |
a) contracts with customers |  |  |  |  |
From connection fees | 6 | 16,510 | 15,386 | – | –
Other deferred income |  | 4,794 | 13,944 | 67 | 13,714
b) operating lease |  | 21,304 | 29,330 | 67 | 13,714
Other deferred income |  | 20 | 20 | 20 | 20
c) other |  | 20 | 20 | 20 | 20
On grant for the installed electrical capacity of CHPPs |  | 23,990 | 23,990 | 23,990 | 23,990
On financing from European Union funds |  | 963 | 891 | 142 | 142
|  | 24,953 | 24,881 | 24,132 | 24,132
TOTAL current deferred income |  | 46,277 | 54,231 | 24,219 | 37,866
TOTAL deferred income |  | 297,292 | 308,527 | 119,150 | 154,399

In 2023, received financing in the amount of EUR 12,570 thousand as part of the agreement with the
Ministry of Economics of the Republic of Latvia on the financing of the European Union Recovery and
Resilience Facility by Sadales tīkls AS, financing in the amount of EUR 2,625 thousand from Connecting
Europe Facility (CEF) for the development of electric vehicles charging network received by the Parent
Company and received European Union financing in the amount of EUR 1,050 thousand for fossil fuels
substitution in Liepāja by Liepājas Enerģija SIA.
The Group and the Parent Company ensure the management, application of internal controls and
accounting for the Group’s and the Parent Company’s projects financed by the European Union funds,
according to the guidelines of the European Union and legislation of the Republic of Latvia.
Accounting of the transactions related to the projects financed by the European Union is ensured using
separately identifiable accounts. The Group and the Parent Company ensure separate accounting of
financed projects with detailed income and expense, non–current investments and value added tax in the
relevant positions of the Statement of Profit or Loss and Statement of Financial Position .

Movement in deferred income (non-current and current part) |  | Group |  | Parent Company | EUR’000
| Notes | 2023 | 2022 | 2023 | 2022
At the beginning of the year |  | 308,527 | 323,071 | 154,399 | 164,981
Received connection fees for connection to distribution system | 6 | 23,015 | 11,840 | – | –
Received deferred income (financing and other income) |  | 20,606 | 13,647 | 2,625 | 13,647
Other deferred income credited to the Statement of Profit or Loss |  | (24,933) | (24,920) | (24,139) | (24,142)
Deferred income from contracts with customer and operating lease credited to the Statement of Profit or Loss |  | (29,923) | (15,111) | (13,735) | (87)
At the end of the year |  | 297,292 | 308,527 | 119,150 | 154,399

29. Related party transactions
Accounting policy
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. Related parties of the Group and the
Parent Company are Shareholder of the Company who controls the Company in accepting operating business
decisions, members of Latvenergo Group entities’ management boards, members of the Supervisory board of the
Company, members of Supervisory body of the Company – the Audit Committee and close family members of any
above–mentioned persons, as well as entities over which those persons have control or significant influence.
Trading transactions taking place under normal business activities with the Latvian government including
its departments and agencies and transactions between state–controlled entities and providers of public
utilities are excluded from the scope of related party quantitative disclosures. The Group and the Parent
Company enter into transactions with many of these bodies on an arm’s length basis. Transactions with
government related entities include sales of energy and related services and does not contain individually
significant transactions and quantitative disclosure of transactions with those related parties is impossible
due to broad range of the Latvenergo Group’s and the Parent Company’s customers, except for
transactions with transmission system operator – Augstsprieguma tīkls AS.
57
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Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report

a) Sales/purchases of goods, PPE and services to/from related parties | Group |  |  | Parent Company |  | EUR’000
2023 | 2022 | 2023 |  | 2022 |
Other | Other | Subsidiaries | Other | Subsidiaries | Other
related | related |  | related |  | related
parties* | parties* |  | parties* |  | parties*
Sales of goods, PPE and services, finance income: |  |  |  |  |  |
- Sales of goods and services | 54,759 | 54,528 | 183,807 | 54,665 | 69,136 | 54,223
- Sales of property, plant and equipment | – | – | – | – | 27 | –
- Lease of assets | 882 | 1,034 | 1,669 | 882 | 1,457 | 1,034
- Interest income | – | – | 15,757 | – | 9,353 | –
TOTAL | 55,641 | 55,562 | 201,233 | 55,547 | 79,973 | 55,257
Purchases of goods, PPE, and services: |  |  |  |  |  |
- Purchases of goods and services | 122,209 | 123,151 | 149,371 | 39,274 | 268,123 | 50,380
- including gross expenses from transactions with Sadales tīkls AS recognised in net amount | – | – | 145,236 | – | 92,691 | –
- Purchases of property, plant and equipment and construction services | 7,774 | 3,313 | 1,408 | 830 | 76 | 715
- Lease of assets | 1,049 | 1,114 | 150 | 669 | 168 | 788
TOTAL | 131,032 | 127,578 | 150,929 | 40,773 | 268,367 | 51,883
* Other related parties included transmission system operator – Augstsprieguma tīkls AS and its subsidiary Conexus Baltic Grid AS, Latvijas valsts meži AS, Pirmais Slēgtais Pensiju Fonds AS and other entities controlled by the management members of Latvenergo Group, if any |  |  |  |  |  |

|  |  | Group | Parent Company | EUR’000
| Notes | 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
b) Receivables and payables at the end of the year |  |  |  |  |
arising from sales/purchases of goods, PPE, and services:: |  |  |  |  |
Receivables from related parties: |  |  |  |  |
- Subsidiaries | 18 a, b | – | – | 41,642 | 35,120
- Other related parties* |  | 15,506 | 17,245 | 15,172 | 16,810
- Loss allowances for expected credit loss from receivables |  |  |  |  |
of subsidiaries | 18 a, b | – | – | (31) | (22)
- Loss allowances for expected credit loss from receivables |  |  |  |  |
of other related parties* |  | (33) | (20) | (33) | (20)
Payables to related parties: | 26 | 15,473 | 17,225 | 56,750 | 51,888
- Subsidiaries |  | – | – | 15,214 | 22,369
- Other related parties* |  | 14,864 | 12,511 | 6,176 | 5,439
c) Accrued income raised from transactions with related parties: |  | 14,864 | 12,511 | 21,390 | 27,808
- For goods sold / services provided for subsidiaries | 18 a, b | – | – | 11,425 | 2,483
- For interest received from subsidiaries | 18 a, b | – | – | 3,483 | 2,100
d) Accrued expenses raised from transactions with related parties: | 26 | – | – | 14,908 | 4,583
- For purchased goods / received services from subsidiaries |  | – | – | 3,321 | 31,191
|  | – | – | 3,321 | 31,191
* Other related parties included transmission system operator – Augstsprieguma tīkls AS and its subsidiary Conexus Baltic Grid AS, Latvijas valsts meži AS, Pirmais Slēgtais Pensiju Fonds AS and other entities controlled by the management members of Latvenergo Group, if any |  |  |  |  |

The Group and the Parent Company have not incurred write–offs of trade payables and receivables from
transactions with related parties, as all debts are recoverable.
Receivables and payables with related parties are current balances for services and goods. None of the
amounts at the end of the reporting year are secured.
Remuneration to the Latvenergo Group’s management includes remuneration to the members of
the Management Boards the Group entities, the Supervisory Board, and the Supervisory body (Audit
Committee) of the Parent Company. Remuneration to the Parent Company’s management includes
remuneration to the members of the Parent Company’s Management Board, the Supervisory Board, and
the Supervisory body (Audit Committee). Information disclosed in Note 9.
Dividend payments to Shareholder of the Parent Company and share capital contributions are disclosed
in Note 20 and Note 21 b, respectively.
Dividends received from subsidiaries are disclosed in Note 16.
58
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Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
e) Loans to related parties

Non-current and current loans to related parties |  | Group | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022 | 31/12/2023 | 31/12/2022
Non–current loans to subsidiaries |  |  |  |
Sadales tīkls AS | – | – | 445,553 | 494,979
Elektrum Eesti OÜ | – | – | 6,960 | 7,260
Elektrum Lietuva, UAB | – | – | 10,888 | 8,535
Allowances for expected credit loss | – | – | (371) | (306)
Non-current loans to other related parties |  |  |  |
UAB Geniva | 432 | – | – | –
UAB Vėjo miestas | 431 | – | – | –
TOTAL non–current loans | 863 | – | 463,030 | 510,468
Current portion of non–current loans |  |  |  |
Sadales tīkls AS | – | – | 105,839 | 95,312
Elektrum Eesti OÜ | – | – | 300 | 300
Elektrum Lietuva, UAB | – | – | 1,555 | 904
Allowances for expected credit loss | – | – | (85) | (57)
Current loans to subsidiaries |  |  |  |
Sadales tīkls AS | – | – | 1,961 | 10,000
Elektrum Eesti OÜ | – | – | 18,965 | 41,700
Elektrum Lietuva, UAB | – | – | 3,731 | 54,746
Enerģijas publiskais tirgotājs SIA | – | – | 29,046 | –
Allowances for expected credit loss | – | – | (44) | (65)
TOTAL current loans | – | – | 161,268 | 202,840
TOTAL loans to related parties | 863 | – | 624,298 | 713,308

Counterparty model is used on individual contract basis for assessment of expected credit risk for
non-current and current loans to subsidiaries. The expected credit losses according to this model
are based and impairment for expected credit loss is recognised on assessment of the individual
counterparty’s risk of default and recovery rate assigned by Moody’s credit rating agency for 12 months
expected losses (Note 4 b). Credit risk of subsidiaries is assessed at the same level as Latvenergo AS
credit risk considering that they are 100% controlled by Latvenergo AS – ‘Baa2 level’ credit rating. Since
the initial recognition of loans, credit risk has not increased significantly that matches Stage 1.
All current loans to related parties as of 31 December 2023 will be settled in 2024.

Movement in loans issued to related parties | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
At the beginning of the year | – | – | 713,308 | 706,378
Change in current loans in cash (net) | – | – | (68,272) | 225,482
Change in current loans by non–cash offsetting of operating |  |  |  |
receivables and payables (net) | – | – | 76,311 | (120,831)
Issued non–current loans in cash | 863 | – | – | –
Repaid non–current loans by non–cash offset | – | – | (96,977) | (97,746)
Impairment for expected credit loss | – | – | (72) | 25
At the end of the year | 863 | – | 624,298 | 713,308
incl. loan movement through bank account |  |  |  |
Issued loans to subsidiaries | 863 | – | 719,798 | 921,687
Repaid loans issued to subsidiaries | – | – | (788,070) | (696,205)
(Repaid) / issued loans, net | 863 | – | (68,272) | 225,482

Interest received from related parties | Group |  | Parent Company | EUR’000
| 2023 | 2022 | 2023 | 2022
Interest received | 3 | – | 15,812 | 9,378
TOTAL interest paid | 3 | – | 15,812 | 9,378

I) Non–current loans, including current portion

Concluded non–current loan agreements with Sadales tīkls AS |  |  |  |  | EUR’000
Agreement | Principal amount | Outstanding loan amount |  | Interest rate | Maturity date
conclusion date | of the loan | 31/12/2023 | 31/12/2022 | 6 months EURIBOR + |
29/09/2011 | 316,271 | 4,156 | 12,538 | floating rate | 01/09/2025
18/09/2013 | 42,686 | – | 4,269 | fixed rate | 10/08/2023
29/10/2014 | 90,000 | 10,000 | 20,000 | fixed rate | 10/09/2024
20/10/2015 | 90,000 | 20,000 | 30,000 | fixed rate | 21/10/2025
22/08/2016 | 60,000 | 20,000 | 26,667 | fixed rate | 22/08/2026
22/08/2016 | 50,000 | 20,000 | 25,000 | fixed rate | 14/06/2027
14/12/2018 | 260,000 | 147,750 | 175,811 | fixed rate | 31/01/2030
03/03/2020 | 200,000 | 154,136 | 177,067 | fixed rate + floating rate | 25/03/2030
|  |  |  | 6 months EURIBOR + |
08/03/2022 | 175,000 | 175,350 | 118,939 | floating rate | 31/03/2032
|  |  |  | 6 months EURIBOR + |
31/08/2023 | 175,000 | – | – | floating rate | 31/01/2034
TOTAL | 1,458,957 | 551,392 | 590,291 |  |

As of 31 December 2023, total outstanding amount of non–current loans with Sadales tīkls AS
amounted to EUR 551,392 thousand (31/12/2022: EUR 590,291 thousand), including current portion
of the loan repayable in 2023 – EUR 105,839 thousand (31/12/2022: EUR 95,312 thousand). As of
31 December 2023, 34.46% of non–current loans issued to Sadales tīkls AS (31/12/2022: 24.3%) was
bearing floating interest rate, which was influenced by 6 months EURIBOR interbank rate fluctuations.
During 2023 the effective average interest rate of non–current loans was 2.22% (2022: 1.42%).
59
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Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
– Independent Auditors’
Report
As of 31 December 2023, for non–current floating rate loans issued to Sadales tīkls AS 6-month
EURIBOR ranged from 4.000% to 4.125% (31/12/2022: 6M EURIBOR ranged from 1.763% to
2.726%). As of 31 December 2023, impairment for expected credit loss of non–current loans to
Sadales tīkls AS in the amount of EUR 441 thousand EUR (31/12/2022: EUR 354 thousand) was
recognised. Non–current loans are not secured with a pledge or otherwise.

Non–current loans to Sadales tīkls AS by maturity | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022
Non–current loan: |  |
- < 1 year (current portion) | 105,839 | 95,312
- 1 – 5 years | 326,443 | 334,109
- > 5 years | 119,110 | 160,870
| 551,392 | 590,291

Concluded non–current loan agreements with Elektrum Eesti OÜ |  |  |  |  | EUR’000
Agreement | Principal amount | Outstanding loan amount |  | Interest rate | Maturity date
conclusion date | of the loan | 31/12/2023 | 31/12/2022 |  |
|  |  |  | 6 months EURIBOR + |
25/08/2021 | 7,860 | 7,260 | 7,560 | fixed rate | 24/08/2031

As of 31 December 2023, total outstanding amount of non–current loans with Elektrum Eesti OÜ
amounted to EUR 7,260 thousand (31/12/2022: EUR 7,560 thousand), including current portion of the
loan repayable in 2023 – EUR 300 thousand (31/12/2022: EUR 300 thousand). The annual interest rate
according to the loan agreement is 6 (six) months EURIBOR (Euro Interbank Offer Rate) plus margin
0.74% (2022: 0.74%). If the Base rate is negative, it is equal to zero. The final repayment date of the
loan is 24 August 2031.

Non–current loans to Elektrum Eesti OÜ by maturity | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022
Non–current loan: |  |
- < 1 year (current portion) | 300 | 300
- 1 – 5 years | 600 | 900
- > 5 years | 6,360 | 6,360
| 7,260 | 7,560

Concluded non–current loan agreements with Elektrum Lietuva, UAB |  |  |  |  | EUR’000
Agreement | Principal amount | Outstanding loan amount |  | Interest rate | Maturity date
conclusion date | of the loan | 31/12/2023 | 31/12/2022 |  |
|  |  |  | 6 months EURIBOR + |
31/10/2021 | 22,280 | 12,443 | 9,439 | fixed rate | 29/09/2031

As of 31 December 2023, total outstanding amount of non–current loans with Elektrum Lietuva, UAB
amounted to EUR 12,443 thousand (31/12/2022: EUR 9,439 thousand), including current portion
of the loan repayable in 2023 – EUR 1,555 thousand (31/12/2022: EUR 904 thousand). The annual
interest rate according to the loan agreement is 6 (six) months EURIBOR (Euro Interbank Offer Rate)
plus margin 0.68% (2022: 0.68%). If the Base rate is negative, it is equal to zero. The final repayment
date of the loan is 29 September 2031.

Non–current loans to Elektrum Lietuva, UAB by maturity | Parent Company | EUR’000
| 31/12/2023 | 31/12/2022
Non–current loan: |  |
- < 1 year (current portion) | 1,555 | 904
- 1 – 5 years | 6,222 | 4,340
- > 5 years | 4,666 | 4,195
| 12,443 | 9,439

II) Current loans / borrowings
To ensure efficiency and centralised management of Latvenergo Group companies’ financial resources
and using the functionality of Group accounts and possibility for non–cash offsetting of mutual invoices
between the parties, current loans / borrowings are provided. In the reporting period Latvenergo AS
issued loans to subsidiaries in accordance with mutually concluded agreement ‘On provision of
mutual financial resources’, allowing the subsidiaries to borrow and to repay the loan according to
daily operating needs and including non-cash offsetting of operating receivables and payables.
In 2023 the effective average interest rate was 3.70% (2022: 0.74%). Within the framework of the
agreement, as of 31 December 2023, Parent Company issued loans to subsidiaries in the amount
of EUR 53,703 (31/12/2022: EUR 106,446 thousand), as of 31 December 2023 Latvenergo AS
had no current borrowings from subsidiaries (31/12/2022: there was current borrowing from
Enerģijas publiskais tirgotājs SIA in the amount of EUR 3,317 thousand).
As of 31 December 2023 impairment for expected credit loss of current loans to related parties is
recognised in the amount of EUR 44 thousand (31/12/2022: EUR 65 thousand).
f) Interest paid to related parties
Financial transactions between related parties have been carried out by using current loans / borrowings
with a target to manage Latvenergo Group companies’ financial resources effectively and centrally,
using Group accounts. In the reporting period Latvenergo AS has received borrowings from subsidiaries
in accordance with mutually concluded agreement “On provision of mutual financial resources”. In 2023
the effective average interest rate was 3.70% (2022: 0.74%).

| Parent Company | EUR’000
| 2023 | 2022
Interest paid | 12 | 18
TOTAL interest paid | 12 | 18

60
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Notes to the Financial Statements
– Independent Auditors’
Report
30. Commitments and contingent liabilities
As of 31 December 2023, the Group had commitments amounting to EUR 112.2 million (31/12/2022:
EUR 82.4 million) and the Parent Company had commitments amounting to EUR 57.1 million (31/12/2022:
EUR 49.6 million) for capital expenditure contracted but not delivered at the end of the reporting period.
Latvenergo AS has issued support letters to its subsidiaries – on 16 February 2024 to Sadales tīkls AS
and on 22 February 2024 Elektrum Eesti OÜ acknowledging that its position as the shareholder is to
ensure that subsidiaries are managed so that they have sufficient financial resources and are able to carry
their operations and settle their obligations.
31. Events after the reporting year
Accounting policy
Events after the reporting period that provide significant additional information about the Group’s and the Parent
Company’s position at the balance sheet date (adjusting events) are reflected in the financial statements. Events
after the reporting period that are not adjusting events are disclosed in the notes when material.
After the end of the reporting year, at the beginning of 2024, Renewable energy generation capacity
portfolio of Latvenergo AS has been expanded by seven solar power plant projects in Latvia, with a
total capacity of 40 MW and which are planned to be built by the end of the year 2024. Also has been
starter the development of a new wind station project in Lithuania, Akmenes district, with a capacity of
up to 15 MW. The project is planned to be completed in the second half of the year 2025.
Latvijas valsts meži AS was permitted to terminate its participation in Latvijas vēja parki SIA, the joint
venture of Latvijas valsts meži AS and Latvenergo AS, by alienating all shares (20%) of Latvijas vēja
parki SIA owned by Latvijas valsts meži AS for the benefit of Latvenergo AS.
There have been no other significant events after the end of the reporting year that might have a
material effect on the Latvenergo Consolidated and Latvenergo AS Annual Financial Statements for the
year ending 31 December 2023.
This document is signed with a secure digital signature and contains a time stamp
Mārtiņš Čakste Guntars Baļčūns
Chairman of the Management Board of Latvenergo AS Member of the Management Board of Latvenergo AS
Liāna Ķeldere
Accounting director of Latvenergo AS
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