AB Amber Grid : Annual report of Amber Grid of 2023

Annual report 2023

AMBER GRID AB CONSOLIDATED ANNUAL

REPORT 2023

Vilnius

2024

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Annual report 2023

CONTENT

1.	OVERVIEW	6
2.	BUSINESS ENVIRONMENT	13
3.	STRATEGY	18
4.	OPERATIONS	27
5.	FINANCIAL RESULTS	39
6. RISKS AND RISK MANAGEMENT	51
7.	MANAGEMENT REPORT	57
8.	SUSTAINABILITY REPORT	72
9. SIGNIFICANT EVENTS DURING THE REPORTING PERIOD	126
10.	ANNEXES	127

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Annual report 2023

FOREWORD BY THE CHAIRMAN OF THE BOARD

2023 was a successful year for Amber Grid. The Company maintained stable revenue and profit performance, and achieved significant results in network modernisation projects. Employee and customer satisfaction with the Company and its services improved during the year. The Company continues to present itself as a reliable and responsible company that plays an important role in ensuring the energy security of Lithuania and the entire Baltic region.

Last year, despite the complicated geopolitical situation and high gas prices at the start of this year, Amber Grid successfully ensured uninterrupted gas supply to all its customers. The Company made further investments in the modernisation and development of the gas transmission system: during the year, upgraded five gas distribution stations and other gas transmission system facilities, as well as implemented the reconstruction of sections in the Vilnius-Kaunas gas pipeline.

The environment and climate change reduction remains the area of particular attention in the Company. In 2023, the Company's solar power plants generated even more electricity from renewable sources, and its car fleet was upgraded by replacing polluting cars with electric or hybrid vehicles. In addition, the Company approved future plans to switch the existing gas compressor from gas to electric.

Although a gas pipeline incident in Pasvalys district marked the beginning of the year, the Company and its customers did not suffer significant losses. On the contrary, internal diagnostics of gas pipelines were improved, and around 600 km of gas pipelines across Lithuania were tested. The Company also held the campaign to raise public awareness for safety at gas pipelines.

Amber Grid will continue to pursue its goals outlined in the Strategy: to ensure reliable and secure gas supply, to increase the diversification of gas supply and to actively contribute to the development of green energy by participating in the implementation of green hydrogen and other renewable gas projects. I am grateful to my colleagues for a successful past year and wish Amber Grid sustainable growth, strengthening the Baltic energy sector and creating benefits for Lithuania in the dynamically changing energy sector.

Yours faithfully

Dalius Svetulevičius

Chairman of the Board of Amber Grid

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Annual report 2023

CEO'S FOREWORD

2023 was a year of events, achievements and changes. We successfully implemented numerous projects, strengthened our presence in the region and took significant steps towards energy transformation.

Last year, we transported more than 61 TWh of gas through our well-developed gas transmission infrastructure to meet national and regional needs. This period was accompanied by exceptionally large gas flows towards Latvia. During the year, we transported as much as 19 TWh of gas to the underground gas storage facility and to the Baltic States and Finland. The strategic ELLI project implemented on the territory of Lithuania in 2022 served for this, boosting gas transmission flows to Latvia by a third. Since the interconnection capacities were also enhanced on the territory of Latvia at the end of 2023, the ELLI project is considered complete.

This was one of the last projects increasing the integration of the gas market in the Baltic region. After implementing it, we achieved that gas flows in large quantities between the Baltic countries and Finland. The Klaipėda LNG terminal, and the recently implemented GIPL and ELLI projects have substantially increased the gas infrastructure possibilities of Lithuania and the Baltic States, created economic and geopolitical benefits.

One of the key projects implemented by the Company last year was the reconstruction of sections in the Vilnius-Kaunas gas pipeline. The project, which cost more than EUR 13 million, was implemented on schedule and improved reliability and security of the gas supply. As part of our investments in network modernisation, last year we completed the reconstruction of five gas distribution stations in Šiauliai, Telšiai, Grigiškės, Vievis and Kėdainiai, as well as the installation of the pressure relief valve in the main gas pipeline branch to the Marijampolė GDS.

The gas pipeline incident on 13 January last year has motivated us to reinforce action on the security of infrastructure. We carry out a complete diagnostics of gas pipelines, held national training exercise and launched a public awareness campaign "Protect yourself and the pipeline".

We also successfully completed an international transaction by selling a majority of shares in our subsidiary, gas exchange GET Baltic, to the German gas exchange EEX. The transaction strengthens the region's energy market and brings benefits to all its participants.

2023 was also notable for concrete steps towards hydrogen energy. We launched hydrogen transport activities, established an Energy Transformation Centre and, together with the Ministry of Energy of the Republic of Lithuania, drafted guidelines for the development of the hydrogen sector in Lithuania. We have also entered the preparatory phase of the Hydrogen Corridor, one of the biggest future projects: together with Scandinavian, Baltic and European partners we are developing a feasibility study enabling to plan the Nordic-Baltic Hydrogen Corridor project.

Last year was also a breakthrough year for biomethane: we connected a link dedicated for biomethane supply to the gas transmission system. In July, biomethane production was put into pilot mode, and in September the first biomethane plant connected to the Lithuanian network started operating. The plant is expected to feed around 100 GWh of biomethane into the transmission system each year. The biomethane will be granted green gas guarantees of origin.

Taken together, these achievements prove that Amber Grid is a reliable and responsible company committed to care for energy security and sustainability. We will continue working towards a reliable and secure gas supply, and we will invest in infrastructure modernisation and contribute to the development of national green energy.

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Annual report 2023

As we have increased our focus on sustainability, we have expanded the list of sustainability indicators being assessed. We disclose them in the Sustainability Report that accompanies the Annual Report. Diligent work in the field of sustainability will allow us to be seen as a responsible and valuable part of a sustainable society.

I am thankful to all Amber Grid's employees and colleagues for their dedication and cooperation. Your professionalism and efforts have enabled us to achieve a very satisfactory outcome. I am also thankful to our clients, partners and shareholders for their trust and support. I do believe 2024 is going toe an even more successful year. We will continue to strengthen our presence in the region, invest in the security and renewal of infrastructure, and play an active role in the energy transformation.

Yours faithfully

Nemunas Biknius

Chief Executive Officer

Amber Grid

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Annual report 2023

1. OVERVIEW

The Consolidated Annual Report covers the reporting period for the year 2023.

1.1. BASIC DETAILS

Name	Amber Grid AB (hereinafter "Amber Grid" or the "Company")
Legal form	Public limited liability company
Date of registration and name of register	25 June 2013, Register of Legal Entities
Legal entity code	303090867
Manager of the Register of Legal Entities	State Enterprise Centre of Registers
Issued capital	EUR 51,730,929.06
LEI code	097900BGMP0000061061
Registered office address	Laisvės ave. 10, LT-04215 Vilnius, Lithuania
Phone	[phone]
Email address	[e-mail]
Website	www.ambergrid.lt

Amber Grid is the gas transmission system operator in Lithuania, which ensures reliable and safe transporting of natural gas to its consumers through high pressure gas pipelines. The Company is responsible for the operation, maintenance and development of the Lithuanian gas transmission infrastructure consisting of a network of nearly 2,300 km-long gas pipelines and two gas compressor stations. A well-developed gas transmission infrastructure in Lithuania is convenient for transporting large volumes of energy to Poland, the Baltic States and Finland.

The Company has implemented two strategic energy projects, i.e. GIPL and ELLI, which interconnected the gas transmission systems of Poland and Lithuania, and fostered integration of the Baltic and Finnish gas markets into the pan-European gas trading market.

As part of its decarbonisation goals, Amber Gird takes active measures to look into innovative technological and market solutions and to facilitate adaptation of the Lithuanian gas transmission system to transporting green gas, including hydrogen. Amber Grid also administers the National Register of Guarantees of Origin for gas produced from renewable energy sources (RES).

Amber Grid is a part of the EPSO-G UAB group of companies (hereinafter "EPSO-G" or the "EPSO-G Group"). EPSO-G is a state-owned group of energy transmission and exchange companies, and EPSO-G UAB acts as a holding company of the EPSO-G Group, with its shareholder's rights and obligations implemented by the Ministry of Energy of the Republic of Lithuania. For more information about EPSO-G UAB and the EPSO-

1. Group, seewww.epsog.lt.

Amber Grid holds 34% of shares in the GET Baltic UAB gas exchange. GET Baltic, a part of the EEX gas exchange, undertakes and develops gas exchange trade in Lithuania, Latvia, Estonia and Finland. For more information about GET Baltic, see www.getbaltic.com.

The Company has no branches and representative offices.

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Annual report 2023

VISION

An environmentally friendly, innovative energy company in the integrated European gas network.

MISSION

To develop the system that enables competition and the use of climate- friendly energy.

1.2. PERFORMANCE INDICATORS

Table 1. The Company's performance indicators in 2021-2023

	2023	2022	2021
Quantity of gas transported to domestic exit point and used for own needs,	14913	15576	24136
GWh
Quantity of gas transported to adjacent transmission systems 1, GWh	46326	48213	28595
Number of systems users at the end of the period	127	122	110
Length of main gas pipelines, km	2288	2288	2285
Gas distribution stations and gas metering stations (number of units)	68	68	67
Number of employees at the end of the period	340	332	324

1.3. SIGNIFICANT EVENTS

01

January

13 January. An incident in the Pasvalys district in the northern part of Lithuania on the gas pipeline of Amber Grid occurred, during which the fire broke out. There were no human injuries during the incident. The gas ignited during the incident and the fire ceased after 4 hours. The gas transmission system at the site of the incident consists of two parallel gas pipelines running towards the direction of Latvia. The incident occurred in one of them, while the other pipeline was not damaged. The gas transmission to the damaged pipeline was immediately

1 The transmission systems in Latvia, Poland and the Karaliaučius Region

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Annual report 2023

cut off. The gas transmission to the Pasvalys district and other consumers in Northern Lithuania is ensured through a parallel pipeline. The gas transmission to Latvia was also restored on the same evening. The damaged gas pipeline was repaired in few days, and the gas transmission to Latvia was fully restored on 16 January. The causes of the incident are being investigated.

8 January. Amber Grid started the reconstruction of one of the most important gas

02 transmission arteries in Lithuania - Vilnius-Kaunas gas pipeline: almost 17 km of gas pipeline sections in Kaunas and Kaišiadorys districts. The reline of the section is planned to be

February completed in 2023.

		16 March. European Energy Exchange AG (EEX) was awarded the contract following the
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conclusion of the international public tender to select a strategic partner for GET Baltic gas
		exchange. The Board of Amber Grid made a decision to approve the sale of 66% shares of GET
March	Baltic to EEX for EUR 6.5 million. This price reflects GET Baltic' strong performance in 2022,
with revenues of EUR 1.61 million and EBITDA of EUR 0.93 million, as well as future business
		prospects.

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April

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May

11 April. the ordinary General Meeting of Shareholders, elected Paulius Butkus, nominated by the parent company EPSO-G to the Board of Amber Grid for the remainder of its term of office.

11 April. The ordinary General Meeting of Shareholders of Amber Grid resolved to distribute the Company's profit for 2022 and to grant a dividend of EUR 0.0676 per share. In total, more than EUR 12 million in dividends was paid.

14 April. Amber Grid participating in the international Nordic-Baltic Hydrogen Corridor project, launched the international public procurement for developing the feasibility study. This is another important step in the development of Europe's hydrogen infrastructure, following the signing the cooperation agreement in December 2022 between the transmission system operators of six European Union countries for the implementation of a cross-border project - the Nordic-Baltic Hydrogen Corridor.

16 May. Amber Grid and the European Energy Exchange AG (EEX) have officially signed an agreement under which EEX will acquire a 66% stake in regional gas exchange GET Baltic. The gas exchange, which operates in the three Baltic countries and Finland, thus became part of the EEX Group. Amber Grid continues to hold the remaining 34% of shares.

23 May. Amber Grid set gas transmission service prices for 2024. The prices are based on the regulatory revenue cap approved by the Council. Compared to the average price of transmission services for Lithuanian consumers in 2023 (EUR 1.39/MWh), the price will increase by 7% to EUR 1.49/MWh in 2024. The gas transmission service price makes up only a few percent of the final price paid by consumers for gas.

2 June. As part of its internal investigation and assessment of available information, Amber

06 Grid contacted the Prosecutor's Office regarding the GIPL pipeline connection fittings. The ongoing process does not have any impact on the normal operation of the GIPL pipeline.

June

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Annual report 2023

07

July

08

August

Previous and new additional tests and investigations carried out on the pipeline and its components confirm that the pipeline is technically safe and reliable.

In June 2023, the internal diagnostics of the GIPL pipeline was carried out as previously planned.

25 June. Amber Grid has initiated a public awareness campaign "Saugok save ir dujotiekį" (Protect yourself and the pipeline) to encourage residents to pay attention to the main gas pipelines and surrounding infrastructure. It highlights important aspects of living or working near a main gas pipeline, as well as applicable rules, permits and restrictions.

1 August. Special land use conditions become applicable for areas within the location classes of trunk gas pipelines. This change will raise public awareness of the standards for property development near gas transmission system facilities, and will encourage people to plan their activities near gas pipelines more carefully, to check the applicable activity restrictions and to comply with the rules. From now on, the registered main gas pipelines' class location will be recorded in the extract of the land plot's legal registration from the real property register. This change is being made by Amber Grid to implement the provisions of the Law on Special Land Use Conditions of the Republic of Lithuania.

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September

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October

September 18. The first biomethane plant started operating in Pasvalys district. The plant feeds green gas into the transmission system, Tube green biomethane plant facilities were connected to the gas transmission system in the middle of the year as part of a joint project between Amber Grid and Tube green. Around 100,000 megawatt hours (MWh) of biomethane is expected to be injected into the transmission system from this plant each year. This will account for up to 0.6% of Lithuania's total gas demand. In the future, biomethane production is expected to increase to as much as 250,000 MWh.

October 9. As part of its contribution to a sustainable Lithuania, Amber Grid has launched hydrogen transport activities, develops hydrogen-related projects and aims to become the Lithuania's hydrogen infrastructure operator. This will allow timely integration into the European green hydrogen transport network currently under development. Amber Grid established the Energy Transformation Centre to accelerate the development of hydrogen transport activities. Its specialists are responsible for the development of the hydrogen gas transport network and market, and the adaptation of the existing gas transmission system to the transport of the gas-hydrogen mixture. They will also ensure the development of the Green Gas Guarantee Register and the creation of the necessary partnerships to enable energy transformation.

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November

November 13. Amber Grid and Conexus Baltic Grid, Lithuanian and Latvian transmission system operators, respectively, has started to offer increased technical capacity at the Kiemėnai interconnection point. As a result of the accelerated implementation of ELLI project, the technical capacity was increased to 82 GWh/d from Latvia to Lithuania with a possible dynamic increase to around 100 GWh/d. Last year, the technical capacity was increased to 90 GWh/d from Lithuania to Latvia with a possible dynamic increase to around 100 GWh/d.

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Annual report 2023

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December

December 1. Amber Grid completed the reconstruction of sections of the Vilnius-Kaunas gas pipeline, one of the most important gas transmission arteries in Lithuania. The project cost more than EUR 13 million and involved the relining of almost 17 km of gas pipeline sections in Kaunas and Kaišiadorys districts.

December 8. Amber Grid modernised five gas distribution stations in Šiauliai, Telšiai, Grigiškės, Vievis and Kėdainiai, and installed a gas pressure limiting unit at the branch of the gas pipeline to the Marijampolė gas distribution station. The renewal works took one and a half years and the total investment in these projects amounts to EUR 14 million.

December 14. Amber Grid announced a public tender for the purchase of an electric compressor for gas transmission. The 5 MW electric compressor will be built on the territory of the Jauniūnai gas compressor station and will be used as required together with, or separately from, the three existing 11.5 MW gas compressors. This project will reduce compressor maintenance costs. Moreover, electric compressor will operate using only green energy, which will reduce air pollution.

Events after the reporting period

01

Janua

3 January. The European Gas Transmission System Operators Gasgrid Finland (Finland), Elering (Estonia), Conexus Baltic Grid (Latvia), Amber Grid (Lithuania), GAZ-SYSTEM (Poland) and ONTRAS (Germany) participating in the international project for the creation of the Nordic-Baltic Hydrogen Corridor signed a contract on the pre-feasibility study on the green hydrogen corridor. AFRY Management Consulting, the winner of the tender, will analyse the conditions for the development of cross-border hydrogen infrastructure from Finland, through the Baltic countries and Poland to Germany, as well as green hydrogen trends in the region. It is planned that the study, which will provide a comprehensive, fact-based framework to allow the optimal decisions to be made, will be prepared in six months, by the middle of 2024.

26 January. The ELLI project, a joint partnership between Amber Grid and Latvian gas transmission and storage system operator Conexus Baltic Grid, has been officially completed. The project increases the interconnection capacity in both directions, strengthening the security of natural gas supply in the region. The ELLI project was included in the BEMIP gas priority corridor in the list of projects of common interest adopted by the European Commission, and co-financed by the European Union.

1.4. MEMBERSHIP

The Company has membership in the following organisations: European Network of Transmission System Operators for Gas ENTSOG (www.entsog.eu), Association Polish and Lithuanian Chamber of Commerce, National Lithuanian Energy Association, Lithuanian Liquefied Natural Gas (LNG) Platform, EASEE-gas Association, European Renewable Gas Registry (ERGaR), European Clean Hydrogen Alliance, Lithuanian Hydrogen Platform, Lithuanian Hydrogen Energy Association, association INFOBALT, European Hydrogen Backbone initiative:

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