ANNUAL REPORT 2015 AB Lietuvos Geležinkeliai Mindaugo G

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ANNUAL REPORT 2015 AB Lietuvos Geležinkeliai Mindaugo g. 12, Vilnius LT-03603, Lithuania Fax. +370 5 269 21 28 [email protected] www.litrail.lt ANNUAL REPORT 2015 LITHUANIAN RAILWAYS

6 Contents Overview of economic and financial activities 15 Rolling 13 stock 17 Passenger Freight transportation transportation 21 19 Infrastructure 25 Technical development Environmental and investment policy protection 29 Information 27 systems 31 Traffic safety International relations 39 35 Highlights 40 Human resources and JSC Lithuanian social initiatives Railways manage- 42 ment structure Balance 41 sheet 44 Independent Income auditor‘s report statement ANNUAL REPORT 2015

Lithuanian Railways means more than 155 years in experience

50%

10,000+ 84.9% Up to 50% of the freights in Lithuania are transported by railways

Employees in 2015 In 2015, 84.9% of its total revenue the Company earned from freight 1,500+ forwarding operations 20+

Customers 105

countries of the world use the services provided by JSC Lithuanian Railways

544 Railway stations 385

544 level crossings 48.05 200+ 383 viaducts and bridges

In 2015 – 48.05 m tonnes of freight 200+ locomotives LITHUANIAN RAILWAYS

The Lithuanian transport policy seeks the development of nius and Kaunas public intermodal terminals, completion sustainable and environmentally-friendly transport, and the of the projects of road construction works at the sections creation of green transport corridors. The strategic objectives Kūlupėnai–Kretinga, Pavenčiai–Raudėnai and Telšiai–Dū- of JSC Lithuanian Railways related to ensuring the quality of seikiai, and the end of the five years manoeuvre locomotive passenger transportation and freight forwarding services are upgrading programme. in line with the provisions of the State policy, and are being successfully attained. Seeking to ensure that the national railway development plans are successfully implemented, in 2015 the Board of the Com- While using European Union financing, the Company in 2015 pany discussed and passed appropriate decisions concerning was intensively developing and modernising the railway infra- each major project and controlled the corporate performance structure in the international transport corridors crossing the results and the process of investment projects in progress. territory in both the North-South and East-West directions. Although throughout 2015 the external economic conditions During 2015, the Company allocated EUR 89.3 m of its invest- in the transport sector were quite challenging, especially in ment resources for the restoration and modernisation of the the international transportation sector, JSC Lithuanian Rail- railway infrastructures, and acquired assets and carried out ways managed to achieve positive results, operate at a prof- works amounting to EUR 73.5 m. it and secure the property interests of the shareholder (the State). In 2015, the Company recorded the completion of Stage I of the Rail Baltica project which included building of the Euro- The professionals working at the Company are successfully pean standard gauge, and the reconstruction of the existing coping with the challenges and fulfilling the defined strategic railway section of the Lithuanian and Polish state border– objectives. Mockava–Šeštokai–Marijampolė–Kazlų Rūda–Kaunas. The Company also entered into agreements on financing further SAULIUS GIRDAUSKAS works under the Rail Baltic project in 2014–2020. Vice-Minister of Transport and Communications of the Republic of Lithuania The other equally important undertakings were the commis- Chairman of the Board of JSC Lithuanian Railways sioning of the Vilnius railway bypass, launching of the Vil- ANNUAL REPORT 2015

In 2015, due to political and economic reasons, the overall It is highly encouraging that in 2015 the activities and the railway transportation volumes decreased significantly in the performance of JSC Lithuanian Railways were appreciated. neighbouring States; therefore, the conditions in the railway Within the national transportation sector Lithuanian Rail- transport market were challenging. This situation did have an ways was recognised to be the most desirable employer; fur- effect on the performance of JSC Lithuanian Railways. In 2015, ther, the Company was awarded the nomination “For merits the Company transported 48 m tonnes of freight, of which to business. Innovative solution leader 2015”, the award “For 33.6 m tonnes were transported on international routes, and the achievements in logistics in 2015”, and the regular contain- 14.4 m tonnes on local routes. er train VIT EKSPRES project.

The Company transported 4.2 m passengers in 2015. The ren- STASYS DAILYDKA ovation of the park of rolling stock for passengers, and the Director General of means for the improvement of customer services turned out JSC Lithuanian Railways to be an advantage.

During the reporting period the Company invested EUR 233.6 m, recording the execution of the investment funds us- age plan to 107 %. The Company absorbed EUR 93.9 m from EU assistance sources, EUR 1.9 m from the State budget, EUR 83.1 m from the Company‘s own funds and EUR 54.7 m were borrowed from banks.

Throughout 2015, JSC Lithuanian Railways was actively searching for new opportunities in the freight transportation business, and prioritised Rail Baltica and a number of other projects in modernisation of the railway infrastructure, upgrading the rolling stock, intermodal transportation and the development of information technologies. LITHUANIAN RAILWAYS

Overview of economic and financial activities

KEY INDICATORS

2015 2014

ASSETS AND LIABILITIES (EUR m)

Assets 2,065.1 2,017.3

Equity 1,098.6 1,012.1 Grants and subsidies 576.4 573.8 Amounts payable and liabilities 390.1 431.4

REVENUES (EUR m) 437.2 472.8

Revenue from the principal activities (sales) 429.0 461.7 Income from financing and investing activities 0.6 0.9 Other operating income 7.6 10.2

COSTS (EUR m) 433.0 447.6

Costs of principal activities 427.5 438.2 Costs of financing and investing activities 4.7 8.3 Costs of operating activities 0.8 1.1

RESULTS (EUR m)

EBITDA (earnings before interest, taxes, depreciation and amortisation) 119.3 136.2 EBIT (earnings before interest and taxes) 10.3 31.6 Profit before taxes 4.2 25.2 Net profit 2.8 20.4 ANNUAL REPORT 2015

Overview of economic 7 and financial activities

2015 2014

FINANCIAL RATIOS

Liquidity (current assets/short-term liabilities) 1.1 0.9 Gross margin (gross profit/sales), % 15.4 16.6 Net profit margin (net profit/sales), % 0.7 4.4 TReturn on assets (ROA) (net profit/assets), % 0.1 1.0 Return on equity (ROE) (net profit/equity), % 0.3 2.0

INVESTMENT FUNDS (EUR m)

Investment funds 233.6 331.7 Corporate investment funds 83.1 86.7

PERFORMANCE INDICATORS

Payroll employees 10,150 10,480 Average monthly wages (EUR) 1,026 979 Sales revenues per employee (EUR’000/person) 42.3 44.1 LITHUANIAN RAILWAYS

CHANGES IN THE BALANCE SHEET trade payables, as well as payments to the subsidiaries and associates. For reasons stated above, the amounts payable Throughout the period of 2015, the value of the assets of JSC within one year and short-term liabilities of the Company Lithuanian Railways, as compared to 2014, increased by 2.4% dropped by 35.0%. to reach EUR 2,065,100. The value of the non-current assets, accounting for 95.3% in the overall structure of the assets, At the end of 2015, the debts of JSC Lithuanian Railways to increased by 4.1% and was reported at EUR 1,968,400. The credit institutions reached EUR 312.9 m; i.e. by 2.7% more value of the corporate assets increased mostly due to the than in 2015. To fund the investment projects for the mod- large-scale public railway infrastructure and the rolling stock ernisation and development of its infrastructure and the ac- upgrading investment projects, as well as the increase in the quisition of railway rolling stock, the Company has obtained value of the tangible assets. 16 long-term loans from the European Bank for Reconstruc- tion and Development, the European Investment Bank, the Compared to 2014, the value of the current assets of the Nordic Investment Bank, and other credit institutions. Company decreased by 23.4% to EUR 96.7 m, and accounted for 4.7% of the entire assets of JSC Lithuanian Railways. The Company paid to the state EUR 8.2 m in dividends for The changes in the value of the assets resulted mostly due to the shares owned by the State in 2015. a decrease in the Company budget, as well as its inventories and amounts receivable within one year. REVENUES

During the accounting year the Company’s equity appreciat- During the reporting year, the Company earned EUR 437.2 m, ed by 8.6% to EUR 1,098.6 m, essentially because of the in- i.e. 7.5% down from 2014. crease in the Company’s authorised capital by EUR 116.8 m, or 12.4% to EUR 1,057.4 m by respective resolutions of the FREIGHT TRANSPORTATION REVENUES. The Com- Government of the Republic of Lithuania. In 2015, the value pany earned a major part of its total revenues, 84.9%, from of the Company’s grants and subsidies was EUR 576.4 m, and freight forwarding operations. Freight transportation rev- its change was minor. A major share of the grants and sub- enues, which accounted for EUR 371.3 m in 2015, dropped sidies is earmarked for funding investment projects on the by 4.3% from 2014. The freight revenues decreased mostly modernisation of the public railway infrastructure financed because of the significant decline in the volumes of transit by the European Union, and used to increase the authorised freight transportation to the Kaliningrad region, which rep- capital of the Company. resents a vital importance for the revenue and performance indicators of the Company. In 2015, the liabilities of JSC Lithuanian Railways decreased by 9.6% to EUR 390.1 m. Having implemented the invest- PASSENGER TRANSPORTATION REVENUES. The ment projects funded from the European Union resources in Company’s revenues from passenger transportation in 2015 the 2007–2013 financing period, the Company decreased its accounted for EUR 23.9 m, or 5.5% of its total income. In ANNUAL REPORT 2015

view of the significant decline in the passenger flows on both REVENUES OF THE COMPANY IN TOTAL (EUR m) local and international routes, the Company’s income by 8.1% lower than in 2014. In 2015, the State allocated from 511.4 its budget EUR 2.719 m in subsidies supporting the passen- 481.1 467.5 472.8 437.2 ger transportation operations, of which EUR 2.383 m were allocated to compensate the income foregone due to the transportation of passengers on preferential terms, and EUR 0.336 m were used to finance the loss from passenger transportation on local routes.

OTHER REVENUES. The Company also renders other services related to freight and passenger transportation, as well as additional services operating aboard (freight transporta- tions in the territory of other countries, operation of loco- 2011 2012 2013 2014 2015 motives and engine-crews abroad), provides rolling stock repair and technical maintenance services, freight handling and storage, and the sales of scrap iron. In 2015 the Compa- STRUCTURE OF THE COMPANY’S ny’s earnings from the services mentioned above constituted REVENUES IN 2015 (%) EUR 33.8 m; i.e. less by 29.0% compared to 2014. The other income accounted for 7.7% in the overall structure of the Company’s income. This decrease in the Company’s earnings was caused mainly by a significant decline in the demand for the lease and repair of freight wagons, as well as a decline in metal scrap.

84.9 Freight transportation 7.7 Other additional services 5.5 Passenger transportation 1.7 Other activities 0.2 Financing and investing activities LITHUANIAN RAILWAYS

NET PROFIT (EUR m) COSTS

The overall costs of JSC Lithuanian Railways in 2015 account- 42.6 ed for EUR 433.0 m, which is 3.3% less than in 2014. 37.7

The most significant decline was recorded in the cost for fu- 28.1 el, mainly due to the fall in freight transportation volumes and the price of diesel. Furthermore, in 2015 the Company 20.4 reduced its expenses for procuring repair works and materials; nonetheless, during the reporting year the Company’s costs were adversely increased as a result of the ongoing legal proceedings with JSC ORLEN Lietuva regarding rates for 2.8 freight transportation, in addition to the provision to secure the objection on the part of the European Commission in the 2011 2012 2013 2014 2015 case regarding the dismantling of the railway rails from the Bugeniai train station to the State border. COST STRUCTURE OF THE COMPANY (%) Remuneration costs represented the major part in the total cost structure and accounted for 36.1%; the non-current asset depreciation costs and the costs of fuels comprised 24.3 % and 10.6% respectively.

PROFIT

In 2015 the Company was operating at a profit – its profit before taxes accounted for EUR 4.2 m, and the net profit was reported at EUR 2.8 m.

36.1 Wages and salaries 10.6 Fuel 24.3 Depreciation (amortisation) 1.8 Energy resources 6.6 Materials 4.7 Repair works 1.1 Financial and investment costs 4.1 Settlement with railway companies of other countries 10.7 Other costs ANNUAL REPORT 2015

PERFORMANCE OF THE COMPANY’S SUBSIDIARIES

The Group consisted of JSC Lithuanian Railways and its subsidiaries in 2015:

Profit (loss) for the Principal activities Company reporting year

JSC Vilnius Locomotive Repair Depot 115.7 Repair and production of the rolling stock

Repair and construction of the railway JSC Railway Building Centre 23.4 infrastructure track

JSC Gelsauga 662.1 Security and cleaning services

Designing and research works in railways, JSC Railway Designing 637.4 construction and repair of buildings

Waste management and logistics, protection and JSC Centre of Railway (118.4) maintenance of the protective forests and green Environment Protection plantations of the railway line

Joint ventures of the Baltic States’ company RB RAIL AS, responsible for the implementation of the project JSC Rail Baltica Construction (157.1) Rail Baltica 2, and realisation of the shareholder’s functions

JSC Voestalpine VAE Legetecha 74.9 Production of railway switches LITHUANIAN RAILWAYS

Passenger transportation

In 2015, JSC Lithuanian Railways provided transportation Even in view of the complicated situation at the international services to 4.2 m passengers. Local trains transported 3.4 m market, and without receiving any support from the State to passengers, i.e. about 6.6% less than in 2014, the Company’s compensate the loss incurred at local routes, the Company turnover from this activity accounted for 247.7 m passenger made considerable efforts to improve the passenger commu- km. International trains transported total about 0.8 m pas- nications by trains. sengers. i.e. by about 12% less than in 2014, and the Com- pany’s turnover from this activity accounted for 113.0 m pas- —— Since 26 February 2015, all local communication senger km. passengers can acquire the tickets at the internet site www.traukiniobilietas.lt. During 2016, the The principal reasons for the decrease in the passenger flows Company intends to adapt it internet website for on the local communication routes were the repair of the mobile telephones and tablets. railway infrastructure that caused the cancellation of 3,811 trains, i.e. about 6% of all local communication trains. —— The employees of the Company selling tickets to passengers and controlling them are supplied The decrease in the flows of international passengers is large- with the most modern ticket sale and check- ly related to geopolitical and economic reasons, due to which ing devices; participants of the JSC Lithuanian in June 2015, the Vilnius–St. Petersburg–Vilnius train formed Railways passenger loyalty programme, of whom by JSC Lithuanian Railways was cancelled, and since Decem- there are about 30,000, are provided a possibility ber 2015, the Vilnius–Moscow–Vilnius train was joined to the to benefit from discounts when purchasing the transit train Kaliningrad–Vilnius–Kaliningrad. Nevertheless, tickets on trains. as compared with 2014, in 2015 the overall number of passengers travelling the trains operated on the Vilnius–Minsk–Vil- —— An additional express train was launched on nius route still showed some increase. the route Vilnius–Klaipėda–Vilnius that reaches Klaipėda from Vilnius in 3 h and 47 min. During 2015, the number of passengers travelling by trains formed by railway companies of other states declined by —— An additional fast train launched on the route 11,300, as compared with 2014, or 2.4%. Vilnius–Turmantas–Vilnius reaches Turmantas from Vilnius in 2 h and 8 min. In 2015, the Company’s revenues from transportation of passengers on local routes were recorded at EUR 8.1 m, i.e. an —— In December the Company renewed the com- increase by about 1% since 2014, and the revenues from pas- munication on the route Kaunas–Marijampolė– senger transportation by international routes reached about Kaunas. EUR 13.1 m, down by about 14% as compared to 2014. The Company’s income from the transportation of post, luggage and other carriage services was EUR 0.4 m, i.e. by about 8% less than in 2014. ANNUAL REPORT 2015

Passenger 13 transportation

—— The Company signed the agreement on the in- Six trains on the Vilnius–Kaunas routes have been assigned stallation of wireless internet on the trains oper- the express category, and three trains on the Kaunas–Vilni- ating on the route Vilnius–Kaunas–Vilnius. us route. The trains travelling between Vilnius and Kaunas stop in Kašiadorys, Vievis or Lentvaris. The travel time is 1h 05 —— The two recently set up bilateral working groups min., and 1h 09 min. The en route speed of the express trains were given the task to renew in 2016 the direct travelling between Vilnius and Kaunas is 90.4–96.3 km/h. communication between Lithuania and Poland. As compared to 2014, there has been some increase in the —— The Passenger Freight Directorate was an active technical speed of EJ575 trains, as on the route Vilnius–Kau- contributor to the organisation of the transpor- nas it reached in 2014 on average 66,47–88.89 km/h, and in tation of the participants of mass events (e.g., 2015 the speed increased to 70.27–97.2 km/h. The speed of festivals Granatos, Loftas Fest, Sūpynės, etc.), double-deck EJ575 series trains in the section Vilnius–Trakai also of school and kindergarten children, which was 43.08–51.39 km/h, and, respectively, 41.11–52.83 km/h in eventually attracted about 11,000 additional pas- 2015. sengers. During the reporting period the four electrical ER9M series ROLLING STOCK trains were operated only on the route Vilnius–Trakai.

During 2015, for passenger transportation the Company con- OTHER ACTIVITIES sumed a little more than 5 m litres of diesel fuel. In 2015, at an auction the Company sold three passenger In 2015, for the purpose of carrying passengers on domestic wagons, for which it generated EUR 65,100 in proceeds. and international routes diesel trains covered nearly 3 m km, or by 8.06% more than in 2014, when the mileage of the die- During 2015, the Company delivered 778.6 tonnes of metal sel trains stood at 3,572,883 km. scrap collected at production divisions, or obtained as the passenger rolling stock that the Company failed to sell, and During 2015, the diesel passenger trains delivered 346,257,000 generated EUR 178,600 in proceeds. tonne-kilometres (gross), which is by 21,342,000 tonne-kilometres (gross), or 6.57% more than in 2014. In 2015, the Company on a single occasion organised a sale of illiquid and redundant assets of the Passenger Transpor- During the reporting period, the Company consumed tation Directorate, and sold the illiquid assets for EUR 12,800 9,465,000 kWh in electric energy to transport passengers by (excl. VAT). electric trains, which is by 325,596 kWh, or 3.44% less than in 2014, when the electric energy costs were recorded at 9,788,000 kWh. LITHUANIAN RAILWAYS

Rolling stock

DIESEL TRAINS

Maximum speed, Series Capacity, kW Number Fuel type Production year km/h

DR1AM 745 120 12 Diesel fuel 1988–1995

RA-2 2 x 360 100 4 Diesel fuel 2008

620M 382 120 12 Diesel fuel 2008–2011

630M 2 x 382 140 3 Diesel fuel 2013

DR1A 2 x 736 120 2 Diesel fuel 1989-1991

AR-2 310 120 1 Diesel fuel 1997

ELECTRIC TRAINS

Maximum speed, Series Capacity, kW Number Fuel type Production year km/h

ER9M 8 x 182 130 4 Electricity 1976–1995

EJ575 4 x 500 160 10 Electricity 2008–2013

FREIGHT LCOMOTIVES

Maximum speed, Series Capacity, kW Number Fuel type Production year km/h

TEP 70 2,942 160 5 Diesel fuel 1990–1994

TEP 70BS 2,942 160 4 Diesel fuel 2006

TEP70M 3,000 160 1 Diesel fuel 2014

TEM LTH 709 80 1 Diesel fuel 2015 ANNUAL REPORT 2015

TEP70M

As part of the passenger rolling stock renewal programme a passenger locomotive TEP70M was upgraded at JSC Vilnius Locomotive Repair Depot according to the project of a Hun- garian company MAV Woodward. The passenger locomotive is used for the traction of passenger wagon sets on the route Vilnius–Klaipėda–Vilnius, as well as for transit trains on the route Vilnius–Kybartai in Kaliningrad direction. Following the modernisation the maximum speed and the traction performance of the locomotive remained unchanged, however, the fuel consumption decreased by 30%, the expenses of for-cause and scheduled repairs decreased, respectively, by 20% and 5%.

The modernised locomotive now complies with all the requirements prescribed for the rolling stock of the type, as well as the mandatory interoperability specifications. The operating time of the locomotive was thus extended for another 11 years.

TEM LTH

For the purpose of the formation on the rails in the Vilnius railway station of passenger trains operating on the route the Company acquired a shunting locomotive series TEM LTH. locomotive TEM LTH produced at JSC Vilnius Locomotive Repair Depot according to the project of a Czech company AB CZ LOKO. LITHUANIAN RAILWAYS

Freight transportation

In 2015, JSC Lithuanian Railways transported a total of 48.05 In 2015, TRANSIT freight via Lithuania accounted for 8.92 m tonnes of freight; i.e. 1.9% less than in 2014. In terms of m tonnes, which is 13% less than in 2014. Nearly all transit types, freight import accounted for 42.9%, domestic freights freight was transported in the direction of the Kaliningrad for 30%, transit for18.6%, and export for 8.5% of the total region. Due to the unstable situation in the neighbouring volumes of freight transportation. markets, the flows of freights transported in the route decreased significantly, which also resulted in a significant fall in Throughout the accounting year the Company transported the Company‘s revenues. Transportation of petroleum prod- 20.61 m tonnes of IMPORTED FREIGHT; i.e. 2.6% more ucts decreased by 26.5%, while transportation of food prod- than in 2014. 55% of the total imported freights were chem- ucts, solid mineral fuel and ferrous metals increased by 6.7%, ical and mineral fertilises, 20% were oil products, 10% were 5.5% and 12.3%, respectively. The decreases in the flows of ferrous metals, and 6% were mineral products. A significant the freight in the sector, as well as the fluctuations, are be- increase (+5.8%) in the volumes of the transportation of fer- coming a negative trend. In terms of types, oil products ac- tilisers from Belarus via the Klaipėda Sea Port; total freights counted for the largest group of the transit freight (24%), fol- accounted for 10.05 m tonnes. Due to the global decrease in lowed by solid mineral fuel (24%), food products (14%), fer- oil prices and the highly efficient operation of JSC Lithuanian rous metals (12%), and plant products (11%). Railways and the Klaipėda oil terminal, the volumes of the oil products import increased by as much as 20% (4.02 m tonnes In the accounting year JSC Lithuanian Railways transport- imported altogether). The volumes of ferrous metals trans- ed a total of 4.09 m tonnes of EXPORT freight; i.e. 1.7% portation increased by half (2.10 m tonnes). The largest share less than in 2014. As in previous years, more than half (about of imported freight flow was from Belarus and Russia via the 58%) of export freight flows were petroleum products trans- Klaipėda Sea Port. In 2015, the rail transportation of import ported from JSC Orlen Lietuva to Ukraine, Latvia and Esto- freights via the port accounted for 14.84 m tonnes, which is nia. A decrease in transportation flows is observable in nearly 3.1% more than in 2014. all other freight groups.

The freight transportation on LOCAL routes in 2015 report- During 2015, the Company successfully continued the devel- ed volumes equal to those in 2014. 40% of the local freight opment of the public logistics centres in Vilnius, Kaunas and were oil products (JSC Orlen Lietuva), 2% were chemical and Klaipėda. Through the reporting year, JSC Lithuanian Rail- mineral fertilisers (principal customers JSC Achema, JCS Li- ways dedicated significant attention to the projects of in- fosa), 14% were mineral products (mostly breakstone), and ter-modal container trains Viking Train, Merkurijus, Saulė, 16% were plant products (mostly grain). In this market seg- Šeštokai Express, Baltijos vėjas, Vilnius Shuttle, and Mi- ment, the principal customers of JSC Lithuanian Railways are lano Express. The Company also provided freight forward- major factories, plants and companies of sector associations. ing, warehousing, coach leasing and other services related to freight transportation. IMPORT LOCAL TRANSIT EXPORT

ANNUAL REPORT 2015

FREIGHT TRANSPORTATION BY FREIGHT TRANSPORTATION VIA LITHUANIAN LITHUANIAN RAILWAYS (m tonnes) RAILWAYS BY DIRECTIONS (m tonnes)

52.3 20.1 49.4 48.0 49.0 48.0 20.6

14.5 14.4

10.3 8.9

4.2 4.1

2011 2012 2013 2014 2015 Import Local Transit Export

FREIGHT TRANSPORTATION VIA LITHUANIAN RAILWAYS BY TYPES, 2015 (%)

42,9 Import 30,0 Local 18,6 Transit 8,5 Export LITHUANIAN RAILWAYS

Smolensk Klaipėda Kaunas Moscow Ufa

Vilnius Kaliningrad Samara

Berlin Minsk Antwerp Šeštokai Ozink Astana Kostanay Liudvigshafenas Warsaw Kiev Aktogai Saratov Aktobe Ilyichevsk

Dostyk Milan Almaty Ürümqi

Lianyungang

Chongqing

VIKINGAS SAULĖ BALTIJOS VĖJAS ŠEŠTOKAI EXPRES

Klaipėda—Vilnius— 1 Klaipėda—Minsk— Warsaw—Šeštokai— Minsk—Kiev— Klaipėda—Minsk— Samara—Kostanay/ Astana Smolensk Ilyichevsk Smolensk—Samara— Astana—Dostyk Distance – 3,233/5,499 km Distance – 1,126 km Distance – 1,734 km Duration – 5/12 days Duration – 3 days Duration – 2–9 days 2 Runs three times per month Runs as needed Runs three times per week Antwerp—Berlin— and daily if has sufficient Warsaw—Šeštokai— freight volumes Minsk—Smolensk— Samara—Aktobe—Almaty Dostyk—Ürümqi— Chongqing—Lianyungang

Distance – 5,800/11,065 km Duration – 8/18 days Runs as needed ANNUAL REPORT 2015

Smolensk Klaipėda Kaunas Moscow Ufa

Vilnius Kaliningrad Samara

Berlin Minsk Antwerp Šeštokai Ozink Astana Kostanay Liudvigshafenas Warsaw Kiev Aktogai Saratov Aktobe Ilyichevsk

Dostyk Milan Almaty Ürümqi

Lianyungang

Chongqing

MERKURIJUS VILNIUS SHUTLE NEMUNAS MILANO EXPRESS

Klaipėda— Klaipėda—Vilnius (Paneriai) Vilnius/Kaunas/Klaipėda— Kaunas—Warsaw— Kaliningrad—Moscow Minsk Ludwigshafen—Milan Distance – 330 km Distance – 1,382 km Duration – 9 h Distance – 242/327/612 km Distance – 2,000 km Duration – 4 days Runs twice per week Duration – 8/10/18 h Duration – week Runs as needed Runs as needed Runs once per week

VIT EKSPRES

Klaipėda—Vilnius

Distance – 387 km Duration – 9 h Runs twice per week LITHUANIAN RAILWAYS Technical development and investment policy

Through the period of 2015, the Company’s technical devel- RENEWAL AND MODERNISATION OF opment and investment policy were specifically geared to- THE RAILWAY INFRASTRUCTURE wards the implementation of the strategic objectives of the National Communications Development Programme for During 2015, the Company acquired assets and delivered 2014–2022. The priority objectives of the Company remain works for EUR 73.5 m. It completed all the strategic railway unchanged: ensuring an uninterrupted, balanced, secured infrastructure renewal projects partly financed from the and efficient functioning of railway transport. 2007–2013 financing period with EU resources: construction of the second track of the Vilnius bypass Kyviškės–Valčiūnai; Significant efforts in the course of 2015 were allocated to the construction of the second tracks in sections Kūlupėnai– implementation of the Rail Baltica and other railway electri- Kretinga, Pavenčiai–Raudėnai and Telšiai–Dūseikiai; con- fication projects, and the development of logistics solutions struction of the Vilnius and Kaunas public logistics centres; facilitating the interaction between the rail transport and and the modernisation of the infrastructure of the connect- other transport modes. ing railway line Klaipėda–Pagėgiai.

One of the most important tasks of JSC Lithuanian Railways In 2015, the Company progressed with the projects scheduled is the availability and accessibility of objects in the railway to be completed in 2016, such as electrification of the sec- transport infrastructure, by implementing the principles and tion State border with Belarus–Kena–Naujoji Vilnia, the de- the module of the private partnership activity, and the in- sign for the electrification of the Vilnius railway node, and the crease in the throughput of the public railway infrastructure. preparations for the implementation of the projects intended to be funded from the resources allocated for the 2014–2020 To ensure a proper fulfilment of environmental protection EU financing period: the modernisation and electrification of measures, to meet the needs of business clients as well as the section Šiauliai–Radviliškis (Stage I) and the design for passengers, the Company has been implementing the most the contractor’s works in relation to the construction of the advanced freight and passenger transportation technologies, second railway track in the section Telšiai –Lieplaukė. optimising its technological processes and applying the most advanced work organisation standards. To renew and upgrade its FREIGHT TRANSPORTATION FACILITIES in 2015, the Company acquired assets and de- During the reporting period, for investment purposes the livered works for EUR 21.4 m. JSC Lithuanian Railways ac- Company allocated EUR 233.6 m, of which EUR 93.9 m quired five shutting locomotives TEM TMH, carried out the were funds from the EU assistance funds, EUR 83.1 m were overhaul of 585 freight wagons, developed the integrated in- the Company’s own funds, EUR 54.7 m were borrowed from formation system for cargo carriage by sea and railway trans- banks, and EUR 1.9 m represented a contribution from the port (e-Krovinys), completed the construction of the wash- State budget. ing facilities of the locomotive depot rolling stock and the self-propelled multiple train units in Radviliškis, reconstruct- In 2015, the Company invested a total of EUR 169.2 m. ANNUAL REPORT 2015

Technical 21 development and investment policy

ed the boiler houses, completed the overhaul of the axe- In cooperation with researchers, the Company started draw- wheel workshop of the freight wagon depot in Radviliškis, ing up the text-books Railway. The General course (2nd edi- and completed other projects for the reconstruction and tion), and Railway track. Design, building, operation and main- modernisation at other freight forwarding economic entities. tenance.

During the reporting period, for the purpose of the improve- The Company is constantly looking for ways to reduce the ment of the PASSENGER FREIGHT, the Company ac- operational costs of fuel, and in that relation conducted the quired assets and delivered works for EUR 7.9 m. It also ob- experimental tests of the transitional operating modes of tained rolling stock for shunting operations and modified and diesel engines of freight locomotives. carried out an overhaul repair for passenger rolling stock and construction works. Significant attention was dedicated to the railway infrastructure; in that area the Company carried out a feasibility study RESEARCH ACTIVITIES. One of the major accomplish- on the use of slab road construction and a study on the scan- ments of the Company during 2015, while cooperating with ning of the automated locomotive signalisation (ALS) codes research institutions and consulting companies, was the de- from the electrically conductive surfaces of the rolling stock; veloped Strategy for ensuring the competitiveness of the in the area of metrology the Company established the me- Lithuanian railway sector until 2025. trology maintenance processes and the principles for their optimization and unification. To address the technical issues, the Company referred to sci- entists in order to assess the threat caused by the defects in the geometry of the rolling stock and the rolling surface; in connection with these objectives, JSC Lithuanian Railways also carried out diagnostic tests on the engines of freight and shunting locomotives, and the experimental tests on the operating characteristics of engines of freight locomotives. The research materials and findings are highly instrumental when seeking to save energy and reduce pollution of the environment. Another accomplished task was the feasibility study for the use of renewable (alternative) energy in the Lithuani- an railway sector. LITHUANIAN RAILWAYS

Infrastructure

The convenient geographical location, well-developed Lith- 1,428 bn, of which EUR 643.3 m represented financial assis- uanian railway network, ice-free Klaipėda Seaport, skilled tance of the EU funds. In 2015, investment by JSC Lithuanian technical capacities are all factors that have a considerable Railways in the renewal and development of rail infrastruc- impact on the transport system in this country. The two in- ture amounted to EUR 97.983 m, including EUR 49.656 m al- ternational transport corridors with special importance for located from European Union funds. the entire European transport system cross the territory of Lithuania: The key objectives of the infrastructure development cover —— Corridor I (Helsinki–Tallinn–Riga–Kaunas– raising speed limits, enlarging track capacity and maximum Warsaw), weight of freight trains, strengthening the subgrade, improv- —— Corridor IX: IXB (Kiev–Minsk–Vilnius–Šiauliai– ing design parameters, increasing axle load limits, reducing Klaipėda) with a branch IXD (Kaišiadorys–Kau- side slopes, raising the radii of curves on the routes, conduct- nas–Kaliningrad). ing the electrification of lines, and modernising telecommu- nications and train traffic management systems. The total length of the Lithuanian railway lines makes up 1,871.5 km, of which 122 km are electrified lines and 428.4 km Having completed a number of the infrastructure network are double tracks. There are 108 railway stations, 544 level modernization projects partly funded by EU resources, in 2015 crossings and 383 overpasses and bridges. the Company successfully completed the following projects: —— Construction of the second track at the Vilnius JSC Lithuanian Railways seeks integration with the TEN-T bypass Kyviškės–Valčiūnai at the IXB Corridor; network, thus the Company is enhancing the attractiveness —— Construction of the second track on the railway and competitiveness of its railway transportation. It also aims section Telšiai–Dūseikiai, to provide high quality passenger and freight transportation —— Construction of the second track on the railway by rail services in East European, Central Asian, the Baltic section Pavenčiai–Raudėnai, States and other countries. Benefiting from the assistance of —— Construction of the second track on the railway the European Union funds in 1996–2015, the Company in- section Kūlupėnai–Kretinga, vested in the railway infrastructure development over EUR —— Establishment of the traffic management centre; ANNUAL REPORT 2015

—— Modernisation of the Vilnius–Kaunas line for Kaišiadorys–Radviliškis section, as well as the modernisation speeds up to 160 km/h; and electrification of the Šiauliai–Radviliškis section. —— Reconstruction of the section Šiauliai–Joniškis– Lithuanian and the Latvian State border. During 2015, the Company progressed in carrying out a feasibility study for the project on the electrification of the Pol- The Company published a call for the tender to procure the ish State border –Marijampolė–Kazlų Rūda–Kaunas section. construction works regarding the second track of the Vilni- us bypass Pušynas–Paneriai, and prepared the tender doc- The following was accomplished in 2015, as part of the as- umentation for the project on Stage II of the development signment to improve the technical parameters and ensure of the Klaipėda railway node and reconstructed the Pauos- traffic safety: tis yard. —— reconstruction of 1.98 km of the existing railway tracks; As part of the modernisation of the railway infrastructure —— repair of 44.11 km of regular road; network, the Company continued the electrification works —— replacement of 66.89 km of rails by new long rails; according to the project Construction of the second track in —— replacement of 10.54 km of rails by new long rails; the Telšiai–Lieplaukė section, and the Kena–Naujoji Vilnia —— 50 switches installed and replaced by new ones, section. of which five switches were with new generation controls with electro-hydraulic steering; JSC Lithuanian Railways continued working on the electrifi- —— repair of seven bridges, of which four were recon- cation of the State border section with Belarus–Kena–Vilni- structed into throughputs; us, and the construction of the second track in the Livintai– —— repair of 4 platforms; Gaižiūnai section, and the Vilnius railway node. —— repair of 6 level crossings.

The Company is continuing drawing up the terms of refer- ence for the electrification of the Lithuanian and Polish State border–Marijampolė–Kazlų Rūda–Kaunas section, and the LITHUANIAN RAILWAYS

Environmental protection

ONE OF THE PRIORITY OBJECTIVES OF JSC LITH- The environmental condition of the Lithuanian railways was UANIAN RAILWAYS IS AN EFFICIENT USE OF EN- continuously monitored, which also engaged the prevention ERGY AND NATURAL RESOURCES, AND THE FUL- of environmental infringements; with the intention of im- FILMENT OF ENVIRONMENTAL PROTECTION RE- proving technological processes the Company carried out QUIREMENTS control inspections of 110 injects at the structural divisions of JSC Lithuanian Railways. On contractual basis, the services related to environmental protection services to JSC Lithuanian Railways are provided Thus the JSC Centre of Railway Environment Protection pro- by the JSC Centre of Railway Environment Protection by or- vided consultations to structural divisions of the Company ganising the handling and management of waste produced regarding 18 incidents whose consequences were liquidated by the railway operations, related logistics, maintenance of to avoid any damage to the environment. In this context, JSC waste treatment facilities, and the preparation of wagons. Lithuanian Railways handled and delivered to waste man- The JSC Centre of Railway Environment Protection is also agement companies 7,330.00 tonnes of waste. engaged in laboratory tests and measurements, drawing up of environmental documentation, and the maintenance of greenery in the railway protection zone. ANNUAL REPORT 2015

At the stationary ambient air pollution sources (20 objects In 2015, the Company’s environmental taxes for the station- observed altogether), the Company performed control test of ary pollution sources (having identified the air pollutants the emissions at the frequency set forth by law. The analysis and the pollutants discharged with waste-water) accounted of the test results and findings did not determine any cases of for EUR 1,162.00 (EUR 2,324.8 in 2014). The pollution tax de- exceeding the authorised levels of emissions. creased partly due to the revocation of the authorisation of the integrated pollution prevention and control with respect During 2015, the Company periodically performed the main- to the freight wagon depot of Radviliškis of the Freight Trans- tenance and technical servicing operations of 80 waste-wa- portation Directorate of JSC Lithuanian Railways. ter treatment facilities, which included monitoring the pollution level at the discharge water and laboratory testing of The Company is consistently modernising and upgrading its waste-water at 60 entities. rolling stock, improving the parameters of the railway infrastructure; therefore, the pollution level caused by mobile pol- Underground water monitoring operations are continued at lution sources in 2015 decreased by 5% compared to 2014. ten units of JSC Lithuanian Railways, in addition to the 10 watering places and 73 shaft wells. In case of excess of authorised levels, the shaft wells are disinfected, and free oil products are collected from the surface of ground water.

LITHUANIAN RAILWAYS

Traffic safety

Nearly half of all employees at JSC Lithuanian Railways JSC Lithuanian Railways also recorded a decrease in the (5,439) are involved in dangerous work; nevertheless, in 2015 number of traffic incidents (hereinafter – TI) due to the fault there were no fatal or severe injuries or accidents (AW) reg- of bystanders. In 2015 there were 24 TIs; i.e. by 14 fewer than istered at work. During 2015, the Company registered 13 ac- in 2014 (38 registered TIs). There was a significant reduction cidents at work (AW). Compared to the data from 2014, the in the number of fatalities or injuries among bystanders. In number of NW decreased (14 AW in 2014) in 2015. 2015 there were 14 fatalities and 5 persons were injured at JSC Lithuanian Railways (cf. 18 and 15, respectively, in 2014). The For health and safety at work, the Company allocated EUR Company organises, on a regular basis, different events re- 126,730. 2,147 employees were vaccinated against tick-borne lated to safety at work (Crossing day, etc.), installs new alarm encephalitis, and 1,519 employees were vaccinated against systems at the crossings, fencing, and delivers lectures at ed- the flu. ucational institutions for children and the youth about safe behaviour in relation to railways. The Company‘s allocations for the improvement of working conditions and health protection means in 2015 accounted for EUR 948,700. At individual structural divisions the working conditions for employees are improved by reconstructing and arranging production and social premises, thereby ful- ly meeting the requirements for safety and health at work, in addition to the upgrading of technological facilities, work tools and supplying the employees with protective means. ANNUAL REPORT 2015

Indicator January- January- Comparison December 2014 December 2015

Accidents at work 14 13 -1

Fatal 1 - -1

Severe 1 - -1

Minor 12 13 +1

Incidents 3 2 -1

Accidents on the way to/from work 11 16 +5

Fatal 1 - -1

Severe - - -

Minor 10 16 +6

Traffic incidents involving bystanders 38 24 -14

At railway stations 10 6 -4

At railway crossings 16 6 -10

On the lines between stations 12 12 -

Injured persons, dead/injured (d/i) 18d/15i 14d/5i -4d/-10i LITHUANIAN RAILWAYS

Information technologies

During the reporting period for the purpose of the devel- The Company considers it to be especially important to opment of its information technologies, the Company ac- maintain good partnership relations with railway companies quired assets and delivered works for EUR 4.8 m. In order of neighbouring states, be an active participant in the activi- to enhance the Company’s information systems, it upgrad- ties of international organisations, and promote cooperation ed its main computer networks and those installed in build- with foreign logistics and forwarding companies. Therefore, ings, also was upgrading or replacing the broken or obsolete in the course of 2015 the Company was an active player on computer networks or hardware. The Company comprehen- the international arena. sively renewed its security systems, and in this way ensured the protection of the computer network from harmful soft- ware and fraudulent access to the Company’s databases. JSC Lithuanian Railways introduced the operative transportation computerised information system, expanded its WEB function, is in the process of modernisation of the information system Krovinys and e-krovinys, is expanding the function- al abilities of its Financial accounting and business management systems, as well as the remuneration accounting information systems (PVDUAIS), and is continuing the operations on the integrated interfaces between the system on the accounting of locomotive fuel from travel sheets and the other information systems of JSC Lithuanian Railways. ANNUAL REPORT 2015

Information Project 29 technologies Rail Baltica

October 2015 marked the completion of the construction of Baltica section the Company’s contractors upgraded the in- the first section as part of the international project from the frastructure of the railway engineering network, reconstruct- Lithuanian and Polish State border to Kaunas. The total price ed the stations, yards, and platforms, and performed other of the construction works of the Rail Baltica project is EUR contracting works. The building of the Rail Baltica railway 364.5 m; i.e. EUR 8.6 m less than planned. The section of the from the Polish and Lithuanian State border to Marijampolė international railway in Lithuania was built by five general was financed from the funds of the EU TEN-T programme, contractors and assisted by 28 sub-contractors. In the 120 km the Lithuanian state, and own funds of JSC Lithuanian Rail- long section of Rail Baltica the Company built a new Euro- ways. The contracting works in the remaining sections from pean standard gauge (1,435 mm wide) and renewed the Rus- Marijampolė to Kaunas were financed from the Cohesion sian standard gauge railway line (1,520 mm wide) laid down fund and resources of JSC Lithuanian Railways. in the vicinity. Along the entire route, the Company laid down 233 km of rails for 1,435 mm and 1,520 mm gauge roads, including road yards at the railway stations. At the entire Rail LITHUANIAN RAILWAYS

International relations

COOPERATION WITH BELARUS COOPERATION WITH RUSSIA

It has been for several years now that the Belarusian Railways At the meeting of the top level managers of Lithuanian and company remains one of the most important partners of JSC Russian railway companies that was held in Moscow on 28- Lithuanian Railways in the area of freight transportation. 31 January 2015, the results of the economic performance of the two companies was discussed, as well as pricing issues, The meeting of JSC Lithuanian Railways and the Belarusian the problems related to the transportation of freights via the Railways company that took place in Šiauliai on 25-27 Feb- Klaipėda port, the development of the container train pro- ruary 2015, became a forum for the managers to discuss the jects, and the tariff rates for passenger transportation on the prospects for 2015, the progress in the implementation of the Vilnius–Moscow–Vilnius route. international projects Nemunas and Vikingas, organisation of the throughput of wagon flows at the border points, imple- COOPERATION WITH KAZAKHSTAN mentation of the traffic schedules, operation of locomotives and the brigades at the borderlands, the fast passenger train In 2015, aiming to strengthen the cooperation between the between Vilnius and Minsk, and issues related to the elec- Lithuania and Kazakhstan railways companies, JSC Lithua- trification of the Molodechno–Hudagaj–State border–Kena– nian Railways opened its representative office in Kazakhstan. Naujoji Vilnia railway section. The Republic of Kazakhstan is the most important partner of JSC Lithuanian Railways in Central Asia. The opening of the On 8 October 2015, JSC Lithuanian Railways and the Belaru- representative office gives new opportunities for the Compa- sian Railways signed a memorandum regarding the cooper- ny to operate actively in the large Asian-European transpor- ation in the area of transit freight transportation by railway tation markets and develop its logistics centres and container transport. The parties of the memorandum agreed to contin- train projects. ue strengthening the mutually beneficial cooperation in the area of transit by increasing the volumes of freight transpor- Askar Mamin, the General Manager of the Kazakhstan Rail- tation and enhancing the competitiveness of the companies. ways, as well as other businessmen from the country, attended the forum on ‘The New Silk Road – a reliable link between On 6-8 October 2015, JSC Lithuanian Railways extended its Europe and Asia’ held in Klaipėda on 5-6 May 2015. cooperation agreements with Grodno Azot and Avantreil, providing for the terms and conditions of transportation of An international transport and logistics business forum ‘The freight and empty rolling stock by Lithuanian railways. New Silk Road’ was held on 21 May 2015, in Astana. Attend- ing the forum was an excellent opportunity to introduce the achievements of Lithuania in the area of transport and logistics – the projects of logistics centres, the integration of the wide and the European gauge, the advantages of the ice-free port, and the other best practice examples. ANNUAL REPORT 2015

International 31 relations

The representatives of the Lithuanian and the Kazakhstan services in Lithuania. This newly established company will be Railways companies attending the meetings on 26 Novem- responsible for forwarding freights between Lithuania, Be- ber 2015, discussed the issues on the organisation of freight larus and China, and providing full-range logistics services. transportation by container trains from China to the West- On 29 June–3 July, 2015, a delegation from China of 40 ern Europe via Lithuania, and a range of other issues – the persons visited Lithuania, consisting of a group led by the use of platform wagons of JSC Lithuanian Railways, compet- Vice-Governor of Sindzian province, as well as represent- itive rates, and cooperation in developing logistics centres. atives from China Merchants Group, Kerry East Logistics, SINOTRANS, CNR Corporation Limited, China Communi- COOPERATION WITH CHINA cations Construction Company Limited (“CCCC”), CAMC Transportation and Xinjiang Continental Bridge Group, pro- During 2015, quite a number of Chinese companies demon- viding transportation, logistics, infrastructure construction strated significant interest in the Lithuanian transport sector. and rolling stock production services. On 4-9 May 2015, representatives of China Merchant Groups (CMG), one of the largest Chinese State-owned corporations, At the conference ‘One Belt, One Road – Visions and Op- visited Lithuania and attended meetings with the managers portunities’ held on 1 July 2015, in Klaipėda, representatives of JSC Lithuanian Railways; the guests from China had an of JSC Lithuanian Railways discussed with Chinese compa- opportunity to learn about the projects implemented by JSC nies the possibilities to address the common issues by build- Lithuanian Railways, and presented their own activities and ing container trains from China via Klaipėda, and to establish discussed opportunities for further cooperation. On May 8, Lithuania and its transport infrastructure as a credible point the two parties signed a Memorandum of Understanding on the route of the New Silk Road. that established the foundation for further cooperation between the two companies. COOPERATION WITH POLAND

On 6 October 2015, Li Xiaopeng, President of China Mer- On 20–21 August 2015, Jakub Karnowski, Director General of chants Group (CMG), and the delegation he led visited Vilni- the Polish railway company PKP S.A and the delegation he us. During the visit, JSC Lithuanian Railways presented to its led arrived for their first ever official visit to Lithuania. At a Chinese counterpart a range of proposals regarding further meeting with managers of JSC Lithuanian Railways, the Pol- cooperation, and on 8 October 2015, JSC Lithuanian Rail- ish counterparts discussed the possibilities and prospects for ways and China Merchants Group signed an agreement con- further cooperation. The parties also negotiated the Rail Bal- cerning the establishment of a joint forwarding venture. On tica project and its development plans, as well as the oppor- 23 November, while attending the joint Lithuanian and Chi- tunities for cooperation in developing freight and passenger nese business forum in Beijing, the representatives of the two transportation operations. The parties of the meeting signed companies concluded an agreement on the establishment of a common statement. a joint venture between JSC Lithuanian Railways and China Merchants Logistics Holding that will be providing logistics LITHUANIAN RAILWAYS

COOPERATION WITH TURKEY COOPERATION WITH LATVIA

On 21 January 2015, JSC Lithuanian Railways and the manag- On 16–17 March 2015, Ugis Magonis, Director General of the ers of a Turkish company GEFCO Taşımacılık ve Lojistik A.Ş., Latvian Railway company, and his delegation visited Vilnius. visiting Vilnius, signed an agreements on forwarding services, The delegations discussed the prospects for the transporta- defining the relations between the Companies when trans- tion of passengers on the route Šiauliai–Riga and other issues porting freights and empty rolling stock by railways from related to possible cooperation in the future. The two railway Lithuania and other countries, and the procedure for settle- companies agreed to jointly explore the possibilities to create ment for the provided services. The forwarding contract con- a service on the transportation of freight in the South-North cluded with the Turkish company GEFCO will in the future direction, as well as to exchange information and cooperate ensure a flow of various equipment, metal articles and oth- in promoting the growth in the volumes of freight and pas- er goods in the direction of Lithuania and the Scandinavian senger transportation by railways. countries.

At the international transport and logistics exhibition Log- itrans 2015 held on 18–20 November 2015, JSC Lithuanian Railways signed freight forwarding contracts with the Turk- ish companies Gefco Taşımacılık ve Lojistik A.Ş., Dabkovich Maritime Agencies AS and Gebrüder Weiss Nakliye ve Loj. Hizm. Tic. Ltd. Şti. On the basis of such contracts, the parties will be offering to potential customers a wider range of freight forwarding services in Turkey and attract new clients and additional freight for the container train Vikingas. ANNUAL REPORT 2015

COOPERATION WITH OTHER PARTICIPATION IN INTERNATIONAL FOREIGN STATES AND BUSINESS ORGANISATIONS PARTNERS In 2015, the Company actively participated and defend- On 21 January 2015, JSC Lithuanian Railways received in Vil- ed its interests in a number of international organisations, nius a delegation of the railway trade mission of the UK from such as CER (the Community of European Railway and In- the Railway Industry Association and the UK Trade and In- frastructure Companies), UIC (International Union of Rail- vestment Department of the UK, and thirteen companies, in- ways), CIT (International Rail Transport Committee), OSJD cluding such world-known names as AECOM, Pandrol and (Organisation for Cooperation of Railways), CCTT (Coordi- Tata Steel Rail. At the meeting the companies made pres- nating Council on Trans-Siberian Transportation), GTT (CIS entations of their activities, the railway transport production Rail Transport Council), and the rail freight corridor North and explored the possibilities for cooperation. Participants of Sea–Baltic Sea. Managers and specialists of the Company the meeting exchanged their contact data and established attended the meetings, assemblies, sittings and workshops business relations. of the organisations and discussed important issues that have a strategic impact on the performance of JSC Lithua- Seeking to further develop its commercial activities and pro- nian Railways. mote its services, while at the same time increasing its freight flows, JSC Lithuanian Railways in 2015 participated in international transport shows in Istanbul (Eurasia Rail), Moscow (TransRussia), Munich (Transport Logistic), Shanghai (Trans- port Logistic China), Russia (EXPO 1520), Almaty (Transit– Kazakhstan), Gdansk (Trako 2015), Minsk (Transport&Logis- tics), Warsaw (TransPoland), and Istanbul (Logitrans). LITHUANIAN RAILWAYS

Human resources and social initiatives

The staff of the Company consisted of 10,150 employees in 2015. EMPLOYEE TRAINING AND COOPERATION WITH TRAINING AVERAGE WAGES AND LABOUR INSTITUTIONS PRODUCTIVITY At the Company significant attention is dedicated to the In the period of 2015, the average wages of employees of JSC training, professional development and re-qualification of its Lithuanian Railways were EUR 1,026 (EUR 979 in 2014). As employees. In 2015, training was provided to 5,704 employ- compared to 2014, the average wages increased by EUR 47, or ees, and the Company’s expenses for this purpose amounted 4.8%. The labour productivity in 2015 was EUR 44,000/per- to EUR 234,700. In the 2015–2016 academic year 459 employ- son, which compared to 2014 decreased by 3.3% (2014 – EUR ees of JSC Lithuanian Railways were studying at high and 45,500/person). higher educational institutions. In the autumn semester of 2015, the Company covered 50% of the training costs with The labour productivity computed in terms of conditional respect to 27 employees. production in 2015 was estimated at 1,507,700 tkm/person; i.e. 1.8% higher than in 2014, when it was recorded at 1,480,600 Following the cooperation agreements signed with edu- tkm/person. cational institutions, students were accepted for practical placements, while teachers were seconded for internship. IMPROVEMENT OF WORKING CONDITIONS In 2015, 594 students of high and higher education establish- ments were placed in practical training at the company, and During 2015, JSC Lithuanian Railways allocated EUR 948,700 55 students participated in educational trips. for the purpose of arranging working places, improving working conditions and acquiring health protection means. The SOCIAL NEEDS OF THE EMPLOYEES Company’s allocations for health care purposes amounted to EUR 126,730 (JSC Lithuanian Railways finances a mandatory In order to address the social needs of the employees, the periodic health check, and employees are vaccinated against Company allocated EUR 1.5 m in 2015. The funds earmarked tick-borne encephalitis and influenza). for social needs are used to improve the quality of life of the employees, develop their healthy lifestyle skills, and the pre- The number of incidents and accidents at work in 2015 de- vention, early diagnostics and efficient treatment of the most creased compared to 2014 (17 incidents and accidents in 2014, common diseases. and 13 in 2015). ANNUAL REPORT 2015

PROMOTION OF EMPLOYEES AND ty of Technology (KTU), when the KTU students were invited DEVELOPMENT OF THEIR SOCIAL to learn more about JSC Lithuanian Railways. The LRYO also RESPONSIBILITY contributed to the celebration organised by the State Child Rights Protection and Adoption Service under the Ministry The Company employees are encouraged and rewarded for of Social Security and Labour for facilities raising children their good performance. Awards such as the Honour Sign without parental care. Several employees of the Company of the Railroader, the Company Sign for Merit, and annu- helped with the daily work at Kaunas Zoo. The employees of al nominations for teams and staff are usually presented on JSC Lithuanian Railways at the administration of the Compa- the occasion of the professional holiday of a rail road worker ny and its entire structural division organised a campaign at in June. The annual nominations to individual departments which they sold home-made food products or donated them and employees are awarded at the annual event at the end to the “Food bank”. The women employees of the Company of each year. participated in the initiative ‘Give a dress – donate a celebration’, and for the entire December donated their dresses to In 2015, JSC Lithuanian Railways was given quite a num- members of the large family community ‘Vilniaus šeimyna’, ber of awards in different areas. According to the CV Online and the Lithuanian Red Cross Society. Railway workers are opinion poll in January 2015, the company ranked first in the active participants in blood donation days – several hundred transport category of the overall contest ‘TOP employer 2014’. of the Company’s employees donated blood to the National Data of the opinion poll carried out by CV Market showed Blood Centre. that JSC Lithuanian Railways was one of the most attractive employers (the survey ‘The most attractive employer in Lith- uania 2015’). The Association of Human Resources Profes- LABOUR PRODUCTIVITY EUR‘000/employee sionals issued to the Company a certificate regarding the participation of JSC Lithuanian Railways in the 5th ‘Contest on 48.6 46.0 45.5 best practice in human resources management’ organised by 44.4 44.0 the Association of Human Resources Professionals. Further- more, the Company was the winner in the XL entities category in the contest ‘The favourite company 2015’ organised by the Lithuanian Business Confederation.

In the course of the year, employees of JSC Lithuanian Rail- ways were active participants of different social campaigns and activities: The Lithuanian Railroad Youth Organisation (LRYO) largely contributed to the event ‘Electricity days’ organised by the Students’ Representation of Kaunas Universi- 2011 2012 2013 2014 2015 LITHUANIAN RAILWAYS

Major events

On 26 February 2015, the Company started selling train On June 2–4, in relation to the celebration of the Interna- tickets online. Passengers are asked to print the tickets ac- tional day of safe traffic at crossings, employees of JSC Lith- quired at the site www.traukiniobilietas.lt, or store them on uanian Railways in cooperation with officers from the Lithu- their smart devices. anian Traffic Police Service arranged a campaign for drivers and pedestrians, inviting all the participants to follow Traffic On 26 February 2015, JSC Lithuanian Railways started pro- Regulations when passing the crossings, and warning them viding new services for the transportation of oversized and of imminent dangers. bulky freight. The non-standard freight is transported not only in Lithuania, but also in the territories of European, the June 19 marked the completion of the building of the Europe- CIS and Baltic States. an railway gauge in the Rail Baltica section from the Lithua- nian and Polish State border to the Mockava railway station. At the cross-border meeting of the members of the Vikingas project held on April 15 in Vilnius, the Georgian Railways On 31 July, the locomotive depot of Radviliškis celebrat- company joined the international project Vikingas. ed its 145th anniversary. The locomotive depot in Radviliškis was built in 1870, in relation to building the railway line from A special contained train VIT EKSPRES was launched be- Liepoja (Latvia) to Romny (Ukraine). At the beginning of its tween the container terminal of the Klaipėda Sea Port and operation the depot had only 6 locomotives, and two dec- the inter-modal terminal of the Vilnius public logistics centre ades later the depot became the largest in the entire railway on 6 May 2015. of Liepoja – it then operated 41 freight and 10 passenger locomotives. In 2015, the traction rolling stock of the locomo- On 12 May 2015, the Company carried out the first test of the tive depot in Radviliškis consisted of 89 modern and new lo- newly built European gauge from Kaunas to the Lithuanian comotives, of which 38 powerful locomotives were Siemens and Polish State border. ER20CF.

May 26 was the date of the official opening of the Vilnius On August 27, the first passenger train arrived from Poland and Kaunas inter-modal terminals (VIT and KIT). The pro- to Kaunas by the new gauge of Rail Baltica. The important jected transhipment capacity of the Vilnius inter-modal ter- passenger of the train was Catherine Trautmann, the new minal is 100,000 TEU containers. The feature of the Kaunas European Coordinator for the North Sea–Baltic core net- inter-modal terminal is that it serves as a crossing point of work corridor, of which Rail Baltic is a part. The intention of the European standard gauge (1,435 mm), and the wide rail- the Coordinator Catherine Trautmann was to assess the railway gauge (1,520 mm). The value of the Vilnius inter-modal way infrastructure in Lithuania and Poland, the construction terminal is EUR 31.77 m, and the Kaunas inter-modal termi- works under Rail Baltica in Lithuania, and the prospects for nal is considered to be worth EUR 24.4 m. Nearly 85% of the the further implementation of the project. Catherine Traut- amounts were funded from the Cohesion Funds of the Euro- mann was accompanied in her trip by representatives of the pean Union. The VIT and KIT are the first objects of the logis- Ministries of Communications and other transport institu- tics centres built in Vilnius and Kaunas. tions of Poland, Lithuania, Latvia, Estonia and Finland. Dur-

ANNUAL REPORT 2015

Major 37 events

ing the journey the officials and specialists discussed the progress in the implementation of the Rail Baltica project and completion of the project of the fast train from Kaunas to Tallinn.

September 14 was the day of opening for the representative office of JSC Lithuanian Railways in Astana (Kazakhstan). The principal purpose of opening the representative office was to increase the freight transportation from China via Ka- zakhstan and Lithuania to Europe, as well as in the opposite direction.

On 18 September, a celebration at the Vilnius Railway Sta- tion marked the 155th anniversary of the arrival of the first train to Lithuania.

On 1 October, JSC Lithuanian Railways completed implementation of the construction of the second track at the Vil- nius bypass Kyviškės–Valčiūnai at the IXB Corridor; the value of the project is in excess of EUR 50 m. The project was funded from European Union resources (85%) and own funds from JSC Lithuanian Railways.

On 23 November, while attending the joint Lithuanian and Chinese business forum in Beijing, the representatives of the two companies concluded an agreement on the establishment of a joint venture between JSC Lithuanian Railways and China Merchants Logistics Holding that will be providing logistics and forwarding services in Lithuania.

On 21 December, in relation to the contest ‘Top employer 2015’ the internet personnel selection company CV Online awarded JSC Lithuanian Railways first place in the Transport category. LITHUANIAN RAILWAYS

Management structure

MINISTRY OF TRANSPORT AND COMMUNICATIONS OF THE REPUBLIC OF LITHUANIA

THE BOARD

HEAD OFFICE

FREIGHT RAIL BALTICA PROJECT DIRECTORATE DIRECTORATE

RAILWAY INFRASTRUCTURE INFORMATION TECHNOLOGY DIRECTORATE CENTRE

PASSENGER DIRECTORATE

SUBSIDIARY REPRESENTATIVE OFFICES IN COMPANIES FOREIGN COUNTRIES ANNUAL REPORT 2015

Management Independent 39 structure auditor‘s report LITHUANIAN RAILWAYS

Balance sheet

Group Company As of 31 De- As of 31 De- As of 31 De- As of 31 De- cember 2014 cember 2014 cember 2015 cember 2015 (revised) (revised) ASSETS A. NON-CURRENT ASSETS 1,961,218,739 1,883,173,984 1,968,439,183 1,891,134,867 I. INTANGIBLE ASSETS 18,061,050 18,406,487 17,145,665 17,650,434 II. PROPERTY, PLANT AND EQUIPMENT 1,935,287,364 1,903,827,518 1,828,273,474 II.1. Land and buildings 155,185,375 154,266,709 155,179,053 154,260,387 II.2. Structures and machinery 517,238,578 453,698,579 510,048,121 447,897,368 II.3. Vehicles 271,064,184 268,371,441 248,668,525 244,349,341 II.4. Other equipment and tools 437,484,913 449,932,934 431,777,959 448,246,057 II.5. Other property, plant and equipment 16,831,777 17,249,643 15,795,629 16,119,382 II.6. Construction in progress and prepayments 522,668,458 512,406,704 527,433,602 515,320,075 II.7. Investment property 13,918,234 1,135,923 14,028,784 887,102 II.7.1. Buildings 895,845 1,193,762 895,845 1,193,762 III. FINANCIAL ASSETS 895,845 1,193,762 895,845 1,193,762 III.1. Investments into subsidiaries and associated companies 4,092,222 3,169,134 43,918,198 42,072,559 Loans to associated companies, III.2. 3,840,123 3,161,028 43,911,472 42,064,453 subsidiaries and other companies III.3. Non-current receivables 252,099 8,106 6,726 8,106 IV. OTHER NON-CURRENT ASSETS 3,778,103 3,342,668 3,547,802 3,138,400 IV.1. Deferred income tax asset 3,778,103 3,342,668 3,547,802 3,138,400 IV.2. Other non-current assets - - - - B. Current assets 116,574,579 154,228,639 96,685,422 126,179,633 I. INVENTORIES AND PREPAYMENTS 55,340,629 60,676,549 46,420,893 48,050,388 I.1. Inventories 51,663,183 56,543,927 44,725,712 45,244,784 I.2. Non-current assets held for sale 819,783 967,540 819,783 967,540 I.3. Prepayments 2,857,663 3,165,082 875,398 1,838,064 I.4. Contracts in progress - - - - II. CURRENT RECEIVABLES 43,294,066 51,055,870 38,552,480 41,011,788 II.1. Trade receivables 37,551,425 41,078,875 33,956,470 30,612,614 II.2. Receivables from subsidiaries and associated companies - 9,054 235,688 991,840 II.3. Other receivables 5,742,641 9,967,941 4,360,322 9,407,334 III. OTHER CURRENT ASSETS 3,258,029 - 3,231,803 - III.1. Other current assets 26,226 - - - ANNUAL REPORT 2015

Loans to associated companies, III.2. 3,231,803 - 3,231,803 - subsidiaries and other companies IV. CASH AND CASH EQUIVALENTS 14,681,855 42,496,220 8,480,246 37,117,457 TOTAL ASSETS 2,077,793,318 2,037,402,623 2,017,314,500 C. SHAREHOLDERS EQUITY 1,099,418,959 1,014,965,736 1,012,045,197 I. EQUITY 1,057,387,313 940,557,173 1,057,387,313 940,557,173 I.1. Share capital (subscribed) 1,057,386,401 940,556,070 1,057,386,401 940,556,070 I.2. Share premium 912 1,103 912 1,103 II. REVALUATION RESERVE (RESULTS) - - - - III. RESERVES 39,469,111 51,099,080 39,469,111 51,099,080 III.1. Legal reserve 26,927,180 24,833,533 26,927,180 24,833,533 III.2. Other reserves 12,541,931 26,265,547 12,541,931 26,265,547 IV. RETAINED EARNINGS (DEFICIT) 2,562,535 23,309,483 1,749,354 20,388,944 IV.1. Current year’s profit (loss) 668,893 19,375,995 2,776,251 20,388,944 IV.2. Previous year’s profit (loss) 1,893,642 3,933,488 (1,026,897) - D. GRANTS AND SUBSIDIES 576,611,299 574,116,466 576,409,815 573,834,365 E. LIABILITIES 401,763,060 448,320,421 390,109,012 431,434,938 I. NON-CURRENT LIABILITIES 307,237,902 294,145,103 299,233,219 291,552,829 I.1. Financial borrowings 296,618,044 286,359,588 289,033,970 284,257,095 I.2. Trade payables 1,860,921 124,800 1,946,605 124,800 I.3. Provisions 8,675,451 7,660,715 8,169,158 7,170,934 I.4. Other accounts payable and non-current liabilities 83,486 - 83,486 - II. CURRENT LIABILITIES 94,525,158 154,175,318 90,875,793 139,882,109 II.1. Current portion of non-current borrowings 24,090,105 20,484,478 23,852,427 20,373,038 II.2. Financial borrowings 380 4,379,164 - - II.3. Trade payables 26,966,177 81,527,853, 19,891,543 65,447,182 II.4. Accounts payable to subsidiaries and associated company 745,878 415,641 8,388,556 11,625,617 II.5. Prepayments received 4,533,778 4,412,783 4,197,047 4,371,322 II.6. Taxes payable 986,883 1,815,727 521,346 586,192 II.6.1. Income tax liabilities 179,749 78,430 - - II.6.2. Other taxes 807,134 1,737,297 521,346 586,192 II.7. Labour-related liabilities 24,858,644 25,099,080 21,769,481 22,045,300 II.8. Provisions 5,348,348 4,168,532 5,292,468 4,139,008 II.9. Other accounts payable and current liabilities 6,994,965 11,872,060 6,962,925 11,294,450 TOTAL EQUITY AND LIABILITIES 2,077,793,318 2,037,402,623 2,017,314,500 Income statement

Group Company 2015 2014 2015 2014 I. Sales 429,521,356 470,354,690 428,994,062 461,714,714 II. Cost,of,sales (360,019,782) (388,318,462) (362,804,941) (384,872,870) III. GROSS,PROFIT 69,501,574 82,036,228 66,189,121 76,841,844 IV. Operating,expenses (69,549,336) (59,307,658) (64,632,797) (53,336,122) V. PROFIT,FROM,OPERATIONS (47,762) 22,728,570 1,556,324 23,505,722 VI. OTHER,ACTIVITIES VI.1. Income, 7,718,661 10,249,827 7,583,235 10,222,527 VI.2. Expenses (868,283) (1,071,646) (824,827) (1,039,594) 6,850,378 9,178,181 6,758,408 9,182,933 VII. FINANCIAL,AND,INVESTMENT,ACTIVITIES VII.1. Income, 689,857 1,262,374 616,755 846,118 VII.2. Expenses (5,127,251) (8,576,512) (4,722,281) (8,325,836) (4,437,394) (7,314,138) (4,105,526) (7,479,718) VIII. PROFIT,FROM,ORDINARY,ACTIVITIES 2,365,222 24,592,613 4,209,206 25,208,937 IX. Extraordinary,gain, - - - - X. Extraordinary,loss, - - - - XI. PROFIT,BEFORE,TAX 2,365,222 24,592,613 4,209,206 25,208,937 XII. Income,tax (1,696,329) (5,216,618) (1,432,955) (4,819,993) XIII. NET,PROFIT 668,893 19,375,995 2,776,251 20,388,944 ANNUAL REPORT 2015 AB Lietuvos Geležinkeliai Mindaugo g. 12, Vilnius LT-03603, Lithuania Fax. +370 5 269 21 28 [email protected] www.litrail.lt