CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Signed on behalf of management on 13 March 2023.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

Signed on behalf of management on 13 March 2023.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSLIDATED STATEMENT OF CASH FLOWS

Cash outflows for purchase of property, plant and equipment include capitalised interest paid in the amount of Tenge 6,610,277 thousand (2021: Tenge 2,332,453 thousand).

1. Samruk-Energy Group and Its Operations

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) for the year ended 31 December 2022 for Samruk-Energy JSC (the “Company”) and its subsidiaries (together referred to as the “Group”).

The Company was incorporated on 18 April 2007 and registered on 10 May 2007. The Company is a joint stock company and was set up in accordance with regulations of the Republic of Kazakhstan. The Group was established for the purpose of consolidation of entities in energy industry of the Republic of Kazakhstan (“RoK”).

As at 31 December 2022 and 2021 the Company’s sole shareholder is Samruk-Kazyna National Welfare Fund JSC (“Samruk-Kazyna”). The Company’s ultimate controlling party is the Government of the RoK.

Principal activity

The Group’s principal activities are production of electricity, heating energy, hot water on the basis of coal, hydrocarbons and water resources, and renewable energy sources (‘RES”), and then subsequently the sale to households and industrial enterprises, the transmission of electricity and technical distribution of electricity within the network, as well as leasing of property of hydro power plants.

The operations of the Group’s subsidiaries and joint ventures are regulated by the Law of the Republic of Kazakhstan On Electric Power Industry, the Law On Natural Monopolies, the Law On Support of the Use of Renewable Energy Sources, and the Commercial Code of the RoK. Tariffs, based on the type of activities of a company, are regulated by the Committee on Regulation of Natural Monopolies of the Ministry of National Economy of the Republic of Kazakhstan (“Committee”) or by the relevant ministry – Ministry of Energy of the Republic of Kazakhstan (“ME”).

Electricity tariffs for energy producers are approved by order of the Minister of Energy of the Republic of Kazakhstan No.160 On Approval of Cap Tariffs for Electricity for a Group of Energy Producing Organizations dated 27 February 2015 and subsequent amendments to it. Tariffs for the supply of electricity produced by renewable energy sources are fixed and approved by the Decree of the Government of the Republic of Kazakhstan dated 12 June 2014 No.645 On Approval of Fixed Tariffs, according to the Renewable Energy technology used (separately for wind, solar and other sources), and are subject to annual indexation. In addition, the financial settlement centre of RE acts as a buyer, and the power producer acts as a seller. Tariffs for electric power transmission and distribution for energy transmission companies, heating energy production and power supply (“PSE”) are regulated by the Committee. Regulation and control by the Committee are performed strictly in accordance with the legislation and regulations of the Republic of Kazakhstan.

The tariff related decisions are significantly exposed to social and political issues. Economic, social and other policies of the Government of the Republic of Kazakhstan may have a significant effect on the Group’s operations.

Registered address and place of business

The registered address and place of Company’s Head Office is: Block B, 15A, Kabanbay Batyr Avenue, Astana, Republic of Kazakhstan.

2. Basis of Preparation and Significant Accounting Policies

Basis of preparation of the consolidated financial statements

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) under the historical cost convention. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

Going concern

Management prepared these consolidated financial statements on a going concern basis. Management decision is based on the financial position of the Group, its current intentions, profitability of operations and access to financial resources and support of the Government of RoK.

As of 31 December 2022, the Group's current liabilities exceed its current assets by 29,011,658 thousand Tenge (2021: the Group’s current liabilities exceeded its current assets by Tenge 68,880,793 thousand). The main factor in increasing current liabilities was the attraction of short-term bank loans, associated with the Group's policy to reduce the level of long-term loans with a higher interest rate. In addition, in the reporting period, the Group made early repayments on long-term loans.

The following factors were considered in assessing the Group's ability to continue in the foreseeable future:

• The Group is of strategic importance for ensuring the reliability of the energy system of RoK. The management and shareholders of the Group have neither the intention nor the need to dissolve the Group
• The Group’s current liabilities of Tenge 5,841,514 thousand represent payable to the Akimat of Almaty city and, by agreement, do not require cash outflows.
• In 2022, the Group expects positive net cash flows from operating activities in the amount of more than Tenge 97.1 billion.

As of 31 December 2022, the Group has available funds on revolving credit facilities in banks of Kazakhstan totaling more than 80 billion Tenge.

These consolidated financial statements do not include any adjustments to the carrying amount of assets and liabilities, income and expenses, or classification of the consolidated statement of financial position that would be necessary if it was not possible to continue operations, such adjustments may be significant.

Consolidated financial statements

(i) Subsidiaries

Subsidiaries are those investees, including structured entities, that the Group controls because the Group (i) has power to direct relevant activities of the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its power over the investees to affect the amount of investor’s returns. The existence and effect of existing rights, including existing potential voting rights, are considered when assessing whether the Group has power over another entity. For a right to be existing, the holder must have practical ability to exercise that right when decisions about the direction of the relevant activities of the investee need to be made. The Group may have power over an investee even when it holds less than majority of voting power in an investee. In such a case, the Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee.

Subsidiaries are consolidated from the date on which control is transferred to the Company (acquisition date) and are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest.

The Group measures non-controlling interest that represents present ownership interest and entitles the holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis, either at: (a) fair value, or (b) the non-controlling interest's proportionate share of net assets of the acquiree.

Non-controlling interests that are not present ownership interests are measured at fair value.

Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognised in profit or loss, after management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities assumed and reviews appropriateness of their measurement.

The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments issued, and liabilities incurred or assumed, including the fair value of assets or liabilities from contingent consideration arrangements, but excludes acquisition related costs such as advisory, legal, valuation and similar professional services. Transaction costs related to the acquisition of and incurred for issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt as part of the business combination are deducted from the carrying amount of the debt and all other transaction costs associated with the acquisition are expensed.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the cost cannot be recovered. The Company and all of its subsidiaries use uniform accounting policies consistent with the Group’s policies.

Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests which are not owned, directly or indirectly, by the Company. Non-controlling interest forms a separate component of the Group’s equity.

(ii) Purchases of subsidiaries from parties under common control

Purchases of subsidiaries from parties under common control are accounted for using the predecessor values method. Under this method the consolidated financial statements of the combined entity are presented as if the businesses had been combined from the beginning of the earliest period presented or, if later, the date when the combining entities were first brought under common control. The assets and liabilities of the subsidiary transferred under common control are at the predecessor entity’s carrying amounts. The predecessor entity is considered to be the highest reporting entity in which the subsidiary’s IFRS financial information was consolidated. Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded in these consolidated financial statements. Any difference between the carrying amount of net assets, including the predecessor entity's goodwill, and the consideration for the acquisition is accounted for in these consolidated financial statements as an adjustment to other reserves within equity.

(iii) Purchases and sales of non-controlling interests

The Group applies the economic entity model to account for transactions with owners of non-controlling interest in transactions that do not result in a loss of control. Any difference between the purchase consideration and the carrying amount of non-controlling interest acquired is recorded as a capital transaction directly in equity. The Group recognises the difference between sales consideration and the carrying amount of non-controlling interest sold as a capital transaction in the statement of changes in equity.

(iv) Joint arrangements

Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income.

Dividends received from joint ventures reduce the carrying value of the investment in joint ventures.

When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

(v) Investments in associates

Associates are entities over which the Group has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. Dividends received from associates reduce the carrying value of the investment in associates. Other post-acquisition changes in the Group’s share of net assets of an associate are recognised as follows: (i) the Group’s share of profits or losses of associates is recorded in the consolidated profit or loss for the year as the share of results of associates, (ii) the Group’s share of other comprehensive income is recognised in other comprehensive income and presented separately, (iii); all other changes in the Group’s share of the carrying value of net assets of associates are recognised in profit or loss within the share of results of associates.

However, when the Group’s share of losses in an associate equal or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

(vi) Disposals of subsidiaries, associates or joint ventures

When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

Foreign currency translation

(i) Functional and presentation currency

All amounts in these consolidated financial statements are presented in thousands Tenge, unless otherwise stated.

Functional currency is the currency of the primary economic environment in which the entity operates. The functional currency of subsidiaries, joint ventures, associates and the parent is Tenge.

(ii) Transactions and balances in foreign currency

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of transactions.

Foreign exchange gains and losses resulting from the settlement of such transactions or from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

At 31 December 2022, the principal rate of exchange used for translating foreign currency balances was US Dollar per Tenge 462.65 (31 December 2021: US Dollar per Tenge 431.67). Exchange restrictions and currency controls exist relating to converting the Tenge into other currencies. Currently, Tenge is not freely convertible in most countries outside of the Republic of Kazakhstan.

Financial instruments

(i) Key measurement terms

Fair value is price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is price in an active market.

An active market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the number of instruments held by the entity. This is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price.

Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consideration of financial data of the investees are used to measure fair value of certain financial instruments for which external market pricing information is not available.

Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs). Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period (Note 33).

Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition and includes transaction costs. Measurement at cost is only applicable to investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured and derivatives that are linked to, and must be settled by, delivery of such unquoted equity instruments.

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties.

Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs.

Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses (“ECL”). Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to the maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of the related items in the statement of financial position.

The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the net carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate.

For assets that are purchased or originated credit impaired (“POCI”) at initial recognition, the effective interest rate is adjusted for credit risk, i.e., it is calculated based on the expected cash flows on initial recognition instead of contractual payments.

(ii) Financial assets

Measurement categories. The Group classifies financial assets in the following measurement categories: i) carried at fair value through profit or loss (FVTPL), ii) carried at fair value through other comprehensive income (FVOCI), iii) carried at amortised cost (AC). The classification and subsequent measurement of debt financial assets depends on: (i) the Group’s business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset.

As at 31 December 2022 and 31 December 2021 the Group’s financial assets were carried at amortised cost.

Business model

The business model reflects how the Group manages the assets in order to generate cash flows – whether the Group’s objective is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”,) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL. Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activities that the Group undertakes to achieve the objective set out for the portfolio available at the date of the assessment.

Cash flow characteristics

Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Group assesses whether the cash flows represent solely payments of principal and interest (“SPPI”). Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are consistent with the SPPI feature. In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending risks and profit margin. Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recognition of an asset and it is not subsequently reassessed.

Financial assets – reclassification

Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes.

The reclassification has a prospective effect and takes place from the beginning of the first reporting period that follows after the change in the business model. The Group did not change its business model during the current and comparative period and did not make any reclassifications.

Financial assets impairment – credit loss allowance for ECL

The Group assesses, on a forward-looking basis, the ECL for debt instruments measured at AC and for the exposures arising from loan commitments and financial guarantee contracts, for contract assets. The Group measures ECL and recognises Net impairment losses on financial and contract assets at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.

Debt instruments measured at AC are presented in the consolidated statement of financial position net of the allowance for ECL.

The Group applies a three stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 Months ECL”). If the Group identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“Lifetime ECL”). If the Group determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. For financial assets that are purchased or originated credit-impaired (“POCI Assets”), the ECL is always measured as a Lifetime ECL.

Financial assets – write-off

Financial assets are written-off, in whole or in part, when the Group exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event.

Financial assets – derecognition

The Group derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expire or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement whilst (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all the risks and rewards of ownership but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the sale.

Financial assets – modification

The Group sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Group assesses whether the modification of contractual cash flows is substantial.

If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Group derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred. The Group also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners.

In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the originally agreed payments, the Group compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition.

The Group recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets), and recognises a modification gain or loss in profit or loss.

(iii) Financial liabilities

Measurement categories

Financial liabilities are classified as subsequently measured at AC, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.

Financial liabilities – derecognition

Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

An exchange between the Group and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors are also considered. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners.

Financial liabilities designated at FVTPL

The Group may designate certain liabilities at FVTPL at initial recognition. Gains and losses on such liabilities are presented in profit or loss except for the amount of change in the fair value that is attributable to changes in the credit risk of that liability (determined as the amount that is not attributable to changes in market conditions that give rise to market risk), which is recorded in OCI and is not subsequently reclassified to profit or loss. This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in credit risk of the liability are also presented in profit or loss.

(iv) Offsetting

Financial assets and liabilities are offset, and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously. Such a right of set off (a) must not be contingent on a future event and (b) must be legally enforceable in all of the following circumstances: (i) in the normal course of business, (ii) in the event of default and (iii) in the event of insolvency or bankruptcy.

Property, plant and equipment

(i) Recognition and subsequent measurement

Property, plant and equipment are stated at cost less accumulated depreciation and provision for impairment, where required. Cost comprises purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour and part of production overhead costs.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Costs of minor repairs and day-to-day maintenance are expensed when incurred. Cost of replacing major parts or components of property, plant and equipment items are capitalised and the replaced part is retired. Asset retirement obligation is capitalised to the cost of property, plant and equipment.

Gains and losses on disposals are determined by comparing proceeds with carrying amount, and are recognised in profit or loss for the year within other income or expenses.

(ii) Depreciation

Land is not depreciated. Depreciation on other items of property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its useful life. The residual value of an asset set equal to zero, if the Group intends to use the object till the end of its physical useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

(iii) Impairment

At the end of each reporting period, management assesses whether there is any indication of impairment of property, plant and equipment. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of: an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in the profit or loss for the year. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell.

Intangible assets

All of the Group’s intangible assets have definite useful lives and primarily include capitalised computer software and licenses. Acquired computer software is capitalised on the basis of the costs incurred to acquire and bring it to use.

All intangible assets are amortised using the straight-line method over their useful lives, estimated by the management as from 2 to 25 years.

If impaired, the carrying amount of intangible assets is written down to the higher of: value in use and fair value less costs to sell.

If the Group acquires a group of assets, which is not a business, it spreads the cost of the group between the individual identifiable assets in the group based on their relative fair values at the acquisition date.

Assets that are subject to depreciation and amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

Investment property

Investment property is property held by the Group to earn rental income or for capital appreciation and which is not occupied by the Group. Investment property includes construction in progress intended for use as investment property

Investment properties are stated in the consolidated financial statements at cost less accumulated depreciation and provision for impairment, where required.

If any indication exists that investment properties may be impaired, the Group estimates the recoverable amount as the higher of value in use and fair value less costs to sell. The carrying amount of an investment property is written down to its recoverable amount through profit or loss for the year. An impairment loss recognised in prior years is reversed if there has been a subsequent change in the estimates used to determine the asset’s recoverable amount. Subsequent expenditures are capitalised only when it is probable that future economic benefits associated with the investment property will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed when incurred.

If an investment property becomes owner-occupied, it is reclassified to property, plant and equipment, and its carrying amount at the date of reclassification becomes its deemed cost to be subsequently depreciated. Depreciation on investment property is calculated using the straight-line method to allocate its cost to its residual values over their estimated useful lives, as follows:

Earned rental income is recorded in profit or loss for the year within revenue.

The carrying amount of investment property approximates fair value.

Right-of-use assets

The Group leases various offices, equipment and vehicles. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

Assets arising from a lease are initially measured on a present value basis.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• costs to restore the asset to the conditions required by lease agreements;
• any initial direct costs.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying assets’ useful lives.

Depreciation on the items of the right-of-use assets is calculated using the straight-line method over their estimated useful lives as follows:

Discontinued operations

A discontinued operation is a component of the Group that either has been disposed of, or that is classified as held for sale, and: (a) represents a separate major line of business or geographical area of operations; (b) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or (c) is a subsidiary acquired exclusively with a view to resale. Earnings and cash flows of discontinued operations, if any, are disclosed separately from continuing operations with comparatives being re-presented.

Inventories

Inventories are recorded at the lower of cost and net realisable value. The cost of inventory is determined on the first-in, first-out basis. The cost of finished goods and work in progress comprises raw material, direct labour, other direct costs and related production overheads, but excludes borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling expenses.

Trade and other receivables

Trade and other receivables, except for prepaid taxes and advances to supplies, are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest method.

Advances to suppliers are carried at cost less provision for impairment. Advances are classified as non-current when the goods or services relating to the advances are expected to be obtained after one year, or when advances relate to an asset which will itself be classified as non-current upon initial recognition. Advances to acquire assets are transferred to the carrying amount of the asset once the Group has obtained control of the asset and it is probable that future economic benefits associated with the asset will flow to the Group. Other advances are written off to profit or loss when the goods or services relating to the advances are received. If there is an indication that the assets, goods or services relating to advances will not be received, the carrying value of the advances is written down accordingly, and a corresponding impairment loss is recognised in the profit or loss for the year. Prepaid taxes are stated at actual amounts paid less impairment provision.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and cash at current bank accounts and repurchase and reverse repurchase agreements ("reverse repo") with other banks with an original maturity of less than ten days (secured debt instruments). Cash and cash equivalents are carried at AC because: (i) they are held for collection of contractual cash flows until maturity and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.

Restricted balances are excluded from cash and cash equivalents for the purposes of the consolidated cash flow statement.

Balances restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period are included in other non-current assets; balances restricted for more than three months but less than twelve months after the reporting period are included in other current assets.

Non-current assets held for sale (or disposal groups)

Non-current assets or disposal groups (which may include both non-current and current assets) are classified in the statement of financial position as ‘non-current assets held for sale and disposal groups’ if their carrying amount will be recovered principally through a sale transaction within twelve months after the reporting period. Assets are reclassified when all of the following conditions are met: (a) the assets are available for immediate sale in their present condition; (b) the Group’s management approved and initiated an active programme to locate a buyer; (c) the assets are actively marketed for a sale at a reasonable price; (d) the sale is expected within one year; and (e) it is unlikely that significant changes to the plan to sell will be made or that the plan will be withdrawn.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. The Board of Directors of the Company determines value per share and a number of shares to be issued on each individual share issue based on the statutory rules. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity.

Dividends

Dividends are recognised as a liability and deducted from equity at the end of reporting period only if they are declared and approved before or on the end of reporting period.

Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the financial statements are authorised for issue.

Other reserves

Other reserves is the part of capital whose distribution to owners is restricted by IFRS, regulation or the Group's initiative and is prescribed by the charter documents. Other reserve capital includes business combination reserve, result of transactions with shareholder and other comprehensive income/loss. The accrual of expenses or the distribution of assets at the discretion of the shareholder, including fixed assets, business combinations, interests in other entities and disposal groups, cash and other, are recognised within the equity as "Other reserves". Other reserves also include gain on initial recognition of loans received from the shareholder with non-market terms.

Earnings per share and carrying amount of one share

Basic earnings per share are calculated by dividing the profit or loss attributable to owners of the Group by the weighted average number of ordinary shares in issue during the year. The Group has no dilutive potential ordinary shares; therefore, the diluted earnings per share equals the basic earnings per share (Note 35).

Value added tax

Value-added tax (“VAT”) related to sales is payable to the tax authorities when goods are shipped, or services are rendered. Input VAT can be offset against output VAT upon the receipt of a tax invoice from a supplier.

Tax legislation allows the settlement of VAT on a net basis. Accordingly, VAT related to sales and purchases is stated in the statement of financial position on a net basis. Recoverable VAT is classified as non-current if its settlement is not expected within one year after the reporting period.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are not recognised for future operating losses.

Asset retirement obligation

Asset retirement obligation, including ash dump restoration provision is recognised when there is a high certainty of incurring the costs and those costs can be measured reliably. Estimated restoration costs are added to the cost of an item of property plant and equipment when incurred in the accounting period when the obligation arising from the related disturbance occurs, based on the net present value of estimated future costs. Asset retirement obligation does not include any additional obligations which are expected to arise from future disturbance.

Ash dump restoration costs include dismantling and demolition of ash dump infrastructure, environmental cleanup and discharge monitoring.

The costs are estimated on the basis of a restoration plan. The cost estimates are calculated annually during the operating life to reflect known developments, such as updated cost estimates and revisions to the estimated lives of operation and are subject to formal review at regular intervals.

Although the ultimate cost to be incurred is uncertain, the Group estimates the respective costs based on feasibility and engineering studies using current restoration standards and techniques for conducting works on restoration and remediation of waste polygons. The amortisation or “unwinding” of the discount applied in establishing the net present value of provisions is charged to profit and loss in each accounting period. The amortisation of the discount is shown as finance costs.

Employee benefits

(i) Long-term employee benefits

The Group companies provide the long-term employee benefits to employees before, on and after retirement, in accordance with a Collective Labour Agreement. The agreement provides for one-off retirement payments, financial aid for employees’ disability, significant anniversaries and funeral aid to the Group’s employees. The entitlement to some benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period.

The expected cost of these benefits is accrued over the period of employment using the same accounting methodology as used for the defined post-employment benefit plan. The Group does not have any funded pension plans. The liability recognised for the end of each reporting period represents the present value of defined benefit obligations. Actuarial gains and losses arising in the year are taken to other comprehensive income for the year. For this purpose, actuarial gains and losses comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred.

Other movements in post-employment benefit obligations when incurred are accounted for as follows: (i) cost of services and net interest costs are included in profit or loss; and (ii) restatements are recorded in other comprehensive income.

The main assumptions used in accounting for defined benefit obligations are the discount rate and the personnel turnover assumptions. The discount rate is used to determine the net present value of future liabilities and each year the unwinding of the discount on those liabilities is charged to the profit or loss for the year as finance costs. The personnel turnover assumption is used to estimate the future stream of benefit payments, which is then discounted to arrive at a net present value of liabilities.

These obligations are valued annually by independent qualified actuaries.

(ii) Staff costs and related contributions

Wages, salaries, contributions to pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Group.

On behalf of its employees, the Group withholds and transfer those statutory pension and post-employment benefit amounts prescribed by the legal requirements of the Republic of Kazakhstan to Unified Accumulative Pension Fund JSC (“Fund”). For those employees, not covered by the Collective Labour Agreement payments, upon retirement, the financial obligations of the Group cease and all subsequent payments to retired employees are administered by the Fund.

Lease liabilities

Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the Group under residual value guarantees;
• the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and;
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Extension and termination options are included in a number of property lease agreements across the Group. These terms are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. Extension options (or period after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases of the Group, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, collateral and conditions.

To determine the incremental borrowing rate, the Group:

• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received,
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk, and
• makes adjustments specific to the lease, e.g. term, country, currency and collateral.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect.

When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance costs. The finance costs are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred and are subsequently carried at AC using the effective interest method.

При учете займов от акционеров на нерыночных условиях Группа отражает доход/(убыток) от первоначального признания в капитале как вклад в капитал/(распределение капитала). Порядок учета, который отражает экономическую сущность операции, применяется последовательно ко всем аналогичным операциям и раскрывается в консолидированной финансовой отчетности.

In accounting for loans from the shareholders with off market terms, the Group records gain/(loss) on origination in equity as a capital contribution/(distribution). The method used reflects the transaction's economic substance and is applied consistently to all similar transactions and is disclosed in the consolidated financial statements.

General and specific borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial time to get ready for intended use or sale (qualifying assets) are capitalised as part of the costs of those assets.

The commencement date for capitalisation is when (a) the Group incurs expenditures for the qualifying asset; (b) it incurs borrowing costs; and (c) it undertakes activities that are necessary to prepare the asset for its intended use or sale. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use or sale.

The Group capitalises borrowing costs that could have been avoided if it had not made capital expenditure on qualifying assets. Borrowing costs capitalised are calculated at the Group’s average funding cost (the weighted average interest cost is applied to the expenditures on the qualifying assets), except to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset. Where this occurs, actual borrowing costs incurred on the specific borrowings less any investment income on the temporary investment of these borrowings are capitalised.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

Trade and other payables

Trade and other payables are accrued when the counterparty performed its obligations under the contract. Trade and other payables, except for advances received, are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Advances received are stated at actual amounts received from the third parties.

Revenue recognition

Revenue is income arising in the course of the Group’s ordinary activities.

Revenue is recognised in the amount of transaction price. Transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring control over promised goods or services to a customer, excluding the amounts collected on behalf of third parties. Revenue is shown net of value-added tax and discounts. Revenue from sale of energy is recognised over the period.

Consolidated revenue of the Group is mainly attributed to sale and transmission of electric and heating power, and hot water production.

According to the contracts for sale and transmission of electric and heating power of the Group, obligations to be performed are identified when concluding the relevant contract. Contracts for sale and transmission of electric and heating power do not include related and/or additional services.

The Group does not assume concluding contracts which provide for a period between transfer of the promised goods or services to the customer and payment by the customer to be more than one year. Accordingly, the Group does not adjust transaction prices for time value for money

According to the contracts for sale and transmission of electric and heating power, the contract amount is the price for sold or transmitted amount of electric or heating power, which is a separate performance obligation.

Electric and heating power generation and sale

Revenues are recognised based on the actual amount of electric and heating power sold by the Group’s power plants.

Revenue is determined based on tariffs approved by the authorised agency.

Sales of electric and heating power are recognised based on readings of metering devices on a monthly basis. These devices installed at connection point of the Group’s power plant to the transmission networks.

A receivable is recognised when electric and heating power is delivered at the connection point of the Group’s power plant to the transmission networks, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Actual volume of electric and heating power transmitted for the accounting period is supported by the act of electric power supply/reconciliation report on heating power. Invoices are issued to customers on a monthly basis.

Electric power transmission and distribution

The Group provides services under fixed-price contracts per 1 kWh of transmitted and distributed power based on the tariffs approved by the authorised agency.

Revenue from providing services is recognised in the accounting period in which the services are rendered. Revenue is recognised based on the actual volume of electric power transmitted over the reporting period because the customer receives and uses the benefits simultaneously.

The actual volume of electric power transmitted and distributed for the reporting period is supported by relevant reconciliation reports to be monthly executed and signed with customers based on readings of metering devices. Customers are billed on a monthly basis on the last day of each month, and consideration is payable within 5 working days after billing.

A receivable is recognised when an invoice is issued, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Revenue from services to maintain the electric power capacity

Also, the Group provides a service to maintain the electric power capacity. Revenues from the provision of services to maintain the electric power capacity are recognized in the reporting period when these services were provided. Revenue is determined on the basis of the actual electric power capacity, on the basis of monthly reports on the available electric power capacity from a single purchaser in accordance with the Rules of the power capacity market.

The contract provides for payment for 1 kW of available power per month, and revenue is recognized in the amount to which the Group has the right to invoice.

Pursuant to the certificate signed for the reporting month, the Group issues invoices to the Single Purchaser on a monthly basis.

Sale of electric power

The Group sells electric power under agreements with individuals and legal entities based on the tariffs approved by the authorised agency.

Sales to legal entities are recognised monthly in the reporting period in which electric power is consumed, according to readings of the metering devices. A legal entity agreement requires payment within 5 working days after billing. An agreement of publicly-funded legal entities provides for payment until 15th day of the month following the billing month.

Sales to individuals are recognised monthly in the reporting period in which electric power is consumed. Revenues from agreements with individuals include revenues for the last few days of the month after reading of the metering devices, which are recognised as a proportion of the total electric power sold for the billing month. An agreement with individuals provides for payment until the 25th day of the month following the billing month, based on the payment document to be issued by the Company. The billing period is one calendar month.

Offsetting

A portion of sales and purchases are settled by offset, barter or other non-cash settlements.

These transactions are settled generally as the exchange of dissimilar goods and services with the industrial and commercial customers in the form of offset.

Sales and purchases that are expected to be settled by mutual settlements, barter or other non-cash settlements are recognised based on the Group entities’ management estimate of the fair value to be received or given up in non-cash settlements. The fair value is determined with reference to observable market information.

Non-cash transactions have been excluded from the consolidated cash flow statement. Investing and financing activities and the total of operating activities in these consolidated statements represent actual cash flows.

Segment reporting

Segments are reported in a manner consistent with the internal reporting provided to the Group’s chief operating decision maker. Segments whose revenue, financial result or assets are ten percent or more of all the segments assets are reported separately.

Income taxes

Income taxes have been provided for in these consolidated financial statements in accordance with legislation of the Republic of Kazakhstan enacted or substantively enacted by the end of the reporting period.

The income tax charge comprises current tax and deferred tax and is recognised in profit or loss for the year except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in equity.

Current tax is the amount expected to be paid to or recovered from the state budget in respect of taxable profits or losses for the current and prior periods. Taxable profits or losses are based on estimates if financial statements are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within operating expenses.

Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the exception for initial recognition, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit. Deferred tax balances are measured at tax rates, which are expected to apply to the period when the temporary differences will reverse or tax loss carry-forwards will be utilised in accordance with tax rates enacted or substantively enacted at the end of reporting period. Deferred tax assets and liabilities are netted only within the individual companies of the Group. Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilised.

The Group controls the reversal of temporary differences relating to taxes chargeable on dividends from subsidiaries or on gains upon their disposal. The Group does not recognise deferred tax liabilities on such temporary differences except to the extent that management expects the temporary differences to reverse in the foreseeable future.

In determining the tax bases of the restoration and closure costs are added to the cost of property plant and equipment and provision for asset retirement obligation the Group allocates the future tax deductions to the liability. Under this approach the initial recognition exception does not apply.

Deferred tax liability is recognised in respect of the taxable temporary difference on the restoration and closure costs added to the cost of property plant and equipment and, subject to recognition criteria mentioned above, a deferred tax asset is recognised in respect of the deductible temporary difference on the provision for asset retirement obligation.

The Group's uncertain tax positions are reassessed by management at the end of each reporting period.

Liabilities are recorded for income tax positions that are determined by management (the assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the end of the reporting period and any known court or other rulings on such issues) as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. Liabilities for penalties, interest and taxes other than on income are recognised based on management’s best estimate of the expenditure required to settle the obligations at the end of the reporting period. Adjustments for uncertain income tax positions are recorded within the income tax charge.

Uncertain tax positions

Management at the end of each reporting period evaluates the Group’s uncertain tax positions. Liabilities reported in respect of income tax positions are taken into account when management believes that the likelihood of emergence of additional tax liabilities, in case the tax authorities challenge the tax position of the Group, is higher than the probability of their absence.

Such an assessment is conducted based on the interpretation of tax laws that are in force or in effect at the end of the reporting period, as well as any known court decisions or other decisions on such matters. Liabilities for fines, penalties and taxes, other than income tax, are presented on the basis of management's best estimate of the costs required to settle the obligations at the end of the reporting period. Adjustments to uncertain income tax positions are reported within income tax expense.

Change in presentation: reclassification

As of 31 December 2022, the Group classified a long-term borrowing of JSC Halyk Bank (the “Bank”) as current liabilities. These borrowings have a maturity up to 2029. The management made this classification due to a clause in the loan agreement which requires immediate repayment not earlier than 10 months after a written request of the Bank. In February 2023, the management signed an addendum and amended this clause to 13 months (Note 34).

As of the date of these consolidated financial statements there was no request from the Bank for early repayment. The management decided to adjust the presentation of the corresponding figures in line with the current year. The effect of reclassifications for presentation purposes was as follows on amounts at 31 December 2021:

3. New Accounting Pronouncements

The following amended standards and interpretations became effective from 1 January 2022, but did not have any material impact on the Group:

• Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022).

New standards and interpretations

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2023 or later, and which the Group has not early adopted.

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB).
• IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021, the effective date subsequently modified to 1 January 2023 by the Amendments to IFRS 17 as discussed below).
• Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023).
• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023).
• Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023).
• Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). The Group is currently assessing the impact of the amendments on its financial statements.
• Transition option for insurers applying IFRS 17 – Amendments to IFRS 17 (issued on 9 December 2021 and effective for annual periods beginning on or after 1 January 2023).
• Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (issued on 22 September 2022 and effective for annual periods beginning on or after 1 January 2024).
• Classification of liabilities as current or non-current – Amendments to IAS 1 (originally issued on 23 January 2020 and subsequently amended on 15 July 2020 and 31 October 2022, ultimately effective for annual periods beginning on or after 1 January 2024).

Unless otherwise described above, the new standards and interpretations are not expected to affect significantly the Group’s consolidated financial statements.

4. Critical Accounting Estimates, and Judgements in Applying Accounting Policies

The Group makes estimates and assumptions that affect the amounts recognised in the consolidated financial statements and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include:

Impairment of non-financial assets

At each reporting date management assesses whether there is any indication of impairment of separate assets or groups of assets, and whether there is any indication that an impairment loss recognised in prior periods for separate assets or groups of assets other than goodwill may no longer exist or may have decreased.

If such indications exist, management estimates the recoverable amount of an asset, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The calculation of value in use requires the application of the management’s estimates and judgments, which are deemed appropriate under the current circumstances.

Assessment of impairment indicators also requires the use of judgments and estimates in determining possible technological obsolescence of fixed assets, discontinuing operations, residual useful lives, and other changes in operating conditions.

Under IAS 36, one of the possible impairment indicators is the presence of significant changes that had negative consequences for the Group that occurred during the period or are expected in the near future in the technological, market, economic or legal environment in which the Group operates or in the market for which the asset is used.

In assessing the recoverable amount of assets, the Group makes estimates and judgments. Estimates and judgments are repeatedly evaluated and based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgments, apart from those involving estimations, in the process of applying the accounting policies.

Analysis of the impairment indicators of property, plant and equipment – production of electricity and heat based on coal, transmission and distribution of electricity

The Group’s management performed the analysis of the impairment indicators of property, plant and equipment of subsidiaries JSC "Almaty Electric Stations" ("AlES"), Ekibastuz GRES-1 named after Bulat Nurzhanov LLP (“EGRES-1”), Alatau Zharyk Company JSC (“AZhK”) as well as investments in the joint venture JSC "Station Ekibastuzskaya GRES-2" (hereinafter "SEGRES-2") in accordance with IAS 36 “Impairment of Assets”.

The principal facts and assumptions used in the analysis of the impairment indicators are:

• Lack of negative changes in the economic efficiency of subsidiaries for the reporting period;
• Increase in marginal tariffs for electricity for energy producing organizations from 1 July 2022 in accordance with Order of the Minister of Energy of the RoK dated 30 June 2022 No. 226, with the possibility of adjusting tariffs with an increase in basic costs, in accordance with the Rules for approving the marginal tariff for electrical energy, approved by Order of the Minister of Energy of the RoK dated 27 February 2015 No. 147;
• A change in interest rates on loans will not have a significant impact on the recoverable amount of assets, since an increase in the debt financing rate will be similarly reflected in the WACC rate when calculating the rate of return, in the next validity period of the cap tariffs, according to the methodology for determining the rate of return taken into account when approving the cap tariffs for electricity, as well as a fixed profit for balancing, taken into account when approving cap tariffs for balancing electricity approved by Order of the Minister of Energy of the RoK dated 22 May 2020 No. 205, the cost part of the tariff also includes interest expenses for the previous period;
• A change in inflation rates will not have a significant impact, since the cost part of the tariff includes costs taking into account actual inflation for the previous year, as well as amendments to the Law “On Natural Monopolies” dated 27 December 2018 No. 204-VI ZRK stipulate additional conditions for adjusting tariffs approved for 5 years for the transmission of electricity before its expiration (change in the approved investment program in connection with the implementation of national projects, receipt on the balance sheet or in trust management of networks, change in the average monthly nominal wage);
• Lack of significant changes having adverse consequences for subsidiaries, which occurred during the period or may presumably occur in the nearest future;
• Projected growth in the medium term in demand for electricity in the northern and southern zones of the Republic of Kazakhstan;

Additional facts and assumptions used in the analysis of impairment indicators for AlES:

• Increase in the tariff for heat energy from 1 September 2022 with the possibility of adjusting tariffs when changing the type and cost of strategic goods, according to the Law of RoK “On natural monopolies”;
• It is planned to modernize the two main power plants of AlES (Almaty CHP-2 and CHP-3). The residual value of the existing assets of the coal-fired power units of these plants, subject to conservation or dismantling, by the time the new gas turbine/combined cycle power units are put into operation will be equal to zero;
• No significant changes that have occurred during the period, or are expected to occur in the near future and can have a material effect on the asset's recoverable amount.

Modernisation of Almaty CHP-2 with the minimization of the environmental impact

The project is being implemented as part of the execution of the order of the President of the Republic of Kazakhstan to ensure the construction of a new combined cycle gas plant at the Almaty CHP-2 to reduce emissions of harmful substances into the atmosphere, ensure the reliability and efficiency of energy and heat supply through the use of modern environmentally clean technologies.

The project is included in the national project "Sustainable economic growth aimed at improving the welfare of Kazakhstanis" approved by Decree of the Government of the Republic of Kazakhstan dated 12 October 2021 No. 730.

The conclusion of an investment agreement and the receipt of an individual capacity tariff to finance the project of converting CHP-2 to gas is expected by the end of 2023. The project for the modernization of CHP-2 provides for the conservation of the existing capacities of CHP-2 after the commissioning of a new gas-fired plant. The Group's management plans to complete the project of converting CHP-2 to gas by 31 December 2026. In 2021, the Group recognized a provision for impairment in the amount of KZT 20,737,321 thousand of the core assets of CHP-2, including coal-fired power units subject to conservation or dismantling after commissioning of the combined-cycle gas plant. Accordingly, the residual value of these assets will be zero by the time the new combined-cycle power units are put into operation.

Reconstruction of Almaty CHP-3

AlES developed a feasibility study “Reconstruction of the Almaty CHP-3 (with construction of a CCGT unit with a capacity of at least 450 MW)" (the "Project"). The project implementation period: 2022-2025. The purpose of the Project: Reconstruction of the Almaty CHP-3 provides for the replacement of the existing pulverized coal-fired equipment with modern environmentally friendly combined cycle power units, the construction of a new CHP plant of greater capacity with a cycling service on the existing site, to partially cover the shortage of maneuverable capacities in the southern zone of Kazakhstan.

On 10 October 2022, AlES received a positive opinion of a comprehensive non-departmental expertise No. 02-0158/22 on the feasibility study of the Project. On 14 December 2022, AlES took part in the auction, and per the results, AlES was declared the winner of the auction (Tenge 9,788,700/MW*month excluding VAT). The committed capacity is 480 MW.

On 27 January 2023, AlES sent to “Financial Settlement Centre for Support of Renewable Energy Sources” LLP a signed Agreement on the purchase of a service to maintain the readiness of electric power during the construction of newly commissioned generating plants with a cycle generation mode.

The Almaty CHP-3 reconstruction project provides for the replacement of the existing equipment, the fleet life of which will be exhausted by the time the new plant is commissioned, with modern environmentally friendly combined cycle power units, as well as fully depreciated, so the Group's management did not identify any significant changes having negative consequences for the Group, which are expected in the near future.

Additional facts and assumptions used in the analysis of impairment indicators for AZhK:

• Overfulfillment of the plan in terms of key operational and financial performance indicators at 31 December 2022;
• Projected growth in the medium term in demand for electricity in the Almaty city and the Almaty region;
• Increase in the tariff for electricity transmission from 1 September 2022 per joint order of the DCRNM of the Ministry of National Economy of the Republic of Kazakhstan for Almaty and Almaty Region No. 89-OD dated 18 August 2022;
• Law of the Republic of Kazakhstan dated 30 December 2022 No. 177-VII amended Law of RoK “On Natural Monopolies” dated 27 December 2018 No. 204-VІ ZRK allowing to adjust the tariffs for electricity transmission approved for 5 years before expiration.

Results of analysis of the impairment indicators of property, plant and equipment – production of electricity and heat based on coal, transmission and distribution of electricity

As a result of the analysis of external and internal impairment indicators, the Group’s management concluded that there were no impairment indicators at the date of the analysis. Accordingly, the Group’s management has elected not to test for impairment of property, plant and equipment and intangible assets of these subsidiaries and investments in the joint venture at 31 December 2022.

Analysis of indications of impairment of property, plant and equipment - green energy production

In connection with the restructuring of green energy assets associated with the registration of a new subsidiary Qazaq Green Power PLC and the subsequent transfer of a full stake in Moynak HPP JSC, and a stake in First Wind Power Plant LLP, Samruk-Green Energy LLP, the Group carried out a fair value assessment, which revealed that for Samruk-Green Energy LLP the carrying amount of the assets exceeds the fair value at 31 December 2022. For Moynakskaya HPP JSC and First Wind Power Plant LLP, the fair value of the assets was significantly higher than the carrying amount. When analyzing impairment indicators for the remaining groups of green energy assets, the Group identified indicators of impairment for Semirechya Energy LLP and Ereymentau Wind Power LLP and performed an impairment test for property, plant and equipment and intangible assets under IAS 36 Impairment of Assets.

The recoverable amount of property, plant and equipment and intangible assets was determined based on the measurement of estimated future cash inflows and outflows from the use of the assets, the discount rate and other indicators.

Management classifies property, plant and equipment and intangible assets of each subsidiary as a single cashgenerating unit as it is the smallest identifiable group of assets that generates cash inflows that are substantially independent of the cash flows generated by other assets and the lowest level at which each the subsidiary controls the recovery of the value of the assets. Management has estimated the recoverable amount of property, plant and equipment based on value in use, defined as the sum of the estimated discounted future cash flows that the Group expects to receive from their use.

Samruk-Green Energy LLP

The cash flows under the Samruk-Green Energy LLP’s model were calculated up to 2051 based on the remaining useful life of the assets.

The key assumptions used by management in the financial model in determining value in use are the following:

Forecast volumes and tariffs for the sale of electricity:

The sales price of Samruk-Green Energy LLP is set at fixed tariffs under Law of the Republic of Kazakhstan dated 4 July 2009 No. 165-IV "On supporting the use of renewable energy sources and subject to annual indexation in accordance with the Rules for determining fixed tariffs and maximum auction prices dated 27 March 2014 No. 271.

The sales forecast is based on information from previous years and management's expectations in accordance with the Group's Development Plan for 2023-2027.

The volume of sales for 2028-2051 was determined at the level of the volumes of the Group Development Plan for 2023-2027.

Discount rate:

The cash flows were discounted using an after-tax interest rate of 17.33% per annum, which was determined based on the weighted average cost of capital of Samruk-Green Energy LLP.

As a result of the test, the Group recognized an impairment loss of Tenge 2,720,934 thousand.

Semirechya Energy LLP

As a result of the test, the investment in Semirechya Energy LLP was completely impaired, as the value in use of the investments was zero. The Group recognized an impairment loss on investments of Tenge 1,529,090 thousand.

Ereymentau Wind Power LLP

The cash flows under Ereymentau Wind Power LLP’s model were calculated up to 2044 based on the useful life of assets that are planned to be put into operation in the second half of 2024.

The key assumptions used by management in the financial model in determining value in use are:

Forecast volumes and tariffs for the sale of electricity:

The electricity price was determined as the average of commercial offers received by similar companies of the Group, from a number of potential consumers, taking into account annual indexation for forecast inflation.

Commissioning dates are based on the management’s expectations, the volumes and period of electricity generation by wind turbines are based on the technical documentation of the project (design estimates, contract with the contractor, etc.).

The volume of sales for 2028-2044 was determined at the level of the volumes of the Group Development Plan for 2023-2027.

Discount rate:

The cash flows were discounted using an after-tax interest rate of 16.97% per annum, which was determined based on the weighted average cost of capital of Ereymentau Wind Power LLP.

As a result of the test, the Group recognized an impairment loss of Tenge 6,220,277 thousand.

Sensitivity of impairment test - for Green energy production

Accounting for property, plant and equipment

Property, plant and equipment with a carrying value of Tenge 15,181,721 thousand represent the assets of the First Wind Power Plant (PVES) of Tenge 14,296,747 thousand and Samruk-Green Energy LLP of Tenge 844,974 thousand.

The Settlement and Financial Centre, a governmental organization, acts as an agent that buys the entire volume of electricity generated by RES companies and resells it to stations powered by coal and hydrocarbons. The total volume of electricity is purchased from the power plants at a specified tariff above the market one, which is annually adjusted to the inflation rate.

According to IFRS 16, arrangements of this nature may contain a lease. Upon review of IFRS 16 criteria, management concluded that this arrangement is an operating lease, whereby PVES and Samruk-Green Energy LLP act as lessors. Accordingly, revenue from electricity of these stations was included in rental income from these power plants.

Useful lives of property, plant and equipment

The estimation of the useful lives of items of property, plant and equipment is a matter of judgment based on the experience with similar assets. The future economic benefits embodied in the assets are consumed principally through use. However, other factors, such as technical or commercial obsolescence and wear and tear, often result in the diminution of the economic benefits embodied in the assets. Management assesses the remaining useful lives in accordance with the current technical conditions of the assets and estimated period during which the assets are expected to earn benefits for the Group.

The following primary factors are considered: (a) expected usage of the assets; (b) expected physical wear and tear, which depends on operational factors and maintenance programme; and (c) technical or commercial obsolescence arising from changes in market conditions.

If the estimated useful lives were different by 10% from management’s estimates, the depreciation for the year ended 31 December 2022 would have been higher/lower by Tenge 5,952,097 thousand (31 December 2021: higher/lower by Tenge 5,497,703 thousand).

Balkhash Thermal Power Plant

On 29 October 2019, the Group acquired 50% + 1 share of BTPP from Samsung C&T and became the owner of 100% interest in BTPP. As of the acquisition date, BTPP was on the brink of bankruptcy and did not actually perform any significant activities. Since 2017, creditors and suppliers have repeatedly sued due to the insolvency of BTPP, which in turn led to the seizure of property, and also significantly limited the activities of BTPP. On 6 December 2019, a temporary administrator was appointed by the court to control and conduct the bankruptcy process.

On 20 April 2022, following the petition of Bank CenterCredit JSC, the Specialized Interdistrict Court of Almaty Region (“SIEC”) initiated a civil case to declare BTPP bankrupt. By the decision of SIEC of the Almaty region dated 27 June 2022, the BTPP was refused to be declared bankrupt. By the decision of the Judicial Chamber for Civil Cases of the Almaty Regional Court, the decision of SIEC was upheld, the appeal of Bank CenterCredit JSC was not satisfied. According to the courts, the recognition of BTPP as a bankrupt is premature due to the absence of a decision on the part of the state on the future fate of the Project and is based on arguments about the presence of assets and property, plant and equipment in BTPP, the cost of which may be the subject of fulfilment of obligations if the Government of the RoK makes a negative conclusion regarding the project, as well as a prospect for resuming the Project and restoring the financial position of the debtor with the possibility of repaying debts to creditors.

In turn, the operations of the BTPP were completely suspended as of 31 December 2022. BTPP’s property was fully distrained and arrested by bailiffs on the applications of creditors and tax authorities for subsequent sale through an auction to pay off the debt to creditors. Therefore, management believes that the Group has no control and the investments in BTPP are fully impaired.

Asset retirement obligations

The Group’s management performed an analysis of the existence and necessity of recognizing obligations for the decommissioning, dismantling and reclamation of the territory of the Group’s production assets.

In particular, the Group’s management analyzed the requirements of the Environmental Code of the Republic of Kazakhstan that, after the cessation of operation of facilities that have a negative impact on the environment, facility operators are required to ensure the elimination of the consequences of the operation of such facilities per the requirements of the legislation of the Republic of Kazakhstan. In accordance with the provisions of the Environmental Code, liquidation measures depend on the nature of facilities and the degree of their impact on the environment, in particular, the code regulates the classification of facilities into categories that reflect the degree of impact on the environment.

The Group conducted an analysis of the requirements, received appropriate explanations from government authorities, determined the approach and method of evaluation and, based on the Group’s interpretation, per the provisions of the Environmental Code of the Republic of Kazakhstan, the legislation on electric power industry of the Republic of Kazakhstan, as well as the Group’s accounting policy, recognized provisions for liabilities of subsidiaries "Ekibastuzskaya GRES-1 named after Bulat Nurzhanov" LLP, "Almaty Electric Stations” JSC, "First Wind Power Plant" LLP and "Samruk-Green Energy" LLP, as well as the joint venture “Station Ekibastuzskaya GRES-2” JSC to ensure the liquidation consequences of operation of the facilities at 31 December 2022.

The provisions were determined based on the interpretation of the group of the current environmental legislation of the Republic of Kazakhstan, supported by a feasibility study and/or engineering studies per the current standards and methods of liquidation (dismantling), reclamation work, the level of technology and prices.

The following judgments were applied by the Group in determining the amount of the obligation to eliminate the consequences of the operation of the facilities as at 31 December 2022:

• calculation of obligations to eliminate the consequences of the operation of the facilities as of 31 December 2022 was performed by the Group based on the results of assessments carried out by independent and internal specialists. The scope of work provided for by law and included in the calculation included the dismantling and disposal of the main equipment and mechanisms directly involved in the production of electrical and thermal energy (steam boilers, turbines, generators, fuel supply, etc.), engineering systems and structures intended for removal of combustion products, as well as equipment of fuel oil facilities and chemical reagents warehouse, which have a negative impact on the environment and the safety of life and/or health of people;
• there are assets (administrative buildings and other structures) on the balance sheet of facility operators in the Group, which in the future are very likely to be converted, and also have a minimal adverse impact on the environment, for which there is no need to recognize obligations to eliminate the consequences of their operation;
• for thermal power plants, referred to the I category, the amount of reserves is determined based on the expected costs that will be incurred by the facilities during the liquidation of the main equipment and mechanisms directly involved in the production of electrical and thermal energy (steam boilers, turbines, generators, fuel supply, etc.), engineering systems and structures designed to remove combustion products, as well as equipment for fuel oil facilities and a chemical reagents warehouse, as well as facilities and equipment of the fuel oil economy, which really have an adverse impact on the environment;
• the Group’s management applied the judgment that the deadline for the liquidation of category I facilities of Ekibastuzskaya GRES-1 and Ekibastuzskaya GRES-2, which have a negative impact on the environment, is in 2055 and 2053, respectively, based on the useful lives of the assets. These useful lives are justified by the fact that the residual fleet life of the main and auxiliary equipment and engineering structures of the main equipment will be extended through major repairs or reconstruction until the end of filling the existing ash dumps;
• deadlines for closing ash dumps are applied in accordance with the approved working projects for closing ash dumps per the “Rules for the formation of liquidation funds for waste disposal sites” approved by Decree of the Government of the RoK dated 10 July 2007 No. 591. Coal reserves are sufficient to continue the work on these stations. These periods were determined based on the need to ensure the country ’s energy security in response to a predicted shortage of electricity in the RoK.
• for Almaty Electric Stations JSC, the deadlines for the liquidation of CHPP-2 and CHPP-3 facilities were applied taking into account the timing of implementation, commissioning and technical parameters of the projects "Modernization of Almaty CHPP-2 with minimization of environmental impact" and "Reconstruction of Almaty CHPP-3".
• hydroelectric power plants of the Group belong to category II facilities.the Shardara hydroelectric power station, as a strategic complex structure, which is an integral part of the hydrotechnical complex of the Shardara hydroelectric complex on the Syrdarya River, which has a direct purpose for flood control and irrigation, due to the specifics of its activity, does not eliminate embankments / dams and adjacent hydraulic structures; at the same time, in the opinion of the station’s management, the liquidation work of the Company may be limited to the dismantling of the equipment of hydroelectric units and some surface utility facilities, and the provision to cover them is not significant at the reporting date;
• for the Moinak hydroelectric power plant, , in accordance with the legislation, the Group’s management applied the judgment that the useful lives of the main hydraulic structures, as structures of I and II classes, in the conditions of timely overhauls amount to 60 years. After the expiration of useful lives of the main building of the hydroelectric power plant, the diversion tunnel and the halfway, in accordance with the norms of the “Methodological recommendations on the procedure for extending the life of the safe operation of technical devices, equipment and structures at hazardous production facilities,” further use of these structures as a hydrological post and mudflow holders during the flood period is expected on the Sharyn River. At the same time, in the opinion of the plant’s management, the liquidation work of the Company may be limited to the dismantling of the equipment of hydroelectric units and some surface utility facilities, and the provision for their coverage is not material at the reporting date;
• AZhK facilities in III and IV categories. Due to the fact that AZhK's production facilities have an insignificant minimum negative impact on the environment, the Group has not accrued obligations for liquidation of the consequences of activities in these consolidated financial statements, as there is currently no reasonable calculation method for these types of assets, and the Group has received confirmation from government authorities on the absence of obligations to eliminate the consequences for the environment;
• wind and solar power plants recognize provisions for dismantling and removal of generating and technological equipment, further, the liquidation terms are determined by the technical specifications of equipment and structures.

In view of the above, the estimated future costs of facilities for remediation are determined at current prices, increased using the estimated long-term inflation rate for the Republic of Kazakhstan and discounted.

Key assumptions in making such estimates include estimates of the discount rate, amount and timing of future cash flows. The discount rate is based on the risk-free rate defined as the yield on government bonds with maturities that coincide with the liquidation of the facilities.

Estimated asset restoration costs were added to the cost of an item of property plant and equipment (Note 7).

Sensitivity analysis

Since the actual costs of eliminating the consequences of operating the facilities may differ from their estimates due to changes in relevant legislation, interpretation of regulations, technologies, prices and other conditions, and these costs will be incurred in the distant future, the carrying amount of the provisions is subject to regular review and adjustment to take into account such changes.

Payable to the Akimat

In 2009 AZhK was involved in litigation with the Akimat of Almaty city (“Akimat”) related to the settlement of AZhK payables to Akimat. On 14 February 2014 AZhK and Akimat signed an amicable agreement for the settlement of AZhK liabilities. To settle the liabilities, among other procedures, AZhK shall accept power lines, being in the communal ownership and under trust management of the Akimat, and Akimat assumes to write-off the liabilities of AZhK. The amount of liabilities of the AZhK to Akimat, after deduction of all payments made during the previous years as part of the amicable agreement, as of 31 December 2022 is Tenge 5,841,514 thousand (31 December 2022: Tenge 5,841,514 thousand). As of 31 December 2022, the transfer of ownership over power lines has not been completed. The Group will derecognise this liability when it is exempted from payments, i.e., at the time of implementation of all actions by the parties to the amicable agreement, particularly at the time of the assuming the ownership over power lines from the Akimat. At the same time, the Group recognises a gain from write-off of the liability in the amount of Tenge 5,841,514 thousand.

ECL measurement

Measurement of ECLs is a significant estimate that involves determination methodology, models and data inputs. Details of ECL measurement methodology are disclosed in Note 32. The following components have a major impact on the credit loss allowance: definition of default, SICR, probability of default (“PD”), exposure at default (“EAD”), and loss given default (“LGD”), as well as models of macro-economic scenarios. The Company regularly reviews and validates the models and inputs for the models to reduce any differences between expected credit loss estimates and actual losses in respect of receivables.

5. Segment Information

Operating segments are components that engage in business activities that may earn revenues or incur expenses, segment operating results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The CODM is the person or group of persons who allocates resources and assesses the performance for the entity. The functions of the CODM are performed by the management board of the Group.

CODM monitors the revenue and operating profit. CODM also monitors the EBITDA, which is calculated as profit/(loss) for the period before accounting for finance income and finance expense, income tax expenses, depreciation of property, plant and equipment and amortisation of intangible assets, impairment of property plant and equipment and investment property, impairment of goodwill, share of profit/(loss) of associates and joint ventures and effects, related to acquisition and other similar effects. Sequence for identification of adjusted EBITDA by Group might be different from sequence used by other companies.

(a) Description of products and services from which each reportable segment derives its revenue

The Group is organised on the basis of three main business segments:

• Production of electric and heating energy.
• Transmission and distribution of electricity.
• Sale of electricity.

(b) Performance of operating segment

The CODM evaluates performance of each segment based on a measure of revenue and pre-tax profit.

There is no revenue from discontinued operations in 2022 and 2021 (Note 28).

Expenses, assets and liabilities from discontinued operations relate to other segments and were not included in the table above. Finance costs from discontinued operations amounted to Tenge 155,429 thousand and does not include interest expenses (2021: Tenge 152,055 thousand).

Reportable segment assets and liabilities of discontinued operations as at 31 December 2021 were disclosed in Note 28.

(c) Reconciliation of reportable segment revenues, profit or loss, assets and liabilities

The Group’s revenues are analysed by products and services in Note 20 (revenue from core activities). Majority of sales of the Group are within Kazakhstan.

(d) Major customers

In 2022 and 2021, more than 10% of the total revenues were derived from sales to the companies under control of Samruk-Kazyna (Note 6).

The Group’s revenues are recorded during the period when obligations are performed, in accordance with IFRS 15.

6. Balances and Transactions with Related Parties

Related parties are defined in IAS 24, Related Party Disclosures. Parties are generally considered to be related if one party has the ability to control the other party, is under common control, or can exercise significant influence or joint control over the other party in making financial and operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. The Company’s parent entity and ultimate controlling party are disclosed in Note 1.

The related parties include the companies under control of Samruk-Kazyna. Transactions with governmentrun companies are not disclosed if they are carried out in the ordinary course of business in accordance with conditions consistent with all public and private companies i) when they are not individually significant; ii) if the Group’s services are provided on standard terms available to all consumers, or iii) provided there is no choice of providers of services such as electricity transmission services, telecommunications services, etc.

The Group purchases from and sells goods to a large number of government related entities. Such purchases and sales are individually insignificant and are generally entered into on an arm’s length basis. Transactions with the state also include taxes which are detailed in Note 27.

At 31 December 2022, the outstanding balances with related parties were as follows:

At 31 December 2021, the outstanding balances with related parties were as follows:

Share of emissions is disclosed in Note 15.

The income and expense items with related parties for the year ended 31 December 2022 were as follows:

The income and expense items with related parties for the year ended 31 December 2021 were as follows:

At 31 December 2022, the Group has following outstanding guarantees from related parties:

• Corporate guarantee from Samruk-Kazyna in the amount of 12,285,000 thousand Tenge for outstanding loan to Development Bank of Kazakhstan JSC (2021: Tenge 12,285,000 thousand).
• Governmental guarantee in the amount of US Dollars 25,000,000 for outstanding loan to Development Bank of Kazakhstan JSC (2021: US Dollars 25,000,000).

Key management compensation is presented below:

Key management personnel compensation represents the salaries, bonuses and other short-term employee benefits. Key management personnel as at 31 December 2022 include 5 persons (31 December 2021: 4 persons). Independent directors - members of the Board of Directors at 31 December 2022 - 4 persons (31 December 2021 - 2 persons).

Transactions with related parties are made on terms agreed between the parties that do not necessarily correspond to market rates, with the exception of regulated services that are provided on the basis of the tariffs approved by the Order of the Minister of Energy On Approval of Cap rates for Electricity for a Group of Energy-Producing Companies.

7. Property, Plant and Equipment

Movements in the carrying amount of property, plant and equipment were as follows:

Additions include capitalised borrowing costs of Tenge 7,109,611 thousand (2021: Tenge 2,882,180 thousand). The average capitalization rate on interest expenses was 12.32% (2021: 11.44%).

As at 31 December 2022 buildings and constructions include carrying value of windmills, solar panels and other related infrastructure in the amount of Tenge 14,449,822 thousand (31 December 2021: Tenge 15,578,365 thousand) that earn rental income from renewable energy power plants on a monthly basis (Note 4, 20).

As at 31 December 2022 and 31 December 2021 property, plant and equipment have not been pledged as collateral for borrowings (Note 17).

Depreciation charge is allocated to the following items of profit and loss for the year:

8. Intangible Assets

9. Investments in Joint Ventures and Associates

The table below summarises the movements in the carrying amount of the Group’s investment in joint ventures and associates.

At 31 December 2022 and 2021, the Group has interests in the following jointly controlled entities:

• SEGRES-2 – 50%. The remaining 50% interest is owned by National Welfare Fund Saruk-Kazyna JSC (Note 4).
• Forum Muider – 50%. The remaining 50% is owned by UC RUSAL.

The Group has a share in the Semirechya Energy LLP associate (25%). Semirechya Energy LLP plans to build a renewable energy source station. The shareholders of Semirechya Energy LLP are Hydrochina Corporation (interest share of 50%), Samruk Energy JSC (interest share of 25%), Powerchina Chegdu Engineering Corporation (interest share of 15%), and Powerchina Resourses Ltd (interest share of 10%).

The only difference at reconciliation of the amounts below and carrying values of investments in associates and joint ventures is the excluded share of other investors in these associates and joint ventures.

The Group’s management believes that the Group’s share in net assets in associates and joint ventures is limited to the investment in the associate.

Contingencies related to the Group’s share in joint ventures are disclosed in Note 29. Related party balances and transactions are presented in Note 6.

Presented below is summarised financial information of joint ventures and associates as at 31 December 2022 and 2021 and for the years then ended:

10. Other Non-Current Assets

As at 31 December 2021 long-term receivables includes the receivable from of OESK Holding LLP in the amount of Tenge 7,561,445 thousand (Note 13).

Gross amount of other non-current assets includes advances and prepayments for the following types of construction and property, plant and equipment:

11. Inventories

As at 31 December 2022 and 31 December 2021 inventories have not been pledged as collateral for borrowings.

Presented below are movements in the Group’s inventory provision:

12. Trade and Other Receivables

Carrying amount of financial receivables approximates fair value due to its short-term nature. As at 31 December 2022, other receivables of Maikuben-West LLP were impaired in the amount of Tenge 2,732,541 thousand (2022: Tenge 3,165,768 thousand).

Financial receivables are denominated in Tenge. Movement in the impairment provision for trade and other receivables are as follows:

The levels of default and calculation of loss allowance are disclosed in Note 32.

13. Other Current Assets

Other receivables mainly include short-term debt of OESK Holding LLP (formerly East Kazakhstan Energy Company LLP) in the amount of Tenge 7,560,135 thousand for shares of VC REC JSC, which were sold during 2017. As at 31 December 2021 this receivables was included in Other non-current asset in the amount of Tenge 7,561,445 thousand. In connection with the request of OESK Holding LLP (formerly East Kazakhstan Energy Company LLP) to grant a deferral payment due to negative consequences of force majeure circumstances related to the COVID-19 pandemic, the Company's management decided to extend the term debt repayment till 1 October 2023 subject to indexation of the purchase price. As at 31 December 2022, the Company assigned a rating of 'SK C' and recognised an expected credit losses to the debt of OESK Holding LLP in the amount of Tenge 559,489 thousand.

14. Cash and Cash Equivalents

Term deposits and current deposits have contractual maturity terms less than three months or are available on demand.

In 2022 for portfolio diversification purposes the Client has used repurchase and reverse repurchase agreements (“reverse repo”) which are presented by transactions on placement of cash for a short period of time (1-7 days) at stock exchange. This transaction is collateralised securities which credit rating is not lower than an investment grade. These transactions allowed to decrease the credit risk and increase the returns.

Cash and cash equivalents balances are denominated in the following currencies:

15. Equity

Authorised capital

As at 31 December 2022, 5,632,537 of issued ordinary shares were fully paid in the amount of Tenge 378,531,570 thousand (31 December 2021: 5,601,812 shares). Each ordinary share equals to one vote. The Company has no preferred shares. There are 8,602,187 authorised shares. As at 31 December 2022, Samruk- Kazyna NWF JSC is a 100% shareholder of the Company (2021: 100%).

On 20 December 2022 Samruk Kazyna purchased 30,725 of the Group shares at price of 80,899.7 Tenge per share and were fully paid in cash in the amount Tenge 2,485,643 thousand in accordance with the preferred right to purchase shares.

On 28 April 2022, the Company declared dividends payment to the Sole Shareholder in the amount of Tenge 2,041,000 thousand – Tenge 364.35 per share (2021: Tenge 3,242,143 thousand). On 9 June 2022, the Group has fully paid dividends in amount Tenge 2,041,000 thousand to the sole Shareholder.

Other reserves

16. Provision for asset restoration

Movements in provision for asset restoration are as follows:

17. Borrowings

Borrowings of the Group are denominated in the following currencies:

An analysis of the amount of net debt and movements in the Group's liabilities arising from financial activities for each of the periods presented are provided in the table below. Items of these liabilities are reported in the consolidated statement of cash flows as part of financial activities.

Samruk-Energy JSC

Samruk-Kazyna SWF JSC

On 17 March 2010 the Group signed a loan agreement with Samruk-Kazyna for amount of Tenge 48,200,000 thousand for the purpose of re-financing of debt arising as the result of acquisition of 50% interest in Forum Muider. The loan carries an interest rate of 1.2% per annum with maturity not later than 15 September 2029. The principal amount is payable in equal annual instalments and interest is payable by semi-annual payments starting from the following reporting year after the receipt of loan.

On 14 January 2011 the Company signed a loan agreement with Samruk-Kazyna for the amount of Tenge 7,000,000 thousand for the purpose of financing construction of substation of Alatau Zharyk Company JSC. The loan carries an interest rate of 2% per annum with maturity not later than 25 January 2024. The principal amount is payable at maturity and interest is payable by semi-annual payments.

On 16 January 2014 the Company signed a loan agreement with Samruk-Kazyna for amount of Tenge 200,000,000 thousand for the purpose of acquisition of remaining share in EGRES-1. The principal amount is payable on 1 December 2028 and interest at 7.8% is payable by semi-annual payments.

On 3 October 2014 principal amount of Tenge 100,000,000 thousand was converted to the Company’s shares. Interest rate on the remaining principal amount was increased to 9%.

On 25 December 2015 interest rate on the principal amount was reduced to 1% per annum which was considered as a settlement of the original loan and recognition of a new loan at a fair value. At the loan origination date, the market rate was 12.8% per annum. The Company recognised a gain on initial recognition of the loan of Tenge 72,581,903 thousand as part of other reserves.

Bonds

In August and September 2017, the Company issued and placed bonds for a total of Tenge 20,000,000 thousand and Tenge 28,000,000 thousand, respectively, with a nominal value of Tenge 1,000 per bond with a five-year term. The coupon rate was 13% per annum and 12.5% per annum, respectively, and is payable twice a year and on a quarterly basis, respectively.

In November 2018, the Company issued and placed bonds in the amount of Tenge 21,736,200 thousand with a nominal value of 1,000 Tenge per 1 bond for a period of seven years. The coupon interest rate was 11.2% per annum and is payable twice a year.

On 25 November 2021, the Company issued and placed 184 units of green bonds in the amount of Tenge 18,400,000 thousand, with a par value of 100,000,000 tenge per 1 bond with a term of 6.5 years. The coupon rate was 11.4% per annum and is payable twice a year.

European Bank for Reconstruction and Development

In December 2016 the Company opened a non-revolving line of credit for Euro 100 million to refinance Eurobonds. In September 2019 the Company received two tranches of Tenge 39,114,450 thousand within this credit facility All-in-cost, which is calculated based on inflation, plus margin of 3.5% and 4.5% per annum. Changes in the independent indicative interest rate are recorded on a quarterly basis. The principal is payable twice a year and at maturity. As of 31 December 2022, the carrying amount of loan was Tenge 1,534,764 thousand (31 December 2021: Tenge 12,777,245 thousand).

Asian Development Bank

On 8 November and 5 December 2018, the Company opened non-revolving credit facilities in the amount of USD 120 million with the Asian Development Bank in order to increase the operational efficiency of core activities and identify opportunities associated with renewable energy sources. In 2019, the Company received three tranches under Credit facilities for a total of Tenge 45,860,800 thousand with maturities of tranche A and B after 5 years, tranche C after 7 years. The interest rate is set on the basis of actual inflation indicators of the Republic of Kazakhstan (All-in-cost), plus bank margin (3.75% on Tranches А and В, 4.50% on Tranche С). In 2022 tranches A and B were fully repaid. As of 31 December 2022, the carrying amount of loan was Tenge 15,786,450 thousand (31 December 2021: Tenge 46,614,572 thousand).

Bogatyr Komir LLP

During 2022, the Company received loans from subsidiary of the Group’s joint venture Forum Muider - Bogatyr Komir LLP, totalling Tenge 12,482,770 thousand for a period of 12 months with the condition of repayment of the principal and interest at the end of the loan term. The annual interest rate is equal to the base rate of the National Bank of the Republic of Kazakhstan effective on the date of issuance of the Tranche plus a margin of 1% per annum.

Alatau Zharyk Company JSC

Halyk Bank of Kazakhstan JSC

In 2015, the AZhK entered into a credit facility agreement with Halyk Bank of Kazakhstan JSC ("Halyk Bank") (the "Agreement"). In accordance with the Agreement, the total amount of the credit facility is Tenge 27,514,358 thousand with different purposes depending on the limit. Interest rate was from 12 to 12.5% per annum. In accordance with the addendum, starting from 20 October 2021, fixed rates of interest were changed by 11.5% for previously issued and newly issued borrowings. As collateral for borrowings cash in current account in Halyk Bank of Kazakhstan JSC was provided. On 12 May 2022 the fixed interest rate for the use of newly issued bank loans is set at the rate equal to the base rate of the NBRK, effective on the date of issuance of the loan, plus 2% per annum of the amount of the bank loan. As of 31 December 2022, the carrying amount of loan was Tenge 5,457,423 thousand (31 December 2021: Tenge 8,558,361 thousand).

Ereymentau Wind Power LLP

Eurasian Development Bank

Under non-revolving credit facility agreement No.193 dated 31 October 2019, Ereymentau Wind Power LLP (“EWP”) raised a long-term loan for construction of a wind power electric plant in Akmola region. The interest rate for tranches issued during seven years from the enforcement date of credit facility agreement is 11.5% per annum, for tranches expiring after the first seven years of the agreement – base rate amount plus margin. As of 31 December 2022, the carrying amount of loan was Tenge 6,927,648 thousand (31 December 2021: Tenge 7,500,166 thousand).

Almaty Electric Stations JSC

АО «First Heartland Jusan Bank»

On 14 December 2021, AlES entered into general facility agreement with First Heartland Jusan Bank JSC for a total credit line of Tenge 18,419,719 thousand, for a period up to 28 February 2025, with the interest rates 10.4- 17.4% per annum. The purpose of the loans is refinancing of loan debt in Halyk Bank of Kazakhstan JSC and to replenish working capital.

As security for the fulfilment of obligations under the Agreement, money was provided that will become the property in the future under contracts for the provision of services for the production of thermal energy and the provision of services for the supply of water through main pipelines concluded between AlES and Almaty Heat Networks LLP, also under an agreement for the purchase - sale of electric power concluded between AlES and AZhK. As of 31 December 2022, the carrying amount of loan was Tenge 13,482,747 thousand (31 December 2021: Tenge 13,720,361 thousand).

Moinak HPS JSC

Development Bank of Kazakhstan JSC

On 14 December 2005 and 16 January 2008, the Company received a loan in two tranches from the Development Bank of Kazakhstan JSC, a related party, in the amount of US Dollars 25,000,000 and US Dollars 26,058,000 at an interest rate of 1.15*6MLIBOR + 1.5% and 8% per annum, accordingly. Loans were granted for 20 years. On 6 December 2012, Moinak HPS JSC signed an addendum to amend the interest rate of the second tranche from 8% to 7.55%, relating to the amount of US Dollars 1,563,053 for further borrowings. On 28 November 2019, Moinak HPS JSC signed an additional agreement on changing the loan currency for the second tranche from US dollars to tenge and changing the interest rate to 10.72%.

On 17 June 2011 Moinak HPS JSC signed a contract with the Development Bank of Kazakhstan JSC for the third tranche of Tenge 12,285,000 thousand at an interest rate of 12% per annum. The loan has been provided for 17 years. On 6 December 2012, Moinak HPS JSC signed an addendum on amending the interest rate of the third tranche from 12% to 7.55%, relating to borrowings after this date in the amount of Tenge 8,924,392 thousand.

As of 31 December 2022, the carrying amount of loan was Tenge 36,827,406 thousand (31 December 2021: Tenge 46,896,556 thousand).

The loans are secured as follows:

• Government guarantee of the Ministry of Finance of the Republic of Kazakhstan of US Dollars 25,000,000. Uncovered counter-guarantee for the guarantee of the Ministry of Finance of the Republic of Kazakhstan Halyk Savings Bank of Kazakhstan JSC for US Dollars 2,304,331;
• Guarantee of Samruk-Energy JSC for Tenge 1,079,213 thousand dated 13 December 2012 and for Tenge 4,545,554 thousand dated 28 November 2019;
• Guarantee of Samruk-Kazyna SWF JSC for Tenge 12,285,000 thousand dated 1 July 2011.

Ekibastuz GRES-1 LLP

Sberbank SB JSC

In 2022 all loans were repaid and the agreement on cease of credit line agreement was signed. In August 2022 EGRES-1 closed all current bank accounts. As of 31 December 2021, the carrying amount of loan was Tenge 7,677,759 thousand.

Halyk Bank of Kazakhstan JSC

During 2022, within the general agreement ERGES-1 received tranches for the total amount of the principal debt of Tenge 15,087,315 thousand (2021: Tenge 74,188,013 thousand) from Halyk Bank of Kazakhstan JSC, including for capital projects in the amount of Tenge 7,921,315 thousand (2021: Tenge 51,088,013 thousand), for replenishment of working capital Tenge 7,166,000 thousand (2021: Tenge 23,100,000 thousand). On 5 January 2022, EGRES-1 entered into additional agreements with Halyk Bank of Kazakhstan JSC to extend the term of loans in the amount of Tenge 37,132,612 thousand until 2029. Interest rate on borrowings obtained in 2022 was – 11.0-18.0%, till 31 December 2021 - 10.75-12.0%. As of 31 December 2022, the carrying amount of loan was Tenge 62,526,408 thousand (31 December 2021: Tenge 64,888,193 thousand).

AlmatyEnergoSbyt LLP

Halyk Bank of Kazakhstan JSC

AlmatyEnergoSbyt LLP has opened a short-term credit facility at Halyk Bank of Kazakhstan JSC to replenish working capital since 22 April 2015. Under this credit line in 2022, AlmatyEnergoSbyt LLP received loans totalling Tenge 24,091,243 thousand. During 2022, the interest rate in Tenge was increased from 10.75% to 18.75% per annum in Tenge, due to the increase in the interest base rate of the National Bank of the RoK from 9.25% to 16.75%. The loans were provided for replenishment of working capital.

On 6 October 2022, the limit of the credit line provided by Halyk Bank of Kazakhstan JSC was increased to Tenge 5,000,000 thousand when property is pledged as collateral security in 2023. In this regard, on 19 October 2022, supplementary agreement No. 29 with Halyk Bank of Kazakhstan JSC was concluded. As at 31 December 2022 collateral agreement was not signed.

As of 31 December 2022, the carrying amount of loan was Tenge 5,003,532 thousand (31 December 2021: Tenge 1,300,379 thousand).

18. Trade and Other Payables

Financial payables are denominated in the following currencies:

19. Taxes payable and other payables to budget

20. Revenue

21. Cost of Sales

22. Selling Expenses

23. General and Administrative Expenses

State duties include penalties and fines based on the results of tax audits and research of the historical data is scope of the pilot project on horizontal monitoring of the State Revenue Committee of Ministry of Finance of RoK. In 2022 the Group accrued the penalties and fines based on the results of tax audit, including the amount of Tenge 2,981,943 thousand for EGRES-1 (Note 29). In addition, provision in the amount of Tenge 880,844 thousand related to withholding tax based on horizontal monitoring of Samruk-Energy was accrued (Note 29). The remaining amounts related to penalties and fines on income tax.

24. Other Income

25. Finance Income

26. Finance Costs

27. Income Tax

Reconciliation between the expected and the actual taxation charge is provided below:

Differences between IFRS and Kazakhstani statutory taxation regulations give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements in these temporary differences are detailed below and are recorded at the rate applicable to the period of reversal of temporary differences.

In the context of the Group’s current structure, tax losses and current tax assets of different companies of the Group cannot be offset with the current tax liabilities and tax benefits of other companies of the Group, and accordingly, taxes can be charged even in case of consolidated tax loss. Therefore, deferred income tax assets and liabilities are offset only if they are related to the same taxable company.

The Group has potential deferred tax assets in respect of unused tax losses carry forwards. The above tax losses carry forwards expire in 2027.

The Group did not recognise deferred tax liabilities in 2022 (2021: no deferred tax liabilities) in respect of temporary differences associated with investments in joint ventures as the Group is able to control the timing of the reversal of those temporary differences and does not intend to reverse them in the foreseeable future.

28. Discontinued operations

On 28 December 2022, the Company sold (“TM”) and its subsidiary Mangyshlak Munay LLP (“MM”) to QazaqGaz NC JSC at a market price of Tenge 13,178,650 thousand.

Since TM and MM transactions are separate significant activities, this disposal group is presented as a discontinued operation in the consolidated financial statements.

The information on the disposed assets and liabilities and consideration on the sale is as follows:

An analysis of the results of discontinued operations for the year ended 31 December 2022 is as follows:

An analysis of the results of discontinued operations for the year ended 31 December 2021 is as follows:

29. Contingencies, Commitments and Operating Risks

COVID-19

In March 2020, the World Health Organisation declared the outbreak of COVID-19 a global pandemic. In response to the pandemic, the Kazakhstani authorities implemented numerous measures attempting to contain the spreading and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place orders and limitations on business activity, including closures. Most of those measures were subsequently relaxed, however, as of 31 December 2022, there remains a risk that the authorities may impose additional restrictions in 2023 as a response to possible new variants of the virus. The Group’s activities for the period of quarantine were not suspended, the work of office employees was organized remotely. In the opinion of the Group’s management, this event related to the outbreak of the virus does not have a material effect on the Group’s operating activities and the consolidated financial statements.

War between Russia and Ukraine

On 21 February 2022 the Russian President announced that Russian government would recognise the Luhansk and Donetsk People’s Republics. On 24 February the Russian president directed its military mobilized troops to the territory of Ukraine. As a response to the Russian actions, the United States, the European Union and a number of other states imposed sanctions against Russia including the disconnection of a number of Russian financial institutions from SWIFT. Russia is Kazakhstan's largest trade partner, accounting for up to 40% of non-oil exports, and is the key country of transit for trade, notably via the Caspian Pipeline Consortium (CPC) pipeline, through which up to 80% of Kazakh crude is exported.

CPC operations were interrupted in March 2022 officially due to storm damage, which did not have a significant budgetary economic impact because of rising oil prices. However, a prolonged closure by Russia of the CPC route for Kazakh crude oil would have serious consequences for Kazakh exports and the economy as a whole. The Kazakh authorities consider alternative routes to the Caspian Sea, including through Azerbaijan, Georgia and Turkey, but these will require significant additional infrastructure and it will take many years to replace the CPC route.

In connection with the Russian/Ukraine conflict and its consequences, the Tenge exchange rate began to be more volatile and inflation index reached almost 20.3% in December 2022. To date, the National Bank of the Republic of Kazakhstan has taken a number of measures to maintain the stability of the Kazakhstan financial system.

In the opinion of the Group’s management, this event related to the Russian/Ukraine conflict does not have a material effect on the Group’s operating activities and the consolidated financial statements, except for the overall macroeconomic consequences and some delays in delivery of the imported equipment.

The long-term effects of the current economic situation are difficult to predict and management’s current expectations and estimates could differ from the actual results.

Operating environment

In general, the economy of the Republic of Kazakhstan continues to display characteristics of an emerging market. Its economy is particularly sensitive to prices on oil and gas and other commodities, which constitute major part of the country’s export. These characteristics include, but are not limited to, the existence of national currency that is not freely convertible outside of the country and a low level of liquidity of debt and equity securities in the markets. Higher inflation, challenges posted by the recent domestic unrest in January 2022, ongoing political tension in the region, volatility of exchange rate have caused and may continue to cause negative impact on the economy of the Republic of Kazakhstan, including decrease in liquidity and creation of difficulties in attracting of international financing.

On 20 August 2015 the National Bank and the Government of the Republic of Kazakhstan made a resolution about discontinuation of supporting the exchange rate of Tenge and implement of new monetary policy, which is based on inflation targeting regime, cancellation of exchange rate trading band and start a free-floating exchange rate. However, the National Bank's exchange rate policy allows it to intervene to prevent dramatic fluctuations of the Tenge exchange rate and to ensure financial stability.

As at the date of this report the official exchange rate of the National Bank of the Republic Kazakhstan was Tenge 445.98 per US Dollar 1 compared to Tenge 422.65 per US Dollar 1 as at 31 December 2022 (31 December 2021: Tenge 431.67 per 1 US Dollar). Therefore, uncertainty remains in relation to the exchange rate of Tenge and future actions of National Bank and the Government of the Republic of Kazakhstan and the impact of these factors on the economy of the Republic of Kazakhstan.

In September 2022 S&P Global Ratings, international rating agency affirmed the credit rating of Kazakhstan of“ВВВ-”. The outlook on sovereign credit rating is downgraded to negative as a result of the growth of external and financial risks. Fitch Ratings affirmed Kazakhstan long-term rating at “BBB” with a stable outlook. The stable outlook is supported by the government's strong fiscal and external balance sheets, financing flexibility underpinned by accumulated oil revenue savings, net fiscal creditor position as well as measures implemented by the Government of the Republic of Kazakhstan.

Challenges posed by social tension resulted in domestic unrest in early 2022 and spillover from the Russia/Ukraine conflict and associated sanctions are balanced by high prices for key export commodities and the increase in oil production from 2024 when the Tengiz oil field's expansion starts to come onstream. According to the analysts' forecasts, the growth rate of the national economy in 2022-2025 will amount, on average, to about 3.6%.

The economic environment has a significant impact on the Group’s operations and financial position. Management is taking necessary measures to ensure sustainability of the Group’s operations. However, the future effects of the current economic situation are difficult to predict, and management’s current expectations and estimates could differ from actual results.

Additionally, energy sector in the Republic of Kazakhstan is still impacted by political, legislative, fiscal and regulatory developments. The prospects for future economic stability in the Republic of Kazakhstan are largely dependent upon the effectiveness of economic measures undertaken by the Government, together with legal, controlling and political developments, which are beyond the Group’s control.

For the purpose of measurement of expected credit losses (hereinafter – “ECL”) the Group uses supportable forward-looking information, including forecasts of macroeconomic variables. As with any economic forecast, however, the projections and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different from those projected.

Tax legislation

Kazakhstani tax legislation and practice is in a state of continuous development and therefore is subject to varying interpretations and frequent changes, which may be retroactive. In some cases, in order to determine the taxable base, the tax law refers to the provisions of IFRS, and the interpretation of the relevant provisions of IFRS by Kazakhstani tax authorities may differ from the accounting policies, judgments and estimates applied by management in the preparation of these consolidated financial statements, which may lead to additional tax liabilities of the Group. Fiscal periods remain open to review by the authorities in respect of taxes for five years after the end of the fiscal year.

From July 2020, the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan (hereinafter - “SRC”) launched a pilot project to introduce horizontal monitoring, which will last until 31 December 2023. In 2021, SRC, as part of a pilot project on horizontal monitoring, inspected the historical data of the EGRES-1 and Samruk- Energy (Head office) for the five years period. Based on the results, SRC completed tax audits and issued acts with the results of tax audit. The main non-compliances relate to the interest expense deducted for tax purposes and underaccrual of withholding tax (Note 23). The Group expressed its disagreement with these notifications and continues to work to appeal its position in the court.

The Group management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax positions will be sustained. In the opinion of the Group management, no material losses will be incurred in respect of existing and potential tax claims in excess of provision that have been made in these consolidated financial statements (Note 23).

Insurance

The insurance industry in the Republic of Kazakhstan is in a developing stage and many forms of insurance protection common in other parts of the word are not yet generally available in the Republic of Kazakhstan. The Group does not have full coverage for its plant facilities, losses caused by business interruptions or third party liabilities in respect of property or environmental damage arising from accidents or the Group’s activities. Until the Group obtains adequate insurance coverage, there is a risk that the loss or destruction of certain assets could have a material adverse effect on the Group’s operations and financial position.

Environmental matters

At present, environmental legislation is being tightened in the Republic of Kazakhstan and the review of the position of Kazakhstani state bodies regarding its enforcement continues. In 2021, a new environmental code came into force in the Republic of Kazakhstan, which regulates social relations in the field of interaction between man and nature (environmental relations) arising in connection with the implementation by individuals and legal entities of activities that have or can have an impact on the environment. In addition to increasing the responsibility of industrial enterprises for environmental pollution, the Code also provides for the introduction of a waste management hierarchy and prescribes requirements for the elimination of the consequences of activities.

The provisions of this Code obliges to obtain integrated environmental permits related to the use of the best available techniques (BAT), issued by the Committee for Environmental Regulation and Control of the Ministry of Ecology, Geology and Natural Resources of the Republic of Kazakhstan.

Other provisions of this Code applicable to certain Group entities include the installation of automated emission monitoring systems and waste management practices. Until a full assessment is made, it is not possible to assess the financial implications of the new requirements of Kazakhstan's new environmental code, but an increase in the cost of complying with environmental requirements is expected, either in the form of additional investments required for waste management and development of appropriate monitoring processes, or in the form of increased fees for waste generation.

According to the newly introduced norms of the environmental code, all enterprises have obligations to eliminate the consequences of the operation of facilities causing negative environmental impact, but the requirements for liquidation of the consequences depend on the category of industrial enterprises and construction projects, which are determined depending on the nature of facilities, degree of environmental impact and the scope of activities of enterprises. Since the entry into force of the new requirements and throughout 2022, the Group has been assessing the new requirements for the Group's financial statements. As a result of this work, the Group has recognized additional asset retirement obligations in relation to the elimination of the consequences of the operation of its facilities (Note 4, 16).

Under the current version of the Environmental Code, the Group has an obligation to provide financial security for the elimination of the consequences of category I facilities by 1 July 2024. Financial security is provided in the form of: guarantees; bank deposit pledge; pledge of property; insurance. Financial security is provided in one of several types of financial security listed above, or in their combination at the choice of the operator of the category I facility, provided that the share of financial security in the form of collateral for a bank deposit should be:

1) after ten years from the date of facility commissioning (for existing facilities as of 1 July 2021 until 2031) – at least fifty percent of the total amount of financial security;

2) after twenty years from the date of facility commissioning for existing facilities as of 1 July 2021 until 2041 – one hundred percent of the total amount of financial security. The operator of the category I facility is obliged to ensure the availability of financial security continuously until all of its asset retirement obligations are fully fulfilled.

The amount of financial security is determined in accordance with the methodology approved by the authorized body in the area of environmental protection, based on the estimated cost of work to eliminate the consequences of the operation of the category I facility, and is subject to recalculation every seven years.

The Group periodically evaluates its obligations related to environmental protection at least on an annual basis. As liabilities are identified, they are promptly recognized in the financial statements. Potential liabilities that may arise as a result of changes in existing laws and regulations, as well as a result of judicial practice, cannot be estimated with a sufficient degree of reliability, although they may be significant. The Group’s management believes that in the current system of control over compliance with applicable environmental laws, there are no significant liabilities arising from environmental damage, except for those recognised or disclosed in these financial statements.

Under the environmental exemption, the Group is legally obligated to acquire additional greenhouse gas emissions allowances. The volume of greenhouse gas emissions for the Group was determined based on the projected production of electricity and greenhouse gas emissions coefficient per unit of production till 2025. Due to the growth in electricity consumption in the country and for the purpose of uninterrupted and reliable power supply to consumers, the generating capacities of EGRES-1 were used in full, which led to an increase in electricity generation and a shortage of quotas for greenhouse gas emissions in 2022 and 2021. The Group conducts the work to obtain an additional quota for greenhouse gas emissions in accordance with the Environmental Code of RoK. As at 31 December 2022 there was a provision to acquire additional greenhouse gas emissions for 2022 and 2021 (31 December 2021: for 2021) (Note 19).

Ash dump liquidation provision

In accordance with Environmental Code, the Group is also legally obliged to liquidate ash dump sites representing landfill sites for the Group’s operating activities. As of 31 December 2022, the carrying amount of ash dump liquidation provision was Tenge 2,481,986 thousand (31 December 2021: Tenge 2,826,592 thousand). The assessment of the current ash dump liquidation provision is based on the Group’s interpretation of the environmental legislation of RK in force, supported by feasibility study and engineering research in accordance with current norms of restoration methods and reclamation works. This assessment may change upon completion of subsequent nature protection research works and review of existing reclamation and restoration programmes.

Environmental, Social and Governance (ESG) matters - Consideration of climate change and resulting climate related risks

The Group shares the concerns of the world community climate change and supports global efforts to reducing greenhouse gas emissions, increasing energy efficiency, transition to renewable sources energy and phasing out carbon fuels. SK Fund, the parent company of the Group, has the strategic goal to reduce the carbon footprint of SK Fund by 10% by 2032 compared to 2021 and aims to achieve carbon neutrality by 2060. In general, carbon neutrality does not mean complete exclusion of greenhouse gas emissions - the volume of emissions that not possible to reduce, must be compensated.

The Group is continuously assessing climate related and environmental risks and their impact on the Group’s operation. For the identified risks, the Group has assessed their impact on the recognition/derecognition of assets and liabilities and measurement of such assets and liabilities as well as the disclosure provided in its consolidated financial statements. The areas listed below are predominantly impacted by the climate related and environmental risks:

а) The Group has initiated projects on constructions of new combined cycle gas plant at the Almaty CHP-2 and CHP-3. The purpose is the replacement of the existing coal-fired equipment with modern environmentally friendly combined cycle power units (Note 4); and

b) The Group has assessed and recognized provisions for decommissioning of power plants and rehabilitating environmental damage due to recently introduced regulatory requirements in accordance with Environmental Code (Note 4).

Capital expenditure commitments

The Group has analysed its exposure to seasonal and other arising business risks, but did not determine any risks, which could have impact on financial indicators or position of the Group as of 31 December 2022. The Group has relevant funds and financing sources to implement capital expenditure commitments and maintain working capital.

As of 31 December 2022, the Group had contractual commitments on acquisition of property, plant and equipment totalling Tenge 65,331,177 thousand (31 December 2021: Tenge 84,376,182 thousand).

Capital expenditure commitments of joint ventures and associates

As of 31 December 2022, the Group’s share in non-current contractual commitments of Forum Muider and SEGRES-2 liabilities was Tenge 3,997,304 thousand and Tenge 11,812,824 thousand accordingly (31 December 2021: Tenge 5,942,347 thousand and Tenge 12,892,412 thousand accordingly).

Borrowing covenants

The Group is subject to certain covenants related to all bank loans, obligations, financial guarantee of Samruk-Energy and loan of Samruk-Energy from Samruk-Kazyna (Note 17). Non-compliance with such covenants may result in negative consequences for the Group including growth in the cost of borrowings and declaration of default. Upon the results of 2022, the Group was in compliance with covenants on borrowings, and received waivers on reduction of thresholds, when a violation forecasted.

30. Non-controlling interest

The following table provides information about each subsidiary that has non-controlling interest that is material to the Group.

31. Principal Subsidiaries, Associates and Joint Venture

On 4 November 2022, a new subsidiary, QAZAQ Green Power PLC (“CGP”), was registered in the jurisdiction of the Astana International Financial Center. In December 2022, the Company contributed to the authorized capital of QGP by transferring a full holding of shares of Moynak HPP JSC and interests in the First Wind Electric Station LLP of Samruk- Green Energy LLP. In these consolidated financial statements, this operation is recorded as an asset restructuring.

32. Financial Risk Management

Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group does not use derivative financial instruments to hedge risk exposures.

Risk management is carried out by management under policies set by the Group’s ultimate parent (Note 1), which provides principles for risk management, covering specific areas, such as credit risk, liquidity risk, and market risk.

(a) Credit risk

The Group exposes itself to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet an obligation.

Exposure to credit risk arises as a result of the Group’s lending and other transactions with counterparties, giving rise to financial assets.

The Group’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets in the consolidated statement of financial position.

Credit risk management

Credit risk is the single largest risk for the Group's business; management therefore carefully manages its exposure to credit risk.

The estimation of credit risk for risk management purposes is complex and involves the use of models, as the risk varies depending on market conditions, expected cash flows and the passage of time. The assessment of credit risk for a portfolio of assets entails further estimations of the likelihood of defaults occurring, the associated loss ratios and default correlations between counterparties.

Credit risk grading system

For measuring credit risk and grading financial instruments by the amount of credit risk, the Group applies two approaches – an Internal Risk-Based (IRB) rating system or risk grades estimated by external international rating agencies (Standard & Poor’s – “S&P”, Fitch, Moody’s). Internal and external credit ratings are mapped on an internally defined master scale with a specified range of probabilities of default. The IRB system is designed internally, and ratings are estimated by management. Various credit-risk estimation techniques are used by the Group depending on the class of the asset.

The Group applies IRB systems for measuring credit risk for non-current receivables.

The rating models are regularly reviewed, backtested on actual default data and updated, if necessary. Despite the method used, the Group regularly validates the accuracy of ratings estimates and appraises the predictive power of the models.

External ratings are assigned to counterparties by independent international rating agencies, such as S&P, Moody’s and Fitch. These ratings are publicly available. Such ratings and the corresponding range of probabilities of default (“PD”) are applied for all financial assets other than trade receivables and non-current receivables.

Expected credit loss (ECL) measurement

ECL is a probability-weighted estimate of the present value of future cash shortfalls (i.e., the weighted average of credit losses, with the respective risks of default occurring in a given time period used as weights). An ECL measurement is unbiased and is determined by evaluating a range of possible outcomes. ECL measurement is based on four components used by the Group: Probability of Default (“PD”), Exposure at Default (“EAD”), Loss Given Default (“LGD”) and Discount Rate.

EAD is an estimate of exposure at a future default date, taking into account expected changes in the exposure after the reporting period, including repayments of principal and interest, and expected drawdowns on committed facilities. The EAD on credit related commitments is estimated using Credit Conversion Factor (“CCF”). CCF is a coefficient that shows the probability of conversion of the commitment amounts to an on-balance sheet exposure within a defined period. PD an estimate of the likelihood of default to occur over a given time period. LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from any collateral. It is usually expressed as a percentage of the EAD. The expected losses are discounted to present value at the end of the reporting period. The discount rate represents the effective interest rate (“EIR”) for the financial instrument or an approximation thereof.

Expected credit losses are modelled over instrument’s lifetime period. The lifetime period is equal to the remaining contractual period to maturity of debt instruments, adjusted for expected prepayments, if any.

Management models Lifetime ECL, that is, losses that result from all possible default events over the remaining lifetime period of the financial instrument. The 12-month ECL, represents a portion of lifetime ECLs that result from default events on a financial instrument that are possible within 12 months after the reporting period, or remaining lifetime period of the financial instrument if it is less than a year.

The ECLs that are estimated by management for the purposes of these financial statements are point-in-time estimates, rather than through-the-cycle estimates that are commonly used for regulatory purposes. The estimates consider forward looking information, that is, ECLs reflect probability weighted development of key macroeconomic variables that have an impact on credit risk.

The ECL modelling does not differ for Purchased or Originated Credit Impaired (“POCI”) financial assets, except that (a) gross carrying value and discount rate are based on cash flows that were recoverable at initial recognition of the asset, rather than based on contractual cash flows, and (b) the ECL is always a lifetime ECL. POCI assets are financial assets that are credit-impaired upon initial recognition, such as impaired loans acquired in a past business combination.

For purposes of measuring PD, the Group defines default as a situation when the exposure meets one or more of the following criteria:

• the borrower is more than 90 days past due on its contractual payments;
• international rating agencies have classified the borrower in the default rating class;
• the borrower meets the unlikeliness-to-pay criteria listed below:
  • suspending accrual of interest/reduction in the interest rate on a financial asset;
  • writing-off the principal amount;
  • sales of a financial asset at a significant discount to its nominal value;
  • restructuring that will result in reduction in/write-off of the loan/debt release
  • increase in the maturity of a financial asset;
  • granting of indulgence on the principal/interests;
  • filing a bankruptcy claim against the counterparty in line with the legislation of the Republic of Kazakhstan;
  • bankruptcy claim filed by the counterparty;
  • liabilities covered by the guarantee agreement or payment under the guarantee agreement are past due more than 90 days.

For purposes of disclosure, the Group fully aligned the definition of default with the definition of credit-impaired assets. The default definition stated above is applied to all types of financial assets of the Group.

An instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria for a consecutive period of three months. This period of three months has been determined based on an analysis that considers the likelihood of a financial instrument returning to default status after curing by using different possible definitions of cures.

The assessment whether or not there has been a significant increase in credit risk (“SICR”) since initial recognition is performed on an individual basis and on a portfolio basis.

The level of ECL that is recognised in these consolidated financial statements depends on whether the credit risk of the borrower has increased significantly since initial recognition. This is a three-stage model for ECL measurement.

A financial instrument that is not credit-impaired on initial recognition and its credit risk has not increased significantly since initial recognition has a credit loss allowance based on 12-month ECLs (Stage 1).

If a SICR since initial recognition is identified, the financial instrument is moved to Stage 2 but is not yet deemed to be credit-impaired and the loss allowance is based on lifetime ECLs. If a financial instrument is credit-impaired, the financial instrument is moved to Stage 3 and loss allowance is based on lifetime ECLs. The consequence of an asset being in Stage 3 is that the entity ceases to recognise interest income based on gross carrying value and applies the asset’s effective interest rate to the carrying amount, net of ECL, when calculating interest income.

If there is evidence that the SICR criteria are no longer met, the instrument is transferred back to Stage 1. If an exposure has been transferred to Stage 2 based on a qualitative indicator, the Group monitors whether that indicator continues to exist or has changed.

ECL for POCI financial assets is always measured on a lifetime basis. The Group therefore only recognises the cumulative changes in lifetime expected credit losses.

The table below classifies financial assets, such as other long-term receivables and bonds and loans given carried at amortised cost, by separate stage of impairment models. ECL provisions of other financial assets is insignificant as at 31 December 2022.

The Group has three approaches for ECL measurement: (i) assessment on an individual basis; (ii) assessment on a portfolio basis: internal ratings are estimated on an individual basis but the same credit risk parameters (e.g. PD, LGD) will be applied during the process of ECL calculations for the same credit risk ratings and homogeneous segments of the loan portfolio; and (iii) assessment based on external ratings.

In general, ECL is the sum of the multiplications of the following credit risk parameters: EAD, PD and LGD, that are defined as explained above, and discounted to present value using the instrument’s effective interest rate. The ECL is determined by predicting credit risk parameters (EAD, PD and LGD) for each future month during the lifetime period for each individual exposure or collective segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has been repaid or defaulted in an earlier month). This effectively calculates an ECL for each future period, that is then discounted back to the reporting date and summed up. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof.

The table below summarises external (if any) and internal credit ratings at the end of the relevant reporting period and related to on counterparty rating, expect for reverse repo which based on rating of security provided as a collateral:

The Group applies the provision matrix for calculation of ECL on trade receivables. To measure the expected credit losses, trade and other receivables have been grouped based on shared credit risk characteristics and the overdue days.

The levels of default and calculation of loss allowance at the end of the relevant reporting period were as follows:

Forward-looking information incorporated in the ECL models

The assessment of SICR and the calculation of ECLs both incorporate supportable forward-looking information. The Group identified certain key economic variables that correlate with developments in credit risk and ECLs: GDP, inflation, exchange rate, oil price, and short-term economic indicator used for description of the economic development trend based on changes in the performance of primary sectors.

The impact of the relevant economic variables on the PD, EAD and LGD has been determined by performing statistical regression analysis to understand the impact that the changes in these variables historically had on the default rates and on the components of LGD and EAD.

As with any economic forecast, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty, and therefore the actual outcomes may be significantly different to those projected.

The Group regularly reviews its methodology and assumptions to reduce any difference between the estimates and the actual loss of credit. Such backtesting is performed at least once a year.

The results of backtesting the ECL measurement methodology are communicated to Group Management and further steps for tuning models and assumptions are defined after discussions between authorised persons.

(b) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

In accordance with the Group policy on formation and monitoring of development plans the Group manages the liquidity risk using short-term (one month) forecasts and also mid-term forecast for the next five years. In addition, the Group develops and approves development strategy of the Group for the next ten years. In planning cash flows, the Group also accounts for income from temporary excess cash using the bank deposits.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the maturity table are the contractual undiscounted cash flows, including future payment of interest and principal.

(c) Market risk

The Group takes on exposure to market risks. Market risks arise from open positions in (a) currency, (b) interest rates and (c) equity products, all of which are exposed to general and specific market movements.

Currency risk

The Group’s certain borrowings (Note 17) and trade payables (Note 18) are denominated in foreign currencies (US dollars and Euro) and hence the Group is exposed to foreign exchange risk. Due to the fact that the variety of financial derivative instruments on the Kazakhstani market is limited and those instruments are rather expensive the management chooses at the moment not to hedge the Group’s foreign exchange risk, as currently the benefits from implementing such instruments do not outweigh the costs. Nevertheless, the Group continues monitoring changes of financial derivatives market in order to implement hedging structure in the future or as needed.

The table below shows the total amount of foreign currency denominated liabilities that give rise to foreign exchange exposure:

The following table presents sensitivities of profit or loss and equity to reasonably possible changes in exchange rates applied at the end of the reporting period relative to the functional currency of the respective Group entities, with all other variables held constant.

In general, the Group is not exposed to significant currency risks and is not subject to negative changes in Tenge rate volatility. The financial obligations denominated in foreign currency approximates 1% of total obligations. Currency risks were minimised in previous periods by refinancing foreign currency loans, and at 31 December 2022 the Group has only one loan in foreign currency from the Development Bank of Kazakhstan in US Dollars.

Interest rate risk

The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows.

Interest rate risk arises from long-term and short-term borrowings. The Group is exposed to potential market risk of LIBOR quotas at London Stock Exchange and All-in-Cost (total bank costs, taking into account the inflation rate in the Republic of Kazakhstan and other bank charges). Increase in LIBOR and All-in-Cost would have an adverse effect on the Group’s cash flows. The Group carefully monitors changes in floating interest rates.

If at 31 December 2022, interest rates had been 245 basis points higher/less, with all other variables held constant, profit for the year would have been Tenge 83,659 thousand higher or Tenge 83,659 thousand lower, mainly as a result of higher/lower interest expense on floating interest rate liabilities (31 December 2021: Tenge 50,924 thousand and Tenge 10,185 thousand respectively). The above sensitivity amount calculated based on USD liabilities in amount Tenge 3,408,077 thousand (2021: Tenge 4,073,923 thousand), which have variable interest rate.

Management of capital

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated statement of financial position plus net debt. Management considers the current gearing ratio of 30-40% as acceptable for the risk profit of the Group.

33. Fair Value Disclosures

Fair value measurement

To be indicative of the reliability of the data used in determining fair value, the Group classifies its financial instruments at three levels established in accordance with IFRS. Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly or indirectly (that is, as prices), and (iii) level three measurements are valuations not based on observable market data (that is, unobservable inputs). Management applies judgement in categorising financial instruments using the fair value hierarchy. If a fair value measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement. The significance of a valuation input is assessed against the fair value measurement in its entirety. Fair values analysed by level in the fair value hierarchy and the carrying value of assets and liabilities not measured at fair value are as follows:

Financial assets carried at amortised cost

The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risks and remaining maturities. Discount rates used depend on the credit risk of the counterparty.

Liabilities carried at amortised cost

The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risks and remaining maturities.

34. Events after the Reporting Period

In January and February 2023 the Group received loans from Halyk Bank in the amount of Tenge 7,528,456 thousand for the project "Restoration of power unit No. 1" with a maturity till 30 November 2029 and an interest rate of 18.75% and Tenge 2,800,000 thousand was received for replenishment of working capital with a maturity of 12 months and interest rate of 18.75%.

On 25 January 2023 the Group early repaid a loan of Tenge 4,000,000 thousand and accrued interest of Tenge 138,152 thousand to Halyk Bank of Kazakhstan JSC.

On 23 February 2023 AZhK and EGRES-1 signed additional agreements to the Credit Line Agreements with Halyk Bank which change the period within which the bank has an option to request earlier repayment from 10 months to 13 months.

35. Earnings per Share and Carrying Amount of one Share

Earnings per share from continuing operations

Loss per share from discontinued operations

Carrying amount of one share

At 31 December 2022, this indicator calculated by the management of the Group based on the consolidated financial statements amounted to Tenge 93,987 (31 December 2021: Tenge 88,985). The table for calculating the carrying amount of one share is as follows: