Approach to Increase Value of Lietuvos Energija Gains Speed
In 2014, Lietuvos Energija group achieved its best ever results and could offer the lowest prices to electricity and gas consumers. In 2015, the group is to embark on the value chain improvement programme intended for the optimisation of the group’s structure and its main operational processes. In this way an even higher operational efficiency and transparency will be achieved and better-quality services will be provided to the clients.
ʻThe group already comprises 20 enterprises and owns a wide-ranging diversified portfolio of activities. On our way to optimal activity of the group we are looking for and see opportunities to improve the value-creating activities and to effectively integrate the activities amongst themselves as well as to distribute them among the companies. For this purpose, the 2015 value chain improvement programme focuses on client service, efficiency and cost reductionʼ, says Dalius Misiunas, general manager of Lietuvos Energija and chairman of the board.
Lietuvos Energija has started 2015 with a clearer financial view as this year, in accordance with the resolutions adopted by the National Commission for Energy Control and Prices at the end of 2014, LESTO AB, electrical power distributor operated by the group, has carried out the assessment of long-term tangible assets pursuant to International Accounting Standards (IAS).
The actual value of the assets determined by the assessment according to unaudited details reduced by EUR 618 million (LTL 2,135 million) and accounted for EUR 683 million (LTL 2.357 million). This negative effect is one-time and the evaluated value of the assets corresponds to the actual value of the assets according to the current regulatory environment. The portrayal of the change in decrease in value in the financial statements has had a significant impact on the size of own capital of LESTO and the entire group; this, however, has not changed the strategic goals of the group.
ʻThe assessment of the assets of LESTO was carried out with the aim to objectively assess the current state and to reflect the actual situation in the financial statements. This will help the investors and creditors find the financial statements more explicit; besides, it contributed to the resolution of the problem of discrepancies between regulatory and financial value of the assets which was encountered back in 2009ʼ, says Mr Misiunas.
Profits Earned Due to Efficiency
ʻThe group already comprises 20 enterprises and owns a wide-ranging diversified portfolio of activities. On our way to optimal activity of the group we are looking for and see opportunities to improve the value-creating activities and to effectively integrate the activities amongst themselves as well as to distribute them among the companies. For this purpose, the 2015 value chain improvement programme focuses on client service, efficiency and cost reductionʼ, says Dalius Misiunas, general manager of Lietuvos Energija and chairman of the board.
Lietuvos Energija has started 2015 with a clearer financial view as this year, in accordance with the resolutions adopted by the National Commission for Energy Control and Prices at the end of 2014, LESTO AB, electrical power distributor operated by the group, has carried out the assessment of long-term tangible assets pursuant to International Accounting Standards (IAS).
The actual value of the assets determined by the assessment according to unaudited details reduced by EUR 618 million (LTL 2,135 million) and accounted for EUR 683 million (LTL 2.357 million). This negative effect is one-time and the evaluated value of the assets corresponds to the actual value of the assets according to the current regulatory environment. The portrayal of the change in decrease in value in the financial statements has had a significant impact on the size of own capital of LESTO and the entire group; this, however, has not changed the strategic goals of the group.
ʻThe assessment of the assets of LESTO was carried out with the aim to objectively assess the current state and to reflect the actual situation in the financial statements. This will help the investors and creditors find the financial statements more explicit; besides, it contributed to the resolution of the problem of discrepancies between regulatory and financial value of the assets which was encountered back in 2009ʼ, says Mr Misiunas.
Profits Earned Due to Efficiency
Over the period of two years the value of the group increased by 1.4 times – the aim to double the value of the group by 2020 has reached 40 per cent coverage.
Better profitability of power production, effective activities of the distribution network and the positive results of gas transmission and distribution determined that the normalised net profit of Lietuvos Energija (used to compare the activity results of several reference periods excluding the impact of one-time factors) over 2014 accounted for EUR 58 million (LTL 200 million) and was 42 per cent higher than in 2013. Normalized earnings of the group were calculated applying the elimination of one-time impact of over-evaluation of the assets of LESTO and assessing the need for the future reduction of natural gas price for consumers resulting from the accumulative effect of discount on natural gas received from Gazprom.
Given these effects, the negative net loss of the group would account for EUR 288 million (LTL 995 million), meanwhile, in 2013, the group earned net profit of EUR 40.8 million (LTL 140.8 million).
ʻThe growth was achieved by inter-coordinating the expansion of the enterprises of the group and by making their activities efficient as well as by integrating them amongst themselves. Last year, we transferred the procurement and accounting functions of the group to be carried out by Verslo Aptarnavimo Centras UAB. This allowed to provide reliable services to consumers and to help them lower their bill, and the shareholders – to get a higher return. In parallel, quality indicators grew which explained how well we provided services to consumers; customer satisfaction indices also improved – electricity customer satisfaction index remained higher than the comparative EU indicators, ʼ summarises Mr Misiunas.
Presumptions to reduce prices to consumers as of 2015 were prompted by the achievements of the group – last year LESTO acquired less electrical energy from thermal power plants qualified for state support – the need for public interest services in 2014 was around LTL 97 million (EUR 28 million) lower than in 2013. Compared to 2013, last year, Lietuvos Energijos Gamyba saved almost LTL 14 million (EUR 4 million) of consumers’ finances by producing smaller amount of quota-liable electricity power and doing this in a more efficient manner.
Over 2014, income of Lietuvos Energija group almost reached EUR 1 billion, namely, EUR 978 million (LTL 3,375 million), which is 16 per cent more than in 2013. The higher revenue levels were obtained by the group due to new activities, i.e. gas distribution and sales which accounted for the growth by EUR 154 million; meanwhile, sales, trade and supply of electrical power contributed to the growth by additional EUR 54 million. As the consumers of electric power were charged lower prices, income from electric power transmission reduced by EUR 59 million.
Earnings of the group before interest, tax, depreciation and amortisation (EBITDA) accounted for EUR 208 million last year and was 5.7 per cent higher than in 2013.
In 2014, the activities of Lietuvos Energija group expanded in several fields. Following the acquisition of Lietuvos Dujos the group now also governs gas distribution network and supplies natural gas as well as ensures the alternative to the natural gas supply through LITGAS UAB by means of the use of liquefied natural gas terminal in Klaipeda. Meanwhile, Vilnius and Kaunas saw the launch of the projects on new co-generation power plants.
More Efficient Production and Operation of Networks
In 2014, qualitative indicators of electric power supply of the group improved and technological costs in electric power distribution network reduced to 7.3 per cent (from 7.5 per cent in 2013).
Over 2014, Lietuvos Energija group produced 1.9 TWh of electric power or 6.4 per cent less than a year ago; however, the competitive production of electric power generated in Kruonis Pumped Storage Power Plant increased by 39 per cent to 0.7 TWh per annum.
The growth in the quality of services, reliability and security of electric power and natural gas networks are guaranteed by responsible planning of investments. In total, investments in infrastructure over 2014 accounted for EUR 145 million (LTL 499 million) which is 45 per cent more than a year ago. The increase in investments was largely (EUR 17 million) due to the expansion of heat generation capabilities; moreover, investments intended for the maintenance of electricity distribution network grew by EUR 17 million.
The group remains financially strong and capable of making investments and promoting development. The levels of financial debts continue to be low in terms of both the income earned and capital structure compared to corresponding indicators of European enterprises within the energy sector. The net financial debt-to-equity ratio of the group at the end of 2014 was 14 per cent. The net financial debts of the group are lower than EBITDA of one year – the ratio of these accounted for 0.8 times at the end of 2014.
