During first nine months of this year, the demand of “Lietuvos Energijos Gamyba” for PSO funds was LTL 39,1 million smaller than last year

 

The electricity market stayed stable in January-September 2014. During the first months of the year, the prices in the Lithuanian zone of the Nord Pool Spot market were quite low and stayed that way until the supply of cheap electricity started decreasing towards the middle of the year. Similar trend is observed every year: electricity prices jump in summer in both Lithuania and Latvia, when the amount of water in the hydro power plants significantly drop, majority of combined heat and power plants are out of operation, electricity grids are under maintenance, and ventilation systems are switched on during the periods of heat. Thus, the electricity prices in January-September are similar to the last year's prices. The average electricity price in January-September 2014 in the Lithuanian price zone of the Nord Pool Spot was only insignificantly (about 2.3%) higher than in the same period in 2013: 171.71 LTL/MWh (49.77 EUR/MWh) and 167.88 LTL/MWh (48.66 EUR/MWh), respectively.

 

Quiet beginning of the year, with the electricity demand fully satisfied by the import and combined heat and power plants, and the summer without any major surprises determined 13.1% smaller electricity generation in January-September 2014, in Elektrėnai than during the same period in 2013: in total, 0.768 TWh or 85% of the total supported electricity generation quota assigned for 2014. The combined cycle unit controlled by the Company was switched on for the first time this April according to the plan agreed with the transmission system operator Litgrid. The unit stayed in operation nearly for the whole period, from the beginning of June till mid-October and generated 80% of the total electricity produced during nine months in Elektrėnai complex.

 

"The new unit first put into operation two years ago has already proven its important role in securing stable electricity supply during warm seasons and reducing production costs.  During nine months, it generated nearly half more electricity than during the same period last year and at the same time helped to save several tens of millions PSO funds, which would have had to be additionally spent if using the old less effective units of Elektrėnai", said Juozas Bartlingas, CEO of Lietuvos Energijos Gamyba.

 

During January-September 2014, all three power plants under the Company's control generated 1,463 TWh electricity in total (during the same period in 2013, the generated electricity amount was 5.7 bigger, i.e. 1,547 TWh electricity). Bigger production volumes than last year were observed only in Kruonis Pumped Storage Hydroelectric Power Plant, which in first nine months of 2014 generated 27.4% more electricity than during the same period last year (0,442 TWh and 0,347 TWh, respectively). Because of dry weather, Kaunas Algirdas Brazauskas' Hydroelectric Power Plant generated one fifth less electricity during nine months of 2014 than in the same period in 2013.

 

Smaller electricity generation volumes in Elektrėnai and Kaunas were among other reasons that determined smaller incomes earned by the group of companies of Lietuvos Energijos Gamyba (hereinafter referred to as the Group) in January-September 2014, amounting to LTL 672,6 million, or 23.9% smaller than the earnings in January-September 2013 (LTL 883,6 million).

 

Electricity sale to LESTO decreased by 2.4 times because of the changed trading principle from the beginning of the year made even stronger impact on decrease of incomes (from 1,791 TWh in January-September 2013 down to 0,745 TWh in the same period in 2014).

 

Nevertheless, the Group continued successfully trading on the free market, making in particular effective use of Kruonis Pumped Storage Hydroelectric Power Plant, resulting in the growth of the Group's trading on the free market by 26.7%, up to 1,173 TWh (the trade on the free market in January-September last year amounted0,926 TWh). During first nine months of 2014, the Group's sold 1,918 TWh electricity on the domestic market. It is 29.4% less than during the same period in 2013, when the sold amount was 2,716 TWh.

 

The Group's EBITDA margin of nine months 2014 was 25.2%. If compared with the same period in 2013, the EBITDA margin increased by 3.7% (from 21.5 %). However, dropping volumes of electricity generation and trade resulted in the EBITDA decreasing from LTL 189,6 million down to LTL 169,5 million in absolute value. The net profitability of the Group increased by 3.8 %: The net profitability rate in January-September 2013 was 10.0%, while during the same period this year it was 13.8%. During January-September 2014, the Group's net profit was LTL 92,8 million or 4.9% bigger than during the same period in 2013, when the net profit was LTL 88,5 million.

 

"During all nine months were managed to secure reliable operation, by compensating the decreased electricity generation volumes caused by the market and weather conditions by good trading performance, using the opportunities to buy and sell electricity on favourable terms. Professional performance of the generation and trade staff in the third quarter allowed to shift lots of attention to other important projects", said Mr. Bartlingas.

 

According to him, both staff and contractors of Lietuvos Energijos Gamyba are working closely together to ensure that starting from this heating season Elektrėnai town would be supplied with heating generated in the new biofuel power plant. And from the new year, the Company will decommission two small units of the standby power plant (150 MW capacity). This significant event is planned to boost the process that has been taking place in the Company for several years by now, i.e. saving public service obligations (PSO) funds assigned for generation in Elektrėnai.

 

Optimisation of servicing activities (i.e. centralisation and procurement and accounting functions in the newly-established company), preparation works for which were in particular intense in the third quarter of 2014, will also contribute to the achievement of the strategic goals - operating efficiency and value increase - set by the Company and the entire group of Lietuvos Energija.

Further information on the regulated and commercial activities.

 

During January-September 2014, the Group's incomes from the regulated activities were experiencing slightly bigger than one fifth decline, and slightly over one fourth from the regulated activities. Incomes from the commercial activities in the period of nine months of 2013 accounted for 45.8% of the total incomes, while during the same period this year it dropped down to 43.6%.

 

The regulated activities of the Group include electricity and heat generation in Elektrėnai complex and power reservation services provided by Kruonis PPS and Elektrėnai complex. The incomes from these activities have been decreasing from LTL 478,6 million during nine months of 2013 down to LTL 379,1 million during nine months of this year. The cause of the decrease in the incomes from the regulated activities, as it was already mentioned, was smaller-volume and much more efficient generation in Elektrėnai complex. During two years the combined cycle unit has been in operation, the total amount of LTL 168 million of the PSO funds has already been saved in total.

The incomes from the commercial activities, which embrace electricity generation in Kruonis PPS and Kaunas HPP, and wholesale and retail trading in electricity on the free market and other commercial services, have decreased by 27.5%. The change of the principle of electricity sale to LESTO determined the decrease of electricity sale to LESTO by 58.4% (starting from the beginning of 2014, from Lietuvos Energijos Gamyba, LESTO has been buying exclusively subsidised electricity generated in Elektrėnai plant), the decrease of the incomes from commercial activities from LTL 404,9 million during January-September 2013 down to LTL 293,6 million during the same period in 2014.

 

To enhance its commercial activities and to pursue its aspiration of active contribution to the integration of the Nordic European and Baltic electricity markets, in August 2014 the Company was the first Lithuanian company to join the NASDAQ OMX Commodities.

 

Furthermore, in the third quarter of this year the Company attracted the attention of the investors and other interested parties to the decision of the National Commission for Energy Control and Prices recognising the Company being a highly influential player on the electricity generation market, which the Company considered to be unreasonable.

 

The Company noted that the generation market research, on which the latter decision was based, was conducted under inadequate prerequisites. Because of that, the Company believes that the decision of the National Commission for Energy Control and Prices to recognise the Company being a highly influential player on the electricity generation market and related obligations should not apply to the Company. The Company lodged an appeal to the court against the latter decision.

 

Lietuvos Energijos Gamyba, AB is listed on NASDAQ OMX Vilnius  Stock Exchange. 96.13% of its shares belong to the state-controlled Lietuvos energija, UAB.

 

Lietuvos Energijos Gamyba Group consists of the controlling company, i.e. Lietuvos Energijos Gamyba, AB controlling the standby power plant and combined cycle unit in Elektrėnai, Kruonis Pumped Storage Plant and Kaunas Hydroelectric Power Plant, as well as Energijos Tiekimas, UAB, Kauno energetikos remontas, UAB.