Lietuvos Energija already reaps the harvest of its strategic decisions and investments
Over the third quarter of this year and the second half of autumn, the state-owned group of energy companies Lietuvos Energija stimulated competition in the market of electricity and natural gas, laid foundations for lower prices of energy resources and guaranteed the payment of dividends into the state budget by implementing decisions significant for the Group and the State and making targeted investments.
The most significant events of this year in the Lietuvos Energija group – the acquisition of Lietuvos Dujos, a discount negotiated from Gazprom, the agreement signed by LITGAS and Statoil enabling an alternative for the supply of natural gas, decisions on the development of projects of cogeneration power plants in Vilnius and Kaunas – will have a long-term positive impact on the country’s economy and consumers.
When LITGAS purchased and guaranteed the delivery of LNG cargo required for terminal testing, for the first time in the history of Lithuania natural gas flowed to the country’s gas system not from Russia.
“Over the last few months we could obviously witness the value generated by our strategic investments in the sector of natural gas for the whole economy of Lithuania. Having acquired Lietuvos Dujos and improved the conditions of supply and agreed on competitive prices of liquefied natural gas (LNG) between LITGAS and Statoil, market rules started working in the Lithuanian sector of natural gas”, – notes Dr. Dalius Misiūnas, the Board Chairman and CEO of Lietuvos Energija, the controlling company of the Group.
According to him, the real benefits of these decisions will also be enjoyed by consumers – irrespective of the infrastructure costs that have increased due to objective reasons, as a result of lower average price of natural gas and reasonable allocation of the compensation for overpayment, it will be possible to supply consumers with cheaper gas and to create preconditions for lower heating prices.
Moreover, the targeted actions of the Lietuvos Energija group companies in the electricity sector will contribute to the improved quality of services and lower electricity tariffs not only in the nearest future, but also to ensure their stability in the longer perspective.
During 9 months, Lietuvos Energija Gamyba saved LTL 39.1 million of consumers’ funds through more effective and lower quota-based production of electricity, and LESTO – LTL 44 million, because of lower volumes of electricity purchased from cogeneration power plants and more electricity acquired on the exchange. The transfer of generation from old units to the modern one, next year will enable Lietuvos Energijos Gamyba to produce more electricity at a lower price. Further reduction of costs is achieved through the elimination of inefficient capacities and upgrading the remaining capacities.
Meanwhile, LESTO is increasing investments in the reliability of the distribution network – the improvement of its indicators facilitates in ensuring higher safety, reducing network maintenance costs and, through the involvement of partners and use of electronic self-service solutions, the efficiency of customer servicing is improved, which will also contribute to the reduction of costs and help to guarantee more favourable electricity prices.
The acquisition of Lietuvos Dujos by Lietuvos Energija created the possibilities for further improvement of customer service – the zone for servicing customers of Lietuvos Dujos was created in Vilnius LESTO Customer Service Centre. This is the first stage of assessment of synergy possibilities the results of which will facilitate further integration of servicing of gas and electricity consumers, making it more convenient and offering additional benefits.
The centralisation of service functions was further continued at the level of Lietuvos Energija group. The public procurement and accounting administration functions have been transferred to the established Business Service Centre and in spring the Company will also start the administration of labour relations in the companies of Lietuvos Energija. The Company has already mobilised all public procurement and accounting specialists from the Group companies and until spring the labour relations’ administration specialists will also join them.
Right decisions of Lietuvos Energija and Group companies facilitated in ensuring the return for the shareholder – Lietuvos Energija will pay LTL 84.95 million of dividends into the State Budget.
“This testifies to our ability to effectively manage the assets entrusted by the State, while ensuring the State Budget revenue and concurrently financing strategic projects that improve the situation and perspectives of the Lithuanian energy”, – maintains D. Misiūnas.
By diversification of its activities Lietuvos Energija continues investing in the heat production sector. The projects of cogeneration power plants that will use local renewable resources are being developed in Vilnius and Kaunas. In autumn, the search for partners for these projects was started and in the first stage of the competition 18 applications were received from 8 public entities. These modern power plants are expected to produce up to 60 % of heat required by Vilnius and Kaunas at almost by 30 % lower price and about one-tenth of the electricity demand of Lithuania at a competitive price.
Already during this heating season a new bio-fuel fired boiler plant of Lietuvos Energijos Gamyba will start supplying heat to Elektrėnai, enabling to reduce the price of heat. The new gas-fired steam boilers that will supply steam for the needs of the Lithuanian Power Plant and heat to Elektrėnai during cold peak periods will be put into operation already this year. They will help in reducing the reserve power plant’s demand for PSO funds.
Reorganisation of the natural gas sector
On 1 November, the natural gas sector of Lithuania completed the implementation of the requirement of the EU’s Third Energy Package to separate the activities of supply, sales and distribution of natural gas. A new company Lietuvos Dujų Tiekimas was set up to take care of the supply of natural gas to consumers, while concentrating the operation and development of the distribution network in Lietuvos Dujos.
By integrating Lietuvos Dujos and Lietuvos Dujų Tiekimas with the Lietuvos Energija group, a corporate management model uniform for the entire Group was introduced, starting the centralisation of public procurement, accounting and labour relations’ administration functions, which will be transferred to the Business Service Centre, while looking for the optimal efficiency solutions in other service activities, such as management of assets, transport, IT systems and technology.
Income and profit kept growing
Over 9 months of 2014, revenue of Lietuvos Energija group amounted to LTL 2,202.3 million (by 3 % or LTL 63.3 million more than over 9 months of 2013). The change was mainly influenced by new operating income of the Group from distribution and sales of natural gas (LTL 175 million), and growth of income from sales, trade and supply of electricity (LTL 85 million). The growth was slowed down by the reduction of income from transmission service (11.7 % or LTL 123.9 million), balancing, regulation and power reservation (56.2 % or LTL 60.5 million) and lower income from public service obligations (PSO) of Lietuvos Energijos Gamyba (15.9 % or LTL 39.1 million).
Total operating expenses of the Group of 9 months of 2014 amounted to LTL 367 million and, compared to the same period of the last year, increased by 17.6 % or LTL 55 million. The growth of the operating expenses was mostly influenced by expenses for subcontracting and materials that have increased by LTL 26 million (116 %), related to repairs and maintenance of the distribution network, as well as operating expenses of AB Lietuvos Dujos (LTL 29 million) included in the operating expenses of the Group since June 2014, when the Group acquired the qualifying holding of AB Lietuvos Dujos.
During the reporting period, the expenses of procurement of electricity, gas, fuel and related services, compared to 9 months of 2013, increased by 22.3 % (LTL 286 million). The increase was mainly predetermined by the inclusion of AB Lietuvos Dujos procurement costs in the procurement costs of the Group since June 2014.
The Group’s EBITDA of 9 months of 2014 was LTL 543.8 million and, compared to EBITDA of 9 months of 2013, reduced by 1.2 % (LTL 6.6 million). EBITDA profit margin of the reporting period has not changed and stood at 24.7 % (EBITDA margin of 9 months of 2013 was 25.7 %). The lower EBITDA of the Group resulted from reduced EBITDA of electricity generation activity over 9 months of 2014, due to lower electricity generation volumes.
Net profit of the Group of 9 months of 2014 was LTL 130.8 million and, compared to the result of 9 months of 2013 (LTL 127.5 million), has increased by LTL 3.4 million or 2.7 %. The net profit result was significantly influenced by positive results of activities of electricity production as well as electricity distribution and transmission sectors.
Investments have significantly increased and the level of financial debts remains low
Investments of 9 months of 2014 of the Group companies amounted to LTL 326.5 million and exceeded by 45 % (LTL 101 million) the comparable figure of the same period of 9 months of 2013 (LTL 225 million). Over 9 months of 2014, the largest amounts were invested in the development of infrastructure of the distribution network (LTL 134 million) and its maintenance (LTL 93 million), construction and maintenance of natural gas systems (LTL 21 million). During the reporting period investments in the development of new heat production capacities have considerably increased (LTL 51 million) – new bio-fuel boilers and other ancillary equipment were installed in Elektrėnai complex, and also in the maintenance of the distribution network (LTL 25.8 million).
In the end of Q3 2014, net financial debts of the Group amounted to LTL 689 million and were by LTL 247 million larger than net financial debts in end-2013. The increase in net financial debts of the Group was mainly influenced by acquisition of the qualifying holding of AB Lietuvos Dujos in H1 of this year with internal financial resources accumulated by the Company. Over 9 months 2014, the level of Group loans in terms of loan-to asset ratio of the Group has not changed significantly and stood at LTL 1,263 million, compared to LTL 1,180 million in end-2013. The current level of financial debts of the Group in the end of Q3 2014 remains low in terms of earned income and profitability as well as capital structure.
Over H1 2014, net financial debts of the Group augmented almost by 1.5 times, however, such growth was predetermined by low level of net financial debts and by the use of internal financial resources of the Group in H1 2014 for acquisition of the qualifying holding of AB Lietuvos Dujos.
The most significant events of this year in the Lietuvos Energija group – the acquisition of Lietuvos Dujos, a discount negotiated from Gazprom, the agreement signed by LITGAS and Statoil enabling an alternative for the supply of natural gas, decisions on the development of projects of cogeneration power plants in Vilnius and Kaunas – will have a long-term positive impact on the country’s economy and consumers.
When LITGAS purchased and guaranteed the delivery of LNG cargo required for terminal testing, for the first time in the history of Lithuania natural gas flowed to the country’s gas system not from Russia.
“Over the last few months we could obviously witness the value generated by our strategic investments in the sector of natural gas for the whole economy of Lithuania. Having acquired Lietuvos Dujos and improved the conditions of supply and agreed on competitive prices of liquefied natural gas (LNG) between LITGAS and Statoil, market rules started working in the Lithuanian sector of natural gas”, – notes Dr. Dalius Misiūnas, the Board Chairman and CEO of Lietuvos Energija, the controlling company of the Group.
According to him, the real benefits of these decisions will also be enjoyed by consumers – irrespective of the infrastructure costs that have increased due to objective reasons, as a result of lower average price of natural gas and reasonable allocation of the compensation for overpayment, it will be possible to supply consumers with cheaper gas and to create preconditions for lower heating prices.
Moreover, the targeted actions of the Lietuvos Energija group companies in the electricity sector will contribute to the improved quality of services and lower electricity tariffs not only in the nearest future, but also to ensure their stability in the longer perspective.
During 9 months, Lietuvos Energija Gamyba saved LTL 39.1 million of consumers’ funds through more effective and lower quota-based production of electricity, and LESTO – LTL 44 million, because of lower volumes of electricity purchased from cogeneration power plants and more electricity acquired on the exchange. The transfer of generation from old units to the modern one, next year will enable Lietuvos Energijos Gamyba to produce more electricity at a lower price. Further reduction of costs is achieved through the elimination of inefficient capacities and upgrading the remaining capacities.
Meanwhile, LESTO is increasing investments in the reliability of the distribution network – the improvement of its indicators facilitates in ensuring higher safety, reducing network maintenance costs and, through the involvement of partners and use of electronic self-service solutions, the efficiency of customer servicing is improved, which will also contribute to the reduction of costs and help to guarantee more favourable electricity prices.
The acquisition of Lietuvos Dujos by Lietuvos Energija created the possibilities for further improvement of customer service – the zone for servicing customers of Lietuvos Dujos was created in Vilnius LESTO Customer Service Centre. This is the first stage of assessment of synergy possibilities the results of which will facilitate further integration of servicing of gas and electricity consumers, making it more convenient and offering additional benefits.
The centralisation of service functions was further continued at the level of Lietuvos Energija group. The public procurement and accounting administration functions have been transferred to the established Business Service Centre and in spring the Company will also start the administration of labour relations in the companies of Lietuvos Energija. The Company has already mobilised all public procurement and accounting specialists from the Group companies and until spring the labour relations’ administration specialists will also join them.
Right decisions of Lietuvos Energija and Group companies facilitated in ensuring the return for the shareholder – Lietuvos Energija will pay LTL 84.95 million of dividends into the State Budget.
“This testifies to our ability to effectively manage the assets entrusted by the State, while ensuring the State Budget revenue and concurrently financing strategic projects that improve the situation and perspectives of the Lithuanian energy”, – maintains D. Misiūnas.
By diversification of its activities Lietuvos Energija continues investing in the heat production sector. The projects of cogeneration power plants that will use local renewable resources are being developed in Vilnius and Kaunas. In autumn, the search for partners for these projects was started and in the first stage of the competition 18 applications were received from 8 public entities. These modern power plants are expected to produce up to 60 % of heat required by Vilnius and Kaunas at almost by 30 % lower price and about one-tenth of the electricity demand of Lithuania at a competitive price.
Already during this heating season a new bio-fuel fired boiler plant of Lietuvos Energijos Gamyba will start supplying heat to Elektrėnai, enabling to reduce the price of heat. The new gas-fired steam boilers that will supply steam for the needs of the Lithuanian Power Plant and heat to Elektrėnai during cold peak periods will be put into operation already this year. They will help in reducing the reserve power plant’s demand for PSO funds.
Reorganisation of the natural gas sector
On 1 November, the natural gas sector of Lithuania completed the implementation of the requirement of the EU’s Third Energy Package to separate the activities of supply, sales and distribution of natural gas. A new company Lietuvos Dujų Tiekimas was set up to take care of the supply of natural gas to consumers, while concentrating the operation and development of the distribution network in Lietuvos Dujos.
By integrating Lietuvos Dujos and Lietuvos Dujų Tiekimas with the Lietuvos Energija group, a corporate management model uniform for the entire Group was introduced, starting the centralisation of public procurement, accounting and labour relations’ administration functions, which will be transferred to the Business Service Centre, while looking for the optimal efficiency solutions in other service activities, such as management of assets, transport, IT systems and technology.
Income and profit kept growing
Over 9 months of 2014, revenue of Lietuvos Energija group amounted to LTL 2,202.3 million (by 3 % or LTL 63.3 million more than over 9 months of 2013). The change was mainly influenced by new operating income of the Group from distribution and sales of natural gas (LTL 175 million), and growth of income from sales, trade and supply of electricity (LTL 85 million). The growth was slowed down by the reduction of income from transmission service (11.7 % or LTL 123.9 million), balancing, regulation and power reservation (56.2 % or LTL 60.5 million) and lower income from public service obligations (PSO) of Lietuvos Energijos Gamyba (15.9 % or LTL 39.1 million).
Total operating expenses of the Group of 9 months of 2014 amounted to LTL 367 million and, compared to the same period of the last year, increased by 17.6 % or LTL 55 million. The growth of the operating expenses was mostly influenced by expenses for subcontracting and materials that have increased by LTL 26 million (116 %), related to repairs and maintenance of the distribution network, as well as operating expenses of AB Lietuvos Dujos (LTL 29 million) included in the operating expenses of the Group since June 2014, when the Group acquired the qualifying holding of AB Lietuvos Dujos.
During the reporting period, the expenses of procurement of electricity, gas, fuel and related services, compared to 9 months of 2013, increased by 22.3 % (LTL 286 million). The increase was mainly predetermined by the inclusion of AB Lietuvos Dujos procurement costs in the procurement costs of the Group since June 2014.
The Group’s EBITDA of 9 months of 2014 was LTL 543.8 million and, compared to EBITDA of 9 months of 2013, reduced by 1.2 % (LTL 6.6 million). EBITDA profit margin of the reporting period has not changed and stood at 24.7 % (EBITDA margin of 9 months of 2013 was 25.7 %). The lower EBITDA of the Group resulted from reduced EBITDA of electricity generation activity over 9 months of 2014, due to lower electricity generation volumes.
Net profit of the Group of 9 months of 2014 was LTL 130.8 million and, compared to the result of 9 months of 2013 (LTL 127.5 million), has increased by LTL 3.4 million or 2.7 %. The net profit result was significantly influenced by positive results of activities of electricity production as well as electricity distribution and transmission sectors.
Investments have significantly increased and the level of financial debts remains low
Investments of 9 months of 2014 of the Group companies amounted to LTL 326.5 million and exceeded by 45 % (LTL 101 million) the comparable figure of the same period of 9 months of 2013 (LTL 225 million). Over 9 months of 2014, the largest amounts were invested in the development of infrastructure of the distribution network (LTL 134 million) and its maintenance (LTL 93 million), construction and maintenance of natural gas systems (LTL 21 million). During the reporting period investments in the development of new heat production capacities have considerably increased (LTL 51 million) – new bio-fuel boilers and other ancillary equipment were installed in Elektrėnai complex, and also in the maintenance of the distribution network (LTL 25.8 million).
In the end of Q3 2014, net financial debts of the Group amounted to LTL 689 million and were by LTL 247 million larger than net financial debts in end-2013. The increase in net financial debts of the Group was mainly influenced by acquisition of the qualifying holding of AB Lietuvos Dujos in H1 of this year with internal financial resources accumulated by the Company. Over 9 months 2014, the level of Group loans in terms of loan-to asset ratio of the Group has not changed significantly and stood at LTL 1,263 million, compared to LTL 1,180 million in end-2013. The current level of financial debts of the Group in the end of Q3 2014 remains low in terms of earned income and profitability as well as capital structure.
Over H1 2014, net financial debts of the Group augmented almost by 1.5 times, however, such growth was predetermined by low level of net financial debts and by the use of internal financial resources of the Group in H1 2014 for acquisition of the qualifying holding of AB Lietuvos Dujos.
