“Lietuvos energijos gamyba” was increasing the operating efficiency and the value of the company in 2014

Electricity generation and trade company “Lietuvos Energijos Gamyba” (hereinafter referred to as the Company) carried out successful operations in pursuit of its long-term strategy's goals. According to the unaudited data, the consistent increase of commercial profitability and reduction of operating costs resulted in the company's earnings before interest, taxes, depreciation and amortisation (EBITDA) amounting to LTL 221,1 million in 2014. The unaudited result of the “Lietuvos Energijos Gamyba” Group (hereinafter referred to as the Group) was LTL 219,2 million.

 

"In the beginning of the last year, when discussing the strategic directions of the company until 2020, we emphasised the importance of increasing the value and operating efficiency of the company, of ensuring provision of high-quality services, and of building values-based corporate culture. Today, I can firmly say to the company's shareholders, partners, customers and the general public that the very first year of the implementation of the updated strategy has already justified the major expectations concerning staff's professionalism and determination to work responsibly in pursuit of the set goals", said CEO and Chair of the Board of “Lietuvos Energijos Gamyba” Juozas Bartlingas.

 

The Company's sale earnings in 2014, according to the unaudited data, decreased by 26%, i.e. from LTL 1079,6 million down to LTL 797,9 million, if compared to 2013. There were two main reasons of the decrease. First of all, the change in the trading principle in 2014 resulted in almost 2.9 times smaller sales of the Company to LESTO (from 2,393 TWh in 2013, down to 0,832 TWh in 2014). Second reason, which had major impact on the Company's earnings reduction, was decrease in electricity generation by nearly one fifth in Elektrėnai Complex and Kaunas Algirdas Brazauskas' Hydroelectric Power Plant.

 

The situation on the electricity market in 2014 was stable, thus differently from 2013, when over-quota electricity was generated in Elektrėnai in order to ensure power supply in autumn, last year electricity production in Elektrėnai was according to the schedule agreed with the transmission system operator - mainly in the efficient new combined-cycle unit, during the warm season and without exceeding the quota established by the Government. The quota of 0,9 TWh was established for 2014, while the actual production was 0,857 TWh electricity. In 2013, Elektrėnai generated 25.7% more electricity, i.e. 1,077 TWh, though the quota remained unchanged. While, Kaunas A. Brazauskas' Hydroelectric Power Plant, producing purely green Lithuanian energy, generated smaller volumes in 2014 because of dry weather and consequently decreased inflow of the River Nemunas. Production rates of the plant varied from 0,409 TWh in 2013 down to 0,317 TWh in 2014 (22.5% decrease).

 

"Decrease in Company's earnings caused by the shrinking electricity generation in Elektrėnai  and growing competition on the exchange is projected by us also in the long-term strategy of the “Lietuvos Energijos Gamyba”. At the same time it stipulates growing value and profitability of the Company through strengthening of the competition in the commercial activities, better use of the capacities that may produce competitive electricity", added Mr. Bartlingas. According to him, Kruonis Pumped Storage Hydroelectric Plant showed very effective operation in this respect in 2014, with the increase in its production volumes by 39.3% if compared with 2013.  The plant produced 0,661 TWh electricity, which is 0,187 TWh more than in 2013.

 

Thus, despite all three power plants producing 6.4% less electricity together in 2014 if compared with 2013 (1,960 TWh and 1,835 TWh, respectively), good results were achieved. The Company's sale volumes on the free market were growing by 21.7% (from 1,328 TWh in 2013 up to 1,616 TWh in 2014), while effective generation in Eletrėnai and professional trading activities resulted in 31.8% decrease in costs (from LTL 981,4 million in 2013 down to LTL 669,3 million in 2014), the value of the tradable pollution allowances available was growing (the price changed from EUR 4,91 in the end of 2013 up to EUR 7,2 by the end of 2014). All these factors determined good profitability rates of the Company and the entire “Lietuvos Energijos Gamyba” Group (hereinafter referred to as the Group).

 

The unaudited EBITDA of the Company in 2014 amounted to LTL 221,1 million, which was 6.4% higher than in 2013 (LTL 207,9 million), while the net profit from sustained activities was growing by 13.8% (from LTL 94,4 million in 2013 up to LTL 107,4 million in 2014). The increase of the value of the tradable pollution allowances that started in the second half of 2014 made positive impact on the Company's yearly profitability rates, which according to the unaudited data amounted to LTL 19,7 million (the decrease in TPA’s value in 2013 resulted in LTL 15,9 million loss).

 

The total earnings of the Group in 2014 reached LTL 866,2 million and were 27.8% smaller than in 2013 (LTL 1,199,4 million), its expenses dropped down by 31.6% (from LTL 1,076,7 million in 2013 down to LTL 736,8 million in 2013). In 2014, the Group's EBITDA margin was 25.3%. If compared with the same period in 2013, the EBITDA margin increased by 5.4% (from 19.9 %). The Group's EBITDA in absolute value decreased from LTL 239,3 million down to LTL 219,2 million. The net profitability of the Group increased by 2.2%: the net profitability rate in 2013 was 9.1%, while in 2014 - 11.3%. During 2014, the Group's net profit from the sustained activities was LTL 98,1 million or 9.7% smaller than during the same period in 2013, when the net profit was LTL 108,6 million.

 

The year 2014 was the year of challenges for the Company and the whole Group in terms of both making adaptations to the changing market conditions and implementing the important development project of new heat generation facilities in Elektrėnai. Staff's involvement and responsible work together in pursuit of the best result contributed to the timely completion of decommissioning of the units 3 and 4 of the reserve power plant, while 2015 witnessed taking of the units 1 and 2 out of operation and starting their decommissioning", said J. Bartlingas.

 

Bigger volumes of electricity generation have been planned in Elektrėnai for this year, following approval of bigger supported electricity generation quota (1,1 TWh), the production cost price in the combined cycle unit will drop even further. Thus, through using the most efficient capacities, refusing the ones that are no longer in operation and investing into refurbishment of the other capacities, the Company is planning to achieve the set goals and to ensure the return to its shareholders. At the same time, the Company will be further aspiring to make successful contributions to the reduction in the budget of the public interest services (PIS), thus creating a possibility of cheaper electricity for consumers.

 

The Head of “Lietuvos Energijos Gamyba” noted that the Company will remain being one of the main links guaranteeing national energy security and will firmly aspire just assessment of the Company's activities, taking into consideration actual market conditions, clauses of all effective legal acts and previously adopted regulatory decisions.

Further information on the regulated and commercial activities
 
During 2014, the Group's incomes from the regulated activities decreased by 11.9%, from commercial - by 39.8%. Incomes from the commercial activities in 2013 accounted for 57% of the total incomes, while in 2014 it dropped down to 47.4%.
 
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. Incomes from these activities were decreasing by LTL 516,2 million in the course of 2013, down to LTL 455 million in 2014. As it was mentioned before, the decrease in the regulated activity incomes was caused by smaller and more effective production in Elektrėnai complex. The Company has already announced saving of LTL 168 million of the PIS funds in the period of two years, since the combined-cycle unit has been launched, i.e. that is the amount that would have been needed if the old units in Elektrėnai stayed in operation.
 
Incomes from commercial activities, comprising of electricity generation in Kruonis PSHP and Kaunas HPP as well as electricity wholesale and retail on the free market and other commercial services, dropped down from LTL 683,2 million in 2013 to LTL 411,2 million in 2014. The main cause of such decrease was the change in the principle of electricity sale to LESTO, which resulted in 65.2% less electricity sold to LESTO. (from the beginning of 2014, LESTO buys exclusively subsidised electricity generated in Elektrėnai complex from “Lietuvos Energijos Gamyba”). While electricity sales by the Group on the free market, as it was mentioned before, have been growing by more than one fifth.