CONSOLIDATED INTERIM REPORT OF THE COMPANY AND THE GROUP 1 January 2016 – 30 September 2016
1 INTERIM STATEMENT FOR 9 MONTHS 2016 | Content
Content Consolidated Interim Report of the Company and the Group Address of the Chairman of the Board
5
About the Group and the Company
6
Major Events
10
Analysis of Financial and Performance Results of the Group
11
Overview of the Performance of the Company and the Group
20
Corporate Responsibility
29
Corporate Governance
33
Key Information about the Company and the Group
41
2 INTERIM STATEMENT FOR 9 MONTHS 2016 | Content
Key indicators of the Lietuvos Energija Group 9 months of 2016
9 months of 2015
Change (+/-)
Revenue
million EUR
803.5
761.9
million EUR 41.6
% 5.5%
Costs of purchase of electricity, gas, fuel, and related services
million EUR
-512.8
-511.6
-1.3
-0.2%
Operating expenses (1)
million EUR
-98.7
-113.5
14.9
13.1%
EBITDA (2)
million EUR
201.0
166.2
34.7
20.9%
%
25.0%
21.8%
Net profit
million EUR
95.6
72.5
23.1
31.9%
Net profit (comparative)
million EUR
103.1
89.5
13.6
15.2%
EBITDA margin (3)
30/09/2016
31/12/2015
14.6%
Change (+/-)
Total assets
million EUR
2,353.4
2,339.2
million EUR 14.2
Equity
million EUR
1,301.6
1,304.5
-2.9
-0.2%
Financial debts
million EUR
444.9
420.7
24.2
5.7%
Net debt (4)
million EUR
261.6
251.8
9.8
3.9%
Return on equity (ROE) (5)
%
10.5%
9.0%
Equity level (6)
%
55.3%
55.8%
times
1.02
1.14
Net debt / equity ratio
%
20.1%
19.3%
Asset turnover ratio (7)
times
0.341
0.320
Current ratio (8)
times
0.987
1.049
Net debt / EBITDA 12 month
% 0.6%
Operating expenses, except for the cost of purchase of electricity and related services, depreciation and amortization, as well as impairment of value and write-off expenses of long-term tangible assets; 2) Pre-tax profit (loss) + financial expenses - financial revenue – received dividends + costs of depreciation and amortisation + value impairment costs + write-offs of tangible fixed assets + impact of the discount of the price of natural gas; 3) EBITDA / revenue; 4) Financial debts – cash and cash equivalents – short-term investments and time deposits – share of other fixed financial assets comprising investments in debt securities; 5) Net profit (loss), restated annual expression / average equity capital during the period; 6) Equity capital at the end of period / total assets at the end of period; 7) Revenues / total assets at the end of the period 8) Current assets at the end of the period / current liabilities at the end of the period
3 INTERIM STATEMENT FOR 9 MONTHS 2016 | Content
Revenues of Lietuvos Energija Group increased by EUR 41.6 million due to an increase in the income from energy transmission, power reservation, and balancing
EBITDA of Lietuvos Energija Group grew by 34.7 million EUR mostly due to better gas supply and trading activity result, as well as decreased operating costs of the Group
Net comparative profit of Lietuvos Energija Group grew by 15.2% and exceeded the returnon-capital (ROC) requirements set for a state-controlled enterprise (SCE). The minimum ROC for a SCE was 5.7 percent, whereas the Group’s indicator for three quarter of 2016 was 11.0 percent.
Net debt of Lietuvos Energija remains relatively low, as compared with an optimal borrowed-to-equity capital ratio.
Financial data provided in EUR million
4 INTERIM STATEMENT FOR 9 MONTHS 2016 | Content
Address of the Chairman of the Board Dear customers, partners, employees, and shareholders The accomplishments of the 3rd quarter 2016 will ensure even more advantageous energy and service prices for customers of Lietuvos Energija Group in the coming 2017. The consistently improved performance of the Group’s companies ensured growing financial results and an adequate return for its shareholder – the Lithuanian State. During the nine months of the year Lietuvos Energija earned a consolidated profit of EUR 201 million before interest, tax, depreciation, and amortisation (EBITDA) – up by one fifth year-onyear, when EBITDA was EUR 166 million. By consistently pursuing one of the strategic objectives of the Company – to facilitate higher competitiveness of the Lithuanian economy we continue exploring ways and methods to ensure lower energy prices for Lithuanian residents and businesses by reducing operational costs and benefiting from the available market opportunities.
One of more significant indicators demonstrating the efficiency of Lietuvos Energija performance is its net comparative profit that was growing by more than 15 percent and exceeded the return on equity (ROE) requirement set for our company Group. The required ratio is 5.7 percent, while ROE of Lietuvos Energija Group for the first three quarters of 2016 was 10.5 percent. This year we are the first in the Baltic States to set up a venture capital fund that will select and finance the most promising and viable business ideas in energy area. That is our contribution to the creation of innovations not only for the benefit of the company Group, but also for the entire Lithuania. This year we have made several steps of strategic importance for the purpose of strengthening our energy production capacities. We acquired two wind farms in Lithuania and Estonia. The construction of cogeneration plants has been launched in Vilnius and Kaunas – that will reduce the volumes of waste disposed at landfills and thus will bring the price of heat for residents down, and increase the volume of electric energy generated in Lithuania. In view of the EU requirement for Lithuania to reach ambitious energy saving targets, a Group company Energijos sprendimų centras, newly established this year, offered range of sustainable energy efficiency solutions to national businesses and institutions. The performance results of Lietuvos Energija Group of the 3rd quarter certainly encouraging and allow forecasting a successful completion of 2016.
Having optimised the natural gas supply portfolio, we have reduced the gas price for the second time this year – since September corporate customers have been paying for natural gas as much as 20 percent less and residents on average by 11 percent less since the middle of the year.
5 INTERIM STATEMENT FOR 9 MONTHS 2016 | Address of the Chairman of the Board
Dr. Dalius Misiūnas Chairman of the Board and the CEO UAB Lietuvos Energija
About the Group and the Company
6 INTERIM STATEMENT FOR 9 MONTHS 2016 | Address of the Chairman of the Board
About the Group and the Company
The Lietuvos Energija group is one of the largest state-owned groups of energy companies in the Baltic countries. The main activities of the Group include the generation and supply of electricity and heat, trading and distribution of electricity, trading and distribution of natural gas, as well as the servicing and development of the energy sector. The rights and obligations of the shareholder of the Lietuvos Energija group are implemented by the Ministry of Finance of the Republic of Lithuania. The Lietuvos Energija group with more than 5 000 employees manages and operates the key energy generation capacities of Lithuania that ensure the security of energy supply, a distribution network covering the entire territory of the country, and provides services to almost 1.6 million of consumers across Lithuania, offers electricity supply services to consumers abroad, operates gas distribution pipelines in the length of 8.5 thousand km, supplies gas to 570 thousand consumers, implements development projects of strategic value and pursues the objective set forth in the National Energy Strategy. During the nine months of 2016 1,06 TWh of electricity were generated, 4,82 TWh of electricity were transmitted to consumers and 449 billion m3 of natural gas were transported via gas distribution pipelines.
7 INTERIM STATEMENT FOR 9 MONTHS 2016 | About the Group and the Company
The consolidated revenue of the Company for nine months of 2016 amounted to EUR 804 million, the EBITDA of the Group was EUR 201 million. The parent company of the Group – Lietuvos Energija, UAB (hereinafter – Lietuvos Energija or the Company) is responsible for transparent management and coordination of activities of the whole Group, improvement of the efficiency in order to ensure competitive services for consumers, and for socially responsible creation of long-term value for its shareholders. The Company analyses the activities of the Group, represents the Group, implements rights and obligations of the shareholder, establishes operational guidelines and rules, and coordinates the activities in the areas of production, commerce, finance, law, strategy and development, human resources, risk management, audit, technology, communication and others.
Structure of the Group At the reporting date, the Lietuvos Energija group consisted of 21 companies: the parent company and 21 directly and indirectly controlled companies. The main business activities of the Group are the generation of electricity and heat, transmission trading, distribution and supply, trade in natural gas and its distribution. Activities of the Group’s companies servicing these main types of business activities
8 INTERIM STATEMENT FOR 9 MONTHS 2016 | Structure of the Group
comprise ITT, real estate, transport, repair and construction of energy facilities, professional development of employees, public procurement, accounting, administration of employment relationships and other services. The detailed list of the Group companies is presented on page 42 of this document. The organisational chart of the Group effective from 30 September 2016 is presented below:
Group Strategy
MISSION –
VISION –
VALUES –
sustainable growth of value in the energy sector by promoting the economic and social development of the country.
to become the highest-value energy company in the Baltic countries.
responsibility, cooperation, and results.
The main goal of the strategy of the Lietuvos Energija group is to double the value
of the Group and to become the highest-value energy company in the Baltic countries by 2020. This value is perceived as a sustainable balance of three components: return on assets, improvement of competitiveness and responsibility towards employees, society and environment. The Group's return on assets is increased through the development – diversifying activities, indulging in new and economically feasible projects and activities, acquiring enterprises, ensuring the efficiency of daily operations and achieving the goals set by the shareholder. The Group will reinforce the country's competitiveness by ensuring a stable supply of electricity and natural gas, offering new products and promoting rational use of electricity and natural gas. The Group assumes responsibility towards society and its employees, proactively implements environmental requirements and ensures the continuity and improvement of skills.
increase the competitiveness of the Group and the national economy at large as well as the country's energy independence, optimisation of the production and trading portfolio, development of new activities by extending the value chain of the Lietuvos Energija group. These goals will be achieved using the available resources and infrastructure, investing in the creation of new infrastructure and effective governance, as well as through acquisitions.
Enhancing the efficiency of operations. The efficiency is pursued in the main
The main strategic directions of the Group:
activities of the Group, as well as in the provision of support functions, management of assets and other resources across all Group companies. In order to achieve higher efficiency, the management and control system of the Group companies is integrated by setting the common principles of business management, division, coordination and control of responsibilities. Efficiency improvement measures covering all Group companies or identical or very similar activities at the individual company level are also continued. Active sharing of best practices between companies is promoted and sought.
Ensuring quality services to consumers. The care is taken to achieve better
Building new organisational culture. A modern, effective and dynamic
servicing of consumers, develop electronic (time-saving) and new services responding to the needs of consumers, increase consumer choices and guarantee the reliability of generation, distribution and supply of electricity and of distribution and supply of natural gas.
Diversifying the operations. The diversification includes implementation of investment projects in the sectors of electricity, heat and natural gas. The projects
9 INTERIM STATEMENT FOR 9 MONTHS 2016 | Group Strategy
organisation is being created operating on the basis of common values, developing in a consistent and targeted manner the required competences and successors for key employees, and offering internal environment which encourages the involvement of employees.
Major events in Q3, 2016
10 INTERIM STATEMENT FOR 9 MONTHS 2016 | Major events in Q3, 2016
kkkk
Grupės finansinių ir veiklos rezultatų analizė LIETUVOS ENERGIJA, UAB GRUPĖS ESMINIAI VEIKLOS RODIKLIAI
Pokytis (+/-) +/%
2016 m. 6 mėn.
2015 m. 6 mėn.
TWh
0,69
0,92
-0,23
-24,7%
Paskirstyta el. energijos vartotojams vidutinės ir žemos įtampos tinklais
TWh
4,49
4,25
0,24
5,6%
Visuomeninis ir garantinis tiekimas Paskirstyta nepriklausomų tiekėjų vartotojams
TWh TWh
1,60 2,89
1,59 2,66
0,01 0,23
0,7% 8,5%
30,37
27,21
3,16
11,6%
0,36 0,0042
0,33 0,0029
0,03 0,0013
7,9% 43,3%
Elektros energija Pagaminta elektros energijos
Elektros energijos tiekimo kokybės rodikliai SAIDI, min. (be „force majeure“) SAIFI, vnt. (be „force majeure“) Technologinės sąnaudos skirstomajame tinkle Dujos Paskirstytas dujų kiekis Parduotas dujų kiekis Dujų tiekimo kokybės rodikliai SAIDI, min. (be „force majeure“) SAIFI, vnt. (be „force majeure“)
min. vnt. % TWh TWh min. vnt.
11 INTERIM STATEMENT FOR 9 MONTHS 2016 | Grupės finansinių ir veiklos rezultatų analizė
Analysis of Financial and10,5% 0,42 0,38 0,04 5,82% 6,18% -5,9% Performance Results of 3,93 3,80 0,13 3,5% the6,15Group 6,35 -0,20 -3,1%
Analysis of Financial and Performance Results of the Group KEY OPERATIONAL INDICATORS OF THE LIETUVOS ENERGIJA GROUP
Change (+/-) +/%
9 months 2016
9 months 2015
TWh
1.06
1.65
-0.60
-36.1%
Distributed electricity via medium and low voltage power grids
TWh
6.60
6.29
0.32
5.1%
Public and guaranteed supply Distributed to customers of independent suppliers
TWh TWh
2.33 4.27
2.31 3.97
0.02 0.30
0.7% 7.6%
min.
51.43
45.84
5.59
12.2%
units
0.6719
0.6187
0.05
8.6%
%
5.74%
6.05%
TWh TWh
4.82 7.56
4.59 8.64
0.23 -1.08
5.0% -12.5%
min. units %
0.4642 0.00515 2.55%
0.8708 0.00546 2.96%
-0.41 -0.0003
-46.7% -5.7% -18.2%
Electricity Generated electricity
Quality indicators of electricity supply SAIDI, min. (excl. force majeure) SAIFI, units (excl. force majeure) Technological costs in the distribution network
-5.1%
Gas Distributed volume of gas Total gas sold Quality indicators of gas supply SAIDI, min. (excl. force majeure) SAIFI, units (excl. force majeure) Technological costs in the distribution network
During January-September, electric power quantity distributed by the Group to consumers by medium and low-voltage grids grew by +5.1 percent (0.32 TWh) and amounted to 6.60 TWh. The main reasons for the tangible growth were a lower (by -3.6°, as compared with the climate rate of change) air temperature than in January 2015, and positive growth of the national gross domestic product. During the nine months of 2016, the volumes of public and guaranteed electric power supply by Lietuvos Energija Group amounted to 2.33 TWh, which is +0.7 percent or +0.02 TWh more than during the reporting period a year ago. Distribution of electric power to independent consumers grew and amounted to 4.27 TWh (+7.6 percent, +0.30 TWh, as compared to the three quarters of the preceding year). Consumption of electric power grew due to increased electricity consumption by commercial users whose suppliers are most often independent suppliers. During the nine months of 2016, Lietuvos Energija Group generated 1.06 TWh electric power (-36.1 percent down year-on-year). During the comparative period, generation of electric energy at Kaunas Algirdas Brazauskas’ Hydroelectric Power Plant increased by 21.6 percent (from 0.211 TWh during the 9 months of 2015 to 0.257 TWh year-on-year). Production volumes of Kruonis HAE decreased – 0.411 TWh during the nine months 2016, down from 0.486 TWh year-on-year. After quotas for the electricity generation were cancelled, generation capacities of Elektrėnai combined cycle gas production complex were activated in view of high electricity price due to disconnections of NordBalt or other reasons. Although the combined-cycle unit was placed into operations more often than in 2015, generation of electricity in the combined cycle unit decreased by -69.0 percent from 0.917 TWh to 0.284 TWh, because the production capacities were turned on 12 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
and shut down during peak hours, i.e., when electricity price was the biggest and it was possible to place a competitive production offer in the neighbouring countries. Units of the Elektrėnai complex are used for generation of electricity, seeking to ensure reliable operation of the electricity system, when due to repairs of other resources for electricity generation, limited throughput capacity in the country or due to other reasons, there appears a shortage of electricity and its price rises at the exchange. During the nine months of 2016, the wind farms operating in Estonia and Lithuania generated 0.079 TWh of electricity. During the nine months of 2016, technological costs in the electricity distribution grid decreased – they accounted for 5.74 percent (6.05 percent year-on-year). An average duration of unscheduled disconnections of electric power transmission, excluding the impact of force majeure, or the SAIDI indicator was deteriorating during the comparative period and amounted to 51.43 minutes (a year ago, during the comparative period, the SAIDI was 45.84 minutes), whereas the SAIFI indicator, showing the rate of unscheduled disconnections per consumer, was 0.67 times during the nine months of 2016, as compared to 0.62 times year-on-year. The SAIDI and SAIFI indicators were lower due to the significant changes in the weather during H1 2016, which in their own turn caused more frequent faults of the system. The quantity of gas distributed by the Group companies practically did not change during the nine months 2016 and amounted to 4.82 TWh, i.e. +5.0 percent or +0.23 TWh more, as compared 4.59 TWh year-on-year. The amount of gas sold by the Group during the nine months of 2016 dropped by 12.5 percent, accounted for 7.56 TWh or 1.08 TWh less than year-on-year. In view of the ongoing changes in the regulatory environment sales of Litgas UAB to heat suppliers were decreasing, which was partly compensated by better sales to commercial customers by the Lietuvos Dujų Tiekimas UAB. An average duration of unscheduled disconnection of gas distribution per customer, without regard to the impact of force majeure (SAIDI indicator), during 2016 decreased and amounted to 0.46 min (0.33 min in nine months of 2016), whereas the average number of disconnection of gas transportation per customer (SAIFI indicator) was 0.00515 (0.00546 in the nine months of 2015).
13 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
Key Financial Indicators Revenues Revenues of Lietuvos Energija Group, during the nine months of 2016 increased by +5.5 percent year-on-year or + EUR 41.6 million and totalled EUR 803.5 million. As compared on the year-on-year basis, due to an increase in the volumes of distributed electricity by medium and low voltage grids in the nine months of 2016, the revenues from electricity transmission increased (+EUR 73.6 million, up to EUR 300.1 million). As compared on the year-on-year basis, due to a decrease in the gas prices the revenues from gas distribution and sale decreased (EUR 18.3 million to EUR 170.6 million). Furthermore, during the nine months of 2016, the revenues from balancing and power reservation increased by EUR 25.3 million, due to bigger quantities of secondary and tertiary power ordered by the Group ’s company Lietuvos Energijos Gamyba AB and bigger income of the synchronous compensator 1. Compared year-on-year, due to smaller rates of the public and guaranteed electricity, the sale of produced electricity, electricity trade and supply volumes decreased by EUR 13.2 million. The statement of the Group’s general revenues includes the revenues of EUR 5.3 million from the wind farms acquired in Estonia and Lithuania in 2016. Upon increase of the revenues from the electric power transmission activity, they accounted for 37 percent of the Group’s total revenues (30 percent year-on-year). Due to decreasing revenues from gas distribution and sale, this share of the Group ’s revenues in the total revenue structure decreased during the first three quarters of 2016 from 25 percent to 21 percent.
1
The service for regulating the reactive power and frequency in the Lithuanian electricity system.
14 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
Operating and Procurement Costs During the first nine months of 2016, the Group’s operating costs totalled EUR 98.7 million, i.e. a fall by 13.1 percent year-on-year (-EUR 14.9 million). A major reason for the decrease in the operating costs was the merger of LESTO AB and Lietuvos dujos AB and the implementation of the measures enhancing the operational efficiency. During the period concerned EUR 1.5 million in operating costs were incurred with respect to new projects, of which 44 percent represented the operating costs associated with the acquisition of the wind farms in Lithuania and Estonia during IQ 2016. Comparative costs of the principal activity decreased mainly due to a drop by EUR 3.8 million in expenses related with repair and maintenance costs of the electric grid and electricity generation facilities, a decrease by EUR 4.1 million in other repair and maintenance expenses, reduction in transportation costs by EUR 0.9 million. The operating costs related to gas distribution operations decreased by EUR 4.9 million, mostly due smaller remuneration costs. The comparative operating costs include the businesses that were part of the Group before 2013, while the operating costs related to the new businesses starting from 2013 to a largest extent concerned gas distribution and trade, co-generation plants and wind plant business, also the development of energy efficiency solutions. During the reporting period, the Group’s costs for the purchase of electricity, gas, fuel, and associated services decreased as compared to nine months in 2015 only marginally, by 0.2 percent or 1.1 million. The purchase of electricity or associated services amounted to EUR 343.6 million or up by 29.2 percent on a year-on-year basis due to an increase by EUR 40.7 million VIAP costs and an increase by EUR 30.8 million in energy purchase costs. Purchases of gas and associated services decreased by 40 percent due to diversified supply and procurement of gas at advantageous terms from the liquefied gas terminal (during the nine months of 2016 9 vessels and the same period in 2015 4 vessels carrying liquefied natural gas were brought to Lithuania), reduced sale quantity of gas and reduced quota for the generation of supported electric power in the Elektrėnai complex. Due to change in the regulatory environment, part of costs for gas is reflected in accounts as purchases of gas and fuel oil, a major part of which consists of the additional constituent for the security of natural gas supply, added to the sale price of natural gas.
15 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
EBITDA and Net Profit The Group’s EBITDA during the reporting period amounted to EUR 201.1 million, up by 20.9 percent or EUR 34.7 million year-on-year, as in 2015 the EBITDA was EUR 166.2 (EBITDA of the reporting period does not include a negative effect of the discount of EUR 8.8 million on the gas price applied to household and nonhousehold customers during the accounting period). The Group ’s EBITDA increased due to a positive change in the result of the gas supply and trade activity in 2016 as a result of an increase in the collection of more regulated income of a subsidiary LITGAS UAB, by which the operating results of the Group ’s activity and sale volumes of the subsidiary Lietuvos Dujų Tiekimas UAB to commercial users will be reduced. During the nine months of 2016, as compared to the respective period last year, the electricity production EBITDA decreased by EUR 8.0 million, essentially due to the changes in the regulation and a decrease in the supported electricity production quota at the Elektrėnai compound. During the nine months of 2016 the trade in electricity results were by EUR 8.3 million better as compared to the same period in 2015, due to an increase in the retail and wholesale sale of electricity. During Q1 2016, the contribution to the EBITDA of Lietuvos Energija by the wind farms acquired in Lithuania and Estonia was EUR 4.6 million.
16 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
During the nine months of 2016, Lietuvos Energija Group earned EUR 95.6 of net profit, i.e., up by EUR 23.1 year-on-year (EUR 72.5 million). The factors of the biggest impact upon the results of the reporting period, as compared to the previous period, included the following:
An increase in the revaluation costs of the environmental pollution permits by EUR 8.9 million (+ EUR 2.1 million in the 9 months of 2015 and - EUR 6.7 million in 2016). An increase in the net profit of a subsidiary Litgas UAB by EUR 11.9 million (+ EUR 0.9 million during 9 months of 2015 and + EUR 12.8 during the 9 months of 2016). An increase in the net profit of a subsidiary Lietuvos Dujų Tiekimas UAB by + EUR 21.1 million (+ EUR -18.8 million during 9 months of 2015 and + EUR +2.3 during the 9 months of 2016). A decrease in the Group’s operating costs by EUR 14.9 million. The net profit of a subsidiary Lietuvos Energijos Gamyba AB was adversely affected by the decisions of the National Commission for Energy Control and Prices (hereinafter – NCCP) regarding the results of the audit of the Company’s performance in 2010-2012 and the recognition of the Company having significant effect in the electricity production market. Because of the decisions lower regulated service prices were set for the Company in 2016; the decisions were contested at courts. The resulting adverse effect upon the net profit in January-September 2016 was EUR 11.0 million. The effect of the decisions of the NCCP upon the net profit during the comparative period of January-September 2015 was EUR 9.1 million. In 2015 and 2016, the net profit of three quarters was significantly affected by discounts on the gas price and the impact of the accumulation of loss-making contracts. In 2015 and 2016, the effect of the relevant decisions was respectively EUR 18.7 million and EUR 7.5 million. After eliminating the impact of discount on the gas price for customers, the attribution of costs of the preceding periods to the 9 months of 2016 and the oneoff restatement of the negative goodwill income tax of the subsidiary Lietuvos Dujų Tiekimas UAB in the amount of EUR 8.5 million due to the acquisition of gas supply activity, the comparative net profit for the 9 months of 2016 (EUR 103.1 million) was +15.2 percent or by +EUR 13.6 million up from the net comparative profit year-onyear (EUR 89.5 million).
17 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
Investment In the period of nine months of 2016, the overall investment of Lietuvos Energija Group stood at EUR 177.7 million, an increase by 80.0 percent since the preceding year. Excluding the acquisition of the wind farms, the investment of the Company increased by 16.5 percent or EUR 16.3 million as compared to the same period last year (EUR 98.7 million). The largest share of the Company’s investment funded from own and borrowed resources (35.3 percent) was allocated for the acquisition of the wind farms in Lithuania and Estonia, followed by Energijos Skirstymo Operatorius AB investment to maintenance (26.8 percent) and development (16.0 percent) of the power distribution grid. During the nine months of 2016, the investment to the maintenance of the distribution grid increased by EUR 9.1 million for the purpose of upgrading the regular vehicle fleet of the Group and fleet and acquisition of fire trucks that were rented to state fire rescue services by the Group’s company NT Valdos UAB increased by EUR 8.7 million. Investment into real estate increased by EUR 5.5 million due to the acquired ownership right to the land plot for EUR 3.9 million by the Group’s company Kauno Kogeneracinė Jėgainė UAB and a technical design, as well as ongoing reconstruction works in buildings owned by the Group ’s companies. During the reporting period, investment into ITT (IT telecommunication and management systems) increased by EUR 4.4 million due to investment by the Group’s company Technologijų ir Inovacijų Centras UAB in the amount of EUR 2 million into the data transmission network, also other minor investments of the Group’s companies. Investment into heat generation capacities decreased by EUR 8.0 million, as no investment into heat production capacities was made during the nine months of 2016.
18 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
Assets, Equity and Relative Indicators During the nine months of 2016, the Group ’s assets increased by 0.61 percent or EUR 14.2 million and on 30 September 2016 were worth at EUR 2,353.4 million. For the purpose of comparison as of 31 December 2015, the Group ’s assets were worth EUR 2,339.2 million. The largest change in the value of the Group’s assets was caused by the acquisition of the wind farms in Lithuania and Estonia, as a result of which the non-current tangible assets of the Company increased by EUR 69.9 million, while the entire non-current assets increased by EUR 74.9 or 3.8 percent. The current assets of the Company during the reporting period decreased by 34.1 percent or EUR 74.9 million. The decrease in the inventories by EUR 13.9 million from EUR 40.0 million to EUR 26.1 million was to a largest extent caused by a decrease by EUR 10.2 million in the stock of gas held at Litgas UAB. Advance payments to suppliers decreased by EUR 27.0 million, mostly because no new long-term gas purchase contracts were signed, so the payments to suppliers by the Lietuvos Dujų Tiekimas UAB were reduced from EUR 28.2 million to EUR 4.9 million. Due to the seasonal nature of the gas distribution activity, short-term amounts receivable decreased by EUR 16.1 million, from EUR 30.4 million to EUR 14.3 million. During the reporting period the equity of Lietuvos Energija Group decreased by 0.2 percent or EUR 2.9 million and as of 30 September 2016 was reported at EUR 1,301.6 million. As of 31 December 2015, the equity of the Company was worth EUR 1,304.5 million. The Company’s equity decreased after the payment of EUR 56.2 million in dividends for 2015, recording to EUR 40.9 million as a liability in interim dividends for the first half-year period of 2016; as a result, the retained loss increased by EUR 14.9 million from EUR 49.3 million at the end of 2015 to EUR 64.2 million on 30 September 2016. The Group’s equity ratio changed in the course of the reporting period only marginally and in September 2016 was 55.3 percent (on 31 December 2015 the indicator was 55.8 percent). The asset turnover ratio of Lietuvos Energija Group continues increasing due to an enhanced efficiency in asset utilisation and the growing sales income, while the current ratio is decreasing due to efficiently managed inventories of the Company.
19 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
Financial Debts On 30 June 2016, the Group ’s net debt amounted to EUR 261.6 million and, as compared to the net debt as of the end of 2015, it increased by EUR 9.8 million. The level of overall debt increased due to the increase in the financial debts designated for financing investment by the Group’s companies. The level of the Group’s financial debts increased during the reporting period by 5.7 percent or EUR 24.1 million and at the end of the reporting period amounted to EUR 444.8 million (at the end of 2015 – EUR 420.7 million). The biggest effect on that was made by the new loan in the amount of EUR 66.9 million for the acquisition of the wind farms and the loan of EUR 16.9 million taken by NT Valdos UAB with an aim to optimize the company’s capital structure. Meanwhile the Group ’s company Lietuvos Energijos Gamyba AB reduced its financial liabilities by EUR 37.2 million. Monetary funds of the Group’s companies and short-term investment amounted to EUR 183.2 million, i.e., by EUR 14.3 million or 8.5 percent more than at the end of 2015 (EUR 168.9 million). The Group’s net debt and the Group’s EBITDA for the last 12 months’ ratio decreased due to an increase by EUR 34.8 million in the EBITDA and the net debt ratio that actually did not change (1.14 times at the end of 2015 to 1.08 times in the nine months of 2016). The Group’s net debt-to equity ratio increased from 19.3 percent at the end of 2015 to 20.1 percent during the nine months of 2016. The Group ’s current debt level remains sufficiently low with respect to both the income earned and the capital structure. The low level of the Group ’s financial debts and the high level of its equity, profitability of the typical activity reflect a firm and stable financial position of the Group, the Group ’s financial possibilities to implement investment necessary to ensure the provision of existing services, implement and finance the acquisition and development of new wind farms, construction of co-generation plants and other projects, as well as to ensure a sustainable development of the Group in the future.
20 INTERIM STATEMENT FOR 9 MONTHS 2016 | Analysis of Financial and Performance Results of the Group
Company and Group performance review An overview of activities of the Lietuvos Energija Group covers the period from 1 July 2016 to the date of preparing the report.
procedures of connection to the engineering networks and other procedures are faster. Also the Group achieved higher operational efficiency and reduction of costs.
Renewed operational concept
The programme was divided into 4 main fields of activity: production, supply/trading, network and customer service, at the same time conducting the project for the operations of contracting companies.
Since the start of 2016 the structure of Lietuvos Energija group was updated after the most significant project of 2015 at the Lietuvos Energija group was completed, i.e. the programme focused on optimising central activities of the Group.
The central activities of the Group were distributed among the companies in a way that would ensure more efficient operations of the Group, creation of the highest value and provision of additional benefits to customers: similar activities were merged, the customer service was centralised. By 2020, the total estimated benefit of these changes for customers and shareholders will amount to EUR 64 million. The new structure of the Group became effective from 1 January 2016 when the joint companies started their activities. The largest benefits of the changes are focused to the clients. The revised operational concept led to improvement of customer service, a simple and convenient 'single window' servicing arrangement has been offered, the servicing and the processes have been standardised, new services are provided, the
Focus on customer, quality and efficiency by ESO
Overview of Activity of the Company and the Group
On 1 January 2016, Energijos Skirstymo Operatorius (ESO), a company established on the basis of LESTO and Lietuvos Dujos, started its operations. It provides the services of electricity supply and distribution, and natural gas distribution to more than 1.6 million customers. ESO joined the best competences of both companies – synergy of these two companies leads to improvement of the Group's efficiency as a result of lower operating expenses, and as many as possible benefits to electricity and natural gas users. It is estimated that the merger will result in a 5% decline in operating expenses and the annual savings effect will amount to EUR 3.6 million. ESO has 5 regional divisions located in the cities of Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys. Divisions established in the regional centres coordinate the work of the dispatch centres located in the surrounding districts, plan repair, development
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and modernisation works of electricity and gas distribution networks. On 11 January 2016, the symbolic stroke of the bell marked the beginning of trade in ESO shares at Nasdaq Vilnius stock exchange. The ESO logo also appeared in Times Square in New York on the occasion of share trading.
and gas-related issues will be answered round the clock by calling 1802. In case of gas discharge customers can use the emergency service line 1804.
Joint service under the trade name Gilė
Electricity generation activity has been concentrated with the company Lietuvos Energijos Gamyba, while wholesale electricity trading activity has been separated and transferred to the company Energijos Teikimas. This ensures greater flexibility in the market, possibilities to offer new products in view of customers' needs.
Starting from the beginning of 2016, customers of ESO, Lietuvos Dujų Tiekimas and Energijos Tiekimas are serviced in a joint service centre Gilė which is managed by the Group company Verslo Aptarnavimo Centras. Electronic services are provided at the self-service website www.manogile.lt. The smart phone application was also presented. The joint customer service arrangement accumulated the best practices and through the ‘single window' facility enables the companies to provide the key services in the ways most convenient to the customers – online, by telephone or at a customer service centre. The servicing at a joint service portal is made even more convenient due to a possibility to pay by a single transfer for two services – electricity and natural gas. Other companies providing utility services, such as water, heat suppliers, are also invited to become part of the joint customer servicing arrangement.
Separated trade in electricity and electricity production operations
Lietuvos Energijos Gamyba sold commercial wholesale electricity trade to Energijos Teikimas on 12 October 2015, the ownership of the part of the business has changed since 1 January 2016. The transferred part of the business covered trade in derivative financial instruments and provision of the balancing service not related to physical electricity trading. Following the transfer Lietuvos Energijos Gamyba continues to receive income from sale of electricity in the market which was produced at the power plans under its control and from the provision of system services.
EnePRO – a new player in the electricity contracting market
In August 2016, some significant modifications were introduced in manogile.lt enabling the customers to effect settlement for all utility services by a single payment operation. This way the system collects the payments of about 1,500 new service providers and in the period from August the number of customers effecting settlements by a single payment for all utility services has nearly doubled. It was estimated that in September the new functionality of manogile.lt has been used by about 12,000 new customers. In the meantime, about 6,500 customers chose to pay their August bills using the new functionality. The overall number of the customers of manogile.lt also increased and totaled 279,500 at the end of September.
From 1 January 2016, Elektros Tinklo Paslaugos (ETP) and Kauno Energetikos Remontas (KER), two energy services companies controlled by the Lietuvos Energija Group, were reorganised by way of merger and a single company was established named Energetikos Paslaugų ir Rangos Organizacija (EnePRO).
The concentration of customer servicing specialists in a single company of the Group – Verslo Aptarnavimo Centras – allows reducing operational costs, increasing flexibility and enables creating additional benefits for customers. Verslo Aptarnavimo Centras Verslo also started the administration of payments, provision of accounting services and management of amounts owed.
The synergy of two similar and complementing companies offer more possibilities to develop complex and targeted solutions, expand the range of the service portfolio, increase the company's competitiveness in the energy services market, reduce operating costs and contribute to enhancing the Group's value.
The Gilė customer service centres are established in Vilnius, Kaunas, Klaipėda, Šiauliai, Panevėžys, Alytus, Marijampolė, Utena and Visaginas. They were mainly established in the premises of the former customer service centres of LESTO and Lietuvos Dujų Tiekimas. The centres provide the possibility to learn how to use the Gilė application and the self-service portal www.manogile.lt. Enquiries on electricity
EnePRO concentrated competences and experience of the two companies and creatied a single strong energy services and contracting company which provides the services of construction, reconstruction, repair and maintenance of electricity equipment and other services.
Diversification of Activity Diversification of activity by the Group’s companies is one of the main conditions seeking to enhance the Group’s value. Until 2020, the Group plans to invest nearly EUR 1 billion into different fields: heat sector, building of new or modernizing of
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existing co-generation plants, supply and trade of natural gas, using the potential of the LNG terminal, also investing into renewable energy sources.
Energy Innovations Will Be Attracted by the Venture Capital Fund On 31 May 2016, Lietuvos Energija initiated the establishment of a venture capital fund. The new fund will finance starters in the energy field. Each year it is intended to invest up to EUR 1 million into the selected best projects. This is the first Energy Innovation Fund in the Baltic countries. It will contribute to the growth of investment into starting projects. During 2014, venture capital investments per resident amounted to EUR 2 In Lithuania, whereas in Europe such investments amount to EUR 11, in the USA – EUR 148, whereas in Israel – EUR 413 on average. The majority of major European energy companies already run or make investment into similar funds. Activities of the Innovation Fund will start from the idea screening stage, when it is expected to receive 300-500 ideas. For the incubation stage, 50-60 ideas will be selected whose authors will be provided with premises for operation and consulting by experts. Still later, in the acceleration stage, 10 -15 best projects will be granted financing, e.g. up to EUR 30 thousand. Up to EUR 500 thousand (depending on the need) may be invested into the projects selected during the latest, investment stage. Decisions on the selection of ideas for financing will be made by the investment committee. Partial financing will be granted for selected starters. More important, however, is the fact that Lietuvos Energija Group, which is one of the largest energy enterprises in the Baltic Countries, will be able to offer technological knowledge and adequate testing base for the implementation of projects. The Innovation Fund of Lietuvos Energija will operate together with partners. Other investors will also be able to contribute to the financing of projects in the energy sector, whereas one of the experienced venture capital fund managers will be selected on a competition basis to be an adviser/partner.
Ongoing Projects of Co-generation Plants in Vilnius and Kaunas Lietuvos Energija Group implements projects on modern high efficiency cogeneration plants powered by waste and biofuel in Vilnius and Kaunas. By generating heat and electricity, the plants will ensure smaller heat production prices for urban users, also additional generation of local electric power at a competitive price, will solve waste management issues. According to the resolution of the Government of the Republic of Lithuania of 28 May 2014, these projects were
declared economic projects of state significance. Upon implementing economic projects important for the state, the price of heat generated in new plants would be less by approximately 20 percent as compared with the existing alternatives. In Vilnius, the project is implemented by Lietuvos Energija independently; a possibility to attract partners in other project implementation stages has been provided for. The environmental protection agency has recognized the planned activity of Vilnius co-generation plant as permissible. On September 29, the Vilnius co-generation plant signed the contracts on the construction of the co-generation operated on biofuel and incinerating waste with the contractors recognised the winners of the public tender. For the total cost of EUR 178.29 million the waste incineration and the general technological facilities will be built by an international consortium consisting of the German company Steinmuller Babcock Environment, a Polish construction group Budimex, and a Lithuanian company Kauno dujotiekio statyba. The biofuel incineration facilities and the supply infrastructure will be built for nearly EUR 150 million by a Polish company Rafako. On 19 September 2016, the European Commission passed a Resolution to permit an allocation, following the regulations on State aid effective in the European Union, of about EUR 150 million in State aid to the waste and biofuel high efficiency cogeneration plan in Vilnius constructed by the State-managed Lietuvos Energija. The European Commission believes that the project is of great benefit for citizens of Lithuania and the environment and does not distort competition. The Vilnius co-generation plant construction project has already received funding of EUR 190 million from the European Investment Bank through the European Fund for Strategic Investment (EFSI). The financing according to the so-called Junker’s plan will ensure the most favourable credit terms and interest rates for the new cogeneration plant operated on biofuels and incinerating waste. The power plant will be able to produce nearly half of the heat centrally supplied to Vilnius and the volumes of electricity sufficient to supply to 230,000 or 80 percent of new households. The estimated electric capacity of the plant in Vilnius will be about 90 MW and 230 MW in heat production. It has been estimated that the price of the heat produced by the new co-generation plant will be about 20 percent lower for Vilnius residents as compared to any available alternative solutions. For the purpose of production of heat and electricity the co-generation plant intends to use waste collected and delivered from Vilnius, Utena, and possibly other regions. The plant is estimated to incinerate up to 160,000 tonnes of sorted waste.
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In Kaunas Lietuvos Energija is developing a co-generation plant project in cooperation with its partner – Fortum Heat Lietuva UAB. According to the shareholder agreement Lietuvos Energija will own 51 % of the shares of the Kaunas co-generation plant, thus ensuring the State control over the project.
During the first six months’ period liquefied natural gas (LNG) accounted for 73 percent of the total natural gas supplied to the country. It has been estimated that this year the share of the LNG in the Lithuanian market will account for about 60 percent.
On 31 March 2016, the partners signed a transaction completion statement. The Board of the Kaunas co-generation plant formed consists of three members: one member was delegated by each of the two shareholders, and one member is independent. Nerijus Rasburskis, Director of the co-generation plant projects service of Lietuvos Energija, Vitalijus Žuta (Director General of Fortum Heat Lietuva UAB) and an independent member – Andrius Vilkauskas were appointed to serve on the Board of the Kaunas co-generation plant. Ramūnas Paškauskas was appointed Director General of the Kaunas co-generation plant.
The natural gas trade companies LITGAS and Lietuvos dujų tiekimas signed with Statoil a contract whereby the companies will be cooperating at the Klaipėda liquefied natural gas terminal offering reliable and flexible wholesale LNG supply services thus contributing to the small-scale LNG market development in the Baltic region. Having considered the most recent trends in the small-scale LNG supply market in the Baltic Sea region, the contracting companies identified the need for a wholesale supply centre designed to facilitate a more rapid development of a smallscale LNG sector. The Klaipėda LNG terminal is located in a location strategically convenient for providing vessels with LNG fuels. The LNG terminal is in the very centre of the region, thus from the Baltic Sea can be reached within one day, and Klaipėda is distanced from the remotest edges of the Baltic sea within a distance of three days.
In 2016, Kauno kogeneracinė jėgainė UAB was implementing public procurement procedures for the main components of the future waste plant: incineration boiler, steam turbine and generator, flue gas cleaning equipment, and fuel bunker cranes. In parallel, the company was implementing the public procurement procedures for designing, acquisitions, and consultation services for the management of commissioning-tuning works. The procurement documents are available at the Lithuanian Central Public Procurement Information System and posted on the official publication TED intended for European public procurements. On 13 June 2016, the Kaunas co-generation plant received a permit from the Kaunas district administration for the construction of a plant on Veterinarų St. 19, Kaunas district municipality, Karmėlava sub-district, Biruliškės village. The project provides for a construction of a new high capacity power plant that will be using waste as fuel with the electric power reaching 24 MW and the heat production power of 70 MW. Such capacities will ensure an efficient utilisation of about 200,000 tons of waste generated in the region and production of about 500 GWh heat and about 170 GWh of electricity. The total investment in the project will amount to EUR 147 million. Early in October 2016, the Government of the Republic of Lithuania recognised the Kaunas co-generation plant to be a waste management facility of national significance. The Resolution of the Government will facilitate the implementation of the project and attract the funds required for the construction of the power plant.
The development in the LNG supply operations and a new supply contract for 2017
On 28 September 2016, a natural gas supply company Lietuvos dujų tiekimas successfully completed stage one of the acquisition of natural gas for 2017 and concluded a contract regarding the supply of LNG in 2017 with Koch Supply & Trading operating as part of Koch Industries corporation, one of the largest privately managed companies in the USA. The 2 TWh of natural gas acquired from Koch Supply & Trading will account for more than one third of the projected demand of the customers of Lietuvos Dujų Tiekimas in 2017. The Company is continuing the negotiations with other gas suppliers regarding the acquisition of the remaining share of the required gas. The contract concluded by Lietuvos Dujų Tiekimas will be also beneficial for regulated energy producers purchasing from LITGAS the amount of gas required for ensuring minimum operation of the terminal, as well as for residents, the customers of such energy producers. An increased load upon the LNG terminal in the warm period of the year will facilitate adjusting the schedule of the supply to regulated energy producers according to their needs and allow cutting the technological and the assigned supply operations costs by EUR 0.7 million. According to the contract with Statoil concluded early in the year Lietuvos Dujų Tiekimas will be supplied by the end of the year about 3.2 TWh of natural gas.
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ESCO projects implemented by a new company In February 2016, Lietuvos Energija established a new company Energijos Sprendimų Centras UAB (ESC) which will be developing projects on energy efficiency improvement and renewable energy resources in Lithuania and abroad. The operations of the new company will be based on the ESCO (Energy Service Company) model which defines the company providing energy efficiency improvement services as the entity investing in energy efficiency measures and covering the investments made using future energy savings during the validity term of the agreement. The company's operations will allow achieving the highest impact of energy efficiency and at the same time avoid incurring large initial investments by the owners of buildings or equipment. On 27 April 2016, the street lighting project in the municipality of Širvintos, which was the first one based on the ESCO model principles, was finished by Energijos Tiekimas, where around 70% of lamps held by the municipality and consuming the largest quantity of electricity will be replaced with modern LED type lamps. It is estimated that the municipality of the region will save about 75% of electricity consumed for the street lighting per year due to the introduction of advanced technologies. This was the first of its scale ESCO project in Lithuania. Contracting works were carried out by a Group company Energijos paslaugų ir rangos organizacija (EnePRO). In September the biggest vegetables and flower seeds supplier in Baltic market Sėklos already modernized lighting by replacing old lamps with modern LED lights in one-third of its owned stores Žaliasis centras and Žalia stotelė. Company would have to invest in this project 68 thousand euro. However Sėklos decided to use ESCO model, ESCO company Energijos sprendimų centras invested in installation of new lamps. During the period of 4, 5 years company will get back the investment from the energy which will be saved because of new lamps.
Development in the Wind Power Field Lietuvos Energija, having acquired two companies running wind power farms in Lithuania and Estonia in January 2016, is looking for further possibilities to invest into the field of wind energy.
On 15 June 2016, Lietuvos Energija announced a tendering procedure to acquire a project ensuring the installation of a wind power farm and operation of the necessary infrastructure. In the tendering procedure announced it is sought to acquire developed projects at such a stage when the necessary infrastructure for the installation of a wind power farm has already been developed or is being developed: land plots that would allow, in terms of the impact on environment, public health and territorial planning, to install and operate a wind power farm. This would enable to implement a project in shorter terms, as compared to those the implementation whereof has to be started from the beginning, also a part of risks and procedures would be eliminated. Currently the group runs wind power plants with the installed capacity of 42.3 MW managed by the Group’s companies Eurakras UAB and Tuulueenergia OU. These farms may produce about 136 thousand megawatts (MWh) of electric power– such quantity is equal to the annual need of Klaipėda city residents. In August 2016 we have officially opened wind power field in Jurbarkas region, Rotuliai. In order to develop production of green energy, Lietuvos energija Group. In order to develop green energy production, "Lithuanian Energy" group intends to expand operations in this segment through already operating wind farm acquisitions or by investment in the construction of new wind farms.
Assessment of wind energy potential in Kruonis Pumped Storage Power Plan At the beginning of 2015, the complex measurements of wind speed, directions and other meteorological conditions were completed in the territory of Kruonis Pumped Storage Power Plant in order to carry out an initial assessment of the potential of the land plot for the installation of the wind power park. Based on favourable wind measurement results the company initiated the preparatory works for the installation of the wind power park in the territory of Kruonis Pumped Storage Power Plant. There is already a Kruonis wind farm impact on Natura 2000 sites studio, wind resource and power output evaluation feasibility study and environmental impact assessment program, complete birds and bats in the territory of the monitoring program, preparation of an environmental impact assessment report of publicity and coordination of areas of detailed planning work procedures providing for completion by 2016. end.
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We have already prepared the environment impact assessment report on Natura 2000 areas. It includes wind resource and electricity production evaluation feasibility study and program of environment impact assessment, birds and bats monitoring was completed
Enhancing the efficiency of operations Higher efficiency of activities of the Group ensures the balance between higher profit and return for shareholders and lower tariffs for consumers. The strategy of Lietuvos Energija for 2014–2020 provides that higher operational efficiency will be achieved by applying the most advanced management practices in corporate governance, planning and monitoring of activities, finance, procurement, risk management and internal audit areas. The Group currently has an installed and developed uniform management and control system, it has an approved management and control system policy, risk management policy and methodology, integrated planning and monitoring system policy, innovation management policy, project management policy and procedure, a process management standard, portfolio formation and monitoring procedure currently being drawn up, etc. The uniform management and control system facilitate progress towards higher efficiency and synergy in the activities of the Group companies and the implementation of goals set.
Centralisation and improvement of efficiency of processes With a view to improving the processes that support the principal activities of the Group and reducing their expenses, the Lietuvos Energija group companies concentrated the part of functions supporting the principal activity in a separate company, i.e. Verslo Aptarnavimo Centras UAB. IT provides to the Group companies the services of public procurement, accounting and administration of employment relationships, manages customer service network and self-service website, as well the centralization of law function and so on. The aim of centralisation of the processes is to standardise the processes, achieve higher transparency and efficiency and accelerate them. Such model of concentration of the supporting processes is in line with the best international practices.
Lietuvos energija Group that previously centralised the management of the immovable property in the hands of NT Valdos, with a view to increasing its operating efficiency and focusing upon its principal activities, now undertook selling the immovable property it owned but not having any strategic relevance for the energy sector. In September NT Valdos announced the opening of the registration to the auction for real estate objects not used in the Company’s operations. The auction that will last until October 25 is offering 32 objects in different cities and towns of the country to the market. The total initial price of the items sold by way of auction is EUR 19.9 million (incl. VAT). Within the previous auction for the property of Lietuvos Energija held on 19 July 2016, 10 real estate objects were sold for EUR 3.8 million (incl. VAT) and at the February auction the Company acquired eight real estate objects for EUR 1.53 million (incl. VAT). On 5 January 2016, Lietuvos Energija also announced the procurement for the overdraft with the two-year maturity. SEB bankas was selected, the credit agreement was concluded on 7 March 2016. This short-term lending facility will be available to all companies of the Group, therefore there will be no need for acquiring such services separately. The centralised treasury management will allow reducing the Group's overdraft limit by half compared to the limit obtained by the companies individually. This will lead to lower interest expenses incurred by the Group when obtaining financing for working capital and higher treasury management effectiveness. On 1 February 2016, the Board of Lietuvos Energija approved the project to enhance the Group's treasury activities – the management of a part of treasury functions is planned at the Group level.
Forthcoming integrated business management system On 14 August 2015, Lietuvos Energija Group announced its plans to shift to an integrated business management system as a means to enhance the performance efficiency, flexibility and facilitate further development. On July 22, the Company published the ranking of the potential installers of the integrated business management system. For the consortium of companies that submitted the best offer, consisting of NESS Czech s.r.o and InnoForce UAB, operating on the basis of a joint-activity agreement, Lietuvos Energija will offer to sign the relevant contract. The price of the best offer is EUR 18.8 million, excl. VAT.
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The unconventional scope project is estimated to extend for up to three years. The installer shall be providing the system maintenance services for three years after the installation of the system. Currently the companies managed by Lietuvos Energija use more than 70 individual information systems, on average more than 15 years in operation. About a third of those systems have not been supported or maintained for some time, which limits their performance capabilities and does not ensure sufficient security and efficiency of the operation. The new information system will cover the field of accounting and finance, procurement, human resources and project management, bookkeeping, customer service, and technological asset management. The new system will be certainly beneficial for customers of the Lietuvos Energija Group of companies – by providing a possibility to design more flexible service plans and render better service to the customers at the centres and online. The new system will make it possible to provide and analyse information in real time, in addition to enhanced reliability and speed, configuration possibilities, reducing the amount of manual work and eliminating the possible mismatch between individual systems.
Old units withdrawn from operation in Elektrėnai, arrangement of the fuel economy After completing a project on the development of heat generation facilities in Elektrėnai in 2015 by Lietuvos energijos gamyba, the use of 1st and 2nd units of the plant for heat generation was no longer expedient; therefore, it was decided to disassembly these old and inefficient units of reserve power plant, built in 19621965, each with a capacity of 150 MW. Electricity generated by these units is not competitive on the market; therefore, their decommissioning will help to reduce the need for services implementing public interest (SIPI), and at the same time, also the final electricity tariff for consumers. Thermal insulation of the units, bricks of furnaces have already been dismantled and utilized, also equipment and devices of the units are removed, by selling a part of them as metal scrap, and the remaining equipment still suitable for use in the market. In the first half of 2016, 70 percent of dismantling works was completed. On 8 December 2015, the board of Lietuvos energijos gamyba made a decision to terminate the operation of another two – 5and 6 units – of the reserve electricity plant operating in Elektrėnai from 2016. Dismantling works of these units will preliminary start at the beginning of 2017, upon completion dismantling of the 1st and 2nd units. Decommissioning of the 5th and 6th units of the electricity plant, the capacity of which is 300 MW each, was planned in the Company’s long-term strategy
published in the middle of 2014. The units are decommissioned due to poor technical condition, low utilization potential in the future and great maintenance costs. The units that started generation of electricity in 1967-1968, did not operate for several years, and, therefore, have been conserved recently. Due to minimized use of fuel oil in activities of Lietuvos energijos gamyba, which resulted in the disappeared need to store the state reserve of fuel oil, scopes of the fuel economy in Elektrėnai no longer meet the Company’s actual demand. Therefore, at the end of 2015, the 1st stage of arrangement of the fuel economy was initiated. During it, tenders for sale or lease of the existing fuel oil reservoirs for fuel oil, works of preparation for liquidating a part of the reservoirs, optimization of the electricity grid of the fuel economy, dismantling of the cistern heater and 1st fuel oil ramp, also other programme implementation works were initiated.
Assurance of Quality Services Investment into Electricity and Natural Gas, Improvement of Services The Group’s company Energijos Skirstymo Operatorius, operational since 2016, serves approximately 1.65 million electricity consumers. It pays much attention to the development and modernization of the electricity grids, and, taking into consideration the changing needs of customers, has consistently expanded and improved the services provided. Furthermore, the Company runs a natural gas distribution grid by which gas is supplied to more than 570,000 customers; the Company has invested into the construction of new gas pipelines and connection of customers to the grid consistently. The Group supplies natural gas to approximately 560,000 private customers and approximately 9,500 corporate and public sector customers. Within the coming decade ESO intends to essentially modernise the distribution network. Seeking to ensure reliable, safe, and smartly managed services, the Company intends to invest EUR 1.7 billion into the upgrading and renewal of the grid by 2025. Planned investments into the natural gas grid during the coming decade will total EUR 141.1 million. The largest share of the investment will be allocated to the development of the distribution system, reconstruction of distributive gas pipelines, as well as modernization of remote data collection and management systems.
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On 2 August 2016, ESO and a public entity Lithuanian Business Support Agency signed a contract regarding a financial assistance of the European Union of EUR 7.6 million for the modernisation of the electricity distribution network. During September 2016, 20,430 new customers connected to the electricity distribution network. The permissible capacity of newly connected consumers during the first nine months of 2016 amounted to 244,279 thousand kW and was by 15.3 percent smaller than in January-September 2015, when it amounted to 288,710 thousand kW. During the reporting period, ESO replaced 53,072 meters with an expired metrological verification term of which 44,605 were electricity meters and 8,467 natural gas meters. The Company installed 10,564 electricity meters and 1,599 natural gas meters. By investing into the modernization and automation of electricity, and natural gas meters, during six months ESO connected 967 electricity meters and 132 gas meters to the automated data scanning system, thus increasing the number of remotely scanned electric metering devices operated by the Company, respectively, up to 28,305 and 1,212 pcs. Gas heating is becoming increasingly popular as the most economically efficient and convenient heating method. During the period of nine months 2016, 4,381 new customers applied to ESO regarding connection to the natural gas distribution network. This is more than last year and twice the number in the first half of 2015. On the basis of the data provided by Lietuvos Dujų Tiekimas, nearly 1,700 new private customers ordered gas for heating their housing. In the course of the year the number of private customers of Lietuvos Dujų Tiekimas using natural gas for heating their housing increased by 4.7 percent, and by more than 10 percent since the beginning of 2014. This year in cooperation with a consortium of Lithuanian and foreign companies that won the international public procurement tender ESO started installing smart meters. During the first half of the year smart meters were installed at 2,926 thousand customers of ESO. Within the framework of a pilot project ESO seeks to determine the efficiency of smart meters and their benefit to residents. On a special screen or the Gilė self-service website www.manogile.lt customers will be able to monitor the hourly consumption of electricity and the specialists of ESO will receive more comprehensive information about the quality of the energy supplied and the condition of the network.
Service prices to customers continue to decline Since 1 January 2016, new electricity prices as adjusted in view of the amendments to the Law on the LNG Terminal were announced – the price of electricity for household customers declined by an average of 0.2 cent per kWh. In 2016, the price cap for the electricity distribution service via medium voltage networks is equal to 1 euro cent/kWh, i.e. by 0.178 euro cent lower than in 2015. In 2016, the price cap for the electricity distribution service via low voltage networks is equal to 1.766 euro cent/kWh, i.e. by 0.216 euro cent higher than in 2015. This price increases due to the larger needs for investments in the modernisation of low voltage networks. The total weighted natural gas distribution tariff decreased by around 1% compared to 2015. During the second part of the year gas prices for private customers of Lietuvos Dujų Tiekimas decreased by 8-15 percent depending on the group of customers. The Company was in a position to decrease the prices due to its advantageous deal with Statoil for LNG as a result decreasing the projected average import price by 15 percent. Gas prices at the international market were falling faster than initially projected; therefore, last year the average purchase price was lower which favourably affected the prices in the second half of the year. Despite the increasing infrastructure costs since the beginning of 2014 the final gas price for private customers has decreased by 30 percent on average. On 23 May 2016, the NCECP changed the upper price limits for public electricity for the second half year of 2016. For those buying electricity from medium voltage grids, the upper limit will be 7.499 ct/kWh, from the low voltage grids – 9.530 ct/kWh (excl. VAT). As compared with the 1st half-year of 2016, these prices were, respectively, 8.086 ct/kWh and 9.852 ct/kWh (excl. VAT). As of 1 July 2016, ESO will be offering its private customers electricity prices lower on average by 5.4 percent. After the NCCP approves the new prices proposed by ESO, from 1 July onwards the price of electricity under the “Standard” one-time zone tariff plan currently used by about 70 percent of the private customers of ESO will be 12 ct/kWh, i.e., 5.5 percent down from the price of the first half of 2016. From June 1, some changes will be introduced in the rates on connecting to power grids and increase in capacity. The rates per constructed meter of the grid for private and corporate customers with permissible capacity not exceeding 100 kW will be reduced by more than one fifth (22 percent). Rates for customers using a capacity of 100-500 kW will be reduced by more than one tenth (13 percent). The rate for
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getting electricity will also be reduced for new customers who plan business development or housing construction in more remote locations with longer distances to the required electricity grid points. The new rates of connecting electricity equipment to ESO distribution grids were approved by the NCCP. Electricity transmission services and the public electricity prices were changed as of July 1. For private customers, the electricity prices were decreasing by 5.4 percent, on average. In view to the changes in the prices and the volumes of purchased gas, on the decision of the NCCP the projected natural gas market price at which regulated energy producers purchase gas from the assigned supplier LITGAS was reduced by 10 percent as of 1 July 2016. The new gas price will come into effect as of the end of 2016. Early in October for the second time already Lietuvos Dujų Tiekimas reduced the natural gas prices for all corporate customers. The prices for business customers of Lietuvos Dujų Tiekimas that were reduced by about one fifth will be valid for four months – from early September until the end of the year. This March the Company had already reduced the price of natural gas by 16 percent. Overall, in the first half of 2016 the average gas price for corporate customers was by 23 percent lower than in the same period in 2015 and the final price of natural gas, including the infrastructure service price was lower by 12 percent on average. As a result corporate customers of Lietuvos Dujų Tiekimas saved nearly EUR 10 million during the first half of the year alone.
Return to the shareholders ESO declared EUR 12.525 million to be paid in dividends for the six months’ period of 2016. Lietuvos Energijos Gamyba decided to allocate EUR 27.309 million in dividends for the same period.
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Corporate Responsibility
Relations with the employees and the society
Environmental protection
The Lietuvos Energija group aims to conduct its operations in a responsible manner with a particular regard to corporate social responsibility (CSR). The Group seeks to ensure that its operations are based on the principles laid down in the Global Compact, a United Nations initiative. The latter principles define corporate responsibility in the areas of human rights, rights at work, environment, and anticorruption. The model of socially responsible business of the Lietuvos Energija group is implemented through targeted and consistent activities in the following areas: relationships with employees and society, environmental protection and responsible and transparent market operations. Lietuvos Energija aims to reduce the impact of its operations on the environment, community, and other businesses, and to joint its efforts with public authorities and non-governmental organisation in dealing with social and environmental issues, thereby contributing to the development of the society and economic growth. Lietuvos energija on a voluntary basis seeks to ensure long-term business and social progress, contribute to the social development and wealth creation, develops Support Fund and supports initiatives which are important for the state by significant state and the public valuable initiatives and projects.
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Responsible and transparent market operation
Environment In its responsible activities Lietuvos Energija follows social responsibility policies approved by the Board that provide common CSR directions and principles to be followed by all companies of the Group aiming to create the conduct and standards of socially responsible and sustainably developed business of the Lietuvos Energija group. In its operations the Group seeks to use advanced measures, technologies and processes that help reducing the impact of operations on environment, promoting efficient management and utilisation of resources. The Group companies promote and actively participate in environmental campaigns and preventive programmes. The companies of Lietuvos Energija pay particular attention to the education of society and businesses in the field of energy (including security, energy efficiency and promotion of rational energy consumption) by creating its own initiatives and engaging in those organised by society, encouraging responsibility and awareness; it actively cooperates with local communities.
Waste management and sorting, efficient use of resources
Transparency
The Lietuvos Energija Group are implementing waste sorting initiatives, and have installed special waste sorting containers for sorting plastic and paper. The Group companies keep encouraging its clients to give up paper bills and pay-books.
The Lietuvos Energija group has approved the zero-tolerance policy against corruption, which applies to all employees of the Group and its interested parties, i.e. contractors, suppliers, consultants, agents and other intermediaries. Persons responsible for the implementation of this policy have been appointed.
The Environmental Management System complying with requirements of LST EN ISO 14001 has been implemented in objects of Lietuvos Energijos Gamyba and EnePRO. Also the requirements for the atmospheric, surface water, groundwater and soil pollution monitoring and protection measures specified in the Integrated Pollution Prevention and Control (IPPC) permits are implemented. 18 types of waste are sorted in the modern waste sorting site in Elektrėnai. Hazardous and non-hazardous waste generated in activities of the Company’s electrical plants are transferred for waste managers. Ferrous and non-ferrous metal scrap is sold for buyers-up for the market price. Household, paper and cardboard, plastic and glass waste is sorted and transferred for utility services companies.
Health and Safety Safety of operations is one of the most important priorities of the Lietuvos Energija group. All companies of the Group are required to follow the Occupational Safety and Health Policies. Top-level managers are responsible for safe and healthy work environment.
The policy sets out public commitments to comply with legal norms applicable to the operations and to fight corruption. All employees of the Group are acquainted with this policy and its requirements. The Group has clearly established procedures regarding gifts and other benefits. The single Trust Line is available for the Group's employees and all interested parties – its telephone number and email are announced publicly, indicated on the website. The Group commits to ensure confidentiality and keep the identity of the person giving the information secret.
Accountability For more information on corporate responsibility and initiatives conducted please visit the websites indicated below (the sections of social responsibility and CSR progress reports):
http://www.le.lt/en/social-responsibility-/467 http://www.eso.lt/lt/socialine-atsakomybe_349.html
Bendrovėje ESO nuo 2015 metų pabaigos tęsiama vidinė „Saugumo agentų“ iniciatyva – darbuotojai ne darbo metu stebi ir praneša apie netvarkingus ir galimai pavojingus elektros įrenginius. Per pirmąjį ketvirtį gauta 11 pranešimų su nuotraukomis – apie juos pranešama atsakingiems padaliniams, aprašoma įmonės intranete. Tokiu būdu šviečiame ir tiesiogiai su tinklo infrastruktūra nedirbančius kolegas.
https://gamyba.le.lt/en/node/4115
Since the end of 2015, the internal initiative of “Safety Agents” has been carried out in ESO company; during off-hours employees observe and notify of disorderly and possibly hazardous electrical equipment. During the first quarter, 11 notifications with pictures were received that were conveyed to the units in charge of them, also described on the Company’s intranet. This way we also educate colleagues not directly involved in the network infrastructure.
In 2016, the Policy on Granting Financial Assistance and Financial Assistance Management Rules were updated. Potential beneficiaries of financial assistance were invited on 21 March – 4 April to submit applications for the receipt of financial assistance. The priority areas at the national level were established in 2016:
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Sponsorship Pursuant to the Order of the Minister of Finance of the Republic of Lithuania, Lietuvos Energija has set up the Sponsorship Fund (the Fund), which supports initiatives and projects that are significant to the state and society.
Sports (with an exception of extreme) by supporting professional sports clubs uniting the country and making its name known, also sports organizations training new sports talents; Support of children suffering from oncological diseases by fostering public organizations or movements which activities or projects are ongoing and create benefit on the whole-nation level, having experience in implementing international social projects and disseminating the good experience of implementing such projects, providing knowledge and cooperating with health care institutions, as well as families of children with oncological diseases, fostering maintenance of family and social relationships of such children; Fostering of science and innovation by supporting ideas, investigations, works of young researchers the implementation whereof would strengthen positions of Lithuania in the international innovation market, help to strengthen the Lithuanian education and science system, enhance public interest in science, reinforce long-term cooperation traditions among research institutions, academic society, business and public organizations, also help young talents in research and innovations to become established in the Lithuanian and global research community. On 31 May 2016, Lietuvos Energija Support Fund allocated 620 thousand euros for 25 different activities and projects which are in line with the Funf criteria and priorities. At the national level, support was provided under the 14 applications: for the initiatives of Baltijos pažangiųjų technologijų institutas "Tyrėjų naktis", "Mokslo pieva“, Rugutė Charity and Support Fund (Genetic testing to target more efficient and every mini-patient treatment), Lithuanian sports federation of the disabled, N. Marčiulionis Basketball Academy, Kaunas basketball club Žalgiris, the twenty-first Pažaislis music festival, Kaunas University of Technology, the National Student Academy, the debate ballooning club "Audenis" organized by the women of the world hot air balloon championship, Lithuania handball federation Lithuanian rugby federation Lithuanian Young Scientists union. At the regional level, support stratified communities, which operates in the environment of the company, social, education, arts, culture, science and sports (except for extreme and high risk sport) projects, activities. Among the 11 beneficiaries: Association TEDxVilnius, Lithuanian Youth Center, Elektrenai hockey club LRK ENERGY, Rotula rural community of Lithuanian National Committee for
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UNICEF and other organizations. More information on beneficiaries can be found www.le.lt website.
Public initiatives Each year the Group actively contributes to the event of the traditional Days of Energy Professionals organised by the National Lithuanian Energy Association (NLEA). On 15-16 April 2016, free educational events were hosted in the Lithuanian Energy and Technology Museum – excursions for the public. During the excursions, visitors were able to get familiarised with the Lithuanian energy system and its topicalities, also, to learn more about the energy specialist’s occupation. In order to strengthen ties with Elektrėnai region community, where the main activities of Lietuvos Energijos Gamyba are focused, traditional events “Lietuvos Energijos Gamyba Presents” are held. In March 2016, the meeting with the famous Sedish publicist, film director and translator John Ohman was arranged. In June meeting with professional journalists from national television (LRT) was organized. A total of 15 cycle meetings were held so far. Every year Lietuvos Energija organizes events in order to contribute to the natural enhancement. In May 2016 Lietuvos Energija helped Kaisiadoriu foresters to replant 2 hectares of forest. Also, company cleaned the environment they as well as traditionally managed environment for their operational areas - Elektrenai, Kruonis and Kaunas. The Group ensures a possibility to charge electric cars in a rapid charging station free of charge. In July of 2014, together with partners Nissan and NT Valdos we opened station in J. Lelevelio street. The station seems to have a flow of regular users - each month about 1000 kWh of electricity is charged here. Currently, Energijos Tiekimas, the largest Lithuanian capital electricity supplier, ensures a free of charge supply of electricity to the station. In order to contribute to raising awareness about energy among society and young generation in particular, Lietuvos Energijos Gamyba welcomes free of charge excursions to the objects under its control: the combined cycle unit, Kruonis Pumped Storage Power Plant and Kaunas Algirdas Brazauskas’ HPP. In 2016, the power plants were visited by few hundreds visitors. Seeking to foster consciousness of school communities and contribute to the creation of sustainable, energy and environment saving Lithuanian society, the Lithuanian Children’s and Youth Centre and ESO together with partners invited the country’s education institutions to participate in a year-long educational programme
“A Sustainable School”. This project earned a prize of the Swedish business awards for the best social responsibility project in 2014. In 2016 ESO has launched a wide-scale campaign for the safe use of electricity and gas. Additionally, providing useful information about prevention of technological thefts. Many different channels was used to communicate about the campaign – television, radio, newspapers, and internet. The campaign included the field work related to safety issues, with emphasis on the underground electricity and gas network, as well as educational advice on safe behavior during storms. Before Easter in the Head office of ESO charity fair was organised. During this fair employees had possibility to buy handcrafts of disable people from Mažoji Guboja Center. All funds which were collected during the fair were dedicated for educational activities, excursions and events. All funds received during the fair center for distribution to members of educational activities, excursions, events. During the third quarter of 2016 ESO was carrying out an information campaign “Safe energy”. Using different visualization means and a range of media channels, the Company was broadcasting to the public the message on safe conduct with electricity, prevention of storms, a responsible approach when carrying out field works close to distribution electricity and gas networks. Significant attention was dedicated to the prevention of thefts of ESO technological assets and in that respect the ESO launched a series of meetings in regions with local communities, representatives of police and the media.
Long-term projects The Group’s company ESO continues broad-scale long-term social responsibility projects intended for children, youth and general public that are united by active involvement of different society groups, ideas on safety and efficient energy use, as well as environmental friendliness. “As Much as Needed”. Fostering rational use of energy is one of ESO priority directions of social responsibility contributing to the preservation of environment
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and energy resources, as well as the country’s obligations in implementing the European Union Climate Change Programme. The project is intended for creating traditions of a rationally living society – here solutions for rational electricity consumption are searched by focusing on consumption in business, industry. The Green Protocol. It is ESO initiated agreement (has been existing for six years) by which the companies and organizations that signed it confirm that they approve and undertake to apply environmentally friendly ideas. During the 1st half 2016, the initiative was joined by 25 new companies (in total, 213 companies have joined it).
Recognized activity Recognized governance. On 18 March 2016, the weekly Veidas elected as a CEO of the Year 2015 the Director General of Lietuvos energija Group of companies Dr. Dalius Misiūnas. During prestigious elections held for the sixteenth year in a row, for the first time the winner was elected a CEO of a state-controlled company (SSC). Relations with investors. During the event Nasdaq Baltic Market Awards 2015 of the securities exchange, three awards were received – for progress of Lietuvos dujos and LESTO achieved in improving relations with investors in 2015. Legal functions. An award “The Lawyer of the Year” established by the Association of Corporate Lawyers (B.I.T.A.) was earned on 14 April 2016 by Ingrida Kudabienė, Director of the ESO Law Department. Community. In September 2016, at the national responsible business awards ESO was awarded “The Most communal company 2015” in the large companies’ category. The award is granted for the close and active cooperation with communities.
Corporate Governance
The aim of the Lietuvos Energija group, with the State of Lithuania as its shareholder, is to ensure effective and transparent operations. In order to achieve this aim, the reorganisation of governance was carried out in 2013, during which the corporate governance of the Group was reorganised and improved. The new governance structure and model of the Group has been developed on the basis of the most advanced international and national practices, following the recommendations published by the Organisation for Economic Cooperation and Development, having regard to the Corporate Governance Code of companies listed on the NASDAQ OMX Vilnius exchange, Guidelines on the Governance for Stateowned Enterprises recommended by the Baltic Institute of Corporate Governance. The corporate governance model of the power generation companies’ group was implemented in observance of the Corporate Governance Guidelines approved by the Ministry of Finance of the Republic of Lithuania on 7 June 2013 (the Guidelines are available at www.le.lt).
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The primary goal of the corporate governance is to achieve the effect of synergy aligning different activities of the Lietuvos Energija group companies and targeting them at the achievement of the common goals at the Group level. The Group’s governance structure has been formed according to the principles of corporate governance and contributes to their implementation. The Company’s shareholder is the State which controls 100% of its shares. The rights and obligations of the shareholder are implemented by the Ministry of Finance of the Republic of Lithuania, which adopts the main decisions relating to the implementation of the ownership rights and obligations. Management Coordination Centre recognised the Lietuvos Energija group as the best managed State capital entity in 2014 and in 2013. High scores were given for transparency and management. In 2014 the good management index of the Group reached 8.44 points out of 10 possible.
Supervisory Bodies Supervisory Board The Supervisory Council is a collegial supervisory body provided for in the Articles of Association of the Company and elected by the General Meeting of Shareholders for a term of four years. The Supervisory Council of Lietuvos Energija consists of seven members – natural persons representing the Ministry of Finance, the Ministry of Energy, the Ministry of Economy, the Office of the Government of the Republic of Lithuania, and three independent members. The Chairman of the Supervisory Board is elected from the members of the Supervisory Board. This model of formation of the Supervisory Council complies with the principles of corporate governance. The composition of the Supervisory Council functioning at Lietuvos Energija as 30 September was as follows*:
Education
Šarūnas Kliokys (born 1959)
Antanas Danys (born 1975)
Dr. Virginijus Lepeška (born 1955)
Chairman, independent member
Independent member
Independent member
Vytautas Magnus University; Baltic Management Institute, Master's degree in Business Administration (EMBA);Vilnius University, Economist’s Diploma.
Vilnius University, Master’s Vilnius University, Doctoral degree in Social Sciences. degree in Business Administration (MBA); Boston College, Bachelor’s degree
Workplace, Chairman of the Board of Ekonovus UAB, Chairman of position
Tomas Garasimavičius Aloyzas (born 1978) Vitkauskas (born 1954) Member Member (until
Rasa Noreikienė (born 1959)
Rokas Baliukovas (born 1977)
Agnė Bagočiutė (born 1977)
Member
Member (since
Member (since
17/12/2014)
26/05/2016)
Kaunas University of Technology, Bachelor's degree in Electrical Engineering; Šiauliai University, Master's degree in Power Engineering; Šiauliai University, Master's degree in Management and Business Administration.
Vilnius University, Bachelor's degree in Public (economic) geography; Vilnius University, Masters degree in General Geography and Landscape science.
26/05/2016)
Director of Grinvest PTE.LTD; Development the Board of Avestis UAB; Director of Kaštonų Kalva Chairman of the Board Kilimai UAB; Member of the Board AB; Member of the Board of of Lanestead OU; Member the state enterprise Centre of of the Board Balaef OU; Registers, Member of the Chairman of the Board of Board of the association Neo Finance UAB; Director EUROCHAMBERS, President of of Asian Pacific Green the Lithuanian Chamber of Energy Pte. Ltd. Commerce, Industry and Crafts
Creighton University, Master’s studies of Political Science; Institute of International Relations and Political Science (IIRPS) of Vilnius University, Master’s studies of Political Science; IIRPS of Vilnius University, Bachelor's degree in Political Science.
Consultant, Chairman of the Government of the Republic of Board of Organizacijų Vystymo Lithuania, Advisor to the Prime Centras UAB; Consultant at OVC Minister for Energy. Mokymai UAB; Advisor to the Chairman of the Board of Vilandra UAB; Advisor to General Manager of AL Holdingas UAB; Member of the Board of the Association Mentor Lietuva; Member of the Board of the public institution Paramos Vaikams Centras; Member of the Commission for the Selection of Candidates for Judge.
Vilnius Civil Engineering Institute, Post-graduate studies of Technical Sciences; Vilnius Civil Engineering Institute, Master’s degree in Civil Engineering.
Kaunas University of Technology, Master’s degree in Public Administration; Vilnius University, Lawyer’s speciality.
Ministry of Energy of the Republic of Lithuania; Deputy Minister (until 29/04/216).
Ministry of Economy of the Ministry of Energy of the Ministry of Finance of the Republic of Lithuania; Deputy Republic of Lithuania; Deputy Republic of Lithuania; Deputy Minister. Minister. Minister.
* None of the members of the Supervisory Council has any ownership interest in the capital of the Company or the Group of the companies.
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The main functions and responsibilities of the Supervisory Council are as follows: election and removal of the Board Members, supervision of activities of the Board and the CEO, provision of comments to the General Meeting of Shareholders on the Company’s strategy, a set of financial statements, appropriation of profit or loss, and annual report. The Supervisory Council also addresses other matters within its competence. The Supervisory Council is functioning at the Group level, i.e. where appropriate, it addresses the issues related not only to the activities of the Company, but also to the activities of its subsidiaries or the activities of their management and supervisory bodies.
Committees of the Supervisory Council For the purpose of effective fulfilment of its functions and obligations, the Supervisory Council forms the committees. The committees of the Supervisory Board provide their conclusions, opinions and proposals to the Supervisory Council within their competence. A committee consists of at least three members, of whom at least one member is a member of the Supervisory Council and at least one member is an independent member.
Where appropriate, the Company may also form other ad hoc committees (e.g. for addressing specific issues, preparation, supervision or coordination of strategic projects, etc.).
Audit Committee Member of the Committee
Number of shares of the Company and the Group companies held
Workplace
Rasa Noreikienė Chair of the Committee
-
Ministry of Economy of the Republic of Lithuania, Vice-Minister
Danielius Merkinas Independent member
-
Finance Director of Nordnet UAB
Aušra Vičkačkienė Member
-
Gintaras Adžgauskas Member
-
Ministry of Finance of the Republic of Lithuania, Director of the Asset Management Department Director of the Lithuanian Committee of the World Energy Council
Irena Petruškevičienė Independent member
-
Member of Audit Development Committee of the European Commission
The following committees have been established at Lietuvos Energija:
Risk Management Supervision Committee is responsible for the submission of conclusions or proposals to the Supervisory Council on the functioning of management and control system in the Group and (or) main risk factors and implementation of risk management or prevention measures; Audit Committee is responsible for the submission of the objective and impartial conclusions or proposals to the Supervisory Council on the functioning of the audit and control system in the Group; Appointment and Remuneration Committee is responsible for the submission of conclusions or proposals on the matters of appointment, removal or promotion of the Board Members to the Supervisory Council, also for the assessment of activities of the Board and its members and for issuing the respective opinion. The functions of the committee also cover the formation of the common remuneration policy at the Group level, establishment of the amount and composition of remuneration, principles of promotion, etc.
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Main functions of the Committee are as follows:
to monitor the process of preparation of financial statements of the Company and the Group companies, with a special focus on the relevance and consistency of accounting methods used; to monitor the effectiveness of internal controls and risk management systems of the Company and the Group companies, to analyse the need for and relevance of these systems and perform the review of the existing internal control management systems; to monitor the adherence to the principles of independence and objectivity by the certified auditor and audit company, to provide related recommendations, as well as proposals for the selection of an audit company; to monitor the audit performance processes of the Company and the Group companies, to examine the effectiveness of audit and response of the administration to the recommendations provided in the management letter; to monitor the effectiveness of the internal audit function of the Company and the Group companies, to analyse the need for and relevance of this function, to provide recommendations on the need for, effectiveness of the internal audit function, and on other internal audit related matters; to provide proposals for the internal audit plans of the Company and the Group companies, recommendations for the regulations of the internal audit units of the
Company and the Group companies, appointment and dismissal of the head of a structural unit performing the functions of the internal audit, approval of his (her) job description, imposition of incentives and penalties; to monitor the compliance of activities of the Company and the Group companies with laws and other legal acts of the Republic of Lithuania, articles of association and operational strategy; to assess and analyse other issues attributed to the competence of the Committee by the decision of the Supervisory Council; to perform other functions related to the functions of the Committee set forth by legal acts of the Republic of Lithuania and in the Corporate Governance Code of companies listed on NASDAQ Vilnius Stock Exchange.
Risk Management Supervision Committee Member of the Committee
Number of shares of the Company and the Group companies held Antanas Danys Chairman of the Committee
Workplace Director of Grinvest PTE.LTD
Raimundas Petrauskas Independent member
-
General Manager of Schmitz Cargobull Baltic UAB
Donatas Kaubrys Independent member
-
Director of Dovirma UAB
Tomas Garasimavičius Member
-
Advisor to the Prime Minister of Lithuania for Energy
Main functions of the Committee are as follows:
to monitor the identification, assessment and management of risks relevant for the accomplishment of goals of the Company and the Group companies; to assess the relevance of internal control procedures and risk management measures with respect to the identified risks; to assess the status of implementation of risk management measures; to monitor the implementation of risk management process; to analyse financial possibilities for the implementation of risk management measures; to assess the risks and risk management plan of the Company and the Group companies; to assess the regular risk identification and assessment cycle; to control the establishment of risk registers, analyse their data and provide proposals; to monitor the drafting of risk management related internal documents;
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to perform other functions attributed Committee by the Supervisory Council.
to
the
competence
of
the
Appointment and Remuneration Committee
Number of shares of the Company and the Group companies held Aloyzas Vitkauskas Chairman of the Committee (until 26/05/2016) Virginijus Lepeška Independent member , Chairman of the Committee from 14/06/2016 Member of the Committee
Tomas Garasimavičius Member Agnė Bagočiutė Member from 14/06/2016
-
Workplace Ministry of Finance of the Republic of Lithuania, Vice-Minister (unti 29/04/2016) Chairman of the Board of Organizacijų Vystymo Centras UAB Advisor to the Prime Minister of Lithuania for Energy Ministry of Finance of the Republic of Lithuania, Vice-Minister
Main functions of the Committee are as follows:
to assess and provide proposals on the long-term remuneration policy of the Company and Group companies (the main fixed part of the remuneration, performance based remuneration, pension insurance, other guarantees and forms of remuneration, compensations, termination benefits, other parts of the remuneration package), principles of compensation for costs related to the individual’s performance; to assess and provide proposals on the policy of bonuses of the Company and the Group companies; to monitor the compliance of the policy of remunerations and bonuses of the Company and the Group companies with the international practice and good governance practice recommendations, and provide respective proposals for the improvement of the policy of remunerations and bonuses; to provide proposals concerning bonuses upon appropriation of profit (losses) to be appropriated of the Company and the Group companies of the respective financial year; to assess the terms and conditions of agreements of the Company and the Group companies with members of management bodies of the Company and the Group companies; to assess the procedures of recruitment and selection of candidates to members and senior management of the Company and the Group companies and establishment of the qualification requirements; to perform regular reviews of the structure, size, composition and activities of the management and supervisory bodies of the Company and the Group companies;
to supervise how members of management bodies and employees of the Company and Group companies are notified of the professional development possibilities and how they upgrade their skills regularly; to supervise and assess the implementation of measures ensuring the continuity of operations of the management bodies and employees of the Company and the Group companies;
38 INTERIM STATEMENT FOR 9 MONTHS 2016 | Corporate Governance
to perform other functions attributed to the competence of the Committee by the Supervisory Council.
Management bodies Board The Board is a collegial management body provided for in the Articles of Association of the Company. The members of the Board are elected for a term of four years and removed by the Supervisory Council on the proposal of the Appointment and Remuneration Committee. The Board consists of five members and elects the Chairman of the Board – the Chief Executive Officer of the Company from among its members. The members of the Board, acting within their competence, must ensure the proper performance of the Company’s activities / supervision of the respective areas at the Group level. None of the members of the Supervisory Council has any ownership interest in the capital of the Company or the Group of the companies. The composition of the Board functioning at Lietuvos Energija as of 30 September 2016 was as follows:
Dr Dalius Misiūnas
Ilona Daugėlaitė
Darius Kašauskas
Mindaugas Keizeris
Dominykas Tučkus
(born in 1978)
(born in 1970)
(born in 1972)
(born in 1980)
(born in 1981)
Chairman of the Board, CEO
Member of the Board, Organisational Development Director
Member of the Board, Finance and Treasury Director
Member of the Board, Strategy and Development Director
Member of the Board, Production and Services Director from 04/01/2016
Educational background
Lund University, Doctoral degree in Vilnius University, Master’s degree in Hydrogeology and Engineering Geology. Technological Sciences; Lund University, Master’s degree in Industrial Electrical Engineering and Automatics; Kaunas University of Technology, Bachelor's degree in Electrical Engineering.
ISM University of Management and Economics, Doctoral studies of Social Sciences in the field of Economics; ISM University of Management and Economics, BI Norwegian Business School, Master’s degree in Management; Vilnius University, Master’s degree in Economics.
Vilnius University, Master’s degree in International Business. Vilnius University, Bachelor’s degree in Business Administration and Management.
L. Bocconi University (Italy), Master's degree in Finance; L. Bocconi University (Italy), Degree in Business Management and Administration.
Workplaces, position
Chairman of the Supervisory Council of Energijos Skirstymo Operatorius AB (from 3 Dec 2015); Member of the Board of Directors of the Association Eurelectric; President of the Lithuanian Power Association; President of the Alumni Association of Kaunas University of Technology; Member of the Board of the Sponsorship Fund of Lietuvos Energija; Member of the Council of the Lithuanian Confederation of Industrialists.
Chairman of the Board of NT Valdos UAB; Chairman of the Board of Verslo Aptarnavimo Centras UAB (until 6 Jan 2016); Chairman of the Board of Elektroninių Mokėjimų Agentūra UAB (from Dec 2015); Chairman of the Board of Duomenų Logistikos Centras UAB (from Jan 2016).
Chairman of the Supervisory Council of Lietuvos Energijos Gamyba AB (from 2 Dec 2015); Chairman of the Board of Energijos Teikimas UAB (until 8 Feb 2016); Chairman of the Board of LITGAS UAB (until 11 Jan 2016); Member of the Board of Lietuvos Dujų Tiekimas UAB (until 11 Jan 2016); Chairman of the Board of Energetikos Paslaugų ir Rangos Organizacija UAB (from 26 Oct 2015); Chairman of the Board of Vilniaus Kogeneracinė Jėgainė UAB (from 6 Nov 2015), Member of the Board of the Sponsorship Fund of Lietuvos Energija; Member of the Supevisory Council of Elektroninių Mokėjimų Agentūra UAB (from Jan 2016).
Member of the Supervisory Council of Lietuvos Energijos Gamyba AB (from Jan 2016); Chairman of the Board of LITGAS UAB (from Jan 2016); Member of the Board of Lietuvos Dujų Tiekimas UAB (from Jan 2016); Member of the Board of Energijos Tiekimas UAB (from Jan 2016); Member of the Supervisory Council of Elektroninių Mokėjimų Agentūra UAB (from Jan 2016); Member of the Board of HOB OU; Member of the Board of Tuuleenergia OU; Member of the Board of EURAKRAS UAB.
Member of the Supervisory Council of Energijos Skirstymo Operatorius AB (from 3 Dec 2015); Chair of the Board of Technologijų ir Inovacijų Centras UAB (from Dec 2013); Chair of the Board of Duomenų Logistikos Centras UAB (until 22 Jan 2016); Chair of the Board of Verslo Aptarnavimo Centras UAB (from 6 Jan 2016); Member of the Supervisory Council of Elektroninių Mokėjimų Agentūra UAB (from Dec 2015).
39 INTERIM STATEMENT FOR 9 MONTHS 2016 | Corporate Governance
Organizational Culture and Employees The basis for implementing the strategy of Lietuvos Energija Group is employees working in it. Efforts are put to establish and maintain value-based organizational culture fostering employees to assume responsibility, cooperate, and seek the best results in a concerted way By implementing the goals set by the shareholder and pursuing a socially responsible business, we seek to attract and maintain qualified employees ensuring mutual benefit, to create long-term partnership relationships with them and a common successful future. As of 30 September, there were 5002 employees working at the Company. Company Lietuvos energija, UAB Energijos skirstymo operatorius, AB Lietuvos energijos gamyba, AB Energetikos paslaugų ir rangos organizacija, UAB Technologijų ir inovacijų centras, UAB Duomenų logistikos centras, UAB Energijos tiekimas, UAB Elektroninių mokėjimų agentūra, UAB NT Valdos, UAB PE Energetikų mokymo centras LITGAS, UAB VAE SPB, UAB Verslo aptarnavimo centras, UAB Lietuvos dujų tiekimas, UAB Vilniaus kogeneracinė jėgainė, UAB Kauno kogeneracinė jėgainė, UAB Energijos sprendimų centras, UAB Total:
2
As of 30 June 2016, there were 84 employees working at the Company. 97.73 percent of the employees working in the Company have a higher university education, of which – 6 are holders of PhD degrees. The Company employees: 2 certified professional project managers (PRINCE2 and PMP), 1 certified financial analyst (CFA), 1 certified internal auditor (CIA), 1 certified fraud examiner (CFE), 2 certified risk management experts (CRMA), a certified ISO 31000:2009 risk management specialist, and 5 employees holding the qualification of a Board member of the Baltic Institute of Corporate Governance. The employees are active members of associations and unions, participants of academic community (Research Council of the Lithuanian Institute of Energy; Business Council of Kaunas University of Technology; Supervisory Council of the LIE; Technological Development Committee of the Research, Innovation and Technology Agency).
Total employees 88 2,732 404 669 178 15 29 3 230 120 15 10 447 34 19 3 4 5,000
A number of valid employment contracts.
40 INTERIM STATEMENT FOR 9 MONTHS 2016 | Corporate Governance
52.9 percent of the employees working in the Group have higher education, of which – 22 PhD degree holders, 37.8 percent have an advanced vocational education, 9.4 percent have a secondary education.
The major part of the Group’s employees consisted of men – 77.1 percent, women constituted 22.9 percent. The gender distribution among the employees holding managerial positions is very similar: 77.6 percent of managing staff consisted of men and women constituted 22.4 percent.
The total payroll budget of the Company for January-September 2016 was EUR 1,774 thousand. Average Remuneration of the Company’s Employees before Taxes during JulySeptember 2016 Position category
Average monthly wage, EUR
Chief Executive Officer
6,654
Top level managers
4,893
Medium-level managers
3,234
Experts, specialists
1,890
lectures on leadership, strategic governance, management team building and governance, and other themes.
During IIQ 2016, the Newcomer Day for new employees in the Group’s companies was held, involving the participation of approximately 100 employees. During the Newcomer Day, employees became familiar with the Group’s strategy, meaning of values, the most important goals and priorities. During the second part of the day, “a game of values” took place during which situations associated with values were solved. The ambassadors of Lietuvos Energija Group were continuing their activity and implementing the initiatives supporting the idea of community.
month, before taxes On 30 September 2016, the Group had 5,000 employees. The total wage bill of the Group for January–September 2016 amounted to EUR 48 million. Average Remuneration of the Group’s Employees before Taxes during JulySeptember 2016
The Company continued implementing its career development, rotation system structuring processes (during Q III 2016 15 employees rotated within the Company, and 113 employees were promoted internally).
Development of competences Position category
Average monthly wage, EUR
Chief Executive Officer
4,181
Top-level managers
3,850
Medium-level managers
1,986
Experts, specialists, workers
965
Development of the organisation and its culture After the rearrangement of governance at the Lietuvos Energija Group in 2016, focus was placed on the coordinated development of the organizational culture, human resources management, formation of the new organizational culture, enhancement of activity organization, training of new employees, and improvement and maintaining of competences. In September 2016, the Company started a long-term managerial staff training programmes the purpose of which was to strengthen and develop a uniform leadership culture involving and able to achieve the strategic business objectives of the organisation. About 300 managers are expected to receive the intended training in the course of the coming two years. The managers will be invited to attend
41 INTERIM STATEMENT FOR 9 MONTHS 2016 | Corporate Governance
Lietuvos Energija Group has consistently taken care of the improvement of employees’ qualification. It assures that employees have all mandatory certificates required by the laws, improved their competences necessary for work. At the organization’s level, different trainings of general, professional and management competences, e.g. leadership, team formation, change management, communication, project management, and business process management, etc., were held in individual companies.
Practice placement The Group’s companies establish conditions for students of higher and professional schools to apply theoretical knowledge and acquire practical skills. During Q III 2016, 8 trainees completed their practical training periods at the Group.
Supervisory and management bodies of the listed companies of the Group On 3 December 2015, following the reorganisation of LESTO AB and Lietuvos Dujos AB by way of merger the company Energijos Skirstymo Operatorius AB (ESO) was established, which started its activities from 1 January 2016 and on 31 December 2015, LESTO AB and Lietuvos Dujos AB ceased their activities and were removed from the register.
The composition of the Supervisory Council functioning at ESO from 30 September 2016 was as follows:
The composition of the Supervisory Council functioning at Lietuvos Energijos Gamyba, AB as at 30 September 2016 was as follows:
Participation in the capital of the Term of office Company and Group companies, % Dalius Misiūnas 3 Dec 2015 – Chairman Dec 2019
Full name
Full name
Workplace
Lietuvos Energija, UAB, Chief Executive Officer
Ilona Daugėlaitė Member
-
3 Dec 2015 – Dec 2019
Lietuvos Energija, UAB, Director of Organisational Development
Petras Povilas Čėsna Independent member
-
3 Dec 2015 – Dec 2019
LITEXPO, Chairman of the Board
Participation in the capital of the Term of office Company and Group companies, % Mindaugas Keizeris 20 Nov 2014 – Chairman from August 2017 2 Dec 2015
Workplace
Lietuvos Energija, UAB, Strategy and Development Director
Pranas Vilkas Independent member
-
August 2013 – August 2017
-
Dominykas Tučkus Member
-
21 Dec 2015 – August 2017
Lietuvos Energija, UAB, Production and Services Director
As at 30 September 2016, the Board of ESO comprised as follows:
Full name
Participation in the capital of the Term of office Workplace Company and Group companies, %
Liudas Liutkevičius Chairman
-
Dalia Andrulionienė Member Rytis Borkys Member
-
Dalius Svetulevičius Member
-
-
As at 30 September 2016, the Board of Lietuvos Energijos Gamyba, AB comprised as follows: Full name
31 Dec 2015 – Energijos Skirstymo Operatorius AB, Chief Dec 2019 Executive Officer 3 Dec 2015 – Dec 2019 3 Dec 2015 – Dec 2019
Energijos Skirstymo Operatorius AB, Services Director Energijos Skirstymo Operatorius AB, Director of Network Maintenance Service
3 Dec 2015 – Energijos Skirstymo Operatorius AB, Director Dec 2019 of Network Development Service
General Manager: Liudas Liutkevičius, Chief Executive Officer of Energijos Skirstymo Operatorius AB.
42 INTERIM STATEMENT FOR 9 MONTHS 2016 | Corporate Governance
Eglė Čiūžaitė Chairman
Participation in the capital of the Company and Group companies, %
Term of office
Workplace
-
February 2016 – September 2017
Lietuvos Energijos Gamyba, AB, Chief Executive Officer
Adomas Birulis Member
-
September 2013 – September 2017
Lietuvos Energijos Gamyba, AB, Director of Business Development Department
Darius Kucinas Member
-
September 2013 – September 2017
Lietuvos Energijos Gamyba, AB, Director of Production Department
General Manager: Eglė Čiužaitė, Chief Executive Officer of Lietuvos Energijos Gamyba, AB.
Key Information about the Company and the Group An annual report of Lietuvos Energija and its subsidiaries is prepared in accordance with the Resolution No. 1052 of the Government of the Republic of Lithuania of 14 July 2010 “On approval of the description of guidelines for the assurance of transparency of activities in State-controlled enterprises and appointment of the coordinating institution” and is published at the Company’s website at www.le.lt.
Company name
Lietuvos energija, UAB
Company code
301844044
Authorised capital
EUR 1,212,156,000 (LTL 4,179,849,289)
Paid authorised capital
EUR 1,212,156,000
Address
Žvejų St. 14, LT-09310, Vilnius, Lithuania
Tel.
(8 5) 278 2998
Fax
(8 5) 278 2115
biuras@le.lt
Internet website
www.le.lt
Legal form
Private company
Registration date and place Register accumulating and storing data about the Company
As of 30 June 2016, the authorised capital was divided into ordinary registered shares with a par value of LTL 1 (EUR 0.29). All shares have been fully paid-up. Shareholders of the Company The Republic of Lithuania represented by the Ministry of Finance
Share capital (EUR‘000)
%
1,212,156
100
The Company has not put in place any individual dividend policy and in this respect is guided by the effective version of 15 February 2014 of the Resolution of the Government of the Republic of Lithuania of 14 January 1997 “On dividends for shares of State-owned enterprises and profit contributions by State-owned enterprises”.
28 August 2008, Register of Legal Entities Register of Legal Entities, State Enterprise the Centre of Registers
On 13 February 2013, the Company’s shares were transferred to the Ministry of Finance by the right of trust. From 30 August 2013, the name of Visagino Atominė Elektrinė UAB was changed into Lietuvos energija UAB.
43 INTERIM STATEMENT FOR 9 MONTHS 2016 | Key Information about the Company and the Group
Information on subsidiaries, branches and representative offices At the end of the reporting period (30 September 2016 ) Lietuvos Energija directly or indirectly controlled following companies: Company
Lietuvos Energijos Gamyba, AB
Adress of Head office
The effective part of managed shares 2016-06-30 (%) Elektrinės str. 21, Elektrėnai 96,75
Share capital Main activity (thousand Eur) 2016-06-30 184 174 Electricity generation, supply, import, export and trade
Energijos Skirstymo Operatorius, AB (until 1 Jan 2016 –LESTO AB and Lietuvos Dujos, AB) NT Valdos, UAB
Aguonų str. 24, Vilnius
94,98
259 443
Electricity supply and distribution to end users; natural gas distribution
Geologų str. 16, Vilnius
100
85 550
Disposal of real estate, other related activities and service provision
UA Duomenų Logistikos Centras UAB
A. Juozapavičiaus str. 13, Vilnius
79,64
4 033
Support services for information technology and telecommunications
Energetikos Paslaugų ir Rangos Organizacija, UAB (until 1 Jan 2016 –ELEKTROS TINKLO PASLAUGOS, UAB and Kauno Energetikos Remontas, UAB) LITGAS UAB
Motorų str. 2, Vilnius
100
7 003
Construction, repair and maintenance of electricity networks and related equipment, connection of customers to the grid, repairs of energy equipment, manufacturing of metal structures
Žvejų str. 14, Vilnius
66,67
13 050
Supply of liquid natural gas via terminal and trade in natural gas
Elektroninių Mokėjimų Agentūra UAB
Žvejų str. 14, Vilnius
100
437
Energijos Tiekimas UAB
P. Lukšio str. 1, Vilnius
100
17 240
VšĮ Energetikų mokymo centras
Jeruzalės str. 21, Vilnius
100
85
Professional development and further training of energy specialists
Geton Energy OÜ
Narva mnt 5, 10117 Talinas
100
35
Electricity supply
Geton Energy SIA
Bezdelingu 12, LV-1048, Ryga
100
28
Electricity supply
Technologijų ir Inovacijų Centras UAB
A. Juozapavičiaus str. 13, Vilnius
97,80
6 440
IT and telecommunication, and other services
VAE SPB UAB
Smolensko str. 5, Vilnius
100
293
Business and other management consultations
Verslo Aptarnavimo Centras UAB
P. Lukšio str. 5 b, Vilnius
97,00
580
Public procurement organisation and implementation, accounting, personnel administration services
Lietuvos Dujų Tiekimas UAB
Žvejų str. 14, Vilnius
100
8 370
Lietuvos energijos paramos fondas
Žvejų str. 14, Vilnius
100
3
Vilniaus kogeneracinė jėgainė UAB
Žvejų str. 14, Vilnius
100
1 003
Modernisation of the district heating sector in the city of Vilnius
Kauno kogeneracinė jėgainė UAB
Žvejų str. 14, Vilnius
51
10 759
Modernisation of the district heating sector in the city of Kaunas
Tuuleenergia OU
Keskus, Helmküla, Varbla Rural Municipality, Pärnu County
100
499
HOB OU
Mustamäe tee 16, Tallinn
100
3 653
Shareholder of 57% shares of Tuuleenergia OU, that is a company, generating electricity power from renewable sources.
Eurakras UAB
Vytenio str. 46, Vilnius
75
8 096
Electricity generation from renewable resources
Energijos sprendimų centras UAB
Žvejų str. 14, Vilnius
100
10
Provision of payment collection services Electricity and natural gas supply, electricity export/import, balancing services
Gas supply Provision of support for projects, initiatives and activities of public interest
Electricity generation from renewable resources
Energy-saving (ESCO) services
44 INTERIM STATEMENT FOR 9 MONTHS 2016 | Key Information about the Company and the Group
Information on securities of the Group companies The shares of Energijos Skirstymo Operatoriu and, Lietuvos Energijos Gamyba have been listed on the Main List of NASDAQ Vilnius Stock Exchange. The trading of shares of the companies was started on 11 January 2016 and 1 September 2011, respectively. The shares of the companies are traded only at NASDAQ Vilnius Stock Exchange.
Structure of the authorised share capital and shareholders owning more than 5 per cent of the issuer’s authorised share capital as at 30 June 2016 Company
Total nominal value of shares (in EUR)
ISIN code
Securities' abbreviation
Trading list
Lietuvos energijos gamyba, AB
184 174 248,35
LT0000128571
LNR1L
BALTIC MAIN LIST
„Lietuvos energija“, UAB
96,75%
Energijos skirstymo operatorius, AB
259 442 796,57
LT0000130023
ESO1L
BALTIC MAIN LIST
„Lietuvos energija“, UAB
94,98%
Information about intermediaries
agreements
with
Full name of the shareholder (name of the company)
Percentage of voting rights conferred by shares owned
securities
Lietuvos Energija has not concluded any agreements with intermediaries of public trading in securities, because its securities are not traded on the stock exchange.
Group companies: Lietuvos Energijos Gamyba, AB As at 30 September 2016, the company had issued 635,083,615 ordinary registered shares with the nominal value of EUR 0.29. Shares of Lietuvos Energijos Gamyba have been listed on the main list of NASDAQ OMX Vilnius stock exchange. ISIN code of the issue is LT0000128571.
Energijos Skirstymo Operatorius AB
As at 30 September 2016, the company had issued 894,630,333 ordinary registered shares with the nominal value of EUR 0.29. Shares of Energijos Skirstymo Operatorius AB have been listed on the main list of NASDAQ OMX Vilnius Stock Exchange. ISIN code of the issue is LT0000130023. Energijos Skirstymo Operatorius AB has concluded the agreement on the accounting of securities issued by the company and management of personal securities accounts with SEB Bankas AB.
Lietuvos Energijos Gamyba has concluded the securities accounting agreement on the accounting of securities issued and management of personal securities accounts with SEB Bankas AB.
45 INTERIM STATEMENT FOR 9 MONTHS 2016 | Information on securities of the Group companies
Main Events at the Group until the Date of Preparing the Report 01/07/2016. ESO started automatic reading of smart meters. 01/07/2016. 8-15 percent reduced gas tariffs of Lietuvos Dujų Tiekimas for private household customers for H2 2016. 19/07/2016. Offer of ESO to the customers to pay for electricity and gas without using paper pay-books. 19/07/2016. As a result of a successful auction NT Valdos sold real estate objects for EUR 3.6 million. 22/07/2016. Announcement by Lietuvos Energija of a ranking of potential installers of the integrated business management system under the international IT system upgrading tender. 26/07/2016. Kruonis Hydro Power Plant emergency reserve activated due to disconnection of the NordBalt power link.
31/08/2016. EBITDA of Lietuvos Energijos Gamyba for the first half of the year accounted for EUR 21.7 million. Lietuvos Energijos Gamyba declared EUR 27.309 million to be paid in dividends for the six months’ period of 2016. 14/09/2016. ESO and the State Labour Inspectorate signed a cooperation agreement on exchange in information on any identified cases of illegal work or illegal connection to electricity or gas networks. 15/09/2016. Temporary manager of EnePRO Algaudas Martinka was recalled and dismissed following an internal inspection that revealed a number of infringements. 15/09/2016. LITGAS, Lietuvos Dujų Tiekimas and Statoil concluded a contract according to which the parties will cooperate at the Klaipėda LNG terminal offering wholesale LNG supply services (small-scale LNG market development in the Baltic region, Lietuvos Dujų Tiekimas will help to balance gas flows).
01/08/2016. ESO started providing electricity and gas grid installation services in Kaunas city and the region.
16/09/2016. The Management Coordination centre published the reports for 2015 on the companies managed by the State that according to the good governance index Lietuvos Energija was assigned A rating (highest among all State-managed enterprises).
03/08/2016. ESO and PE Lithuanian Business Support Agency signed a contract regarding a financial assistance of the European Union of EUR 7.6 million for the modernisation of the electricity distribution network.
19/09/2016. The European Commission approved the State aid to the Vilnius cogeneration power plant.
08/08/2016. The self-service website manogile.lt provides functionality for all utility services – new service providers were connected.
20/09/2016. Lietuvos Energijos Gamyba published its updated operating strategy until 2020.
24/08/2016. Kaunas co-generation plant initiated the loan purchase transaction.
21/09/2016. NT Valdos announced its third auction at which it will offer to the market real estate objects for EUR 19.9 million.
25/08/2016. Official opening of the wind farms in Rotuliai. 31/08/2016. An announcement of Lietuvos Energija of EUR 142.4 million in EBITDA earned in the first half of the year.
23/09/2016. The Ministry of Finance passed a decision regarding the dividends paid by Lietuvos energija UAB – EUR 40.9 million in dividends will be allocated to the State.
31/08/2016. EBITDA of ESO for the first half of the year accounted for EUR 87.7 million. ESO declared EUR 12.525 million to be paid in dividends for the six months’ period of 2016.
23/09/2016. Lietuvos Dujų Tiekimas launched a pilot project in trading in gas boilers and related services in Vilnius.
46 INTERIM STATEMENT FOR 9 MONTHS 2016 | Main Events at the Group until the Date of Preparing the Report
27/09/2016. An increased vibration of a gas turbine recorded in relation to an operating KCB at Lietuvos energijos gamyba. The repair of the KCB will last until late October. 28/09/2016. Lietuvos Dujų Tiekimas concluded an agreement regarding the supply of LNG in 2017 with Koch Supply & Trading. The natural gas acquired from Koch Supply&Trading will account for more than one third of the projected demand of the customers of Lietuvos Dujų Tiekimas in 2017. 29/09/2016. Contracts regarding the construction of the Vilnius co-generation plant were concluded. 03/10/2016. Lietuvos Energija acquired a 33.33 percent holding in LITGAS UAB (15 million ordinary registered shares) from Klaipėdos nafta and became a sole shareholder of the Company. 05/10/2016. Lietuvos Dujų Tiekimas for the second time this year reduced the natural gas price for all corporate customers (6,600 customers). The natural gas prices reduced by one fifth on average will apply to the customers of Lietuvos Dujų Tiekimas for four months – from September until the end of the year. 05/10/2016. Kaunas co-generation plant recognised to be a waste management facility of national significance.
Commission for Energy Control and Prices. ESO has been entrusted to ensure the supply of gas to residents of Druskininkai starting from 1 November 2016. 02/11/2016. Simonas Šileikis was appointed the Director General of the energy services and contracting organisation EnePRO. 14/11/2016. Lietuvos Energija continues improving its operations by initiating the process of sale of Duomenų logistikos centras – one of the most modern and advanced IT and telecommunication companies in the Baltic region providing data transmission and data centre services. 17/11/2016. The NCCP approved new gas and electricity distribution prices for ESO; thus, starting from 1 January 2017, the gas distribution prices will be reduced for seven customer groups categorised according to the gas amount consumed. 17/11/2016. Lietuvos Energija Support Foundation selected five Lithuanian universities at which master degree students in energy and technology studies will be able to claim nominal grants as soon as this year. 22/11/2016. On the fourth auction Lietuvos Energija will offer to the market real estate owned by NT Valdos of EUR 15 million in value.
10/10/2016. Liudas Liutkevičius, CEO of ESO, officially announced his resignation as of 4 November 2014 from the position of the Chairman of the Board and the CEO of the Company.
23/11/2016. The Government decided that in 2017 the service indicated in Item 7.4 of the Description of the provision of the public interest obligations (VIAP) in the electricity sector will be provided by Lietuvos Energijos Gamyba by its combined cycle unit. The decision will contribute to ensuring that the facility is prepared to produce electricity at all times when it is most needed in the market.
11/10/2016. With a view to strengthening the cooperation between business and research institutions, the Lietuvos Energija Support Foundation decided to allocate nominal grants to the most talented students of Lithuanian higher schools.
25/11/2016. The Supervisory Board of Lietuvos Energija approved a motion of the Board to appoint Dalia Andriulionienė as Chairperson of the Board and the CEO of the electricity and gas distribution company ESO.
11/10/2016. The Lithuanian Court of Appeal made an announcement on imposing the temporary protection measures and suspending the works on the construction of a waste-incinerating co-generation facility and the appurtenances according to a public procurement contract “Construction of the Vilnius co-generation plant“.
28/11/2016. During the first half of 2017 the prices of the natural gas supplied by Lietuvos Dujų Tiekimas to private customers will remain at record low levels, as the NCCP approved the Company’s proposal to apply the same prices as in the second half of 2016.
31/10/2016. ESO authorised to engage in the distribution of natural gas in Druskininkai municipality. The decision to include Druskininkai municipality into the territory of the licensed operations of ESO was on October 31 passed by the National
Lietuvos energija, UAB Director General 30 November 2016
47 INTERIM STATEMENT FOR 9 MONTHS 2016 | Main Events at the Group until the Date of Preparing the Report
Dr. Dalius Misiūnas