Responsibility. Cooperation. Result.
Annual Report 2013
Lietuvos Energija, UAB
CONSOLIDATED ANNUAL REPORT, CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, presented together with the independent auditor’s report
Translation note: This version of the accompanying documents is a translation from the original, which was prepared in Lithuanian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the accompanying documents takes precedence over this translation.
2013 Annual report
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Contents Consolidated Report of the Company and the Group
Independent Auditor’s report
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CEO statement
61 Independent Auditor’s report
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About the Group and the Company
Consolidated and financial statements
11 Strategy
14 Market review
64 Statement of financial position
19 Review of activities of the Group
66 Statement of comprehensive income
26 Corporate governance
67 Statement of cash flow
30 Analysis of the Group’s consolidated financial results
68 Statement of changes in equity
34 Results of operations of the Group’s companies
70 Notes to the financial statements
47 Information on securities of the Group companies
49 Social responsibility 54 Key information on the Company and the Group
2013 annual report Contents
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ing efficiency – lower costs for consumers, better conditions for the Lithuanian enterprises competing with their peers from other countries, larger amounts of paid taxes and contributions. We have demonstrated by our example that it is possible to plan the generation of supported electricity in a more efficient and socially responsible manner, saving the money of consumers. Being guided by the principles of sound use of the existing import, trade and generation opportunities, we started producing the supported electricity at Lietuvos energijos gamyba in Elektrėnai only in summer or early autumn, when combined heat and power plants are closed and there are limited possibilities of import to Lithuania from power plants of neighbouring countries because of repairs of transmission lines. Well-contemplated investments of the Group Company LESTO in the modernisation of the infrastructure and review of business processes helped in optimising the operation and management of the distribution network. Due to the reduction of the distribution tariff as a result of higher operating efficiency of LESTO and reduced need for GEIS budget funds for electricity generation in Elektrėnai, in 2014, consumers of electricity will be able to save about LTL 230 million. The Group paid LTL 347 million to the State Budget and Social Insurance Fund.
Dear Customers, Partners, Employees and Shareholders, The last year was very significant and important for our Group – full of responsible works, noted for good results and ambitious plans for the future. By achieving the best performance in five years, ensuring the control of costs and higher efficiency of regulated activity and profitability of commercial operations, we have proved our ability to respond to changing business environment, to generate income while competing on a free market and to increase the value of the state-owned assets. Our performance indicators and governance policy have brought us even closer to the advanced energy companies of Europe. Our EBITDA increased by 29% to LTL 678 million, and EBITDA margin went up from 18.8% to 23.3%. We achieved this through the reduction of tariffs of the regulated activities of the Group. Timely solutions in the commercial market of trading in electricity considerably contributed to higher profitability of the Group. As a result of these solutions the commercial activity profit before taxes increased by 26.5%. By such actions we improved the management of assets entrusted by the State – last year, the profitability of the Group’s equity noticeably increased to 2.3%. The actions and results of the Lietuvos Energija group are important not only to us, but also to the country’s population at large. The Group has achieved higher operat-
2013 annual report CEO statement
The benefits and importance of the Lietuvos Energija group is not limited to the reduction of tariffs and collection of taxes. We are also the guarantor of the Lithuanian energy stability, ensuring the reliable supply of electricity to consumers. This is a big commitment assumed by us, and we are implementing with due responsibility. Last year we generated more than half of all electricity produced in Lithuania, satisfying 20% of the total demand of the country. We serviced over 1.6 million of consumers. We also kept supplying with electricity under stressed market conditions and power shortage caused by import constrains. We have guaranteed uninterrupted supply to those consumers, who were left without their suppliers. In 2013, the confidence indicators of the distribution network managed by our Group Company LESTO increased by about 6%. While increasing the efficiency and ensuring the reliability, we did not forget the transparency. We helped the society and the shareholder’s representatives to submit exhaustive reports on activities. We introduced a new model of corporate governance focused on the improvement of the processes of governance, and support, assessment and improvement of operations common for all companies of the Lietuvos Energija group, by centralising, coordinating, and standardizing these processes at the Group level, sharing experiences and best practices. In addition, as part of renewal of the management and supervisory bodies of companies, the decision-making was separated from the supervision of performance of operations. In line with the best international practices, independent members were also included in the boards and supervisory boards of companies. All these measures make our activities more trans-
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parent, promote responsibility and cooperation, integrate different competences and allow reasonably expecting sustainable growth of value in the future. Being aware of the possibilities to grow, we have developed the long-term strategy of the Lietuvos Energija group companies, setting the ambitious goal to increase by 2 times the Group’s value by 2020. One of the directions to be pursued by us in pursuing this goal is the development and diversification of activities of the Group, the foundations for which have already been laid. Last year the Company LITGAS joined the Group and in the end of 2014 – beginning of 2015 it will start essentially new activities at the Group and country level – supply of liquefied natural gas via the LNG terminal of Klaipėda. 2014 will be the year of very active preparations for these activities. This year we are also planning to clarify the goals and plans of Lietuvos Energija by developing the projects of co-generation power plants in the biggest cities of Lithuania. One more important task is further improvement of efficiency. In 2014, we will continue the centralisation and optimisation of support functions of the Group started last year. The third and undoubtedly the most important force is our people. We have more than 4,300 motivated and qualified specialists, experts of their area, whose involvement, cooperation and responsibility facilitated in achieving good results. I am sure, that with their help we can achieve even more. In order to realise this hidden potential, we will build the organisational culture. A great attention will be devoted to the system of career planning, development of competences and successors inside the Group. I believe that works completed last year will also serve as a strong foundation for our responsible work and joint achievement of the best results in the future.
Being aware of the possibilities to grow, we have developed the long-term strategy of the Lietuvos Energija group companies, setting the ambitious goal to increase by 2 times the Group’s value by 2020.
Dr. Dalius Misiūnas
Chairman of the Board and Chief Executive Officer Lietuvos Energija, UAB
2013 annual report CEO statement
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About the Group and the Company The Lietuvos Energija group is one of the largest stateowned groups of energy companies in the Baltic States. The main activities of the Group include electricity and heat generation and supply, sales and distribution of electricity, service and development of the energy sector. In 2013, we were also preparing for trade and supply of natural gas. The rights and obligations of the shareholder of the Lietuvos Energija group are exercised by the Ministry of Finance of the Republic of Lithuania. The Lietuvos Energija group with more than 4,300 employees manages and operates the main energy generation capacities of Lithuania ensuring security of energy supply, the distribution network covering the territory of the whole country, services about 1.6 million of customers throughout Lithuania, provides electricity supply services to customers abroad, implements development projects of strategic value and pursues the goals of the National
The Company analyses the activities of the Group, represents the Group, implements the rights and obligations of the shareholder, establishes the operational guidelines and rules, and coordinates the activities in the areas of generation, commerce, finance, law, strategy and development, human resources, risk management, audit, technology, communication, etc.
EBITDA
2 908 mln. LTL
680 mln. LTL 30,7%
Net profit
141 mln. LTL + 210 mln. Lt
Asset value
Generated electricity
Transmitted electricity
9 727 mln. LTL
1,96 TWh
8,21 TWh
- 0,8%
About the Group and the Company
The parent company of the Group – Lietuvos Energija, UAB (hereinafter – Lietuvos Energija or Company) is responsible for the transparent management and coordination of activities of the whole Group, improvement of the efficiency with a view to providing competitive service to customers, and for the socially responsible creation of the long-term value for shareholders.
Revenue
3,9%
2013 annual report
Energy Strategy.
- 10,9%
1,2%
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Key events of 2013 • •
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Implementation of ISO 9001 management system in the TIC*. Beginning of performance of the designated undertaking’s functions by LEG**, i.e. purchase of all electricity generated by wind power plants and its trading on the Nord Pool Spot electricity exchange.
Beginning of supply of electricity by Energijos tiekimas to customers in Latvia and Estonia.
• •
Transfer of the parent company’s shares to the Ministry of Finance of the Republic of Lithuania.
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Completion of surveys of Syderiai geological structure in drill wells.
Selection of the contractor for the project of construction of 40 MW biofuel boiler-room in Elektrėnai – Consortium of Filter and Vapor and UAB Kauno energetikos remontas.
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Beginning of the reorganisation of management of the Group.
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Assessment of the implementation possibilities of Kruonis PSHP development project.
January
February
March
April
May
June
July
August
September
October
November
December
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Signing the agreement between LEG and Windhunter – Serwis Spolka z.o.o on complex measurements of wind speed, directions and other meteorological conditions in the territory of Kruonis PSHP.
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Issue of the natural gas supply license to Energijos tiekimas.
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Lietuvos Energija became the principal shareholder of LITGAS – it holds 67% of the company’s shares.
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Issue of the natural gas supply license to LITGAS.
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Approval of the common position of the potential investors – Estonian, Latvian, Lithuanian energy companies and the Japanese company Hitachi – on the viability of the Project of Visaginas Nuclear Power Plant, concluding that the economic viability of the Nuclear Power Plant project depends on successful settlement of open issues.
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Inclusion of the development project of Kruonis PSHP in the European list of priority projects of infrastructure.
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Allocation of the EU financial assistance of LTL 6 million for the project of the boiler-room burning biofuels.
Essential completion of the reorganisation of management of the Group.
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Signing the Memorandum of Understanding on cooperation between Lietuvos Energija and Hitachi.
*UAB Technologijų ir inovacijų centras ** “Lietuvos energijos gamyba“, AB
2013 annual report
About the Group and the Company
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Structure of the Group The Lietuvos Energija group consists of 15 companies: the parent company and 14 directly and indirectly managed companies. The main business activities of the Group are the generation and supply of electricity and heat, sales, distribution and supply of electricity, and supply of natural gas. Activities of the Group’s companies
servicing these main types of business activities comprise the ITT, RE, transport, repairs and construction of energy facilities, staff training and other services. The detailed list of the Group companies is provided on p. 55 of this document.
The structure of the Lietuvos Energija group as of 31 March 2014 Lietuvos Energija, UAB
Supervisory Board consists of 7 members (3 of them independent). Board consists of 5 members. Chief Executive Officer is the Chairman of the Board.
Board* consists of 3 members (2 from the shareholder). Chief Executive Officer is not a member of the Board.
Supervisory Board consists of 5 members (1 independent). Board consists of 5 members. Chief Executive Officer is the Chairman of the Board.
Chief Executive Officer, Board is not formed.
*In case of TIC, 5 members Board is formed; in case of VAE SPB the Board is not formed.This complies with the provision of the corporate governance guidelines approved by the Minister of Finance
2013 annual report
About the Group and the Company
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The subsidiaries directly controlled by Lietuvos Energija, whose shares are traded on NASDAQ OMX Vilnius Stock Exchange: Lietuvos energijos gamyba, AB (hereinafter – Lietuvos energijos gamyba) – is a company engaged in the generation of electricity and heat, and in the import, export and sales of electricity. The company is of strategic importance because it ensures the energy security of the country with its electric energy capacities. Lietuvos energijos gamyba has three production facilities: Elektrėnai Complex of the Reserve Power Plant and Combined Cycle Unit, Kruonis Pumped Storage Hydroelectric Plant (PSHP) and Kaunas Hydroelectric Power Plant (HPP).
AB LESTO (hereinafter – LESTO) is the Lithuanian power distribution network operator. The main functions of the Company are transmission of electricity to consumers via distribution networks, effective connection of new consumers, operation, maintenance, management and development of the distribution networks, and ensuring their security and reliability. LESTO services about 1.6 million of customers, has the power grid covering about 65,300 km2 of the area of Lithuania and electricity lines of more than 123,000 km total length. LESTO system comprises 930 units of 110/35 kV transformer substations and distribution points and more than 35,000 units of transformer stations.
Electricity generation facilities of Lietuvos energijos gamyba
Elektrėnai Complex Reserve Power Plant, Combined Cycle Unit
Kruonis Pumped Storage Hydroelectric Plant
Kaunas Hydroelectric
Capacity – 1955 MW
Capacity – 900 MW
Capacity – 101 MW
The main power plant of the Lithuanian energy system with the largest production capacities in the country and supporting the tertiary energy reserve to ensure the security of energy supply and energy system reserves. The project of the new heat energy production installations is under implementation.
Kruonis PSHP is aimed at balancing the generation and consumption of energy and at the prevention and liquidation of the energy system accidents. Kruonis PSHP secures the bigger part of the total required emergency reserve quantity of the Lithuanian energy system. Kruonis PSHP is the only power plant of this type in the Baltic States.
Kaunas HPP is the largest power plant using renewable resources in Lithuania. Kaunas HPP helps to balance the generation and consumption of energy and levels out the differences in the energy system. This is one of the Lithuanian energy system power plants capable of starting its autonomous operations upon occurrence of the system accident.
2013 annual report
About the Group and the Company
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Structure of the Company
Structure of Lietuvos Energija as at the end of the accounting period (31 December 2013)
Supervisory Board
Internal Audit unit
Chairman of the Board, Chief
Legal Affairs unit
Board
Unit of Project Management
Unit of Strategy and Development
Unit of Organizational Development
Unit of Generation and Service
Unit of Finance and Treasury
Unit of Corporate Communication
Unit of Prevention
Lineal subordination Functional subordination
2013 annual report
About the Group and the Company
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Strategy During the previous year, the Lietuvos Energija group increased the efficiency and profitability of its operations, but the existing production portfolio of the Group is insufficiently competitive and is incapable of ensuring the long-term revenue and return. In order to address such a situation, the Group has developed a new business strategy for the period of 2014–2020 maintaining the ambitious goal – to double the value of the Group and to become the most valuable energy company in the Baltic States by 2020. The value is understood as a sustainable balance between three elements: return on assets, improvement of competitiveness and responsibility to employees, society and environment.
To double the value of the Group and to become the most valuable energy company in the Baltic States by 2020.
VALUE
=
Perception
VALUE
MISSION Expression
Sustainable balance
Return on assets
Improvement of economic competitiveness
Responsibility
Development through diversification of activities
Security and stability of supply
Responsibility to the society and employees
Efficiency of daily operations
Transparent and rational activities
Proactive implementation of the environmental requirements
Return to the shareholder
Participation in market development by offering new products
Ensuring the continuity and growth of the sector competences
2013 annual report Strategy
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The growth of return on assets of the Group will be achieved through the development – diversification of activities, development of new and economically justified projects and activities, acquisition of enterprises, ensuring the efficiency of daily operations and achieving the goals set by the shareholder. The Group will contribute to the enhancement of the economic competitiveness by ensuring the stability of power supply and new product offering. Responsibility is the key principle of relationships with the society and employees, proactive implementation of environmental standards and building of employee competences. The mission of the Group is understood as the enhancement of sustainable value in the energy sector by promoting the economic and social development of the country. The responsibility, cooperation and focus on results are the main values on which the performance of activities, realisation of goals and vision and implementation of the Group’s mission is built.
Mission:
to create sustainable value in the energy sector by promoting the economic and social development of the country
2013 annual report Strategy
Vision:
to become the highest-value energy company in the Baltic States
Values:
responsibility, cooperation, result
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Main strategic directions The main strategic directions supporting the realisation of the vision and mission of the Lietuvos Energija group:
Ensuring the provision of quality services to customers covers the reliable and timely provision of quality services and guaranteed customer satisfaction. Care will be taken to improve services provided to customers, to create electronic (saving customer time) and new services responding to the needs, develop different solutions offered to customers, and guarantee reliable generation, distribution and supply of energy. Diversification of operations covers the implementation of investment projects in the sector of electricity, heat and natural gas. The projects would increase the competitiveness of the Group and the sector of economy at large as well as the energy independence of the country, also the 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 available resources and infrastructure, investing in the creation of new infrastructure and effective management through acquisitions. Enhancement of the operating efficiency is a continuous process. The efficiency will be sought in all main activities of the Group, as well as in the provision of support functions, management of assets and other resources in all companies of the Group. The higher efficiency will be achieved through the integration of the system of management and control of the Group companies and establishment of the common principles of business management, division, coordination and control of responsibilities. The efficiency improvement measures covering all Group companies or identical or very similar activities at the individual company level will also be continued. Active sharing of the best practices between companies will be promoted and sought. Efficiency and its improvement will be one of the principal directions of activities of Lietuvos Energija, as of the parent company.
Formation of the new organisational culture is related to the development of the Lietuvos Energija group, as of the integral organisation:
2013 annual report Strategy
aiming at the creation of a modern, effective and dynamic organisation building its operations on common values, developing in consistent and targeted manner the successors for the required competences and key personnel, and promoting the employee involvement through the internal environment. The involvement of employees is considered to be a prerequisite of successful implementation of the strategy and therefore will be revised, the best practices of personnel management will be applied in uniform manner, and the common values of the Lietuvos Energija group, which serve as a basis for the implementation of the whole strategy, increasing the involvement and motivation of all employees, will be introduced in the companies. The energy sector is noted for long-lasting and complex projects, the implementation of which require the consistent work and involvement of the best specialists. The outcomes of certain projects planned within the framework of this strategy are likely to be visible only after 2020. Thus, the factors of consistency of solutions and ongoing improvement of operations are of critical importance for the implementation of the ambitious vision. Consequently, the particularly great attention will be devoted to the skills upgrading of employees and ensuring their succession. The full text of the Lietuvos Energija group Strategy for 2014-2020 is available on the internet website: www.le.lt
Efficiency and its improvement will be one of the principal directions of activities of Lietuvos Energija, as of the parent company.
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Market review
European electricity sector •
In 2013, rapidly increasing generation of electricity from renewable energy sources (RES), the bigger part of which was subsidised, resulted in lower wholesale prices of electricity in the market, but the prices for consumers – increased.
•
Low prices of electricity in the market, cheap emission allowances, and subsidies to RES limited investments in the new less-pollutant controlled electric energy generation capacities and forced to reduce generation volumes in the natural gas-fired power plants.
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The list of the EU Projects of Common Interest aimed at contributing to the EU energy market integration and security of supply, reducing CO2 emissions, was approved and measures for a more rapid implementation of these projects were envisaged.
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The supply of emission permits was reduced – in 2014 it is lower by 36% than in 2013, resulting in higher prices of permits.
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The new targets of the EU climate policy and energy sector until 2030, the emissions trading scheme reform and changes in subsidies to the sector of energy are pending in 2014.
Pushing gas-fired power plants from the market In 2013, the turmoil in the European electricity market continued caused by poor economic growth indicators, absence of changes in the electricity consumption patterns, rapidly growing generation of electricity from RES due to subsidies and resulting drop of wholesale prices in the market.
because these flexible power plants easily adjustable to different capacities are seen as the main generators, capable of balancing the generation of RES which is difficult to forecast.
Expected developments in energy sector Although capacities of the European energy generation are getting older, low market prices of electricity and emission allowances have almost stopped investments in new unsubsidised power plants firing cleaner fuel. It is estimated that by 2050, Europe will need EUR 5–7 trillion of investments in low pollution electric energy generation capacities. This situation stimulated the debate on the need to assess the mechanisms of subsidising RES and to create a model promoting the operation of flexible power generators and reserve power plants. The adoption of directives on state support to the sector of energy and environment that will facilitate the integration of the EU market, balanced development of the EU energy sector and establish RES subsidising schemes less distorting the market of subsidies is envisaged in 2014. The EU climate and energy policy framework for 2030 will be defined this year. The European Commission has proposed to increase the share of renewable energy sources to 27% and reduce by 40% greenhouse gas emissions compared to 1990 levels.
Reduced supply of emission allowances At the beginning of 2014, the decision was adopted to postpone the auctioning of 900 million tons of CO2 emission allowances of the EU in 2014-2016. In 2014, the auctioning of emission allowances will reduce by 400 million tons – to 528.4 million tons, which is by 36% less than in 2013, when 826 million tons were sold.
Although wholesale prices of electricity dropped to one of their rock-bottom levels, consumer prices kept climbing up due to growing charges and subsidies to RES.
In February this decision drove the futures prices of CO2 emission allowances for December 2014 to the record heights of 14 months – EUR 7.33 per ton.
These factors coupled with record-low prices of emission allowances (EUR 2.8-6.7 per ton) and cheaper coal (caused by rapid entry of shale gas into the USA) forced electricity producers to shut down gas-fired power plants.
Still, the achieved price is not a sufficient stimulus to invest in less pollutant electric energy generation capacities and calls for a structural reform of the emissions trading scheme.
The study performed by the Oxford University has shown that in 2013, 10 largest European producers closed down their gas-fired power plants, the total capacity of which amounted to 21.3 GWe and accounted for 12% of all electric energy capacities of Europe. The closure of gas-fired power plants is unfavourable for the development of RES,
2013 annual report Market review
Accelerated integration of the EU energy market To accelerate the development of the integrated energy market of the EU and addressing of emerging challenges, in 2013, the List of 248 Projects of Common Interest was formed. This list includes the priority intergovernmental energy projects that
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contribute to market integration and further competition, enhance security of supply and reduce CO2 emissions.
In 2013, the average electricity consumption per household was 140,6 kWh (in 2012 – 144,68 kWh).
These projects will benefit from faster planning and permit granting procedures, with the term of three and half years set for the granting of permits.
In 2013, likewise in 2012, about 66% (6,946 TWh) of consumed electricity was imported.
Furthermore, as from 2014, these projects will have access to financial support from the Connecting Europe Facility of the EU infrastructure networks amounting to EUR 5,85 billion (LTL 20,2 billion) for the period 2014–2020.
In 2013, heat power plants generated 2,356 TWh of electricity: Lietuvos elektrinė generated 1,098 TWh (by 23% less than in 2012; the combined cycle unit generated 0,627 TWh), and the remaining 1,257 TWh of electricity were produced by other heat power plants.
6 energy projects of Lithuania were included in this list and approved: Lithuanian– Polish interconnection LitPol Link, synchronous operation connection of Estonia, Latvia and Lithuania with the European Continental Network, extension of Kruonis PSHP capacities, extension of Klaipėda – Kiemėnai gas pipeline, extension of the Lithuanian – Latvian gas connection, and gas connection of Lithuania – Latvia.
Electricity sector in Lithuania and neighbouring countries
Consumed electricity generated from RES made up 15% (2,042 TWh, or by 22.4% more than in 2012). Hydroelectric power plants and wind power plants accounted for the bigger part of RES: Kaunas HPP generated 0,424 TWh (by 31% more than in 2012), Kruonis PSHP – 0,543 TWh (increase of almost 6%), and wind power plants – 0,6 TWh (increase of 11.5%).
Regulated electricity price for consumers keeps reducing According to the data of the National Control Commission for Prices and Energy (NCC), in 2013, the average regulated price for small consumers was 39,09 ct/kWh, less VAT. While the average electricity price for commercial consumers totalled 42,4 ct/kWh, less VAT.
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Changes in electricity consumption in Lithuania were minor, import of electricity accounted for two thirds of electricity consumption and generation of electricity from RES kept growing.
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In 2013, the average electricity price in the market increased by 10% (Nord Pool Spot power exchange), but no major changes are expected for 2014.
•
In 2014, the regulated electricity price for consumers is reducing.
In 2013, the public service obligation price (PSOP) fixed by NCC was 9,377 ct/kWh and for 2014 it was reduced to 7,141 ct/kWh. The price of transmission, system and distribution service components was also reduced by one cent.
•
The power connection works are gaining momentum and Estlink-2 connection was completed and put into operation.
Average NPS price higher by 10%
66% of consumed energy was imported According to the data of LITGRID, in 2013, the total electricity demand in Lithuania amounted to 11,344 TWh, of which 0,77 TWh were used for Kruonio PSHP activation. Without taking into consideration this demand, the total consumption was 10,574 TWh and the final consumption (excluding network technological costs) – 9,645 TWh. In 2013, electricity consumption in Lithuania remained practically unchanged – it was only by 0,15% lower than in 2012. The biggest changes were registered in the consumption of residents, which decreased by 1,9%. Changes of electricity consumption in industry were minor – it increased by 0.22%, and in agriculture – by 1.3%.
2013 annual report Market review
The average electricity price 37,778 ct/kWh (less VAT) was fixed for 2014.
In 2013, the average electricity price on the exchange (Nord Pool Spot (NPS) in the trade zone of Lithuania) was LTL 168,94 per megawatt hour (16,9 ct/kWh), less VAT, and exceeded almost by 10% the comparable price of 2012 (154,15 LTL/MWh (15,4 ct/kWh), less VAT). The average market price of electricity in 2013 was mainly influenced by high prices of September and October driven by shortage of electricity caused by restricted intersystem electricity transmission capabilities and repairs of Kaliningrad Thermal Power Plant. In October, the average price on the exchange was 221,73 LTL/MWh (22,2 ct/ kWh), less VAT. In 2013, the average price in Lithuania exceeded by 13% the price in Estonia and by 19% the price in Finland.
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In 2013, the general price indicator of NPS – the NPS system price was LTL 131,16/ MWh (13,1 ct/kWh), less VAT and exceeded by 21,8% the comparable price of 2012, when the average system price of 107,72 LTL/MWh (10,8 ct/kWh), less VAT, prevailed in the market. Such situation was predetermined by the interrelated factors: long winter, cold spring and water level lower than the long-term mean in the reservoirs of hydroelectric power plants, reducing the supply of cheap electricity generated in hydroelectric power plants.
Agreement on cross-border electricity transfer capacities The Lithuanian, Latvian and Estonian operators of the electricity transmission system LITGRID, Augstsprieguma tikls and Elering signed the agreement on the utilisation of the electricity transfer capacities for the electricity market, establishing the uniform principles of the allocation of capacities between the Baltic States and third countries. However, during certain periods the new methodology of calculation of capacities restricted the possibilities of import of electricity from the continental Russia. Meanwhile, due to insufficient interconnection capacities between Estonia and Latvia and particularly unfavourable generation structure, energy import from Scandinavian countries was insufficient for satisfying the total demand for electricity in BRELL (Belarus, Russia, Estonia, Latvia and Lithuania) ring in gas-burning local power plants had to cover the shortage. Due to that the prices on the exchange were high in summer and at the beginning of autumn. Consequently, on 1 January 2014, LITGRID decided to give up this methodology and started using the national cross-border capacities calculation methodology approved by the NCC. As a result of rising prices of electricity in the market, five independent suppliers of electricity, who have taken unreasonably high risk, faced financial problems. In December – January, their activities were wound up.
Latvia joined the Nord Pool Spot On 3 June 2013, Latvia joined the electricity trading on the Nord Pool Spot (NPS) market. Latvia’s joining the NPS allowed connecting the Lithuanian market with other Baltic States through the Estlink connection with the Scandinavian countries. The prices that are being formed now in Lithuania are still dependent not only on electricity demand and supply in Lithuania, but also in other countries that belong to the Nord Pool Spot market. After Latvia’s joining the NPS and connection of markets, in H2 of 2013 equal
2013 annual report Market review
prices prevailed in Lithuania and Latvia.
Integration with Northern and Western European networks Constructions of power transmission links with Sweden and Latvia have gathered momentum. The first stage of construction of the NordBalt link with Sweden was completed. All permits necessary for construction of the LitPol Link with Poland were obtained, the last agreements were signed, and the reconstruction of Alytus switchyard was started. The beginning of construction of the line is planned in May 2014. Poland, on its part, is also planning to start the works in the analogous manner. Both links are expected to be put into operation by end-2015. In addition, in 2013, both these links were approved as the EU Projects of Common Interest. The testing of the new link Estlink-2 was commenced on 6 December 2013, and since February the link was officially put into operation. The new 650 MW link increased the capacity between Estonia and Finland to 1,000 MW.
Freezing the constriction of the Nuclear Power Plant in Kaliningrad, preparations of Finland to construct a new NPP In mid-2013, the Russian Concern Rosatom ordered to freeze construction operations of the Baltic Nuclear Power Plant planned in Kaliningrad Region and started its conservation works. Later it was announced that until the middle of 2014 the decision will be adopted on the construction of a nuclear power plant of smaller capacity. The Finnish nuclear energy company Fennovoima signed the agreement with Rusatom Overseas, a subsidiary of the Russian state nuclear energy company Rosatom on the construction of 1200 MW nuclear power plant Hanhikivi-1. According to the plans, construction operations will begin in 2015, and the power plant will be put into operation in 2024. The Finnish Parliament will deliberate the project again, because of its significant changes compared to the original version for which the permit was granted in 2010.
The year 2014: milestones and trends •
No major changes in the electricity prices on the exchange are expected. It is forecasted that the shortage electricity will exist in summer months of 2014 driving energy prices higher during summer. The average annual price of electricity should be close to that of 2013.
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•
•
•
The operation of Estlink-2 should support equal prices in Estonia and Finland for the bigger part of the time, but because of insufficient capacity between Estonia and Latvia, electricity prices in Lithuania and Latvia will not be completely equal to the Finnish and Estonian prices. Electricity prices in the Baltic States are forecasted to come closer to the prices in Finland and Sweden by end-2015, when the NordBalt link between Sweden and Lithuania is put into operation. It means that electricity prices in the Baltic market will be more dependent on the meteorological conditions, because almost half of Nordic electricity is generated in hydroelectric power plants, the capacities of which depend on precipitation. Given that Nordic countries often use electricity for heating, the demand for electricity will be predetermined by temperature changes. In spring of 2014, Poland is planning to announce the invitation to tender for the construction of its first nuclear power plant. It was announced that in 2014-2016 the place and technologies for this power plant will be chosen and in 2017-2018 the necessary decisions will be adopted, including decisions on financial obligations, and construction operations will commence in 2019. Projected capacity of the power plant – 3000 MW, and completion of construction operations is envisaged in 2024. In the middle of 2014, the Lithuanian Energy Institute should draft the updated National Energy Strategy of Lithuania. It is planned to perform the analysis of fuel and energy prices, to assess technologies used for the generation of energy, possibilities of modernisation of the centralised heat supply sector, analyse the sectors of electricity, natural gas, oil and oil products.
European and world’s natural gas sector •
As a result of weakening of competitiveness of natural gas, consumption of natural gas in the sector of energy reduced by 1.4% in the EU.
•
Import of natural gas to the EU from Norway and through LNG terminals decreased, while the share of import from Russia – increased.
•
For the third year in a row, high prices in the LNG market were predetermined by the prevailing high demand in Japan (this country consumes almost one third of the total LNG demand in the world) and growing demand in China and India.
•
The key factors of influence envisaged for 2014: the Ukrainian crisis, Japan’s decision to restart nuclear power reactors, results of antitrust investigation opened by the European Commission into Gazprom’s activities.
Reduction of demand in the EU and structural changes of import According to the data of the European industry association Eurogas, in 2003, natural gas consumption in the EU reduced by 1.4% to 462 bn m3, and the structure of sources changed – the share of Russia contracted, and import via gas pipelines from the Northern Africa and Norway, import and extraction of the liquefied natural gas (LNG) in the region kept reducing. Consumption of natural gas in Europe was influenced by several interrelated factors, such as slow economic growth, reduction of gas consumption in the generation of electricity. The latter tendency was influenced by heaper coal, low prices of emission allowances reducing competitiveness of natural gas, as of the fuel for power plants. Utilisation of natural gas for the generation of electricity was also prevented by large quantitative growth of electricity generated from RES, which in many cases is purchased by order of priority and is subsidised. In the first half of 2013, the growth of demand for natural gas was stimulated by unusually cold weather in the big part of Europe.
Tension in the LNG market Supply of LNG to Europe kept contracting due to high prices in Asia influenced by high demand and limited possibilities to increase supply. In Japan, the demand for LNG remains very high because of closure of the nuclear power plants (this country accounts for one third of the LNG supply). Due to closure of several nuclear reactors, the demand for LNG has also increased in South Korea. Furthermore, the needs of India and China and the demand in South America are also growing. In 2013, the average LNG prices in the terminals of Belgium and Great Britain was USD 352 and 355 per 1000 m3, respectively, and in Japan and South Korea – USD 568 and USD 561 per 1000 m3, respectively. Given the limited supply, the LNG cargo flows are directed to the zones of higher prices. In 2013, LNG accounted for about 10% of the total consumption of natural gas at the global level. In November 2013, there were 32 liquefaction and 94 re-gasification terminals of LNG in the world, and the biggest export country was Qatar.
The year 2014: key factors of influence •
2013 annual report Market review
In 2014, the European natural gas sector and LNG needs are likely to be in-
17
fluenced by the Ukrainian crisis, because almost half of Russia’s gas supply is transmitted to Europe by transit through Ukraine, and Russia satisfies about one third of the natural gas needs of Europe. •
•
In 2014, the LNG market might be influenced by Japan’s decision on the operation of nuclear power plants. According to the most recent data, the applications have been filed for restarting some 14–17 out of 50 nuclear power reactors of Japan. The results and conclusions of the antitrust investigation opened by the European Commission into Gazprom’s activities are pending in 2014.
Natural gas sector of Lithuania and neighbouring countries •
In 2013, consumption of natural gas in Lithuania reduced. The natural gas consumption forecasted in 2014 will be similar to 2013.
•
In 2013, the average price of natural gas in Lithuania was LTL 1247 / 1,000 m3 and in Latvia and Estonia – about LTL 1,000/1000 m3.
•
Construction of the floating storage vessel of the LNG terminal was actually completed and its testing was started, new projects of gas connections were launched, transmission activities were separated from Lietuvos dujos and transferred to the new transmission system operator Amber Grid.
•
In 2014, control over gas transmission and supply activities will be separated, construction operations of Klaipėda LNG terminal will be finished, the agreement on purchase of LNG to Klaipėda terminal for the period of 5 years will be signed, the pilot cargo will be delivered and the testing of the terminal will be commenced.
•
By end-2014, construction of the Polish Svinoujscie LNG terminal will be completed.
uania), AB Lietuvos dujos (37.2%), UAB Dujotekana (14.1%), UAB Kauno termofikacijos elektrinė (8.2%), and UAB Haupas (0.4%).
The year 2014: milestones and trends •
According to forecasts, in 2014, natural gas consumption in Lithuania will be similar to 2013.
•
In the middle of 2014, it is planned to sign the agreement on purchase of LNG for a period of 5 years, whereby the minimum supply of 540 million m3 of natural gas necessary for the terminal will be ensured.
•
In Q3–Q4, the floating storage vessel of the LNG terminal will arrive to Klaipėda, and its testing will start in Q4. At that time the pilot cargo of LNG will be delivered.
•
By 31 October, the separation of control over transmission operations from supply and distribution will be finalised and Lietuvos dujos and Amber Grid will belong to different shareholders.
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Construction of the gas pipeline Klaipėda – Kuršėnai will begin.
•
The prospects of the LNG terminal project, construction of which is jointly planned by Finland and Estonia, are expected to become clear by end-May.
•
Construction of the Polish Svinoujscie LNG terminal is planned to be completed and put into operation by end-2014.
•
Poland is planning to intensify exploration of shale gas – drilling twice as many test wells as in 2013 – at least 30 test wells and possibly starting commercial extraction.
The review is based on data of the Lietuvos Energija group companies, reports of LITGRID, market analysts and energy companies.* *This market review is not a legal, tax or financial advice, no assurances or guarantees are provided for any future forecasts stated herein. Lietuvos Energija, UAB waives any liability in respect of this information to the extent permitted by legal acts.
Consumption in the region reduced and the price peaked In 2013, the average natural gas price in Lithuania was LTL 1,247 (about USD 480) / 1,000 m3. Average natural gas prices in other Baltic States were LTL 1,000 / 1,000 m3. Natural gas sold in 2013 to the Lithuanian consumers accounted for 2.67 billion m3 – by 18.4% less than in 2012. All natural gas was imported via the pipeline from one supplier – Russian Concern Gazprom. The largest importers were AB Achema (40.1% of the total import to Lith-
2013 annual report Market review
18
Review of activities of the Group Review of activities of the Lietuvos Energija group covers the events between 1 January 2013 and 31 December 2013 and after the accounting period – until the date of preparation of the Annual Report.
Service quality assurance The Group’s Company LESTO has about 1.6 million customers; therefore the quality of provided services is of particular relevance: the costs of the Group, as well as the satisfaction of customers, saving of their time and funds, and stability of the entire electricity system depends on it. The network and service modernisation projects implemented in 2013 facilitated in increasing the reliability indicators of LESTO network almost by 6%, consumer satisfaction – by one percentage point, and also ensured the guaranteed supply of electricity upon withdrawal of the part of independent suppliers. Combined cycle and reserve power plant units managed by another company of the Group – Lietuvos energijos gamyba guaranteed continuous power supply and helped to stabilise the prices of electricity prices on the exchange under conditions of limited possibilities of import from third countries and shortage of electricity.
Network reliability improved The quality of provided services is mostly related to the power distribution network operator LESTO – the company of the Group servicing the largest number of consumers. LESTO is modernising its network in order to ensure and improve the quality of provided services, avoid losses and increase the reliability of supply. In 2013, LESTO installed and modernised 877 transformer stations of 10/0.4 Kv, and replaced 283 km overhead power transmission lines by more resistant cable lines. Last year 1326 km length cable lines of 10/6/0.4 Kv voltage were installed and by end-2013 their total length reached 25,892 km and accounted for 21.3% of the whole network of 123,000 km. After network modernisation the reliability indicators increased almost by 6%. Excluding force majeure effects, in 2013, the average duration of unplanned power transmission interruptions (System Average Interruption index (SAIDI)) per consumer was 72.67 minutes (in 2012, SAIDI was 76.67 min). The average number of unplanned long interruptions per customer (System Average Interruption Frequency Index (SAIFI)) in 2013 was 0.96 (in 2012, SAIFI was 1.06).
2013 annual report
Review of activities of the Group
LESTO continues improving network reliability, in December 2013, LESTO launched the project financed from the EU structural funds, during the implementation of which 724 worn complete transformer stations will be replaced by modern pole-mounted transformer stations. This will help to satisfy the increasing loads, to meet the requirements of reliability and quality of power supply and to reduce losses. LESTO kept upgrading the operated electricity measurement devices and in 2013, compared with 2012, the number of breakdowns of electricity measurement devices reduced by 20%. In 2013, LESTO replaced 113,608 thousand obsolete electricity measurement devices. One more important indicator improved by LESTO was the reduction of technological costs. In 2013, these costs contracted almost by 5%. It means that power losses in distribution networks have reduced. In order to minimise electricity losses in the network, in 2013, LESTO launched a pilot project – installed electricity control meters intended for the calculation of the amount of electricity consumed in different sections of the power grid.
Introduction of more convenient functionalities for consumers LESTO has improved the functionality of its self-service website www.manoelektra.lt – now it offers more than 30 services to private and business customers. In 2013, the number of visitors of the self-service website rose from 1.7 million to 2.5 million, and the number of unique system visitors – from 0.9 million to 1.1 million. By end-2013, 385,000 customers were registered in the system; 334,000 of them were household customers. The improvement of functionality of the online self-service and introduced the telephone line 1802 and having analysed the consumer service tendencies, it was decided to optimise the customer service network transferring the operations of ten smallest town centres to bigger cities. However, consumers residing in these townships were not left without attendance – the provision of certain services to consumer was started in cooperation with the Lithuanian Post. If the project of cooperation with the Lithuanian Post is justified, LESTO is planning to introduce more services and extend them to other post offices. With a view to reducing the workload of the customer service centre, LESTO has also introduced the possibility of notifying consumers of power cut-offs and duration of elimination of failures by SMS or e-mail. Increasingly more consumers of LESTO choose more convenient ways of online settlement. In end-2013, about 40% of all payments for the consumer electricity were
19
made in e-channels. One of payment methods for consumer electricity, which is becoming most popular, is direct debit. It is used by more than 12.5% of LESTO consumers. Furthermore, in order to make the collection of readings more convenient for customers and more efficient for the company, in 2013, 2,294 electricity measurement devices were connected to the automated data reading system. By the end of the year, their number reached 20,067. The automation of electricity meters provides the possibility of automated billing of customers for electricity consumed in a certain period, and customers don’t need to declare the consumed amount of electricity by themselves. For the purpose of improving the servicing of consumers, LESTO investigated the possibilities of upgrading the services provided to consumers with special needs: people with a temporary of permanent disability, elderly people suffering from age-related disability, also for people with temporarily limited mobility, e-mail, people walking with crutches, mothers pushing baby carriages, etc. the assessments and recommendations obtained after completion of the analysis are being implemented in the customer service centres. Memos have also been prepared for employees how to offer better service to consumers with such needs. The Group’s company Energijos tiekimas is working on the development of the flexible pricing services for customers. At the beginning of 2014, the company offered to the customers the pricing model linked with the Nord Pool Spot electricity exchange prices, which was chosen by 200 enterprises. In January, the total savings of all these companies amounted to LTL 135,000.
Growing satisfaction with the Group services among customers During the year, the satisfaction of LESTO customers with services kept growing: the consumer satisfaction rate calculated according to the GCSI research methodology in 2013 was 76 points and exceeded by 1 point the comparable rate of 2012. For comparison – the mean of the European energy companies is 67 index points, and of the USA companies – 77 points. LESTO consumers were particularly positive about the clarity of provided necessary information, expedited resolution of the matters of concern, timely fulfilment of obligations and implementation of agreements. The Group’s company Energijos tiekimas, competing in the free market with other independent suppliers of electricity, has extended the number of its customers to 5,600, whose satisfaction amounted to 8.48 points out of 10. Energijos tiekimas realised 1.2 TWh of electricity and occupied about 20% of the market.
2013 annual report
Review of activities of the Group
Secured power supply In 2013, when the possibilities of import from third countries reduced and the country experienced shortage of electricity, the combined cycle and reserve power plant units managed by Lietuvos energijos gamyba guaranteed uninterrupted supply or electricity and contributed to the stabilisation of electricity prices on the exchange. In January – September 2013, almost the whole quota allocated for 2013 to Elektrėnai complex as generated, therefore, in the fourth quarter, with the persisting situation of constrained import of electricity, the combined cycle and 300 MW reserve power plant units in Elektrėnai generated electricity in excess of the quota. When at the end of the year a certain number of independent suppliers of electricity were shut down, LESTO continued its activities as the supplier of last resort (SLR) supplying with electricity the customers of these companies. As of 31 January 2014, independent suppliers supplied electricity to 46,080 objects, i.e. by 12% less compared to 31 November 2013.
Diversification of activities Diversification of activities of the Group companies is one of the main preconditions for improving the Group value. By 2020, the Group is planning to invest LTL 2–3 billion in the following areas: heat sector by constructing new or upgrading the existing co-generation power plants and using the possibilities offered by biofuels, supply and sales of natural gas utilising the potential of the LNG terminal, renewable energy sources, using the possibilities provided by the existing and future power links for trade in electricity and participate in the implementation of the nuclear power plant project upon adoption of the respective decisions. Certain steps in these directions have already been made – the construction of heat generation facilities was started in Elektrėnai, the possibilities of investments in heat and electricity generation capacities of Vilnius and Kaunas are being analysed, the preparations for supply of natural gas vial the LNG terminal are under way and the preparatory works of the nuclear power plant project are continued.
Enhancement of electricity supply positions, investments in power generation from biofuels During 2013, Energijos tiekimas increased the number of its customers to more than 5,600; the number of consumers of the certified “Green Lithuanian Energy” generated by Kaunas Hydroelectric Power Plant also increased. In July 2013, Energijos tiekimas entered the Lithuanian and Estonian markets, with
20
the Lithuania’s Embassies in Riga and Tallinn, having appreciated the best offered price, becoming its first customers. In 2013, Energijos tiekimas sold to its customers 1.2 TWh electricity and occupied about 20% of the market. Construction operations of the project of construction of the new heat complex in Elektrėnai have gained momentum. It is planned, that construction of 40 MW capacity biofuel firing boiler-room will be completed by end-2014. A new 50 MW capacity steal boiler-room, which will ensure the maintenance of hear reserves, generation of heat during peak of low temperatures, and the possibility of putting into operation the reserve units of the old power plant, will also be installed. The installation of this object is envisaged in June 2014. The new boiler-rooms will provide with required power and steam the town of Elektrėnai, the company Kietaviškių gausa and the reserve power plant managed by Lietuvos energijos gamyba, and will facilitate in reducing the need for PSOP funds. In 2013, the contractor – the Consortium of Filter and Vapor and UAB Kauno energetikos remontas – was selected and the maximum financial assistance of the EU in the amount of LTL 6 million was guaranteed. In February 2014, the project contractor obtained the construction permit and in March three steam boilers, 65 t weight, 9 m length and 4.5 m diameter each, were delivered to Elektrėnai from Vapor Boilers factory in Finland. In 2013, the assessments of the development of heat and electricity generation capacities in Vilnius and Kaunas were commenced.
Preparations for supply and sale of gas In 2013, the Group was joined by a new company LITGAS whose objective is to ensure the efficient operation of the LNG terminal by supplying the necessary minimum amount of LNG and to develop operations in the regional commercial market of LNG supply and natural gas trade. On 27 December 2013, NCC issued the natural gas supply license to LITGAS, and in February 2014, LITGAS was approved as the designated supplier, who will have to supply the LNG terminal with the minimum necessary quantity of natural gas of 540 million m3 and to support uninterrupted operations of the terminal. During 2013, the team of LITGAS was essentially formed, the procurement of financing, legal services necessary for carrying out the activities of purchase of LNG and supply of natural gas were started. The procurement of LNG according to the longterm agreements of 5 years was renewed: the procurement terms and conditions were updated, the updated tenders from LNG suppliers were received, in January 2014, the short list of potential LNG suppliers was compiled, and at the beginning of March the first stage of direct negotiations was finalised. The signing of the agree-
2013 annual report
Review of activities of the Group
ment on supply of LNG for a period of 5 years is pending in the middle of 2014. In January 2014, LITGAS signed a non-binding agreement with Latvijas gaze for up to LTL 20 million on the possibility of using the services of Incukalns Natural Gas Storage. LITGAS also helped to coordinate the framework agreements with LNG suppliers on sales of LNG, according to which the company will be able to engage in sport market sales. Concurrently, LITGAS is also discussing the possibilities to supply natural gas to commercial customers in the Baltic Region and to commence a new business – small-scale supply and bunkering of LNG – supply of LNG to ships. Another company of the Group – Energijos tiekimas obtained the natural gas supply license. In the future, the company is planning to offer joint purchase of power and natural gas to its customers the.
Completion of preparations for Kruonis PSHP development project In 2013, the preparatory stage of Kruonis PSHP development project was completed. It is planned to install the fifth unit of 225 MW in Kruonis PSHP in order to make the operations of the power plant more flexible, increasing the system reserve and economic potential. Investments in the construction operations of the new unit of Kruonis PSHP will reach about LTL 400 million. This project was included in the EU infrastructure Projects of Common Interest. All projects inscribed on this list will benefit from different EU financing instruments. According to its technical characteristics, the new unit of Kruonis PSHP will operate with 110-225 MW capacity in pump mode and with 55-225 MW capacity in generation mode. The indicative overall efficiency factor of the new unit cycle is 78%. These technical characteristics will allow using Kruonis PSHP for real-time regulation of the power generation misbalance of wind power plants, which will grow as the countries of the region increase the share of electricity generated from renewable sources. Furthermore, this unit will enable to effectively use the benefits of the NordBalt and LitPol Link interconnections importing from neighbouring markets cheaper electricity generated at night and converting it into peak load electricity. Also, the extension of Kruonis PSHP will help to satisfy the reserve needs.
Completion of surveys of Syderiai natural gas storage In 2013, the surveys of Syderiai geological structure aimed at determining whether this place is suitable for the installation of the first natural gas storage in Lithuania were completed. After drilling of four wells of more than 1.5 km depth, Lietuvos en-
21
ergijos gamyba continued carrying out the survey operations of the storage facility and analysing the collected data. Having systematised and assessed all data collected in 2010–2013 about the composition and parameters of Syderiai geological structure, a model of the reservoir was created for the assessment of characteristics of the storage.
Preparatory works of the nuclear power plant project In 2013, geological geotechnical soil surveys of a new nuclear power plant of Visaginas were completed and their report was coordinated with public authorities. The nuclear power plant site safety analysis and its substantiation were also completed and the report was submitted to the State Nuclear Power Safety Inspectorate (SNPSI) for assessment. At the beginning of 2014, a positive conclusion was received from the SNPSI on the nuclear power plant site assessment report. The SNPSI found no irregularities, and positive conclusions were also obtained in respect of the undated report from all coordinating authorities. This conclusion completed an important stage of the project that has lasted for several years. Summarising the completed site assessment surveys and the amount of data obtained in the course of such surveys it is concluded that the sites are suitable for the construction of the power plant; and besides the completed geological surveys of the sites were most detailed at the level of both Lithuania and the Baltic States. Also, in 2013, the economic viability of the project was assessed together with regional partners and the strategic investor, looking for the possibilities of ensuring the maximum project financing with minimum costs from international financial institutions and export credit agencies. In September 2013, potential investors – power generation companies from Estonia, Latvia and Lithuania and Hitachi from Japan adopted the common position on the viability of the project of Visaginas Nuclear Power Plant, whereby it was concluded that the project of the nuclear power plant might become economically viable, if open matters are addressed successfully. Seeking to ensure the sharing of the project implementation costs, responsibility and risks, the negotiations with regional partners on the contractual enforcement of their involvement in the project are continued.
Analysis of other viable projects Complex measurements of wind speed, directions and other meteorological conditions were started in the territory of Kruonis PSHP for the purpose of initial assessment of the potential of the lot for the installation of the wind park.
in August the agreement was signed with the service provider. The measurements were commenced at the beginning of 2014, and their results will serve as a basis for deciding on further woks of installation of wind power plants. Lietuvos Energija signed the Memorandum of Understanding with the Japanese company Hitachi on cooperation seeking common grounds in the areas of power and heat generation, buildings’ energy efficiency management systems, accumulation of electricity, smart networks, electric cars and their infrastructure and other innovative power technologies.
Strengthening of secondary non-commercial activities of the Group In 2013, the National Training Centre for Energy Specialists increased the share of services offered outside the Group – provided training to more than 8,500 people. The Centre started providing new certification and expert examination services. The Group’s ITT Company Duomenų logistikos centras providing commercial services to the market, in 2013 started constructions of Data Inn – one of the largest and most advanced data centres in the Baltic States, which is the only centre in Lithuania with Tier III certification. The projected power usage effectiveness (PUE) ratio of Data Inn is 1.3. Construction operations of Data Inn will be performed in stages. The first stage will be completed and part of the data centre with places for up to 100 server stands will be put into operation in May 2014. The power of the completed Data Inn data centre will be 6,000 kilowatts, useful floor space – up to 3,200 m2 and it will have about 700 server stands. In 2013, together with partners from the Baltic Optical Network alliance, the development of the Baltic Highway 10 G and 100 G data transmission network connecting Tallinn with Frankfurt am Main through Riga, Vilnius, Warsaw, and Berlin was continued – the infrastructure for the network section Warsaw – Frankfurt am Main was implemented. This is the last stage of the Baltic Highway, after completion of which the alternative data transmission route through Scandinavia will bee established linking East with West. The agreements on lease of capacities of the data centre for a period of ten years were signed with the Bank of Lithuania and Tele2. Agreements were signed with Tele2 on the creation of 10 Gbps speed data transmission ring for this company in Lithuania, and with the company Retn.net on the provision of Vilnius – Riga – Tallinn connection of 10 Gbps.
In June 2013, the invitation to tender for measurement services was announced, and
2013 annual report
Review of activities of the Group
22
Enhancement of the operating efficiency
implementation of this project, the total staff number of LESTO decreased by 11 employees.
Higher efficiency of activities of the Group implies both higher profit and return for shareholders and lower tariffs for consumers.
In order to improve the Company’s efficiency, the second stage of the project of centralization of customer service centres functions unrelated to customer service was implemented in Q3 2013, as a result of which total staff number of the Company decreased by 26 employees.
In 2013, more efficient operations regulated by the Lietuvos Energija group helped in reducing the electricity distribution tariff by 4% and the need for PSOP budget funds for power generation in Elektrėnai – by about 45%, in 2014. Enhancement of the efficiency also contributed to higher profitability of commercial activities of the Group. The Strategy of Lietuvos Energija for 2014-2020 establishes that higher operating efficiency will be achieved by adapting the most advanced management practices in corporate management, planning and monitoring of activities, finance, purchase, risk management and internal audit areas.
Implementation of management and control system The building of solid foundations for the improvement of operating efficiency and transparency started already in 2013, when a new governance model of the Lietuvos Energija group was introduced. The parent company Lietuvos Energija concentrated the coordination of the Group companies’ activities, elected the supervisory and management boards, and separated the responsibilities of management and supervisory bodies. The uniform governance and control system under implementation is aimed at defining the principles of governance and control responding to the common needs of the Lietuvos Energija group, the division of responsibilities for individual activities and processes, risk management and control, the principles of supervision, coordination and control of activities and processes at group and individual company level. This system will contribute to achieving the efficiency and synergy in the activities of Group companies and the realisation of the set goals.
LESTO centralised and optimised its functions In implementing the network service strategy, in 2013, LESTO centralised the function of inspection of the electricity network defects and set up the Groups for Inspection of Defects mobilising in them the best specialists of this area. The project of optimization of warehouses and inventories was implemented by LESTO in Q2 2013, which allowed streamlining the functions of warehouses, combining the warehouses of the inventories and electricity meters. By refusing the unnecessary warehousing areas, the rental costs of warehousing premises decreased and the reduction of the fixed value of inventories in the warehouses was started. After
2013 annual report
Review of activities of the Group
In Q4 2013, LESTO completed the implementation of the Projects of centralisation of the network maintenance functions, and continued the Project of implementation of the uniform dispatch management system and the Project of expansion of the territories serviced by operational crews. In implementing these projects, in Q4 2013, LESTO reduced its total staff number by 63 employees.
Organisational culture The Company’s employees constitute the key element in implementing the operating strategy of the Group for Lietuvos Energija. The aim is to build and maintain the organisational culture based on values and motivating employees to assume responsibility, cooperate, and joint efforts to achieve the best result. In the end of 2013, continuing the implementation of the corporate governance model of the Group, the uniform Human Resources’ Management Policy and the Top and Medium-level Managers’ Remuneration Policy was drafted, and the remuneration and in 2014 business management systems based on common principles will be implemented.
Employees While implementing the goals set by the shareholder and pursuing socially responsible business, we aim to attract and retain skilled specialists in the Group and create with them the long-term partnership relationships and joint successful future while ensuring the mutual benefits.
Involvement of employees in the development of culture The Lietuvos Energija group appreciates the opinion of its employees, therefore, the opinion poll of the Group employees was organised in 2013. Its results were introduced to the managers and employees of the Group companies, and the plan of actions for addressing the problems identified during the poll was prepared. In 2013, Lietuvos energijos gamyba launched the project of the “Dialogue of values” aimed at the communication and practical implementation of the values. The group of twelve “Value ambassadors” selected for the project collected, analysed and dis-
23
cussed the most relevant situations in the Group activities related to the corporate values. In this way, new models of behaviour at work consistent with the Company’s values and main objectives of its activities were developed. The project is aimed at fostering and disseminating the values and involving all employees of the Company in this activity. In the end of 2013, representatives of the employees and the employer held joint discussions and drafted a new Collective Agreement which covers, on the basis of mutual interests, different matters of work organisation, working conditions and remuneration, professional, social and economic guarantees for employees. At the beginning of 2014, the new values of the Group were approved together with the Operating Strategy of the Group for 2014–2020. Involving all employees of the Group these values will be implemented in all companies of the Group.
Attention to professional competences The Group companies aim at targeted development of employees and upgrading of their qualifications, accordingly, the employees and encouraged to attend training and required competences’ development courses. The Group ensures that its employees possess all attestations and qualification certificates required for work by laws. In 2013, the Lietuvos Energija group employees attended 212 training courses, of which 80 training courses were organised in the technical area, and 132 – in the public area. In 2013, 1,313 employees of LESTO attended compulsory training in the technical area and 1,640 employees – training courses aimed at the development of general competences. Already for a third year in a row LESTO has been successfully implementing the in-house coaching programme, according to which more than 25 employees of the company delivered training to the co-workers. In 2013, 1,391 employees attended the in-house coaching sessions. LESTO maintains ongoing cooperation with manufacturers and equipment suppliers, who share knowledge with employees of the Company’s power grid and introduce market tendencies and innovations in the area of energy free of charge. In 2013, such training was attended by 536 employees of the Company. In order to attract young qualified specialists to the Group, the Lietuvos Energija group actively participates in the events of “Career Days” organised by higher educational institutions, cooperates with the educational establishments, creates conditions for students of universities and vocational schools to apply theoretical knowledge and acquire practical skills. In 2013, 106 students were placed on internship in the Group Companies – Lietuvos energijos gamyba and LESTO. The fixed-term or open-end-
2013 annual report
Review of activities of the Group
ed employment contracts were signed with fourteen participants of the internship in these Group companies. As of 31 December 2013, the Group had 4,379 employees. The total wages fund of the Group in January – December 2013 equalled to LTL 182,297,000. Average wage of Group employees in January – December 2013
Professional category
Average monthly wage, LTL
Management personnel
13,062
Specialists and middle level managers, blue-collar workers
3,388
As of 31 December 2013, the parent company had 53 employees. All top and medium level managers of the Company have higher university education. The total wages fund of the Company in January – December 2013 equalled to LTL 5,419,000. Bendrovės darbuotojų vidutinis darbo užmokestis 2013 m. sausio – gruodžio mėn.
Professional category
Average monthly wage, LTL
Management personnel
12,818
Specialists and middle level managers
8,371
Compared to 31 December 2012, there were no essential changes in staff numbers of the Company. Total staff number Viso darbuotojai
Change %*
Lietuvos Energija, UAB AB LESTO Lietuvos energijos gamyba, AB UAB Technologijų ir inovacijų centras ir UAB „Duomenų logistikos centras“ Energijos tiekimas UAB UAB „Kauno energetikos remontas“ UAB „ELEKTROS TINKLO PASLAUGOS“ NT Valdos, UAB VšĮ Respublikinis energetikų mokymo centras UAB LITGAS
53 53 2,420 2420 503 503
8 (5) (2)
191 191 18 18 224 224 559 559 233 233 168 168 9 10
(24) 6 (7) (5) (3) (1) -
Total Iš viso
4,378 4379
(5)
24
At the beginning of 2014, the Group conducted a 360° assessment of competences of (top and middle level) managers of all Group companies and of all employees of Lietuvos Energija, Lietuvos energijos gamyba and Technologijų ir inovacijų centras for the purpose of conducting a comprehensive self-assessment of the competences of co-workers, direct managers and subordinates, to define the areas of improvement based on the results and to set the targets for the coming year.
Distribution of the Group employees by service record in 2013
Men
Women
0
500
1 000
Share of employees with over 10 year service record in the Company; Share of employees with 1 to 3 year service record in the Company;
1 500
2 000
2 500
3 000
Share of employees with 5 to 10 year service record in the Company; - Share of employees with up to 1 year service record in the Company.
3 500
4 000
Share of employees with 3 to 5 year service record in the Company;
Attention to and development of talents Lietuvos energijos gamyba and LESTO have been devoting considerable attention in their HR development to the identification and development of talents – proactive and best employees who exceed the expectations.
While implementing the goals set by the shareholder and pursuing socially responsible business, we aim to attract and retain skilled specialists in the Group and create with them the long-term partnership relationships and joint successful future while ensuring the mutual benefits.
LESTO has been developing the system of management of talents already for several years in a row. In 2013, employees from the list of talents of LESTO participated in various development programmes – competence development centres and training courses. The aim is to gather the Company’s employees, who perform their duties perfectly and have leadership skills, into one team and help them to discover and improve their strengths. Lietuvos energijos gamyba started implementing the programme of talents in 2012.
Development of uniform HR system In the end of 2013, the steps were made towards the creation of a uniform system of management of human resources based on common principles. In Q4 2013, the Group approved its human resources’ management policy introducing system attitude to the management of human resources, defining uniform and principle provisions of management of this area. The Medium-level Managers’ Remuneration Policy of the Group approved in Q4 2013 established the key principles of the fixed and variable wage components.
2013 annual report
Review of activities of the Group
25
Corporate governance The Lietuvos Energija group, whose shareholder is the State of Lithuania, aims at ensuring the efficient and transparent operations. As part of the reorganisation of governance initiated in H1 of 2013 and essentially completed by end-2013, the Group reorganised and improved its corporate governance. The key events related to the reorganisation of the Group are specified on p. 56. 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 for companies listed on the NASDAQ OMX Vilnius exchange, Guidelines on the Governance for State-owned 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). The Company’s shareholder is the State holding 100% of 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 related to the implementation of the ownership rights and obligations.
Principles of corporate governance of the Group:
•
Openness and transparency. The timely and accurate disclosure of information about the Group.
•
Responsibility and accountability of the management and supervisory bodies. Ensuring the proper performance of functions of the management and supervisory bodies of the Group or individual companies and their accountability to shareholders.
The principles and model of corporate governance are aimed at assessing and reconciling the expectations of the stakeholders and at converting them into measurable targets and indicators.
System of governance and control The main measure of implementation and maintenance of the corporate management of the Lietuvos Energija group is the integrated system of management and control aimed at ensuring the timely and effective realisation of goals and their compliance with the expectations of stakeholders. This system covers all key elements of activities: from cyclic planning of activities defining the targets of operations, and performance of activities to the assessment of the achieved operating results, and guarantees uninterrupted process in which the outcomes one completed cycle serve as the input to begin another cycle. This is a precondition for the implementation of the principles of continuous improvement. The model of the system of corporate governance and control of the Group distinguishes four groups of processes: governance (planning, strategic decision-making), support (HR management, communication, procurement, etc.), main activities (production, services, trade, etc.) and assessment and improvement of operations (monitoring, prevention, risk management).
•
Creating preconditions for the effective corporate governance. Creation of the operating environment of the Group or individual companies stimulating transparent activities on the market, compliance with legal acts, and guaranteeing the separation of management, supervision and regulatory functions.
The processes of governance, support, assessment and improvement in each company of the Group are essentially the same and targeted at the efficient implementation, management, support, assessment and improvement of the main activities of such companies.
•
Realisation of rights awarded by shares held by shareholders. Ensuring the possibilities for the implementation of the property and non-property rights arising from the management of shares, as well the minority interests of shareholders.
Accordingly, the main purpose of corporate governance is improvement of these common processes at the Lietuvos Energija group level through their centralisation, coordination, standardization and sharing experience and best practices.
•
Stakeholders’ role. Recognition of the expectations and rights of stakeholders arising from agreements or legal regulation and promotion of active cooperation in creating the sustainable added value.
The corporate governance activities are concentrated in the parent company of the Group – Lietuvos Energija, UAB, which coordinates in the Group companies the areas of finance, law, planning and monitoring, human resources, risk management, audit, technology, communication and other common areas.
2013 annual report Corporate governance
26
Supervisory bodies Supervisory Board the Supervisory Board is elected by the Supervisory Board from among its members. This model of formation of the Supervisory Board complies with the principles of corporate governance.
The Supervisory Board is a collegiate supervisory body specified in the articles of association of the Company and elected by the general meeting of shareholders for a term of four years. The Supervisory Board of Lietuvos Energija consists of 7 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 3 independent members. The Chairman of
Šarūnas Kliokys (born in 1959) Chairman, independent member Educational background Vytautas Magnus University, Baltic Management Institute, Master degree in Business Administration (EMBA) Vilnius University, Economist’s Diploma
The Supervisory Board of Lietuvos Energija, operating since 16 July 2013 and at the end of the accounting period (until 31 December 2013), was as follows:
Antanas Danys (born in 1975)
Dr. Virginijus Lepeška (born in 1955)
Tomas Garasimavičius (born in 1978)
Aloyzas Vitkauskas (born in 1954)
Žydrūnė Juodkienė (born in 1974)
Rasa Noreikienė (born in 1959)
Independent member
Independent member
Member
Member
Member
Member
Vilnius University, Master’s Degree in Business Administration (MBA) Boston College, Bachelor’s degree
Vilnius University, Doctor of Social Sciences
Creighton University, Political Science Master’s Studies Vilnius University IIRPS, Political Science Master’s Studies Vilnius University TSPMI, Bachelor’s Degree in Political Science
Vilnius Civil Engineering Institute, Post-graduate studies of technical sciences Vilnius Civil Engineering Institute, Master’s Degree in Civil Engineering
ISM University of Management and Economics, Bachelor’s Degree in Management and Business Administration Mykolas Romeris University, Master’s Degree in Law Vilnius Pedagogical University, Diploma of History and Political Sciences
Kaunas University of Technology, Master’s Degree in Public Administration Vilnius University, Lawyer’s Speciality
—
—
—
Participation in the capital of the Company and Group companies , % —
—
—
—
Workplace, position Chairman of the Board of UAB Ekonovus Chairman of the Board and Director of UAB Avestis Chairman of the Board of UAB Šiaulių plento grupė
Board Member of VšĮ Lietuvos Junior Achievement Partner of United partners
2013 annual report Corporate governance
Chairman of the Board of UAB Organizacijų vystymo centras Board Member of the association Mentor Lietuva Board Member of VšĮ Children’s Support Centre
Advisor to the Prime Minister of the republic of Lithuania for Energy
Vice-minister of Finance of the Republic of Lithuania
Vice-minister of Energy of the Republic of Lithuania
Vice-minister of Economy of the Republic of Lithuania
27
The main functions and responsibility of the Supervisory Board cover the following areas: election and recall of the Board Members, supervision of activities of the Board and CEO, provision of feedback to the general meeting of shareholders on the Company’s strategy, a set of financial statements, distribution of profit (loss), and annual report. The Supervisory Board also addresses other matters attributed to its competence. The Supervisory Board is functioning at the Group level, i.e. where appropriate, it addresses the issues related to the activities of the Company, its subsidiaries or their management or supervisory bodies.
Committees of the Supervisory Board For the purpose of effective fulfilment of its functions and duties, the Supervisory Board forms the committees. The committees of the Supervisory Board provide their conclusions, opinions and proposals to the Supervisory Board according to their competence. The committee shall consist of minimum 3 members of whom at least 1 member must be a member of the Supervisory Board and at least 1 independent member.
The Supervisory Board is functioning at the Group level, i.e. where appropriate, it addresses the issues related to the activities of the Company, its subsidiaries or their management or supervisory bodies.
Committees of Lietuvos Energija: •
Risk Management Supervision Committee is responsible for the submission of conclusions or proposals to the Supervisory Board 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 Board on the functioning of the audit and control system in the Group;
•
Nomination and Remuneration Committee is responsible for the submission of conclusions or proposals on the matters of nomination, recall or promotion of the Board members to the Supervisory Board, 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.
Where appropriate, other committees may also be formed according to the ad hoc principle (e-mail in, for addressing special matters, preparation, supervision or coordination of strategic projects, etc.). Detailed description of the supervisory bodies of the Company and listed companies of the Group – p. 57 - 59.
2013 annual report Corporate governance
28
Management Board The Board is a collegiate 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 recalled by the Supervisory Board on proposal of the Nomination and Remuneration Committee. The Board comprising 5 members elects from among its members the chairman of
Educational background
Participation in the capital of the Company and Group companies, % Workplace, position, participation in activities of other enterprises and organisations
the Board – the Chief Executive Officer of the Company. The members of the Board, acting according to their competence, must ensure the proper performance of the Company’s activities / supervision of the respective areas at the Group level. The Board of Lietuvos Energija, operating since 16 July 2013 and at the end of the accounting period (until 31 December 2013) was as follows:
Dr. Dalius Misiūnas (born in 1978) Chairman, CEO
Ilona Daugėlaitė (born in 1970) Member
Darius Kašauskas (born in 1972) Member
Mindaugas Keizeris (born in 1980) Member
Liudas Liutkevičius (born in 1980) Member
Lund University, Doctor’s degree in Technological Sciences Lund University, Master’s Degree in Industrial Electrical Engineering and Automatics Kaunas University of Technology, Bachelor’s Degree in Electrical Engineering
Vilnius University, Master’s Degree in Hydrogeology and Engineering Geology
ISM University of Management and Economics, Doctoral Studies of Social Sciences, Course 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 International Business Master’s Degree, Vilnius University Business Administration and Management Bachelor’s Degree
Vilnius University, International Business School, International Business Finance Master’s Degree Vilnius University, International Business School, International Business Bachelor’s Degree
— Lietuvos Energija, UAB Chairman of the Board, CEO Lietuvos energijos gamyba, AB, Supervisory Board Chairman Association Eurelectric , Member of the Board of Directors National Lithuanian Electricity Association KTU Alumni Associaton, President
— Lietuvos Enerija, UAB Board Member, Organisational Development Council Director LESTO AB, Supervisory Board Member UAB Technologijų ir inovacijų centras, Chairwoman of the Board UAB Elektros tinklo paslaugos, Board Member
—
—
—
Lietuvos Energija, UAB Board Member, Finance and Treasury Service Director LESTO AB, Supervisory Board Chairman NT Valdos UAB, Board Member UAB Kauno energetikos remontas, Board Member UAB LITGAS, Board Member
Lietuvos Energija, UAB, Board Member, Strategy and Development Service Director UAB Elektros tinklo paslaugos, Board Member Energijos tiekimas UAB, Board Member
Lietuvos Energija, UAB, Board Member, Production and Service Director NT Valdos, UAB, Board Member Energijos tiekimas UAB, Board Member UAB Kauno energetikos remontas, Board Member UAB LITGAS, Board Member
Description of management bodies of the listed companies of the Group is provided on p. 59 - 60.
2013 annual report Corporate governance
29
Analysis of the Group’s consolidated financial results Revenue
Consolidated financial performance indicators
Revenue of Lietuvos Energija group for the year 2013 amounted to LTL 2,908.2 million (change of +3.9 % and LTL +108 million compared to the results for 2012).
Change during 2013 +/proc.
LTL million, unless stated otherwise
2011*
2012*
2013
Revenue Purchase of electricity, fuel and related services Operating expenses EBITDA
2,705
2,799
2,908
108
1,739 469 498
1,840 438 521
56 (9) 159
(3) 2 31
18,4
18,6
1,785 447 680
210
-
EBITDA margin, %
Net profit**
Net profit margin, % ROE, %
Net profit including discontinued operations Total assets Equity Borrowings Borrowings, net Borrowings, net / EBITDA, % Borrowings, net / Equity, %
(90)
(69)
(3,3) (1,2)
(2,5) (1,1)
23,4
141
4
2% 1%
5%
5%
9%
Transmission revenue
LTL 2,908 million
Revenue from sale of electricity produced, electricity trade and supply
51%
PSO service revenue of LEG Heat energy revenue
4,8 2,3
27%
Revenue from connection of new customers Revenue from provision of balancing, regulating and power reserve services Other revenue
(109)
(784)
141
924
-
11,156 7,254 1,088 573
9,808 6,140 1,256 832
(1) 2 (6) (47)
115 8
160 14
9,727 6,253 1,180 442
(81) 113 (76) (390)
65 7
567
568
844
276
49
(717)
(421)
(283)
139
(33)
Number of employees, units***
5,413
4,621
4,378
(243)
(5)
Change in annual revenue of Lietuvos Energija, LTL million
3 200
328
48
16
4,5
1,2
(57)
3 000
Financial performance indicators are defined on page 46. *In September 2012, an agreement was signed between the Company and EPSO-G UAB owned by the Ministry of Energy on the sale of shares of electricity transmission system operator LITGRID AB, based on which 97.50% of shares of LITGRID AB held by the Company were sold to EPSO-G UAB at market value. **continuing operations ***number of valid employment agreements (at the end of the reporting period)
Analysis of the Group’s consolidated financial results
Revenue growth was driven by increase in the quantity of electricity distributed (+1.2%), increase in PSO service component in the transmission service tariff from 7.04 ct/kWh to 9.38 ct/kWh and increase in the average price of electricity transmission from 3.09 ct/kWh to 3.45 ct/kWh. 3 400
Net cash generated from operating activities Net cash used in investing activities
2013 annual report
Distribution of revenue of Lietuvos Energija group for the year 2013, %
2 800
(232) 2 908
2 799
2 600 2 400 2 200
Revenue for 2012
Transmission revenue
Revenue from provision of balancing, regulating and power reserve services
Other revenue
Revenue Heat energy from revenue connection of new customers
PSO service revenue of LEG
Revenue Revenue for from sale of 2013 generated electricity, trade in and supply of electricity
30
Due to the mismatch between the electricity supply and electricity consumption schedules that arose in the system of Lithuania in the third quarter of 2013, Lithuanian electricity transmission operator LITGRID AB activated more reserve capacities. Consequently, Lietuvos Energija received more revenue from the provision of balancing, regulating and power reserve services. The overall growth of revenue was impeded by reduction in trade and supply revenue due to decline in supply and generation volumes. Revenue was also negatively affected by the reduced electricity generation quota for the year 2013 and PSO service fee for the Reserve Power Plant in Elektrėnai.
Change in annual expenses of Lietuvos Energija, LTL million 20 2012 m.
Distribution of operating and purchase expenses of Lietuvos Energija group for the year 2013, % 80%
LTL 2,232 million
Purchases of electricity, fuel and related services
10%
1,785
2013 m.
0
500
20%
1,500
2,000
2,232
2,500
Expenses for subcontractor work and materials for the performance of construction works Operating expenses*
*Operating expenses net of expenses for subcontractor work and materials for the performance of construction works
EBIDTA and net profit Net profit increased by LTL 210 million compared to 2012 and amounted to LTL 141 million (LTL -69 million from continuing operations). Profitability indicators of Lietuvos Energija, LTL million
Wages and salaries and related expenses
800
Repair and maintenance expenses
700
Other expenses
500
Operating expenses amounted to LTL 447 million and increased by 2.1% (LTL 9 million) compared to the same period in 2012. This increase was mainly caused by increase in repair and maintenance expenses for assets managed by Lietuvos Energija group and rise in expenses for subcontractor works and materials for the performance of construction works related to sales of non-operating activities. A positive impact on the annual cost base was made by the following main reasons which supplemented each other: increasing efficiency of regulated activities and declining costs related the project on the new Visaginas Power Plant.
200
Analysis of the Group’s consolidated financial results
23.4% 18.6%
25%
200
20%
120
680
15%
521
400 10%
300
5%
2012 m.
2013 m.
0
141
100
-50 -100
6% 5% 4% 3% 2%
50 0
100 0
4.8%
+30.7%
600
Lower annual volumes of electricity supply and generation in Lithuanian Power Plant in Elektrėnai resulted in the decline of expenses related to purchases of electricity, fuel and related services by 3.0% (LTL 56 million) compared to 2012.
2013 annual report
1,000
413
Purchases of electricity, fuel and related services
Purchases of gas and heavy fuel oil
17%
-2,0%
Operating expenses Purchases of electricity or related services
4%
2,278
EBITDA of Lietuvos Energija group for 2013 amounted to LTL 680 million (change of +30.7% and LTL +159 million compared to the results of operations for 2012).
63%
6%
418 35
Operating and purchase expenses Operating and purchase expenses of Lietuvos Energija group for 2013 amounted to LTL 2,232 million (change of -2% and LTL -47 million compared to the results of operations for 2012).
1,840
1%
2012 m. 2013 m. -69 -2.5%
EBITDA
Net profit
EBITDA margin
Net profit margin
0% -1% -2% -3%
31
The growth of EBITDA of Lietuvos Energija group was mainly affected by higher net distribution revenue, higher gross profit of electricity trade and supply activity and balancing, regulating and power reserve activities, increased revenue from non-operating activities. The current EBITDA margin reached 23.4% (EBITDA margin for 2012 was equal to 18.6%).
Distribution of investments of Lietuvos Energija group for 2013, % 0.3% 5%
7%
Annual change in EBITDA of Lietuvos Energija group, in LTL million 33%
1 200 1 000 90
22
(9,1)
(57)
ITT (IT, telecommunications and management systems) Heat energy generation capacities Other investments Maintenance of the distribution network
4%
Electricity generation capacities
680 521
Investments in the development of the distribution network amounted to LTL 176 million, which is a 7.5% increase compared to the 2012 investments in the electricity network (LTL 163 million). In 2013, LESTO AB connected 20,649 objects of new customers, which is a 26.7% increase compared to 2012 when 16,302 objects of new customers were connected.
400 200 0
Development of the distribution network
51%
(232)
246
800 600
52
48
LTL 342 million
EBITDA for 2012
∆ Electricity ∆ Electrictrade and ity (fuel) supply generation expenses expenses
∆ Trans- ∆ Balancing, *Effect mission regulating of other revenue and power income / reserve expenses revenue
Operating PSO service Revenue expenses revenue of from sale of (OPEX) LEG generated electricity, trade in and supply of electricity
EBITDA for 2013
* ∆ Other revenue, ∆ Revenue from connection of new customers, ∆ Heat energy revenue, ∆ Balancing, regulating and power reserve expenses, ∆ Other financial activity.
As a result of the completion of the construction of the new combined cycle block of the Lithuanian Power Plant in 2012, investments for 2013 in electricity generation capacities decreased to the level of investments required for the maintenance of existing generation capacities. Change in annual investments of Lietuvos Energija group, LTL million 600 550
The growth of the Group‘s net profit basically reflected the dynamics of EBITDA increase. The net profit growth was to some extent mitigated by the estimation and accounting for the impairment of emission allowances obtained caused by changes in the value of emission allowances in the market. The current net profit margin reached 4.8% (the net profit margin for 2012 was negative at -2.5%).
Investments Investments of Lietuvos Energija group for 2013 amounted to LTL 342 million (change of -35.7% and LTL -190 million compared to the results of operations for 2012).
2013 annual report
Analysis of the Group’s consolidated financial results
535
12
5,3
0,9
(10)
(36) (163)
500 450 400
342
350 300 250 200
Investments DevelopITT (IT, in 2012 ment of the telecommunications distribution and mannetwork agement systems)
Heat energy generation capacities
Other investments
MainteElectricity Investments in 2013 nance generation of the capacities distribution network
32
Borrowings At the end of 2013, the Group’s net debt was reached to LTL 442 million (change of -46.9% and LTL -390 million compared to the net amount of borrowings at the beginning of 2013). During 2013, the level of the Group’s borrowings did not change significantly, yet a substantial increase in cash and current investments decreased the Group’s borrowings, net, by 47%. In 2013, the Group’s financial capacity was retained and strengthened. Change in borrowings of Lietuvos Energija group, net, LTL million 900
832
314
800 700 600
76
500
442
400 300 200 100 0
Borrowings, net, as at 31/12/2012
Cash and current investments
Decrease in borrowings
Borrowings, net, as at 31/12/2013
The current level of borrowings remains low both with respect to revenue earned and the capital structure. The Group‘s level of borrowings, compared to average debt indicators of the European energy companies, reflects a solid financial position of the Group. Solvency ratios of Lietuvos Energija group, LTL million
159.9% 2012 12 31
13.6% 65.0%
2013 12 31
7.1% 0
25
50
75
100
125
150
175
200
Net borrowings / EBITDA Net borrowings / Equity
2013 annual report
Analysis of the Group’s consolidated financial results
33
Results of operations of the Group’s companies Results of operations of LESTO AB LESTO AB is the Lithuanian electricity distribution network operator which was established in 2011 following the reorganisation of distribution networks companies Rytų Skirstomieji Tinklai AB and VST AB by way of merger. The core lines of business of LESTO AB include electricity transmission via distribution networks, connection of new equipment and objects of customers, operation, maintenance, management, development of distribution networks, ensurance of their safety and reliability, public and guaranteed electricity supply services.
Financial performance indicators of LESTO AB LTL million, unless stated otherwise Revenue Operating expenses EBITDA
2011
2012
2013
2,216 283 387
2,253 282 378
17,6
16,8
2,398 291 447
EBITDA margin, %
Net profit
Net profit margin, %
Total assets Equity Borrowings Borrowings, net
(47)
(44)
(2,1)
(2,0)
18,6
43
1,8
5,162 3,529 445 401
5,040 3,314 577 567
Net cash generated from operating activities Net cash used in investing activities
104 11
150 17
362 (295)
325 (312)
360 (290)
Number of employees, units*
2,890
2,555
2,420
Borrowings, net / EBITDA, % Borrowings, net / Equity, %
4,967 3,255 615 607 136 19
Revenue of LESTO AB for 2013 amounted to LTL 2,398 million (change of +6.4% and +LTL 145 million compared to the results of operations of 2012). Transmission and public supply income represented the major share of income. In 2013, income from regulated activities accounted for 99.3% of the company’s income. EBITDA for 2013 amounted to LTL 447 million (change of +18.2% and +LTL 69 million compared to EBITDA for 2012). The growth of EBITDA was mainly caused by higher quantity of transmitted electricity, exemption of losses in the network from the PSO service fee. In 2013, EBITDA of regulated activities was equal to 97% of the EBITDA indicator achieved by the company. In 2013, operating expenses of LESTO AB increased by LTL 9 million mainly due to the impact of repair and technical maintenance expenses. On 11 October 2013, the National Control Commission for Prices and Energy established the price caps for electricity distribution and public supply services for the year 2014 as follows: •
electricity distribution services via medium voltage network – 4,479 ct/kWh (2013: 4,747 ct/kWh);
•
electricity distribution services via low voltage network – 6,162 ct/kWh (2013: 6,219 ct/ kWh);
•
public supply of electricity – 0.52 ct/kWh (2013: 0.49 ct/kWh).
On 22 November 2013, the National Control Commission for Prices and Energy established the price cap of 31,616 ct/kWh (excl. VAT) to private consumers who receive electricity via medium voltage network (2013: 34,104 ct/kWh (excl. VAT)), and the price cap of 37,778 ct/ kWh (excl. VAT) to private consumers who receive electricity via low voltage network (2013: 40,323 ct/kWh (excl. VAT)) for the year 2014.
Performance indicators In 2013, LESTO AB transmitted to customers 8.21 TWh of electricity (change of +1.2% and +0.10 TWh compared to the quantity of electricity transmitted in 2012). Higher quantity of electricity transmitted to customers reflected a further growth of the Lithuanian economy.
*Number of valid employment agreements (at the end of the reporting period)
2013 annual report
Results of operations of the Group’s companies
34
SAIDI IR SAIFI
Distribution of the quantity of electricity transmitted by LESTO AB, % 31.9%
SAIDI
3% 4% 4%
6.9
Corporate customers
8% 10%
SAIFI
32%
Private customers
2012 m.
Residents
48.8
Industrial objects
8.21 TWh
211.4
21
288
0.69
2012 m.
0.27
0.77
1.83
0.1
21.3
Service establishments 49
2013 m.
Trade
11%
Administrative premises Engineering networks
28% 68.1%
0
Agricultural production Other objects
The volume of public and guaranteed electricity supply accounted for 37.3% of electricity transmitted by LESTO AB to customers (sales decreased by -15.2% compared to 2012). Lower quantity of electricity sold was caused by the ongoing liberalisation of the electricity market and relocation of consumers to independent suppliers. Electricity distributed to consumers via medium and low voltage networks
2011
TWh Quantity of electricity received in the distribution network Technological expenses, commercial losses and own needs Distribution expenses in technological equipment, %
Quantity of electricity transmitted
8.56 0.71 8.3
7.85
2012 8.80 0.69
2013 8.87 0.66
7.8
7.5
8.11
8.21
In 2013, LESTO AB successfully improved quality indicators of electricity supply. Regardless of the impact of natural disasters („force majeure“), the average outage duration for each customer served (SAIDI) was equal to 72.67 minutes in 2013 and was improved compared to 2012 (SAIDI for twelve months of 2012 was equal to 76.67 minutes). During the reporting period of 2013, the average number of interruptions per customer (SAIFI) was equal to 0.96 interruptions and was slightly improved compared to a respective period of 2012 (SAIFI for twelve months of 2012 was equal to 1.06 interruptions per customer).
81.3 2.5 50
154
0.68
2013 m.
0.25
0.46
1.43
0.03 100
150
200
250
300
0
0.5
Attributed to the responsibility of the operator
Unidentified
Impact of external factors
Natural disasters
1.0
1.5
2.0
The geographical market of LESTO AB is Lithuania. At the end of 2013, the number of the company’s customers exceeded 1.609 million and the territory serviced covered 65.3 thousand km2. During 2013, the number of new consumers connected increased by +13.9% compared to 2012. In 2013, permissible power of connected objects of new customers was 297.4 MW, which is more by 25.6% as compared to 2012. Change in the number of customers and the length of the network
2011
2012
2013
1,571,798
1,592,626
1,608,898
16,852
18,130
20,649
265,4
236,8
297,4
0,4 – 10 kV Length of the network (at the end of the period), km Length of the newly constructed electricity network, km
120,034
120,883
117,923
1,084
1,027
1,047
110 – 35 kV Length of the network (at the end of the period), km Length of the newly constructed electricity network, km
3,747
3,747
3,775*
0
0
0
Total number of customers
Number of private customers Number of corporate customers
New customers connected, units Permissible power of connected objects of new customers, MW
1,510,224 61,574
1,528,055 64,571
1,545,204 63,694
*number of lines has changed due to the update of data
2013 annual report
Results of operations of the Group’s companies
35
Significant events of the reporting period •
On 21 March 2013, LESTO AB and bank SEB AB signed the agreement under which a non-current loan of EUR 75.3 million was granted. This loan is allocated for the refinancing of the company‘s financial liabilities to financial institutions and financing of investments.
•
On 13 December 2013, LESTO AB, the Ministry of Economy of the Republic of Lithuania and the Lithuanian Business Support Agency signed the agreement on the financing and administering of the project Substitution of pole-mounted transformers for complete transformers of LESTO AB. According to this agreement, funds allocated from the EU Structural Funds for the financing of this project amount up to LTL 7,769 million. The total value of the project to be implemented until 28 August 2015 is LTL 19,423 million. During the implementation of the project and performance of modernisation works of distribution networks, modern pole-based transformers will be substituted for 724 outdated and worn complete transformers. This will allow satisfying increasing loads and meeting reliability and quality requirements of electricity supply. Works will be performed across the entire territory of Lithuania.
2013 annual report
Results of operations of the Group’s companies
36
Results of operations of Lietuvos energijos gamyba, AB
In 2013, the company‘s profitability indicators significantly improved compared to 2012, irrespective of declined revenue.
Lietuvos energijos gamyba, AB is a company of strategic importance engaged in the activities of electricity and heat production, electricity supply, import and export and trade in electricity. The company assumes the major responsibility for the improvement of effectiveness, competitiveness and transparency of the country‘s electricity sector and safeguarding interests of consumers. The group is engaged in electricity trade in the wholesale market (i.e. in the environment of electricity producers and suppliers). Lietuvos energijos gamyba, AB sells electricity and provides electricity balancing services to public and independent suppliers operating in the Lithuanian market as well as exports electricity and sells electricity in the power exchange.
Financial performance indicators LTL million, unless stated otherwise PRevenue Operating expenses EBITDA EBITDA margin, %
Net profit
Net profit margin, %
Total assets Equity Borrowings Borrowings, net
Borrowings, net / EBITDA, % Borrowings, net / Equity, %
Net cash generated from operating activities Net cash used in investing activities Number of employees, units*
Results of operations of the Group’s companies
In 2013, operating expenses increased by LTL 9 million mainly due to the impact of repair and maintenance expenses. In 2013, expenses related to revaluation of emission allowances amounted to LTL 16 million (2012: LTL 31 million). This loss is related to a drop in the value of emission allowance in the market in 2013.
2011
2012
2013
The company‘s EBITDA for 2013 amounted to LTL 208 million (change of +42% or +LTL 62 million compared to 2012). Such an increase resulted from a successful trade in electricity. In 2013, EBITDA of regulated activities made up 59% of EBITDA achieved by the company.
1,390 75 83
1,177 74 146
1,087 84 208
The company’s net profit margin increased even by 5.9 percentage points and was largely affected by the same factors which determined a positive change of the company‘s EBITDA.
6,0
12,4
19,1
0,8
2,8
8,7
3,217 1,273 641 633
3,347 1,307 661 652
3,241 1,373 555 377
In the financial statements for 2013, the company re-estimated depreciation of property, plant and equipment due to depreciation rates that were incorrectly applied in the previous reporting periods and retrospectively adjusted misstatements of the previous reporting periods. These adjustments resulted in the decrease in the company’s assets and equity by LTL 453 million and LTL 375 million, respectively, as at 31 December 2012 and the net profit for 2012 increased by LTL 1.0 million.
762 50
447 50
11
93 (157) 509
33
171 (159) 511
*number of valid employment agreements (at the end of the reporting period)
2013 annual report
Revenue of Lietuvos energijos gamyba, AB for 2013 amounted to LTL 1,087 million (change of -7.6% or -LTL 89 million compared to the results of operations for 2012). The main portion of revenue represented revenue from electricity sale and export activities, electricity balancing, power reserve and PSO service income. Decline in revenue is related to lower volumes of sponsored electricity generation and a highly competitive environment in the free market. In 2013, income from regulated activities accounted for 47.5% of the company’s income.
94
181 27
442 (118) 503
Net cash generated from operating activities increased by LTL 271 million in 2013. This increase was mainly affected by the change in the working capital of LTL 197 million.
Performance indicators Lietuvos energijos gamyba, AB holds the largest electricity generation capacities in Lithuania which ensure the country‘s energy security. The company owns three generation entities: Elektrėnai complex, Kruonis Pumped Storage Power Plant and Kaunas Hydro Power Plant. The Company has permits of unlimited validity to engage in electricity generation activities.
37
Installed power, MW
2011
2012
2013
Elektrėnai complex
1,800
1,955
1,955
0 1,800
455 1,500
455 1,500
2,801
2,956
2,956
New Combined Cycle Block Old blocks of the Lithuanian Power Plant
Kruonis Pumped Storage Power Plant Kaunas Hydro Power Plant Total
900 101
900 101
Distribution of the quantity of electricity produced by the company, % 46% 21%
900 101
55%
Commercial production
24%
Subsidised quota-based production Elektrėnai complex
In 2013, the company produced 1.96 TWh of electricity (change of -10.9% or -LTL 0.24 TWh compared to the results of 2012). Reduction in the quantity of electricity produced was mainly caused by the reduced quota of the sponsored electricity generation for the Reserve Power Plant in Elektrėnai for 2014. An actual decline in the reporting period was partly compensated by higher volumes of electricity generation at Kaunas Hydro Power Plant. Electricity produced, TWh
2011
2012
2013
Elektrėnai complex Kruonis Pumped Storage Power Plant Kaunas Hydro Power Plant
1.10 0.53 0.39
1.42 0.47 0.31
1.08 0.47 0.41
Total
2.02
2.20
1.96
Production quota subsidised by PSO services at Elektrėnai complex
1.74
1.53
54%
Kruonis Pumped Storage Power Plant Kaunas Hydro Power Plant
During 2013, the company sold 3.6 TWh of electricity to the internal market (to public suppliers and other independent suppliers) (3.7 TWh of electricity during a respective period last year). Moreover, with effect from 8 January 2013, the company performs the functions of the designated body, i.e. buys up all electricity produced by wind-power generators.
Significant events of the reporting period •
In March 2013, Elektrėnai municipality approved of the project of Lietuvos energijos gamyba, AB on new heat production capacities;
•
In December 2013, the agreement on the EU support (LTL 6 million) was signed;
•
With effect from 8 January 2013, the company has its representative at the Customer Advisory Board of Nord Pool Spot (a single representative from the Lithuanian energy sector);
•
In October 2013, the construction project of unit 5 of Kruonis Pumped Storage Power Plant was included in the list of Projects of Common Interest in energy infrastructure drawn up by the European Commission
0.90
Significant events after the end of the reporting period In February 2014, the company signed the credit agreement with bank SEB AB for the granting of loan not exceeding EUR 158 million. Three loans received under the credit agreements concluded with the banks operating in Lithuania and the European Bank for Reconstruction and Development will be subject to refinancing. The loans were used for the financing of projects on the construction of the combined cycle gas turbine and construction and installation of facilities for the removal of sulphur dioxide from emissions and catching of particulate matter.
2013 annual report
Results of operations of the Group’s companies
38
Results of operations of NT Valdos UAB NT Valdos UAB is one of the largest companies in the area of property management and transport services in Lithuania.
Financial performance indicators LTL million,
Performance indicators 2011
2012
2013
55.0 42.2 12.8
53.3 41.6 11.7
53.6 39.8 13.9
23.3
22.0
25.9
(31.3)
2.6
5.0
298.9 288.8 (15.9)
312.9 294.7 (18.9)
311.6 297.4 (18.5)
229
240
233
unless stated otherwise
Revenue Operating expenses EBITDA EBITDA margin, %
(17.2)
Net profit
Net profit margin, %
Total assets Equity Borrowings Borrowings, net
Number of employees, units*
The company‘s EBITDA for 2013 amounted to LTL 13.9 million (change of +18.8% or +LTL 2.2 million compared to 2012). The growth of EBITDA was affected by the reduction in operating expenses.
1.4
2.7
*of valid employment agreements (at the end of the period).
The company’s revenue for 2013 amounted to LTL 53.6 million (principally remained unchanged from 2012). The majority of the company’s income was generated from real estate management (48%) and lease of motor vehicles (47%). The major share of income was received from the group companies. Distribution of the company’s revenue for 2013, %
The company is engaged in the lease of administrative, production and warehousing premises as well as lease of territories and long-term and short-term lease of cars and special purpose motor vehicles and equipment, management of vehicle feet, accommodation and conference organisation services. The scope of real estate operated by the company principally remained unchanged in 2013. Although some real estate objects no longer fit for use in the company’s operations were sold, the area of real estate operated by the company increased due to revised cadastral data on real estate held. Real estate operated by the company
Thousand m2 Real estate
2012
2013
235
242
245
In 2013, the occupancy level of real estate was increased by commencing its more active use in the market. Three large agreements on the lease of premises with companies that do not belong to the group were concluded, the annual income of which amounts to LTL 1.1 million. The area of real estate used in the company’s activities was reduced as a result of the optimisation of the company‘s activities. Real estate operated by the company
% (at carrying amounts Real estate leased Real estate available for lese Real estate used in the company‘s activities
36%
2011
Total real estate
2011
2012
2013
54 31 15
55 31 14
61 27 12
100
100
100
48% 64%
Companies of Lietuvos Energija group
47%
Other clients
5%
Income from real estate management Income from lease of motor vehicles Income from accommodation services and other income
2013 annual report
Results of operations of the Group’s companies
39
In 2013, the expansion of car fleet was continued. The company acquired 270 units of motor vehicles during the year. A part of them was designated for the fulfilment of contractual obligations by renewing motor vehicles of existing customers and the other part was used to meet the needs of new clients. Vehicle feet
2011
2012
2013
Cars and heavy motor vehicles up to 3.5 tonnes Heavy motor vehicles over 3.5 tonnes
1,351 526
1,546 513
1,662 463
Total number of motor vehicles
1,877
2,059
2,125
units
Results of operations of Duomenų Logistikos Centras UAB Duomenų Logistikos Centras UAB (known as Technologijų ir inovacijų centras UAB until 4 November 2013) is one of the largest IT/Telecommunications companies in Lithuania providing IT and telecommunications services to the companies of the electricity sector and commercial clients – the major Lithuanian banks, communication providers and operators, state institutions. Duomenų Logistikos Centras UAB was established in 2010 by joining IT, telecommunications and technological equipment management specialists who were employed at separate companies of the Lithuanian electricity sector.
Financial performance indicators LTL million,
2011*
2012
2013
44.6 35.4 9.5
65.4 49.4 16.0
63.1 48.8 14.3
21.3
24,5
3.4
5.3**
(0.4)
5.1
8.5
63.2 53.5 0 (15.6)
68.2 56.9 0 (25.1)
74.6 62.2 0 (28.2)
226
250
191
unless stated otherwise
Revenue Operating expenses EBITDA EBITDA margin, %
Net profit
Net profit margin, %
Total assets Equity Borrowings Borrowings, net
Number of employees, units***
(0.2)
22.6
*only IT/Telecommunications activities **net profit includes gain of LTL 2.5 million on the disposal of discontinued operations ***number of valid employment agreements (at the end of the period)
The company’s revenue for 2013 contracted compared to 2012 and amounted to LTL 63.1 million. The company’s EBITDA margin for 2013 decreased by 1.9% compared to the previous year and amounted to LTL 14.3 million.
2013 annual report
Results of operations of the Group’s companies
40
Performance indicators Income from the maintenance activities of IT and telecommunications represented the major share of income and amounted to LTL 38.7 million. Income from IT and telecommunications design activities amounted to LTL 5.8 million; income from data centres and data transmission totalled LTL 18.6 million.
(function) of Duomenų Logistikos Centras UAB on 31 December 2013. In such a way the direct activity (function), i.e. data transmission and lease of data centres, of Duomenų Logistikos Centras UAB was streamlined, whereas a non-commercial activity (function) of the company, i.e. maintenance and service of the IT sector of electricity companies of the group, was transferred to Technologijų ir Inovacijų Centras UAB.
Distribution of the company‘s revenue for 2013, %
Results of operations of ELEKTROS TINKLO PASLAUGOS UAB
9%
30% 61% IT/Telecommunications maintenance Data centres and data transmission IT/Telecommunications design activities
Significant events of the reporting period •
ISO 9001 management and ISO 27001 information safety certificates were obtained;
•
agreement with Tele2 was signed which allowed reducing the price of the data reading service of LESTO AB three times;
•
data transmission agreement was signed with Google (value – LTL 4.6 million) together with partners from Baltic Optical Network;
•
agreement with the Bank of Lithuania was signed (value – LTL 3.5 million);
•
data centre Data Inn received Tier III certificate and became the most effective in Europe
Separation of activities •
Technologijų ir Inovacijų Centras UAB was renamed to Duomenų Logistikos Centras UAB on 4 November 2013;
•
Shareholders of Duomenų Logistikos Centras UAB established a new company Technologijų Inovacijų Centras UAB on 4 December 2013;
•
Duomenų Logistikos Centras UAB transferred to the ownership of Technologijų ir Inovacijų Centras UAB the set of assets related to non-commercial activity
2013 annual report
Results of operations of the Group’s companies
ELEKTROS TINKLO PASLAUGOS UAB is a group company engaged in the construction, reconstruction, repair and technical maintenance, testing and diagnostic works of electricity equipment of 0.4kV – 400kV voltage for the companies of the electricity sector and external market. The company provides services to the Lithuanian energy sector companies and companies of other sectors and natural persons in Lithuania.
Financial performance indicators LTL million,
2011
2012
2013
52.0 48.8 3.3
71.7 68.0 3.7
78.5 76.2 2.3
unless stated otherwise
Revenue Operating expenses EBITDA EBITDA margin, %
Net profit
6.3
Number of employees, units*
2.9
(1.0)
0.1
2.1
(1.4)
0.2
28.9 20.4 (1.1)
37.4 22.5 (4.6)
37.1 22.9 0.7 0.6
445
589
559
Net profit margin, %
Total assets Equity Borrowings Borrowings, net
5.2
1.1
*number of valid employment agreements (at the end of the period)
41
The company‘s revenue for 2013 amounted to LTL 78.5 million (change of +9.4% and +LTL 6.8 million compared to the results for 2012). Revenue received from the Lithuanian energy sector (97.4%) made up a major portion of the company‘s revenue. The company‘s EBITDA for 2013 amounted to LTL 2.3 million (change of -39% andLTL 1.4 million compared to 2012). The reduction of EBITDA was caused by changes in the revenue structure which were affected by the change in the profile of works performed.
Performance indicators Revenue received from energy projects comprising repair, reconstruction, construction works and technical maintenance of overhead lines, overhead cable lines, cable lines, transformers of 6kV – 10kV voltage and distribution stations of of 6kV – 10kV voltage, transformer substations of 35kV and higher voltage represents the major portion of the company’s revenue. The majority of the company’s revenue is generated from the provision of services to LESTO AB. Revenue received from services rendered to LESTO AB accounted for 89% (2012: 86%) of the total revenue of the company. Distribution of the company’s revenue for 2013, %
•
Reconstruction works of 110 kV switchgear at 110/10 kV Palemonas transformer substation (contract value – LTL 1.95 million excl. VAT);
•
Reconstruction works of 110 kV switchgear at 110/35/10 kV Kalveliai transformer substation (contract value – LTL 4.62 million excl. VAT);
•
In 2013, procedural management was implemented in the company integrated with the system of quality, environmental, occupational safety and health management.
Results of operations of Kauno Energetikos Remontas Kauno Energetikos Remontas UAB is one of the most experienced companies in the field of repair of energy equipment in Lithuania. The company’s core lines of business include repair, modernisation, installation, diagnostics of energy equipment, manufacturing of spare parts and various metal structures, construction of constructions of various types. The company provides services to the Lithuanian energy and industrial companies in Lithuania and fulfils orders placed by foreign companies.
Consolidated financial performance indicators of KER group LTL million,
89%
2011
2012
2013
41.6 39.2 2.4
37.9 35.1 2.7
40.6 37.0 3.5
unless stated otherwise
3% 0,4%
8%
LESTO AB LITGRID AB Other companies of the energy sector Other sectors
Significant events of the reporting period In 2013, the company acquired know-how of LITGRID in the field of construction works of technological objects, took part in public tenders announced by LITGRID on it’s own and was awarded the right to perform reconstruction works of the following objects: •
Reconstruction works of 110 kV switchgear at 110/35/10 kV Zarasai transformer substation (contract value – LTL 3.29 million excl. VAT);
Revenue Operating expenses EBITDA EBITDA margin, %
Net profit
5.6
7.2
1.8
0.6
8.6
0.9
4.3
1.5
2.1
Total assets Equity Borrowings Borrowings, net
47.1 21.7 7.4 3.4
38.7 21.7 12.1 11.1
50.0 22.5 9.1 2.7
Number of employees, units*
277
241
224
Net profit margin, %
*number of valid employment agreements (at the end of the period)
2013 annual report
Results of operations of the Group’s companies
42
The company’s consolidated revenue for 2013 amounted to LTL 40.6 million (change of +7% and +LTL 2.7 million compared to the results of operations for 2012). Revenue received from the Lithuanian energy sector (77%) comprised the major portion of the company’s revenue. The company‘s consolidated EBITDA for 2013 amounted to LTL 3.5 million (change of +28% and +LTL 0.8 million compared to the results of operations for 2012). The growth of EBITDA resulted from higher volumes of manufacturing of metal structures for foreign customers, introduction of the process management system LEAN and the balanced scorecard methodology. Labour productivity also increased in 2013.
Performance indicators The major share of the company‘s revenue is received from energy projects comprising reconstruction, repair and technical maintenance of transformer substations, installation and repair of energy equipment (transformers, engines, generators), boilers, turbines, technological pipes, management projects of engineering projects. Manufacturing activities include manufacturing of stacks, metal structures for constructions, pressure vessels, technological pipes for Lithuanian and foreign customers. Accommodation services are provided by subsidiary Gotlitas UAB. Other services include services of laboratory analyses, training and lease of premises. Sales revenue (in LTL million)
2011
2012
2013
Energy projects Manufacturing activities Accommodation services Other services
34.21 4.64 0.50 2.28
32.58 3.62 0.34 1.37
35.50 3.47 0.38 1.24
Total
41.63
37.91
40.59
Sales revenue (in LTL million) Lithuanian market Lithuanian energy sector Including: companies of Lietuvos Energija group Other sales
Foreign market Total
2012
2013
38.64 33.68
36.11 30.28
37.52 31.24
7.81 3.96
11.73 5.83
1.80
4.62 6.28
3.07
41.63
37.91
40.59
2.99
Results of operations of Energijos Tiekimas UAB Energijos Tiekimas UAB is a subsidiary of Lietuvos energijos gamyba, AB and the largest independent Lithuanian capital electricity supplier. The company is the sole supplier of Green Lithuanian Energy – certified electricity produced from renewable energy resources of Lithuania.
Financial performance indicators LTL million,
2011
2012
2013
211,4 2,7 6,3
328,9 4,4 2,6
195,4 3,3 6,1
unless stated otherwise
Revenue Operating expenses EBITDA EBITDA margin, %
Net profit
Net profit margin, %
In 2013, 92% of revenue was received from the Lithuanian market, whereof 83% of works were performed for the Lithuanian energy sector and 17% – for industrial companies. In 2013, revenue received from foreign customers increased by 71% compared to 2012.
2011
Total assets Equity Borrowings Borrowings, net
Number of employees, units*
3,0
0,8
3,1
0,6
4,9
2,3
0,2
2,5
29,9 9,8 1,2 1,2
39,4 7,4 6,5 6,5
34,6 10,3 (6,8)
15
17
18
4,9
*number of valid employment agreements (at the end of the period)
2013 annual report
Results of operations of the Group’s companies
43
The company‘s revenue for 2013 contracted by 40.6% down to LTL 195 million compared to 2012. Reduction in revenue for 2013 was caused by a more intense competitive situation in the market and re-distribution of the portfolio of the company’s clients, i.e. the number of large clients slightly decreased, however the number of small and medium-sized consumers significantly increased. EBITDA for 2013 increased up to LTL 6.1 million as a result of higher efficiency of operations that enabled increasing EBITDA margin by more than 4 times up to 3.1%.
Performance indicators In 2013, Energijos Tiekimas UAB sold 1,163 million kWh of electricity to its customers, which is more than 12% of the total electricity consumption in the country.
Electricity sold, million kWh Number of clients, units Overall client satisfaction indicator Sales of Green Lithuanian Energy, million kWh Number of clients of Green Lithuanian Energy, units
2011
2012
2013
1,234 1,746 8,00 -
1,901 2,909 8,32 46,4 12
1,163 5,568 8,48 61,7 43
The change in the company‘s client portfolio principally reflects the stages of the market liberalisation, i.e. after a full opening of the market for legal entities in 2013, the company witnessed a record-high growth rate (by more than 90%) of the client portfolio at the end of 2013 when 5,568 clients were using services of the company. The growing number of clients did not prevent the company from improving the quality of services provided and client service. In 2013, the client satisfaction level reached 8.48 (10) and it was the highest indicator since the company’s establishment. In 2013, Green Lithuanian Energy produced at Kaunas Hydro Power Plant was supplied to 37 legal entities and 6 natural persons. These clients consumed 61.7 million kWH of electricity per year or approx. 14.5% of the total quantity of electricity produced at Kaunas Hydro Power Plant.
Significant events of the reporting period •
At the beginning of 2013, Energijos Tiekimas UAB established subsidiaries in Latvia and Estonia and started expanding its business activities in these markets. In July the company signed agreements with the first clients – the embassies of Lithuania in these countries and later with other commercial entities.
•
In September 2013, the company obtained the natural gas supplier’s licence. The company plans to offer clients purchasing electricity together with natural gas.
2013 annual report
Results of operations of the Group’s companies
Results of operations of LITGAS UAB LITGAS UAB is the enterprise of strategic importance to national security which was established in December 2012 for the purpose of pursuing liquefied natural gas (thereafter “LNG”) trading activity and/or natural gas supply through the currently developed LNG Terminal in Klaipėda. Based on order of 10 February 2014 of the Minister of Energy the company was assigned with the functions of the designated supplier committed to ensure uninterrupted operation of the LNG Terminal in Lithuania. From the beginning of 2015, based on the agreement to be concluded with a supplier of liquefied natural gas, LITGAS UAB will be obliged to supply to the LNG Terminal a minimum required quantity of natural gas, i.e. 540 million cubic meters, which is necessary for the ensurance of uninterrupted operation of the LNG Terminal.
Financial performance indicators LTL million,
2012
2013
-
(0.9) (0.9) (0.8) -
1.0 1.0 -
2.3 2.2 0.1
1
9
unless stated otherwise
Revenue Operating expenses EBITDA EBITDA margin, %
Net profit
Net profit margin, %
Total assets Equity Borrowings Borrowings, net
Number of employees, units* *number of valid employment agreements (at the end of the period)
The company did carry out its main activities in 2013 and 2012. Expenses of LTL 0.9 million incurred during 2013 are related to the preparation for the performance of the activities of natural gas supply and trade in LNG through the LNG Terminal in Klaipėda. It is planned that the natural gas supply activities will be launched after the commencement of operations of the LNG Terminal in Klaipėda and after complying with all the legal and regulatory requirements.
44
Objectives of operations The main objective of the company is to ensure an effective operation of the alternative gas supply source, the LNG Terminal, by regularly supplying a minimum required quantity of natural gas. This activity would allow Lithuania implementing its strategic objectives such as the creation of the access to the global natural gas market and the opportunity for suppliers to benefit from its advantages, establishment of preconditions for the ensurance of safety of supply and competition on the Lithuanian natural gas supply market. The company also plans to engage in small and medium-sized commercial activities which would be focused on the supply of seaports of the region with LNG to be used as fuel for ships.
LITGAS
Timetable for operations
Negotiations on the supply of gas and ensurance of financing
Klaipėdos nafta
2012 m.
2013 m. Q1
The agreement on the lease of the LNG carrier was signed in 2012
2013 annual report
2013 m. Q2
2013 m. Q3
2013 m. Q4
The agreement on the supply of gas is signed the agreement on the financing of operations is signed the agreements with energy producers are signed
2014 m. Q1-2 .
Construction of the LNG carrier; construction of quays and gas pipelines
Results of operations of the Group’s companies
July. The agreement on trial freight. October. Delivery of trial freight to Klaipėda seaport.
Commencement of operations of the LNG Terminal
2014 m. Q3-4
October. Delivery of the LNG carrier to Klaipėda seaport.
45
Results of operations of VšĮ Respublikinis energetikų mokymo centras The main activities of the VšĮ Respublikinis energetikų mokymo centras (REMC) include professional training, qualification development, certification and seminars and conferences. The company provides trainings for workers, engineers, managers and executives working in the fields of electricity and heat sector management, occupational safety and health, welding and hoisting equipment work organisation and gas sector. The company provides regular trainings to and certifies foremen responsible for the maintenance of potentially dangerous equipment and heads of special works. REMC operates in Lithuania, its specialists work in Vilnius, Kaunas, Klaipėda, Panevėžys, Šiauliai and Utena.
Financial performance indicators LTL million,
2011
2012
2013
unless stated otherwise
Revenue Operating expenses EBITDA EBITDA margin, %
Net profit
Net profit margin, %
Total assets Equity Borrowings Borrowings, net
3.3 3.5 (0.2) (4.9)
3.3 3.4 (0.1) (3.2)
3.2 2.9 0.3
VAE SPB UAB was dormant in 2013. The company did not earn income and expenses amounted to LTL 10 thousand.
Terms used •
Operating expenses = operating expenses, net of expenses related to purchases of electricity and related services, depreciation and amortisation and impairment and write-off expenses of property, plant and equipment and other noncash expenses;
•
EBITDA (earnings before interest, taxes, depreciation and amortisation) = profit (loss) before tax + interest expense – interest income – dividends received + depreciation and amortisation expenses + impairment expenses + write-offs of property, plant and equipment + other non-cash expenses;
•
EBITDA margin = EBITDA / Revenue;
•
Net profit margin = Net profit / Revenue;
•
Return on equity = Net profit / Equity;
•
Net borrowings = borrowings – cash and cash equivalents – current investments and time deposits – other non-current financial assets.
9.7
(0.3)
(0.3)
0.3
(8.0)
(8.1)
7.8
0.7 (1.1) 0.2
0.6 (1.4) 0.1 (0.1)
0.5 (1.3) 0.0 (0.2)
28
169**
168***
Number of employees, units*
Results of operations of VAE SPB UAB
*number of valid employment agreements (at the end of the period) *138 lectors were employed at the company based on hourly pay at the end of 2012 **139 lectors were employed at the company based on hourly pay at the end of 2013
2013 annual report
Results of operations of the Group’s companies
46
Information on securities of the Group companies The shares of LESTO AB and Lietuvos energijos gamyba, AB have been listed on the Main List of NASDAQ OMX Vilnius Stock Exchange since 17 January 2011 and 1 September 2011, respectively. The shares of the companies are traded only at NASDAQ OMX Vilnius Stock Exchange. The ordinary registered shares of LESTO AB and Lietuvos energijos gamyba, AB issued at the nominal value of LTL 1 represent 100% of the share capital of these companies. LESTO
Company
Total nominal value 603 944 593 of shares, in LTL Full name of the shareholder (name of the company) Percentage of proprietary votes.
Distribution of the company‘s shares by shareholders, % (according to the data of 31 December 2013)
11,8
0,08
Lietuvos energijos gamyba
0,33 3,46
4,1
LESTO
96,13
Lietuvos energijos gamyba, AB
1
82,6
635 083 615
Lietuvos Energija, UAB E.ON Ruhrgas International Lietuvos Energija, UAB Gmbh
96.13
ISIN code
LT0000128449
LT0000128571
Trade list
BALTIC MAIN LIST
BALTIC MAIN LIST
Abbreviation of securities
LES1L
Natural persons
Lietuvos Energija, UAB E.ON Ruhrgas International Gmbh
Other shareholders
Financial institutions
Dynamics of the price of securities of LESTO AB LESTO AB is one of the largest companies listed on OMX Baltic Stock Exchange in terms of the market capitalisation. During 2013, the price of shares of LESTO AB increased by 26.19%. The lowest price of shares was observed on 28 May 2013 (it was equal to LTL 2.09). The price of shares of LESTO AB reached the highest level on the last day of the 2013 trade in shares (on 30 December 2013) (it was equal to LTL 2.69). Dynamics of the price of shares of LESTO AB and their turnover (17/01/2011–31/12/2013) 2
4,5
1,6
3,5 Price (in LTL)
As at 31 December 2013, shares of LESTO AB and Lietuvos energijos gamyba, AB were held by 7,188 and 6,153 shareholders, respectively.
1,8
4
LNR1L
1,4
3
1,2
2,5
1
2
0,8
1,5
0,6
1
0,4
0,5
0,2
Price of shares of LESTO
Information on securities of the Group companies
2013.11.06
2013.12.19
2013.09.24
2013.08.12
2013.06.28
2013.05.15
2013.03.27
2013.02.12
2012.11.09
2012.12.27
2012.09.27
2012.08.15
2012.07.03
2012.05.21
2012.04.02
2012.02.17
2011.11.22
2012.01.05
2011.10.10
2011.08.26
2011.07.14
2011.05.30
2011.04.13
2011.03.01
2011.01.17
0
Turnover (in LTL )million)
82.63 11.76
2013 annual report
0,5
0
Turnover
47
Comparison of stock exchange indices and prices of securities
On 31 December 2013, the price of shares of Lietuvos energijos gamyba, AB was by 3.34% higher than the price of shares at the beginning of the year. From the beginning of 2013 the price of the company‘s shares fluctuated in the range from -5.5% to +7.8%. The shares reached the highest price on 26 March (it was equal to LTL 1.42).
The shares of LESTO AB are included in the OMX Vilnius and Baltic Benchmark Index. The OMX Vilnius Index includes all companies quoted on the Main and Secondary Lists of Vilnius Stock Exchange. The weight of shares of LESTO AB represents 20.3% in this index.
Dynamics of the price of shares of Lietuvos energijos gamyba, AB and their turnover (1/09/2011–31/12/2013)
The Baltic Benchmark Index comprises shares of the highest capitalisation and most liquid companies of all sectors which are traded on NASDAQ OMX Baltic Stock Exchange. According to the classification by the industry, LESTO AB is attributed to the utilities sector.
1,8
0,16
1,6
0,14
1,4
0,12
1,2
0,1
1
0,08
0,8
0,06
0,6 0,4
0,04
0,2
0,02 2013.11.12
2013.12.30
2013.09.30
2013.08.16
2013.07.04
Dynamics of prices of shares of LESTO AB and Lietuvos energijos gamyba, AB and indices of OMX Vilnius and OMX Baltic Benchmark (1/01/2013–31/12/2013)dinamika, 2013 01 01–2013 12 31
0
30%
25%
Turnover
20%
LES1L
2013 annual report
Information on securities of the Group companies
LNR1L
12-18-2013
12-24-2013
11-6-2013
11-20-2013
10-9-2013
10-23-2013
9-11-2013
OMX Vilnius
9-25-2013
8-28-2013
8-14-2013
7-31-2013
1-2-2013
-10%
7-3-2013
-5%
7-17-2013
(0,4)
6-5-2013
16,026,50
0
6-19-2013
16,089,94
5%
5-8-2013
29,4 3,4
5-22-2013
1,626,53 863,97
4-24-2013
1,257,44 835,46
10%
4-10-2013
Change, %
3-27-2013
Total market capitalisation
2013
3-13-2013
LESTO AB Lietuvos energijos gamyba, AB
2012
2-27-2013
Company
15%
2-13-2013
Capitalisation of the companies and the total capitalisation of companies listed on NASDAQ OMX Vilnius AB Stock Exchange, in LTL million
1-30-2013
2013.05.21
2013.04.04
2012.08.15
2013.02.18
2012.11.15
2013.01.04
From the beginning of 2013 until the last day of the 2013 trade in shares, the OMX Vilnius Index increased by 18.7%, the OMX Baltic Benchmark Index increased by 12.2%, while during the period of 12 months of 2013 the price of shares of LESTO AB increased by 16.2% from its level that prevailed at the beginning of the year.
1-16-2013
of share of Lietuvos Energijos Gamyba, AB
2012.10.03
2012.08.21
2012.07.09
2012.05.25
2012.04.10
2012.02.23
2011.11.28
2012.01.11
2011.09.11
2011.10.14
0
Turnover (in LTL million)
Price (in LTL)
Dynamics of the price of securities of Lietuvos energijos gamyba, AB
OMX Baltic Benchmark GI
48
Social responsibility The Lietuvos Energija group devotes special attention to the social responsibility and seeks to ensure that operations of the Group are based on principles of responsible activities enshrined in the Global Compact, initiated by the United Nations. The Global Compact includes implementation of 10 principles of responsible activity and encourages companies to avoid damage to the environment, community, and other businesses, and to join their eÂŹffort with the United Nations, public authorities and non-governmental organisations in dealing with social and environmental issues, thereby contributing to the development of the society and economic growth. The Global Compact is based on the principles of human rights, rights at work, environment, and anti-corruption.
In 2013, the Lietuvos Energija group company LESTO was invited to chair the National Network of Responsible Business (NNRB), the key mission of which is to encourage the responsible business ideas as the main prerequisite of sustainable development in Lithuania. The model of socially responsible business of the Lietuvos Energija group is implemented through targeted and consistent activities in these areas:
Environmental protection Relationships at work and with society Market operations
2013 annual report Social responsibility
49
Key events and milestones of 2013 • The conference on ener•
LESTO was invited to chair NNRB in 2013.
•
LESTO – is one of the 10 most transparent companies in the Baltic States, and the annual report prepared by the Company was recognised to the 3rd among the annual reports submitted by the companies whose shares are quoted on the market.
January July
gy efficiency for business organised by the business newspaper Verslo žinios and LESTO. During the conference, the companies shared practical experiences of saving energy resources in production, efficient solutions reducing energy consumption in retail trade, as well as solutions for the office and other sectors of industry and trade.
• The Association Investors’ Fo• Completion of the environ-
mental project “Protection of the White Stork in Lithuania”, implemented since 2009 together with the Lithuanian Society of Ornithologists, the Institute of Ecology of the Centre for Natural Studies and other partners.
February
March
April
August
September
October
• On the eve of 1 September, LEG granted the
inmates of Elektrėnai Child Care Home and children from families eligible to social support and other pupils of primary school with the baskets of primary school pupils.
•
• The upgraded website Elektromagija.lt was
introduced – in this website children are taught safe behaviour playing games, reading the stories prepared specially for them, and using other interactive and colourful aids.
2013 annual report Social responsibility
rum nominated LESTO for the “Socially Responsible Business” award. • On the occasion of the “Days of Energy Specialists”, the companies of the Group organised free of charge events: lectures for students, excursions to the Museum of Energy and Technology, exhibitions of electric cars and experiments.
•
May
LESTO received the National Responsible Business Award for winning the nomination of the “Most Community-friendly Company 2012” in the category of large companies of Lithuania. The award was granted for the versatile partnership and dissemination of best practices abroad.
participated in the annual environment cleaning campaign “Let’s Do It”.
June
November
During the Global Education Week LESTO delivered the lecture “Electric ideas – from bulb to electric car” introducing to schoolchildren social activities of the company, prospects of use of electric cars in Lithuania, and energy saving project “To the extent required”.
• Group employees actively
December
• 32 employees of the Group donated their blood during the Blood Donation campaign organised by LEG in Vilnius.
• LEG acquired ISO 14001:2005 Certifi-
cation of the Environmental Management Systems.
• LESTO and Vilnius Archdiocese Caritas
organised the campaign “Let’s share the Christmas”, during which LESTO employees personally contributed to the humanitarian activities and assistance provided by Caritas to people living in poverty. During this campaign LESTO employees purchased, packed and brought about 450 various useful items – gifts.
50
Environmental protection „The Lietuvos Energija group encourages the use of work equipment reducing costs and pollution, sustainable use of natural resources, is actively looking for ways of minimising the impact of energy objects on people and environment, and investing in the environmentally friendly modern technologies. In implementing different environmental projects, the Group companies aim at minimising the impact of energy objects on people and environment, and also at encouraging the participation of society in different initiatives related to environmental protection. In 2013, the project of the Environmental Management System complying with requirements of LST EN ISO 14001:2005 standard was successfully implemented in the objects of Lietuvos energijos gamyba and on 30 December 2013 the certificate of conformity was obtained. In 2013, LESTO completed the implementation of the environmental project “Protection of the White Stork in Lithuania”, that has been implemented since 2009 together with the Lithuanian Society of Ornithologists, the Institute of Ecology of the Centre for Natural Studies and other partners. As part of this project, safe platforms for storks’ nests were mounted on the supports of electricity lines.
Management and sorting of waste, moderate use of resources The Group companies take care of waste management and sorting and encourage their employees and society to use resources in moderate manner. In 2013, the Lithuania Power Plant transferred for utilisation about 1,840 t of hazardous waste, sold 2,117 of ferrous metal scrap, 179,425 t of copper, 36.12 t of aluminium waste. In 2013, Kruonis PSHP transferred for utilisation about 10.99 t of hazardous waste. The average quantity of domestic waste generated in the territory of the Lithuania Power Plant during the year was 320 m3, and in the territory of Kruonis PSHP – 33.28 t. Removal of domestic waste is carried out by a specialised company, and paper and cardboard waste is transferred to the company processing such waste. The largest companies of the Group have introduced the waste sorting initiatives, installed special waste sorting containers for sorting of plastic and paper. In cooperation with the association of purchasers of electronic equipment, LESTO also collects energy-saving light bulbs, small electronic devices and batteries at the customer servicing centres, subdivisions of Lietuvos energijos gamyba; special containers have also been installed in Elektrėnai, Kruonis, Kaunas and Vilnius for discarding obsolete small electronic devices and batteries. Since 2013, the Group company UAB Kauno energetikos remontas is participating in the environmental project “We sort waste in the company” aimed at sorting and collecting waste of electronic equipment, domestic appliances and portable batteries and accumulators generated in the pro-
2013 annual report Social responsibility
cess of operations of the companies and at homes of their employees, reducing the discharge of such waste into the environment, educating and informing the society about the sorting of waste. In 2013, the companies of the Group traditionally participated in the environment cleaning campaign “Let’s Do It”, during which employees of the Group companies were cleaning the environment and planted black pine-trees in Elektrėnai. The Group’s company LESTO keeps encouraging its clients to give up paper bills and pay-books. More than 90% of business customers of LESTO already use electronic bills.
Implementation of environmentally friendly technologies Subdivisions of Lietuvos energijos gamyba implement 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. According to the results of surveys conducted in 2013, the maximum environment (atmosphere and water) pollution values specified in IPPS permits of the Lithuania Power Plant, Kruonis PSHP, and Kaunas HPP were not exceeded. The Company also carries out the regular calculations of pollution from stationary and mobile sources of pollution and performs internal audit of used chemical substances and preparations, waste generation and wastewater management. The expert examination of the project of cleaning the Lithuania Power Plant’s Obeniai lot was successfully completed. After implementation of the technical design the piles of sludge will be formed and covered with soil in the existing basis of the lot and a new emergency wastewater reservoir will be erected. New automated monitoring systems for regular emissions of pollutants were installed in energy units No 1 and No 2 of the Lithuania Power Plant. The project of installation of the technological water preparation equipment of the Lithuania Power Plant has been further implemented and the preparation of the technical work project is in progress. The assembly of modern technological water preparation equipment of up to 100 m3/h efficiency is planned in the chemical section of the Lithuania Power Plant. The assembly of the new equipment will facilitate in reducing the technological water preparation costs up to 25%, and water losses – up to 20%. In 2013, the reconstructed wastewater treatment facilities of the Lithuania Power Plant polluted with petroleum products were put into operation. The reconstructed wastewater treatment facilities allowed reducing wastewater treatment costs up to 50%. In order to avoid the prohibited release of pollutants with wastewater into the River Strėva, the device indicating the presence of petroleum products dissolved in wastewater was put into operation.
51
Social initiatives, market operations In 2013, the Group companies actively contributed to the event of the traditional “Days of Energy Professionals” organised by the National Lithuanian Electricity Association (NLEA). Representatives of the Group delivered lectures to pupils, students and other interested parties about the generation of electricity, activities of the distribution network operator, smart and nuclear energy. Lietuvos energijos gamyba was actively engaged in the activities of Elektrėnai community, continued the cycle of events “Lietuvos energijos gamyba presents”, during which the residents of Elektrėnai were provided with an opportunity to meet with the outstanding culture, art, sports and business representatives and to discuss the relevant matters. The Company also has become a member of the educational initiative “Who needs this?!” accepting the largest number – 160 students from all Lithuania. Students were invited to visit the power plants managed by the Company – the reserve power plant in Elektrėnai, Kruonis PSHP and Kaunas HPP and to see with their own eyes, where and how the electricity originates and to learn everything about the energy specialist’s profession directly from representatives of this profession.
Cooperation with academic community In 2013, the Group companies traditionally attended the career events hosted by higher educational institutions, during which students were familiarised with the activities of the Group and career possibilities. In 2013, ISM Executive School launched a new teaching module of Energy Economics, the content of which was prepared and qualified lecturers were appointed with the help of the Group companies. The Lithuanian University of Educational Sciences, in implementing the mission of the “Green University” and seeking to develop the social responsibility activities, together with LESTO organised an open lecture “Social responsibility, or how organisations can achieve social benefits” for the academic community of the University. During the lecture, the best practice of social responsibility of the organisations was discussed and the methods used by the University for developing consumption culture and encouraging students to use reasonably the electricity, water, gas and other energy resources, were introduced. LESTO actively participated in the Global Education Week events ran by the Lithuanian Youth Centre for the whole month of November. The purpose of these events was to draw attention of youth to the impact of human activities on the environment and quality of human life, stimulate to take care of the implementation of development ideas and to create new values of consumption culture.
2013 annual report Social responsibility
Long-term projects The large scale long-term social responsibility projects for children, youth and general public implemented by the Group Company LESTO are characterised by active involvement of communities and different social groups, and ideas of safety, energy efficiency and conservation of environment.
„Operation 2020“. The purpose of the programme “Operation 2020” implemented by the Group company LESTO is to promote responsible behaviour with power grid installations, raise awareness of people about safe behaviour with electrical equipment and minimise negative consequences arising from irresponsible or malicious behaviour of residents. In 2013, in cooperation with law enforcement bodies, largest entities of the infrastructure and communities, 63 criminal acts were disclosed as a result of which LESTO suffered losses of LTL 161,300 (part of these losses was already compensated). In 2013, LESTO also continued cooperation with the Association of the Wardens of the Municipalities of Lithuania, attended its meetings and conferences. The greatest support in fighting against thefts is the sense of community – reports of residents help to quickly identify the offenders, repair damaged transformers before they get burnt and supply of electricity to residents is interrupted. Speaking about the investigated cases of thefts it can be concluded that 50% of thefts were identified with the help of residents.
„To the extent required“. This social responsibility project of LESTO is aimed at developing the reasonable energy use traditions of the society. In 2013, for a third year in a row, LESTO together with the business newspaper Verslo žinios hosted the conference on reasonable use of energy, which was attended by more than 300 participants from more than 160 enterprises of the country. Also, LESTO invited the enterprises to join the “Green Project” – the agreement whereby the enterprises and organisations confirm that they are familiar with the ideas of conservation of the environment promoting reasonable use of electric energy, approve such ideas and promise to apply them in practice. In order to draw attention to the moderate use of energy and its security in shared areas, LESTO and its partners are implementing the project “To the extent required by a multi-dwelling building: safe and efficient home”. As part of this project, a representative modern lighting of stairways and exterior doors was installed in four multi-dwelling buildings in different cities. During the first days after changing the lighting, the energy efficiency in the stairways improved by 26–32%. Replacement of incandescent light bulbs by LEDs reduced monthly electricity bills in medium-sized stairways by LTL 61.33.
52
In 2013, LESTO launched the pilot project of light fixtures with LED technology “To the extent required by a city” in Birštonas. Technical characteristics of LED light fixtures show that by modernising the lighting of town streets municipalities would be able to reduce electricity consumption by up to 50–60%.
„Electromagic“. This educational initiative of LESTO is aimed at raising awareness
of children and youth about benefits, threats and safety of electric energy. The purpose of this initiative is to teach youth safe behaviour with electricity and electrical equipment, stimulate their interest in responsible use of electricity, environmental protection and ideas of sustainable development. In September 2013, LESTO essentially upgraded the project initiated in 2009 “Elektromagija.lt”. The new website teaches children safe behaviour through games, specially created stories, other interactive and colourful aids and participation in competitions organised to attract the attention of children.
In autumn 2013, LESTO and Vilnius Computer Users’ Academy (VCUA) agreed to cooperate and create joint projects to be realised by schoolchildren. They will be given the electricity related tasks – to create games, tests, etc. for visitors of the website “Elektromagija.lt”.
In implementing different environmental projects, the Group companies aim at minimising the impact of energy objects on people and environment, and also at encouraging the participation of society in different initiatives related to environmental protection.
2013 annual report Social responsibility
53
Key information on the Company and the Group The Annual Report of Lietuvos Energija and its subsidiaries is prepared in observance of Resolution No 1052 of the Government of the Republic of Lithuania of 14 July 2010 on approval of the guidelines for ensuring the transparency of activities of the state-owned enterprises and appointment of the coordinating authority and published on the Company’s internet website at: www.le.lt. Company’s name
Lietuvos Energija, UAB
Company’s code
301844044
Authorised capital
LTL 4 067 163 632
Paid up authorised capital
LTL 4 067 163 632
Address
Žvejų str. 14, LT-09310, Vilnius, Lithuania
Phone
(8 5) 278 2998
Fax
(8 5) 278 2115
biuras@le.lt
Webpage
www.le.lt
Legal form
Private Limited Liability Company
Date and place of registration
Registered on 28 August 2008 in the Register of Legal Entities
Data about the Company are collected and kept in
the Register of Legal Entities, SE Centre of Registers
As of 31 December 2013, the authorised capital of the Company totalled LTL 4,067,163,632. On 30 June 2013, the authorised capital was divided into ordinary registered shares of LTL 1 par value of one share. All shares are fully paid up. Shareholders of the Company Republic of Lithuania, represented by the Ministry of Finance of Republic of Lithuania
Share capital (LTL thousand)
%
4,067,164
100
On 13 February 2013 the Company’s shares were transferred to the Ministry of Finance by right of trust.
2013 annual report
Key information on the Company and the Group
54
Information on subsidiaries, branches and representative offices Lietuvos Energija, UAB directly or indirectly controls the following companies: Company
Head office address of the Company
Effective shareholding, 31 12 2013 (%)
Authorised Main capital activity (LTL thousand) 31 12 2013
Company
Head office address of the Company
Lietuvos energijos gamyba, AB
Elektrinės str. 21, Elektrėnai
96.1
635,084
Electricity generation, supply, import, export and trade
UAB „Kauno energetikos remontas“
Chemijos str. 17, Kaunas
AB LESTO
Žvejų str. 14, Vilnius
82.6
603,945
Electricity supply and distribution to consumers
NT Valdos, UAB
Geologų str. 16, Vilnius
87.9
314,001
UAB Duomenų logistikos centras
A.Juozapavičiaus str. 13, Vilnius
73.2
UAB Technologijų ir inovacijų centras*
A.Juozapavičiaus str. 13, Vilnius
VšĮ Respublikinis energetikų mokymo centras
UAB „ELEKTROS TINKLO PASLAUGOS“
Effective shareholding, 31 12 2013 (%)
Authorised Main capital activity (LTL thousand) 31 12 2013
96.1
14,245
Repairs of electric installations, manufacture of metal structures
Gotlitas UAB (valdoma per R. Kalantos str. 119, Kaunas UAB „Kauno energetikos remontas“)
96.1
1,450
Accommodation services, trade
Disposal of real property, other related activities and provision of services
Energijos tiekimas UAB
Jeruzalės str. 21, Vilnius
96.1
750
Supply of electricity and natural gas
58,907
ITT maintenance services
Energijos tiekimas OŪ
Narva mnt 5, Tallinn
96.1
121
Supply of electricity
85.8
10
Provision of ITT and other services
Energijos tiekimas SIA
Elizabetes iela 45/47, Rīga
96.1
99
Supply of electricity
A.Jeruzalės str. 21, Vilnius
73.2
294
Professional development and continuing vocational education and training of energy sector specialists
UAB „VAE SPB“
Žvejų str. 14, Vilnius
100
10
Advisory business and other management activities
Motorų str. 2, Vilnius
82.6
18,904
Construction, repairs, technical maintenance of power grids and related installations, connection of consumers to power grids
UAB LITGAS**
Gedimino str. 33 - 2, Vilnius
66.7
3,000
Supply LNG via terminal and trade in natural gas
* From 15 October 2013, ** From 4 December 2013
2013 annual report
Key information on the Company and the Group
55
Key reorganisation-related events
•
Petras Povilas Čėsna was elected an independent member of the Supervisory Board of AB LESTO (30 September 2013).
•
Board members of the following subsidiaries of Lietuvos Energija Group were elected: NT Valdos, UAB, UAB Kauno Energetikos Remontas, UAB Technologijų ir Inovacijų Centras, UAB LITGAS, UAB ELEKTROS TINKLO PASLAUGOS, Energijos Tiekimas UAB (November to December 2013).
•
The Minister of Finance of the Republic of Lithuania approved guidelines of corporate governance of UAB Visagino Atominė Elektrinė (as of 30 August 2013 known as Lietuvos Energija, UAB) companies group controlled by the Ministry of Finance and comprising of power generation, distribution and maintenance companies (7 June 2013).
•
Based on decision by the Ministry of Finance, articles of association of the state-controlled UAB Visagino Atominė Elektrinė (as of 30 August 2013 known as Lietuvos Energija, UAB) were amended and a seven-member Supervisory Board was elected for a four-year term (16 July 2013).
Changes of company names
•
Šarunas Kliokys was elected as a chairman of Supervisory Board of Group parent company UAB Visagino Atominė Elektrinė (as of 30 August 2013 known as Lietuvos Energija, UAB) and Appointment and Salary Committee was established in the meeting of the Supervisory Board (17 July 2013).
On 30 August 2013, Group parent company UAB Visagino Atominė Elektrinė has changed its name to Lietuvos Energija, UAB.
•
The Supervisory Board elected a Board of the parent company UAB Visagino Atominė Elektrinė (as of 30 August 2013 known as Lietuvos Energija, UAB) for a four-year term.
•
The Board members elected dr. Dalius Misiunas as the Board chairman and CEO of the Company (22 July 2013).
•
2 members of the Supervisory Board were elected at the extraordinary general meeting of AB LESTO (26 July 2013)
•
Shareholders of Lietuvos energija, AB approved the change of the company name to Lietuvos energijos gamyba, AB and elected a Supervisory Board with 3 members, where 1 independent member is Pranas Vilkas. (29 July 2013).
•
Lietuvos Energija, AB was renamed to Lietuvos energijos gamyba, AB. New name and articles of association were registered with the Register of Legal Entities (5 August 2013).
On 5 August 2013, Lietuvos Energija, AB, a power generation and supply, electricity import, export, and trade company changed its name to Lietuvos energijos gamyba, AB.
Supervisory bodies Full name
Participation in the capital of the Company and of the Group companies, %
Workplace
Šarūnas Kliokys Chairman, independent member
—
CEO and Chairman of the Board of UAB „Avestis“, Chairman of the Board of UAB „Šiaulių plento grupė“ and UAB „Kilimai“.
Antanas Danys Independent member
—
Public Institution Lietuvos Junior Achievement, Board Member
Dr. Virginijus Lepeška Independent member
—
Chairman of the Board of UAB Organizacijų vystymo centras
•
The selection to the Boards of Lietuvos energijos gamyba, AB and AB LESTO was announced (8 August 2013).
Tomas Garasimavičius Member
—
Advisor to the Prime Minister of the Republic of Lithuania for Energy
•
UAB Visagino Atominė Elektrinė became Lietuvos Energija, UAB (30 August 2013).
Aloyzas Vitkauskas Member
—
Ministry of Finance of the Republic of Lithuania, Vice-minister
•
The Board of Lietuvos energijos gamyba, AB was elected and Juozas Bartlingas was appointed its chairman and chief executive officer of the company (17 September 2013).
Žydrūnė Juodkienė Member
—
Ministry of Energy of the Republic of Lithuania, Vice-minister
•
The Board of AB LESTO was elected and Aidas Ignatavičius was appointed its chairman and chief executive officer of the company (17 September 2013).
Rasa Noreikienė Member
—
Ministry of Economy of the Republic of Lithuania, Vice-minister
2013 annual report
Key information on the Company and the Group
56
As of 31 December 2013, the Supervisory Board of Lietuvos energijos gamyba, AB comprised:
Particulars of the Committee members: Full name
As of 31 December 2013, the Supervisory Board of Lietuvos energijos gamyba, AB comprised:
Participation in the capital of the Company and of the Group companies, %
Workplace
Workplace
Rasa Noreikienė Chairwoman of the Commitete
—
Ministry of Economy of the Republic of Lithuania, Vice-minister
—
CEO of Lietuvos Energija, UAB
Danielius Merkinas Independent member
—
UAB Nordnet, Finance Director
Pranas Vilkas Member
—
—
Aušra Vičkačkienė Member
—
Ministry of Finance of the Republic of Lithuania, Asset Management Department Director
Liudas Liutkevičius Independent member
—
Gintaras Adžgauskas Member
—
Director of the Lithuanian Member Committee, World Energy Council
Full name
Participation in the capital of the Company and of the Group companies, %
Dr. Dalius Misiūnas Chairman
Production and Services Director of Lietuvos Energija, UAB
As of 31 December 2013, the Supervisory Board of AB LESTO comprised:
Main functions of the Committee:
Workplace
•
monitoring the process of preparation of financial statements of the Company and Group companies, with a special focus on the adequacy and consistency of used accounting methods;
•
monitoring the efficiency of the internal control and risk management systems of the Company and Group companies, analysis of the need for, and adequacy of, these systems and perform the review of the existing internal control management systems;
•
monitoring the adherence to the principles of independence and objectivity by the certified auditor and audit company, provision of related recommendations, as well as proposals for the selection of an audit company;
•
monitoring the audit performance processes of the Company and Group companies, examining the effectiveness of audit and response of the administration to the recommendations provided by the audit company in the management letter;
As of 31 December 2013, the Supervisory Board committees formed in the Company, as a parent company of the Group, included the Audit, Risk Management Supervision, Nomination and Remuneration Committees.
•
monitoring the effectiveness of the internal audit function of the Company and Group companies, analysis of the need for, and adequacy of, this function, provision of recommendations on the need for, effectiveness of, the internal audit function, and on other internal audit related matters;
Audit Committee
•
providing proposals for the internal audit plans of the Company and Group companies, recommendations for the regulations of the internal audit units of the Company and 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;
Full name
Participation in the capital of the Company and of the Group companies, %
Darius Kašauskas Chairman
—
Finance and Treasury Director of Lietuvos Energija, UAB
Petras Povilas Čėsna Independent member
—
LITEXPO Board Chairman
—
Organisational Development Director of Lietuvos Energija, UAB
Ilona Daugėlaitė Member
Committees of the Supervisory Board
As of 31 December 2013, the Audit Committee of the Supervisory Board functioning in the Company also performs the functions of the Audit Committee of the Group companies, in accordance with provisions of the Law on Audit.
2013 annual report
Key information on the Company and the Group
57
•
monitoring the compliance of activities of the Company and Group companies with laws and other legal acts of the Republic of Lithuania, articles of association and business strategy;
•
assessment and analysis of other issues attributed to the competence of the Committee by decision of the Supervisory Board;
•
performance of 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 OMX Vilnius stock exchange.
Risk Management Supervision Committee Particulars of the Committee members: Full name
Participation in the capital of the Company and of the Group companies, %
Antanas Danys Chairman of the Committee
—
Raimundas Petrauskas Independent member
—
Workplace
Public Institution Lietuvos Junior Achievement, Board Member
—
Director of Dovirma, UAB
Žydrūnė Juodkienė Member
—
Ministry of Energy of the Republic of Lithuania, Vice-minister
Tomas Garasimavičius Member
—
Advisor to the Prime Minister of the Republic of Lithuania for Energy
*appointed on 15 October 2013
Main functions of the Committee •
monitor the identification, assessment and management of risks relevant for the accomplishment of goals of the Company and Group companies;
•
assess the adequacy of internal control procedures and risk management measures to the identified risks;
•
assess the status of implementation of risk management measures;
Key information on the Company and the Group
monitor the implementation of risk management process;
•
analyse financial possibilities for the implementation of risk management measures;
•
assess the risks and risk management plan of the Company and Group companies;
•
assess the regular risk identification and assessment cycle;
•
control the establishment of risk registers, analyse their data and provide proposals;
•
monitor the drafting of risk management related internal documents;
•
perform other functions attributed to the competence of the Committee by decision of the Supervisory Board.
Nomination and Remuneration Committee Particulars of the Committee members: Full name
CEO of Schmitz Cargobull Baltic,
Donatas Kaubrys* Independent member
2013 annual report
•
Participation in the capital of the Company and of the Group companies, %
Workplace
Aloyzas Vitkauskas Chairman of the Committee
—
Ministry of Finance of the Republic of Lithuania, Vice-minister
Virginijus Lepeška Independent member
—
Board Chairman of UAB Organizacijų vystymo centras
Tomas Garasimavičius Member
—
Advisor to the Prime Minister of the Republic of Lithuania for Energy
Main functions of the Committee •
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, severance pays, other parts of the remuneration package), other principles of compensation for costs related to the individual’s performance;
•
assess and provide proposals on the policy of bonuses of the Company and Group companies;
58
•
monitor the compliance of the policy of remunerations and bonuses of the Company and 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;
Ilona Daugėlaitė Member
—
Director for Organisational Development of Lietuvos Energija, UAB
•
provide proposals concerning bonuses upon distribution of distributable profit (losses) of the Company and Group companies of the respective financial year;
Darius Kašauskas Member
—
Director for Finance and Treasury of Lietuvos Energija, UAB
•
assess the terms and conditions of agreements of the Company and Group companies with members of management bodies of the Company and Group companies;
Mindaugas Keizeris Member
—
Director for Strategy and Development of Lietuvos Energija, UAB
•
assess the procedures of recruitment and selection of candidates to members and senior management of the Company and Group companies and establishment of the qualification requirements;
Liudas Liutkevičius Member
—
Director for Production and Services of Lietuvos Energija, UAB
•
perform regular reviews of the structure, size, composition and activities of the management and supervisory bodies of the Company and Group companies;
•
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;
•
supervise and assess the implementation of measures ensuring the continuity of operations of the management bodies and employees of the Company and Group companies;
Juozas Bartlingas Chairman
—
CEO of Lietuvos energijos gamyba, AB
perform other functions attributed to the competence of the Committee by decision of the Supervisory Board.
Adomas Birulis Member
—
Business Development Department Director of Lietuvos energijos gamyba, AB
Management bodies
Eglė Čiužaitė Member
—
Finance and Legal Department Director of Lietuvos energijos gamyba, AB
In accordance with the articles of association as of 31 December 2013, the management bodies of the Company were as follows: the Board of the Company and Chief Executive Officer of the Company.
Darius Kucinas Member
—
In accordance with the articles of association as of 31 December 2013, the Board, as a collegial body of the Company, included 5 members.
Vidmantas Salietis Member
—
•
At the end of the reporting period (31 December 2013), the Board of the Company included the following: Full name
Participation in the capital of the Company and of the Group companies, %
Dr. Dalius Misiūnas Chairman
2013 annual report
—
Key information on the Company and the Group
Manager: Dr. Dalius Misiūnas, Chief Executive Officer of Lietuvos Energija, UAB As of 31 December 2013, the Board of Lietuvos energijos gamyba, AB comprised: Full name
Participation in the capital of the Company and of the Group companies, %
Workplace
Production Department Director of Lietuvos energijos gamyba, AB Wholesale Electricity Trade Department Director of Lietuvos energijos gamyba, AB
Manager: Juozas Bartlingas, Chief Executive Officer of Lietuvos energijos gamyba, AB
Workplace
Chief Executive Officer of Lietuvos Energija, UAB
59
As of 31 December 2013, the Board of AB LESTO comprised: Full name
Participation in the capital of the Company and of the Group companies, %
Workplace
Trading in securities of the Group companies on regulated markets Lietuvos energijos gamyba, AB
Aidas Ignatavičius Chairman
—
Andrius Bendikas Member
—
Finance and Administration Depart met Director of AB LESTO
Dalia Andrulionienė Member
—
Personnel and Communication Division Director of AB LESTO
Sergejus Ignatjevas Member
—
Customer Service Division Director of AB LESTO
—
Director of Electricity Network Division of AB LESTO
Virgilijus Žukauskas Member
The authorised manager of securities accounts of LESTO is Swedbank, AB.
CEO of AB LESTO
Manager: Aidas Ignatavičius, Chief Executive Officer of AB LESTO
Information about agreements with intermediaries of public trading in securities
The shares of Lietuvos energijos gamyba are listed on NASDAQ OMX Vilnius since 1 September 2011,. The Company’s shares are traded on NASDAQ OMX Vilnius stock exchange. As of 31 December 2013, the shares issued by the Company were 635,083,615 ordinary registered shares of LTL 1 (one litas) par value. ISIN code of the issue: LT0000128571. AB LESTO Ordinary registered shares of LESTO are listed on NASDAQ OMX Vilnius since 17 January 2011. As of 31 December 2013, the shares issued by the Company were 603,944,593 ordinary registered shares of LTL 1 (one litas) par value. ISIN code of the issue: LT0000128449. Chief Executive Officer
Dalius Misiūnas 11 April 2014
Lietuvos Energija, UAB 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 Lietuvos energijos gamyba has concluded the securities accounting agreement on the accounting of securities issued by the issuer and management of personal securities accounts with Swedbank, AB. AB LESTO
2013 annual report
Key information on the Company and the Group
60
This version of our report is a translation from the original, which was prepared in Lithuanian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. Independent Auditor’s Report To the shareholder of Lietuvos Energija, UAB Report on the financial statements We have audited the accompanying stand-alone and consolidated financial statements of Lietuvos Energija, UAB (“the Company”) and its subsidiaries (“the Group”) set out on pages 64 to 113, which comprise the stand-alone and consolidated statements of financial position as of 31 December 2013 and the stand-alone and consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes comprising a summary of significant accounting policies and other explanatory information (“the financial statements”). Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
PricewaterhouseCoopers UAB, J. Jasinskio g. 16B, LT-o3163 Vilnius, Lithuania T: +370 (5) 239 2300, F:+370 (5) 239 2301, Email: vilnius@lt.pwc.com, www.pwc.com/lt PricewaterhouseCoopers UAB, company code 111473315, is a private company registered with the Lithuanian Register of Legal Entities
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Basis for qualified opinion According to the Group’s accounting policy, property, plant and equipment, except for Power Plants, should be carried at revalued amounts (being their fair values as of the date of revaluation less subsequent accumulated depreciation and impairment losses) and are subject to an impairment test when impairment indicators exist. As explained in Note 4 to the financial statements, the amendments to the legislation may have a significant adverse impact on the fair value and recoverable amount of the Group’s assets. The Group’s management has not reassessed fair values of property, plant and equipment with the carrying amounts of LTL 4,499 million as of 31 December 2013 (LTL 4,644 million as of 31 December 2012), or carried out a proper impairment test. It has not been possible to estimate reliably the financial effects of this non-compliance. As of 31 December 2011, the Group did not estimate the recoverable amount of the Reserve Power Plant, including construction in progress, with the carrying amount of LTL 2,039 million, although impairment indications existed as of this date. As of 31 December 2012 the Group estimated the recoverable amount of the Reserve Power Plant and Combined Cycle Block, which exceeded the carrying amount equal to LTL 2,160 million as of 31 December 2012. The recoverable amount of these assets increased in 2012 as a result of the legal acts introduced in 2012. In the absence of the impairment test as of 31 December 2011, we were unable to assess the amounts of impairment loss that should have been recognised during the periods before 1 January 2012, and the amount of impairment loss that should have been reversed in the financial year ended 31 December 2012. Our audit opinion on the financial statements for the year ended 31 December 2012 was modified accordingly. Our opinion on the current period’s financial statements is also modified because of the effect of this matter on the comparability of the current period’s figures and the corresponding figures. The Group accounts for goodwill and licenses with infinite useful lives amounting to LTL 178 million and LTL 118 million as of 31 December 2013 and 2012, at acquisition cost less impairment charge. These assets are subject to an annual impairment test. As explained in Note 4 to the financial statements, the amendments to the legislation may have a significant adverse impact on the recoverable amount of these assets. The Group’s management has not reassessed recoverable amounts of the goodwill and licenses with infinite useful lives as at 31 December 2013 and 2012. It has not been possible to estimate reliably the financial effects of this non-compliance.
The Company accounts for investments in subsidiary companies at cost less impairment charge. As explained in Note 4 to the financial statements the amendments to the legislation may have a significant adverse impact on the recoverable amount of investments in subsidiaries. The Company’s management has not reassessed recoverable amounts of investments in subsidiary companies with the carrying amount of LTL 1,743 million and LTL 2,761 million as of 31 December 2013 and as of 31 December 2012, respectively. It has not been possible to estimate reliably the financial effects of this non-compliance. Qualified opinion In our opinion, except for the effects of the matters referred to in Basis for qualified opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Company and the Group as of 31 December 2013, and their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Report on other legal and regulatory requiremen Furthermore, we have read the consolidated annual report for the year ended 31 December 2013 set out on pages x to xx and have not noted any material inconsistencies between the financial information included in it and the audited financial statements for the year ended 31 December 2013. On behalf of PricewaterhouseCoopers UAB
Rimvydas Jogėla Partner Auditor’s Certificate No.000457 Vilnius, Republic of Lithuania 11 April 2014
Statement of financial position Statement of financial position as of 31 december 2013 all amounts in ltl thousands unless otherwise stated Group
Note
ASSETS Non-current assets Intangible assets Property, plant and equipment Prepayments for non-current assets Investment property Investments in associates Amounts receivable after one year Long-term investments Other non-current assets Deferred income tax assets
2013
7 8 9 10 11 16 12 22
Total non-current assets Current assets Inventories Prepayments Trade receivables Other amounts receivable Other current assets Prepaid income tax Short-term investments, time deposits Cash and cash equivalents
13 14 15 16 17
Non-current assets held for sale Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital Reserves Retained earnings (deficit) Equity attributable to owners of the parent Non-controlling interests Total equity
2013 annual report
Statement of financial position
18 19
2012 (restated)
Group 2011 (restated)
336,017 7,318,650 132 121,626 28,800 712,888 57,302 17,850 1,160
361,653 7,509,236 7,408 113,879 29,178 733,110 23,723 978
343,342 9,531,257 89,911 93,574 28,797 3,795 9,657 6,884
8,594,425
8,779,165
10,107,217
34,614 16,292 304,437 85,641 227 10,190 122,385 558,396
73,618 2,346 271,244 245,406 6 4,262 301,454 122,176
144,147 3,227 240,528 138,889 109 3,379 352,943 161,944
1,132,182
1,020,512
1,045,166
618
8 291
4 309
1,132,800 9,727,225
1,028,803 9,807,968
1,049,475 11,156,692
4,067,164 1 456,119 30,194
4,067,164 1 568 323 (207,569)
4,067,164 2,915,038 (505,392)
5,553,477
5,427,918
6,476,810
699,228
711,864
777,891
6,252,705
6,139,782
7,254,701
Note
Amounts payable and liabilities Non-current liabilities Non-current borrowings Finance lease liabilities Grants and subsidies Deferred income tax liabilities Provisions Deferred income Other non-current amounts payable and liabilities
2013
20 21 23 22 25 24 26
Total non-current liabilities Current liabilities Current portion of long-term debts Current borrowings Current portion of finance lease liabilities Trade payables Advance amounts received Income tax liabilities Provisions Other current amounts payable and liabilities
20 20 21 27 25 28
Total current liabilities Total amounts payable and liabilities TOTAL EQUITY AND LIABILITIES
2012 (restated)
2011 (restated)
805,826 36 1,091,511 409,339 4,588 189,523 77,559
948,017 44 1,125,450 448,853 3,512 198,034 34,429
572,368 319 1,214,937 653,996 4,286 223,195 47,294
2,578,382
2,758,339
2,716,395
302,656 71,562 8 268,561 69,470 7,765 12,437 163,679
178,078 129,525 327 225,140 65,846 17,396 13,915 279,620
494,107 20,419 584 237,021 77,306 37,827 63,039 255,293
896,138 3,474,520 9,727,225
909,847 3,668,186 9,807,968
1,185,596 3,901,991 11,156,692
The accompanying notes form an integral part of these financial statements. Dalius Misiūnas Chief Executive Officer
Darius Kašauskas Finance and Treasury Director
Edita Steponavičienė Head of Accounting Department
64
Statement of financial position as of 31 december 2013 all amounts in ltl thousands unless otherwise stated Company
Note
ASSETS Non-current assets Intangible assets Property, plant and equipment Subsidiaries and other investments Amounts receivable after one year Long-term investments Deferred income tax assets
7 8 10 11 16 22
Total non-current assets Current assets Prepayments Trade receivables Other amounts receivable Short-term investments, time deposits Cash and cash equivalents Non-current assets held for sale Total current assets TOTAL ASSETS
2013 annual report
Statement of financial position
14 15 16 17
2013
Company
2012 (restated)
33 2,763,355 690,000 57,302 71
48 2,761,345 720,000 98
3,510,761
3,481,491
8 2 38,537 122,385 309,974 470,906
126 2 36,110 298,434 57,765 392,437
266
266
471,172 3,981,933
392,703 3,874,194
Note
EQUITY AND LIABILITIES Equity Share capital Retained earnings (deficit) Equity attributable to owners of the parent Non-controlling interests
18
Total equity Amounts payable and liabilities Amounts payable within one year and current liabilities Trade payables Other current amounts payable and liabilities Total amounts payable within one year and current liabilities Total amounts payable and liabilities TOTAL EQUITY AND LIABILITIES
27 28
2013
2012 (restated)
4,067,164 (87,060) 3,980,104 -
4,067,164 (200,328) 3,866,836 -
3,980,104
3,866,836
409 1,420
595 6,763
1,829 1,829 3,981,933
7,358 7,358 3,874,194
The accompanying notes form an integral part of these financial statements. Dalius Misiūnas Chief Executive Officer
Darius Kašauskas Finance and Treasury Director
Edita Steponavičienė Head of Accounting Department
65
Statement of comprehensive income Statement of comprehensive income For the year ended 31 december 2013 All amounts in ltl thousands unless otherwise stated. Group
Note
Continuing operations Revenue Sales revenue Other income
2013
29 30
Total revenue Operating expenses Purchases of electricity, and transmission or other related services Purchases of gas and heavy fuel oil Depreciation and amortisation Wages and salaries and related expenses Repair and maintenance expenses Other expenses Total operating expenses Operating profit (loss) Impairment of shares of subsidiary Finance income Finance costs Results of associates
2013
2,690,995 108,095
8
8
2,907,537
2,799,090
8
8
Net profit (loss) for the year
7,8,23
( 81)
31
(231,687) (84,194) (184,884)
(232,979) (68,657) (221,861)
(7,082) (3,593)
( 8,277) ( 54,298)
(2,755,533) 152,004
(2,850,382) (51,292)
(10,692) (10,684)
(62,656) (62,648)
20,103 (30,219) (358)
13,598 (23,490) 1,402
123,983 (4) -
( 363,467) 530,928 (9) -
141,530
(59,782)
113,295
104,804
34
(40,044)
(30,070)
-
-
22,34
39,333
20,904
(27)
(6,408)
140,819
(68,948)
113,268
98,396
Statement of comprehensive income
Note
2,787,167 120,370
(17)
6 32 33 10
Discontinued operations Loss on disposal of discontinued operations Net profit (loss) from discontinued operations, net of related income tax
(1 376,545) (463,689) (486,651)
Net profit (loss) from continuing operations
2013 annual report
Group
2012 (restated)
(1,410,414) (374,164) (470,190)
Profit (loss) before tax Current year income tax expense Deferred income tax (expense)/ income
Company
2012 (restated)
Attributable to: Owners of the parent Non-controlling interests Other comprehensive income (loss) Items that will not be reclassified to profit or loss) Gain (loss) on revaluation of non-current assets Total other comprehensive income (loss) for the year Total comprehensive income (loss) for the year Attributable to: Owners of the parent Non-controlling interests
Company
2012 (restated)
2013
2012 (restated)
2013
6
-
(731,183)
-
-
6
-
16,507
-
-
140,819
(783,624)
113,268
98,396
129,940 10,879
(777,282) (6,342)
113,268 -
98,396 -
(2 056)
(231)
-
-
(2,056)
( 231)
-
-
138,763
(783,855)
113,268
98,396
127,852 10,911
(777,540) (6,315)
113,268 -
98,396 -
The accompanying notes form an integral part of these financial statements. Dalius Misiūnas Chief Executive Officer
Darius Kašauskas Finance and Treasury Director
Edita Steponavičienė Head of Accounting Department
66
Statement of cash flows
Statement of cash flows for the year ended 31 december 2013 all amounts in ltl thousands unless otherwise stated. Group Note
Cash flows from operating activities Net profit (loss) for the year Adjustments for non-monetary expenses (income): Depreciation and amortisation Revaluation of property, plant and equipment Impairment of assets (reversal) Share of profit of associates Income tax expenses (Depreciation) of grants Increase (decrease) in provisions (Gain) loss on disposal/write-off of property, plant and equipment Emission allowances utilised Elimination of results of financing and investing activities Interest income Interest expenses Other finance (income) costs Changes in working capital: (Increase) decrease in trade receivables and other amounts receivable (Increase) decrease in inventories, prepayments and other current assets Increase (decrease) in amounts payable, deferred income and advance amounts received Income tax (paid) Net cash flows from (used in) operating activities Cash flows from investing activities (Acquisition) of property, plant and equipment and intangible assets Disposal of property, plant and equipment and intangible assets
Company
Group
2012 (restated)
2013
140,819
(783,624)
113,268
98,396
7,8
511,301
602,152
17
81
8 7,8,9 6,34 23 25
4,205 (4,724) 358 711 (40,796) (402)
1,232 26,706 (1,402) 12,584 (21,071) 48,847
34 27 -
24,334 6,408 -
25
12,777 13,895
16,285 16,265
-
-
(15,129) 30,041 (4,796)
(11,559) 18,274 732,853
(14,728) (109,255)
32 33
2013
Note
2012 (restated)
(8,914) (158,364)
126,572
30,718
2,115
( 928)
24,837
64,555
118
(27)
100,843 (55,765)
(138,370) (46,534)
113 -
(8,278) -
844,747
567,911
(8,291)
(47,292)
(452,502)
(581,773)
(5,678)
(7,428)
1 581
734
-
-
Loan repayments received, (repayments) of borrowings Change in time deposits Grants received Acquisition of subsidiaries (associates) Bonds acquired Bonds redeemed Interest received Dividends received Disposal of LITGRID AB
2013
2012 (restated)
23,632 151,295 6,485
394 65,929 100,732
25,000 147,475 -
(42,400) -
(199,583) 170,695 16,205 -
(158,557) 55,558 10,525 200,000 (114,807)
(2,010) (199,583) 170,695 15,346 109,255 -
(158,557) 55,558 5,918 521,821 -
(282,192)
(421,265)
260,500
374,912
36
171,074 (191,842) (327) (30,723) (18,544)
201,631 (150,659) ( 532) (42,657) (312,115)
-
(275,000)
10
(1,272)
-
-
-
(18)
( 54)
-
-
(71,652)
(304,386)
-
(275,000)
490,903
(157,740)
252,209
52,620
17
(3,215)
154,525
57,765
5,145
17
487,688
(3,215)
309,974
57,765
6,36 6
Net cash flows from (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Finance lease payments Interest paid Dividends paid Increase of share in subsidiaries (associates) Other cash flows from financing activities Net cash flows from (used in) financing activities Increase (decrease) in cash and cash equivalents (including overdraft) Cash and cash equivalents (including overdraft) at beginning of year Cash and cash equivalents (including overdraft) at end of year
Company
2012 (restated)
2013
The accompanying notes form an integral part of these financial statements. Dalius Misiūnas Chief Executive Officer
2013 annual report Statement of cash flows
Darius Kašauskas Finance and Treasury Director
Edita Steponavičienė Head of Accounting Department
67
Statement of changes in equity Statement of changes in equity for the year ended 31 december 2013 all amounts in ltl thousands unless otherwise stated. Equity attributable to owners of the parent Subtotal
Non-controlling interest
4,067,164 -
124,567 -
1,145,301 -
1,645,170 -
(144,198) (361,194)
6,838,004 (361,194)
792,426 (14,535)
7,630,430 (375,729)
4,067,164 -
124,567 -
1,145,301 (258) (258) (258)
1,645,170 -
( 505,392) (777,282) (777,282)
6,476,810 (258) (258) (777,282) (777,540)
777,891 27 27 (6,342) (6,315)
7,254,701 (231) (231) (783,624) (783,855)
-
345 (49,204) (241)
(95,932) (246,632) 455
(316,884) (638,387) 23
95,932 316,539 (275,000) 934,223 3,411
(275,000) 3,648
(39,348) (38,152) 17,788
(314,348) (38,152) 21,436
4,067,164
75,467
802,934
689,922
( 207,569)
5,427,918
711,864
6,139,782
4,067,164 -
75,467 -
802,934 (2,088) (2,088) (2,088)
689,922 -
(207,569) 129,940 129,940
5,427,918 (2,088) (2,088) 129,940 127,852
711,864 32 32 10,879 10,911
6,139,782 (2,056) (2,056) 140,819 138,763
-
1 595 12
(73,434) 164
(38,453) -
73,434 36,858 (307) ( 2,162)
(307) (1,986)
(18,818) 1,307 (6,036)
(18,818) 1,000 (8,022)
4,067,164
77,074
727,576
651,469
30,194
5,553,477
699,228
6,252,705
Group Share capital
Note
Balance at 1 January 2012 Recalculation of PPE value Balance at 1 January 2012 (restated) Revaluation of property, plant and equipment, net of deferred income tax Total other comprehensive income (loss) for the year Net profit (loss) for the year (restated) Total comprehensive income (loss) for the year Transfer of revaluation reserve to retained earnings (transfer of depreciation, net of deferred income tax) Transfer to reserves and movement in reserves Dividends Disposal of LITGRID AB Changes in non-controlling interests due to changes in the group‘s structure
5 7,22
36 6
Balance at 31 December 2012 (restated) Balance at 1 January 2013 Revaluation of property, plant and equipment, net of deferred income tax Total other comprehensive income (loss) for the year Net profit (loss) for the year Total comprehensive income (loss) for the year Transfer of revaluation reserve to retained earnings (transfer of depreciation, net of deferred income tax) Transfer to reserves and movement in reserves Dividends Acquisition of LITGAS UAB Acquisition of non-controlling interests Balance at 31 December 2013
7,22
36
Legal reserve
Revaluation reserve
Other reserves
Retained earnings
Total
The accompanying notes form an integral part of these financial statements. Dalius Misiūnas Chief Executive Officer
2013 annual report
Statement of changes in equity
Darius Kašauskas Finance and Treasury Director
Edita Steponavičienė Head of Accounting Department
68
Statement of changes in equity for the year ended 31 december 2013 all amounts in ltl thousands unless otherwise stated. Company
Note
Balance at 1 January 2012 Net profit (loss) for the year (restated) Dividends
Share capital
Legal reserve
4,067,164
-
-
Balance at 31 December 2012 (restated)
Accumulated losses
Total
-
(23,724) 98,396 (275,000)
4,043,440 98,396 (275,000)
4,067,164
-
(200,328)
3,866,836
Balance at 1 January 2013 Net profit (loss) for the year
4,067,164
-
(200,328) 113,268
3,866,836 113,268
Balance at 31 December 2013
4,067,164
(87,060)
3,980,104
5 36
The accompanying notes form an integral part of these financial statements. Dalius Misiūnas Chief Executive Officer
2013 annual report
Statement of changes in equity
Darius Kašauskas Finance and Treasury Director
Edita Steponavičienė Head of Accounting Department
69
Notes to the financial statements 1. General information
The Group consists of Lietuvos Energija UAB and subsidiaries directly or indirectly controlled by the Company:
Lietuvos Energija, UAB (formerly known as Visagino Atominė Elektrinė UAB) (hereinafter “the Company”) is a private limited liability company registered in the Republic of Lithuania. The address of the Company’s registered office is Žvejų g. 14, LT-09310, Vilnius, Lithuania. The Company is a limited liability profit-seeking entity registered on 28 August 2008 with the Register of Legal Entities managed by the public institution the Centre of Registers. Company code 301844044, VAT payer’s code LT10004278519. The Company has been established for an unlimited period. As from 30 August 2013, Visagino Atominė Elektrinė UAB is officially known as Lietuvos Energija, UAB. The new name and the updated version of its Articles of Association have been registered with the Register of Legal Entities. Lietuvos Energija, UAB is a parent company, which is responsible for the management and coordination of activities of group companies engaged in electric power and heat production and supply, electric power import and export, distribution and trade, as well as in service and development of electric energy industry. The Company analyses the activities of group companies, represents the whole group, implements its shareholders‘ rights and obligations, defines operation guidelines and rules, and coordinates the activities in the fields of finance, law, strategy and development, human resources, risk management, audit, technology, communication and other. Lietuvos Energija, UAB seeks to ensure effective operation of group companies, implementation of goals related to the group’s activities set forth in the National Strategy on Energy and other legal acts, ensuring that it builds a sustainable value in a socially responsible manner. The Company is wholly owned by the Republic of Lithuania. At 31 December 2013 Company’s shareholder Republic of Lithuania represented by the Lithuanian Ministry of Finance Republic of Lithuania represented by the Lithuanian Ministry of Economy
2013 annual report
Notes to the financial statements
Share capital
Ownership interest, %
4,067,164
100.00
Company
Registered office address
Lietuvos energijos gamyba, AB
Elektrinės str. 21, Elektrėnai
AB LESTO
Effective ownership interest at 31 December 2013, %
Share capital (‘000 LTL) at 31 December 2013
Profile of activities
96.1
635,084
Electricity generation, supply, import, export and trade
Žvejų str. 14, Vilnius
82.6
603,945
Electricity supply and distribution to end users
NT Valdos, UAB
Geologų str. 16, Vilnius
87.9
314,001
Operation of real estate, other related activities and provision of services
UAB Duomenų logistikos centras
A.Juozapavičiaus str. 73.2 13, Vilnius
58,907
Maintenance of information technologies and telecommunications
UAB Technologijų ir inovacijų centras
A.Juozapavičiaus str. 85.8 13, Vilnius
10
Provision of IT, telecommunication and other services
Public Institution Republican Centre of Training for Energy Specialists
A.Jeruzalės str. 21, Vilnius
73.2
294
Professional development and continuing training of energy specialists
UAB „ELEKTROS TINKLO PASLAUGOS“
Motorų str. 2, Vilnius
82.6
18,904
Construction, repair and maintenance of grid and related equipment, connection of customers to the grid
At 31 December 2012 Share capital
Ownership interest, %
4,067,164
100.00
70
Company
Registered office address
UAB „Kauno energetikos remontas“
Chemijos str. 17, Kaunas
Effective ownership interest at 31 December 2013, % 96.1
Share capital (‘000 LTL) at 31 December 2013 14,245
Profile of activities
Repairs of energy equipment, production of metal structures
Gotlitas UAB (valdoma per R. Kalantos str. 119, Kaunas UAB „Kauno energetikos remontas“)
96.1
Energijos tiekimas UAB
Jeruzalės str. 21, Vilnius
96.1
750
Supply of electric power and natural gas
Energijos tiekimas OŪ
Narva mnt 5, 10117 Tallinn
96.1
121
Supply of electric power
Energijos tiekimas SIA
Elizabetes iela 45/47, 96.1 LV-1010 Rīga
99
Supply of electric power
UAB „VAE SPB“
Žvejų str. 14, Vilnius
100
10
Consultations
UAB LITGAS
Gedimino str. 33-2, LT-01104 Vilnius
66.7
3,000
Supply of liquid natural gas via terminal and trade in natural gas
1,450
Accommodation services, trade
The Group had 4,378 employees as at 31 December 2013 (4,621 employees as at 31 December 2012); and the Company had 53 employees as at 31 December 2013 (49 employees as at 31 December 2012). The Company‘s management approved these financial statements on 11 April 2014. The Company’s shareholders have a statutory right to approve or not to approve these financial statements and require the preparation of a new set of financial statements.
2013 annual report
Notes to the financial statements
2. Summary of significant accounting policies The principal accounting policies adopted in the preparation of the Company’s and the Group’s financial statements for the year ended 31 December 2013 are summarised below:
2.1 Basis of preparation These financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Group’s and the Company’s financial statements as at and for the year ended 31 December 2013 have been prepared on a historical cost basis, except for property, plant and equipment measured at revaluated amount, and investment property, emission allowances and derivative financial instruments measured at fair value. Adoption of new and/or amended International Financial Reporting Standards (IFRSs) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC) IFRS 13 Fair value measurement (effective for annual periods beginning on or after 1 January 2013), aims to improve consistency and reduce complexity by providing a revised definition of fair value, and a single source of fair value measurement and disclosure requirements for use across IFRSs. The Group/Company presented additional disclosures in the financial statements. Amendments to IAS 1 Presentation of financial statements (effective for annual periods beginning on or after 1 July 2012), changes the disclosure of items presented in other comprehensive income. The amendments require entities to separate items presented in other comprehensive income into two groups, based on whether or not they may be reclassified to profit or loss in the future. The suggested title used by IAS 1 has changed to ‘statement of profit or loss and other comprehensive income’. The amended standard resulted in changed presentation of the Group‘s/Company‘s financial statements, but did not have any impact on measurement of transactions and balances. Improvements to International Financial Reporting Standards (effective for annual periods beginning 1 January 2013). The improvements consist of changes to five standards. IAS 1 was amended to clarify that explanatory notes are not required to support the third balance sheet presented at the beginning of the preceding period when it is provided because it was materially impacted by a retrospective restatement, changes in accounting policies or reclassifications for presentation purposes,
71
while explanatory notes will be required when an entity voluntarily decides to provide additional comparative statements. When preparing the financial statements, the Group/Company took into consideration the improvement to IAS 1. Other improvements had no significant impact on the Group’s/Company’s financial statements. The following new or amended IFRSs and IFRIC interpretations are effective in 2013 but had no material impact or are not relevant to the Company and the Group Amendments to existing standards and interpretations adopted by the EU that are mandatory for annual accounting periods beginning on or after 1 January 2013 but not relevant to the Group/Company are as follows: •
Amended IAS 19 Employee benefits (effective for periods beginning on or after 1 January 2013),
•
Disclosures—Offsetting financial assets and financial liabilities - amendments to IFRS 7 (effective for annual periods beginning on or after 1 January 2013).
•
Severe hyperinflation and removal of fixed dates for first-time adopters – amendments to IFRS 1 (effective for annual periods beginning on or after 1 July 2011).
•
Recovery of underlying assets – amendments to IAS 12 (effective for annual periods beginning on or after 1 January 2012).
•
IFRIC 20 Stripping costs in the production phase of a surface mine (effective for annual periods beginning on or after 1 January 2013).
•
Amendments to IFRS 1 First-time adoption of International Financial Reporting Standards - Government loans (effective for annual periods beginning on or after 1 January 2013).
Standards, interpretations and amendments that are not yet effective and have not been early adopted by the Company/Group IFRS 10 Consolidated financial statements (effective for annual periods beginning on or after 1 January 2014) replaces all of the guidance on control and consolidation in IAS 27 Consolidated and separate financial statements and SIC-12 Consolidation special purpose entities. IFRS 10 changes the definition of control so that the same criteria are applied to all entities to determine control. This definition is supported by extensive application guidance. The Group/Company is currently assessing the impact of this standard on its financial statements. IFRS 12 Disclosure of interest in other entities (effective for annual periods beginning on or after 1 January 2013) applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity. IFRS 12 sets out the required disclosures for entities reporting under the two new standards:
2013 annual report
Notes to the financial statements
IFRS 10, Consolidated financial statements, and IFRS 11, Joint arrangements, and replaces the disclosure requirements currently found in IAS 28, Investments in associates. IFRS 12 requires entities to disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. To meet these objectives, the new standard requires disclosures in a number of areas, including significant judgments and assumptions made in determining whether an entity controls, jointly controls, or significantly influences its interests in other entities, extended disclosures on share of non-controlling interests in group activities and cash flows, summarised financial information of subsidiaries with material non-controlling interests, and detailed disclosures of interests in unconsolidated structured entities. The Group/Company is currently assessing the impact of this standard on its financial statements. IAS 27 Separate financial statements (effective for annual periods beginning on or after 1 January 2013) was changed and its objective is now to prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. The guidance on control and consolidated financial statements was replaced by IFRS 10, Consolidated Financial Statements. The Group/Company is currently assessing the impact of this standard on its financial statements. IAS 28 Investments in associates and joint ventures (effective for annual periods beginning on or after 1 January 2013). The amendment of IAS 28 resulted from IFRS 11 and now requires accounting for joint ventures and associates using the equity method. The Group/Company is currently assessing the impact of this standard on its financial statements. Transition guidance amendments to IFRS 10, IFRS 11 and IFRS 12 (effective for annual periods beginning 1 January 2013). The amendments clarify the transition guidance in IFRS 10 Consolidated financial statements. Entities adopting IFRS 10 should assess control at the first day of the annual period in which IFRS 10 is adopted, and if the consolidation conclusion under IFRS 10 differs from IAS 27 and SIC 12, the immediately preceding comparative period (that is, year 2012 for a calendar year-end entity that adopts IFRS 10 in 2013) is restated, unless impracticable. The amendments also provide additional transition relief in IFRS 10, IFRS 11, Joint arrangements, and IFRS 12, Disclosure of interests in other entities, by limiting the requirement to provide adjusted comparative information only for the immediately preceding comparative period. Further, the amendments will remove the requirement to present comparative information for disclosures related to unconsolidated structured entities for periods before IFRS 12 is first applied. The Group/Company is currently assessing the impact of this standard on its financial statements.
72
Amendments to IAS 36 - Recoverable amount disclosures for non-financial assets (effective for annual periods beginning 1 January 2014; earlier application is permitted if IFRS 13 is applied for the same accounting and comparative period). The amendments remove the requirement to disclose the recoverable amount when a cash generating unit contains goodwill or indefinite lived intangible assets but there has been no impairment. The Group/Company is currently assessing the impact of these amendments on its financial statements.
voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Amendments to IAS 39 - Novation of derivatives and continuation of hedge accounting (effective for annual periods beginning 1 January 2014).The amendments will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated (i.e parties have agreed to replace their original counterparty with a new one) to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. The Group/ Company does not apply hedge accounting, consequently, the Group/Company does not expect these amendments to have significant impact on the financial statements.
Non-controlling interest represents a part of profit or loss and net assets which is not controlled by the Group. Non-controlling interest is reported separately in the consolidated statement of comprehensive income. The share of equity attributable to the non-controlling interest and to the owners of the parent is shown separately in the consolidated balance sheet.
Standards, interpretations and amendments that have not been endorsed by the European Union and that have not been early adopted by the Group/Company •
IFRS 9 Financial instruments: Classification and measurement
•
IFRIC 21, Taxes
•
Amendments to IAS 19 Defined benefit plans: Employee contributions
•
Annual improvements to 2012 IFRSs
•
Annual improvements to 2013 IFRSs
The Group/Company is currently assessing the impact of these amendments on its financial statements. There are no other new or amended standards and interpretations that are not yet effective and that may have a material impact for the Group/Company.
2.2 Consolidation and business combinations involving entities under common control Consolidation The consolidated financial statements of the Group include the financial statements of the parent company Lietuvos Energija, UAB and its directly and indirectly controlled subsidiaries. Control is obtained when the Company has the power to govern the financial and operating policies of an enterprise, so as to obtain benefits from its activities, generally accompanying a shareholding of more than one half of the
2013 annual report
Notes to the financial statements
The financial statements of subsidiaries have been prepared using uniform accounting policies and for the same reporting period as that covered by the financial statements of the parent company. On consolidation, all inter-company transactions, balances and unrealised gains and/or losses on transactions among the Group companies are eliminated.
Business combinations involving entities under common control IFRS 3, ‘Business combinations’ is not applied to business combinations involving entities under common control. Business combinations involving entities under common control are accounted for using the ‘pooling of interest’ method. The application of this method in practice consists of the following procedures: •
the assets and liabilities of the entities in business combination are stated at their carrying amounts; equal to those reported in the consolidated financial statements of the ultimate parent company.
•
no newly arising goodwill is recognised on business combination;
•
any differences between consideration paid and the carrying amount of net assets acquired as at the date of acquisition is recognised directly in equity within retained earnings;
•
the acquiree’s results are consolidated as if the acquiree had always been controlled by the acquirer (or from the date the common control arises).
2.3 Company’s investments in subsidiaries A subsidiary is an entity directly or indirectly controlled by the parent company. In the parent company’s balance sheet, investments in subsidiaries are stated at acquisition cost less impairment loss, where the investment’s carrying amount in the parent company’s balance sheet exceeds its estimated recoverable amount.
2.4 Investments in associates An associate is an entity over which the Group/Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
73
In the parent company’s balance sheet, investments in associates are stated at cost less impairment losses, where the investment’s carrying amount in the parent’s balance sheet exceeds its estimated recoverable amount. In the consolidated financial statements of the Group, results of operation of associates are accounted for using the equity method, except when the investment is classified as held-for-sale and it is recognised according to IFRS 5, ‘Non-current assets held for sale and discontinued operations’. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the investee, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s share of assets in that associate are not recognised, unless the Group had incurred legal or indirect obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the fair value of the Group’s share of net identifiable assets, liabilities and contingent liabilities of the associate at the date of acquisition is accounted for as notional goodwill. The goodwill is included in the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the fair value of the Group’s share of net identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the statement of comprehensive income. Where the Group company conducts transactions with an associate of the Group, unrealised profits or losses are eliminated to the extent of the Group’s interest in the relevant entity. Financial guarantees provided for the liabilities of the associates are initially recognised as an investment in associates at estimated fair value and as a financial liability in the balance sheet. The fair value is estimated as the difference between the fair value of the liability secured with guarantee and the fair value of analogous liability not secured with guarantee. Subsequent to initial recognition, this financial liability is amortised and recognised as income depending on the related amortisation / repayment of the associate’s financial liability to the bank. If there are indications that the associate may fail to fulfil its obligations to the bank, a financial liability of the Company is accounted for at the higher of amortised cost and the value estimated according to IAS 37, ‘Provisions, contingent liabilities and contingent assets’.
2.5 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in the Lithuanian litas (LTL), which is the Company’s functional and presentation currency.
2013 annual report
Notes to the financial statements
With effect from 2 February 2002, the litas has been pegged to the euro at exchange rate of LTL 3.4528 = EUR 1.
(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rate of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
2.6 Property, plant and equipment Property plant and equipment is accounted at cost or at revalued amount. Property, plant and equipment class of assets named as the hydro power plant, pumped storage power plant, combined-cycle block and reserve power plant, is accounted for at cost less accumulated depreciation and impairment. All other property, plant and equipment are shown at revaluated amounts, based on periodic (at least every 5 years) valuations by external independent valuers or by the Group’s management, less subsequent accumulated depreciation and subsequent accumulated impairment losses. Cost includes replacement costs of components of property, plant and equipment when incurred and when these costs meet the recognition criteria of property, plant and equipment. Any accumulated depreciation and impairment losses at the date of revaluation are eliminated against gross carrying amount of the asset and net amount is restated to the revalued amount of the assets. All other repairs and maintenance costs charged to the statement of comprehensive income as incurred. Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to other comprehensive income and shown as the revaluation reserve in shareholders’ equity. If the carrying amount of property, plant and equipment increases after revaluation and the carrying amount of these assets has suffered impairment in previous periods as a result of which expenses were recognised in profit or loss, the amount of the increase in the asset’s carrying amount, net of depreciation, is deducted from expenses which were included in profit or loss in previous periods and the remaining amount of the increase is credited against the revaluation reserve. Decreases that offset previous increases of the same asset are charged to other comprehensive income and debited against the revaluation reserve directly in equity; all other decreases are charged to profit or loss of the statement of comprehensive income. Each year the difference between depreciation based on the revalued amount of the asset (when the carrying amount increases after revaluation) charged to the profit or loss of the statement of comprehensive income and depreciation based on the asset’s original acquisition cost is transferred from revaluation reserve to retained earnings, net of deferred income tax.
74
Depreciation of property, plant and equipment is calculated using the straight-line method to allocate the revalued amounts to their residual values over their estimated useful lives (number of years), as follows: Buildings
15-75
Structures and machinery electricity and communications equipment
20-25
electricity distribution equipment
15-45
electricity equipment
15-35
other equipment
5-50
Assets Power Plants: Hydro Power Plant and Pumped Storage Power Plant hydrotechnical structures and equipment
75
pressure pipelines
50
hydro technical turbines
25-40
other equipment
8-15
Reserve Power Plant: constructions and infrastructure
10-70
thermal and electricity equipment
10-60
measuring devices and equipment
5-30
other equipment
8-15
Combined Cycle Block constructions and infrastructure
20-50
electricity lines
20-40
electricity generation equipment
20-50
Motor vehicles
2-35
Other property, plant and equipment: computer and telecommunication equipment
3-10
tools, other property, plant and equipment
4-10
Property, plant and equipment include spare parts, stand-by equipment and servicing equipment when they meet the definition of property, plant and equipment.
When property is retired or otherwise disposed of, the cost and related accumulated depreciation are derecognised and any related gains or losses are included to profit or loss in the statement of comprehensive income. Gains or losses on disposal of property, plant and equipment are determined as proceeds received on disposal less the book value of assets disposed. When revalued assets are disposed, the corresponding portion of revaluation reserve is transferred to retained earnings (deficit). Subsequent repair costs are included in the asset’s carrying amount, only when it is probable that future economic benefits associated with these costs will flow to the Group and the Company and the costs can be measured reliably. The carrying amount of the replaced part is derecognised. All other repair and maintenance costs are recognised as expenses in the statement of comprehensive income during the financial period in which they are incurred. Construction in progress is transferred to appropriate categories of property, plant and equipment when it is completed and ready for its intended use.
2.7 Intangible assets (a) Patents and licences Patents and licences are stated at acquisition cost. Trademarks and licences acquired in business combination are recorded at fair value at the date of acquisition. Trademarks and licences are accounted for at cost less accumulated amortisation. Amortisation is calculated using a straight-line basis over the estimated useful life of 3 to 5 years or a specific validity term of a licence and/or patent, if any. The Group has licences with indefinite useful life identified in the business combination in 2008 on acquisition of VST AB. Useful life is reviewed each year to determine whether events and circumstances continue to support an indefinite life assessment. See Note 7 for more details. (b) Computer software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (2 to 4 years).
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate.
(c) Emission allowances
Borrowing costs directly attributable to the acquisition, construction or production of assets other than at fair value through profit or loss and that necessarily take a substantial time (more than one year) to get ready for intended use or sale (qualifying assets) are capitalised as part of the cost of those assets (see note 2.18).
For detailed description of accounting policy for emission allowances see note 2.23.
2013 annual report
Notes to the financial statements
75
(d) Other intangible assets Intangible assets expected to provide economic benefits in future periods are valued at acquisition cost less subsequent accumulated amortisation and any accumulated impairment losses. Amortisation is calculated on the straight-line basis over the estimated economic useful life of 3 to 4 years.
2.8 Impairment of non-financial assets At each reporting date, the Group/Company reviews the book values of its property, plant and equipment and intangible assets to determine whether there are any indications that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is impossible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. Where a reasonable and consistent basis of allocation can be identified, assets are also allocated to individual cash-generating units, otherwise they are allocated to the smallest groups of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at each reporting date, and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. In assessing value in use, the expected future cash flows are discounted to their present value using the discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
initially at acquisition cost, and subsequently at fair value which is determined by independent properly qualified property valuers and based on recent experience in valuation of assets of similar nature. Investment property is not depreciated, and gain or loss on change in the fair value of investment property is recognised in profit or loss of the statement of comprehensive income for the reporting period. Transfers to and from investment property are made only when there is an evidence of change in the purpose of use of assets. Certain immovable property may be occupied by the Group, with the remainder being held for rental yields or for capital appreciation. If part of immovable property occupied by the Group can be sold separately, the Group accounts for such property separately. The portion that is owner-occupied is accounted for under IAS 16, and the portion that is held to earn rentals or for capital appreciation or both is treated as investment property under IAS 40.
2.10 Non-current assets held for sale Non-current assets held for sale are stated at the lower of the carrying amount and fair value less costs of disposal if the carrying amount is recovered principally through a sale transaction rather than through a continuing use.
2.11 Financial assets The Group/Company classifies its financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans granted and receivables. The classification of financial assets is based on the purpose of financial assets acquired, the management’s intentions and whether the investments are quoted in active market. The management determines the classification of financial assets at initial recognition. Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group/ Company commits to purchase or sell the asset. Financial assets are initially recognised at fair value, plus directly attributable transaction costs for investments not carried at fair value through profit or loss. The subsequent measurement of financial assets depends on their classification as follows: Financial assets at fair value through profit or loss The Group’s financial assets measured at fair value through profit or loss includes the derivative financial instruments only (see note 2.12).
2.9 Investment property
Held-to-maturity financial assets
Investment property, which consists of the Group’s buildings and constructions, is held to earn rentals or for capital appreciation. Investment property is recognised
Held-to-maturity investments are non-derivative financial assets traded in active market with fixed or determinable payments and fixed maturities that the Group’s man-
2013 annual report
Notes to the financial statements
76
agement has the positive intention and ability to hold to maturity. Held-to-maturity investments are measured at amortised cost using the effective interest rate method. Effective interest rate method is used to calculate amortised cost of financial assets and allocate interest income over the relevant period. The effective interest rate exactly discounts estimated future cash inflows or outflows to net carrying amount of financial assets over the expected life of the financial instrument or a shorter period, if necessary. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period, in which case they are classified as non-current assets. Loans and receivables are initially recognised at acquisition cost (the fair value of consideration transferred) and subsequently carried at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss of the statement of comprehensive income when the these assets are derecognised, impaired or amortised. Impairment of financial assets At each reporting date the Group and the Company assess whether there is an indication that financial assets may be impaired. A financial asset is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial assets. Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of expected future cash flows, estimated using the original effective interest rate. The carrying amount of the financial asset is directly reduced by the amount of estimated impairment loss, except for trade receivables, for which impairment is recorded through allowance for doubtful receivables account. Impaired trade receivable are written-off when they are identified as irrecoverable.
2013 annual report
Notes to the financial statements
If subsequent to the reporting date the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and recognised in the statement of comprehensive income to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date that would have been determined had no impairment loss been recognised for the asset in prior years. Derecognition of financial asset A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when: •
the rights to receive cash flows from the asset have expired;
•
the right to receive cash flows from the asset is retained, but an obligation is assumed to pay them in full without material delay to a third party under a “pass through” arrangement; or
•
the rights to receive cash flows from the asset are transferred and either (a) substantially all the risks and rewards of the asset have been transferred, or (b) substantially all the risks and rewards of the asset have neither been transferred nor retained, but control of the asset has been transferred.
2.12 Derivative financial instruments Derivative financial instruments are classified as held for trading. At inception they are recognised at fair value and subsequently measured at fair value. The fair value is determined with reference to quoted market prices or using valuation techniques encompassing the present market values or contractual prices of assets relating to financial instruments, and all other inputs. Derivative financial instruments are classified as assets when their fair value is positive, and they are classified as liabilities when their fair value is negative. Gain or loss on these financial instruments is recognised in profit or loss in the statement of comprehensive income within finance income or costs.
2.13 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of inventories comprises purchase price, taxes (other than those subsequently recoverable by the Group and the Company from the tax authorities), transportation, handling and other costs directly attributable to the acquisition of inventories. Cost does not include borrowings costs. Net realisable value is the estimated selling price in the ordinary course of business, less attributable variable selling expenses.
77
2.14 Trade receivables
2.18
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less impairment loss. Impairment of trade receivables is recognised when there is objective evidence that the Group or the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (overdue more than 2 months) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of the allowance account, and the amount of the impairment loss is recognised in the statement of comprehensive income. When a trade receivable is irrecoverable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are recognised in the statement of comprehensive income as income.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Any difference between the amount at initial recognition and the redemption value is recognised in profit or loss of the statement of comprehensive income over the period of the borrowings using the effective interest method.
2.15
2.19 Income tax and deferred income tax
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. For the purpose of cash flow statement, cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown under liabilities within current borrowings in the balance sheet.
2.16 Share capital Ordinary shares are classified as equity. When the Company acquires its own shares, the shares acquired are deducted from equity. No gain or loss is recognised on the purchase, sale, issue or cancelation of the Company’s own equity instruments. Share premium represents the difference between the nominal value of the new share issue and the fair value of consideration received for the shares sold.
2.17
Trade payables
Trade payables are recognised when the other party has performed its obligations under the contract. Trade payables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.
2013 annual report
Notes to the financial statements
Borrowings
Borrowings are classified as current liabilities unless the Company and the Group has an unconditional right to defer settlement of the liability for at least 12 months after the financial reporting date. Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial time (more than one year) to get ready for intended use or sale (qualifying assets) are capitalised as part of the costs of those assets until those assets are completely ready for use or sale. Interest income that relate to temporal investment of borrowed funds until their use for the acquisition of the assets are deducted from the acquisition cost of the assets.
Income tax Income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount of income tax are those that are enacted or substantively enacted at the balance sheet date. Current income tax is calculated on profit for the year, net of deferred income tax. Calculation of income tax is based on requirements of the Lithuanian regulatory legislation on taxation. In 2013 and 2012, a standard income tax rate of 15 per cent was applicable to the companies in Lithuania. Tax losses can be carried forward for indefinite period, except for the losses incurred as a result of disposal of securities and/or derivative financial instruments. Such carrying forward is discontinued if the Company terminates the activities that caused these losses, except when the Company discontinues its activities due to the reasons that are beyond the Company’s control. The losses from disposal of securities and/ or derivative financial instruments can be carried forward for 5 consecutive years and only be used to reduce the taxable income earned from the transactions of the same nature.
78
Deferred income tax
Termination benefits
Deferred income tax is accounted for using the liability method. Deferred tax assets and liabilities are recognised for future tax purposes to reflect differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised on all temporary differences that will increase the taxable profit in future, whereas deferred tax assets are recognised to the extent that is probable to reduce the taxable profit in future. Deferred income tax assets and liabilities are not recognised when temporary differences arise from goodwill (or negative goodwill) or from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting, nor taxable profit or loss.
Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company and the Group recognise termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Non-current benefits are recognised at present value discounted at market interest rate.
The carrying amounts of deferred income tax assets are reviewed at each date of the statement of financial position and reduced to the extent it is no longer probable that sufficient taxable profit will be available against which such deferred income tax assets could be utilised in full or in part. Deferred income tax is determined using tax rates that are expected to apply when the related deferred income asset is realised or the deferred income tax liability is settled. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Current and deferred income tax Current and deferred income tax are recognised as income or expenses and included in net profit or loss for the reporting period, except for the cases when tax arises from a transaction or event that is recognised directly in equity or in other comprehensive income in the same or subsequent period or on business combination.
2.20
Employee benefits
Social security contributions The Company and the Group pay social security contributions to the State Social Security Fund (the Fund) on behalf of its employees based on the defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a plan under which the Group and the Company pay fixed contributions into the Fund and will have no legal or constructive obligations to pay further contributions if the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period. The social security contributions are recognised as an expense on an accrual basis and are included within remuneration expenses.
2013 annual report
Notes to the financial statements
Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are recognised immediately in the Group’s and the Company’s other comprehensive income. All past service costs are recognised immediately. Long-term employee benefits Each employee of retirement age who terminates his/her employment with the Group and the Company upon retirement is entitled to receive a payment equal to 2-6 monthly salaries according to Lithuanian laws and the terms of the collective employment agreement. A liability for such pension benefits is recognised in the statement of financial position and it reflects the present value of these benefits at the date of the balance sheet. The aforementioned non-current liability for pension benefits to employees at the date of the statement of financial position is determined with reference to actuary valuations using the projected credit unit method. The present value of the defined non-current liability for pension benefits to employees is determined by discounting the estimated future cash flows using the effective interest rates as set for government bonds denominated in a currency in which the benefits will be paid to employees and that have maturity term similar to that of the related liability.
2.21 Provisions Provisions are recognised when the Group/Company has a legal obligation or irrevocable commitment as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group/Company expects that provision amount in part or in full will be compensated, e.g. under the insurance contract, compensation to be received is recorded as a separate asset, but only when it is virtually certain. Expenses related to provisions are recorded in the statement of comprehensive income, net of compensation receivable. If the effect of the time value of money is material, the amount of provision is discounted using the effective pre-tax discount rate based on the interest rates for the period and taking into account specific risks associated with the provision as appropriate. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance costs.
79
Provisions for onerous contract Provisions for onerous contract represent liabilities that are initially recognised at fair value and subsequently at the end of each reporting period they are measured at present value using the effective interest rate method.
2.22
Revenue and expense recognition
Revenue is recognised to the extent that it is probable that the economic benefits associated with a transaction will flow to the Group and the Company and the amount of revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or services, net of value added tax, returns and discounts. Revenue from sale of electricity to end customers The Group’s revenue from sale of electricity to end customers includes production, transmission, distribution, supply, public service obligations (PSO) and other services rendered in the process of sale of electricity to end customers. The prices of transmission, distribution and PSO services provided by the Group companies are regulated by the National Control Commission for Prices and Energy. Revenue from electricity sales to private customers is recognised when electricity is supplied. An estimate of accrued revenue is made to record electricity supplied but not yet declared by private customers at the end of each reporting period. This estimate is based on the historical experience and the average payment for electricity period by the customers. Revenue from electricity sales to business customers is recognised when electricity is supplied based on the actual consumption of electricity which is determined with reference to meter readings. The Group’s subsidiary involved in production of electricity receives PSO fees that are paid to the producers of electricity under public service obligations scheme based on pre-set annual quantities and prices of services established by the National Control Commission for Prices and Energy (Commission). The tariff is set by the Commission based on estimated variable costs to produce electricity, provided by the producers. PSO fees are collected from end-customers by the distribution network subsidiary of the Group based on the tariffs established by the Commission, and forwarded to the electricity transmission system operator (an entity outside the group) who is responsible for distributing the PSO fees to electricity producers. The revenue from end-customers for PSO fees that are later distributed to production entities not within the Group are recognised based on the actual electricity consumption and tariffs established by the Commission. The revenue from PSO fees that is later distributed to
2013 annual report
Notes to the financial statements
the production subsidiary of the Group is recognised based on actual variable costs incurred, although the monthly payments from transmission system operator to the producer are based on pre-set quantities and prices. the Commission approves the actual amount of the PSO fee receivable during one year after the end of reporting period, and difference is paid to the transmission operator during the second year after the end of reporting period. Therefore, the difference between the accrued revenue and actual payments during a year is recognised as a non-current receivable or payable (in the line “Amounts receivable after one year” or “Other non-current amounts payable and liabilities ”), and at subsequent year-end the amount is reclassified to current receivable or payable (in the line Other amounts receivable or Trade payables). The monthly amounts payable by the distribution network subsidiary to the transmission system operator are recognised in current payables (in the line Trade payables). Regulation of tariffs Tariffs for electricity distribution are regulated by the National Control Commission for Prices and Energy (Commission) by establishing the upper limits on prices. The specific prices for the distribution services are established by the Group’s company which is distribution network operator within the limits approved by the Commission. Tariffs for electricity transmission and PSO services are regulated by the National Control Commission for Prices and Energy (hereinafter “the Commission”) by establishing the upper limit for tariffs of the transmission services and prices for PSO services. The specific prices and tariffs for the transmission services are established by the service provider which is not the Group’s company within the limits approved by the Commission. Tariffs for electricity sold by the producers and independent suppliers, as well as tariffs for capacity reserves are not regulated, except when the producer or independent supplier holds more than 25 per cent of the market, in which case, the procedure for tariff setting is established by the Commission. Tariffs for import and export of electricity are not regulated. Income from repair services Income from specific projects, i.e. income from repair services, is recognised using the stage of completion method, based on which project costs actually incurred are compared against total estimated project costs. The probable change in profitability is recognised in the statement of comprehensive income when such change is established. The projects are reviewed regularly and the provisions are established for onerous contracts when such are identified.
80
Income from new customer connection Fees received after 1 July 2009 for the connection of new customers and producers to electricity network and for the dislocation and reconstruction of electricity network facilities on request of the customer, producer or any other entity, are recognised as revenue upon connection. The above-mentioned fees received before 1 July 2009 were initially recognised as deferred income and are subsequently recognised as income on a proportionate basis over the useful life of the related newly created property, plant and equipment. The related costs comprising the acquisition cost of property, plant and equipment and other costs were capitalised and depreciated over the estimated useful life of the assets capitalised. Income from sale of services Income from sale of services is recognised in the period when the services have been rendered with reference to the stage of completion of the specific transaction, which is determined as a percentage of services actually rendered compared with the total services to be rendered. Revenue from services is recognised when it is possible that the economic benefits associated with the transaction will flow to the entity and revenue can be measured reliably. Revenue is recognised when services were provided. Income from sale of goods Income from sale of goods is recognised when all risks associated with loss or damage to goods, as well as any incremental costs arising from events occurring subsequent to the delivery of goods to the carrier or to the agreed place of destination, are transferred from the Group to a buyer under the standard sale terms (INCOTERMS) agreed with the buyer, and the recoverability of the related amounts receivable is reasonably certain. Interest income Interest income is recognised on accrual basis using the effective interest rate method. For the purpose of the cash flow statement, interest received is attributed to investing activities, whereas for the purpose of the statement of comprehensive income, interest received is recognised as finance income. Dividend income Dividend income is recognised after the shareholders’ rights to receive payment have been established. Dividends received are attributed to investing activities in the statement
2013 annual report
Notes to the financial statements
of cash flows. Dividends of subsidiaries, attributable to the parent company, are eliminated in the consolidated financial statements. Operating lease income Lease income is recognised on a proportionate basis over the lease period. Expense recognition Expenses are recognised in the statement of comprehensive income as incurred by the accrual method.
2.23 Emission allowances Based on the EU Directive 2003/07/EC, the greenhouse gas emissions trading scheme was developed which came into force on 1 January 2005. The first period of operation of this scheme covered 3 years from 2005 to 2007; the second period covered 5 years from 2008 to 2012, and the third period covers 7 years from 2013 to 2020. The Scheme’s operation period is in line with the period established under the Kyoto Agreement. The system functions on ‘cap’ and ‘trade’ basis. The governments of the EU Member States are required to set caps for each emission unit in the scheme and for the period of implementation. These caps are specified in the National Allocation Plan to be developed by a responsible authority of each Member State (in Lithuania – the Ministry of Environment). The National Allocation Plan determines the annual emission amount (measured as tons of carbon dioxide equivalent) for each emission unit and each period and allocates annual emission allowances. Entities involved in the trading scheme of emission allowances are entitled throughout the period from 2008 to 2020 to use emission reduction units that are accepted in the EU trading scheme of emission allowances, but not in excess of 20% of total quantity of emission allowances allocated to them during the period from 2008 to 2012. A Member State has an obligation to allocate emission allowances by 28 February of each year in accordance with the National Allocation Plan (a part of emission allowances are set aside for new units). A Member State is to assure that an operator of each emission unit will submit data on the unit’s actual amount of greenhouse gas emissions during the current calendar year not later than by 30 April of the next year. Intangible assets The EU emission allowances are treated as intangible assets that were provided by the state or acquired by an entity in the form of non-monetary grant and that should be accounted for at fair value at the moment of their issuance or transfer.
81
After the initial recognition emission allowances are revalued at fair value using the active market prices. Increases in the carrying amount arising on the revaluation of emission allowances are credited against revaluation reserve in other comprehensive income and decreases in excess of the previously accumulated amount in the revaluation reserve are recognised in the profit or loss. On realisation of emission allowances, the respective positive balance of the revaluation reserve is taken directly to retained earnings. Government grant The EU emission allowances provided to the Group at no consideration are treated as a non-monetary government grant which is recognised at fair value at the date of its receipt or issuance. Subsequently, the government grant is recognised as income in proportion to emission allowances utilised during the validity period of emission allowances or upon their disposal. Provision for utilisation of emission allowances As the Group makes emissions, a liability arises to pay for these emissions to the state using emission allowances, the nominal value of which is equal to the quantity of emissions. Such liability is a provision which is estimated at a value equal to expenses to be incurred by the Group for the settlement of liability at financial reporting date. The liability can be offset against intangible assets only when the actual quantity of emissions is approved by an appropriate regulatory state authority. Changes in the value of liability are recognised in profit or loss and presented in the statement of comprehensive income. Lending of emission allowances Lending of emission allowances is a sale transaction during which assets is disposed and the right to receive emission allowances is acquired. The right to receive emission allowances is recognised as other non-current assets. Such assets are initially recognised at acquisition cost, and subsequently such assets are tested for impairment as described in Note 2.8.
2.24 Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
Where the Company and (or) the Group are lessors Operating lease income is recognised on a straight-line basis over the lease term. Initial direct costs are added to the carrying amount of the asset leased and recognised over the lease term similarly as lease income. Where the Company and (or) the Group are lessees Finance leases are capitalised at the commencement of the lease at the lower of the fair value of the property leased and at the present value of the minimum lease payments. Respective finance lease liability is recorded in the balance sheet. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. Finance charges are charged to the statement of comprehensive income. Payments made under operating leases are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. Assets acquired under finance leases are depreciated over the estimated useful lives of assets. If the Group does not intend to exercise the option to acquire the asset leased at the end of the lease term, the asset is depreciated over the shorter of the useful life of the asset and the lease term.
2.25 Grants and subsidies Asset-related grants Government and the EU asset-related grants comprise grants received in the form of non-current assets or intended for the acquisition of non-current assets. Grants are initially recorded at the fair value of the asset received and subsequently recognised in the statement of comprehensive income by reducing the depreciation charge of the related asset over the expected useful life of the asset. Income-related grants Government and the EU grants received as a compensation for the expenses or unearned income of the current or previous reporting period, also, all the grants, which are not grants related to assets, are considered as grants related to income. The income-related grants are recognised as used to the extent of the expenses incurred during the reporting period or unearned income to be compensated by that grant. These grants are presented in the statement of comprehensive income as reduction of expenses.
Leases where substantially all the risks and rewards of ownership of assets leased are transferred to the lessee are classified as finance lease. All other leases are classified as operating leases.
2013 annual report
Notes to the financial statements
82
2.26 Dividend distribution
2.32 Fair value
Dividend distribution to the Company‘s shareholders is recognised as a liability in the Group‘s and the Company‘s financial statements in the period in which the dividends are approved by the Company‘s shareholders.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels in the fair value hierarchy:
2.27 Contingencies
Level 1: fair value of assets is based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements, but disclosed when an inflow of income or economic benefits is probable.
2.28 Events after the end of the reporting period All events after the end of the reporting period (adjusting events) are accounted for in the financial statements provided that they are related to the reporting period and have a significant impact on the financial statements. Events after the end of the reporting period that are significant but are not adjusting events are disclosed in the notes to the financial statements.
2.29 Related parties
Level 2: fair value of assets is based on other observable market data, directly or indirectly. Level 3: fair value of assets is based on non-observable market data.
3 Financial risk management 3.1 Financial risk factors The Group and the Company are exposed to a variety of financial risks in their operations: market risk (including foreign exchange risk, interest rate risk in relation to cash flows), credit risk and liquidity risk. In managing these risks the Group companies seek to mitigate the impact of factors which could adversely affect the Group’s and the Company’s financial performance results.
Related parties are defined as shareholders, Board members, their close family members, state-owned enterprises and companies that directly or indirectly (through the intermediary) control the Company or are controlled by, or are under common control with the Company, provided such relationship empowers one of the parties to exercise control or significant influence over the other party in making financial and operating decisions.
Market risk
2.30 Offsetting
With effect from 1 February 2002, the exchange rate of the litas has been pegged to the euro. As almost all assets and liabilities of the Group are denominated in the euros or litas, fluctuations in foreign exchange rate do not have a significant impact on the Group‘s results of operations and assets. Therefore, the Group did not use any derivative financial instruments for managing exposure to foreign exchange risk in 2013 and 2012.
When preparing the financial statements, assets and liabilities, as well as revenue and expenses are not set off, except the cases when a certain IFRS specifically requires such set-off.
2.31 Discontinued operations For the purpose of the consolidated statement of comprehensive income, all intercompany transactions within the Group between discontinued operations and continuing operations, which the Group will continue following the termination, have been classified under continuing operations, i.e. as if they had been conducted with the third parties.
2013 annual report
Notes to the financial statements
Foreign exchange risk The Group and the Company enter into financing contracts only in the euros or litas. Purchases and sales are conducted by the Group and the Company either in the euros or litas, transactions in other currencies are rare.
In view of the National Euro Changeover Plan approved in Lithuania in 2013, the Group/Company initiated a project dedicated to the preparation of the Group companies for the introduction of euro in Lithuania. The project is aimed at ensuring a timely implementation of measures pertaining to introduction of euro in Lithuania at the Group companies, and a smooth transition of the Group’s operations to the use of euro currency.
83
Interest rate risk
Fair values of financial instruments
The Group‘s income and cash flows are affected by fluctuations in market interest rates because all borrowings of the Group are with variable interest rates as of 31 December 2013. The Group does not have financial assets measured at fair value with fixed interest rates, therefore, it is not exposed to fair value interest rate risk. Time deposits bear fixed interest rate, therefore, they are not affected by interest rate risk.
Only the Group’s derivative financial instruments are measured at fair value. All other financial assets and financial liabilities are recognised initially at cost and subsequently measured at amortised cost, less impairment loss.
In order to manage interest rate risk, the Group used derivative financial instruments in 2012. Specifically the Group has entered into interest rate swap agreements enabling it to convert floating interest flows into fixed. The nominal value of the Group’s borrowings with interest rate risk managed by interest rate swaps amounted to LTL 69,056 thousand as at 31 December 2012. As at 31 December 2012, fair value of interest rate swaps represented a liability of LTL 1,558 thousand, and on 11 November 2013 the interest rate swap contract expired, and no new contracts were signed. The following table demonstrates the sensitivity of the Group’s profit to potential shift in interest rates. Increase/decrease in percentage points
(Decrease)/ increase in profit
2013 m.
+0.5% / -0.5%
(3,812) / 3,812
2012 m.
+0.5% / -0.5%
(3,782) / 3,782
Group
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined on the basis of quoted market prices, discounted cash flow models and option pricing models as appropriate. The carrying amount of the Group‘s and the Company’s financial assets and financial liabilities approximates their fair value except for mortgage loans granted (see note 11) and borrowings of the Group company Lietuvos energijos gamyba, AB (see note 20), and receivable from Litgrid AB. As at 31 December 2012 fair value of Group’s and Company’s receivable from sale of subsidiary Litgrid AB (see note 11 and 15) approximates its carrying amount. As at 31 December 2013 the carrying amount of this receivable is LTL 725 thousand and its fair value amounts to LTL 724.88 thousand; fair value was established based on cash flows discounted with 1,39% discount rate. The fair value is attributed to level 3 in the fair value hierarchy. The following methods and assumptions are used to estimate the fair value of each class of financial instruments: a) The carrying amount of current trade receivables and other receivables, current trade and other payables and short – term borrowings approximates their fair value. b) The fair value of long-term borrowings (current and non-current portion included), other than mortgage loans granted (see note 11) and borrowings of the Group company Lietuvos energijos gamyba, AB (see note 20), and receivable from Litgrid AB is estimated by discounting the contractual future cash flows using discount rate which is based on the quoted market price for the same or similar loans or on the current rates available for debt with the same maturity profile. The fair value of the above mentioned borrowings with variable interest rates approximates their carrying amounts. Their fair value is attributed to Level 3 in the fair value hierarchy. c) The fair value of interest rate swaps is determined using the swap valuation model. Their fair value is attributed to Level 3 in the fair value hierarchy. Credit risk The Group’s and the Company’s exposure to credit risk arises from operating activities of the companies (trade and other amounts receivable) and from financing activities (cash and cash equivalents, time deposits).
2013 annual report
Notes to the financial statements
84
The Group and the Company are not exposed to significant credit risk concentration related to amounts receivable. The Group and the Company invest free monetary funds only in low-risk money market instruments and debt securities, i.e. time deposits, bonds of creditworthy financial institutions, and Lithuanian government bonds. The priority objective of the Group’s and the Company’s treasury management is to ensure security of funds and maximise return on investments in pursuance of this objective. Risk of counterparties defaulting is managed by entering into transactions with reliable financial institutions with a long-term credit rating (in foreign currency) not lower than “A-“ according to the rating agency Fitch Ratings (or an equivalent rating of other rating agencies). Based on the general guidelines of the Group’s treasury management policy, there are exceptions when upon a prior approval of the Company’s head of administration, transactions may be conducted with financial institutions whose long-term credit rating (in foreign currency) is lower than “A-” but not lower than “BBB” according to the rating agency Fitch Ratings (or an equivalent rating of other rating agencies). In 2013 and 2012, the exception in terms of the counterparty’s credit rating was granted at the Group and the Company in acquisition of the Lithuanian Government debt securities. The credit risk relating to cash in banks is limited because the Group and the Company conduct transactions with the banks with high credit ratings assigned by international credit rating agencies. The Group and the Company hold cash balances and term deposits in accounts of the major banks in Lithuania assigned with ‘A-‘ and higher external credit rating by the rating agency Fitch Ratings. The Group and the Company acquired Lithuanian Government debt securites, their credit rating according to to the rating agency Fitch Ratings was “BBB+” and according to S&P was „BBB“.
Liquidity risk The liquidity risk is managed by planning future cash flows of each Group company and ensuring sufficient cash and availability of funding through committed credit facilities and overdrafts to support their operating activities. The refinancing risk is managed by ensuring that borrowings over a certain period were repaid from available cash, from cash flows expected from operating activities of the Group companies over that period, and from unwithdrawn committed credit facilities which have to be repaid in later periods. As at 31 December 2013, the Group’s current liquidity ratio (total current assets / total current liabilities) and quick ratio ((total current assets – inventories) / total current liabilities) were 1.26 and 1.22, respectively (31 December 2012: 1.13 and 1.04, respectively). The table below summarises the maturity profile of the Group’s and the Company‘s financial liabilities under the contracts (based on contractual undiscounted payments of interest-bearing financial liabilities and the carrying amounts of other financial liabilities): 2013 Group Interest-bearing borrowings, finance lease and other liabilities
Less than 3 months
3 months to 1 year
1 to 5 years
84,973
316,122
737,325
Over 5 years
Total
116,671
Trade payables
268,561
Other payables
103,638
-
-
-
103,638
The Group and the Company acquired bonds of a bank with credit rating according to the rating agency Fitch Ratings (or an equivalent rating of other rating agencies) was “A+”.
At 31 December 2013
457,172
316,122
742,806
116,671
1,632,771
The maximum exposure to credit risk as at 31 December 2013 and 31 December 2012 is equal to the carrying amount of each class of financial assets.
Group
Less than 3 months
3 months to 1 year
1 to 5 years
92,167
241,766
863,871
Group
Company
5,481
1,255,091 274,042
2012
Interest-bearing borrowings, finance lease and other liabilities
Over 5 years
Total
178,407
1,376,211
2013
2012
2013
2012
Trade payables
225,140
1,101,751
1,233,486
727,472
753,549
Other payables
223,143
-
-
-
223,143
Loans and receivables
81,433
293,177
81,433
290,162
At 31 December 2012
540,450
241,766
868,249
178,407
1,828,872
Held-to-maturity financial assets
98,254
7,292
98,254
7,292
558,396
122,176
309,974
57,765
1,839,834
1,657,116
1,217,133
1,108,768
Trade and other receivables
Cash and cash equivalents Total
2013 annual report
Notes to the financial statements
4,378
229,518
85
4 Critical accounting estimates and judgements used in the preparation of the financial statements
2013 Company
Less than 3 3 months to 1 to 5 years months 1 year
Interest-bearing borrowings, finance lease and other liabilities
-
-
Over 5 years
-
Total -
-
Trade payables
409
409
Other payables
1,288
1,288
At 31 December 2013
1,697
-
-
-
1,697
2012 Company
Less than 3 3 months to 1 to 5 years months 1 year
Interest-bearing borrowings, finance lease and other liabilities
-
-
-
Over 5 years
Total -
-
Trade payables
595
595
Other payables
6,107
6,107
At 31 December 2012
6,702
-
-
-
6,702
3.2 Capital risk management Pursuant to the Lithuanian Law on Companies, the authorised share capital of a public company must be not less than LTL 100 thousand (the authorised share capital of a private company must be not less than LTL 10 thousand) and the shareholders’ equity must be not lower than 50 per cent of the company’s authorised share capital. As at 31 December 2013 and 2012, the Company and many of the Group companies complied with these requirements. Technologijų ir Inovacijų Centras UAB and the Public Institution Republican Centre of Training for Energy Specialists did not comply with these requirements as at 31 December 2013, whereas as at 31 December 2012 only the Public Institution Republican Centre of Training for Energy Specialists did not comply with these requirements. Lietuvos Energija has provided confirmation to these companies, certifying that financial support will be provided for not less than 12 months after the approval of their financial statements. When managing the capital risk, the Group companies seek to maintain an optimal capital structure in a long run to ensure a consistent implementation of capital cost and risk minimisation objectives. The Group companies form their capital structure in view of internal factors relating to operating activities, the expected capital expenditures and developments and in view of business strategy of the Group companies, as well as based on external current or expected factors significant to operations relating to markets, regulation and local economic situation.
2013 annual report
Notes to the financial statements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The preparation of financial statements according to International Financial Reporting Standards as adopted by the European Union requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and costs and contingencies. Change in the underlying assumptions, estimates and judgements may have a material effect on these consolidated financial statements. Revaluation and impairment of assets The Group accounts for property, plant and equipment (except for assets of Kaunas Hydro Power Plant, Kruonis Pumped Storage Power Plant, combined-cycle block and reserve power plant) at fair value in accordance with International Accounting Standard 16 ‘Property, plant and equipment’. The fair value of almost all items of property, plant and equipment of the Group and the Company due to their specific nature was measured using a depreciated replacement cost approach at 31 December 2008. If the value of assets is measured based on a depreciated replacement cost method, International Valuation Standards require that an economic depreciation test should be performed. Accounting standards require a periodical review of property, plant and equipment for impairment. The value of property, plant and equipment should be reduced if its carrying value in the statement of financial position is higher than its value in use or the fair value less cost to sell. In other words, the carrying amount of property, plant and equipment reported in the statement of financial position should be written down to the higher of the present value of the future benefits that would be derived by the Group from the continued use of the assets and the proceeds it would derive from the asset’s disposal. The previous version of the Lithuanian Law on Electricity effective as at 31 December 2008 stipulated that the upper limits of prices for electricity transmission, distribution and public supply services were determined based on the value of assets used in the licensed activities of the service provider established with reference to data reported in the service provider’s financial statements (Regulated Assets Base). According to the Amendment to the above-mentioned Law effective from 1 June 2009, the upper limits of prices for electricity transmission, distribution and public supply services are to be determined based on the value of assets used in the licensed activities of the service provider established and approved by the National
86
Control Commission for Prices and Energy (the NCCPE) in accordance with the Principles for the determination of the value of assets used in the licensed activities of the service provider drafted by the NCCPE and approved by the Government. According to Resolution No 1142 of the Government of the Republic of Lithuania of 9 September 2009 On the Principles for the Determination of the Value of Assets Used in the Licensed Activities of the Electricity Service Provider, when determining the upper limits of prices for electricity transmission, distribution and public supply services, the value of assets used in the licensed activities of the service provider is equal to the net book value (carrying amount) of property, plant and equipment as at 31 December 2002 as increased by the amount of investments accomplished and agreed with the NCCPE and reduced by the depreciation amount calculated pursuant to the procedure stipulated in the Lithuanian Law on Income Tax. Due to the reasons specified above, the values of property, plant and equipment reported in these financial statements may significantly differ from those that would have been determined had the valuation of assets been performed by external independent valuers as required by International Valuation and Accounting Standards. It is probable that valuation would have a negative impact on the results of the Group’s operations and the shareholders’ equity reported in the financial statements for the years 2013 and 2012. The spilt of assets which have not been properly revalued or evaluated if approximate fair values is as follows: Net book amount at 31 December 2012
Group Land Buildings Structures and machinery Assets of Hydro Power Plant, Pumped Storage Power Plant and Thermal Power Plant
Net book amount at 31 December 2013 -
-
254,288
241,243
4,204,324
4,142,034
-
-
Motor vehicles
49,384
-
Other PP&E
74,483
65,628
Construc-tion in progress Total
61,214
50,275
4,643,693
4,499,180
Based on management’s decision, no independent valuation was performed to determine the fair values of this property, plant and equipment as at 31 December 2013 and 31 December 2012 due to existing uncertainties relating to the above-mentioned amendments to legal acts.
2013 annual report
Notes to the financial statements
Revaluation of assets As at 31 December 2013, independent valuation of assets was performed at the Group with respect to Lietuvos energijos gamyba, AB (assets carried at revalued amount), ELEKTROS TINKLO PASLAUGOS UAB and NT Valdos UAB (buildings and structures). The valuation was carried out by independent valuation companies. As at 31 December 2012, independent valuation of assets was performed at the Group in respect of NT Valdos UAB. The valuation was carried out by independent valuation company and the Group’s internal valuation specialists. Independent valuation of property, plant and equipment of Kauno Energetikos Remontas UAB was carried out on 31 December 2011 using the comparative price and income methods. In October 2010, independent property valuers carried out the revaluation of non-current assets that were transferred as in-kind contribution to share capital formation of UAB Technologijų ir Inovacijų Centras, UAB Duomenų Logistikos Centras, NT Valdos, UAB. In 2013, Duomenų Logistikos Centras UAB and NT Valdos, UAB carried out the valuation of the selected items of assets and determined that the carrying amount of property, plant and equipment did not differ significantly from the fair value. Impairment of assets The Group and the Company make an assessment, at least annually, whether there are any indications that the carrying amount of property, plant and equipment has been impaired. If that is the case, the Group and the Company make an impairment test in accordance with the accounting policy set out in Note 2. In 2013 and 2012, the Group and the Company accounted for property, plant and equipment (except for assets of the Hydro Power Plant, Pumped Storage Power Plant, Combined Cycle Block and Reserve Power Plant) at the revalued amount in accordance with International Accounting Standard No16 ‘Property, plant and equipment’. As of 31 December 2013 and 2012, the Group’s management considered the property, plant and equipment of Kruonis Pumped Storage Power Plant and Kaunas Hydro Power Plant for impairment indications and did not identify any thereon. As of 31 December 2013 and 2012, the impairment test was performed for the property, plant and equipment of the Reserve Power Plant and Combined Cycle Block (hereinafter “the power plant”), and it was determined that the recoverable amount of the power plant exceeded its carrying amount equal to LTL 2 090m (31 December 2012: LTL 2 160m), consequently, no impairment was recognised thereon. The recoverable amount of these assets increased in 2012 as a result of Resolution No 03-229 of the National Control Commission for Prices and Energy adopted on 14 September 2012.
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As of 31 December 2011 and 2010, the Company did not assess the impairment for the property, plant and equipment of the Reserve Power Plant, including contracts in progress (with the carrying amounts of LTL 2 039m and LTL 1 830m, respectively) due to regulatory legislation uncertainties outstanding as of 31 December 2011 in relation to electricity tariffs and changes therein, the regulated profit margins and outputs. According to the Description of PSO Services effective as of 31 December 2011, the producers of electricity were paid PSO service fees based on the actual electricity output per year subject to support and according to the fixed buy-out prices. The power plant is treated as a single cash generating unit based on the following: •
The transmission system operator treats each power plant as a single cash generating unit irrespective of the number of individual units that constitute the power plant.
•
All units of the power plant can be used for both, electricity generation and provision of capacity reserve services. The situation of which unit at a specific moment is used for electricity generation or launching of capacity reserve depends on the system’s needs, the technical condition of the units (e.g. scheduled repair works, disruptions in operations of units), potential disruptions in supply of natural gas, etc.
1. Value in use was estimated with reference to the most up-to-date budget for the year 2014 (2012: for the year 2013), the financial plan covering the period 20152018 (2012: 2013-2017), the projected pre-tax discounted cash flows using a pre-tax weighted average capital cost (WACC) of 7.09% (2012: 6.37%). The WACC was estimated according to the model of the National Control Commission for Prices and Energy based on the weighted cost of capital and debt, under which the equity risk premium is estimated as the difference in the average rate of return on investments in 10-year Lithuanian treasury bonds and stocks (2012: in 10-year US treasury bonds and stocks). When estimating the pre-tax weighted average capital cost, in 2013 the Group used the market long-term borrowing cost and effective average Euro Interbank Offered Rate (3 months EURIBOR) (in 2012 – the Group used the average annual borrowing cost and the base risk-free interest rates effective in December 2012, which were adjusted for risk effects in view of data announced in public by the Bank of Lithuania and the European Central Bank).
•
Electricity and thermal power production and provision of capacity reserve services at the power plant are considered to be regulated activities.
•
When establishing the prices for the regulated services, the National Control Commission for Prices and Energy takes into account all variable and fixed costs of the power plant, allocates and compensates a part of these costs against capacity reserve revenue and the remaining part against the PSO service fees. The electricity buyout price is established for electricity produced at the power plant as a whole.
2. Cash flow forecasts are prepared by the management as a result of financial projections based on the financial performance results, market development expectations and regulatory environment. In line with the Methodology approved by the Commission, the Reserve Power Plant‘s revenue is estimated based on the projections of variable costs, fixed costs and general and administrative costs. The projections of revenue from regulated activities also take into account the depreciation expenses of property, plant and equipment and the return on investments, which is calculated on the value of assets used in the regulated activities. When estimating the return on investments, the management used the rate of return on investments set by the NCCPE for the year 2014, which was 6.129236% (2012: rate of return on investments set by the NCCPE for the year 2013, which was 6.129236%).
The recoverable amount of cash generating units was estimated with reference to the value-in-use calculations. These calculations take into account the pre-tax cash flow forecasts based on the financial budgets approved by the management for the period of five years. Continuous cash flow is estimated using the discounted cash flow in the fifth year.
In view of the analysis, the management determined that it was not necessary to recognise any impairment loss as of 31 December 2013 and 31 December 2012. Had the discount rate increased by 0.5 p.p. in 2013 (1 p.p. in 2012), the value in use of the Combined Cycle Block and the Reserve Power Plant would still approximate the carrying amount.
The management estimated the projected operating profit in view of historical data, forecasts of position in the market and the Methodology for establishing the prices for electricity and capacity reserve services approved by Resolution No. O3-229 of the National Control Commission for Prices and Energy on 14 September 2012 (the Methodology). Key assumptions used in performing the impairment test as at 31 December 2013 and 2012 were as follows:
2013 annual report
Notes to the financial statements
Impairment of investments in the Company‘s subsidiaries The Company makes an assessment, at least annually, whether there are any indications that the carrying amount of investments in subsidiaries has been impaired. If that is the case, the Company makes an impairment test in accordance with the accounting policy set out in Note 2.8.
88
Although the shares of the Company’s subsidiaries LESTO AB and Lietuvos energijos gamyba, AB are traded on Vilnius Stock Exchange, the Group’s management believes this market is not active enough so that the quoted stock prices could be treated as equivalent to the fair value of investments in subsidiaries at the balance sheet date. Due to significant uncertainties, as described in Note 4 ‘Revaluation and impairment of assets’, related to the impact on future cash flows of Group companies of amendments to legal acts regulating the establishment of upper limits of prices for electricity transmission, distribution and public supply services, the Company did not carry out impairment tests for investment in subsidiary LESTO AB as at 31 December 2013 and 2012. As at 31 December 2013, the Company‘s management performed the impairment test for Lietuvos energijos gamyba, AB. For testing purposes, the recoverable amount of the cash generating units was determined with reference to the ‘value in use’ calculations. There are four main cash generating units: Kruonis Pumped Storage Power Plant, Kaunas Hydro Power Plant, Combined Cycle Block and Reserve Power Plant (which are treated as one cash generating unit as described in note 4 above) and other activities. The calculations were made with reference to pre – tax cash flows, prepared based on approved financial budgets for 5 years. Terminal value was determined based on cash flow of the fifth year. The forecasted cash flows reflect financial targets set in the Strategy of Lietuvos Enerija. The management determined operational profits based on historical data, market forecasts (i.e. development of renewable energy resources, construction of electricity transmission interconnections between Lithuania and Sweden) and the Methodology for establishing the prices for electricity and capacity reserve services approved by Resolution No. O3-229 of the National Control Commission for Prices and Energy on 14 September 2012. Value in used was determined using a pre-tax weighted average capital cost (WACC) of 8,76%. An increase in discount rate by 1 p.p. would still not result in any impairment loss. Based on the analysis performed, the Company‘s management determined that as at 31 December 2013 no impairment in respect of investment in Lietuvos energijos gamyba, AB exist. Sales price for LITGRID AB For the purpose of implementing the provisions of the Law on Electricity, on 4 July 2012 the Lithuanian Government adopted Resolution No 826 On the establishment of a private limited liability company and investment of state-owned capital, based on which the Ministry of Energy was assigned to establish a private limited liability company and adopt all the decisions necessary for the transfer of shares of LITGRID
2013 annual report
Notes to the financial statements
AB owned by Lietuvos Energija, UAB to the newly established private limited liability company EPSO-G UAB in return for a consideration based on the market value of shares determined by independent valuers. For the purpose of implementing the above-mentioned Resolution of the Lithuanian Government, the management initiated an independent valuation of the Company‘s shares held in LITGRID AB – an electricity transmission system operator controlled by the Company. The independent valuers determined the market value for 97.5% shares held in Litgrid AB using the income approach. The value of LITGRID AB shares owned by the Company determined by independent valuers was lower than their carrying amount, therefore, impairment of LTL 363,467 thousand was recognised in the statement of comprehensive income. In view of the results of independent valuation, the assumptions used in valuation and uncertainties in relation to future changes in the principles for the establishment of prices for services under regulated activities, the implementation of which is stipulated in the new provisions of the Lithuanian Law on Electricity adopted on 17 January 2012, the agreement on purchase and sale of shares of Litgrid AB provides for an extra charge on the final price, the realisation of which depends on possible changes in regulatory environment in future. The extra charge on the final price may be a positive or negative amount. Its determination is mostly affected by assumptions on future changes in regulatory environment. At the end of 2013, the National Commission for Control of Prices and Energy (NCCPE) had not reached a decision so far as to the application of methodology for Long-run Average Incremental Costs (LRAIC), therefore, the Company was not able to determine reasonable assumptions necessary for the calculation of the extra charge, and estimated the closing amount of extra charge on the final price as equal to zero as at 31 December 2013. In 2014, the NCCPE plans to make the decision as to the commencement of application of LRAIC methodology. As soon as the new amendments to the methodology for regulation of prices come into force, the Company will be able to estimate the effects of possible changes in the extra charge on the final price on its financial performance for the year 2014. Impairment of goodwill and intangible assets not subject to amortisation The consolidated financial statements include goodwill and licences with indefinite useful life that arose on acquisition of VST AB in 2008. Due to significant uncertainties, as described in Note 3 ‘Revaluation and impairment of assets’, related to the impact on future cash flows of the Group companies of amendments to legal acts regulating the prices for electricity distribution and supply services, the Group did not carry out impairment tests for goodwill and licences with indefinite useful life as at 31 December 2013 and 2012. The Group’s management believes the value of these assets of the Group could not be measured reliably as at 31 December 2013 and 2012.
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Useful lives of property, plant and equipment
Accounting for customer connection fees
The estimation of the useful lives of items of property, plant and equipment is a matter of judgment based on the experience with similar assets. The future economic benefits embodied in the assets are consumed principally through use. However, other factors, such as technical or commercial obsolescence and physical wear and tear, often result in the diminution of the economic benefits embodied in the assets. Management assesses the remaining useful lives in accordance with the current technical conditions of the assets and estimated period during which the assets are expected to earn benefits for the Group and the Company. The following key factors are considered: (a) expected usage of the assets; (b) expected physical wear and tear, which depends on operational factors and maintenance programme; and (c) technical or commercial obsolescence arising from changes in market conditions.
Before 1 July 2009, the Group used to defer income received from new customer connections to the grid and recognise it as deferred income over the period of 31 years, which is the average useful life of electricity equipment constructed by the Group upon connection of new customers. Management of the distribution companies of the Group believe that the period of provision of services to customers is indefinite, therefore, the average useful life of electricity equipment constructed by the Group upon connection of new customers was used as the best estimate of the period over which connection fees paid customers were recognised as income.
Accrued revenue Revenue received from private customers is recognised based on the payments received, therefore, at the end of each reporting period the amount of the revenue earned but not yet paid by private customers is estimated and accrued by the management of the Group company operating distribution networks. Accrued revenue is estimated as 1/3 of total payments for electricity received in December. The accrued revenue is based on past experience and average term of payment by customers for electricity. The management has estimated that the majority of private customers declare and make payment for the electricity consumed on approx. the 20th day of the month, while electricity is supplied for a full month (30 or 31 days). Consequently, the volume of electricity provided to the electricity supply network (the actually known variable) and the total volume of electricity declared by private customers during December and multiplied by the average rate per 1 kWh (Note 15). Consumption of overdeclared electricity With effect from 2013 and 2012, the Group increased the prices for electricity. In view of this, a part of private customers declared higher volume of electricity than they actually consumed in order to pay a lower price. As at 31 December 2012, the Group estimated the overdeclared amount with reference to change in electricity consumption, which is calculated as the difference between the volume of electricity to be supplied to the network over the period of recalculation and the volume of electricity actually supplied over the same period in the previous year. The difference was recognised as advance amounts received as at 31 December 2012. The amount of decrease in revenue due to overdeclared electricity in 2012 was recognised as amount receivable in the first quarter of 2013.
With effect from 1 July 2009 and based on IFRIC 18 interpretation, the newly connected customers to the grid do not obtain any additional future benefits as compared to all the remaining customers, consequently, the provision of connection service is treated as completed and income from connection is recognised upon the connection of a new customer (Note 24). Impairment of amounts receivable Impairment losses for amounts receivables are determined based on the management’s estimates on recoverability and timing relating to the amounts that will not be collectable according to the original terms of receivables. This determination requires significant judgement. Judgement is exercised based on significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments. Current estimates of the Group could change significantly as a result of change in situation in the market and the economy as a whole. Recoverability rate also highly depends on success rate and actions employed relating to recovery of significantly overdue amounts receivable. Amounts receivable are assessed to determine their value and impairment individually or collectively in a group of similar receivables. In case of individually assessed receivables for impairment, the Group takes into account the available or accessible data from external sources of information on market trends and forecasts, the possible credit enhancements (collateral) provided for receivables and events providing evidence of impairment of receivables such as, for example, fulfilment of contractual terms, the borrower’s actual performance, etc. In case of collectively assessed receivables for impairment, the Group takes into account the historical statistics, and reviews annually whether the provisioning rates used for collectively assessed receivables are in line with the historical data of impairment of receivables, and that the provisioning rates used for collectively assessed receivables are approved for the upcoming year.
With effect from 2014, the Group reduced the prices for electricity. The Group‘s management believes there was no significant difference between electricity declared by residents in 2013 and electricity actually consumed.
2013 annual report
Notes to the financial statements
90
Tax audits The tax authorities may at any time inspect the books and records within 5 years subsequent to the reported tax year, and may impose additional tax assessments and penalties. The Group’s management is not aware of any circumstances that might result in a potential material liability in this respect. Amortisation rates of licences Indefinite useful lives were established for the licences of distribution system operator and public supply services that were acquired on a business combination in 2008 because the validity term of these licences can be extended at no significant efforts or costs. Held-to-maturity financial assets The Group/Company follows the requirements of IAS 39, based on which non-derivative financial assets with fixed or otherwise determinable payments and fixed maturity terms are classified as held-to-maturity. For the purpose of such classification, the Group/Company assesses its intentions and abilities to hold these investments to maturity. If the Group/Company were not able to hold these investments to maturity due to other than specific circumstances, for instance, sells an insignificant part of securities close to maturity, the Group/Company would have to reclassify the entire group as available-for-sale financial assets and measure investment at fair value rather than at amortised cost. If all held-to-maturity investments were reclassified to other category of assets, the carrying amount would not change significantly. The fair value of the Group’s and the Company’s investments amounted to LTL 179,871 thousand as at 31 December 2013. Provision for utilisation of emission allowances The Group estimates provision for utilisation of emission allowances based on actual emissions over the reporting period multiplied by the market price for one unit of emission allowances. Actual emissions are approved by a relevant regulating state over the period of 4 months after the year end. Based on its past experience, the Group’s management do not expect any significant differences between the estimated provisions as at 31 December 2013 and emissions that will be approved for 2014. Accrued revenue from PSO service fees The variable part of PSO service fees is estimated by the production subsidiary with reference to variable costs incurred during the reporting period. The producers ensuring the security of electric power supply and reserves of energy system, submit their PSO service fee estimates to the NCCPE which include breakdown of variable electric power production costs – natural gas, heavy fuel oil, emission allowance costs,
2013 annual report
Notes to the financial statements
and costs for reagent desulphurisation. The variable part of PSO service fees for the upcoming calendar year is estimated with reference to scheduled variable costs to be incurred for the production of approved quota of electricity subject to support. In 2013, the amount of variable costs incurred by the Group was lower than the amount allocated for compensation of PSO service costs, therefore, the Group accounted for refundable PSO amount of LTL 56,955 thousand as of 31 December 2013, which will be compensated during 2015 in other non-current amounts payable and liabilities. The other amount of LTL 13 104 thousand relate to 2011 (note 26) . As at 31 December 2012 the Group management accounted for LTL 9 103 thousand in non-current receivables (note 11), the amount will be received in 2014. Also, as at 31 December 2012 the Group accounted for LTL 15 061 thousand in Other amounts receivable (note 15) of PSO fees to compensate difference in the price of natural gas; the amount was received in 2013. Accrued revenue from capacity reserve services Pursuant to the Methodology for establishing the prices for electricity and capacity reserve services approved by Resolution No O3-229 of the National Control Commission for Prices and Energy, in 2013 the Group’s management recognised additional revenue from capacity reserve services of LTL 19,082 thousand (in 2012 – 0 LTL), which will be compensated over 2015 (Note 11).
5 Adjustment to comparative figures When preparing the consolidated financial statements of Lietuvos Energija, UAB for the year ended 31 December 2013, the following adjustments were made to comparative data: Adjustment to comparative figures on recognition of impairment for capitalised costs of a new nuclear power plant project development As at 31 December 2012 the Company / Group accounted for LTL 24,3 m for assets relating to capitalised costs of new nuclear power plant project development and LTL 10,9 m. for deferred income tax assets to the extent they were related to the costs of new nuclear power plant project development. Until December 2012, costs attributable to research activities, assessments, engineering works carried out to obtain the construction permit for the nuclear power plant were capitalised by the Company/ Group as part of the cost of construction in progress. In view of the fact that no decision on the construction of a new nuclear power plant has been adopted as of the date of signing the financial statements for 2013, although all legal acts regulating the construction of a new nuclear power plant in the Republic of Lithuania have still been in force, the Company/Group has reviewed all
91
circumstances available as at 31 December 2012, and has retrospectively recognised impairment of LTL 24,3 m for capitalised costs and impairment of LTL 10.9 m. for deferred income tax asset because it is not probable that sufficient taxable profit would be available in future against which these assets could be realised in full or in part. The newly revised provisions of the Lithuanian Law on Nuclear Power Plant came into force on 21 June 2012. Art. 3.1 of the revised Law stipulates that the Lithuanian Parliament approves of the construction of a new nuclear power plant. Art. 6.1 of the revised Law sets forth that the national investor, a legal entity controlled by the state, has been established to take part in the implementation of the project for the construction of a new nuclear power plant. Pursuant to Resolution No 485 of the Lithuanian Government of 15 May 2012, Lietuvos Energija, UAB was appointed for the role of the national investor. In addition, on 21 June 2012 the Lithuanian Parliament adopted the Law on Provision of Concession and Undertaking of Fundamental Commitments of the Republic of Lithuania in Relation to the Project of Visaginas Nuclear Power Plant, by which it approved of the provision of concession to the project implementation company. The above-mentioned legal acts are still in force, however, in view of the results of the consultative referendum held on 14 October 2012 in relation to the construction of a new nuclear power plant in the Republic of Lithuania, on 18 December 2012 the Lithuanian Parliament adopted the resolution, by which it proposed to the Lithuanian Government to elaborate and submit to the Lithuanian Parliament a cost-effective and beneficial for the users strategy for the provision of electricity, and at the same time encouraged the Lithuanian Government to elaborate the draft legal acts or amendments thereto pertaining to the above matters and submit them to the Lithuanian Parliament not later than by 15 May 2013. As of the date of approval the financial statements for 2013, no legal acts have been adopted so far in relation to the development of new nuclear power plant construction project. Adjustment to comparative figures on re-estimation of carrying amount of property, plant and equipment The Group’s first-time adoption of International Financial Reporting Standards dates back to 2004, and since then the Group had been incorrectly applying the depreciation rates to property, plant and equipment of the Reserve Power Plant, which resulted in misstatements that had not been corrected for the entire period from 2004 to 31 December 2012. In 2013, the Group re-estimated the depreciation for property, plant and equipment of the Reserve Power Plant and adjusted accordingly the comparative figures in preparing the financial statements for 2013. As a result of the reestimation, the Group reduced the carrying amount of property, plant and equipment as at 31 December 2011 and 2012.
2013 annual report
Notes to the financial statements
Information on effect of the both adjustments , as discussed above, on the Group’s/ Company’s assets, equity, liabilities and profit as at 31 December 2011 and 2012 is summarised below: Group’s statement of financial position at 31 December 2011
Re-estimated carrying amount of PP&E
Before adjustment
After adjustment
Non-current assets Property, plant and equipment TOTAL ASSETS
9,985,395
(454,138)
9,531,257
11,610,830
(454,138)
11,156,692
(144,198)
(361,194)
(505,392)
792,426
(14,535)
777,891
Equity Retained earnings (deficit) Non-controlling interest Amounts payable after one year and liabilities Deferred income tax liabilities TOTAL EQUITY AND LIABILITIES
Group’s statement of financial position at 31 December 2012
732,405
(78,409)
653,996
11,610,830
( 454,138)
11,156,692
Before adjustment
Re-estimated carrying amount of PP&E
Impairment of PP&E and deferred tax asset
After adjustment
Non-current assets Property, plant and equipment Deferred income tax assets TOTAL ASSETS
7,986,191
(452,621)
11,879
(24,334)
7,509,236
(10,898)
981
10,295,821
(452,621)
(35,232)
9,807,968
Retained earnings (deficit)
187,934
(360,271)
(35,232)
(207,569)
Non-controlling interest
726,362
(14,498)
Equity 711,864
Amounts payable after one year and liabilities Deferred income tax liabilities TOTAL EQUITY AND LIABILITIES
Group’s statement of comprehensive income at 31 December 2012
526,705
(77,852)
10,295,821
(452,621)
Before adjustment
Re-estimated carrying amount of PP&E
448,853 (35,232) Impairment of PP&E and deferred tax asset
9,807,968
After adjustment
Operating expenses Depreciation and amortisation
(488,168)
Other expenses
(197,527)
Deferred tax income (expenses) Net profit (loss) from continuing operations Net profit (loss)
1,517
(486,651) (24,334)
(221,861)
32,359
(557)
(10,898)
20,904
(34,676)
960
(35,232)
(68,948)
(749,352)
960
(35,232)
(783,624)
92
Company’s statement of financial position at 31 December 2012
Before adjustment
Impairment of PP&E and deferred tax asset
After adjustment
Non-current assets Property, plant and equipment
24,382
(24,334)
48
Deferred income tax assets
10,996
(10,898)
98
3,909,426
( 35,232)
3,874,194
(165,096)
(35,232)
( 200,328)
3,909,426
( 35,232)
3,874,194
TOTAL ASSETS Equity Retained earnings (deficit) TOTAL EQUITY AND LIABILITIES
Company’s statement of comprehensive income at 31 December 2012
Before adjustment
Impairment of PP&E and deferred tax asset
After adjustment
Operating expenses Other expenses
(29,964)
Deferred tax income (expenses)
( 24,334)
( 54,298)
4,490
(10,898)
( 6,408)
Net profit (loss) from continuing operations
133,628
( 35,232)
98,396
Net profit (loss)
133,628
( 35,232)
98,396
6 Discontinued operations For the purpose of implementing Directive 2009/72/EC of the European Parliament and the Council of 13 July 2009 and the requirements of the Lithuanian Law on Electricity, on 4 July 2012 the Lithuanian Government adopted Resolution No. 826 On the establishment of a private limited liability company and investment of state-owned capital, based on which the Ministry of Energy was assigned to establish a private limited liability company and take all the decisions necessary to transfer the shares of LITGRID AB held by Lietuvos Energija, UAB to the newly established private limited liability company EPSO-G UAB in return for a consideration based on the market value of shares determined by independent valuers. On 10 July 2012, the Lithuanian Ministry of Energy issued an Official Letter No. (11.2-13)3-2428 On the implementation of the Lithuanian Government’s Resolution, based on which Lietuvos Energija, UAB was obliged to ensure that all the decisions necessary for spin-off of LITGRID AB will be taken. In September 2012, an agreement was signed between the Company and EPSO-G UAB owned by the Ministry of Energy on the sale of shares of electricity transmission system operator LITGRID AB, based on which 97.50% of shares of LITGRID AB were sold by the Company to EPSO-G UAB at market value.
2013 annual report
Notes to the financial statements
As described in Note 4, independent valuation of the shares of LITGRID AB was conducted in September 2012. The agreement on purchase and sale of shares of LITGRID AB has established the sale price of the shares equal to the market value of shares determined by independent valuers amounting to LTL 750,000 thousand, taking into account the uncertainties relating to future changes in the principles for establishment of prices of services of regulated activities, and the expected extra charge on final price. According to the agreement on purchase and sale of shares of LITGRID AB, the payment for the shares to the Company will be conducted by EPSO-G UAB in parts and interest will be charged on the outstanding balance of the consideration. The variable part of the interest rate under the agreement will be subject to repricing annually. Interest will be charged over the entire period from the date of transaction to the final settlement date and will be payable together with annual payments. As of 31 December 2013, the outstanding balance of the consideration amounted to LTL 725,000 thousand (31 December 2012: LTL 750,000 thousand), whereof LTL 35,000 thousand is payable in 2014 (LTL 30,000 thousand in 2013). Interest accrued on the outstanding balance of the consideration as at 31 December 2013 amounted to LTL 2,466 thousand (as at 31 December 2012: LTL 2,931 thousand). The impairment of the shares of LITGRID AB amounted to LTL 363,467 thousand and it was accounted for in the Company‘s financial statements as at 31 December 2012. For income tax calculation purposes, this amount may be carried forward for 5 years and offset against gain from disposal of securities. The Company did not recognise deferred income tax assets on this tax loss. In its statement of comprehensive income as at 31 December 2012, the Group accounted for loss on disposal of discontinued operations amounting to LTL 731,183 thousand arising on the difference between the net assets of LITGRID AB group and the sale price of the shares of LITGRID AB. LITGRID AB owned 67% of shares of BALTPOOL UAB, 20.36% of shares of Technologijų ir Inovacijų Centras, 0.35% of shares of NT Valdos UAB, 61.13% of shares of TETAS UAB, and 25.03% of shares of ELEKTROS TINKLO PASLAUGOS UAB. As a result of disposal of LITGRID AB shares, the Company and the Group lost control over the companies LITGRID AB, BALTPOOL UAB and UAB TETAS, and all revenue/expenses earned/incurred by these companies during a nine-month period in 2012 have been classified under discontinued operations in the financial statements. The Group retained control over Technologijų ir Inovacijų Centras, NT Valdos UAB, and ELEKTROS TINKLO PASLAUGOS UAB. Decrease in ownership interest caused increase in the share of non-controlling interest as presented in the statement of changes in equity.
93
Since LITGRID AB owned 61.13% of shares of TETAS UAB, the Group lost control over TETAS UAB following the sale of LITGRID AB shares, and the Group‘s ownership interest decreased to 32.12%. In the Group’s financial statements, investment in this associate was accounted for at fair value determined by independent valuers. In October 2012, the Group‘s management decided to sell all the shares of its associate TETAS UAB. As a result, the investment in TETAS UAB was reclassified as assets held for sale as at 31 December 2012. The table below presents information on assets and liabilities of the disposed LITGRID AB group for the period ended 30 September 2012: LITGRID AB Group
Notes
LIABILITIES Amounts payable and liabilities Amounts payable after one year and liabilities Grants and subsidies
23
257,227
Deferred income tax liabilities
22
169,889
Provisions
25
730
Deferred income
24
14,127
Other non-current amounts payable and liabilities
5,538
Amounts payable to Lietuvos Energija, UAB group
6,069
ASSETS
Total amounts payable after one year and non-current liabilities
Non-current assets
Amounts payable within one year and liabilities
Intangible assets
7
1,262
Property, plant and equipment
8
1 972,662
Prepayments for non-current assets
111,427
Investments in associates
21,313
Other financial assets Deferred income tax assets Total non-current assets
22
11,880
TOTAL ASSETS
Income tax liabilities Provisions
321
85,723 119,402 96,638 367,806 2,482,427
116,377
Total amounts payable within one year and current liabilities
502,760
Total amounts payable and liabilities
956,340
TOTAL LIABILITIES
956,340
NET ASSETS
1,526,087
Recognition of associate
6,752
Non-controlling interest
38,152
Sale price
750,000
Loss on disposal
731,183
Reconciliation of cash flows from disposal of subsidiary: Proceeds from disposal of subsidiary
-
Cash and cash equivalents (including bank overdraft)
114,806
Cash and cash equivalents
119,402
Cash flows from disposal of subsidiary
Notes to the financial statements
14,578 25
Other amounts payable to Lietuvos Energija, UAB group
Bank overdraft
2013 annual report
9,064
200,000
Other amounts receivable
Amounts receivable from Lietuvos Energija, UAB group
Advance amounts received
Dividends payable to Lietuvos Energija, UAB
39,706
Total current assets
36,281
235 2,114,621
Trade receivables
Cash and cash equivalents
4,596
Trade payables
121,543
1,331
Short-term investments, time deposits and other financial assets
Current borrowings
Other current amounts payable and liabilities
13,126
Prepayments
453,580
7,722
Current assets Inventories
LITGRID AB Group
Notes
(4,596) (114,806)
94
Upon the disposal of LITGRID AB, all revenue/expenses earned/incurred during a nine-month period in 2012 by LITGRID AB, BALTPOOL UAB and TETAS UAB were classified in the statement of comprehensive income as discontinued operations. LITGRID AB group 9 months 2012 Revenue Sales revenue
315,935
Other income
35,697
Total revenue
351,632
Operating expenses Purchases of electricity and related services
( 161,497)
Depreciation and amortisation
(94,431)
Wages and salaries and related expenses
(24,796)
Write-off of property, plant and equipment Repair and maintenance expenses Other expenses Total operating expenses Operating profit (loss)
( 95) (27,680) (25,000) ( 333,499) 18,133
Financing activities Finance income
2,291
Finance costs
( 499)
Finance income (costs), net Profit (loss) before tax Current year income tax expense Deferred income tax (expense)/income Net profit (loss) for the year from discontinued operations
1,792 19,925 (12,056) 8,638 16,507
Attributable to: Owners of the parent Non-controlling interests
16,756 ( 249)
The table below presents cash flows of LITGRID AB group during a 9-month period in 2012. LITGRID AB gruop 2012 Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities
2013 annual report
Notes to the financial statements
86,861 152,153 ( 184,797)
95
7 Non-current intangible assets Group
Patents and licences
Computer software
Other intangible assets
Emission allowances
Goodwill
Total
At 31 December 2011 Acquisition cost
119,492
21,354
35,459
1,051
(382)
(11,444)
-
-
-
-
Net book amount
119,110
9,910
35,459
Net book amount at 31 December 2011
119,110
9,910
372
712
Accumulated amortisation Accumulated impairment
Additions
178,427
355,783
(291)
-
(12,117)
-
(324)
(324)
760
178,103
343,342
35,459
760
178,103
343,342
127,582
3,559
-
132,225 (76,124)
Revaluation
-
-
(76,124)
-
-
Reclassified from/to PP&E
-
1,693
-
(1,482)
-
211
Write-offs/emission allowances utilised (note 25)
-
-
(16,265)
-
-
(16,265) (15,239)
Lending Amortisation charge Disposal of LITGRID AB group (note 6) Net book amount at 31 December 2012
-
-
(15,239)
-
-
(609)
(4,513)
-
(113)
-
(5,235)
-
(1,215)
-
(47)
-
(1,262)
118,873
6,587
55,413
2,677
178,103
361,653
119,880
18,045
55,413
3,024
178,427
374,789
(1,007)
(11,458)
-
(347)
-
(12,812)
-
-
-
-
(324)
(324)
At 31 December 2012 Acquisition cost Accumulated amortisation Accumulated impairment Net book amount
118,873
6,587
55,413
2,677
178,103
361,653
Net book amount at 31 December 2012
118,873
6,587
55,413
2,677
178,103
361,653
17
367
1,221
4,954
-
6,559
-
-
(9,994)
-
-
(9,994)
653
3,403
-
(3,333)
-
723
Write-offs/emission allowances utilised (note 25)
-
(4)
(13,895)
(6)
-
(13,905)
Disposals
-
-
(4,041)
-
-
(4,041)
(762)
(4,148)
-
(68)
-
(4,978)
118,781
6,205
28,704
4,224
178,103
336,017
118,866
18,364
28,704
4,626
178,427
348,987
(85)
(12,159)
-
(402)
-
(12,646)
-
-
-
-
(324)
(324)
118,781
6,205
28,704
4,224
178,103
336,017
Additions Revaluation Reclassified from/to PP&E
Amortisation charge Net book amount at 31 December 2013 At 31 December 2013 Acquisition cost Accumulated amortisation Accumulated impairment Net book amount
2013 annual report
Notes to the financial statements
96
The carrying amount of distribution network operator’s and public electricity supplier’s licences with indefinite useful life acquired by the Group in 2008 amounted to LTL 117,951 thousand as at 31 December 2013 and 31 December 2012. As at 31 December 2013 and 31 December 2012, the Group did not carry out impairment test in respect of goodwill (which arose in 2008) and licences with indefinite useful life due to uncertainties described in Note 4 Critical accounting estimates and judgements used in the preparation of the financial statements. In 2012, the Group carried out the testing of the Combined Cycle Block and capitalised expenses arising from emitting CO2 during the testing period (expenses being equal to the fair value of the emission allowances submitted, in the amount of LTL 3,205 thousand) to the cost of the Combined Cycle Block. The fair value of emission allowances is determined using the prices quoted in an active market, therefore, it is attributable to Level 1 in the fair value hierarchy. At the end of each reporting period, the value of emission allowances is estimated with reference to the market prices prevailing at the year-end. Other intangible assets
Company
Total
At 31 December 2011 Acquisition cost Accumulated amortisation Net book amount Net book amount at 31 December 2011 Additions Amortisation charge Net book amount at 31 December 2012
287
287
(221)
(221)
66
66
66
66
-
-
(66)
(66)
-
-
At 31 December 2012 Acquisition cost Accumulated amortisation Net book amount
287
287
(287)
(287)
-
-
Net book amount at 31 December 2012
-
-
Additions
-
-
Amortisation charge
-
-
-
-
Net book amount at 31 December 2013 At 31 December 2013 Acquisition cost Accumulated amortisation Net book amount
287
287
(287)
(287)
-
-
The Group and the Company have no internally created intangible assets.
2013 annual report
Notes to the financial statements
97
8 Property, plant and equipment Group
Land
At 31 December 2011 (restated) Cost or revalued amount Accumulated depreciation Accumulated impairment Net book amount Net book amount at 31 December 2011 (restated) Additions Revaluation Disposals Write-offs Reclassifications between groups Reclassified to assets, intangible assets Reclassified to assets held for sale Reclassified to investment property Reclassified to/from inventories Impairment charge (note 5) Depreciation charge Disposal of LITGRID AB (note 6) Net book amount at 31 December 2012 (restated) At 31 December 2012 (restated) Cost or revalued amount Accumulated depreciation Accumulated impairment Net book amount Net book amount at 31 December 2012 (restated) Additions Revaluation Disposals Write-offs Reclassifications between groups Reclassified to assets, intangible assets Reclassified to assets held for sale Reclassified to investment property Reclassified to/from inventories Impairment charge Reversal of impairment Depreciation charge Net book amount at 31 December 2013 At 31 December 2013 Cost or revalued amount Accumulated depreciation Accumulated impairment Net book amount
2013 annual report
Notes to the financial statements
Buildings 8,151 -
504,575 (50,211)
Structures and machinery 7,169,007 (1,009,212)
Assets of power plants 2,652,867 (1,233,360)
Motor vehicles 78,232 (32,208)
Other PP&E 277,627 (129,077)
Construc-tion in progress 1313,408 -
Total 12,003,867 (2,454,068)
-
(2,209)
(9,146)
(5,659)
(31)
(728)
(769)
(18,542)
8,151 8,151 (1,961) 6,190
452,155 452,155 1,823 78 (232) (433) 7,575 1,090 (21,830) (22,546) (34,144) 383,536
6,150,649 6,150,649 8,290 (1,554) (89) (15,105) 308,343 (21) (847) (452,998) (1,767,966) 4,228,702
1,413,848 1,413,848 1,172 (235) (73) 1,330,752 (80,507) 2,664,957
45,993 45,993 12,696 12 (155) (6,971) (1,307) 50,268
147,822 147,822 12,272 (40) (23) (42) 18,189 (113) 39 (33,895) (41,987) 102,222
1312,639 1312,639 575,973 (663) (1,664,859) (98) (24,334) (125,297) 73,361
9,531,257 9,531,257 612,226 (1,504) (734) (16,316) (211) 1,069 39 (22,677) (24,334) (596,917) (1,972,662) 7,509,236
6,190 6,190 6,190 753 6,943
451,914 (68,227) (151) 383,536 383,536 241 (1,284) (43) (179) 4,407 (6,327) 867 (19,663) 361,555
5,354,543 (1,124,617) (1,224) 4,228,702 4,228,702 4,113 (6,602) (112) (12,324) 289,004 (1) (34) (6) (338,358) 4,164,382
3,982,942 (1,312,326) (5,659) 2,664,957 2,664,957 1,214 -(166) (4,401) 11,021 6,572 4,668 (116,763) 2,567,102
88,282 (37,983) (31) 50,268 50,268 10,851 543 (565) (1) (7,037) 54,059
207,183 (104,233) (728) 102,222 102,222 4,815 (34) (266) (66) 8,620 (9) (24,502) 90,780
98,464 (25,103) 73,361 73,361 316,006 (433) (313,052) (723) (1,296) (34) 73,829
10,189,518 (2,647,386) (32,896) 7,509,236 7,509,236 337,240 (6,624) (1,152) (17,404) (723) (10) (7,657) 7,433 (34) 4,668 (506,323) 7,318,650
6,943 6,943
447,977 (86,397) (25) 361,555
5,605,133 (1,440,751) 4,164,382
3,991,094 (1,423,992) 2,567,102
92,514 (38,455) 54,059
169,830 (79,044) (6) 90,780
98,966 (25,137) 73,829
10,412,457 (3,068,639) (25,168) 7,318,650
98
Assets of power plants include assets of Hydro Power Plant, Pumped Storage Power Plant, Reserve Power Plant and Combined Cycle Block. Power plants are accounted at cost, other classes of assets at revalued amounts. Įmonė At 31 December 2011 Cost or revalued amount Accumulated depreciation Net book amount Net book amount at 31 December 2011 Additions Depreciation charge Impairment charge Net book amount at 31 December 2012 (restated) At 31 December 2012 (restated) Cost or revalued amount Accumulated depreciation Accumulated impairment Net book amount Net book amount at 31 December 2012 (restated) Additions Depreciation charge Impairment charge Net book amount at 31 December 2013 At 31 December 2013 Cost or revalued amount Accumulated depreciation Accumulated impairment Net book amount
Other PP&E
Construction in progress
Total
67 (21)
11,281 -
11,348 (21)
46
11,281
11,327
46 17 (15) -
11,281 13,053 (24,334)
11,327 13,070 (15) (24,334)
48
-
48
84 (36) -
24,334 (24,334)
24,418 (36) (24,334)
48
-
48
48 2 (17) -
34 (34)
48 36 (17) (34)
33
-
33
86 (53) -
24,368 (24,368)
24,454 (53) (24,368)
33
-
33
As at 31 December 2013, the independent valuation was performed at the Group in respect of assets carried at revalued amounts in subsidiaries Lietuvos energijos gamyba, AB , ELEKTROS TINKLO PASLAUGOS UAB AND NT Valdos UAB. The valuation was carried out by independent valuation companies, as described in Note 4.
Information on the results of revaluation carried out in 2013 and 2012 is summarised in the table below: Decrease recognised in other comprehensive income and revaluation reserve in equity
(Income) expenses recognised in profit and loss
Total revaluation effect
(Increase) decrease in net book amount as at 31 December 2013
2,419
4,205
6,624
(Increase) decrease in net book amount as at 31 December 2012
272
1,232
1,504
Group
The table below includes the carrying amounts of the Group‘s property, plant and equipment that would have been recognised, had these assets been carried at cost method as at 31 December 2013 and 2012.
Group Land
At 31 December 2013
At 31 December 2012
6,051
6,052
422,165
438,999
Structures and machinery
3,009,061
3,104,832
Assets of Hydro Power Plant, Pumped Storage Power Plant and Thermal Power Plant
2,567,102
2,664,957
Motor vehicles
45,788
41,430
Other PP&E
95,124
107,894
Buildings
Construc-tion in progress Total
73,829
73,361
6,219,120
6,437,525
The table below includes information on attribution of fair value of the Group’s revalued property, plant and equipment to appropriate levels in the fair value hierarchy (see Note 2.32 for description of the fair value hierarchy) as at 31 December 2013
As at 31 December 2012, the independent valuation was performed at the Group only in respect of NT Valdos UAB. The valuation was carried out by independent valuation company and the Group’s internal specialists, as described in Note 4.
2013 annual report
Notes to the financial statements
99
Group
Level 1
Level 2
Level 3
Quoted prices in active markets
Other observable market data, directly or indirectly
Non-observable market data
Total
Land
-
6,490
-
6,490
Buildings
-
104,441
68
104,509
Constructions and machinery
-
6,310
3,089
9,399
Motor vehicles
-
2,354
993
-
398
71
469
Total
-
119,993
4,221
124,214
Comparable price method
-
119,993
-
119,993
Cost method
-
-
4,101
4,101
Income method
-
-
720
720
The fair values of property, plant and equipment of Lietuvos energijos gamyba, AB carried at revalued amount, which were determined using observable market data, directly or indirectly, have been attributed to Level 2 in the fair value hierarchy. The valuation was conducted using the comparable and cost methods. The carrying amount of these assets as at 31 December 2013 is LTL 12,712 thousand. The fair values of property, plant and equipment of NT Valdos UAB have been attributed to Level 2 in the fair value hierarchy. The sale prices of comparative objects selected by the valuers were adjusted for specific characteristics of the object included in the valuation, such as area or location. The valuation of assets attributed to Level 3 in the fair value hierarchy was conducted using the income method. The carrying amount of all valued assets as at 31 December 2013 is LTL 99,568 thousand. The property, plant and equipment of ELEKTROS TINKLO PASLAUGOS UAB has been attributed to Level 2 in the fair value hierarchy, and its valuation was conducted using the comparable price method. This method was used for all items of real estate, majority of motor vehicles not intended for special purposes and other movable property, in respect of which sale transactions or demand instances were successfully observed in the market. The valuation of property, plant and equipment attributed to Level 3 in the fair value hierarchy was conducted using the cost method. This method was used to determine the value of engineering communications and part of special purpose movable property, in respect of which no sale transactions or supply instances were observed in the market. When determining the value of constructions under the cost method, the valuation was based on the lists of recoverable costs (construction values) of objects prepared by a third party. For valuation purposes, a straight-line depreciation method was selected based on assumption that the assets
Notes to the financial statements
The table below includes the net book amounts of the Group‘s and the Company‘s property, plant and equipment acquired under finance lease contracts as at 31 December 2013 and 2012: Group 2013
3,347
Other PP&E
2013 annual report
are depreciation in proportion to the number of years. Replacement costs are estimated in view of the levels of development costs defined by a third party. The carrying amount of these assets as at 31 December 2013 is LTL 11,934 thousand.
Plant and machinery
1,982
2013
2012
2,405
-
-
48
109
-
-
2,030
2,514
-
-
Motor vehicles Carrying amount
Company 2012
During the year 2013, the Group’s capitalised borrowing costs on loans relating to the development of non-current assets amounted to LTL 941 thousand (2012: LTL 22,710 thousand). The average interest rate of capitalised borrowing costs was 1.88% (2012: 2.23%). The Group has significant contractual commitments to purchase property, plant and equipment to be fulfilled in later periods. The Group‘s commitments to purchase and construct property, plant and equipment amounted to LTL 132 million as at 31 December 2013 (31 December 2012: LTL 42 million). As at 31 December 2013, the Group had pledged to the banks property, plant and equipment with the value of LTL 1,347,271 thousand (31 December 2012: LTL 403,799 thousand) (Note 20).
9 Investment property Group
Investment property
Carrying amount at 31 December 2011
93,574
Reclassification from property, plant and equipment
22,677
Increase in value Decrease in value
3,149 (5,521)
Carrying amount at 31 December 2012
113,879
Carrying amount at 31 December 2012
113,879
Reclassification from property, plant and equipment Increase in value Decrease in value Carrying amount at 31 December 2013
7,657 1,735 (1,645) 121,626
100
In 2013, the Group’s income from lease of investment property amounted to LTL 6,599 thousand (2012: LTL 3,330 thousand). The fair value of investment property as at 31 December 2013 and 2012 was determined in December 2013 and 2012 by independent valuers and the Group’s internal valuation specialists using the comparable market price method. In the opinion of the Group‘s management, the value of investment property determined under this method approximated its fair value as at 31 December 2013 and 2012. The Company had no investment property in 2013 and 2012. The table below includes information on attribution of fair value of the Group’s investment property to appropriate levels in the fair value hierarchy (see Note 2.32 for description of the fair value hierarchy) as at 31 December 2013:
Group
Level 1
Level 2
Level 3
Quoted prices in active markets
Other observable market data, directly or indirectly
Non-observable market data
118,733
579
On 4 December 2013, a newly established entity, named Technologijų ir Inovacijų Centras UAB, was registered with the Register of Legal Entities, which took over the business of IT, telecommunication and other services to the group companies. On 19 September 2013, Klaipėdos Nafta AB approved the decision to increase the authorised share capital of its subsidiary LITGAS UAB.
119,312
On 8 October 2013, the Company paid in full all the newly issued ordinary registered shares of LITGAS UAB (2 million shares).
-
Constructions and machinery
-
2,283
31
2,314
Total
-
121,016
610
121,626
The valuation of assets attributed to Level 2 in the fair value hierarchy was conducted using the comparable price method. The sale prices of comparative objects selected by the valuers were adjusted for specific characteristics of the object included in the valuation, such as area or location. The valuation of assets attributed to Level 3 in the fair value hierarchy was conducted using the income method.
10 Investments in subsidiaries and associates On 23 May 2012 Lietuvos Energija, UAB established a subsidiary VAE SPB UAB In September 2012, an agreement was signed between the Company and EPSO-G UAB owned by the Ministry of Energy on the sale of shares of electricity transmission system operator LITGRID AB, based on which 97.50% of shares of LITGRID AB were sold by Lietuvos Energija, UAB to EPSO-G UAB. Since LITGRID AB owned 61.13% of shares of TETAS UAB, the Group lost control over TETAS UAB following the sale of LITGRID AB shares, and the Group’s ownership interest decreased to 32.12%. In October 2012, the Group‘s management decided to sell all the shares of its associate TETAS UAB. As a result, the investment in TETAS UAB was reclassified as assets held for sale.
Notes to the financial statements
On 25 October 2013, the name of Technologijų ir Inovacijų Centras was changed into Duomenų Logistikos Centras UAB.
Total
Buildings
2013 annual report
On 7 January 2013 the Group and LITGRID AB concluded a share exchange agreement, under which the Group‘s title to 38.87% shareholding in associate TETAS UAB was disposed to LITGRID AB in return for the latter‘s 25.03% shareholding in ELEKTROS TINKLO PASLAUGOS UAB. On the date of exchange of shares, the value of acquired shareholding in ELEKTROS TINKLO PASLAUGOS UAB was LTL 8,022 thousand, and the value of disposed shareholding in TETAS UAB was LTL 6,752 thousand. The resulting difference was paid in cash.
On 15 October 2013, the Company became the principal shareholder of LITGAS AB, which is responsible for supply of liquid natural gas via the terminal and trade in natural gas. The Company owns 67% of shares in LITGAS UAB. The remaining shares are owned by the founder of LITGAS UAB - Klaipėdos Nafta AB. The Company‘s ownership interests in the Group companies as at 31 December 2013 were as follows: Group company
Acquisition cost
Contribution to cover loss
Carrying amount
Ownership interest, %
Subsidiaries: Lietuvos energijos gamyba, AB
1,017,998
-
1,017,998
96.13
AB LESTO
1,742,737
-
1,742,737
82.63
2,000
-
2,000
66.67
5
-
5
50.00 100.00
UAB LITGAS UAB Technologijų ir inovacijų centras UAB „VAE SPB“
10
5
15
2,762,750
5
2,762,755
UAB Duomenų logistikos centras
500
-
500
0.65
NT Valdos, UAB
100
-
100
0.03
600
-
600
2,763,350
5
2,763,355
Investments:
101
The Company‘s ownership interests in the Group companies as at 31 December 2012 were as follows: Acquisition cost
Group company
Carrying amount
Impairment
Ownership interest, %
Subsidiaries: Lietuvos energijos gamyba, AB
1,017,998
-
1,017,998
96.13
LESTO AB
1,742,737
-
1,742,737
82.63
10
100.00
VAE SPB UAB
10 2,760,745
-
2,760,745
Duomenų Logistikos Centras UAB
500
-
500
0.65
NT Valdos UAB
100
-
100
0.03
Investments:
600
-
600
2,761,345
5
2,761,345
2013 Carrying amount
Geoterma UAB Nordic Energy Link AS Enmašas UAB Total cost
2012
Group‘s ownership interest, %
Carrying amount
7,396
23.44
7,396
23.44
25.00
21,175
25.00
-
,20
23.44
28,571
28,591
7,625
2,874
Share of losses in associates
(7,396)
(2,287)
Carrying amount
28,800
29,178
Geoterma UAB Nordic Energy Link AS
2013 annual report
Sales revenue
Enmašas UAB
Net profit (loss)
31,412
11,967
7,246
(14,424)
4,371
56,291
13,352
Net profit (loss)
16,994
(242)
279,511
182,846
48,153
5,449
1,409
326
2,080
152
-
-
-
-
On 29 May 2013, Enmašas UAB was de-registered from the Register of Legal Entities. In September 2012 LitPol Link Sp.z.o.was disposed as to UAB EPSO-G as associate of Litgrid AB. Movement on account of investments in associates during the periods ended 31 December 2013 and 31 December 2012 were as follows:
Carrying amount at 1 January
2013
2012
29,178
28,797
Acquisition of associate
-
6,752
Reclassification of associate to assets held for sale
-
(6,752)
(20)
(1,020)
Share of result of operations of associates Carrying amount at 31 December
(358)
1,401
28,800
29,178
11 Amounts receivable after one year Amounts receivable after one year comprise as follows:
Mortgage loans granted
114,391
Notes to the financial statements
LitPol Link Sp.z.o.o
Sales revenue
11,665
Group
The financial position of associates as at 31 December 2013 and the results of their operation for the year then ended were as follows (unaudited): Liabilities
Nordic Energy Link AS
Liabilities
45,480
2013
The Group did not recognise the Group‘s share of loss of associate UAB Geoterma in the full amount because the amount of loss exceeded the value of the Group‘s investment. The unrecognised loss amounted to LTL 214 thousand.
Assets
Assets
Geoterma UAB
Decrease in investments
Group‘s ownership interest, %
21,175
Share of profits in associates
Group
Group
Group
The structure of the Group’s investments in associates as at 31 December 2013 and 2012 was as follows: Group
The financial position of associates as at 31 December 2012 and the results of their operation for the year then ended were as follows (unaudited):
Amount receivable on disposal of LITGRID AB (note 6) Unbilled accrued revenue from electricity sales (note 4) Amounts receivable for lent emission allowances lent Total Less: impairment Carrying amount
3,580
Company 2012 4,122
2013
2012 -
-
690,000 720,000 690,000 720,000 19,082
9,103
-
-
1,244
1,115
-
-
713,906 734,340 690,000 720,000 (1,018)
(1,230)
-
-
712,888 733,110 690,000 720,000
In 2013 the Group accounted for LTL 19,082 thousand relating to capacity reserve income, and in 2012 the Group accounted to LTL 9,103 thousand relating to PSO service fees receivable to compensate the difference in variable costs.
102
In 2013 the Group accounted for LTL 19,082 thousand relating to capacity reserve income, and in 2012 the Group accounted to LTL 9,103 thousand relating to PSO service fees receivable to compensate the difference in variable costs. Receivables for emission allowances lent represent future proceeds under the lending agreement signed with STX BV and CF Partners (UK) LLP. Receivables were estimated at the present value of future payments using a 6% discount rate (as at 31 December 2013 and 31 December 2012). The fair value of amounts receivable for emission allowances lent is attributed to Level 3 in the fair value hierarchy. Accrued revenue from electricity sales is attributed to Level 3 in the fair value hierarchy. The fair value of accrued revenue receivable did not differ significantly from the carrying amount. Mortgage loans represent loans granted to individuals for the term of 25 years. The mortgage loans are repayable in instalments till 2027. The mortgage loans are secured over residential housing property. In 2013, the current portion of these loans amounted to LTL 300 thousand (2012: LTL 319 thousand) and was accounted for under Other receivables (Note 15). These loans are subject to fixed interest rates ranging from 0.1 to 1 per cent. The Group’s mortgage loans were discounted at rates, the weighted average of which was 7.65 per cent as at 31 December 2013 (31 December 2012: 7.61 per cent). Fair value of mortgage loans was estimated based on discounted cash flows using a discount rate of 2.51 per cent (31 December 2012: 3.03 per cent) and is attributed to Level 3 in the fair value hierarchy. The fair values of mortgage loans are presented below: Group 2013
2012
2013 -
-
Carrying amount of loans granted (current and non-current parts)
2,862
3,211
-
-
Movement on the account of impairment during the years ended 31 December 2013 and 2012 were as follows: Group
Company
2012
2013
2012
1,438
-
-
-
-
-
-
Reversal of impairment
(212)
(208)
-
-
At December 31
1,018
1,230
-
-
Notes to the financial statements
Less: impairment Carrying amount
2012
2013
33,498
33,498
2012
(15,648)
(9,775)
-
-
17,850
23,723
-
-
-
-
As at 31 December 2011, 400,000 emission allowances were lent under the terms of the lending agreement signed on 1 December 2009 with STX Services BV. The agreement expires in 2021. On 16 April 2012, additional 650,000 emission allowances were lent under the terms of the lending agreement signed on 13 April 2012 with CF partners (UK) LLP. On 25 June 2013, this agreement was supplemented to extend its validity term until 31 March 2015. Impairment of right to receive emission allowances was estimated by estimating the fair value less costs of disposal with reference to the market prices of emission allowances as at 31 December 2013. The right to receive emission allowances is valued on monthly basis based on market values of emission allowances. The fair value of the right to receive emission allowances in future is attributed to Level 3 in the fair value hierarchy.
13 Inventories Raw materials, consumables and spare parts Electricity meters Heavy fuel oil Other Total Less: impairment
1,230
2013 annual report
Right to receive emission allowance in future
Company
2013
Group
4,617
Impairment
Group
2012
3,458
2013
Other non-current assets comprise as follows:
Company
Fair value of loans granted
At January 1
12 Other non-current assets
Carrying amount
Company
2013
2012
2013
20,881
30,674
-
2012 -
3,257
2,508
-
-
20,740
54,434
-
-
4,222
3,343
-
-
49,100
90,959
-
-
(14,486)
(17,341)
-
-
34,614
73,618
-
-
The Group‘s inventories expensed during the period ended 31 December 2013 amounted to LTL 79,004 thousand (2012: LTL 172,726 thousand).
103
Movement on the account of write-down of inventories to net realisable value during the years 2013 and 2012 was as follows: Group
Company
2012
17,341
16,206
-
-
1,898
4,085
-
-
Reversal of impairment
(4,753)
(2,950)
-
-
Carrying amount at 31 December
14,486
17,341
-
-
Additional impairment
2013
Group
2013 Carrying amount at 1 January
The ageing analysis of trade receivables that were not identified as doubtful receivables is as follows:
2012 Not past due Past due up to 30 days
Company
2013
2012
2013
273,292
248,029
2
2012 2
20,340
14,265
-
-
Past due from 30 to 60 days
5,462
3,713
-
-
Past due from 60 to 90 days
1,926
1,325
-
-
The change in write-down of inventories to net realisable value was reported under the line item ‘other expenses’ in the statement of comprehensive income.
Past due from 90 to 120 days
1,058
978
-
-
Past due over 120 days
2,359
2 934
-
-
The Group‘s inventories pledged as collateral amounted to LTL 6,000 thousand as at 31 December 2013 (31 December 2012: LTL 6,000 thousand) (Note 20).
Carrying amount
304,437
271,244
2
2
14 Trade receivables Group
15 Other amounts receivable
Company
2013
2012
Receivables for electricity sold in Lithuania
311,186
284,015
-
-
Amounts receivable for electricity exported
1,819
2,213
-
-
Value added tax
Other trade receivables
2013
The fair value of trade receivables as at 31 December 2013 and 2012 approximated their carrying amount.
2012
Group 2013
Company
2012
2013
2012
1,215
16,274
1,067
2,563
45,820
37,437
2
2
Amounts receivable for property, plant and equipment
3
140
-
-
Total
358,825
323,665
2
2
22,050
21,593
-
-
Less: provision for impairment of trade receivables
(54,388)
(52,421)
-
-
Accrued unbilled revenue from sale of electricity (related VAT incl.)
Carrying amount
304,437
271,244
2
2
Accrued unbilled revenue from sale of electricity (Note 4)
11,280
159,180
-
-
300
319
-
-
Movement on the account of provision for impairment during the years 2013 and 2012 were as follows: Group
Company
2013
2012
At January 1
52,421
42,287
-
-
Increase in provision for impairment
18,127
14,568
-
-
(16,160)
(4,434)
-
-
54,388
52,421
-
-
Amounted written off At December 31
2013
2012
Current portion of mortgage loans granted Amount receivable on disposal of LITGRID AB
35,000
30,000
35,000
30,000
Other amounts receivable
18,923
19,820
2,470
3,547
Total
88,771
247,326
38,537
36,110
Less: impairment of other receivables
(3,130)
(1,920)
-
-
Carrying amount
85,641
245,406
38,537
36,110
The fair value of other amounts receivable as at 31 December 2013 and 2012 approximated their carrying amount.
The increase in provision for impairment of trade receivables was reported under the line item ‘other expenses’ in the statement of comprehensive income.
2013 annual report
Notes to the financial statements
104
16 Investments and time deposits
As at 31 December 2013, the Group’s and the Company’s held-to-maturity financial assets comprised Lithuanian Government bonds denominated in the euros and litas, the redemption dates of which is in 2014-2016. As at 31 December 2012, Lithuanian Government bonds were denominated in the euros and litas, the redemption date of which is in 2013. As at 31 December 2013, the weighted average annual interest rate on bonds was 0.77% (31 December 2012 - 1.35%) .
Long-term investments comprised as follows: Group 2013
Company
2012
2013
2012
Held-to-maturity financial assets: Lithuanian Government bonds Carrying amount
57,302
-
57,302
-
57,302
-
57,302
-
As at 31 December 2013, the Group’s and the Company’s held-to-maturity financial assets comprised Lithuanian Government bonds denominated in the euros and litas, the redemption date of which is in 2015 and 2016. As at 31 December 2013, the weighted average annual interest rate on bonds was 1.50%. Short-term investments and time deposits comprised as follows: Group 2013
Company
2012
2013
2012
Held-to-maturity financial assets: Lithuanian Government bonds
40,131
7,292
40,131
7,292
81,433
142,687
81,433
142,687
-
150,495
-
147,475
821
980
821
980
122,385
301,454
122,385
298,434
Loans and receivables Bank bonds Time deposits Interest receivable Carrying amount
Movement of long term and short term bonds ir presented below: Group 2013 1 January
Company
2012
2013
The fair value of Bank bonds totalled LTL 81 587 thousand as at 31 December 2013, The fair value was determined with reference to the interest rate applied on early redemption of bonds and the holding term of bank bonds at the Company.
17 Cash and cash equivalents Group Cash at bank and in hand Overnight deposits Carrying amount
149,979
46,981
149,979
46,981
Acquired
199,583
158,557
199,583
158,557
170,696
55,559
170,696
55,559
31 December
178,866
149,979
178,866
149,979
As at 31 December 2012, the weighted average annual interest rate on short-term deposits was 1.09%.
Notes to the financial statements
The fair value of all Lithuanian Government bonds totalled LTL 98 284 thousand as at 31 December 2013. The fair value measurement is attributed to Level 1 in the fair value hierarchy. The fair value of debt securities was determined with reference to the highest average of bid/ask prices (incl. accrued interest) applied by the banks (DNB or Danske Bank) for similar debt securities as at 31 December 2013. Nominal value of investments was multiplied by the most favourable average of bid/ask prices (incl accrued interest) prevailing as at 31 December 2013.
2012
Matured
2013 annual report
As at 31 December 2013, the Group’s and the Company’s bank bonds comprised securities of the banks of the Republic of Lithuania denominated in the euros and litas, the redemption date of which is in 2014; As at 31 December 2012 - the bonds with redemption in 2013, As at 31 December 2013, the weighted average annual interest rate on bonds was 0.66%. (31 December 2012 - 1.28%) .
Company
2013
2012
2013
2012
558,396
120,886
309,974
57,765
-
1,290
-
-
558,396
122,176
309,974
57,765
For the purpose of cash flow statement, cash and cash equivalents and bank overdraft comprised as follows: Group
Company
2013
2012
2013
2012
Cash and cash equivalents
558,396
122,176
309,974
57,765
Bank overdraft (note 20)
(70,708) (125,391)
Carrying amount
487,688
(3,215)
-
-
309,974
57,765
105
The fair value of cash and cash equivalents as at 31 December 2013 and 2012 approximated their carrying amount Based on the loan agreements signed with the banks, the Group has pledged to the banks its current cash balances and future inflows into the bank accounts (Note 20) amounting to LTL 5,630 thousand as at 31 December 2013 (31 December 2012: LTL 22 thousand).
18 Share capital On 28 September 2012, the shares of Lietuvos Energija, UAB were transferred into the ownership of the Lithuanian Ministry of Economy. On 13 February 2013, the shares of Lietuvos Energija, UAB were transferred into the ownership of the Lithuanian Ministry of Finance. As at 31 December 2013 and 31 December 2012, the Company’s share capital equalled LTL 4,067,163,632. The share capital as at 31 December 2013 and 2012 was divided into ordinary registered shares with nominal value of LTL 1 each. All the shares are fully paid.
19 Reserves Legal reserve The legal reserve is compulsory under the Lithuanian laws. The companies in Lithuania are required to make annual transfers of 5 per cent of net profit from retained earnings to the legal reserve until the reserve reaches 10 per cent of the authorised share capital. The legal reserve may not be used for payment of dividends and it is formed to cover the company’s future losses only. As at 31 December 2013, the Group’s legal reserve amounted to LTL 77,074 thousand (31 December 2012: LTL 75,467 thousand). The Company has not established the legal reserve because as at 31 December 2012 and 2011 the Company had accumulated losses. Revaluation reserve Revaluation reserve comprises increase in the value of property, plant and equipment on revaluation. Pursuant to the Lithuanian laws, revaluation reserve cannot be used to reduce loss.
Other reserves Other reserves are formed based on the decision of shareholders and they can be redistributed upon appropriation of profit for the following year. As at 31 December 2013, the Group’s other reserves amounted to LTL 651,469 thousand (31 December 2012: LTL 689,922 thousand). The Company did not have other reserves. Reserve for share capital reduction
Reserve for investments
Reserve for bonuses and support
Restricted use reserves related to non-current assets
Balance at 31 December 2011
(61,310)
112,381
(19)
638,956
Reserves utilised/reversed
-
(105)
19
- (316,798) (316,884)
Disposal of LITGRID AB
-
-
-
- (638,387) (638,387)
Effect of the Group‘s restructuring
Group
Other reserves
Total
955,162 1,645,170
-
-
-
-
23
23
Balance at 31 December 2012
(61,310)
112,276
-
638,956
-
689,922
Reserves utilised/reversed
-
-
-
(38,453)
-
(38,453)
Balance at 31 December 2013
(61,310)
112,276
-
600,503
-
651,469
The reserve for share capital reduction due to the transfer of heavy fuel oil storage facilities is negative. It was formed in 1999 as a result of the transfer of heavy fuel oil storage facilities from Lietuvos energijos gamyba, AB to VĮ Vilniaus Mazuto Saugykla (although expected, the share capital has not been reduced by this amount until now). The reserve for investments was formed to accumulate funds for the construction and development of non-current assets for Lietuvos energijos gamyba, AB . Decision on utilisation of these funds is to be made by the Group’s shareholders. The restricted use reserve related to non-current assets was formed upon the first-time adoption of IFRS by Lietuvos energijos gamyba, AB on 1 January 2004. As a result of transition to IFRS, the equity of this company increased and the reserve related to non-current assets was formed to restrict the distributions from that increase in equity. These amounts can be transferred to retained earnings under decision of shareholders.
As at 31 December 2013, the Group’s revaluation reserve amounted to LTL 727,576 thousand (31 December 2012: LTL 802,934 thousand). The Company did not have such reserve.
2013 annual report
Notes to the financial statements
106
20 Borrowings Group 2013
To secure the repayment of certain loans, the Group has pledged its property, plant and equipment (Note 8), inventories (Note 13) and cash (Note 17).
Company 2012
2013
2012
Non-current Bank borrowings
805,826
948,017
-
-
302,656
178,078
-
-
-
3,155
-
-
70,708
125,391
Current Current portion of long-term loans Other borrowings Bank overdraft (note 17) Accrued interest Total borrowings
854
979
-
-
1,180,044
1,255,620
-
-
All Group’s borrowings bear variable interest rates; intervals of repricing are no longer than 6 months.
The loan agreements contain certain financial and non-financial covenants that the individual Group companies are obliged to comply with. In the opinion of management, as at 31 December 2013 and 2012 the Group complied with the covenants. The Group‘s management believes it is unlikely that the lenders will take measures in respect of the above-mentioned loans. As at 31 December 2013 unused Group‘s loans and overdrafts amounted to LTL 325,147 thousand (as at 31 December 2012 – LTL 180,038 thousand).
21 Išperkamosios nuomos įsipareigojimai
Non-current borrowings analysed by maturity:
2013 Group
2013
2013
Between 1 and 2 years
113,352
275,888
-
-
590,329
520,746
-
-
Over 5 years
102,145
151,383
-
-
Total
805,826
948,017
-
-
The carrying amounts of borrowings are denominated in the following currencies: Group LTL
Present value of minimum finance lease payments
Minimum finance lease payments
Present value of minimum finance lease payments
Within the first year
10
8
331
327
Between the second and the fifth year
38
36
47
44
Minimum finance lease payments
48
44
378
371
Less: future finance charges
(4)
-
(7)
-
Present value of minimum finance lease payments
44
44
371
371
2012
Between 2 and 5 years
2013
Minimum finance lease payments
Company 2012
Company 2012
2013
2012
70,708
128,546
-
-
EUR
1,109,336
1,127,074
-
-
Total
1,180,044
1,255,620
-
-
As at 31 December 2013 and 2012, the fair value of borrowings approximated their carrying amount, except for Lietuvos energijos gamyba, AB borrowings with the carrying amount of LTL 555,390 thousand and LTL 660,590 thousand, respectively. The fair values of these borrowings as at 31 December 2013 and 2012 were approx. LTL 609,920 thousand and LTL 697,685 thousand, respectively. The fair value was estimated using a 2.90% discount rate (as of 31 December 2012: 2.75% discount rate). The fair value of borrowings is attributed to Level 3 in the fair value hierarchy.
2012
Finance lease payments:
The finance lease liabilities are secured by the lessor’s right into the lessee’s assets acquired under finance lease. The fair value of the finance lease liabilities approximated their carrying amount as at 31 December 2013 and 2012. The Company did not have any finance lease liabilities.
2013 annual report
Notes to the financial statements
107
22 Deferred income tax Deferred income tax assets and deferred income tax liabilities are offset when there are legally enforceable grounds to set off current tax assets against current tax liabilities and when deferred income tax relates to the same fiscal authority. Movements on the accounts of deferred income tax assets and deferred income tax liabilities during the reporting period were as follows: At 31 December 2011 (restated)
Group
Recognised through profit and loss
Recognised in other comprehensive income
At 31 December 2012 (restated)
Disposal of LITGRID AB
Recognised through profit and loss
Recognised in other comprehensive income
At 31 December 2013
Deferred income tax assets Revaluation of PP&E (decrease in value)
155,778
(12,278)
-
(1,701)
141,799
(10,371)
406
131,834
Difference in recognition of revenue from new customer connections
2,987
(587)
-
-
2,400
(587)
-
1,813
Deferred income
1,611
(392)
-
(85)
1,134
11,130
-
12,264
Accrued expenses
3,043
(6,631)
-
(264)
(3,852)
19
-
(,3,833)
Impairment of assets
19,045
(798)
-
(10,734)
7,513
10,943
-
18,456
Tax losses not utilised
8,470
(5,560)
-
-
2,910
382
-
3,292
Other
3,261
377
-
(100)
3,538
(1,336)
-
2,202
194,195
(25,869)
-
(12,884)
155,442
10,180
406
166,028
-
-
-
-
-
(41)
-
(41)
194,195
(25,869)
-
(12,884)
155,442
10,139
406
165,987
Deferred income tax assets before write-down to recoverable value Less: write-down to recoverable value Deferred income tax assets, net
Company
At 31 December 2011
769,329
(55,065)
(41)
(172,644)
541,579
(40,166)
43
501,456
Differences in depreciation rates
20,059
2,103
-
(551)
21,611
15,365
-
36,976
Tax relief on acquisition of PP&E
30,292
(2,612)
-
(9,296)
18,384
(3,080)
-
15,304
Recognised in other comprehensive income
At 31 December 2013
Accrued expenses
63
35
-
98
(27)
-
71
Tax losses not utilised
6,443
(6,443)
-
-
-
-
-
Deferred income tax assets before write-down to recoverable value
6,506
(6,408)
-
98
(27)
-
71
-
-
-
-
-
-
-
6,506
(6,408)
-
98
(27)
-
71
Less: write-down to recoverable value Deferred income tax assets, net
The Group and the Company has not recognised deferred tax asset from accrued tax losses amounting to LTL 68,607 thousand which incurred in operating activities and from tax losses amounting to LTL 363,467 thousand which incurred in disposal of Litgrid AB.
23 Grants and subsidies The balance of grants comprises grants to finance acquisition of assets, funds received from the International Fund for Support of Decommissioning of Ignalina Nuclear Power Plant, from the EU structural funds, and property, plant and equipment and intangible assets received in return for no consideration from the Government of the Republic of Lithuania. Movement on the account of grants in 2013 and 2012 was as follows:
Group
Other projects implemented by the Group
Projects for renovation, improvement of environmental and security standards
Grants for emission allowances
Total
4
-
-
-
4
-
-
4
301,351
913,586
-
1,214,937
(150)
-
-
(1,964)
(248)
-
(2,212)
Depreciation of PP&E
(4,600)
(16,471)
-
(21,071)
Grants received
78,955
110,487
16,211
205,653
-
-
(16,211)
(16,211)
11,420
302
-
-
11,722
(984)
-
10,738
Other
12,017
11
-
(47)
11,981
(81)
-
11,900
841,307
(55,411)
(41)
(182,538)
603,317
(29,194)
43
574,166
(647,112)
29,542
41
169,654
(447,875)
39,333
363
(408,179)
Deferred income tax, net
Recognised through profit and loss
(1,814)
Difference in recognition of revenue from new customer connections
Deferred income tax liabilities, net
At 31 December 2012 (restated)
Asset –related grants
Revaluation of PP&E (increase in value)
Increase in value of assets
Recognised in other comprehensive income
Deferred income tax assets
Deferred income tax liabilities
Accrued expenses
Recognised through profit and loss
2013 annual report
Notes to the financial statements
Balance at 31 December 2011
Emission allowances utilised Grants reversed Disposal of LITGRID AB (note 6) Balance at 31 December 2012
(631)
-
-
(631)
(257,227)
-
-
(257,227)
117,848
1,007,602
-
1,125,450
108
25 Provisions
Asset –related grants Group
Other projects implemented by the Group
Projects for renovation, improvement of environmental and security standards
(5,952)
(34,844)
-
(40,796)
6,919
-
6,406
13,325
Depreciation of PP&E Grants received Emission allowances utilised Grants reversed Balance at 31 December 2013
Grants for emission allowances
Group
Total
2013 Non-current
-
-
(6,406)
(6,406)
(62)
-
-
(62)
118,753
972,758
-
1,091,511
-
-
Current
12,437
13,915
-
-
Total
17,025
17,427
-
-
Group
Increase during the period
Amortisation of grants is included in depreciation and amortisation expenses in the statement of comprehensive income and charged against the depreciation expenses of the related property, plant and equipment.
Disposal of LITGRID AB (note 6)
At 1 January Reclassified to current liabilities Disposal of LITGRID AB (note 6) At 31 December
2013
2012
198,034
223,195
-
Notes to the financial statements
Provisions Provisions for for employee emissions * benefits
Total
679
61,931
4,715
76
13,895
132
67,325 14,103
(106)
(16,268)
(913)
(17,287)
Provisions for onerous contract
-
12,824
-
12,824
Usage of provisions for onerous contract
-
(58,487)
-
(58,487)
(344)
-
(707)
(1,051)
At 31 December 2012
305
13,895
3,227
17,427
Increase during the period
101
9,745
4,153
13,999
Utilised during the period (emissions – Note 7)
(20)
(13,895)
(486)
(14,401)
At 31 December 2013
386
9,745
6,894
17,025
2012 -
(8,511)
(11,034)
-
-
-
(14,127)
-
-
189,523
198,034
-
-
Fees received after 1 July 2009 for the connection of new customers to the grid and for the dislocation of electricity network facilities on request of customers are recognised as sales revenue during the period in which the works are carried out. Before 1 July 2009 deferred income was recognised over the average useful life of property, plant and equipment concerned (see Notes 2.22 and 4).
2013 annual report
Utilised during the period (emissions – Note 7)
Provisions for litigations and claims
* For the purpose of the statement of comprehensive income, expenses of provisions for emission allowances utilised are reported net of government grants (Note 23).
Company 2013
2012
3,512
At 31 December 2011
Group
2013
4,588
The grant related to emission allowances was received in full by Lietuvos energijos gamyba, AB . Grants for emission allowances which were received in 2013 comprise of LTL 5,366 thousand grants related to 2013 and of LTL 1,040 thousand related to 2012.
24 Deferred income
Company 2012
Emission allowances under onerous contracts were acquired in 2012, therefore the provisions were used. Some Group companies pay employee benefits and other extra pays depending on their term of service. In addition, benefits amounting to 2 monthly salaries are paid to employees upon redundancy or termination of employment on retirement as stipulated in the Lithuanian laws. Some subsidiaries pay termination benefits on retirement higher than that defined in the collective employment contract. Actuarial calculations are made to ensure the accuracy of estimates of these liabilities to employees. The liabilities are recognised at a present value discounted at the effective market interest rate.
109
26 Other non-current amounts payable and liabilities Group
Company
2013
2012
70,059
26,208
-
-
Non-current trade payables
5,481
4,378
-
-
Other
2,019
3,843
-
-
77,559
34,429
-
-
Advance PSO service fees received (Note 4)
Carrying amount
2013
2012
The current portion of advance PSO service fees received was classified as advance amounts received (LTL 25,114 thousand as at 31 December 2013 and LTL 13,104 thousand as at 31 December 2012).
To manage its interest rate risk, the Group used derivative financial instruments. For this purpose, the Group entered into interest rate swap contracts to convert variable interest rate into fixed interest rate. As at 31 December 2012 and, the nominal value of interest rate swap contracts amounted to LTL 69,056 thousand. On 11 November 2013 this interest rate swap contract expired. The Group’s another derivative financial instrument arose from a contract signed between Gazprom Marketing and Trading Limited and the Company on 20 October 2010 for the conversion of emission allowances into emission reduction units. The date of execution was set as 21 March 2013. The fair value of the derivative financial instrument was determined based on the market values of emission allowances and emission reduction units as at 31 December 2012.
29 Sales revenue
27 Trade payables
Group Group
Amounts payable for electricity Amounts payable for contractor works and services
2013
Company
2013
2012
2013
2012
217,840
185,067
-
-
45,409
20,596
-
-
Revenue from sale of electricity to end users
Amounts payable for gas
2,868
4,342
-
-
Other amounts payable
2,444
15,135
409
595
268,561
225,140
409
595
Carrying amount
Company 2012
2013
2,720,150 2,550,819
2012 -
-
Electricity exports
15,342
93,027
-
-
Other sales revenue
51,675
47,149
-
-
2,787,167 2,690,995
-
-
Total
30 Other income 28 Other current amounts payable and liabilities Group 2013 Employment-related liabilities Accrued expenses and deferred income for electricity
Group Company
2012
2013
2012
11,312
12,012
132
656
108
1,862
-
-
Amounts payable for property, plant and equipment
93,212
186,406
-
5,642
Taxes other than income tax
16,366
10,582
-
-
Accrued expenses and deferred income
32,255
33,000
-
-
7,310
-
Derivative financial instruments Other amounts payable and liabilities Carrying amount
2013 annual report
Notes to the financial statements
-
10,426
28,448
1,288
465
163,679
279,620
1,420
6,763
Company
2013
2012
2013
Repair services
44,344
34,966
-
2012 -
IT and communications services
31,008
27,867
-
-
Rental income
16,584
12,613
8
8
Other income
28,434
32,649
-
-
120,370
108,095
8
8
Total
The Group leases vehicles and premises, the terms of lease vary from several hours to several years. Rental income is recognised proportionately during the term of lease period in the statement of comprehensive income.
110
32 Finance income
31 Other expenses Group
Company
2012 (restated)
2013
2013
Group
2012
Interest income
Subcontractor works and materials
34,603
20,297
-
-
Taxes
19,631
21,740
168
160
Allowances for accounts receivables (note 14, 15)
19,337
14,568
-
-
Write-off of property , plant and equipment (note 7,8)
17,414
16,221
-
-
Revaluation of emission allowances, related provisions and grants (note 7, 23, 25)
14,320
12,113
-
-
Transport
13,479
14,090
549
584
Telecommunications and IT services
12,343
10,939
630
618
Services to customers
8,547
8,260
-
-
Utility services
6,597
7,038
145
118
Impairment of other non-current assets (note 12)
5,873
606
-
-
Consultation services
5,666
26,489
789
20,288
Advertising
2,858
8,769
63
6,384
Expenses of small-value inventory items
2,681
1,647
-
-
HR development
1,744
1,572
111
88
Business trips
1,332
1,916
195
810
(4,634)
24,334
34
23,334
Scientific and research works
-
177
-
-
Provisions for onerous contract (note 25)
-
12,824
-
-
4,115
3,604
-
-
Allowances for inventories (note 13)
(2,855)
1,135
-
-
Other expenses
21,849
8,608
909
914
184,884
221,861
3,593
54,298
Impairment of property, plant and equipment (note 5, 8)
Revaluation of assets and fair value gains and losses (note 8,9)
Total
2013 annual report
Notes to the financial statements
2012
2013
15,129
10,312
14,728
8,914
-
-
109,255
521,821
1,837
-
-
-
6
278
-
-
3,131
3,008
-
193
20,103
13,598
123,983
530,928
2013
2012
2013
30,041
18,581
Dividends received Income from derivatives Foreign exchange net gain Other finance income Total
Company
2013
2012
33 Finance costs Group Interest expenses Foreign exchange net loss
Other finance costs
2012 -
-
32
208
-
2
-
4,114
-
-
146
587
4
7
30,219
23,490
4
9
Losses from derivatives
Total
Company
34 Income tax expenses Income tax expenses comprise current income tax and deferred income tax. Income tax at a rate of 15% was payable on profit for 2013 (the same as in 2012) in accordance with the Lithuanian regulatory legislation on taxation. Group
Company
2013
2012
2013
2012
40,044
30,070
-
-
(39,333)
(20,904)
27
6,408
711
9 166
27
6,408
Continuing operations: Current income tax Deferred income tax Income tax expenses (income) recognised in profit and loss
111
Income tax calculated on the Group‘s and the Company‘s profit before tax differs from the theoretical amount that would arise using the income tax rate applicable to the Company : Group 2012 (restated)
2013 Profit before tax Income tax at a rate of 15% Effect of non-deductible expenses Effect of non-taxable income Investment relief
Company 2013
2012
141,530
(59,782)
113,295
104,804
21,230
(8,967)
16,994
15,721
3,061
16,687
5
3,701
(18,086)
(3,498)
(16,388)
(78,397)
(4,395)
(4,510)
Previous year adjustments
1,097
1,321
-
-
Utilised accrued tax losses
(584)
-
(584)
-
42
10,226
711
9,166
Unrecognised deferred tax assets from accrued tax losses Income tax expenses (income)
65,383 27
6,408
35 Contingent liabilities and commitments Buyout of electricity facilities According to Order No 4-450 of 3 December 2003 of the Lithuanian Minister of Economy, as amended by Order No 4-72 of 15 February 2005, LESTO AB conducts the buyout from individuals and companies electricity distribution equipment under common use with LESTO AB. During the year 2013, 19 electricity networks of common use for the value of LTL 737 thousand were bought out (2012: 28 electricity networks for the value of LTL 474 thousand). Since the beginning of the buyout until 31 December 2013, 934 electricity networks of common use of homestead cooperatives for the value of LTL 11,621 million had been bought out. Overall 20 applications to buyout assets under a simplified procedure had been submitted as at 31 December 2013. Guarantees issued and received On 6 June 2013, Lietuvos energijos gamyba, AB signed a guarantee agreement with Swedbank for the total amount of EUR 400 thousand to secure the fulfilment of the Company’s obligations in relation to payments to Nord Pool Spot AS. On 12 July 2013, the guarantee amount was increased up to EUR 1,000 thousand. On 20 December 2013, Lietuvos energijos gamyba, AB signed a guarantee agreement with Swedbank for the total amount of EUR 195 thousand to secure the fulfilment of the Company’s obligations in relation to Fingrid Oyj and Elering AS tenders.
2013 annual report
Notes to the financial statements
As at 31 December 2013, Energijos Tiekimas UAB had guarantees from Danske Bank A/S Lithuania Branch for the total amount of LTL 1,918 thousand. As at 31 December 2013, Kauno Energetikos Remontas UAB had bank guarantees in relation to participation in a tender, amounting to LTL 12,954 thousand (31 December 2012: LTL 2,773 thousand). As at 31 December 2013 and 2012, Lietuvos energijos gamyba, AB and Nordea Bank Finland Plc had an agreement on bank guarantee in relation to EUR 1,013 thousand guarantee issued by the Bank, the amount of which may be increased up to EUR 1,500 thousand upon the Company‘s request. The beneficiary of the guarantee is General Electric International Inc. As at 31 December 2013, Lietuvos energijos gamyba, AB had guarantees issued by other companies for the total amount of LTL 1,632 thousand in relation to projects carried out at the Company by different contractors. As at 31 December 2013 and 2012, the guarantee was granted by Lietuvos energijos gamyba, AB to Nordea Bank Finland Plc Lithuania Branch to provide an irrevocable and unconditional guarantee in favour of Kauno Energetikos Remontas UAB for the payment of EUR 1,883 thousand upon the initial written request by the Bank. Under the guarantee agreements signed in 2005, Lietuvos energijos gamyba, AB guaranteed the fulfilment of 25 per cent of liabilities by Nordic Energy Link AS to Nordic Investment Bank (LTL 45,750 thousand) and to SEB Eesti Uhispank AB (LTL 26,759 thousand). In 2013, the associate repaid the loans to these banks, therefore Lietuvos energijos gamyba, AB did not account for any additional provisions related to these guarantees. The carrying amount of the guarantee obligations amounted to LTL 259 thousand as at 31 December 2012. On 18 April 2011, Lietuvos energijos gamyba, AB entered into guarantee agreement with Nordea Bank Finland Plc Lithuania Branch in relation to issue of guarantee for the amount of EUR 1,766 thousand under the guarantee agreement concluded by Kauno Energetikos Remontas UAB on 18 January 2007. Under this agreement, Lietuvos energijos gamyba, AB guaranteed an appropriate fulfilment of obligations of Kauno Energetikos Remontas UAB, but not in excess of EUR 1,766 thousand.
36 Transactions with related parties As at 31 December 2013, the sole shareholder of Lietuvos Energija, UAB was the Republic of Lithuania represented by the Lithuanian Ministry of Finance, whereas as at 31 December 2012 the parent company was the Republic of Lithuania represented by the Lithuanian Ministry of Economy. For the purpose of disclosure of related parties, the Republic of Lithuania does not include central and local government au-
112
thorities. The disclosures comprise transactions and balances of these transactions with the shareholder, subsidiaries (for the Company’s transactions), associates and all entities under control, or significant influence of the state (transactions with these entities are disclosed separately only if they are material), and management.
In 2012, dividends declared by the Group companies were as follows: Dividends received by Dividends declared by
Republic of Lithuania
Non-controlling interest
Lietuvos Energija, UAB
Total
The following transactions were conducted with related parties:
Lietuvos Energija, UAB
275,000
-
-
275,000
The Group‘s related-party transactions in 2013 and balances arising from these transactions as at 31 December 2013 were as follows:
LITGRID AB
-
381,096
9,761
390,857
LESTO AB
-
140,725
29,587
170,312
275,000
521,821
39,348
836,169
Total Finance income
Related parties EPSO-G UAB (Note 6,11)
Amounts payable
Amounts receivable
Sales
10,800
-
LITGRID AB
-
38,941
11,982
185,126
382,139
BALTPOOL UAB
-
82,611
61,973
552,532
653,188
441
8,832
1,132
5,640
38,012
-
-
77
449
7,153
TETAS UAB Group‘s associates Total
11,241
130,384
727,469
Purchases
802,633
-
743,747
-
1,080,492
The Group‘s related-party transactions in 2012 and balances arising from these transactions as at 31 December 2012 were as follows: Finance income
Related parties EPSO-G UAB (Note 6,11) LITGRID AB
Sales
Purchases
-
753,547
-
-
717
108,143
51,703
557,228
918,063
-
192
201
81,392
254,176
149
14,413
1,494
6,644
46,118
Group‘s associates Total
Amounts receivable
2,931
BALTPOOL UAB TETAS UAB
Amounts payable
-
-
68
612
7,284
3,797
122,748
807,013
645,876
1,225,641
In 2013, dividends declared by the Group companies were as follows: Dividends received by Dividends declared by
Lietuvos Energija, UAB
Non-controlling interest
Total
Lietuvos Energijos Gamyba UAB
24,421
982
25,403
LESTO AB
84,834
17,836
102,670
109,255
18,818
128,073
Total
2013 annual report
Notes to the financial statements
Dividends paid out to the Republic of Lithuania amounted to 6.8 cents per share. The Company‘s related-party transactions in 2013 and balances arising from these transactions as at 31 December 2013 were as follows: Related parties
Finance income
Amounts payable
Amounts receivable
Sales
Purchases
LESTO AB
-
-
2
39
5
Duomenų Logistikos Centras UAB
-
124
-
2
662
NT Valdos UAB
-
194
-
-
1,049
EPSO-G UAB
10,800
-
727,469
-
-
Total
10,800
318
727,471
41
1,716
The Company‘s related-party transactions in 2012 and balances arising from these transactions as at 31 December 2012 were as follows: Related parties LESTO AB LITGRID AB
Finance income
Amounts payable
Amounts receivable
Sales
Purchases
-
-
2
8
-
717
-
-
-
-
Duomenų Logistikos Centras UAB
-
68
-
-
563
NT Valdos UAB
-
144
-
-
854
EPSO-G UAB
2,931
-
753,547
-
-
Total
3,648
212
753,549
8
1,417
The major sale and purchase transactions with related parties within the Group in 2013 and 2012 comprised transactions with the entities controlled by the Ministry of Energy of the Republic of Lithuania: LITGRID AB ir BALTPOOL UAB. The Group’s purchases from these entities mainly included purchases of electricity, capacity, transmission and PSO services. Sales transactions mainly included sales of electricity, capacity, and PSO services.
113
The amount receivable from UAB „EPSO-G“ is unpaid amount for sale of LITGRID AB and accrued interest from unpaid amount. Accrued interest during the year is included to finance income (note 6). Transactions with state-owned entities included regular business transactions and therefore they are not disclosed. There were no guarantees or pledges given or received in respect of the related-party payables and receivables, except for guarantees to the associate and the subsidiaries as disclosed in Note 35. Compensation to management: Group 2013
Company 2012
2013
2012
Salaries and other short-term benefits to management:
9,765
9,270
1,209
1,363
Whereof: termination benefits and payments to board members
810
298
112
184
60
55
11
4
Number of management staff
Management in the table above includes heads of administrations and their deputies, and chief accountants.
37 Events after the end of the reporting period Share capital increase and acquisition of associate The Lithuanian Ministry of Finance, which holds in trust the shares of Lietuvos Energija, UAB owned under the title by the state (based on Order No 1K-060 of 21 February 2014 On increasing the share capital of Lietuvos Energija, UAB and Finance Minister‘s Order No 1K-251 On the amendments to the articles of association of Visagino Atominė Elektrinė UAB and changes in the formation of the supervisory council), decided to increase the Company’s share capital by LTL 112.7m. On 21 February 2014, the Ministry and the Company signed the Agreement on Subscription for Shares, under which the Company assumed a commitment to provide 112,685,657 ordinary registered shares, whereas the Ministry assumed a commitment to subscribe and pay for all the newly issued shares in return for an in-kind contribution, i.e. the shares of Lietuvos Dujos AB owned by the state. On 20 February 2014, the state’s 17.7% shareholding in this company was officially transferred from the Lithuanian Ministry of Energy to the Lithuanian Ministry of Finance, with a right to control, use and dispose of the shares.
2013 annual report
Notes to the financial statements
On 6 March 2014, the authorised share capital of Lietuvos Energija, UAB was increased from LTL 4 billion and 067 million to 4 billion and 180 million. The nominal value and issue price per share was equal to LTL 1. The value of 17.7% shareholding in Lietuvos Dujos AB owned by the Lithuanian Ministry of Finance was determined under the provisions of the Lithuanian Law on Companies, and it is equal to 6 months‘ average weighted market value of LTL 112,685,657. This is the nominal value of the shares issued by Lietuvos Energija, UAB. Loan agreement On 21 February 2014, Lietuvos energijos gamyba, AB signed a loan agreement with SEB Bankas AB for the maximum loan amount of EUR 158,000,000 (LTL 545,542,400. This agreement will be used to refinance two loan agreements signed with the banks operating in Lithuania and one loan with European Bank for Reconstruction and Develoment. The carrying value of the loans as at 31 December 2013 was LTL 544,098 thousand. These loans were used to finance the construction of gas turbine combined-cycle block, for the construction and mounting of equipment for flue-gas desulphurization and particulate matter removal, and other projects. LESTO and Lietuvos energijos gamyba, AB dividends for 2013. As a result of appropriation of profit during the General Meeting of Shareholders of LESTO AB held on 4 April 2014, LTL 114,749 thousand was allocated for the payment of dividends. The Company received dividends of LTL 94,815 thousand. As a result of appropriation of profit during the General Meeting of Shareholders of Lietuvos energijos gamyba, AB held on 4 April 2014, LTL 150,000 thousand was allocated for the payment of dividends. The Company received dividends of LTL 144,197 thousand.
114