CONSOLIDATED INTERIM REPORT OF THE COMPANY AND THE GROUP 1 January 2015 – 31 March 2015
INTERIM REPORT FOR Q1 of 2015 Content
1
Content
Message from the Chairman of the Board
5
About the Group and the Company
7
Most significant events
11
Analysis of financial and operating results of the Group
12
Review of activities of the Company and the Group
23
Corporate governance
33
Social responsibility
46
Key information about the Company and the Group
51
INTERIM REPORT FOR Q1 of 2015 Content
2
Key indicators of the Lietuvos Energija Group Change (+/-) 3 months of 2015
3 months of 2014
thousand EUR
%
Revenue
thousand EUR
321,764
208,937
112,827
54.0
Costs of purchase of electricity, gas, fuel and related services
thousand EUR
(225,291)
(122,679)
-102,612
83.6
EBITDA (2)
thousand EUR
70,588
56,545
14,043
24.8
21.9
27.1
30,975
19,186
11,788
61.4
2015-03-31
2014-12-31
EBITDA margin (3) Net profit
% thousand EUR
Total assets
thousand EUR
2,333,752
2,369,176
-35,424
-1.5
Equity
thousand EUR
1,342,069
1,308,890
33,179
2.5
Financial debts
thousand EUR
412,112
391,606
20,506
5.2
Net financial debts (4)
thousand EUR
26,996
15.3
202,872
175,876
Return on equity (ROE) (5)
%
9.2
5.9
Equity capital level (6)
%
57.5
55.2
times
0.88
0.81
%
15.1
13.4
Net financial debt / EBITDA of 12 months Net financial debt / Equity ratio
1) Operating expenses (OPEX) = operating expenses, except for the cost of purchase of electricity and related services, depreciation and amortization as well as impairment of value and write-off expenses of long-term tangible assets; 2) EBITDA (earnings before interest, taxes, depreciation and amortisation) = pre-tax profit (loss) + financial expenses - financial revenue – received dividends + costs of depreciation and amortisation + value impairment costs + write-offs of tangible fixed assets + impact of the discount of the price of gas (for more information, see section EBITDA and net profit”); 3) EBITDA margin = EBITDA / revenue; 4) Net financial debts = financial debts – cash and cash equivalents – short-term investments and time deposits – share of other fixed financial assets comprising investments in debt securities; 5) Return on equity (ROE) = net profit (loss), restated annual expression / equity capital at the end of period; 6) Equity capital level = equity capital at the end of period / total assets at the end of period;
INTERIM REPORT FOR Q1 of 2015 Content
3
Revenue, million EUR
Net profit, million EUR
350
35
322
300 250
31.0
30 226
219
25
209
200
20
150
15
100
10
50
5
19.2
5.1 0
2.5
0 3 months 2012 3 months 2013 3 months 2014 3 months 2015
3 months 2012 3 months 2013 3 months 2014 3 months 2015
EBITDA, million EUR and EBITDA margin, %
Assets, million EUR and equity capital level, % 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0
65.0%
64.5%
70%
65.4% 57.5%
3368 2943
60% 50%
2849
40% 2334
30% 20% 10% 0%
3 months 2012 3 months 2013 3 months 2014 3 months 2015 Assets Equity, %
INTERIM REPORT FOR Q1 of 2015 Content
100 90 80 70 60 50 40 30 20 10 0
27.1% 23.1%
21.9% 70.6
14.8%
50.5
25% 20%
56.5
33.4
15%
10% 5% 0%
3 months 2012 3 months 2013 3 months 2014 3 months 2015 EBITDA EBITDA margin, %
4
Message from the Chairman of the Board
INTERIM REPORT FOR Q1 of 2015 Content
5
Message from the Chairman of the Board Dear Customers, Partners, Employees and Shareholders, In Q1 of this year, Lietuvos Energija Group further reduced its operating expenses and, consequently, energy and service prices to its customers. Nevertheless, financial indicators of the Group improved, which came as a result of new activities and increased revenue from sales in the market. Operating expenses decreased by 1.5 percent during the year (excluding Lietuvos Dujos and Lietuvos Duju Tiekimas, which were not yet companies of the Group in Q1 of 2014), and consumers felt that. Compared to last year, the price of electricity decreased by an average of 6.3 percent since the start of this year, while the price of the transmission of each kilowatt-hour of electricity fell by an average of 0.68 - 0.95 euro cents to business customers. More efficient distribution activity and rationally allocated negotiated discounts allowed maintaining stable prices of natural gas, which were about 40 percent lower than in Q1 of 2014. Earnings before interest, taxes, depreciation and amortization (EBIDTA) of the Group increased by 24.8 percent to EUR 70.6 million. Greater integration of the Group and increased centralization of servicing activities has obviously brought positive results for several quarters now. Having implemented principles of the corporate governance model, we are now able to much better see what the companies of the Group are doing and
INTERIM REPORT FOR Q1 of 2015 Content
monitor their success. By setting reasonable and consistent objectives, centralizing certain activities, we can better plan for joint operations, provide better services to customers and increase our efficiency. In Q1 of 2015, the Group engaged in the strategic programme for the consolidation of its core activities, thus preparing for further growth of efficiency indicators. The implementation of the programme of a clearer definition of the value chain of core activities - consolidation of energy production, distribution, supply and customer service - was started. Decisions on the mergers of LESTO and Lietuvos Dujos as well as Lietuvos Duju Tiekimas and LITGAS were made before the end of May. Having consolidated the core activities and centralized certain servicing operations, we will create new possibilities for the improvement of efficiency and further development, which will result in the benefit felt by our customers and shareholders - we will be able to reduce costs, increase efficiency, provide a wider range of services to our customers and better serve them. We have taken a significant step forward in our strategic heat production projects in Vilnius and Kaunas, we started selling natural gas to Estonia and ensured the necessary operations of the LNG terminal. We hope that important works started this year will help achieve the objectives set and create value for the sector, consumers and the state of Lithuania. Dr. Dalius Misi큰nas Chairman of the Board and Chief Executive Officer Lietuvos Energija, UAB
6
About the Group and the Company
INTERIM REPORT FOR Q1 of 2015 Content
7
About the Group and the Company
The Lietuvos Energija Group is one of the largest state-owned groups of energy companies in the Baltic States. The principal activity of the Group includes the generation and supply of electricity and heat, sales and distribution of electricity, sales, distribution and supply of natural gas, as well as the servicing and development of the energy sector. The rights and obligations of the shareholder of Lietuvos Energija Group are implemented by the Ministry of Finance of the Republic of Lithuania. The Lietuvos Energija Group with more than 5 500 employees manages and operates key electricity generation capacities of Lithuania ensuring the security of energy supply, also distribution network covering the whole territory of the country, and provides services to more than 1.6 million customers throughout Lithuania, offers electricity supply services to consumers abroad, operates 8.4 thousand km of distribution gas pipelines, supplies gas to more than 560 000 consumers, implements development projects of strategic value and pursues the goals of the National Energy Strategy. During three months of 2015, 248 MWh of electricity were generated, 2.23 TWh of electricity were transmitted to consumers and 252 million m3 of natural gas were transported via gas distribution pipelines.
INTERIM REPORT FOR Q1 of 2015 About the Group and the Company
The consolidated revenue of the Group of three months of 2015 amounted to EUR 321.8 million and EBITDA of the Group was EUR 70.6 million. Net profit of twelve months totalled EUR 31 million. The parent company of the Group – Lietuvos Energija, UAB (hereinafter – Lietuvos Energija or the Company) is responsible for transparent management and coordination of activities of the whole Group, improvement of the efficiency in order to ensure competitive services for consumers, and for socially responsible creation of long-term value for its shareholders. The Company analyses the activities of the Group, represents the Group, implements rights and obligations of the shareholder, establishes operational guidelines and rules, and coordinates the activities in the areas of production, commerce, finance, law, strategy and development, human resources, risk management, audit, technology, communication and others.
8
Structure of the Group As of the date of the Report, the Lietuvos Energija Group consisted of 19 companies: the parent Company and 18 directly and indirectly managed companies. The core business activities of the Group include the generation of electricity and heat, sales, distribution and supply of electricity as well as sales and distribution of natural gas. Activities of the Group’s companies servicing these core types of business activities comprise the ITT, real estate,
INTERIM REPORT FOR Q1 of 2015 About the Group and the Company
transport, repairs and construction of energy facilities, staff training, public procurement, accounting, administration of labour relations and other services. A detailed list of the Group companies is presented on p. 52 hereof. The following is the structure of the Group as of 31 March 2014.
9
Strategy of the Group The main goal of the strategy of the Lietuvos Energija Group is to double
the value of the Group and to become the most valuable energy company in the Baltic States by 2020. This value is perceived as a sustainable balance of three components: return on assets, improvement of competitiveness and responsibility towards employees, society and the environment.
MISSION –
VISION –
VALUES –
sustainable growth of value in the energy sector by promoting economic and social development of the country.
to become the most valuable energy company in the Baltic States.
responsibility, cooperation, result.
Return on assets of the Group is increased through the development – diversifying activities, indulging in new and economically feasible projects and activities, acquiring enterprises, ensuring the efficiency of daily operations and achieving the goals set by the shareholder. The Group will contribute to the enhancement of the economic competitiveness by ensuring a stable supply of electricity and natural gas, offering new products and promoting rational consumption of electricity and natural gas. The Group assumes responsibility towards society and its employees, proactively implements environmental requirements and ensures the continuity and improvement of skills.
The main strategic directions of the Group: Ensuring quality services to customers. The care will be taken to achieve better servicing of customers, develop electronic (saving customer time) and new services responding to the needs of customers, increase customers choices and guarantee the reliability of generation, distribution and supply of electricity and of distribution and supply of natural gas.
Diversification the operations includes the implementation of investment projects in the sector of electricity, heat and natural gas. The projects increase the competitiveness of the Group and of the national economy at large as well as the energy independence of the state, optimisation of the production and trading portfolio, development of new activities by
INTERIM REPORT FOR Q1 of 2015
extending the value chain of the Lietuvos Energija Group. These goals will be achieved using the available resources and infrastructure, investing in the creation of new infrastructure and effective governance, as well as through acquisitions.
Enhancing the efficiency of operations. The efficiency will be sought in the main activities of the Group, as well as in the provision of support functions, management of assets and other resources across all Group companies. In order to achieve higher efficiency, the management and control system of the Group companies will be integrated by setting the common principles of business management, sharing, coordination and control of responsibilities. Efficiency improvement measures covering all Group companies or identical or very similar activities in each company will also be continued. Active sharing of best practices between companies will be promoted and sought.
Building new organisational culture. A modern, effective and dynamic organisation will be created operating on the basis of common values, developing in consistent and targeted manner the required competences and successors for key employees, and offering internal environment which encourages the involvement of employees.
10
Most significant events of the reporting period
Start of supply of natural gas from the LNG terminal On 1 January 2015, LITGAS started the supply of the minimum necessary natural gas quantities of the liquefied natural gas (LNG) terminal to energy producers subject to regulation, also, having signed agreements on the supply of gas with Estonian companies, it became one of the first companies in the Baltic States supplying natural gas to customers in other countries. LITGAS announced its plans to engage in new activities of a small-scale LNG supply and bunkering together with Statoil. (See p. 25 for more information).
planned merger of LESTO and Lietuvos Dujos was announced, also, other changes are planned for. (See p. 28 for more information).
Tenders for contract works of cogeneration power plants are held On 10 April 2015, Lietuvos Energija Group established companies engaged in the development of new cogeneration power plant projects in Vilnius and Kaunas and started tender procedures of contract works for the construction of power plants. Fortum Heat Lietuva was selected a project partner in Kaunas. (See p. 24 for more information).
Lower service tariffs to customers, more convenient services Since 1 January 2015, lower electricity and natural gas distribution tariffs to customers have been approved. Also, the application of the discount to customers for the price of natural gas was extended this year. Starting from 1 June, new customers will be able to get access to electricity in a more convenient way and at lower prices. Gas and electricity customers started receiving services in the major cities of Lithuania according to the one-stopshop principle in joint customer service centres. (Read more in the report).
Applied Research Centre of the Lithuanian Energy opened up On 22 April 2015, Lietuvos Energija opened up a joint Applied Research Centre of the Lithuanian Energy (LEARC) together with Kaunas University of Technology (KTU). Partners will be solving technological challenges and developing new business ideas in the cooperation platform set up in the Santaka Valley.
Dividends paid out for 2014 Implementation of the programme of a clearer definition of the value chain Since 27 February 2015 till the end of the year Lietuvos Energija plans to clear up its core activities and to distribute them across companies creating the greatest value for the Group and its customers - energy consumers. The
INTERIM REPORT FOR Q1 of 2015 Most significant events of the reporting period
On 29 April 2015, UAB Lietuvos Energija allocated 28 million EUR in dividends for the second half of 2014. In total, company paid 52.7 million EUR in form of dividends for the period of 2014, the most of all state-owned enterprises. Listed companies of the Group also allocated dividends to shareholders. (See p. 31 for more information.).
11
Analysis of financial and operating results of the Group
INTERIM REPORT FOR Q1 of 2015 Most significant events of the reporting period
12
Key operating indicators Key operating indicators of Lietuvos Energija, UAB Group Electricity Generated electricity Distributed electricity via medium- and low-voltage grids Public and guarantee supply Supply to independent customers Quality indicators of electricity supply SAIDI, min. (exclusive of force majeure) SAIFI, units (exclusive of force majeure) For technological costs in the distribution network Gas Distributed volume of gas Distributed volume of gas Sold volume of gas Sold volume of gas Quality indicators of gas supply SAIDI, min. (exclusive of force majeure) SAIFI, units (exclusive of force majeure)
With the growing economy of the country, electricity consumption increased in Q1 of 2015. The amount of electricity distributed by the Group via medium- and low-voltage networks in January - March increased by 1.3 percent (0.03 TWh) compared to Q1 of 2014 and totalled 2.23 TWh. During 3 months of 2015, the public and guarantee supply of electricity of the Lietuvos Energija Group was 0.84 TWh, which is -6.9 percent or -0.06 TWh less than a year ago. The supply of electricity to independent consumers totalled 1.39 TWh (+6.8 percent, + 0.09 TWh). In January - March 2015, the Lietuvos Energija Group generated 0.248 TWh of electricity (+1.2 percent more compared to the result of January - March of 2014). Compared to the previous reporting period, in January - March of INTERIM REPORT FOR Q1 of 2015 Key operating indicators
Change (+/-) +/%
Q1 of 2015
Q1 of 2014
TWh TWh TWh TWh
0.248 2.23 0.84 1.39
0.245 2.21 0.91 1.30
0.003 0.03 -0.06 0.09
1.2 1.3 -6.9 6.8
min. units %
11.6 0.17 7.24
15.5 0.19 8.15
-3.9 0.02 -0.91
-25.5 -10.5 -11.1
billion m3 thousand MWh billion m3 thousand MWh
0.252 2,650 0.391 4,065
0.301 3,165 0.354 3,682
-0.049 -515 0.037 383
-16.3 -16.3 10.4 10.4
min. units
0.0835 0.0009
0.0864 0.0010
-0.0029 -0.0001
-3.3 -6.0
2015 electricity generation volumes in Kaunas Algirdas Brazauskas Hydroelectric Power Plant decreased by -15 percent (from 113 MWh in Q1 of 2014 to 96 MWh January - March of 2015). The level of generation of electricity in Kruonis Pumped Storage Plant increased in January - March of 2015 compared to January - March of 2014 - 0.151 TWh of electricity was produced and sold in Q1 of 2015, which is +0.019 TWh, or +14.4 percent more than in Q1 of 2014 (0.132 TWh). Electricity in ElektrÄ—nai Complex was not generated in the period under examination and in Q1 of 2014. The ElektrÄ—nai Complex units are used for electricity generation in order to ensure reliable operation of the electricity system, when there is a shortage of electricity in the country due to the repair or limited permeability of other sources of electricity generation or the price thereof on the market
13
increases. Such arrangement of electricity production in ElektrÄ—nai Complex allows ensuring efficient use of PIMS funds.
the same period a year ago, when about 3 165 thousand MWh of gas was distributed (0.30 billion cubic meters).
Electricity supply quality indicators of the Group improved in January March of 2015. Technological costs in the distribution network decreased from 8.15 percent in Q1 of 2014 to 7.24 percent in Q1 of 2015. The average duration of unplanned interruptions in electricity transmission excluding the causes of force majeure (SAIDI) improved in Q1 of 2015 and was 11.6 minutes (compared to 15.5 minutes in January - March of 2014), while the indicator illustrating the frequency of unplanned interruptions per consumer (SAIFI) accounted for 0.17 times in January - March of 2015 compared to 0.19 times in January - March of 2014.
With the commencement of operations of the liquefied natural gas terminal and the Group LITGAS having started to sell gas to customers, the volume of gas sold by the Group increased and totalled 4 065 thousand MWh (about 0.39 billion cubic meters) in Q1 of 2015, which was +10.4 percent, or + 383 thousand MWh more than the volume of gas sold by Lietuvos Dujos in Q1 of 2014 (3 682 thousand MWh or 0.354 billion cubic meters of gas).
With decreasing consumption of natural gas, the volume of gas distributed by the Group also decreased. The volume of gas distributed by the Group in January - March of 2015 totalled 2 650 thousand MWh (about 0.25 billion cubic meters), i.e. -16.3 percent, or -515 thousand MWh less compared to
Sold and distributed volumes of gas, thousand MWh
Generation, distribution and sales of electricity, TWh
4195
0.86 0.91 0.84
Public and guarantee supply
Electricity distributed to customers via medium- and low-voltage grids
The average duration of unplanned interruptions in transportation of gas (SAIDI), excluding the causes of force majeure (SAIDI) slightly improved in January - March of 2015 and totalled 0.0835 min. (compared to 0.0864 min. in January - March of 2014), while the average number of interruptions in gas transportation (SAIFI) was 0.0009 times (compared to 0.0010 times in January - March of 2014).
Sold gas
3682 4065
2.21 2.21 2.23
3924
Distributed gas Generated electricity
3165
0.30 0.25 0.25
2650
0 Q1 of 2013
INTERIM REPORT FOR Q1 of 2015 Key operating indicators
Q1 of 2014
Q1 of 2015
1,000
Q1 of 2013
2,000 Q1 of 2014
3,000
4,000
Q1 of 2015
14
5,000
Key financial indicators Revenue In Q1 of 2015, the revenue of Lietuvos Energija Group increased by +54 percent, or EUR 112.8 million, compared to the same period of last year, and totalled EUR 321.8 million. During the reporting period, the major share of revenue was generated from the electricity transmission service (28 percent of the total revenue, or EUR 88.8 million), sales of the generated electricity as well as supply and trade of electricity (24 percent of the total revenue, or EUR 78.2 million) and distribution and sales of gas (37 percent of the total revenue, or EUR 118.9 million).
Structure of the revenue of the Group in Q1 of 2015, million EUR and percent.
118.9 37%
88.8 28%
Q1 of 2015
EUR 321.8 Revenue of the Group, million EUR 350
321.8
300 250
78.2 24%
+54 % 208.9
200 150 100 50 0 Q1 of 2014
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Q1 of 2015
12.4 4% 13.0 4%
PIMS of LEG Connection of new customers Other revenue Sales of produced electricity, trade and supply of electricity Revenue from distribution and sales of gas Heat energy Balancing, regulation and power reserve Transmission of electricity
15
Compared to the revenue of Q1 of 2014, in Q1 of 2015, with increasing sales of electricity in the free market, revenue from the sales of generated electricity as well as supply and trade of electricity increased by +12 percent (+ EUR 8.4 million). Revenue from the electricity transmission service decreased upon the reduction of the transmission price by - 17.4 percent (EUR 18.8 million), from EUR 107.6 million in Q1 of 2014 to EUR 88.8 million in Q1 of 2015. A share of these both groups of revenue significantly decreased in the structure of revenue of the Group in Q1 of 2015 and accounted for 52 percent (compared to 86 percent in Q1 of 2014), because revenue from gas distribution and sales accounted for a major share of the revenue of the Group in Q1 of 2015 (37% of the revenue of the Group, or
EUR 118.9 million). Excluding income related to gas transmission and distribution activity included in the Group’s statement of comprehensive revenue for Q1 of 2015, the revenue of Lietuvos Energija Group decreased by EUR 6.1 million, or - 2.9 percent in Q1 of 2015 compared to the same period of last year. This reduction in the revenue of the Group was determined by lower electricity transmission prices applied and, respectively, the reduction of revenue from the electricity transmission service.
118.9
(0,6)
(0,9)
(18,8)
Heat energy
Balancing, regulation and power reserve
Transmission of electricity
350
Revenue from distribution and sales of gas
Dynamics of revenue of the Group during Q1 of 2015 compared to Q1 of 2014 by sectors, million EUR 321.8
208.9
1.5
1.7
2.6
8.4
PIMS of LEG
Connection of new customers
Other revenue
Sales of produced electricity, trade and supply of electricity
250
Revenue of Q1 of 2014
300
200 150 100 50
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Revenue of Q1 of 2015
0
16
Assets and equity In Q1 of 2015, the Group’s assets decreased by -1.5 percent, or EUR -35.4 million, and totalled EUR 2 333.8 million as at 31 March 2015. Compared to 31 December 2014, the Group’s assets amounted to EUR 2 369.2 million. The reduction in the Group’s assets was mainly determined by more efficient management of short-term assets - during Q1 of 2015, the level of inventories of the Group fell by EUR 17.1 million, or 32 percent, while trade receivables decreased by EUR 16.1 million, or -12.3%.
Equity of the Lietuvos Energija Group increased by +2.5 percent, or + EUR 33.2 million, in Q1 of 2015 and was EUR 1 342 million as at 31 March 2015. On 31 December 2014, equity of the Group amounted to EUR 1 308.9 million. The growth of the equity of the Group was determined by profitable and efficient operations in Q1 of 2015. These factors led to the increase of the equity level during the quarter, which was equal to 57.5 percent as at 31 March 2015 (compared to 55.2 percent as at 31 December 2014).
Operating and purchasing expenses During Q1 of 2015, operating expenses of the Group amounted to EUR 37 million and, compared to Q1 of 2014, increased by 24.5 percent (EUR 7.3 million). The increase in operating expenses was determined by acquired control of Lietuvos Dujos in June of 2014 – since then, operating expenses of the taken-over gas transmission and distribution activity have been included in the Group’s operating expenses (in Q1 of 2015, the expenses of this activity increased by + EUR 8.3 million). Excluding these expenses, compared to Q1 of 2014, in Q1 of 2015, operating expenses of the Group decreased by -1.5%, or -0.4 million, from EUR 27.4 million to EUR 27 million. Operating expenses of the Group in Q1 of 2014 and Q1 of 2015, million EUR 40 37.0 Operating +24,5 % expenses related to 35 8.3 the take-over gas 29.7 30 transmission and 2.3 1.7 distribution activity 25 Subcontracting, 20 15
materials and other related expenses
-1,5 % 27.4
27.0
10
250
Purchasing expenses of electricity, gas, fuel and other services of the Group in Q1 of 2015, million EUR 224.3 +83,6 %
200
109.0 150
122.7 4.8
-42 %
100 50
117.87
113.55
Q1 of 2014
Q1 of 2015
0
0 Q1 of 2014 INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Q1 of 2015
Purchase of gas for trade Purchases of gas and fuel oil
2.8
-3,7 % Operating expenses
5
During the reporting period, expenses of the Group for the purchase of electricity, gas, fuel and related services, compared to Q1 of 2014, increased by +83.6 percent, or + EUR 101.6 million. The growth was mostly predetermined by inclusion of costs related to the trade of gas, which totalled EUR 109 million in Q1 of 2015, into the Group’s purchasing costs. The Group engaged in the activity of trade of natural gas in June 2014 upon the acquisition of the controlling stake of AB Lietuvos Dujos. Compared to Q1 of 2014, in Q1 of 2015, the purchase of gas and fuel oil for energy production decreased from EUR 4.8 million to EUR 2.8 mln million, while the purchase of electricity and related services decreased by -3.7 percent, or EUR 4.4 million, from EUR 117.9 million in Q1 of 2014 to EUR 113.5 million.
17
Purchases of electricity and related services
EBITDA and net profit In Q1 of 2015, the Group’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR 70.6 million, which is +24.8 percent, or + EUR 14.1 million more than in EBIDTA in Q1 of 2014, which was EUR 56.5 million (EBITDA of Q1 of 2015 does not include the negative effect of temporary nature of the discount of the price of gas in the amount of EUR 11.12 million applied to household and non-household customers in January - March of 2015). The growth of EBITDA of the Group was predetermined by better electricity distribution, sales and production profitability results and significant positive result (+ EUR 10 million) of gas transmission and distribution activity in Q1 of 2015.
Dynamics of EBITDA of the Group by the nature of activities, million EUR
60
56.5
70.6
80
56.5
60
70.6
10.0 2.8
2.3
Electricity production
70
+24.8 %
Electricity distribution and supply
EBITDA of the Group, million EUR 80
EBITDA profitability margin of the reporting period of the Group decreased and accounted for 21.9 percent (compared to EBITDA profitability margin of 27.1 percent of Q1 of 2014). This change was predetermined by a significantly lower profitability of the gas sales activity, compared to other core activities of the Group, which made up a significant share of revenues of the Group in January - March of 2015.
-1,0
50 40
40 30
20
20
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Q1 of 2015
Other 18
EBITDA of Q1 of 2015
Q1 of 2014
Gas supply and distribution
0
EBITDA of Q1 of 2014
0
10
In January - March of 2015, the Group earned EUR 31 million in net profit, which is + EUR 11.8 million, or +61.4% more than in January - March of 2014 (EUR 19.2 million). In Q1 of 2015, net profit was significantly impacted by depreciation and amortisation costs of LESTO, which were EUR 15.5 million lower compared to Q1 of 2014. The reduction of these costs was determined by revaluation of long-term tangible assets of LESTO at the end of 2014, and costs in the amount of EUR 11.12 million related to the gas price discount applied by the Group to household and non-household gas customers in January - March 2015.
17% 25%
Q1 of 2015
EUR 70.6 million Net profit of the Group, million EUR 35
31.0
30
57%
+61.4%
25 20
19.2
15
Lietuvos dujos
10
LESTO
5
Lietuvos energijos gamyba
0
Others Q1 of 2014
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Q1 of 2015
19
Investments The Group’s investments totalled EUR 22.6 million in January - March of 2015, i.e. made up +62.6 percent, or + EUR 8.7 million more than in January - March of 2014 (EUR 13.9 million). In Q1 of 2015, most investments (74%) were allocated for the development and maintenance of the electricity distribution network.
Compared to Q1 of 2014, investments into the maintenance of the electricity distribution network increased the most in Q1 of 2015 (+ EUR 6.4 million); investments in other sectors also gradually increased or remained similar to those made in Q1 of 2014.
Structure of investments of the Group in Q1 of 2015, % 3%
6.4
22.6
Investments of Q1 of 2015
25
Maintenance of the electricity distribution network
6%
Investments of the Group in Q1 of 2015 by sectors, million EUR
8%
(0,4)
ITT (IT, telecommunications and management systems)
10
0.8
5 4%
3% 2%
Development of the electricity distribution network ITT (IT, telecommunications and management systems) Heat generation capacities Construction of gas systems Maintenance of the electricity distribution network Electricity generation capacities Reconstruction of gas systems Other investments
0 Investments of Q1 of 2014
37%
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
0.9
1.3
Electricity generation capacities
(1,2)
0.6
Reconstruction of gas systems
0.3
Development of the electricity distribution network
13.9
Heat generation capacities
EUR 22.6 million
15
Construction of gas systems
37% Q1 of 2015
Other investments
20
20
Financial debts As of 31 March 2015, net financial debts of the Group totalled EUR 175.9 million and, compared to the level of net financial debts at the end of 2014, increased by + EUR 27 million. The greatest impact on the increase of net financial debts of the Group was caused by increased financial debts aimed at funding the Group’s investments during the quarter. During Q1 of 2015, the level of financial debts of the Group increased by 5.2 percent, or EUR 20.5 million, and accounted for EUR 412.1 million at the end of March, compared to EUR 391.6 million at the end of 2014. Upon the reduction of obligations to suppliers of the Group in Q1 of 2015, cash and short-term investments of the Group totalled EUR 202.9 million as at 31 March 2015, which is EUR 12.9 million, or 6% less than at the end of 2014. The ratio of net financial debts of the Group and EBITDA of the past 12 months of the Group slightly increased due to a higher financial debt (from 0.81 times at the end of 2014 to 0.88 times at the end of March 2015). The ratio of net financial debts of the Group and equity of the Group increased from 13.4 percent at the end of 2014 to 15.1 percent at the end of Q1 of 2015. The current level of net financial debts of the Group remains low in terms of both the generated revenue and capital structure compared to indicators of companies operating in the European energy sector. Low level of financial debts of the Group and high level of its equity as well as profitability of its ordinary activities reflect a sustainable and stable current financial position of the Group and the perspective thereof, the Group’s financial capability to make investments necessary for the ensurance of the provision of the current services of the Group, implementation and funding of new projects and ensurance of further development of the Group.
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Group‘s net borrowings in December 2014 and March 2015, in EUR million 250
200
20.5
202.9
Borrowings
Borrowings, net, at 31 Mar 2015
12.9 175.9
150
100
50
0 Borrowings, net, Cash and shortat 31 Dec 2014 term investments
21
Net financial debts of the Group/ equity ratio, % 16% 15.1%
Net financial debts of the Group/ EBITDA of 12 months, in times 1.0 0.88 0.9 0.81 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 31 Dec 2014 31 Mar 2015
15% 15% 14%
13% 13% 31 Dec 2014
31 Mar 2015
Comparison of net financial debts/EBITDA ratio of EU energy companies 12 months of 2014 (LE Group in Q1 of 2015), times
Comparison of net financial debt/equity ratio of selected EU energy companies level in 2014 (LE Group in Q1 of 2015), %
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
3.90 3.24
1.96
2.03
2.25
1.94 Vatenfall, SE
1.17
0.88 Lietuvos Energija, LT
2.68
2.94
1
22
ENEA, PL
Tauron polska, PL
ČEZ, CZ
ESB, IE
Fortum, FI
DONG Energy, DK
0 Eesti Energia, EE
Tauron polska, PL
EDP, PT
ČEZ, CZ
ESB, IE
Fortum, FI
DONG Energy, DK
Vatenfall, SE
Lietuvos Energija, LT
Eesti Energia, EE
Latvenergo, LV
0%
2
Latvenergo, LV
78.4%
3
ENEA, PL 31.0%
38.6%
38.7%
61.9%
15.1%
34.9%
50%
51.6%
75%
55.4%
100%
4
EDP, PT
142.4%
119.3%
125%
4.68
5
150%
25%
13.4%
14%
Review of activities of the Company and the Group
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
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Review of activities of the Company and the Group Review of activities of the Lietuvos Energija Group covers the period from 1 January 2015 till the end of the reporting period (31 March 2015) as well as after the reporting period – until the date of the Report.
Diversification of activities Diversification of activities of the Group is one of the main preconditions for increasing the value of the Group. By 2020, the Group is planning to invest LTL 2–3 billion in various areas: heat sector by constructing new or upgrading the existing cogeneration power plants, supply and sales of natural gas utilising the potential of the LNG terminal, renewable energy sources, and to participate in the implementation of the nuclear power plant project after the adoption of respective decisions.
Cogeneration power plant projects implemented in Vilnius and Kaunas The Lietuvos Energija Group plans to construct modern waste and biofuelfired high-efficiency cogeneration power plants in Vilnius and Kaunas, which will produce heat and electricity and ensure lower heat production prices for consumers of these cities as well as additional production of local electricity at a competitive price and will solve waste management problems. Lietuvos Energija was appointed to implement projects of the modernization of the district heating sector in the cities of Vilnius and Kaunas by Resolution of the Government of the Republic of Lithuania of 28 May 2014, whereby the projects were recognized as projects of state significance. Currently, Lietuvos Energija is implementing the project in Vilnius independently, however, it has planned for a possibility to attract partners in other stages of the implementation of the project.
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
On 8 May 2015, the Lietuvos Energija Group published an international tender for “turnkey” construction works of Vilnius cogeneration power plant. The object of the procurement comprises all works, services, equipment and materials, which will be used to design and constructed a new cogeneration power plant in Vilnius. The Buyer is a special-purpose company UAB Vilniaus Kogeneracinė Jėgainė (VKJ), which was established by Lietuvos Energija for the implementation of the project. According to preliminary technical specifications, thermal capacity of Vilnius biofuel power plant will total about 155 MW, and its electric capacity will be about 70 MW, while capacity of a waste power plant will be about 70 MW and 17.6 MW, respectively. The implementation of the project is planned in the land plot located at Jočionių g. 13, Vilnius, Vilnius city municipality (the purpose of the land plot is that of industrial and storage facilities) owned by VKJ. According to preliminary evaluation, the heat production price will decrease by about 20% upon the implementation of the project in Vilnius in 2017 compared to 2013. On 28 April 2015, the Environmental Protection Agency approved the environmental impact assessment programme of the Vilnius cogeneration power plant project. Based thereon, an environmental impact assessment report was drawn up and published on 20 May. When it comes to the cogeneration power plant project implementation in Kaunas, Lietuvos Energija has been developing it together with a partner on 20 May 2015, it signed a cooperation agreement with UAB Fortum Heat Lietuva. The companies will have to agree on the business plan of the planned power plant complex in Kaunas in the nearest future, which will cover economic and technological solutions of the power plant, also, to approve a shareholder agreement, which will precisely define the shares of investments of the companies into the capital of UAB Kaunas Kogeneracinė Jėgainė (KKJ), which will be responsible for project development. Having
24
reached these agreements and received permits of the Competition Council and other authorities, an investment decision will be made.
Energia. In 2015, LITGAS plans to sell about 30 MCM of natural gas to Estonia.
On 26 May 2015, KKJ started open procurement procedures necessary for the selection of contractors for the construction works of a waste-fired power plant - preliminary technical specification for tenderers was published in English and Lithuanian languages. At this stage, exact electric and thermal capacity of the power plant has not yet been set, but is defined by possible capacity range (23 MW +/- 25 percent of electric capacity and, respectively, about 70 MW +/- 25 percent of thermal capacity). Exact technical parameters of the power plant will be set in the prepared detailed technical specifications, which will be provided to contractors meeting qualification requirements.
Also, in February of 2015, LITGAS was one of the first companies in Lithuania to sign a contract on the transit of natural gas through Latvia with Latvijas Gaze, thus expanding its possibilities for the trade of natural gas in the region. On 19 February 2015, the Estonian regulator made an exception to LITGAS, which will be able to trade natural gas in Estonia without having to establish its branch therein. Such a possibility allows the company to come closer to potential customers, who had to previously take care of the transportation of natural gas from the Estonian-Latvian border.
Companies VKJ and KKJ implementing the projects were established on 27 February 2015. The transparency of the implementation of the projects and adoption of most suitable decisions is ensured under the supervision of the Government of the Republic of Lithuania - a special committee was formed on 28 January; it will examine issues of the implementation of projects for the modernization of the district heating sector of Vilnius and Kaunas related to project development, territory planning, environmental impact, public health, also, project funding questions related to the use of assistance from the EU Structural Funds and others.
Increasing natural gas supply activity On 1 January 2015, LITGAS started the supply of the minimum volume of natural gas necessary for the liquefied natural gas (LNG) terminal to energy producers subject to regulation. These LITGAS activities help to ensure operations of the alternative source of import of natural gas - the LNG terminal, and allow importing gas from the global LNG market. In February of 2015, LITGAS also broke the ice in the natural gas market of the Baltic countries and became the first company in Lithuania and one of the first companies in the Baltic countries supplying natural gas to customers in other countries. LITGAS supplies natural gas by transit through Latvia to three Estonian companies: Eesti Energia, Reola Gaas and VKG
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
On 13 February 2015, LITGAS announced its plans to engage in new activities of a small-scale LNG supply and bunkering together with Statoil. Having analysed the possibilities of cooperation in these areas, the plan is to reach an agreement on the form of joint activities by the end of Q2. The activities of small-scale LNG supply and bunkering would allow increasing the LNG terminal load and would reduce the costs of maintenance of its infrastructure incurred by Lithuanian consumers. On 26 February, LITGAS signed a memorandum on the supply of gas from Delfin LNG - company engaged in the development of the first floating liquefaction project in the United States. Thus on 27 February LITGAS signed a joint trade agreement, which will allow it to acquire LNG from the Cheniere Energy division of the US company Cheniere Energy, which will open up the first US LNG export facility to have been built in over 40 years this year. It will grant the company access to abundant US natural gas market and contribute to the diversification of supply and pricing models.
Expansion of heat production infrastructure in Elektrėnai In 2015, Lietuvos Energijos Gamyba (LEG) continued construction works of new heat energy production capacities (of biofuel and steam boiler rooms) in Elektrėnai. Tests of the steam boiler room were completed in January. This 49.8 MW steam boiler room has been installed for maintaining heat reserves, ensuring heat production during peak periods of cold season, also, for launching reserve power plant units. Heat generated in the steam boiler room has also been supplied to the city of Elektrėnai.
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LEG also continued the construction of a biofuel boiler room. During the first three months of 2015, construction works of the main structures of the biofuel boiler room were completed, facilities were mounted and system testing works were carried out. During the tests, heat was produced from biofuel in the boiler room in March.
Syderiai geological structure surveys Having completed all the planned surveys of the suitability of Syderiai geological structure and possibilities for storing natural gas therein in 2014, pursuant to Resolution of the Government of the Republic of Lithuania works aimed at securing the European Union financial support for the project from the CEF fund and figuring out the interest and preparedness of Polish energy companies to jointly implement the project have been conducted in 2015. Lietuvos Energijos Gamyba analysed the possibilities for the installation of the underground natural gas storage in TelĹĄiai District, finalised the processing of data collected during all seismic and geological surveys, and developed the simulation model of the storage reservoir.
Assessment of wind energy potential in Kruonis PSHP In the beginning of 2015, complex measurements of wind speed, directions and other meteorological conditions were completed in the territory of Kruonis PSHP in order to conduct the initial assessment of the potential of the land plot for the installation of a wind power plant park. Based on positive wind measurement results, Lietuvos Energijos Gamyba initiated preparatory works for the installation of a wind power plant park in the territory of Kruonis PSHP, by conducting a feasibility study for the assessment of wind resources and electricity production volumes in the Kruonis wind power plant park as well as mandatory environmental impact assessment and territory planning procedures.
Offered derivatives
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
On 20 January 2015, Lietuvos Energijos Gamyba was the first of the Lithuanian electricity market participants to become a market maker, and started trading in financial derivatives linked to price differences between the price forming in Latvian bidding areas and the overall Nord Pool Spot systematic price in the Electricity Price Area Differential (EPAD) RIGA. Financial products, which the company will offer on the financial derivatives’ exchange NASDAQ Commodities, allow all electricity market participants and financial institutions to protect themselves from the fluctuation of electricity prices on the Nord Pool Spot exchange in the Lithuanian and Latvian price zones and to better manage risks arising from trade between different price zones.
Increased data centre capacities In the beginning of 2015, DuomenĹł Logistikos Centras expanded the area of its data centres to 833 square meters, which would fit about 15 000 standard servers, while the total throughput of data network cables was more than 3 Tbit/s. The area of the data centre is now 1.6 times bigger than a year ago, and the throughput of data transmission networks is greater by 7.5 times. By expanding its capacities, the company seeks to meet the growing demand for data storage and transmission in the region. The growing demand for data storage and transmission was determined by new facilities, new services and changing habits of businesses and residents. The number of servers in data centres is forecasted to increase 10 times and the amount of data therein - by 14 times by 2020. Data Inn, a data centre of a particularly high reliability opened up in Vilnius in 2014, is the only data centre in Lithuania and the first in the Eastern Europe, both the project and the operating data centre whereof have been certified according to stringent Uptime Institute Tier III reliability level requirements.
Introduced Baltic Highway data transmission network 21 January 2015 marks an official launch of a 3 000 km-long data transmission highway Baltic Highway, which connects by a high-throughput
26
connection Vilnius and Tallinn with one of the largest data transmission centres in the world Frankfurt via Riga, Warsaw and Berlin. The new data transmission network is distinguished for its reliability, very low 35 milliseconds latency, capacity of 100G per channel and 9.6 Tbit/s total throughput, and provides a possibility to very rapidly transmit large amounts of data between the East and the West. The Baltic Highway project was implemented by three partners - Duomenu Logistikos Centras owned by Lietuvos Energija Group in Lithuania, Latvenergo in Latvia and telecommunications operator Tele2. The data network development lasted for more than five years and involved investment of more than EUR 1.5 million. Baltic Highway is the first and the only seamless (i.e. not made up of different segments of operator networks) network, which uses infrastructure of a single manufacturer. It is the shortest span data highway connecting Eastern and Western Europe and one of the fastest ways for data travelling between Europe and Asia. The first commercial data highway contract was signed with the Finish telecommunications company Elisa Corporation on 1 April 2015. It is a 24 month-long contract in the value of EUR 290 000, in accordance with which the company will be provided with the 100 Gbps data transmission service. Duomenu Logistikos Centras will get the share of EUR 140 000 in this contract.
Performance of preparatory works of the nuclear power plant project With a view to separating and clarifying the activities of a new nuclear power plant project and concentrating all nuclear energy-related achievements, competences, started and completed projects, the new power plant project, as part of business of Lietuvos Energija, was transferred to a separate company VAE SPB, UAB at the end of 2014. According to amended Articles of Association, the activities of VAE SPB were expanded without limiting them solely to the new nuclear plant project. VAE SPB was provided with a possibility to operate in the sphere of creation and
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
application of new technologies, participate in the projects already being carried out, and provide expert advice to other companies of the Group. On 5 February 2015, a special transport and communications plan (STCP) was approved by Order of the Minister of Transport and Communications, and it was registered in the state territorial planning data registry. This completes the programme of the preparatory technical works of the new nuclear power plant project. On 27 February 2015, a meeting was held with representatives of potential investors (Latvenergo, Eesti Energia and Hitachi) into the new nuclear power plant project. Methods for continuing negotiations for the resolution of open questions of the project were discussed. An agreement was reached to wait for a conclusion of the transmission system operators on the synchronization with networks of the continental Europe in presence of a nuclear power plant (planned at the end of March) and, in case of a positive conclusion, to decide on further actions and open questions.
Enhancement of the operating efficiency Higher efficiency of activities of the Group implies both higher profit and return for shareholders as well as lower tariffs for consumers. 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 governance, planning and monitoring of activities, finance, procurement, risk management and internal audit areas. Solid foundations for enhancing the operating efficiency were laid in 2013, when governance of the Lietuvos Energija Group was reorganized according to a new model. Having concentrated the coordination of activities of the Group companies, elected the supervisory and management boards and separated the responsibilities of management and supervisory bodies, the Group completed its governance reform in 2014. The occurred structural changes and changing situation in the market allowed the Lietuvos Energija Group to search for synergy possibilities between Group companies in 2015. Lietuvos Energija has reviewed the maximum benefit created by each
27
company to the customers and employees and looked for processes the efficiency whereof could be further increased. The Group plans to clear up its core activities by the end of 2015 and to distribute them across the companies to create the maximum value to the Group and its customers - energy consumers. The Group currently has an installed and developed uniform management and control system aimed at establishing the management and control principles corresponding to the common needs of the Lietuvos Energija Group, the division of responsibilities for separate activities and processes, risk management and control, as well as supervision, coordination and control of activities and processes at the level of the Group or individual companies. It has an approved management and control system policy, risk management policy and methodology, integrated planning and monitoring system policy, innovation management policy, project management policy and procedure, a process management standard, portfolio formation and monitoring procedure currently being drawn up, etc. The uniform management and control system will help to achieve efficiency and synergy in the activities of the Group as well as the implementation of the goals set.
Implementation of the programme for a clearer definition of the value chain Lietuvos Energija has been implementing the programme of a clearer definition of the value chain, the aim whereof is to clear up the core activities of the Group and to distribute them across companies ensuring more efficient operations of the Group, creating the highest value and providing additional benefits to customers. The updated operating concept will improve customer service, increase operating efficiency and allow reducing costs. The programme of a clearer definition of the value chain will cover 4 core areas of operations: production, supply/ sales, network and customer service, at the same time conducting the project for the operations of contracting companies.
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Customers are expected to benefit most from the changes. Having cleared up customer service activities of LESTO, Lietuvos Dujos and Lietuvos Duju Tiekimas, the plan is to offer to the customers a simple and convenient one stop shop. First steps have already been taken - customers of these companies are already being served in joint customer service centres, and this cooperation will be further expanded. Common gas and electricity distribution operator. Staring from 2016, the activities of the largest companies of the Group LESTO and Lietuvos Dujos will be continued in a common distribution network company. Essential changes in these companies will include the reorganization of the structure of governance rather than the operations of the networks. The synergy of these companies will allow increasing the Group’s efficiency, decreasing operating costs and creating the maximum possible number of additional benefits for electricity and natural gas consumers. Single supplier of natural gas. A clearer definition of the natural gas supply activities is continued, thus the plan is to merge Lietuvos Duju Tiekimas, a natural gas supply company, and LITGAS, which specializes in the area of the supply of liquefied natural gas and is a designated supplier of the necessary volume of the LNG terminal. The companies have cooperated up until now ensuring stable supply of gas to customers. That way a single strong gas supply company will be created in Lithuania, which will seek to expand operations in the Baltic region. The conducted analysis reveals that a single company will be able to better exploit the available natural gas supply alternatives and administrative resources, increase the reliability of gas supply and offer new services and products to its customers. After the merger, the company will be called Lietuvos Duju Tiekimas. The company is planned to also take over the status of a designated liquefied natural gas supplier, as well as rights and obligations related thereto. The name LITGAS will be used as a trademark in international activities of Lietuvos Duju Tiekimas. Enhanced trade activities. Lietuvos Energijos Gamyba will mainly focus on energy production operations, and the plan is to unbundle its trade activities, thus seeking to increase flexibility in the market creating new products based on customers’ needs. Respectively, the activities of the trade
28
in electricity and of an independent supply conducted by Energijos Tiekimas will be enhanced. Project of contracting companies. In the implementation of this project, activities of Elektros Tinklo Paslaugos and Kauno Energetikos Remontas have been analysed in search for their synergy possibilities.
Simplified corporate governance structure of the Group increases efficiency In the beginning of the year, Lietuvos Energija optimized the structure of the Group – a flatter structure of the Group allows the companies to focus on their core activities, while the governance of the Group became simpler. On 31 March 2015, Lietuvos Energija took over subsidiaries owned by its subsidiaries: 100 percent of shares of Elektros Tinklo Paslaugos (ETP) from LESTO and 100 percent of shares of Energijos Tiekimas as well as 100 percent of shares of Kauno Energetikos Remontas (KER) from Lietuvos Energijos Gamyba. The shares of the companies were purchased at the market value of shares set by independent property appraisers: shares of ETP were evaluated at EUR 7.695 million, the determined value of shares of Energijos Tiekimas was EUR 6.883 million, and the value of shares of KER totalled EUR 4.778 million. Based on the adjusted results of 2014 (after the elimination of one-time events), the multipliers of the business value of the companies and profit before interest, taxes, depreciation and amortisation (EV/EBITDA) ranged between 6 and 8 times, which corresponds to market averages of the transactions. On 27 April 2015, Lietuvos Energija further simplified the structure of the Group - it took over the shares of NT Valdos owned by its subsidiaries. Lietuvos Energija took over 57.3 percent of shares of NT Valdos from LESTO at the set transaction price of EUR 41.2 million, from Lietuvos Energijos Gamyba (LEG) - 41.73 percent of shares at the price of EUR 29.9 million and from Duomenu Logistikos Centras – 0.59 percent of shares at the price of EUR 424 000. The total initial transaction price was EUR 71.5 million. The contracts on the transactions provide for the fact that the final price will be increased depending on the results achieved during the period till 2018. Lietuvos Energija will pay for the shares in cash. On 30 April, AB Litgrid also
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
transferred 0.35 percent of shares of NT Valdos to Lietuvos Energija. The base price of sales was EUR 252 000. Litgrid may be paid a premium on the base price of sales of up to EUR 67 000 by 31 March 2019, if financial indicators of NT Valdos, UAB provided for in the agreement on the purchase-sale of its shares are achieved. After these transactions, the holding company Lietuvos Energija is in direct control of all the companies engaged in servicing activities, which allows for a smooth achievement of the main goal of this year - the programme for a clearer definition of the value chain. Having sold the assets owned by UAB Gotlitas in December of 2014, a decision was made on the reduction of the company’s authorized capital in April of 2015. This company is being prepared for liquidation; the start of the liquidation process is planned in June.
Centralization and improvement of efficiency of processes With a view to improving the processes that support the core activities of the Group and reducing their expenses, the Lietuvos Energija Group concentrated a part of functions supporting the core activity in a separate company – UAB Verslo Aptarnavimo Centras, which provides to the Group the services of public procurement, accounting and administration of employment relations. Centralization of the processes of public procurement, accounting and administration of employment relations is aimed at standardizing them, ensuring greater transparency and efficiency as well as faster implementation thereof. Such concentration model of servicing processes is in line with best global practices. Administration of the employment relations of the Group was started through UAB Verslo Aptarnavimo Centras in the beginning of 2015. All internal auditors of the Group’s companies were transferred to the Internal Audit Service of Lietuvos Energija on 5 January 2015, thus centralizing internal audit activities.
29
The Group has also centralized the management of vehicles - it started organizing a unified procurement of vehicle rental services for 17 companies of the Group on 3 April 2015. Such decisions are expected to help save costs for the administration of the vehicle fleet of the Group. The common principles of the vehicle fleet management have already rendered benefits to the Group - having optimized the vehicle fleet in 2013 - 2014, some cars were abandoned. The purchased services will include vehicle rental, supervision, insurance, repair works, technical maintenance thereof and other services.
and fuel oil. The total installed capacity of the power plant would reach 1055 MW.
Approval and application of a uniform project management policy
The action plan for the integration of Lietuvos Dujos into the Lietuvos Energija Group has been implemented since 2014. The started integration of the company covers such areas as governance model, procurement procedures and accounting, planning and monitoring, ITT, internal audit and other functional areas. The company’s public procurement function is transferred to the Group company UAB Verslo Aptarnavimo Centras; functions of the administration of employment relations and accounting will be transferred as well. A part of activities will be centralized in the company seeking for a greater efficiency.
A uniform project management policy has been implemented in the Group, according to which the portfolios are formed for the implementation of the Group’s strategy. The Enterprise Project Management Office (EPMO) has been set up in the holding company Lietuvos Energija, which ensures the sharing of best practices between the Group companies. The EPMO consults the Project Management Offices (PMO) established / renewed in the companies and all project managers of the Group on project management matters and monitors the status of projects under implementation.
Optimal operations of Elektrėnai complex In the implementation of the operating strategy of Lietuvos Energijos Gamyba, operation of units 1 and 2 of the reserve power plant owned by the Group was terminated on 1 January 2015. Dismantling of unit 1 was started in the beginning of January, and of unit 2 - in the beginning of April of 2015. According to the established optimal operating scenario of Elektrėnai Complex, units 1 and 2 (each of 150 MW power) of the reserve power plant should be decommissioned upon the start of operations of the new biofuel boiler room, which is currently being built in Elektrėnai, and units 5 and 6 (each of 300 MW power) – upon the launch of connections with Sweden and Poland. That way, as from 2016, electricity generation capacities in Elektrėnai Complex would consist of a modern unit of the 455 MW power combined cycle gas turbine, and units 7 and 8 of the reserve power plant (each of 300 MW power) capable of generating electricity firing both gas
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Reorganization of Lietuvos Dujos operations On 10 March 2015, Lietuvos Dujos approved its new corporate structure; since 1 June, the legal status of the company’s branches will be revoked, while subdivisions of Lietuvos Dujos will operate as regional gas system departments in major cities of the country.
On 9 February 2015, the Supervisory Board of Lietuvos Dujos elected a new member of the Board Dalius Svetulevičius, who has worked as the Head of Operational Management Department up until then. The new member of the Board was elected till the end of the term of office of the current Board.
Ensuring the quality of services The Group’s company LESTO servicing more than 1.63 million customers devotes great attention to the development and modernisation of the power grid and consistently expands and improves the provided services considering the changing needs of its customers, thus providing both economic and social benefits to the society, increasing the reliability and quality of electricity supply and creating conditions for more rational use of electricity. During 3 months of 2015, LESTO connected 5 364 new customers, which is 35.8 percent more than during the respective period of 2014 when 3 951
30
new customers were connected. The total permissible capacity of newly connected consumer objects amounted to 84 112 kW, which is 51.8 percent more than during the same period of 2014 when the total permissible capacity was 55 420 kW.
Involving the partners – the Lithuanian Post and libraries of the country – LESTO offered to its customers even more possibilities of conveniently provided services, which will reduce costs incurred by the company and increase its long-term efficiency.
Also, LESTO continued the purchase of power grids of gardeners’ associations, thus ensuring a reliable and secure supply of electricity, and carried out the projects of network modernisation co-financed from the EU structural funds – during 3 months of 2015, the company bought power grids of 5 gardeners’ associations, by 31 March it completed works in 76 objects of gardeners’ associations (of 76 according to the project), carried out the modernization of 5 transformer substations (7 substations will be modernized according to the project), and replaced overhead power transmission lines by cable lines. During the upcoming decade, LESTO plans to modernize the distribution network in essence. In order to ensure reliable, safe and intelligently managed services, the company plans to invest EUR 1.7 billion into the modernization and renovation of the network by 2025.
At the end of the reporting period, on 31 March, there were 550 000 registered on the self-service website www.manoelektra.lt, and the number of its visitors reached 1 million (compared to 760 000 a year ago). During 3 months, information was provided to more than 295 000 customers having called the short LESTO customer service number 1802, inquiries of more than 119 000 customers on different matters were received and resolved, and customer service centres situated in seven largest cities of Lithuania provided services to more than 62 800 customers.
During 3 months of 2015, LESTO replaced 26 139 electricity meters that no longer met the metrological requirements and installed 3 987 electricity meters for new customers. By investing in the modernisation and automation of electricity meters, LESTO connected 729 electricity meters to the automated data reading system during the three months, thus increasing the number of electricity meters operated by the Company, the data of which are read in remote manner to 25 839. The automation of electricity meters provides the possibility of automated billing of customers for electricity consumed in a certain period without the need for customers to declare the consumed amount of electricity themselves. LESTO takes into account the needs of customers and their changing habits – customers are willing to save their time and to receive information on the matters of interest to them in expedited manner, therefore in the recent years more and more customers have been acquiring services calling by phone or ordering a service on the self-service website www.manoelektra.lt instead of ordering them in customer service centres.
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
Essential reform implemented in Q1 of 2015 is joint electricity and gas customer service centres in major cities of the country. Since 30 March customers of the electricity distributor LESTO, natural gas supplier Lietuvos Duju Tiekimas and natural gas distribution system operator Lietuvos Dujos have been served in joint customer service centres in Kaunas, Klaipėda, Šiauliai, Panevėžys, Alytus and Utena. Last year such a joint customer service centre was opened up in Vilnius. In Q1 of 2015, Lietuvos Dujos invested EUR 0.9 million for connecting new customers, compared to investments of EUR 0.7 million in Q1 of 2014. The company built 14 km of gas distribution pipelines (10 km a year ago) and connected 736 new customers to the gas pipelines, which is 49 percent more compared to Q1 of 2014 when 494 new customers were connected to the gas distribution system. One of the largest projects of investment in the construction of new gas systems completed in Q1 of 2015 was the construction of the mediumpressure distribution pipeline in Kaunas, Pramonės Avenue. Gas pipeline was built for a business customer planning to consume about 9 million cubic meters of natural gas per year. Investments into the project amount to almost EUR 100 000 and 0.9 km of gas pipelines was built for connecting the customer. Also, an almost 2 kilometre-long gas pipeline was built in Noreikiškių neighbourhood, Kaunas district. Investments of the project totalled more than EUR 63 000.
31
Testing of smart metering devices On 7 May 2015, LESTO published an international tender for the procurement of smart meters, according to which the installation of 3 000 smart meters is planned. They would allow for a more rational use of electricity and saving of household expenses. A pilot project of smart meters is Lithuania’s commitment to the European Commission to test the efficiency of smart metering and the benefit thereof to residents. Having installed a smart electricity metering device, a client will be able to see exact data on the time and the volume of electricity used by him on the self-service site www.manoelektra.lt. Moreover, LESTO will receive more accurate information on the power grid during the pilot project, which will allow to faster identify and eliminate power grid failures.
decrease for all customer groups, but the greatest reduction of 49 percent will be experienced by group 2 customers. According to preliminary estimates, a connection tariff for a business customer will decreased by EUR 758 to EUR 5 000.
Return for shareholders The state-owned Lietuvos Energija Group allocated EUR 52.6 million in dividends for 2014, and this was the most of all state-owned enterprises. Lietuvos Energija Group companies listed on the exchange paid dividends for 2014 every half year. LESTO dividends for 2014 accounted for the total of EUR 31.33 million (EUR 33.23 million for 2013), those of Lietuvos Energijos Gamyba - EUR 41.96 million (EUR 72.48 million for 2013), and of Lietuvos Dujos - EUR 48.2 million (EUR 15.43 million for 2013).
The plan is to start installation works of electricity meters in Q1 of 2016. Smart meters will be installed for LESTO customers living in the territories of Alytus city, Šiauliai city, Šilutė district, Trakai district, Varėna district, Vilnius city and Vilnius district municipalities. Further installation of smart metering systems may depend on economic assessment. The goal set in the electricity sector is to install smart metering systems for at least 80 percent of customers by 2020, if projects are economically viable and beneficial to customers.
Decreasing price of access to electricity As from 1 June 2015, tariffs for access to electricity networks have changed for new customers. According to preliminary estimates, a statistical new consumer planning to get access to electricity will pay EUR 230 and businesses - EUR 758 less than up until now. Tariffs for access to electricity networks depend on the capacities desired by a customer and the distance between the customer’s object to electricity networks. Prices for the installation or increase of permissible power will
INTERIM REPORT FOR Q1 of 2015 Key financial indicators
32
Corporate governance
The Lietuvos Energija Group, whose shareholder is the state of Lithuania, aims at ensuring efficient and transparent operations. To that end, the reorganisation of governance was carried out in 2013, during which the corporate governance of the Group was reorganised and enhanced. 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 energy 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).
INTERIM REPORT FOR Q1 of 2015 Corporate governance
The primary goal of the corporate governance is to achieve the effect of synergy aligning different activities of the Lietuvos Energija Group and targeting them at the achievement of the common goals at the Group level. The Group’s governance structure was formed in observance of the principles of corporate governance, and contributes to their implementation. The Company’s shareholder is the State controlling 100 % of its shares. The rights and obligations of the shareholder are implemented by the Ministry of Finance of the Republic of Lithuania, which adopts the main decisions related to the implementation of the ownership rights and obligations.
33
Supervisory bodies Supervisory Board The Supervisory Board is a collegial 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 seven members – natural persons representing the
Šarūnas Kliokys (born in 1959)
Antanas Danys (born in 1975)
Ministry of Finance, the Ministry of Energy, the Ministry of Economy, the Office of the Government of the Republic of Lithuania, and three independent members. The Chairman of the Supervisory Board is elected 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 of Lietuvos Energija operating at the end of the reporting period (31 March 2015) was as follows:
Dr. Virginijus Lepeška Tomas Garasimavičius Aloyzas Vitkauskas (born in 1955) (born in 1978) (born in 1954)
Chairman, Independent member Independent member Independent member Member Educational background
Vytautas Magnus University, Baltic Management Institute, Degree in Business Administration (EMBA) Vilnius University, Economist’s Diploma.
Participation in the – capital of the Company and of the Group, % 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.
INTERIM REPORT FOR Q1 of 2015 Corporate governance
Vilnius University Vilnius University Master’s Degree in Business Doctor of Social Sciences. Administration (MBA) Boston College Bachelor’s degree.
–
–
Educational background Creighton University Political Science Master’s Studies Vilnius University IIRPS Political Science Master’s Studies Vilnius University TSPMI Bachelor’s Degree in Political Science. –
Rasa Noreikienė (born in 1959)
Rokas Baliukovas (born in 1977)
Member
Member
Member since 17-12- 2014
Vilnius Civil Engineering Institute Post-graduate studies of technical sciences Vilnius Civil Engineering Institute Master’s Degree in Civil Engineering.
Kaunas University of Technology Master’s Degree in Public Administration Vilnius University Lawyer’s Speciality.
Kaunas University of Technology Bachelor’s Degree in Electric Engineering Šiauliai University Master’s Degree in Energy Engineering Šiauliai University Master’s Degree in Management and Business Administration.
–
Board Member of PE Chairman of the Board of Government of the Republic Ministry of Finance of the Lietuvos Junior Achievement UAB Organizacijų Vystymo of Lithuania, Advisor to the Republic of Lithuania; Partner of United Partners. Centras; Board Member of Prime Minister for Energy. Vice-Minister. the Association Mentor Lietuva; Board Member of PE Paramos Vaikams Centras.
–
Ministry of Economy of the Republic of Lithuania; Vice-Minister.
34
–
Ministry of Energy of the Republic of Lithuania; Vice-Minister.
The main functions and responsibility of the Supervisory Board cover the following areas: election and recall of members of the Board, supervision of activities of the Board and the 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 and supervisory bodies.
Committees of the Supervisory Board For the purpose of effective fulfilment of its functions and duties, the Supervisory Board forms committees. The committees of the Supervisory Board provide their conclusions, opinions and proposals to the Supervisory Board according to their competence. A committee consists of a minimum of three members of whom at least one member must be a member of the Supervisory Board and at least one independent member. The following committees have been operating in 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 objective and impartial conclusions or proposals to the Supervisory Board on the functioning of the audit and control system in the Group;
INTERIM REPORT FOR Q1 of 2015 Corporate governance
Nomination and Remuneration Committee is responsible for the submission of conclusions or proposals on the matters of nomination, recall or promotion of member of the Board to the Supervisory Board, also for the assessment of activities of the Board and its members and for issuing a 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, the Company may also form other ad hoc committees (e.g., for addressing specific issues, preparation, supervision or coordination of strategic projects, etc.). A detailed description of the supervisory bodies of the Company and listed companies of the Group is provided on p. 41.
35
Management bodies Board The Board is a collegial management body provided for in the Articles of Association of the Company. The members of the Board are elected for a term of four years and recalled by the Supervisory Board on proposal of the Nomination and Remuneration Committee. The Board comprising 5
Dr. Dalius Misiūnas (born in 1978)
Ilona Daugėlaitė (born in 1970)
members elect from among its members the Chairman of 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 at the end of the reporting period (31 March 2015) was as follows:
Darius Kašauskas (born in 1972)
Mindaugas Keizeris (born in 1980)
Dalia Andrulionienė (born in 1971) Board Member since 02-03-2015
Educational background Lund University Vilnius University Doctor’s degree in Technological Master’s Degree in Hydrogeology and Sciences; Master’s Degree in Engineering Geology. Industrial Electrical Engineering and Automatics Kaunas University of Technology Bachelor’s Degree in Electrical Engineering. Participation in the capital of the Company and the Group, % Workplace, position
–
Lietuvos Energija, UAB, Chairman of the Board, CEO Lietuvos Energijos Gamyba, AB, Chairman of the Supervisory Board Association Eurelectric, member of the Board of Directors National Lithuanian Electricity Association, President KTU Alumni Association, President.
–
Lietuvos Energija, UAB, member of the Board, Director of the Organisational Development Service LESTO AB, member of the Supervisory Board UAB Technologiju ir Inovaciju Centras, Chair of the Board UAB Elektros Tinklo Paslaugos, member of the Board AB Duomenu Logistikos Centras, Chair of the Board
ISM University of Management and Economics Doctoral Studies of Social Sciences, Course of Economics; BI Norwegian Business School Master’s Degree in Management Vilnius University Master’s Degree in Economics. –
Lietuvos Energija, UAB, member of the Board, Director of the Finance and Treasury Service LESTO AB, Chairman of the Supervisory Board NT Valdos UAB, Chairman of the Board UAB Kauno Energetikos Remontas, Chairman of the Board AB Lietuvos Dujos, Chairman of the Supervisory Board.
Vilnius University Master’s Degree in International Business Vilnius University, Bachelor’s Degree in Business Administration and Management.
–
–
Lietuvos Energija, UAB, member of the Board, Director of the Strategy and Development Service UAB Elektros Tinklo Paslaugos, Chairman of the Board; UAB Lietuvos Duju Tiekimas member of the Board; Energijos Tiekimas, UAB, Chairman of the Board; UAB LITGAS Chairman of the Board; Lietuvos Energijos Gamyba, AB, member of the Supervisory Board; UAB Kauno Energtikos Remontas, Chairman of the Board.
The description of management bodies of the listed companies of the Group is provided on p. 44.
INTERIM REPORT FOR Q1 of 2015 Corporate governance
BI Norwegian Business School, Executive Master, Management program; Vilnius University, Master’s Degree in Economics and Management.
36
Lietuvos Energija, UAB, member of the Board, Director of Production and Service Department.
Organizational culture and employees The Company’s employees are the key element in implementing the operating strategy of the Lietuvos Energija Group. The aim is to build and maintain a value-based organisational culture, motivating employees to assume responsibility, cooperate and jointly seek for the best result. In implementing the goals set by the shareholder and pursuing a socially responsible business, we have been seeking to attract and retain skilled specialists in the Group and to create with them long-term partnership relationships and joint successful future while ensuring mutual benefit. 1
As of 31 March 2015, there were 5 578 employees in the Group. Compared to Q4 of 2014, the number of employees of the Lietuvos Energija Group slightly decreased.
As of 31 March 2015, there were 77 employees in the Company. 92.2 of the Company’s employees have higher university education, of whom 5 are doctors of science. The Company employs 2 Certified Professional Project Managers (PRINCE2), 1 Certified Financial Analyst (CFA), 1 Certified Internal Auditor (CIA), 1 Certified Fraud Examiner (CFE), 2 Certified Risk Management Assurance Experts (CRMA), 5 employees with the professional Board Member’s qualification of the Baltic Institute of Corporate Governance. The employees are active members of associations and unions and of the academic community (KTU Business Council, LEI Supervisory Board, Technological Development Committee under the Agency for Science, Innovation and Technology, etc.). Structure of the Company's emloyees by educational background, percent
1.3 6.5
92.2 Company Lietuvos Energija, UAB AB LESTO Lietuvos Energijos Gamyba, AB AB Lietuvos Dujos UAB Technologiju ir Inovaciju Centras UAB Duomenu Logistikos Centras Energijos Tiekimas UAB UAB Kauno Energetikos Remontas UAB Gotlitas UAB ELEKTROS TINKLO PASLAUGOS NT Valdos, UAB VšĮ Respublikinis Energetikų Mokymo Centras UAB LITGAS UAB VAE SPB UAB Verslo Aptarnavimo Centras UAB Lietuvos Duju Tiekimas Total
INTERIM REPORT FOR Q1 of 2015 Corporate governance
Number of employees 77 2208 454 1134 173 18 17 241 1 584 218 155 12 17 126 143 5578
0
10
20 30 40 50 60 Higher Advanced vocational
70 80 Secondary
90
100
53.8 percent of Group’s employees have higher university education, 25 of them are doctors of science, 27.7 percent have advanced vocational and 18.3 percent - secondary education. Distribution of the Group's employees by educational background, percent 53.8
0
10
20 Higher
30 40 50 60 Advanced vocational
27.7
70 80 Secondary
37
18.3
90 100 Other
The majority of the Group’s employees was male (72.5%), while female accounted for 27.5% of employees. Distribution of employees by gender, percent
The total wage fund of the Company for January - March 2015 was EUR 415 000. The following was the average monthly wage of the Company’s employees in January – March 2015. Category of employees Chief Executive Officer (CEO) Top-level managers Mid-level managers Experts, specialists
27.5
72.5
Male
Average monthly wage, EUR
Female
As of 31 March 2015, there were 5 578 employees in the Group. The total wage fund of the Group in January – March 2015 was EUR 16 610 million The following was the average monthly wage of the Group employees in January – March 2015. Category of employees
Distribution by gender of executives is also similar: 69.2 % of executives were male and 30.8 % - female.
Distribution of executives by gender, percent
5310 4017 2698 1701
Average monthly wage, EUR
Chief Executive Officer Top-level managers Mid-level managers Experts, specialists
4006 3300 1811 918
30.8
69.2
Male
INTERIM REPORT FOR Q1 of 2015 Corporate governance
Female
38
Developing organization and its culture After the reorganization of the governance of the Lietuvos Energija Group, the focus was placed on coordinated organisational development, management of human resources, creation of new organisational culture, efficiency of the organisation of activities, and building and maintaining of competences in 2015. In Q1 of 2015, the project for the consolidation of administration of employment relations and the project of the renewal of employee adaptation system was completed; in reinforcing image of the employer, 4 career day events organized by universities were attended, evaluation of activities of the Group’s employees was conducted based on general activity management principles. The project of the improvement of remuneration system has been continued and guidelines for employee training have been prepared in 2015. Also, projects of the career management and structuring of rotation systems have been successfully continued (in Q1 of this year, 20 employees rotated across Group companies, while 36 employees climbed up the corporate ladder inside the company). 40
36
35 30
The Lietuvos Energija Group understands that the realisation of its aims of continuous development and increase of the Group’s value mostly depends on the involvement of employees and their contribution to the development and success of the organisation. In order to assess how much the employees are involved in the activity of the organisation and are interested in active participation in the achievement of success of the organisation, the survey of involvement of the Group’s employees was initiated. Survey result action plans have been implemented.
Developing competences The Lietuvos Energija Group is consistently taking care of professional development of its employees and ensuring that employees possess all certificates established by laws that are necessary for their work and that they improve the necessary competences. By the end of Q1 of 2015, training courses organised by the Lietuvos Energija Group were attended by 5 576 employees. Individual companies held at the organizational level various general, professional and management competence trainings, such as time management and planning, team building, making an impact, conflict and stress management, change management, communication, project management, business process management, sales skills, efficient customer service and others. The Group’s Mid-level Management Forum initiative involving 25 mid-level managers representing each company of the Group was initiated in 2014 and continued in 2015. The purpose of this Programme is to organise common discussions, seminars and project activities in order to develop management and leadership competences of mid-level managers, facilitate the sharing of experience and encourage mutual cooperation, also, to promote the solidarity of Lietuvos Energija Group and to jointly pursue strategic goals.
25 20 20 15 10 5 0 Rotation inside the Group
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Career inside the company
39
Share of employees having participated in trainings, percent. 100 90 80 70 60 50 40 30 20 10 0
98.6 83.9 76.5 64.3 41.7
40.3
35.3
34.4 26.1 5.8
LE
LESTO
LEG
LD
LDT
VAE SPB
ETP
ETP
KER
NTV
7.7
8.1
5.6
4.8
EMC
TIC
DLC
VAC
Internship opportunities The Group companies create conditions for students of higher education institutions and vocational schools to apply their theoretical knowledge and acquire practical skills. During Q1 of this year, 62 interns were accepted for practice:
70 62 60 50 40 30
20 10
3
0 Number of interns
INTERIM REPORT FOR Q1 of 2015 Corporate governance
Number of employed interns
40
Supervisory bodies As of 31 March 2015, the Supervisory Board functioning in Lietuvos Energijos Gamyba, AB comprised:
Name, surname
Participation in the capital of the Company and the Group, %
Dr. Dalius Misiūnas Chairman
-
Pranas Vilkas Independent member Mindaugas Keizeris
Name, surname Term of office
Workplace Darius Kašauskas Chairman
August 2013 – August 2017
Lietuvos Energija, UAB, Chairman of the Board and CEO
-
August 2013 – August 2017
-
20-11-2014 August 2017
Name, surname Darius Kašauskas Chairman
-
Petras Povilas Čėsna Independent member
Ilona Daugėlaitė Member
Workplace Lietuvos Energija, UAB, Director of the Finance and Treasury Service
-
November 2014 – November 2018
LITEXPO Chairman of the Board
-
Ilona Daugėlaitė Member
-
November 2014 – November 2018
Lietuvos Energija, UAB, Director of the Organisational Development Service
Lietuvos Energija, UAB, Strategy and Development Director
Committees of the Supervisory Board As of 31 March 2015, the Supervisory Board committees formed in Lietuvos Energija, as a parent company of the Group, included the Audit, Risk Management Supervision, Nomination and Remuneration Committees.
Audit committee Term of office
Number of shares held in the Company and the Group
Workplace
Committee member July 2013 – July 2017
Lietuvos Energija, UAB, Director of the Finance and Treasury Service
-
September 2013 – July 2017
LITEXPO Chairman of the Board
-
July 2013 – July 2017
Lietuvos Energija, UAB, Director of the Organisational Development Service
Workplace
Rasa Noreikienė Chair of the Committee
-
Ministry of Economy of the Republic of Lithuania, Vice-Minister
Danielius Merkinas Independent member
-
UAB Nordnet, Finance Director
Aušra Vičkačkienė Member
-
Gintaras Adžgauskas Member
-
Ministry of Finance of the Republic of Lithuania, Director of the Asset Management Department World Energy Council, Director of the Lithuanian Committee
Irena Petruškevičienė Independent member
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Participation in the capital of Term of office the Company and the Group, % November 2014 – November 2018
Petras Povilas Čėsna Independent member
As of 31 March 2015, the Supervisory Board functioning in AB LESTO comprised: Participation in the capital of the Company and the Group, %
As of 31 March 2015, the Supervisory Board of AB Lietuvos Dujos formed since 29 October 2014 comprised:
European Commission Member of the Audit Development Committee
41
the Corporate Governance Code of companies listed on NASDAQ OMX Vilnius Stock Exchange.
Main functions of the Committee:
monitoring the process of preparation of financial statements of the Company and the Group, with a special focus on the adequacy and consistency of used accounting methods; monitoring the efficiency of internal control and risk management systems of the Company and the Group, analysis of the need for, and adequacy of, these systems and perform 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 the Group, examining the effectiveness of audit and response of the administration to the recommendations provided by the audit company in the letter to the management;
Risk Management Supervision Committee Committee member
Number of shares held in the Company and in the Group
Workplace
Antanas Danys Chairman of the Committee
-
Public Institution Lietuvos Junior Achievement, member of the Board
Raimundas Petrauskas Independent member
-
Schmitz Cargobull Baltic, UAB CEO
Donatas Kaubrys Independent member
-
Dovirma, UAB, Director
Tomas Garasimavičius Member
-
Advisor to the Prime Minister of the Republic of Lithuania for Energy
Main functions of the Committee:
monitoring the effectiveness of the internal audit function of the Company and the Group, 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;
monitor the identification, assessment and management of risks relevant for the accomplishment of goals of the Company and the Group;
assess the adequacy of internal control procedures and risk management measures to the identified risks;
providing proposals for the internal audit plans of the Company and the Group, recommendations for the regulations of internal audit units of the Company and the Group, 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;
assess the status of implementation of risk management measures;
monitor the implementation of the risk management process;
analyse financial possibilities for the implementation of risk management measures;
assess the risks and risk management plan of the Company and the Group;
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;
monitoring the compliance of activities of the Company and the Group 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
INTERIM REPORT FOR Q1 of 2015 Corporate governance
42
perform other functions attributed to the competence of the Committee by decision of the Supervisory Board.
Nomination and Remuneration Committee Number of shares held in the Company and in the Group
Committee member
Workplace
Aloyzas Vitkauskas Chairman of the Committee
-
Ministry of Finance of the Republic of Lithuania, Vice-Minister
Virginijus Lepeška Independent member
-
UAB Organizaciju Vystymo Centras, Chairman of the Board
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 the Group (the main fixed part of the remuneration, performance-based remuneration, pension insurance, other guarantees and forms of remuneration, compensations, severance pays, other components 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 the Group;
monitor the compliance of the policy of remunerations and bonuses of the Company and the Group with the international practice and good governance practice recommendations, and provide respective proposals for the improvement of the policy of remunerations and bonuses;
provide proposals concerning bonuses upon distribution of distributable profit (losses) of the Company and the Group of the respective financial year;
INTERIM REPORT FOR Q1 of 2015 Corporate governance
assess the terms and conditions of agreements of the Company and the Group with members of management bodies of the Company and the Group;
assess the procedures of recruitment and selection of candidates to members and senior management of the Company and the Group and establishment of qualification requirements;
perform regular reviews of the structure, size, composition and activities of the management and supervisory bodies of the Company and the Group;
supervise how members of management bodies and employees of the Company and the Group 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 the Group;
perform other functions attributed to the competence of the Committee by decision of the Supervisory Board.
43
Management bodies of the Group As of 31 March 2015, the Board of AB LESTO comprised: Name, surname Aidas Ignatavičius Chairman
Participation in the capital of Term of office Workplace the Company and the Group, % September 2013- AB LESTO, CEO September 2017
Andrius Bendikas Member
-
Sergejus Ignatjevas Member
-
Virgilijus Žukauskas Member
-
Dalia Andrulionienė Member till 02-032015
-
September 2013- AB LESTO, September 2017 Director of Finance and Administration Department September 2013- AB LESTO, September 2017 Director of Customer Service Division September 2013- AB LESTO, September 2017 Director of Electricity Network Division September 2013- AB LESTO, Director of Organizational March 2015 Development and Communication Service
Head: Aidas Ignatavičius, CEO of AB LESTO
As of 31 March 2015, the Board of Lietuvos Energijos Gamyba, AB comprised: Participation in the capital of the Company and the Group, %
Name, surname
Term of office
Workplace
Juozas Bartlingas Chairman
-
September 2013- Lietuvos Energijos Gamyba, AB, CEO September 2017
Adomas Birulis Member
-
September 2013- Lietuvos Energijos Gamyba, AB, Director September 2017 of Business Development Department
Eglė Čiužaitė Member
-
September 2013- Lietuvos Energijos Gamyba, AB, Director September 2017 of Finance and Legal Department
Darius Kucinas Member
-
September 2013- Lietuvos Energijos Gamyba, AB, Director September 2017 of Production Department
Vidmantas Salietis Member
September 2013- Lietuvos Energijos Gamyba, AB, Director September 2017 of Wholesale Electricity Trade Department
Head: Juozas Bartlingas, CEO of Lietuvos Energijos Gamyba, AB.
As of 31 March 2015, the Board of AB Lietuvos Dujos comprised: Name, surname
Liudas Liutkevičius Chairman
Participation in the capital of the Term of office Workplace Company and the Group, % November 2014 – AB Lietuvos Dujos, November 2018 Chief Executive Officer
Giedrė Ginskienė Member
-
November 2014 – AB Lietuvos Dujos, Director of November 2018 Finance and Treasury Service
Nemunas Biknius Member
-
Valentina Birulienė Member
-
Dalius Svetulevičius Member since 9-02-2015
November 2014 – AB Lietuvos Dujos, November 2018 Director of Service Provision and Development Service November 2014 – AB Lietuvos Dujos, November 2018 Director of Organisational Development Service February 2015AB Lietuvos Dujos, Director of Gas November 2018 Network Service
Tomas Šidlauskas Member till 30-01- 2015.
November 2014 - AB Lietuvos Dujos, January 2015 Director of Gas Network Service
Head: Liudas Liutkevičius, CEO of AB Lietuvos Dujos.
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44
Social responsibility and environmental protection
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45
Social responsibility
The Lietuvos Energija Group devotes special attention to 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 effort with the United Nations, public authorities and nongovernmental organisations in dealing with social and environmental issues,
Environmental protection
The model of socially responsible business of the Lietuvos Energija Group is implemented through targeted and consistent activities in the following areas:
Relationships with employees and society
On 12 May 2015, Director of Finance and Treasury Service Darius Kašauskas was recognized as the “Head of Finance of the Year 2015”. The Association of Financial Analysts and the national business daily Verslo Žinios held these elections for the third consecutive year. On 22 January 2015, LESTO was declared one of the best investor relations companies in the Baltic States. This was announced in the Baltic Market Awards ceremony held by Nasdaq Baltic stock exchange of 2014. On 22 April 2015, Lietuvos Energija opened up a joint Applied Research Centre of the Lithuanian Energy (LEARC) together with Kaunas University of Technology (KTU). Partners will be solving technological challenges and
INTERIM REPORT FOR Q1 of 2015
thereby contributing to the development of the society and economic growth. The Global Compact is based on the principles of human rights, employee rights, environmental protection and anti-corruption.
Market operations
developing new business ideas in the cooperation platform set up in the Santaka Valley. The Lietuvos Energija Group has a functioning zero-tolerance policy with regard to corruption, which applies to all employees of the Group. The policy emphasizes that Lietuvos Energija shall not tolerate any form of corruption - both direct and indirect. Group employees must perform their work and functions in a fair and transparent manner. More information on social responsibility, the entire zero zero-tolerance policy with regard to corruption and other information can be found on the Group’s website at www.le.lt.
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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 to minimise the impact of energy objects on people and the environment, and invests in the environmentally friendly modern technologies. In implementing different environmental projects, the Group aims at minimising the impact of energy objects on people and the environment, and also at encouraging the participation of society in different initiatives related to environmental protection.
Waste management and sorting, efficient use of resources The Lietuvos Energija Group are implementing waste sorting initiatives, and have installed special waste sorting containers for sorting plastic and paper. In cooperation with the association of purchasers of electronics, LESTO also collects energy-saving light bulbs, small electronic devices and batteries in its customer service centres; special containers have also been installed in subdivisions of Lietuvos Energijos Gamyba in Elektrėnai, Kruonis, Kaunas and Vilnius for discarding obsolete small electronic devices and batteries. Since 2013, the Group company UAB Kauno Energetikos Remontas has been involved 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 process 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 waste sorting. In April 2015, employees of the Group actively joined the traditional annual cleanness initiative “Let’s Do It 2015”. 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 have already transferred to the use of electronic bills. The Environmental Management System complying with requirements of LST EN ISO 14001:2005 has been implemented in objects of Lietuvos Energijos Gamyba. Also, subdivisions of Lietuvos Energijos Gamyba
INTERIM REPORT FOR Q1 of 2015 Social responsibility
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. In January - March 2015, Elektrėnai Complex handed over for utilisation 178 t of liquid fuel ash, 2 765 t of waste rubber, 0.7 t of waste batteries, 1.39 t contaminated packaging waste, 1.7 t absorbent waste unsuitable for use, 0.4 t of used waste tires; 44 t of electrical scrap and 476 t of ferrous metal scrap were sold to metal collectors. Household waste collected in the territory of this object is removed by a specialised company on contractual basis. The operations of the chemical water treatment bar generated and released into the Obeniai land plot for clearing 68 t of water clarifier sludge waste. The installation works of facilities of the new technological water preparation workshop in Elektrėnai Complex were completed, and launch tuning works were started in the first months of 2015. The plan is that the new facilities will decrease water losses incurred at the time of preparation of technological water by 20% since Q3 of 2015. In January - March 2015, Kruonis PSPP handed over for utilisation 0.044 t of hazardous waste and sold 12.66 t of ferrous metal scrap. Household waste collected in the territory of this object is removed by a specialised company on contractual basis - in January - March 2015, 8.32 t of household waste was generated in the territory. In January - March 2015, Kaunas Algirdas Brazauskas Hydroelectric Power Plant handed over for utilisation 0.14 t of hazardous waste, 0.54 t of nonhazardous waste and sold 2.12 t of ferrous metal scrap. Household waste collected in the territory of this object is removed by a specialised company on contractual basis; during the quarter, about 1.62 of household waste was generated in the territory. Paper and cardboard waste in all power plants are handed over to enterprises processing such waste. Lietuvos Dujos has an implemented and certified environmental management system in accordance with ISO 14001 standard requirements,
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which is constantly managed and improved. In March 2015, UAB Bureau Veritas conducted a recertification audit of the environmental management system implemented in the Company under the ISO 14001 standard. One discrepancy was identified during the audit, a corrective action plan was drawn up for the elimination whereof. One of the main objectives of Lietuvos Dujos in the field of control and minimization of atmospheric pollution using technical measures is the control of any possible gas leaks in the process of natural gas distribution. One of the most important goals of the company in controlling and reducing atmospheric pollution with the help of technical measures is to control possible gas leaks when distributing natural gas. In order to ensure the reliability of gas systems, maintenance of gas pipelines and their facilities, repairs, reconstruction and modernization thereof is being performed. During three months of 2015, gas emissions into the atmosphere at the fault 3 of third persons amounted to 0,038 million m . Gas consumption for technologic needs related to gas emissions into the atmosphere totalled 3 2.95 million m . In order to reduce unfavourable environmental impact, Lietuvos Dujos has been implementing technical measures for the ensurance of reliability of gas systems and renewing its car fleet every year. This year, it purchased 14 new cars fuelled on the cleanest fossil fuel - natural gas. CO2 emissions of 80 kw power natural gas-fuelled cars is 157 g/km compared to 191 g/km of 59 kW power petrol-fuelled cars or 167 g/km of 55 kW diesel-fuelled cars.
Support Fund In August 2014, the Minister of Finance of the Republic of Lithuania signed the order on the establishment of the Support Fund of Lietuvos Energija. The purpose of activities of the Fund is to provide support and other assistance to legal persons in accordance with the procedure established by the Republic of Lithuania Law on Charity and Sponsorship and the Republic of Lithuania Law on Charity and Sponsorship Funds in the areas of science, education, culture, art, sports and other spheres useful to the society and not associated with profit-seeking.
INTERIM REPORT FOR Q1 of 2015 Social responsibility
Lietuvos Energija set up the Support Fund, which supports significant initiatives and projects valuable to the state and the society on behalf of the Group. In order to avoid speculation and ensure transparency, evaluation criteria are published, also, application evaluation and consent to the allocation of a specific support is conducted in several stages. In order to enable the use of the support by initiatives and projects of different levels, 80 percent of funds from the Support Fund are allocated for the national level and 20 percent - for community level projects. Support is not allocated and cannot be used for funding political parties or political campaigns and extreme sports. The budget of the Support Fund is formed of contributions of all the companies of the Group accounting for up to 1 percent of net consolidated profit.
Social initiatives The Group actively contributed to the event of the traditional Days of Energy Professionals organised by the National Lithuanian Energy Association (NLEA). On 17-18 April 2015, free educational events were hosted in the Lithuanian Energy and Technology Museum – excursions for the public and a concert of the Latvian instrumental cello trio Melo-M. During the excursions, visitors were able to get familiarised with the Lithuanian energy system and its topicalities, also, to learn more about the energy specialist’s occupation. The Group ensures a possibility to charge electric cars in a rapid charging station free of charge. In July of last year, LESTO opened up the first electric vehicle rapid charging station in Vilnius, J. Lelevelio Street, together with its partners Nissan and NT Valdos. The station seems to have a flow of regular users - each month about 1000 kWh of electricity is charged here (3682 kWh during the three months of 2015). Currently, Energijos Tiekimas, the largest Lithuanian capital electricity supplier, ensures a free of charge supply of electricity to the station. In order to contribute to raising awareness about energy among society and young generation in particular, Lietuvos Energijos Gamyba welcomes free of charge excursions to the objects under its control: the combined cycle unit, Kruonis Pumped Storage Power Plant and Kaunas Algirdas Brazauskas’ Hydroelectric Power Plant. In January - March 2015, the power plants were
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visited by more than 450 visitors from different enterprises, schools and other institutions as well as by delegations from foreign countries. During the aforementioned period, the majority of excursions were organised in Kruonis PSPP. LESTO is continuing its cooperation with libraries under the project “Libraries for Progress 2” launched in 2014. The purpose of this cooperation is to enable customers to use the self-service website www.manoelektra.lt at places convenient for them. LESTO together with the Association of the Wardens of the Municipalities of Lithuania invited wardenships and their communities to submit applications for the competition of projects for increasing safety nearby power grid installations and enhancing public accountability. In 2015, applications from 30 wardenships and communities were received. The applications were evaluated by representatives of LESTO, the Association of the Wardens of the Municipalities of Lithuania, the Association of the Municipalities of Lithuania and PE Rūpi. 7 educational and practical projects were declared winners – first events planned by them were already held during the three months of 2015 - community residents acquired knowledge on safe behaviour with electric equipment and nearby power grid installations in interactive lectures and quizzes. Lietuvos Dujos constantly organizes and participates in social activities. Continuing its long-lived tradition, it arranged a charity fair for PE Mažoji Guboja inmates on 1 April 2015.
behaviour with electrical equipment and reducing negative consequences arising from irresponsible or malicious behaviour of residents. During the first three months of 2015, thieves caused damage in the amount of EUR 17 993.84 to all electricity consumers. A greater than usual number of thefts from LESTO facilities were recorded in Pasvalys and Biržai districts. LESTO enhanced its cooperation with the police and security companies. During the first three months of 2015, 6 applications for the initiation of pretrial investigation were submitted, 1 of which resulted in conducted searches. A large-scale plundering of electricity was detected, and allegations of the theft of electricity were brought against 2 persons residents themselves helped to bring one case to light. In order to raise awareness of school communities and contribute to the creation of a sustainable, energy-efficient and environmentally-friendly society of Lithuania, LESTO and the Lithuanian Children and Youth Centre together with partners invited educational institutions of the country to participate in a one-year educational programme “Sustainable School”. 70 educational institutions participating in the programme completed the first task of the programme – the Ecological Footprint study, and 17 schools have been implementing changes allowing to reduce the ecological footprint throughout the year. In the beginning of 2015, organizers, including a LESTO representative, analysed and selected most creative institutions having achieved best results.
Not More Than Needed. The project is aimed at developing rational energy use traditions of the society.
Long-term projects The large scale long-term social responsibility projects for children, youth and the general public implemented by the Group’s company LESTO are characterised by active involvement of communities and different social groups, and ideas of safety, energy efficiency and conservation of environment. Active development of such projects was continued in Q1 of 2015.
Operation 2020. This project is aimed at promoting responsible behaviour with power grid installations, raising awareness of people about safe
INTERIM REPORT FOR Q1 of 2015 Social responsibility
Energy Efficiency Conference “Energy Efficiency Solutions - a Path to the Competitiveness of Business”. On 12 February, LESTO and the business daily Verslo Žinios held a traditional business conference. Specialists from various sectors shared their insights with more than 300 conference participants. Practical energy efficiency measures, specific solutions implemented by companies, energy efficiency functions, energy efficiency Directive of the European Union and other relevant issues were discussed in the conference. A company having used electricity most efficiently in 2014 was awarded a special prize - this year Norfos Mažmena received the award. LESTO encourages other companies and organizations to search for rational
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business solutions, starting with more efficient use of electricity. A social responsibility project Not More than Needed for Enterprise and the Green Protocol, which invite companies to express their wish and will to start using energy more efficiently, conserve the environment and encourage others to do that as well, was initiated for this purpose.
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. Different initiatives for education of children about safe behaviour with electricity have been continued in 2015.
Electromagic. This educational initiative is aimed at raising awareness of children and youth about benefits, threats and safety of electric energy. The
INTERIM REPORT FOR Q1 of 2015 Social responsibility
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Key information about the Company and the Group The Interim Report of Lietuvos Energija and its subsidiaries has been 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 is published on the Company’s website at www.le.lt. Company’s name
Lietuvos Energija, UAB
Company’s code
301844044
Authorised capital
EUR 1 212 156 thousand
Paid-up authorised capital
EUR 1 212 156 thousand
Address
Žvejų g. 14, LT-09310, Vilnius, Lithuania
Telephone
(8 5) 278 2998
Fax
(8 5) 278 2115
biuras@le.lt
Website
www.le.lt
Legal form
Private Limited Liability Company Registered on 28 August 2008 in the Register of Legal Entities
Date and place of registration Register collecting and storing data about the Company
On 13 February 2013, the Company’s shares were transferred to the Ministry of Finance under right of trust. On 30 August 2013, UAB Visagino Atominė Elektrinė was renamed to Lietuvos Energija, UAB. On 31 March 2015, the authorised capital of the Company was divided into ordinary registered shares with par value of EUR 0.29 each. All shares are paid up in full. Shareholders of the Company Republic of Lithuania, represented by the Ministry of Finance of RL
Share capital (EUR thousand)
%
1 212 156
100
Register of Legal Entities, SE Centre of Registers
INTERIM REPORT FOR Q1 of 2015 Key information about the Company and the Group
51
Information about subsidiaries, branches and representative offices Companies directly or indirectly owned by Lietuvos Energija, UAB at the end of the reporting period (31 March 2015): Company
Head office address of the company
Effective shareholding, 31-03-2015 (%)
Authorised capital (EUR thousand) 31-03-2015
Core activity
Lietuvos Energijos Gamyba, AB
Elektrinės g. 21, Elektrėnai
96,1
184 174
Electricity generation, supply, import and export, as well as trade in electricity
AB LESTO
Žvejų g. 14, Vilnius
94,4
175 144
Electricity supply and distribution to consumers
AB Lietuvos Dujos
Aguonų g. 24, Vilnius
96,6
84 299
Natural gas supply and distribution to consumers
NT Valdos, UAB
Geologų g. 16, Vilnius
94,7
85 550
Disposal of real estate, other related activities and provision of services
UAB Duomenu Logistikos Centras
A. Juozapavičiaus g. 13, Vilnius
79,6
4 028
ITT maintenance services
UAB ELEKTROS TINKLO PASLAUGOS
Motorų g. 2, Vilnius
100
5 483
UAB Kauno Energetikos Remontas
Chemijos g. 17, Kaunas
100
4 421
Construction, repairs, technical maintenance of power grids and related installations, connection of consumers to power grids Repairs of electric installations, manufacture of metal structures
UAB LITGAS
Žvejų g. 14, Vilnius
66,7
13 050
Supply of LNG via the LNG terminal and trade in natural gas
Gotlitas UAB
Chemijos g. 17, Kaunas
100
319
Accommodation services, trade
Energijos Tiekimas UAB
Jeruzalės g. 21, Vilnius
100
218
Supply of electricity and natural gas
VšĮ Energetiku Mokymo Centras
Jeruzalės g. 21, Vilnius
100
85
Geton Energy OÜ
Narva mnt 5, 10117 Talinas
96,1
35
Professional development and continuing vocational education and training of energy sector specialists Supply of electricity
Geton Energy SIA
Bezdelingu 12, LV-1048, Ryga
96,1
28
Supply of electricity
UAB Technologiju ir Inovaciju Centras
A. Juozapavičiaus g. 13, Vilnius
97,8
5 995
UAB VAE SPB
Žvejų g. 14, Vilnius
100
293
Advisory business and other management activities
UAB Verslo Aptarnavimo Centras
P. Lukšio g. 5 b, Vilnius
97,0
580
UAB Lietuvos Duju Tiekimas“
Smolensko g. 5, Vilnius
100
870
Services of organising and carrying out public procurement and administration of personnel Gas supply
Lietuvos Energija Support Fund
Žvejų g. 14, Vilnius
100
3
Allocation of support for projects, initiatives and activities important to the public
UAB Vilniaus Kogeneracinė Jėgainė
Žvejų g. 14, Vilnius
100
3
Modernization of the district heating system of the city of Vilnius
UAB Kauno Kogeneracinė Jėgainė
Žvejų g. 14, Vilnius
100
3
Modernization of the district heating system of the city of Kaunas
INTERIM REPORT FOR Q1 of 2015 Key information about the Company and the Group
Provision of ITT and other services
52
Information about securities of the Group Shares of LESTO, Lietuvos Energijos Gamyba and Lietuvos Dujos are listed on the Main List of NASDAQ OMX Vilnius. The trade in shares of the companies was started on 17 January 2011, 1 September 2011 and 13 April,
respectively. The shares of the companies are traded solely on the Nasdaq Vilnius stock exchange.
Structure of the authorised capital and shareholders having held more than 5 percent of the Issuer’s authorised capital according to the data of 31 December 2014
Company
Total nominal value of shares, EUR
ISIN code
Ticker symbol
Trade list
Shareholder name and surname (company name)
Share of votes granted by owned shares, %.
AB LESTO
175 143 931.97
LT0000128449
LES1L
BALTIC MAIN LIST
Lietuvos Energija, UAB
94.39%
Lietuvos Energijos Gamyba, AB
184 174 248.35
LT0000128571
LNR1L
BALTIC MAIN LIST
Lietuvos Energija, UAB
96.13%
AB Lietuvos Dujos
84 298 864.6
LT0000116220
LDJ1L
BALTIC MAIN LIST
Lietuvos Energija, UAB
96.64%
INTERIM REPORT FOR Q1 of 2015 Information about securities of the Group
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Agreements with intermediaries of public trading in securities Lietuvos Energija has not concluded any agreements with intermediaries of public trading in securities, because its securities are not traded on the stock exchange.
Group companies: Lietuvos Energijos Gamyba, AB
As of 31 March 2015, the company had issued 290 685 740 ordinary registered shares with par value of EUR 0.29 per share. Issue ISIN code LT0000116220. AB Lietuvos Dujos has concluded an agreement on the accounting of securities issued by the company and management of personal securities accounts, payment of dividends to minority shareholders and provision of other related services with AB SEB Bank.
On 1 September 2011, shares of Lietuvos Energijos Gamyba were included in the Main List of NASDAQ OMX Vilnius Stock Exchange. As of 31 March 2015, the company had issued 635 083 615 ordinary registered shares with par value of EUR 0.29 per share. Issue ISIN code LT0000128571. Lietuvos Energijos Gamyba has concluded securities accounting agreements on the accounting of securities issued by the issuer and management of personal securities accounts with Swedbank, AB.
AB LESTO Since 17 January 2011, ordinary registered shares of LESTO have been listed on the Main List of NASDAQ OMX Vilnius Stock Exchange. As of 31 March 2015, the company had issued 603 944 593 ordinary registered shares with par value of EUR 0.29 per share. Issue ISIN code LT0000128449. The authorised manager of securities accounts of LESTO is Swedbank, AB.
AB Lietuvos Dujos On 1 January 2008, shares of AB Lietuvos Dujos were included in the Main List of NASDAQ OMX Vilnius. The company’s shares are traded on NASDAQ OMX Vilnius Stock Exchange.
INTERIM REPORT FOR Q1 of 2015 Agreements with intermediaries of public trading in securities
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Main Group events until the date of the Report Lietuvos Duju Tiekimas reduced the price of natural gas for business and other non-household customers by about one-fifth in 2015. Such a possibility emerged after the NCCPE’s approval of the pricing of Lietuvos Duju Tiekimas for business customers for 2015-2016 on 30 December (1 January 2015). The Group successfully transferred to the euro as a new currency in Lithuania (1 January 2015). Lietuvos Dujos started publishing calorific value of gas supplied to the network. Since now on, consumed gas for system users are accounted for in euros per kilowatt-hour (1 January 2015). LITGAS started supplying the minimum necessary volume of natural gas of the liquefied natural gas terminal to energy producers subject to regulation (1 January 2015). Lietuvos Energija and Kaunas University of Technology signed a letter of intent on the establishment of a joint research centre (16 January 2015) Tests of a part of new heat production capacities - steam boiler room in Elektrėnai were completed. The newly-built natural gas-fired steam boiler room is already in use, it was taken over by Lietuvos Energijos Gamyba staff (16 January 2015). The Vilnius County Administrative Court accepted the appeal of Lietuvos Energijos Gamyba requesting to dismiss the Resolution No. O3-934 of the NCCPE of 11 December 2014. By its Resolution, the NCCPE unilaterally set the components of the price of heat produced by the Company (16 January 2015). Lietuvos Energijos Gamyba became the market maker of electricity price derivatives in Latvian bidding areas (20 January 2015). Baltic Highway, a 3000 km-long data transmission highway of a particularly high throughput, was officially launched (21 January 2015).
INTERIM REPORT FOR Q1 of 2015 Main Group events until the date of the Report
The Vilnius County Administrative Court accepted the appeal of Lietuvos Energijos Gamyba requesting to partially dismiss the Resolution No. O3-941 of the NCCPE of 19 December 2014. The NCCPE decided by paragraphs of the Resolution the dismissal whereof is requested to reduce the amount of funds paid to the Company in 2015 for the provision of the service meeting public interest (PIMS) production of electricity necessary for ensuring the security of the electric power supply (21 January 2015). The Vilnius County Administrative Court accepted for hearing the appeal of LESTO requesting to revoke the Resolution of the NCCPE of 19 December 2014 On the Planned Inspection of AB LESTO and resolutions adopted on the basis thereof (23 January 2015). LITGAS became the first company in Lithuania and one of the first enterprises in the Baltic States supplying natural gas to customers in other countries. In January, LITGAS signed natural gas supply contracts with the Estonian Eesti Energia and the Reola Gaas company of the Estonian energy group Alexela Group (27 January 2015). The Government formed a special commission, which will examine the issues related to the implementation of projects for the modernization of district heating sectors of Vilnius and Kaunas (28 January 2015). In its meeting of 30 January, the NCCPE decided not to consider the issue on imposing a sanction to LESTO and to postpone the decisionmaking until the end of March (30 January 2015). Tomas Šidlauskas, member of the Board of Lietuvos Dujos, resigned (30 January 2015). LESTO announced about its plans to invest EUR 1.7 billion into the modernization of the network until 2025 (3 February 2015). Lietuvos Duju Tiekimas won a gas tender procedure held by Vilniaus Energija (6 February 2015).
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Lietuvos Energija announced about its programme of a clearer definition of its value chain - by the end of the year, the Group plans to clear up its core activities and distribute them among companied to create the greatest value for the group and its customer - energy consumers (13 February 2015). LITGAS announced its engagement in the analysis of cooperation in new activities of a small-scale LNG supply and bunkering together with Statoil. An agreement on the form of joint activity is planned to be reached by the end of Q2 of 2015 (13 February 2015). The Estonian regulator made an exception to LITGAS, which will be able to trade natural gas in Estonia without having to establish its branch therein. Such a possibility will allow the company to come closer to potential customers, who had to previously take care of the transportation of natural gas from the Estonian-Latvian border (19 February 2015). LITGAS secured gas transit through Latvia - it signed a contract with Latvijas Gaze (20 February 2015). LITGAS signed a memorandum on the supply of gas from the US terminal Delfin LNG (26 February 2015). LITGAS signed a joint trade agreement with Cheniere Marketing (27 February 2015). In its meeting, the Board of Lietuvos Energija approved the concept of the programme of a clearer definition of its value chain. By the end of the year, the Group plans to clear up its core activities and distribute them among companied to create the greatest value for the Group and its customer - energy consumers. The programme of a clearer definition of the value chain covers 4 core areas of operations: production, supply/ sales, network and customer service, at the same time examining synergy possibilities (27 February 2015). Lietuvos Energija published its plans of the merger of LESTO and Lietuvos Dujos - companies in control of electricity and gas distribution networks. The synergy of these companies would allow increasing the efficiency of the Group, reducing operating costs and creating the greatest number of additional benefits to electricity and natural gas consumers (3 March 2015). INTERIM REPORT FOR Q1 of 2015 Main Group events until the date of the Report
The Vilnius County Administrative Court accepted the appeal of LESTO requesting to dismiss the Resolution No. O3-11 of the National Control Commission for Prices and Energy (NCCPE) of 19 January 2015 On Setting Price Caps for Distribution Services via Medium- and LowVoltage Networks Provided by AB LESTO for 2016-2020 (10 March 2015). The Board of Lietuvos Dujos made a decision to revoke the legal status of the company’s branches till 1 June 2015. Starting from 1 June 2015, gas system departments will operate in regions (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys). The legal status of branches is changed in order to facilitate corporate governance of the company and make it more efficient (10 March 2015). Customers of Lietuvos Dujos, Lietuvos Duju Tiekimas and LESTO are now served in joint customer service centres in Kaunas, Klaipėda, Šiauliai, Panevėžys, Alytus and Utena (30 March 2015). Lietuvos Energija took over 100 percent of shares of Elektros Tinklo Paslaugos from LESTO, also, 100 percent of shares of Energijos Tiekimas and 100 percent of shares of Kauno Energetikos Remontas from Lietuvos Energijos Gamyba (31 March 2015). Lietuvos Energija finished the evaluation of tender offers of potential partners for new cogeneration power plant projects in Vilnius and Kaunas. The selection procedure was terminated in Vilnius having received no partner offers meeting the project objectives, providing for a possibility to include partners in other stages of the implementation of the project. In Kaunas, a ranking of tender offers best meeting the project objectives was drawn up. Tender offers submitted by Fortum Heat Lietuva, AB Kauno Energija and UAB E Energija were entered in the ranking (31 March 2015). The Board of LESTO adopted a resolution to hold the annual general meeting of shareholders on 27 April. The Board of LESTO proposed allocating the amount of EUR 12.079 million for paying dividends, or EUR 0.02 per share (3 April 2015). The Board of Lietuvos Energijos Gamyba convoked the annual meeting of shareholders on 27 April 2015. The proposal was made to pay out
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EUR 21.72 million, or EUR 0.0342 per share, in dividends to shareholders of the company (3 April 2015).
The Lietuvos Energija Group started organizing a unified procurement of vehicle rental services for 14 companies of the Group (3 April 2014).
Lietuvos Dujos announced about the convocation of its general meeting of shareholders to take place on 27 April. The proposal was made to allocate EUR 28 million, or EUR 0.0963 per share, in dividends for Half 2 of 2014 (3 April 2015). UAB Vilniaus Kogeneracinė Jėgainė started procedures necessary for an open tender procedure for the selection of a contractor for the construction of biofuel and waste power plants - a preliminary technical specification for tenderers was published in the English and Lithuanian languages (13 April 2015). LESTO announced about its intention to start an open tender procedure for a long-term loan. The plan is to borrow EUR 70 million for a five-year period. Funds will be allocated for refinancing the company’s financial obligations and working capital. The planned base variable interest rate is 1 month EURIBOR (15 April 2015). Lietuvos Energija opened up a joint Applied Research Centre of the Lithuanian Energy together with Kaunas University of Technology (KTU) (22 April 2015). Lietuvos Energija took over from its subsidiaries and Litgrid, AB the shares of NT Valdos (27 April 2015). Annual general meetings of shareholders of Lietuvos Energijos Gamyba, LESTO, Lietuvos Dujos, VAE SPB, Energijos Tiekimas, Elektros Tinklo Paslaugos, NT Valdos and Kauno Energetikos Remontas were held. Annual financial statements of the companies for 2014 were approved and decisions on the allocation of profit (loss) were made in the meetings. The payment of EUR 12.1 million (~2 ct per share) in dividends by AB LESTO, EUR 21.72 million (~3.42 ct per share) -by AB Lietuvos Energijos Gamyba (LEG) and EUR 28 million (~9.63 ct per share) - by AB Lietuvos Dujos (LD) was approved (27 April 2015).
INTERIM REPORT FOR Q1 of 2015 Main Group events until the date of the Report
The Environmental Protection Agency approved the environmental impact assessment programme of the Vilnius cogeneration power plant project (28 April 2015). The court had completely refused to examine the appeal of electricity distribution company LESTO with regard to the conclusion of the Public Procurement Office (PPO) on the company’s supposedly illegal purchase of electricity in 2011-2013 (28 April 2015). The Vilnius County Administrative Court rejected the appeal of Lietuvos Energijos Gamyba of 16 September 2014 with regard to the dismissal of the Resolution No. O3-757 of the NCCPE On Electricity Production Market Research Results (30 April 2015). Information on the convocation of extraordinary general meetings of shareholders of LESTO and Lietuvos Dujos was published, at the time whereof decisions will be made on the preparation of reorganization conditions of these companies. Shareholders were proposed to consent to the preparation of reorganization conditions of AB LESTO and AB Lietuvos Dujos in the way of a merger (4 May 2015). The address of LESTO headquarters changed – now LESTO headquarters are located at Aguonų g. 26, Vilnius (4 May 2015). The planned unbundling of Lietuvos Energijos Gamyba activities was announced. A clearer definition of the company’s production activity is planned by separating a part of its commercial electricity wholesale trading activities (4 May 2015). Lietuvos Energija decided to merge its two natural gas supply subsidiaries Lietuvos Duju Tiekimas and LITGAS. The plans were approved by the Ministry of Finance. The new company will be called Lietuvos Duju Tiekimas (5 May 2015).
Lietuvos Energijos Gamyba received an act of completion of the construction of a biofuel boiler room in the Elektrėnai complex (6 May 2015).
The NCCPE meeting determined that a dispute between Kaunas Heat and Power Plant (KHPP) and LITGAS on the KHPP’s obligation to acquire the mandatory share of gas of the LNG terminal and payment for the gas supplied was actually resolved (7 May 2015).
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An international tender for “turnkey” construction works of Vilnius cogeneration power plant was published. The object of the procurement comprises all works, services, equipment and materials, which will be used to design and construct a new cogeneration power plant in Vilnius (8 May 2015).
The electricity distribution company LESTO and Finish bank Pohjola Bank signed a contract on the disbursement of a long-term loan in the amount of EUR 75 million (15 May 2015). In order to ensure a reasonable development of the energy sector, which would meet the needs of market participants, also, a reliable and efficient operation of the systems, the NCCP approved the investments planned by Lietuvos Energijos Gamyba in 2015, the total value whereof is about EUR 5.6 million (15 May 2015). The Lithuanian Supreme Administrative Court accepted an appeal of Lietuvos Energijos Gamyba regarding a decision of the Vilnius County Administrative Court of 30 April 2015. By its decision, the Vilnius County Administrative Court rejected the Company’s appeal regarding the dismissal of the Resolution No. O3-757 of the NCCPE On Electricity Production Market Research Results (15 May 2015). The NCCPE approved the proposal made by Lietuvos Duju Tiekimas to extend the period of time for the reduction of the price of gas to residents using a discount of EUR 11.75 million for more expensive gas supplied to Lithuania in 2013 and first four months of 2014 for one year, till the end of Half 1 of 2017. The previous procedure provided for
Lietuvos Energija, UAB Chief Executive Officer 29 May 2015
INTERIM REPORT FOR Q1 of 2015 Main Group events until the date of the Report
the use of the entire discount by the end of Half 1 of 2016 (15 May 2015). Upon the NCCPE’s approval, tariffs for access to electricity to new consumers will change as from 1 June 2015. The price for the connection to electricity will decrease for majority of consumers (18 May 2015). Lietuvos Energija signed a cooperation agreement with UAB Fortum Heat Lietuva for the development of the new cogeneration power plant project in Kaunas (20 May 2015). An environmental impact report of the Vilnius cogeneration power plant was drawn up (20 May 2015). The liquefied natural gas (LNG) terminal operator Klaipėdos Nafta started the search for potential buyers of a third of its stake in LITGAS. Its largest shareholder Lietuvos Energija has a pre-emptive right to acquire the shares. Potential buyers of shares, who meet the national security requirements, were invited to submit applications by 29 May (21 May 2015). The distribution of territories served by regions of Lietuvos Dujos will change as from 1 June. According to the new scheme, Klaipėda gas network department will also serve customers from Plungė, Telšiai and Rietavas as well as the gas distribution network thereof, while Panevėžys and Šiauliai gas network department will additionally serve Kėdainiai, Ukmergė and Taujėnai (1 June 2015).
Dr. Dalius Misiūnas
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