CONSOLIDATED INTERIM REPORT OF THE COMPANY AND THE GROUP 1 January 2015 – 30 June 2015
INTERIM REPORT FOR H1 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
50
INTERIM REPORT FOR H1 of 2015 Content
2
Key indicators of the Lietuvos Energija Group Change (+/-) 6 months of 2015
6 months of 2014
million EUR
%
Revenue
million EUR
321.764
208.937
112.827
54.0
Costs of purchase of electricity, gas, fuel and related services
million EUR
(225.291)
(122.679)
-102.612
83.6
Operating expenses (1)
million EUR
Operating expenses (normalised)
million EUR
EBITDA (2)
million EUR
70.588
56.545
14.043
24.8
21.9
27.1
30.975
19.186
11.788
61.4
2015-06-30
2014-12-30
EBITDA margin (3)
%
EBITDA (last 12 months)
million EUR
Net profit
million EUR
Net profit (normalised)
million EUR
Total assets
million EUR
2 294.8
2 369.2
-74.4
-3.1
Equity
million EUR
1 318.9
1 308.9
10.0
0.8
Financial debts
million EUR
396.6
391.6
5.0
1.3
Net financial debts (4)
million EUR
196.3
175.9
20.4
11.6
Return on equity (ROE) (5)
%
9.4
4.5
Equity capital level (6)
%
57.5
55.2
times
0.86
0.81
%
14.9
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 H1 of 2015 Content
3
Revenue, million EUR
Net profit, million EUR
600
548 Net profit
500 410
415
95.4
403
400
Normalised net profit
61.8
59.0
300
30.2
200 22.3 100 -3.6 0
6 months 2012 6 months 2013 6 months 2014 6 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%
65.3%
70%
64.8% 57.5%
3403 2926
2938
2295
60%
140
50%
120
40%
100
30% 20%
6 months 2012 6 months 2013 6 months 2014 6 months 2015 Assets Equity, %
INTERIM REPORT FOR H1 of 2015 Content
25.5%
160
80
26.5% 21.4%
16.7%
105.9
106.5
117.3
10%
40 20
0%
0
20% 15%
68.3
60
10%
25%
5% 0% 6 months 2012 6 months 2013 6 months 2014 6 months 2015 EBITDA EBITDA margin, %
4
Message from the Chairman of the Board
INTERIM REPORT FOR H1 of 2015 Content
5
Message from the Chairman of the Board Dear Customers, Partners, Employees and Shareholders,
integrated business management system within the Group, and we have made the use of office premises more efficient
Lietuvos Energija Group has a set strategic goal to double the value of the Group by 2020; currently it has already achieved 50 percent of this goal.
Comparative profit of the Group (excluding one-off effects) totalled EUR 61.8 million in Half 1 of the year, which is 4.8 percent more than in the same period of last year. With increasing profit, comparative revenue of the Group (excluding gas transmission and distribution activity-related revenue) decreased by 1.7 percent as a result of lower tariffs applied. The reduction of revenue was determined by electricity transmission prices decreased since the beginning of the year.
Having previously centralized and optimized its activities, Lietuvos Energija Group reduced its expenses directly related to the price of electricity, gas supply and other services by 10 percent in Half 1 of this year. At the same time, performance results of the Group improved. The state-owned group continues investing in strategic development projects and optimizing processes creating value. This has created preconditions for sustainable increase of benefits created for customers. Compared to Half 1 of 2014, operating expenses of Lietuvos Energija Group decreased by 10.1 percent in Half 1 of 2015, namely, from EUR 58 million to EUR 52.1 million. This reduction was effected by centralized accounting, public procurement and personnel administration activities as well as more efficient performance of real estate, vehicle fleet, IT and other service functions. The previously conducted works in the centralization and optimization of activities have rendered tangible results to the Group, while customers paying less for electricity and gas received the greatest benefit. We yet have measures for the reduction of expenses: the value chain refinement programme of the main activities, namely, the consolidation of energy production, distribution, supply, customer service and contracting, providing for the merger of companies will allow eliminating three legal entities and facilitating the Group structure. We also plan implementing a single
INTERIM REPORT FOR H1 of 2015 Content
In Q2, Lietuvos Energija Group simplified its structure - it took over from its subsidiaries companies under their control (Elektros Tinklo Paslaugos, Energijos Tiekimas, Kauno Energetikos Remontas and NT Valdos). The flatter structure of the Group allows Group companies to focus on their core activities, while the competence of the management of Group companies is efficiently concentrated in Lietuvos Energija company. We have focused on the increase of value in the Group, thus besides the constant reduction of expenses and control, we have invoked development projects for the growth of value, which will create value to customers in the long run. We see potential in wind energy, also, we have developed the projects of cogeneration power plants in Vilnius and Kaunas and expanded the liquefied natural gas market We hope to continue successful activities of the company and seek for the best results by responsible cooperation. Dr. Dalius Misi큰nas Chairman of the Board and Chief Executive Officer Lietuvos Energija, UAB
6
About the Group and the Company
INTERIM REPORT FOR H1 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 six months of 2015, 0.919 TWh of electricity were generated, 4.25 TWh of electricity were transmitted to consumers and 360 million m3 of natural gas were transported via gas distribution pipelines.
INTERIM REPORT FOR H1 of 2015 About the Group and the Company
The consolidated revenue of the Group of six months of 2015 amounted to EUR 548.3 million and EBITDA of the Group was EUR 117.3 million. Net normalised profit of six months totalled EUR 61.8 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 20 companies: the parent Company and 19 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 H1 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. 51 hereof. The following is the structure of the Group as of 25 August 2015.
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 is 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 of 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
INTERIM REPORT FOR H1 of 2015
economy at large as well as the energy independence of the state, optimisation of the production and trading portfolio, development of new activities by extending the value chain of the Lietuvos Energija Group. These goals are achieved using the available resources and infrastructure, investing in the creation of new infrastructure and effective governance, as well as through acquisitions.
Enhancing the efficiency of operations. The efficiency is 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 are integrated by 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 are continued. Active sharing of best practices between companies are promoted and sought.
Building new organisational culture. A modern, effective and dynamic organisation is being 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
Nominated CEOs of reorganized companies of the Group On 28 July 2015, the Supervisory Board of Lietuvos Energija approved the candidates nominated to take the posts of CEOs of Group companies undergoing reorganization as from 1 January 2016. CEOs and members of the Boards of the new electricity and gas distribution operator as well as of the companies Lietuvos Duju Tiekimas and Energijos Tiekimas. Lietuvos Energija intends to refine its core activities by the end of the year and to distribute them among companies so that the greatest value for the Group and its customers - energy consumers - was created (for more information, see page 27).
Environmental impact assessment of Vilnius cogeneration power plant was carried out On 4 June 2015, environmental impact assessment report of Vilnius cogeneration power plant was publicly presented, where experts of individual areas evaluated the impact of the planned power plant on the environment and public health. Companies developing new cogeneration power plant projects in Vilnius and Kaunas started the procurement of contracting services for the construction of the power plants (for more information, see page 24).
Lietuvos Energija Applied Research Centre opened up The plan to install a single integrated business management system On 14 August 2015, in order to increase operating efficiency, flexibility and to create better possibilities for development, Lietuvos Energija Group plans to move to a single integrated business management system (for more information, see page 29).
On 22 April 2015, Lietuvos Energija opened up a joint Applied Research Centre of Lietuvos Energija (LEARC) together with Kaunas University of Technology. Partners will solve technological challenges emerging in the energy sector and develop new operational ideas in the cooperation platform set up in Santaka Valley.
Lietuvos Energija Support Fund distributed support
Dividends paid for 2014
18 August 2015. This year, Lietuvos Energija Support Fund allocated support for 19 projects and activities, which will be received almost EUR 600 000 in support. The support fund received a total of 90 applications, which were evaluated according to the set criteria and priorities (for more information, see page 48).
29 April 2015. The state-owned Group Lietuvos Energija allocated EUR 52.6 million in dividends for 2014, which is the most of all state-owned enterprises. Listed companies of the Group also allocated dividends for their shareholders (for more information, see page 33).
INTERIM REPORT FOR H1 of 2015 Most significant events of the reporting period
11
Analysis of financial and operating results of the Group
INTERIM REPORT FOR H1 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 H1 of 2015. The amount of electricity distributed by the Group via medium- and low-voltage networks in January - June increased by 2 percent (0.08 TWh) compared to H1 of 2014 and totalled 4.25 TWh. In Half 1 of 2015, the growth in the amount of electricity consumed came as a result of increased consumption of electricity in the industrial sector. 1.2 TWh more of electricity was distributed to this group of customers in Half 1 of 2015, or +3.4 percent more than in Half 1 of 2014 (1.16 TWh). During 6 months of 2015, the public and guarantee supply of electricity of the Lietuvos Energija Group was 1.59 TWh, which is -3.3 percent or -0.05 TWh less than a year ago. The supply of electricity to independent consumers totalled 2.66 TWh (+5.4 percent, + 0.14 TWh). INTERIM REPORT FOR H1 of 2015 Key operating indicators
Change (+/-) +/%
6 months of 2015
6 months of 2014
TWh TWh TWh TWh
0.919 4.25 1.59 2.66
0.597 4.17 1.64 2.52
0.323 0.08 -0.05 0.14
54.1 2.0 -3.3 5.4
min. units %
27.2 0.38 6.18
31.9 0.42 6.87
-4.66 -0.04 -0.69
-14.6 -10.6 -9.9
billion m3 thousand MWh billion m3 thousand MWh
0.360 3.801 0.623 6.474
0.408 4.246 0.485 5.047
-0.048 -0.445 0.137 1.427
-11.7 -10.5 28.3 28.3
min. units
0.1434 0.0016
0.1043 0.0014
0.0391 0.0002
37.5 13.8
In January - June 2015, the Lietuvos Energija Group generated 0.919 TWh of electricity (+54.1 percent more compared to the result of January - June of 2014). Compared to the previous reporting period, in January - June of 2015 electricity generation volumes in Kaunas Algirdas Brazauskas Hydroelectric Power Plant decreased by -14.3 percent (from 0.2 TWh in H1 of 2014 to 0.175 TWh January - June of 2015). The level of generation of electricity in Kruonis Pumped Storage Plant increased in January - June of 2015 compared to January - June of 2014 - 0.3 TWh of electricity was produced and sold in H1 of 2015, which is +0.033 TWh, or +12.4 percent more than in H1 of 2014 (0.265 TWh). Electricity generation in combined cycle gas turbine of Elektrėnai Complex was started in Q2 of 2015, it amounted to 0.444 TWh. In the same period in H1 2014 electricity in Elektrėnai complex was not generated. The Elektrėnai Complex units are used for electricity generation 13
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 increases. Such arrangement of electricity production in ElektrÄ—nai Complex allows ensuring efficient use of PIMS funds. Electricity supply quality indicators of the Group improved in January - June of 2015. Technological costs in the distribution network decreased from 6.87 percent in H1 of 2014 to 6.18 percent in H1 of 2015. The average duration of unplanned interruptions in electricity transmission excluding the causes of force majeure (SAIDI) improved in H1 of 2015 and was 27.2 minutes (compared to 31.9 minutes in January - June of 2014), while the indicator illustrating the frequency of unplanned interruptions per consumer (SAIFI) accounted for 0.38 times in January - June of 2015 compared to 0.42 times in January - June of 2014. 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 - June of 2015 totalled 3.801 TWh (about 0.36 billion cubic meters), i.e. -10.5 percent, or -0.445 TWh less compared to the same period a year Generation, distribution and sales of electricity, TWh
Electricity sales in free market
ago, when about 4.246 TWh of gas was distributed (0.408 billion cubic meters). 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 6 474 thousand MWh (about 0.623 billion cubic meters) in H1 of 2015, which was +28.3 percent, or + 1.427 TWh more than the volume of gas sold by Lietuvos Dujos in H1 of 2014 (5.047 TWh or 0.485 billion cubic meters of gas). The average duration of unplanned interruptions in transportation of gas (SAIDI), excluding the causes of force majeure (SAIDI) remained almost unchanged in January - June of 2015 and totalled 0.1434 min. (compared to 0.1043 min. in January - June of 2014), while the average number of interruptions in gas transportation (SAIFI) was 0.0016 times (compared to 0.0014 times in January - June of 2014). The slight growth of these indicators was caused by a short-term disurption of natural gas supply to several apartment buildings in Q2 of 2015.
Sold and distributed volumes of gas, thousand MWh
0.54 0.58 0.69
5968 1.58 1.64 1.59
Public and guarantee supply Electricity distributed to customers via medium and low voltage grids Generated electricity
Sold gas
5047 6474
4.15 4.17 4.25
3924
Distributed gas
3165
0.74 0.60 0.92
3801
0 H1 2013
INTERIM REPORT FOR H1 of 2015 Key operating indicators
H1 2014
H1 2015
1,000 2,000 3,000 4,000 5,000 6,000 7,000 H1 2013
H1 2014
H1 2015
14
Key financial indicators Revenue In H1 of 2015, the revenue of Lietuvos Energija Group increased by +36.1 percent, or EUR 145.6 million, compared to the same period of last year, and totalled EUR 548.3 million. During the reporting period, the major share of revenue was generated from the electricity transmission service (29 percent of the total revenue, or EUR 159.8 million), sales of the generated electricity as well as supply and trade of electricity (28 percent of the total revenue, or EUR 153.9 million) and distribution and sales of gas (29 percent of the total revenue, or EUR 159.7 million).
Revenue of the Group, million EUR 600
548.3
Compared to the revenue of H1 of 2014, in H1 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 +18.4 percent (+ EUR 23.9 million, from EUR 130 million to EUR 153.9 million). Revenue from the electricity transmission service decreased upon the reduction of the transmission price by – 18.8 percent (- EUR 36.9 million), from EUR 196.7 million in H1 of 2014 to EUR 159.8 million in H1 of 2015. A share of these both groups of revenue significantly decreased in the structure of revenue of the Group in H1 of 2015 and accounted for 51 percent (compared to 81 percent in H1 of 2014). Structure of the revenue of the Group in H1 of 2015, million EUR and percent.
+36.1 %
500
159.7, 29%
402.7
400
159.8, 29% H1 of 2015
300
EUR 548.3 million
200 100
153.9, 28%
0 H1 of 2014
INTERIM REPORT FOR H1 of 2015 Key financial indicators
H1 of 2015
32.1, 6%
27.2 PIMS of LEG 5% 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 Distribution of electricity 15
Excluding income related to gas transmission and distribution activity included in the Group’s statement of comprehensive revenue for H1 of 2015, the revenue of Lietuvos Energija Group decreased by EUR 6.1 million, or - 2.9 percent in H1 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.
Other revenue
(36.9)
548.3
23.9
Revenue of H1 of 2015
Connection of new customers
INTERIM REPORT FOR H1 of 2015 Key financial indicators
(3.8)
Transmission of electricity
4.8
(0.8)
Balancing, regulation and power reserve
0.1
Revenue from distribution and sales of gas
5.8
Sales of produced electricity, trade and supply of electricity
402.7
PIMS of LEG
152.5
Revenue of H1 of 2014
600 550 500 450 400 350 300 250 200 150 100 50 0
Heat energy
Dynamics of revenue of the Group during H1 of 2015 compared to H1 of 2014 by sectors, million EUR
16
Assets and equity In H1 of 2015, the Group’s assets decreased by -3.1 percent, or EUR -74.4 million, and totalled EUR 2 224.8 million as at 30 June 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 H1 of 2015, the level of inventories of the Group fell by EUR 27.5 million, or 51.8 percent, while trade receivables decreased by EUR 36.1 million, or -27.6%.
Equity of the Lietuvos Energija Group increased by +0.8 percent, or + EUR 10 million, in H1 of 2015 and was EUR 1 318.9 million as at 30 June 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 H1 of 2015. These factors led to the increase of the equity level, which was equal to 57.5 percent as at 30 June 2015 (compared to 55.2 percent as at 31 December 2014).
Operating and purchasing expenses During H1 of 2015, operating expenses of the Group amounted to EUR 78 million and, compared to H1 of 2014, increased by 26.3 percent (EUR 16.2 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 H1 of 2015, the expenses of this activity increased by + EUR 17.5 million). Excluding these expenses, compared to H1 of 2014, in H1 of 2015, normalised operating expenses of the Group decreased by -10.1%, or -5.9 million, from EUR 58 million to EUR 52.1 million.
Operating expenses of the Group in H1 of 2014 and H1 of 2015, million EUR 90 78.0 Operating expenses 80 +26.3 % 70
61.8
60
3.8
17.5 8.4
50 -10.1%
40 30
58.0
related to the takeover gas transmission and distribution activity, new projects Assets revaluation, sales, dismantling and related expenses
450
Operating expenses
300 250 200 100
0
0
INTERIM REPORT FOR H1 of 2015 Key financial indicators
Purchases of gas for trade
+2.4 times
350
50 H1 of 2015
390.3
400
10 H1 of 2014
Purchasing expenses of electricity, gas, fuel and other services of the Group in H1 of 2015, million EUR
183.2 264.4 24.4
150
52.1
20
During the reporting period, expenses of the Group for the purchase of electricity, gas, fuel and related services, compared to H1 of 2014, increased by +66.4.6 percent, or + EUR 155.4 million. The growth was mostly predetermined by inclusion of costs related to the trade of gas, which totalled EUR 183.2 million in H1 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 H1 of 2014, in H1 of 2015, the purchase of gas and fuel oil for energy production decreased by 81% from EUR 24.4 million to EUR 4.6 million, while the purchase of electricity and related services remained stable and were -0.2% lower.
Purchases -
%
4.6
-0.2 % 202.80
202.47
2014 m. I pusm.
2015 m. I pusm. 17
Elektros ar susijusių paslaugų pirkimai
EBITDA and net profit In H1 of 2015, the Group’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR 117.3 million, which is +10.1 percent, or + EUR 10.7 million more than in EBIDTA in H1 of 2014, which was EUR 106.5 million (EBITDA of H1 of 2015 does not include the negative effect of temporary nature of the discount of the price of gas in the amount of EUR 28.9 million applied to household and non-household customers in January - June of 2015 and a negative effect of EUR 8.4 million cost allocation for H1 2015 from previous periods). 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 H1 of 2015.
EBITDA of the Group, million EUR
EBITDA profitability margin of the reporting period of the Group decreased and accounted for 21.4 percent (compared to EBITDA profitability margin of 26.5 percent of H1 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 - June of 2015.
Dynamics of EBITDA of the Group by the nature of activities, million EUR
140
60 40 20 0 H1 of 2014
INTERIM REPORT FOR H1 of 2015 Key financial indicators
H1 of 2015
4.0
117.3
13.6 -0.1
-6.7
18
EBITDA of H1 of 2015
80
106.5
Electricity production
100
140 120 100 80 60 40 20 0
Other
117.3
Gas supply and distribution
+10.1%
Electricity distribution and supply
106.5
EBITDA of H1 of 2014
120
In January - June of 2015, the Group earned EUR 30.3 million in net profit, which is - EUR 65.1 million, or -68.3% less than in January - June of 2014 (EUR 95.4 million).
Sources of EBITDA of the Group in H1 of 2015, % 11%
The amount of net profit in Half 1 of 2015 was significantly affected by additional costs related to the gas price discount applied by the Group to household and non-household customers in 2015 (total negative effect of EUR -24.6 million), significant negative impact (of EUR -6.9 million) of the revaluation of assets and transfer of costs from previous periods on the results of Half 1 of 2015. In Half 1 of 2014, net profit results were significantly impacted by a positive result of EUR 59.5 million related to the acquisition of control of AB Lietuvos Dujos. Compared to Half 1 of 2014, in Half 1 of 2015, net result was positively affected by decreased depreciation and amortization costs upon the accounting of revaluation of AB LESTO assets in December of 2014, and it was negatively impacted by the increase of these costs related to the inclusion of gas supply and distribution activities (total positive effect of these changes considering the impact of profit tax was EUR + 23.1 million on the result of Half 1 of 2015).
24% H1 of 2015
61%
AB "Lietuvos dujos" LESTO, AB Lietuvos energijos gamyba, AB Others
In light of these factors, comparative net profit in Half 1 of 2015 was 4.8% greater than net profit in Half 1 of 2014 (EUR 61.8 million in Half 1 of 2015 and EUR 59 million in Half 1 of 2014).
Normalised net profit of the Group, million EUR
Net profit of the Group, million EUR
70
120 100
60
95.427
59.0
+4.8%
61.8
50
80
40
60
30
40
30.295
20
20 10 0
0 H1 of 2014 INTERIM REPORT FOR H1 of 2015 Key financial indicators
H1 of 2015
H1 of 2014
H1 of 2015
19
Investments The Group’s investments totalled EUR 61.6 million in January - June of 2015, i.e. made up +35.3 percent, or + EUR 15.9 million more than in January June of 2014 (EUR 45.1 million). In H1 of 2015, most investments (68%) were allocated for the development and maintenance of the electricity distribution network.
Investments of the Group in H1 of 2015 by sectors, million EUR 70
H1 of 2015
30
EUR 61 million
20
(1.2)
(0.4)
1.3
Reconstruction of gas systems
40
2.2
Construction of gas systems
45.1
ITT (IT, telecommunications and management systems)
50
3.7
2.7
0.7
Electricity generation capacities
60
Other investments
9.6
Development of the electricity distribution network
Structure of investments of the Group in H1 of 2015, %
Compared to H1 of 2014, investments into the maintenance of the electricity distribution network increased the most in H1 of 2015 (+ EUR 9.6 million); investments in other sectors also gradually increased or remained similar to those made in H1 of 2014.
61.0
10
Construction of gas systems Maintenance of the electricity distribution network Electricity generation capacities Reconstruction of gas systems Other investments
INTERIM REPORT FOR H1 of 2015 Key financial indicators
20
Investments of H1 of 2015
Heat generation capacities
Maintenance of the electricity distribution network
ITT (IT, telecommunications and management systems)
Heat generation capacities
Development of the electricity distribution network
Investments of H1 of 2014
0
Financial debts As of 30 June 2015, net financial debts of the Group totalled EUR 196.3 million and, compared to the level of net financial debts at the end of 2014, increased by + EUR 11.6 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 first half. During H1 of 2015, the level of financial debts of the Group increased insignificantly by 1.3 percent, or EUR 5.1 million, and accounted for EUR 396.7 million at the end of June, compared to EUR 391.6 million at the end of 2014. Upon the payment of dividends to shareholders of the Group, cash and short-term investments of the Group totalled EUR 200.4 million as at 30 June 2015, which is -EUR 15.4 million, or 7.1% 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 0.86 times at the end of June 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 14.9 percent at the end of H1 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 H1 of 2015 Key financial indicators
Group‘s net borrowings in December 2014 and June2015, in EUR million 250
200
15.4
5.1
196.3
Borrowings
Borrowings, net, at 30 June 2015
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, % 14.9% 16% 13.4% 14%
Net financial debts of the Group/ EBITDA of 12 months, in times 1.0 0.86 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 30 Jun 2015
12% 10% 8% 6% 4%
2% 0% 31 Dec 2014
Comparison of net financial debts/EBITDA ratio of EU energy companies 12 months of 2014 (LE Group in H1 of 2015), times 5
Comparison of net financial debt/equity ratio of selected EU energy companies level in 2014 (LE Group in H1 of 2015), %
38.6% Fortum, FI
78.4%
55.4%
38.7% DONG Energy, DK
14.9% Lietuvos Energija, LT
61.9%
51.6%
25%
Eesti Energia, EE
50%
34.9%
1.96
2.03
75%
22
Tauron polska, PL
EDP, PT
ČEZ, CZ
ESB, IE
Vatenfall, SE
ENEA, PL
Tauron polska, PL
EDP, PT
ČEZ, CZ
ESB, IE
Fortum, FI
DONG Energy, DK
Vatenfall, SE
Lietuvos Energija, LT
Eesti Energia, EE
Latvenergo, LV
INTERIM REPORT FOR H1 of 2015 Key financial indicators
Latvenergo, LV
0%
0
ENEA, PL 31.0%
100%
3.24 2.25
119.3%
3.90
125%
1.17
1
1.94
0.86
2.68
2.94
3
142.4%
4.68
150%
4
2
30 Jun 2015
Review of activities of the Company and the Group
INTERIM REPORT FOR H1 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 31 March 2015 till the end of the reporting period (30 June 2015) as well as after the reporting period – until the date of the Report.
Diversification of activities
Cogeneration power plant projects implemented in Vilnius and Kaunas
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.
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. By Resolution of the Government of the Republic of Lithuania of 28 May 2014 the projects were recognized as projects of state significance.
Planned investments in wind energy
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.
On 5 August 2015, Lietuvos Energija announced its intentions to invest in wind power plant parks and invited the owners of wind power plants and their parks to consider a possibility to sell their power plants and present their offers. The Group plans to acquire wind power plants with installed capacity of at least 50 MW and their parks in the first investment stage and thus diversify its electricity production portfolio. Lietuvos Energija focuses on projects of power plants with the capacity of at least 1 MW, which have already received fixed electricity feed-in tariffs or have been declared winners in auctions for the allocation of incentive quotas. Lietuvos Energija is interested in power plants built using completely new equipment, thus ensuring that the best available technologies were or are used. The plan is to acquire power plants holding all the necessary permits, the owners of which have concluded long-term technical maintenance and servicing contracts with equipment producers.
INTERIM REPORT FOR H1 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 construct 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. 9 applications of suppliers willing to take part in the tender were received along with documents certifying qualification, including applications of major international waste and biofuel power plant construction companies. Contractors who meet qualification requirements will be invited to submit their tender offers.
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The tender consists of two parts - construction of waste incineration and biofuel cogeneration facilities. The planned electric capacity of waste incineration facility will be about 18 megawatts and its thermal capacity about 53 MW, while electric and thermal capacity of biofuel facilities will be 70 MW and 174 MW, respectively. On 20 May 2015, environmental impact assessment report of Vilnius cogeneration power plant was drawn up, and it was published on 4 June. Experts of various fields assessed the impact of the future power plant on the environment and public health in the EIA report. The planned activities will increase economic and social well-being, while its impact on the environment and public health will meet strict requirements of national and EU legislation. Authorized capital of Vilnius cogeneration power plant will be increased. In Kaunas, Lietuvos Energija is developing a cogeneration power plant project 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 future power plant complex in Kaunas in the nearest future, which will cover economic and technological power plant solutions, and will have to also approve a shareholders’ agreement in accordance with which the shares invested by the companies into the project developing the capital of UAB Kauno Kogeneracinė Jėgainė (KKJ) will be precisely defined. Having reached these agreements and received permits of the Competition Council and other institutions, a decision to invest will be made. On 26 May 2015, KKJ started procedures necessary for the selection of contractors for the construction of the power plant in an open tender procedure - preliminary technical specification for tenderers was published in the English and Lithuanian languages. In this stage, exact electrical and thermal capacity of the power plant has not yet been determined, but rather it was defined by a range of possible capacities (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 determined in drawn-up detailed technical specifications, which will be submitted to contractors who meet qualification requirements.
INTERIM REPORT FOR H1 of 2015 Key financial indicators
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 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 Energia. Also, in February of 2015, LITGAS signed 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 2 July 2015, LITGAS and Norway concern Statoil in Vilnius signed a memorandum of understanding on the establishment of a joint company, which would engage in the development of small-scale liquefied natural gas (LNG) supply activities in Lithuania. The plan is to establish the new company in Lithuania this year and to have it supply LNG to vessels, minor terminals in the Baltic Sea and supply fuel by trucks to land customers. According to estimates, the small-scale LNG market will grow to 0.5-1 billion cubic meters per year by 2020.
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. LEG has also continued the construction of the biofuel-fired boiler house. In January-June 2015, construction works of biofuel power plant buildings were being completed, equipment was mounted and system tests were
25
carried out, also completing procedures of the construction of buildings. The Commission signed a certificate of completion of construction works of the buildings on 6 May 2015. Heat energy is produced from biofuel depending on heat demand, preparatory works for guarantee tests of the biofuel power plants are conducted and defects are being eliminated. LEG investment project “Chemical Water Treatment Facilities for Water Supply to the Combined Cycle Block” was completed on 19 June 2015. A certificate of acceptance of the performed works and recognition thereof to be suitable for use was signed. The new facilities were taken over for operation by colleagues from Chemistry Bar of the Production Department.
Investments in the gas pipeline in Tauragė On 26 June 2015, the National Commission for Energy Control and Prices gave a permission to install a new gas system in Tauragė region. The length of the gas distribution system should total 5.9 kilometres, while Lietuvos Dujos would implement the project by Q4 of 2016. One of the major dairy companies in the country asked the Price Commission to connect Tauragė region to the gas distribution network. The territory of Tauragė has not yet been supplied with gas up until now, even though a gas transmission system pipeline of Amber Grid going through it at a distance of about 5 kilometres from the boundary of Tauragė town has been constructed. On 27 July 2015, Lietuvos Dujos signed a gas connection agreement with Vilkyškių Pieninė, which was a step towards the connection of one more town of Lithuania, namely, Tauragė, to the gas network.
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
INTERIM REPORT FOR H1 of 2015 Key financial indicators
Kruonis wind power plant park as well as mandatory environmental impact assessment and territory planning procedures. In May-June, service suppliers were selected and service contracts were signed therewith. Currently, a feasibility study for assessing wind resources and scope of electrical energy production is being drawn up and assessment of a possible impact of the planned economic activities in the territory of Kruonis PSPP on NATURA 2020 areas is conducted.
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 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. On 1 April 2015, the first commercial agreement on data highway was signed. This is a 24-month agreement signed with the Finish telecommunications company Elisa Corporation, in accordance with which 100 Gbps data transmission service is provided to this company. In order to increase revenues from the data centre service and diversify the activities, on 14 July 2015, Duomenų Logistikos Centras offered a new microcolocation service - customers, who only need to place a single server, will also be able to keep their equipment in the most modern Tier-III data centre Data Inn in Lithuania.
Performance of preparatory works of the nuclear power plant project 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. In VAE SPB all nuclear energy-related achievements, competences, started and completed projects are concentrated. The activities of VAE SPB were expanded without limiting them solely to the new nuclear plant project. VAE
26
SPB was provided with a possibility to operate in the sphere of creation and application of new technologies, participate in the projects already being carried out, and provide expert advice to other companies of the Group.
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. 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, 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 helps to achieve efficiency and synergy in the activities of the Group as well as the implementation of the goals set.
Implementation of value chain improvement programme Lietuvos Energija has been implementing the programme of a value chain improvement, 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 value chain improvement covers 4 core areas of operations: production, supply/ sales,
INTERIM REPORT FOR H1 of 2015 Key financial indicators
network and customer service, at the same time conducting the project for the operations of contracting companies. 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. On 28 July 2015, the Supervisory Board of Lietuvos Energija approved the candidates nominated to take the posts of CEOs of the reorganized companies as from 1 January 2016. Changes were introduced to trade unions of the Group. 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. The current Chairman of the Board and CEO of LESTO was nominated to the position of the Chairman of the Board and CEO. 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. After the merger, the company will be called Lietuvos Duju Tiekimas, the nominated head of the company is current CEO Mantas Mikalajōnas. 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
27
products based on customers’ needs. Respectively, the activities of the trade in electricity and of an independent supply conducted by Energijos Tiekimas will be enhanced. Vidmantas Salietis, Director of Wholesale Electricity Sales Department and member of the Board of Lietuvos Energijos Gamyba, was nominated to the position of CEO of the said company. Contracting company project. In the implementation of the project, the plan is to merge two secondary energy service companies Elektros Tinklo Paslaugos (ETP) and Kauno Energetikos Remontas (KER). Upon the merger of competence and experience of these companies, a single strong energy service and contracting company ensuring the construction, reconstruction, repair and supervision of energy facilities will be created. The new company will be called Energetikos Paslaugų ir Rangos Organizacija, or EnePRO in short. Joint customer service. As from 2016, the plan is to ensure customer service of LESTO, Lietuvos Duju Tiekimas, Lietuvos Dujos and Energijos Tiekimas from a joint service centre. Specialists ensuring customer service will be brought together in a single company of the Group, namely, Verslo Aptarnavimo Centras.
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. On 30 April, AB Litgrid also 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 63 000 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 value chain improvement programme.
Simplified corporate governance structure of the Group increases efficiency
Upon the sale of assets owned by Gotlitas in December of 2014, in April of 2015, a decision was made on the reduction of the authorized capital of the company. Lietuvos Energija acquired 100 percent of shares of Gotlitas from its subsidiary Kauno Energetikos Remontas on 19 August for EUR 61 000.
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.
Centralization and improvement of efficiency of processes
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.
INTERIM REPORT FOR H1 of 2015 Key financial indicators
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
28
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. 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. In June-July, Lietuvos Energija optimized the use of office premises located in Vilnius and thus plans to save about EUR 1 million during the period of three years and to create conditions for employees of the Group to be in closer cooperation. Centralization and optimization of the management of real estate allowed the Group to reduce its expenses for rent of premises by almost a third and occupied areas - by three times throughout Lithuania in 4 years. It is estimated that the office area used by Lietuvos Energija Group in Lithuania decreased by 13 percent due to the optimization. Vacated office premises covering about 4000 square meters in the central and industrial parts of Vilnius were placed on the market. Upon the completion of the optimization project, offices of Lietuvos Energija, Lietuvos Energijos Gamyba, Lietuvos Duju Tiekimas, Energijos Tiekimas, LITGAS, Duomenų Logistikos Centras and Technologijų ir Inovacijų Centras are set up in the building located at Žvejų g. 14, headquarters of administrations of distribution operators LESTO and Lietuvos Dujos are set up at Aguonų g. 24/26 and those of Lietuvos Dujos Vilnius branch, NT Valdos and VAE SPB at Smolensko g. 5. Verslo Aptarnavimo Centras was left in the building located at Lukšio g. 5B and LESTO Vilnius accounting group - at Lukšio g. 1. Technical divisions of Elektros Tinklo Paslaugos and LESTO continue operating in the premises located at Motorų g. 2 and the training centre of energy specialists - at Jeruzalės g. 21.
INTERIM REPORT FOR H1 of 2015 Key financial indicators
Planned single integrated business management system On 14 August 2015, Lietuvos Energija announced about its plans to transfer to a single integrated business management system, thus seeking to increase its operating efficiency, flexibility and to create better possibilities for expansion. The estimated duration of the project of exceptional scope is three years. The company will publish an international open tender procedure for the selection of an implementer of the integrated business management system, which would cover common business management, accounting and customer service as well as technological asset management information systems. The implementer will also have to provide support services for three years after the deployment of the system. Customers of Lietuvos Energija Group should also feel the benefit of the new system - due to the single and modern system, Group companies will be able to provide services to Group customers in a more qualitative and flexible way: create more flexible service plans, better serve customers in service centres and via self-service channels; system reliability and speed will increase.
Optimized branches of Lietuvos Dujos Having abolished their legal status, branches of Lietuvos Dujos started operating as Gas Network Departments of the company in Vilnius, Kaunas and Klaipėda, while regional divisions of Panevėžys and Šiauliai were merged into a single Northern Gas Network Department. Since now on, Heads of regional gas network departments are under direct subordination of the Director of Gas Network Service rather than CEO of the Company. Since 1 June, management of the activities of new customers was centralized in regional divisions, project implementation divisions were abolished and their functions were distributed to Engineering and New Customer Divisions, centralizing a part of gas metering functions, the function of economists and ICT administration. In order to achieve greater operating efficiency, territories served by regional departments were reviewed: Plungė and Telšiai were assigned to the Klaipėda region, Kėdainiai and Ukmergė - to the Northern region. On 1 June, the company’s financial accounting function was transferred to the Group company UAB Verslo Aptarnavimo Centras.
29
Application of a uniform project management policy 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.
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. During 6 months of 2015, LESTO connected 12 775 new customers, which is 8.3 percent more than during the respective period of 2014 when 11 801 new customers were connected. The total permissible capacity of newly connected consumer objects amounted to 171 256 kW, which is 29 percent more than during the same period of 2014 when the total permissible capacity was 132 806 kW. This year, connecting to electricity networks is even faster and simpler. Compared to last year, the average duration of the connection to the electricity distribution network for businesses decreased by as many as ten calendar days and for private customers - by four days. Currently, objects of business customers are connected to the gas distribution network within an average of 45 calendar days and those of private customers - within 47 calendar days compared to 2011, when business customers were connected to electricity networks within an average of 65 days and private customers within 61 days. 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 the upcoming decade, LESTO plans to modernize the distribution network in essence. In order to ensure reliable, safe and
INTERIM REPORT FOR H1 of 2015 Key financial indicators
intelligently managed services, the company plans to invest EUR 1.7 billion into the modernization and renovation of the network by 2025. During 6 months of 2015, LESTO replaced 49 162 electricity meters that no longer met the metrological requirements and installed 10 273 electricity meters for new customers. By investing in the modernisation and automation of electricity meters, LESTO connected 971 electricity meters to the automated data reading system during the six months, thus increasing the number of electricity meters operated by the Company, the data of which are read in remote manner to 26 081. LESTO will modernize its network management system - on 30 June, a contract was signed with the international tender winner IGE Energy Management Services Limited. The project includes the set-up of the infrastructure, arrangement of the premises of dispatch centres, acquisition of the system and the installation thereof. On 3 July 2015, LESTO announced its plans to reorganize its customer service network. In light of changing customer habits, the company expanded computerized site network of its self-service website www.manoelektra.lt and transferred a part of the services to Lietuvos Paštas offices. Upon the increase of the number of customer service points, customer service centres of Biržai, Ukmergė, Mažeikiai, Druskininkai, Tauragė, Jonava, Plungė, Švenčionys, Jurbarkas, Raseiniai, Šalčininkai and Rokiškis will be moved to regional centres as from 1 October. It was preliminary estimated that the company’s operating expenses will decrease by another EUR 312 000 per year due to the reorganization of the customer service network. At the end of the reporting period, on 30 June, there were 600 000 registered on the self-service website www.manoelektra.lt, and the number of its visitors reached 1.933 million (compared to 1.36 million a year ago). During 6 months, information was provided to more than 517 000 customers having called the short LESTO customer service number 1802, inquiries of more than 228 000 customers on different matters were received and resolved, and customer service centres situated in seven largest cities of Lithuania provided services to more than 123 800 customers (compared to 147 600 a year ago).
30
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. Lietuvos Dujos serves about 556 000 household customer objects and about 9 000 non-household customer objects. About 84 000 household customers use gas for heating their houses, while the majority of customers, about 472 000, use gas in stoves for cooking. In H1 of 2015, Lietuvos Dujos invested EUR 2.2 million for connecting new customers, compared to investments of EUR 1.9 million in H1 of 2014. The company built 28.4 km of gas distribution pipelines (22.7 km a year ago) and connected 1 464 new customers to the gas pipelines, which is 40 percent more compared to H1 of 2014 when about one thousand new customers were connected to the gas distribution system. In Half 1 of 2015, EUR 1.6 million was invested in projects of reconstruction of gas systems and gas distribution reliability and safety ensurance projects (compared to EUR 0.9 million in Half 1 of 2014), which is 78 percent more than in Half 1 of last year. 80 gas pipeline closing devices were reconstructed, about 120 remote control and data reading systems in gas pressure regulating equipment and in homes of natural gas customers were installed and about 7.2 thousand gas meters were replaced during the reporting period. On 20 July 2015, in order to increase safety and reliability of natural gas distribution systems, the project of the looping of gas pipelines between Nemenčinė and Kairėnai was started. 2.5 km of gas pipelines will be built from Kairėnai Street to Šilėnai Street during the project. Upon the implementation of the project, uninterrupted distribution of natural gas will be ensured for about 1 000 customers.
Testing of smart metering devices
INTERIM REPORT FOR H1 of 2015 Key financial indicators
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. 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. 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.
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 pays 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 decreased 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. On 16 July 2015, LESTO announced about its preparedness for electricity exchanges with producers, who plan to install small solar power plants and develop production. The company updated its information and electricity metering systems, which will ensure efficient exchanges with customers producing electricity. A service price will be set for the use of electricity network infrastructure; the methodology for the calculation thereof was approved by the National Commission for Energy Control and Prices on 17 July.
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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).
INTERIM REPORT FOR H1 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 H1 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)
Educational background
Participation in the capital of the Company and of the Group, % Workplace, position
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 (30 June 2015) was as follows:
Dr. Virginijus Lepeška Tomas Garasimavičius Aloyzas Vitkauskas (born in 1955) (born in 1978) (born in 1954)
Rasa Noreikienė (born in 1959)
Rokas Baliukovas (born in 1977)
Chairman, Independent member Independent member Independent member Member
Member
Member
Member since 17-12- 2014
Vytautas Magnus University, Baltic Management Institute, Degree in Business Administration (EMBA) Vilnius University, Economist’s Diploma.
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.
–
Chairman of the Board of UAB Ekonovus; Chairman of the Board and Director of UAB Avestis; Chairman of the Board and Managing Director of UAB Šiaulių Plento Grupė; Chairman of the Board of AB Kilimai.
INTERIM REPORT FOR H1 of 2015 Corporate governance
Vilnius University Master’s Degree in Business Administration (MBA) Boston College Bachelor’s degree.
–
Board Member of PE Lietuvos Junior Achievement Partner of United Partners. Director of Grinvest PTE.LTD; Managing parner of Equity United Fondų Valdymas; Development manager of UAB „Kaštonų kalva“.
Vilnius University Doctor of Social Sciences.
–
Chairman of the Board and consultant of UAB Organizacijų Vystymo Centras; Consultant of UAB OVC Mokymai; Advisor of the Chairman of the Board of UAB Vilandra; Advisor to CEO of UAB AL Holdingas; Board Member of the Association Mentor Lietuva; Board Member of PE Paramos Vaikams Centras; Member of the Commission of Candidates to Judicial Selection.
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. –
Government of the Republic of Lithuania, Advisor to the Prime Minister for Energy.
–
Ministry of Finance of the Republic of Lithuania; Vice-Minister.
–
Ministry of Economy of the Republic of Lithuania; Vice-Minister.
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–
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 H1 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.
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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 (30 June 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 Paramos fondas, Member of the Board
–
Lietuvos Energija, UAB, member of the Board, Director of the Organisational Development Service; LESTO AB, member of the Supervisory Board; AB Lietuvos Dujos 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. UAB Verslo aptarnavimo centras Chairman of the Board; UAB „Gotlitas“ CEO.
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, Lietuvos Energija, UAB, member of the Director of the Strategy and Development Service; Board, Director of Production and Lietuvos Energijos Gamyba, AB, member of the Service Department. Supervisory Board; UAB Elektros Tinklo Paslaugos, Chairman of the Board; Energijos Tiekimas, UAB, Chairman of the Board; UAB LITGAS Chairman of the Board; UAB Kauno Energtikos Remontas, Chairman of the Board; UAB Lietuvos Duju Tiekimas member of the Board.
The description of management bodies of the listed companies of the Group is provided on p. 44.
INTERIM REPORT FOR H1 of 2015 Corporate governance
BI Norwegian Business School, Executive Master, Management program; Vilnius University, Master’s Degree in Economics and Management.
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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. As of 30 June 2015, there were 5 5521 employees in the Group. Compared to Q1 of 2015, the number of employees of the Lietuvos Energija Group slightly decreased. 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 H1 of 2015 Corporate governance
As of 30 June 2015, there were 76 employees in the Company. 97.4% of the Company’s employees have higher university education, of whom 7 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
453 1021 190 18 17 259 1 591 239 159 12 16 166 130 5552
1.3
97.4
Number of employees 76 2205
1.3
0
10
20 30 40 50 60 Higher Advanced vocational
70 80 Secondary
90
100
53.9 percent of Group’s employees have higher university education, 27 of them are doctors of science, 27.4 percent have advanced vocational and 18.4 percent - secondary education. Distribution of the Group's employees by educational background, percent 53,9
0
10
20 Higher
30 40 50 60 Advanced vocational
27,4
70 80 Secondary
37
18,4
90 100 Other
The majority of the Group’s employees was male (75.1%), while female accounted for 24.9% of employees. Distribution of employees by gender, percent
The total wage fund of the Company for January - June 2015 was EUR 954 000. The following was the average monthly wage of the Company’s employees in January – June 2015. Category of employees Chief Executive Officer (CEO) Top-level managers Mid-level managers Experts, specialists
24.9
75.1
Male
Average monthly wage, EUR
Female
As of 30 June 2015, there were 5 552 employees in the Group. The total wage fund of the Group in January – June 2015 was EUR 34 645 million. The following was the average monthly wage of the Group employees in January – June 2015. Category of employees
Distribution by gender of executives is also similar: 72.5 % of executives were male and 27.5% - female. Distribution of executives by gender, percent
6267 4425 2891 1760
Average monthly wage, EUR
Chief Executive Officer Top-level managers Mid-level managers Experts, specialists
4289 3913 1952 880
27.5
72.5
Male
INTERIM REPORT FOR H1 of 2015 Corporate governance
Female
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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.
Energija Group understands that the implementation of these goals is mainly dependent on the involvement of its employees and their contribution to the development of the organization and its success. After receiving the results of the initiated survey of the involvement of Group employees, action plans were drawn up and the implementation of the plans was started.
Developing competences In Q2 of 2015, the adaptation process of new Lietuvos Energija Group employees was unified. The process will speed up the integration of new employees into the activities of the Group and will help to quickly master the necessary information about work specifics of the position. The Group has continued its project for the improvement of remuneration system and model for allocating additional benefits, prepared employee development guidelines and developed the concept of recruitment competence centre. It has successfully continued career management and rotation system structuring processes (55 employees rotated between Group companies in H1 of this year, and 100 employees moved up the corporate ladder).
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 H1 of 2015, training courses organised by the Lietuvos Energija Group were attended by 1 919 employees. Individual companies held at the organizational level various general, professional and management competence trainings, such as time team building, making an impact, change management, communication, project management, business process management and others.
In order to continuously improve and increase Group value, Lietuvos 120 100 100 80
60
55
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.
40 20 0 Rotation inside the Group
INTERIM REPORT FOR H1 of 2015 Corporate governance
Career inside the company
39
Share of employees having participated in trainings, percent. 100 90 80 70 60 50 40 30 20 10 0
84.9 76.5
44.7
39.3 31.0 16.9
18.8
26.3
25.0 17.4
15.9
17.0 8.4
6.6 LE
LESTO
LEG
LD
LDT
VAE SPB
LITGAS
ETP
ET
KER
NTV
EMC
TIC
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 H1 of this year, 127 interns were accepted for practice:
140
127
120 100 80 60 40 20
6
0 Number of interns
INTERIM REPORT FOR H1 of 2015 Corporate governance
Number of employed interns
40
Supervisory bodies As of 30 June 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 30 June 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
INTERIM REPORT FOR H1 of 2015 Corporate governance
Participation in the capital of Term of office the Company and the Group, % November 2014 – November 2018
Petras Povilas Čėsna Independent member
As of 30 June 2015, the Supervisory Board functioning in AB LESTO comprised: Participation in the capital of the Company and the Group, %
As of 30 June 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 H1 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 H1 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.
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Management bodies of the Group companies As of 30 June 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 30 June 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 30 June 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
INTERIM REPORT FOR H1 of 2015 Corporate governance
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 29 July 2015, Lietuvos Energija was declared to be one of the major companies in Lithuania best accounting for its operations to the public - it ranked second in corporate accountability study conducted by Transparency International Lithuanian branch. 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 28 May 2015, LITGAS won a Central and Eastern European Energy Award for the best energy independence transaction of the year. Jury of the contest held by BiznesPolska.pl and BizPoland magazine awarded the work of the company in the assurance of energy safety and positive impact on the natural gas market. On 22 April 2015, Lietuvos Energija opened up a joint Applied Research Centre of the Lithuanian Energy (LEARC) together with Kaunas University of
INTERIM REPORT FOR H1 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
Technology (KTU). Partners are solving technological challenges and developing new business ideas in the cooperation platform set up in the Santaka Valley. On 26 June 2015, the Central Calibration and Testing Laboratory of Lietuvos Dujos received a perfect evaluation in the international comparative studies for determining natural gas composition conducted by the Institute for Interlaboratory Studies, Spijkenisse of the Netherlands. 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 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 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 - June 2015, Elektrėnai Complex handed over for utilisation 366 t of liquid fuel ash, 713 t of asbestos containing waste, 341 t of electrical scrap and 796 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 123 t of water clarifier sludge waste.
INTERIM REPORT FOR H1 of 2015 Social responsibility
Rules on the Use and Maintenance of Elektrėnai pond were updated according to requirements of valid legislation and approved with stakeholders. A specialized company removes municipal waste collected in the territory of Kruonis PSPP on the basis of signed agreements. In January-June 2015, 16.6 tonnes of municipal waste were removed from the territory. During JanuaryJune 2015, Kruonis PSPP gave over 3.044 tonnes of hazardous waste (of which oiled water accounted for 3.0 tonnes, fluorescent lamps - 0.034 tonnes and used batteries - 0.01 tonnes) for utilization and sold 12.66 tonnes of ferrous scrap. In January - June 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 first half, about 3.24 of household waste was generated in the territory. Lietuvos Dujos has an implemented and certified environmental management system in accordance with ISO 14001 standard requirements, which is constantly managed and improved. The sertificate, that was granted on 8 of April 2015, will be valid until 7th of April 2018. 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. 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 six months of 2015, gas emissions into the atmosphere at the fault of third persons amounted to 1297 MWh (compared to 373 MWh a year ago). Gas consumption for technologic needs related to gas emissions into the atmosphere totalled 62 742 MWh (61 555 MWh a year ago).
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Support Fund
UNICEF children’s running event “Už kiekvieną vaiką” (English: For Every Single Child).
Pursuant to the Order of the Minister of Finance of the Republic of Lithuania, Lietuvos Energija has set up a support fund, which supports significant initiatives and projects valuable to the country and the society on behalf of the entire Group.
The management of the Support Fund made decisions on the allocation of the national and regional level support, and they were approved by the Board of the Fund.
During the period from 8 to 22 of June, Lietuvos Energija Support Fund invited entities holding the status of support beneficiary and meeting criteria set by the fund to submit applications for support in 2015. This year, the management of the Fund determined the support for children suffering from oncological diseases, sports and culture to be priority areas of support at the national level. The Fund received a total of 90 applications, which were evaluated according to the set criteria. On 17 August 2015, the Fund allocated support for 19 projects and activities; the support amount totalled almost EUR 600 000. At the national level, support was allocated for the project “Šeimos Namučiai” (English: Sweet Family Home) of the charity and support fund Mamų Unija (English: Mothers’ Union), participation of the disabled of Lithuania in Paralympic Games (Lithuanian Sports Federation of People with Disabilities), Š. Marčiulionis basketball academy, which trains basketball talents for cadet, junior and national Lithuanian men’s basketball team, Kaunas men’s basketball club Žalgiris, development of St. Christopher Chamber Orchestra in order to increase access to culture for residents of Lithuania and the event held by the Baltic Institute of Advanced Technology called “Tyrėjų Naktis 2015” (English: Researcher’s Night 2015). At the regional level, Lietuvos Energija Support Fund provided support to the project implemented by Elektrėnai district municipality called “Pamatyk – Sužinok – Dalyvauk” (English: See - Learn - Participate), ice hockey club “Energija”, project for the creation of a monument for M.K. Oginskis and his descendants initiated by Rietavas fellow club, 20th Pažaislis music festival, events held by TEDxVilnius association “TEDxVilnius 2016” and “TEDxKids@Vilnius 2016”, project arranged by the Lithuanian Children and Youth Centre called “Darni Mokykla” (English: Sustainable School) and
INTERIM REPORT FOR H1 of 2015 Social responsibility
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. On 19 May 2015, Lietuvos Energijos Gamyba gave to the Elektrėnai Fire and Rescue Service (EFRS) a new modern fire truck lift-ladder in an official ceremony. The team of EFRS presented with a heavy vehicle Volvo equipped with a ladder able to reach as high as 42 meters will watch after the objects owned by Lietuvos Energijos Gamyba located in the territory of Elektrėnai complex, and, if necessary, will rush to incidents happening within the boundaries of Elektrėnai town. On 19 July, in commemoration of the 56th anniversary when the old Nemunas bed was reimpounded and the Kaunas lagoon overflew and when the currently operating A. Brazauskas HPP and Kruonis PSPP were built, an animated graphics clip was presented, which briefly and clearly told about the largest energy object in the country using renewable sources for electricity production, namely, A. Brazauskas HPP in Kaunas. This is the third animated graphics movie telling about divisions of Lietuvos Energijos Gamyba. 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
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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. Currently, Energijos Tiekimas, the largest Lithuanian capital electricity supplier, ensures a free of charge supply of electricity to the station.
Operation 2020. This project is aimed at promoting responsible behaviour
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 - June 2015, the power plants were visited by almost 1500.
In Half 1, thieves caused losses to all electricity customers for more than EUR 518 000; 13 pre-trial investigations were started for energy thefts, 3 persons suspected of oil thefts from transformers in Trakai district were arrested. Residents themselves helped to resolve two cases.
In order to strengthen ties with Elektrėnai region community, where the main activities of Lietuvos Energijos Gamyba are focused, traditional events “Lietuvos Energijos Gamyba Presents” are held. In Half 1 of 2015, two meetings were arranged: one of them was with players of Kaunas basketball club Žalgiris and Elektrėnai ice hockey club Energija and another one - with the bard Andrius Kulikauskas. A total of eleven cycle meetings were held so far. 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. 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.
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.
INTERIM REPORT FOR H1 of 2015 Social responsibility
with power grid installations, raising awareness of people about safe behaviour with electrical equipment and reducing negative consequences arising from irresponsible or malicious behaviour of residents.
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 Q2 of 2015, a final event was held for the awarding of participants having achieved best results as well as most creative participants selected by the commission.
Not More Than Needed. The project is aimed at developing rational energy use traditions of the society. A little more than a year ago, LESTO in cooperation with Birštonas municipality and the Italian public lighting company Enel Sole started a pilot project for increasing efficiency of LED lighting fixtures in Birštonas “To the Extent Needed for the City”. During the project, 14 conventional street lamps were replaced with LED lighting fixtures. The results of the pilot project lasted for one year, when 14 LED lighting fixtures were installed in one of the streets in Birštonas, were introduced in a press conference held in April. LED lighting fixtures used only 7 601 kWh of electricity, meanwhile 14 old sodium lamps on the other side of the same street used 13 324 kWh electricity during the same period of time.
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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 30 June 2015, the authorised capital of the Company was divided into ordinary registered shares with par value of LTL 1 (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 H1 of 2015 Key information about the Company and the Group
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Information about subsidiaries, branches and representative offices Companies directly or indirectly owned by Lietuvos Energija, UAB at the end of the reporting period (30 June 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
3
Energijos Tiekimas UAB
P. Lukšio g, 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
100
35
Professional development and continuing vocational education and training of energy sector specialists Supply of electricity
Geton Energy SIA
Bezdelingu 12, LV-1048, Ryga
100
28
Supply of electricity
UAB Technologiju ir Inovaciju Centras
A. Juozapavičiaus g. 13, Vilnius
97,8
6 438
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 H1 of 2015 Key information about the Company and the Group
Accommodation services, trade
Provision of ITT and other services
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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 3 July 2015
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 H1 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 30 July 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 30 July 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 30 July 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 H1 of 2015 Agreements with intermediaries of public trading in securities
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Main Group events until the date of the Report The Lietuvos Energija Group started organizing a unified procurement of vehicle rental services for 14 companies of the Group (3 April 2014). 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 - it published a preliminary technical specification for tenderers (13 April 2015.). LESTO announced about its intention to start an open tender procedure for a long-term loan of EUR 70 million. (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). 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). The Environmental Protection Agency approved the environmental impact assessment programme of Vilnius cogeneration power plant (28 April 2015). The court had completely refused to examine the appeal of LESTO with regard to the conclusion of the Public Procurement Office 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 of 7 August 2014 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
INTERIM REPORT FOR H1 of 2015 Main Group events until the date of the Report
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 by way of 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). 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). 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 NCCPE approved the
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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 (VCAC) of 30 April 2015. By its decision, the VCAC rejected the Company’s appeal regarding the dismissal of the Resolution No. O3-757 of the NCCPE of 7 August 2014 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 (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 networks will decrease for the majority of customers (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 assessment report of the Vilnius cogeneration power plant was drawn up (20 May 2015). Klaipėdos Nafta started the search for potential buyers of a third of its stake in LITGAS. Its largest shareholder Lietuvos Energija has a preemptive 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 NCCPE approved the natural gas tariffs of Lietuvos Duju Tiekimas for residents for Half 2 of 2015. The price of gas remained stable (28 May 2015). The extraordinary general meetings of shareholders of Lietuvos Dujos and LESTO approved the reorganization conditions of the companies by way of merger (29 May 2015). Legal statuses of branches of Lietuvos Dujos were abolished establishing regional gas network departments of Vilnius, Kaunas, Klaipėda and the Northern region (having merged Panevėžys and Šiauliai regions). Distribution of territories served by Lietuvos Dujos regions was changed: Klaipėda gas network department additionally
INTERIM REPORT FOR H1 of 2015 Main Group events until the date of the Report
serves customers from Plungė, Telšiai and Rietavas, while Panevėžys and Šiauliai gas network department additionally serves Kėdainiai, Ukmergė and Taujėnai (1 June 2015). Tariffs for connecting new customers to electricity networks changed. The price of connecting to electricity networks decreased by EUR 230 for a statistical consumer (1 June 2015). The NCCPE imposed a penalty of EUR 300 000 on LESTO for violations detected in cost inspection protocol and obligated the company to revised the regulated cost reports for 2011-2013 (6 June 2015). It was published that Lithuania will hold an annual meeting of the European Electricity Association “Eurelectric” (8 June 2015). Lietuvos Energija started the optimization of the use of office premises located in Vilnius. Office space used in Vilnius will decrease by 13 percent (11 June 2015). A project for the preparation of new chemical water preparation plants in Elektrėnai complex was completed (19 June 2015). LESTO signed a contract for the modernization of network management system. “General Electric” company “IGE Energy Management Services Limited” will implement the system together with partners (30 June 2015). The Board of Lietuvos Energija made a decision to merge Elektros Tinklo Paslaugos and Kauno Energetikos Remontas into a single company as from 2016, which will be called Energetikos Paslaugų ir Rangos Organizacija, or EnePRO in short (2 July 2015). LITGAS and Swedbank, AB signed as amendment to credit agreement conditions, which provides for the reduction of the credit line limit from EUR 83.33 million to EUR 70.0 million (2 July 2015). LITGAS and Statoil signed a memorandum of understanding on the establishment of a joint company, which would engage in the development of small-scale liquefied natural gas (LNG) supply activities, in Lithuania (2 July 2015). LESTO announced about the reorganization of its customer service network: customer service centres of Biržai, Ukmergė, Mažeikiai, Druskininkai, Tauragė, Jonava, Plungė, Švenčionys, Jurbarkas, Raseiniai, Šalčininkai and Rokiškis will be moved to regional centres as from 1 October (3 July 2015). Authorized capital of UAB Vilniaus Kogeneracinė Jėgainė was increased to EUR 1 003 000, by issuing 3 450 000 ordinary registered shares. By
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the day of signing of these financial statements, EUR 250 000 was paid for the new issue of shares (4 July 2014). The NCCPE approved the changes in the procedure for setting the gas acquisition price forecasted by LITGAS applicable to energy producers (9 July 2015). Vilnius County Administrative Court accepted LESTO’s claim regarding the NCCPE’s decision to impose a fine on the company for violations of the regulated activity. LESTO disagrees with the decision because the NCCPE failed to prove the violation and imposed the sanction unreasonably (10 July 2015). LESTO updated its information and electricity metering systems and thus prepared for efficient exchanges with electricity producers (16 July 2015). The NCCPE issued a warning to Lietuvos Energijos Gamyba for violation of the transparency of electricity trading committed on 30 June and 1 July of 2014, which was done by human error (15 July 2015). In order to increase security and reliability of natural gas distribution, the project for the looping of gas pipelines between Nemenčinė and Kairėnai is started in Vilnius (30 July 2015). The Supervisory Board of Lietuvos Energija approved the candidates nominated to take the posts of CEOs of Group companies undergoing reorganization as from 1 January 2016 (28 July 2015). Transparency International declared Lietuvos Energija to be one of the companies best accounting to the public in Lithuania (29 July 2015). UAB Lietuvos Duju Tiekimas, AB Lietuvos Dujos and PAO Gazprom signed a tripartite agreement whereby UAB Lietuvos Duju Tiekimas
Lietuvos Energija, UAB Chief Executive Officer 25 August 2015
INTERIM REPORT FOR H1 of 2015 Main Group events until the date of the Report
formally took over all rights and obligations related to the natural gas supply agreement signed by PAO Gazprom and AB Lietuvos Dujos in 1999 (3 August 2015). Lietuvos Energija planning to invest in wind energy invited owners of wind power plants and their parks to consider a possibility to sell their power plants and present their offers (5 August 2015). Lietuvos Energija announced its plans to move over to a single integrated business management system (14 August 2015). Lietuvos Energija Support Fund announced its intention to allocate support for 19 projects and activities distributing almost EUR 600 000 in support thereto. The Support Fund received a total of 90 applications, which were valuated according to the set criteria and priorities (17 August 2015). Lietuvos Energija signed a contract on the purchase-sale of shares with Kauno Energetikos Remontas in accordance with which it acquired 100 percent of shares of Gotlitas. The price of acquisition is EUR 61 000 (19 August 2015). The NCCPE approved the price for the use of electricity networks to customers producing electricity for 2015 (20 August 2015).
Dr. Dalius Misiūnas
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