CONSOLIDATED INTERIM REPORT OF THE COMPANY AND THE GROUP 1 January 2015 – 30 September 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
34
Social responsibility
46
Key information about the Company and the Group
51
INTERIM REPORT FOR H1 OF 2015 Content
2
Key indicators of the Lietuvos Energija Group Change (+/-)
Revenue Costs of purchase of electricity, gas, fuel and related services Operating expenses (1) Operating expenses (normalised) EBITDA (2) EBITDA margin (3) EBITDA (last 12 months) Net profit Net profit (normalised) Total assets Equity Financial debts Net financial debts (4) Return on equity (ROE) (5) Equity capital level (6) Net financial debt / EBITDA of 12 months Net financial debt / Equity ratio
million EUR million EUR million EUR million EUR million EUR % million EUR million EUR million EUR million EUR million EUR million EUR million EUR % % times %
9 months of 2015
9 months of 2014
761.9 (511.6) (114.3) (79.3) 166.2 21.8 225.7 63.9 89.5
637.7 (373.9) (106.3) (91.2) 157.4 24.7 195.2 106.1 82.1
2015-09-30
2014-12-31
2 311.5 1 351.4 400.1 241.7 6.3 58.5 1.07 17.9
2 369.2 1 308.9 391.6 175.9 4.5 55.2 0.81 13.4
million EUR
%
124.1 137.7 8.0 -11.9 8.8
19.4 36.8 7.5 -13.1 5.6
30.5 -42.2 7.4
15.6 -39.7 9.1
-57.7 42.5 8.5 65.8
-2.4 3.2 2.2 37.4
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 Key indicators of the Lietuvos Energija Group
3
Revenue, million EUR 700
Net profit, million EUR
762
800
120 620
620
106.1
638 100
600 500
80
400
60
300
63.9 36.3
36.9
40
200
20
100
0
0 9 months 2012
9 months 2013
9 months 2014
9 months 2012
9 months 2015
9 months 2013
Net profit
65.0%
64.3% 58.5%
55.2% 2968
70%
250
60%
200
2311
40% 30% 20% 10% 0%
9 months 2013 Assets
INTERIM REPORT FOR H1 OF 2015 Key indicators of the Lietuvos Energija Group
9 months 2014
9 months 2015
Equity, %
25.2% 155.9
50% 2817 2369
9 months 2012
9 months 2014
9 months 2015
Normalised net profit
EBITDA, million EUR, and EBITDA margin, %
Assets, million EUR, and equity capital level, % 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0
89.5
82.1
30%
25.7%
24.7%
159.4
21.8%
157.4
166.2
150
25% 20% 15%
100
10%
50
5%
0
0% 9 months 2012
9 months 2013 EBITDA
9 months 2014
9 months 2015
EBITDA margin, % 4
Message from the Chairman of the Board
INTERIM REPORT FOR H1 OF 2015 Key indicators of the Lietuvos Energija Group
5
Message from the Chairman of the Board Dear Customers, Partners, Employees and Shareholders, Due to its improved performance efficiency Lietuvos Energija Group is able to offer in 2016 more advantageous prices – for the next year the Company plans lower electricity tariffs, and grid access rates have been lowered since June. During the three quarters of 2015, the State-managed group engaged in the improvement of value chain earned the highest ever comparative net profit of EUR 89.5 million, up by 9.1 % from the same time last year. The Group achieves better performance results even generating lower revenues. Due to the responsible cost management within three quarters, Lietuvos Energija Group reduced its regular operating costs by as much as 13 % as compared to January-September 2014 (from EUR 91.2 million to EUR 79.3 million). Within that period the Company centralised its accounting, public procurement, human resources administration operations, completed the optimisation of its immovable property and vehicle fleet, achieved higher efficiency of the corporate IT and other servicing functions. A more efficient infrastructure, accelerated processes and the use of internal resources facilitate increasing of the created value and our contribution to the State budget, and thus enabling us to decrease the prices of the services related to gas and electricity for customers. We have been improving our services and expanding their scope, which saves times and money of our customers and increases their satisfaction. Moreover, we shall not stop there – this year we have completed the value chain improvement programme, therefore we will meet the coming year even
INTERIM REPORT FOR H1 OF 2015 Message from the Chairman of the Board
more flexible, efficient and largely customer-needs and value enhancement oriented. During the third quarter of the year the Company laid down the foundations for the changes in the Group effective as of 1 January 2016: in addition the approved terms for the merger of the electricity distributor LESTO and the natural gas distributor Lietuvos dujos into a joint distribution network entity Energijos skirstymo operatorius (ESO), a principle of ‘single window' customer servicing by entities of the Group has been introduced, the entire customer servicing will be covered by a single trademark Gilė, future plans include a merger of Lietuvos dujų tiekimas and LITGAS. Other improvements concern contractors, electricity production and trade companies. We have estimated that the improvements launched as of 2016 will in the course of the next five years generate benefit for consumers amounting to EUR 64 million, we will also be strengthening the Group and the enhancing the value it creates. Now a more efficient and dynamic group will be able to provide better quality services, create new services and contribute to creating a business-friendly environment in Lithuania. The performance results of Lietuvos energija will allow, as of the beginning of the next year, to ensure the conditions that are even more advantageous for customers. The power grid connection rate for new customers was reduced this June. The electricity distribution tariff has been decreasing for the past four years in turn, estimated to further decrease this year for another 4 %. We will achieve the best results working together and with great sense of responsibility. Dr. Dalius Misiūnas Chairman of the Board and Chief Executive Officer Lietuvos Energija, UAB
6
About the Group and the Company
INTERIM REPORT FOR H1 OF 2015 Message from the Chairman of the Board
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 5 470 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 8.5 thousand km of distribution gas pipelines, supplies gas to more than 570 000 consumers, implements development projects of strategic value and pursues the goals of the National Energy Strategy. During nine months of 2015, 1.83 TWh of electricity were generated, 6.29 TWh of electricity were transmitted to consumers and 441 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 nine months of 2015 amounted to EUR 761.9 million and EBITDA of the Group was EUR 166.2 million. Net profit of nine months totalled EUR 63.9 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. 52 hereof. The following is the structure of the Group as of 27 November 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 About the Group and the Company
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
The value chain improvement project is approaching completion On 28 July 2015 AB Lietuvos energija completed the implementation of its value chain improvement programme; the purpose of the programme was to clearly identify the individual activities of the Group and allocate them among the entities in a way ensuring that the Group operates in a more efficient manner. In Q 3 the Company published the terms and conditions for the reorganisation of its entities, and nominated the managers of each company. The estimated benefit of the reorganisation for customers and shareholders amounts to EUR 64 million. (More – on p. 27).
Service prices for 2016 30 October 2015. The National Commission for Energy Control and Prices (hereainafter – the NCC) approved the ceiling prices for energy distribution and public supply services for 2016. A little earlier, on 19 October 2015, the NCC approved the natural gas distribution prices. The VIAP budget was approved last autumn. The consolidated efforts of the Group ensure the most advantageous services for its customers. (More – on p 31).
Support allocated by the Lietuvos Energija Support Fund 18 August 2015. The Lietuvos Energija Support Fund this year granted support to 19 projects and activities which were in total allocated nearly EUR 600,000. Overall, the Support Fund received 90 applications that were assessed according to a pre-defined set of criteria. (More – on p. 49).
INTERIM REPORT FOR H1 OF 2015 Most significant events of the reporting period
Completed environmental impact assessment of the Vilnius cogeneration power plant 15 October 2015. Endorsed by the Government AB Lietuvos energija and UAB Fortum Heat Lietuva concluded a contract that defined the terms for the obligations of the partners, and the conditions for the joint investment into the construction of a new waste cogeneration power plant in Kaunas. On 24 November 2015 the European Commission authorised a concentration regarding UAB Kauno kogeneracinė jėgainė (Kaunas cogeneration power plant) to be implemented by the partners. (More – on p. 24).
Allocated and disbursed dividends for H1 2015 24 September 2015. The entities under the management of AB Lietuvos energija allocated dividends to its shareholders for H1 2015. For H 1 2015, AB Lietuvos energija allocated EUR 29.83 million in dividends; the dividends were paid to the budget. (More – on p. 34).
Unified integrated business management system is planned 14 August 2015. With a view to increasing the efficiency of the Company's performance, its flexibility and creating better conditions for the development, the Lietuvos energija Group entities plan to implement a uniform integrated business management system. (More – on p. 29).
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 during nine months of 2015. The amount of electricity distributed by the Group via medium and low-voltage networks in January - September increased by 1.7 percent (0.11 TWh) compared to nine months of 2014 and totalled 6.29 TWh in three quarters of 2015, the growth in the amount of electricity consumed came as a result of increased consumption of electricity in the industrial sector. 1.7 TWh more of electricity was distributed to this group of customers in nine months of 2015, or +2.9 percent more than in the same period of 2014 (1.75 TWh). During 9 months of 2015, the public and guarantee supply of electricity of the Lietuvos Energija Group was 2.31 TWh, which is -2.8 percent or -0.07
INTERIM REPORT FOR H1 OF 2015 Key operating indicators
Change (+/-) +/%
9 months of 2015
9 months of 2014
TWh TWh TWh TWh
1.828 6.29 2.31 3.97
1.464 6.18 2.38 3.80
0.365 0.11 -0.07 0.17
24.9 1.7 -2.8 4.6
min. units %
45.8 0.62 6.05
53.1 0.68 6.62
-7.30 -0.06 -0.57
-13.7 -9.2 -8.6
billion m3 thousand MWh billion m3 thousand MWh
0.441 4.591 0.865 8.994
0.499 5.190 0.595 6.188
-0.058 -0.598 0.270 2.806
-11.5 -11.5 45.3 45.3
min. units
0.2121 0.0025
0.1400 0.0021
0.0721 0.0004
31.1 19.1
TWh less than a year ago. The supply of electricity to independent consumers totalled 3.97 TWh (+4.6 percent, + 0.17 TWh). In January - September 2015, the Lietuvos Energija Group generated 1.828 TWh of electricity (+24.9 percent more compared to the result of January September of 2014). Compared to the previous reporting period, in January - September of 2015 electricity generation volumes in Kaunas Algirdas Brazauskas Hydroelectric Power Plant decreased by -16.2 percent (from 0.253 TWh to 0.212 TWh during January - September of 2015). The level of generation of electricity in Kruonis Pumped Storage Plant increased in January - September of 2015 compared to January - September of 2014 0.487 TWh of electricity was produced and sold, which is +0.045 TWh, or +10.2 percent more than in nine months of 2014 (0.442 TWh). Electricity 13
generation in combined cycle gas turbine of Elektrėnai Complex was started in Q2 of 2015, during nine months it amounted to 0.918 TWh (+0.309 TWh, or +50.8 percent more compared to nine months of 2014, when generation amounted to 0.609 TWh). The Elektrėnai Complex units are used for electricity generation in order to ensure reliable operation of the electricity system, when there is a shortage of electricity in the country due to the repair or limited permeability of other sources of electricity generation or the price thereof on the market increases. Such arrangement of electricity production in Elektrėnai allows ensuring efficient use of PIMS funds. Electricity supply quality indicators of the Group improved in January September of 2015. Technological costs in the distribution network decreased from 6.62 percent in January - September of 2014 to 6.05 percent during nine months of 2015. The average duration of unplanned interruptions in electricity transmission excluding the causes of force majeure (SAIDI) improved and was 45.8 minutes (compared to 53.1 minutes a year ago), while the indicator illustrating the frequency of unplanned interruptions per consumer (SAIFI) accounted for 0.62 times in January September of 2015 compared to 0.68 times in January – September of 2014. With decreasing consumption of natural gas, the volume of gas distributed Sold and distributed volumes of gas, thousand MWh
6188 8994
6478 Distributed gas
5190 4591
0 2,000 4,000 6,000 8,000 10,000 9 months 2013 9 months 2014 9 months 2015
INTERIM REPORT FOR H1 OF 2015 Key operating indicators
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 8 994 thousand MWh (about 0.865 billion cubic meters) in Q1-Q3 of 2015, which was +45.3 percent, or + 2.803 TWh more than the volume of gas sold by Lietuvos Dujos during nine months of 2014 (6.188 TWh or 0.595 billion cubic meters of gas). The average duration of unplanned interruptions in transportation of gas (SAIDI), excluding the causes of force majeure (SAIDI) remained low in January - September of 2015 and totalled 0.21 min. (compared to 0.14 min. in January - September of 2014), while the average number of interruptions in gas transportation (SAIFI) was 0.0025 times (compared to 0.0021 times in January - September of 2014). The slight growth of these indicators was caused by a short-term disurption of natural gas supply to several apartment buildings. Generation, distribution and sales of electricity, TWh Electricity sales in free market
7670 Sold gas
by the Group also decreased. The volume of gas distributed by the Group in January - September of 2015 totalled 4.591 TWh (about 0.441 billion cubic meters), i.e. -11.5 percent, or -0.598 TWh less compared to the same period a year ago, when about 5.19 TWh of gas was distributed (0.499 billion m3).
Public and guarantee supply
0.81 0.89 1.00 2.27 2.38 2.31
Electricity distributed to customers via medium and low voltage grids
Generated electricity
0 9 months 2015
6.07 6.18 6.29
1.55 1.46 1.83 2 4 9 months 2014 14
6 9 months 2013
8
Key financial indicators Revenue During nine months of 2015, the revenue of Lietuvos Energija Group increased by +19.4 percent, or EUR 124.1 million, compared to the same period of last year, and totalled EUR 761.9 million. During the reporting period, the major share of revenue was generated from the electricity transmission service (30 percent of the total revenue, or EUR 226.5 million), sales of the generated electricity as well as supply and trade of electricity (30 percent of the total revenue, or EUR 226.7 million) and distribution and sales of gas (25 percent of the total revenue, or EUR 188.3 million).
Compared to the revenue of January-September of 2014, during nine months 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 +19.3 percent (+ EUR 36.6 million, from EUR 190.1 million to EUR 226.7 million). Revenue from the electricity transmission service decreased upon the reduction of the transmission price by – 16.2 percent (- EUR 43.8 million), from EUR 270.3 million in January-September 2014 to EUR 226.5 million in January-September 2015. A share of these both groups of revenue significantly decreased in the structure of revenue of the Group and accounted for 60 percent (compared to 72 percent in January September 2014). Structure of the revenue of the Group in January - September 2015
Revenue of the Group, million EUR 800 700
+19,4 %
761.9
637.7
600
188.9 25%
226.5 30%
9 months 2015
500
EUR 761.9
400 300
226.7 30%
200 100 0 2014 m. I-III ketv .
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
2015 m. I-III ketv.
40.9 5%
56.7 8%
Distribution of electricity Balancing, regulation and power reserve PIMS of LEG Heat energy Connection of new customers Other revenue Sales of produced electricity, electricity trade and supply Revenue from distribution and sales of gas 15
Excluding income related to gas transmission and distribution activity included in the Group’s statement of comprehensive revenue for nine months of 2015, the revenue of Lietuvos Energija Group decreased by EUR 14.1 million, or -2.94percent 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. Dynamics of revenue of the Group during 9 months of 2015, compared to nine months of 2014 by sectors, million EUR
2.7 (1.6)
(3.0)
(4.8)
Balancing, regulation and power reserve
761.9
(0.3)
PIMS of LEG
700.0
36.6
Heat energy
138.2
800.0
Connection of new customers
900.0
637.8
(43.8)
600.0 500.0
400.0 300.0 200.0 100.0
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
Revenue of nine months of 2015
Distribution of electricity
Other revenue
Sales of produced electricity, electricity trade and supply
Revenue from distribution and sales of gas
Revenue of 9 months of 2014
0.0
16
Assets and equity During 9 months of 2015, the Group’s assets decreased by -2.4 percent, or EUR -57.7 million, and totalled EUR 2 311.5 million as at 30 September 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 9 months of 2015, the level of inventories of the Group fell by EUR 8 million, or 15.1 percent, while trade receivables decreased by EUR 51.2 million, or -33.7%.
Equity of the Lietuvos Energija Group increased by +2.1 percent, or + EUR 42.5 million, during 9 months of 2015 and was EUR 1 351.4 million as at 30 September 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. These factors led to the increase of the equity level, which was equal to 58.5 percent as at 30 September 2015 (compared to 55.2 percent as at 31 December 2014).
Operating and purchasing expenses During 9 months of 2015, operating expenses of the Group amounted to EUR 114,3 million and, compared to 9 months of 2014, increased by 7.5 percent (+EUR 8 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. Excluding these expenses, compared to 9 months of 2014, in January – September of 2015, normalised operating expenses of the Group decreased by -13.1%, or -11.9 million, from EUR 91.2 million to EUR 79.3 million. Purchasing expenses of electricity, gas, fuel and other services of the Group, million EUR 600 511.6
400 300
373.9 41.0 67.5
120
237.5 -86 %
9.7
0.4 %
200 100
Operating expenses of the Group, millionEUR Purchases of gas for trade
500
265.47
264.37
0 9 months 2014 INTERIM REPORT FOR H1 OF 2015 Key financial indicators
9 months 2015
During the reporting period, expenses of the Group for the purchase of electricity, gas, fuel and related services, compared to 9 months of 2014, increased by +36.8 percent, or + EUR 137.7 million. The growth was mostly predetermined by inclusion of costs related to the trade of gas, which totalled EUR 237.5 million in January - September 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 9 months of 2014, during 9 months of 2015, the purchase of gas and fuel oil for energy production decreased by 85.6% from EUR 67.5 million to EUR 9.7 million, while the purchase of electricity and related services remained stable and were -0.4% lower.
Purchases of gas and fuel Purchases of electricity and related expenses
100
+7.5 % 106.3 9.5 5.6
26.0
9.1
80
91.2
Operating expenses related to the take-over over gas transmission and distribucion activity, new projects Assets revaluation, sales, dismantrling and related expenses
-13.1 %
60 40
114.3
79.3 Normalised operating expenses
20 0 9 months 2014
9 months 2015 17
EBITDA and net profit
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
9 months 2015
18
166.2
EBITDA of 9 months of 2015
9 months 2014
Electricity production
+5.6%
Other
166.2
157.4
Electricity supply and distribution
180 160 140 120 100 80 60 40 20 0
Dynamics of EBITDA of the Group by the nature of activities, million EUR 200 19.8 180 157.4 (1,3) 160 (2,9) (10,5) 140 120 100 80 60 40 20 0
Gas supply and distribution
EBITDA of the Group, million EUR
EBITDA profitability margin of the reporting period of the Group accounted for 21.8 percent (compared to EBITDA profitability margin of 24.7 percent during 9 months 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 - September of 2015.
EBITDA of 9 months of 2014
During 9 months of 2015, the Group’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR 166.2 million, which is +5.6 percent, or + EUR 8.8 million more than EBIDTA of 9 months of 2014, which was EUR 157.4 million (EBITDA of 9 months of 2015 does not include the negative effect of temporary nature of the discount of the price of gas in the amount of EUR 21.97 million applied to household and nonhousehold customers in January - September of 2015 and a negative effect of EUR 8.2 million of cost allocation 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 19.8 million) of gas transmission and distribution activity.
In January - September of 2015, the Group earned EUR 63.9 million in net profit, which is - EUR 42.2 million, or -39.7% less than in January September of 2014 (EUR 95.4 million). The profit result for January– September 2014 was largely affected by the positive discount for gas price granted to AB Lietuvos dujos by Gazprom (EUR 68.4 million adjusted for corporate income tax).
Sources of EBITDA of the Group during 9 months of 2015, %.
10%
8%
AB Lietuvos Dujos LESTO, AB
The amount of net profit during 9 months 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 -18.7 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 9 months 1 of 2015. In January-September of 2014, net profit results were significantly impacted by a one-time positive result of EUR 59.5 million related to the acquisition of control of AB Lietuvos Dujos. Compared to 9 months of 2014, during 9 months of 2015, net result was positively affected by decreased depreciation and amortization costs upon the accounting of revaluation of AB LESTO assets (EUR + 35.4 million).
22%
9 months of 2015.
EUR 166.2 million
Lietuvos energijos gamyba, AB Others
60%
In light of these factors, comparative net profit during 9 months of 2015 (EUR 89,5 million) was 9.1% or EUR 7.4 million greater than net profit in Januory - September of 2014 (EUR 82.1 million). Normalised net profit of the Group, million EUR
Net profit, million EUR
120
100 106.1
100
90
89.5
81.8
+9.1%
80
-39.7%
70
80
63.9
60 50
60
40
40
30 20
20
10
0
0 9 months 2014
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
9 months 2015
9 months 2014
9 months 2015
19
Investments
80.0 33% 9 mnths 2015
(6.9)
(3,7)
(2,2)
3.3
1.2
60.0 40.0
EUR 98,7 million
20.0
4% Development of the electricity distribution network ITT (IT, telecommuniacations and management systems) Heat generation capacities Construction of gas systems Maintenance of the electricity distribution network Electricity generation capacities Reconstruction of gas systems Other investments
0.0
Reconstruction of gas systems
8%
Construction of gas systems
3%
Investmens during 9 months of 2014
39%
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
3.7
4.1
98.7
Investmens during 9 months of 2015
87.5
11.6
Maintenance of the electricity distribution network
6%
Heat generation capacities
3%
100.0
Electricity generation capacities
4%
Other investments
Structure of investments of the Group during 9 months 2015, %
Investments of the Group during 9 months of 2015 by sectors, million EUR 120.0
ITT (IT, telecommuniacations and management systems)
Compared to January- September of 2014, investments into the maintenance of the electricity distribution network increased the most in
January-September of 2015 (+ EUR 11.6 million); also investments increased in construction of gas systems (+ EUR 4.6 million) and reconstruction of gas systems (+ EUR 3.7 million) in other sectors also gradually increased or remained similar to those made during 9 months of 2014, except lower investments in development of the electricity distribution network (- EUR 3.7 million) and lower investments in heat generation capacities (- EUR 6.9 million).
Development of the electricity distribution network
The Group’s investments totalled EUR 98.7 million in January - September of 2015, i.e. made up +12.8 percent, or + EUR 11.2 million more than in January - September of 2014 (EUR 87.5 million). During 9 months of 2015, most investments (72%) were allocated for the development and maintenance of the electricity distribution network.
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Financial debts 250
57.3
8,5
241,7
Borrowings, net, at 30 June 2015
During 9 months of 2015, the level of financial debts of the Group increased insignificantly by 2.2 percent, or EUR 8.5 million, and accounted for EUR 400.1 million at the end of September, compared to EUR 391.6 million at the end of 2014. Upon the payment of dividends to shareholders and the investments of the Group, cash and shortterm investments of the Group totalled EUR 153.7 million as at 30 September 2015, which is -EUR 57.3 million, or 27.2% less than at the end of 2014.
Group's net borrowings, EUR million
Borrowings
As of 30 September 2015, net financial debts of the Group totalled EUR 241.7 million and, compared to the level of net financial debts at the end of 2014, increased by + EUR 65.8 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 and by the payment of dividends to shareholders In January – September of 2015.
200
175.9 150
100
50
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
Cash and short term investments
Borrowings, net, at 31 Dec 2014
0
21
The ratio of net financial debts of the Group and EBITDA of the past 12 months of the Group slightly increased (from 0.81 times at the end of 2014 to 1.07 times at the end of September 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 17.9 percent at the end of September 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. Net financial debts of the Group/equity ratio, %
20%
17.9%
18%
Net financial debts of the Group/EBITDA of 12 months, in times
13.4%
1.07
1.1 1.0 0.9
16% 14%
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.
0.81
0.8 0.7
12%
0.6
10%
0.5
8%
0.4
6%
0.3
4%
0.2
2%
0.1
0% 2014 12 31
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
2015 09 30
0.0 2014 12 31
2015 09 30
22
Review of activities of the Company and the Group
INTERIM REPORT FOR H1 OF 2015 Key financial indicators
23
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 September 2015) as well as after the reporting period – until the date of the Report.
Diversification of activities Diversification of activities of the Group is one of the main preconditions for increasing the value of the Group. By 2020, the Group is planning to invest LTL 2–3 billion in various areas: heat sector by constructing new or upgrading the existing cogeneration power plants, supply and sales of natural gas utilising the potential of the LNG terminal, renewable energy sources, and to participate in the implementation of the nuclear power plant project after the adoption of respective decisions.
Cogeneration power plant projects in Vilnius and Kaunas The Lietuvos Energija Group implements the projects of modern waste and biofuel-fired high-efficiency cogeneration power plants construction in Vilnius and Kaunas. New power plants 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. Currently, Lietuvos Energija is implementing the project in Vilnius independently, however, it has planned for a possibility to attract partners in other stages of the implementation of the project.
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
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. On 12 October 2015, the potential contractors selected by way of competition were delivered the technical specifications according to which the potential contractors are drawing up and will submit the final binding tenders. 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 3 September 2015 an important stage in the Vilnius cogeneration power plant project was completed – the Environmental Protection Agency authorised the activities under the project. On 26 October 2015, the Board of AB Lietuvos energija approved the new Articles of Association of UAB Vilniaus kogeneracinė jėgainė, and approved its Board with Mindaugas Keizeris, Nerijus Rasburskis and Valdas Lukoševičius as its elected members. Saulius Barauskas appointed as General Manager of UAB Vilniaus kogeneracinė elektrinė. 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.
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After the approval by the Government on 28 September, on 15 October 2015 AB Lietuvos energija and UAB Fortum Heat Lietuva concluded a contract that defined the terms for the obligations of the partners, and the conditions for the joint investment into the construction of a new waste cogeneration power plant in Kaunas. 24 November 2015. The European Commission authorised the partners to implement concentration regarding UAB Kauno kogeneracinė jėgainė which officially recorded the agreement between the partners to develop a joint waste power plant project in Kaunas. According to the shareholder agreement, AB Lietuvos energija will own 51 % of the shares of the Kaunas cogeneration power plant, thus ensuring the State control over the project as provided for in the Resolution of the Government. UAB Forum Heat Lietuva will manage 49 % of the power plant's shareholding, of which 5 % of the shares may be transferred to the Kaunas municipality and/or an entity operating within the district heating supply system and controlled by the Kaunas municipality. The company to be established will have the Board consisting of three members of which two will be appointed by AB Lietuvos energija, in addition to one independent member of the Board. The Company's authorised capital will amount to EUR 24-40 million depending on the contribution of the EU support. The total investment in the project will amount to EUR 147 million. The project provides for a construction of a new high capacity power plant using waste as fuel, with the electric power reaching 24 MW, and the heat production power of 70 MW. Such capacities will ensure an efficient utilisation of about 200,000 tons of waste generated in the region, and a production of about 500 GWh heat and about 170 GWh of electricity.
Changes in the LNG supply costs sharing model 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
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
operations of the alternative source of import of natural gas - the LNG terminal, and allow importing gas from the global LNG market. 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. On 2 November 2015, LITGAS agreed with the leading producer of fertilizers AB Achema in Jonava concerning the sale and supply of 100 million cubic metres of gas. LITGAS will be supplying Achema with gas acquired from UAB Lietuvos dujų tiekimas. On 17 November 2015, the parliament approved the amendments to the Law on the LNG terminal; the amendments provided for a new arrangement for sharing the LNG supply and the assigned supply costs for all consumers of the natural gas system depending on their maximum declared demands. The new model for the maintaining the LNG terminal provides that the NCC should establish an average market price for natural gas. That will be the price for which LITGAS would sell gas to heat and electricity producers, and the difference between the acquisition and the sale price, and other assigned supply-related costs would be recovered from the capacity charge collected from all consumers of gas.
Assessesment of possibility to take over the third cogeneration power plant On 16 October 2015, a taking over by the Municipality of Vilnius of the third cogeneration power plant (TEC) was announced. The transaction will make it possible to establish the value of the TEC corresponding to market conditions, and assess the possibilities for the further use of the TEC. Untill recently, neither the Municipality of Vilnius, nor the State-managed group of entities Lietuvos energija has had a possibility to assess the condition of the TEC or determine its market price corresponding to market conditions. The
25
Group maintains cooperation ties with the Municipality and seeks possibilities to ensure that the TEC generates maximum possible added value for electricity and heat consumers. Prior to taking over an asset of that volume, it is necessary to carry out its diligent technical, financial and economic analysis; the value of the TEC will have to be determined by competent experts, asset valuers.
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. The construction of the biofuel power plant at the Elektrėnai unit was completed on 6 May 2015 recorded by signing the Construction completion statement. The construction of the biofuel power plant in Elektrėnai started in February 2014. The power plant is equipped with the most advanced facilities reducing environmental pollution. For the biofuel combustion, the power plant will employ fluidised bed technology thus reducing the emission of pollutants into the atmosphere. This technology is best for incineration of biomass. The power plant will use felling waste and other timber not usable in other economic sectors as fuel. On 22 October 2015, AB Lietuvos energijos gamyba issued the certificate on the take-over of the new biofuel power plant in Elektrėnai to the general construction contractor. The take-over certificate means that the operation of the facility is completely taken over by the production personnel of AB Lietuvos energijos gamyba.
the first stage of the investment the Group intends to acquire wind power plants of a capacity at least 50 MW, and their farms and thus diversify their power production portfolio. AB Lietuvos energija is mostly targeting projects of power plants of no less than 1 MW in capacity; such power plants must be already assigned a fixed electricity purchase tariff, or have been recognised as the winners at promotion quota allocation auctions.
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. In September the conclusion of the approving authority was received regarding the possible impact of the Kruonis wind power plant farm upon NATURA 2000 territory which also contained an instruction to carry out a full scale environmental impact assessment. In this respect, AB Lietuvos energija is drawing up an environmental impact assessment programme, and finalising a feasibility study on the assessment of wind resources and potential power production volumes.
Introduced Baltic Highway data transmission network
Projected investment in wind energy
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.
On 5 August 2015, AB Lietuvos energija announced its intention to invest in wind power farms, and invited the owners of wind power plants and their farms to discuss the possibility to sell the plants and submit their quotes. In
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
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
26
also be able to keep their equipment in the most modern Tier-III data centre Data Inn in Lithuania.
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 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 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. INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
Implementation of value chain improvement programme Lietuvos Energija is finishing to implement 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 purpose of the value chain improvement programme is to merge related activities and centralise the customer service operations. By 2020, the total estimated benefit for customers and shareholders of the company will amount to EUR 64 million, and the customers will be granted additional benefits. The structure of the Group will be reorganised by the end of this year, and the new joint entities will start their operations as of 1 January 2016. 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, network and customer service, at the same time conducting the project for the operations of contracting companies. The largest benefit of the changes are expected for the customers. The improvements introduced with respect to the customer service activities of LESTO, AB Lietuvos dujos and AB Lietuvos dujĹł tiekimas will offer to their customers a simple and convenient 'single window' servicing arrangement, bring about new services, standardise the servicing and the processes, increase flexibility, expand the range of remotely provided services, increase the speed of the service provision and accelerate the procedures of connection to the engineering networks. Customers of the companies are already served at joint customer service centres. 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.
27
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 Energijos Skirstymo Operatorius (ESO). On 31 of August, the Boards of LESTO and Lietuvos Dujos approved the terms of reorganisation, the terms were announced publicly. Essential changes in these companies will include the reorganization of the structure of governance. 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. Joint customer servicing. Starting with 2016, LESTO, AB Lietuvos dujų tiekimas, AB Lietuvos dujos and AB Energijos tiekimas plan to arrange for joint customer servicing at joint service centres and in the cyberspace. The joint customer servicing arrangement will accumulate the best practices and through the ‘single window' facility will enable the entities to provide the key services in the ways most convenient to the customers – online, by telephone or at a customer service centre. The customer service area will be covered by a single trademark – Gilė. The servicing will be made even more convenient due to a possibility to pay by a single transfer for two services – electricity and natural gas. Other entities, such as water or heat suppliers, also other entities providing utility services will be invited to become part of the joint customer servicing arrangement. All customer servicing specialists will be concentrated in a single entity of the Group – Verslo aptarnavimo centras (Business Servicing Centre). This will reduce operational costs, increase flexibility and enable creating additional benefits for customers. The Business Servicing Centre will also administer the payments, manage accounting and handle indebtedness.
current CEO Mantas Mikalajūnas. The name LITGAS will be used as a trademark in international activities of Lietuvos Duju Tiekimas. Enhanced trade activities and improved generation activity. Lietuvos Energijos Gamyba will mainly focus on energy production operations, and the plan is to unbundle its trade activities, thus seeking to increase flexibility in the market creating new products based on customers’ needs. On 12 October 2015, AB Lietuvos energijos gamyba sold the commercial wholesale electricity trade operations to UAB Energijos tiekimas. The maximum value of the transaction may reach EUR 21.1 million, of which EUR 13.1 million will be invested by end of March 2014. Depending on the performance of the sold operations another EUR 8 million (EUR 2 million per year) may be paid by 2019. UAB Energijos tiekimas will take over the wholesale trade in electricity operations as of 1 January 2016. 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. Since 1 January 2016 Martynas Pargaliausikas will become the CEO of EnePRO.
Centralization and improvement of efficiency of processes 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. On 2 of September the terms of reorganisation were announced. After the merger, the company will be called Lietuvos Duju Tiekimas, the nominated head of the company is
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
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.
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Centralization of the processes of public procurement, accounting and administration of employment relations is aimed at standardizing them, ensuring greater transparency and efficiency as well as faster implementation thereof. Such concentration model of servicing processes is in line with best global practices. Administration of the employment relations of the Group was started through UAB Verslo Aptarnavimo Centras in the beginning of 2015. 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. The Group has also centralized the management of vehicles - it started organizing a unified procurement of vehicle rental services for 14 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
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
were abandoned. The purchased services will include vehicle rental, supervision, insurance, repair works, technical maintenance thereof and other services.
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.
Optimised service of gas customers On 30 September 2015, UAB Lietuvos dujų tiekimas reorganised its customer servicing operations. The administration of services to entities and residents, and debt management was transferred from 5 regional services centres to the divisions in Vilnius, Kaunas and Panevėžys. The Company also moved the divisions in Kėdainiai and Telšiai that were rarely visited by customers to the divisions located in the cities. Because of such reorganisations the number of employees at customer service centres decreased from 95 to 50. Preparatory arrangements are continuing related to the transfer of the customer servicing operations to the Business Service Centre.
29
Since 1 June, 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.
Ensuring the quality of services Investments in electricity network and services The Group’s company LESTO servicing more than 1.64 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 9 months of 2015, LESTO connected 20 477 new customers, which is 7.3 percent more than during the respective period of 2014 when 19 078 new customers were connected. The total permissible capacity of newly connected consumer objects amounted to 288 710 kW, which is 26.9 percent more than during the same period of 2014 when the total permissible capacity was 227 436 kW. On 27 October 2015, the World Bank published its business regulation ranking 'Doing Business 2016', in which in terms of the 'getting electricity' indicator Lithuania from the 66th place progressed to the 54th. The indicator was significantly improved to the accelration in the procedures for getting electricity to new customers, namely, a reduction in the number of connection procedures, within one year the connection process was
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
shortened by one week. According to the methodology used by the World Bank, the duration of getting electricity to businesses this year was reduced by 42 calendar days to 95 days. 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. On 16 October 2015, LESTO completed the network modernisation project in 96 collective garden communities. The largest number of modernised collective garden communities were in Vilnius and Šiauliai regions, i.e. 22 communities in each, 16 communities in Kaunas region and 12 communities in Klaipėda region. The total value of the project is EUR 6.5 million, of which EUR 2.6 million represented a contribution from the EU funds. During the upcoming decade, LESTO plans to modernize the distribution network in essence. In order to ensure reliable, safe and intelligently managed services, the company plans to invest EUR 1.7 billion into the modernization and renovation of the network by 2025. During 9 months of 2015, LESTO replaced 69 515 electricity meters that no longer met the metrological requirements and installed 16 202 electricity meters for new customers. By investing in the modernisation and automation of electricity meters, LESTO connected 1 283 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 26 393.
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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. 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. Since 1 October, 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 were moved to regional centres. 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 September, there were 628 000 registered users on the self-service website www.manoelektra.lt, and the number of its visitors reached 2.92 million (compared to 2.06 million a year ago). During 9 months, information was provided to more than 745 000 customers having called the short LESTO customer service number 1802, inquiries of more than 351 000 customers on different matters were received and resolved, and customer service centres situated in seven largest cities of Lithuania provided services to more than 185 800 customers (compared to 216 100 a year ago). 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.
New gas consumers are connected Lietuvos Dujos serves about 559 000 household customer objects and about 9 000 non-household customer objects. About 88 000 household customers use gas for heating their houses, while the majority of customers, about 471 000, use gas in stoves for cooking.
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
During 9 months of 2015, Lietuvos Dujos invested EUR 4.1 million for connecting new customers, compared to investments of EUR 3.9 million in January - September of 2014. The company built 55.3 km of gas distribution pipelines (53.5 km a year ago) and connected 2 453 new customers to the gas pipelines, which is 4 percent more compared to 9 months of 2014 when about 2 347 new customers were connected to the gas distribution system. One of the largest investment in new gas system construction projects was the gasification of the Tauragė region municipality territory launched in 2015. All the works related to the Tauragė municipality gasification are scheduled to be completed by the end of 2016. A medium pressure distribution gas pipeline construction project at Pramonės Ave. was completed within nine months of 2015. The gas pipeline was built for a business customer Dirbtinis pluoštas. The investment under the project accounted for nearly EUR 87,000. A gas pipeline of 0.9 m was built in order to connect the new customer to the network. Further, a nearly 2 km long gas pipeline was built as part of the project for the improvement of infrastructure services for the residents in a new private house area in Noreikiškės settlement, Kaunas region. During 9 months of 2015, EUR 4.2 million was invested in projects of reconstruction of gas systems and gas distribution reliability and safety ensurance projects (compared to EUR 3.2 million during 9 months of 2014). 140 gas pipeline closing devices were reconstructed, about 169 remote control and data reading systems in gas pressure regulating equipment and in homes of natural gas customers were installed and about 8.9 thousand gas meters were replaced during the reporting period. On 7 October 2015, AB Lietuvos dujos concluded agreements with the companies Mano Būstas, Elektrovoltas and Inlinen making them responsible for checking gas meters of the least risky customers of AB Lietuvos dujos using gas only for cooking. For the purpose of increasing its performance efficiency, decreasing costs and seeking to focus on the principal activities creating the largest value for the shareholder and the customers the Company outsourced part of its non-principal operating functions to third party suppliers.
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Testing of smart metering devices On 7 May 2015, LESTO published an international tender for the procurement of smart meters, according to which the installation of 3 000 smart meters is planned. They would allow for a more rational use of electricity and saving of household expenses. 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.
Cheaper services to customers On 30 October 2015, the NCC approved the ceiling prices for energy distribution and public supply services for 2016. In 2016, the ceiling price for the electricity distribution by medium voltage network will be 1 euro cent/kWh, i.e. by 0.178 euro cent lower than in 2015. In 2016, the ceiling price for the electricity distribution by low voltage network will be 1.766 euro cent/kWh, or 0.216 euro cent up from 2015. This rate is increasing due to a higher investment needs for the modernisation of the low voltage networks. The total weighted natural gas distribution tariff will be slightly lower than in 2015. Such results were achieved due to an enhanced efficiency in the performance and the consistently implemented investment projects designed to increase the reliability of the networks and reduce the allocations for their maintenance and repair. On 19 October 2015, the NCC approved the natural gas distribution prices for 2016. Starting with 2016, the ceiling price for natural gas distribution is higher by 6 %, the distribution prices for most of the large private, corporate or public sector customers will be changing only marginally. Within natural
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
gas distribution prices of Groups 1-5 gas distribution prices are decreasing to 2.4 %, or increasing to 0.8 %. In view of the projected developments in the amounts of the gas to be distributed, the number of customers and other parameters, more significant changes concerned Group 6 and Group 7 prices. The new corporate consumers within Group 6 increased the volumes of gas distributed within the Group, therefore the price within this group is down by 13.8 %. In the meantime in Group 7 the number of customers and the volumes of the distributed gas have decreased, therefore the gas distribution price within this price group is increasing by one fifth. 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. Some decrease in the electricity electricity tariffs was achieved due to a lower budget of the public interest obligations (VIAP). On 26 October 2015, the NCC approved the VIAP budget for 2016 of EUR 139,981 million (11.5 % down from 2015). As the VIAP quotes were abolished, the electricity production at cogeneration plants and the Elektrėnai power plant of AB Lietuvos energijos gamyba will no longer be supported, while in 2015 the support for the electricity production in Elektrėnai amounted to EUR 50.59 million. Within this amount EUR 11.578 million were allocated as support to secure the energy system reserve service provided by AB Lietuvos energijos gamyba.
Preparations for electricity exchange completed 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
32
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. On 20 August 2015, the NCC approved the prices for the use of power networks of the clients producing electricity for 2015. The price will apply to the customers who have installed small solar power plants and will be developing production using the existing electricity network infrastructure. The NCC established the price for the use of the medium voltage network at 1.59 euro cent/kWh, and 3.04 euro cent/kWh for the use of the low voltage network. This price will be charged for the use of the electricity network infrastructure – power lines and cables, substations and transformer stations. The prices approved by the NCC for 2015 apply as of 1 October. The new electricity accounting principles also became effective as of 1 October 2015.
Ensured high customer service quality The satisfaction surveys conducted in autumn 2015 among the customers of the Lietuvos Energija Groupcompanies LESTO, AB Lietuvos dujos and UAB Lietuvos dujų tiekimas yielded the results exceeding the average indicators among the European and other world utility service providers. The customer satisfaction index among private customers of LESTO increased by 4 points since last year and stood at 80, 2 and 76 points, respectively, for corporate customers. The respective figures for private customers of AB Lietuvos dujos are 80 points for private customers and 77 points for corporate customers. The customer satisfaction index for UAB Lietuvos dujų tiekimas reached 81 points. The results exceed the average customer satisfaction indices of European and other global utility service providers; the European average index stands at 70, and 73 points globally. This high customer satisfaction index was mostly achieved to the customer service improvement initiatives launched by the Lietuvos Energija Group– joint customer service centres, centralised activities, more efficient processes, faster and higher quality services.
the number of complaints decreased by 7 percentage points, the professionalism of the servicing personnel was rated highly positively, promptly provided assistance, convenient servicing both online (www.manoelektra.lt), or at a short number 1802. The most important indicators for the purpose of assessment of the quality in the area of natural gas supply are the ability to meet the needs and the experience of irregularities. The customers noted that their service and servicing needs were fully met, and the experience related to irregularities was rare. The areas best assessed by private and corporate customers of Lietuvos dujos were the simplicity in paying for the services, politeness of the employees, timely fulfilled obligations, clear and relevant information provides by the employees of the company, as well as at the website www.lietuvosdujos.lt.
Return for shareholders AB Lietuvos energija allocated EUR 29.83 million in dividends for H 1 2015; the dividends were paid to the budget. The entities under the management of AB Lietuvos energija allocated dividends to its shareholders for H1 2015: LESTO – EUR 21.742 million, or EUR 0.036 per share; Lietuvos energijos gamyba – EUR 2.677 million, or EUR 0.0042 per share, and AB Lietuvos dujos – EUR 10.348 million, or EUR 0.0356 per share. 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.
During 2015, LESTO improved all principal customer satisfaction indicators. The experience of private customers of LESTO exceeded the expectations, as
INTERIM REPORT FOR H1 OF 2015 Review of activities of the Company and the Group
33
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. On 19 October 2015, the Management Coordination Centre recognised Lietuvos Energija Group as the best managed State capital entity. The customers scored specifically high the entity’s transparency and management indicators. Compared to 2013, the Group improved the good management index by 8 %, and scored 8.44 points out of 10 possible.
34
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 September 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; Member of the Board of VĮ Registrų Centras; Member of the Board of EUROCHAMBERS.
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.
35
–
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.
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.).
Audito komitetas
The following committees have been operating in Lietuvos Energija:
Number of shares held in the Company and the Group
Committee member
Workplace
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;
Rasa Noreikienė Chair of the Committee
-
Ministry of Economy of the Republic of Lithuania, Vice-Minister
Danielius Merkinas Independent member
-
UAB Nordnet, Finance Director
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;
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
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
INTERIM REPORT FOR H1 OF 2015 Corporate governance
Irena Petruškevičienė Independent member
European Commission Member of the Audit Development Committee
36
the Corporate Governance Code of companies listed on NASDAQ 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; perform other functions attributed to the competence of the Committee by decision of the Supervisory Board.
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 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
37
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
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.
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;
assess the terms and conditions of agreements of the Company and the Group with members of management bodies of the Company and the Group;
INTERIM REPORT FOR H1 OF 2015 Corporate governance
38
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 September 2015) was as follows:
Darius Kašauskas (born in 1972)
Mindaugas Keizeris (born in 1980)
Dalia Andrulionienė (born in 1971)
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.
Vilnius University Master’s Degree in International Business Vilnius University, Bachelor’s Degree in Business Administration and Management.
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; Council member of Lithuanian Cofederation of Industrialists.
–
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;
–
Lietuvos Energija, UAB, member of the Board, Director of the Finance and Treasury Service; LESTO AB, Chairman of the Supervisory Board; AB Lietuvos Dujos, Chairman of the Supervisory Board; NT Valdos UAB, Chairman of the Board; UAB Kauno Energetikos Remontas, Chairman of the Board; UAB Verslo aptarnavimo centras Chairman of the Board; UAB„Gotlitas (now UAB Elektroninių mokėjimų agentūra) CEO (till 15-10-2015); Board Member of UAB Elektroniniu mokejimu agentura (since 6-11-2015).
–
–
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; UAB Energetikos paslaugų ir rangos organizacija, Member of the Board (since 26-10-2015); UAB Kauno kogeneracinė jegaine, Member of the Board (since 06-11-2015).
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.
39
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 September 2015, there were 5 471 1 employees in the Group. Compared to Q2 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 Technologijų ir inovacijų centras UAB Duomenų 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 dujų tiekimas“ UAB „Vilniaus kogeneracinė jėgainė“ Total
INTERIM REPORT FOR H1 OF 2015 Corporate governance
As of 30 September 2015, there were 75 employees in the Company. 97.3% 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 employees by educational background, percent
Number of employees
1.3 1.3
97.3
75 2185 448 989 187 18 16 243 1 589 239 164 14 15 169 108 11 5 471
0
10
20
30 40 50 60 70 Higher Advanced vocational
80 90 Secondary
100
57.2 percent of Group’s employees have higher university education, 31 of them are doctors of science, 26.2 percent have advanced vocational and 14.3 percent - secondary education. Distribution of the Group's employees by educational background, percent 57.2
0
10
20 Higher
26.2
14.3
30 40 50 60 70 80 90 Advanced vocational Secondary Other
40
100
The majority of the Group’s employees was male (73.7%), while female accounted for 26.3% of employees. Distribution of employees by gender, percent
26.3
The total wage fund of the Company for January - September 2015 was EUR 1 492 000. The following was the average monthly wage of the Company’s employees in January – September 2015, before taxes. Average monthly wage, Category of employees EUR Chief Executive Officer (CEO) 6 642 Top-level managers 4 736 Mid-level managers 2 992 Experts, specialists 1 854
73.7 As of 30 September 2015, there were 5 471 employees in the Group. The total wage fund of the Group in January – September 2015 was EUR 53 033 million. Male
Female
Distribution by gender of executives is also similar: 73.6 % of executives were male and 26.4% - female. Distribution of executives by gender, percent
The following was the average monthly wage of the Group employees in January – September 2015, before taxes. Average monthly wage, Category of employees EUR Chief Executive Officer (CEO) 4 397 Top-level managers 3 917 Mid-level managers 1 945 Experts, specialists 912
26.4
73.6
Male
INTERIM REPORT FOR H1 OF 2015 Corporate governance
Female
41
Developing organization and its culture After the reorganization of the governance of the Lietuvos Energija Group, the focus is placed on coordinated organisational development, management of human resources, creation of new organisational culture, efficiency of the organisation of activities, and building and maintaining of competences in 2015. In Q 3 2015, the Group drew up a strategic concept for a long-term education programme, and developed the concept implementation process. The long-term education programme is designed to facilitate the development of management concepts and a formation of a unified identity. The Group continues implementing the project on the improvement of the remuneration and additional benefits allocation model, and developing the concept of the selection competences centre. It has successfully continued career management and rotation system structuring processes (12 employees rotated between Group companies in Q3 of this year, and 53 employees moved up the corporate ladder). In order to continuously improve and increase Group value, Lietuvos 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 60
receiving the results of the initiated survey of the involvement of Group employees, action plans are implemented and the preparation for a new survey has begun.
Developing competences „Lietuvos energijos“ grupėje nuosekliai rūpinamasi darbuotojų kvalifikacijos kėlimu bei užtikrinama, kad darbuotojai turėtų visus įstatymų numatytus darbui privalomus atestatus, tobulintų darbui reikalingas kompetencijas. Iki 2015 m. trečio ketvirčio pabaigos, „Lietuvos energijos” grupės mokymuose buvo sudalyvavę 1779 darbuotojai. Individual companies held at the organizational level various general, professional and management competence trainings, such as time team building, change management, communication, business process management and others. In Q 3, Lietuvos Energija Group opened its in-house Academy and initiated a selection of internal lecturers. The training package at the Academy included as many as 15 subjects, including project management, client servicing, change management and other topics relevant for the entire Group of entities. The lecturers of the Academy will be delivering courses on managerial skills development, a course for new members of the Group, and will develop relevant competences of the current employees.
53
50 40 30 20
12
10 0 Rotation inside the Group
INTERIM REPORT FOR H1 OF 2015 Corporate governance
Career inside the company
42
Share of employees having participated in trainings, percent. 100 93.9 90 80 70 60 50 35.3
40 26.6
30
14.7
20 10
32.0
27.8 13.3
14.3
12.5
9.5
4.0
8.2
13.4 5.6
0 LE
LESTO
LEG
LD
LDT
VAE SPB
LITGAS
ETP
ET
KER
NTV
TIC
DLC
VAC
Internship opportunities The Group companies create conditions for students of higher education institutions and vocational schools to apply their theoretical knowledge and acquire practical skills. During Q3 of this year, 22 interns were accepted for practice:
25 22 20
15
10 4
5
0 Number of interns
INTERIM REPORT FOR H1 OF 2015 Corporate governance
Number of employed interns
43
Supervisory bodies in listed Group companies As of 30 September 2015, the Supervisory Board functioning in Lietuvos Energijos Gamyba, AB comprised:
Name, surname
Dr. Dalius Misiūnas Chairman
Participation in the capital of the Company and the Group, %
-
Term of office
August 2013 – August 2017
Workplace
Lietuvos Energija, UAB, Chairman of the Board and CEO
Pranas Vilkas Independent member
-
August 2013 – August 2017
-
Mindaugas Keizeris
-
20-11-2014 August 2017
Lietuvos Energija, UAB, Strategy and Development Director
As of 30 September 2015, the Supervisory Board of AB Lietuvos Dujos formed since 29 October 2014 comprised:
Name, surname Darius Kašauskas Chairman
Participation in the capital Term of office of the Company and -the Group, % November 2014 – November 2018
Petras Povilas Čėsna Independent member
November 2014 – November 2018
Ilona Daugėlaitė Member
November 2014 – November 2018
-
As of 30 September 2015, the Supervisory Board functioning in AB LESTO comprised:
Name, surname Darius Kašauskas Chairman
Participation in the capital of Term of office the Company and the Group, % July 2013 – July 2017
Workplace Lietuvos Energija, UAB, Director of the Finance and Treasury Service
Petras Povilas Čėsna Independent member
September 2013 – July 2017
LITEXPO Chairman of the Board
Ilona Daugėlaitė Member
July 2013 – July 2017
Lietuvos Energija, UAB, Director of the Organisational Development Service
-
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44
Workplace Lietuvos Energija, UAB, Director of the Finance and Treasury Service LITEXPO Chairman of the Board Lietuvos Energija, UAB, Director of the Organisational Development Service
Management bodies of listed companies As of 30 September 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
-
September 2013- AB LESTO, Director of Finance and September 2017 Administration Department
Sergejus Ignatjevas Member
-
September 2013- AB LESTO, Director of Customer September 2017 Service Division
Virgilijus Žukauskas Member
-
September 2013- AB LESTO, Director of Electricity September 2017 Network Division
Dalia Andrulionienė Member till 02-032015
-
September 2013- AB LESTO, Director of Organizational March 2015 Development and Communication Service
Head: Aidas Ignatavičius, CEO of AB LESTO
As of 30 September 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 September 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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Social responsibility and environmental protection
INTERIM REPORT FOR H1 OF 2015 Corporate governance
46
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:
Relation with employees and society
On 14 September 2015, a new publication 'LE knyga' (LE Book) was introduced to all employees of the AB Lietuvos energija Group. The 'LE knyga' is an employee guide which should become a desk book for all new, experienced and the incumbent employees. The book represents a summary of the key principles of corporate governance at AB Lietuvos energija, its corporate culture, objectives and values. The book is a quick reference source for the most important information required in daily activities. 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.
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
The Sustainable school ('Darni mokykla') project initiated by LESTO in early October 2015 was selected at the Swedish business award ceremony as the Social responsibility initiative of the Year. The purpose of the project is to promote the education institutions communities to use energy resources sustainably and to protect the environment. 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. 47
Environmental protection
and released to Obenys plot for clarification 123 t of sludge from water clarification.
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.
Rules on the Use and Maintenance of Elektrėnai pond were updated according to requirements of valid legislation and approved with stakeholders.
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. 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. Within the framework of a partly EU-funded project LESTO is replacing the old overhead power lines by new cables in locations where the wiring of the former overhead lines was thin and have dangerously approached the surrounding greenery, the obsolete infrastructure would cause frequent malfunctioning instances. 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–September 2015 the waste managing entities at Elektrėnai were delivered for utilisation 384 t of liquid fuel ash, 16.35 t of activated carbon waste, 10.57 t of ion exchange resins, 1,168 t of construction and insulation materials containing asbestos, 4.5 t of plastic and rubber wastes, 3 t of paper and cardboard waste, 2 t of timber waste; metal purchasers were delivered 766 t of electro-technical waste, 2,327 t of ferrous metal scrap, 47 t of copper scrap and 20 t of aluminium scrap. The Chemical unit generated
INTERIM REPORT FOR H1 OF 2015 Social responsibility
A specialized company removes municipal waste collected in the territory of Kruonis PSPP on the basis of signed agreements. In January-September 2015, 24.96 tonnes of municipal waste were removed from the territory. During January-September 2015, Kruonis PSPP gave over 6.6 tonnes of hazardous waste (of which oiled water accounted for 6.0 tonnes, fluorescent lamps - 0.04 tonnes and electronic scrap - 0.11 tonnes) and 0,3 tonnes of non-hazardous waste for utilization, and sold 12.66 tonnes of ferrous scrap. In January - September 2015, Kaunas Algirdas Brazauskas Hydroelectric Power Plant handed over for utilisation 0.158 t of hazardous waste, 0.54 t of non-hazardous 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 9 months, about 4.86 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 9 months of 2015, gas emissions into the atmosphere at the fault of third persons amounted to 1 624 MWh (compared to 572 MWh a year ago). Gas consumption for technologic needs related to gas emissions into the atmosphere totalled 97 858 MWh (93 350 MWh a year ago).
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Support Fund 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. 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
UNICEF children’s running event “Už kiekvieną vaiką” (English: For Every Single Child). 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.
Social initiatives On 17 October 2015, the entities of the Group joined the 'International corruption perception week'. The initiative is a continuation of the Group's employees in the area of perception of corruption. On the same week, the Group also joined the World Prematurity Day, then the conventional lighting of the building at Žvejų St. 14 was changed to bright purple. On 25 September 2015, the entities of the Lietuvos Energija Group were active participants at an annual Friday event 'Investigator's Night'. The objects offered attracted a great deal of attention of the participants and organisers of the event. Six tours were arranged at one of the most modern regional data centres Data Inn. The tour 'The Light Guard' organised by LESTO was attended by 24 participants, among them a class of teenagers from the Vilnius Engineering Lyceum (future engineers). Two tours were arranged at the practical training site of AB Lietuvos dujos in Panevėžys, the tours were attended by 44 participants who enjoyed the most interesting guided tours and picturesque simulations. 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. 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. During 9 months of 2015,
49
three meetings were arranged: one of them was with players of Kaunas basketball club Žalgiris and Elektrėnai ice hockey club Energija, with the bard Andrius Kulikauskas and another one – with Kaunas University of Technology scientists and inventors. A total of 12 cycle meetings were held so far. 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 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. 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 - September 2015, the power plants were visited by almost 2 000 visitors. LESTO continues a tender for education projects for neighbourhoods and communities; all the events scheduled actually were held within the nine months period, – residents of the communities attended interactive lectures, quizzes, contents and other activities and acquired some valuable knowledge on safe operation with electrical equipment.
INTERIM REPORT FOR H1 OF 2015 Social responsibility
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.
Operation 2020. This project is aimed at promoting responsible behaviour 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. Considering that the greatest support in fighting thefts of electricity is the civil consciousness of the citizens, LESTO continued its cooperation with the Association of Managers of Local Authorities of Lithuania – in September the representatives of the Company met with 38 Managers of local authorities of Jurbarkas, Šilalė, Pagėgiai ir Tauragė regions. The agenda of the meetings included presentations of the current situation, and discussions on the prevention of thefts from and accidents at transformation stations.
Not More Than Needed. The project is aimed at developing rational energy use traditions of the society. In order to encourage the residents to contribute to saving energy resources, in September 2015 LESTO has for the second time organised a cycle of events on rational and safe electricity consumption for 15 libraries throughout the country. At such events, specialists of LESTO explained to the participants on the ways for a convenient analysis and evaluation of the household electricity costs, and briefed the participants on the habits that in the estimation of the experts mostly affect the electricity bills.
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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 September 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
51
Information about subsidiaries, branches and representative offices Companies directly or indirectly owned by Lietuvos Energija, UAB at the end of the reporting period (30 September 2015): Company
Head office address of the company
Effective shareholding, 31-09-2015 (%)
Authorised capital (EUR thousand) 31-09-2015
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
Aguonų g. 26, 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
100
85 550
Disposal of real estate, other related activities and provision of services
UAB Duomenų logistikos centras
A. Juozapavičiaus g. 13, Vilnius
79,6
4 028
ITT maintenance services
UAB „ELEKTROS TINKLO PASLAUGOS“
Motorų g. 2, Vilnius
100
2 853
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
UAB Elektroninių mokėjimų agentūra
Chemijos g. 17, Kaunas
100
350
Payment collection services are estimated
Energijos tiekimas UAB
P. Lukšio g. 1, Vilnius
100
218
Supply of electricity and natural gas
VšĮ Energetikų 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 Technologijų ir inovacijų centras
A. Juozapavičiaus g. 13, Vilnius
97,8
6 438
UAB „VAE SPB“
Smolensko g. 5, Vilnius
100
293
Advisory business and other management activities
UAB Verslo aptarnavimo centras
P. Lukšio g. 5 b, Vilnius
97,0
580
UAB „Lietuvos dujų tiekimas“
Žvejų g. 14, Vilnius
100
870
Services of organising and carrying out public procurement and administration of personnel Gas supply
Lietuvos energijos paramos fondas
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
253
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
the name till October 2015 was UAB „Gotlitas“
INTERIM REPORT FOR H1 OF 2015 Key information about the Company and the Group
Provision of ITT and other services
52
Information about securities of the Group Shares of LESTO, Lietuvos Energijos Gamyba and Lietuvos Dujos are listed on the Main List of NASDAQ OMX Vilnius. The trade in shares of the companies was started on 17 January 2011, 1 September 2011 and 13 April,
respectively. The shares of the companies are traded solely on the Nasdaq Vilnius stock exchange.
Structure of the authorised capital and shareholders having held more than 5 percent of the Issuer’s authorised capital according to the data of 30 September 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
53
Agreements with intermediaries of public trading in securities „Lietuvos energija“ nėra sudariusi sutarčių su vertybinių popierių viešosios apyvartos tarpininkais, nes jos vertybiniais popieriais biržoje neprekiaujama.
As of 30 September 2015, the company had issued 290 685 740 ordinary registered shares with par value of EUR 0.29 per share. Issue ISIN code LT0000116220.
Group companies: Lietuvos Energijos Gamyba, AB On 1 September 2011, shares of Lietuvos Energijos Gamyba were included in the Main List of NASDAQ OMX Vilnius Stock Exchange.
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.
As of 30 September 2015, the company had issued 635 083 615 ordinary registered shares with par value of EUR 0.29 per share.
AB LESTO
Issue ISIN code LT0000128571.
Since 17 January 2011, ordinary registered shares of LESTO have been listed on the Main List of NASDAQ OMX Vilnius Stock Exchange.
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.
As of 30 September 2015, the company had issued 603 944 593 ordinary registered shares with par value of EUR 0.29 per share. Issue ISIN code LT0000128449.
AB Lietuvos Dujos
The authorised manager of securities accounts of LESTO is Swedbank, AB.
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 general meetings of shareholders of the Group's companies LESTO, AB Lietuvos energijos gamyba and AB Lietuvos dujos appointed PricewaterhouseCoopers as the auditor of the financial statements of the entities for 2015 and the consolidated financial statements. (01 July 2015) A joint customer service centre of LESTO and UAB Lietuvos dujų tiekimas was opened in Marijampolė at Sporto St. 11. (01 July 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 were 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 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). UAB UAB Duomenų logistikos centras offered a new micro colocation service. (14 July 2015) LESTO updated its information and electricity metering systems and thus prepared for efficient exchanges with electricity producers (16 July 2015). The NCC issued a warning to AB Lietuvos energijos gamyba for an infringement of the transparency in trading in electricity that were committed due to a human error. (15 July 2015) With a view to increasing the safety and reliability of the natural gas distribution a project on the integration of gas pipelines between Nemenčinė and Kairėnai was launched in Vilnius (20 July 2015). The Supervisory Board of AB Lietuvos energija approved the candidates to the positions of the General Managers of the reorganised entities of the Group since 1 January 2016. Nominated managers of the reorganised entities within the Group: ESO – Aidas Ignatavičius, UAB Lietuvos dujų tiekimas – Mantas Mikalajūnas, UAB Energijos tiekimas – Vidmantas Salietis, Business Service Centre – Eglė Šimė (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 formally took over all rights and obligations related to the natural gas
INTERIM REPORT FOR H1 OF 2015 Main Group events until the date of the Report
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supply agreement signed by PAO Gazprom and AB Lietuvos Dujos in 1999 (3 August 2015).
First issue of 'LE knyga', a publication for all employees of the AB Lietuvos energija Group. (14 September 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).
Launch of electricity exchange with the customers who have installed small solar power plants and intend to develop electricity production using the existing electricity network infrastructure. (01 October 2015)
Lietuvos Energija announced its plans to move over to a single integrated business management system (14 August 2015).
AB Lietuvos energijos gamyba sold the commercial wholesale electricity trade operations to UAB Energijos tiekimas. The maximum value of the transaction might reach EUR 21.1 million. (12 October 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). Publication of the terms for the reorganisation of the companies LESTO and AB Lietuvos dujos. Martynas Pargaliauskas nominated the manager of the joint UAB Elektros tinklo paslaugos and UAB Kauno energetikos remontas since 1 January 2016. (01 September 2015) UAB Lietuvos dujų tiekimas and LITGAS announced the terms for the reorganisation of the two companies. (02 September 2015) Environmental protection Agency authorised the operations of the Vilnius cogeneration power plant. (03 September 2015) In response to the invitation of Robertas Dargis, the President of the Confederation of Lithuanian Industrialists (CLI) Dalius Misiūnas agreed to be appointed as the Vice-President of the CLI. The Presidium of the CLI approved the nomination of Dalius Misiūnas at its meeting of 8 September. (08 September 2015)
INTERIM REPORT FOR H1 OF 2015 Main Group events until the date of the Report
AB Lietuvos energija and UAB Fortum Heat Lietuva concluded an agreement regarding investment in UAB Kauno kogeneracinė jėgainė (Kaunas cogeneration power plant). (15 October 2010) The Board of AB Lietuvos energija decided to change the name of UAB Gotlitas into UAB Elektroninių mokėjimų agentūra; the company's authorised capital was increased by EUR 700,000. (26 October 2010) The NCC approved the VIAP budget of the electricity sector for 2016 – total EUR 139,981. Within this amount EUR 11.578 million were allocated as support to secure the energy system reserve service provided by AB Lietuvos energijos gamyba. (26 October 2015) AB Lietuvos energijos gamyba issued the certificate on the take-over of the new biofuel power plant in Elektrėnai to the general construction contractor; the operation of the facility was fully handed over to the production personnel. (22 October 2015) The NCC established the ceiling prices for the reserve capacity securing service provided by AB Lietuvos energijos gamyba for 2016. (22 October 2015) AB Lietuvos energijos gamyba circulated a material event notice regarding the Resolution of the Government of the Republic of Lithuania 'Regarding the buy-out of shares' obligating the Company to buy out the shares of minority shareholders of the expired legal entity AB Lietuvos elektrinė, and establishing the price of the shares to be redeemed in the mandatory manner. (26 October 2015) The NCC established the ceiling prices of the electricity distribution service and the public supply service in 2016 (30 October 2015). 56
The NCC established the ceiling price for the distribution of natural gas for 2016 – EUR 7.92/MWh. (29 October 2015) The NCC established the ceiling of the public price of electricity for household consumers. (06 November 2015) AB Lietuvos dujos and AB Amber Grid entered into a share purchasesale agreement according to which AB Lietuvos dujos transferred its 34 % share in the authorised capital in UAB GET Baltic to AB Amber Grid. The shares were sold at the market price established by an independent asset valuer – EUR 130,832. (06 November 2015) AB Lietuvos energija was ranked the fifth among Lithuanian companies in the TOP 500 list of the largest Central European companies published by an audit and consultation company Deloitte. The management of Deloitte awarded a memorial gift of the project CE TOP 500. (12 November 2015)
heat production price of AB Lietuvos energijos gamyba, and AB Lietuvos elektrinė', and the annulment of Resolution No. O3-934 of 11 December 2014 'Regarding the unilateral establishment of the heat production price by AB Lietuvos energijos gamyba and AB Lietuvos elektrinė'. (17 November 2015) LESTO and Pohjola Bank Plc. signed a contract regarding the granting of a long-term loan of EUR 70 million. (19 November 2015) The European Commission authorised the State-managed group AB Lietuvos energija and UAB Fortum Heat Lietuva to implement concentration regarding UAB Kauno kogeneracinė jėgainė. (25 November 2015)
The Vilnius Regional Administrative Court rejected the appeals of AB Lietuvos energijos gamyba regarding Resolution No. O3-875 of 30 October 2014 of the NCC 'On the recalculation of the component of the
Lietuvos Energija, UAB Chief Executive Officer 27 November 2015
INTERIM REPORT FOR H1 OF 2015 Main Group events until the date of the Report
Dr. Dalius Misiūnas
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