CONSOLIDATED INTERIM REPORT OF THE COMPANY AND THE GROUP 1 January 2016 – 31 March 2016
1 INTERIM REPORT FOR Q1 OF 2016 | Content
Content Consolidated interim report of the company and the group Message from the Chairman of the Board
5
About the Group and the Company
6
Most significant events
10
Analysis of financial and operating results of the Group
11
Review of activities of the Company and the Group
20
Corporate responsibility
28
Corporate governance
31
Key information about the Company and the Group
39
2 INTERIM REPORT FOR Q1 OF 2016 | Content
Key indicators of the Lietuvos Energija Group 3 months of 2016
3 months of 2015
Change (+/-)
Revenue
million EUR
335.1
321.8
million EUR 13.3
% 4.1%
Costs of purchase of electricity, gas, fuel and related services
million EUR
-226.3
-225.3
-1.0
-0.4%
Operating expenses (1)
million EUR
-34.1
-37.0
+2.9
8.4%
EBITDA (2)
million EUR
78.1
70.6
7.5
10.6%
EBITDA margin (3)
%
23.3%
21.9%
Net profit
million EUR
35.3
31.0
4.3
13.8%
Net profit (normalised)
million EUR
38.3
40.4
-2.1
-5.4%
2016-03-31
2015-12-31
Change,(+/-)
Total assets
million EUR
2,347.8
2,339.2
Million EUR 8.6
% 0.4%
Equity
million EUR
1,339.2
1,304.5
34.8
2.7%
Financial debts
million EUR
449.3
420.7
28.6
6.8%
Net financial debts (4)
million EUR
307.8
251.8
56.1
22.3%
Return on equity (ROE) (5)
%
11.6%
12.2%
Equity capital level (6)
%
57.0%
55.8%
Net financial debt / EBITDA of 12 months
times
1.35
1.14
Net financial debt / Equity ratio
%
23.0%
19.3%
1) Operating expenses, except for the cost of purchase of electricity and related services, depreciation and amortization as well as impairment of value and write-off expenses of long-term tangible assets; 2) Pre-tax profit (loss) + financial expenses - financial revenue – received dividends + costs of depreciation and amortisation + value impairment costs + write-offs of tangible fixed assets + impact of the discount of the price of natural gas; 3) EBITDA / revenue; 4) Financial debts – cash and cash equivalents – short-term investments and time deposits – share of other fixed financial assets comprising investments in debt securities; 5) Net profit (loss), restated annual expression / average equity capital during the period; 6) Equity capital at the end of period / total assets at the end of period;
3 INTERIM REPORT FOR Q1 OF 2016 | Key indicators of the Lietuvos Energija Group
Revenue of Lietuvos energija Group increased by 13.3 million EUR due to growth in income from electricity transmission.
Net profit of Lietuvos energija Group remained stable and exceeded the return requirements set for a SOEs. In 2015, the minimum return requirement for SOEs was 5%, whereas the Group’s indicator during the 1st quarter was 11.6%. 60
PlaÄ?iau: http://vz.lt/vadyba/finansai-apskaita/2016/04/18/kuriosvvi-tures-siekti-
400 350
322
335
40.5
38.1
40
300 250
50
35.1 31.0
226
219
30
209
200
19.2 19.2
20 150
10
100
2.5 2.5 50
5.1 5.1
0 Q1 of 2012
0
Q1 of 2012
Q1 of 2013
Q1 of 2014
Q1 of 2015
Q1 of 2016
EBITDA of Lietuvos energija Group grew by almost 8 million EUR, mostly due to better operating result of gas supply and trade. 100
151 6.4%
60
50.5
238 11.1%
2000
70.6
70 56.5
Q1 of 2015
Q1 of 2016
Net profit
Net debt of Lietuvos energija remained relatively low, as compared with an optimal borrowed capital-to-equity ratio. Debt during the Q1grew intensively by investing into development, due to increasing financial debts and reducing money quantity.
78.1
80
Q1 of 2014
Comparable net profit
2500
90
Q1 of 2013
127 6.4% 203 13.1%
1500
308 18.7%
50 40
33.4
1000
30 20
500
2212 93.6%
1899 88.9%
1863 93.6%
1304 83.8%
10 0
1339 81.3%
0 Q1 of 2012
Q1 of 2013
Q1 of 2014
Q1 of 2015
Q1 of 2016
Q1 of 2012
Q1 of 2013 Equity
Q1 of 2014 Q1 of 2015 Borrowings, net
Q1 of 2016
Financial data is presented in million euros.
4 INTERIM REPORT FOR Q1 OF 2016 | Key indicators of the Lietuvos Energija Group
Message from the Chairman of the Board
Dear Customers, Partners, Employees and Shareholders, Lietuvos Energija that demonstrated record performance results last year, this year is raising the bar even higher. We met the year 2016 having improved our operations, with an efficient structure of the Group. Such significant changes added a momentum to the Company’s performance results. In Q1 2016 the profit was even higher, revenues increased, in addition to enhancing efficiency and decreasing costs. Some additional revenues to our portfolio were generated from the wind farms acquired in Estonia and Lithuania. nd we are happy to see that as soon as from 1 July our clients will start realising the benefit of the successful performance of Lietuvos energija: the price of natural gas will drop by 8-15 %, and that of electric energy – by about 5 % According to the preliminary unaudited data in Q1, 2016 the Company earned EUR 78.1 m in consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA), i.e. a 10.6 % increase y-o-y, when the profit was recorded at EUR 70.6 million. Our customers can already feel the changes in the servicing and the provision of services – shorter terms of procedures, we have offered to our customers convenient servicing and payment methods, where they can benefit from a one-stop facility, or at the servicing centre, or electronically or by phone.
5 INTERIM REPORT FOR Q1 OF 2016 | Message from the Chairman of the Board
We manage to ensure quality services to our customers at lower costs. As compared to Q1, 2015, the operating costs of Lietuvos energija Group in the same period this year decreased by 8.4 %, to EUR 34.1 million. The robust financial position of the Group also allows increasing the dividends payable to the State budget. In 2015 Lietuvos energija disbursed EUR 86 million in dividends. For comparison, in 2014, Lietuvos energija paid EUR 52.6 million in dividends, the most, compared to other the state-managed companies. When looking prospectively the value created for the customer remains our key priority. We will be further improving the quality of the services we provide, and the Operational Excellence programme launched this year will guide the companies in their commitment to the implementation of improvements in their daily operations, and that will in the long run simplify the processes and enhance our efficiency. We continue trying to spot opportunities to invest into sustainable energy projects, including the renewable energy resources. We will make every effort to achieve the targets set for 2020 while developing sustainably and responsibly.
Dr. Dalius Misiūnas Chairman of the Board and Chief Executive Officer Lietuvos Energija, UAB
About the Group and the Company
6 INTERIM REPORT FOR Q1 OF 2016 | Message from the Chairman of the Board
About the Group and the Company
The Lietuvos Energija group is one of the largest state-owned groups of energy companies in the Baltic countries. The main activities of the Group include the generation and supply of electricity and heat, trading and distribution of electricity, trading and distribution of natural gas, as well as the servicing and development of the energy sector. The rights and obligations of the shareholder of the Lietuvos Energija group are implemented by the Ministry of Finance of the Republic of Lithuania. The Lietuvos Energija group with more than 5 000 employees manages and operates the key energy generation capacities of Lithuania that ensure the security of energy supply, a distribution network covering the entire territory of the country, and provides services to almost 1.6 million of consumers across Lithuania, offers electricity supply services to consumers abroad, operates gas distribution pipelines in the length of 8.5 thousand km, supplies gas to 570 thousand consumers, implements development projects of strategic value and pursues the objective set forth in the National Energy Strategy. During Q1 of 2016, 0.31 TWh of electricity were generated, 2.38 TWh of electricity were transmitted to consumers and 0.27 billion m3 of natural gas were transported via gas distribution pipelines.
7 INTERIM REPORT FOR Q1 OF 2016 | About the Group and the Company
During 3 months of 2016, the consolidated revenue of the Group amounted to EUR 335.1 million and EBITDA of the Group was EUR 78.1 million. Net normalised profit totalled to EUR 38.3 million. The parent company of the Group – Lietuvos Energija, UAB (hereinafter – Lietuvos Energija or the Company) is responsible for transparent management and coordination of activities of the whole Group, improvement of the efficiency in order to ensure competitive services for consumers, and for socially responsible creation of long-term value for its shareholders. The Company analyses the activities of the Group, represents the Group, implements rights and obligations of the shareholder, establishes operational guidelines and rules, and coordinates the activities in the areas of production, commerce, finance, law, strategy and development, human resources, risk management, audit, technology, communication and others.
Structure of the Group At the reporting date, the Lietuvos Energija group consisted of 22 companies: the parent company and 21 directly and indirectly controlled companies. The main business activities of the Group are the generation of electricity and heat, transmission trading, distribution and supply, trade in natural gas and its distribution. Activities of the Group’s companies servicing these main types of business activities
8 INTERIM REPORT FOR Q1 OF 2016 | Structure of the Group
comprise ITT, real estate, transport, repair and construction of energy facilities, professional development of employees, public procurement, accounting, administration of employment relationships and other services. The detailed list of the Group companies is presented on page 40 of this document. The organisational chart of the Group effective from 31 May 2016 is presented below:
The Group's strategy
MISSION –
VISION –
VALUES –
sustainable growth of value in the energy sector by promoting the economic and social development of the country.
to become the highest-value energy company in the Baltic countries.
responsibility, cooperation, results.
The main goal of the strategy of the Lietuvos Energija group is to double the value
Diversifying the operations. The diversification includes implementation of
of the Group and to become the highest-value energy company in the Baltic countries by 2020. This value is perceived as a sustainable balance of three
investment projects in the sectors of electricity, heat and natural gas. The projects increase the competitiveness of the Group and the national economy at large as well as the country's energy independence, optimisation of the production and trading portfolio, development of new activities by extending the value chain of the Lietuvos Energija group. These goals will be achieved using the available resources and infrastructure, investing in the creation of new infrastructure and effective governance, as well as through acquisitions.
components: return on assets, improvement of competitiveness and responsibility towards employees, society and environment. The Group's return on assets is increased through the development – diversifying activities, indulging in new and economically feasible projects and activities, acquiring enterprises, ensuring the efficiency of daily operations and achieving the goals set by the shareholder. The Group will reinforce the country's competitiveness by ensuring a stable supply of electricity and natural gas, offering new products and promoting rational use of electricity and natural gas. The Group assumes responsibility towards society and its employees, proactively implements environmental requirements and ensures the continuity and improvement of skills
The main strategic directions of the Group: Ensuring quality services to consumers. The care is taken to achieve better servicing of consumers, develop electronic (time-saving) and new services responding to the needs of consumers, increase consumer choices and guarantee the reliability of generation, distribution and supply of electricity and of distribution and supply of natural gas.
9 INTERIM REPORT FOR Q1 OF 2016 | The Group's strategy
Enhancing the efficiency of operations. The efficiency is pursued 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 is integrated by setting the common principles of business management, division, coordination and control of responsibilities. Efficiency improvement measures covering all Group companies or identical or very similar activities at the individual company level are also continued. Active sharing of best practices between companies is promoted and sought.
Building new organisational culture. A modern, effective and dynamic organisation is being created operating on the basis of common values, developing in a consistent and targeted manner the required competences and successors for key employees, and offering internal environment which encourages the involvement of employees.
Major events in 2016
January On 21 January 2016, Lietuvos energija acquired two wind farms the total installed capacity of which amounted to 42.3 megawatts. (Read more on page 24).
February On 2 February 2016, Lietuvos Dujų Tiekimas concluded a liquefied natural gas supply agreement (LNG) agreement with Statoil, according to which it will satisfy more than half (approximately 300 million m3) of the gas demand this year. (Read more on page 23). On 18 February 2016, Energijos Sprendimų Centras UAB was established. It will engage in the enhancement of energy consumption efficiency and development of renewable energy resources. (Read more on page 24).
10 INTERIM REPORT FOR Q1 OF 2016 | Major events in 2016
March On 18 March 2016, the “CEO of the Year 2015” was elected Dr. Dalius Misiūnas, Lietuvos energija Director General.
April On 4 April 2016, Lietuvos energijos paramos fondas (Lietuvos Energija Support Fund) invited potential beneficiaries to submit applications for the receipt of financial assistance. This year three priority directions for granting financial assistance were established: support for children suffering from oncological diseases, science and sports. (Read more on page 29).
May On 10 May 2016, the timelimit during which minority shareholders of the former public company LIETUVOS ELEKTRINĖ could use a possibility to redeem their shares expired. Money for redeemed shares will be paid to the shareholders during May. (Read more on page 42). On 30 May 2016, in response to changes in the market, the National Commission for Energy Control and Prices set lower by approximately 5 percent upper limits for the public electricity price for the 2nd half-year of 2016. (Read more on page 27)
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Analysis of the Group’s financial and operational results
11 INTERIM REPORT FOR Q1 OF 2016 | Major events in 2016
Analysis of the Group’s financial and operational results KEY OPERATIONAL INDICATORS OF THE LIETUVOS ENERGIJA, UAB GROUP
Change (+/-) +/%
3 months of 2016
3 months of 2015
TWh
0.31
0.25
0.06
23.2%
Distributed electricity via medium and low voltage networks
TWh
2.38
2.23
0.14
6.4%
Public and guaranteed supply Distributed to customers of independent suppliers
TWh TWh
0.85 1.52
0.84 1.39
0.01 0.13
0.9% 9.8%
min. units
14.9 0.19
11.6 0.17
3.3 0.02
29.0% 13.2%
%
7.27%
7.40%
-0.13
-1.8%
billion m3 TWh billion m3 TWh
0.27 2.90 0.37 4.21
0.25 2.65 0.34 3.91
0.02 0.25 0.02 0.30
7.5% 9.4% 6.9% 7.5%
min. units %
0.15 0.00161 1.62%
0.08 0.00094 2.24%
0.07 0.00067 -0.62
82.5% 71.5% -38.3%
Electricity Generated electricity
Quality indicators of electricity supply SAIDI, min. (excl. force majeure) SAIFI, units (excl. force majeure) Technological costs in the distribution network Gas Distributed volume of gas Distributed volume of gas Volume of gas sold Volume of gas sold Quality indicators of gas supply SAIDI, min. (excl. force majeure) SAIFI, units (excl. force majeure) Technological costs in the distribution network
With the growing economy of the country, electricity consumption increased during three months of 2016. In the period from January to March, the amount of electricity distributed by the Group to consumers via medium and low voltage networks increased by 6.4% (0.14 TWh) and amounted to 2.38 TWh compared to three months of 2014. The main reasons for a big increase were colder than average weather (-3,6°, compared to climate norm) and gross domestic product growth . In Q1 of 2016, the public and guaranteed supply of electricity of the Lietuvos Energija group was equal to 0.852 TWh (a 0.9% or 0.01 TWh increase compared to a year ago). The supply of electricity to independent consumers increased and totalled 1.52 TWh (a +9.8% or 0.13 TWh increase from Q1 2015). Electricity consumption growth was led by larger consumption in commercial sector, where suppliers are ofter independent.
During Q1 of 2016 the Lietuvos Energija Group generated 0.31 TWh of electricity (+23.2% more compared to the results of Q1 2015). Compared to the previous reporting period, electricity generation volumes at Kaunas Algirdas Brazauskas Hydro Power Plant increased by +22.6% (from 0.096 TWh in Q1 2015 to 0.118 TWh in Q1 2016). The level of electricity generation at Kruonis Pumped Storage Plant remained nearly unchanged – 0.153 TWh of electricity was produced and sold during Q1 of 2015, which is more than in Q1 2015 (0.151 TWh). After electricity generation quotas were cancelled, combined cycle gas generation capacities of Elektrėnai complex were turned on upon the formation of high electricity price due to disconnections of the NordBalt link and other reasons. During the 1st quarter 2016, generation of Elektrėnai complex increased by +0.034 TWh (1st quarter 2015 0.0004 TWh). Units of Elektrėnai complex are used for electricity generation in order to ensure reliable operation of
12 INTERIM REPORT FOR Q1 OF 2016 | Analysis of the Group’s financial and operational results
the electricity system, when due to repairs of other electricity generation sources, limited bandwidth in the country, or due to other reasons, there is shortage of electricity as a result whereof its price increases in the exchange. During the 1st quarter 2016, 0.032 TWh electricity was generated in the wind farms acquired in Estonia and Lithuania. During Q1 2016, technological costs in the distribution network declined – comprised 7.27% (7.7% in Q1 2015). The average duration of unplanned interruptions in electricity transmission (System Average Interruption Duration Index (SAIDI)), excluding the causes of force majeure circumstances, per customer, declined and was 14.9 minutes (11.6 minutes in Q1 2015), and the average number of unplanned long interruptions (System Average Interruption Frequency Index (SAIFI)) per customer was 0.19 times compared to 0.17 times in Q1 2015. Due to colder weather during January-March the volume of gas distributed by the Group companies increased. During Q1 of 2016, the Group companies distributed 2.9 TWh of gas, which is a 9.4% or 0.25 TWh increase compared to Q1 2015 when 2.65 TWh of gas was distributed. Succesful operations of the liquefied natural gas terminal created competition in the gas market, the volume of gas sold by the Group companies increased and totalled 4.21 TWh in Q1 2016. This is 7.5% or 0.3 TWh more compared to Q1 2015.
In Q1 2016, the average duration of unplanned interruptions in gas transportation (SAIDI ratio), excluding the effects of force majeure circumstances, per consumer increased and equaled to 0.15 minute. (0.08 minutes in Q1 2015), and the average number of interruptions in gas transportation (SAIFI ratio) per customer was 0.00161 time (0.00094 time in Q1 2015). Decrease in these ratios resulted from the lower weather temperature during January 2016.
Electricity generation, distribution and sale, TWh
1.35 1.30 1.39 1.52
Distributed to customers of independent suppliers
Volume of gas sold and distributed, TWh 0.86 0.91 0.84 0.85
Public and guaranteed supply
2.21 2.21 2.23 2.38
Distributed electricity via medium and low voltage networks
0.30 0.25 0.25 0.31
Generated electricity
0 Q1 of 2013
13 INTERIM REPORT FOR Q1 OF 2016 | Analysis of the Group’s financial and operational results
1 Q1 of 2014
1 2 Q1 of 2015
2 Q1 of 2016
3
Key financial indicators
Group's revenue structure in Q1 of 2016, % and in EUR million
Revenue
Electricity distribution revenue
During January-March of 2016, revenue of the Lietuvos Energija group increased by +4.1% or EUR +13.3 million compared to Q1 of 2015 and reached EUR 335.1 million. During the reporting period, revenue earned from the electricity distribution service (33% of all revenuew earned, or EUR 109.9 million), the sale of electricity produced, electricity supply and trading (23% or EUR 78.2 million), and the activity of gas distribution and sale (30% or EUR 100.8 million) represented the major portion of all revenue earned. Compared to revenue earned in Q1 2015, in January-March of 2016 due to increase in electricity distribution via medium and low voltage networks, the distribution revenue increased by EUR +21.1 million, to EUR 109.9 million. Compared to Q1 2015, the revenue from gas distribution and sale decreased by EUR -18.1 million, to EUR 100.8 million.
million 17.6 5%
Revenue from sale of produced electricity, electricity trade and supply PSO service revenue Revenue from other activities Revenue from provision of balancing, regulating and power reserve services Revenue from connection of new customers Heat energy revenue
78.2 23%
Dynamics of the Group's revenue by sector, in EUR million 360
8.2
350
5.2
21.1 335.1 -2.2
-0.5
-0.4
0.0
Revenue from sale of electricity produced, electricity trade and supply
320
-18.1
Heat energy revenue
330
Revenue from other activities
340
Revenue from connection of new customers
As a result of an increase in electricity distribution revenue, this type of revenue increased and represented 33% of the Group's total revenue (28% in Q1 2015). Due to decline in revenue from gas distribution and sale activity the portion of this revenue declined from 37% in Q1 2015 to 30% in Q1 2016 in the overall revenue structure of the Group.
EUR 335.1
100.8 30%
Revenue from gas distribution and sale
The Group's revenue statement includes EUR 2.1 million revenue from wind farms drom Estonia and Lithuania that were acquired during Q1 of 2016.
Revenue from gas distribution and sale
109.9 33%
321.8
310
14 INTERIM REPORT FOR Q1 OF 2016 | Key financial indicators
Revenue for Q1 of 2016
PSO service revenue
Revenue from provision of balancing, regulating and power reserve services
Electricity distribution revenue
Revenue for Q1 of 2015
300
Operating and purchase expenses
Groups operating expenses, in EUR million 40
The Group's operating expenses during Q1 of 2016 amounted to EUR 34.1 million and compared to Q1 of 2015 decreased by -7.8% (EUR -2.9 million A decline in expenses was the result of merger of LESTO AB and Lietuvos dujos AB, as well as increased efficiency of activities, centralization of common functions of the whole Group’s companies, and purification of the value chain. For the new projects during the 1st quarter, 0.4 million EUR operating expenses were sustained, of which 56 percent consisted of operating costs associated with the acquired electricity farms in Lithuania and Estonia. Comparative costs of typical activity reduced due to smaller by 1.0 million EUR repair and maintenance costs of the electricity grid and electricity generation equipment, also due to smaller by 0.4 million EUR telecommunication and IT services, as compared with the 1st quarter 2015. Operating costs associated with the takenover gas transmission and distribution activity reduced by 1.5 million EUR due to decreased remuneration costs. Ataskaitiniu laikotarpiu Grupės elektros, dujų, kuro ir susijusių paslaugų pirkimų sąnaudos, palyginti su 2015 m. I ketvirčiu, didėjo nežymiai +0,5 proc., arba +0,9 mln. Eur. Elektros ar susijusių paslaugų pirkimas sudarė 130,9 mln. Eur, arba +19 proc., palyginti su 2015 m. I ketvirčiu, dėl +12,8 mln. Eur didesnio elektros perdavimo sąnaudų bei +9,0 mln. Eur didesnių VIAP sąnaudų, palyginti su 2015 m. I ketvirčiu. During the reporting period, expenses of the Group for the purchase of electricity, gas, fuel and related services increased insignificantly by +0.5% or EUR 0.9 million compared to Q1 2015. Compared to Q1 2015, the purchases of electricity and related services increased by 19%, to EUR 130.9 million, due to EUR 12.8 million higher electricity transmission expenses and EUR 9 million higher PSO service expenses.
37.0 -14.7%
35
34.1
8.8 7.5
30 25
Operating expenses related to taken over operations of gas transmission and distribution, new projects
20 -5.6%
15
28.2
26.6
Q1 of 2015
Q1 of 2016
Comparable expenses of operating activities
10 5 0
Group's purchase expenses of electricity, gas fuel and other related services, in EUR million 250 225.3 200
226.4
-23%
84.3
114.3
Purchases of gas and related services for trading
150
Purchases of gas and associated services decreased by 21 percent due to diversified supply and acquisition of gas from the liquefied natural gas terminal under favourable conditions. Due to change in the regulation environment, a part of costs for gas was accounted as purchases of gas and fuel oil for generation, the major part whereof consisted of the additional constituent of natural gas supply safety, added to the price of natural gas.
11.1 100
50
+16% 110.4
130.9
0 Q1 of 2015
15 INTERIM REPORT FOR Q1 OF 2016 | Key financial indicators
Purchases of gas and heavy fuel oil for production
Q1 of 2016
Purchases of electricity of related services
Group's EBITDA sources in Q1 of 2016, %
During three months of 2016, the Group’s earnings before interest, taxes, depreciation and amortisation (EBITDA) amounted to EUR 78.1 million, which is 10.6% or EUR 7.5 million more than EBIDTA of Q1 2015, which was equal to EUR 70.6 million (EBITDA of Q1 2016 does not include the negative effect of the discount for the price of gas in the amount of EUR 3.6 million applied to household and non-household customers). The growth of EBITDA of the Group was determined by a positive change (EUR +15.2 million) in the results of the activity of gas supply and trade in 2016 due to higher than planned regulated revenue collection in subsidiary LITGAS, the difference will reduce the future results of the Grouop.
Lietuvos DujĹł Tiekimas UAB and LITGAS UAB
EUR 78.1
Lietuvos Energijos Gamyba AB
million
17% Other activities
12%
8%
Dynamics of the Group's EBITDA in Q1 of 2016 by sectors, in EUR million 15.2
3.4
1.9
0.3
70.6
78.1 3.9
EBITDA for Q1 of 2016
Electricity generation
Electricity and gas distribution and supply
Other activities
Wind farms in Lithuania and Estonia
9.0
EBITDA for Q1 of 2015
100 90 80 70 60 50 40 30 20 10 0
16 INTERIM REPORT FOR Q1 OF 2016 | Key financial indicators
Energijos Skirstymo Operatorius AB
Electricity trade
The Group's EBITDA margin for the reporting period slightly increased and was equal to 23.3% (21.9% during Q1 2015). This change was determined by a higher profitability of the gas sales activity.
63%
Gas supply and trade
EBITDA and net profit
In Q1 2016, the Group earned EUR 35.3 million in net profit, which is EUR 4.3 million more than net profit of Q1 2015 (EUR 31.0 million). The biggest impact for the results of 1st quarter 2016, as compared with 2015, was determined by the following effects:
Revaluation costs of environmental pollution permits – 5.8 million EUR (1st quarter 2015 - 0.7 million EUR). Bigger net profit by +5.5 million EUR of the daughter company LITGAS UAB (1st quarter 2015 -2.0 million EUR, 1st quarter 2016 +3.5 million EUR). Reduction in the Group’s operating expenses by – 2.9 million EUR. Changes in the regulation environment as a result whereof net profits of Lietuvos energijos gamyba AB reduced by 4.9 million EUR. The amount of net profit for Q1 of 2015 and 2016 was significantly affected by the gas price discount applied to customers. The impact of the gas price discount for Q1 of 2015 was EUR 9.5 million and for Q1 of 2016 was EUR 3.0 million. After eliminating the effect of discount on gas price for consumers, the comparative net profit for the 1st quarter 2016 (38.3 million EUR) was -5.4 percent, or less by -2.1 million EUR than the net comparative profit of the 1st quarter 2015 (40.4 million EUR).
Net profit and comparable net profit for Q1 of 2016, in EUR million 40.4
35.3
Transport
million
Other investments Real estate
9%
Electricity generation capacities
8%
ITT (IT, telecommunications and management systems)
Without assessing the acquisition of wind farms, investment grew by +5.5 percent, or +1.2 million EUR, as compared with the same period in 2015 (22.6 million EUR). The majority of investment (72 percent) was allocated for the acquisition of wind farms in Lithuania and Estonia. During 1st quarter 2016, investment into transport grew by +2.1 million EUR due to renewal of the Group’s vehicle fleet. Investment into real estate increased by +0.9 million EUR due to ongoing reconstruction works in smaller towns of Lithuania.
0 Q1 of 2016 Comparable net profit
17 INTERIM REPORT FOR Q1 OF 2016 | Key financial indicators
22.6
-1.5
-0.8
1.0
0.9
0.1
86.5
Investments for Q1 2016
5
2.1
ITT (IT, telecommunications and management systems)
10
62.7
Real estate
15
100 90 80 70 60 50 40 30 20 10
Other investments
20
Net profit
EUR 86.5
Transport
25
Q1 of 2015
Development of the distribution network
Group's investments by sector, in EUR million
+8,2%
30
Maintenance of electricity distribution network
-0.6
Maintenance of electricity distribution network Acquisition of wind farms in Lithuania and Estonia
31.0
Acquisition of wind farms in Lithuania and Estonia
72%
Elektros generacijos pajėgumai
35
Group's investments structure in Q1 of 2016, %
Development of the distribution network
40
38.3
The Group`s investments totalled EUR 86.5 million in January – March of 2016, i.e. made up EUR 86.5 million, or 282% more than in Q1 of 2015.
Investments for Q1 2015
45
Investments
Investment in other sectors, as compared with the 1st quarter 2015, increased by +1.0 million EUR. Investments into development of the distribution grid reduced by -1.5 million EUR, into electricity generation capacities – reduced by -0.8 million EUR, and maintenance of the distribution grid – -0.6 million EUR.
Dynamics of the Group's Assets, in EUR million 2,420 67.3 2,400
Assets and equity In Q1 2016, the Group’s assets increased by 0.4% or EUR 8.6 million and amounted to EUR 2,347.8 million as at 31 March 2016. For comparison, on 31 December 2015 the Group‘s assets amounted to EUR 2,339.2 million. Growth in the Group’s assets was mostly affected by the acquisition of wind farms in Lithuania and Estonia; therefore, fixed assets increased by 69.9 million EUR, or 4.2 percent, whereas the total fixed assets increased by 67.3 million EUR, or 3.4 percent. Current assets reduced during the reporting period by -15.3 percent, or -58.7 million EUR, mostly due to reduced cash and cash equivalents (-27.4 million EUR, or -16.7 percent), due to reduction in account surplus sum by 42.4 million EUR, from 43.0 million EUR to 0.6 million EUR in the 1st quarter 2016. The value of current assets was also affected by reduction in the level of stocks by -56.5 percent, or 22.6 million EUR, from 40.0 million EUR to 17.4 million EUR, due to reduction of raw materials and spare parts held by the Group’s companies by 19.5 million EUR. In Q1 2016, the equity of the Lietuvos Energija group increased by 2.7% or EUR 34.7 million and amounted to EUR 1,339.2 million as at 31 March 2016. The equity of the group was equal to EUR 1,304.5 million at 31 December 2015. Increase in the Group’s equity was determined by profitable activity of the Company during the reporting period, as a result whereof the accrued non-allocated losses reduced by 32.4 million EUR, from 49.3 million EUR during the 1st quarter 2015 to 16.8 million EUR during the 1st quarter 2016. During the reporting period, the Group did not pay dividends to the shareholder. The Group’s equity capital indicator changed insignificantly during the reporting period, and during the 1st quarter 2016 was 57.0 percent (on 31 December 2015, it was 55.8 percent).
18 INTERIM REPORT FOR Q1 OF 2016 | Key financial indicators
2,380
-27.4
2,360 2,340
2.348 2.339
-31.3
2,320 2,300 Assets at 31 Dec Non-current 2015 assets
Cash and cash Other current equivalents assets
Assets at 31 Mar 2016
Borrowings
Group's borrowings, net in EUR million
The Group's net borrowings amounted to EUR 307.8 million at 31 March 2016 and, compared to the amount of net borrowings in the end of 2015, increased by EUR 56.0 million. The increase resulted from higher borrowings designated for the financing of the investment of the Group companies and from decrease in cash balances and current investments
350
During Q1 of 2016, the Group's borrowings increased by 6.8% or EUR 28.7 million and amounted to EUR 449.3 million as at 31 March 2016 compared to EUR 420.7 million as at 31 December 2015. The Group's cash balances and current investments amounted to EUR 141.5 million as at 31 March 2016, which is a EUR 27.4 million or 16.2% decrease compared to the year end of 2015 (EUR 168.9 million). Cash balances decreased due to decline in overdraft, investments and group investments and wind power parks acquisitions in Lithuania and Estonia.
100
As a result of the increase in the Group's borrowings, the Group's net borrowings to the last 12-month EBITDA ratio increased from 1.141 time at the 2015 year-end to 1.35 times at the end of Q1 2016. The Group's net borrowings to equity ratio increased from 19.3% at the 2015 yearend to 23.0% at 31 March 2016. The current ratio of the Group's net borrowings remains to be rather low with respect to revenue earned and the capital structure. A low ratio of the Group's borrowings and a high ratio of equity, profitability of operating activity indicate a solid and stable current financial position of the Group and its prospects, as well as the Group's financial capacities to implement investments required to ensure the provision of the existing services of the Group, to implement and finance new projects and safeguard a further development of the Group.D
300 250
27.4
251.8
28.7
307.8
Borrowings
Borrowings,net, as at 31 Mar 2016
200
150 50 0 Borrowings,net, as Cash and shortat 31 Dec 2015 termp investments
D
Group's borrowings, net ratios 1.40 1.35 1.30 1.25 1.20 1.15 1.10 1.05 1.00
1.35
25.0% 20.0%
1.14
15.0%
10.0%
31 Dec 2015
31 Mar 2016
D Group's borrowings,net, to 12-months EBITDA ratio
D
19 INTERIM REPORT FOR Q1 OF 2016 | Key financial indicators
30.0%
Group's borrowings, net, to equity ratio (second axis)
Review of the Company’s and the Group’s activities
20 INTERIM REPORT FOR Q1 OF 2016 | Key financial indicators
Review of the Company’s and the Group’s activities The review of the activities of the Lietuvos Energija group covers the period from 1 January 2016 to the date of the preparation of the report.
Renewed operational concept Since the start of 2016 the structure of Lietuvos Energija group was updated after the most significant project of 2015 at the Lietuvos Energija group was completed, i.e. the programme focused on optimising central activities of the Group. The central activities of the Group were distributed among the companies in a way that would ensure more efficient operations of the Group, creation of the highest value and provision of additional benefits to customers: similar activities were merged, the customer service was centralised. By 2020, the total estimated benefit of these changes for customers and shareholders will amount to EUR 64 million. The new structure of the Group became effective from 1 January 2016 when the joint companies started their activities. The largest benefits of the changes are focused to the clients. The revised operational concept led to improvement of customer service, a simple and convenient 'single window' servicing arrangement has been offered, the servicing and the processes have been standardised, new services are provided, the procedures of connection to the engineering networks and other procedures are faster. Also the Group achieved higher operational efficiency and reduction of costs. The programme was divided into 4 main fields of activity: production, supply/trading, network and customer service, at the same time conducting the project for the operations of contracting companies.
Focus on customer, quality and efficiency by ESO On 1 January 2016, Energijos Skirstymo Operatorius (ESO), a company established on the basis of LESTO and Lietuvos Dujos, started its operations. It provides the services of electricity supply and distribution, and natural gas distribution to more than 1.6 million customers.
ESO joined the best competences of both companies – synergy of these two companies leads to improvement of the Group's efficiency as a result of lower operating expenses, and as many as possible benefits to electricity and natural gas users. It is estimated that the merger will result in a 5% decline in operating expenses and the annual savings effect will amount to EUR 3.6 million. ESO has 5 regional divisions located in the cities of Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys. Divisions established in the regional centres coordinate the work of the dispatch centres located in the surrounding districts, plan repair, development and modernisation works of electricity and gas distribution networks. On 11 January 2016, the symbolic stroke of the bell marked the beginning of trade in ESO shares at Nasdaq Vilnius stock exchange. The ESO logo also appeared in Times Square in New York on the occasion of share trading.
Joint service under the trade name Gilė Starting from the beginning of 2016, customers of ESO, Lietuvos Dujų Tiekimas and Energijos Tiekimas are serviced in a joint service centre Gilė which is managed by the Group company Verslo Aptarnavimo Centras. Electronic services are provided at the self-service website www.manogile.lt. The smart phone application was also presented. The joint customer service arrangement accumulated the best practices and through the ‘single window' facility enables the companies to provide the key services in the ways most convenient to the customers – online, by telephone or at a customer service centre. The servicing at a joint service portal is made even more convenient due to a possibility to pay by a single transfer for two services – electricity and natural gas. Other companies providing utility services, such as water, heat suppliers, are also invited to become part of the joint customer servicing arrangement. The concentration of customer servicing specialists in a single company of the Group – Verslo Aptarnavimo Centras – allows reducing operational costs, increasing flexibility and enables creating additional benefits for customers. Verslo Aptarnavimo Centras Verslo also started the administration of payments, provision of accounting services and management of amounts owed. The Gilė customer service centres are established in Vilnius, Kaunas, Klaipėda, Šiauliai, Panevėžys, Alytus, Marijampolė, Utena and Visaginas. They were mainly established in the premises of the former customer service centres of LESTO and Lietuvos Dujų Tiekimas. The centres provide the possibility to learn how to use the Gilė application and the self-service portal www.manogile.lt. Enquiries on electricity and gas-related
21 INTERIM REPORT FOR Q1 OF 2016 | Review of the Company’s and the Group’s activities
issues will be answered round the clock by calling 1802. In case of gas discharge customers can use the emergency service line 1804.
existing co-generation power plants, supply and trade in natural gas utilising the potential of the LNG Terminal, renewable energy sources.
Concentration of electricity trading and improved generation activities
Co-generation power plant projects in Vilnius and Kaunas
Electricity generation activity has been concentrated with the company Lietuvos Energijos Gamyba, while wholesale electricity trading activity has been separated and transferred to the company Energijos Teikimas. This ensures greater flexibility in the market, possibilities to offer new products in view of customers' needs.
The Lietuvos Energija group implements the projects on the construction of modern waste and biofuel-fired high-efficiency co-generation power plants 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 dated 28 May 2014 the projects were recognised as projects of state significance.
Lietuvos Energijos Gamyba sold commercial wholesale electricity trade to Energijos Teikimas on 12 October 2015, the ownership of the part of the business has changed since 1 January 2016.. The transferred part of the business covered trade in derivative financial instruments and provision of the balancing service not related to physical electricity trading. Following the transfer Lietuvos Energijos Gamyba continues to receive income from sale of electricity in the market which was produced at the power plans under its control and from the provision of system services.
Lietuvos Energija is implementing the project in Vilnius independently, however, an opportunity for partners to be invited to take part in other phases of the project implementation is established. The Environmental Protection Agency has recognised the planned operations of Vilnius co-generation power plant as permissible.
EnePRO concentrated competences and experience of the two companies and creatied a single strong energy services and contracting company which provides the services of construction, reconstruction, repair and maintenance of electricity equipment and other services.
In 2016 an international tender for the turn-key construction works of Vilnius cogeneration power planti is continued. The object of the procurement comprises all works, services, equipment and materials, which will be used to design and construct a new co-generation power plant in Vilnius. Successful potential contractors after qualifying procedures were delivered the technical specifications according to which the potential contractors are drawing up and will submit their tenders. The tender consists of two parts – construction of waste incineration and biofuel co-generation 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.
The synergy of two similar and complementing companies offer more possibilities to develop complex and targeted solutions, expand the range of the service portfolio, increase the company's competitiveness in the energy services market, reduce operating costs and contribute to enhancing the Group's value.
In Kaunas, Lietuvos Energija is developing a co-generation power plant project with a partner Fortum Heat Lietuva UAB. According to the shareholder agreement, Lietuvos Energija owns 51% of the shares of the joint venture Kauno Kogeneracinė Jėgainė UAB, thus ensuring the State control over the project.
EnePRO – a new player in the electricity contracting market From 1 January 2016, Elektros Tinklo Paslaugos (ETP) and Kauno Energetikos Remontas (KER), two energy services companies controlled by the Lietuvos Energija Group, were reorganised by way of merger and a single company was established named Energetikos Paslaugų ir Rangos Organizacija (EnePRO).
Diversification of activities Diversification of activities of the Group companies is one of the main preconditions for increasing the value of the Group. By 2020, the Group plans to invest around EUR 1 billion in the following areas: heat sector by constructing new or upgrading the
On 31 March 2016, the partners signed the statement on the completion of the transaction. The Board of Kauno Kogeneracinė Jėgainė UAB was formed consisting three members: one member was delegated by each shareholder and one member is independent. To the board were appointed: Mr Nerijus Rasburskis (Director of Cogeneration Power Plant Project Service of Lietuvos Energija), Mr Vitalijus Žuta (the CEO of Fortum Heat Lietuva UAB) and Mr Andrius Vilkauskas (the independent member of the Board). Mr Ramūnas Paškauskas holds the postion of the CEO.
22 INTERIM REPORT FOR Q1 OF 2016 | Review of the Company’s and the Group’s activities
In 2016, Kauno Kogeneracinė Jėgainė UAB started public procurements for the main components of the future waste power plant: the waste-fired boiler, the gas turbine and the generator, the equipment for the purification of smokes, the cranes for fuel bunker. Paralelly, the tender for engineering, procurement and construction – management works was also released. Procurement documents are publicly available at Lithuanian central public procurement information system and also in the TED official journal of European public procurements. The new high-efficiency co-generation power plant burning waste as fuel planned to be constructed in Kaunas is expected to have electric and thermal capacity of 24 MW and 70 MW, respectively. Such capacities will enable to more rationally use 200 thousand tons of waste accumulating in the region and produce around 500 GWh of heat and 170 GWh of electricity. The total investment in the project will be about EUR 147 million.
LNG gas becomes a competitive alternative At the beginning of 2016, the natural gas supply company Lietuvos dujų tiekimas diversified its natural gas portfolio, acquired liquefied natural gas (LNG) from Statoil under favourable conditions and this way reduced the forecasted general average import price for 2016 by 15 percent. Meanwhile, the natural gas trade company LITGAS renewed the supplied gas supply agreement with Statoil and this way reduced maintenance costs of the LNG terminal sustained through the LNG terminal constituent by one third. Achievements enabled to reduce prices for private customers of Lietuvos dujų tiekimas for the 2nd quarter 2016 by 8-15 percent. Also, from 1 March 2016, the company also reduced the price of natural gas for corporate customers by 16 percent on average. Changes in the supply of natural gas will enable to save this year approximately about 50 million euros for the whole market. According to agreement for the supply of LNG concluded on 5 February 2016 between Lietuvos dujų tiekimas and Statoil, the company will satisfy more than half (about 300 million m3) of the gas demand under more favourable conditions, when Gazprom pricing changed in the unfavourable direction. On 16 February 2016 a gas tanker delivered to Klaipėda Port the first commercial LNG consignment – about 70 thousand cubic meters. From 18 February 2016 amendments to the agreement between LITGAS and Statoil enabled to reduce the LNG quantity necessary for terminal operation by one third – from approximately 5.5 TWh (about 540 million m3) to about 3.6 TWh (350 million m3). Duration of the agreement was extended until the end of 2024 and will coincide with the duration of the ship Independence lease agreement. Besides, the price
formula was changed; it approximated the price of LNG supplied under this agreement to the prices of gas supplied by the gas pipeline. As a result of changes in the agreement, this year maintenance costs of Klaipėda LNG terminal, and at the same time – also energy prices for natural consumers – reduced by approximately 30 percent. In addition, LITGAS cut down operating costs this year by approximately 19 percent – this was the result of success in assuring favourable financing conditions of the assigned supply. This enables to reduce the costs of assigned supply included into the constituent of the liquefied natural gas (LNG) terminal by approximately 5 percent from 2017.
ESCO projects implemented by a new company In February 2016, Lietuvos Energija established a new company Energijos Sprendimų Centras UAB (ESC) which will be developing projects on energy efficiency improvement and renewable energy resources in Lithuania and abroad. During the sitting of the Board held on 19 February the Board of Lietuvos Energija elected Mr Donatas Černiauskas as the CEO of Energijos Sprendimų Centras UAB. The operations of the new company will be based on the ESCO (Energy Service Company) model which defines the company providing energy efficiency improvement services as the entity investing in energy efficiency measures and covering the investments made using future energy savings during the validity term of the agreement. The company's operations will allow achieving the highest impact of energy efficiency and at the same time avoid incurring large initial investments by the owners of buildings or equipment. On 27 April 2016, the street lighting project in the municipality of Širvintos, which was the first one based on the ESCO model principles, was finished by Energijos Tiekimas, where around 70% of lamps held by the municipality and consuming the largest quantity of electricity will be replaced with modern LED type lamps. It is estimated that the municipality of the region will save about 75% of electricity consumed for the street lighting per year due to the introduction of advanced technologies. This was the first of its scale ESCO project in Lithuania. Contracting works were carried out by a Group company Energijos paslaugų ir rangos organizacija (EnePRO). On 7 April 2016, ESC arranged a conference for representatives of municipalities during which time it familiarised them with peculiarities of the procurements of street lighting modernization, state guarantees, course of the public - private sector
23 INTERIM REPORT FOR Q1 OF 2016 | Review of the Company’s and the Group’s activities
partnership projects, as well as technical aspects. The conference was attended by over 140 participants.
Two wind power parks added to the Group's portfolio In January 2016, Lietuvos Energija acquired two companies operating wind power parks in Lithuania and Estonia – Eurakras UAB and Tuulueenergia OU. The existing electricity generation capacities of the state-owned group of companies were increased by additional 42.3 megawatts (MW). The wind power parks held by Lietuvos Energija are expected to produce around 136 thousand MWh of electricity per year, which is the quantity that could meet the annual electricity demand of Klaipėda city residents. Eurakras UAB, a Lithuanian company acquired, operates the park consisting of 8 wind turbines with the capacity of 24 MW located in the villages of Geišiai and Rotuliai II in Jurbarkas region. Lietuvos Energija acquired 75% of shares of this company from Renagro UAB and the investment entity BaltCap. Wind turbines for this wind power park were produced by the German company Nordex. The installed capacity of each turbine is equal to 3 MW, the height of the tower reaches 120 metres and the diameter of the rotor – 117 metres. This wind power park was constructed only recently – the building completion statement and the permit for electricity generation were issued at the end of December 2015. During the auction on the allocation of promotion quotas organised by the National Control Commission for Prices and Energy on 22 February 2013, the wind power park of Eurakras was granted the promotion quota for electricity generation. Electricity produced by the wind power park will be purchased at the tariff of EUR 71 per MWh for 12 years. The company Tuulueenergia operates the park consisting of 6 wind turbines with the capacity of 18.3 MW in the locations of Mali and Tamba in Estonia. Lietuvos Energija acquired 100% of shares of this company from BaltCap and minority shareholders. All six wind turbines were produced by the German company Enercon. The installed capacity of each turbine is equal to 3 MW, the height of the tower reaches 99 metres and the diameter of the rotor – 101 metres. This wind power park was put into operation at the beginning of 2015. The wind power park of Tuulueenergia was installed using two types of support: a part of the park was constructed using the investment support and with respect to the other part a promotional tariff was ensured, which is paid for 12 years in Estonia as of the commencement of the operation of the park (a fixed premium of EUR 53.7 per MWh is added to the electricity market price).
The total consideration for both transactions is equal to EUR 28 million. The enterprise multiple (enterprise value-to-EBITDA ratio), after the assessment of the borrowings of the companies, ranges from 9 to 10 times. These acquisitions were mostly financed using borrowed funds. On 5 August 2015, Lietuvos Energija publicly invited owners of the wind power parks to consider the possibilities of selling the infrastructure operated.
Assessment of wind energy potential in Kruonis Pumped Storage Power Plant At the beginning of 2015, the complex measurements of wind speed, directions and other meteorological conditions were completed in the territory of Kruonis Pumped Storage Power Plant in order to carry out an initial assessment of the potential of the land plot for the installation of the wind power park. Based on favourable wind measurement results the company initiated the preparatory works for the installation of the wind power park in the territory of Kruonis Pumped Storage Power Plant. Currently, the environmental impact assessment report is being drafted, which is expected to be finalised by the middle of 2016.
International companies choose Duomenų Logistikos Centras In February 2016, Hurricane Electric Internet Services, the world’s largest IPv6-native Internet backbone, announced its latest Point of Presence (PoP) at Duomenų Logistikos Centras (DLC), Juozapaviciaus str. 13, Vilnius, as the start of its operations in the Baltic countries. With this new PoP, customers of DLC and companies in Lithuania will have direct access to Hurricane Electric’s robust IPv4 and IPv6 network. DLC customers will also now have the opportunity to exchange IP traffic with Hurricane Electric’s global network.
Enhancing the efficiency of operations Higher efficiency of activities of the Group ensures the balance between higher profit and return for shareholders and lower tariffs for consumers. The strategy of Lietuvos Energija for 2014–2020 provides that higher operational efficiency will be achieved by applying the most advanced management practices in corporate governance, planning and monitoring of activities, finance, procurement, risk management and internal audit areas. The Group currently has an installed and developed uniform management and control system, it has an approved management and control system policy, risk management
24 INTERIM REPORT FOR Q1 OF 2016 | Review of the Company’s and the Group’s activities
policy and methodology, integrated planning and monitoring system policy, innovation management policy, project management policy and procedure, a process management standard, portfolio formation and monitoring procedure currently being drawn up, etc. The uniform management and control system facilitate progress towards higher efficiency and synergy in the activities of the Group companies and the implementation of goals set.
Centralisation and improvement of efficiency of processes With a view to improving the processes that support the principal activities of the Group and reducing their expenses, the Lietuvos Energija group companies concentrated the part of functions supporting the principal activity in a separate company, i.e. Verslo Aptarnavimo Centras UAB. IT provides to the Group companies the services of public procurement, accounting and administration of employment relationships, manages customer service network and self-service website, as well the centralization of law function and so on. The aim of centralisation of the processes is to standardise the processes, achieve higher transparency and efficiency and accelerate them. Such model of concentration of the supporting processes is in line with the best international practices. Following the centralisation of real estate management and its concentration with the company NT Valdos, aiming to enhance efficiency and focus on principal activities, the Group launches the sale of real estate which is not of strategic importance to the power sector. The first auction of real estate administered by NT Valdos was organised on 26 February 2016. The participants were offered the objects suitable for administrative, warehousing, production purposes, including several residential or recreational objects. In total 8 objects for EUR 1.265 million were sold at the auction. On 5 January 2016, Lietuvos Energija also announced the procurement for the overdraft with the two-year maturity. SEB bankas was selected, the credit agreement was concluded on 7 March 2016. This short-term lending facility will be available to all companies of the Group, therefore there will be no need for acquiring such services separately. The centralised treasury management will allow reducing the Group's overdraft limit by half compared to the limit obtained by the companies individually. This will lead to lower interest expenses incurred by the Group when obtaining financing for working capital and higher treasury management effectiveness. On 1 February 2016, the Board of Lietuvos Energija approved the project to enhance the Group's treasury activities – the management of a part of treasury functions is planned at the Group level.
Interest charged for the overdraft will be linked with the euro area overnight interbank interest rate (EONIA). In case of the effective interbank interest rate becoming negative, this interest rate will be deemed to be equal to zero. The option to postpone the overdraft's repayment term equal to 24 months for the additional term of 12 months will be available. The repayment of the overdraft will not be secured with pledges of the Group's assets. The credit terms will not provide any restrictions on obtaining additional borrowings or engaging in economic activities.
Single integrated business management system is planned 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 Group 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 the Lietuvos Energija group should also feel the benefit of the new system – due to the single and modern system, the Group companies will be able to provide services to customers in a more qualitative and flexible way: create more flexible service plans, better service customers in service centres and via self-service channels; system reliability and speed will increase.
Old units withdrawn from operation in Elektrėnai, arrangement of the fuel economy After completing a project on the development of heat generation facilities in Elektrėnai in 2015 by Lietuvos energijos gamyba, the use of 1st and 2nd units of the plant for heat generation was no longer expedient; therefore, it was decided to disassembly these old and inefficient units of reserve power plant, built in 1962-1965, each with a capacity of 150 MW. Electricity generated by these units is not competitive on the market; therefore, their decommissioning will help to reduce the need for services implementing public interest (SIPI), and at the same time, also the final electricity tariff for consumers. Thermal insulation of the units, bricks of furnaces have already been dismantled and utilized, also equipment and devices of the units are removed, by selling a part of them as metal scrap, and the remaining equipment still suitable for use in the market. Before the end of March 2016, 60 percent of dismantling works was completed.
25 INTERIM REPORT FOR Q1 OF 2016 | Review of the Company’s and the Group’s activities
On 8 December 2015, the board of Lietuvos energijos gamyba made a decision to terminate the operation of another two – 5and 6 units – of the reserve electricity plant operating in Elektrėnai from 2016. Dismantling works of these units will preliminary start at the beginning of 2017, upon completion dismantling of the 1st and 2nd units. Decommissioning of the 5th and 6th units of the electricity plant, the capacity of which is 300 MW each, was planned in the Company’s long-term strategy published in the middle of 2014. The units are decommissioned due to poor technical condition, low utilization potential in the future and great maintenance costs. The units that started generation of electricity in 1967-1968, did not operate for several years, and, therefore, have been conserved recently. Due to minimized use of fuel oil in activities of Lietuvos energijos gamyba, which resulted in the disappeared need to store the state reserve of fuel oil, scopes of the fuel economy in Elektrėnai no longer meet the Company’s actual demand. Therefore, at the end of 2015, the 1st stage of arrangement of the fuel economy was initiated. During it, tenders for sale or lease of the existing fuel oil reservoirs for fuel oil, works of preparation for liquidating a part of the reservoirs, optimization of the electricity grid of the fuel economy, dismantling of the cistern heater and 1st fuel oil ramp, also other programme implementation works were initiated.
Ensuring the quality of services Investments in electricity network and services Since 2016, the Group company Energijos Skirstymo Operatorius (ESO) services 1.65 million customers and devotes great attention to the development and modernisation of the power grid, consistently expanded and improved the provided services considering the changing needs of its customers. Also the company operates natural gas distribution network that supplies natural gas to more than 560 thousand customers. ESO is consistently investing into construction of new pipelines and connecting new customers. About 89 thousand household customers use gas for heating their houses, while the majority of customers, about 471 thousand, use gas in stoves for cooking. Corporate customers, thermal power producers and public sector objects are the largest consumers of gas. ESO plans to carry out a major modernisation of the power distribution network over the next ten years. In order to ensure the provision of reliable, safe and smart services, the company plans to invest EUR 1.7 billion in the modernisation and renewal of the network by 2025. In the period from 2016 to 2025, the estimated need for
investments in the natural gas distribution network is equal to EUR 141.1. The major part of the planned investments will be directed towards the construction of new gas pipelines and customer connections. During Q1 2016, ESO connected 4,807 new electricity customers, i.e. 10.3% less than in the respective period of 2015, when 5,364 new customers were connected. Admissible electric power of newly connected customers was 66,551 kW, which is 20.8% more than in 2015 (84,112 kW). During Q1 of 2016, ESO replaced 29,544 units of electricity meters that no longer meet the meteorological requirements, 23,774 were electric meters and 5,770 natural gas meters. The company installed 4,235 units of electricity and 1,247 units of natural gas metering devices for new customers. By investing in the modernisation and automation of electricity and gas metering devices, during the period of 3 months, ESO connected 402 units of electricity and 78 units of gas metering devices to the automated data reading system, thus increasing the number of electricity and gas metering devices operated by the company, the data of which are read in a remote manner, to 27,740 and 1,158 respectively. During Q1 2016, 1,532 new natural customers applied and signed contract for a connection to the natural gas distrubution network. In comparison, the were 965 new customers a year ago. On 8 January 2016, ESO, in cooperation with the consortium of the Lithuanian and foreign companies which was announced as the winner of the international public tender, started preparing for the installation of smart meters. Such devices will be installed for 3 thousand ESO customers. By implementing the pilot project ESO aims to assess the effectiveness of smart meters and their benefit for customers. An hourly electricity consumption will be displayed on a special screen or on the Gilė self-service website www.manogile.lt. ESO specialists will receive detailed information about the quality of electricity supplied and the condition of the network. In 2016 ESO plans to build over 100 kilometers of gas distribution pipelines and to connect almost 4,000 new gas customers.
Service prices to customers continue to decline Since 1 January 2016, new electricity prices as adjusted in view of the amendments to the Law on the LNG Terminal were announced – the price of electricity for household customers declined by an average of 0.2 cent per kWh.
26 INTERIM REPORT FOR Q1 OF 2016 | Review of the Company’s and the Group’s activities
In 2016, the price cap for the electricity distribution service via medium voltage networks is equal to 1 euro cent/kWh, i.e. by 0.178 euro cent lower than in 2015. In 2016, the price cap for the electricity distribution service via low voltage networks is equal to 1.766 euro cent/kWh, i.e. by 0.216 euro cent higher than in 2015. This price increases due to the larger needs for investments in the modernisation of low voltage networks. The total weighted natural gas distribution tariff decreased by around 1% compared to 2015. On 30 November 2015, the National Control Commission for Prices and Energy (the Commission) approved the gas price for household customers for the first half of 2016 – as of 1 January 2016 household customers pay for gas the same price as in the second half of 2015. Stable prices for household customers were retained due to the application of an additional discount which equalises fluctuations in the prices for the natural gas import and infrastructure services. Additional possibilities for reducing the tariffs appear from the beginning of the 2nd half year of 2016. On 18 May 2018, the NCECP suggested that Lietuvos dujų tiekimas should approve lower by 8-15 percent prices for private customers. It is possible to reduce prices due to a diversified natural gas portfolio after gas was acquired under favourable conditions from Statoil and it was successfully agreed regarding smaller by 30 percent LNG quantity for the terminal maintenance. From the beginning of 2014, the final gas price for private customers, irrespective of increased infrastructure costs, reduced by 30 percent on average. From 1 March Lietuvos dujų tiekimas also reduced prices by 16 percent for natural gas to corporate customers.
will be reduced by more than one tenth (13 percent). The rate for getting electricity will also be reduced for new customers who plan business development or housing construction in more remote locations, when the distance up to electricity grid points is longer. The new rates of connecting electricity equipment to ESO distribution grids were approved by the National Commission for Energy Control and Prices on 21 April (NCECP).
Return for shareholders Lietuvos energija allocated dividends in the amount of 56.2 million EUR for the 2nd half-year 2015 and they will be paid into the budget. Previously, for the 1st half-year 2015, an amount of 29,83 million EUR dividends was paid into the budget, thus, dividends of Lietuvos energija for 2015 totalled 86 million EUR. In comparison, Lietuvos energija Group allocated 52.6 million EUR dividends for 2014 and this was the biggest amount from all state-controlled companies. Energijos skirstymo operatorius company under the management of Lietuvos energija allocated 30.596 million EUR for dividends for the 2nd half-year 2015. For the first half-year 2015, LESTO allocated dividends for the shareholders in the amount of 21.742 million EUR, or 0.036 euro per share; Lietuvos energijos gamyba – 2.667 million EUR, or 0.0042 euro per share; and Lietuvos Dujos – 10.348 million EUR, or 0.0356 euro per share, dividends.
On 23 May 2016, the NCECP changed the upper price limits for public electricity for the second half year of 2016. For those buying electricity from medium voltage grids, the upper limit will be 7.499 ct/kWh, from the low voltage grids – 9.530 ct/kWh (excluding VAT). As compared with the 1st half-year of 2016, these prices were 8.086 ct/kWh and 9.852 ct/kWh (excluding VAT) accordingly. From 1st July, ESO will apply lower by 5.4 percent on average electricity prices for private customers. After the NCECP announced the prices approved by ESO on 30 May, from 1 July 2016 the price of the “Standard” one-time zone tariff according to which payments are made by 70 percent of private ESO customers, will be 12 cents per kWh, which is less by 5.5 percent than during the first quarter of 2016. From 1 June, the rates for getting electricity and capacity increase will change. The rates per constructed meter of the grid for private and corporate customers, the allowable usage capacity used by whom does not exceed 100 kW will be reduced by more than one fifth (22 percent). Rates for customers using a capacity of 100-500 kW
27 INTERIM REPORT FOR Q1 OF 2016 | Review of the Company’s and the Group’s activities
Corporate responsibility
Relationships with employees and society
Environmental protection
Responsible and transparent market operations
The Lietuvos Energija group aims to conduct its operations in a responsible manner with a particular regard to corporate social responsibility (CSR). The Group seeks to ensure that its operations are based on the principles laid down in the Global Compact, a United Nations initiative. The latter principles define corporate responsibility in the areas of human rights, rights at work, environment, and anticorruption. The model of socially responsible business of the Lietuvos Energija group is implemented through targeted and consistent activities in the following areas: relationships with employees and society, environmental protection and responsible and transparent market operations.
Lietuvos Energija has a purpose of ensuring a long-term progress of business and society, aims to contribute to the development of society and promotion of its welfare. The Group has established the Sponsorship Fund and supports initiatives and projects that are significant to the state and society. In its operations the Group seeks to use advanced measures, technologies and processes that help reducing the impact of operations on environment, promoting efficient management and utilisation of resources; it implements activities to reduce costs and waste. The Group companies promote and actively participate in environmental campaigns and preventive programmes.
Lietuvos Energija aims to reduce the impact of its operations on the environment, community, and other businesses, and to joint its efforts with public authorities and non-governmental organisation in dealing with social and environmental issues, thereby contributing to the development of the society and economic growth.
The companies of Lietuvos Energija pay particular attention to the education of society and businesses in the field of energy (including security, energy efficiency and promotion of rational energy consumption) by creating its own initiatives and engaging in those organised by society, encouraging responsibility and awareness; it actively cooperates with local communities.
Social responsibility and environmental protection In its responsible activities Lietuvos Energija follows social responsibility policies approved by the Board that provide common CSR directions and principles to be followed by all companies of the Group aiming to create the conduct and standards of socially responsible and sustainably developed business of the Lietuvos Energija group.
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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.
The Environmental Management System complying with requirements of LST EN ISO 14001:2005 has been implemented in objects of Lietuvos Energijos Gamyba.Also the requirements for the atmospheric, surface water, groundwater and soil pollution monitoring and protection measures specified in the Integrated Pollution Prevention and Control (IPPC) permits are implemented. 18 types of waste are sorted in the modern waste sorting site. Hazardous and nonhazardous waste generated in activities of the Company’s electrical plants are transferred for waste managers. Ferrous and non-ferrous metal scrap is sold for buyers-up for the market price. Household, paper and cardboard, plastic and glass waste is sorted and transferred for utility services companies.
Group commits to ensure confidentiality and keep the identity of the person giving the information secret.
Accountability For more information on corporate responsibility and initiatives conducted please visit the websites indicated below (the sections of social responsibility and CSR progress reports): http://www.le.lt/lt/socialine-atsakomybe/12, www.eso.lt/Socialinėatsakomybe,
Safety
https://gamyba.le.lt/lt/socialine-atsakomybe.
Safety of operations is one of the most important priorities of the Lietuvos Energija group. All companies of the Group are required to follow the Occupational Safety and Health Policies. Top-level managers are responsible for safe and healthy work environment.
Sponsorship
Since the end of 2015, the internal initiative of “Safety Agents” has been carried out in ESO company; during off-hours employees observe and notify of disorderly and possibly hazardous electrical equipment. During the first quarter, 11 notifications with pictures were received that were conveyed to the units in charge of them, also described on the Company’s intranet. This way we also educate colleagues not directly involved in the network infrastructure.
Transparency The Lietuvos Energija group has approved the zero-tolerance policy against corruption, which applies to all employees of the Group and its interested parties, i.e. contractors, suppliers, consultants, agents and other intermediaries. Persons responsible for the implementation of this policy have been appointed. The policy sets out public commitments to comply with legal norms applicable to the operations and to fight corruption. All employees of the Group are acquainted with this policy and its requirements, educational anti-corruption programmes are conducted. The Group has clearly established procedures regarding gifts and other benefits. The single Trust Line is available for the Group's employees and all interested parties – its telephone number and email are announced publicly, indicated on the website. The
29 INTERIM REPORT FOR Q1 OF 2016 | Corporate responsibility
Pursuant to the Order of the Minister of Finance of the Republic of Lithuania, Lietuvos Energija has set up the Sponsorship Fund (the Fund), which supports initiatives and projects that are significant to the state and society. In 2016, the Policy on Granting Financial Assistance and Financial Assistance Management Rules were updated. Potential beneficiaries of financial assistance were invited on 21 March – 4 April to submit applications for the receipt of financial assistance. The priority areas at the national level were established in 2016: Sports (with an exception of extreme) by supporting professional sports clubs uniting the country and making its name known, also sports organizations training new sports talents; Support of children suffering from oncological diseases by fostering public organizations or movements which activities or projects are ongoing and create benefit on the whole-nation level, having experience in implementing international social projects and disseminating the good experience of implementing such projects, providing knowledge and cooperating with health care institutions, as well as families of children with oncological diseases, fostering maintenance of family and social relationships of such children; Fostering of science and innovation by supporting ideas, investigations, works of young researchers the implementation whereof would strengthen positions of Lithuania in the international innovation market, help to strengthen the Lithuanian education and science system, enhance public interest in science, reinforce longterm cooperation traditions among research institutions, academic society, business and public organizations, also help young talents in research and
innovations to become established in the Lithuanian and global research community. On 23 May 2016, a budget of Lietuvos energijos paramos fondas (Lietuvos Energija Support Fund) for financial assistance was approved by Lietuvos energija; in 2016 it is intended to allocate up to 661 thousand euros in total for financial assistance.
Public initiatives Each year the Group actively contributes to the event of the traditional Days of Energy Professionals organised by the National Lithuanian Energy Association (NLEA). On 16-17 April 2016, free educational events were hosted in the Lithuanian Energy and Technology Museum – excursions for the public. During the excursions, visitors were able to get familiarised with the Lithuanian energy system and its topicalities, also, to learn more about the energy specialist’s occupation. In order to strengthen ties with Elektrėnai region community, where the main activities of Lietuvos Energijos Gamyba are focused, traditional events “Lietuvos Energijos Gamyba Presents” are held. In March 2016, the meeting with the famous Sedish publicist, film director and translator John Ohman was arranged. A total of 13 cycle meetings were held so far. The Group ensures a possibility to charge electric cars in a rapid charging station free of charge. In July of 2014, 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’ HPP. In 2016, the power plants were visited by few hundreds visitors. Seeking to foster consciousness of school communities and contribute to the creation of sustainable, energy and environment saving Lithuanian society, the Lithuanian Children’s and Youth Centre and ESO together with partners invited the country’s education institutions to participate in a year-long educational programme “A Sustainable School”. This project earned a prize of the Swedish business awards for the best social responsibility project in 2014.
30 INTERIM REPORT FOR Q1 OF 2016 | Corporate responsibility
On 11 February 2016, ESO and the daily Verslo Žinios organized the sixth, already traditional conference for business. More than 220 participants attending it shared their insights with specialists from different sectors. During its time practical energy efficiency measures, specific solutions for electricity and gas infrastructure implemented by companies, energy efficiency, financing, transposition of the European Union energy efficiency directive into the country’s national law, also other relevant issues were discussed.
Long-term projects The Group’s company ESO continues broad-scale long-term social responsibility projects intended for children, youth and general public that are united by active involvement of different society groups, ideas on safety and efficient energy use, as well as environmental friendliness. “As Much as Needed”. Fostering rational use of energy is one of ESO priority directions of social responsibility contributing to the preservation of environment and energy resources, as well as the country’s obligations in implementing the European Union Climate Change Programme. The project is intended for creating traditions of a rationally living society – here solutions for rational electricity consumption are searched by focusing on consumption in business, industry. The Green Protocol. It is ESO initiated agreement (has been existing for six years) by which the companies and organizations that signed it confirm that they approve and undertake to apply environmentally friendly ideas. During the 1st quarter 2016, the initiative was joined by 24 new companies (in total, 212 companies have joined it).
Recognized activity Recognized governance. On 18 March 2016, the weekly Veidas elected as a CEO of the Year 2015 the Director General of Lietuvos energija Group of companies Dr. Dalius Misiūnas. During prestigious elections held for the sixteenth year in a row, for the first time the winner was elected a CEO of a state-controlled company (SSC). Relations with investors. During the event Nasdaq Baltic Market Awards 2015 of the securities exchange, three awards were received – for progress of Lietuvos dujos and LESTO achieved in improving relations with investors in 2015. Legal functions. An award “The Lawyer of the Year” established by the Association of Corporate Lawyers (B.I.T.A.) was earned on 14 April 2016 by Ingrida Kudabienė, Director of the ESO Law Department.
Corporate governance
The aim of the Lietuvos Energija group, with the State of Lithuania as its shareholder, is to ensure effective and transparent operations. In order to achieve this aim, the reorganisation of governance was carried out in 2013, during which the corporate governance of the Group was reorganised and improved. The new governance structure and model of the Group has been developed on the basis of the most advanced international and national practices, following the recommendations published by the Organisation for Economic Cooperation and Development, having regard to the Corporate Governance Code of companies listed on the NASDAQ OMX Vilnius exchange, Guidelines on the Governance for Stateowned Enterprises recommended by the Baltic Institute of Corporate Governance. The corporate governance model of the power generation companies’ group was implemented in observance of the Corporate Governance Guidelines approved by the Ministry of Finance of the Republic of Lithuania on 7 June 2013 (the Guidelines are available at www.le.lt).
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The primary goal of the corporate governance is to achieve the effect of synergy aligning different activities of the Lietuvos Energija group companies and targeting them at the achievement of the common goals at the Group level. The Group’s governance structure has been formed according to the principles of corporate governance and contributes to their implementation. The Company’s shareholder is the State which controls 100% of its shares. The rights and obligations of the shareholder are implemented by the Ministry of Finance of the Republic of Lithuania, which adopts the main decisions relating to the implementation of the ownership rights and obligations. Management Coordination Centre recognised the Lietuvos Energija group as the best managed State capital entity in 2014 and in 2013. High scores were given for transparency and management. In 2014 the good management index of the Group reached 8.44 points out of 10 possible.
Supervisory bodies Supervisory Council The Supervisory Council is a collegial supervisory body provided for in the Articles of Association of the Company and elected by the General Meeting of Shareholders for a term of four years. The Supervisory Council of Lietuvos Energija consists of seven members – natural persons representing the Ministry of Finance, the Ministry of Energy, the Ministry of Economy, the Office of the Government of the Republic of Lithuania, and three independent members. The Chairman of the Supervisory Board is elected from the members of the Supervisory Board. This model of formation of the Supervisory Council complies with the principles of corporate governance. The composition of the Supervisory Council functioning at Lietuvos Energija as at 31 March 2016 was as follows*:
Šarūnas Kliokys (born in 1959)
Antanas Danys (born in 1975)
Dr Virginijus Lepeška (born in 1955)
Tomas Garasimavičius (born in 1978)
Aloyzas Vitkauskas (born in 1954)
Rasa Noreikienė (born in 1959)
Rokas Baliukovas (born in 1977)
Chairman, independent member
Independent member
Independent member
Member
Member
Member
Member from 17/12/2014
Creighton University, Master’s studies of Political Science; Institute of International Relations and Political Science (IIRPS) of Vilnius University, Master’s studies of Political Science; IIRPS of Vilnius University, Bachelor's degree in Political Science.
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 Electrical Engineering; Šiauliai University, Master's degree in Power Engineering; Šiauliai University, Master's degree in Management and Business Administration.
Ministry of Economy of the Republic of Lithuania; Deputy Minister.
Ministry of Energy of the Republic of Lithuania; Deputy Minister.
Educational background
Vytautas Magnus University; Baltic Management Institute, Master's degree in Business Administration (EMBA); Vilnius University, Economist’s Diploma.
Vilnius University, Master’s degree in Business Administration (MBA); Boston College, Bachelor’s degree
Vilnius University, Doctoral degree in Social Sciences.
Workplace, position
Chairman of the Board of Ekonovus UAB, Chairman of the Board of Avestis UAB; Chairman of the Board and Executive Director of Šiaulių Plento Grupė UAB; Chairman of the Board Kilimai AB; Member of the Board of the state enterprise Centre of Registers, Member of the Board of the association EUROCHAMBERS, President of the Lithuanian Chamber of Commerce, Industry and Crafts
Director of Grinvest PTE.LTD; Development Director of Kaštonų Kalva UAB; Member of the Board of Lanestead OU; Member of the Board Balaef OU; Chairman of the Board of Neo Finance UAB; Director of Asian Pacific Green Energy Pte. Ltd.
Consultant, Chairman of the Board Government of the Republic of Ministry of Finance of the of Organizacijų Vystymo Centras Lithuania, Advisor to the Prime Republic of Lithuania; Deputy UAB; Consultant at OVC Mokymai Minister for Energy. Minister. UAB; Advisor to the Chairman of the Board of Vilandra UAB; Advisor to General Manager of AL Holdingas UAB; Member of the Board of the Association Mentor Lietuva; Member of the Board of the public institution Paramos Vaikams Centras; Member of the Commission for the Selection of Candidates for Judge.
*None of the members of the Supervisory Council has any ownership interest in the capital of the Company or the Group of the companies. On 26/05/2016, by the order of the Minister of Finance, Aloyzas Vitkauskas was withdrawn from the Supervisory Council of Lietuvos Energija – instead of him, Finance Vice-Minister Agnė Bagočiutė was appointed.
32 INTERIM REPORT FOR Q1 OF 2016 | Corporate governance
The main functions and responsibilities of the Supervisory Council are as follows: election and removal of the Board Members, supervision of activities of the Board and the CEO, provision of comments to the General Meeting of Shareholders on the Company’s strategy, a set of financial statements, appropriation of profit or loss, and annual report. The Supervisory Council also addresses other matters within its competence. The Supervisory Council is functioning at the Group level, i.e. where appropriate, it addresses the issues related not only to the activities of the Company, but also to the activities of its subsidiaries or the activities of their management and supervisory bodies.
Committees of the Supervisory Council For the purpose of effective fulfilment of its functions and obligations, the Supervisory Council forms the committees. The committees of the Supervisory Board provide their conclusions, opinions and proposals to the Supervisory Council within their competence. A committee consists of at least three members, of whom at least one member is a member of the Supervisory Council and at least one member is an independent member. The following committees have been established at Lietuvos Energija:
Audit Committee Member of the Committee Rasa Noreikienė Chair of the Committee
33 INTERIM REPORT FOR Q1 OF 2016 | Corporate governance
Workplace Ministry of Economy of the Republic of Lithuania, Vice-Minister
Danielius Merkinas Independent member
-
Finance Director of Nordnet UAB
Aušra Vičkačkienė Member
-
Gintaras Adžgauskas Member
-
Ministry of Finance of the Republic of Lithuania, Director of the Asset Management Department Director of the Lithuanian Committee of the World Energy Council
Irena Petruškevičienė Independent member
-
Main functions of the Committee are as follows:
Risk Management Supervision Committee is responsible for the submission of conclusions or proposals to the Supervisory Council on the functioning of management and control system in the Group and (or) main risk factors and implementation of risk management or prevention measures; Audit Committee is responsible for the submission of the objective and impartial conclusions or proposals to the Supervisory Council on the functioning of the audit and control system in the Group; Appointment and Remuneration Committee is responsible for the submission of conclusions or proposals on the matters of appointment, removal or promotion of the Board Members to the Supervisory Council, also for the assessment of activities of the Board and its members and for issuing the respective opinion. The functions of the committee also cover the formation of the common remuneration policy at the Group level, establishment of the amount and composition of remuneration, principles of promotion, etc. 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.).
Number of shares of the Company and the Group companies held -
Member of Audit Development Committee of the European Commission
to monitor the process of preparation of financial statements of the Company and the Group companies, with a special focus on the relevance and consistency of accounting methods used; to monitor the effectiveness of internal controls and risk management systems of the Company and the Group companies, to analyse the need for and relevance of these systems and perform the review of the existing internal control management systems; to monitor the adherence to the principles of independence and objectivity by the certified auditor and audit company, to provide related recommendations, as well as proposals for the selection of an audit company; to monitor the audit performance processes of the Company and the Group companies, to examine the effectiveness of audit and response of the administration to the recommendations provided in the management letter; to monitor the effectiveness of the internal audit function of the Company and the Group companies, to analyse the need for and relevance of this function, to provide recommendations on the need for, effectiveness of the internal audit function, and on other internal audit related matters; to provide proposals for the internal audit plans of the Company and the Group companies, recommendations for the regulations of the internal audit units of the Company and the Group companies, appointment and dismissal of the head of a structural unit performing the functions of the internal audit, approval of his (her) job description, imposition of incentives and penalties;
to monitor the compliance of activities of the Company and the Group companies with laws and other legal acts of the Republic of Lithuania, articles of association and operational strategy; to assess and analyse other issues attributed to the competence of the Committee by the decision of the Supervisory Council; to perform other functions related to the functions of the Committee set forth by legal acts of the Republic of Lithuania and in the Corporate Governance Code of companies listed on NASDAQ Vilnius Stock Exchange.
Risk Management Supervision Committee Member of the Committee
Number of shares of the Company and the Group companies held Antanas Danys Chairman of the Committee Raimundas Petrauskas Independent member Donatas Kaubrys Independent member Tomas Garasimavičius Member
-
Appointment and Remuneration Committee Member of the Committee
Number of shares of the Company and the Group companies held Aloyzas Vitkauskas Chairman of the Committee Virginijus Lepeška Independent member Tomas Garasimavičius Member
Ministry of Finance of the Republic of Lithuania, Vice-Minister Chairman of the Board of Organizacijų Vystymo Centras UAB Advisor to the Prime Minister of Lithuania for Energy
Main functions of the Committee are as follows: Workplace
Director of Grinvest PTE.LTD General Manager of Schmitz Cargobull Baltic UAB Director of Dovirma UAB Advisor to the Prime Minister of Lithuania for Energy
Main functions of the Committee are as follows:
Workplace
to monitor the identification, assessment and management of risks relevant for the accomplishment of goals of the Company and the Group companies; to assess the relevance of internal control procedures and risk management measures with respect to the identified risks; to assess the status of implementation of risk management measures; to monitor the implementation of risk management process; to analyse financial possibilities for the implementation of risk management measures; to assess the risks and risk management plan of the Company and the Group companies; to assess the regular risk identification and assessment cycle; to control the establishment of risk registers, analyse their data and provide proposals; to monitor the drafting of risk management related internal documents; to perform other functions attributed to the competence of the Committee by the Supervisory Council.
34 INTERIM REPORT FOR Q1 OF 2016 | Corporate governance
to assess and provide proposals on the long-term remuneration policy of the Company and Group companies (the main fixed part of the remuneration, performance based remuneration, pension insurance, other guarantees and forms of remuneration, compensations, termination benefits, other parts of the remuneration package), principles of compensation for costs related to the individual’s performance; to assess and provide proposals on the policy of bonuses of the Company and the Group companies; to monitor the compliance of the policy of remunerations and bonuses of the Company and the Group companies with the international practice and good governance practice recommendations, and provide respective proposals for the improvement of the policy of remunerations and bonuses; to provide proposals concerning bonuses upon appropriation of profit (losses) to be appropriated of the Company and the Group companies of the respective financial year; to assess the terms and conditions of agreements of the Company and the Group companies with members of management bodies of the Company and the Group companies; to assess the procedures of recruitment and selection of candidates to members and senior management of the Company and the Group companies and establishment of the qualification requirements; to perform regular reviews of the structure, size, composition and activities of the management and supervisory bodies of the Company and the Group companies; to supervise how members of management bodies and employees of the Company and Group companies are notified of the professional development possibilities and how they upgrade their skills regularly; to supervise and assess the implementation of measures ensuring the continuity of operations of the management bodies and employees of the Company and the Group companies; to perform other functions attributed to the competence of the Committee by the Supervisory Council.
Management bodies Board The Board is a collegial management body provided for in the Articles of Association of the Company. The members of the Board are elected for a term of four years and removed by the Supervisory Council on the proposal of the Appointment and Remuneration Committee. The Board consists of five members and elects from among its members the Chairman of the Board – the Chief Executive Officer of the Company. The members of the Board, acting within their competence, must ensure the proper performance of the Company’s activities / supervision of the respective areas at the Group level. The composition of the Board functioning at Lietuvos Energija as at 31 March 2016 was as follows*:
Dr Dalius Misiūnas (born in 1978)
Ilona Daugėlaitė (born in 1970)
Darius Kašauskas (born in 1972)
Mindaugas Keizeris (born in 1980)
Dominykas Tučkus (born in 1981)
Chairman of the Board, CEO
Member of the Board, Organisational Development Director
Member of the Board, Finance and Treasury Director
Member of the Board, Strategy and Development Director
Member of the Board, Production and Services Director from 04/01/2016
Educational background
Lund University, Doctoral degree in Vilnius University, Master’s degree in Technological Sciences; Hydrogeology and Engineering Geology. Lund University, Master’s degree in Industrial Electrical Engineering and Automatics; Kaunas University of Technology, Bachelor's degree in Electrical Engineering.
ISM University of Management and Economics, Doctoral studies of Social Sciences in the field of Economics; ISM University of Management and Economics, BI Norwegian Business School, Master’s degree in Management; Vilnius University, Master’s degree in Economics.
Vilnius University, Master’s degree in International Business. Vilnius University, Bachelor’s degree in Business Administration and Management.
L. Bocconi University (Italy), Master's degree in Finance; L. Bocconi University (Italy), Degree in Business Management and Administration.
Workplaces, position
Chairman of the Supervisory Council of Energijos Skirstymo Operatorius AB (from 3 Dec 2015); Member of the Board of Directors of the Association Eurelectric; President of the Lithuanian Power Association; President of the Alumni Association of Kaunas University of Technology; Member of the Board of the Sponsorship Fund of Lietuvos Energija; Member of the Council of the Lithuanian Confederation of Industrialists.
Chairman of the Board of NT Valdos UAB; Chairman of the Board of Verslo Aptarnavimo Centras UAB (until 6 Jan 2016); Chairman of the Board of Elektroninių Mokėjimų Agentūra UAB (from Dec 2015); Chairman of the Board of Duomenų Logistikos Centras UAB (from Jan 2016).
Chairman of the Supervisory Council of Lietuvos Energijos Gamyba AB (from 2 Dec 2015); Chairman of the Board of Energijos Teikimas UAB (until 8 Feb 2016); Chairman of the Board of LITGAS UAB (until 11 Jan 2016); Member of the Board of Lietuvos Dujų Tiekimas UAB (until 11 Jan 2016); Chairman of the Board of Energetikos Paslaugų ir Rangos Organizacija UAB (from 26 Oct 2015); Chairman of the Board of Vilniaus Kogeneracinė Jėgainė UAB (from 6 Nov 2015), Member of the Board of the Sponsorship Fund of Lietuvos Energija; Member of the Supevisory Council of Elektroninių Mokėjimų Agentūra UAB (from Jan 2016).
Member of the Supervisory Council of Lietuvos Energijos Gamyba AB (from Jan 2016); Chairman of the Board of LITGAS UAB (from Jan 2016); Member of the Board of Lietuvos Dujų Tiekimas UAB (from Jan 2016); Member of the Board of Energijos Tiekimas UAB (from Jan 2016); Member of the Supervisory Council of Elektroninių Mokėjimų Agentūra UAB (from Jan 2016); Member of the Board of HOB OU; Member of the Board of Tuuleenergia OU; Member of the Board of EURAKRAS UAB.
Member of the Supervisory Council of Energijos Skirstymo Operatorius AB (from 3 Dec 2015); Chair of the Board of Technologijų ir Inovacijų Centras UAB (from Dec 2013); Chair of the Board of Duomenų Logistikos Centras UAB (until 22 Jan 2016); Chair of the Board of Verslo Aptarnavimo Centras UAB (from 6 Jan 2016); Member of the Supervisory Council of Elektroninių Mokėjimų Agentūra UAB (from Dec 2015).
*None of the members of the Board has any ownership interest in the capital of the Company or the Group of the companies.
35 INTERIM REPORT FOR Q1 OF 2016 | Corporate governance
Organizational culture and employees Employees of the Company are the key element in implementing the operational strategy of the Lietuvos Energija group. The aim is to build and maintain the organisational culture based on values that motivate employees to assume responsibility, cooperate, and joint efforts to achieve the best result. In implementing the objectives set by the shareholder and pursuing a socially responsible business, we aim at attracting and retaining skilled specialists at the Group and creating with them the long-term partnership relationships and joint successful future while ensuring the mutual benefits. As at 31 March 2016, the Group had 50591 employees. During the year the number of employees of the Lietuvos Energija group decreased by 6% or by 320 employees. Company
Structure of the Company's employees eccording to educational background, %
Number of valid employment contracts.
36 INTERIM REPORT FOR Q1 OF 2016 | Corporate governance
83 2,749 404 711 185 17 29 3 238 142 16 11 416 34 18 1 2 5,059
1.3 1.3
97.4
Total number of employees
Lietuvos Energija, UAB Energijos Skirstymo operatorius, AB Lietuvos Energijos Gamyba, AB Energetikos Paslaugų ir Rangos Organizacija, UAB Technologijų ir Inovacijų Centras, UAB Duomenų Logistikos Centras, UAB Energijos Tiekimas, UAB Elektroninių Mokėjimų Agentūra, UAB NT Valdos, UAB Energetikų Mokymo Centras, VšĮ LITGAS, UAB VAE SPB, UAB Verslo Aptarnavimo Centras, UAB Lietuvos Dujų Tiekimas, UAB Vilniaus Kogeneracinė Jėgainė, UAB Kauno Kogeneracinė Jėgainė, UAB Energijos Sprendimų Centras, UAB Total
1
As at 31 March 2016, the Company had 78 employees. The total of 96.2% of the Company’s employees have higher university education, of whom 6 have doctoral degrees. The Company employs two certified professional project managers (PRINCE2 and PMP), one certified financial analyst (CFA), one certified internal auditor (CIA), one certified fraud examiner (CFE), two certified risk management assurance experts (CRMA), one certified ISO 31000:2009 risk management professional, five employees holding the professional Board Member’s qualification of the Baltic Institute of Corporate Governance. The employees are active members of the associations, unions, and academic community (Business Council of Kaunas University of Technology; Supervisory Council of the Lithuanian Energy Institute; Technological Development Committee under the Agency for Science, Innovation and Technology).
0%
10% 20% 30% 40% 50% 60% 70% Higher education Advanced vocational education
80% 90% 100% Secondary education
The total of 54.9% of the Group’s employees have higher university education, of whom 19 have doctoral degrees, 28.5% of employees have acquired advanced vocational education and 13.5% have secondary education.
Structure of the Group's employees according to educational background, % 54.9
0% 10% 20% Higher education
30% 40% 50% 60% Advanced vocational education
28.5
13.5
3.0
70% 80% 90% 100% Secondary education Other
The percentage of men and women employed at the Group is equal to 76.5% and 23.5%, respectively. The breakdown of managers by gender is similar, i.e. male managers make up 75.9% and female managers – 24.1%.
Breakdown of all employees by gender 24%
Breakdown of managers by gender
Men
Women
76% Men
Women
The total wage bill of the Company for January – March 2016 amounted to EUR 481 thousand.
Average monthly wage of the Company's employees before tax during January – March 2016 Category of employees
Structuring processes of career management, rotation systems were further continued successfully (during the 1st quarter 2016m 34 employees rotated among the Group’s companies, whereas a career inside a company was made by 151 staff member).
Development of competences
Average monthly wage, in EUR
Chief executive officer (CEO)
5,213
Top-level managers
4,003
Medium-level managers
3,177
Experts, specialists
1,725
As at 31 March 2016, the Group had 5,059 employees. The total wage bill of the Group for January–March 2016 amounted to EUR 15,238 thousand.
Average monthly wage of the Group's employees before tax during January– December 2015 Category of employees
Following the reorganisation of the management of the Group in 2016 attention is focused on a coordinated development of the organisation, management of human resources, formation of a new organisational culture, enhancement of efficiency of organisation of operations, development and maintenance of competences. During the 1st quarter 2016, the project of Human resources management purification was further implemented. Corporate (in Lietuvos energija), partnership (in the Group’s companies) and administrative (in the business service centre) Human resources management functions were separated. The function of Human resources management consulting is being formed, and managers of companies will have internal partners on strategic personnel management issues. HR management partners of companies will be able to dedicate more time for daily training of their own company managers, leadership development in the organization, thus enhancing their maturity in the field of human resources management.
24%
76%
Development of the organisation and its culture
Average monthly wage, in EUR
Chief executive officer (CEO)
3,613
Top-level managers
3,229
Medium-level managers
1,855
Experts, specialists, workers
37 INTERIM REPORT FOR Q1 OF 2016 | Corporate governance
961
Consistent care is taken of the advancement of employees’ professional skills in Lietuvos energija Group. It is made sure that employees have all certificates prescribed by the laws mandatory for their work, improved competences necessary for their job. In separate companies, at the organization’s level, different training on common, professional and management competences were organized, e.g. on leadership, team formation, change management, communication, project management, business process management, etc.
Opportunities of internship The Group companies create conditions for students of higher education institutions and vocational schools to apply their theoretical knowledge and acquire practical skills. In Q1 2016, the internship programme was accomplished by 50 students at the Group, whereof 2 were employed at the Company later on.
Supervisory and management bodies of the listed companies of the Group On 3 December 2015, following the reorganisation of LESTO AB and Lietuvos Dujos AB by way of merger the company Energijos Skirstymo Operatorius AB (ESO) was established, which started its activities from 1 January 2016 and on 31 December 2015, LESTO AB and Lietuvos Dujos AB ceased their activities and were removed from the register.
The composition of the Supervisory Council functioning at ESO from 1 January 2016 was as follows: Participation in the capital of the Term of office Company and Group companies, % Dalius Misiūnas 3 Dec 2015 – Chairman Dec 2019 Full name
Ilona Daugėlaitė Member Petras Povilas Čėsna Independent member
-
3 Dec 2015 – Dec 2019 3 Dec 2015 – Dec 2019
Workplace
Lietuvos Energija, UAB, Chief Executive Officer Lietuvos Energija, UAB, Director of Organisational Development LITEXPO, Chairman of the Board
As at 31 March 2016, the Board of Energijos Skirstymo Operatorius AB comprised as follows:
Full name
Participation in the capital of the Company and Group companies, %
Liudas Liutkevičius Chairman
-
Eglė Čiužaitė Member Dalia Andrulionienė Member Rytis Borkys Member Dalius Svetulevičius Member Augustas Dragūnas Member
-
Term of office
Workplace
31 Dec 2015 – Energijos Skirstymo Operatorius AB, Chief Dec 2019 Executive Officer 3 Dec 2015 – Feb 2019 3 Dec 2015 – Dec 2019 3 Dec 2015 – Dec 2019 3 Dec 2015 – Dec 2019 Feb 2016 – Dec 2019
Energijos Skirstymo Operatorius AB, Director of Finance and Administration Service Skirstymo Operatorius AB, Services Energijos Director Energijos Skirstymo Operatorius AB, Director of Network Maintenance Service Energijos Skirstymo Operatorius AB, Director of Network Development Service Energijos Skirstymo Operatorius AB, Director of Finance and Administration
General Manager: Liudas Liutkevičius, Chief Executive Officer of Energijos Skirstymo Operatorius AB.
38 INTERIM REPORT FOR Q1 OF 2016 | Corporate governance
The composition of the Supervisory Council functioning at Lietuvos Energijos Gamyba, AB as at 31 March 2016 was as follows: Full name
Participation in the capital of the Company and Group companies, %
Term of office
Workplace
Mindaugas Keizeris Chairman from 2 Dec 2015
-
20 Nov 2014 – August 2017
Lietuvos Energija, UAB, Strategy and Development Director
Pranas Vilkas Independent member Dominykas Tučkus Member
-
August 2013 – August 2017 21 Dec 2015 – August 2017
-
-
Lietuvos Energija, UAB, Production and Services Director
As at 31 March 2016, the Board of Lietuvos Energijos Gamyba, AB comprised as follows: Full name
Participation in the capital of the Company and Group companies, %
Eglė Čiūžaitė Chairman Adomas Birulis Member Darius Kucinas Member Vidmantas Salietis Member Mindaugas Kvekšas Member Juozas Bartlingas Chairman
-
-
Term of office
February 2016 – September 2017 September 2013 – September 2017 September 2013 – September 2017 September 2013 – September 2017 December 2015 – September 2017 September 2013 – February 2017
Workplace
Lietuvos Energijos Gamyba, AB, Chief Executive Officer Lietuvos Energijos Gamyba, AB, Director of Business Development Department Lietuvos Energijos Gamyba, AB, Director of Production Department Lietuvos Energijos Gamyba, AB, Director of Wholesale Electricity Trade Department, Energijos Tiekimas, UAB, Chief Executive Officer Lietuvos Energijos Gamyba, AB, Director of Finance and Legal Department Lietuvos Energijos Gamyba, AB, Chief Executive Officer
General Manager: Juozas Bartlingas, Chief Executive Officer of Lietuvos Energijos Gamyba, AB.
Key information about the Company and the Group The Annual Report of Lietuvos Energija and its subsidiaries is prepared in compliance with Resolution No 1052 of the Government of the Republic of Lithuania of 14 July 2010 On the Approval of the Guidelines for Ensuring the Transparency of Activities of the State-owned Enterprises and Appointment of the Coordinating Authority and published on the Company’s internet website at www.le.lt. Company name
Lietuvos Energija, UAB
Company code
301844044
Authorised share capital
EUR 1,212,156 thousand (LTL 4,179,849,289)
Paid-up share 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
Date and place of registration
28 August 2008, Register of Legal Entities
Register accumulating and storing data about the Company
Register of Legal Entities, State Enterprise the Centre of Registers
On 13 February 2013, the Company’s shares were transferred to the Ministry of Finance by right of trust. With effect from 30 August 2013, the Company's name Visagino Atominė Elektrinė UAB was changed to Lietuvos Energija, UAB. As at 31 March 2016, the authorised share capital was divided into ordinary registered shares with the nominal value of LTL 1 (EUR 0.29) each. All the shares are fully paid.
The Company’s shareholders The Republic of Lithuania represented by the Ministry of Finance of the Republic of Lithuania
39 INTERIM REPORT FOR Q1 OF 2016 | Key information about the Company and the Group
Share capital (EUR ‘000)
%
1,212,156
1,095.7
Information on subsidiaries, branches and representative offices Companies directly or indirectly controlled by Lietuvos Energija, UAB at the end of the reporting period (31 March 2016) were as follows: Company
Registered office address
Effective ownership interest at 31 Dec 2015, (%) 96.25
Share capital Profile of activities (EUR ‘000) at 31 Dec 2015 184,174 Electricity generation, supply, import, export and trade
Lietuvos Energijos Gamyba, AB
Elektrinės g. 21, Elektrėnai
Energijos Skirstymo Operatorius, AB (until 1 Jan 2016 –LESTO AB and Lietuvos Dujos, AB) NT Valdos, UAB
Aguonų g. 24, Vilnius
94.98
259,443
Electricity supply and distribution to end users; natural gas distribution
Geologų g. 16, Vilnius
100
85,550
Disposal of real estate, other related activities and service provision
Duomenų Logistikos Centras UAB
A. Juozapavičiaus g. 13, Vilnius
79.6
4,033
Support services for information technology and telecommunications
Energetikos Paslaugų ir Rangos Organizacija, UAB (until 1 Jan 2016 –ELEKTROS TINKLO PASLAUGOS, UAB and Kauno Energetikos Remontas, UAB) LITGAS UAB
Motorų g. 2, Vilnius
100
7,003
Construction, repair and maintenance of electricity networks and related equipment, connection of customers to the grid, repairs of energy equipment, manufacturing of metal structures
Žvejų g. 14, Vilnius
66.7
13,050
Supply of liquid natural gas via terminal and trade in natural gas
Elektroninių Mokėjimų Agentūra UAB
Žvejų g. 14, Vilnius
100
437
Energijos Tiekimas UAB
P. Lukšio g. 1, Vilnius
100
10,000
VšĮ Energetikų mokymo centras
Jeruzalės g. 21, Vilnius
100
85
Professional development and further training of energy specialists
Geton Energy OÜ
Narva mnt 5, 10117 Talinas
100
35
Electricity supply
Geton Energy SIA
Bezdelingu 12, LV-1048, Ryga
100
28
Electricity supply
Technologijų ir Inovacijų Centras UAB
A. Juozapavičiaus g. 13, Vilnius
97.8
6,440
IT and telecommunication, and other services
VAE SPB UAB
Smolensko g. 5, Vilnius
100
293
Business and other management consultations
Verslo Aptarnavimo Centras UAB
P. Lukšio g. 5 b, Vilnius
97.0
580
Public procurement organisation and implementation, accounting, personnel administration services
Lietuvos Dujų Tiekimas UAB
Žvejų g. 14, Vilnius
100
870
Gas supply
Lietuvos energijos paramos fondas
Žvejų g. 14, Vilnius
100
3
Vilniaus Kogeneracinė Jėgainė UAB
Žvejų g. 14, Vilnius
100
1,003
Tuuleenergia OU
Keskus, Helmküla, Varbla Rural Municipality, Pärnu County
43
499
HOB OU
Mustamäe tee 16, Tallinn
100
3,653
Shareholder of 57% shares of Tuuleenergia OU, that is a company, generating electricity power from renewable sources.
Eurakras UAB
Vytenio g. 46, Vilnius
75
8,096
Electricity generation from renewable resources
Energijos sprendimų centras UAB
Žvejų g. 14, Vilnius
100
10
Provision of payment collection services Electricity and natural gas supply, electricity export/import, balancing services
Provision of support for projects, initiatives and activities of public interest Modernisation of the district heating sector in the city of Vilnius Electricity generation from renewable resources
Energy-saving (ESCO) services
40 INTERIM REPORT FOR Q1 OF 2016 | Key information about the Company and the Group
Information on securities of the Group companies The shares of Energijos Skirstymo Operatoriu and, Lietuvos Energijos Gamyba have been listed on the Main List of NASDAQ Vilnius Stock Exchange. The trading of shares of the companies was started on 11 January 2016 and 1 September 2011, respectively. The shares of the companies are traded only at NASDAQ Vilnius Stock Exchange.
Structure of the authorised share capital and shareholders owning more than 5 per cent of the issuer’s authorised share capital as at 31 March 2016 Company
Total nominal value of shares (in EUR)
ISIN code
Securities' abbreviation
Trading list
LESTO AB (until 31 Dec 2015)
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%
84,298,864.6
LT0000116220
LDJ1L
BALTIC MAIN LIST
Lietuvos Energija, UAB
96.64%
259,442,796.57
LT0000130023
ESO1L
BALTIC MAIN LIST
Lietuvos Energija, UAB
94.98%
Lietuvos Dujos AB (until 31 Dec 2015) Energijos Skirstymo Operatorius. AB
Full name of the shareholder (name of the company)
Percentage of voting rights conferred by shares owned
Information about agreements with securities intermediaries Lietuvos Energija has not concluded any agreements with intermediaries of public trading in securities, because its securities are not traded on the stock exchange.
Group companies: Lietuvos Energijos Gamyba, AB As at 31 March 2015, the company had issued 635,083,615 ordinary registered shares with the nominal value of EUR 0.29. Shares of Lietuvos Energijos Gamyba have been listed on the main list of NASDAQ OMX Vilnius stock exchange. ISIN code of the issue is LT0000128571.Lietuvos Energijos Gamyba has concluded the securities accounting agreement on the accounting of securities issued and management of personal securities accounts with SEB Bankas AB.
Energijos Skirstymo Operatorius AB As at 31 March 2016, the company had issued 894,630,333 ordinary registered shares with the nominal value of EUR 0.29. Shares of Energijos Skirstymo Operatorius AB have been listed on the main list of NASDAQ OMX Vilnius Stock Exchange. ISIN code of the issue is LT0000130023. Energijos Skirstymo Operatorius AB has concluded the agreement on the accounting of securities issued by the company and management of personal securities accounts with SEB Bankas AB.
41 INTERIM REPORT FOR Q1 OF 2016 | Information on securities of the Group companies
Main events at the Group that occurred until the date of the preparation of the Report The activities of Energijos Skirstymo Operatorius AB (ESO), which was established on the basis of LESTO and Lietuvos Dujos, were started. The new self-service website was launched www.manogile.lt. (1 January 2016). The activities of Energetikos Paslaugų ir Rangos Organizacija (EnePRO), which was established on the basis of Elektros Tinklo Paslaugos and Kauno Energetikos Remontas, were started. (1 January 2016). Lietuvos Energija announced the procurement for the overdraft of EUR 60 million with the two-year maturity. (5 January 2016). The trading in shares of ESO was started at the Nasdaq Vilnius stock exchange. (11 January 2016). Mr Mindaugas Keizeris was revoked from the Boards of Lietuvos Dujų Tiekimas and LITGAS and Mr Dominykas Tučkus was appointed to take over these positions. (11 January 2016). The Lithuanian Consumer Association filed a claim to the court whereby it alleges that Lietuvos Dujų Tiekimas fails to refund the overpayment for natural gas. (12 January 2016). Vilnius Regional Court rejected the claim of Vilniaus Energija against Lietuvos Dujų Tiekimas for a EUR 19 million overpayment for gas. (21 January 2016). Lietuvos Energija acquired two companies operating wind power parks in Lithuania and Estonia – Eurakras UAB and Tuulueenergia OU. (21 January 2016). Energijos Teikimas joined the electricity financial derivatives’ exchange Nasdaq Commodities. (28 January 2016). The announcement on the auction of real estate of NT Valdos to be held on 26 February 2016 was released. (1 February 2015). The process of acquisition of shares from the minority shareholders of the former public limited liability company LIETUVOS ELEKTRINĖ was started. The established price paid for the calculated quantity of shares of Lietuvos Energijos Gamyba being purchased is equal to EUR 1.2959 per share (2 February 2016).
The following persons were elected to the Board of Energijos Tiekimas: Dominykas Tučkus, Ieva Lauraitytė and Edvardas Jatautas (independent member). (2 February 2016). Vilnius Regional Administrative Court rejected the complaint of LESTO whereby it requested to annul the Resolution of the Commission dated 19 December 2014 On the Scheduled Audit of LESTO. (5 February 2016). The National Association of Electric Energy and the Association of Gas merged and became the National Power Association. (8 February 2016). LITGAS signed the revised agreement on the designated supply with Norwegian company Statoil. The amendments to the agreement are expected to result in a decrease in the maintenance costs of the Klaipėda LNG Terminal by more than a third. (18 February 2016). The Commission designated Lietuvos Dujų Tiekimas as an operator with Significant Market Power in wholesale and retail trade markets. (18 February 2016). Mr Augustas Dragūnas was appointed to the positions of the Board Member and Finance and Administration Service Director of ESO. He replaced Ms Eglė Čiužaitė who was appointed as the Chair of the Board and CEO of Lietuvos Energijos Gamyba. Before that the resignation of the former CEO of Lietuvos Energijos Gamyba was satisfied and he as well as Mr Vidmantas Salietis were revoked from the company's Board. (19 February 2016). During the auction of real estate of NT Valdos 8 objects for EUR 1.265 million were sold. (26 February 2016). Lietuvos Dujų Tiekimas reduced the prices for natural gas for this year to corporate customers by an average of 16%. (25 February 2016). Lietuvos Energija and SEB Bankas signed the agreement on the overdraft of EUR 40 million with the two-year maturity. (7 March 2016) After the completion of the agreed preparatory works the group of energy companies Lietuvos Energija and Fortum Heat Lietuva UAB signed the statement
42 INTERIM REPORT FOR Q1 OF 2016 | Main events at the Group that occurred until the date of the preparation of the Report
on the completion of the transaction on Kaunas Kogeneracinė Jėgainė UAB. (18 March 2016).Dividends relating to the second half year allocated by Energijos Skirstymo Operatorius amount to EUR 30.596 million. (29 March 2016). Lietuvos energija, by reacting to conclusions of the Anti-Corruption Commission of the Seimas of the Republic of Lithuania, started an internal investigation into the agreement concluded between Karalienės Mortos mokykla UAB and NT Valdos UAB under the company’s management (22 March 2016). On the initiative of NT Valdos UAB, a preliminary agreement concluded on 11 September 2015 was terminated with Karalienė Morta mokykla regarding a development project (24 March 2016). On 30 March 2016, the Supreme Court of Lithuania approved a peace agreement in the case regarding an investigation into activities of the public company Lietuvos Dujos (30 March 2016). The National Audit Office started an audit regarding an agreement of NT Valdos UAB: Lietuvos energija received a request to provide the institution’s representatives with a possibility to receive necessary data (4 April 2016). The NCECP did not approve on imposing a sanction on ESO according to the certificate of planned inspection of Lietuvos dujos regulated activity during 20092013 (21 April 2016); Upon expiry of the time-limit for redemption of shares of the public company LIETUVOS ELEKTRINĖ, Lietuvos energija transferred monetary funds to former shareholders of the Company according to effective agreements. In total, 1,144
share purchase-sale agreements were concluded during the share redemption process, on which basis 3,866,497 shares of Lietuvos energijos gamyba were assigned to Lietuvos energija, what accounts for 0.61 percent of the total share issue. Those who did not use the right to sell shares during the process, or who did not manage to submit necessary documents for the redemption of shares, further remain shareholders of Lietuvos energijos gamyba and may trade in their shares on the exchange (23 May 2016). By responding to changes in the market and upon beginning of Lithuania to import electricity from Poland and Sweden, the NCECP set lower by 5 percent upper price limits for domestic consumers for the 2 nd half year of 2016. For those buying electricity from medium voltage grids, the upper limit will be 7.499 ct/kWh, excluding VAT (before it was 8.086 ct/kWh excluding VAT), and for those buying electricity from low voltage grids – 9.530 ct/kWh (before it was 9.852 ct/kWh excluding VAT) (25 May 2016). By the order of the Minister of Finance, Aloyzas Vitkauskas was withdrawn from the Supervisory Council of Vilniaus energija – instead of him, Finance ViceMinister Agnė Bagočiutė was appointed as a member of the Supervisory Council (26 May 2016). NCECP announced new prices for electricity transmission services and public electricity that will be valid during the 2nd half-year 2016. From the 1st of July, electricity price will reduce for private customers by 5.4 percent on average (on 30 May 2016).
Lietuvos Energija, UAB Chief Executive Officer 31 May 2016
Dr. Dalius Misiūnas
43 INTERIM REPORT FOR Q1 OF 2016 | Main events at the Group that occurred until the date of the preparation of the Report