In 2016 1Q, the national energy producer Lietuvos Energijos Gamyba effectively availed of the potentials of the managed power generation facilities to conduct competitive production and provided services necessary for the energy system in a reliable manner. Unaudited financial performance results of the Company reveal that its operation was more effective. Still a considerable negative effect of the regulatory provisions disputed by the Company can be felt.
In 2016 1Q, all three power plants managed by the Company produced 25% more power than during the same period last year (305 GWh and 247 GWh, accordingly). Higher amount of water determined the 22.6% increase in production of power by Kaunas Algirdas Brazauskas’ Hydroelectric Power Plant (Kaunas HPP) – up to 118 GWh. Kruonis Pumped Storage Hydroelectric Plant (Kruonis PSHP) maintained similar level of production (produced 153 GWh), meanwhile, the unit of combined cycle which functioned in a competitive manner produced 34 GWh. During the first quarter of last year, no power was produced in Elektrėnai at all.
“We prepared for 2016 responsibly because we knew that once subsidised electricity generation quotas are removed and new links occur, we will have to operate in a changed market. Consequently, we produced more power during the first quarter of the year, power plants managed to operate reliably even when the weather abruptly became cold or where the link with Sweden NordBalt was disconnected and we had to ensure stable power supply and contribute to energy price stabilisation on the market. All this shows that we successfully adapt to changes,” Eglė Čiužaitė, chairwoman of the Board and Chief Executive Officer of Lietuvos Energijos Gamyba, said.
Despite the successful operation of the Company, by decision of the National Commission for Energy Control and Prices (NCC), part of the result of the Company’s commercial activity had to reduce the earnings the Company receives from funds of public services obligations. This was the main reason the Company’s sales income reduced (drop of 10.1% from EUR 37.23 million in 2016 1Q to EUR 33.46 million in 2016 1Q) as well as earnings before interest, tax, depreciation and amortisation (EBITDA) which amounted to EUR 9.56 million in 2016 1Q and was by 48.1 % lower than EBITDA of 2015 1Q (EUR 18.41 million).
The impact of the NCC decisions excepted, the Company’s EBITDA would be by EUR 5.8 million higher. Most of this amount, namely, EUR 4.8 million, is part of the earnings from commercial activity of Kruonis PSHP and Kaunas HPP, which, by decision of NCC, is currently directed towards covering the Company’s fixed costs while providing public services.
It should be recalled that the influence of the NCC decisions was not reflected in the statements of 2016 1Q a year ago. These decisions regarding the results of the inspection of the Company’s performance during the 2010-2012 period and the recognition of the Company as having considerable impact in the power generation market reduce the amount the Company receives from funds of public service obligations and the income from services of ensuring capacity reserves, i.e. part of income from regulated activities are not recognised. The Company does not include this income in the financial statements referring to the auditor’s recommendations, however, it continues to actively defend its position regarding their recognition and seeking to annul the above mentioned decisions of the NCC in the court.
Unaudited net earnings of the Company in 2016 1Q amounts to EUR 13.96 million, meanwhile, the net profit in 2015 1Q was EUR 14.82 million. The net result was largely determined by the sale of part of the wholesale power business. It should be recalled that Energijos Tiekimas UAB, which bought this part of the business will have to pay the Company EUR 13.1 million in cash in instalments by 31 March 2017. Moreover, EUR 8 million in addition (EUR 2 million per year) may have to be paid subject to the results of the sold activity in the period until 2019. The final price of the transaction, if all terms and conditions specified in the agreement are fulfilled, may amount to EUR 21.1 million. However, the sale of the wholesale electricity business share has negative impact on the Company’s EBITDA because having sold this share of business on 1 January 2016 it no longer receives any income from this activity.
According to Ms. Čiužaitė, tangible benefit in improving the results of the Company in 2016 1Q was the result of the effort of all employees who aimed at becoming a more flexible and effective energy production company. “We will continue focusing on ensuring the reliability of facilities. Operating costs are reducing due to faster repairs and changes in work organisation, besides, the costs of business support services also fall down,” the head of the Company said.