OREANDA-NEWS. April 21, 2016. The audited consolidated financial statements of Latvenergo for 2015 are approved by the Management Board of Latvenergo AS.

In 2015, Latvenergo Group has retained its leading position in the Baltic States, successfully using its experience and skills to respond to different market situations in the complicated conditions of the electricity market. The most significant events in the energy sector, which have influenced the operation of Latvenergo Group in 2015, involve deeper integration of the Baltics into the Nordic electricity market, as well as completion of the electricity market liberalization in Latvia by including Latvian households to this market. Investments of Latvenergo Group constitute 190.5 million euros, and the most ambitious project is reconstruction of Daugava HPPs hydropower units. In 2015, diversification of fund raising was successfully continued, and Latvenergo AS became the first state-owned company in the Eastern Europe to issue green bonds.

Electricity supply

In 2015, the market share of Latvenergo Group remained high – approximately 1/3 of the total electricity market of the Baltic States. In total we have supplied 7,869 GWh (gigawatt-hours) of electricity to retail customers in the Baltics, and almost one third or 2,539 GWh of it is supplied to customers outside Latvia. Targeted sales activities in 2015 have increased the number of business customers in Lithuania and Estonia by approximately 33%, compared to the previous year.

Generation of electricity

Latvenergo Group has generated 3,882 GWh of electricity and 2,408 GWh of thermal energy in its power plants in 2015. It is notable that the previous year was one of the driest in terms of water inflow in Daugava, even longstanding employees of the Group can't remember similar conditions. In this situation Riga CHPPs showed their value, as their efficient operation limited the risk of increased electricity price and they proved their significance in the energy independence of the state. Daugava HPPs generated by 6% less electricity than in the previous year, i.e., in total 1,805 GWh, whereas Riga CHPPs generated by 23% more than in the previous year, i.e., in total 2,025 GWh, adapting the operation mode to the conditions of the electricity market.

Financial results

Latvenergo Group revenue in 2015 constitutes 929.1 million euros, which is by 8% less than in 2014. The decrease of Latvenergo Group revenue was determined by changes in financial results accounting principles along with the entrance into operation of Ener?ijas publiskais tirgot?js AS as of 1 April 2014, and reflecting the revenue and costs of the mandatory procurement in balance assets. In turn, EBITDA* of the Group has increased by 30% reaching 307.0 million euros. The results were positively influenced mainly by the opening of the electricity market to households in Latvia as of 1 January 2015. Until then, Latvenergo AS supplied electricity to households at regulated tariffs, which were below the market price. The profit of the Group constitutes 85.0 million euros. According to the Law “On the State Budget for 2016”, the estimated amount of dividends payable by Latvenergo AS for 2015 is 77.4 million euros (for 2014 – 31.5 million euros), which after the decision of the Shareholder will be allocated for various goals, among them supporting provision of electricity service to poor and low-income inhabitants, large families, as well as to persons with group I disability and families with a disabled child, as well as for partial reimbursement of the mandatory procurement public service obligation fee costs, ensuring that the mandatory procurement public service obligation fee remains at the previous level (26.79 EUR/MWh).

The audited consolidated financial statements of Latvenergo AS for 2015 do not significantly differ from the unaudited condensed financial statements of Latvenergo Group, published on 29 February 2016.

Investments

Latvenergo Group investments in 2015 constitute 190.5 million euros, which is by 7% more than in 2014. We have invested 62% of total investments in network assets and their modernization, increasing the quality, technical indicators and safety of operation of network services. Whereas 31.9 million euros are invested in the Daugava HPPs hydropower units’ reconstruction programme. The main objective of the reconstruction is to replace the outdated hydro-turbines, increasing their installed capacity, efficiency coefficient and electricity output on a yearly basis, thereby ensuring secure, efficient, durable and competitive operation of Daugava HPPs within the general energy system and on the free electricity market for at least another 40 years.

Green bonds

In June 2015, Latvenergo Group issued green bonds in the amount of 75 million euros, successfully continuing diversification of funding sources. Thus, Latvenergo AS has become the first state-owned company in the Eastern Europe to issue green bonds. The international credit rating agency Moody's Investors Service has assigned a Baa2 credit rating with a stable future outlook to the issued green bonds, in line with the credit rating of Latvenergo AS.

Content of Sustainability Report

This is the first year, when the Sustainability Report of Latvenergo Group is prepared in accordance with the core requirements of GRI G4 guidelines. For defining the content of the 2015 report an enhanced engagement of the Group management and stakeholders was implemented, clarifying their opinion on material aspects for sustainability of Latvenergo Group. Along with enhanced engagement of stakeholders in defining the report content the amount of information provided in the report is improved and supplemented. The auditor’s report on the Sustainability Report 2015 is provided by Ernst & Young Baltic SIA.

Along with the Sustainability and Annual Report for 2015, also the Corporate Governance Report of Latvenergo AS for 2015 is published. It is prepared according to article 562 of the Financial Instrument Market Law and “Corporate Governance Principles and Guidelines”, issued by Nasdaq Riga AS in 2010.

Interim financial reports of Latvenergo Group for 2016 will be published on 31 May, 31 August and 30 November.

* EBITDA – earnings before interest, corporate income tax, share of profit or loss of associates, depreciation and amortisation, and reduction of value of intangible assets and fixed assets.

Key Performance Indicators

Operational Figures

    2015 2014
Retail electricity supply GWh 7,869 8,688
Electricity generation GWh 3,882 3,625
Thermal energy supply GWh 2,318 2,442
Number of employees   4,177 4,563
Moody's credit rating   Baa2 (stable) Baa3 (stable)

Financial Figures

    2015 2014
Revenue MEUR 929.1 1,010.8
EBITDA 1) MEUR 307.0 236.8
Net profit MEUR 85.0 29.8
Assets MEUR 3,517.4 3,486.6
Equity MEUR 2,096.7 2,020.8
Net debt 2) MEUR 692.9 706.2
Investments MEUR 190.5 177.6

Financial Ratios

    2015 2014
Net debt / EBITDA 3)   2.3 3.0
EBITDA margin 4)   33% 23%
Capital ratio 5)   60% 58%

1) EBITDA: earnings before interest, corporate income tax, share of profit or loss of associates, depreciation and amortisation, and impairment of intangible and fixed assets

2) Net debt: borrowings at the end of the period minus cash and cash equivalents at the end of the period

3) Net debt / EBITDA: net debt to EBITDA ratio

4) EBITDA margin: EBITDA / revenue

5) Capital ratio: total equity / total assets
 

Consolidated Statement of Profit or Loss

    2015 2014
    EUR'000 EUR'000
       
Revenue   929,128 1,010,757
Other income   4,880 5,273
Raw materials and consumables used   (470,444) (621,285)
Personnel expenses   (94,609) (97,954)
Depreciation, amortisation and impairment of property, plant and equipment   (198,827) (187,595)
Other operating expenses   (61,940) (59,953)
Operating profit   108,188 49,243
Finance income   2,926 3,004
Finance costs   (18,579) (20,380)
Share of profit / (loss) of associates   – (357)
Profit before tax   92,535 31,510
Income tax   (7,496) (1,720)
Profit for the year   85,039 29,790

Consolidated Statement of Financial Position        

    31/12/2015 31/12/2014
    EUR'000 EUR'000
ASSETS      
Non?current assets      
Intangible assets   14,405 13,011
Property, plant and equipment   3,076,256 3,066,316
Investment property   696 1,343
Non?current financial investments   41 41
Other non?current receivables   20,609 28,528
Investments in held?to?maturity financial assets   41 41
Total non?current assets   3,113,719 3,109,253
Current assets      
Inventories      
Trade receivables and other receivables   24,791 22,560
Deferred expenses   263,452 233,045
Current financial investments   3,008 707
Derivative financial instruments   – –
Investments in held?to?maturity financial assets   – –
Cash and cash equivalents   7,859 –
Total current assets   104,543 121,011
TOTAL ASSETS   403,653 377,323
ASSETS   3,517,372 3,486,576
       
EQUITY      
Share capital   1,288,531 1,288,446
Reserves   669,596 645,829
Retained earnings   131,662 79,995
Equity attributable to equity holders of the Parent Company   2,089,789 2,014,270
Non?controlling interests   6,913 6,531
Total equity   2,096,702 2,020,801
       
LIABILITIES      
Non?current liabilities      
Borrowings   714,291 688,297
Deferred income tax liabilities   273,987 268,026
Provisions   15,984 15,588
Derivative financial instruments   8,291 11,698
Other liabilities and deferred income   196,386 194,474
Total non?current liabilities   1,208,939 1,178,083
Current liabilities      
Trade and other payables      
Income tax payable   117,249 139,909
Borrowings   4,007 3
Derivative financial instruments   83,192 138,925
Total current liabilities   7,283 8,855
TOTAL EQUITY AND LIABILITIES   211,731 287,692
LIABILITIES   3,517,372 3,486,576