OREANDA-NEWS. December 12, 2012. January–September 2012 saw a decline in electricity prices on the Lithuanian wholesale electricity market. During this period the average price of electricity on the Lithuanian power exchange dropped 2% to 156.2 LTL/MWh from the year-earlier figure.

Electricity prices on the Lithuanian power exchange were also affected by prices in the Estonian and Finnish bidding areas of the Nord Pool Spot (NPS). In January–September 2012, the average electricity price in the NPS Finnish bidding area slipped 34% to 119.68 LTL/MWh, year-on-year. The NPS Estonian bidding area saw a drop of 14% to 131.86 LTL/MWh during the period.

After Lithuania joined the NPS on 18 June 2012, Lithuanian and Latvian companies ceased trading on the Estonian power exchange and joined the ELE bidding area of Estonia and Latvia. The average price in NPS ELE area was 146.05 LTL/MWh in June–September 2012.

Despite the decline in electricity prices this year, some months saw a record rise in prices. Freezing weather and increased demand for electricity at the beginning of February pushed the electricity price on the Lithuanian power exchange to a record high of 348.72 LTL/MWh. Such price rise was observed neither in January–February 2010 nor 2011.

Usually the largest proportion of electricity in winter is generated by city-based thermal power plants. However, it was a fossil-fuel power plant in Elektrenai, controlled by Lietuvos Energija Group (hereinafter Group), that managed to deal with extremely high demand for electricity during the coldest period of 2012. Electricity output at Elektrenai power plant soared remarkably in 2012, compared to 2010 and 2011.

Another record rise in electricity prices in 2012 was observed on 20 August, with the electricity price on the Lithuanian power exchange at its highest level of the year, 692.60 LTL/MWh. According to the data of the electricity transmission system operator, the price rise was triggered by the unscheduled disconnection of an electricity transmission line by Russia, which was crucial for electricity imports to Lithuania and Latvia. Reacting to this situation, Elektrenai power plant increased electricity output. This helped to ensure security of supply and stabilise electricity price on the power exchange.

CEO of Lietuvos Energija Dalius Misiunas said that Elektrenai power plant was the key source of electricity generation in the summer when Lithuanian thermal power plants generated virtually no heat or electricity. “During the warm period the power plant had to secure system reserves and ensure security of supply. To achieve this objective, Elektrenai power plant was tasked with generating substantially large volumes of electricity. Therefore, the third quarter yielded the largest amount of electricity produced by the Group. Besides, the tests of a new Combined Cycle Unit also resulted in generating the great amounts of electricity during the said quarter,” pointed out Mr Misiunas.

In January–September 2012, the output of eligible electricity at Elektrenai power plant made up 1.19 TWh, a rise of 52% year-on-year. Meanwhile, the other power plants controlled by the Group saw a drop in electricity output during the period.

In January–September 2012, electricity output at Kruonis Pumped Storage Plant (KPSP) fell 9% from the year earlier figure. During the period electricity output at Kaunas Hydroelectric Power Plant (KHPP) plunged 25% as the annual average discharge of the Nemunas river was well below the average of multiple years.

The total electricity output of the Group’s power plants amounted to 1.77 TWh in January–September 2012, a growth of 20% than year ago. Electricity demand has not changed remarkably in Lithuania during the period – it was a bit higher than 7 TWh.

The Group’s companies were particularly busy with expanding their activity in the retail market. The amount of electricity sold on the free market surged 21% to 1.42 TWh, year-on-year. Meanwhile, electricity sales to LESTO AB shank as much as 15%, as more and more customers switched to independent electricity suppliers.

Despite the growing competition among independent suppliers to corner the retail market, nearly 40% of free market customers purchased electricity from the Group-controlled UAB Energijos Tiekimas by the end of September.

Energijos Tiekimas has also boosted the sale of “green Lithuanian energy” generated by KHPP. In the third quarter, the first two consumers of “green Lithuanian energy” – Druskininku Rasa and MARS Lietuva – were joined by Iki retail chain, the operator of the largest number of stores in Lithuania, and Lukoil filling station chain. It is expected that these customers will consume about 26% of KHPP’s projected output of “green” electricity in 2012.

Revenues

In January–September 2012, the Group’s revenues amounted to LTL 1 079 million, a rise of 4% from the 2011 figure of LTL 1 036 million. This surge in revenues is attributed to the fact that after the completion of another stage of the electricity market liberalisation customers with permissible power capacity over 30 kW were free to choose their independent suppliers. Subsequently, the sales of the Group’s companies on the free market increased by more than a fifth. The Group’s revenues were also driven up by growing electricity output.

Regulated and commercial activity

In January–September 2012, the Group generated 41% of its revenues from regulated activity: the generation of eligible electricity at Elektrenai power plant and power reserve services provided by Elektrenai power plant and KPSP. The Group’s pre-tax loss from regulated activity made up LTL 12 million. As electricity generation at Elektrenai power plant is not making profit, it was revenues from KPSP power reserve services that improved the results of regulated activity.

Net profit from commercial activity which comprises electricity generation at KPSP and KHP, the wholesale and retail sale of electricity on the free market and other commercial services made up LTL 48 million in January–September 2012 before taxes.

General profitability indicators

In January–September 2012, the group’s EBITDA made up LTL 100 million, while profit totalled LTL 36 million. EBITDA margin was 9%.

Compared to 2011, in January–September 2012 the Group managed to maintain a relatively stable net profit margin: it only fell from 4% to 3%, while the average nine-month gas purchase price then was 1440 LTL/MWh (more than 26% higher than in January–September 2011).

The profitability indicators were negatively affected also by increasing electricity output at Elektrenai power plant, falling wholesale electricity prices on the wholesale Scandinavian and Baltic markets, shrinking electricity output at the Group-controlled power plants caused by decrease in water discharge and growing competition on the retail Lithuanian electricity market.