OREANDA-NEWS. Lietuvos Energija Group of Companies (“the Group“) has reported an increase in profit from commercial operations in QI of 2013. However, the Group’s revenues have shrunk due to the decrease in power generation at Elektrenai plant and the further liberalization of the market.

In Quarter I of 2013, the average electricity price in the Lithuania price area of Nord Pool Spot exchange (“NPS“) was 153.42 LTL/MWh and was almost 5% lower than in the same period of last year. Unusually high February temperatures resulting in a reduction of energy consumption was the main factor that influenced the reduction in the average electricity price. In the NPS Estonia price area, the average electricity price in QI of 2013 was 146.30 LTL/MWh similarly to QI of 2012. There was no marked difference between the prices forming in the NPS Estonian-Latvian cross-section (ELE) area either. Due to limited capacity of the lines between Estonia and Latvia, in the said area it was slightly higher than in other zones and was 150.64 LTL/MWh on average. In QI of 2013, the average electricity price in the NPS Finland price area was 145.35 LTL/MWh, which is approx. 1% less than in the same period of previous year (146.71 LTL/MWh).

According to Dalius Misiunas, the CEO of Lietuvos Energija, “such market prices enabled Lietuvos Energija to effectively coordinate its electricity exchange trading with the generation at its plants. The average electricity purchase price in Quarter I of 2013 was 10% lower than in the same period of 2012 due to favourable market conditions and proper planning of generation and trading volumes. This helped the company to offset the effect of the decreasing value of emission allowances on the Group’s results“.

The drop in the value of emission allowances slashed the value of Lietuvos Energija’s emission allowances by LTL 16 million in QI of 2013 and had the biggest negative impact on performance results at the beginning of the year. Despite this, the Group’s companies achieved high performance results in commercial activity* and reported profit for QI of 2013.

Income of the Group

In Quarter I of 2013, income of the Group amounted to LTL 238 million, which is 32% less than in the same period of 2012 (LTL 353 million). Smaller production volumes and very strong competition in the free market are the reasons for this reduction. The greatest decrease is observed in the income from regulated activities**.

On completion of the last phase of market liberalisation and with smaller amounts of electricity generated at the reserve power plant due to reduced quota, sales of the Group to LESTO were 36% smaller in QI of 2013 compared with same period of last year.

Regulated activities and commercial activities

Income from regulated activities decreased 36% in QI of 2013 compared with same period of last year and accounted for approx. 38% of the Group’s total income. Due to regulated activities, the Group incurred an LTL 8 million loss before tax in the first quarter. The result of the same period of previous year was a gross profit of LTL 4 million.

Successful commercial activities enabled the Group to offset the loss and to end the first quarter at a profit. Income from commercial activities was 30% lower compared with the same period of previous year. Nevertheless, gross profit on these activities amounted to LTL 18 million (+13% compared with previous year). Pretax profit from commercial activity has increased by 4.4 p.p. to 11.9%.

Production volumes

In the first quarter of this year, the amount of electricity generated by power plants of Lietuvos Energija was 37% smaller than in the same period of previous year: 0.3 TWh and 0.48 TWh respectively.

No significant changes took place in the generation at hydro power plants, however, the production volume of the main power plant of Lietuvos Energija, i.e. the reserve plant in Elektrenai, decreased nearly 70% compared with the same period of previous year. This has resulted from the smaller generation quota and unusually warm February when the demand for power was easily met by local co-generation plants. Upon termination of power generation in Elektrenai, heat for the residents and enterprises of this municipality is produced in the boilers of the reserve plant. This leads to savings of funds of services of general economic interest, however, the heat generation cost is higher.

It should be noted that the importance of the reserve plant has become apparent in spring. When the temperatures dropped again in March, the demand for electricity increased considerably – together with prices, Lietuvos Energija started up one of the units of its reserve plant. This enabled to ensure security of supply and to stabilise the price for electricity.

Green Lithuanian Energy generated at Kaunas Hydro-Electric Power Plant is now purchased by 29 business customers and 5 domestic customers; over 15 m kWh of such electricity was supplied to them in QI 2013. This accounts for nearly 15% of total power generation at the plant in QI of 2013.

Profitability ratios

The Group‘s EBITDA increased to LTL 55 m (27% compared with QI of 2012). The EBITDA margin was 23.1%, which is 10.9 p.p. more than in QI of 2012.

Net profit of the first quarter decreased from LTL 17 m last year to LTL 7 m this year due to the aforesaid changes in the value of emission allowances and interest costs. On elimination of the effects of the emission allowances devaluation, the Group‘s profit in the period under consideration increased 28%: from LTL 18 m in QI of 2012 to LTL 23 m in QI of 2013. Net profit grew from 5.1% to 9.8%.