OREANDA-NEWS. Lietuvos Energijos Gamyba, an electricity generation company that is part of the state-owned Lietuvos Energija group of energy companies, offset the decline in production volume during the first half of the year with successful operations in the free market and, together with its subsidiaries, pulled in LTL 121.9 million in earnings before interest, taxes, depreciation, and amortization (EBITDA).

The first half of 2014 was quiet in the power market: electricity demand was noticeably decreased by the considerably higher than the average temperatures in January-April; there were also no significant restrictions on intersystem capacities from other countries, so prices on the exchange remained relatively low. With the temperature in May hovering around the norm for this month, prices on the exchange began to rise slightly - as is common during the warm season - but still remained relatively stable. At 159.8 LTL/MWh, the average price of electricity in the Lithuanian bidding area on the Nord Pool Spot exchange in January-June 2014 was barely 0.8 per cent higher than it was in January-June 2013. For the sake of comparison, in September and October 2013, when import options were severely limited, the average price of electricity in the Lithuanian bidding area was 36 per cent higher.

Unlike in 2013, when temperatures dropped drastically in March, there was no need to turn on the Elektrėnai complex units during the first months of this year with the market situation as it was. Therefore, in line with the plan which was agreed with transmission system operator Litgrid, electricity only began to be produced at the combined cycle unit in early April, and by the end of June, 40 per cent less has been generated than during the first half of last year. In addition, production at the Kaunas HPP also fell by one fifth due to the dry spring. Lower electricity production volumes in the first half of the year are one of the reasons why the revenue of the Lietuvos Energijos Gamyba group of companies (hereinafter - the Group) decreased from LTL 498 million in the first half of 2013 to LTL 367.7 million for the same period this year (26 per cent less).

Another reason for the decline in revenue was the fact that the Group's electricity sales decreased. In January-June 2014, 0.926 TWh of electricity were sold to the domestic market - this is 45 per cent less than during the same period in 2013, when 1.689 TWh were sold. The main reason for this decrease is that as of 2014, bilateral contracts are no longer being concluded to ensure that the needs of electricity distribution network operator LESTO are met. Meanwhile, the Group's sales in the free market increased over the first half of 2014.

“During the first half of this year, Lietuvos Energijos Gamyba increased its sales on the free market by more than one third compared to the same period last year. Successful trading activities and favourable opportunities to purchase and sell electricity helped to compensate for the reduced electricity production at the company's plants caused by market and weather conditions, and to achieve good results during the first half of the year,” comments Juozas Bartlingas, Chairman of the Board and CEO of Lietuvos Energijos Gamyba.

The Group's EBITDA margin for the first half of 2014 was 33.2 per cent, which, compared to the same period last year, amounts to an increase of 5.9 percentage points (from 27.3 per cent). Nevertheless, the lower electricity generation and trading volumes still resulted in a decrease of EBITDA in absolute terms, from LTL 135.7 million to LTL 121.9 million. The Group's net profitability increased by 9.5 percentage points: for the first half of 2013, the net profitability ratio was 11 per cent, compared to 20.5 per cent for the same period this year. During the first half of 2014, the Group earned LTL 75.5 million in net profit, or 37 per cent more than during the same period in 2013, when net profit amounted to LTL 55.2 million. Profit ratios were also increased by the favourable situation in the emission permit market (prices for emission permits have increased from 16.95 LTL/pc. to 20.06 LTL/pc. since the beginning of the year), so the value of the emission permits held by the company increased.

According to Mr Bartlingas, these operating results are an excellent starting point for implementing Lietuvos Energijos Gamyba's 2014-2020 business strategy, which was approved at the end of H1 2014. The strategy includes plans to increase the company's value, ensure the provision of quality services to customers, boost operational efficiency, and form a value-based organizational culture.

“The activities of all of the company's employees during the first half of this year indicate that we can indeed achieve the goals that have been set: during this period, construction of new thermal energy generation capacities in Elektrėnai have made significant headway and an optimal operational scenario for the Elektrėnai complex was provided for. We will already begin producing heat from biofuel at the end of this year, and the competitiveness and efficiency of the Elektrėnai complex will increase upon eliminating excess capacity and producing electricity with the modern combined cycle unit and units 7 and 8 of the reserve power plant once connections are made,” says the head of the company.