Published: 2020-02-28 15:00:31 CET
Latvenergo
Financial Statement Release

Unaudited results of the Latvenergo Group for 2019

Riga, 2020-02-28 15:00 CET -- Today, on 28 February, the unaudited consolidated condensed financial statements of the Latvenergo Group for 2019 are published.

In the times of changes in the energy sector the Group has been successfully operating in new business directions – electrical mobility, trading of natural gas, solar panels and other electricity-related products. After 2018 with dry and hot weather, in the last quarter of 2019 the hydrobalance in Nordic countries normalised and the price of electricity decreased.

In turn, the most important factor that affected operations of the Latvenergo Group in the Baltic States was reduced generation by Estonian oil shale power plants due to high prices of emission allowances, which, considering several times lower intensity of CO2 emissions of Latvenergo AS combined heat and power plants (CHPP) contributed to record-high generation by CHPPs for the second year in a row.  

On its 80th anniversary, the Latvenergo Group was the most valuable energy company in Latvia for the 12th time and repeatedly also in the Baltics with the value of assets reaching almost 3.9 billion euros. In 2019, Group revenue remained stable and constitutes 841.6 million euros. EBITDA decreased by 14% to 243.5 million euros. Meanwhile the profit of the Group increased by 24% and constitutes 94.4 million euros. In 2019, Latvenergo Group generated 4880 gigawatt-hours (GWh) of electricity, sold 6505 GWh of electricity and 303 GWh of natural gas.

The operations and results of the Latvenergo Group in 2019 were affected by global and regional factors of the operating environment. In 2019, the average regional prices of electricity were lower than a year earlier, defined by improvements in the hydrological situation in Nordic countries in the second half of the year, warmer weather and therefore lower demand for electricity in the region, lower prices on natural gas and coal markets, as well as other factors. It should be noted that in the previous year, the generation of electricity in the Baltics was by 21% lower than in 2018. The biggest reduction in generation of electricity was in Estonia, where operations of oil shale power plants were limited and therefore the role and the contribution of Latvenergo AS CHPPs to the common market has increased.

In the previous year, 4,880 GWh of electricity and 1,842 GWh of thermal energy was generated by Latvenergo Group's power plants. For the second year in a row, CHPPs of Latvenergo AS generated historically the largest amount of electricity – 2,780 GWh, which is 5% more than in 2018. The high level of generation of CHPPs was facilitated by regional electricity demand, as the electricity generation of oil shale power plants in Estonia was decreased considerably due to high prices of CO2 emission allowances in 2019. Whereas the amount of CO2 emissions at CHPPs of Latvenergo AS has been reduced to a minimum after the reconstruction, making the most efficient use of energy sources for energy generation. CO2 emissions at the oil shale power plants are very high – up to 1 t/MWh, whereas they do not exceed 0.3 t/MWh at Latvenergo CHPPs. Also, during the period, when the operation of the Daugava HPPs was affected by low water inflow in the Daugava River, both CHPPs worked to meet the electricity market demand. In turn, the Daugava HPPs generated 2,047 GWh, which was 14% less than in the previous year. This was due to lower water inflow in the Daugava River.

In 2019, Latvenergo Group was one of the largest providers of power supply services in the Baltic market. At the same time, the Group is actively extending operations in new business segments:

  • the year was particularly successful for trading of solar panels. Over 300 agreements on sale and installation of solar panels were concluded in the Baltic countries, with a considerable increase in the Lithuanian market. Furthermore, each third household in Latvia, which had installed solar panels, purchased them from the Elektrum trade brand of Latvenergo AS. In 2019, Latvenergo Group's market share in the Baltic solar panel market was approximately 8%;
  • In August, Latvenergo Group started working in the electrical mobility market by launching the first fast electric vehicle charging stations. By the end of 2019, approximately 1,450 charges had been made providing assurance of further growth of the electric vehicle charging service;
  • At the beginning of 2019, Latvenergo Group started operations on the natural gas market for Latvian households concluding two times more agreements than planned. Overall, the amount of natural gas sold doubled compared to 2018 and amounted to 303 GWh.

In 2019, Latvenergo Group supplied 6,505 GWh of electricity in retail, more than third of which were supplied outside Latvia.

In 2019, Latvenergo Group revenue constitutes 841.6 million euros, which is 2.8 million euros more than in 2018. Profit has increased by 18.4 million euros or 24% compared to the previous year, and reaches 94.4 million euros. In the reporting period, EBITDA of Latvenergo Group decreased by 14% compared to the previous year and constitutes 243.5 million euros. It was impacted by 57.0 million euros lower compensation for the Latvenergo AS CHPPs’ capacity payments recognised in the profit and loss statement of Latvenergo AS. The financial results were also negatively impacted by lower electricity output at the Daugava HPPs.

In 2019, the total amount of investments of Latvenergo Group amounted to 229.4 million euro, which is 8.8 million euro more compared to 2018. 79% of the total investments were invested in network assets. In 2019, 16.6 million euros were invested in the reconstruction of hydropower units of the Daugava HPPs. The reconstruction programme has been scheduled until 2023, and its total reconstruction costs will exceed 200 million euro. By the end of 2019, investments amounting to 166.1 million euros had been made within the scope of the contracts. The reconstruction will ensure functionality of the hydropower units for another 40 years.

In 2019, the Kurzeme Ring, the most extensive electricity transmission project in the history of independent Latvia, was completed. Its total construction costs comprised almost 230 million euros, approximately one half of which were covered by the European Commission co-financing. In turn, on 16 March 2019, the first poles were raised in the Rūjiena Municipality to start the construction of the Third Estonia-Latvia power transmission network interconnection.

On 8 October 2019, the Cabinet of Ministers of the Republic of Latvia decided to complete the ownership unbundling of the electricity transmission system operator by 1 July 2020, transferring all assets of the electricity transmission system on the balance sheet of Latvijas elektriskie tīkli AS, a subsidiary of Latvenergo AS, to transmission system operator Augstsprieguma tīkls AS. The change of ownership of assets is planned through the reduction of the share capital of Latvenergo AS by withdrawing from the base of assets of Latvenergo AS the capital shares of Latvijas elektriskie tīkli AS.

On 15 October, the international credit rating agency Moody's affirmed the credit rating of Latvenergo AS at investment grade Baa2 with a stable outlook, also taking into account the planned unbundling of transmission system asset ownership.

Taking into account the amendments to the methodology of calculation of tariffs of the electricity distribution system services approved by the Public Utilities Commission (PUC), on 27 November 2019, the PUC approved a project on the electricity distribution service tariff for a period of 5 years until 2024 which was submitted by Sadales tīkls AS. The project provides for a reduction of the tariff of 5.5% on average. The lowering of distribution tariffs is possible due to the ambitious operational efficiency improvement programme of Sadales tīkls AS, which includes process improvement and reduction of personnel and the number of vehicles and real estate bases. The changes in tariffs took effect on 1 January 2020.

The audited results of Latvenergo Group for 2019 will be published on 8 April 2020.

 

LATVENERGO GROUP KEY FIGURES

In accordance with the Cabinet of Ministers of the Republic of Latvia decision of 8 October 2019 on the unbundling of transmission assets from Latvenergo Group until 1 July 2020, the Unaudited Condensed Financial Statements of the Group for the year 2019 were prepared in such a way that the operations of the transmission segment are reported as discontinuing operations. This therefore affects the profit and loss positions previously published; for more information, see Note 17 to the Unaudited Condensed Financial Statements for 2019.

Operational figures

    2019 2018
Electricity supply, incl.: GWh   9,259 9,984
Retail electricity* GWh   6,505 6,954
Wholesale electricity** GWh   2,754 3,030
Retail natural gas GWh   303 147
Electricity generated GWh   4,880 5,076
Thermal energy generated GWh   1,842 2,274
Number of employees     3,423 3,508
Moody’s credit rating     Baa2 (stable)  Baa2 (stable) 

* Including operating consumption

** Including sale of energy purchased within the mandatory procurement on the Nord Pool

 

Financial figures*

EUR’000                                                                                                                                                                                      

    2019 2018
Revenue**   841.6 838.8
EBITDA1)**   243.5 281.9
Profit   94.4 76.0
Total assets   3,864.9 3,798.8
Total equity   2,265.5 2,320.1
Net debt2)**   564.0 505.4
Investments   229.4 220.6

1) EBITDA – earnings before interest, income tax, share of result of associates, depreciation and amortisation, and impairment of intangible assets and property, plant and equipment

2) Net debt = borrowings at the end of the year (without discontinuing operations) minus cash and cash equivalents at the end of the year (without discontinuing operations)

* Information about the financial indicators and coefficients used by the Latvenergo Group is available in Latvenergo Group's consolidated and Latvenergo AS Unaudited Condensed Financial statements – see the section “Formulas”.

**Excluding discontinuing operations (unbundling transmission system asset ownership) – see Note 17 to the Unaudited Condensed Financial Statements for 2019.

   

Financial ratios*

    2019 2018
EBITDA margin3)   29% 34%
Net debt / EBITDA4)   2.2 1.8
Net debt / equity5)   25% 22%
Return on assets (ROA)6)   2.5% 1.8%
Return on equity (ROE)7)   4.1% 2.9%
Return on capital employed (ROCE)8)**   3.4% 2.5%

3) EBITDA margin = EBITDA / revenue

4) Net debt / EBITDA = (net debt at the beginning of the reporting period + net debt at the end of the reporting period) * 0.5 / EBITDA (12-months rolling)

5) Net debt / equity = net debt at the end of the reporting period / equity at the end of the reporting period

6) Return on assets (ROA) = profit / average value of assets ((assets at the beginning of the reporting period + assets at the end of the reporting period) / 2)

7) Return on equity (ROE) = profit / average value of equity ((equity at the beginning of the reporting period + equity at the end of the reporting period) / 2)

8) Return on capital employed (ROCE) = operating profit / (average value of equity ((equity at the beginning of the reporting period + equity at the end of the reporting period) / 2) + average value of borrowings ((borrowings at the beginning of the reporting period + borrowings at the end of the reporting period) / 2))

* Information about the financial indicators and coefficients used by the Latvenergo Group is available in Latvenergo Group's consolidated and Latvenergo AS Unaudited Condensed Financial statements – see the section “Formulas”.

**Excluding discontinuing operations (unbundling transmission system asset ownership) – see Note 17 to the Unaudited Condensed Financial Statements for 2019.

 

Consolidated Statement of Profit or Loss*

                                                                                EUR'000

  2019 2018
     
Revenue 841,636 838,805
Other income 25,863 91,098
Raw materials and consumables used  (477,660) (497,148)
Personnel expenses (101,349) (103,359)
Other operating expenses (44,964) (47,449)
EBITDA 243,526 281,947
Depreciation, amortisation and impairment of intangible assets and property, plant and equipment (143,161) (199,964)
Operating profit 100,365 81,983
Finance income 1,187 1,157
Finance costs (9,480) (8,406)
Profit before tax 92,072 74,734
Income tax (7,945) (9,209)
Profit for the year from continuing operations 84,127 65,525
Profit for the year from discontinued operation 10,232 10,430
Profit for the year 94,359 75,955
Profit attributable to:    
  - Equity holder of the Parent Company 92,660 73,423
  - Non–controlling interests 1,699 2,532

* The Latvenergo Consolidated and Latvenergo AS Unaudited Condensed Financial Statements for 2019 are prepared in accordance with the IFRS as adopted by the European Union

 

Consolidated Statement of Financial Position*

                                                                                                                                                                     EUR'000

    31/12/2019 31/12/2018  
ASSETS        
Non–current assets        
Intangible assets and property, plant and equipment     2,775,531 3,316,172
Right–of–use assets     5,522                     –
Investment property     301 467
Non–current financial investments     39 40
Investments in other financial assets     16,885 16,935
Other non–current receivables     434 30,920
Total non–current assets     2,798,712 3,364,534
Current assets        
Inventories     104,781 71,975
Receivables from contracts with customers     111,677 117,955
Other current receivables     76,938 84,830
Prepayment for income tax     140 11,619
Non–current assets held for sale     146                     –
Deferred expenses     3,015 2,598
Derivative financial instruments     6,717 15,853
Cash and cash equivalents     122,422 129,455
Current assets excluding discontinued operation     425,836 434,285
Assets of discontinued operation     640,393                     –
Total current assets     1,066,229 434,285
TOTAL ASSETS     3,864,941 3,798,819
EQUITY AND LIABILITIES        
Equity        
Share capital     834,883 834,791
Reserves     1,075,235 1,125,466
Retained earnings     318,555 351,350
Reserves of discontinued operation     28,936   –
Equity attributable to equity holder of the Parent Company     2,257,609 2,311,607
Non–controlling interests     7,878 8,458
Total equity     2,265,487 2,320,065
Liabilities        
Non–current liabilities        
Borrowings     702,129 700,028
Non–current lease liabilities     4,349                     –
Provisions     18,491 20,178
Deferred income tax liabilities     8,327 12,297
Deferred income on contracts with customers     6,149 3,923
Other deferred income     142,453 143,494
Derivative financial instruments     194,910 303,519
Total non–current liabilities     1,076,808 1,183,439
Current liabilities        
Borrowings     180,542 114,315
Current lease liabilities     1,216                     –
Trade and other payables     115,706 135,008
Income tax payable     2 2
Deferred income on contracts with customers     13,701 13,271
Other deferred income     24,920 26,438
Derivative financial instruments     6,983 6,281
Current liabilities excluding discontinued operation     343,070 295,315
Liabilities of discontinued operation     179,576                     –
Total current liabilities     522,646 295,315
Total liabilities     1,599,454 1,478,754
TOTAL EQUITY AND LIABILITIES     3,864,941 3,798,819
               

* The Latvenergo Consolidated and Latvenergo AS Unaudited Condensed Financial Statements for 2019 are prepared in accordance with the IFRS as adopted by the European Union

 

Additional information:
Jānis Irbe
Group Treasurer
Phone: +371 67 728 239
E-mail: 
investor.relations@latvenergo.lv

www.latvenergo.lv

About Latvenergo

Latvenergo Group is one of the leading energy suppliers in the Baltics operating in electricity and thermal energy generation and trade, natural gas trade, electricity distribution services and lease of transmission system assets. Latvenergo AS has been acknowledged as the most valuable company in Latvia for several times. International credit rating agency Moody's has assigned Latvenergo AS an investment-grade credit rating of Baa2/stable.

Latvenergo Group is comprised of the parent company Latvenergo AS (generation and trade of electricity and thermal energy, trade of natural gas) and seven subsidiaries - Latvijas elektriskie tīkli AS (lease of transmission system assets), Sadales tīkls AS (electricity distribution), Elektrum Eesti OÜ (trade of electricity and natural gas in Estonia), Elektrum Lietuva UAB (trade of electricity and natural gas in Lithuania), Enerģijas publiskais tirgotājs AS (administration of mandatory electricity procurement process) and Liepājas enerģija SIA (generation and trade of thermal energy in Liepaja, electricity generation). All shares of Latvenergo AS are owned by the state and held by the Ministry of Economics of the Republic of Latvia.

 

 


02_Latvenergo 12M 2019_presentation_ENG.pdf
01_Latvenergo 12M 2019_ENG.pdf