OREANDA-NEWS. The state-run energy group Lietuvos Energija achieved the best results in five years in 2013, while improved efficiency helped reduce the electricity distribution rate for 2014 and the need for budget allocations for energy generation to meet public service obligations (PSO). After the virtual completion of the corporate governance reform and creation of the framework for further improvement of performance and development, Lietuvos Energija set an ambitious strategic objective to double the value of the Group by 2020.

“Last year was a significant year as we achieved our annual objectives and targets. We demonstrated the ability to successfully improve our performance and management of state property,” said Dr. Dalius Misiunas, CEO and Chairman of the Board of Lietuvos Energija, UAB.

Last year, the Lietuvos Energija Group earned LTL 2.907 billion in revenue, up by 3.9% from 2012, and saw its gross profit rise by 17.8% to LTL 1.1 billion. In 2013, went up by 29% (LTL 153 million) and EBITDA margin rose to 23.3% (from 18.8% in 2012).

The growth of EBITDA mostly relied on higher net distribution revenue, more efficient regulated activities and more profitable commercial activities. Net profit stood at LTL 117 million (up from a loss of LTL 34 million in 2012). The profitability of Group's equity went up from -0.5% in 2012 to 1.9% in 2013.

It should be noted that the Group boosted its operating profitability in 2013 despite lower tariffs of Group's regulated activities (electricity distribution) and volumes of subsidised electricity generation.

Moreover, more efficient performance in 2013 helped reduce the electricity distribution tariff by 4% and cut the need for PSO budget allocations for electricity generation in Elektrenai by about 45% in 2014.

Good operating results further strengthened the Group's equity capital base and improved cash flows from the Group's operations cut the net financial debt by half. At the end of 2013, the net financial debt of the Group was LTL 442 million and with net dept to equity ratio being 7.1%. These indicators reflect a strong financial capacity of the Group and excellent opportunities to raise more capital for strategic projects undertaken by the Group.

Qualitative indicators also improved

Last year, Lietuvos Energijos Gamyba, a company of the Group, generated 1.96 TWh of electricity, which made up 20% of the total national demand, and LESTO distributed 8.21 TWh of electricity.

In 2013, LESTO improved the reliability of supply by replacing 283 kilometres of overhead electricity lines with more reliable cable lines measuring 1,326 kilometres in length. At the end of 2013, the total length of cable lines was 25,892 kilometres and made up 21.3% of the total network of 122,000 kilometres.

In 2013, the reliability of the distribution network improved by 6% on average and technological losses decreased by nearly 5%.

Governance reformed, strategic objectives set

At the end of 2013, Lietuvos Energija undertook a complete overhaul of its corporate governance structure by amending and approving the articles of association of companies, separating governing and supervisory bodies and drawing up general policies in order to coordinate the activities of Group's companies, increase efficiency and build value.

Last year, the Group drew up the Operating Strategy of Lietuvos Energija Group for 2014-2020 which was approved in early 2014. The strategy set a target of doubling the value of the Group and becoming the most valuable energy company in the Baltic states by 2020.

This strategic objective will be pursued by putting in place a new organisational culture based on the values of responsibility, cooperation and result orientation, improving efficiency and diversifying operations as well as ensuring the provision of quality services to customers.

“There were some challenges in the past and there will be new ones in the future but we feel that we have built a strong foundation which will help us create value for our employees, public and shareholders in a responsible, united and result-oriented way,” said Dr. Misiunas.

New activities

Last year, Lietuvos Energijos Gamyba secured financial support from the European Union and began the construction of a LTL 86.5 million biofuel unit in Elektrenai. The Group also undertook feasibility studies for the development of heat and electricity generation capacities in Vilnius and Kaunas.

The Group acquired a 67% interest in LITGAS, a supplier of liquefied natural gas (LNG) through the future LNG terminal in Klaipeda and natural gas trader. At the end of the year, LITGAS was issued a natural gas supply licence and was approved as the designated supplier in early 2014. Starting from 2015, it will have to supply the minimum necessary volume of natural gas (540 million cubic metres) to the LNG terminal.

The Group began its expansion abroad as Energijos Tiekimas set up subsidiaries in Latvia and Estonia and signed electricity supply contracts with the first customers in both countries.

At the start of this year, a 17.7% stake in Lietuvos Dujos held by the state was also transferred to Lietuvos Energija, UAB.