OREANDA-NEWS. The group of companies of Lithuania's largest electricity producer Lietuvos Energijos Gamyba ('the Group') has recorded LTL 59.5 million earnings before interest, tax, depreciation and amortisation (EBITDA). Successful trading in electricity in the free market and increased generation at hydro electric power plants have contributed to the good results of the Group.

The first three months of 2014 did not bring any surprises to the electricity market. January, February and March were slightly warmer than usual, with the average temperature in Lithuania exceeding the standard value, and there were no significant restrictions on intersystem capacities in this period, therefore, subsidised electricity was generated in Lithuania only by co-generation plants of the cities. In the January - March period, the average electricity price in the Lithuanian bidding area of Nord Pool Spot was 4.3% lower than in the same period of 2013 and was 146.5 Lt/MWh. For comparison, in September and October 2013, when import opportunities were significantly restricted, the average electricity price in the Lithuanian bidding area was almost 50% higher.

Thus, based on a stable situation in the electric power system and seeking to save the funds of the public interest services (PIS), the company was able to comply with the plan agreed with Litgrid, the Lithuanian transmission system operator, and not to put into operation the reserve generation units and the combined-cycle unit of the Elektrenai complex during the January - March period of 2014. Furthermore, since the beginning of 2014 LESTO, the distribution network operator, started purchasing electricity on the exchange, which has led to a decrease of the Group's sales under bilateral contracts. As a result, the Group's revenues were reduced by one fourth: from LTL 221.9 million in the January-March period of 2013 to LTL 165.3 million in the same period of 2014.

According to Juozas Bartlingas, Chairman of the Board and CEO of Lietuvos Energijos Gamyba, the decrease in revenues has been compensated by the professionalism of the company's sales personnel, which has enabled the company increase the electricity sales in the free market by nearly one third, and by the increased power generation at the competitive Kaunas Hydroelectric Power Plant ('Kaunas HPP') and Kruonis Pumped Storage Hydroelectric Plant ('Kruonis PSHP') due to warm winter. 'In addition, costs were reduced considerably in the first quarter of 2014 compared with the first quarter of 2013 due to lower expenses for fuel and the use of the opportunities for purchasing cheaper electricity. This has resulted in better profitability ratios of the Group in the first quarter of 2014 compared with last year', says J. Bartlingas.

In the period of January - March 2014, the Group's EBITDA margin was 36%. Compared with the same period of 2013, the EBITDA margin has increased by 9.5 pp (from 26.5%). EBITDA has increased from LTL 58.8 million to LTL 59.5 million. The net profitability of the Group has grown by 16.8 pp: the net profitability ratio for the 3 months of 2014 was 3.1%, for the same period of this year 20%. Net profit of the Group in the period of January-March 2014 is LTL 33 million, which is nearly five times more than in the same period of 2013 (LTL 7 million).

'We are pleased that successful operations of 'Lietuvos Energijos Gamyba' are being noticed. As shown by the results of the procurement procedure for the refinancing of the company's loans, which was completed in the first quarter of this year, creditors' trust in the company and the energy sector as a whole is growing, which enables us to realise our goals. We will continue focussing on our priorities: increase in the efficiency of operations, project development and analysis of new opportunities. We plan to put the new Elektrenai thermal energy generation capacities into operation at the end of 2014, and are continuing wind measurements in the territory of Kruonis PSHP. The results of these measurements will form a basis for our decision on the feasibility of construction of a wind farm next year', says J. Bartlingas.

Production indicators

The electricity generation volume of all the company's power plants totalled 0.245 TWh in the 3 months of 2014. Last year it amounted to 0.3 TWh, which is 22.4% more.

As already mentioned above, no electricity was generated at the Elektrenai complex during the first 3 months of this year. It had been planned last year that in the period from 1 April until 15 October the operation of the units of the complex would be based on a schedule agreed with 'Litgrid', in order to ensure a reliable operation of the power system and an efficient use of the PIS funds allotted to the Elektrenai power plant.

During the 3 months of 2014, Kaunas HPP generated 0.113 TWh of electricity, which is 12% more than in the same period of 2013. The average flow rate in the River Nemunas was higher in January and February, and close to the average multi-annual flowrate in March.

Production volumes of Kruonis PSHP increased 8% during the 3 months of this year compared with the same period of last year: the power plant produced 0.132 TWh of electricity.

Regulated and commercial activities

In the first quarter of 2014, there has been a decrease in the Group's revenues from both regulated and commercial activities, however, the share of the latter in the overall revenue structure has been increasing: commercial revenues accounted for 59% of total revenues in the 3 months of 2013 and for nearly 65% in the same period of 2014.

Regulated activities of the Group include the generation of electric and heat energy at the Elektrenai complex and the power reserving services provided by Kruonis PSHP and the Elektrenai complex. As no electricity was generated at Elektrenai, the Group's revenue earned from regulated activities during the 3 months of 2014 was 36% lower compared with the same period of 2013 (LTL 58.3 million).

Revenues from commercial activities, which consist of the electricity generation at Kruonis PSHP and Kaunas HPP and the wholesale and retail trading in electricity in the free market as well as other commercial services, have dropped 18%. Due to the change in the arrangement of electricity sale to LESTO, revenues from commercial activities decreased from LTL 131 million during the 3 months of 2013 to LTL 107 million in the same period of 2014.

The Group's electricity sales in the free market during the 3 months of 2014 increased 30% compared with the same period of 2013 (0.414 TWh and 0.318 respectively). Professional trading activities have enabled the Group to increase its EBITDA from LTL 20 million for the 3 months of 2013 to LTL 30 million for the 3 months of 2014.

The company has started trading according to the gross bidding arrangement in March 2014 and is concluding its electricity purchase and sale transactions separately. The company is determined to continue its contribution to enhancing market transparency and, at the same time, it will seek to maximise the use of the opportunities provided by Kaunas HPP and Kruonis PSHP to compete in the market by the electricity price.

Lietuvos Energijos Gamyba, AB is a company listed on NASDAQ OMX Vilnius Electricity Exchange. 96.13% of its shares are held by Lietuvos Energija, UAB, a state-controlled private company.

The Group of Lietuvos Energijos Gamyba consists of the parent company Lietuvos Energijos Gamyba, AB, which controls the reserve power plant and the combined-cycle unit in Elektrenai, the Kruonis Pumped Storage Hydroelectric Plant and the Kaunas Hydroelectric Power Plant, as well as of private companies Energijos Tiekimas UAB and Kauno Energetikos Remontas UAB.