LITHUANIAN STATE-OWNED ENTERPRISES in 2011 Annual Report
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REFORM PROGRAMME OF STATE-OWNED ENTERPRISES LITHUANIAN STATE-OWNED ENTERPRISES IN 2011 Annual Report Annual Report. Lithuanian State-Owned Enterprises in 2011 | 1 REFORM PROGRAMME OF STATE-OWNEDCONTENTS ENTERPRISES FOREWORD BY THE PRIME MINISTER 3 WHAT IS COVERED BY THE REPORT 4 REFORM PROGRAMME OF STATE-OWNED ENTERPRISES 4 ECONOMISTS ABOUT THE REFORM OF STATE-OWNED ENTERPRISES 9 OVERVIEW OF PORTFOLIO RESULTS 11 SPECIAL OBLIGATIONS 20 EFFECT OF SNORAS BANKRUPTCY ON THE NET RESULT OF THE SOE PORTFOLIO 22 EFFECT OF ADJUSTMENTS ON THE NET RESULT OF THE SOE PORTFOLIO IN 2009 AND 2010 22 Transport 24 ENERGY 34 FORESTRY 44 OTHER ENTERPRISES 53 ENTERPRISES IN DETAIL 59 Lithuanian Railways 60 Lithuanian Post 61 Klaipėda State Seaport Authority 62 Lithuanian Shipping Company 63 Vilnius International Airport 64 Kaunas Airport 65 Palanga International Airport 66 Road maintenance enterprises 67 Klaipėdos Nafta 68 LESTO 69 Lietuvos Energija 70 Litgrid 71 Visaginas Nuclear Power Plant 72 Forest enterprises 73 Lithuanian Radio and Television Centre 74 OVERVIEW OF THE PORTFOLIO OF MUNICIPALLY-OWNED ENTERPRISES 75 HEAT 81 EVALUATION METHODOLOGY 88 LIST OF ENTERPRISES 90 ABBREVIATIONS AND DEFINITIONS 103 The Report is available online at www.vvi.ukmin.lt Ministry of Economy of the Republic of Lithuania Gedimino pr. 38 / Vasario 16-osios g. 2, LT-01104 Vilnius Design by UAB VRS WPI Vilnius, Lvovo g. 12, LT-09313 Vilnius Printed by AB Kopa, Kampo g. 7, LT-3009 Kaunas Print run of 500 copies 2012 2 | Annual Report. Lithuanian State-Owned Enterprises in 2011 REFORM PROGRAMMEFOREWORD OF STATE-OWNED BY THE PRIME ENTERPRISES MINISTER Dear shareholder, fit payments in 2012 which is 12 times more than in 2010. I would like to point out that these dividend payments will not The Government has interfere with the progress of projects undertaken by companies drawn up the third Annual to ensure growth. Some dividends will be paid out from profits Report on state-owned en- accrued in the previous years but this fact shows once again that terprises. These reports are previously financial resources were used inefficiently. Although becoming an example of good state-run enterprises paid LTL 65 million in taxes on property practice of the Government and raw materials to the national budget in 2011, their results providing information to the were significantly affected by the bankruptcy of Snoras bank. citizens of Lithuania, who are If these financial losses are excluded, profits generated by sta- the true shareholders of state- te-owned enterprises more than tripled in 2011 rising to LTL owned enterprises, on the acti- 246 million. The improving results are encouraging but we will vities, results and challenges of strive to ensure that they are even better in the future. these enterprises. In terms of systemic change, it should be pointed out that The first report on the performance of state-owned enterpri- the Government, acting in the interests of all shareholders, paid ses since the restoration of independence was published 2010. more attention to analysing the enterprises, setting clear targets The report disclosed the portfolio of commercial assets held by and putting in place professional boards. This function must be the state for the first time and showed that the return on these further strengthened and the Governance Coordination Centre assets was lower than, for instance, in the neighbouring Nordic will be set up this year to advise the Government on how to su- countries. Therefore, the Government made important decisi- pervise state-owned enterprises and put in place related policies. ons to change the way these companies were managed, to make Last year, we made a promise to focus on transparency in them more efficient, transparent and accountable in order to municipally-owned enterprises as well. Therefore, the Govern- ensure higher returns generated by these enterprises. ment took the initiative and included a review of municipally- This Report outlines major achievements and milestones owned companies in this Annual Report. As a rule, munici- since the beginning of 2011. I would like to draw your atten- pally-owned enterprises are less visible in the media compared tion to several key aspects. to such companies as Lithuanian Railways or LESTO but their The delegation of independent members to the boards of inefficiency has a direct impact on the finances of every citizen enterprises run by the Ministry of Energy and Ministry of Eco- because these enterprises operate in heat, water, waste and local nomy underlines a change in approach to state-owned enter- transport sectors. prises and their role in society. It is widely agreed that state- I strongly believe that municipally-owned enterprises will owned enterprises must be isolated from political processes and become more transparent if the public takes interest in them their management must be based on clear business principles. and demands more from local governments. Therefore, the Acting in accordance with good practices used in many Government will continue to include the results of munici- advanced countries, the Government adopted the Ownership pally-owned enterprises in its reports so that the public could Guidelines this June setting an ambitious governance standard have an unbiased view on the efficiency of municipal enterpri- for state-owned enterprises. Under this document, indepen- ses and members of municipally-owned councils adopt better dent board members will be appointed to serve on the boards decisions. of major state-owned enterprises by September. They will make Transparency, efficiency and professionalism are the key up at least a third of all board members. I believe that advantage principles underlying the Government’s reform of state-ow- will be taken of this opportunity to have true professionals on ned enterprises. We have developed the tools used in Western the boards in order to ensure that operations of state-owned Europe and Asia which have already proven themselves in Li- enterprises are more efficient and profitable. thuania such as the legal framework, Transparency Guidelines, The reform of state-owned enterprises have already yielded Ownership Guidelines and Governance Coordination Centre. tangible results as companies began to operate more transpa- I hope that the main transparency and good governance prin- rently and efficiently and contribute more to the budget. The ciples will also be applied to public institutions operating in target is to collect over LTL 500 million in dividends and pro- health, education and cultural sectors. Yours sincerely, Andrius Kubilius Prime Minister Annual Report. Lithuanian State-Owned Enterprises in 2011 | 3 REFORM PROGRAMME OF STATE-OWNED ENTERPRISES WHAT IS COVERED BY THE REPORT This is the third annual report summarising the form programme of state-owned enterprises, general financial performance of state-owned enterprises. This Report has been overview of the portfolio of state-owned enterprises, indicators drawn up in accordance with the Transparency Guidelines of the financial condition, profitability and efficiency of state- approved by the Government in July 2010 and updated owned enterprises, overviews of major sectors and largest state- in March 2012. These Guidelines stipulate one of the key owned enterprises. In addition, this Report has several impor- objectives of the Government of the Republic of Lithuania tant new features: which is to improve the transparency of operations of state- n Views of economists on the efficiency of state-owned enter- owned enterprises. The purpose of this Report is to inform prises and the ongoing reform (page 9); Lithuanian citizens as indirect shareholders and owners n Changes in the value of stock of state-owned enterprises of state-owned enterprises of the results of activities of traded on NASDAQ OMX Vilnius (page 14); enterprises and encourage these enterprises to operate in a n Assessment of the impact of special obligations, or more efficient and transparent way. functions delegated to enterprises for the pursuit of strategic, The first report on state-owned enterprises was published in political and social goals of the state, on the profitability of 2010. Since then one more annual report and four interim re- enterprises (page 20); ports have been released. An attempt to summarise and evalua- n Aggregated advertising and media expenditure of state- te the results of state-owned enterprises for the first time posed owned enterprises; various challenges: how to bring data from financial statements n Overview of municipally-owned enterprises (page 75). of enterprises to a uniform standard and aggregate them cor- Although the reform programme of state-owned enterprises rectly into a single portfolio, which indicators to calculate so does not cover municipally-owned enterprises, the latter are that they reflect the actual situation of enterprises allowing to also recommended to comply with the Transparency Guide- compare them against other companies, how to present the lines. These enterprises are indirectly owned or controlled by most relevant and interesting information to the reader. The- residents of towns or districts of their operation and these re- refore, financial statements were being improved throughout sidents also need to be aware of the results of activities of the- 2011 so that more comprehensive and clear data could be pro- se enterprises. Therefore, the Report contains an overview of vided to help everyone interested to better understand why and the total portfolio of municipally-owned enterprises and the how the results of state-owned enterprises change. overview of the heat sector which is especially important for Traditionally, this Report contains information on the re- households. REFORM PROGRAMME OF STATE- OWNED ENTERPRISES Why state-owned enterprises must be reformed The Lithuanian state is an important shareholder of public and gement system of enterprises which offers no incentives to be private limited liability companies and owner of state enterprises profitable, sets conflicting targets and creates conditions for their with the largest holdings of commercial property in the country.