CONSOLIDATED INTERIM REPORT OF THE COMPANY AND THE GROUP 12014 January m. sausio 2014 1– d.31 – December 2014 m. rusgėjo 2014 30 d.
1 Contents
Message from the Chairman of the Board 4 About the Group and the Company 5 The most signifi cant events 8 Analysis of fi nancial and operating results of the Group 9 Review of activities of the Company and the Group 20 Corporate governance 31 Social responsibility 45 Key information about the Company and the Group 52
2 Key indicators of the Lietuvos Energija Group
12 months 12 months Change of 2014 of 2013 +/- % Revenue LTL million 3,375.3 2,907.5 467.7 16.1 Costs of purchase of electricity, gas, fuel and related services LTL million -2,115.8 -1,784.6 -331.2 18.6 Operating expenses1 LTL million -539.8 -447.2 -92.6 20.7 EBITDA2 LTL million 719.3 680.6 38.8 5.7 EBITDA margin3 % 21.3 23.4 Normalized net profit* LTL million 200.0 59.2 42.0 12 months 12 months of 2014 of 2013 Total assets LTL million 8,171.1 9,609.3 -1,438.2 -15.0 Equity LTL million 4,490.9 6,134.8 -1,643.8 -26.8 Financial debts LTL million 1,352.1 1,180.1 172.1 14.6 Net financial debts4 LTL million 607.3 442.0 165.3 37.4 Return on equity (ROE)5 % -22.2 2.3 Return on equity (ROE)*5 % 4.5 2.3 Equity capital level6 % 55.0 64.3 Net financial debt / EBITDA of 12 months times 0.84 0.65 Net financial debt / Equity ratio % 13.5 7.2
1Operating expenses (OPEX) = operating expenses, excluding the costs of purchase of electricity and related services, costs of depreciation, amortisation and value impairment and write-offs of tangible fixed assets. 2EBITDA (earnings before interest, taxes, depreciation and amortisation) = pre-tax profit (loss) + interest expenses – interests revenue – received dividends + costs of depreciation and amortisation + value impairment costs + write-offs of tangible fixed assets. 3EBITDA margin = EBITDA / revenue. *Net profit calculated excluding the reappraisal of AB LESTO and assets, one-time tax costs related to the acquisition of AB Lietuvos Dujos and evaluation of deferrals related to the obligation to apply a discount for the price of gas to customers in 2015-2016 4Net financial debts = financial debts – cash and cash equivalents – short-term investments and time deposits – share of other fixed financial assets comprising investments in debt securities. 5Return on equity (ROE) = net profit (loss), restated annual expression / equity capital at the end of period. 5Return on equity (ROE) = net profit (loss), restated annual expression / equity capital at the end of period. 6Equity capital level = equity capital at the end of period / total assets at the end of period.
Key indicators of the Lietuvos Energija Group 3 1 Message from the Chairman of the Board
Dear Customers, Partners, EUR 683 million (LTL 2 357 million). This is a one-time negative Employees and Shareholders, effect, as the evaluated value of assets corresponds to the actual value of assets under the current regulatory environment. In its path to increasing value, Lietuvos Better electric power generation profitability results, efficient dis- Energija has been gaining momentum - in tribution network activities and a positive gas transmission and 2014, the Company achieved best operat- distribution activity result determined that normalized net profit ing results since the establishment of the of Lietuvos Energija (allowing comparing performance of several Group and managed to ensure the lowest reporting periods after the elimination of the impact of one-time prices for electricity and gas consumers. factors) totalled EUR 58 million (LTL 200 million) in 2014 and was In two years, the value of Lietuvos Energija Group increased 1.4 42 % greater than in 2013. The growth was ensured by coordi- times, which means that 40 percent of the goal to double the val- nated development of the Group companies, increased effi- ue of the Group by 2020 was achieved. ciency and integration of their activities - last year we trans- The Group, which currently comprises 20 companies, brought to- ferred the functions of procurement and accounting of the gether a wide and sufficiently diversified activity portfolio. In our Group to UAB Verslo Aptarnavimo Centras, we started com- path to optimal performance of the Group, we have been search- bining service provision for electricity and gas consumers. ing and seeing opportunities for clearing up activities creating We have ensured reliable services for our customers at a lower value, efficiently integrating them into each other and distribut- price and a better return for our shareholders. At the same time, ing them among companies. In 2015, the Group will carry out a our quality indicators reflecting how well we have been providing programme for the clearer definition of the value chain, the aim services to our customers, as well as customer satisfaction indices whereof is to optimize the structure and key operating processes experienced a growth - satisfaction index of our electricity cus- of the Group, thus allowing achieving an even greater operating tomers remained higher than the comparative EU indicators for efficiency, transparency and ensuring better services for custom- the third consecutive year. ers. Tackling emerging challenges and having ambitions for the de- Lietuvos Energija starts the year 2015 having a clearer financial velopment, we set ambitious goals for our management team to view - in light of decisions made by the National Control Commis- continue successful activities of the Group. sion for Prices and Energy at the end of 2014, AB LESTO, a power distribution network operator owned by the Group, conducted the valuation of its fixed tangible assets this year pursuant to in- ternational accounting standards. Pre-audited data revealed that Dr. Dalius Misiūnas the fair value of the assets determined during the valuation de- Chairman of the Board and Chief Executive creased by EUR 618 million (LTL 2 135 million) and amounted to Officer of Lietuvos Energija, UAB
Message from the Chairman of the Board 4 2 About the Group and the Company
The Lietuvos Energija group is one of the largest state-owned The consolidated revenue of the Group of twelve groups of energy companies in the Baltic States. The principal activity of the Group includes the generation and supply of elec- months of 2014 amounted to EUR 977.5 million tricity and heat, sales and distribution of electricity, sales and dis- (LTL 3 375.3 million), and EBITDA of the Group was tribution of natural gas, as well as the servicing and development EUR 208.3 million (LTL 719.3 million). Normalized net of the energy sector. The rights and obligations of the shareholder profi t of twelve months stood at EUR 57.9 million of Lietuvos Energija Group are implemented by the Ministry of Fi- (LTL 200 million). nance of the Republic of Lithuania.
The Lietuvos Energija Group with more than 5 600 employees The parent company of the Group – Lietuvos Energija, UAB (here- manages and operates the key energy generation capacities of inafter – Lietuvos Energija or the Company) is responsible for Lithuania ensuring the security of energy supply and distribution transparent management and coordination of activities of the network covering the whole territory of the country, and pro- whole Group, improvement of the effi ciency in order to ensure vides services to more than 1.6 million consumers throughout competitive services for consumers, and for socially responsible Lithuania, off ers electricity supply services to consumers abroad, creation of long-term value for its shareholders. The Company operates 8.4 thousand km of distribution gas pipelines, supplies analyses the activities of the Group, represents the Group, imple- gas to more than 556 000 consumers, implements development ments the rights and obligations of the shareholder, establishes projects of strategic value and pursues the goals of the National operational guidelines and rules, and coordinates the activities in Energy Strategy. During twelve months of 2014, 1.84 TWh of elec- the areas of production, commerce, fi nance, law, strategy and de- tricity were generated, 8.4 TWh of electricity were transmitted to velopment, human resources, risk management, audit, technolo- consumers and 747.8 million m3 of natural gas were transported gy, communication and others. via the distribution gas pipelines.
About the Group and the Company 5 Structure of the Group
As of the date of the Report, the Lietuvos Energija Group consisted types of business activities comprise the ITT, real estate, transport, of 18 companies: the parent company and 17 directly and indirect- repairs and construction of energy facilities, staff training, public ly managed companies. The core business activities of the Group procurement, accounting, administration of labour relations and include the generation of electricity and heat, sales, distribution other services. A detailed list of the Group companies is presented and supply of electricity as well as sales and distribution of nat- on p. 53 hereof. ural gas. Activities of the Group’s companies servicing these core
The Structure the Group as of 31 December 2014
„Lietuvos energija“, UAB
94,39 % 96,64 % 96,13 %
AB LESTO AB „Lietuvos dujos“ „Lietuvos energijos gamyba“, AB
100 % 57 % 50 % 67 % 100 % 100 % 100 % 80 % 56 % 100 % 100 % UAB UAB UAB UAB UAB UAB VŠĮ Energijos „Elektros NT Valdos, Verslo UAB Lietuvos Energetikų UAB Duomenų Technologijų „Kauno tiekimas tinklo UAB aptarnavimo LITGAS dujų mokymo „VAE SPB“ logistikos ir inovacijų energetikos UAB paslaugos“ centras tiekimas centras centras centras remontas“
100 % 100 % 100 %
Geton Geton Gotlitas Energy SIA Energy OU UAB
The Supervisory Board comprises 7 members (of whom 3 are independent members). The Board comprises 5 members (who work in the Company). The Chairman of the Board is the Company’s CEO. The Supervisory Board comprises 3 members (of whom 1 is independent member). The Board comprises 5 members (who work in the Company). The Chairman of the Board is the Company’s CEO. *In the case of TIC, the Board of 5 members is formed; in the case of VAE SPB the Board The Board* comprises 3 members (2 shareholders and 1 independent member). is not formed. This complies with the provisions of the corporate governance guide- The Company’s CEO is not a member of the Board. lines with respect to management and supervisory bodies of subsidiaries approved by The Chief Executive Officer, boards are not formed. the Minister of Finance.
About the Group and the Company 6 Strategy of the Group The main goal of the strategy of the Lietuvos Energija Group is to double the value of the Group and to become the most valuable energy company in the Baltic States by 2020. This value is perceived as a sustainable balance of three components: return on assets, improvement of competitiveness and responsi- bility towards employees, society and environment.
Return on assets of the Group is increased through the develop- ment – diversifying activities, indulging in new and economically feasible projects and activities, acquiring enterprises, ensuring the effi ciency of daily operations and achieving the goals set by the shareholder. The Group will contribute to the enhancement of the economic competitiveness by ensuring a stable supply of electricity and natural gas, off ering new products and promoting rational consumption of electricity and natural gas. MISSION – VISION – VALUES – sustainable growth of value in the energy to become the most valuable responsibility, sector by promoting economic and social energy company in the Baltic cooperation, development of the country. States. result.
The main strategic directions of the Group: Enhancing the effi ciency of operations. The effi ciency will be sought in the main activities of the Group, as well as in the pro- Ensuring quality services to consumers. The care will be taken vision of support functions, management of assets and other to achieve better servicing of consumers, develop electronic (sav- resources across all Group companies. In order to achieve high- ing consumer time) and new services responding to the needs of er effi ciency, the management and control system of the Group consumers, increase consumer choices and guarantee the reliabil- companies will be integrated by setting the common principles ity of generation, distribution and supply of electricity and of dis- of business management, sharing, coordination and control of tribution and supply of natural gas. responsibilities. Effi ciency improvement measures covering all Group companies or identical or very similar activities in each Diversifying the operations. The diversifi cation includes im- company will also be continued. Active sharing of best practices plementation of investment projects in the sector of electricity, between companies will be promoted and sought. heat and natural gas. The projects increase the competitiveness of the Group and of the national economy at large as well as the Building new organisational culture. A modern, eff ective and energy independence of the state, optimisation of the production dynamic organisation will be created operating on the basis of and trading portfolio, development of new activities by extending common values, developing in consistent and targeted manner the value chain of the Lietuvos Energija Group. These goals will be the required competences and successors for key employees, and achieved using the available resources and infrastructure, invest- off ering internal environment which encourages the involvement ing in the creation of new infrastructure and eff ective governance, of employees. as well as through acquisitions.
About the Group and the Company 7 3 The most signifi cant events of the reporting period
Beginning of supply of natural gas from the LNG terminal The Support Fund allocated support for 2014 On 1 January 2015, LITGAS started the supply of the minimum nec- 15 October 2014. Lietuvos Energija set up the Support Fund, which will essary natural gas quantities of the liquefi ed natural gas (LNG) terminal combine and coordinate the support provided by all Group companies to energy producers subject to regulation, also, having signed agree- for projects, programmes and activities of public signifi cance. The Sup- ments on the supply of gas with Estonian companies, it became one port Fund ensures the transparency of support allocation and estab- of the fi rst companies in the Baltic States supplying natural gas to cus- lishes a solid foundation for social responsibility of the Group. The Fund tomers in other countries. This will help LITGAS to diversify its sources received a total of 95 applications for support this year. Support in the of supply. Also, LITGAS announced its plans to engage in new activities amount of LTL 1.8 million was allocated for 12 regional and 4 national of a small-scale LNG supply and bunkering together with Statoil. (See level projects in 2014. (See p. 47 for more information) p. 21 for more information). Unbundling of the natural gas distribution and supply activities Creation of the concept of clearer defi nition of the value chain 31 October 2014. AB Lietuvos Dujos transferred the service of supply 13 February 2015. Lietuvos Energija seeks to clear up its core activ- of natural gas to a new company UAB Lietuvos Dujų Tiekimas, which ities by the end of the year and to distribute them across companies has been ensuring the supply of natural gas to household, business and creating the greatest value for the Group and its customers - energy other customers since 1 November. In November, the reorganization of consumers, therefore, the concept of a clearer defi nition of the value AB Lietuvos Dujos completed the implementation of the requirement chain is being developed and an action plan is being drawn up. The laid down in the EU’s Third Energy Package to unbundle the activities of updated business concept will improve customer service, increase op- the supply and sales as well as distribution of natural gas. Lietuvos Dujos erational effi ciency and will allow reducing costs. (See p. 26 for more continues operating the natural gas distribution system and providing information). distribution services (See p. 22 for more information) Start of implementation of cogeneration projects Payment of interim dividends 5 December 2014. Lietuvos Energija, in developing the projects of November 2014. Lietuvos Energija, UAB received EUR 57.13 million cogeneration facilities in Vilnius and Kaunas, received off ers of poten- (LTL 197.283 million) in interim dividends from the companies under tial partners in the conducted selection procedure of partners. Con- its control – AB LESTO, Lietuvos Energijos Gamyba, AB, and AB Lietuvos sultations will be held with partners having presented off ers, which Dujos. By decision of the Government, Lietuvos Energija paid out to the best meet the goals of the project, and cooperation contracts will be state LTL 84.95 million in interim dividends. According to decisions of the eventually signed. On 28 January 2015, the Government formed a spe- meetings of shareholders held on 30 September, AB LESTO disbursed cial commission, which will examine project implementation-related LTL 66.4 million of dividends (11 cents per share), Lietuvos Energijos issues. (See p. 20 for more information). Gamyba, AB – LTL 69.9 million (11 cents per share), and AB Lietuvos Du- jos – LTL 69.8 million (24 cents per share) of dividends to shareholders.
The most signifi cant events of the reporting period 8 4 Analysis of operating results of the Group
Key operating indicators Change Operating indicators of Lietuvos Energija, UAB Group 2014 2013 +/- % Electricity Generated electricity TWh 1.835 1.960 -0.125 -6.4 Distributed electricity through medium- and low-voltage grids TWh 8.401 8.209 0.192 2.3 Public and guarantee supply TWh 3.230 3.061 0.169 5.5 Sales of electricity on the free market TWh 1.261 1.163 0.098 8.4 Quality indicators of electricity supply SAIDI (incl. force majeure) min. 144.04 153.43 -9.4 -6.1 SAIFI, (incl. force majeure) units 1.29 1.43 -0.1 -10.2 Technological costs in the distribution network % 7.28 7.48 -2.7 Gas Distributed volume of gas billion m3 0.748 0.856 -0.109 -12.7 Sold volume of gas billion m3 0.799 1.035 -0.236 -22.8 Quality indicators of gas supply SAIDI (incl. force majeure) min. 1.67 0.12 SAIFI, (incl. force majeure) units 0.006 0.002 During 12 months of 2014, the amount of electricity distributed the result of 2013). Compared to the previous reporting period, in by the Group to consumers via medium and low voltage networks 2014, electricity generation volumes in Kaunas Algirdas Brazaus- increased to 8.40 TWh (+ 2.3 %, +0.19 TWh compared to the same kas Hydroelectric Power Plant decreased by 22 percent due to period of 2013). The increase was mainly infl uenced by H2 of 2014, relatively dry spring, summer and beginning of the autumn sea- during which the amount of distributed electricity increased by son (from 0.41 TWh in 2013 to 0.311 TWh in 2014). The level of 4.2 % compared to the same period of 2013. the generation of electricity in Kruonis Pumped Storage Plant in- creased in 2014 compared to 2013 - during 2014, it generated and During 12 months of 2014, the public and guarantee supply of sold 0.66 TWh of electricity, which was 39 % more than in 2013 electricity of the Lietuvos Energija Group was 3.23 TWh (+5.5 %, (0.47 TWh). Electricity generation volumes in Elektrėnai Complex +0.17 TWh). The growth in volumes of this activity was predeter- also decreased: in 2014, it generated 0.22 TWh, or 20 % less elec- mined by unplanned winding-up of activities of several indepen- tricity than in 2013 (1.08 TWh). Electricity in Elektrėnai Complex dent electricity suppliers at the end of 2013. The Group’s electric- was generated since April of 2014 according to the schedule ap- ity sales on the free market during the reporting period totalled proved in 2014 in the procedure prescribed by laws. The Elektrė- 1.26 TWh (+8.4 %, +0.1 TWh). nai Complex units are used for electricity generation in order to During 12 months of 2014, the Lietuvos Energija Group generated ensure reliable operation of the electricity system, when there is a 1.835 TWh of electricity (-6.4 % or by 0.125 TWh less compared to shortage of electricity in the country due to the repair or limited
Analysis of operating results of the Group 9 permeability of other sources of electricity generation or the price With decreasing consumption of natural gas in 2014, the volume thereof on the market increases. Such arrangement of electricity of gas distributed and sold by the Group also decreased. The production in Elektrėnai Complex allows ensuring efficient use of volume of gas distributed by the Group in 12 months of 2014 PIMS funds. accounted for 0.748 billion m3 (which was 12.7 %, or 0.11 billion m3 less compared to 2013, when the distributed volume of gas Electricity supply quality indicators of the Group improved in totalled 0.856 billion m3). The volume of gas sold in 12 months of 2014. Technological costs in the distribution network decreased 2014 decreased by 22.8 %, or 0.236 billion m3, from 1.036 billion m3 from 7.48 % in 2013 to 7.28 % in 2014. The average duration of un- in 2013 to 0.799 billion m3 in 2014. The reduction of the distributed planned interruptions in electricity transmission (SAIDI), including and sold volume of gas was mainly influenced by lower amounts the causes of force majeure, was 144 minutes per consumer, and (-0.223 billion m3, or -24 %) of sales of natural gas to non-house- the average number of unplanned long interruptions (SAIFI) was hold customers. During 2014, 84 % of the total volume of sold gas 1.29 times per customer. In 2013, the quality indicator of electric- was sold to non-household customers. ity supply SAIDI was 153.4 minutes and SAIFI accounted for 1.43 times. As overhead lines make up about 78 % of the distribution The average duration of unplanned interruptions in transportation of networks of Lithuania, the reliability of electricity supply remains gas (SAIDI), including the causes of force majeure, was 1.67 minutes very dependent on prevailing weather conditions. per consumer during 12 months of 2014 (compared to 0.12 minutes in 2013), while the average number of interruptions in gas transpor- Excluding force majeure effects, in 12 months of 2014, compared tation (SAIFI) was 0.006 times (compared to 0.002 times in 2013). The to 12 months of 2013, SAIDI improved and was 71.56 minutes (in gas supply quality indicator became significantly worse as a result 12 months of 2013 – 72.51 minutes), and SAIFI of 12 months of of one incident - disorder in the transportation of natural gas in 2014 was 0.90 times compared to SAIFI of 0.97 times of 12 months the natural gas distribution system on 4 October 2014, when gas of 2014. distribution was temporarily terminated in the city of Širvintos due to a failure of a gas pressure regulator.
Electricity generation and distribution, TWh Distributed and sold volumes of gas, billion m3
3,61 Public and 1,32 guarantee supply 3,06 1,13 3,23 Sold gas 1,04 Electricity distributed 8,11 0,80 to customers through medium- and low- 8,21 voltage grids 8,40 1,07 0,98 2,20 Distributed gas Generated 0,86 electricity 1,96 0,75 1,84
0 2 4 6 8 10 0 1 1 2
2012 2013 2014 2011 2012 2013 2014
Analysis of operating results of the Group 10 Key financial indicators
Financial indicators of Lietuvos Energija, UAB Group 12 months of 2014 12 months of 2013 Change EUR million LTL million EUR million LTL million EUR million LTL million % Revenue 977.5 3,375.3 842.1 2,907.5 135.5 467.7 16.1 Costs of purchase of electricity, gas, fuel and related services -612.8 -2,115.8 -516.8 -1,784.6 -95.9 -331.2 18.6 Operating expenses1 -156.3 -539.8 -129.5 -447.2 -26.8 -92.6 20.7 Operating expenses* -115.5 -398.7 -115.6 -399.1 0.1 0.4 -0.1 EBITDA2 208.3 719.3 197.1 680.6 11.2 38.8 5.7 EBITDA margin3 % 21.3 23.4 Net profit -288.2 -995.0 40.8 140.8 -329.0 -1,135.8 Normalized net profit** 57.9 200.0 40.8 140.8 17.1 59.2 42.0
12 months of 2014 12 months of 2013 Change EUR million LTL million EUR million LTL million EUR million LTL million % Total assets 2,366.5 8,171.1 2,783.0 9,609.3 -416.5 -1,438.2 -15.0 Equity 1,300.7 4,490.9 1,776.7 6,134.8 -476.1 -1,643.8 -26.8 Financial debts4 391.6 1,352.1 341.8 1,180.1 49.8 172.1 14.6 Net financial debts 175.9 607.3 128.0 442.0 47.9 165.3 37.4 Return on equity (ROE)5 % -22.2 2.3 Return on equity (ROE)*5 % 4.5 2.3 Equity level6 % 55.0 63.8 Net financial debt / EBITDA of 12 months Times 0.84 0.65 Net financial debt / Equity ratio % 13.5 7.2
1Operating expenses (OPEX) = operating expenses, excluding the costs of purchase 4Net financial debts = financial debts – cash and cash equivalents – short-term of electricity and related services, costs of depreciation, amortisation and value investments and time deposits – share of other fixed financial assets comprising impairment and costs of write-offs of tangible fixed assets. investments in debt securities. *Operating expenses excluding subcontracting and other unusual costs and expenses 5Return on equity (ROE) = net profit (loss), restated annual expression / equity at the related to gas distribution and transmission activities end of period. 2EBITDA (earnings before interest, taxes, depreciation and amortisation) = 5Return on equity (ROE) = net profit (loss), restated annual expression / equity at the pre-tax profit (loss) + interest expenses – interest revenue – received dividends + end of period, calculated using normalized net profit costs of depreciation and amortisation + value impairment costs + write-offs of 6Equity level = equity at the end of period / total assets at the end of period. tangible fixed assets. 3EBITDA margin = EBITDA / revenue. **Net profit calculated excluding the reappraisal of AB LESTO and assets, one-time tax costs related to the acquisition of AB Lietuvos Dujos and evaluation of deferrals related to the obligation to apply a discount for the price of gas to customers in 2015-2016
Analysis of operating results of the Group 11 Revenue
In 2014, the revenue of the Lietuvos Energija Group amounted to generated electricity as well as supply and trade of electricity in- EUR 977.5 million (LTL 3 375.3 million) and increased by 16.1 %, creased (by 24.1 %, or EUR 54.3 million (LTL 187.6 million)), and the or EUR 135.5 million (LTL 467.7 million) compared to EUR 842.1 share thereof in the comprehensive revenue structure remained million (LTL 2 907.5 million) in 2013. During the reporting peri- similar to that in 2013 (it accounted for 27 % in 2013). Revenue od, the major share of revenue was generated from the electricity from the electricity transmission service decreased upon the re- transmission service (38 % or EUR 374.8 million (LTL 1 294 mil- duction of the transmission price by 13.6 %, or EUR 58.9 million lion)) and sales of the generated electricity as well as supply and (LTL 203.6 million)) and the share thereof in the overall structure trade of electricity (29 % or EUR 280.1 million (LTL 967.2 million)). of revenue decreased (it was 51.5 % in 2012 and accounted for Compared to revenue of 2013, in 2014, revenue from sales of the 38 % in 2014).
Structure of revenue of the Group in 2014, %
28 %
38 % 12 months of 2014 EUR 977.5 million
Revenue of the Group in 2013 and 2014 7 %
1.200 7 % 2 % 977.5 16 % 1.000 +16,1 % 2 % 842.1 800
600 Balancing, regulation and Transmission power reserve 400 Connection of new customers Sales of produced electricity, trade and supply of electricity Revenue, EUR million Revenue, 200 Revenue from distribution and Other revenue 0 sales of gas 12 months of 2013 12 months of 2014 Heat energy PIMS of LEG
Analysis of operating results of the Group 12 Excluding income related to gas transmission and distribution ac- 2 819.2 million). The main reasons for lower revenue of the Group tivity included in the Group’s statement of comprehensive revenue was the reduction of income from electricity transmission service, of 2014, which after the acquisition of AB Lietuvos Dujos as from also the reduction of income from balancing, regulation and pow- 20 June 2014 accounted for EUR 159.4 million (LTL 550.2 million) or er reserve (-56.4 %, or -EUR 23.1 million (-LTL 79.8 million), from 16.3 % of the total revenue of the Group, during 12 months of 2014, the decrease of services meeting public interest (PIMS of Lietuvos revenue of the Lietuvos Energija Group, compared to the same peri- Energijos Gamyba, AB (-EUR 3.6 million (-LTL 12.3 million)) and de- od of last year, reduced by EUR 24 million (LTL 88.7 million) or by 3 % creased sales of heat (-EUR 9.1 million (-LTL 31.4 million). from EUR 842.1 million (LTL 2 907.5 million) to EUR 818.1 million (LTL
Dynamics of revenue of the Group during 2014, by sector
EUR million 1.250 154 9 4 23 59 977,5 1.000 21 1 842,1 54 750
500
250
0 sales of gas PIMS of LEG Heat energy power reserve power Other revenue Balancing, regulation and regulation Balancing, Transmission of electricity Transmission Sales of produced electricity, Sales of produced trade and supply of electricity Connection of new customers Revenue from distribution and Revenue from Revenue of 12 months 2013 Revenue of 12 months 2014
Analysis of operating results of the Group 13 Assets and equity
In 2014, the Group’s assets decreased by 15 % (or - EUR 416.5 mil- which is EUR 618.4 million (LTL 2 135 million) lower than the resid- lion (-LTL 1 438.2 million)) and as of 31 December 2014 totalled ual book value of fixed tangible assets as of 31 December 2013, EUR 2 366.5 million (LTL 8 171.1 million). Compared to the con- which totalled EUR 1 301 million (LTL 4 492 million). dition of 31 December 2013, the Group’s assets amounted to EUR 2 783 million (LTL 9 609.3 million). The increase in the Equity of the Lietuvos Energija Group decreased by 26.8 %, or Group’s assets in 2014 was mainly determined by positive result by EUR 476.1 million (LTL 1 643.8 million), and as of 31 Decem- of usual operations of the Group and the acquisition of AB Lietu- ber 2014 was EUR 1 300.7 million (LTL 4 490.9 million). On 31 vos Dujos, however, the overall result of the change in the Group’s December 2014, equity of the Group amounted to EUR 1 776.7 assets in 2014 was negative due to the negative impact of revalu- million (LTL 6 134.8 million). Even though the equity of the Group ation of fixed tangible assets of LESTO. grew during 2014 as a result of net profit from usual operations earned by the Group, negative results of the revaluation of fixed Based on the report on the evaluation of fixed tangible assets tangible assets of LESTO led to the total negative change in equity drawn up by UAB Ernst & Young Baltic, LESTO conducted the valu- of the Group during 2014. ation of its fixed tangible assets and determined that as of 31 De- cember 2014 the fair value of its fixed tangible assets (including The above-indicated factors determined that the equity level indi- construction in progress) based on preliminary pre-audited LES- cator of the Group decreased in 2014 and accounted for 55 % as of TO financial statements was EUR 682.7 million (LTL 2 357 million), 31 December 2014 (compared to 63.8 % on 31 December 2013).
Analysis of operating results of the Group 14 Operating and purchasing expenses
During 2014, the operating expenses of the Group amounted to During the reporting period, expenses of the Group for purchase EUR 156.3 million (LTL 538.8 million) and compared to the same of electricity, gas, fuel and related services, compared to 2013, in- period of the previous year increased by 20.7 % or EUR 26.8 mil- creased by 18.5 %, or EUR 96 million (LTL 331.2 million). The increase lion (LTL 92.6 million). The increase in operating expenses was was mostly predetermined by inclusion of costs related to the trade mostly influenced by higher costs of subcontracting and materials of gas, which totalled EUR 19.3 million (LTL 515.5 million) into the related to repairs and maintenance of the distribution network, Group’s purchasing costs of the Group from June 2014, when the and other non-monetary costs, which increased by 68 %, or EUR activity of trade of natural gas was started upon the acquisition of 9.5 million (LTL 32.9 million), also, the operating expenses relat- AB Lietuvos Dujos. Decreased volumes of electricity production and ed to the taken-over gas transmission and distribution activities reduced electricity prices in 2014 compared to 2013 led to decreased (+EUR 17.4 million (LTL 60.1 million) included in the operating ex- purchases of gas and oil for electricity from EUR 108.4 million (LTL penses of the Group since the acquisition of the controlling block 374.3 million) to EUR 76.3 million (LTL 263.4 million). Purchase of elec- of shares of AB Lietuvos Dujos from June 2014. Excluding these tricity and related services decreased by 5.2 %, or EUR 21.3 million expenses, in 2014, operating expenses of the Group remained at (EUR 73.5 million) during 12 months of 2014 - from EUR 408.5 million the same level as in 2013 (EUR 115.6 million (LTL 399.1 million). (LTL 1 410.5 million) to EUR 387.2 million (LTL 1 336.9 million).
Operating expenses of the Group in 2013 and 2014, EUR million Expenses of the Group for purchase of electricity, gas, fuel and other related services, EUR million 180
160 156,3 Operating expenses related to 800 the take-over gas transmission +20,7 % 17,4 140 and distribution activity 129,5 612,8 23,4 Subcontracting, materials +18,5 % 120 13,9 and non-monetary expenses 600 516,8 149,3 Purchase of gas for trade 100 -29,6 % -0,1 % 108,4 76,3 Purchases of gas and fuel oil 80 400
60 115,6 115,5 Operating expenses 408,5 -5,2 % Purchases of electricity and 40 200 387,2 related services
20
0 0 12 months of 2013 12 months of 2014 12 months of 2013 12 months of 2014
Analysis of operating results of the Group 15 EBITDA and net profit
The Group’s EBITDA of 2014 amounted to EUR 208.3 million (LTL When comparing activities of several reporting periods, the nor- 719.3 million), which was 5.7 %, or EUR 11.2 million (LTL 38.8 mil- malized net profit of the Group after the elimination of the impact lion), more compared to EBITDA of 2013, when it was EUR 197.1 of one-time actions totalled EUR 57.9 million (LTL 200 million) million (LTL 680.6 million). EBITDA profitability margin of the re- in 2014 and, compared to the result of 2013, when normalized porting period remained almost the same and accounted for net profit amounted to EUR40.8 million (LTL 140.8 million), it in- 21.3 % (compared to EBITDA profitability margin of 23.4 % in creased by 42 % or EUR 17.1 million (EUR 59.2 million). The nor- 2013). The growth of EBITDA of the Group was predetermined by malized net profit is calculated having eliminated a one-time better electricity production profitability results and positive re- impact of the revaluation of fixed tangible assets of LESTO and a sult of gas transmission and distribution activities. one-time impact of tax costs related to the acquisition of Lietuvos Dujos, and having evaluated the need for deferrals related to the In 2014, the Group incurred net loss of -EUR 288.2 million (-LTL obligation of the Group to allocate a part of the reduction of price 995 million), while in 2013 the Group generated net profit of EUR of imported gas negotiated with Gazprom (EUR 81.4 million (LTL 40.8 million (LTL 140.8 million). The negative operating result of 281 million)). Due to the uncertainty of the application of the gas the Group of 2014 was significantly influenced by a one-time neg- price discount in time, the said deferrals were not formed as at 31 ative impact of the revaluation of fixed tangible assets of LESTO, December 2014 following the requirements of international ac- the value of fixed tangible assets of LESTO determined at the time counting standards. This circumstance will have a negative impact whereof was lower by EUR 618.4 million (LTL 2 135 million). on the gas supply activity results of the Group in 2015-2016.
EBITDA of the Group in 2013 and Net profit of the Group in Net profit of the Group (normalized) in 2014, EUR million 2013 and 2014, EUR million 2013 and 2014, EUR million
100 60 +42 % 57,9 40,8 250 50 50 +5,7 % 208,3 12 months of 2014 40,8 200 197,1 0 40 12 months of 2013 150 -50 30
100 -100 20
50 -150 10
0 -200 0 12 months of 2013 12 months of 2014 12 months of 2013 12 months of 2014 -250
-300 -288,2
Analysis of operating results of the Group 16 Investments
The Group’s investments in 12 months of 2014 totalled EUR 144.6 ties have also considerably increased (a total of EUR 17.7 million million (LTL 499.3 million), which was +45 %, or +EUR 44.7 million (LTL 61.1 million) – new biofuel-fired boilers and other ancillary (LTL 154.3 million), more than in the same period of 2013 (EUR equipment were installed in Elektrėnai Complex. Investments into 99.9 million (LTL 344.9 million)). During 2014, compared to 2013, the maintenance of electricity distribution maintenance, the de- investments in the development of the distribution network re- velopment of electricity generation capacities and telecommu- mained similar, and in other sectors they increased. During 12 nication and management systems increased significantly. The months of 2014, more investments were made in the develop- Group’s investments into the reconstruction and construction of ment of the distribution network (EUR 49.6 million (LTL 171 mil- the gas system amounted to EUR 6.1 million (LTL 21 million) since lion) and in its maintenance (EUR 49.5 (LTL 170.7 million)). In 2014, the acquisition of the controlling block of shares of AB Lietuvos investments in the development of new heat generation capaci- Dujos in Q2 of 2014. Structure of investments of the Group during 12 months of 2014, % Investments of the Group during 2014 by sectors, EUR million 2 % EUR million 3 % 144,6 5 % 150 16,8 140 1,6 1,1 130 3,8 2,3 34 % 2,5 120 17,3 -0,7 12 months of 2014 110 99,9 34 % EUR 144.6 million 100 90 80 7 % 70 12 % 60 50 3 %
Development of the electricity distribution network Maintenance of the electricity distribution network Heat generation capacities Other investments
Construction of gas systems distribution network distribution network management systems)
Reconstruction of gas systems Heat generation capacities Construction of gas systems Maintenance of the electricity Reconstruction of gas systems Development of the electricity Electricity generation capacities
ITT (IT, telecommunications and management systems) and ITT telecommunications (IT, Investments of 9 months 2014 Investments Investments of 12 months 2013 Investments Electricity generation capacities
Other investments
Analysis of operating results of the Group 17 Financial debts
As of 31 December 2014, net financial debts of the Group totalled debts aimed at funding the Group’s investments in 2014. During EUR 175.9 million (LTL 607.3 million) and, compared to the level 2014, the level of financial debts of the Group increased by of debts at the end of 2013, they increased by EUR 47.9 million 14.6 %, or EUR 49.8 million (LTL 172.1 million), and amounted (LTL 165.3 million). The greatest impact on the increase of the net to EUR 391.6 million (LTL 1 352.1 million) compared to EUR financial debt of the Group was determined by increased financial 341.8 million (LTL 1 180.1 million) at the end of 2013.
Net financial debts of the Group in December 2013 and December 2014, EUR million
EUR million 200 (49,9) 180 175,9 160 140 128 2 120 100 80 60 40 20 0 debts Financial Financial Cash and Cash short-term debts as of debts as of 31 12 2013 30 12 2014 investments Net financial Net financial
Analysis of operating results of the Group 18 With the increased level of financial debts of the Group, the ra- by the reduction of assets and equity of the Group due to a neg- tio of net financial debts of the Group and EBITDA of the past 12 ative result of the revaluation of fixed tangible assets of LESTO. months of the Group increased from 0.65 times at the end of 2013 The current level of net financial debts of the Group at the end of to 0.84 times in 2014. The ratio of net financial debts of the Group 2014 remains low in respect of both the income earned and the and the Group’s equity increased from 7.2 % at the end of 2013 capital structure compared to respective indicators of companies to 13.5 % at the end of 2014. This change was mainly determined operating in the European energy sector.
Net financial debts of the Group / EBITDA of 12 months, in times Net financial debts of the Group / Equity, %
0,9 0,84 0,8 14 % 13,5 0,7 0,65 12 % 0,6 0,5 10 % 0,4 8 % 7,2 0,3 6 % 0,2 4 % 0,1 2 % 0 0 % 31 12 2013 31 12 2014 31 12 2013 31 12 2014
Net financial debts of the Group / Net financial debts of the Group / EBITDA of 12 months Equity
Analysis of operating results of the Group 19 5 Review of activities of the Company and the Group
Review of activities of the Lietuvos Energija Group covers the pe- On 20 June 2014, Lietuvos Energija started the analysis of potential riod between 1 January 2014 and the end of the reporting period partners of cogeneration projects – the Company sent non-bind- (30 December 2014) as well as after the reporting period – until ing invitations to the municipalities of Vilnius and Kaunas as well the date of the Report. as companies owned by these municipalities to participate in the initial survey, publishing the information about the survey on the website www.kogen.lt. The international market partici- Diversifi cation of activities pants were also informed about the survey by the independent Diversifi cation of activities of the Group companies is one of the energy news agency Platts. Responses were also obtained for co- main preconditions for increasing the value of the Group. By 2020, generation power plants burning biofuel and waste in both cities. the Group is planning to invest LTL 2–3 billion in the following ar- Potential partners were interested in the participation under the eas: heat sector by constructing new or upgrading the existing co- rights of shareholders, contractual works, fi nancing as well as the generation power plants, supply and sales of natural gas utilising operation of power plants. The proposed possible contributions the potential of the LNG terminal, renewable energy sources, and covered land plots, monetary funds and technologies. to participate in the implementation of the nuclear power plant On 28 August 2014, Lietuvos Energija leased 3.33 ha part of the project after the adoption of respective decisions. land parcel located at: Jočionių g. 13, which will be used for the Starting the implementation of strategic cogeneration proj- construction of a new power plant. The state-owned land lease ects in Vilnius and Kaunas agreement was concluded with Vilnius Branch of the National Land Service under the Ministry of Environment of the Republic On 28 May 2014, the Government of the Republic of Lithuania passed of Lithuania. the resolution whereby Lietuvos Energija was tasked with implement- ing Vilnius and Kaunas district heat supply sector modernisation proj- In October 2014, the European Bank for Reconstruction and Devel- ects, attracting investments of municipalities and (or) private partners. opment (EBRD) expressed support for the construction of the new The projects of the new power plants have been recognised by the cogeneration facilities in Vilnius and Kaunas and submitted a propos- Government as projects of the state signifi cance. The purpose of these al to the state-owned Lietuvos Energija Group and future partners projects is to achieve the maximum reduction of the price for genera- on the potential long-term fi nancing or investment in such projects. tion of heat energy supplied to district heat supply systems in Vilnius On 3 October 2014, the selection of partners interested in joint and Kaunas, ensuring maximum economically feasible amount of elec- development of the projects of cogeneration power plants in tricity generated from local and renewable sources of energy. Vilnius and Kaunas was started. In the fi rst stage of the competi-
Review of activities of the Company and the Group 20 tion, until 19 October, Lietuvos Energija received 18 applications supplier, who will have to ensure the volume of natural gas neces- from legal entities established in 8 countries. On 24 October, the sary for uninterrupted minimum operations of the LNG terminal tenderers who have met pre-qualification criteria were provided in Lithuania – 540 million m3 annually starting from 2015. with partner selection conditions, legal and economic structure of On 8 July 2014, LITGAS signed non-binding Master Trade Agree- the projects proposed by Lietuvos Energija, business assessment ments (MTA) on LNG with seven global LNG supply companies. assumptions and other significant information necessary for the When cheaper liquefied natural gas appears on the global market preparation of tender offers. and if there is a need for such liquefied natural gas in Lithuania, it On 5 December 2014, potential partners submitted their initial would be possible to acquire additional LNG quantities according tender offers, and on 28 January 2015, final tender offers were re- to such agreements. In the beginning of 2015, LITGAS had more ceived. After the evaluation thereof, consultations are held with than 15 master trade agreements on LNG with supplier jointly partners having presented tender offers best meeting project supplying more than half LNG of the entire world. goals, and finally cooperation contracts will be signed. On 21 August 2014, LITGAS signed the agreement on supply of On 28 January 2015, the Government of the Republic of Lithua- liquefied natural gas (LNG) with the Norwegian Company Statoil, nia formed a special commission, which will examine the issues which has offered the best conditions. According to this agree- related to the implementation of projects for the modernization ment, for a period of 5 years since the beginning of 2015, Statoil of Vilnius and Kaunas district heating sector related to the devel- will annually supply LITGAS with 540 million m3 of natural gas opment of the projects, planning of territories, environmental im- (about 950 000 m3 of liquefied natural gas) to ensure uninter- pact, public health, also, project funding issues related to the use rupted operations of Klaipėda LNG terminal. This agreement will of the EU structural support. This step will allow ensuring trans- enable to ensure uninterrupted operation of the terminal; it also parency of the projects being implemented and adopting most covers the possibility of developing new commercial activity in suitable decisions. the Baltic Sea region – the re-fuelling of LNG. The price of the sup- plied LNG is lnked to the National Balancing Point (NBP) of the UK Plans for Vilnius and Kaunas include the installation of modern Natural Gas Exchange, which means that natural gas price trends power plants burning waste and biofuel generating heat and elec- in Lithuania will correspond to the European trends. Statoil will tricity, which will ensure lower heat production prices for consum- deliver to the Seaport of Klaipėda 6-7 cargos of the liquefied nat- ers of these cities, produce a significant share of heat necessary ural gas every year. for these cities, ensure additional production of local electricity in Lithuania at a competitive price and will solve waste management On 28 October 2014, the LNG cargo for terminal testing purchased problems. The National Heat Sector Development Programme by LITGAS was brought to the Seaport of Klaipėda (100 000 m3 of provides for the preliminary amount of investments in these proj- liquefied natural gas or 60 3m of gas). Gas was purchased from ects of about EUR 138.4 million in Kaunas and about EUR 328.4 Statoil having evaluated 16 tender offers from 9 different suppli- million in Vilnius. Both technical parameters of power plants and ers, with whom LITGAS has signed non-binding general sales con- the amount of investments might change when optimal solutions tracts. In October, LITGAS started selling gas intended for testing are finally selected together with partners. The share of capital of works of the liquefied natural gas (LNG) terminal. By 31 December the potential partners in the future special-purpose companies 2014, LITGAS offered up to 50 million m3 of gas intended for test- can account up to 49 %. ing of the liquefied natural gas (LNG) terminal on the Lithuanian natural gas exchanges GET Baltic and Baltpool. Beginning of the supply and sales of liquefied natural gas On 23 December 2014, the first commercial LNG cargo was brought In February 2014, LITGAS, the liquefied natural gas (LNG) supply to Klaipėda - Arctic Aurora gas carrier brought 141 000 m3 of lique- and sales company of the Group, was approved as the designated fied natural gas. From 1 January 2015, LITGAS started the supply
Review of activities of the Company and the Group 21 of the minimum necessary volume of gas of the LNG terminal to On 21 May 2014, Lietuvos Energija, having obtained the approv- regulated energy producers. als of the Competition Council of the Republic of Lithuania and the NCCPE, signed agreements with the German Company E.ON In January 2015, LITGAS broke the ice in the natural gas market of Ruhrgas International whereby it took over 38.9 % of shares of AB the Baltic States and became the first company in Lithuania and Lietuvos Dujos and 11.76 % of shares of AB LESTO. The total val- one of the first enterprises in the Baltic States supplying natural ue of the shareholding was LTL 336.9 million, and the price of the gas to customers in other countries: on 23 January, LITGAS signed block of shares of Lietuvos Dujos alone totalled LTL 219 million. natural gas supply contracts with the Alexela Group company Re- After this transaction, the Group acquired control over more than ola Gaas, on 27 January it signed a contract with the Estonian Eesti half of shares of AB Lietuvos Dujos. Energia and on 20 February - with VKG Energia, the electricity and supply company owned by Viru Keemia Grupp. In 2015, LITGAS Acting in observance of the Law on Securities, having exceeded plans to sell about 30 million m3 of gas to Estonia, which will help the threshold of one-third of votes, Lietuvos Energija submitted it diversify its sources of supply. Gas will be supplied from Lithua- an official tender offer for purchase of the remaining shares of nia to Estonia via a gas pipeline going through Latvia. Lietuvos Dujos, held by OAO Gazprom and minority shareholders. The official tender price – EUR 0.653 (or LTL 2.255) per ordinary On 13 February 2015, LITGAS was one of the first companies in registered share of the issuer with par value of LTL 1 per share. Lithuania to sign a contract on the transit of natural gas through During the official offering, Lietuvos Energija acquired 40.03 %, or Latvia with Latvijas Gaze, thus expanding its possibilities for the 116 357 288 shares of AB Lietuvos Dujos at the price of LTL 262 trade of natural gas in the region. On 19 February 2015, the Esto- million. nian regulator made an exception to LITGAS, which will be able trade natural gas in Estonia without having to establish its branch From 1 November, in implementing the requirements of legisla- therein. Such a possibility allows the company to come closer to tive acts of the European Union to unbundle the activities of sup- potential customers, who had to previously take care of the trans- ply and distribution of natural gas, the company Lietuvos Dujų portation of natural gas from the Estonian-Latvian border. Tiekimas was unbundled from Lietuvos Dujos. The company will be responsible for the supply of natural gas to consumers of Lith- On 13 February 2015, LITGAS announced its plans to engage in uania. The new company has taken over from Lietuvos Dujos all new activities of a small-scale LNG supply and bunkering togeth- gas consumers and gas supply agreements concluded with them. er with Statoil. Having analysed the possibilities of cooperation in Lietuvos Dujos manages the natural gas distribution network and these areas, the plan is to reach an agreement on the form of joint provides distribution services. The governance of both companies activities by the end of Q2. The activities of small-scale LNG sup- has also been reorganised. The Supervisory Board and Manage- ply and bunkering would allow increasing the LNG terminal load ment Board of Lietuvos Dujos were formed in observance of the and would reduce the costs of maintenance of its infrastructure corporate governance guidelines approved by the Minister of incurred by Lithuanian consumers. Finance applicable throughout the entire state-owned Lietuvos Expansion into the natural gas sector Energija Group. The implementation of this model contributed to the clearer definition of the responsibilities of management and Over three quarters of this year Lietuvos Energija kept intensively supervisory bodies of the company, ensured higher transparency expanding into the natural gas sector. and better realisation of goals set by the shareholder. On 21 February 2014, the Ministry of Finance of the Republic of Lithuania transferred to Lietuvos Energija 51 454 638 state-owned Investments in generation from biofuel in Elektrėnai, analy- ordinary registered book-entry shares of the public company sis of wind energy potential in Kruonis PSHP Lietuvos Dujos, which award 17.7 % of votes at the General Meet- Lietuvos Energijos Gamyba continued the project of the devel- ing of Shareholders of Lietuvos Dujos. opment of new heat production capacities launched in 2011 in
Review of activities of the Company and the Group 22 Elektrėnai Complex. The tinworks and assembly of technological Installation of the infrastructure of the industrial park in the equipment were completed at the scheduled time and according territory of Kruonis PSHP to the planned scope, the works of installation of smoke conden- sation economiser and related pipelines were carried out, smoke In Q1 2014, Lietuvos Energijos Gamyba finalised the planned channels were installed, electrostatic smoke filters were mount- works under the project of installation of the engineering infra- ed, biofuel weighing machine was installed and a building of the structure industrial park situated in the territory of Kruonis PSHP. weighing machine was built. The local road was constructed by Now the territory is better prepared for foreign direct investments which trucks will deliver the stocks of biofuel to the territory of the that will enable to develop high-tech activities in this appealing boiler room in cold season. The adjustment works of the part of area provided with all the required infrastructure. equipment assembled on the construction site of the boiler room In implementing the project, about 5 km of roads were reconstruct- have been started – the newly erected grab-cranes to be used in ed and the engineering infrastructure was set up: the water sup- the premises of the boiler-room’s warehouse were tested. Also, ply system with water wells and rainwater drainage networks. The the works of installation of the heating system pipelines were works of reconstruction of the road and installation of rain water carried out in the biofuel boiler room. Heat supply via the newly collector were also completed by the end of December 2013, and installed pipelines was ensured for the 2014-2015 heating season. in February 2014, the final part of the project – the installation of Testing of the newly assembled installations and systems was car- the watering place – was completed. At present, the second stage ried out in November 2014 and the new steam generation facili- of the project is panned. ties were launched in December. On 19 December 2014, after the Joining NASDAQ OMX Commodities Exchange, the Group’s successful performance of construction completion procedures, representative will contribute to the implementation of REMIT a deed of completion was received allowing the new facilities to be launched. On 14 August 2014, Lietuvos Energijos Gamyba joined the finan- cial derivatives’ exchange NASDAQ OMX Commodities thus seek- A steam boiler-room was installed for the maintenance of heat re- ing to actively contribute to the integration of electricity markets serves, generation of heat during the peak of low temperatures, of the Northern European and Baltic States. NASDAQ OMX Com- as well as the possibility of putting into operation units of the modities is derivatives’ exchange trading in financial instruments reserve power plant. Heat produced in the steam boiler room is linked to the electricity price on the Nord Pool Spot exchange. currently supplied to Elektrėnai as well. The trading in financial instruments enables to manage the risks At the beginning of 2014, the complex measurements of wind of volatility of energy prices. speed, directions and other meteorological conditions were start- In October 2014, Diana Kazakevič, the lawyer of Lietuvos Energijos ed in the territory of Kruonis PSHP with the aim to preliminary as- Gamyba trading on the exchange, was invited to represent par- sess the potential of the land plot for the installation of the park of ticipants of the Lithuanian energy sector and the market of the wind power plants. Based on positive interim wind measurement Baltic States in the Nord Pool Spot Member Focus Group for RE- results, the Company made a decision to initiate the project of the MIT. REMIT is the Regulation of the European Parliament and of preparatory works for the installation of the part of wind power the Council on the integrity and transparency of wholesale ener- plants in the territory of Kruonis PSHP. In 2015-2016, a feasibility gy market. This group, whereto the representative from Lietuvos study for the installation of the park of wind power plants will be Energijos Gamyba was invited, focuses on addressing any issues drawn up, environmental project assessment and the necessary arising to market participants with respect to the implementation territory planning procedures will be carried out. of REMIT. Representatives of the members give feedback and ex- press the needs, ideas and proposals of members of the exchange in implementing the changes.
Review of activities of the Company and the Group 23 On 20 January 2015, Lietuvos Energijos Gamyba was the first of the Officially introduced Baltic Highway data transmission network Lithuanian electricity market participants to become a market mak- 21 January 2015 marks an official launch of a 3 000 km-long er and started trading in financial derivatives linked to price differ- data transmission highway Baltic Highway, which connects by a ences between the price forming in Latvian bidding areas and the high-throughput connection Vilnius and Tallinn with one of the overall Nord Pool Spot systematic price in the Electricity Price Area largest data transmission centres in the world Frankfurt via Riga, Differential (EPAD) RIGA. Warsaw and Berlin. The new data transmission network is distin- Start of operations of the most effective data centre in the guished for its reliability, very low 35 milliseconds latency, capac- Eastern Europe Tier 3 ity of 100 G per channel and 9.6 Tbit/s total throughput, and pro- vides a possibility to very rapidly transmit large amounts of data One of the most state of the art data centres in the Baltic States Data between the East and the West. Inn started operating on 6 May 2014. Data Inn is the only centre in Lithuania holding the Uptime Institute Tier III Certificate. Data Inn is The Baltic Highway project was implemented by three partners - managed by one of the largest data transmission and data centre Duomenų Logistikos Centras owned by Lietuvos Energija in Lithu- operators in the Baltic States Duomenų Logistikos Centras owned ania, Latvenergo in Latvia and telecommunications operator Tele2. by the Group. The energy efficient Data Inn will allow reducing costs The data network development lasted for more than five years and for information technologies, improving their functional reliability involved investment of more than EUR 1.5 million. and enhancing the competitiveness of Lithuania and its business at Baltic Highway is the first and the only seamless (i.e. not made up the global level. Its power usage effectiveness (PUE) ratio is only 1.3, of different segments of operator networks) network, which uses considerably outpacing the global average of about 1.65. infrastructure of a single manufacturer. It is the shortest span data The new data centre is the first stage of the entire Data Inn project. highway connecting Eastern and Western Europe and one of the Currently, its useful floor space covers 500 2m , power – 1000 kW, fastest ways for data travelling between Europe and Asia. and capacity – 100 server racks. Investments in the project amount- Syderiai geological structure surveys ed to about EUR 2.9 million (LTL 10 million). At the beginning of 2014, Lietuvos Energijos Gamyba analysed The plans for the nearest future include the design and construction the possibilities for the installation of the underground natural works of new stages of Data Inn and the expansion of its facilities by gas storage in Telšiai District, finalised the processing of data col- several times. According to the plans, after completion of expansion, lected during all seismic and geological surveys, and developed Data Inn will have its useful floor space increased to 3 200 m2, pow- the simulation model of the storage reservoir. This model allows er – to 6 000 kW and will provide places for 600 server racks. The total assessing the geological suitability of the storage, its behaviour in project value will reach EUR 12.2 million (LTL 42 million). the course of gas pumping and extraction processes, and setting On 16 October 2014, Duomenų Logistikos Centras received an the working parameters of operations of the storage. All results updated information security management system certificate and conclusions of the surveys were submitted to the Ministry ISO27001:2013, which also covers the new Data Inn data centre. of Energy. In order to enable the project initiator – the Govern- The certificate proves that the company has implemented appro- ment to adopt a reasonable decision on further progress of the priate confidentiality, integrity and information availability control project, specialists of Lietuvos Energijos Gamyba conducted the measures aimed at protecting information of the company and the cost-to-benefit analysis of the project on instruction of the Min- clients, also confirming that the entire information security man- istry. Its results showed that only the regional alternative of 500 agement system of the company meets high security level. million m3 working capacity storage facility is financially feasible, using part of the storage facility’s capacities for satisfying the needs of the Polish market, however, the implementation of the
Review of activities of the Company and the Group 24 project Gas Interconnection Poland-Lithuania (GIPL) is necessary. on the intermediate project company. This company is being set up The study specifies that it would be expedient to attract the EU for the purpose of ensuring the maturity of the project and further financial support from the European fund of the infrastructure improvement of the project competitiveness and implementation network facility (CEF) for the implementation of the project. After conditions. the presentation of the project study results to the Government, On 30 October, the SNPSI coordinated the report on the assessment a decision was made to assess possibilities for receiving CEF fi- of safety of construction site of the new power plant. The report nancial support for the implementation of the project, to clear up prepared by Lietuvos Energija, UAB covers the assessment of two the interest of Polish energy companies and their preparation for alternative sites selected for the construction of the power plant in joint implementation of the project, initiating the actual imple- the territory of Visaginas municipality near the completely decom- mentation of further preparatory project works only having en- missioned Ignalina Nuclear Power Plant. The Report contains the sured co-funding from the CEF fund for these actions and having information about the specifics of the construction site which are cleared up Poland’s interest and preparation for joint implemen- likely to have impact on the safety of the nuclear power plant, the tation of the project. formulated conclusion on the suitability of both selected construc- Performance of preparatory works of the nuclear power plant tion sites for the design of the new power plant. The report analyses project geotechnical, geological and seismological data of the construction site, the features of the final heat absorber (Drūkšiai Lake), the risks At the beginning of 2014, a positive conclusion was received from of meteorological phenomena characteristic of the site (extreme the SNPSI on the nuclear power plant site assessment report. The winds, precipitation, extreme snow cover, extreme temperatures, SNPSI found no irregularities, and positive conclusions were also tornados, snowstorms, etc.) and other relevant safety matters. obtained in respect of the updated report from all coordinating authorities. This conclusion finalised an important stage of the nu- With a view to separating and clarifying these activities and con- clear plant project that has lasted for several years. Summarising centrating all nuclear energy related achievements, competences, the completed site assessment surveys and the amount of data started and completed projects, it was decided to transfer the proj- obtained in the course of such surveys it has been concluded that ect of the new power plant, as part of business of Lietuvos Energi- the sites are suitable for the construction of the power plant; and, ja, to a separate company VAE SPB. On 13 October 2014, Rimvydas moreover, the territory of the sites has been subject to the best geo- Štilinis was appointed the Head of VAE SPB, and on 21 October, the logical surveys at the level of both Lithuania and the Baltic States. employees of the Project Management Service of Lietuvos Energi- ja, who have worked with the project, were transferred to VAE SPB. On 30 July 2014, the Ministry of Energy and the strategic investor of According to amended articles of associations, the activities of VAE the new nuclear power plant – Hitachi – signed the Memorandum SPB were expanded without limiting them solely to the new nucle- of Understanding on joint action in preparing to set up an inter- ar plant project. VAE SPB was provided with a possibility to oper- mediate project company. The parties to the Memorandum have ate in the sphere of creation and application of new technologies, undertaken to jointly perform the preparatory works of the estab- participate in the projects already being carried out, and provide lishment of the intermediate project company after completion of expert advice to other companies of the Group. which potential investors will be provided with the proposal on the establishment of the intermediate project company. The plan is to have prepared a detailed plan for the establishment of the interme- Enhancement of the operating efficiency diate project company defining the structure and functions of this Higher efficiency of activities of the Group implies both higher company. The prepared plan and its implementation process will profit and return for shareholders as well as lower tariffs for con- be introduced and discussed in detail with representatives of the sumers. The strategy of Lietuvos Energija for 2014–2020 establish- regional partners – Latvia and Estonia – in order to adopt decisions es that higher operating efficiency will be achieved by adapting
Review of activities of the Company and the Group 25 the most advanced management practices in corporate gover- the highest value was created for the Group and its customers - nance, planning and monitoring of activities, finance, procure- energy consumers. The plan is to complete the concept of clear- ment, risk management and internal audit areas. ing up the value chain and to draw up an action plan in Q1 of 2015, while the implementation of the programme is planned in Solid foundations for enhancing the operating efficiency were April - December. laid in 2013, when governance of the Lietuvos Energija Group was reorganized according to a new model. The parent company The updated operating concept is planned to improve customer Lietuvos Energija concentrated the coordination of activities of service, improve operating efficiency and to allow reducing costs. the Group companies, elected the supervisory and management The programme of a clearer definition of the value chain will cov- boards, separated the responsibilities of management and super- er 4 core areas of operations: production, supply / sales, network visory bodies. In Q2 2014, when Lietuvos Energija became the and customer service. The programme of a clearer definition of principal shareholder of Lietuvos Dujos, the management reform the value chain is being developed, and will be implemented by of Lietuvos Dujos was commenced in accordance with the corpo- a team of specialists of Lietuvos Energija Group; hiring of external rate governance guidelines applicable across the Group. The man- consultants is not planned. agement reform was completed on 3 November 2014. Centralisation and improvement of efficiency of processes Also, at present the Group is implementing the uniform manage- With a view to improving the processes that support the core ac- ment and control system aimed at establishing the management tivities of the Group and reducing their expenses, the Lietuvos En- and control principles corresponding to the common needs of ergija Group has agreed on the concentration of the part of func- the Lietuvos Energija Group, the division of responsibilities for tions supporting the core activity in a separate company – UAB separate activities and processes, risk management and control, Verslo Aptarnavimo Centras, which helps the Group companies as well as supervision, coordination and control of activities and in providing the services of public procurement, accounting and processes at the level of the Group or individual companies. This administration of employment relations. In July 2014, the agree- system will facilitate achieving efficiency and synergy in the activ- ment on the establishment of UAB Verslo Aptarnavimo Centras ities of the Group and the implementation of the goals set. was signed by five companies of the Group – Lietuvos Energija, Successful activities allow Lietuvos Energija to find itself among UAB, Lietuvos Energijos Gamyba, LESTO, LITGAS and Technologiju the largest taxpayers in Lithuania - in 2014, the Lietuvos Energija ir Inovaciju Centras. Group paid to the state budget EUR 180.2 million (LTL 622.2 mil- The aim of the centralisation of the processes of public procure- lion) in taxes, which was 80 % more than in 2013. The increase ment, accounting and administration of employment relations is in the amount of the taxes paid was mainly determined by the to standardise the processes, achieve higher transparency and acquisition of Lietuvos Dujos. efficiency, and to accelerate them. Such model of concentration Creation of the concept of a clearer definition of activities of the supporting processes is in line with the best international practices. Structural changes having occurred in 2014 and changing situa- tion in the market in 2015 allowed the Lietuvos Energija Group to In the first instance, from October of 2014, UAB Verslo Aptarnavi- search for synergy possibilities between companies of the Group. mo Centras took over the public procurement functions from the Lietuvos Energija has reviewed the greatest benefit created by Group companies. In December, the company started providing each company to its clients and employees and things it could do centralised accounting services (all accounting employees of the more efficiently. Lietuvos Energija Group were transferred to Verslo Aptarnavimo Centras on 21 December). Also, the plan is to start administering Lietuvos Energija plans to clearer define its core activities by the employment relations in the Group through Verslo Aptarnavimo end of 2015 and to distribute them across the companies so that
Review of activities of the Company and the Group 26 Centras in spring of 2015. On 2 October, the Board of Lietuvos company intends to invest EUR 1.7 billion (LTL 5.87 billion) in the Energija approved the public procurement policy of contracting modernization and renewal of the network by 2025. The largest authorities of the Group, which establishes uniform principles of investment of EUR 511 million (LTL 1 764 million) is planned into organisation and conducting of the public procurement of the making the network more resistant to climatic phenomena. Group. Integration of Lietuvos Dujos into the Group Lietuvos Energija, having acquired the controlling block of shares On 21 July 2014, the Board of Lietuvos Dujos approved the de- of AB Lietuvos Dujos, controls two companies providing services scription of the method of unbundling of the company’s distribu- to individuals and business – the synergy will enable to improve tion activities with the action plan, which provide for the unbun- the quality of services provided to the electricity and gas consum- dling of the company’s distribution and supply activities by selling ers and to offer better servicing to them, as well as to contribute to a complex of assets (part of enterprise), i.e. the natural gas supply higher efficiency and improvement of operating results through activity with assets, rights and obligations attributed thereto, to coordinated activities of the companies. In August, Lietuvos Dujos a company controlled by Lietuvos Energija, the shareholder of together with LESTO opened up a joint customer service centre in Lietuvos Dujos, on the basis of a purchase and sale contract. On Vilnius. 24 July 2014, the NCCPE approved the plan and concluded that Publication of the Operating Strategies of LESTO and Lietu- this change of the action plan on the unbundling of the distri- vos Energijos Gamyba for 2014-2020 bution activities will not affect the established final term of legal, functional and organisational separation of activities of Lietuvos On 20 August 2014, LESTO and Lietuvos Energijos Gamyba pub- Dujos. lished the approved new Operating Strategies for 2014-2020. On 30 July 2014, the Board of Lietuvos Energija approved the LESTO will attempt to improve almost by one-tenth the reliability guidelines of the action plan for integration of Lietuvos Dujos of the electricity distribution network. According to the approved into the Lietuvos Energija Group compliant with the corporate long-term strategy, LESTO will seek consistent investments in the governance guidelines of the Lietuvos Energija Group. The start- projects contributing to higher reliability and security of the dis- ed integration of the company covers such areas as management tribution of electricity and increase of the company’s value, oper- model, procurements and accounting, planning and monitoring, ating efficiency and return on equity. One of the key aims of LES- ITT, internal audit and other functional areas. On 31 October 2014, TO is to seek for a further simplification of the power installation Lietuvos Dujos transferred and UAB Lietuvos Dujų Tiekimas (with procedures and shortening the time of connection to power grids. 100 % of its shares owned by Lietuvos Energija) took over the part Lietuvos Energijos Gamyba provides in its strategy that its total of enterprise, i.e. the natural gas supply activity with all assets, revenue over the coming year will decrease because of increased rights and obligations attributed thereto. The price of the part of competition and declining production volumes of Elektrėnai enterprise amounted to LTL 60 457 million. The price of the sold Complex. However, the profitability of the company should grow part of enterprise corresponded to the market value of the part of in implementing the strategic goals. Lietuvos Energijos Gamyba enterprise established by independent property appraisers. envisages increasing its value through consistent improvement of At the Extraordinary General Meeting of Shareholders of Lietuvos the profitability of commercial activities, refusal of unused produc- Dujos held on 29 October new articles of association of Lietuvos tion capacities, by investing in the upgrading of other capacities, Dujos, on the basis of which the Supervisory Board is formed in enhancing process efficiency and reducing operating expenses. the company, were approved, and the Supervisory Board was On 3 February, LESTO also announced about its plans to essential- elected, the terms and conditions of agreements on activities of ly modernize the distribution network in the nearest decade. In the Supervisory Board members and of the confidential informa- order to ensure reliable, safe and smartly managed services, the tion protection agreements were approved, and the former audit
Review of activities of the Company and the Group 27 committee of Lietuvos Dujos was cancelled. By these actions, the electricity generation capacities in Elektrėnai Complex would consist governance of the company was reorganised according to the of a modern unit of the 455 MW power combined cycle gas turbine, corporate governance guidelines. Members of the new Supervi- and units 7 and 8 of the reserve power plant (each of 300 MW power) sory Board supervise specific areas of operations of Lietuvos Du- that can generate electricity firing both gas and fuel oil. The total in- jos and hold positions of heads of respective subdivisions. stalled power of the power plant would reach 1 055 MW. Implementation of a uniform project management policy Considering the situation on the market and in implementing the operating strategy of the company, on 20 October, the Board of The Group is implementing a uniform project management poli- Lietuvos Energijos Gamyba passed the resolution to close down cy, according to which the portfolios will be formed for the imple- units 1 and 2 of the reserve power plant in Elektrėnai. Dismantling mentation of the Group strategy. The Enterprise Project Manage- of unit 1 was started in January 2015, and the start of dismantling ment Office (EPMO), which is being set up in the parent company of unit 2 is planned in April. Lietuvos Energija, will ensure the sharing of best practices be- tween companies of the Group. EPMO will consult the Project The Gross Bidding principle-based trading Management Offices (PMO) set up / renewed in the companies In March 2014, Lietuvos Energijos Gamyba started electricity trad- and all project managers of the Group on management matters ing on the Nord Pool Spot Exchange under the Gross Bidding prin- and will monitor the status of projects under implementation. ciple. This means that the company carries out all its electricity Also, EPMO will set up the Project Supervision Committees (PSC) – purchase and sale transactions separately, which allows increas- bodies managing / providing expert advice on management of port- ing the transparency of the non-regulated market and enhancing folios of the Group projects, carrying out the supervision of projects its efficiency. The assessment of benefits of the concluded fixed- and providing recommendations to programme and project manag- price transactions has become easier for Lietuvos Energijos Gamy- ers with respect to the implementation of programmes or project. ba and the company has better preconditions for increasing the The programme and project management indicators will be estab- efficiency of commercial activities. At the same time, the company lished. Project portfolio indicators indicating the number of projects contributes to the development of transparent wholesale electric- going on according to the plan, the size of portfolio deviations, their ity market in the Baltic States. distribution by project stages and causes were selected, are being monitored and regularly submitted to the management. Conclusion of credit agreements On 21 February 2014, Lietuvos Energijos Gamyba and the SEB Establishment of the optimal scenario of operations of Elek- Bank signed a credit agreement on granting a 10-year loan of EUR trėnai Complex 158 million (LTL 546 million). The funds will be allocated for re- On the basis of results of analysis of the project “Prospects of Elek- financing of three long-term loans disbursed to the company in trėnai Complex” initiated by Lietuvos Energijos Gamyba, the rec- 2005 and 2010 by consortiums of banks operating in Lithuania ommended optimal operating scenario was developed for Elek- and the European Bank for Reconstruction and Development. This trėnai Complex, which consists of old units of the Lithuania Power transaction contributes to the optimisation of investments of the Plant and the unit of the combined cycle gas turbine. country’s company of strategic importance aimed at the imple- mentation of projects in Elektrėnai Complex, because having re- According to the established optimal operating scenario of Elektrė- financed the existing loans, the regulated operating expenses of nai Complex, units 1 and 2 (each of 150 MW power) of the reserve the company will reduce and the administration of assumed obli- power plant should be decommissioned upon the start of operations gations will become more convenient. Moreover, the decreasing of the new biofuel boiler room, which is currently being built in Elek- credit risk of the company will allow expecting favourable funding trėnai, and units 5 and 6 (each of 300 MW power) – upon the launch conditions in the future. of connections with Sweden and Poland. In this way, as from 2016,
Review of activities of the Company and the Group 28 On 8 October 2014, LESTO and SEB bank signed a credit agree- ity consumed in a certain period without the need for customers ment on granting a long-term loan of EUR 85 million. LESTO will to declare the consumed amount of electricity themselves. allocate the funds loaned by the bank for refinancing and in- LESTO takes into account the needs of customers and their chang- vestments projects, which will ensure a more reliable and qual- ing habits – customers are willing to save their time and to receive ity electricity supply to customers. Also, in 20 November, LESTO information on the matters of interest to them in expedited man- announced its intention to start public procurement procedures ner, therefore in the recent years more and more customers have for a long-term loan - the plan is to borrow EUR 75 million for the been acquiring services calling by phone or ordering a service on period of 5 years. the self-service website www.manoelektra.lt instead of ordering them in customer service centres. In the third quarter of 2014, Ensuring the quality of services LESTO reorganised its customer service network. Involving the partners – the Lithuanian Post and libraries of the country – LESTO The Group’s company LESTO servicing more than 1.6 million cus- offered to its customers even more possibilities of conveniently tomers devotes great attention to the development and moderni- provided services, which will reduce costs incurred by the compa- sation of the power grid and consistently expands and improves ny and increase the long-term efficiency. the provided services considering the changing needs of its cus- LESTO introduced to its customers a mobile version of the self-ser- tomers, thus providing both economic and social benefits to the vice website www.manoelektra.lt. From now on, a specially adapt- society, increasing the reliability and quality of electricity supply ed and convenient mobile link to LESTO website will be displayed and creating conditions for more rational use of electricity. to customers who connect to www.manoelektra.lt with smart During twelve months of 2014, LESTO connected 26 433 new elec- phones or tablets. tricity consumers, which is 28 % more than during the respective By the end of the reporting period, on 31 December, there were period of 2013, when 20 649 new consumers were connected. The 513 000 users registered on the self-service website www.mano- total permissible capacity of newly connected consumer objects elektra.lt, and the number of its visitors reached 3 044 million. amounted to 335 910 kW, which is 13 % more than in 2013. Also, During twelve months of this year, information was provided to LESTO continued the purchase of power grids of gardeners’ asso- more than 1 million customers having called the short LESTO ciations, thus ensuring a reliable and secure supply of electrici- customer service number 1802, inquiries of more than 434 000 ty, and carried out the projects of network modernisation co-fi- customers on different matters were received and resolved, and nanced from the EU structural funds – during 2014, the Company customer service centres situated in five largest cities of Lithuania completed the works in 75 objects of gardeners’ associations, car- provided services to more than 252 000 customers. ried out the modernisation of 5 transformer substations (accord- ing to the project, 7 substations will be modernised), and replaced In 2014, Lietuvos Dujos invested EUR 5.7 million (LTL 14.9 million) overhead power transmission lines by cable lines. for connecting new customers, compared to investments of EUR 4.3 million (LTL 14.9 million) made in 2013. The company built During the period of twelve months, LESTO replaced 124 202 elec- 87.3 km of gas distribution pipelines (72.6 km in 213) and tricity meters that no longer met the metrological requirements, connected 3 600 new customers to the distribution network, installed 25 505 electricity meters for new customers. By investing which was 15 % more than in 2013, when 3 000 new customers in the modernisation and automation of electricity meters, during were connected to the gas distribution systems. During 2014, 2014, LESTO connected 5 043 electricity meters to the automat- the company’s employees performed 357 000 checks of readings ed data reading system, thus increasing the number of electricity of natural gas meters of customers. meters operated by the Company, the data of which are read in re- mote manner to 25 110. The automation of electricity meters pro- In August, Lietuvos Dujos and LESTO opened a joint customer vides the possibility of automated billing of customers for electric- service centre in Vilnius, Viršuliškių sk. 34, where the services of
Review of activities of the Company and the Group 29 both companies may be provided to customers during one visit. in Vilnius. The first stage of this project was already completed, Since 1 December 2014, services of Lietuvos Dujų Tiekimas and at the time of which 4.6 km of the gas distribution system were LESTO have been provided to residents of Vilnius region only in constructed, EUR 0.14 million (LTL 0.5 million) were invested and this joint customer service centre. If the pilot project proves out, 37 new customers were connected. Further development of the reorganization of other electricity and gas customer service cen- project will be carried out considering the needs of customers. tres is planned following this model in order to offer customers a In 2014, the project of the construction of Vilnius gas infrastruc- possibility to obtain services and to be serviced according to the ture distribution system in Vismaliukai was completed. 4.1 km of one-stop-shop principle. mid-pressure gas pipelines were constructed and EUR 0.26 mil- One of the largest projects of investment in the construction of lion (LTL 0.9 million) were invested into the project. The company new gas systems launched in 2014 is the mid-pressure gas pipe- will continue its started projects aimed at increasing operating line to the block of residential houses of the northern part of Pi- efficiency, cost optimization and synergy in the Lietuvos Energija laitė district in Zujūnų, Varnės, Smalinės and Karaliaučiaus Streets Group.
Review of activities of the Company and the Group 30 6 Corporate governance
The Lietuvos Energija Group, whose shareholder is the State of The primary goal of the corporate governance is to achieve the ef- Lithuania, aims at ensuring effi cient and transparent operations. fect of synergy aligning diff erent activities of the Lietuvos Energi- To that end, the reorganisation of management was carried out in ja Group and targeting them at the achievement of the common 2013, during which the corporate governance of the Group was goals at the Group level. reorganised and enhanced. The Group’s governance structure was formed in observance The new governance structure and model of the Group has been of the principles of corporate governance, and contributes to developed on the basis of the most advanced international and their implementation. The Company’s shareholder is the State national practices, following the recommendations published by controlling 100 % of its shares. The rights and obligations of the the Organisation for Economic Cooperation and Development, shareholder are implemented by the Ministry of Finance of the having regard to the Corporate Governance Code for companies Republic of Lithuania, which adopts the main decisions related to listed on the NASDAQ OMX Vilnius Exchange, Guidelines on the the implementation of the ownership rights and obligations. Governance for State-Owned Enterprises recommended by the Baltic Institute of Corporate Governance. The corporate gover- nance model of the energy Group was implemented in obser- vance of the Corporate Governance Guidelines approved by the Ministry of Finance of the Republic of Lithuania on 7 June 2013 (the Guidelines are available at www.le.lt).
Corporate governance 31 Supervisory bodies gy, the Ministry of Economy, the Offi ce of the Government of the Republic of Lithuania, and three independent members. The Chair- Supervisory Board man of the Supervisory Board is elected by the Supervisory Board from among its members. This model of formation of the Supervi- The Supervisory Board is a collegial supervisory body specifi ed in sory Board complies with the principles of corporate governance. the articles of association of the Company and elected by the Gen- eral Meeting of Shareholders for a term of four years. The Supervi- The Supervisory Board of Lietuvos Energija, operating since 16 July sory Board of Lietuvos Energija consists of seven members – natural 2013 and at the end of the reporting period (until 31 December persons representing the Ministry of Finance, the Ministry of Ener- 2014), was as follows:
Šarūnas Kliokys Antanas Dr. Virginijus Tomas Aloyzas Žydrūnė Rasa Rokas (born in 1959) Danys Lepeška Garasimavičius Vitkauskas Juodkienė Noreikienė Baliukovas (born in 1975) (born in 1955) (born in 1978) (born in 1954) (born in 1974) (born in 1959) (born in 1977) Chairman, Independent member Independent member Independent member Member Member Member till 12-09-2014 Member Member since 17-12-2014
Educational Vytautas Magnus Vilnius University Vilnius University, Creighton University, Vilnius Civil ISM University of Mana- Kaunas University of Kaunas University of background University, Master’s Degree Doctor of Social Political Science Engineering Institute, gement and Economics, Technology, Technology, Baltic Management in Business Sciences. Master’s Studies; Post-graduate studies Bachelor’s Degree in Master’s Degree in Bachelor’s Degree in Institute, Administration (MBA); Vilnius University IIRPS, of technical sciences; Management and Busi- Public Administration; Electric Engineering; Degree in Business Boston College, Political Science Vilnius Civil ness Administration; Vilnius University, Šiauliai University, Administration (EMBA); Bachelor’s degree. Master’s Studies; Engineering Institute, Mykolas Romeris Lawyer’s Speciality. Master’s Degree in Vilnius University, Vilnius University Master’s Degree in University, Master’s Energy Engineering; Economist’s Diploma. TSPMI, Civil Engineering. Degree in Law; Vilnius Šiauliai University, Bachelor’s Degree in Pedagogical University, Master’s Degree Political Science. Diploma of History and in Management Political Sciences. and Business Administration. Participation in – – – – – – – – the capital of the Company and of the Group, %
Workplace, Chairman of the Board Board Member of Chairman of the Board Government of the Ministry of Finance Ministry of Energy Ministry of Economy Ministry of Energy position of UAB Ekonovus, PE Lietuvos Junior of UAB Organizacijų Republic of Lithuania, of the Republic of of the Republic of of the Republic of of the Republic of Chairman of the Board Achievement, Vystymo Centras, Advisor to the Prime Lithuania, Lithuania, Lithuania, Lithuania, and Director of Partner of Board Member of the Minister for Energy. Vice-minster. Vice-minster. Vice-minster. Vice-minster. UAB Avestis, United Partners. Association Mentor Chairman of the Lietuva, Board of UAB Šiaulių Board Member of Plento Grupė. PE Paramos Vaikams Centras.
Corporate governance 32 The main functions and responsibility of the Supervisory Board cover the following areas: election and recall of members of the Board, supervision of activities of the Board and the CEO, provi- sion of feedback to the General Meeting of Shareholders on the Company’s strategy, a set of fi nancial statements, distribution of profi t (loss), and annual report. The Supervisory Board also ad- dresses other matters attributed to its competence.
The Supervisory Board is functioning at the Group level, i.e. where appropriate, it addresses the issues related to the activities of the Company, its subsidiaries or their management and supervisory bodies.
Committees of the Supervisory Board For the purpose of eff ective fulfi lment of its functions and duties, • Nomination and Remuneration Committee is responsible the Supervisory Board forms committees. The committees of the for the submission of conclusions or proposals on the matters Supervisory Board provide their conclusions, opinions and pro- of nomination, recall or promotion of member of the Board to posals to the Supervisory Board according to their competence. the Supervisory Board, also for the assessment of activities of A committee consists of a minimum of three members of whom the Board and its members and for issuing a respective opin- at least one member must be a member of the Supervisory Board ion. The functions of the Committee also cover the formation and at least one independent member. of the common remuneration policy at the Group level, estab- lishment of the amount and composition of remuneration, The following committees have been operating in Lietuvos En- principles of promotion, etc. ergija: Where appropriate, the Company may also form other ad hoc • Risk Management Supervision Committee is responsible for committees (e.g., for addressing specifi c issues, preparation, su- the submission of conclusions or proposals to the Supervisory pervision or coordination of strategic projects, etc.). Board on the functioning of management and control system in the Group and (or) main risk factors and implementation of A detailed description of the supervisory bodies of the Company risk management or prevention measures; and listed companies of the Group is provided on p. 40.
• Audit Committee is responsible for the submission of objec- tive and impartial conclusions or proposals to the Supervisory Board on the functioning of the audit and control system in the Group;
Corporate governance 33 Management bodies The Board comprising 5 members elect from among its members the Chairman of the Board – the Chief Executive Officer of the Compa- Board ny. The members of the Board, acting according to their competence, must ensure the proper performance of the Company’s activities / su- The Board is a collegial management body provided for in the articles pervision of the respective areas at the Group level. of association of the Company. The members of the Board are elected for a term of four years and recalled by the Supervisory Board on pro- The Board of Lietuvos Energija, operating since 22 July 2013 and at the posal of the Nomination and Remuneration Committee. end of the reporting period (by 31 December 2013) was as follows:
Dr. Dalius Misiūnas Ilona Daugėlaitė Darius Kašauskas Mindaugas Keizeris Liudas Liutkevičius (born in 1978) (born in 1970) (born in 1972) (born in 1980) (born in 1980)
Valdybos narys iki 2014-11-03 Educational Lund University, Doctor’s Vilnius University, Master’s ISM University of Management Vilnius University, Vilnius University, background degree in Technological Degree in Hydrogeology and Economics, Doctoral Master’s Degree in International School of Sciences; and Engineering Geology. Studies of Social Sciences; International Business; Business, Master’s Degree Lund University, Master’s Course of Economics, ISM Vilnius University, in International Business Degree in Industrial University of Management and Bachelor’s Degree in Finance; Electrical Engineering Economics; Business Administration Vilnius University, and Automatics; Kaunas BI Norwegian Business and Management. International School of University of Technology, School, Master’s Degree in Business, Bachelor’s Degree Bachelor’s Degree in Management; Vilnius University in International Business. Electrical Engineering. Master’s Degree in Economics. Participation in – – – – – the capital of the Company and the Group, % Workplace, Lietuvos Energija, UAB, Lietuvos Energija, UAB, Mem- Lietuvos Energija, UAB, Lietuvos Energija, UAB, AB Lietuvos Dujos, position Chairman of the Board, CEO; ber of the Board, Director for member of the Board, Finance Member of the Board, Strategy Chairman of the Board Lietuvos Energijos Gamyba, AB, Organisational Development; and Treasury Director; and Development Director; and CEO. Chairman of the Supervisory LESTO AB, Member of the LESTO AB, Chairman of the UAB Elektros Tinklo Paslaugos, Board; Supervisory Board; Supervisory Board; Chairman of the Board; Association Eurelectric, AB Lietuvos Dujos, Member NT Valdos UAB, AB Lietuvos Dujų Tiekimas, member of the Board of of the Supervisory Board; Chairman of the Board; Member of the Board; Energijos Directors; UAB Technologijų ir Inovacijų UAB Kauno Energetikos Tiekimas UAB, Chairman of the National Lithuanian Electricity Centras, Chair of the Board; Remontas, Member of Board; UAB LITGAS, Chairman Association, President; UAB Elektros Tinklo Paslau- the Board; UAB Verslo of the Board; Lietuvos Energijos KTU Alumni Association, gos, Member of the Board; Aptarnavimo Centras, Gamyba, AB, Member of the President. AB Duomenų Logistikos Chairman of the Board; Supervisory Board; UAB Kauno Centras, Chair of the Board. AB Lietuvos Dujos, Chairman Energtikos Remontas, Chair- of the Supervisory Board. man of the Board. The description of management bodies of the listed companies of the Group is provided on p. 43.
Corporate governance 34 Organizational culture and employees As of 31 December 2014, there were 61 employees in the parent company Lietuvos Energija. 96.7 % of the Company’s employees have higher university education, and 3 of them are doctors of The Company’s employees are the key element in implementing science. The Company employs two Certified Professional Proj- the operating strategy of the Lietuvos Energija Group. The aim is ect Managers (PRINCE2), one Certified Financial Analyst (CFA), to build and maintain a value-based organisational culture, moti- one Certified Internal Auditor (CIA), one Certified Fraud Examiner vating employees to assume responsibility, cooperate and jointly (CFE), 2 Certified Risk Management Assurance Experts (CRMA), 5 seek for the best result. employees with the professional Board Member’s qualification of the Baltic Institute of Corporate Governance. The employees are In implementing the goals set by the shareholder and pursuing active members of associations and unions and of the academic a socially responsible business, we have been seeking to attract community (KTU Business Council, LEI Supervisory Board, Techno- and retain skilled specialists in the Group and to create with them logical Development Committee under the Agency for Science, long-term partnership relationships and joint successful future Innovation and Technology, etc.). while ensuring the mutual benefits. Structure of the Company’s employees by educational background, % As of 31 December 2014, there were 5 6021 employees in the Group. Compared to Q3 of 2014, the number of employees of the 1,7 Lietuvos Energija Group slightly decreased. Company Number of employees 96,7 Lietuvos Energija, UAB 61 1,7 AB LESTO 2229 Lietuvos Energijos Gamyba, AB 474 0 10 20 30 40 50 60 70 80 90 100 AB Lietuvos Dujos 1136 Higher Advanced vocational Unfinished higher education UAB Technologijų ir Inovacijų Centras 190 education and training UAB Duomenų Logistikos Centras 19 53.2 % of Group’s employees have higher university education, 25 Energijos Tiekimas UAB 16 of them are doctors o science. 30.5 % have advanced vocational Geton Energy SIA 1 and 16.1 % - secondary education. UAB Kauno Energetikos Remontas 236 UAB Gotlitas 9 Distribution of the Group’s employees by educational background, % UAB ELEKTROS TINKLO PASLAUGOS 556 NT Valdos, UAB 219 VšĮ Respublikinis Energetikų Mokymo Centras 164 53,2 30,5 16,1 UAB LITGAS 13 UAB VAE SPB 17 0,2 UAB Verslo Aptarnavimo Centras 121 0 10 20 30 40 50 60 70 80 90 100 UAB Lietuvos Dujų Tiekimas 141 Higher Advanced vocational Secondary Other Total 5602 education and training
1Number of valid employment contracts.
Corporate governance 35 The majority of the Group’s employees is male (70.4 %), while fe- The total wage fund of the Company of January – December 2014 male accounted for 29.6 % of employees. was LTL 6 641 000.
Distribution of employees by gender, % The following was the average monthly wage of the Company’s employees in January – December 2014:
Category of employees Average monthly wage, LTL Chief Executive Officer (CEO) 20 153 29,6 % Top-level managers 16 669 Mid-level managers 10 672 Experts, specialists 6 111
70,4 % As of 31 December 2014, the Group employed 5 602 employees (including AB Lietuvos Dujos). The total wage fund of the Group in January – December 2014 was LTL 211.172 million.*
The following was the average monthly wage of the Group em- ployees in January – December 2014: Male Female Category of employees Average monthly wage, LTL Chief Executive Officers 12 240 Distribution by gender of executives is also similar: 71.5 % of exec- Top-level managers 11 128 utives were male and 28.5 % - female. Mid-level managers 5 612 Experts, specialists, workers 2 767 Distribution of executives by gender, %
28,5 %
71,5 %
Male Female * The wage fund of AB Lietuvos Dujos is included from 1 July 2014.
Corporate governance 36 Developing organization and its culture The Lietuvos Energija Group understands that the realisation of its aims of continuous development and increase of the Group’s After the reorganization of the governance of the Lietuvos En- value mostly depends on the involvement of employees and their ergija Group, the focus was placed on coordinated organisational contribution to the development and success of the organisation. development, management of human resources, creation of new In order to assess how much the employees are involved in the organisational culture, efficiency of the organisation of activities, activity of the organisation and are interested in active participa- and building and maintaining of competences in 2014. tion in the achievement of success of the organisation, the survey of involvement of the Group’s employees was initiated. Survey re- In 2014, the model of general, management and leadership com- sults are analysed and action plans for maintaining and increasing petences applicable at the Group level was updated in 2014, eval- the involvement of employees are drawn up for the year 2015. uation of the competences of employees was conducted, princi- ples / system of the management of activities of employees were In implementing the common values of the Lietuvos Energija updated and unified, key positions in the companies were iden- Group, the companies of the Group hosted the events for the im- tified and employees capable of substituting an employee hold- plementation of values. For example, LESTO organised the sum- ing a key position were named, a level of preparedness to take a mer event LESTIADA attended by more than 800 employees of key position was determined, selection of top-level management LESTO. On 3 October, the Lietuvos Energija group organised the was consolidated; in reinforcing image of the employer, 4 career autumn event “Autumn Energy”. Kauno Energetikos Remontas im- day events organized by universities were attended in 2014. The plemented the session of ambassadors of the Company’s values, project of the consolidation of administration of labour relations during which the action plan for the implementation of values in the service centre, the project of the renewal of employee ad- was worked out and arrangements were made on the responsi- aptation system, the project of the improvement of remuneration ble employees and deadlines. The ambassadors of values have system and the project of the improvement of trainings system already implemented 1 initiative – organised the Children’s Draw- were initiated in 2014 and continued in 2015. ing Afternoon, and the implementation of another 3 initiatives is currently being planned. Also, projects of the career management and structuring of rota- tion systems were initiated (in 2014, 174 employees rotated across The Group’s company LESTO devotes great attention to its best Group companies, while 310 employees climbed up the corporate employees and therefore the talent management system has been ladder inside the company). developed for several consecutive years. In 2014, the company up- dated list of its talents and prepared plans for their development. 350 310 300
250
200 174 150
100
50
0 Rotation within Carreer within the companies company
Corporate governance 37 Developing competences In 2014, the Group’s Mid-level Management Forum initiative in- volving 25 mid-level managers representing each company of the The Lietuvos Energija Group is consistently taking care of profes- Group was initiated. The purpose of this Programme is to organise sional development of its employees and ensuring that employ- common discussions, seminars and project activities in order to ees possess all certificates established by laws that are necessary develop management and leadership competences of mid-level for their work and that they improve the necessary competenc- managers, facilitate the sharing of experience and encourage mu- es. In 2014, training courses organised by the Lietuvos Energija tual cooperation, also, to promote the solidarity of Lietuvos En- Group were attended by 4 287 employees. ergija Group and to jointly pursue strategic goals. Individual companies held at the organizational level various gen- eral, professional and management competence trainings, such as time management and planning, team building, making an impact, conflict and stress management, change management, communication, project management, business process manage- ment, sales skills, efficient customer services and others.
Number of employees having participated in trainings
1957 2000
1800
1600
1400 1355
1200
1000
800
600
400 267 169 227 200 119 95 11 17 2 2 7 23 4 1 0 DLC ET ETP KER LD LDT LE LEG LESTO Litgas NTV EMC TIC VAC VAE
Corporate governance 38 Internship opportunities The Group companies create conditions for students of higher education institutions and vocational schools to apply their the- oretical knowledge and acquire practical skills. During 2014, 182 students were placed on the internship in the Group compa- nies – Lietuvos Energija, Lietuvos Energijos Gamyba, LESTO, Lietuvos Dujos, Kauno Energetikos Remontas, Elektros Tinklo Paslaugos, Respublikinis Energetiku Mokymu Centras and NT Valdos. Having completed their internships in Kauno Energetikos Remontas, LESTO, Lietuvos Energijos Gamyba, Elektros Tinklo Pa- slaugos and Energetiku Mokymu Centras, twenty three trainees were employed under fi xed-term or open-ended employment contracts.
Lietuvos Energijos Gamyba acquired the Occupational safe- ty and Health Certifi cation (OHSAS) On 19 May 2014, Lietuvos Energijos Gamyba acquired OHSAS 18001:2007 certifi cate confi rming that the occupational safety and health management system (OSH) of the company meets the requirements of this management standard. The company was appraised for practically ongoing improvement of the OSH poli- cy, which forms part of the management system of the company capturing the organisational structure, planned activities, distri- bution of responsibility, business practice, internal routines and procedures, methods, management of processes and resources necessary for the implementation, support and improvement of the OSH policy. Lietuvos Energijos Gamyba was also appraised for ensuring the occupational safety and health in reducing the prob- ability of occupational accidents.
Corporate governance 39 Supervisory bodies As of 31 December 2014, the Supervisory Board of AB Lietuvos Dujos formed since 30 October 2014 comprised:
As of 31 December 2014, the Supervisory Board functioning in Participating Lietuvos Energijos Gamyba, AB comprised: Forename, interest in the Term of office Workplace surname Company and the Group, % Participating Forename, interest in the Lietuvos Term of office Workplace surname Company and Dr. Darius November 2014 – Energija, UAB, the group, % Kašauskas - Director of the Chairman November 2018 Finance and Treasury Service Dr. Dalius Lietuvos Misiūnas - August 2013 – Energija, UAB, Petras Chairman August 2017 Chairman of the Povilas Čėsna November 2013 – LITEXPO Chairman Board and CEO Independent - November 2017 of the Board member Pranas Vilkas August 2013 – Lietuvos Independent - August 2017 - Energija, UAB, member Ilona November 2013 – Director of the Daugėlaitė - November 2017 Organisational Member Development Liudas Service Liutkevičius - August 2013 – AB Lietuvos Dujos Member 12 November 2014 CEO Committees of the Supervisory Board Lietuvos Energija, UAB, As of 31 December 2014, the Supervisory Board committees Mindaugas - 20 November 2014 – Strategy and Keizeris August 2017 Development formed in the Company, as a parent company of the Group, in- Director cluded the Audit, Risk Management Supervision, Nomination and Remuneration Committees. As of 31 December 2014, the Supervisory Board functioning in AB LESTO comprised: Audit committee Number of shares Participating Committee member held in the Compa- Workplace Forename, interest in the Term of office Workplace ny and in the Group surname Company and Rasa Noreikienė Ministry of Economy of the Group, % Chairwoman of the - the Republic of Lithua- Lietuvos Committee nia, Vice-minister Dr. Darius July 2013 – Energija, UAB, Kašauskas - Director of the Danielius Merkinas - UAB Nordnet, Chairman July 2017 Finance and Treasury Independent member Finance Director Service Ministry of Finance of the Petras Aušra Vičkačkienė - Republic of Lithuania, Povilas Čėsna - September 2013 – LITEXPO Chairman Member Director of the Asset Man- Independent July 2017 of the Board agement Department member World Energy Council, Lietuvos Gintaras Adžgauskas Member - Director of the Lithua- Ilona Energija, UAB, nian Committee Daugėlaitė - July 2013 – Director of the Member September 2017 Organisational European Commission Development Irena Petruškevičienė Member of the Audit De- Service (From 28 October 2014) velopment Committee
Corporate governance 40 Main functions of the Committee: Risk Management Supervision Committee
• monitoring the process of preparation of financial statements Number of shares of the Company and the Group, with a special focus on the held in the Committee member Workplace adequacy and consistency of used accounting methods; Company and in the Group • monitoring the efficiency of internal control and risk manage- ment systems of the Company and the Group, analysis of the Antanas Danys Public Institution Chairman of the - Lietuvos Junior need for, and adequacy of, these systems and perform review Committee Achievement, member of the existing internal control management systems; of the Board Raimundas Petrauskas - Schmitz Cargobull Baltic, • monitoring the adherence to the principles of independence Independent member CEO and objectivity by the certified auditor and audit company, Donatas Kaubrys - Dovirma, UAB, provision of related recommendations, as well as proposals for Independent member Director the selection of an audit company; Advisor to the Prime Tomas Garasimavičius - Minister of the Republic • monitoring the audit performance processes of the Compa- Member of Lithuania for Energy ny and the Group, examining the effectiveness of audit and response of the administration to the recommendations pro- Main functions of the Committee: vided by the audit company in the letter to the management; • monitor the identification, assessment and management of • monitoring the effectiveness of the internal audit function of risks relevant for the accomplishment of goals of the Company the Company and the Group, analysis of the need for, and ad- and the Group; equacy of, this function, provision of recommendations on the need for, effectiveness of, the internal audit function, and on • assess the adequacy of internal control procedures and risk other internal audit related matters; management measures to the identified risks; • providing proposals for the internal audit plans of the Com- • assess the status of implementation of risk management mea- pany and the Group, recommendations for the regulations of sures; internal audit units of the Company and the Group, appoint- • monitor the implementation of the risk management process; ment and dismissal of the head of a structural unit performing the functions of the internal audit, approval of his (her) job de- • analyse financial possibilities for the implementation of risk scription, imposition of incentives and penalties; management measures; • monitoring the compliance of activities of the Company and • assess the risks and risk management plan of the Company the Group with laws and other legal acts of the Republic of and the Group; Lithuania, articles of association and business strategy; • assess the regular risk identification and assessment cycle; • assessment and analysis of other issues attributed to the com- • control the establishment of risk registers, analyse their data petence of the Committee by decision of the Supervisory and provide proposals; Board; • monitor the drafting of risk management-related internal doc- • performance of other functions related to the functions of the uments; Committee set forth by legal acts of the Republic of Lithuania and in the Corporate Governance Code of companies listed on • perform other functions attributed to the competence of the NASDAQ OMX Vilnius Stock Exchange. Committee by decision of the Supervisory Board.
Corporate governance 41 Nomination and Remuneration Committee • provide proposals concerning bonuses upon distribution of distributable profit (losses) of the Company and the Group of Number of shares the respective financial year; held in the Committee member Workplace Company and in the • assess the terms and conditions of agreements of the Com- Group companies pany and the Group with members of management bodies of Aloyzas Vitkauskas Ministry of Finance of the Company and the Group; Chairman of the - the Republic of Committee Lithuania, Vice-minister • assess the procedures of recruitment and selection of candi- dates to members and senior management of the Company Virginijus Lepeška UAB Organizacijų Independent member - Vystymo Centras, and the Group and establishment of qualification require- Chairman of the Board ments; Tomas Garasimavičius Advisor to the Prime - Minister of the Republic • perform regular reviews of the structure, size, composition Member of Lithuania for Energy and activities of the management and supervisory bodies of the Company and the Group; • supervise how members of management bodies and employ- Main functions of the Committee: ees of the Company and the Group are notified of the profes- • assess and provide proposals on the long-term remuneration sional development possibilities and how they upgrade their policy of the Company and the Group (the main fixed part of skills regularly; the remuneration, performance-based remuneration, pension • supervise and assess the implementation of measures ensur- insurance, other guarantees and forms of remuneration, com- ing the continuity of operations of the management bodies pensations, severance pays, other components of the remu- and employees of the Company and the Group; neration package), other principles of compensation for costs related to the individual’s performance; • perform other functions attributed to the competence of the Committee by decision of the Supervisory Board. • assess and provide proposals on the policy of bonuses of the Company and the Group; • monitor the compliance of the policy of remunerations and bonuses of the Company and the Group with the internation- al practice and good governance practice recommendations, and provide respective proposals for the improvement of the policy of remunerations and bonuses;
Corporate governance 42 Management bodies of the Group As of 31 December 2014, the Board of Lietuvos Energijos Gamyba, AB comprised:
Participating interest Forename, surname in the Company and Term of office Workplace the Group, % Juozas Bartlingas September 2013- Chairman - September 2017 Lietuvos Energijos Gamyba, AB, CEO Adomas Birulis September 2013- Lietuvos Energijos Gamyba, AB, Member - September 2017 Director of Business Development Department Eglė Čiužaitė September 2013- Lietuvos Energijos Gamyba, AB, Member - September 2017 Director of Finance and Legal Department Darius Kucinas September 2013- Lietuvos Energijos Gamyba, AB, Member - September 2017 Director of Production Department Vidmantas Salietis September 2013- Lietuvos Energijos Gamyba, AB, Member - September 2017 Director of Wholesale Electricity Trade Department
Head: Juozas Bartlingas, Chief Executive Officer of Lietuvos Energijos Gamyba, AB.
As of 31 December 2014, the Board of AB LESTO comprised:
Participating interest Forename, surname in the Company and Term of office Workplace the Group, % Aidas Ignatavičius September 2013- Chairman - September 2017 AB LESTO, CEO Andrius Bendikas September 2013- AB LESTO, Member - September 2017 Director of Finance and Administration Department Dalia Andrulionienė September 2013- AB LESTO, Member - September 2017 Director of Personnel and Communication Division Sergejus Ignatjevas September 2013- AB LESTO, Member - September 2017 Director of Customer Service Division Virgilijus Žukauskas September 2013- AB LESTO, Member - September 2017 Director of Electricity Network Division Head: Aidas Ignatavičius, Chief Executive Officer of AB LESTO.
Corporate governance 43 Before 29 October 2014, the Board of AB Lietuvos Dujos comprised:
Participating interest Forename, surname in the Company and Term of office Workplace the Group, % June 2014 – Lietuvos Energija, UAB Dr. Dalius Misiūnas - 29 October 2014 Chairman of the Board, Chief Executive Officer June 2014 – Ieva Lauraitytė - 29 October 2014 Lietuvos Energija, UAB Director of Legal Service June 2014 – Lietuvos Energija, UAB Ilona Daugėlaitė - 29 October 2014 Director of Organizational Development Service June 2014 – Lietuvos Energija, UAB Mindaugas Keizeris - 29 October 2014 Director of Strategy and Development Service
Since 3 November 2014, the Board of AB Lietuvos Dujos comprised:
Participating interest Forename, surname in the Company and Term of office Workplace the Group, % 3 November 2014 – Liudas Liutkevičius - November 2018 AB Lietuvos Dujos, Chief Executive Officer 3 November 2014 – Giedrė Ginskienė November 2018 AB Lietuvos Dujos, Director of Finance and Treasury Service 3 November 2014 – Tomas Šidlauskas November 2018 AB Lietuvos Dujos, Director of Gas Network Service 3 November 2014 – AB Lietuvos Dujos, Nemunas Biknius November 2018 Director of Service Provision and Development Service 3 November 2014 – AB Lietuvos Dujos, Valentina Birulienė November 2018 Director of Organisational Development Service
Head: until 8 September 2014 – Viktoras Valentukevičius, Chief Executive Officer of AB Lietuvos Dujos. Since 9 September till 3 Novem- ber – Mantas Mikalajūnas, Acting CEO of AB Lietuvos Dujos. Since 4 November, CEO of AB Lietuvos Dujos – Liudas Liutkevičius.
Corporate governance 44 7 Social responsibility
The Lietuvos Energija Group devotes special attention to social thereby contributing to the development of the society and eco- responsibility and seeks to ensure that operations of the Group nomic growth. The Global Compact is based on the principles of are based on principles of responsible activities enshrined in the human rights, employee rights, environmental protection and Global Compact initiated by the United Nations. The Global Com- anti-corruption. pact includes implementation of 10 principles of responsible ac- The model of socially responsible business of the Lietuvos Energi- tivity and encourages companies to avoid damage to the environ- ja Group is implemented through targeted and consistent activi- ment, community, and other businesses, and to join their eff ort ties in the following areas: with the United Nations, public authorities and non-governmen- tal organisations in dealing with social and environmental issues,
Environmental Relationships with Market protection employees and society operations
On 3 September 2014, all companies of the Lietuvos Energija of Europe – together with nine other Lithuanian companies the Group joined the Memorandum of Good Business Practice during Group was invited to represent Lithuania in the prestigious pro- the adoption of the euro supervised by the Ministry of the Econo- gramme “European Business Awards 2014”. my of the Republic of Lithuania – in this way the companies com- In December 2014, Lietuvos Energija won the national competi- mitted to ensure fair recalculation of prices of services and goods, tion “Innovation Prize” in the “Innovative Enterprise” category. This indicate the prices in litas and euro in clear and understandable is the contest hosted by PE Lietuvos Inovaciju Centras and the manner, not to mislead consumers and not to increase prices un- Lithuanian Confederation of Industrialists for the tenth consecu- der the pretence of the currency changeover. tive year. On 4 September 2014, Lietuvos Energija was distinguished as one On 22 January 2015, LESTO was declared one of the best investor of the most dynamic and advanced companies from 33 countries relations companies in the Baltic States. This was announced in
Social responsibility 45 the Baltic Market Awards ceremony held by Nasdaq Baltic stock exchange in 2014. The Association Investor’s Forum engaged in assessing and awarding companies, organisations and media representatives that have mostly contributed to the improvement of the coun- try’s climate and business environment for the third consecutive year, recognised LESTO to be the most responsible company of 2013. The Group’s company was awarded for social and public ed- ucation projects implemented by it, targeted aspirations to foster relationships with its customers, promote transparency and con- scious and responsible consumption of energy. At the beginning of 2014, LESTO was elected a member of the Lithuanian Association of Responsible Business (LAVA) Congress. The mission of LAVA is to promote the development of responsi- ble activities as a precondition of sustainable growth in Lithuania. Activities of the association are led by collegial bodies – the Coun- cil of 3 members, the Congress of seven members and the general meeting of members. batteries. Since 2013, the Group company UAB Kauno Energetikos Remontas has been involved in the environmental project “We sort waste in the company” aimed at sorting and collecting waste Environmental protection of electronic equipment, domestic appliances and portable bat- teries and accumulators generated in the process of operations The Lietuvos Energija Group encourages the use of work of the companies and at homes of their employees, reducing the equipment reducing costs and pollution, sustainable use of discharge of such waste into the environment, educating and in- natural resources, is actively looking for ways to minimise the forming the society about waste sorting. impact of energy objects on people and the environment, and invests in the environmentally friendly modern technologies. In In April 2014, employees of the Group actively joined the tradi- implementing diff erent environmental projects, the Group aims tional annual cleanness initiative “Let’s Do It 2014” – they collected at minimising the impact of energy objects on people and the diff erent waste, cleaned the environment in various towns of Lith- environment, and also at encouraging the participation of society uania, and set up new sports equipment and waste bins on the in diff erent initiatives related to environmental protection. coast of Elektrėnai Lagoon. Waste management and sorting, effi cient use of resources The Group’s company LESTO keeps encouraging its clients to give up paper bills and pay-books. More than 90 % of business cus- The Lietuvos Energija Group are implementing waste sorting ini- tomers of LESTO already use electronic bills. LESTO sends free of tiatives, and have installed special waste sorting containers for charge SMS and electronic messages to almost 80 % of the us- sorting plastic and paper. In cooperation with the association of ers of electricity to inform them about power supply failures or purchasers of electronics, LESTO also collects energy-saving light planned duration of their elimination. bulbs, small electronic devices and batteries in its customer ser- vice centres; special containers have also been installed in subdivi- The Environmental Management System complying with require- sions of Lietuvos Energijos Gamyba in Elektrėnai, Kruonis, Kaunas ments of LST EN ISO 14001:2005 has been implemented in objects and Vilnius for discarding obsolete small electronic devices and of Lietuvos Energijos Gamyba. Also, subdivisions of Lietuvos En-
Social responsibility 46 ergijos Gamyba implement the requirements for the atmospher- goals of the company in controlling and reducing atmospheric ic, surface water, groundwater and soil pollution monitoring and pollution with the help of technical measures is to control possi- protection measures specified in the Integrated Pollution Preven- ble gas leaks when distributing natural gas. In order to ensure the tion and Control (IPPC) permits. reliability of gas systems, maintenance of gas pipelines and their facilities, repairs, reconstruction and modernization thereof is be- During 12 months of 2014, Elektrėnai Complex handed over for ing performed. During 2014, gas emissions into the atmosphere utilisation 71 t of railway sleepers, 1 392 of hazardous waste of at the fault of third persons amounted to 0.06 million m3 and were sewage sludge, 1 221 t of liquid fuel ash, 1 243 t of construction the same as in 2013. waste, sold 554 t of waste electrical and electronic equipment, 4 654 t of ferrous metal scrap, 26.6 t of aluminium scrap and In order to reduce unfavourable environmental impact, Lietuvos 15.9 t of copper scrap. Household waste collected in the territory Dujos has been implementing technical measures for the ensur- of this object is removed by a specialised company on contractual ance of reliability of gas systems and renewing its car fleet every basis. The operations of the chemical water treatment bar gener- year. This year, it purchased 14 new cars fuelled on the cleanest ated and released into the Obeniai land plot for clearing 310 t of fossil fuel - natural gas. CO2 emissions of 80 kw power natural water clarifier sludge waste. gas-fuelled cars is 157 g/km compared to 194 g/km of 59 kW pow- er petrol-fuelled cars or 167 g/km of 55 kW diesel-fuelled cars. Elektrėnai Complex managed to significantly reduce the amount of waste water generated and discharged into the natural envi- ronment. Compared to 2013, the amount of discharged waste wa- Support Fund ter decreased by more than 15 %. In August 2014, the Minister of Finance of the Republic of Lithua- In cases where liquid fuel (fuel oil) was used for energy production nia signed the order on the establishment of the Support Fund of in the reserve power plant, up to 97.6 % of sulfur compounds gen- Lietuvos Energija. The purpose of activities of the Fund is to pro- erated during the combustion of fuel and up to 92.9 % of particu- vide support and other assistance to legal persons in accordance late matter were collected by air purifiers. with the procedure established by the Republic of Lithuania Law In 2014, Kruonis PSPP handed over for utilisation 14.7 t of hazard- on Charity and Sponsorship and the Republic of Lithuania Law on ous waste, 1.3 t of non-hazardous waste, and sold 12.9 t of ferrous Charity and Sponsorship Funds in the areas of science, education, metal scrap. Household waste generated in the territory of this culture, art, sports and other spheres useful to the society and not object is removed by a specialised company on contractual basis. related with profit-seeking. Household waste accumulated in 2014 amounted to almost 33.3 t. On 15 October 2014, Lietuvos Energija set up the Support Fund, In 2014, Kaunas Algirdas Brazauskas Hydroelectric Power Plant hand- which combines and coordinates support provided by all compa- ed over for utilisation 0.5 t of hazardous waste and 0.9 t of non-haz- nies of the Group for projects, programmes and activities of social ardous waste. Household waste generated in the territory of this significance. The Support Fund allows ensuring the transparency object is removed by a specialised company on contractual basis. of allocation of support and creates a strong foundation for the Household waste accumulated in 2014 amounted to about 6.5 t. social responsibility of the Group. The amount of support allocat- ed by the Group to the Fund shall not exceed 1 (one) per cent of Paper and cardboard waste in all power plants are handed over to the net consolidated profit of the Group of companies of Lietuvos enterprises processing such waste. Energija of the previous reporting year. Applications shall be filed Lietuvos Dujos has an implemented and certified environmental with the Fund once per year in accordance with the established management system in accordance with ISO 14001 standard re- procedure and time limits. quirements, which is constantly managed and improved. Environ- In 2014, the Fund received 95 applications for support. On 17 No- mental supervision audit conducted in 2014 confirmed that the vember 2014, after the evaluation of the applications, support system has been functioning properly. One of the most important
Social responsibility 47 beneficiaries were invited to sign agreements. The Support Fund Social initiatives of Lietuvos Energija allocated a total of LTL 1.8 million in support for 12 regional and 4 national level projects. The beneficiaries were The Group actively contributed to the event of the traditional published on 5 December 2014. At the national level, the Support Days of Energy Professionals organised by the National Lithuanian Fund granted support to the men’s basketball club Kaunas “Žalgi- Energy Association (NLEA). On 17-18 April 2014, free educational ris”, women’s basketball team “Kibirkštis-Viči”, the Athletic Federa- events were hosted in the Lithuanian Energy and Technology Mu- tion of Lithuania and the Lithuanian Basketball League LKL. seum – excursions for the public, the concert of the pop group At the regional level, support was allocated for two projects car- “Saulės kliošas”. During the excursions, visitors were able to get ried out by Elektrėnai municipality administration: promoting familiarised with the Lithuanian energy system and its topicalities healthy lifestyle and fitness in Elektrėnai and the “Anniversary year and to learn more about the energy specialist’s occupation. - yet one more page in the history of Elektrėnai region”. Support In June 2014, LESTO together with the partners Nissan and the was also granted to Kriklinių community in Pasvalys district for company NT Valdos set up the first stop for quick charging of elec- the update of education system of Kriklinių town, Kaunas com- tromobiles in Vilnius, Lelevelio St. A low battery of an electric ve- munity centre “Girsta” for the project “Creating Together Feels hicle can be charged in 30 minutes at this stop. The project of the Good”, sports club and day care centre for people with disabilities first stop for quick charging of electromobiles was a significant “Friendship” for holding sports events for the disabled, the Lithu- turning point in the development of the infrastructure of electro- anian Computer Society for promoting IT contest “Beaver”, Norių mobiles. At present, free of charge power supply to the station region community in Pasvalys district for street lighting in Norių is guaranteed by the largest supplier of energy of the Lithuanian village, Elektrėnai handball club “RK-ENERGIJA” for promoting capital Energijos Tiekimas. Until present there were only slow handball game, association LRK ENERGIJA for ensuring activities charging stops in Lithuania – the first such stop was installed in of the ice hockey club “Energija”, Druskininkai division of the Lith- 2011 in Vilnius, near the Lithuanian Energy and Technology Mu- uanian Special Creation Society “Guboja” for social integration of seum. At present there are up to 15 slow charging stops for elec- people with disabilities and association TEDxVilnius for projects tromobiles operating in Lithuania. With the help of such stops the TEDxKIDS @VILNIUS and TEDxVilnius. charging of electromobiles takes 4 to 8 hours. At the national level, support was granted to applicants of the In order to contribute to raising awareness about energy among national importance, who are organizations or movements pro- society and young generation in particular, Lietuvos Energijos claiming the name of Lithuania throughout the world in repre- Gamyba welcomes free of charge excursions to the objects un- senting sports, arts, science, culture, environmental protection, der its control: the combined cycle unit, Kruonis Pumped Storage social and other initiatives having received international awards Power Plant, Kaunas Hydroelectric Power Plant. During 12 months and purposefully developed their activities for at least 2 years. of 2014, the power plants were visited by more than 3 292 visitors When evaluating regional level projects and activities, the Sup- from different enterprises, schools and other institutions as well port Fund of Lietuvos Energija considered the value created for as by delegations from foreign countries. During the aforemen- regions nearby which companies of Lietuvos Energija Group con- tioned period, the majority of excursions – 107 – were organised duct their business, also the compliance with the social responsi- in Kruonis PSPP, 50 excursions – in Kaunas HPP, and CCU wel- bility policy trends of the Group as well as associations with the comed 16 delegations arriving on excursions. nature, principles, values and initiatives of the Group’s activities. Support was allocated solely for those applicants, who have been On 19 December, employees of Lietuvos Energija hosted a Christ- engaged in purposeful development of their activities for at least mas celebration for inmates of Molėtai child care home, at the two years. time of which they organized creative workshops together with the children - drew cards, constructed bird feeders and mangers for forest animals.
Social responsibility 48 On the eve of the 1st of September, the inmates of Elektrėnai child care home – pupils of the primary school - received primary school pupils’ kits. In cooperation with Elektrėnai Municipality, the primary school pupils’ baskets were handed over to socially disad- vantaged families. The baskets were also handed over to employ- ees of Lietuvos Energijos Gamyba who raise children studying in primary school. On Christmas Eve, the inmates of Elektrėnai child care home and children from socially disadvantaged families were invited to a holiday performance in Elektrėnai Cultural Centre and received Christmas presents. Lietuvos Energijos Gamyba together with the Library of Elektrėnai holds traditional events for the community of Elektrėnai region, where its principal activity is concentrated. In 2014, four meetings were organised – in March with singing actors, the father and son Saulius and Jokūbas Bareikis, in June – with the director and au- the handmade works was organised before the Easter Holiday, thor of songs Vytautas V. Landsbergis, in October - with the team at which employees of the company purchased the handmade of the largest business plan contest in Lithuania “Verslauk” and in works, supported young people with disabilities. During the December - with the well-known musicologist, conductor of Vilni- blood donation campaign arranged in June a large number of the us St. Christopher Chamber Orchestra Professor Donatas Katkus. company’s employees donated their blood for people suff ering Nine events of this cycle have already been organised. The Com- from illnesses. Employees of the Company have continued their pany aims at gathering the community of the town and region as annual cooperation with the day centre for the disabled PE Mažo- well as its employees in one place providing them with the oppor- ji Guboja. During the event held in December, employees were tunity to meet with famous, interesting and original people. able to purchase handicrafts made by the disabled, thus helping raise funds for the activities of the day centre. In December, the LESTO is continuing its cooperation with libraries under the proj- Company held a Christmas charity auction for supporting a char- ect “Libraries for Progress 2” launched in 2014. The purpose of this ity diner Betanija. During the auction, employees purchased their cooperation is to enable customers to use the self-service website hand-made things or donated items and raised LTL 2 100, which www.manoelektra.lt at places convenient for them. they donated later on for the diner Betanija, visited by about 550 Kaunas customer service centre of LESTO is completely adapted for people living in poverty every day. people with disabilities. This fact was acknowledged by experts of In December 2014, third graders from Panevėžys elementary the Project “Without Thresholds” aimed at minimising social exclu- school paid a visit to Panevėžys training facility, where they were sion of the disabled. During their visit to Kaunas customer service given a tour “Where do our parents work?”. Emergency service centre, the specialists of the Project “Without Thresholds” checked vehicles were shown to the children, also, they saw how gasmen the number of parking spaces for cars of people with disabili- work and they were told about safe behaviour with gas. ties, the distance to the entrance of the building, the condition of the sloping from the carriageway to the pavement, and how the driveway to customer service centre is adapted to customers, Long-term projects as well as many other aspects. The conclusion drawn by experts The large scale long-term social responsibility projects for chil- contained several recommendations for possible improvements. dren, youth and general public implemented by the Group’s In 2014, Lietuvos Dujos continued its cooperation with the fi ne company LESTO are characterised by active involvement of com- crafts’ centre for youth with disabilities – the traditional fair of munities and diff erent social groups, and ideas of safety, energy
Social responsibility 49 efficiency and conservation of environment. Active development More Than Needed by Industry talks about practical energy sav- of such projects was continued in Q4 of 2014. ing measures in companies, energy management automation solutions, industrial equipment maintenance strategies and ex- Operation 2020. This project is aimed at promoting responsible amples of the application thereof. Participants in the event also behaviour with power grid installations, raising awareness of peo- learnt about electric power and reliability exchange, balancing of ple about safe behaviour with electrical equipment and reducing power grid reliability and business production process as well as negative consequences arising from irresponsible or malicious the price of electricity and components that it depends on. Con- behaviour of residents. ference partners from international companies Schneider Electric In 2014, LESTO continued active cooperation with the Association Lietuva, Mano Būstas LT, SKF Lietuva and the Training Centre for of the Wardens of the Municipalities of Lithuania, attended its Energy Specialists shared their experience and knowledge. meetings and conferences. The greatest support in fighting thefts The Green Protocol, Energy Efficiency Conference for Busi- is the sense of community – reports of residents help to quickly ness, Energy Dialogue 2014. All enterprises have been invited identify the offenders, repair damaged transformers before they to join the Green Protocol for the fourth year in a row. This is a get burnt and supply of electricity to residents is interrupted. unique agreement of such type initiated by LESTO in our coun- LESTO together with the Association of the Wardens of the Mu- try whereby enterprises and organisations confirm that they are nicipalities of Lithuania invited wardenships and their commu- familiar with the ideas of conservation of the environment pro- nities to submit applications for the competition of projects for moting rational use of electricity, approve such ideas and commit increasing safety nearby power grid installations and enhancing to applying them in practice. Almost 230 participants from more public accountability. In order to resolve safe and rational electric- than 160 enterprises of the country willing to get familiarised with ity consumption-related problems, communities had to propose the most relevant energy efficiency tendencies and latest solu- plans for solving these problems, and include in the projects the tions enabling to minimise energy costs attended the annual con- greatest possible number of residents. In 2014, applications from ference on reasonable use of energy hosted on 14 February 2014. 30 wardenships and communities were received. The applications The nomination of the Green Ambassador introduced for the first were evaluated by representatives of LESTO, the Association of time may be awarded to an employee of the Green Protocol en- the Wardens of the Municipalities of Lithuania, the Association terprise distinguished for the most creative and effective way of of the Municipalities of Lithuania and PE Rūpi. This year, 7 educa- promotion of the energy saving ideas in the enterprise, involved tional and practical projects, the activities whereof will result in other co-workers, or implemented or encouraged to implement greatest benefit for ensuring safe behaviour of residents nearby the innovative technologies over the past year. power grid installations, were declared winners. This is the third Days of rational and safe use of electricity in libraries of Lith- competition held by LESTO and the Association of the Wardens of uania. In order to encourage residents to contribute to preserva- the Municipalities of Lithuania. tion of the environment and balanced use of energy resources, Not More Than Needed. This social responsibility project of LES- LESTO organises the cycle of events on rational and safe use of TO is aimed at developing the reasonable energy use traditions of electricity in 14 libraries of the country. During these events, LES- the society. TO specialists advise residents on how to use electricity in a bal- anced manner and reduce electricity bills. Energy Efficiency Conference Cycle for Industrial Companies. In September 2014, LESTO together with its partners started the Energy Efficiency Conference for Independent Electricity Sup- energy efficiency conference cycle Not More Than Needed by pliers Energy Dialogue 2014. Independent suppliers supply Industry. The first conference held in Šiauliai was attended by electricity to 13 000 LESTO business customers (58 000 objects), more than 70 representatives from industrial companies operat- who consume about 80 % of all electric power transmitted to ing in Šiauliai and Panevėžys regions. The conference cycle Not business customers. Seeking for a closer cooperation, LESTO, as
Social responsibility 50 a power distribution company, held the second conference for Electromagic. This educational initiative of LESTO is aimed at independent suppliers “Energy Dialogue 2014”. In addition to the raising awareness of children and youth about benefits, threats analysis of the situation existing on the market, a great attention and safety of electric energy. The purpose of this initiative is to during the conference was devoted to the review of the imple- teach youth safe behaviour with electricity and electrical equip- mentation of the upcoming requirements of the Energy Efficiency ment, stimulate their interest in responsible use of electricity, en- Directive. The survey conducted after the event showed that more vironmental protection and ideas of sustainable development. than 90 % the participants of the conference assessed it as rele- In 2014, different initiatives for education of children about safe vant and would agree to participate in it again. behaviour with electricity have been continued. At the beginning The National Educational Programme “Sustainable School”. In of this year, pre-school and school-age children were invited to order to raise awareness of school communities and contribute to take part in the table game creation competition aimed at deep- the creation of a sustainable, energy-efficient and environmental- ening their electricity-related knowledge in physics; this game de- ly-friendly society of Lithuania, LESTO and the Lithuanian Children velops logical thinking, encourages to learn more about the world and Youth Centre together with partners invited educational in- of electricity and technologies, and, of course, develops creativity stitutions of the country to participate in a one-year educational and drawing skills. The Project “Electromagic.lt was also innova- programme “Sustainable School”. 70 educational institutions from tively introduced in the form of interactive lessons for school-age different regions of Lithuania participating in the programme children. completed the first task of the programme – the Ecological Foot- print study. Its results were introduced at the forum of school man- agers participating in the “Sustainable School” programme held in Vilnius. The Ecological Footprint is a measure of human demand on the resources of our planet. The Ecological Footprint study was prepared for schools of Lithuania according to the methodology specially developed for educational institutions by Austrian scien- tists. The project of “Sustainable School” is aimed at contributing to the creation of sustainable educational institutions’ commu- nities capable of efficiently managing and using their resources, combining the environmental protection, social justice and eco- nomic development. This project is implemented with the assis- tance of the public institution VšĮ Pakuočių Tvarkymo Organizacija and companies UAB Schneider Electric Lietuva, UAB Mano Būstas and the National Consumer Federation.
Social responsibility 51 8 Key information about the Company and the Group
The Interim Report of Lietuvos Energija and its subsidiaries is pre- On 13 February 2013, the Company’s shares were transferred to pared in observance of Resolution No. 1052 of the Government the Ministry of Finance under right of trust. of the Republic of Lithuania of 14 July 2010 On Approval of the From 30 August 201, UAB Visagino Atominė Elektrinė was re- Guidelines for Ensuring the Transparency of Activities of the State- named as Lietuvos Energija, UAB. Owned Enterprises and Appointment of the Coordinating Author- ity and is published on the Company’s website at www.le.lt. As of 31 December 2014, the authorised capital of the Com- pany totalled LTL 4,179,849,289 (as of 31 December 2013 – LTL 4,067,163,632). On 31 December 2013 and 31 December Company’s name Lietuvos Energija, UAB 2014, the authorised capital was divided into ordinary regis- Company’s code 301844044 tered shares with LTL 1 par value each. All shares are paid up in full. Authorised capital LTL 4,179,849,289
Paid-up authorised capital LTL 4,179,849,289 Share capital Shareholders of the Company % (LTL thousand) Address Žvejų g. 14, LT-09310, Vilnius, Lithuania Republic of Lithuania, Phone (8 5) 278 2998 represented by the 4,179,849,289 100 Ministry of Finance of RL Fax (8 5) 278 2115
E-mail [email protected]
Website www.le.lt
Legal form Private Limited Liability Company
Date and place Registered on 28 August 2008 of registration in the Register of Legal Entities
Data about the Company are collected and kept in the SE Centre of Registers Register of Legal Entities
Key information about the Company and the Group 52 Information about subsidiaries, branches and representative offices
Companies directly or indirectly controlled by Lietuvos Energija, UAB at the end of the reporting period (31 December 2014):
Effective Authorised capital Head office address Company shareholding, (thousand LTL) Main activity of the company 31 12 2014 (%) 31 12 2014 Elektrinės g. 21, Electricity generation, supply, import and export, Lietuvos Energijos Gamyba, AB Elektrėnai 96.1 635 084 and trade Žvejų g. 14, AB LESTO Vilnius 94.4 603 945 Electricity supply and distribution to consumers Aguonų g. 24, AB Lietuvos Dujos Vilnius 96.6 290 686 Natural gas supply and distribution to consumers Geologų g. 16, Disposal of real property, other related activities NT Valdos, UAB Vilnius 94.7 295 408 and provision of services A. Juozapavičiaus g. 13, UAB Duomenų Logistikos Centras Vilnius 79.6 13 907 ITT maintenance services Construction, repairs, technical maintenance of UAB Elektros Tinklo Paslaugos Motorų g. 2, 94.4 18 904 power grids and related installations, Vilnius connection of consumers to power grids Repairs of electric installations, manufacture of UAB Kauno Energetikos Remontas Chemijos g. 17, Kaunas 96.1 15 244 metal structures Gedimino pr. 33-2, Supply of LNG via the LNG terminal and trade UAB LITGAS LT-01104 Vilnius 66.7 45 000 in natural gas Chemijos g. 17, Gotlitas UAB Kaunas 96.1 1 100 Accommodation services, trade Jeruzalės g. 21, Energijos Tiekimas UAB Vilnius 96.1 750 Supply of electricity and natural gas VšĮ Energetikų Mokymo Centras Professional development and continuing (until 10 2014 - VšĮ Respublikinis Jeruzalės g. 21, 100 294 vocational education and training of energy Energetikų Mokymo Centras) Vilnius sector specialists Narva mnt 5, Geton Energy OŪ 10117 Tallinn 96.1 121 Supply of electricity Bezdelingu 12, Geton Energy SIA LV-1048, Riga 96.1 99 Supply of electricity UAB Technologijų ir Inovacijų A. Juozapavičiaus g. 13, Centras Vilnius 97.8 22 201 Provision of ITT and other services Žvejų g. 14, Advisory business and other UAB VAE SPB Vilnius 100 1 010 management activities UAB Verslo Aptarnavimo Centras (before 31-12-2014 paid-up P. Lukšio g. 5b, 97 2 000 Services of organising and carrying out public capital of LTL 1 891 thousand) Vilnius procurement and administration of personnel Aguonų g. 24, UAB Lietuvo Dujų Tiekimas Vilnius 100 3 000 Supply of gas
Žvejų g. 14, Allocation of support for projects, Lietuvos Energija Support Fund Vilnius 100 10 initiatives and activities important to the public
Key information about the Company and the Group 53 Information about agreements with inter- mediaries of public trading in securities Lietuvos Energija has not concluded any agreements with inter- mediaries of public trading in securities, because its securities are not traded on the stock exchange.
Group companies:
Lietuvos Energijos Gamyba, AB Since 1 September 2011, shares of Lietuvos Energijos Gamyba are listed on the Main List of NASDAQ OMX Vilnius Stock Exchange.
As of 30 September 2014, the company had issued 635,083,615 ordinary registered shares with par value of LTL 1 per share.
Issue ISIN code LT0000128571.
Lietuvos Energijos Gamyba has concluded the securities account- ing agreement on the accounting of securities issued by the issuer AB LESTO and management of personal securities accounts with Swedbank, AB. Since 17 January 2011, ordinary registered shares of LESTO are listed on the Main List of NASDAQ OMX Vilnius Stock Exchange. AB Lietuvos Dujos As of 30 September 2014, the company had issued 603,944,593 Since 1 January 2008, shares of AB Lietuvos Dujos are listed on ordinary registered shares with par value of LTL 1 per share. the Main List of NASDAQ OMX Vilnius. The company’s shares are traded on NASDAQ OMX Vilnius Stock Exchange. Issue ISIN code LT0000128449.
As of 30 September 2014, the company had issued 290,685,740 The authorised manager of securities accounts of LESTO is Swed- ordinary registered shares with par value of LTL 1 per share. bank, AB.
Issue ISIN code LT0000116220.
AB Lietuvos Dujos has concluded the agreement on the account- ing of securities issued by the company and management of per- sonal securities accounts, payment of dividends to minority share- holders and provision of other related services with AB SEB Bank.
Key information about the Company and the Group 54 Main events related to changes in the Group until the date • Tomas Vitkus, Director of Sales Department of UAB Duomenų of the Report Logistikos Centras, was appointed the Acting CEO of UAB Duomenų Logistikos Centras (17 April 2014). • The Ministry of Finance of the Republic of Lithuania, in imple- • Vilius Nikitinas was elected an independent member of the menting Resolution No 120 of the Government of the Republic Board of UAB Elektros Tinklo Paslaugos (17 April 2014). of Lithuania of 12 February 2014 On Investment of the State- • Lina Paukštė was elected an independent member of the Owned Assets and Increase of the Authorised Capital of Com- Board of NT Valdos, UAB (17 April 2014). panies, transferred to Lietuvos Energija, UAB 51,454,638 state- • Kęstutis Betingis was elected an independent member of the owned ordinary registered book-entry shares of AB Lietuvos Board of UAB LITGAS (18 April 2014). Dujos with par value of LTL 1 per share, awarding 17.7 % of votes at the General Meeting of Shareholders of AB Lietuvos • Aurimas Bakas was elected an independent member of the Dujos (21 February 2014). Board of UAB Duomenų Logistikos Centras (30 April 2014). • Appointment of new members of the Board of UAB Duomenų • Rimvydas Štilinis was appointed the Acting CEO of UAB VAE SPB Logistikos Centras – Liudas Liutkevičius, Director of the Pro- (10 May 2014). duction and Service Provision Service of Lietuvos Energija, • Darius Kašauskas, Director of Finance and Treasury Service of UAB, and Mindaugas Keizeris, Director of the Strategy and De- UAB Lietuvos Energija, was elected the Chairman of the Board velopment Service of Lietuvos Energija, UAB (18 March 2014). of NT Valdos, UAB (15 May 2014). • The meeting of shareholders of Nordic Energy Link AS (hereinaf- • Liudas Liutkevičius, Director of the Production and Service ter – NEL), the shareholder of which is Lietuvos Energijos Gamy- Provision Service of UAB LITGAS, was elected the Chairman of ba, AB, passed the decision on winding-up of NEL. The compa- the Board of Lietuvos Energija, UAB (20 May 2014). ny set up in 2004 was tasked with implementing the project of • Lietuvos Energija, UAB signed agreements with the German connection of energy systems of the Baltic States and Finland Company E.ON Ruhrgas International, according to which it by means of the electricity cable “Estlink 1” across the bottom of took over 38.9 % of AB Lietuvos Dujos shares and 11.76 % of the Baltic Sea. On 30 December 2013, the cable was transferred shares of AB LESTO (21 May 2014). to the Estonian and Finnish transmission system operators Eler- • Liudas Liutkevičius, Director of the Production and Service ing and Fingrid, therefore, the shareholders of NEL decided on Provision Service of UAB LITGAS, was elected the Chairman of the winding-up of the company as provided for in the memo- the Board of UAB Duomenų Logistikos Centras, and Andrius randum of association of NEL. Lietuvos Energijos Gamyba, AB Markevičius was appointed the Acting CEO of the Company controls 25 % shareholding of NEL (19 March 2014). (27 May 2014). • Lietuvos Energija, UAB acquired the blocks of shares of 54.04 % • During the official offering Lietuvos Energija, UAB acquired and 24.94 %, respectively, held by the Group companies Lietu- 40.03 % of shares of AB Lietuvos Dujos. After this acquisition vos Energijos Gamyba, AB and AB LESTO in UAB Duomenų Lo- Lietuvos Energija, UAB holds 96.63 % of shares of AB Lietuvos gistikos Centras. After this transaction, Lietuvos Energija, UAB Dujos (17 June 2014). controls 79.34 % of shares of UAB Duomenų Logistikos Centras (31 March 2014). • The General Meeting of Shareholders of UAB LITGAS adopt- ed the decision to increase the Company’s authorised capital • Remigijus Štaras was elected an independent member of the to LTL 45 million by issuing 42 million of ordinary registered Board of Energijos Tiekimas, UAB (1 April 2014). shares with par value of LTL 1 per share. Lietuvos Energija, UAB • Nerijus Stasiulionis was elected an independent member of controls 66.7 %, and AB Klaipėdos Nafta – 33.3 % of shares of the Board of UAB Kauno Energetikos Remontas (2 April 2014). UAB LITGAS (27 June 2014).
Key information about the Company and the Group 55 • The Extraordinary General Meeting of Shareholders of AB lion, or 18.3 cents per share. Also, for the purpose of applying Lietuvos Dujos adopted the decisions to approve the resigna- uniform reserve formation principles to financial statements tion of the members of the Board delegated by E.ON Ruhrgas of all companies of the Lietuvos Energija Group, the meeting International GmbH, Dr. Achim Saul and Uwe Fip, recall the of shareholders decided to transfer to retained earnings of the members of the Board delegated by OAO Gazprom, Dr. Valery company other reserves of LTL 328 million formed by AB Lietu- Golubev and Kirill Seleznev. Three newly members of the vos Dujos over several past years (22 July 2014). Board of AB Lietuvos Dujos were – Ieva Lauraitytė, Director of • A new company of the Group UAB Verslo Aptarnavimo Centras the Legal Service of Lietuvos Energija, UAB, Ilona Daugėlaitė, with share capital of LTL 100 000 was registered in the Register Director of the Organisational Development Service of Lietu- of Legal Entities of the Republic of Lithuania. 50 % of shares vos Energija, UAB, and Mindaugas Keizeris, Director of the of this company were acquired by Lietuvos Energija, UAB. The Strategy and Development Service of Lietuvos Energija, UAB Chairman of the Board and Acting CEO of UAB Verslo Aptar- (30 June 2014). navimo Centras is Darius Kašauskas, Director of the Finance • Meeting of the Board of AB Lietuvos Dujos passed the decision and Treasury Service of Lietuvos Energija, UAB, and its mem- to elect Dr. Dalius Misiūnas, CEO of Lietuvos Energija, UAB, to bers of the Board include Andrius Bendikas, Eglė Čiužaitė, Mar- the position of the Chairman of the Board of AB Lietuvos Dujos ius Juknevičius and Augustas Dragūnas (30 July 2014). (30 June 2014). • The meeting of the National Control Commission for Prices and • The authorised capital of UAB Technologiju ir Inovaciju Cen- Energy (NCCPE) passed the Resolution On Results of Survey of tras was increased from LTL 10 000 to LTL 20 000 000. Lietu- the Electric Power Generation Market (hereinafter – Resolu- vos Energija, UAB acquired 11,106,000 shares of the new is- tion). By its Resolution, the NCCPE recognised Lietuvos Energi- sue and increased the controlled portion of the authorised jos Gamyba to be legal person of high influence in the electric capital of the company from 50 % to 55.55 %. Lietuvos En- power generation market and inter alia imposed requirements ergijos Gamyba, AB and AB LESTO acquired 4,442,000 of new with respect to the publication of information about expenses shares each, increasing their qualifying holdings from 20 % of regulated activities as from 1 January 2015 (7 August 2014). to 20.22 % (10 July 2014). • The reorganisation of management of AB Lietuvos Dujos ac- • Lietuvos Energija, UAB together with other companies of the cording to the corporate governance guidelines applicable Group – Lietuvos Energijos Gamyba, AB, AB LESTO, UAB LIT- across the state-owned Lietuvos Energija Group. In obser- GAS and UAB Technologiju ir Inovaciju Centras signed the vance of these guidelines, the formation of a new Board of AB agreement on the establishment of UAB Verslo Aptarnavimo Lietuvos Dujos was started and public recruitment of candi- Centras. Activities of the company include provision of public dates to Board members was announced (11 August 2014). procurement, accounting and employment relations’ adminis- • Since 14 August, the customer service centre of LESTO in Vil- tration services (21 July 2014). nius opened a new area, which also services customers of AB • The Board of AB Lietuvos Dujos passed the decision on the po- Lietuvos Dujos. This is a pilot project, during which both com- tential obligation to allocate a part of the effect of reduction panies assess the possibilities of their synergy in order to offer of the imported natural gas price for the reduction of price for the services and servicing to customers according to the one- non-household customers, recording in financial statements stop-shop principle (14 August 2014). the provision of LTL 281.1 million for covering possible addi- • Lietuvos Energijos Gamyba became a member of NASDAQ tional expenses between 1 January 2015 and 31 December OMX Commodities Stock Exchange (14 August 2014). 2016 (21 July 2014). • LESTO announced its Operating Strategy for 2014-2020. One • The Extraordinary General Meeting of Shareholders of AB Lietu- of the key goals enshrined in the long-term strategy is to im- vos Dujos passed the decision to pay dividends of LTL 53.3 mil- prove almost by one-tenth the reliability of the power distri-
Key information about the Company and the Group 56 bution network. LESTO will seek consistent investments in the cogeneration power plants in Vilnius and Kaunas. 18 applica- projects contributing to higher reliability and security of the tions from 8 countries were received in the partner selection distribution of electricity and increase of the company’s value, (3 October 2014). operating efficiency and return on equity (20 August 2014). • LESTO and AB SEB bank signed the agreement on granting the • Lietuvos Energijos Gamyba published its Operating Strat- long-term loan of EUR 85 million (LTL 293 488 million). The loan egy for 2014-2020. Lietuvos Energijos Gamyba provides in funds will be used for the refinancing of financial obligations its strategy that its total revenue over the coming year will of the Company to financial institutions and for the financing decrease because of higher competition and reducing pro- of investments aimed at increasing the network reliability and duction volumes of Elektrėnai Complex. However, the prof- the quality of provided services (8 October 2014). itability of the company should grow in implementing the • Rimvydas Štilinis was appointed the CEO of VAE SPB, UAB strategic goals (20 August 2014). (13 October 2014). • Lietuvos Energijos Gamyba changed the guarantee issued • Lietuvos Energijos Gamyba adopted the decision to decommission on 18 April 2011 in the amount of EUR 1 766 000 to the bor- units 1 and 2 of the Lithuania Power Plant as from 1 January 2015, rower UAB Kauno Energetikos Remontas (Agreement No. starting the decommissioning of unit 1 from 1 January 2015, and of BG 07/01/01). The company provides guarantee for another unit 2 – from 1 April 2015 (20 October 2014). obligation of the borrower to Nordea Bank Finland Plc (Ac- • The General Meeting of Shareholders of UAB Verslo Aptarnavi- count Credit Agreement No. OS 14/09/01), as amended and mo Centras passed the decision to increase the authorised supplemented, on granting the bank account credit of EUR capital of UAB Verslo Aptarnavimo Centras from LTL 100 000 1 448 100 (8 September 2014). to LTL 1 500 000. The authorised capital is increased by addi- • Viktoras Valentukevičius resigned from the position of CEO of tional contributions of the company’s shareholders by issu- AB Lietuvos Dujos held since 2002. Mantas Mikalajūnas, Head ing 1 400 000 ordinary registered shares with the par value of Strategic Development Division, was appointed the Acting and issue price of LTL 1 per share (28 October 2014). CEO of AB Lietuvos Dujos (8 September 2014). • The General Meeting of Shareholders appointed the Su- • Lietuvos Energijos Gamyba appealed against the decision of pervisory Board of Lietuvos Dujos, which consists of Darius the NCCPE of 7 August 2014 On Results of Survey of the Elec- Kašauskas, Director of the Finance and Treasury Service of UAB tric Power Generation Market whereby the NCCPE recognised Lietuvos Energija, Ilona Daugėlaitė, Director of the Organisa- the company to be a legal person of high influence in the elec- tional Development Service of Lietuvos Energija, and the in- tric power generation market (23 September 2014). dependent member – Petras Povilas Čėsna, the Chairman of • The General Meeting of Shareholders of AB LESTO passed the the Board of the Lithuanian Exhibition and Conference Centre decision to disburse dividends in the amount of LTL 66.4 mil- LITEXPO. The Supervisory Council is accountable to the Board lion, or 11 cents per share (30 September 2014). of the Company. Also, the Extraordinary General Meeting of • The General Meeting of Shareholders of Lietuvos Energijos Gamy- Shareholders approved new articles of association of AB Lietu- ba, AB passed the decision to disburse dividends in the amount of vos Dujos (29 October 2014). LTL 69.9 million, or 11 cents per share (30 September 2014). • Mindaugas Keizeris and Vitalij Rakovski were elected members • Public procurement policy of contracting authorities estab- of the Board of LITGAS to replace Liudas Liutkevičius and Dari- lishing uniform principles for the organization and perfor- us Kašauskas (29 October 2014). mance of public procurement procedures of Lietuvos Energija • Lietuvos Energija received a letter from ERPB expressing its Group was approved (2 October 2014). support for the construction of new cogeneration power • Lietuvos Energija started a selection and call for applications plants in Vilnius and Kaunas and submitting an offer on a pos- of partners interested in joint development of projects of new sible long-term financing or investing (30 October 2014).
Key information about the Company and the Group 57 • The nuclear power plant project was transferred from Lietuvos • A new Board and CEO of AB Lietuvos Dujos were elected. Li- Energija, UAB, to VAE SPB (30 October 2014). udas Liutkevičius, the Chairman of the Board of Lietuvos Du- • The National Control Commission for Prices and Energy set for jos, became the CEO of the Company. Elected members of the Lietuvos Dujos an adjusted natural gas (NG) distribution price Board of the company were Giedrė Glinskienė, Director of the cap of LTL 25.80/ MWh for 2015. In 2015, compared to 2014, the Finance and Treasury Service, Tomas Šidlauskas, Director of the distribution price cap increased by 16.7 percent mainly due to Gas Network Service, Nemunas Biknius, Director of the Service 17 percent lower forecasted NG volumes (30 October 2014). Provision and Development, and Valentina Birulienė, Director of the Organisation Development Service (4 November 2014). • Mantas Mikalajūnas was appointed the CEO of Lietuvos Dujų Tiekimas, and Ieva Lauraitytė and Mindaugas Keizeris were elect- • The Vilnius County Administrative Court received one more ed members of the Board of the Company (30 October 2014). appeal of Lietuvos Energijos Gamyba, AB requesting to dis- miss Resolution of the NCCPE of 17 October 2014 On Setting • AB Lietuvos Dujos transferred the natural gas supply service Price Caps for Services of Guaranteeing Reserve Power of AB to the new company UAB Lietuvos Dujų Tiekimas, which has Lietuvos Energijos Gamyba for 2015 and Resolution of 30 Oc- been ensuring the supply of natural gas to non-household tober 2014 On Setting the Purchase Price of Electricity Gener- consumers, business and other customers since 1 November. ated in the Subdivision of AB Lietuvos Energijos Gamyba – the The reform of management of AB Lietuvos Dujos in the sector Lithuania Power Plant for 2015. In the opinion of the company natural gas finalised the implementation of the requirement the calculation of return on investment provided in the resolu- of the EU’s Third Energy Package to unbundle the activities of tions are inaccurate and wrong (18 November 2014). supply, sales and distribution of natural gas. After the transfer of the natural gas supply activity to Lietuvos Dujų Tiekimas – a • LESTO announced its intention to start public procurement pro- new company of the Lietuvos Energija Group, Lietuvos Dujos cedures for obtaining a long-term loan. It is planning to borrow manages the natural gas distribution network and provides EUR 75 million (LTL 258.96 million) for a period of five years. The distribution services (31 October 2014). funds will be allocated for refinancing financial obligations of the company and for its working capital. The expected variable • The Vilnius County Administrative Court accepted the appeal loan interest base – 1-month EURIBOR (20 November 2014). of Lietuvos Energijos Gamyba, AB requesting to dismiss Reso- lution No. O3-818 of the National Control Commission for Pric- • Having received the notification of 28 October 2014 of the es and Energy (NCCPE) of 30 September 2014 On the Planned member of the Supervisory Board of AB Lietuvos Energijos Inspection of Lietuvos Energijos Gamyba, AB. The NCCPE ap- Gamyba Liudas Liutkevičius on his resignation from the Su- proved the planned inspection report No. E3-2 of 19 Septem- pervisory Board members of AB Lietuvos Energijos Gamyba, ber 2014 and decided to reduce by LTL 21.2 million (EUR 6.14 Mindaugas Keizeris was elected to the Supervisory Board of million) the income from electric power generation activities the company at the Extraordinary General Meeting of Share- to be received by the Lithuania Power Plant controlled by the holders of 20 November (20 November 2014). company and by LTL 25.7 (EUR 7.44 million) – income from ac- • The Vilnius County Administrative Court received the appeal tivities of the provision of services guaranteeing the reserve of AB LESTO requesting to partially dismiss Resolutions No. power to be received by the company. The resolution also O3-841 and No. O3-845 of the National Control Commission specifies the period for the implementation of these decisions for Prices and Energy (NCCPE) of 17 October 2014. In the opin- of the National Control Commission for Prices and Energy – ion of the company, the NCCPE illegally extended the regu- the reporting year of 2015 – 2016. In the opinion of the com- lation period of 2011-2013 for the year 2015 and incorrectly pany, the resolution is ill-founded and contradicting previous set the price cap of the electric power distribution services for decisions of the NCCPE on the same issues (31 October 2014). 2015 (24 November 2014).
Key information about the Company and the Group 58 • Lietuvos Energija started providing management services to of Article 21(5) of the Law on Securities. Given this fact, the the Group (1 December 2014). Company will reflect impairment of its fixed tangible assets in • Lietuvos Energija acquired 100 % of shareholder rights of the annual financial reports of 31 December 2014 in retrospect. Training Centre for Energy Specialists from Duomenų Logis- Annual financial reports of 31 December 2014 will be pub- tikos Centras (8 December 2014). lished no later than by 30 April 2015 (31 December 2014). • Lietuvos Energija became the winner of the national competi- • Lietuvos Dujų Tiekimas reduced the price of natural gas for busi- tion Innovation Prize 2014 in the Innovative Enterprise catego- ness and other non-household customers by about one-fifth in ry (19 December 2014). 2015. Such a possibility emerged after the NCCPE’s approval of the pricing of Lietuvos Dujų Tiekimas for business customers for • LESTO announced about its disagreement with the results 2015-2016 on 30 December (31 December 2014). and conclusions of the inspection conducted by the NCCPE on supposedly unreasonable costs of LTL 60 871 million (EUR • The Group successfully prepared for the introduction of the 17 629 million) (19 December 2014). euro in Lithuania (1 January 2015). • The NCCPE amended its Resolution of 30 October 2014, thus • Lietuvos Dujos started publishing calorific value of gas supplied the total PIMS budget of Lietuvos Energijos Gamyba de- to the network. Since now on, consumed gas for system users creased by LTL 29.35 million to LTL 174.69 million. The NCCPE are accounted for in euros per kilowatt-hour (1 January 2015). decided that a purchase price of electricity produced in Elek- • LITGAS started supplying the minimum necessary volume of trėnai will be 40.95 cents per kilowatt hour (exclusive of VAT) natural gas of the liquefied natural gas terminal to energy pro- in 2015, which is 0.96 cents less than the previously set price. ducers subject to regulation (1 January 2015). The VCAC accepted the LEG’s appeal against this resolution (19 • Lietuvos Energija and Kaunas University of Technology signed December 2014). a letter of intent on the establishment of a joint research cen- • All accounting employees of the Lietuvos Energija Group were tre (16 January 2015). transferred to the Verslo Aptarnavimo Centras (VAC); account- • Tests of a part of new heat production capacities - steam boiler ing function of all companies was taken on by VAC (21 Decem- room - in Elektrėnai were completed. The newly-build natural ber 2014). gas-fired steam boiler room is already in use, it was taken over • The NCCPE approved new electricity prices for 2015 - since by Lietuvos Energijos Gamyba staff (16 January 2015). 2015, the price of electricity for residents has decreased by an • The Vilnius County Administrative Court accepted the appeal average of 6.3 percent (23 December 2014). of Lietuvos Energijos Gamyba requesting to dismiss the Res- • The pricing of natural gas of Lietuvos Dujų Tiekimas for olution No. O3-934 of the NCCPE of 11 December 2014. By its non-household customers was approved for 2015-2016 - ad- Resolution, the NCCPE unilaterally set the components of the ditional discount of 20 percent was applied to the price of nat- price of heat produced by the Company (16 January 2015). ural gas for 2 years (30 December 2014). • Lietuvos Energijos Gamyba became the market maker of electric- • The Vilnius County Administrative Court accepted the appeal ity price derivatives in Latvian bidding areas (20 January 2015). of Lietuvos Energijos Gamyba against the Resolution of the • Baltic Highway, a 3000 km-long data transmission highway of NCCPE of 19 December 2014 whereby the NCCPE changed the a particularly high throughput, was officially launched (21 Jan- purchase price of electricity generated in the subdivision of uary 2015). the Company – the Lithuania Power Plant for 2015 set by its • The Vilnius County Administrative Court accepted the appeal previous decision (30 December 2014). of Lietuvos Energijos Gamyba requesting to partially dismiss • Lietuvos Dujos was obligated by the decision of the Bank of the Resolution No. O3-941 of the NCCPE of 19 December 2014. Lithuania to announce that it has been warned on the breach
Key information about the Company and the Group 59 • The NCCPE decided by paragraphs of the Resolution the dis- • Tomas Šidlauskas, member of the Board of Lietuvos Dujos, re- missal whereof is requested to reduce the amount of funds signed (30 January 2015). paid to the Company in 2015 for the provision of the service • LESTO announced about its plans to invest EUR 1.7 billion into meeting public interest (PIMS) - production of electricity nec- the modernization of the network until 2025 (3 February 2015). essary for ensuring the security of the electric power supply • Lietuvos Dujų Tiekimas won a gas tender procedure held by (21 January 2015). Vilniaus Energija (6 February 2015). • The Vilnius County Administrative Court accepted for hearing the • Lietuvos Energija announced about its programme of a clearer appeal of LESTO requesting to revoke the Resolution of the NC- defi nition of its value chain - by the end of the year, the Group CPE of 19 December 2014 On the Planned Inspection of AB LESTO plans to clear up its core activities and distribute them among and resolutions adopted on the basis thereof (23 January 2015). companied to create the greatest value for the group and its • LITGAS became the fi rst company in Lithuania and one of the customer - energy consumers (13 February 2015). fi rst enterprises in the Baltic States supplying natural gas to • LITGAS announced its engagement in the analysis of cooper- customers in other countries. In January, LITGAS signed nat- ation in new activities of a small-scale LNG supply and bun- ural gas supply contracts with the Estonian Eesti Energia and kering together with Statoil. An agreement on the form of the Reola Gaas company of the Estonian energy group Alexela joint activity is planned to be reached by the end of Q2 of Group (27 January 2015). 2015 (13 February 2015). • The Government formed a special commission, which will ex- • LITGAS secured gas transit through Latvia - it signed a contract amine the issues related to the implementation of projects for with Latvijas Gaze (20 February 2015). the modernization of district heating sectors of Vilnius and Kaunas (28 January 2015). • In its meeting of 30 January, the NCCPE decided not to consid- er the issue on imposing a sanction to LESTO and to postpone the decision-making until the end of March (30 January 2015).
Lietuvos Energija, UAB Chief Executive offi cer Dr. Dalius Misiūnas 27 February 2015
Key information about the Company and the Group 60