Today, 28 February, the unaudited condensed financial statements of Latvenergo Group for 2018 are published.

In 2018, the electricity market experienced a significant increase in electricity prices due to dry and hot weather conditions in Europe. Under these circumstances, the Group efficiently used the advantages of its diversified generation facilities, generating the largest amount of electricity at Latvenergo AS combined heat and power plants (CHPPs) since 1990.

In 2018, Latvenergo Group was the most valuable energy company in the Baltics, with the value of its assets amounting to EUR 3.8 billion at the end of the year. The Group’s revenue amounted to EUR 878.0 million, which is 5% less than in 2017. EBITDA decreased by 41%, reaching EUR 321.6 million. In 2018, the Group’s profit amounted to EUR 76.0 million. The results were impacted by a 44% decrease in electricity generation at Daugava hydropower plants (HPPs) due to a smaller water inflow in the Daugava River as well as the decision of Latvenergo AS to apply for a one-off compensation, opting out of the receipt of 75% of the annual electrical capacity payments for CHPPs and thereby providing opportunities for reducing the mandatory procurement component (MPC).

Latvenergo Group’s operations and performance in 2018 were influenced by global and regional operational environment factors, such as increased prices of electricity, natural gas and CO2 emission allowance. Prolonged hot and dry weather conditions significantly reduced the output by hydropower plants, especially in Scandinavia, thereby contributing to the rise in electricity spot prices across Europe. Thus, the average electricity price in Latvia in 2018 was 44% higher than a year ago, reaching almost 50 EUR/MWh.

Seasonal flood in January 2018 even placed Latvia in the position of the largest electricity exporter in the Baltics, but overall the output by Daugava HPPs in 2018, compared to previous year, decreased by 44% and reached 2,380 GWh. Consequently, Latvenergo AS CHPPs played a very important role in ensuring electricity demand last year, which compensated for the shortage of hydropower output. In 2018, CHPPs generated 2,644 GWh of electricity, which is 87% more than the previous year. At the same time, it was the largest amount of electricity produced by CHPPs since 1990. In 2018, Latvenergo AS generated 5,076 GWh of electricity at its generation facilities.

In 2018, Latvenergo Group was one of the leading energy traders in the Baltic states. The start of natural gas trade in Lithuania in October 2018 means that Latvenergo now operates in all energy market segments in Latvia, Lithuania and Estonia.

Latvenergo continuously develops new business areas and services, and the latest Elektrum service is the sale of natural gas to Latvian households from February 2019. The Company continues to efficiently develop its operations in the Baltic states by offering its customers Elektrum Solārais (Elektrum Solar) solar panels and Elektrum Viedā māja (Elektrum Smart House) products. In 2018, a total of 7.0 TWh of electricity were sold to retail customers in the Baltics, which is approximately the same amount as the previous year. The electricity trade volume in Latvia was 4.4 TWh, 1.6 TWh in Lithuania and 0.9 TWh in Estonia.

In 2018, the mandatory procurement component decreased, which was facilitated by the decision of Latvenergo AS to opt out of the receipt of 75% of the annual electrical capacity payments for CHPPs, at the same time receiving a one-off compensation from the state. Thus, the impact of CHPPs on the mandatory procurement and capacity payment decreased from 37% to 15% or by EUR 74.2 million in 2018.

The Group’s financial results were negatively impacted by 75% smaller electrical capacity revenue at CHPPs and substantially lower output at the Daugava HPPs' cascades. The revenue of Latvenergo Group in 2018 decreased by 5%, amounting to EUR 878.0 million. EBITDA decreased by 41%, reaching EUR 321.6 million. In 2018, the Group’s profit  amounted to EUR 76.0 million (EUR 322.0 million in 2017). In 2017, the Group's profit consisted of the Group’s operating result: a profit in the amount of EUR 173.1 million and a deferred tax reversal in the amount of EUR 149.1 million as a result of the corporate income tax reform.

The total amount of Latvenergo Group’s investments reached EUR 220.6 million in 2018. The majority or approximately 80% of overall investments was made in the modernisation of the networks with a view to ensuring high quality of network services and improving technical performance and operational reliability. EUR 21.1 million was invested in the reconstruction of the hydropower units of Daugava HPPs. Investments in the large transmission projects, Kurzeme Ring and the Third Estonia–Latvia power transmission network interconnection, continue as well.

In 2018, the Group implemented both internal process and governance projects and external digitisation projects related to communication with customers. By the end of the reporting year, the share of smart meters installed by Sadales tīkls AS was 49% of the total number of meters, thus effectively managing customer consumption information. Latvenergo AS carried out customer service projects that currently provide a full range of digital service options. The implementation of digitisation has contributed to the increased efficiency of the Group, reducing the number of employees and the necessary resources, for example, in the field of transport and real estate.

On 14 March 2018, the international credit rating agency Moody’s reconfirmed the credit rating for Latvenergo AS: Baa2 with a stable outlook.

The audited results of Latvenergo Group for 2018 and the Corporate Governance Report for 2018 will be published on 17 April 2019.

Latvenergo Group’s Key Performance Indicators

Operational Figures

*   Including operating consumption

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

Financial Figures

EUR’000

1)    EBITDA – earnings before interest, corporate income tax, share of profit or loss of associated companies, depreciation and amortisation and impairment of intangible and fixed assets 

2)     Net debt – borrowings at the end of the reporting period minus cash and cash equivalents at the end of the reporting period

* In 2017, the net profit includes a deferred tax reversal in the amount of EUR 149.1 million as a result of the corporate income tax reform. Operating profit: EUR 173.1 million.

Financial Ratios

1)     Net debt / EBITDA – average value of net debt / EBITDA (12-month rolling)

2)     EBITDA margin – EBITDA (12-month rolling) / revenue (12-month rolling)

3)     Return on equity (ROE) – net profit (12-month rolling) / average value of equity

4)     Return on assets (ROA) – net profit (12-month rolling) / average value of assets

5)     Return on capital employed (ROCE) – operating profit (12-month rolling) / average value of equity + average value of borrowings

6)     Net debt at the end of the reporting period / equity at the end of the reporting period

* In 2017, the net profit includes a deferred tax reversal in the amount of EUR 149.1 million as a result of the corporate income tax reform. Operating profit: EUR 173.1 million.

Consolidated Statement of Profit or Loss*

 EUR’000

 *   Consolidated Unaudited Condensed Financial Statements for 2018 have been prepared in accordance with the IFRS as adopted by the European Union.

Consolidated Statement of Financial Position*

EUR'000

*   Consolidated Unaudited Condensed Financial Statements for 2018 have been prepared in accordance with the IFRS as adopted by the European Union.

Additional information:

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

www.latvenergo.lv

About Latvenergo

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

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