The international credit rating agency Moody's Investors Service left unchanged Latvenergo AS Baa3, stable credit rating. This approves the ability of Latvenergo AS to maintain secure credit risk position in the volatile electricity market in the Baltic region.

According to the international credit rating agency Moody’s Investors Service (Moody’s) report published on 19 March 2013, the credit rating of Latvenergo AS has been kept at its previous level – Baa3, stable. The assessment of the credit risk emphasizes the increased credit rating of the Republic of Latvia to Baa2 with a positive outlook as well as depicts the strategic importance of Latvenergo AS to Latvia’s economics. Moody’s also highlights the moderate level of debt in the Group’s balance sheet – the debt to equity ratio is 0.4 which represents an industry average level of borrowings and a stable capital structure.         

Zane Kotāne, Member of the Management Board of Latvenergo AS, CFO: “Moody’s maintained stable – Baa3 – credit rating approves that the company safely and steady operates in volatile market conditions when there is a growing influence of such business risks that are related to further liberalisation of market and increased competition. Although the main factors noted in the assessment from the credit agency that influence the industry have been not been favourable, for the company it has been a new and stable opportunity for growth that has been proved by the development in 2012”.  

It is planed that the total liberalization of electricity market in Latvia will complete in September 2013. By the development of the Group’s competiveness in an open electricity market with the currently low electricity market prices, Moody’s claims that the sustainability of the current credit rating approves that Latvenergo AS will be able to assure the Group’s rentability and revenue also after the liberalisation of the market.   

Zane Kotāne: “Due to the changes in the regulatory environment i.e. by the decreasing number of consumers who pay the fixed tariff and by the liberalisation of the electricity market in the Baltics, Latvenergo Group has been able to successfully operate in such electricity market conditions when there is a trend of declining electricity market price and a growing price of natural gas. As a result, the Group managed to increase the turnover by 10%.  

At the same time in 2012, there has been significantly enhanced transparency of the Group and introduced good governance practices that have been approved by the successful emission of the bonds at the end of last year. Being the first state capital company that has issued bonds, Latvenergo is the first that has begun to publish quarterly unaudited and corporate governance reports. At the end of last year, according to the Financial Instrument Market Law, Audit Committee began its operations. The Audit Committee oversees the preparation of financial and consolidated reports; the efficiency of capital company’s inside control and risk management system as well as handles other tasks.”  

Moody’s confirmed credit rating Baa3, stable provides Latvenergo AS with the opportunity to receive borrowings with more favourable conditions – longer maturities and lower interest rates. The sustainability of the credit rating at its current level suggests the stable financial situation and the low credit risk of Latvenergo AS as well as confirms the issued bonds as safe investment for the investors.

The international credit rating agency Moody’s Investors Service assigned the long-term credit rating Baa1 to Latvenergo AS for the first time in March 2004. Furthermore, in June 2005, Moody’s raised the investment grade rating of Latvenergo AS to A2 ‘stable’. In 2009, the negative impact of the financial crisis in Latvia left an adverse effect on the Latvenergo AS credit rating as it was lowered to Baa3 ‘negative’. However, the credit rating Baa3 with stable outlook has not changed since March 2010.

Additional information:
Jānis Irbe
Group Treasurer
Phone: +371 67 728 239

E-mail: investor.relations@latvenergo.lv

www.latvenergo.lv/investors/eng

About Latvenergo:

The Latvenergo Group is the largest power supply merchant in the Baltics, engaging in electricity generation and trade as well as providing electricity distribution and management of transmission system assets. Latvenergo holds one-third of the entire Baltic electricity market. Latvenergo AS has been acknowledged as the most valuable company in Latvia for several years in a row. International credit rating agency Moody’s has assigned Latvenergo AS an investment-grade credit rating of Baa3/stable.

The Latvenergo Group includes the parent company Latvenergo AS (electricity generation and trade, thermal energy generation) and its subsidiaries Latvijas elektriskie tīkli AS (management of transmission system assets), Sadales tīkls AS (electricity distribution), Elektrum Eesti OÜ (electricity trade in Estonia), Elektrum Lietuva UAB (electricity trade in Lithuania) and Liepājas enerģija SIA (thermal energy generation and trade, electricity generation), as well as Elektrum Latvija SIA, a subsidiary of Elektrum Eesti OÜ.