On 23 April 2013, the Management Board of Latvenergo AS has approved audited Latvenergo Group Sustainability and Annual Report 2012. It is planned that the Shareholders Meeting of Latvenergo AS will approve the respective Latvenergo Group Sustainability and Annual Report 2012 on 15 May 2013. Annual Report 2012 includes the main financial ratios and provides Latvenergo Management Report on the important events that took place in 2012.

According to audited Latvenergo Group Sustainability and Annual Report 2012, the turnover of the Group was LVL 751.0 million, EBITDA – LVL 171.8 million, the annual profit – LVL 35.7 million, dividends to be paid – LVL 28.5 million.

In 2012, the turnover of Latvenergo Group exceeded EUR 1 billion and increased by 10% compared to the turnover in 2011. In 2012, growth was observed in all operating segments –generation and supply, distribution system service and management of transmission system assets.

Developing a successful operation in the retail electricity market, the Group has supplied 8,287 GWh (gigawatt hours) of electricity and is the largest electricity supplier in the Baltics with a market share of 33%. The total amount of the electricity supplied by Latvenergo Group reached 6,708 GWh (market share –88%; unregulated market share – 81%) in Latvia, 1,058 GWh (11%; 17%) in Lithuania and 522 GWh (6%; 18%) in Estonia. The total amount of supplied electricity in Lithuania and Estonia reached 1,580 GWh, making 20% of the total supplied amount of electricity which is greater than the supplied amount of electricity compared to competitors in Latvia (920 GWh). The aggregate heat sales have increased up to 2,669 GWh in 2012 (2011: 2,524 GWh).

The audited financial results of Latvenergo Group indicate that the Group has successfully operated under the conditions of declining electricity market price and growing price of natural gas. Latvenergo Group has managed to increase the turnover by 10% as the total amount exceeded EUR 1 billion (LVL 751 million), however, the profit of the Group reached LVL 35.7 million (2011: LVL 43.8 million). In 2012, the value of assets on the balance sheet of Latvenergo Group has reached LVL 2.47 billion (2011: LVL 2.29 billion in), but the equity increased up to LVL 1.41 billion (2011: LVL 1.35 billion in 2011).

In 2012, the profit of Latvenergo Group has decreased by 20% compared to estimates made in Latvenergo Group 2012 Annual Unaudited Condensed Consolidated Financial Statements and is by 18% smaller the figure of 2011. Considering the publicly expressed information of deteriorating financial situation of Liepājas Metalurgs AS and its announcements to avoid paying part of its liabilities towards Latvenergo AS as well as the expected difficulties to cover liabilities towards its creditors, there is an increased risk that Liepājas Metalurgs AS would incompletely fulfil its liabilities towards Latvenergo AS. According to the International Financial Reporting Standards, Latvenergo AS has created provisions for the liabilities of Liepājas Metalurgs AS that have decreased Group’s profit. Although Liepājas Metalurgs AS is among the major customers of Latvenergo Group, its share in the turnover of Latvenergo Group is not significant and does not exceed 3.5%. The created provisions and the related decrease of profit is a separate one-off event that does not leave a long lasting effect on the operational activities and on the financial stability.

The total investments made by the Group in 2012 reached LVL 185.7 million (compared to LVL 198.7 million in 2011). One of major investment projects was reconstruction of combined heat and power plant Riga TEC-2 (2012: LVL 50.8 million) that is planned to be completed in 2013. Other substantial investment project is the Kurzeme Ring (LVL 16.1 million in 2012), which is part of the NordBalt - the international project of energy infrastructure development. The aim of the project is to strengthen the transmission network in the Western region of Latvia. Totally, the investment amount in transmission system network and distribution assets has increased up to LVL 81.9 million in 2012 (compared to LVL 58.2 million in 2011). The investments are made with an aim to improve the quality of network services and technical indicators such as the frequency and duration of outages, the voltage quality and others.

Latvenergo AS is the first state owned company in Latvia that has successfully issued bonds. In December 2012 Latvenergo AS issued bonds of EUR 20 million, diversifying its sources of borrowing. The issue of bonds was implemented as part of the LVL 50 million (or equivalent amount in euro currency) Programme for issuance of bonds. By continuing the successfully implemented issue of bonds, already in January and March 2013 another two bond issues took place in the amount of EUR 30 million and EUR 20 million. In all three bond issues the demand from investors greatly exceeded the supply of the issued bonds.

Latvenergo Sustainability Report 2012 is prepared according to the Global Reporting Initiative Guidelines B+ application level and it has been reviewed by independent external auditor. Along with audited Latvenergo Group Sustainability and Annual Report 2012 also Latvenergo Corporate Governance Report 2012 is available on Latvenergo website. The Corporate Governance Report is prepared according to the requirements of the Financial Instrument Law, Article 56.², and based on the “Corporate Governance Principles and Guidelines” published by NASDAQ OMX Riga AS in 2010.

Due to the issue of bonds and by implementing the best practice of Investor Relations, Latvenergo AS continues to quarterly publish (interim) financial reports, providing a transparent information of main financial and operational results and indicators of the Group represented segments (generation and supply, distribution system services and management of transmission assets) not only for the investors, but also for a broader society. The Quarterly Interim Financial Reports of Latvenergo Group will be published on 31 May, 30 August and 29 November 2013.

Audited Latvenergo Group Sustainability and Annual Report 2012 and Latvenergo Corporate Governance Report 2012 are available on “Investors” at www.latvenergo.lv (Financial information/reports).

* EBITDA is calculated as earnings before the interest, income tax, depreciation and amortisation.

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.