Energy, Investments, Latvia

The decrease in revenues was mainly determined by discontinuation of recognising the mandatory procurement public service obligation fee income in the revenue of Latvenergo Group along with Enerģijas publiskais tirgotājs AS entrance into operation on 1 April 2014. EBITDA and profit of the Group have increased by 15% to 94.8 million euros and by 28% to 39.3 million euros respectively. 24.8 million euros have been allocated to investments.

In the first quarter of 2015, Latvenergo Group successfully retained its leadership in electricity supply in the Baltics. We have increased the number of customers in neighbouring countries by more than 10%. Overall, retail electricity supply in the Baltics reached 2,132 GWh. The amount of electricity supplied in Lithuania and Estonia was 645 GWh, which is by 60% higher than the amount provided by competing electricity traders in Latvia.

On 1 January 2015, the electricity market opening for households in Latvia took place. Despite the competition, most households in Latvia have chosen to keep Latvenergo as their electricity supplier.

Latvenergo Group power plants generated 1,027 GWh of electricity and 1,019 GWh of thermal energy in the first quarter of 2015. The amount of electricity generated at Daugava hydropower plants (Daugava HPPs) has increased by 5% compared to the respective period last year, reaching 739 GWh. However, output of electricity at the Riga combined heat and power plants (Riga CHPPs) in the first quarter of 2015 was 42% lower compared to the first quarter of 2014, reaching 273 GWh due to lower electricity prices on the market. Riga CHPPs operated in the market conjuncture, efficiently planning their operating modes and fuel consumption.

In the first 3 months of 2015, Latvenergo Group income constituted 259.5 million euros and profit was 39.3 million euros (first three months of 2014: 324.5 million euros and 30.8 million euros respectively). Decrease in Latvenergo Group revenue was determined by change in accounting principles along with Enerģijas publiskais tirgotājs AS entrance into operation as of 1 April 2014. Therefore, mandatory procurement revenues are no longer recognised in the revenue. Improvement of profitability, in turn, were due to opening of the electricity market to households in Latvia as of 1 January 2015. Until that, Latvenergo Group supplied households at the regulated tariff that was below the market price.

Total investments in the 3 months of 2015 amounted to 24.8 million euros. To maintain high-quality network services, technical performance indicators, and operational reliability, significant investments were made in modernising the network. Investment in network assets accounted for 80% of all investments in the first 3 months of 2015. A significant portion of investments were also allocated to environmentally friendly and environmental improvement projects. After the reporting period, in 2015, an agreement with the European Commission Innovation and Networks Executive Agency was concluded regarding to the final stage of the Kurzeme Ring project, Ventspils–Tume–Rīga, stipulating 45% EU co-funding of eligible project costs. Within the framework of the Daugava HPP hydropower unit reconstruction programme, an agreement was concluded on reconstruction of six hydropower units at the Riga HPP. As part of its plan to attract borrowed capital and diversify Latvenergo Group borrowing sources, Latvenergo AS is planning to implement a new bond offering programme totalling up to 100 million euros. The bonds are planned to be included in the NASDAQ OMX Baltic Bonds List.

In early 2015, the Moody’s Investors Service international credit rating agency upgraded the Latvenergo AS credit rating to Baa2 with a stable outlook.