Energy, Investments, Latvia

The decrease in revenue is caused by not reflecting the revenue of the mandatory procurement component into the revenue of Latvenergo Group along with the entrance into operation of Enerģijas publiskais tirgotājs AS as of 1 April 2014. EBITDA* of the Group constitutes 307.0 million euros, which is by 30% more than in 2014. The total amount of investments in 2015 constitutes 190.5 million euros, which is by 7% more than in the previous year.

Along with the consolidated annual report of Latvenergo AS for 2015 also the Sustainability Report and Corporate Governance Report of Latvenergo AS for 2015 are published. In this year, the Sustainability Report is prepared in accordance with GRI (Global Reporting Initiative) G4 guidelines, widely engaging stakeholders in preparation of the report. The report includes analysis of economic performance, society, product responsibility, environmental protection and employees and work environment aspects, which are most material for the Group's operations.

In 2015, Latvenergo Group has retained its leading position in the Baltic States, successfully using its experience and skills to respond to different market situations in the complicated conditions of the electricity market. The most significant events in the energy sector, which have influenced the operation of Latvenergo Group in 2015, involve deeper integration of the Baltics into the Nordic electricity market, as well as completion of the electricity market liberalization in Latvia by including Latvian households to this market. Investments of Latvenergo Group constitute 190.5 million euros, and the most ambitious project is reconstruction of Daugava HPPs hydropower units. In 2015, diversification of fund raising was successfully continued, and Latvenergo AS became the first state-owned company in the Eastern Europe to issue green bonds.

In 2015, the market share of Latvenergo Group remained high – approximately 1/3 of the total electricity market of the Baltic States. In total we have supplied 7,869 GWh (gigawatt-hours) of electricity to retail customers in the Baltics, and almost one third or 2,539 GWh of it is supplied to customers outside Latvia. Targeted sales activities in 2015 have increased the number of business customers in Lithuania and Estonia by approximately 33%, compared to the previous year.

Latvenergo Group has generated 3,882 GWh of electricity and 2,408 GWh of thermal energy in its power plants in 2015. It is notable that the previous year was one of the driest in terms of water inflow in Daugava, even longstanding employees of the Group can't remember similar conditions. In this situation Riga CHPPs showed their value, as their efficient operation limited the risk of increased electricity price and they proved their significance in the energy independence of the state. Daugava HPPs generated by 6% less electricity than in the previous year, i.e., in total 1,805 GWh, whereas Riga CHPPs generated by 23% more than in the previous year, i.e., in total 2,025 GWh, adapting the operation mode to the conditions of the electricity market.

Latvenergo Group revenue in 2015 constitutes 929.1 million euros, which is by 8% less than in 2014. The decrease of Latvenergo Group revenue was determined by changes in financial results accounting principles along with the entrance into operation of Enerģijas publiskais tirgotājs AS as of 1 April 2014, and reflecting the revenue and costs of the mandatory procurement in balance assets. In turn, EBITDA* of the Group has increased by 30% reaching 307.0 million euros. The results were positively influenced mainly by the opening of the electricity market to households in Latvia as of 1 January 2015. Until then, Latvenergo AS supplied electricity to households at regulated tariffs, which were below the market price. The profit of the Group constitutes 85.0 million euros. According to the Law “On the State Budget for 2016”, the estimated amount of dividends payable by Latvenergo AS for 2015 is 77.4 million euros (for 2014 – 31.5 million euros), which after the decision of the Shareholder will be allocated for various goals, among them supporting provision of electricity service to poor and low-income inhabitants, large families, as well as to persons with group I disability and families with a disabled child, as well as for partial reimbursement of the mandatory procurement public service obligation fee costs, ensuring that the mandatory procurement public service obligation fee remains at the previous level (26.79 EUR/MWh).

The audited consolidated financial statements of Latvenergo AS for 2015 do not significantly differ from the unaudited condensed financial statements of Latvenergo Group, published on 29 February 2016.

Latvenergo Group investments in 2015 constitute 190.5 million euros, which is by 7% more than in 2014. We have invested 62% of total investments in network assets and their modernization, increasing the quality, technical indicators and safety of operation of network services. Whereas 31.9 million euros are invested in the Daugava HPPs hydropower units’ reconstruction programme. The main objective of the reconstruction is to replace the outdated hydro-turbines, increasing their installed capacity, efficiency coefficient and electricity output on a yearly basis, thereby ensuring secure, efficient, durable and competitive operation of Daugava HPPs within the general energy system and on the free electricity market for at least another 40 years.

In June 2015, Latvenergo Group issued green bonds in the amount of 75 million euros, successfully continuing diversification of funding sources. Thus, Latvenergo AS has become the first state-owned company in the Eastern Europe to issue green bonds. The international credit rating agency Moody's Investors Service has assigned a Baa2 credit rating with a stable future outlook to the issued green bonds, in line with the credit rating of Latvenergo AS.