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Latvenergo Group publishes the audited results and Sustainability Report for 2018
Emitents Latvenergo, AS (213800DJRB539Q1EMW75)
Veids 1.1 Gada finanšu pārskati un revīzijas ziņojumi
Valoda EN
Statuss Publicēts
Versija
Datums 2019-04-17 16:01:36
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Today, 17 April, the audited financial results of Latvenergo Group for 2018 are published. They were approved by the Management Board of Latvenergo AS on 16 April. Along with the Latvenergo Consolidated Report and Latvenergo AS Annual Report 2018, the Sustainability Report, which has been prepared in accordance with the GRI Standards Guidelines, and the Latvenergo AS Corporate Governance Report 2018 are published.

In 2018, the electricity market was affected by dry and hot weather conditions in Europe, which caused an unexpected rise in electricity prices. 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 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 dropped by 41%, reaching EUR 321.6 million. The Group’s profit for 2018 amounted to EUR 76.0 million. The results were impacted by a 44% drop in electricity generation at the 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 combined heat and power plants 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 emissions allowances. Prolonged hot and dry weather conditions significantly reduced the output by hydropower plants, especially in Scandinavia, thereby contributing to the rise in electricity prices across Europe. The average electricity price in Latvia in 2018 was 44% higher than a year before, 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 was 2,380 GWh. Consequently, the combined heat and power plants (CHPPs) of Latvenergo AS played a very important role in ensuring electricity demand last year, which compensated for the shortage of hydropower output. In 2018, the CHPPs generated 2,644 GWh of electricity, which is 87% more than previous year. At the same time, it was the largest amount of electricity produced by the 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 Elektrumservice 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) 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 previous year. The amount of electricity sold was 4.4 TWh in Latvia, 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 the CHPPs, at the same time receiving a one-off compensation from the state. Thus, the impact of the CHPPs on the mandatory procurement and capacity payment dropped from 37% to 15% or by EUR 74.2 million in 2018.

The Group’s financial results were negatively impacted by the 75% smaller electrical capacity revenue at the CHPPs and a substantially lower output at the Daugava HPP cascade. The revenue of Latvenergo Group in 2018 dropped by 5%, amounting to EUR 878.0 million. EBITDA decreased by 41%, reaching EUR 321.6 million. The Group’s profit for 2018 amounted to EUR 76.0 million (EUR 322.0 million in 2017). In 2017, the profit of Latvenergo Group was comprised of the Group’s operating result: a profit in the amount of EUR 172.9 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 biggest amount of investments (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 the 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, allowing for reducing the number of employees and the necessary resources, for example, in the field of transport and real estate.

On 19 March 2019, after the end of the reporting period, the International Credit Rating Agency Moody’s reconfirmed the credit rating for Latvenergo AS: Baa2 with a stable outlook.

The Latvenergo Group Sustainability Report has been prepared in accordance with the requirements of the GRI Standards Guidelines. The report contains information about the Group, its governance and operating segments. The document also provides information on the economic, social and environmental topics relevant to the Group’s operations. The Sustainability Report 2018 has been audited by PricewaterhouseCoopers SIA.

The Latvenergo AS Corporate Governance Report 2018 is published along with the financial results of Latvenergo Group. The Corporate Governance Report attests that Latvenergo Group has followed all the good corporate governance principles applicable to its operations in all major aspects. The Corporate Governance Report was prepared for the first time for the year 2012 when the Bond Issue Programme was launched and the issued bonds were listed on Nasdaq Riga Exchange. The report has been prepared according to the Financial Instrument Market Law and the Principles of Corporate Governance and Recommendations on Their Implementation issued by Nasdaq Riga AS in 2010.

  

LATVENERGO GROUP KEY FIGURES

Operational figures

    2018 2017
Total electricity supply, incl.: GWh   9,984 10,371
Retail* GWh   6,954 6,923
    Wholesale** GWh   3,030 3,448
Electricity generated GWh   5,076 5,734
Thermal energy generated GWh   2,274 2,612
Number of employees     3,508 3,908
Moody’s credit rating     Baa2 (stable)  Baa2 (stable) 

* Including operating consumption

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

 

Financial figures*                                                             

EUR’000

    2018 2017
       
Revenue   878,008 925,627
EBITDA1)   321,582 541,696
Profit   75,955 322,021**
Dividends2)   156,418 90,142
Total assets   3,798,819 4,415,725
Total equity   2,320,065 2,846,891
Borrowings   814,343 826,757
Net debt3)   684,888 590,754
Investments   220,607 243,811

1) EBITDA – earnings before interest, income tax, share of result of associates, depreciation and amortisation, and impairment of intangible assets and property, plant and equipment

2) Dividends paid to the equity holder of the Parent Company.

3) Net debt = borrowings at the end of the year minus cash and cash equivalents at the end of the year

* Information about the financial indicators and coefficients used by the Latvenergo Group is available in Latvenergo Group's consolidated and Latvenergo AS Annual Report, see the section “Key Figures”.

** 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 172.9 million.

 

Financial ratios*

    2018 2017
EBITDA margin4)   36.6% 58.5%
Net debt / EBITDA5)   2.0 1.1
Net debt / equity6)   0.30 0.21
Return on assets (ROA)7)   1.8% 7.7%
Return on equity (ROE)8)   2.9% 12.2%
Return on capital employed (ROCE)9)   2.8% 6.8%

4) EBITDA margin = EBITDA / revenue

5) Net debt / EBITDA = (net debt at the beginning of the year + net debt at the end of the year) * 0.5 / EBITDA (12-months rolling)

6) Net debt / equity = net debt at the end of the year / equity at the end of the year

7) Return on assets (ROA) = profit / average value of assets ((assets at the beginning of the year + assets  at the end of the year) / 2)

8) Return on equity (ROE) = profit / average value of equity ((equity at the beginning of the year + equity at the end of the year) / 2)

9) Return on capital employed (ROCE) = operating profit / (average value of equity ((equity at the beginning of the year + equity at the end of the year) / 2) + average value of borrowings ((borrowings at the beginning of the year + borrowings at the end of the year) / 2))

* Information about the financial indicators and coefficients used by the Latvenergo Group is available in Latvenergo Group's consolidated and Latvenergo AS Annual Report, see the section “Key Figures”.

   

Consolidated Statement of Profit or Loss*

EUR'000

  2018 2017
     
Revenue 878,008 925,627
Other income 93,260 149,950
Raw materials and consumables used (497,293) (349,690)
Personnel expenses (103,762) (113,289)
Depreciation, amortisation and impairment of intangible assets and property, plant and equipment (225,820) (307,614)
Impairment losses on financial assets, net 478
Other operating expenses (49,109) (70,902)
Operating profit 95,762 234,082
Finance income 1,157 1,243
Finance costs (8,406) (11,211)
Profit before tax 88,513 224,114
Current income tax (261) (51,199)
Deferred tax changes (12,297) 149,106**
Profit for the year 75,955 322,021
Profit attributable to:    
  ‒ Equity holder of the Parent Company 73,423 319,670
  ‒ Non‒controlling interests 2,532 2,351
     
Basic earnings per share (in euros) 0.081  0.250
Diluted earnings per share (in euros) 0.081  0.250

* 2018 annual audited consolidated financial statements prepared in accordance with the IFRS as adopted by the European Union

** in 2017 deferred tax liabilities reversed in the Statement of Profit or Loss in accordance with the changes of tax regulations

   and laws of the Republic of Latvia starting from 1 January 2018

  

Consolidated Statement of Financial Position*

EUR'000

  31/12/2018 31/12/2017
ASSETS    
Non‒current assets    
Intangible assets 19,079 13,413
Property, plant and equipment 3,297,093 3,308,985
Investment property 467 753
Non‒current financial investments 40 40
Other non‒current receivables 30,920 3,229
Other financial investments 16,935
Investments in held‒to‒maturity financial assets 16,984
Total non‒current assets 3,364,534 3,343,404
Current assets    
Inventories 71,975 76,328
Receivables from contracts with customers 117,955 105,369
Other current receivables 84,830 646,761
Deferred expenses 2,598 3,241
Prepayment for income tax 11,619
Derivative financial instruments 15,853 4,619
Cash and cash equivalents 129,455 236,003
Total current assets 434,285 1,072,321
TOTAL ASSETS 3,798,819 4,415,725
EQUITY AND LIABILITIES    
EQUITY    
Share capital 834,791 1,288,715
Reserves 1,125,466 1,125,728
Retained earnings 351,350 424,406
Equity attributable to equity holder of the Parent Company 2,311,607 2,838,849
Non‒controlling interests 8,458 8,042
Total equity 2,320,065 2,846,891
LIABILITIES    
Non‒current liabilities    
Borrowings 700,028 718,674
Deferred income tax liabilities 12,297
Provisions 20,178 21,910
Derivative financial instruments 3,923 4,914
Deferred income from contracts with customers 143,494 142,132
Other deferred income 303,519 350,926
Total non‒current liabilities 1,183,439 1,238,556
Current liabilities    
Trade and other payables 135,008 147,072
Deferred income from contracts with customers 13,271 12,500
Other deferred income 26,438 31,728
Income tax payable 2 27,725
Borrowings 114,315 108,083
Derivative financial instruments 6,281 3,170
Total current liabilities 295,315 330,278
TOTAL EQUITY AND LIABILITIES 3,798,819 4,415,725

* 2018 annual audited consolidated financial statements 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.

Pielikumi
01_Latvenergo_Sustainability_Annual_Report_2018.pdf (7293.41 kB)
02_Latvenergo_Corporate_Governance_Report_2018.pdf (741.35 kB)
03_Latvenergo_presentation_financial_statements_2018.pdf (843.80 kB)