Today, on 30 November, the consolidated unaudited condensed interim financial statements of Latvenergo Group for the 9-month period of 2017 are published.
In the 9-month period of 2017, the revenue of Latvenergo Group has remained close to the level of the previous year and amounts to 679.2 million euros. The Group's EBITDA* has increased by 4% and amounts to 299.0 million euros. Compared to the respective period of the previous year, the amount of electricity generated by the Group has increased by 34%, reaching 4,088 GWh (gigawatt-hours).On 7 September 2017, Moody’s has not revised the credit rating of Latvenergo AS at the Baa2 level with a stable future outlook.
In October 2017, Latvenergo AS applied for a one-off compensation from the state, at the same time opting out of the receipt of 75% of the annual electrical capacity payments for Riga CHPPs cogeneration power plants. The application of Latvenergo AS for the compensation will have a positive impact on reduction of the average mandatory procurement public service obligation fee starting from 1 January 2018.
In the 9-month period of 2017, Latvenergo Group has generated 4,088 GWh of electricity at its power plants, which is 34% more compared to the respective period of 2016. The increase in electricity output was affected mainly by a significantly higher hydropower generation output at the Daugava hydropower plants (Daugava HPPs). The electricity output generated at the Daugava HPPs has increased by 65% compared to the respective period a year ago and amounts to 2,970 GWh. The amount of electricity generated by Latvenergo corresponds to 79% of the total amount of electricity sold to retail customers. By optimally combining generation at the Riga CHPPs and the Daugava HPPs with the import opportunities from other Nord Pool bidding areas, consumers in the Baltics benefit from both price convergence to the Nordic price level and price stability in the long term.In April 2017, the opening of the natural gas market took place. As a result, natural gas for the Group’s generation needs is now supplied also from alternative sources, including Klaipeda natural gas terminal.
Latvenergo Group is the largest thermal energy producer in Latvia, providing 1,791 GWh of heat to consumers during the 9-month period of 2017, which is 4% more than in the previous year.
During the reporting period, the total amount of electricity supplied to customers in the Baltics is 5,189 GWh: in Latvia – 3,428 GWh, in Lithuania – 1,050 GWh and in Estonia – 712 GWh. In the 9-month period of 2017, Latvenergo Group has maintained its position as the leading electricity supplier in the Baltics,despite the increased competition in the business customer segment. In addition to selling electricity, in Q3 of 2017, Elektrum Eesti OÜ, the subsidiary of Latvenergo Group in Estonia, commenced natural gas trade to business customers in Estonia.
The revenue of Latvenergo Group in the 9-month period of 2017 amounts to 679.2 million euros and has not changed significantly compared to the respective period a year ago. During the reporting period, Latvenergo Group’s EBITDA has increased by 4%, reaching EUR 299.0 million.Also the EBITDA margin has improved, reaching 43% which is 4 per cent points above the result in the previous year. The profit of Latvenergo Group is 125.0 million euros. The results were positively affected mainly by the higher electricity output at the Daugava HPPs.
In the 9-month period of 2017, the total amount of investment has increased by EUR 30 million or 22% compared to the respective period last year and amounts to EUR 166.6 million. The increase is due to greater investment in the generation segment and the transmission segment. Approximately 2/3 of investment were made in the network assets. Major investment projects of Latvenergo Group are: 1) reconstruction of hydropower units at the Daugava HPPs, which will ensure their functionality for the next 40 years; 2) the Kurzeme Ring, which will significantly increase power supply safety in the Kurzeme region and in Latvia as a whole, allowing further integration of the Baltics into the Nordic electricity market; 3) Third Estonia-Latvia power transmission network interconnection, which is of major significance for the future electricity transmission infrastructure of the whole Baltic region.
In September this year, the Cabinet of Ministers accepted the order that provides for a new mechanism for reduction of the mandatory procurement public service obligation (PSO) fee for electricity consumers. A mechanism has been created under which the state would reduce its future commitments to cogeneration plants with installed electrical capacity above 100 MW. Such producers are given the opportunity to apply for a one-off payment, agreeing to reduce support intensity in future. After the end of the reporting period, on 19 October 2017, Latvenergo AS applied for the one-off compensation from the state, at the same time opting out of the receipt of 75% of the annual electrical capacity payments for cogeneration power plants Riga CHPP-1 and Riga CHPP-2. The compensation will be financed by applying the rights of the state as the Shareholder to carry out a capital release of Latvenergo AS in the amount of EUR 454 million. The application of Latvenergo AS for the one-off compensation will contribute to reduction of the average PSO fee as of 1 January 2018.
On 7 September 2017, Moody’s has not revised the credit rating of Latvenergo AS at the Baa2 level with a stable future outlook. In the assessment of the credit rating of Latvenergo AS, Moody's has taken into account the one-off compensation, further changes in the support intensity for Riga CHPPs, as well as the planned capital release of Latvenergo AS.
The consolidated unaudited condensed financial statements of Latvenergo Group will be published on 28 February 2018. Latvenergo consolidated and Latvenergo AS Unaudited Condensed Interim Financial Statements for the 9-month period of 2017 are available under Section Investors/ Reports.
* EBITDA – earnings before interest, corporate income tax, share of profit or loss of associated companies, depreciation and amortisation and impairment of intangible and fixed assets