VILNIUS. The Ministry of Energy, the sole shareholder of the holding company EPSO-G, approved the group's audited consolidated financial statements for 2020, took note of the annual report and approved the distribution of profits.
The shareholder also noted the 2020 performance self-assessment prepared by the EPSO-G’s Nomination and Remuneration Committee (hereinafter – Committee) on the holding company and all collegial governance bodies of the Group companies’, i.e. boards, the Nomination and Remuneration Committee, the Audit Committee, and the Innovation and Development Committee, as well as noted the most important areas of activities in 2021 identified by the Committee, thus further improving the performance of collegial bodies.
According to the audited data, the revenues of the State-owned energy transmission and exchange group EPSO-G increased by 7.8% to EUR 270.5 million compared to 2019. The positive revenue dynamics were mainly driven by a significant increase in gas transmission services towards Latvia due to favourable gas prices and the interconnection between Estonia and Finland, launched last year, as well as increased gas consumption in the country’s energy sector. This offset lower revenues at the beginning of the year due to warmer weather and a slight decrease in electricity transmission services last year due to the slower development of the national economy.
EPSO-G’s operating earnings before interest, tax, depreciation and amortisation (EBITDA) rose from EUR 47.8 million to EUR 74.6 million during the period. Net profit amounted to EUR 40.1 million, compared to EUR 11.4 million in 2019. Energy transmission activities are regulated and any excess profit is returned to domestic consumers of the country. Part of the excess profit is returned at a reduced electricity transmission tariff applied this year.
According to Rolands Zukas, CEO of EPSO-G, by adapting effectively to the significant changes in the operating environment due to last year’s COVID-19 pandemic, in 2020, all the Group’s companies were profitable showing the best financial results since the establishment of EPSO-G. This provides a solid foundation for the proactive implementation of projects important for the country’s energy independence and integration with Europe.
“One of the most important works to be performed this year is to expand the capacity of the LitPol Link electricity interconnector, to prepare to work in synchronous mode with the Polish power system, while at the same time working purposefully to ensure that electricity produced in the unsafe Astravets Nuclear Power Plant does not enter the Lithuanian market. Continued attention will be paid to the construction of the offshore link Harmony Link and the implementation of the energy storage project, which is essential for the reliable operation of the system. With the completion of the GIPL interconnector with Poland this year and the opening of the GIPL interconnector with Poland to the market next year, Lithuania will become a major transit and trading centre for gas from the Baltic States and Finland, and in particular an economic value-added centre for consumers and businesses of our country. This is why we are already in dialogue with prospective users of the interconnector and plan to provide information to the market on the order of the first GIPL capacity in the middle of this year,” says Rolandas Zukas, CEO of EPSO-G.
Revenue and costs
The audited EPSO-G Group’s revenue from electricity transmission increased by 20% to EUR 83.4 million compared to 2019. This represented 30.4% of total revenue. The main contributor to the increase in these revenues was the higher average real transmission price. Revenues for system services increased by 23% to EUR 86.7 million in 2020. In all, revenue from electricity transmission and related services amounted to EUR 206.4 million or 75.5% of all EPSO-G Group revenue.
Revenue from natural gas transportation and related services amounted to EUR 49.0 million and accounted for 19% of EPSO-G’s consolidated revenue. Although gas transmission services have been provided at a 16% lower tariff from the beginning of 2020, due to increased gas transmission volumes towards Latvia and higher gas demand in Lithuania, revenues from the natural gas transmission and related services were only 5% lower compared to 2019.
The audited operating costs of the EPSO-G Group amounted to EUR 230.1 million in 2020. Compared to 2019, they were EUR 5.1 million lower. The greatest part of the operating costs was comprised of procurement of energy resources and related services.
Finacial indicators and dividends
EPSO-G’s EBITDA margin for the period amounted to 27.6% (18.9% in 2019). The ROE exceeded the target of the Government of the Republic of Lithuania and in 2020 amounted to 18.8%.
On the basis of the Resolution of the Government of the Republic of Lithuania, the shareholder approved the decision that EPSO-G will pay a dividend of EUR 777,000 directly to the State budget (EUR 773,000 in 2019), thus ensuring the Group’s sustainable financial position in the context of the implementation of the important works on the integration of the synchronisation and the integration of the region’s energy markets, at the same time fulfilling the financial obligations to the State-owned “Ignitis grupė” AB by the “Litgrid” shares.
In May, part of the EPSO-G Group’s 2020 revenues (EUR 14.5 million) will be earmarked to further reduce this financial obligation. In 2020, EPSO-G’s debt to “Ignitis grupė” AB for the shares of its subsidiary “Litgrid” has been reduced by EUR 8 million to EUR 148.6 million.
With a strong focus on transparency and accountability, the EPSO-G Group was recognised in 2020 for the most advanced governance of its subsidiaries. The overall quality of governance was rated “A+”.
This is shown by the “Good Governance Index 2019/2020” published by the Governance Coordination Centre (VKC). The VKC Good Governance Index is the most comprehensive tool for assessing the quality of governance of all State-owned enterprises. The index consists of three main assessment dimensions: transparency, collegial bodies and strategic planning and implementation.