VILNIUS. The state-owned group of energy transmission and exchange companies EPSO-G earned EUR 118.9 million in revenue in the first six months of 2018, as it was actively continuing the implementation of strategic synchronization and gas market integration projects. The revenue growth was 7.1 percent compared to the same period last year.
According to Rolandas Zukas, CEO of EPSO-G, the main drivers behond the revenue growth were strong demand for electricity transmission services and a significant increase in the volume of system and balancing services. Due to significantly reduced service prices as of the start of the year, group’s consolidated net profit was EUR 8.6 million, down 41.5 percent compared to the same period a year ago, the EUR 6.1 million benefit going to the users of Lithuania's energy transmission systems.
‘In the first half of the year, significant progress has been made in implementing the strategic projects of national importance – the signed political agreement on the synchronization of the electricity grids of the three Baltic states with the grids of the continental Europe through Poland obliges us to actively continue the work on integrating our country into the European energy system. We started the procurements for the construction of the pipeline connection with Poland and, as soon as GET Baltic de facto turned into a regional gas exchange, the turnover grew every month in the first half of the year. The country benefits from the heat auctions and round-timber trading launched via Baltpool. Also, the recently created and launched woodchips price index in just a few months has become a reliable benchmark for regional biofuel market participants. No less important is the fact that, despite reducing the price for transmission system users for the second consecutive year, the growing volume of services allows us to use our energy infrastructure more effectively’, Mr Zukas commented on the most important aspects of the EPSO-G group’s business in the first half-year.
Demand for energy transmission services continued to grow
Due to the growth of the country’s economy, the first half of 2018 saw the largest electricity consumption in Lithuania since 1992. As a result of a growing energy demand, in the first half-year 5,153 million kilowatt hours (kWh) of electricity were transferred by high voltage transmission networks for the needs of the country’s population and businesses. It is 4.3 percent more compared to the same period in 2017.
Growth was observed in all sectors of the economy, in particular transport, which consumed 7.1 percent more electricity compared to the same period last year. The agricultural sector consumed 5.9 percent more electricity, while industrial companies increased the consumption by 2.3 percent, residents – by 1.1 percent, and the services sector – by 5.4 percent.
A positive trend also prevailed in the natural gas sector – although the total volume of transmission services provided to Lithuanian consumers in the first half-year decreased due to lower gas consumption in the fertilizer sector in the second quarter, it was amortised by the increased demand for balancing services and the amount of gas transferred to the Baltic markets and other neighbouring countries.
As the GET Baltic gas market is gaining momentum, 822 GWh of natural gas (in the 1st quarter of 2017 – 35 GWh) were transferred to the Republic of Latvia through the Kiemėnai DAS system. During the reporting period, 14,725 GWh of natural gas (in the first half of 2017 – 11,907 GWh) were transferred to the Kaliningrad Region of the Russian Federation. 12,383 GWh of natural gas were transferred to gas distribution systems or directly connected consumer systems for Lithuanian consumers, compared with 12,834 GWh during the same period last year.
In the first half of 2018, GET Baltic natural gas exchange’s trading volume amounted to 696 GWh. Upon becoming a de facto regional gas trading platform, GET Baltic exchange’s trading volume increased by more than 37 times compared to the same period in 2017.
In the first half of 2018, centralised heat-supply companies, independent heat producers and industrial companies purchased 183,000 toe of biofuel through the Baltpool energy exchange. It is 4.6 percent less compared to the same period in 2017.
Revenue and costs
During the first six months of 2018, the EPSO-G group’s consolidated revenue increased by 7.1 percent up to EUR 118.9 million compared to the same period last year, despite significantly lower service tariffs applicable for the second consecutive year. This was mostly influenced by the increased amount of electricity and natural gas transmitted to users of the system.
Although the actual price of electricity transmission dropped by 6.8 percent since the beginning of the year, the revenue for these services decreased by only 2.7 percent to EUR 33.0 million and made up 27.8 percent of the group’s total revenue. The reduction in the transmission price was partly compensated by the increased amount of transmitted electricity. The growth of revenue from system services had the largest positive effect on the overall increase in electricity transmission revenue.
Revenue from natural gas transportation services in the first half of 2018 amounted to EUR 22.8 million or 19.2 percent of the total EPSO-G group revenue. Due to a decrease in gas transportation tariff by, on average, 36.5% since the beginning of the year, the revenue from this field of business was 21.8 percent lower than in the same period last year. More favourable prices for system consumers, which had a negative effect on the revenue, were amortised by a higher volume of provided balancing services and a higher amount of natural gas transferred to Latvia, Estonia and the Kaliningrad region due to growing market trade.
The group’s operating costs during the six months of 2018 amounted to EUR 107.7 million compared to EUR 91.5 million over the same period last year due to an increase in the costs of energy resources and related services because of higher volumes of services.
The purchase of energy resources and related services made up the largest share of operating costs – EUR 61.1 million (the purchase costs of electricity and related services amounted to EUR 56.3 million, the purchase costs of natural gas amounted to EUR 4.7 million) or 56.7 percent of total costs.
Investment
During the first six months of 2018, the EPSO-G group companies have made more investments in order to ensure a reliable and uninterrupted supply of energy for Lithuanian residents and businesses. Compared to the same period last year, investments in the reconstruction of the main gas pipelines and distribution stations increased almost threefold and amounted to EUR 5.8 million.
In the first six months of 2018, investments in the electricity transmission system amounted to EUR 9.1 million, 38 percent of which were for the implementation of the strategic electricity projects of national importance and 62 percent for the reconstruction and development of the transmission network.
Profits
The net profit of the EPSO-G group for the first six months of 2018 were EUR 8.6 million, i.e. 40.5 percent lower compared to the same period last year when the earnings were EUR 14.7 million. This was mostly due to significantly lower tariffs for electricity and gas transmission services for system users, which were introduced in the beginning of the year.
The group’s operating profit before tax, interest, depreciation and amortisation (EBITDA) during the first six months of 2018 amounted to EUR 30.7 million. EBITDA margin in the first half of 2018 was 25.8 percent (in the first half of 2017 – 36.2 percent).
