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Litgrid AB — Interim / Quarterly Report 2011
Aug 31, 2011
2262_rns_2011-08-31_7ddf691a-2f57-400f-b1e8-94fa3113f7bc.pdf
Interim / Quarterly Report
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LITGRID
LITGRID AB
CONSOLIDATED INTERIM REPORT FOR THE FIRST HALF-YEAR OF 2011
CONSOLIDATED INTERIM REPORT OF LITGRID AB AND ITS SUBSIDIARIES FOR THE FIRST HALF-YEAR OF 2011
This Consolidated Interim Report of LITGRID AB (hereinafter referred to as the "Company") and its subsidiaries (the Company and its subsidiaries hereinafter referred to as the "Group")) for the first half-year of 2011 has been prepared according to Section IV, Article 24 of the Republic of Lithuania Law on Financial Statements of Companies and Section III, Article 9 of the Republic of Lithuania Law on Consolidated Financial Statements of Companies as well as resolution of the Securities Commission of the Republic of Lithuania "Concerning Approval of the Regulations on the Preparation and Submission of Periodic and Additional Information" No. 1K-3 of 23 February 2007 and resolution of the Government of the Republic of Lithuania "Concerning approval of the Guidelines on Ensuring Transparency of Companies Controlled by the State and appointment of coordinating body" No. 1052 of 14 July 2010.
Accounting period covered by the Consolidated Interim Report
The Consolidated Interim Report of the Company and its subsidiaries has been prepared for the first half-year of 2011.
Companies forming the Group and their contact details (name, legal form, date and place of registration, business ID, registered office address (and address of place of business if different), telephone and fax numbers, email and website addresses)
As of 30 June 2011, the Company (until 14 March 2011 the name of the Company was LITGRID turtas AB) had direct control over its subsidiaries BALTPOOL UAB and TETAS UAB.
As of 1 January 2011, the Company held 100% of shares in LITGRID AB (company ID 302449655) and indirectly, through LITGRID AB, 100% of shares in BALTPOOL UAB. The Company controlled Energetikos pajėgos UAB indirectly, through TETAS UAB.
At the extraordinary general meeting of shareholders held on 24 January 2011, the shareholders of the Company approved the Terms of Reorganisation of LITGRID turtas AB and LITGRID AB and decided, pursuant to Article 2.97 (3) of the Civil Code of the Republic of Lithuania and the Terms of Reorganisation of LITGRID turtas AB and LITGRID AB, to reorganise LITGRID turtas AB and LITGRID AB by the method of merger, i. e. by merging LITGRID AB, which will cease its operations as a legal person, with LITGRID turtas AB, which will continue operations after the reorganisation and which will take over all the assets, rights and liabilities of LITGRID AB. On 1 March 2011, LITGRID AB and LITGRID turtas AB executed a transfer - acceptance certificate. On the basis of this transfer - acceptance certificate, LITGRID turtas AB took over all the assets, rights and liabilities of LITGRID AB as defined in the Terms of Reorganisation of LITGRID turtas AB and LITGRID turtas AB. On 2 March 2011, LITGRID AB was de-registered from the Register of Legal Entities. On 14 March 2011, a new version of Articles of Association of LITGRID AB was registered in the Register of Legal Entities (LITGRID turtas AB was renamed into LITGRID AB).
Continuing the process of reorganisation of power energy sector companies and seeking to ensure efficient, streamlined and optimised management of assets of Energetikos pajėgos UAB ("EP") and TETAS UAB, as well as in order to ensure more efficient use of human resources, reorganisation of TETAS UAB and EP was carried out on 1 April 2011. The reorganisation took place by merging EP with TETAS UAB by the method of merger. On 1 April 2011, the reorganisation was completed, Articles of Association of TETAS UAB were registered in the Centre of Registers, and on 6 April 2011 VĪ Registrų Centars adopted a decision on de-registering EP from the Register of Legal Entities.
On 30 June 2011, LITGRID AB held 67% of shares in BALTPOOL UAB. The remaining 33% shares in BALTPOOL UAB are held by Klaipėdos nafta AB. On 18 May 2011, amended Articles of Association of BALTPOOL UAB were registered upon increase in the company's authorised capital. Upon registration of BALTPOOL UAB's Articles of Association, Klaipėdos nafta AB completed its investment in BALTPOOL UAB by acquiring 156,627 (one hundred fifty-six thousand six hundred twenty-seven) ordinary registered shares of BALTPOOL UAB of LTL 1 (one Litas) par value.
For the purposes of drawing up of the consolidated financial statements for the first half-year of 2011, the Company consolidated financial statements of BALTPOOL UAB and TETAS UAB.
The Group's contact details are provided in the table below:
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
| Name | Legal form | Date and place of registration | Business ID | Registered office address | Telephone and fax No., email |
|---|---|---|---|---|---|
| LITGRID AB | Public limited liability company | 2010-11-16 Register of Legal Entities of the Republic of Lithuania | 302564383 | A.Juozapavičiaus g.13, LT-09311, Vilnius | Tel. +370 5 278 2777 |
| Fax +370 5 272 3986 | |||||
| [email protected] | |||||
| www.litgrid.eu | |||||
| BALTPOOL UAB | Private limited liability company | 2009-12-11 Register of Legal Entities of the Republic of Lithuania | 302464881 | A.Juozapavičiaus g.13, LT-09311, Vilnius | Tel. +370 5 278 2260 |
| Fax +370 5 278 2707 | |||||
| [email protected] | |||||
| www.baltpool.lt | |||||
| TETAS UAB | Private limited liability company | 2005-12-08 Register of Legal Entities of the Republic of Lithuania | 300513148 | Senamiesčio g. 102B, LT-35116, Panevėžys | Tel. +370 45 504 618 |
| Fax +370 45 504 684 |
Type of core activities of the Group of companies
| Company | % of shares controlled by the Group | Core activities |
|---|---|---|
| LITGRID AB | - | Activities of a electricity transmission system operator - transmission of electricity through high-voltage grids, ensuring the balance of generation and consumption as well as stability and reliability of the electric energy system in the territory of the Republic of Lithuania, control over the companies performing market operator's functions, companies which own intersystem power links with other states or companies which develop, control, use or dispose of such links |
| BALTPOOL UAB | 67 % | Activities of a electricity market operator |
| TETAS UAB | 61.13 % | Specialised services of maintenance, repairs and installation, and testing of transformer substations and switchyards; designing of energy facilities. |
Apart from the subsidiaries referred to above, the Group holds shares in the following companies: LitPol Link Sp.z.o.o (Poland) - 50% of shares and the votes attached thereto; Elektros tinklo paslaugos UAB - 28.87% of shares and the votes attached thereto; Technologijų ir inovacijų centras UAB - 35.14% of shares and the votes attached thereto, and NT Valdos, UAB - 0.35% of shares and the votes attached thereto.
Information on agreements with securities brokers
The issuer has concluded an agreement on accounting for securities of the issuer and management of individual securities accounts with Swedbank AB. The term of validity of the agreement 1 November 2011.
Trade in securities issued by the Group companies in regulated markets (name of regulated market, number of securities traded
Shares of the Company are traded in NASDAQ OMX Vilnius securities exchange (hereinafter referred to as "VVPB") since 22 December 2010. The shares of the Company are listed on the VVPB Additional
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
Trading List. The Company has issued 504,331,380 ordinary registered shares of one Litas par value each (ISIN code LT0000128415).
Overview of position, operations and development of the Group companies. Description of main risks and uncertainties relevant to the Group companies
Objectives of the Group's operations
LITGRID is a Lithuanian electricity transmission system operator responsible for the control of the electricity flows in the country and maintaining stable operation of the power system. LITGRID is responsible for the integrity and compatibility of the power system: it ensures reliable, effective, high-quality and safe transmission of electricity, the power generation and consumption balance in Lithuania and trade in electricity generated by producers using renewable energy resources and providing public service obligation (PSO).
Mission of the Company: to ensure reliable supply of electricity and enable competition in an open electricity market.
Vision of the Company: full integration of the national electricity system into the European electricity infrastructure and common market in electricity.
On 28 March 2011, the Board of LITGRID AB approved objectives of the Company's operation for 2011 based on the long-term operating strategy of the Company:
- integration into the Synchronous Grid of Continental Europe (2020) – launching of the "Study of Options for the Connection of the Baltic States to the EU Internal Market in Electricity";
- implementation of international infrastructure links – coordinate the special plans on NordBalt and LitPol Link routes in the territory of Lithuania; conclude an agreement on implementation of LitPol Link project with PSE Operator, a Polish TSO;
- electricity market development or integration – establish a Nord Pool price zone in Lithuania; develop the power system ensuring the integration of renewable energy resources into the electricity market;
- network reliability $\mathsf{END}{\mathsf{MPL}} <= 5$ MWh and $\mathsf{AIT}{\mathsf{MPL}} <= 0.26$ min.;
- network optimisation – prepare, jointly with LESTO, the distribution system operator, a plan on optimisation of a 330-110 kV network;
- management efficiency: change the organisational culture by focussing on the key areas of operations – implementation of strategic projects, development and integration of electricity market and reliable system control, and organisational transformation and innovation.
Services provided by the Group
In broad terms, operations of LITGRID AB consist of a single operating segment – activities of a transmission system operator ("TSO"). The Company plans long-term development of the power system having regard to the requirements for the reliability of supply, quality, efficiency, consumption, management and environmental protection laid down in the National Energy Strategy and improving conditions for the use of the system. As a TSO, LITGRID AB is responsible for the stability and reliability of the functioning of the power system, performance of the national balancing function, and provision of system services in the territory of the Republic of Lithuania.
In order to increase transparency of operations, the following products/services are identified in the TSO activities for the purposes of the profit and loss account:
- transmission of electricity,
- trade in balancing/regulating power,
- provision of system services (power reserving services), and
- provision of public service obligation (PSO) and administration of PSO funds.
Prices for the power transmission services, system services and PSO are regulated by the State Commission on Price and Energy Control ("the Commission"); prices for balancing power are calculated according to the procedures approved by the Commission.
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
Transmission of electricity
Transmission of electricity through high-voltage grids is the core activity of LITGRID AB. On 24 February 2011, the Commission issued to the Company a power transmission licence of undetermined duration; the licence is effective from 1 March 2011. In the period from 1 January 2011 till 1 March 2011, the TSO function was performed by LITGRID AB, subsidiary of the Company (company ID 302449655), which was de-registered from the Legal Persons Register on 2 March 2011.
No major failures have been recorded in the power system of Lithuania during the first half-year of 2011 even though, upon closure of the Ignalina Nuclear Power Plant at the end of 2009, substantial changes in the power balance has made Lithuania an electricity importer rather than exporter. This has been a serious challenge to the national energy system.
The ceilings of the prices for power transmission services are set by the Commission. According to the Methodology for the Setting of Prices for the Power Transmission and Distribution Services and Price Ceilings approved by resolution of the Commission No. O3-139 of 25 September 2009, the price ceilings are set for a three-year regulation period and are adjusted in the 2nd and 3rd year of the regulatory period using the coefficients of contingency, effect of electricity quantities, inflation and efficiency. The ceiling set by the Commission for the electricity transmission price for 2011-2013 is 2.32 ct/kWh.
Every year the Board of the Company approves the electricity transmission price for customers, which may not exceed the set ceiling. Since 2011, the approved transmission price is differentiated into the power component and the energy component. The electricity transmission price prior to differentiation, approved for 2011, is 2.32 ct/kWh.
In the first half-year of 2011, LITGRID AB as a TSO transmitted 4.62 bn kWh of electricity through high-voltage grids for the country's needs, which is 2% more than in the same period of 2010. 4.08 bn kWh were transmitted to LESTO, the distribution network operator, i.e. 0.6% more than in the same period of 2010; to other customers 0.54 bn kWh (+13.6%).
Provision of system (power reservation) services
LITGRID AB ensures reliable functioning of the system and provides system services to its customers. Power reserve is necessary for the regulation of frequency and the balance in the power system flows and for the generation of power in cases of unforeseen drop in generation or rise in consumption. The Company provides this service to the customers free of charge, i.e. internal costs or profit margin of the Company is not included in the price for the system services. The following prices are set by the Commission:
- selling of power reserves of producers having over 25% of the power reserve market;
- system services provided to customers.
Non-differentiated price for system services to customers set for 2011 is 0.66 ct/kWh. In providing system services in the first half-year of 2011, the Company ordered, on average, 250 MW of secondary power reserve and 349 MW of tertiary power reserve per hour.
Trade in balancing/regulation power
The TSO performs the function of national balancing of the system. LITGRID AB organises trade in the balancing power and purchases and/or sells the balancing power required for ensuring the national balance between electricity generation and consumption. Trade in balancing power is conducted according to the procedure laid down in the Regulations on Electricity Trading; the price for balancing power is set according to the Procedure for the Calculation of Purchase and Selling Price for Balancing Power approved by the Commission. A person that has concluded a balancing power sale-purchase agreement with TSO becomes a supplier of balancing power.
Trading in regulating power takes place at a regulating power auction held by TSO. Suppliers of regulating power and TSOs of other countries take part in the auction. Participants in the electricity market having technical capacities for an effective change in power generation and consumption regimes and having entered into relevant agreement with TSO can become suppliers of regulating power. TSO gives binding instructions on changes in the power generation and/or consumption regimes if the national balance of the system is not maintained during an operating hour.
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
Provision of public service obligation (PSO) and administration of PSO funds
Public interests in the electric power sector consist of those services provided by the power sector's companies which are related to security of society including security, reliability and regularity of supply, protection of the environment, and power generation using renewable energy resources and in co-generation power plants.
PSO funds are funds paid to the PSO providers.
The conditions of provision of PSO are established in the Procedure for the Provision of Public Service Obligation ("PSO Provision Procedure") approved by order of the Minister of Energy of the Republic of Lithuania No. 1-283 of 8 October 2010. The PSO administration procedures are laid down in the Procedure for the Administration of Public Service Obligation Funds ("PSO Funds Administration Procedure") approved by resolution of the Commission No. O3-328 of 17 December 2010. The PSO prices and the PSO funds amounts are set by the Commission. The PSO Provision Procedure states that the Company as a TSO is the administrator of PSO funds, i. e. it is responsible for collection and payment of PSO funds. Payers of PSO funds (consumers of electricity) and receivers of PSO funds are specified in the PSO Provision Procedure and the PSO Funds Administration Procedure. The Company enters into agreements on collection of PSO funds with payers of these funds. Funds collected from the payers are intended for the PSO funds recipients. The Company enters into agreements on payment of PSO funds with receivers of these funds.
The Company is one of the receivers of PSO funds. PSO funds received by the Company consist of:
- PSOS funds for the preparation and implementation of strategic projects related to the increasing of energy security and the construction of intersystem links between Lithuania and Sweden and between Lithuania and Poland as well as the interconnection of the Lithuanian power system with ENTSO-E Continental European Networks;
- PSO funds intended for compensating for PSO costs and PSO funds administration expenses (operating costs):
- PSO funds for the connection of power generation equipment using the wind, biomass, solar or hydro energy;
- PSO funds for the balancing of power generated through the use of renewable energy resources; and
- compensation for the funds administration expenses (operating costs).
According to the PSO Funds Administration Procedure approved by the Commission on 17 December 2010, the Company acts as an intermediary in the PSO funds administration, collection and payment. In 2011, the approved PSO price for customers was 6.01ct/kWh.
Services of maintenance, repairs and designing of transmission network equipment
TETAS UAB, a subsidiary of LITGRID AB:
- performs maintenance and repairs of electrical equipment of power grids;
- provides the services of construction of new and reconstruction of present energy facilities;
- provides the services of designing of electrical equipment.
The Quality Management and Environmental Management System ("the Management System") was implemented in the company in 2007 and is applied in the operation of electrical equipment up to 400 kV and carrying the structural design and construction works in the projects on construction of extraordinary structures.
Market operator services
Seeking to establish free Lithuanian electricity market on December 4 2009 LITGRID AB registered the subsidiary company BALTPOOL UAB; on 28 December 2009 it was granted a license of electricity market operator.
Establishment of the Lithuanian Electricity Exchange administered by BALTPOOL UAB was a significant step toward creating an effective Lithuanian electricity market as part of the common electricity market of the Baltic Sea Region and the Continental Europe. The emergence of an organised and functioning
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
market in electricity ensures an effective use of the present infrastructure and publicity of objective prices for electricity. The electricity price level in a liquid regulated market is one of the best indicators in the assessment of both necessity and benefit of strategic infrastructure projects, while the electricity supply and demand ratio prevailing in an exchange is a clear signal for investors in attracting investments for the development of new generation sources.
International trading takes place in the Lithuanian Electricity Exchange administered by BALTPOOL UAB. Participants in the exchange include producers and suppliers from both Lithuanian and neighbouring energy systems trading in electricity generated in or imported to Lithuania. Electricity is bought for use in Lithuania or for export to the neighbouring energy systems.
The main function of BALTPOOL UAB consists in the organisation of electricity trade. The market operator:
- registers bilateral agreements between participants in wholesale market;
- collects orders on auction trading in electricity and sets the sequence of realisation;
- registers transactions under bilateral agreements and auction transactions;
- presents the results of electricity trade to market participants and regulatory authorities;
- organises settlements between market participants.
Wholesale trade in electricity under administration of BALTPOOL UAB is carried out by two methods: trading in the Lithuanian Electricity Exchange and under bilateral contracts between producers and suppliers. BALTPOOL UAB administers wholesale trade in the Exchange in collaboration with Nord Pool Spot, an electricity exchange of Nordic countries.
The Lithuanian Electricity Exchange functions according to the principles of Nord Pool Spot. The day ahead trading principle is applied: all power supply transactions are concluded in advance, separately for each hour of the next 24-hour period.
Participants in the Exchange pay a trading volume fee. The fee is paid on a weekly basis on the quantity of electricity traded by the participant in the past week. The trading volume fee is established in Annex 6 "Trading Fees" to the Regulations of the Lithuanian Electricity Exchange. The current trading volume fee is EUR 0.03 per MWh of electricity sold or bought on the Exchange, i.e. slightly over 0.01 ct/kWh.
BALTPOOL UAB provides services to the transmission and distribution system operators and electricity producers and suppliers.
The total volume of trade on the Lithuanian Electricity Exchange in the first half-year of 2011 amounted to 3 815 m kWh.
Customers of the Transmission System Operator. Main Customer Groups
According to the services provided/supplied, customers of LITGRID AB can be grouped as follows:
Users of transmission network:
- distribution network operators – LESTO AB, E TINKLAS UAB;
- producers – Vilniaus energija UAB, Kauno termofikacijos elektrinė UAB, Kauno energija AB, Panevėžio energija AB, Lietuvos energija AB, Lietuvos elektrinė AB, power plants/farms using renewable energy resources and supplying electricity to the TSO's transmission network;
- customer – legal persons whose equipment is connected to the TSO's transmission network and which buy electricity for own consumption – such as Achema AB, Akmenės cementas AB, Kauno vandenys AB, Korelita UAB, Lifosa AB, ORLEN Lietuva AB, State Enterprise Ignalina Nuclear Power Plant, SPAB Lietuvos gelezinkeliāč (Lithuanian Railways) etc.
Suppliers of balancing power:
- producers – Vilniaus energija UAB, Kauno termofikacijos elektrinė UAB, Kauno energija AB, Panevėžio energija AB, Lietuvos energija AB, Lietuvos elektrinė AB;
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LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
- suppliers – Enefit UAB, Inter Rao Lietuva UAB, Latvenergo prekyba UAB, Imlitex UAB, Baltic Energy Partners UAB, Lifosa UAB, ORLEN Lietuva AB, Energijos kodas UAB, Marisa UAB, Korelita UAB etc.
As of 30 June 30 there were 22 suppliers of balancing power.
Suppliers of reserve power:
- producers – Vilniaus energija UAB, Kauno termofikacijos elektrinė UAB, Lietuvos energija AB, Lietuvos elektrinė AB;
- suppliers – Inter RAO Lietuva UAB, ORLEN Lietuva AB.
- foreign TSOs: Elering OÜ (Estonia), AS Augstsprieguma tikis (Latvia), GPO Belenergo (Belarus).
Investments in non-current assets
In the first half-year of 2011, investments in assets used in the power transmission operations totalled LTL 113 m. The majority of investments were earmarked for the implementation of strategic projects, i.e. LTL 88 m or 78 % of total investments; investments in the transmission network's reconstruction and development amounted to LTL 24 m (22% of total investment). In the first half-year of 2011, reconstruction of a 110/10 kV Gargždų TS and switchyard was fully completed; part of a 110 kV transmission network of a 110/35/10 kV Kėdainių TS was reconstructed due to changes in the transmission network.
The Company concentrates its efforts on those strategic initiatives which will secure integration of the Lithuanian power system in the European power system and are critical for Lithuania's energy independence, such as:
- NordBalt Lithuanian – Swedish power link;
- LitPol Link Lithuanian – Polish power link;
- interconnection of the Lithuanian, Latvian and Estonian power networks with the Synchronous Grid of Continental Europe;
- integration into European markets for electricity;
- strengthening of Lithuania's internal power network.
Cooperation agreement on the implementation of NordBalt project concluded with Svenska Kraftnät, a Swedish TSO, in March 2011 provides for the parties' cooperation in the phases of planning and construction of the link, while the infrastructure established during the construction will be owned by the parties separately: the Lithuanian TSO will be the owner of the current converter at the Klaipėda TS, the cable from the Klaipėda TS to the sea, and 50% of the cable in the sea. The remaining part of the cable and the link infrastructure on the Swedish side will be owned by Svenska Kraftnät.
By decision of the European Commission of 5 August 2010, EU assistance of EUR 131 m was granted to the NordBalt project; 50% of it will be used for the financing of the project's implementation on the Lithuanian side. In December 2010, the Company concluded agreements on the production and installation of the cable and on construction of the converter stations with ABB – a company that was awarded the contracts in a tendering procedure.
In June 2011, the works under the NordBalt project were transferred to a testing ground – first tests of the sea cable were successfully carried out in Karlskrona (Sweden). Each cable is designed and produced according to the specific power transmission requirements, technologies applied, and specific installation conditions such as depth of the sea and bottom characteristics. Testing of the cable's resistance to mechanical impacts was the first test completed. Success of mechanical tests guarantees that, upon installation of the cable on the sea bottom, the technical characteristics of the link will comply with those indicated in the specifications. This will be followed by tests of current and voltage impact upon the cable, the success of which will guarantee that the cable system will bear voltage of at least 300 kV and electric current of at least 1250 A.
Preparatory works of the LitPol Link, the Lithuanian – Polish power link, project were continued in the first half-year of 2011:
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
- territorial planning – preparation of a special plan for the 400 kV overhead line from Alytus to the Lithuanian-Polish border is underway and a detailed plan for the extension of the Alytus TS with a back-to-back converter is completed;
- publication of the detailed plan for the extension of the Alytus TS;
- land ownership issues related to the extension of the Alytus TS resolved;
- approval of the "Feasibility Study of the extension of the Alytus TS with a Back-to-back Converter";
- approval of the LitPol Link financial and operating model.
EUR 2.37 m was allotted from the EU TEN-E fund for the preparation of the technical design of the Alytus TS reconstruction and extension and the overhead power line from Alytus to the Lithuanian-Polish border. For other works of this project, EUR 2 m from the Ignalina International Decommissioning Support Fund (administered by the European Bank for Reconstruction and Development) were used.
Risks Related to the Issuer's Activities
Political risks
The Group is operating in the electric power sector – an area of the economy which is of extraordinary economic and political importance for the national interests. The sector is regulated by the State, inter alia, for the purposes of implementation of the objectives and tasks of the EU energy policy. The management, structure and functioning of the power sector in Lithuania is governed by the Republic of Lithuania Law on Electric Power and the implementing legal acts.
It should be noted that any amendments to the legal acts governing the power sector – both European Union and national legal acts – may necessitate changes in the activities of the Group. Furthermore, there are no guarantees that any changes in the legal framework will not have an adverse effect on the Company's activities, results and/or financial position.
97.5% of the Company's capital is controlled by the State (indirectly, through Visagino atominė elektrinė UAB) and election of members of the Board of the Company depends on its voting. This means that there are no guarantees that decisions having a substantial impact on the Company's and the Group's activities and financial position will not be adopted in pursuing the public policy in the electric power sector. In addition, such decisions may not always coincide with the opinions and interests of other shareholders of the Company.
Financial risks
The Group companies are exposed to financial risks in their operations including credit risk, liquidity risk and market risk (foreign currency risk, interest rate risk with respect to fair value and cash flows, securities risk). By managing these risks the Group companies seek to minimise the effects of factors that could potentially have an adverse impact on the financial results of the Group and the Company.
Credit risk
Credit risk related to accounts receivable is limited as key customers of the Company are reliable ones. As of 30 June 2011, the credit quality of the trade receivables that are not overdue and not impaired is high as the majority of the accounts are receivable from distribution network operators and major industrial enterprises. The Group and the Company are characterised by high concentration of credit risk as it is shared by the 10 key customers, whose debt accounts for about 99% of all trade receivables.
In order to reduce credit risk, LITGRID AB requires payment of a deposit of a set amount or submission of a bank guarantee from customers – balancing energy suppliers- prior to concluding agreements with them. The Company does not require deposits or guarantees for customers with respect to which it has liabilities itself. BALTPOOL UAB requires deposits and/or guarantees from participants in the Electricity Exchange under the terms of payment set out in the Regulations of the Lithuanian Day Ahead Electricity Market.
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LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
The Group's credits risk related to cash at banks is limited as both LITGRID AB and BALTPOOL UAB conduct operations through banks having high credit ratings given by foreign rating agencies. Cash and term deposits are kept in the accounts opened in Lithuania's largest banks having an external credit rating higher than A- assigned by Fitch Ratings.
Liquidity risk
Liquidity risk is managed by planning the movements of cash flows of the Group companies. Cash flow forecasts are made in order to minimise liquidity risk. Overdraft agreements and credit line agreements are used to manage the risk of delayed payment of accounts receivable and the risk of temporary discrepancies in cash flows (incoming and outgoing).
The Group's liquidity ratio (current assets/current liabilities) and quick ratio (current assets-inventories/current liabilities) were 1.32 and 1.30 respectively as of 30 June 2011. The Company's liquidity ratio (current assets/current liabilities) and quick ratio (current assets-inventories/current liabilities) were 1.33 and 1.32 respectively as of 30 June 2011.
Market risk
Interest rate risk
The Company and the Group are not exposed to a significant interest rate risk as deposits are the main interest-earning assets with fixed interest rates. In addition, the Group keeps its guarantees of discharge of liabilities at banks, on which interest linked to VILIBOR is received. Should interest rate increase/decrease 1%, the effect on the Group's profit before tax would be LTL 45/(45) thou. as of 30 June 2011.
Foreign currency risk
The currencies of financing and purchase and sale agreements concluded by the Company are LTL and EUR.
On 2 February 2002 the Litas was pegged to the Euro. Therefore, equity capital of the Company and of the Group is not significantly affected by currency exchange rate fluctuations.
Securities risk
The Group is not exposed to any risk related to securities' prices as it has not acquired securities.
Technical and production risks
The Lithuanian energy system has a number of intersystem lines connecting it with the neighbouring energy systems. The available means to control power and energy balance are not abundant, which makes the power and energy balance control complicated. While on average four 110 kV transformer substations are modernised every year, investments in the transmission network facilities were limited by 2002, therefore, about 50% of all the TS equipment is older than 25 years. 35% of all 110 kV overhead lines and 24% of all 330 kV overhead lines are older than 45 years. Failures and disruptions of operation of the main production equipment used in the operations can have an adverse effect on the volumes of operations and sales of the Group, and on the financial position and operating result of the Group at the same time.
Environmental risk
In its operations the Group takes guidance from environmental regulations providing for the appropriate marking, use and storage of dangerous substance and for compliance with the requirements set for the equipment operated by the Group. Facilities which pose an increased risk of damage to the environment due to the quantities of pollutants' emissions or waste generation are operated according to the conditions specified in the Integrated Pollution Prevention and Control (IPPC) Permits issued by the regional environmental protection departments. Environmental regulations obligate the Company to implement procedures and technologies preventing environmental pollution or mitigating its potential impact as well as ensuring appropriate response actions in cases of unavoidable pollution.
10
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
Apart from responsibility for current operations, the Group may be held responsible for any past activities, should it become clear that damage was done to the environment. In addition, any amendments to the national or international environmental regulations may obligate the Group to implement measures compliant with new standards. This may require additional investments and have a significant impact upon the Group's operations, financial position and results.
At present the Group is fully compliant will all the applicable environmental regulations.
Analysis of Financial and Non-Financial Performance Results of the Group. Environmental and Personnel Information
Analysis of financial and non-financial results
The table below presents operating results of the Company and Group companies in the first half-year of 2011.
| LITGRID AB | LITGRID AB Group | |
|---|---|---|
| Financial results, LTL'000 | ||
| Sales income related to electricity | 187 418 | 187 468 |
| Other operating income | 2 162 | 21 674 |
| EBITDA * | 60 275 | 61 221 |
| Operating profit (loss) | (6 341) | (6 690) |
| Net profit (loss) | (4 464) | (4 088) |
| Cash flows from operations | 91 957 | 89 646 |
| Financial liabilities | 0 | 0 |
| Financial structure (%) | ||
| Shareholders' equity / assets (%) | 80,5 | 79,9 |
| Liabilities / equity (%) | 19,4 | 20,5 |
| Financial liabilities / equity (%) | 0,0 | 0,0 |
| Financial liabilities / assets (%) | 0,0 | 0,0 |
| Margins and profitability | ||
| EBITDA margin (%) | 31,8 | 29,3 |
| Free cash flows (FCF)/turnover (%) | 17,0 | 14,7 |
| Average return on equity (%/year) | (0,5) | (0,4) |
| Average return on assets (%/year) | (0,4) | (0,3) |
| Earnings per share (LTL/share) | (0,01) | |
| Book value per share 2011-06-30 (LTL) | 3,81 | - |
| Market value per share 2011-06-30 (LTL) | 1,61 | - |
| Quality of power transmission services | ||
| END, MWh (electricity not transmitted due to interruptions)** | 0 | - |
| AIT, min. (average interruption time) ** | 0 | - |
| Production costs in transmission network (%) | 2,25 | - |
- Earnings before tax + interest costs - interest income - dividend received + depreciation & amortisation + non-current & current assets impairment charge.
** Only for reasons falling within the operator's responsibility and undetermined causes.
The Company started operations on 1 December 2010, therefore, comparative figures for 2010 are not available.
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
According to the Requirements for the Power Transmission Reliability and Service Quality approved by State Commission on Price and Energy Control ("the Commission"), two indicators are used to determine the power transmission reliability level: END, i. e. the quantity of electricity not transmitted, which shows the quantity of electricity not transmitted during a reporting period due to interruptions, and AIT, i. e. the average interruption time, which shows the average length of interruptions during the reporting period. The minimum reliability level set for 2011 was as follows: END for reasons falling within the operator's responsibility and undetermined causes – not more than 5 MWh (in first half-year of 2011: 0 MWh) and AIT not more than 0.26 min. (0 min.).
Balance sheet
As of 30 June 2011 the Company had no financial liabilities to credit institutions. Cash and term deposits amounted to LTL 149 m, including LTL 49 m – administered PSO funds.
Profit and loss account
Income
Income of the Group in first half-year of 2011 was LTL 209.1 m. Income from the core activity – electricity transmission – was LTL 102.5 m, or 49 % of total income.
TETAS UAB earned income of LTL 24.1 m and BALTPOOL UAB LTL 1.3 m in the first half-year of 2011.
Costs
Costs of the Group in the first half-year of 2011 amounted to LTL 215.8 m. Costs of purchasing electricity and related services accounts for the larger part of the costs (LTL 96.7 m, or 45%).
TETAS UAB incurred costs of LTL 23.7 m in the first half-year of 2011 including LTL 10.2 m as costs of purchasing subcontractor services and materials/raw materials.
Profit (loss)
Loss before tax of the Group in the first half-year of 2011 amounted to LTL 4.6 m as determined according to the International Financial Reporting Standards, net loss amounted to LTL 4.1 m.
The main reason for the loss is that the depreciation and amortisation costs as disclosed in the financial statements (LTL 66.4 m in the first half-year of 2011) are much higher than the same costs calculated for the purposes of setting the transmission tariff rate (LTL 26.9 m).
Dividend policy
The Group has no formal dividend payment policy. The Government of the Republic of Lithuania, which indirectly (through Visagino atominė elektrinė UAB) controls 97.5% of shares in the Company, has established the principles of allocating divided on the state-owned shares by its resolution No 20 of 14 January 2007 (new version of resolution No. 1451 of 3 December 2001).
Cash flow statement
Net cash flows from operations were positive in the first half-year of 2011 and amounted to LTL 89.6 m. In the same period, investment cash flows of the Group were LTL (115.9) m and the net cash flow was LTL (26.3) m.
TETAS UAB's net cash flows from operations in the first half-year of 2011 were LTL 2.1 m.
Personnel and environmental issues
Personnel
12
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
As of 30 June 2011, the Group employed 621 people: LITGRID AB - 206, BALTPOOL UAB - 9, TETAS UAB - 406 employees. During the first half-year of 2011, statistical turnover of employees at LITGRID AB was 3.9% including dismissals on agreement of the parties, at the employee's request etc.; there was no employee turnover at BALTPOOL UAB.
Employees (average number of employees, changes in last financial / business year, reasons for material changes (over 10%), grouping of employees by education; numbers and average gross monthly pay of managers, specialists and blue-collar workers; special rights and responsibilities of the Issuer's employees or part thereof as provided for in employment contracts or collective agreements
Number of employees and pay
The wage fund amounted to LTL 12,240,000 in the reporting period.
| Number of personnel as of 30 June 2011 | Average pay, LTL | |
|---|---|---|
| Blue-collar workers | 224 | 2.173 |
| Specialists | 350 | 3.378 |
| Managerial personnel | 47 | 8.442 |
| Total | 621 | 3.323 |
Educational attainment of employees as of period end
| 30 June 2011 | |
|---|---|
| Number of employees | 621 |
| including: | |
| higher education | 353 |
| further education | 144 |
| secondary and vocational secondary education | 124 |
Social initiatives and policies pursued by the Company
Understanding the benefits of socially responsible business for the socio-economic development of society, the Company pursues a social policy and applies advanced environmental protection and business transparency principles, which are integrated into the Company's internal processes and external relations. Attention is focussed on the training and formation of management team as well as internal communication. Changes in corporate governance are aimed at the main areas of activities - implementation of strategic projects, development and integration of electricity market, reliable control of the system, and internal transformations and innovations at the organisation.
By introducing new organisational culture, improving management and increasing efficiency, the Company seeks to ensure irreversible positive changes brought about by the reorganisation of the power sector.
In the first half-year of 2011, LITGRID concluded a collective agreement with the employees' trade union. The agreement defines and establishes fair remuneration for work and governs social and economic relations between the employer and the employees.
Environmental protection
In order to comply with the environmental regulations, the Company must ensure proper management of waste and wastewater and implement preventive measures to avoid negative impact on the environment. Main environmental tasks of the Company - safe use of dangerous substances,
13
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
management of waste and wastewater generated by the Company, and matching of energy equipment and structures to the landscape.
Environmental protection activities are organised at the Company according to the provisions of the instructions regulating waste and wastewater management, safe use of chemicals etc., setting environmental requirements for the newly constructed and reconstructed facilities, and according to the IPPC permits.
The Company hires licensed companies for the waste management, maintenance of wastewater treatment facilities and chemical examinations of wastewater. Since October 2010, when the operation of the transmission network equipment was undertaken by the contractors (TETAS UAB and Elektros tinklo paslaugos UAB), organisation and implementation of environmental works was also undertaken by them, however, the Company remains responsible for compliance with the environmental regulations and the relevant reporting.
Main types of dangerous waste generated at the Company: transformer oils and waste related to their use (oil-contaminated wastewater, sludge contaminated with petroleum products accumulated in the treatment facilities, oil waste unfit for use, compressor oils and water emulsion, absorbents and cloths contaminated with oil), batteries, luminescent lamps, residual chemical substances etc.). The Company is covered by civil liability insurance against sudden losses or damage due to the environment by pollution including pollution cleaning costs.
The Company exercises constant control over wastewater released into the environment after treatment by conducting chemical examinations according to the conditions of the IPPC permit or the Wastewater Management Regulations; maintenance of stormwater and domestic wastewater treatment facilities is carried out according to the operating instructions provided by manufacturers.
Environmental impact assessments are carried out for the planned new power transmission lines. Environmental requirements are set for the design of new or reconstruction of new structures (transformer substations, switchyards, power transmission lines etc.). The Company seeks to abandon equipment which uses materials dangerous to the environment by selecting environmentally-friendly or less damaging equipment (e.g. oil connectors are replaced with gas ones). In the tendering procedures for the supply of services, a requirement that the contractors must have implemented the Environmental Management Systems (EMS) according to LST EN ISO 14001 is set; contractors are obligated to take management actions with respect to waste generated during construction and to furnish the Company with the documentary evidence.
TETAS UAB has two internal auditors who conduct internal audits and assess the effectiveness of the integrated EMS in the operations of the company. The company keeps registers for environmental protection purposes; hazardous waste is subjected to processing.
References and Additional Explanations on Figures Disclosed in the Consolidated Financial Statements
More detailed explanations of financial information are provided in the Explanatory Notes to Financial Statements for the First Half-Year of 2011.
Material events since the end of half-year
On 29 July 2011, the State Commission on Price and Energy Control decided that during 2010 - 2016, LTL 479 m will be allotted for the financing of NordBalt project from the funds collected from the provision of PSO services.
Operating plans and projections of the Group
In 2011 the Company will continue its activities carried out in 2110, i. e. will perform the TSO functions; BALTPOOL UAB will perform the functions of a market operator; TETAS UAB will provide services of maintenance, repairs and installation, and testing of transformer substations and switchyards, and designing of energy facilities.
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
The Company has no information about any significant risks or contingencies that could be encountered in the continuing operations of LITGRID AB as a TSO.
In 2011 the Company plans to continue implementation of NordBalt and LitPol Link projects; investments in the reconstruction of the transmission network will not be smaller than in 2010.
BALTPOOL UAB organises the day-ahead electricity exchange in collaboration with Nord Pool Spot, an electricity exchange of Nordic countries, which provides the exchange platform rental services. To implement the BEMIP plan and to create a common Baltic market in electricity, it is intended that the operations of the day-ahead electricity exchange will be transferred to Nord Pool Spot by creating a Nord Pool Spot price zone in Lithuania in the first half-year of 2012. In the second half of 2011 BALTPOOL UAB will continue preparations for the transfer of the exchange trade arrangements to Nord Pool Spot AS – the operator of Nord Pool Spot.
BALTPOOL UAB is preparing for another phase of development of the electricity market – introduction of a market for long-term electricity contracts. The current Lithuanian electricity market allows day ahead trading, however, market participants wish to have opportunities for long-term trading. In order to meet the demand, a long-term contracts market will be developed. Financial instruments will be traded in such market, which means that trade in electricity will take place on electricity exchange but the parties to long-term contracts would settle up for the differences between exchange price and contract price. The operation of the long-term contracts market will be similar to that of the electricity exchange – orders will be placed centrally and the trading system will calculate and publish market prices.
Information on Research and Development Activities at the Group Companies
The Company implements a sound investment policy, which is justified in technical and economic respects, and prepares annual research and development programmes focussed on the development of the power system and increasing the efficiency of the transmission network. Implementation of these programmes takes place mainly through long-term investments in the construction of new energy facilities or extension and modernisation of the present ones. One of the main tasks – reconstruction of energy facilities by replacing outdated equipment with modern technologies and introduction of modern relay protection, system automation, control, and information collection and transmission systems.
Every year the Company draws up long-term (10 year) construction and reconstruction plans according to the Republic of Lithuania Law on Power System, the National Energy Strategy adopted by the Selmas (Parliament), research studies etc. Annual investment plans are prepared on the basis of long-term plans.
In order to efficiently use investments in the new construction and reconstruction, the Company has launched, jointly with LESTO AB – a distribution network operator, a bilateral initiative the purpose of which is to
- maintain long-term cooperation of LITGRID AB and LESTO AB;
- assess and optimise investments in the transmission and distribution networks;
- assess and optimise investments in transformer substations which are underloaded and have no prospects;
- optimise costs of connection of new consumers and producers to the energy system;
- standardise and optimise technical requirements for those components of the transmission and distribution systems that are common to both operators, in order to cut costs.
Furthermore, in order to optimise investments in reconstruction, the Company initiated an internal project on planning of operation of and investments in electrical equipment based on the equipment's condition in order to ensure non-deterioration of reliability indicators and reduction of network losses. Expected output of the project – determination of optimal scope of necessary reconstruction of TS and power transmission lines, methodology for setting reconstruction priorities, setting of the sequence of facilities' reconstruction, and implementation of the system of equipment operation based on condition.
In order to attain its strategic objectives, the Company intends to carry out, jointly with the Latvian and Estonian TSOs, a feasibility study „Options for the integration of the energy systems of the Baltic States
15
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
into the Continental Europe's market in electricity". This feasibility study is co-financed by the EU programme Transeuropean Energy Network for Electricity (TEN-E).
Number and Par Value of the Shares of the Controlling Company owned by the Company, Its Subsidiaries or Persons Acting on Instruction Thereof but in Their Own Name
The Company has not acquired its own shares. The subsidiaries have not acquired shares in the Company.
Other Information on the Issuer
Structure of the authorised capital of the Issuer (number of shares, share par value, share classes, rights and responsibilities attached to each share class, percentages of share classes in the share capital)
The authorised capital of the Company registered in the Legal Persons Register of Enterprises as of 16 February 2010 amounts to LTL 504,331,380. It has been divided into 504,331,380 ordinary registered shares of LTL 1 par value. All the shares have been fully paid for.
All the shares of the Company are ordinary registered shares of the same class granting equal rights to their owners (shareholders).
An ordinary registered share grants its owner (shareholder) the following property rights:
- receive part of the Company's profit (dividend);
- receive part of the assets of the Company under liquidation;
- receive shares free of charge when the authorised capital is being increased from the Company's funds save for exceptions established in the Republic of Lithuania Law on Companies;
- acquire shares or convertible debentures issued by the Company on pre-emption basis save for the case when the general meeting of shareholders decides to withdraw this right for all the shareholders according to the procedure established by save for exceptions established in the Republic of Lithuania Law on Companies;
- lend money to the Company in the manner permitted by the law, however, where the Company borrows from the shareholders it may not use its property as security for the loan. Where the Company borrows from its shareholders, the interest rate may not exceed the average interest rate applied by commercial banks in the place of residence or in the place of business of the lender as of the date of the agreement. In such a case the Company and the shareholders may not agree on higher interest rates;
- transfer all or part of his shares to other persons;
- obtain part of the company's funds when the company's authorised capital is reduced in order to make payments to the shareholders;
- other property rights provided for by the laws.
An ordinary registered share grants its owner (shareholder) the following personal non-property rights:
- attend general meetings of shareholders;
- vote at the general meetings of shareholders using the votes attached to the shares; one vote if attached to an ordinary registered share;
- receive information about the Company to the extent established by the law;
- file a lawsuit against the Company for the damage done by non-fulfilment or improper fulfilment of duties, provided for in the laws and the Articles of Association, by the CEO and members of the Board of the Company and file a lawsuit in other cases established in the law;
- other non-property rights provided for by the laws.
Number of own shares acquired and disposed in the accounting period, their par value and the proportion of the authorised capital
There were no own share acquisitions or disposals during the accounting period.
16
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
Any restrictions on transfer of securities (e. g. restrictions on blocks of securities or requirement that a consent of the Company or other securities' holders must be obtained)
None
Shareholders (total number of shareholders; shareholders that own or control, at the end of accounting period (specify date), over 5% of the Issuer's authorised capital (first names and surnames of natural persons (the printed-out copy of the Annual Report submitted to the Commission must also contain personal IDs of these persons), names, legal forms, business IDs and registered office addresses of legal persons); numbers of shares owned by shareholders by classes, percentage shares of authorised capital and votes held; votes attached to the shares owned by each shareholder (in %) and votes held indirectly (in %))
Total number of shareholders of the Company as of 30 June 2011: 5,955. Shareholders holding more than 5% of authorised capital of LITGRID AB as of 30 June 2011 (LTL 504,331,380):
| Name | Type of shares | Number of shares | Proportion of authorised capital (%) | Proportion of votes (%) |
|---|---|---|---|---|
| Visagino atominė elektrinė UAB, Žvejų g. 14, LT-09310 Vilnius, business ID 301844044 | Ordinary registered shares | 491 736 153 | 97,5 | 97,5 |
Shareholders having special control rights and description of the rights
None.
Any restrictions on voting rights (e. g. restrictions on voting rights of persons holding certain percentage or number of votes; time limits for using the voting rights; or systems whereby property rights attached to securities are separated from holding of securities)
None.
Any agreements between shareholders which are known to the Issuer and due to which transfer of securities and/or voting shares can be restricted
None
Information on branches and representative offices of the Company
The Group has no branches and representative offices.
Powers of the Issuer's bodies to issue and buy shares of the Issuer
None
Information about rules governing the election and replacement of members of the Board and amendments to the Articles of Association
Articles of Association of the Company may be amended following the procedure establishes in the Republic of Lithuania Law on Companies by decision of the general meeting of shareholders adopted by at least 2/3 majority vote of all the shares represented at the general meeting of shareholders.
17
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
The Board consists of 5 (five) members. The Board is elected for the term of office of 4 (four) years. The term of office of the Board starts after the end of the general meeting at which it was elected and ends on the date of the general meeting held in the last year of the Board's term of office.
If the Board is recalled, resigns or stops performing its duties for any other reason prior to the end of the term of office, the new board is elected for the remaining term. If individual members of the Board are elected, they are elected only for the period remaining until the end of the term of the current Board.
A shareholder of the Company proposing candidacies for the Board members must provide written explanations to the general meeting, specifying qualifications, management experience and fitness for the position of each candidacy proposes.
Each candidate to the Board members must submit to the general meeting of shareholders a written confirmation that he/she agrees to be such candidate and a declaration of the candidate's interests, specifying in it any circumstances that may give rise to a conflict of interest between the Board member and the Company. If new circumstances of this nature arise, the Board member must immediately notify the Company and the Board in writing.
The Board elects a chairman from among its members.
Information about powers of the members of the Board
The Board is a collective management body of the Company.
The scope of competence and procedures of decision-adoption and election and recalling of members of the Board are established by the laws, regulations and the Articles of Association.
The Board reports to the general meeting of shareholders.
Scope of competence of the general meeting of shareholders, rights of shareholders – if such information is not provided in the laws
The general meeting of shareholders is the supreme body of the Company.
The scope of competence and procedures for holding meetings and decision-adoption are established by the laws, regulations and the Articles of Association.
Composition of management and supervision bodies and committees thereof; scope of activities of these bodies and the CEO
Areas of activities of the Board
The Board of the Company considers and approves the Company's operating strategy and budget, the organisational structure, positions of employees and the total / maximum number of employees.
The Board adopts decisions on becoming a promoter of a legal person; on transfer of any shares in the Company or votes attached thereto to third parties and on restrictions thereon.
The Board may establish guidelines and rules for operation of its subsidiaries as well as their annual financial plans, the annual rate of return on assets, ceilings of liabilities and other operating indicators of subsidiaries.
The Board adopts decisions on formation or termination of branches and representatives offices of the Company, as well as on approval of and amendments to their regulations. The Board appoints and recalls heads of branches and representative offices, considers issues related to the formation or termination of branches and representatives offices of the companies in which the Company has interests (including subsidiaries of the Company) as well as candidacies to the members of the board proposed by the Company.
18
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
The Board adopts decisions on issue of debentures, rendering of support and charity based on the share of profit allocated by the general meeting of shareholders for this purpose according to the procedures established by the Board.
The Board adopts decisions on the Company's participation in associations or any other amalgamations of legal persons.
The Board establishes the salary and other terms of employment contract for the head of an internal audit unit of the Company, approves his/her job instructions, provides incentives and imposes penalties.
The Board adopts decisions on the following transactions (applicable to individual transactions or a series or related transactions), except cases when transactions meeting these criteria are included in the Company's budget:
- investment, transfer or lease of non-current assets whose book value exceeds LTL 10,000,000 (ten million Litas) (applicable to each type of transaction separately);
- mortgage of non-current assets whose book value exceeds LTL 10,000,000 (ten million Litas) (applicable to the sum of transactions);
- standing surety or guaranteeing of third-party obligations whose amount exceeds LTL 10,000,000 (ten million Litas);
- acquisition of non-current assets at a price higher than LTL 10,000,000 (ten million Litas) except for cases when the Company acquires such assets due to connection of electrical equipment of consumers, producers or other persons to the Company's network or due to reconstruction/removal of the Company's electric equipment at a request of a third party.
The Board adopts decisions on:
- transfer, pledge/mortgage, changing of legal status, other encumbrance or disposal of entities and equipment owned by the Company which are strategically significant for national security as stated in the Law on Enterprises and forming the transmission network of 110 kV or higher voltage as well as equipment related to such network;
- transfer, pledge/mortgage, changing of legal status, other encumbrance or disposal of intersystem power connections with other states owned by the Company;
- transfer, pledge, other encumbrance or disposal of shares (and rights attached thereto) in the companies which are controlled by the Company either directly or indirectly and which own, develop, control, use or dispose of intersystem power connections with other states, or which implement and perform functions and activities of power system operators or market operators; increase or decrease in the authorised capital of such companies or other actions that may change the structure of authorised capital of such companies (e.g. issue of convertible bonds); reorganization, separation, restructuring, liquidation, transformation of such companies or other actions that can change the status of such companies.
Prior to adopting the latter decisions, the Board must obtain an approval of the general meeting of shareholders. Such approval does not release the Board from responsibility for the decisions adopted.
The Board also resolves issues (including those related to transactions) on which it is approached by the Director General.
Where approval of the general meeting of shareholders is needed for the Board's decision under the law, decisions of the Board may only be implemented upon receipt of the approval.
Areas of activities of CEO
Director General is the single-handed management body of the Company. Director General organises and directs activities of the Company, acts on behalf of the Company and may conclude transactions single-handedly.
19
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
The scope of competence and procedures for election and recalling of the Director General are established by the laws, regulations and the Articles of Association.
Members of the Supervisory Council and the Board of the Company, chief executive officer of the Company, chief financier (first names and surnames, data on participation in the Issuer's authorised capital, start and end of term of office of each person), information on amounts paid, other assets transferred and guarantees provided by the Issuer to these persons (total amounts and average amounts per member of the Supervisory Council and the Board, CEO and chief financier
The following persons occupied the positions of members of the Board, the Chief Executive Officer and the Chief Financier of the Company
| Position | Name | Start date | End date | Number of shares in the Issuer's company |
|---|---|---|---|---|
| Board | ||||
| Chairman | Romas Švedas | 2010-10-28 | - | |
| Member | Violeta Greičiuvienė | 2010-10-28 | - | |
| Member | Renatas Šumskis | 2010-10-28 | 2011-04-01 | - |
| Member | Vidmantas Grušas | 2010-10-28 | 2011-04-01 | - |
| Member | Virgilijus Poderys | 2010-12-08 | - | |
| Member | Gintaras Labutis | 2011-04-01 | - | |
| Member | Valentinas Pranas Milaknis | 2011-04-01 | - | |
| Director General | Virgilijus Poderys | 2010-12-08 | - | |
| Chief Financier | Tatjana Didikienė | 2010-11-17 | - |
Information on salaries, bonuses and other allocations from profit to paid during the accounting period, total and on average per person (administration includes the Director General and the Chief Financier).
| Salary in January – June 2011, LTL | |
|---|---|
| Per member of the Board on average | 0 |
| To all members of the Board collectively | 0 |
| Per member of the Administration on average | 89 825 |
| To all members of the Administration collectively | 179 650 |
Members of committees formed in the Company (first names and surnames, data on participation in the Issuer's authorised capital, start and end of term of office of each person, position, powers and main functions)
None
20
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
Any material agreements to which the Issuer is a party and which would take effect, change or cease in case of change in the Issuer's control. Impact of such transactions except for cases where disclosure would cause considerable damage to the Issue due to nature of the agreements
There are no material agreements which would take effect, change or cease in case of change in the Issuer's control.
Any agreements between the Issuer and members of its bodies / employees providing for compensation in case of resignation or dismissal without a valid reason or due to change in the Issuer's control
None
Issuers of equity securities must also present information on major related party transactions specifying the amounts of transactions, nature of relate-party relationship and other information on the transactions required for understanding financial position of the Company if such transactions are materials or were concluded on a basis other than arms-length basis. Information on individual transactions may be generalised based on transaction types except for cases where, in order to understand the impact of the related-party transactions on the Company's financial position, detailed information must be presented. "Related party" has the same meaning as in the accounting standards applied by the Issuer.
Related party transactions are disclosed in Note 9 to the Financial Statements.
Information on Compliance with the Code of Corporate Governance
Information on compliance with the Code of Corporate Governance is presented in Annex to this Annual Report.
Information on Compliance with Sections IV-VIII of the Guidelines on Transparency
The Company is in substance compliant with all the provisions of Sections IV-VIII of the Guidelines on Transparency, except:
- The Company has not followed the practice of publishing annual salaries of management of the Company.
- The Group has no formal dividend payment policy.
- The Company has not followed the practice of specifying the average monthly salary by divisions in the Annual Report.
Information on publicly available information
In the first half-year of 2011 the Company published the following notices of material events:
| 2011.06.10 | Concerning differences in the estimated and audited results of LITGRID turtas AB for 2010 |
|---|---|
| 2011.05.31 | Consolidated interim financial information on LITGRID AB and simplified interim financial information on the company |
| 2011.05.20 | Concerning registration of Articles of Association of BALTPOOL UAB |
| 2011.05.03 | Notice of contract/agreement |
| 2011.04.29 | Annual information for 2010 |
| 2011.04.29 | Decisions adopted at the general meeting of shareholders of LITGRID AB on 29 April 2011 |
LITGRID
LITGRID AB
Business ID 302564383, registered office address A. Juozapavičiaus g. 13, LT-09311 Vilnius
CONSOLIDATED INTERIM REPORT
30 JUNE 2011
| 2011.04.27 | Concerning notice of prices and tariffs of the power transmission service and amendments to the procedure of their application |
|---|---|
| 2011.04.13 | Concerning supplements to the agenda of the general meeting of shareholders of LITGRID AB being convened and approval of draft decision |
| 2011.04.01 | Decisions adopted at the extraordinary meeting of shareholders of LITGRID AB on 1 April 2011 |
| 2011.04.01 | Notice of the target financial indicators of LITGRID AB for 2011 proposed by the Ministry of Finance |
| 2011.03.30 | Notice of valuation of shares of BALTPOOL UAB |
| 2011.03.30 | CORRECTION: general meeting of shareholders of LITGRID AB is convened |
| 2011.03.29 | General meeting of shareholders of LITGRID AB is convened |
| 2011.03.15 | LITGRID turtas AB renamed into LITGRID AB |
| 2011.03.10 | Extraordinary meeting of shareholders of LITGRID AB is convened |
| 2011.03.04 | Decisions adopted at the extraordinary meeting of shareholders of LITGRID turtas AB on 4 March 2011 |
| 2011.03.04 | Notice of de-registration of LITGRID AB from the Legal Persons Register |
| 2011.03.01 | LITGRID turtas AB has taken over assets, rights and liabilities of LITGRID AB |
| 2011.02.28 | Preliminary consolidated unaudited operating results of LITGRID turtas AB Group of companies for 2010 |
| 2011.02.25 | Notice of the issue of the power transmission licence to LITGRID turtas AB |
| 2011.02.09 | Extraordinary general meeting of shareholders of LITGRID turtas AB is convened |
| 2011.01.31 | Concerning approaching the State Commission of Price and Energy Control |
| 2011.01.25 | Decisions adopted at the extraordinary meeting of shareholders of LITGRID turtas AB on 24 January 2011 |
| 2011.01.20 | Concerning treatment of the Terms of Reorganisation as information equal to Prospectus |
| 2011.01.11 | Income of LITGRID turtas AB for 2010 may reach LTL 900 million |
| 2011.01.11 | LITGRID turtas AB presentation for investors |
| 2011.01.04 | Invitation to presentation of LITGRID turtas AB |
Detailed information on material events in 2011 can be found in the website of Vilnius Securities Exchange www.nasdaqomxbaltic.com/market/?pq=news and the website of the Company www.litgrid.eut.
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