Litgrid

Inspired by deeds and aims

2016 Litgrid annual activities report event

Daivis Virbickas, CEO

Litgrid at NASDAQ Baltic

UAB EPSO-G
Smulkieji akcininkai

5 520 shareholders
504 331 380 shares
€ 355,55 mln. market capitalization
€ 18,16 mln. allocated for dividends
ROE = 7%
P/E = 21

(Data for 2016 12 31)

Price and volume of Litgrid share trade at Nasdaq Baltic

Financial indicators

Net profit, ROE and ROA for 2014 shown in chart without respect to tangible fixed assets reevaluation

Investments – to foster business opportunities, security of supply and financial results

Investments of 2014-2015 – to interconnections
Investments of 2016-2021 – to grid enhancement and long-term security of the system

Litgrid is a part of EPSO-G group of companies

Board of Litgrid

Rimvydas
Štilinis,
Chairman of the
board, EPSO-G

Nemunas
Biknius, EPSO-G

Domas
Sidaravičius,
independent
board member

Vidmantas
Grušas, Litgrid

Daivis Virbickas,
Litgrid

In Lithuania

Litgrid mission:
Ensure reliable transmission of electricity and enable competition in the open electricity market

Litgrid vision:
Full integration of the Lithuanian power system into the European power infrastructure and the common electricity market

Litgrid – the key structure of electricity system, ensuring logistics of the power flows

In charge of the strategic national assets in power sector

END = 1,03 MWh
AIT = 0,04 min.

> 7 200 km of high voltage power lines
HVDC technology
Asynchronous interconnections with Sweden and Poland
15 interconnections to 3 separate synchronous areas
Reliable and sufficient power grid
Power system operations 24/7
235 employees

Electricity demand grew by 4.5% in 2016

Industrial consumption grew 3.5%, demand in agriculture - 8.4%, services sector - 5.7%
Domestic users consumed 27% of the national demand, business and industry - 71%
2/3 of consumed electricity was imported

Industry
Transport
Agriculture
Households
Services and other
Technological grid demand

As local generation falls, import grows

19% of consumed (50% of locally generated) electricity was produced from RES in 2016

Electricity generation in Lithuania, GWh

Electricity import structure

Sweden
Latvia, Estonia, Finland
Poland
3rd countries

First year of new interconnections' operation

LitPol Link

Litgrid investment - € 108 mln.
Operation since beg. 2016
500 MW capacity
Availability to market - 96% of time

NordBalt

Litgrid investment - € 222 mln.
Operation since beg. 2016
700 MW capacity
Availability to market - 78% of time

Impact to the regional market

Source: Nord Pool
Electricity market price €/MWh

The Eastern neighborhood

2 reactor block of 1 200 MW just 40 km off Vilnius

Planned start of operation - 2019 (2020)

100 km off Astravets NPP there are 919 thousands of Lithuania’s residents

Sources: MFA; Ari Beser „A Preventable Nuclear Threat You Most Likely Don’t Know About“, http://voices.nationalgeographic.com/2017/02/23/a-preventable-nuclear-threat-you-most-likely-dont-know-about/

1000 km - short-term restrictions for consumption of local food
300 km - long-term restrictions for consumption of certain types of food
100 km - need for iodine therapy

Political or business agenda?

1 200 MW

Nord Pool
36,54 Eur/MWh

~€ 700 million / year

Efforts have to be aligned to prevent electricity from the unsafe construction to get access to Lithuanian/European power market
What can be done?

How to stop electricity from Astravets NPP

Quick solution
Electricity from 3rd countries not traded at Nord Pool

Long-term solution
Power system synchronization with the Continental European Network

Optimizing the grid in North-Eastern Lithuania

Upon completion of the projects the Baltic power systems will be ready for isolated operation test and asynchronous operation with IPS/UPS
Flexible operations of Lithuanian power system
Up to 12 times lower operations cost

Project task	Technical project	Start of operations
2017 Q2
2017 Q2-Q4	2018 Q4
2019 Q1	2021
Public procurement	Start of reconstruction of Utena and Ignalina NPTS

The ring of former Soviet Unions' nuclear power plants

Melvin B. Patnow
A. P. Patnow
T. P. Patnow
T. P. Patnow
T. P. Patnow
T. P. Patnow
T. P. Patnow
T. P. Patnow
T. P. Patnow
T. P. Patnow
T.

Ilgalaikis sprendimas – elektros sistemų sinchronizacija su kontinentine Europa

7 studies on Baltic power systems integration with the continental Europe since 1998 to 2017. Some decisions made:

New lines needed for integration will be built only in the territory of EU
Synchronization – a Project of Common Interest
Final recommendations of EC JRC study expected shortly

Synchronous areas in Europe

Baltic power system orations in isolation to be tested 2018/2019

Operations in the isolated mode – a must before synchronizing to continental European system
After successful tests – in-depth analysis and decisions for preparedness

The LitPol Link interconnection may be sufficient for synchronization

Thermal* capacity of the double-circuit interconnection Alytus-Elk is 2 x 1 200 MW
500 MW HVDC converter station could be switched to Alytus-Grodno line:
To ensure exchange of system services between Kaliningrad and mainland Russia
LitPol Link 2 remains in the plans, possibly - after synchronization

*thermal capacity - maximum technically allowed

A comment on the scenario of Northern synchronization

225 MW HVAC cable interconnection Malta-Italy

	Population 2016	Electricity consumption 2016
Baltic	6 000 000	26 TWh
Estonia	1 317 000	8 TWh
Malta	422 000	2.2 TWh

HVAC

220 kV

97.5 km subsea cable, a

part of 118 km

interconnection

European outlook

Lean energy for all Europeans package: accelerating innovation for low-carbon energy technologies

| No 1
In renewables | Energy efficiency in buildings | Flexible energy system | Consumers and smart cities | Energy efficiency for industry | Sustainable mobility |
| --- | --- | --- | --- | --- | --- |
| 70 €/MWh or less for the cost of offshore wind energy by 2030 | 60% savings of buildings' energy consumption by 2025 | 25% peak load reduction from demand-response by 2030 | 100 positive energy districts 2025, and 80% electricity consumption to be managed by consumers in 4 out of 5 households | 20% reduction of energy consumption for chemical, pharmaceutical and steal industries by 2025 | 70% cost reduction for Li-ion batteries by 2030 |

*Compared to 2015

Source: https://ec.europa.eu/energy/sites/ener/files/documents/set-plan_progress_2016.pdf

General market organization

Market-based pricing
Common power market design to ensure the adequacy of the EU's power system
National capacity markets will not be allowed to disrupt European market design
Enhanced interconnectivity and cross-border participation
Better integration of RES

New roles of consumers

Consumers will, amongst others, be entitled to:
Enter into dynamic pricing contracts reflecting spot prices and restricting termination fees
enter into agreements with demand response providers and aggregators (without the supplier’s consent)
access and use free of charge comparison tools and smart metering systems
rely on detailed billing guidelines and information
Highly flexible demand-side management for companies and private households

New roles for distribution system operators (DSO)

Development of 5- to 10-year network development plan
Development of system services market for:
Distributed generation
Demand-side response
Storage
Energy efficiency measures
Limitation to own and develop charging and storage solutions
Unbundled DSOs must create an “EDSO-E”

More engagement among transmission system operators

Cooperation throughout Regional Operational Centers
Ensure effective participation of all market participants
Limitations to own and develop storage facilities and assets providing ancillary services
Cooperation for risk-preparedness in the electricity sector

Additional powers to regulators

Extension of their tasks and competences with respect:
to regional co-operation on cross-border issues
establishment and functioning of Regional Cooperation Centers
Additional powers to issue (joint) binding decisions on electricity undertakings, carry out investigations and give instructions for dispute settlement, request information and impose penalties

Clean energy for all package will impact all

Energy-only market is enhanced
More powers to consumers
DSO will have to participate in market development
Competition-based market participation
RES are no longer exceptional, rather new traditional source of energy

Grid maintenance and development projects

Enhancing transmission grid

Reconstruction projects of transformer stations: Kaunas HPS, Trakai, Kuršėnai, Kretinga, Zokniai, Grigiškės, Rietavas, Vilnius E2 and Vilnius E3

330 kV Kruonis HPPS -Alytus, € 23 million

Investment to grid projects 2016-2025 - > € 671 million

Strategic projects
System reliability
Projects initiated by grid users
ITT projects

Socially responsible planning and implementation

Better living environment: additional sound isolation by the substations in Alytus and Klaipėda distr.

Informing residents about grid maintenance and development projects in advance

Developing relationship based on dialogue and mutual respect

Taking care of those smaller and weaker

Monitoring of wildlife near newly built lines LitPol Link and Klaipėda-Telšiai

> 17 thousand bird diverters installed on the lines

Special attention to quality of contractors' work

Regular site visits, requirements and control

Safety at work – first of all

Why safety at work is our topic?

Safety at work must become a business priority
99% of accidents can be prevented
Prevention is cheaper than consequences of accidents

FAQ

Protection zones of the power lines

Protections zones are set to protect the lines from accidents, and the people - from possible contact with the lines
Protection zone is a strip of land along the line axis:
for 110 kV lines - 20 meters on both sides off the furthest wire of the line
for 330 kV lines - 30 meters on both sides off the furthest wire of the line

Power line capacity predetermines the safety zone

Magnetic field is a part of natural surroundings

Thank you for your time