• Despite the warm winter, earnings from gas transmission remained stable in 2019, profitability was rising, operating expenses were lower
• Gas demand in Lithuania was growing
• Transportation flows towards Latvia were record-breaking
• Construction of the interconnection with Poland was launched, preparations for increasing transmission capacities at the interconnection with Latvia are in progress
• Service tariffs of Amber Grid for consumers in Lithuania dropped by 16 per cent
According to the unaudited data, gas transmission system operator Amber Grid owned by state-controlled energy transmission and exchange group EPSO-G together with its owned gas exchange GET Baltic earned EUR 54.8 million in 2019. It is 0.4 per cent more than in 2018.
Despite the warm winter, Amber Grid managed to sustain stable level of earnings, while record quantities of gas transportation to Latvia brought profit for the company.
In 2019, the net profit of the company reached EUR 11.8 million. In 2018, the revaluation of fixed assets resulted in the net loss of EUR 21.6 million. Without estimating the impact of single revaluation of the assets, the net profit was EUR 10.4 million in 2018. In 2019, the EBITDA (earnings before interest, tax, depreciation and amortisation) was EUR 24.3 million and 1.3 per cent lower, if compared with EUR 24.6 million in 2018.
‘Targeted investments into the Lithuanian gas transmission infrastructure and its interconnections with the neighbouring countries brought record-breaking flow of gas transported in Latvia's direction. This helped us to amortise the impact of warmer weather on the company's earnings, to operate with higher profitability and following a new regulatory period that started last year, from the beginning of this year our services for Lithuanian consumers dropped 16 per cent in price’, said Nemunas Biknius acting CEO of Amber Grid.
Focusing on operational efficiency and making targeted investments into modern transmission system management decisions, the consolidated operating expenses of Amber Grid during the above-mentioned period decreased by 5 per cent – down to EUR 40.5 million. The investments into the gas transmission network modernisation in January - December amounted to EUR 18.3 million or 14 per cent more than during the same period last year (EUR 16 million).
According to N. Biknius, all investments in to the gas transmission network must serve future energy needs.
‘Well-developed infrastructure will help ensure the sustainability of the energy system, create a favorable ecosystem for renewable green gas - biomethane, synthetic gas, hydrogen, etc.’, said N. Biknius.
Impact of the regulated activity
Following commencement of the new five years' period of natural gas transmission price regulation in 2019 (2019-2023), the return on investment from the assets attributed to the regulated activity was set at 3.33 per cent for Amber Grid. It is significantly lower compared to the return on investment of 7.09 per cent applied during the regulation period of 2014-2018. According to the Methodology for setting the rate of return on investment approved by the VERT (National Energy Regulatory Council), adjustments will be made on a yearly basis, considering factual borrowing costs of the company.
Gas transmission activity
In 2019, compared with the previous year, gas transmission to the Baltic States increased by 2.6 times up to nearly 6 terawatt hours (TWh) gas. During the period concerned, the gas flow to Latvia and Estonia accounted for one fifth (20 per cent) of the total admitted gas quantity for consumers of Lithuania and other Baltic States.
In 2019, the gas consumption of Lithuania increased by 5 per cent, 23.5 TWh gas was consumed for Lithuanian needs, the figure in the previous year was 22.3 TWh. During January - December, 30 TWh natural gas, excluding gas transportation to Kaliningrad District, was transported into Lithuania. It is 20 per cent more than in 2018, when 25 TWh natural gas was transported into Lithuania.
In 2019, Klaipėda LNG terminal supplied 65.3 per cent, while pipelines from Belarus and Latvia supplied 34.7 per cent of total admitted gas quantity for consumption in Lithuania and other Baltic States. Gas transportation through Lithuania to Kaliningrad District amounted to 26 TWh in 2019 and it was 6.6 per cent smaller than in 2018, when 27.8 TWh natural gas was transported through our country to Kaliningrad. Decrease was caused by warmer than usual winter and testing of Kaliningrad LNG terminal conducted in early 2019.
De facto operating regional market
The record gas flows travelling in 2019 to Latvia and further up to Estonia showed that the Lithuanian gas transmission system will be increasingly used for gas transit to other countries in the future. It is caused by the infrastructure already developed or under development – the LNG terminal operating in Klaipėda and the gas interconnection between Lithuania and Poland to be launched in the end of 2021. Enlarged common gas market, suppliers' competition and increased flows will make further reductions of gas infrastructure tariffs for Lithuanian consumers possible.
Negotiations on joining the regional gas market and on conditions favourable for Lithuania are taking place. The goal is reaching essential agreements in 2020 ensuring that all participants in the single gas market operate under mutually acceptable conditions.
Start of the GIPL interconnection construction
On 23 December 2019, Amber Grid signed the agreement with Alvora UAB and Šiaulių dujotiekio statyba on construction of the Gas Interconnection Poland-Lithuania (GIPL). The price of the transaction is EUR 79.85 million (excl. VAT). Following the agreement coming into force, gas pipeline construction was immediately commenced from Jauniūnai, Širvintos District, towards the Lithuanian-Polish state border in Lazdijai District. Pipes for the gas pipeline construction are supplied by Polish company Izostal, which was the successful winner of the tender in summer 2019. The value of the pipes needed for the gas pipeline construction is EUR 26.4 million (excl. VAT). Because of the competition of Lithuanian and foreign companies participating in the procurements, the GIPL project implementation is likely to cost EUR 22 million cheaper than planned.
Capacity enhancement of the interconnection with Latvia
In the end of 2019, the Innovation and Networks Executive Agency (INEA) under the European Commission, Lithuanian and Latvian gas transmission system operators signed the agreement on financing of construction works under the Project of the Lithuanian-Latvian gas pipeline capacity enhancement. Total investments into the project will be EUR 10.2 million. Lithuanian will make investments of EUR 4.7 million into the project. Upon implementation of the project by the end of 2023, increased gas transmission capacities between Lithuania and Latvia will be in particular valuable because of the use of the possibilities of the Lithuanian and Polish interconnection that will be in operation by then for the gas market of the whole region.
On the last days of the last year, the other project important for the Lithuanian-Latvia gas corridor was completed: reconstruction of the sections of Vilnius- Panevėžys-Riga of the gas pipeline of regional importance, following which the reliability of transportation via this interconnection was improved. Following implementation of the project, 14 km gas pipeline were renovated, investments amount to EUR 8.1 million, the EU support accounted for 50 per cent.
