In addition, the Latvenerga's profit in 2018 was significantly influenced by the dividend received from subsidiaries, which amounted to EUR 177,646 million.
At the same time, the Latvenergo group generated a turnover of 878,008 million euros, which is 5.1% less than in 2017, but the Group's profit decreased by 4.2 times in 2018 and amounted to 75.955 million euros. In 2017, the Group's profit was the result of the Group's operating profit of EUR 172.9 million and a reversal of deferred tax in the amount of EUR 149.1 million as a result of the profit tax reform.
Company representatives state that dry and warm weather in Europe was affected in the electricity market in 2018, which caused an unexpected increase in electricity prices. Under these circumstances, the Group effectively benefited from its diversified production facilities generating the largest amount of electricity since 1990 in the Latvenergo thermal power plants (TEC).
The company's management also points out that the results of the Latvenergo Group are affected by a 44% reduction in electricity production in Daugava hydropower plants (HES) due to lower water inflows, as well as Latvia's decision to apply for a one-off fee, refusing to receive 75% of annual electricity payment in TEC and thus provide opportunities for reducing the compulsory procurement component (OIC).
In 2018, according to the company's management, the Latvenergo Group's operations and results were influenced by global and regional environmental factors such as the increase in electricity, natural gas and CO2 emissions. Long-term hot and dry weather significantly reduced the development of HPPs, especially in Scandinavia, which contributed to an increase in electricity prices across Europe. The average price of electricity in Latvia in 2018 was 44% higher than a year ago, reaching almost 50 euros per megawatt-hour (MVh).
The company's management also informs that Latvia, as the largest electricity exporter in the Baltic states, retained Latvia in 2018, but the overall construction of HPP Daugava in 2018, compared to the previous year, decreased by 44% and amounted to 2380 GWh (GVh). Therefore, Latvenergo TEC played a very important role in securing the demand for electricity, which compensated for the lack of hydropower. In 2018, the production of TEC amounted to 2644 GWh, which is 87% more than a year earlier. In total, Latvenergo produced 5076 GWh of electricity last year.
Retail customers in the Baltic countries sold a total of seven terawatt hours (TVh) of electricity in 2018, roughly the same as last year, including 4.4 TVh sold electricity in Latvia, 1.6 TVh in Lithuania and 0 , 9 TVh in Estonia.
The company also points out that in 2018, IO was reduced as a result of Latvenergo's decision to refuse to receive 75% of annual electricity payment to TEC, while receiving a one-off fee from the state. Thus, in 2018, the impact of the TEC on compulsory procurement and payment of capacity fell from 37% to 15%, or 74.2 million euros.
The total amount of Latvenergo Group investments in 2018 was 220.6 million euros. The main investments were invested in modernization of networks – about 80% of total investments. In the reconstruction of hydroelectric power plants Daugava HE, EUR 21.1 million was invested last year. Investments in major transmission projects – Kurzeme Ring and Third Transmission Network between Estonia and Latvia continued.
In 2018, the Group implemented both internal processes and management and external digitization projects for users. By the end of the reporting year, the share of smart meters installed by the "Distribution Network" amounted to 49% of the total number of meters. Together with the realization of digitization, the efficiency of the Group's operations has increased, which enabled the reduction of the number of employees and necessary resources, for example in the field of transport and real estate.
Latvenergo realized a turnover of EUR 498.58 million in 2017 and made a profit of EUR 150.891 million, while Latvenergo group operated with a turnover of EUR 925.627 million and earned 322.021 million EUR.
Latvenergo is engaged in the production and trade of electricity and heat, trade in natural gas, the provision of electricity distribution services and the purchase of transferable funds. Latvenergo bonds are quoted on Riga Stock Exchange.