INTER RAO Lietuva Investor Presentation December 2012.
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Transcript of INTER RAO Lietuva Investor Presentation December 2012.
INTER RAO LietuvaInvestor Presentation
December 2012
DisclaimerNOT FOR RELEASE, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD BE UNLAWFUL.
IMPORTANT NOTICE
By receiving this presentation, you agree to be bound by the following limitations.
In the European Economic Area, with respect to any Member State that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the "Prospectus Directive") this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive.
The securities referred to herein have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to US persons (as such term is defined in Regulation S under the Securities Act) unless the securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. The issuer of the securities has not registered, and does not intend to register, any portion of the offering in the United States, and does not intend to conduct a public offering of securities in the United States.
This communication is directed solely at (i) persons outside Lithuania, Poland and the United Kingdom, or (ii) persons with professional experience in matters relating to investments and high net worth entities, and other persons to whom it may lawfully be communicated, falling within respective provisions implementing article 3.2.a of the Prospectus Directive in Lithuania and Poland, (iii) persons with professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the "Order"), (iv) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order, and (v) persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 ("FSMA")) in connection with the issue or sale of any securities of the Company or any member of its group may otherwise lawfully be communicated or caused to be communicated (all such persons in (i)-(v) above being "relevant persons"). Any investment activity to which this communication relates will only be available to and will only be engaged with relevant persons. Any person who is not a relevant person should not act or rely on this communication.
This presentation and its contents are confidential and proprietary to AB INTER RAO Lietuva (the "Company") and no part of it or its subject matter may be reproduced, redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person (excluding the relevant person's professional advisers) or published in whole or in part for any purpose without the prior consent of the Company or UAB FMI Orion Securities. If this presentation has been received in error then it must be returned immediately. The recipients of this presentation should not base any behaviour in relation to investments or products which would amount to market abuse on the information in this presentation until after the information has been made generally available. Nor should the recipient use the information in this presentation in any way which would constitute market abuse.
These materials shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction.
The information contained in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the correctness, completeness or accuracy of the information or opinions contained therein. Neither the Company nor any of its representatives will be liable for any damages arising from any use of this presentation or otherwise arising in connection with this presentation.
Assumptions, opinions and views reflected in this presentation are solely opinions and forecasts of the Company. Opinions and forecasts are statements using expressions such as "expects", "believes", "assumes", "is the opinion", "to the best of our knowledge" and similar phrases. They reflect the current view of the Company with regard to potential future events, which, however, are uncertain and therefore subject to risk. A multitude of factors can cause actual events to differ significantly from an anticipated development, such as changes in regulatory systems, increased or new competition in the market, risks arising from acquisitions, interest rate and currency risks or risks based on previous liabilities and litigation risks. Neither the Company nor its management can answer for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the developments forecast.
The information contained herein has been prepared using information available to the Company at the time of preparation of the presentation. External or other factors may have impacted on the business of the Company and the content of this presentation, since its preparation. In addition all relevant information about the Company may not be included in this presentation.
2
3
1. Introduction
2. Market background
3. Company overview
Appendices
Agenda
Ph.D. Paulius VazniokasEconomic Director , CFO
Joined the Company in 2007
Vidas ČebatariūnasMember of the Management BoardCommerce Director
Joined the Company in 2005
Jonas GarbaravičiusMember of the Supervisory Board, Chairman of Scaent Baltic,Selling shareholder
Joined the Company in 2008
Today’s presenters
1.Introduction
4
Type of offering ↘ IPO of INTER RAO Lietuva AB common shares with a nominal value of EUR 0.29 per share
Timing of the offering
↘ Offering period ending on 7 December 2012
Pricing↘ Max price of EUR 6.55 per share (capitalization of EUR131 million), offering price set following
the book building
Offer structure ↘ Up to 4,000,000 existing shares (20% of the Issuer’s share capital)
Listing ↘ Main list of Warsaw Stock Exchange and the first day of trading on or about 18 December 2012
Stabilization ↘ Up to 500,000 at Offer price, period 30 days
Offering structure ↘ Public offering in Poland and Lithuania and Reg S placement outside Poland and Lithuania
Lock-up ↘ 1 year following the Listing Date for the Company and the shareholders
Manager ↘ Orion Securities - Global Coordinator and Bookrunner
Offering structure
5
Offering timeline
6
DecemberM T W T F S S
1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30
31
NovemberM T W T F S S
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30
Date Event
27 Nov • Prospectus published
27 Nov – 7 Dec • Retail subscription period
27 Nov – 4 Dec • Roadshow
5 Dec – 7 Dec • Bookbuilding
10 Dec • Press release on pricing and preliminary allocation
11 Dec • Payment for the Offer Shares by Institutional Investors
12 Dec • Press release on final allocation structure
13 Dec • Closing and settlement
18 Dec • Listing and trading
18 Dec – 18 Jan • Stabilisation
JanuaryM T W T F S S
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31
Quick glance
7
↘Accessing capital markets
↘ Increasing transparency, visibility, and reliability
↘Aiding growth in the end-user segment
↘Possibility to use shares to settle future acquisitions
IPO Goals
Source: VŽ.LT, LITGRID, Regula
↘Top 1 largest electricity trading company
↘Top 3 largest wind park by installed capacity
↘Top 12 largest tax payer in Lithuania
↘Top 22 largest company by revenues
The Issuer
8
Investment highlights
↘ Natural increase in electricity consumption in the Baltics
↘ Further Baltic market growth following the completion of LitPol 1&2, EstLink 2 and NordBalt links
↘ New generation capacities in the region, including the completion of Kaliningrad nuclear power plant
Company offering high dividend payouts stemming from high and stable operating margins
Consolidating leading wholesale electricity
market position in the Baltics
↘ Liberalization of the Baltic electricity market from 2013 will allow all consumers to choose an independent electricity supplier thus increasing market size
↘ Entering end-users segment will entitle company to extract the additional margin
Entering end-users electricity business
Expansion in electricity markets
↘ Enter Polish electricity market in 2013 – with local purchase and resale of energy
↘ Further expansion in Poland driven by availability of cheap base-load source from Kaliningrad
↘ Increase in market share in existing markets
Further development of
renewable energy portfolio
↘ The company is actively looking for new renewable energy projects to invest in the Baltic Sea region
↘ Renewable energy sector includes wind, and solar power plants
↘ High profitability expected from RES projects
↘ Reliable supplier of electricity
↘ Strong market position in home country¹
↘ Increasing market share in Estonia and Latvia
44%
17%
7%4%
18%
11%
INTER RAO Lietuva Lietuvos energija
Vilniaus energija Kauno termofikacinė elektrinė
Latvenergo prekyba Other
Leading wholesale electricity trader in Lithuania and the Baltic states, with plans to diversify into retail segment and enter new markets, including Poland
Sole authorized representative of INTER RAO UES in the Baltic region
30MW wind park in Vydmantai with a guaranteed feed-in tariff of 300LTL/MWh until 2020
Business highlights
Trading position Cooperation with Inter RAO UES Renewables
9
↘ Electricity purchased from Inter RAO UES is cheaper than the average price in the Baltics
↘ Inter RAO UES is a leading player in the Russian electricity market
↘ Agreement with Inter RAO UES is valid till 2020 with possibility to renew the agreement
↘ Strategic goal of increasing installed capacity through acquisitions by up to 100 MW by end of 2015
↘ Acquisition of new projects is expected to be a significant source of revenue growth in the coming years
↘ Acquisitions of new projects are planned to be financed with debt and retained earnings
↘ Bigger acquisition projects may be completed together with INTER RAO UES
1. Market shares in Lithuanian wholesale electricity trading as of 2011Source: Lithuanian National Control Commission for Prices and Energy
10
98.8%
1.2%
Electricity purchase and sales Electricity production and sales
91.2%
8.8%
Electricity purchase and sales Electricity production and sales
Key figures
2009 2010 2011 1H 2011 1H 20120
200400600800
1,0001,2001,400
105
750919
420 453
2009 2010 2011 1H 2011 1H 20120
25
50
75
100
-3%0%3%6%9%12%15%18%
17.9
69.478.8
36.243.8
17.1%9.3% 8.6% 8.6% 9.7%
Revenues (LTLm)1
EBITDA (LTLm), EBITDA margin (%)
2009 2010 2011 1H 2012
-100
-50
0
50
100
-02x
00x
02x
-19.8
-81.9
70.472.6
-1.1x -1.2x0.9x
0.8x
Net debt (LTLm), Net debt/EBITDA2
Sales breakdown
Margin (%)
Net debt/EBITDA (x)
1. The litas is pegged to the euro at the rate of 3.4528 to 12. The Company has been operating without any interest bearing liabilities until 2011, when financing was raised for the acqusition of Vydmantai wind farm
98.0%
2.0%2011 1H 2012
EBITDA breakdown2011 1H 2012
82.2%
17.8%
Net profit (LTLm), Dividends (LTLm), Payout ratio
2009 2010 20110
20
40
60
80
0%
50%
100%
150%
200%
250%
15
59 61
29
61 64194%
103% 105%
Net profit Dividends declaired Dividend payout ratio
2.Market background
11
Lith
ua
nia
La
tvia
Es
ton
ia
Eu
roz
on
e
EU
-27
Po
lan
d
Ru
ss
ia 0%
20%
40%
60%
80%
100%
36.1%44.2%
8.0%
90.7%85.4%
55.0%
8.1%
Baltic macroeconomic overview
2011 2012E 2013E 2014E0%
2%
4%
6%
8%
10%
8.3%
2.5%3.1%
4.0%
5.5%
4.3%3.6% 3.9%
5.9%
2.9% 3.1%3.6%
Estonia
Latvia
Lithuania
Lithuania Latvia Estonia Euro area EU-27 Poland Russia
(1%)
0%
1%
2%
3%
4%
5%
2.9%
4.3%
2.5%
(0.4%) (0.3%)
2.4%
3.7%
Baltic countries’ GDP is expected to grow steadily
Baltics growth outpaces that of EU
2012 GDP growth forecast for selected countries
Government finances – low debt ratios
Public debt to GDP (2012E)
Growth set to remains robust
12
Source: EIU, European Commission
↘ Baltic States economies are recovering
↘ Increasing exports together with internal devaluation resulted in higher region’s competitiveness
↘ Baltics growth rate outpaces EU
↘ Region’s GDP growth forecasts are positive and above that of Eurozone or EU-27
↘ Sovereign debt levels are under control
↘ All three Baltic countries have maintained relatively low debt levels throughout the crisis
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
2
4
6
8
10
12
6.91 7.24 7.517.94
8.45 8.82 9.2 9.55 9.889.16 9.22 9.36
4.48 4.58 4.88 5.2 5.4 5.73 6.146.61 6.63
6.1 6.22 6.195.69 6.01 6.33 6.4
6.9 7.18 7.43 7.08 7.43 7.16
Lithuania Latvia Estonia
↘ Electricity consumption in Estonia, Latvia and Lithuania has been gradually increasing since 1999 and peaked in 2008:
↘ In 2009, following the economic slowdown around the globe, demand severely declined
↘ Since 2010 the demand in the region has been increasing
↘ Lithuania, having the largest population among the Baltic States, has been the largest net consumer of electricity in the region:
↘ Lithuania – 9.4 TWh
↘ Estonia – 7.2 TWh
↘ Latvia – 6.2 TWh
↘ The most significant consumers in the region are industry, residential segment, and trade and other commercial users
↘ Electricity consumption per capita in Latvia, Lithuania and Estonia is still lagging behind more developed countries
↘ Level of electricity consumption depends mainly on:
↘ Short-term factors: time of the day/week, weather conditions, holiday, utilisation of appliances,
↘ Long-term factors: population growth and its composition, electricity price, economic growth, commercial and industrial usage, climate change
Ru
ss
ia
Fra
nc
e
Ge
rma
ny
Sp
ain
Cz
ec
h R
ep
...
Un
ited
Ki..
.
Es
ton
ia
Ita
ly
Po
lan
d
La
tvia
Lith
ua
nia
6,878 6,8486,470
5,656 5,440 5,280 5,145 4,949
3,103 2,8752,535
Electricity consumption per capita (kWh)1
Electricity consumption in the Baltics excl. exports (TWh)
13
Baltics electricity demand
Source: Eurostat Statistical Pocketbook April 2012; Business Monitor International Q3 2012; Lithuanian National Control Commission for Prices and Energy; Central Statistical Bureau of Latvia; Statistics Estonia, Eesti Energia, Eesti Gaas
Electricity consumption in the region is growing
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
2
4
6
8
10
12
14
16
18
20
2.3 2.6 2.6 2.8 2.93.2 2.6 2.6 2.6
2.6
3.62.9
8.4
11.414.1
15.5 15.110.3
8.7 9.8 9.9 10.9
1.1 1.5 1.2 1.7 0.7
7.18.7
Imports Thermal Hydro Renewables Other Ignalina
TW
h
↘ Ignalina NPP with two 1,500 MW units has historically produced from 69% to 80% of all electricity in Lithuania.
↘ Lithuania agreed to completely shut down Ignalina NPP by the end of 2009 as part of its accession agreement with the European Union↘ The closure changed Lithuania status from a net electricity
exporter to a net importer of electricity ↘ Electricity imports increased by 10 times to 7.1 TWh in
2010↘ In 2011 electricity imports increased further by 22.5% to 8.7
TWh↘ Lithuanian electricity system is dependent on gas and
electricity imports↘ Imported gas is used as a fuel in local thermal power
plants, however, these power plants produce electricity at uncompetitive prices
↘ Electricity import price is dependent on electricity price in Russian market, which is dependent on local gas and oil prices
↘ The new planned interconnections with Sweden and Poland would facilitate increase diversity of supply
Lithuania electricity production and importsLithuania is heavily dependent on electricity import
14
Lithuania electricity supply
Power generation and system interconnection
Source: Lithuanian National Control Commission for Prices and Energy
2009
2010
2011
0 1,000 2,000 3,000 4,000 5,000 6,000
2,058
2,056
2,174
900
900
900
596
596
584
68
161
185
101
101
101
26
25
26
1300
Gas/fuel oil
Pumped storage
Gas
Wind
Flow of river
Biomass
Solar
Other
Nuclear
Lithuania, installed capacity by fuel type
15
Baltics power market overview
Source: National Control Commission for Prices and Energy, Central Statistical Bureau of Latvia, Statistics Estonia, Eesti Energia, Eesti Gaas.
2009
2010
2011
0 500 1,000 1,500 2,000 2,500 3,000
1,536
1,576
1,576
917
929
933
29
30
36
27
34
60
Flow of river
Gas
Wind
Other
Latvia, installed capacity by fuel type
2009
2010
2011
0 500 1,000 1,500 2,000 2,500 3,000 3,500
2,380
2,380
2,380
190
190
190
141
148
184
160
213
240
Oilshale
Gas
Wind
Other
Estonia, installed capacity by fuel type
Uncompetitive generation capacity
↘ Electricity generation capacity in Lithuania is not competitive:↘ Imported gas price is at such levels that electricity produced in
local power plants is two times larger than the market price↘ Newly launched block in Lithuania is using 30% less gas, but the
cost of electricity is still much above the market price↘ During flood season Latvia is able to produce relatively inexpensive
electricity, however, during other seasons Latvia’s generation capacity is also uncompetitive.
↘ In 2015 transition period for Narva PP, the largest electricity generator in Estonia, will expire↘ This is likely to result in much higher electricity prices in Estonia
and increase in imports from neighbouring countries
↘ NordBalt is to link Lithuania directly with Sweden
↘ Its capacity will amount to 700MW and is scheduled to be operational from December 2015
International links under construction
↘ Estlink 2 linking Estonia to Finland will have a capacity of 650MW
↘ EstLink 2 is co-financed by the EU, and construction should be completed in 2014
↘ LitPol 1 linking Lithuania to Poland is currently scheduled to become operational by the end of 2015, initially with 500MW throughput, subsequently increased to 1,000 MW by 2020
↘ According to the Lithuanian National Energy Independence Strategy, LitPol Link 2 shall be commissioned by 2018/20 and have a capacity of 700-800 MW
↘ Both links have the full support of the Polish PM who in a recent expose in the Polish Parliament confirmed the date of 2020 as the completion date for the entire project
EstLink 2
LitPol
NordBalt
16
EstLink 2
LitPol
NordBalt
↘ Trading opportunities for the Company will substantially increase when wholesale electricity clients from Sweden and Poland enter the Lithuanian market
↘ The Company expects to exploit potential market opportunities by purchasing electricity in Sweden and Poland in order to resell it in Lithuania, as well as in other Baltic States, and vice versa.
Further electricity market growth facilitated by the completion of international links
Source: PSE Operator; Litgrid; Elering; Litgrid
↘ From 2013 all electricity consumers will be eligible to choose electricity suppliers in Lithuania and Estonia. Latvia has been fully liberalized since 2007.
↘ Liberalisation is significantly increasing market size and allows the Company to enter into higher margin segment
Eligibility threshold by installed capacity
Market liberalisation
17
Lithuanian electricity market liberalization timetable
20 GWh 9 GWh 3 GWh 400 kWh 100 kWh 30 kWh All end-users
2002 2003 2004 2010 2011 2012 2013
Latvia
↘ In compliance with EU requirements, the state-owned monopoly Latvenergo AS was reorganized in July 2007. As a result, the market became fully liberalized
↘ Despite the liberalized market, consumers are still heavily dependent on state-owned utility company, which owns majority of electricity generation
Estonia
↘ Until 2009, electricity market opening level was only 12% level, with the eligibility threshold set at 40 GWh p.a.
↘ Starting from April 2010, 35% of the market was freed, with the eligibility level at 2 GWh
↘ Current law foresees that Estonian electricity market will be fully liberalized from 2013
Liberalization process created an opportunity for the customers to select their own electricity supplier
3.Company overview
18
19
2009 2010 2011 1H 2011 1H 20120
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1,062
5,4465,866
2,729 2,846
Lithuania Latvia Estonia Russia Belarus
Sales by country (GWh)
Purchase by volume and origin (GWh)
Electricity sales and purchases
2009 2010 2011 1H 2011 1H 20120
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1,064
5,4465,866
2,729 2,846
Russia Lithuania Latvia Estonia Belarus
↘ The largest amount of electricity is realized in Lithuania, followed by Latvia and Estonia
↘ In 2011, Company realized 4 TWh in Lithuania, 1.6 TWh in Latvia and 0.2 TWh in Estonia
↘ Electricity sales in Latvia almost doubled in 2011
↘ The Company purchases vast majority of electricity from Inter RAO UES, which has significant electricity generation capacities and thus it is a reliable and credible partner
↘ Majority of the agreements are long-term – their validity expires at the end of 2020 and then shall be automatically renewed
↘ The Company has also signed an agreement with INTER RAO UES on potential export of electricity generated in Baltiiskaya NPP under construction in Kaliningrad
↘ The Company also purchases electricity from producers in Lithuania, Latvia and Belarus, always considering the best timing and market conditions
Reliable supplier of electricity at competitive price
20
In 2011, the Company had 44% share in Lithuanian wholesale trading market
↘ Wholesale electricity market comprises trading, based on bilateral agreements or through the power exchange. Wholesale electricity trading is carried out on the basis of the latter
↘ Under the Lithuanian law, all imported electricity (irrespective of origin) has to be sold at the power exchange, and all electricity to be exported (irrespective of the destination) has to be purchased at the power exchange
↘ As of 30 June 2012, there were 65 independent electricity suppliers in Lithuania, however only 26 were actively operating
Market position in Lithuania – wholesale
Electricity sales on the Lithuanian power exchange Electricity purchases on the Lithuanian power exchange
44%
18%
17%
7%
4%
11%
40%
40%
7%
3%3%
6%
2010 2011
45%
19%
18%
6%
4%8%
82%
5%
5%3% 5%
2010 2011
INTER RAO Lietuva Lietuvos energija Vilniaus energija Kauno termofikacine elektrine
Latvenergo Prekyba OtherORLEN Lietuva Enefit
Source: Lithuanian National Control Commission for Prices and Energy, Company data
21
↘ Vydmaintai wind park is the third largest wind park in Lithuania.
↘ In July 2011 the Company acquiring Vydmantai Wind Park in western Lithuania for a total cash consideration of LTL 71.4m
↘ In the period 2009-2011 the net annual electricity production varied in range of 54 and 70 GWh
↘ Under the current energy law, all wind farms and projects with granted quotas are able to receive 300 LTL/MW feed-in-tariff for 12 years from the start of operations
↘ 300 LT/MW FIT is valid till 31 December 2020
↘ New energy law in Lithuania requires wind projects to participate in tender bidding procedure for quotas. The lowest required feed-in-tariff receives quotas for 12 year period at bid prices.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2009
2010
2011
High cash flow and profitability project Electricity generation revenues, mLTL
Wind farm
Vydmantai Wind Park
Source: Litgrid
22
Strategy Market backdrop
↘ Consolidate the leading wholesale electricity trader position in the Baltics (current share of 44% in the Lithuanian market)
↘ Increase market share in Latvia and Estonia
↘ Expand current customer base
Inter-
connections
↘ Completion of 500 MW LitPol Link (2015), 700 MW LT-SWE NordBalt link (2015), and 650 MW EstLink 2 (Estonia-Finland; 2014) would significantly increase the regional electricity market
↘ Further develop wind capacity up to 100MW by the end of 2015
Feed-in
tariff
↘ Renewable energy supportive schemes in place in the Baltic region
↘ Diversify operations into retail and a solid end consumers’ base Bal
tics
↘ From 1 January 2013 full market liberalization in the Baltics will significantly increase market size and provide growth opportunities for the Company
↘ Capitalise on preliminary agreement with INTER RAO UES on potential export of electricity to be generated by the Kaliningrad NPP to the Baltic States
↘ Capitalise on the interconnection of national power systems
KNPP
↘ Electricity produced in KNPP could be sold on the Polish market, provided that LitPol is fully operational
↘ KNPP will provide a reliable and competitive baseload generation source
↘ Expand sales in Poland (start from 2013) and selected international markets
↘ Initial focus on trading, with electricity purchases in Poland, and development of derivatives trading
↘ In the long-term – enter retail segment in Poland
Poland
↘ Largest CEE economy and one of the largest countries in the European Union with strong and resilient macroeconomic backdrop
↘ Tightening reserve margin indicates power price upside potential
↘ North of Poland is deprived of baseload generation
Strategy
1
2
3
4
5
↘ The Company has set a dividend payout rate of no less than 70% of the net profit
↘ The Company retains the right to pay out less than 70% if there are significant investment projects that would ensure Company’s value growth.
↘ Dividends for 2011, 2010 and 2009 amounted to LTL 64.0m, LTL 60.8m and LTL 29.0m respectively
↘ On 20 July 2012 the Shareholders adopted a resolution on the increase of the share capital from the Company’s own funds from LTL1m to LTL20m.
↘ The net profit for distribution for the financial year ending 31 December 2012, will be reduced by the amount of the share capital increase (i.e. LTL19m)
↘ 2011 dividend yield assuming maximum offer price is 14.1%1
Dividend policy
23
2009 2010 20110
10
20
30
40
50
60
70
80
0%
50%
100%
150%
200%
250%
15
59 61
29
61 64194%
103% 105%
Net profit Dividends declaired* Dividend payout ratio
Historical dividends (LTLm)
Double digit dividend yield and high payout ratio
1. Assuming maximum offering price of 6.55 EUR2. * Dividends declaired for the year is paid in the following year
Income statement, 000‘LTL 2009 2010 2011 1H 2011 1H 2012
Sales revenue 104,539 750,389 919,080 419,678 453,350
Gross profit 25,662 79,462 91,965 44,512 47,335
Margin % 24.55% 10.59% 10.01% 10.61% 10.44%
EBITDA 17,862 69,439 78,800 36,245 43,818
Margin % 17.09% 9.25% 8.57% 8.64% 9.67%
EBIT 17,485 69,076 74,032 36,095 38,516
Margin % 16.73% 9.21% 8.06% 8.60% 8.50%
Net profit 14,953 59,061 61,200 31,171 30,777
Robust financials
24
Balance sheet, 000‘LTL 2009 2010 2011 1H 2011 1H 2012
Total non-current assets 8,930 6,718 139,393 137,611
Prepayments 71 8,457 6,723 1,614
Receivables 11,725 59,726 45,086 39,219
Other 5,593 600 355 327
Cash and cash equivalent 19,786 81,932 33,885 27,780
Total current assets 37,175 150,715 86,049 68,940
Total assets 46,105 157,433 225,442 206,551
Equity 33,666 63,745 64,150 30,904
Non current liabilities 1,087 801 103,660 99,880
Trade payable 11,127 70,503 31,797 25,780
Others 225 22,384 25,835 49,987
Current liabilities 11,352 92,887 57,632 75,767
Total equity and liabilities 46,105 157,433 225,442 206,551
High and stable operating margins
↘ Sales revenues have increased by 9 times since 2009
↘ The increase in sales was facilitated by the closure of Ignalina NPP and thus increased electricity import
↘ In 2011 sales revenue has further increased by 22.5% to LTL 919 m
↘ Despite significantly growing electricity import and being the leading wholesale electricity trading company, gross profit margin was maintained at 10% level
↘ CAPEX is relatively low compared to electricity generation companies
↘ Higher free cash flow results in higher dividends
↘ The Company has previously been operating without debt till the acquisition of Vydmantai wind park
↘ Sound financial results of the Company allows and facilitate its further expansion, including renewable energy sector in Lithuania and abroad
Management board
25
Karina TsurkanChairman of the Board
• Joined the board in October 2011• Currently Head of Trading Unit and
management board member in Inter RAO UES
• Previously head of numerous Geographic Units in Inter RAO group
• Holds a bachelor’s degree in law from International Independent University of Moldova, and an MBA from the University Consortium of Spain
Ilnar MirsiyapovMember of the Board
• Joined the board in July 2012• Previous experience in various energy
companies, including Rosatom, Atomic Energy Power Corporation.
• Holds a Bachelor’s degree in management, a Ph.D. of Sociological Sciences, both from; an Engineer’s degree in oil and gas production and development from the Almetyevsk State Oil Institute as well as a Ph.D. of economic sciences
Giedrius BalčiūnasMember of the Board, CEO
• Joined the board in July 2012• Professional experience – 10 years• Served on the board in 2007-2008• CEO of the Company since 2003• Currently board member in various Issuer’s
companies• Holds a degree from Kaunas Polytechnic
Institute
Dmitry PaluninMember of the Board
• Joined the board in March 2010• Previous positions include Head of the
Economics and Finance Department, the Head of the Treasury Department and the Associate CFO.
• Holds a degree in management and engineering from Moscow State Aviation Institute, also holds an MBA from Higher School of International Business at the Academy of National Economy
Vidas ČebatariūnasMember of the Board, Commerce Director
• Joined the board in April 2007• Professional experience – 11 years• Commerce director since 2005• Previous experience include being in
managerial positions in many energy companies
• Holds a Master‘s degree in economic analysis and planning from the Vilnius University.
Key personnel
26
Experienced team with extensive track record
Jonas GarbaravičiusMember of Supervisory Board
• Joined the Company in 2008• Professional experience – 12 years• Currently Counsellor of CEO of the
Company, Chairman of the Management Board of the Scaent.
• Served on the Company‘s Management Board in the years 2008-2012
• Holds a Bachelor’s degree in Business Administration, took part in Energy Experts Programme organized by the Nordic Council of Ministers
Paulius VazniokasEconomic Director, CFO
• Joined the Company in 2007• Professional experience – 6 years• Economic Director since 2007• Currently holds several positions in the
Group Companies• Holds a Ph.D. degree in Economics, a
Master‘s degree in Finance and Banking, and a Bachelor’s degree in Business Administration from Vytautas Magnus University.
Nerijus VeikšaLegal Department Director
• Joined the Company in 2007• Professional experience – 12 years• Past professional experience includes post
of Director at National Association of Business Administrators, Asistant General Director at Kauno termofikacine elektrine,
• Holds a Master‘s degree in International Commercial Law an a Bachelor‘s degree in Business Administration of Vytautas Magnus University.
Aiste Vaitaityte Deputy CEO
• Joined the Company in 2003• Professional experience – 9 years• Deputy CEO since June 2005• Previously, Head of Information Analysis
and Transmission Division. • Holds a Master‘s degree in Law and
Management from Mykolas Romeris University and a Bachelor‘s degree in Social sciences from Lithuanian University of Educational Sciences
Edvardas VažgėlaElectricity Trading Development Director
• Joined the Company in 2012• Professional experience – 35 years• Experience in electricity sector for over 20
years, including working in leading positions in Lietuvos Energija
• Holds a degree from Kaunas Polytechnic Institute with specialization in electricity engineering
↘ Management team has extensive technical and business experience in the area of electricity trading
Key highlights
Consolidating leading wholesale electricity market position in Lithuania
27
Entering end-users electricity business
Investment highlights
Expansion in other electricity markets
Further development of the wind farm portfolio up to 100 MW by 2015
Business highlights
Company offering high dividend payouts stemming from high and stable operating margins
Reliable supplier of a significant volume of electricity at competitive prices
One of the leading players in wholesale electricity markets in Baltics
Highly competent, and experienced management with extensive knowledge of the market
Established relationships with largest customers in the region
Sound financial results support further development
Appendices
28
Shareholders
29
Current shareholding Shareholding after the offering1
RAO Nordic OY51.0%UAB Scaent Baltic
49.0%RAO Nordic OY
51.0%
UAB Scaent Baltic29.0%
Public20.0%
1. Assuming complete sale of the offer shares
↘ RAO Nordic OY is a wholly-owned Finnish subsidiary of INTER RAO UES, the State-owned Russian energy holding company managing assets in Russia, several countries of the CIS and the EU with 28GW of total installed capacity
↘ INTER RAO UES’ operations comprise electric power and heat generation, international power trading and electric industry engineering. As of October 2012, its market capitalization on MICEX–RTS was approximately Russian rubles 265 billion (EUR 6.6bn)
↘ UAB Scaent Baltic is an investment company enagaged primarily in the energy sector. Scaent Baltic is owned and controlled by Jonas Garbaravičius and his family
↘ UAB Scaent Baltic is involved in investment activities in various sectors in Lithuania and abroad, including energy, investment and financial services, media and publishing, food industry and real estate
↘ Following the offering, Scaent Baltic will continue to directly own c. 29% of the outstanding share capital of the Company, assuming all of the offer shares are sold to investors
2002-2008
↘ The Company became an independent supplier of electricity in 2002, following the liberalization of the electricity market in Lithuania
↘ RAO Nordic OY (the majority shareholder), a Finnish subsidiary of INTER RAO UES, acquired 18% of the Company’s share capital from UAB VB rizikos kapitalo valdymas in 2005 and increased its stake to 51% in 2008
↘ Throughout this period the Company managed to build up relations with the largest wholesale suppliers of electricity in the Baltic States
2009
↘ Company signed a supply contract with ORLEN Lietuva
↘ The Company changed its name from UAB 'Energijos Realizacijos Centras' to UAB 'INTER RAO Lietuva.
↘ A change in electricity market dynamics following the decommissioning of the of Ignalina Nuclear Power Plant (end 2009)
2010
↘ From 1 January 2010, Lithuanian entities with installed capacity greater than 400 kW were obliged to start buying electricity from the market
↘ Company established 100% owned subsidiaries in Estonia and Latvia
2011
↘ INTER RAO Lietuva started trading in the Estonian area of NordPool Spot
↘ In July 2011 the Company acquired 100% of UAB 'Vėjo spektras' (Vydmantai wind park)
↘ The Company has signed an agreement with INTER RAO UES on potential export of electricity generated in the Kaliningrad NPP (under construction)
2012
↘ In June 2012, Nord Pool was introduced in Lithuania, thus incorporating the country into the largest Scandinavian electricity trading market
↘ In September 2012, the Company established 100 owned subsidiary in Poland
Company history
30
Group structure
31
INTER RAO Eesti OU100%
IRL Polska100%
AB INTER RAO Lietuva
SIA INTER RAO Latvia100%
UAB Alroka49.99%
UAB IRL Wind100%
UAB Vydmantai wind park100%
Organisation chart
32
Management Board
CEO CounsellorCEO
Deputy CEO
Back Office Manager
Electricity Sales Department
Economics and Investment Projects Department
Commerce Director
Sales Managers
Electricity Trading Analyst
Electricity Trading Development Director
Economic Director
Payment Settlements Manager
Project Manager
Project Analyst
Legal Department
Director of Legal Department
Administrator
Vindicatory Department
Chief Security Officer
Driver
Corporate Communications Department
PR/IR Communication
CoordinatorPress Officer
Corporate Communication
Officer
Shareholder meeting
The Company has a three-tier management structure consisting of the Management Board, Supervisory Board, and the CEO.
Corporate Governance – Management
33
↘ CEO responsible for organising and directing the day-to-day businee activities
↘ The CEO is the only person entitled to represent the Company in relations with third parties
↘ The Management Board appoints the CEO
↘ Responsible for significant and strategic decisions regarding the Company’s business
↘ The Supervisory Board supervises the activities of the Management Board and the CEO
↘ Appoints members of the Management Board
Supervisory Board (5 Members)
Karina Tsurkan
Chairman of the Board
Ilnar Mirsiyapov
Giedrius Balčiūnas
CEO
Dmitry Palunin Vidas Čebatariūnas
Giedrius Balčiūnas
Management Board
The Group constantly supports various organizations and initiatives as a part of its business mission.
↘ For the financial years ended 31 December 2011, 2010 and 2009, the Group spent LTL 4.07 million, LTL 3.91 million and LTL 3.63 million, respectively, on charity and other support
↘ These costs represent Group’s corporate values and culture to support and contribute to the overall social welfare
↘ Support, provided by the Group, is concentrated on three areas:
↘ communities,
↘ education,
↘ culture and sports
↘ While contributing to the social communities the Group donates to orphanages, hospitals, churches and various other charity and support organizations
↘ When sponsoring culture and education spheres, the Group supports universities, schools, theatres, orchestras and various other organizations and events
↘ Sports sponsorship started at the very beginning of the company’s activities, the main attention is paid to basketball, football, car races, tennis and various other sports organizations and events
34
Social Responsibility
January February March April May June120
130
140
150
160
170
0
200
400
600
800
LT
L/M
Wh
GW
h
Trading seasonality
35
1. Total volume excluding equivalent trades on the power exchange.Source: Company data.
Avg. 157 LTL/MWh
Avg. 139 LTL/MWh
January February March April May June July August September October November December120
130
140
150
160
170
0
200
400
600
800
LT
L/M
Wh
GW
h
Avg. 155 LTL/MWh
Avg. 138 LTL/MWh
January February March April May June July August September October November December100
110
120
130
140
150
160
0
200
400
600
800
Total volume (RHS) Total volume adjusted (RHS)¹ Average sale price (LHS) Average purchase price (LHS)
LT
L/M
Wh
GW
h
Avg. 138 LTL/MWh
Avg. 121 LTL/MWh
1H 2012
2011
2010
2010 2011 2012 2013 2014 2015 20160
5
10
15
20
1714 15
1720
11
17
2010 2011 2012 2013 2014 2015 20160
200
400
600
800
1,000
1,200
182 182 184 186 188 192 190
458
570479 492 506 532 538
15
15
15 15 1515 14132
159
161 165171
154 176164
164
165166
167 168169
Coal Gas Oil Nuclear Hydro Non-hydro renewables
↘ Abundance of gas and coal resources causes Russia to rely heavily on thermal sources, primarily gas-fired
↘ The Energy Strategy 2030 aims to double nuclear generation to 300TWh by 2020 and expand non-hydro renewable energy sources so they contribute at least 4.5% of the total generation by 2020
↘ Between 2016 and 2010 Russia’s generation is expected to grow by 1,8% CAGR
↘ Russia will remain net exporter of electricity for the foreseeable future
↘ Kaliningrad Nuclear Power Plant will greatly enhance Russia’s exporting capabilities to the Baltics, Scandinavia and Poland
Commentary
Russia’s electricity net exports (TWh)
36
Russia’s generation forecast (TWh)
Russia’s generation sector
951
1,090
1,0041,024
1,0471,061
1,087
CAGR 1,9%
Source: BMI Russia Power Report, 3Q 2012 Source: BMI Russia Power Report, 3Q 2012