JSC “Latvijas Gāze”: Unaudited financial results of JSC “Latvijas Gāze” for 2023
JSC “Latvijas Gāze”: Unaudited financial results of JSC “Latvijas Gāze” for 2023
Year 2023 can be characterized by lower tension and uncertainty compared to 2022, creating more favorable conditions for natural gas consumers (lower natural gas prices). At the same time, despite various challenges, natural gas traders have had to work actively to ensure the safety and stability of natural gas supply to their customers. At the beginning of winter, European natural gas storages (including in Latvia) were almost completely filled. The Company has also injected in the Inčukalns underground gas storage (hereinafter – IUGS) all the required natural gas amount to ensure uninterrupted supply of gas, including during 2023/2024 heating season. In addition, natural gas prices in the fourth quarter of 2023 (although slightly higher than in the summer) were significantly lower than during the same period in 2022. Despite this, the consumption of natural gas is still low in both Latvia and elsewhere in Europe. The decrease is mainly attributable to low activity in the industrial sector, lower demand in the power sector, warm weather conditions and overall slowdown of the economic activity in the eurozone. Also, a commitment has been established in the European Union to voluntarily reduce natural gas consumption by 15% in the period from 1 April 2023 to 31 March 2024, which is in accordance with the European Union Council Regulation (EU) 2023/706 (it amends Council Regulation (EU) 2022/1369, which stipulated a voluntary reduction of natural gas consumption by 15% in the period from 1 August 2022 to 31 March 2023).
One of the biggest challenges for the Company in 2023 was the opening of the household natural gas market from the first of May. Despite the competitors’ aggressive marketing campaigns and pricing policies, the Company has done extensive work on the development of new products, sales activities, as well as notably changed the customer service model, which has provided results – after the opening of the household natural gas market, the Company has retained 86% of the household customer portfolio compared to the number of customers at the beginning of 2023.
In 2023, the Company operated with 56.9 million EUR losses, compared to 40.8 million EUR net profit in 2022. The results can be explained by the fact that, firstly, the Company made corporate income tax payments to the State budget in the amount of 30.5 million EUR for calculated dividends to the Company’s shareholders. Secondly, the Company has carried out a revaluation of natural gas (inventory), which was purchased at the end of 2022 at a price corresponding to the market situation at that time, thus fulfilling the obligations set out in the Cabinet of Ministers Regulations No. 503 “On the Supply of Energy Users During the Declaration of Early Warning and Alarm Level” (hereinafter – Regulations). In accordance with the Regulations, the public trader (the Company) was obliged to maintain 1 150 GWh of natural gas reserves in the IUGS for household supply during the period from 10 August 2022 till 30 April 2023, reducing the reserved 1 150 GWh each month by the natural gas quantity actually supplied to households in the previous month. Despite the fact that quantity required for the supply of households was 20% lower both in 2022 and 2023 compared to previous three year average consumption, as a result of the Regulations, as at 30.04.2023 the Company had 236 GWh of natural gas in its balance sheet reserved only for household supply, which could not be sold to other customers for market prices. Also, on 14 July 2022, the Saeima (Parliament of the Republic of Latvia) adopted the law “Amendments to the Energy Law”, which foresaw the exclusion of the public trader definition from the Energy Law from 1 May 2023. The Company, as a public trader, was obliged to sell natural gas at a regulated tariff from 1 January 2023, when the tariff was approved, until 30 April 2023. According to the tariff methodology, losses incurred by the public trader are compensated by including the price difference in the next tariff period. The next tariff period did not start due to the amendments to the aforementioned law, nor was the transition set from the regulated industry to market condition that would compensate for the losses caused to the Company in the regulated market. Respectively, the Company, according to the legal norms valid until 30 April 2023, had the right to receive compensation for the losses, but the Company has not been compensated. At the moment, the Company continues talks with the State institutions about the possible solution of the mentioned issue.
The Company will publish its audited financial statements for financial year 2023 on 19 April 2024.
JSC “Latvijas Gāze”
Chairman of the Board
Aigars Kalvītis
www.lg.lv
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