JSC “Latvijas Gāze”: Audited financial results of JSC “Latvijas Gāze” for 2023
Year 2023 both for the Company and natural gas markets can be characterized by lower tension and uncertainty compared to the challenging year 2022, when geopolitical events and changes in the regulatory framework both in Latvia and the European Union had significant impact on operations. At the same time, the Company had to work actively to ensure the security, stability of natural gas supply and better natural gas prices to its customers, as well as to maintain competitiveness in changing market conditions both in Latvia and in other natural gas markets where the Company operates. 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.
Despite lower tension in natural gas markets and lower natural gas prices compared to 2022, natural gas consumption both in Latvia and elsewhere in Europe still remains low. There are a number of reasons for this, but it is mainly due 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 August 2022 to 31 March 2024, which is in accordance with the European Union Council Regulation (EU) 2023/706 (it amends Council Regulation (EU) 2022/1369).
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 addition, extensive work was done to fulfill the year 2022 decision of the Company’s shareholders regarding the sale of the Company’s former subsidiary JSC “Gaso”. The sale process was successfully concluded in the summer of 2023 - on 17 July 2023, the final preconditions for the completion of the sales transaction were met, and on 24 July 2023 the change of ownership was registered with the Commercial Register of the Republic of Latvia, with AS “Eesti Gaas” becoming holder of 100% of shares in the JSC “Gaso”.
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 institutions responsible for the energy sector about the possible solution of the mentioned issue.
The Audited Annual Report is published in XHTML format in accordance with the reporting requirements of the European Single Electronic Format (ESEF). The Annual Report is also available in PDF file attached to this publication.
The Company will publish its Unaudited Interim Condensed Financial Statements for 3 months of 2024 on 24 May 2024.
JSC “Latvijas Gāze”
Chairman of the Board
Aigars Kalvītis
www.lg.lv
Attachments
- IFRS Latvijas Gāze ANNUAL REPORT 2023
- KPZ_EN_2023
- REMUNERATION REPORT 2023_EN
- INDEPENDENT_AUDITORS_REPORT_LGZ_2023_FS_IFRS_EU
