1. Приватизация тепловых активов в Литве Vytautas Stasiūnas President of Lithuanian District Heating Association 2 Марта 2006, Москва Научно-практической конференции «Система взаимоотношений в теплоснабжении. Требования существующего и нового законодательства

2. Main factors retaining DH undestroyed in Lithuania Big investments during 1960-1990 Cold climate conditions, where heating season lasts for 6 -7 months/year Big demand for heat energy for hot water preparation all-year- round The effective and well-timed support from West European countries (particularly from Scandinavia)

3. Population: 3,6 mill. Area: 65 300 km 2 Lithuania Moscow, Russia

4. DH market share in Europe

5. Law on the Reorganization of the Special Purpose Company “Lietuvos Energija” and Transfer of the District Heating and its Management to Municipalities (1997 year) -6 regional and 13 municipal DH companies were established -The State subsidies not received were transfered as a debt to DH utilities. The long term-liability amounting to almost 400 mio LTL was formed; -The heat price have grown by 10-30%; -Municipal companies were regulated by the municipalities (including price fixing) and regional companies by National Control Commission for Prices and Energy. Until 1997, DH sector belonged to the uniform system of Lietuvos energija AB. The heat price was uniform in all country 89.4 LTL/MWh. 1997 – the first stage of decentralization

6. -From 1998-2001 regional DH companies (Klaipėda, Šiauliai, Alytus, Vilnius, Kaunas) were divided into smaller new DH utilities in cities and districts (about 40 municipal companies). -This stage was critical. The majority of DH companies operated unprofitably; -Increase in heat prices caused a discontent to heat consumers, many of them rushed to disconnect from DH and to install their own heat boilers; -During 1996-2000 heat generation reduced by 33 % -This stage is not fully completed. Up until now one regional DH utility (Panevežys) remained. The years 2001-2005 may be specified as the period of stabilization on the DH market. 1998 – the second stage of decentralization

7. DH companies – members of LDHA 1.UAB “Vilniaus energija” 2.AB “Kauno energija” 3.UAB “Litesko” filialai: “Alytaus energija” “Kelmės šiluma” “Marijampolės šiluma” “Palangos šiluma” “Telšių šiluma” “Vilkaviškio šiluma” “Druskininkų šiluma” “Biržų šiluma” 4.AB “Panevėžio energija” “Kėdainių šilumos tinklai” “Rokiškio šilumos tinklai” “Kupiškio šilumos tinklai” “Pasvalio šilumos tinklai” “Zarasų šilumo tinklai” 5.AB “Klaipėdos energija” 6.AB “Šiaulių energija” 7.UAB “Eenergija” filialai: UAB “Prienų energija” UAB “Ukmergės energija” UAB “Akmenės energija” 8.AB “Jonavos šilumos tinklai” 9.UAB “Mažeikių šilumos tinklai” 10.UAB “Utenos šilumos tinklai” 11.UAB “Tauragės šilumos tinklai” 12.UAB “Šilutės šilumos tinklai” 13.UAB “Radviliškio šiluma” 14.UAB “Anykščių šiluma” 15.UAB “Raseinių šilumos tinklai” 16.UAB “Kaišiadorių šiluma” 17.UAB “Švenčionių energija” 18.UAB “Ignalinos šilumos tinklai” 19.UAB “Plungės šilumos tinklai” 20.UAB “Pakruojo šiluma” 21.UAB “Šakių šilumos tinklai” 22.UAB “Lazdijų šiluma” 23.UAB “Birštono šiluma” 24.UAB “Širvintų šiluma” 25.UAB “Molėtų šiluma” 26.UAB “Šilalės šilumos tinklai” 27.UAB “Vilniaus rajono šilumos tinklai” 28.UAB “Fortum Heat Lietuva”

8. Other DH companies – potential to be the members of LDHA UAB “Trakų šilumos tinklai” UAB “Skuodo šiluma” UAB “Elektrėnų komunalinis ūkis” UAB “Joniškio energija” UAB “Kretingos šilumos tinklai” UAB “Neringos energija” UAB “Šalčininkų šiluma” UAB “Rietavo komunalinis ūkis” UAB “Gelvita” VĮ “Visagino energija”

9. Growth of LDHA member-companies in DH market 2001-2004 2001 20032004 Total heat delivered to the network (GWh) 10700106301044010300 Including LDHA members (GWh) 9720102421026210198 %90,896,398,399,0 2005

10. DH Ownership structure, 2005 The lease of heat utilities to foreign and domestic investors started in 2000. Private capital has entered in the DH sector offering high investments for modernization and stable prices (9.5% with JV) (ownership 100% in municipality)

11. Leased companies -UAB “Vilniaus energija” -UAB “LITESKO”: “Alytaus energija” “Kelmės šiluma” “Marijampolės šiluma” “Palangos šiluma” “Telšių šiluma” “Vilkaviškio šiluma” “Druskininkų šiluma” “Biržų šiluma” - UAB “Joniškio energija (51% share owners) - UAB “Švenčionių energija” (51% share owners) DALKIA group (France): UAB “E energija” (local investors): UAB “Fortum Heat” (Finland): - UAB “Prienų energija” - UAB “Ukmergės energija” - UAB “Akmenės energija”

12. Heat Law (adopted 20 May, 2003) New heat law forbids municipalities to sell DHN of more than 5 GWh/year to privatize them It defines rules for private operations through lease agreements obligation for the operator to invest in such amount that book value of lease assets at the end of lease are not less than original value taxation and control and supervision by regulator and state institutions are identical what ever scheme (leased or municipal operations) private or municipal operators must follow public procurement rules Public Private Partnership How that works?

13. Control of DH companies National Control Commission for Prices and Energy: heat pricing policy, price fixing, issuance of licenses to all DH companies and controlling their activities, coordination of investment projects, provision of recommendations on heat quantity allocation among residential customers, consumer rights protection, and investigation of complaints. State Energy Inspectorate: exercise control over the technical safety and operation of energy equipment, also the security of production, transmission, distribution, and supply of energy and energy resources as well as efficiency All procurement procedures are performed in compliance with the Law on Public Procurement

14. LDHA is a member of Euroheat&Power (International Association for District Heating, District Cooling and Combined Heat&Power)Euroheat&Power From July, 2001 LDHA was associated member of Euroheat&Power. From March, 2003 LDHA became a full-right member. Iceland Sweden Norway Denmark Great Britain Holand Czech Estonia Latvia Lithuania Poland Slovakia Hungary Romania Germany France Switzerland Italy Finland Austria Euroheat&Power (Brussels) unites 20 European heat suppliers associations:

15. Heat Prices in Central and East European Countries, 2004 CountryHeat Price (excluding VAT) 1Bulgaria 75,9 Lt/MWh (at lead-in) 2Czech 86,3-258,9 Lt/MWh (at lead-in) 3Estonia 103,6 Lt/MWh (at lead-in) 4Hungary 86,3 - 172,64 Lt/MWh (at lead-in) 5Latvia 62,2 - 113,9 Lt/MWh (at lead-in) 6Lithuania 113,5 Lt/MWh (at flat) 7Poland 124,3 Lt/MWh (at lead-in) 8Romania 65,6 Lt/MWh (at lead-in) 9Slovakia < 163,7 Lt/MWh (at lead-in) 10Austria 185,9 Lt/MWh (at lead-in) 11Denmark 138,5 – 172,6 Lt/MWh (at lead-in) 12Finland 145,7 Lt/MWh (at lead-in) 13Germany 189,4 Lt/MWh (at lead-in) 14Holand 184,6Lt/MWh (at lead-in) 15Norway 176,1 Lt/MWh (at lead-in) 16Sweden 165,7 Lt/MWh (at lead-in)

16. Legal Acts in Central and East European Countries CountryEnergy LawElectricity Law Natural Gas Law Heat LawEnergy Efficiency Law 1BulgariaYesNoNoNoNoNoNo 2CzechYesNoNoNoNoNoNo 3EstoniaNoNoYes NoNo 4HungaryNoNoYes Naujas CŠT įst.Yes 5LatviaYes NoNoNoNoNoNo 6LithuaniaYes TaipYesNoNo 7PolandYesNoNoNoNoNoNoNoNo 8RomaniaNoNoYes CŠT įst. projektas Yes 9SlovakiaYesNoNoNoNoNoNoNoNo

17. Key indicators of the Lithuanian DH sector Unit2001200220032004 Heat delivered to the network GWh 10824106231044010300 Heat delivered to consumers GWh 8166824483098140 Technological heat losses % 21.118.818.117,8 Average cost of fuel EUR/toe 135131 126 Turn over for heating mio. EUR 272278277268 Average price EUR/MWh 33.333.733.332.9

18. Heat energy balance (1996-2004)

19. Competition in heat market among heat producers Implementing the Heat Law several DH companies purchase large amounts of heat from independent heat producers. In such a way certain market (competition) successfully is formed at heat production stage. UAB “Pajūrio mediena” UAB “Geoterma” AB “Izobara” AB “Klaipėdos baldai” AB “Grigiškės” AB “Lifosa” AB “Simega” AB “Panevėžio stiklas” UAB “Plungės bioenergija” AB “Klaipėdos energija” UAB “Vilniaus energija” AB “Panevėžio energija” UAB “Plungės šilumos tinklai” During 2004 DH companies have purchased about 2200 GWh heat from industrial companies. It makes about 20 % of total heat delivered to DH network.

20. Heat energy consumption, 2005

21. Heat users gg

22. Fuels used for DH production Fuels used for DH production 1997-2004 It is foressen that production of heat using local, renewable and waste resources would make 17% in general heat balance in 2010, and 23% - in 2020.

23. The share of renewable energy resources (biofuel) in general fuel structure Biofuel boiler houses: ~200 pcs (~ 416 MW capacity )

24. LithuaniaSweden Comparison of fuel input for DH production in Lithuania and Sweden, 2004

25. Forecast structure of fuel input for DH production in the case available potential of biofuel to be utilized Potential of local and renewable resources available for utilization Wood 100 000 t.n.e (500 000 t) Straw 150 000 t.n.e (500 000 t) Mun. waste 60 000 t.n.e ( 350 000 t) Willows, sludge 90 000 t.n.e. (450 000 t) _________________________ TOTAL ~400 000 t.n.e. Biofuel resources utilized recently

26. Under this agreement it will be strive to implement the national strategic goals, that the share of local, renewable and waste resources used in heat production would make up 17 % of the gross heat production balance in 2010, and 23 % - in 2020. Joint activities set in the Contract: dissemination of information between organizations; planning of joint meetings and seminars; to form a committee on biofuel under LMSA council; promotion of biofuel supply among wood owners; increasing public awareness about strategic benefit of biofuel. On 13 October, 2005 Lithuanian District Heating Association (LDHA), Lithuanian Biofuel Producers and Suppliers Association (LBGTA) and Lithuanian Wood Owners Association (LMSA) signed a triangular agreement for the development of biofuel utilization for district heat production in Lithuania.

27. Average Heat Price (1996-2005)

28. CHP electricity delivered to the network The share of CHP electricity would make up not less than 35% in 2020 (currently it makes about 17.2%) The share of CHP heat would make up not less than 75% in 2020 (currently it makes about 50%) Guidelines of DH Development

29. DH companies - electricity producers III Vilniaus elektrinė (UAB "Vilniaus energija") II Vilniaus elektrinė (UAB "Vilniaus energija") Klaipėdos elektrinė (AB "Klaipėdos energija") Kauno TE (UAB “Kauno termofikacijos elektrinės) Petrašiūnų elektrinė, Noreikiškių kat. (AB "Kauno energija") Panevežio elektrinė (AB "Panevėžio energija") Druskininkų elektrinė (UAB "Litesko") Šiaulių elektrinė (AB "Šiaulių energija") Jonavos elektrinė (AB "Jonavos šilumos tinklai") Produce for own use and purchase to National Elctricity Network Produce for own use

30. Heat consumption and payments for heating in new and old erected apartment buildings (Heat tariff 10 ct/kWh) Old houses; Average flat of 60 m2 Payments for heating 156 Lt/month New buildings average flat of 60 m2 54 Lt/month Payments for heating 54 Lt/month

31. Heat consumption in old and new erected houses Build in Consumed heat amount, kWhPrice 1 m 2 LTL (excluding VAT) Period TotalFor heating For hot water preparation Space heating of 1m 2 (kWh/m 2 ) 40 flats multy- family apartment house (heating area 1756 m 2 )1962 2300018054494610,281,0410/2003 3800033891410919,301,9511/2003 4100036704429620,912,1212/2003 6200058011398933,043,351/2004 6523061307392334,923,522/2004 4330039567373322,542,283/2004 2800023649435113,471,364/2004 154,462,23 102 flats multy- family apartment house (heating area 6923 m 2 2001 3700011967136081,730,1810/2003 7500046508170676,720,6911/2003 5800032998135784,770,4912/2003 106000751811939510,861,121/2004 106000777161686011,221,162/2004 8200051926186507,500,773/2004 5800032777137994,730,494/2004 47,530,70

32. Long-term renovation program “Let’s renovate dwelling- renovate City” On June 2004 Vilnius City Municipality started the implementation of long – term renovation program “Let’s renovate dwelling - renovate City”. World fund for Environmental Protection gave a loan of 6,5 million USD (3 million USD is intended for building renovation). Pilot project – overall renovation of 3 multi-family apartment buildings - is implemented within this project framework.

33. Legal Acts on Renovation of Legal Acts on Renovation of Multy-family Apartment Houses Lithuanian Housing Strategy (Adopted on 21-01-2004); Support Programme on Renovation of Multy-family Apartment Houses (Adopted on 23-09-2004, modified on 21- 06-2005) Measures and terms of implementation of Directive 2002/91/EC of the European Parliament and of the Council on the energy performance of buildings (Adopted on 27-12-2004) Law on State Support for Housing’s Procure or Rent and Modernization of Multy-family Apartment Houses (Adopted with modifications on 24-03-2005)

34. On 7 March, 2005 Lithuanian District Heating Association received the grant form EU Structural fund for the implenetation of the Project "Training of District Heating Companies” Project Goal – increase skills and knowledge of the employees of the District Heating Companies in the area of management, marketing, finance management and accounting, EU energy policy Projected group: 47 high level and middle level managers and accountants from heat supply companies Project duration – 24 months Project value – 204 900 Lt Funding – 150 842 Lt, LDHA funding – 54 058 Lt On 26 October LDHA has signed service supply contract for training with Lithuanian Institute of Public Administration Europos Sąjunga

35. From June 2004 LDHA is implementing ES Phare project SENET: “Applying Corporate Social Responsibility and cross-border networking of local authorities and energy associations towards rational and sustainable energy use in the context of enlarged EU” Project duration: 24 months (June, 2004- June, 2006) Project budget: Total budget 920 thous. EUR (EU support 682 thous. EUR, own contribution 238 thous EUR) Project partners are 9 companies from 5 EU countries: from Finland : City of Vantaa (Lead partner); from Austria: Graz Energy Agency and City of Graz; from Latvia: Association of Latvian District Heating companies and City of Ogre; from Estonia: Estonian Power and Heat Association and Association of Municipalities of Estonia from Lithuania: Lithuanian District Heating Association and Kaunas City Municipality.

36. LDHA has formed a working group (20 members) on implementation of Supplementing acts of Heat Law This group is acting from September 2002 when the heat law was under preparation. The meetings are held on Fridays The main subjects of meetings: –related conceptual problems and their analyzes, –introduction of relevant legal acts, which under preparation (drafts) and which has entered into force –relations between DH companies and governmental and municipal organizations implementing the provisions of legal acts in practice. 100th meeting was held in September 2005 - Governmental institutions (Ministry of Economy, Ministry of Environment, Energy Agency, State Energy Inspectorate, National Control Commission for Prices and Energy), - Consumer organizations (National Consumer Rights Protection Board, Lithuanian Consumer association, Federation of Apartment House Owners Associations), - Associations (Association of Local Authorities, Water Suppliers Association) - Consultants Group members are the representatives from:

38. National Energy Strategy - Heat Sector Strategy for the Heat Supply Development Heat supply development plans for municipalities CHP in DH systems (after the closure of Ignalina NPP) Encourage use of local and renewable energy sources Improve energy efficiency Competition among heat producers Procedure for independent heat producers Modernise heat supply systems Procedure for the purchase of CHP electricity Adopted by Seimas: 10/10-2002

39. Energy Law Adopted by Seimas: 16/5-2002 Energy savings Energy efficient use of primary energy sources Reducing energy intensity Diversification (fuel imports, indigenous fuels) Promotion of indigenous fuels Reliable and cost-effective production Reducing effects on the environment Forming legal and economic conditions for investments Increase economic efficiency: competition, private invest.

40. Heat Law Adopted by Seimas: 20/5-2003 Heat operator tasks (supply heat, maintain system) Heat planning and zoning etc. Relation with heat consumers (responsibilities) New customer contract principles Regulation of consumers’ disconnection options Transparency for consumers Access for external parties to supply heat Separation from municipal economic activities

41. Competition in DH sector The competition between the suppliers of alternative types of fuels. The heat production shall be based on the competition between the heat producers. The hot water preparation and supply shall be based on competition. The state (municipalities) shall promote competition in the field of maintenance of heating and hot water systems inside the multy-family apartment houses.

42. Municipal Heat Plans The municipalities shall manage the heat sector in conformity with the special Municipal Heat Plans. The main objective of the Municipal Heat Plans shall be to satisfy the consumers heat demand on least costs. The Municipal Heat Plans shall be in conformity with the state strategy, national objectives in the energy industry. The government may provide assistance and support in implementing the Municipal Heat Plans.

43. There are 60 municipalities in Lithuania

45. DHC: the link Surplus heat from industry Municipa l Waste CHP Biofuels Fossil fuels Geotherma l