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AB "Ignitis grupė" (IGN)

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Wednesday 30 December, 2020

AB "Ignitis grupė"



Regarding the updated Methodology on Rate of Return on Investments

AB “Ignitis grupė” (hereinafter – Ignitis Group or the Company) informs that on 30 December 2020 National Energy Regulatory Council (hereinafter – NERC) approved the updated the Methodology on Rate of Return on Investments (hereinafter – the Methodology).

Here are the main amendments relevant to the Company that entered into force with the updated Methodology:

  • Determined a fixed equity risk premium of 5.00% (previously this measurement was alternating and, according to the latest data published by NERC on 1 August 2020, accounted for 3,93%)
  • Established a new optimal capital structure for equity capital and debt capital, when 50% can consist of debt capital (previously was 60%) and 50% – of equity capital (previously was 40%)
  • Amended previously effective provisions of effective borrowing incentives by forgoing the second and amending the first effective borrowing incentive limits
  • Provided a possibility to receive additional stimulus if the remaining investments directly contribute to the goals of climate change reduction

The current weighted average cost of capital (hereinafter – WACC) rates determined by NERC in 2021 reaches 5.34% for electricity distribution and 3.9% for natural gas distribution activities in the networks segment, while it is 3.5% in the flexible generation segment.

The updated Methodology will be effective when determining the 2022 WACC rates for electricity distribution in the networks segment and flexible generation segment. The Methodology will be effective only from the beginning of regulation periods, therefore, the updated Methodology will be applicable to the natural gas activities of AB “Energijos skirstymo operatorius” in the networks segment only when determining WACC rates for 2024. Considering the Methodology, the determined WACC rates reflect the expectations of the management of the Company communicated earlier that after the Methodology is updated, the WACC rate should be between 4–5%.

Previously effective redaction of Methodology was approved on 18 February 2020.

For more information please contact:

Artūras Ketlerius, Head of Public Relations
Tel. +370 620 76076
E-mail [email protected]

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