About ownership unbundling of transmission system assets


On 9 October 2019 the Cabinet of Ministers of the Republic of Latvia (CM) decided to support full unbundling of ownership of the electricity transmission system operator (TSO) providing that transmission assets will be taken over from Latvenergo AS by Augstsprieguma tīkls AS.

In accordance with the European Union (EU) regulation TSO should be unbundled from the companies operating in generation and supply of electricity. The EU has defined three types of unbundling of transmission asset ownership: 1) full ownership unbundling; 2) independent system operator and 3) independent transmission operator. All the three transmission assets unbundling models meet the requirements of EU Directive 2009/72/EC. In order to fulfil the EU requirements, in 2011 Latvia introduced an independent system operator model, however, such transmission assets unbundling model is one of rarest in Europe. Therefore, based on the assessment made by the Ministry of Economics, the CM has decided to support the introduction of a full electricity transmission ownership unbundling model in Latvia by 1 July 2020.

Since Latvenergo AS and Augstsprieguma tīkls AS are capital companies belonging to the state, the change of ownership of assets is planned through the reduction of the share capital of Latvenergo AS by withdrawing from the base of assets of Latvenergo AS the capital shares of Latvijas elektriskie tīkli AS. After the capital shares of Latvijas elektriskie tīkli AS become property of the state, it is planned to invest them in the share capital of Augstsprieguma tīkls AS.

One of pre-conditions for the change of ownership of assets is receiving of an acceptance from creditors (incl. lenders and bondholders) of Latvenergo AS. Latvenergo AS will ensure proper communication with other creditors in order to receive the acceptance for unbundling of the transmission assets. The CM decision also provides for increasing the share capital of Latvenergo AS by investing retained earnings of the previous years (retained earnings of Latvenergo AS of the previous years are 235 million EUR), but no more than the market value of the capital shares of Latvijas elektriskie tīkli AS determined by independent appraisers. KPMG Baltics AS has been invited to determine the market value of the capital shares.

The transmission assets rental segment is the smallest segment of the Latvenergo Group both by income and EBITDA. The turnover of this segment in 2018 amounted to 5% of income of the Group and 13% of EBITDA of the Group. The total assets of Latvijas elektriskie tīkli AS as at 31 December 2018 amounted to 551.2 million EUR (15% of the assets of the Group) with equity of 232.8 million EUR, the number of employees – 8. Along with the unbundling of the transmission assets, the net borrowings of the Latvenergo Group (borrowings of Latvijas elektriskie tīkli AS as at 31 December 2018 amount to 179.8 million EUR) and the scope of investments in the next years (87.3 million EUR in 2018, 63.2 million EUR in 2017) will reduce.

Latvijas elektriskie tīkli AS is a subsidiary of Latvenergo AS, which owns electricity transmission system (330 kV and 110 kV transmission lines, substations and distribution points) assets, which are rented to the transmission system operator Augstsprieguma tīkls AS. The rent for the assets is calculated in accordance with the methodology approved by the Public Utilities Commission.


For your information:

The transition to the full ownership unbundling model under EU Directive 2009/72/EC in Latvia takes place in several stages:

  • In 2011 an independent system operator model was been introduced – Latvijas elektriskie tīkli AS, a subsidiary of Latvenergo AS, was established under it, which performed functions of management and operation of transmission system assets (owner of transmission system assets), while Augstsprieguma tīkls AS implemented functions of a transmission system operator;
  • On 1 January 2015 Augstsprieguma tīkls AS took over from Latvijas elektriskie tīkli AS the functions of operation of transmission system assets, incl. 430 employees of Latvijas elektriskie tīkli AS, who operated the assets;
  • By 1 July 2020 it is planned that Augstsprieguma tīkls AS will take over also transmission system assets (330 kV and 110 kV transmission lines, substations and distribution points).