Company’s Investment guidelines

Company’s investments in the latest technologies (the reconstruction of heat generation facilities installing economizers, new biofuel burned boilers, automation of boiler-houses of integrated network, systems of electronic services, system of remote reading of heat meters and data transmission, customer service using “one stop” principle, etc.) help the Company to reduce the price of heat sold. Reconstruction of heat supply networks reduces Company’s heat supply losses. All these investments help the Company to adapt to market changes and to be an advanced company of heat and hot water supply, also of maintenance of heat production facilities in Kaunas and Jurbarkas cities and Kaunas district.

Investments are made in accordance with Company’s revised investment plan for the year 2016, which was approved by decision No T-202 of Kaunas City Municipality Council of 3 May 2016 “Regarding change of decision of Kaunas City Municipality Council No T-749 of 29 December 2015 “Regarding revised investment plan of AB Kauno Energija for the year 2016” and authorisation to sign changes” (hereinafter – Investment plan). EUR 44.54 million were planned to invest in Company’s assets according to approved Investment plan during the period of 2016.

The Company implements trunk pipeline replacement projects co-financed by the European Union structural funds, it also optimizes pipeline diameters, connects new objects to the DHN and modernises heat production facilities according to Investment plan.

Amendments to the Law on Heat Sector of the Republic of Lithuania and changes in NCC’s regulation allowed favourable conditions to invest to construction and reconstruction of heat production facilities, thus increasing competition in heat production sector and effectively reducing heat price for consumers.

In order to reach these goals, the Company continued modernization of its’ own heat generation facilities, installing new heat generation equipment in them. The following projects of heat generation facilities modernization were finished to implement:

1. On September 2016 the Company accomplished a project of installation of 15 MW capacity gas burned boiler No. 2 together with 1.5 MW capacities condensational economizer in “Šilkas” boiler-house. Value of the project is EUR 659 thousand. This new equipment will increase reliability of heat production and supply, and will reduce Company’s comparable expenditures of heat production and the final heat price for consumers;
2. The Company is installing 5 MW and 3 MW capacities biofuel burned boilers together with condensational economizer in Jurbarkas boiler-house for more than EUR 2.1 million. This project is being planned to accomplish in the years 2017–2018. First stage of the project is accomplished in November 2016, i.e. 5 MW heat capacity biofuel burned boiler together with pertinent is installed. The amount of heat produced using biofuel will amount up to 60 percent of all heat supplied in Jurbarkas city after the reconstruction. Starting from November 2016 a total of 12 GWh of heat were produced until the end of the year using this new boiler. A natural gas was used for heat production in Jurbarkas boiler-house until that time.
3. In November 2016 the Company signed an outsourcing contract with the winner of procurement on installation of four gas burned boilers at capacity 15 MW each together with 1.5 MW capacity condensational economizers in Pergalė boiler-house. The planned value of continued project is approx. EUR 2.3 million. Accomplishment of the project is expected in 2017–2018. Works of the project are divided in two stages. One boiler together with economizer is planned to install on the first stage, and the rest three boilers – on the second stage. The second stage can still be terminated due to the changes in Company’s needs, financing or other circumstances.

The Company builds biofuel equipment coherently pursuing strategy of Company’s development, approved by city municipality council and reaching to further reduce heat price for consumers. By increasing and modernizing production capacities the Company increasingly occupies part of heat production market and it seems likely that it will produce in own production facilities and will supply to DHN more than 60 per cent of all heat demand in 2017.

The result of all of these already implemented investment projects is decreased price of heat for Company’s heat consumers. An average price of the heat sold was 5.02 ct/kWh in the year 2016 and in the year 2015 it was 5.40 ct/kWh, and in the year 2014 it was 6.69 ct/kWh.

 In June 2016 the Company submitted 9 applications to the Lithuanian Business Support Agency under the measure No. 04.3.2-LVPA-K-102 “Modernisation and development of heat supply networks” 1 invitation of the 4 priority “Promoting energy efficiency and production and use of renewable energy” of Operational Programme for the European Union Funds’ Investments in 2014-2020:

• “Modernisation of the main pipeline 3Ž of Kaunas city integrated network” (code 04.3.2-LVPA-K-102-01-0009),
• “Modernisation of the main pipeline 6T of Kaunas city integrated network” (code 04.3.2-LVPA-K-102-01-0010),
• “Reconstruction of Kaunas city integrated network in Eiguliai catchment” (code 04.3.2-LVPA-K-102-01-0011),
• “Modernisation of the main pipeline 1T of Kaunas city integrated network” (code 04.3.2-LVPA-K-102-01-0024),
• “Reconstruction of Kaunas city integrated network in Kalniečiai catchment” (kodas 04.3.2-LVPA-K-102-01-0025),
• “Modernisation of the main pipeline 4T of Kaunas city integrated network” (code 04.3.2-LVPA-K-102-01-0026),
• “Reconstruction of heat supply networks, built from Kaunas city Pergalė boiler-house” (code 04.3.2-LVPA-K-102-01-0036),
• “Reconstruction of Kaunas city integrated network in P. Lukšio street” (code 04.3.2-LVPA-K-102-01-0037),
• “Modernisation of the main pipeline 2Ž of Kaunas city integrated network” (code 04.3.2-LVPA-K-102-01-0038).

Implementation of these projects started in 2016 and the accomplishment of them is scheduled in 2018. 9 agreements on financial support were signed with LBSA in December 2016. Total value of the projects is EUR 11.7 million. European Union Structural support in amount of EUR 5.8 million is assigned.

19 new objects with total installed capacity of 12.19 MW were connected to Company’s heat supplies network during the year 2016.