Regarding the mandatory supply of liquefied natural gas
Regarding the mandatory supply of liquefied natural gas
AB “Ignitis grupė” (hereinafter – the Company or Ignitis Group), reacting to the recent discussion and publicly raised questions regarding the mandatory supply volume of liquefied natural gas (hereinafter – LNG) for the terminal, issues an explanation to the investors. It must be noted that the decision regarding the designated supply activities which can have an impact on the business activities of UAB “Ignitis” (hereinafter – Ignitis), a subsidiary of the Company, is not made yet and, at this moment, there is uncertainty whether it will be made.
In 2016, with the approval of the Government of Republic of Lithuania (hereinafter – the Government), Ignitis committed, as per duty of the designated supplier appointed to it, to supply the mandatory volume for the LNG terminal until the end of 2024. The commitment is executed based on a long-term agreement between Ignitis and Equinor. According to previous rulings and effective legal acts, the designated LNG supply volume consists of four LNG shipments per year, and the price difference between the shipments and the market price is covered via the LNG terminal security component.
The Ministry of Energy of Republic of Lithuania submitted a resolution project to the Government, which in 2021 would reduce the number of annual designated supply shipments from four to two. However, the Government did not make a decision during the session of 2 December 2020. The issue regarding the designated supply shipment number was left for the newly formed Government.
The Government was also submitted an amendment project on the Paragraph 11 of the Law on Liquefied Natural Gas No XI-2053 with the intention to regulate that, starting from 1 January 2021, the reasonable designated supplier’s costs will tantamount to not more than 10 per cent of the price difference between the price paid of the designated supplier for the mandatory supply volume for the LNG terminal and the average price of imported liquefied natural gas to Republic of Lithuania.
Ignitis Group provided the Government and the Ministry of Energy with public comments and assessments, where it noted that if the provisions of the project and the law would pass, Ignitis would suffer significant financial losses, which, according to the current presumption, would amount to approximately EUR 52–60m by the end of 2024. The comments of the Company also indicated that it would clearly violate the legitimate expectations of the designated supplier, ie Ignitis and, as a shareholder, Ignitis Group. However, the Company also notes that, at the moment, the decision which could implicate losses is not made. The Company will provide all relevant information regarding the issue to the new Government and other interested institutions in order to ensure that the decision would align with the interests of Lithuania’s energy independence, the Company and all its shareholders. After the Government has made a decision regarding the 2021 mandatory supply volume for the LNG terminal, the Company will issue a separate material event notice about it.
For more information please contact:
Artūras Ketlerius
Head of Public Relations at Ignitis Group
