1
2021
AB KLAIPĖDOS NAFTA
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH INTERNATIONAL
FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE
EUROPEAN UNION, INDEPENDENT AUDITOR’S REPORT AND
CONSOLIDATED ANNUAL REPORT
FOR THE FINANCIAL YEAR ENDED
ON 31 DECEMBER 2021
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE
FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 2
CONTENT
STATEMENT OF FINANCIAL POSITION ............................................................................................................................................................................. 3
STATEMENT OF COMPREHENSIVE INCOME .................................................................................................................................................................. 5
STATEMENT OF CHANGES IN EQUITY .............................................................................................................................................................................. 6
CASH FLOW STATEMENT ....................................................................................................................................................................................................... 8
EXPLANATORY NOTES TO FINANCIAL STATEMENTS .............................................................................................................................................. 10
CONFIRMATION OF RESPONSIBLE PERSONS ............................................................................................................................................................. 58
2021 YEAR AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT ........................................................................................................... 59
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 3
STATEMENT OF FINANCIAL POSITION
Notes
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
3
Right-of-use assets
3
Non-current contract assets
8
Investment in subsidiaries
5
Investment in associates
Deferred tax asset
23
Total non-current assets
Current assets
Inventories
6
Trade receivables and other receivables
7
Contract assets
8
Prepaid income tax
Short term deposits
9
Other financial assets
10
Cash and cash equivalents
11
Total current assets
Total assets
(Cont’d on the next page)
Explanatory notes are an integral part of these financial statements.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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STATEMENT OF FINANCIAL POSITION (CONT’D)
Group
Company
Notes
31-12-2021
31-12-2020
31-12-2021
31-12-2020
EQUITY AND LIABILITIES
Equity
Share capital
1,12
Share premium
Own shares (-)
1
(267 )
(267 )
Reserves
12
Foreign currency translation reserve
(82 )
(72 )
Retained earnings
(64,126 )
(64,971 )
Total equity
Non-current amounts payable and liabilities
Deferred tax liability
23
Non-current employee benefits
13
Loans
14
Deferred government grants
2.21
Lease liabilities
14
Total non-current amounts payable and liabilities
Current amounts payable and liabilities
Current employee benefits
13
Loans
14
Lease liabilities
14
Trade payables and other liabilities
15
Derivatives
17
Payroll related liabilities
18
Provisions
16
Contract liabilities
27
Total current amounts payable and liabilities
Total equity and liabilities
Explanatory notes are an integral part of these financial statements.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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STATEMENT OF COMPREHENSIVE INCOME
Notes
Group
Company
2021
2020
2021
2020
Revenue from contracts with customers
19
Cost of sales
20
(53,109 )
(50,960 )
(52,144 )
(50,191 )
Gross profit (loss)
Operating expenses
21
(61,928 )
(9,811 )
(61,160 )
(8,787 )
Other income and (expenses)
Profit (loss) from operating activities
(53,165 )
(54,610 )
Income from financial activities
22
Expenses from financial activities
22
(24,557 )
(4,550 )
(24,456 )
(4,438 )
Share of the associate‘s profit or (loss)
(32 )
(32 )
Profit (loss) before tax
(75,767 )
(77,129 )
Income tax (expenses)
23
(9,881 )
(9,608 )
Profit (loss) for the year
(64,011 )
(64,917 )
Other comprehensive income
Items that will not be subsequently reclassified to
profit or (loss)
Items that are or may be reclassified subsequently
to profit or (loss)
Actuarial gain (loss)
(63 )
(353 )
(63 )
(353 )
Exchange differences on
translation of foreign operations
(10 )
(72 )
Related taxes
Total other comprehensive income
(64 )
(372 )
(54 )
(300 )
Total comprehensive income (loss), net of tax
(64,075 )
(64,971 )
Profit attributable to:
The shareholders of the Company
(64,011 )
(64,917 )
Non-controlling interests
Total comprehensive income (loss)
attributable to:
The shareholders of the Company
(64,075 )
(64,971 )
Non-controlling interests
Basic and diluted earnings (losses), in EUR
24
(0.17 )
Explanatory notes are an integral part of these financial statements.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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STATEMENT OF CHANGES IN EQUITY
GROUP
Notes
Share
capital
Share
premium
Own
shares (-)
Legal
reserve
Reserve
for own
shares
Other
reserves
Foreign
currency
translation
reserve
Retained
earnings
Total
Balance as at 31 December 2019
(267 )
Net profit for the year
Other comprehensive income (loss)
(72 )
(300 )
(372 )
Total comprehensive income (loss)
(72 )
Dividends declared
25
(7,947 )
(7,947 )
Increase in share capital
1, 12
Transfer between reserves
(87 )
Balance as at 31 December 2020
(267 )
(72 )
Net profit (loss) for the year
(64,011 )
(64,011 )
Other comprehensive income (loss)
(10 )
(54 )
(64 )
Total comprehensive income (loss)
(10 )
(64,065 )
(64,075 )
Dividends declared
25
(7,538 )
(7,538 )
Decrease in share capital
1, 12
(190 )
(77 )
Transfer between reserves
(25,657 )
Balance as at 31 December 2021
(82 )
(64,126 )
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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STATEMENT OF CHANGES IN EQUITY (CONT’D)
COMPANY
Notes
Share
capital
Share
premium
Own
shares (-)
Legal
reserve
Reserve for
own shares
Other
reserves
Retained
earnings
Total
Balance as at 31 December 2019
(267 )
Net profit for the year
Other comprehensive income (loss)
(300 )
(300 )
Total comprehensive income (loss)
Dividends declared
25
(7,947 )
(7,947 )
Increase in share capital
1, 12
Transfer between reserves
(87 )
Balance as at 31 December 2020
(267 )
Net profit (loss) for the year
(64,917 )
(64,917 )
Other comprehensive income (loss)
(54 )
(54 )
Total comprehensive income (loss)
(64,971 )
(64,971 )
Dividends declared
25
(7,538 )
(7,538 )
Decrease in share capital
1, 12
(190 )
(77 )
Transfer between reserves
(25,657 )
Balance as at 31 December 2021
(64,971 )
Explanatory notes are an integral part of these financial statements.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 8
CASH FLOW STATEMENT
(Cont‘d on the next page)
Explanatory notes are an integral part of these financial statements.
Group
Company
Notes
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Cash flows from operating activities
Net profit (loss)
(64,011 )
(64,917 )
Adjustments for non-cash items:
Depreciation and amortization
3
Impairment of non-current assets
(1 )
(1 )
Change in vacation reserve
(312 )
(1 )
(319 )
(42 )
Change in provisions
16
Change in non-current liabilities for employees
13
Contract assets
8
Income tax expenses
23
(11,755 )
(12,211 )
Share of (profit) or loss of equity-accounted
investees
(113 )
(113 )
Change in allowance for doubtful trade and other
receivables
7
(711 )
(711 )
Interest income
22
(13 )
(53 )
(13 )
(53 )
Interest expenses
22
(Gain) or loss of derivative financial instruments
22
(1,898 )
(1,898 )
Currency impact from lease liabilities
22
(28,765 )
(28,765 )
Other non-cash adjustments
Changes in working capital
(Increase) decrease in inventories
6
(10 )
Decrease (increase) in trade and other accounts
receivable
7
(1,610 )
(252 )
(1,392 )
Increase (decrease) in trade and other payables
(4,377 )
(627 )
(4,231 )
(597 )
Increase (decrease) in contract liabilities
27
Increase (decrease) in payroll related liabilities
18
(672 )
(777 )
(735 )
(723 )
Income tax (paid)
(440 )
(27 )
Interest received
Net cash flows from (used in) operating activities
Cash flows from investing activities
(Acquisition) of property, plant, equipment and
intangible assets
3
(9,030 )
(6,926 )
(8,989 )
(6,573 )
Income from sales of non-current assets
Short term deposits (placed)/received
9
(3,000 )
(3,000 )
(Acquisition) of other investments
(2 )
(27 )
Dividends received
Grants, subsidies received
2.20
Net cash flows from (used in) investing activities
(9,583 )
(9,230 )
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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CASH FLOW STATEMENT (CONT’D)
Explanatory notes are an integral part of these financial statements.
Notes
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Cash flows from financing activities
Dividends (paid)
25
(7,538 )
(7,947 )
(7,538 )
(7,947 )
Loans received
14
Loans paid
14
(3,492 )
(3,387 )
(3,492 )
(3,387 )
Interest and fee related to loans (paid)
14
(255 )
(156 )
(255 )
(156 )
Guarantee fees (paid)
14
(146 )
(474 )
(146 )
(474 )
Lease liabilities (paid)
14
(41,459 )
(43,548 )
(41,455 )
(43,548 )
Interest on leasing liabilities paid
14
(1,917 )
(2,000 )
(1,916 )
(2,000 )
Net cash flows from (used in) financing activities
(27,978 )
(30,683 )
(27,973 )
(30,683 )
Net increase (decrease) in cash flows
Cash and cash equivalents on 1 January
11
Cash and cash equivalents on 31 December
11
Other non-financial information related to
cash flows:
Liability for property, plant and equipment
outstanding as at year end
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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EXPLANATORY NOTES TO FINANCIAL STATEMENTS
1 GENERAL INFORMATION
comprise the Company and its subsidiaries (together referred to as “the Group”).
The subsidiaries are these:
• UAB SGD logistika, a subsidiary (hereinafter “the subsidiary UAB SGD logistika”). The address is as follows: Burių g. 19, 92276 Klaipėda,
Lithuania.
• UAB SGD terminalas, a subsidiary (hereinafter “the subsidiary UAB SGD terminalas”). The address is as follows: Burių g. 19, 92276
Klaipėda, Lithuania.
• UAB SGD SPB, a subsidiary of UAB SGD logistika (hereinafter “the subsidiary UAB SGD SPB”). The address is as follows: Burių g. 19,
92276 Klaipėda, Lithuania.
• KN Acu Servicos de Terminal de GNL LTDA (hereinafter “the subsidiary KN Acu Servicos de Terminal de GNL LTDA”). The address is as
follows: F66 Fazenda Saco Dantas s/n, Distrito Industrial, Area 1 and Area 2, 28200-000 São João da Barra, State of Rio de Janeiro
The associates are these:
• Sarmatia Sp. z o.o. – as at 31 December 2021 and 2020 the Group and the Company owns 1% of the authorised capital of the
international pipeline company. As a result of associate financial performance 100% impairment for investment to Sarmatia Sp. z o.o
was accounted for as at 31 December 2021 and 2020. The Group and the Company is entitled to appoint one of five board members
to the management of Sarmatia Sp. z o.o., thus it can have significant influence. Therefore, this investment was classified as an associate
and measured using the equity method. The unaudited equity of the associate as at 31 December 2021 amounts to EUR 54 thousand
(EUR 220 thousand as at 31 December 2020).
• BALTPOOL UAB – as at 31 December 2021 and 2020 the Group and the Company owns 33% of BALTPOOL UAB shares and their voting
rights at the General Meeting of the Shareholders of BALTPOOL UAB. The unaudited equity of the associate as at 31 December 2021
is EUR 675 thousand (EUR 771 thousand as at 31 December 2021).
The main activities of the Group and the Company include operation of oil terminal, oil products transhipment services and other related
National Energy Regulatory Council (hereinafter referred to as “NERC”) issued Natural Gas Regasification License to the Company on 27
November 2014.
The Company was established by AB Naftos Terminalas (Lithuania) and Lancaster Steel Inc, (USA) acquiring 51% and 49% of shares respectively,
The Company was registered on 27 September 1994.
As of 11 January 2021 a new version of the Company's Articles of Association was registered within the Register of Legal Entities of the Republic
of Lithuania following the decrease of the authorised capital of the Company, which is now equal to EUR 110,315,009.65 and divided into
380,396,585 units of shares, which grant 380,396,585 votes. The Ministry of Finance of the Republic of Lithuania granted the Company
permission to decrease the authorised capital of the Company by cancelling 655,808 units of Company’s acquired own shares which each
nominal value EUR 0.29
During the year of 2021 and 2020 the Company has not acquired any own shares.
The Company’s shares are listed in the Baltic Main List on the NASDAQ Vilnius Stock Exchange (ISIN code LT0000111650, abbreviation KNF1L).
As at 31 December 2021 and 31 December 2020 the shareholders of the Company were:
31 December 2021
31 December 2020
Number of
shares held
(thousand)
Part of
ownership
(%)
Number of
shares held
(thousand)
Part of
ownership
(%)
(Gediminas av, 38/2, Vilnius, 302308327)
275,687
72.47
275,687
72.35
UAB koncernas Achemos grupė (Jonalaukis village, Jonava
district, 156673480)
39,663
10.43
39,663
10.41
Other (less than 5% each)
65,047
17.10
65,702
17.24
Total
380,397
100.00
381,052
100.00
As at 31 December 2021, all the shares were owned by 4,926 shareholders (as at 31 December 2020 all the shares were owned by 3,444
shareholders).
The average number of employees of the Group on 31 December 2021 was 388 (400 – on 31 December 2020).
The average number of employees of the Company on 31 December 2021 was 355 (372 – on 31 December 2020).
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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2 ACCOUNTING PRINCIPLES
The financial statements of the Group and the Company are presented in Euro and all values are rounded to the nearest thousand (EUR 000),
except when otherwise indicated.
These financial statements of the Group and the Company have been prepared on a historical cost basis unless otherwise stated in the
accounting policies below.
The financial year of the Group and the Company coincides with the calendar year.
The numbers in tables may not coincide due to rounding of particular amounts to EUR thousand. Such rounding differences are not material
to these financial statements.
2.1. Basis for preparation of the financial statements
Statement of compliance
Annual financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union (hereinafter the EU). They were authorized for issuance by the management on 23 March 2022 and
are subject to the approval of the shareholders. The shareholders of the Company have the power to reject these financial statements and
request for the new ones to be prepared.
IFRSs and their interpretations, announced and adopted by the European Union, effective for the current reporting period
The following new Standards, amendments to Standards and new Interpretations approved by the International Accounting Standards Board
(IASB) and adopted by the EU are applicable for the reporting period:
• COVID-19-Related Rent Concessions (Amendment to IFRS 16)
• Interest rate benchmark reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The Group and the Company anticipates that the adoption of these standards, revisions and interpretations had no material impact on the
financial statements.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of these financial statements the following standards, amendments to existing standards and interpretations were
issued, however the Group and the Company does not plan to adopt these standards early.
• Onerous Contract – Costs of Fulfilling a Contract (Amendment to IAS 37)
• Deferred tax related to assets and liabilities arising from Single Transaction (Amendments to IAS 12)
• Covid-19 Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)
• Annual Improvements to IFRS Standards 2018-2020
• Property, Plant and Equipment – Proceeds before Intended Use (Amendments to IAS 16)
• Reference to the Conceptual Framework (Amendments to IFRS 3)
• Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
• IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance.
• Definition of Accounting Estimates (Amendments to IAS8)
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice statement 2)
The Group and the Company has elected not to adopt these standards, revisions and interpretations. The Group and the Company anticipates
that the adoption of these standards, revisions and interpretations will have no material impact on the financial statements of the Group and
the Company in the period of initial application.
COVID 19 pandemic
The Group's and the Company’s management has assessed the impact of COVID-19 pandemic uncertainty to the following key areas:
• Going concern
• Fair value, impairment, residual value and useful life of property, plant and equipment
• Fair value, impairment of investments and other non-current assets
• Assessment of expected credit losses
• Classification of financial instruments as current and non-current
• Lease contracts
The Group's and the Company’s management has not identified any significant threats in assessing the potential impact of key COVID-19
factors on the Group’s results.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.2. Foreign currency
Functional currency
The amounts shown in these consolidated and separate financial statements are measured and presented in local currency, euro (EUR), which
is the functional currency of the Group and the Company.
The Group and the Company have decided to use EUR as a functional currency considering the structure of revenue, costs, equity, and debt
instruments. Despite the fact that lease liabilities are denominated in US dollars, the major part of revenues and cost are denominated in EUR.
Most of the Group’s and the Company’s sales prices and costs are influenced by competitive forces, acting in Lithuania and in the Euro-zone
countries. The equity of the Company is formed in EUR.
Transactions and balances
Foreign currency transactions are converted into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the conversion of monetary assets and liabilities
denominated in foreign currencies using the exchange rate available at the reporting date are recognised in the statement of profit or loss
and comprehensive income as finance income or expenses.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are converted using the exchange rate
available at the date of the transaction.
Group companies
On consolidation, the assets and liabilities of foreign operations are translated into euros at the rate of exchange prevailing at the reporting
date and their statements of profit or loss and comprehensive income are translated at average exchange rates observed during reporting
period. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a
foreign operation, the component of other comprehensive income relating to that particular foreign operation is reclassified to profit or loss
and comprehensive income.
2.3. Going concern
The management of the Group and the Company assessed the going-concern assumptions, during the preparation of the Group’s and the
Company’s Consolidated financial statements. The management believes that no events or conditions, including those related to the current
COVID-19 pandemic and war in Ukraine, give rise to doubt about the ability of the Group to continue in operation in the next reporting period.
This conclusion is drawn based on knowledge of the Group and the Company, the estimated economic outlook and identified risks and
uncertainties in relation thereto.
Furthermore, this conclusion is based on a review of the expected developments in liquidity and capital, current credit facilities available
including contractual and expected maturities and covenants. Consequently, it has been concluded that it is reasonable to apply the going-
concern concept as the underlying assumption for the financial statements.
For further details on the impact of the Covid-19 pandemic and war in Ukraine to Annual report.
2.4. Basis for consolidation
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company or the Group obtains control and
continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same
reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and
losses resulting from intra-group transactions and dividends are eliminated in full.
Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance. A change
in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a
subsidiary, it:
• Derecognises the assets (including goodwill) and liabilities of the subsidiary;
• Derecognises the carrying amount of any non-controlling interest;
• Derecognises the cumulative translation differences, recorded in equity;
• Recognises the fair value of the consideration received;
• Recognises the fair value of any investment retained;
• Recognises any surplus or deficit in profit or loss;
• Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained
earnings, as appropriate.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each
business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of
the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 13
2 ACCOUNTING PRINCIPLES (CONT’D)
2.4. Basis for consolidation (cont’d)
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree
is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will
be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to
be an asset or liability, will be recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. If
the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-
controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net
assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
2.5. Operating segments
Operating segment is a separated business constituent part, the business risks and profitability of which differ from other business constituent
parts. Chief executive officer of the Group is responsible for making strategic decisions for distribution of the Company’s resources and
evaluation of activity’s results of the segments.
The management of the Group has identified the following segments (Note 4):
▪ LNGT – LNG terminal in Klaipėda which receives and stores liquefied natural gas, regasifies and supplies it to Gas Main pipeline;
▪ OT – Oil terminal in Klaipėda and Subačius oil terminal in Kupiškis who are providing oil products transhipment, services of long-term
storage of oil products and other services related to oil products transhipment;
▪ comLNG – LNG commercial activities - includes LNG reloading station and execution of other LNG projects.
2.6. Investment in subsidiaries and associates
Investments in subsidiaries are carried at cost, less impairment in separate financial statements of the Company. The Company determines at
each reporting date whether there is any objective evidence that the investment in the subsidiary is impaired. If this is the case the Company
calculates the amount of impairment as the difference between the recoverable amount of the subsidiary and it’s carrying value and recognises
the amount in the profit (loss) in the statement of comprehensive income.
The Group and the Company accounts for investments in associates using the equity method. An associate is an entity in which the Group and
the Company has significant influence, but no control over the financial and operating policies. Significant influence is presumed to exist when
the Group and the Company holds between 20% and 50% of the voting rights of another company.
Under the equity method the investment in the associate is carried in the Statement of Financial position at cost plus post acquisition changes
in the Group’s and the Company’s share of the associate’s net assets. Goodwill relating to the associate is included in the carrying amount of
the investment and is neither amortised nor individually tested for impairment.
The share of profit (loss) of an associate is shown on the face of the statement of comprehensive income (loss).
The financial statements of the associate are prepared for the same reporting period as the Group and the Company. Where necessary,
adjustments are made to bring the accounting policies in line with those of the Group and the Company. After application of the equity
method the Group and the Company determines whether it is necessary to recognise an additional impairment loss on the investment in
associate. The Group and Company determines at each reporting date whether there is any objective evidence that the investment in the
associate is impaired. If this is the case the Group and the Company calculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value and recognises the amount in the caption “Share of the associate‘s profit or (loss)”
in the statement of comprehensive income.
Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s
and the Company’s interest to investee. Unrealized losses are eliminated the same way as unrealized gains, but only to the extent that there
is no evidence of impairment.
2.7. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at
cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either
finite or indefinite. The Group and the Company did not have assets with indefinite useful lives (as at 31 December 2021 and 31 December
2020). Intangible assets with finite lives are amortized over the useful economic lives of 3-15 years and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. Amortisation periods and methods for intangible assets with finite useful lives
are reviewed at least at each financial year-end. Calculation of amortization is discontinued as at the first day of the next month after the
disposal of asset or when the whole acquisition cost is expensed or reclassified as a part of another asset.
Costs associated with maintaining computer software programs are recorded as an expense as incurred.
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.8. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The initial cost of property, plant and
equipment comprises its purchase price, including non-refundable purchase taxes, capitalised borrowing costs and any directly attributable
costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after property, plant and equipment
have been put into operation, such as repair and maintenance costs, are normally charged to profit or loss in the period the costs are incurred.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
The useful lives, residual values and depreciation method are reviewed periodically to ensure that the period of depreciation and other
estimates including borrowing costs are consistent with the expected pattern of economic benefits from items of property, plant and
equipment. In case external and (or) internal impairment indications exist at the date of the statement of financial position, the Group and the
Company perform detailed impairment testing in order to ensure that property, plant and equipment are accounted for at value not higher
than their recoverable amount.
Construction-in-progress is stated at cost. This includes the cost of construction, plant and equipment and other directly attributable costs
including borrowing cost. Construction-in-progress is not depreciated until the relevant assets are completed and available for their intended
use. The Group and the Company determine at each reporting date whether there is any objective evidence that the construction-in-progress
is impaired. The Group and the Company calculate the amount of impairment for suspended construction-in-progress.
When property, plant and equipment are retired or otherwise disposed, the cost and related depreciation are removed from the financial
statements and any related gains or losses are included in the statement of comprehensive income. Gains and losses on disposal of property,
plant and equipment are determined as a difference between proceeds and the carrying amount of the property, plant and equipment
disposed and recorded in profit (loss).
Subsequent repair costs are included in the asset’s carrying amount, only when it is probable that future economic benefits associated with
the item will flow to the Group and the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other repair and maintenance costs are charged to profit or loss during the financial period in which they are incurred.
The estimated useful life (in years) of different groups of property, plant and equipment is as follows:
Group and Company
Description
Estimated useful life
Property, plant and equipment
Buildings and structures
10-60
Machinery, plant and equipment
5-55
Other non-current assets
4-15
2.9. Financial instruments
Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another
entity.
i) Financial assets
Initial recognition and measurement
The Group and the Company qualify financial assets to one of the following categories:
- measured at amortised cost;
- measured at fair value through other comprehensive income (FVOCI) – debt instruments;
- measured at fair value through other comprehensive income (FVOCI) – equity instruments;
- measured at fair value through profit or loss (FVTPL).
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s
and the Company’s business model for managing them. Except for trade receivables that do not contain a significant financing component,
the Group and the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs. Trade receivables that do not contain a significant financing component are measured at the transaction price
determined under IFRS 15.
For a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely
payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed
at an instrument level.
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.9. Financial instruments (cont’d)
The Group’s and the Company’s business model for managing financial assets refers to how the Company manages its financial assets to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial
assets, or both.
A regular way purchases or sales of financial assets are recognised on the trade date, i.e., the date that the Company commits to purchase or
sell the asset.
Subsequent measurement
After initial recognition, the Group and the Company measures a financial asset at:
• Amortised cost;
• Fair value through OCI with recycling of cumulative gains and losses upon derecognition (debt instruments). The Company did not
have such items as at 31 December 2021 and 2020;
• Fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments). The Company
did not have such items as at 31 December 2021 and 2020;
• Fair value through profit or loss. The Company did not have such items as at 31 December 2021 and 2020.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group and the Company. The Group’s and the Company’s financial assets at amortised cost
includes trade, other current and non-current receivables and contract assets. The Group and the Company measures financial assets at
amortised cost if both of the following conditions are met and is not designated as of FVTPL:
• The financial asset is held within a business model with the objective to hold financial assets to collect contractual cash flows; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains
and losses are recognised in the statement of comprehensive income when the asset is derecognised, modified or impaired.
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
• Trade receivables and contract assets (Notes 7 and 8).
The Group and the Company performs the assessment for all debt instruments on an individual basis. The management considers a financial
asset in default (credit impaired) when contractual payments are long overdue due or when indications exist that the debtors or a group of
debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with defaults. The lifetime expected credit losses of loans
receivable and trade receivables is recognised in profit or loss through the contrary account of doubtful receivables A financial asset is written
off when there is no reasonable expectation of recovering the contractual cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss (FVTPL) or at amortised costs.
Financial liability is classified as of FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition.
Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign
exchange gains and losses are recognised in profit or loss in the statement of other comprehensive income.
The Group’s and the Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and
finance lease liabilities, as well as derivative financials instruments.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently
enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, i.e. to realize the assets and settle
the liabilities simultaneously.
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STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.9. Financial instruments (cont’d)
iv) Derivative financial instruments and hedge accounting
The Group and the Company holds derivative financial instruments to hedge its foreign currency risk exposures. Embedded derivatives are
separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met. Derivatives
are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally
recognised in profit or loss in the statement of other comprehensive income.
2.10. Derecognition of financial instruments
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e.,
removed from the Group’s and the Company’s statement of financial position) when:
i) The contractual rights to receive cash flows from the asset have expired; or
ii) The Group and the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the
Group/Company has transferred substantially all the risks and rewards of the asset, or (b) the Group/Company has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group and the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group and the Company continues to recognise
the transferred asset to the extent of its continuing involvement. In that case, the Group and the Company also recognises an associated
liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company
has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount
of the asset and the maximum amount of consideration that the Group and the Company could be required to repay (amount of the guarantee).
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability at fair
value, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.
2.11. Employee benefits
Social security contributions
The Group and the Company pays social security contributions to the State Social Security Fund (hereinafter the Fund) on behalf of its
employees based on the legally defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a
plan under which the Group and the Company pays fixed contributions into the Fund and will have no legal or constructive obligations to pay
further contributions if the Fund does not hold sufficient assets to pay all employees benefits related to employee service in the current and
prior period. The social security contributions are recognised as an expense on an accrual basis and are included within staff costs.
Non-current employee benefits
The past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. Any
gains or losses appearing as a result of curtailment and/or settlement are recognised in the statement of comprehensive income as incurred.
The past service costs are recognized in the statement of comprehensive income as incurred.
The above-mentioned employee benefit obligation is calculated based on actuarial assumptions, using the projected unit credit method.
Obligation is recognized in the statement of financial position and reflects the present value of these benefits on the preparation date of the
statement of financial position. Present value of the non-current obligation to employees is determined by discounting estimated future cash
flows using the discount rate which reflects the interest rate of the Government bonds of the same currency and similar maturity as the
employment benefits. Actuarial gains and losses are recognized in the statement of other comprehensive income as incurred.
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.12. Inventories
Inventories are stated at the lower of cost and net realisable value. Net realizable value is estimated taking the selling price in the ordinary
course of business, less the costs of completion, marketing and distribution. The cost of inventories consists of purchase price, transport, and
other costs directly attributable to the cost of inventories. The costs of inventories are determined by the first-in, first-out (FIFO) method.
2.13. Cash and cash equivalents
Cash includes cash in bank accounts. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts
of cash with original maturities of three months or less and that are subject to an insignificant risk of change in value (Note 11).
For the purposes of the cash flow statement, cash and cash equivalents comprise cash, deposits held at call with banks, and other short-term
highly liquid investments with maturities of less than three months.
2.14. Short term deposits
Short term deposits include short-term bank deposits at the commercial banks with maturity of more than 3 months. Initially short-term bank
deposits are recognised at cost. Subsequently short-term deposits are stated at acquisition cost less any allowance for impairment.
2.15. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
The borrowing costs, which represent a part of the cost price of a qualifying asset, the Group and the Company begins to capitalize from the
start of construction. Capitalization start is considered to be the day when the company meets the following conditions for the first time: incurs
costs in respect of the asset, incurs borrowing costs, carries out activities required to prepare the asset for its intended use or sale.
The Group and the Company discontinues the capitalization of borrowing costs when virtually all the activities necessary to prepare a qualifying
asset for its intended use or sale have been completed. Commonly, an asset is prepared for its intended use or sale when its physical
construction has been completed, even if the routine administrative work is still carried out. Although small changes are still possible, such as
finishing of the asset in accordance with the instructions of a purchaser or user, it indicates that, essentially, all the activities have already been
completed.
During the year 2021 and 2020 the Group and the Company did not capitalize borrowing costs due to the reason that all outstanding
borrowings were related to assets which were not qualifying for borrowing costs capitalization in accordance with IAS 23.
2.16. Lease
At inception of contract, a Group and the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use if an identified asset for a period of time in exchange in consideration.
The Group and the Company as a lessee
At commencement or on modification of a contract that contains a lease component the Group and the Company allocates the consideration
in the contract to each lease component on the basis of its relative stand-alone prices.
The Group and the Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term,
unless the lease transfers ownership of the underlying asset to the Group and the Company by the end of the lease term or the cost of the
right-of-use asset reflects that the Group and the Company will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition,
the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group‘s and the Company’s incremental borrowing
rate. Generally, the Group and the Company uses its incremental borrowing rate as the discount rate.
The Group and the Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources
and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
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STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.16. Lease (cont’d)
- Fixed payments, including in-substance fixed payments;
- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as of the commencement date;
- Amounts expected to be payable under a residual value guarantee; and
- The exercise price under a purchase option that the Group and the Company is reasonably certain to exercise, lease payments in an
optional renewal period if the Group and the Company is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Group and the Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in the future lease
payments arising from a change in an index or rate, if there is a change in the Group‘s and the Company’s estimate of the amount expected
to be payable under a residual value guarantee, if the Group and the Company’s changes its assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group and the Company presents right-of-use assets that do not meet the definition of investment property in `Right-of-use assets’ and
lease liabilities in `lease liabilities` in the statement of financial position.
Short-term leases and leases of low-value assets
The Group and the Company has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term
leases, including IT equipment. The Group and the Company recognises the lease payments associated with the leases as an expense on a
straight-line basis over the lease term.
The Group and the Company as a lessor
At inception or on modification of a contract that contains a lease component, the Group and the Company allocates the consideration in the
contract to each lease component based on their relative stand-alone prices.
When the Group and the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Group and the Company makes an overall assessment of whether the lease transfers substantially all the risks and
rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.
As part of this assessment, the Group and the Company considers certain indicators such as whether the lease is for a major part of the
economic life of the asset.
When the Group and the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It
assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the
underlying asset. If a head lease is a short-term lease to which the Group and the Company applies the exemption described above, then it
classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group and the Company applies IFRS 15 to allocate the consideration
in the contract.
2.17. Income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid
to the taxation authorities, also including adjustments in respect of prior years. The tax rates used to compute the amount are those that are
enacted by the date of the Statement of Financial position.
Income tax charge is based on profit for the year and considers deferred taxation. Income tax is calculated based on the Lithuanian tax
legislation.
The standard corporate income tax rate in the Republic of Lithuania is 15% as at 31 December 2021 and 31 December 2020. The Group’s
subsidiary KN Açu Serviços de Terminal de GNL Ltda applies Brazilian Tax System and subsidiary´s administration has elected the Real Profit
Regime that is calculated on quarterly basis. The official rates are 25% for Income tax and 9% Social Contribution on Net Profit.
As to Law on Corporate Income Tax of the Republic of Lithuania starting from 1 January 2014 deductible tax losses carried forward can be
used to reduce the taxable income earned during the reporting year by maximum 70%. Tax losses can be carried forward for indefinite period,
except for the losses incurred as a result of disposal of securities and/or derivative financial instruments. Such carrying forward is disrupted if
the Group and the Company stops its activities due to which these losses were incurred except when the Group and the Company does not
continue its activities due to reasons which do not depend on the Company itself.
The losses from disposal of securities and/or derivative financial instruments can be carried forward for 5 consecutive years and only be used
to reduce the taxable income earned from the transactions of the same nature.
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STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.17. Income tax (cont’d)
Deferred income tax is recognized in respect to temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to reverse based on tax rates enacted or substantively enacted at reporting date.
A deferred tax asset is recognised in the Statement of Financial position to the extent the management of the Group and the Company believes
it will be realised in the foreseeable future, based on taxable profit forecasts. If it is believed that part of the deferred tax asset is not going to
be realised, this part of the deferred tax asset is not recognised in the financial statements.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against
current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
2.18. Dividends
Dividends are recorded in the financial statements when they are declared by the Annual General Shareholders’ Meeting.
2.19. Basic and diluted earnings per share
Basic earnings per share are calculated by dividing the net profit attributable to the shareholders by the weighted average of ordinary
registered shares issued. Provided that the number of shares changes without causing a change in the economic resources, the weighted
average of ordinary registered shares is adjusted in proportion to the change in the number of shares as if this change took place at the
beginning of the previous period presented. Since there are no instruments reducing profit (loss) per share, there is no difference between the
basic and diluted earnings per share (Note 24).
2.20. Provisions
General
Provisions are recognised when the Group and the Company has a present legal or constructive obligation in respect of past events and it is
probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Where the Group
and the Company expects the provision to be reimbursed the reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. Expenses related to provisions are recorded in the statement of comprehensive income.
Greenhouse gas (GHG) emissions
The Company applies a 'net liability' approach in accounting for the emission rights received. It records the emission allowances granted to it
at a nominal (null) amount, as it is allowed by IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”. Liabilities
for emissions are recognised only as emissions are made (i.e. provisions are never made on the basis of expected future emissions) and only
when the reporting entity has made emissions in excess of the rights held. Costs of allowances are recorded under cost of sales caption in the
other comprehensive income.
2.21. Deferred government grants
Asset-related grants
Asset-related government and the European Union grants and third-party compensations comprise grants received in the form of non-current
assets or intended for the acquisition of non-current assets. Grants are initially recognised at fair value of the asset received and subsequently
accounted for in the statement of comprehensive income by reducing the depreciation charge of related asset over the expected useful life of
the asset.
The Group and the Company
2021
2020
Balance as at 1 January
5,817
5,988
Received during the year
302
223
Amortisation
(348)
(394)
Balance as at 31 December
5,771
5,817
Amortisation of grants related to assets of EUR 348 thousand for 2021 (EUR 394 thousand for 2020) has been included into cost of sales in the
statement of comprehensive income.
The Group and the Company has no unfulfilled conditions or contingencies attached to these grants as at 31 December 2021 and as at 31
December 2020.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.21. Deferred government grants (cont’d)
Income-related grants
Government and the European Union grants received as a compensation for the expenses or unearned income of the current or previous
reporting period, also, all other grants, which are not asset-related grants, are treated as income-related grants. The income-related grants are
recognised as used in parts to the extent of the expenses incurred during the reporting period or unearned income to be compensated by
that grant. These grants are recognised in the statement of comprehensive income, net of related expenditure.
2.22. Revenue recognition
Revenue from Contracts with Customers
The Group and the Company recognizes revenue at the time and to the extent that the transfer of goods or services to customers would reflect
an amount that the Group and the Company expects to receive in exchange for those goods or services. In applying this Standard, the Group
and the Company considers the terms of the contract and all relevant facts and circumstances. Revenue is recognized using the 5-step model:
Step 1 – Identification of the contract with the customer.
The contract acknowledges an agreement between two or more parties (subject to purchase / sale conditions) that creates enforceable rights
and enforceable obligations (not applicable if a joint venture agreement is signed).
A contract that is subject to IFRS 15 is recognized only if the following criteria are met:
• the parties have approved the contract (in writing, orally or in accordance with other usual business practices) and are bound by the
obligations under the contract,
• there is a possibility to identify the rights of each party in respect of the goods and / or services to be transferred,
• there is a possibility of identifying the payment terms provided for the goods and / or services to be transferred,
• the contract is of a commercial nature,
• there is a possibility of getting a reward in return for the goods and / or services that will be transferred to the customer.
Contracts with the customer may be combined or separated into several contracts, while retaining the criteria of the former contracts. Such
interconnection or separation is considered a change of contract.
Step 2 – Identification of operational commitments in the contract.
The contract establishes a commitment to deliver goods and / or services to the customer. When goods and / or services can be distinguished,
liabilities are recognized separately. Each commitment is identified in one of two ways:
• the product and / or service is separate, or
• a set of individual goods and / or services that are essentially the same and passed on to the customer in a uniform model.
Step 3 – Determination of a transaction price.
The Group and the Company considers the terms of the transaction and the usual business practices. The transaction price is the amount of
consideration that the Group and the Company expects to receive after delivering promised goods and services to the Customer, except for
amounts collected on behalf of third parties. The fee provided for in a contract with a client may include fixed amounts, variable amounts, or
both.
Step 4 – The transaction price is attributable to the contractual performance obligations.
The Group and the Company attributes the portion of the transaction price to each operating obligation in an amount that reflects the amount
of consideration to which the Group and the Company expects to be entitled in exchange for the promised goods or services transferred to
the customer. The transaction price is allocated to each operating obligation based on the relative individual selling prices of the good or
service promised in the contract. If the contract does not specify the price of the service or product separately (for example, one price for two
products), the Group and the Company determines it. Similar transactions are treated equally.
Step 5 – Revenue is recognised when the Group and the Company performs operating obligations.
Revenue is recognised when the operating obligation is settled by the transfer of goods or services to the customer (i. e. the customer acquires
control over the mentioned goods or services). Revenue is recognized as an amount equal to the transaction price that was determined for
the respective operating obligation. The recognised amount of revenue is attributed to the settled liability that can be settled at a particular
point of time or over a period.
Revenue is recognized when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated
with the transaction will flow to the Company, and when specific criteria have been met for each type of income. The Company relies on
historical results, considering the customer type, the transaction type and the terms of each agreement.
Revenue is recognised by classifying it as per customer contracts, other income and finance income.
Revenue from contracts with clients is only recognized when the control of goods or services is transferred to the client to the extent that
reflects the remuneration which the Group and the Company expects to receive in return for these goods or services.
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STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
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2 ACCOUNTING PRINCIPLES (CONT’D)
2.22. Revenue recognition (cont’d)
The Group and Company has following main revenue streams (Note 19):
- Income from LNGT services (47% from total sales revenue in 2021, 46% in 2020)
One performance obligation exists – to ensure the compensation of for all fixed operating costs of LNGT infrastructure. The Group and the
Company acts as a principal in service provision. Revenues are recognized at the over the point of time when the services were rendered based
on amount collected from the users of the natural gas transmission system due to the following reasons:
✓ The Group and the Company has a present right to payment for the rendered LNGT services;
✓ Significant risks and rewards of ownership have been transferred to the client;
✓ The client has accepted the service.
- Oil products transhipment services (33% from total sales revenue in 2021, 35% in 2020)
One performance obligation exists – to provide oil product loading service for which the loading rate is specified. Company acts as a principal
in service provision. Revenues are recognized over time due to the following reasons:
✓ By providing the services of loading of oil products, the Group and the Company does not create an alternative use of the assets,
which it could sell as goods.
✓ The Group and the Company shall have the unconditional refund right for the performed share of production. In the event the client
does not perform or is behind the schedule in performing his obligations, the Company, having notified the client, has the right to
suspend the provision of services and/or to detain the oil products within the terminal until the client’s obligations are fulfilled. All
the consequences and losses arising from the detention of oil products and/or suspension of the provision of services shall be borne
by the client.
✓ With the client’s delay in dispatching the oil products from the terminal, additional storage fees shall be applied. This way the Group
and the Company shall not only compensate the expenses of storage of oil products, but also obtain income.
✓ In the event the client terminates the agreement in a unilateral manner, he usually must pay the take-or-pay fee, if such was specified
in the contract, or the difference in the oil product quantity between the planned minimum annual amount of reload and the
reloaded amount.
Calculation of percentage of completeness of performance obligation already satisfied at year end is calculated in the following way. The
Group and the Company recognises revenues from oil transhipment taking into account the level of fulfilment of a service. The level of service
provided is measured as percentage of transhipment cost expenses from the total cost of services. In the case reliable evaluation of the service
agreement is impossible, the revenues are recognised only as a part of expenses incurred that can be recoverable. Service provided at certain
level of completion is already received and consumed by the customer and the customer benefits from it (it would not incur the whole loading
service cost in service reperformance case), therefore management believes that percentage of completion accounting method applied by the
Group and the Company is in line with IFRS 15 requirements.
- Income from other LNG terminal activities (15% from total sales revenue in 2021, 15% in 2020). Main source of other LNG
terminal activities income:
• Small-scale LNG reloading station in Klaipėda:
Small-scale LNG reloading station activities have one performance obligation exists – to provide LNG reloading station services. Company
acts as a principal in service provision. Revenues are recognized over the point of time when services are rendered.
✓ The Group and the Company has a present right to payment for the rendered LNG reloading station services;
✓ Significant risks and rewards of ownership have been transferred to the client;
✓ The client has accepted the service.
• Operation of LNG terminal in Açu port in Brazil:
Operation of LNG terminal in Açu port in Brazil has one performance obligation exists – to provide LNG terminal management and operation
services. Company acts as a principal in service provision. Revenues are recognized over the point of time based on services provided.
✓ The Group and the Company has a present right to payment for the rendered LNG terminal operation services;
✓ Significant risks and rewards of ownership have been transferred to the client;
✓ The client has accepted the service.
- Other activities
Revenues from other activities consist of sales of goods and other services rendered (mainly storage of oil products, consulting services). The
Group and the Company acts as a principal in service provision. Revenues from sales of goods are recognized when the control of the goods
is passed to customer (at point in time), revenues from other services – when the services are provided (over the point in time).
Revenues are recorded in the statement of comprehensive income under the item “Revenues from contracts with customers”, and the assets
resulting from contracts with customers are accounted for as short-term assets under the item “contract assets” in the statement of financial
position. Related costs are accounted for in the statement of comprehensive income under the item “Cost of sales”.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 22
2 ACCOUNTING PRINCIPLES (CONT’D)
2.22. Revenue recognition (cont’d)
Due to the Group’s and the Company’s business nature the management did not make any other significant accounting judgments, estimates
or assumptions relating to revenue from contracts with customers recognition except for take or pay transactions described below.
Take-or-Pay
The Company calculates monthly, quarterly or annual Take-or-Pay fees to certain customers once the loading quantities specified in the
contract with customer are not achieved. Since the most probable loading quantity is agreed with the customer in the contract and only due
to certain unforeseen circumstances arisen in the market, the loading quantity cannot be reached. Take-or-Pay is calculated at the period-end.
There is no significant impact on financial statements for year ended 31 December 2021 as no significant Take or-Pay transactions occurred
in 2021 and 2020.
Contract assets – accrued income
Contract assets mean the right to the remuneration for goods or services, which were delivered or provided to the client, but not invoiced yet.
If the Company renders services to the Client before the Client pays for these services or before the payment term, the contractual assets are
calculated by the amount equal to the earned contingent remuneration. The assets resulting from contracts with clients, i.e. the accumulated
income, after all the contractual obligations are fulfilled and the invoice is issued, are recognised as a trade receivable.
Contract liabilities – prepayments received
Contract liabilities include advances received from customers for services to be delivered in the future. Contract liabilities also include interest
and fees paid by AB Ambergrid on behalf of AB Achema (as disclosed in Note 27).
Income from liquefied natural gas terminal services regulated by National Energy Regulatory Council
Income from LNGT services are regulated by NERC. Based on LNG terminal law clause 5.2, all users of the natural gas transmission system,
including final consumers, are obliged to pay the Additional Security supplement together with their other payments for the natural gas
transmission service.
The revenue of the LNG terminal activity comprises from: i) LNG regasification tariff; ii) LNG reloading tariff and iii) liquefaction price fixed part
which is collected through additional security supplement to the natural gas transmission price (hereinafter – LNG security supplement).
Regasification and reloading revenue are collected directly from the clients after services are provided based on quantities. For the actual
tariffs see the LNGT services in the annual report. The LNG security supplement is collected by the transmission service operator (hereinafter
referred to as “TSO”) either directly from the user or from suppliers of natural gas in case the user has no direct contractual obligations with
the TSO. The additional Security Supplement is calculated by the NERC on an annual basis in proportion to the planned natural gas
consumption capacities as set out in National legislation in relation to gas market.
Prices set for the LNGT services for the year 2021 and 2020:
• LNG regasification service price fixed part is approved by the NERC based on LNG regasification service price cap set by NERC:
- price of variable part for the year 2021 set by the resolution No. O3E-1207 on 23 November 2020, is 0.41 EUR/MWh
- price of variable part for the year 2020 set by the resolution No. O3E-724 on 15 November 2019, is 0.35 EUR/MWh
• NERC on 23 November 2020 adopted decision on reloading service prices for the year 2021. Differentiated LNG reloading tariff was
set based on size of LNG cargos to be reloaded (general tariff 1.11 EUR/MWh in 2020):
• Small scale cargos up to 15,000 m3 LNG – 0.53 EUR/MWh;
• Medium scale cargos from 15,000 up to 50,000 m3 LNG – 0.41 EUR/MWh;
• Large scale cargos from 50,000 m3 LNG – 0.30 EUR/MWh.
• LNG regasification service price fixed cap is being adjusted on yearly basis.
Sales of goods
Revenues from sales of goods are recognised upon delivery and transfer of risks of products and customer acceptance.
Interest income
Interest income is recognised in profit (loss) on accrual basis (using the effective interest rate method).
Dividend income
Dividend income represents gross dividends from investment and recognised when the shareholder’s rights to receive payment is established.
Rent income
Rent income is recognised over the lease term on a straight-line basis.
Income from fines and penalties
Income from fines and penalties is recognized when the Company has evidence that fines and penalties will be received and the probability
that it would not be received is low or when money is already received.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 23
2 ACCOUNTING PRINCIPLES (CONT’D)
2.23. Expenses recognition
Expenses are recognised based on accrual and revenue and expense matching principles in the reporting period when the income related to
these expenses was earned, irrespective of the time the money was spent. In those cases when the costs incurred cannot be directly attributed
to the specific income and they will not bring income during the future periods, they are expensed as incurred.
The amount of expenses is usually accounted for as the amount paid or due, excluding VAT. In the cases when a long period of payment is
established and the interest is not distinguished, the amount of expenses shall be estimated by discounting the amount of payment using the
market interest rate.
2.24. Impairment of non-financial assets
The Group and the Company reviews at least at each reporting date the carrying amounts of non-financial assets, excluding inventories and
deferred income tax assets, to assess whether an indication of impairment exists. If such indication exists, the Company estimates the asset’s
recoverable amount.
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount of an asset may
not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the profit
(loss). Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised
for the asset no longer exist or have decreased. The reversal is accounted in the same caption of the profit (loss) as the impairment loss.
Recoverable amount of an asset or cash-generating unit is its value in use or fair value less costs to sell depending on which is greater. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
For impairment testing the asset that cannot be assessed individually is grouped into the minimum asset’s group generating cash inflows
during continuous use and that is independent from other asset or asset’s groups generating cash flows (cash generating unit or CGU).
Where the carrying amount of an asset exceeds its recoverable amount the impairment loss is recognised in the profit (loss). Impairment losses
related to the value of CGU are proportionally attributed to decrease the carrying amount of the asset, prescribed to the unit (unit group).
Previously recognised impairment losses are reversed only if there is any indication that such losses no longer exist or have decreased. The
reversal is limited so that the carrying amount of the asset does not exceed the carrying amount that would have been determined net of
depreciation or amortisation had no impairment loss been recognised for the asset in prior years. The reversal is accounted in the same caption
of the profit (loss) as the impairment loss.
2.25. Use of estimates and judgements
The preparation of the financial statements in accordance with IFRS as adopted by the EU, requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from the estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
Significant accounting judgements
Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the
financial statements is included in the following notes:
- Lease term: whether the Group and the Company is reasonably certain to exercise the option to purchase FSRU (Note 14)
- Provision for acquisition of emission allowances (Note 16);
- The deferred tax (Note 23).
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties as at 31 December 2021 that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the following notes:
- Impairment evaluation of property, plant and equipment and right of use asset: key assumptions underlying recoverable amounts
of identified cash generating units (Note 3);
- Useful life of property, plant and equipment and intangible assets (Note 3);
- Residual value and useful life of FSRU (Note 3);
- Impairment evaluation of investments to subsidiaries: key assumptions underlying recoverable amounts (Note 5);
- Net realisable value of inventory (Note 6)
- Assessment of expected credit losses and impairment losses on receivable amounts: key assumptions determining the impairment
allowance (Note 7);
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 24
2 ACCOUNTING PRINCIPLES (CONT’D)
2.25. Use of estimates and judgements (cont’d)
- Recognition of deferred tax assets: availability of future taxable profit against which deductible temporary differences and tax losses
carried forward can be utilized (Note 23);
- Measurement of non-current employee benefits: key actuarial assumptions (Note 13);
- Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow
of resources (Note 27).
2.26. Contingencies
Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources
embodying economic benefits is remote.
A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable.
2.27. Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a
loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial
guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance
of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present
obligation at the reporting date and the amount recognised less cumulative amortisation.
2.28. Subsequent events
Subsequent events that provide additional information about the Company’s position at the date of the statement of financial position
(adjusting events) are reflected in the financial statements. Subsequent events that are not adjusting events are disclosed in the notes if
material (Note 29).
2.29. Offsetting
When preparing the financial statements, assets, and liabilities, as well as income and expenses are not set off, except the cases when certain
International Financial Reporting Standard specifically allows such set-off.
2.30. Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (Note 26).
However, the objective of a fair value measurement in both cases is the same: to estimate the price at which an orderly transaction to sell the
assets or to transfer the liability would take place between market participants at the measurement date under current market conditions (i.e.,
an ultimate price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
In determining the fair value of non-financial assets, market participant’s ability to derive economic benefit from the assets in using it in the
highest and best use or selling the asset to another market participant, who would use it according to the highest and best use, is considered.
In determining the fair value, a business entity should determine all the following:
▪ the specific assets or liability, the fair value of which is determined (together with the appropriate unit of account);
▪ when non-financial asset is valuated, the valuation assumption, which is fit for the purpose of determining the fair value (along with the
corresponding highest and best use of the non-financial asset);
▪ the principal (or most advantageous) market for the assets or liability;
▪ the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that
represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy
within which the inputs are categorised.
The objective of using a valuation technique is to estimate the price at which an orderly transaction to sell the assets or to transfer the liability
would take place between market participants at the measurement date under current market conditions. Three widely used valuation
techniques are the market approach, the cost approach and the income approach.
Market approach. A valuation technique that uses prices and other relevant information generated by market transactions involving identical
or comparable (i.e., similar) assets, liabilities or a group of assets and liabilities, such as a business.
Cost approach. A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset
(often referred to as current replacement cost).
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 25
2 ACCOUNTING PRINCIPLES (CONT’D)
2.30. Fair value (cont’d)
Income approach. Valuation techniques that convert future amounts (e.g., cash flows or income and expenses) to a single current (i.e.,
discounted) amount. The fair value measurement is determined based on the value indicated by current market expectations about those
future amounts.
Fair value hierarchy. To increase consistency and comparability in fair value measurements and related disclosures, the IFRS 13 establishes a
fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value.
Level 1 inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date.
Level 2 inputs. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly.
Level 3 inputs. Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group and the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing classification (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each reporting period.
3 PROPERTY, PLANT AND EQUIPMENT
GROUP
Land
Buildings
and
structures
Machinery,
plant and
equipment
Other non-
current
assets
Construction
in progress
Total
Acquisition cost
Balance as at 31 December 2019
38
163,502
177,677
21,520
34,696
397,433
Acquisitions
-
25
157
754
5,913
6,849
Advance payments
-
-
-
7
-
7
Retirements and disposals
-
-
(1,613)
(312)
-
(1,925)
Transfers from inventories
-
-
-
-
7
7
Reclassification of stock
-
18,129
12,669
3,646
(34,444)
-
Transfers from construction in progress
-
-
-
-
(134)
(134)
Transfer to inventory
-
-
-
-
(82)
(82)
Effect of foreign currency translation
-
-
(2)
(9)
-
(11)
Balance as at 31 December 2020
38
181,656
188,888
25,606
5,956
402,144
Acquisitions
-
374
250
613
7,473
8,710
Advance payments
-
-
-
-
225
225
Retirements and disposals
-
(39)
(232)
(204)
-
(475)
Transfer from construction in progress
-
81
185
41
(307)
-
Transfer from construction in progress to
intangible assets
-
-
-
-
(98)
(98)
Effect of foreign currency translation
-
-
1
-
-
1
Balance as at 31 December 2021
38
182,072
189,092
26,056
13,249
410,507
Accumulated depreciation and impairment:
Balance as at 31 December 2019
-
79,488
97,038
12,871
212
189,609
Depreciation for the year
-
4,596
5,990
1,641
-
12,227
Retirements and disposals
-
-
(1,610)
(310)
-
(1,920)
Impairment for the year (reversal)
-
-
-
-
384
384
Effect of foreign currency translation
-
-
-
(1)
-
(1)
Balance as at 31 December 2020
-
84,084
101,418
14,201
596
200,299
Depreciation for the year
-
4,308
5,494
1,606
-
11,408
Retirements and disposals
-
(9)
(168)
(172)
-
(349)
Impairment for the year (reversal)*
-
26,796
16,308
1,885
3,473
48,462
Effect of foreign currency translation
-
-
1
-
-
1
Balance as at 31 December 2021
-
115,179
123,053
17,520
4,069
259,821
Net book value as at 31 December 2019
38
84,014
80,639
8,649
34,484
207,824
Net book value as at 31 December 2020
38
97,572
87,470
11,405
5,360
201,845
Net book value as at 31 December 2021
38
66,893
66,039
8,536
9,180
150,686
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 26
3 PROPERTY, PLANT AND EQUIPMENT (CONT’D)
COMPANY
Land
Buildings
and
structures
Machinery,
plant and
equipment
Other non-
current
assets
Construction
in progress
Total
Acquisition cost
Balance as at 31 December 2019
38
163,502
177,677
21,520
34,696
397,433
Acquisitions
-
25
123
637
5,913
6,698
Advance payments
-
-
-
7
-
7
Retirements and disposals
-
-
(1,613)
(312)
-
(1,925)
Transfers from inventories
-
-
-
-
7
7
Reclassification of stock
-
18,129
12,669
3,646
(34,444)
-
Transfers from construction in progress
-
-
-
-
(134)
(134)
Transfer to inventory
-
-
-
-
(82)
(82)
Balance as at 31 December 2020
38
181,656
188,856
25,498
5,956
402,004
Acquisitions
-
374
236
602
7,473
8,685
Advance payments
-
-
-
-
225
225
Retirements and disposals
-
(39)
(232)
(204)
-
(475)
Transfer from construction in progress
-
81
185
41
(307)
-
Transfer from construction in progress to
intangible assets
-
-
-
-
(98)
(98)
Balance as at 31 December 2021
38
182,072
189,045
25,937
13,249
410,341
Accumulated depreciation and impairment:
Balance as at 31 December 2019
-
79,488
97,038
12,871
212
189,609
Depreciation for the year
-
4,596
5,987
1,629
-
12,212
Retirements and disposals
-
-
(1,610)
(310)
-
(1,920)
Impairment for the year (reversal)
-
-
-
-
384
384
Balance as at 31 December 2020
-
84,084
101,415
14,190
596
200,285
Depreciation for the year
-
4,308
5,486
1,584
-
11,378
Retirements and disposals
-
(9)
(168)
(172)
-
(349)
Impairment for the year (reversal)
-
26,796
16,308
1,885
3,473
48,462
Balance as at 31 December 2021
-
115,179
123,041
17,487
4,069
259,776
Net book value as at 31 December 2019
38
84,014
80,639
8,649
34,484
207,824
Net book value as at 31 December 2020
38
97,572
87,441
11,308
5,360
201,719
Net book value as at 31 December 2021
38
66,893
66,004
8,450
9,180
150,565
The Group’s and the Company’s depreciation of property, plant and equipment amounts to EUR 11,408 thousand and EUR 11,378 thousand
for the year 2021, respectively (EUR 12,227 and 12,212 thousand – in 2020). In 2021 the depreciation EUR 348 thousand was reduced by
amortisation of related grant (EUR 394 thousand – in 2020). EUR 11,199 thousand and EUR 11,169 thousand of depreciation charge has been
included into cost of sales of the Group and the Company, respectively (EUR 11,955 and 11,940 thousand – in 2020). The remaining amount
EUR 209 thousand (EUR 272 thousand – in 2020) has been included into operating expenses in the Statement of comprehensive income of
both, the Group and the Company.
Part of the Group’s and the Company’s property, plant and equipment with the acquisition cost of EUR 40,537 thousand as at 31 December
2021 was completely depreciated (EUR 40,019 thousand on 31 December 2020), however, it was still in operation.
The Group’s and the Company‘s property, plant and equipment attributed to Liquefied natural gas terminal (net book value amounted to
EUR 43,353 thousand) was pledged to the Ministry of Finance of Republic of Lithuania for the state guarantee, given to European Investment
Bank (hereinafter – EIB) and Nordic Investment Bank (hereinafter – NIB) as at 31 December 2021 (net book value amounted to EUR 43,274
thousand as at 31 December 2020).
The Group’s and the Company's property, plant and equipment attributed to Subačius oil terminal, with net book value amounting to EUR
4,483 thousand, was pledged to the Ministry of Finance of the Republic of Lithuania for the state guarantee, given to NIB as at 31 December
2021 (net book value of pledged property, plant and equipment amounted to EUR 4,807 thousand as at 31 December 2020).
The management of the Group and the Company has assessed the internal and external indications of impairment for property, plant and
equipment as at 31 December 2021 and 31 December 2020:
- Analysis showed that there were impairment indications of property, plant and equipment attributed to LNG reloading station as at
31 December 2020 due to loss making activities. The estimated recoverable amount of the assets exceeded carrying amount as at
31 December 2020.
- Due to uncertainty in regional LNG market development and LNG reloading station operation extent after the end of long-term
capacity rent agreement the management of the Group and the Company performed an impairment test as at the end of the year
2021. Based on the results of the test no impairment were recognised as at 31 December 2021.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 27
3 PROPERTY, PLANT AND EQUIPMENT (CONT’D)
- Net book value of property, plant and equipment and right of use asset attributed to LNG reloading station amounted to EUR 24,787
thousand as at 31 December 2021 (EUR 26,336 thousand as at 31 December 2020);
- As at 31 August 2021 the management of the Group and the Company identified that there are indications that property, plant and
equipment and right-of-use asset attributed to oil terminal (OT) segment in Klaipėda might be impaired. Accordingly, impairment
loss was recognised as of this date as described below. As at 31 December 2021 no indications for additional impairment (or reversal
of the recognised) were identified. Net book value of assets attributed to OT segment amounted to EUR 91,024 thousand as at 31
December 2021 (EUR 140,329 thousand as at 31 December 2020).
Impairment of property, plant and equipment and right of use asset attributed to Klaipėda oil terminal assets
During 2021, the Group’s and the Company’s management carried out an impairment test in order to determine whether Klaipėda oil terminal
CGU’s recoverable amount may differ from its carrying amount. The recoverable amount of CGU has been determined at the higher of an
asset's fair value less costs of disposal and its value in use. Independent valuator carried out fair value less cost of disposal valuation of Klaipėda
oil terminal CGU as of 31 August 2021. Based on the impairment testing procedures performed it was identified that the value in use is higher
and set as a recoverable amount.
Main indicators for performing impairment test and reassessing possible impairment indications within the Group and the Company are related
to a complex of risks that have materialized throughout the year and are expected to significantly impact future cashflows of CGU of Klaipėda
oil terminal:
- Due to sanctions to Belarus introduced by Council Regulation (EU) 2021/1030 of 24th June 2021 no more transit of oil products
flows from Belarus are possible and not expected in the future.
- KN client AB Orlen Lietuva plans to invest into deeper crude oil processing. Implementation of mentioned project would enable
client to refine higher portion of lighter petroleum products to replace high-sulphur residue products, which currently makes a
signification portion of oil products, transshipped via Klaipėda oil terminal.
Subsequently after occurrence of the abovementioned events, the Management of the Group and the Company has revised the projections of
future cash flows of Klaipėda oil terminal. Value-in-use assessment cash-flow projections were based on the long-term financial plan and
assumptions that were aligned with the Group’s and the Company’s Board in August 2021.
CGU’s cash-flows were projected for the period of 2022-2047 based on estimated remaining useful life of key assets. Additionally, segment is
operating in asset-heavy and stable industry, relying on long-term contracts, allowing to execute long term cash flow projections. Overall oil
product transshipment was expected to increase by 9 percent by 2025, compared to quantity forecasted for 2021, and drop by 23 percent
after expected implementation of AB Orlen Lietuva investment. Oil product transshipment during the period of 2027-2030 was expected to
remain at the similar level and start gradually decreasing by on average 1.7 percent p.a. afterwards. Oil product storage income was expected
to increase by approx. 22 percent by 2023, relative to the amount forecasted for 2021, further increase by 26 percent in 2026 and grow steadily
by 2 percent afterwards, mainly due to indexed growth rates. Restorative and maintenance investments into Klaipėda oil terminal assets were
assumed to reach EUR 55,061 thousand during the forecasted period.
Cash flows up to 2026, used in the assessment, were projected based on the assumption made by the management that AB Orlen Lietuva
investment would be finished till that date, significantly impacting scope of CGU activity and cash flows in subsequent periods. Operating
assumptions used in cash flow calculations are projected based on global oil market forecast from the year 2030, meanwhile, income and
expense assumptions for the remaining periods are projected based on 2% growth rate, which is aimed inflation target in order to maintain
price stability over the medium term, according to the decision of ECB Governing Council in July 2021.
To determine the value in use of CGU, future pre-tax cash flows are calculated and discounted with a pre-tax discount rate that represents
current market valuation of time value of money as well as the significant risks allocated to related assets.
The discount rate was calculated as the weighted average cost of capital using data of a selected peer group of companies, as well as other
commonly used indicators such as – risk-free rate of Lithuanian government bonds, country risk premium, corporate credit spread and effective
tax rate that reflects market that CGU is generally based in. To reflect risks and uncertainty arising from the Company’s business environment,
additional risk premium of 1.3% was estimated and added directly to pre-tax WACC estimate.
Accordingly, the estimate of value in use was determined using a pre-tax discount rate of 6.65 % (31 December 2020 – 5.8%).
As a result of impairment testing carried out as at 31 August 2021 for Klaipėda oil terminal CGU, the impairment loss of EUR 54,206 thousand
for the CGU’s assets with the carrying amount of EUR 139,326 thousand as of that date was recognized and allocated as follows:
Impairment loss recognized in the
statement of comprehensive income
attributed to the assets during 2021
Property, plant and equipment and intangible assets
(45,049)
Construction in progress
(3,342)
Right-of-use assets
(5,815)
(54,206)
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 28
3 PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Sensitivity analysis of Klaipėda oil terminal assets value in use within an impairment test carried out as of 31 August 2021
The major elements impacting the amount of the value in use of Klaipėda oil terminal assets within the individual CGU are income generated
from terminal operation and the discount rate applied.
The sensitivity of changes of the elements mentioned above on the impairment are presented below.
Reversal of impairment loss / (additional impairment loss)
Change in discount rate
-1.0 p.p.
-0.5 p.p.
0.0 p.p.
+0.5 p.p.
+1.0 p.p.
Change in income
projection (other
assumptions held
constant)
(10.0)%
(21,178)
(25,188)
(28,896)
(32,329)
(35,510)
(5.0)%
(5,221)
(10,015)
(14,448)
(18,552)
(22,357)
0.0%
10,735
5,158
-
(4,776)
(9,203)
5.0%
26,691
20,331
14,448
9,001
3,950
10.0%
42,648
35,504
28,896
22,777
17,104
The Group and the Company has additionally assessed annual investments and income level from key client as major elements impacting
value in use of Klaipėda oil terminal assets. Under the base scenario EUR 55,061 thousand of capital investments are assumed during the
valuation period. It is estimated that a 10 percent proportional increase in annual capital expenditure would result in additional impairment of
EUR 3,529 thousand, meanwhile, a 10 percent decrease would result in lower impairment by EUR 3,529 thousand.
In case of reloading quantities from main client would not significantly change from 2026 EUR 19,180 thousand positive impact to value in use
would be identified.
Future financial projections are based on several assumptions, a part of which concern macroeconomic factors such as: commodity prices,
regional and global market demands, global oil business development will remain beyond the control of the Group and the Company. Changes
in mentioned assumptions can affect impairment test results of non-current assets and may result to changes in the financial position and
financial results of the Group and the Company. Accordingly, the CGU of Klaipėda oil terminal remains very sensitive to further impairment
losses (or reversal of impairment losses) in the future reporting periods.
Separately from major impairment recognition in 2021, the Group and the Company accounted impairment of EUR 214 thousand for the
construction in progress (in 2020 the Group and the Company reviewed property, plant and equipment and accounted impairment of EUR
384 thousand). The impairment of such non-current asset items was included into operating expenses in the Statement of comprehensive
income during the year 2021 and 2020. The management has not identified any indications, that the remaining property, plant and equipment
as at 31 December 2021 and 31 December 2020 might be impaired.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 29
3 PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Right-of-use assets
GROUP
Land
Buildings
and
structures
Machinery,
plant and
equipment
Other non-
current
assets
Total
Acquisition cost
Balance as at 31 December 2019
21,042
732
392,961
43
414,778
Acquisitions / disposals
378
233
-
1
612
Balance as at 31 December 2020
21,420
965
392,961
44
415,390
Acquisitions / disposals
1,172
100
74
1
1,347
Balance as at 31 December 2021
22,592
1,065
393,035
45
416,737
Accumulated depreciation and impairment:
Balance as at 31 December 2019
556
315
43,015
20
43,906
Depreciation for the year
554
323
13,535
19
14,431
Balance as at 31 December 2020
1,110
638
56,550
39
58,337
Depreciation for the year
510
274
13,539
6
14,329
Impairment for the year (reversal)
5,759
45
11
-
5,815
Balance as at 31 December 2021
7,379
957
70,100
45
78,481
Net book value as at 31 December 2019
20,486
417
349,946
23
370,872
Net book value as at 31 December 2020
20,310
327
336,411
5
357,053
Net book value as at 31 December 2021
15,213
108
322,935
-
338,256
COMPANY
Land
Buildings
and
structures
Machinery,
plant and
equipment
Other non-
current
assets
Total
Acquisition cost
Balance as at 31 December 2019
21,042
732
392,961
43
414,778
Acquisitions / disposals
378
233
-
1
612
Balance as at 31 December 2020
21,420
965
392,961
44
415,390
Acquisitions / disposals
1,172
71
74
1
1,318
Balance as at 31 December 2021
22,592
1,036
393,035
45
416,708
Accumulated depreciation and impairment:
Balance as at 31 December 2019
556
315
43,015
20
43,906
Depreciation for the year
554
323
13,535
19
14,431
Balance as at 31 December 2020
1,110
638
56,550
39
58,337
Depreciation for the year
510
269
13,539
6
14,324
Impairment for the year (reversal)
5,759
45
11
-
5,815
Balance as at 31 December 2021
7,379
952
70,100
45
78,476
Net book value as at 31 December 2019
20,486
417
349,946
23
370,872
Net book value as at 31 December 2020
20,310
327
336,411
5
357,053
Net book value as at 31 December 2021
15,213
84
322,935
-
338,232
The Group’s and the Company’s depreciation of right-of-use asset amounts to EUR 14,329 thousand and EUR 14,324 thousand for the year
2021, respectively (EUR 14,431 thousand in 2020). EUR 14,052 thousand of depreciation charge has been included into cost of sales of both,
the Group and the Company (EUR 14,096 thousand in 2020) and the remaining amount of EUR 277 thousand and EUR 272 thousand has been
included into operating expenses in the Statement of comprehensive income of the Group and the Company, respectively (EUR 335 thousand
in 2020).
Since right of use assets do not generate separate cash flow, the management of the Group and the Company has assessed the internal and
external indications of impairment of right-of-use assets along with other tangible assets as common CGU as at 31 December 2021 and 31
December 2020. The impairment related to Klaipėda oil terminal business segment for EUR 5,815 thousand accounted as at 31 December 2021
and has been included into operating expenses in the Statement of comprehensive income of both, the Group and the Company. The
management did not identify impairment of the right-of-use assets as at 31 December 2020.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 30
4 INFORMATION ABOUT SEGMENTS
The management of the Group and the Company has identified the following segments:
• LNGT – LNG terminal in Klaipėda which receives and stores liquefied natural gas, regasifies and supplies it to Gas Main pipeline;
• OT – Oil terminal in Klaipėda and Subačius oil terminal in Kupiškis who are providing oil products transhipment, services of long-term
storage of oil products and other services related to oil products transhipment;
• comLNG – LNG commercial activities - includes LNG reloading station and execution of other LNG projects.
The Group includes its investments in subsidiaries and associates to the specific segments according to which activities these entities are
involved in: UAB SGD logistika, UAB SGD SPB and KN Açu Servicos de Terminal de GNL LTDA – comLNG, UAB SGD terminalas – LNGT,
BALTPOOL UAB and Sarmatia Sp. z. o. o. – OT.
As at 31 December 2021, there were three customers each of which generated revenues exceeding 10% of total Company’s revenues and in
total amounted to EUR 45,079 thousand:
Customer A – EUR 27,732 thousand (LNGT segment);
Customer B – EUR 12,841 thousand (OT segment);
Customer C – EUR 4,506 thousand (OT segment).
As at 31 December 2020, there were three customers each of which generated revenues exceeding 10% of total Company’s revenues and in
total amounted to EUR 56,901 thousand:
Customer A – EUR 35,731 thousand (LNGT segment);
Customer B – EUR 10,806 thousand (OT segment);
Customer C – EUR 10,364 thousand (OT segment).
Main indicators of the segments of the Company included in the statement of comprehensive income and statement of financial position for
the financial year 2021 and 2020 are described below:
Group
For the year ended 31 December 2021
LNGT
OT
comLNG
Total
Revenues from contracts with customers
34,831
21,427
5,553
61,811
Profit (loss) before income tax
(20,584)
(55,700)
517
(75,767)
Segment net profit (loss)
(16,510)
(47,563)
62
(64,011)
Interest revenue
-
13
-
13
Loan interest expense
481
-
-
481
Interest on financial lease liabilities
1,484
303
13
1,800
Depreciation and amortisation
3,172
6,737
1,408
11,317
Depreciation of right-of-use-assets
13,745
464
120
14,329
Write-off of non-current assets
-
19
-
19
Impairment of non-current asset (reversal)
-
54,338
-
54,338
Acquisitions of tangible and intangible assets
210
8,764
97
9,071
Segment total assets*
377,049
106,872
26,643
510,564
Loan and related liabilities
119,985
(20)
(42)
119,923
Lease liabilities
270,594
14,872
1,639
287,105
Segment total liabilities
398,655
20,782
7,931
427,368
For the year ended 31 December 2020
LNGT
OT
comLNG
Total
Revenues from contracts with customers
43,395
31,414
5,305
80,114
Profit (loss) before income tax
37,443
6,945
(549)
43,839
Segment net profit (loss)
29,169
5,812
(1,023)
33,958
Interest revenue
9
44
-
53
Loan interest expense
349
-
-
349
Interest on financial lease liabilities
1,737
309
9
2,055
Depreciation and amortisation
3,313
7,253
1,559
12,125
Depreciation of right-of-use-assets
13,752
567
112
14,431
Write-off of non-current assets
-
5
-
5
Impairment of non-current asset (reversal)
-
384
-
384
Acquisitions of tangible and intangible assets
156
6,423
405
6,984
Segment total assets*
394,341
154,827
27,450
576,618
Loan and related liabilities
96,572
(20)
(42)
96,510
Lease liabilities
289,798
15,432
389
305,619
Segment total liabilities
406,923
22,299
6,146
435,368
Segment total assets* - total assets of the Group, excluded Cash and cash equivalents and short-term deposits at the period end.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 31
4 INFORMATION ABOUT SEGMENTS (CONT’D)
Reconciliation of information on reportable segments to the amounts reported in the financial statements
I. Revenues
2021
2020
Total revenues for reportable segments
61,811
80,114
Consolidated revenue
61,811
80,114
II. Profit (loss) before tax
2021
2020
Total profit (loss) before tax for reportable segments
(75,767)
43,839
Consolidated profit (loss) before tax from continuing operations
(75,767)
43,839
III. Net profit (loss)
2021
2020
Total net profit (loss) for reportable segments
(64,011)
33,958
Consolidated net profit (loss)
(64,011)
33,958
IV. Interest on financial lease liabilities
2021
2020
Total interest on financial lease liabilities for reportable segments
1,800
2,055
Consolidated interest on financial lease liabilities
1,800
2,055
V. Depreciation and amortization
2021
2020
Total depreciation and amortization for reportable segments
11,317
12,125
Consolidated depreciation and amortization
11,317
12,125
VI. Depreciation of ROU assets
2021
2020
Total depreciation of ROU assets for reportable segments
14,329
14,431
Consolidated depreciation of ROU assets
14,329
14,431
VII. Acquisitions of tangible and intangible assets
2021
2020
Total acquisitions of tangible and intangible assets for reportable segments
9,071
6,984
Consolidated acquisitions of tangible and intangible assets
9,071
6,984
VIII. Assets*
2021
2020
Total assets for reportable segments
510,564
576,618
Consolidated total assets
510,564
576,618
IX. Loan and related liabilities
2021
2020
Total loan and related liabilities for reportable segments
119,923
96,510
Consolidated loan and related liabilities
119,923
96,510
X. Lease liabilities
2021
2020
Total lease liabilities for reportable segments
287,105
305,619
Consolidated financial lease liabilities
287,105
305,619
XI. Liabilities
2021
2020
Total liabilities for reportable segments
427,368
435,368
Consolidated total liabilities
427,368
435,368
Segment total assets* - total assets of the Company, excluding Cash and cash equivalents and short-term deposits at the period end.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 32
4 INFORMATION ABOUT SEGMENTS (CONT’D)
The Group’s and Company’s customers are both Lithuanian and foreign. Sales revenue by geography is as follows:
Majority of property, plant and equipment is located in Lithuania and only less than 1% - in Brazil.
5 INVESTMENT IN SUBSIDIARIES
The Company
31-12-2021
31-12-2020
Cost of shares of UAB SGD logistika
4,540
4,540
Cost of shares of UAB SGD terminalas
38
13
4,578
4,553
The Company indirectly controls subsidiaries UAB SGD SPB and KN Açu Servicos de Terminal de GNL LTDA.
UAB SGD logistika
UAB SGD logistika was established by AB Klaipėdos nafta acquiring 100% of shares. The subsidiary was registered on 20 November 2015. The
main activity – expansion of operation of international LNG terminal activities, LNG transportation activities, other economic activities.
The authorised capital of UAB SGD logistika is equal to EUR 4,540 thousand and is divided into 4,540 thousand units of shares, which grant
4,540 thousand votes. Nominal value per share – EUR 1.00.
As KN has been appointed as the operator of a liquefied natural gas (LNG) terminal in the Brazilian Port of Açu, on 13th of December 2019,
UAB SGD logistika together with UAB SGD SPB established KN Acu Servicos de Terminal de GNL LTDA. As to the long-term contract with Gas
Natural Açu (GNA), KN, through its subsidiary, assumes the responsibility for the provision of safe, reliable and efficient operations, including
maintenance of the jetty and its installations, gas pipeline and gas metering stations as well as supporting the commissioning of the LNG
Terminal.
The management of the Company has assessed indications of impairment of investment to subsidiary 31 December 2021 and 31 December
2020, assessment showed, that investment to subsidiary might be impairment. As at 31 December 2021, the Company performed the
impairment test of investment to subsidiary UAB SGD logistika by comparing discounted future cash flows forecasted for the project,
implemented by established KN Açu Serviços de Terminal de GNL Ltda to carrying value of investment. Impairment test was prepared for the
period until the year 2033, as to initial 13-year agreement with GNA. The main assumptions used to perform the test were income level, which
is based on different main project phases and agreed in the long-term contract, possible operating costs, which were estimated based on
actual LNG terminal operation business activity expenses and adjusted as to local inflation and discount rate, estimated as weighted average
cost of capital (WACC) of Brazil market that as at 31 December 2021 was assumed to be 8.9% (as at 31 December 2020 was assumed to be
11.3%).
Based on impairment test results no impairment should be recognized for investment to UAB SGD logistika as at 31 December 2021.
Unaudited financial position of UAB SGD logistika is as follows:
UAB SGD logistika
2021
2020
Non-current assets
151
151
Current assets
4,012
3,893
Non-current liabilities
-
-
Current liabilities
1
1
Equity
4,162
4,043
Unaudited comprehensive income of UAB SGD logistika is, as follows:
UAB SGD logistika
2021
2020
Income
154
26
(Expenses)
(34)
(4)
Profit (loss)
120
22
Group
Company
2021
2020
2021
2020
Lithuanian clients
53,272
59,050
53,272
59,050
Foreign clients
8,539
21,064
5,361
18,424
61,811
80,114
58,633
77,474
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 33
5 INVESTMENT IN SUBSIDIARIES (CONT’D)
UAB SGD terminalas
The subsidiary of AB Klaipėdos nafta – UAB SGD terminalas (Burių str. 19, 92276 Klaipėda, 304139242) was established and registered on 27
December 2018. UAB SGD terminalas objective is to perform activities of operating and managing a whole structure of LNG terminal in
Klaipėda. The subsidiary is currently inactive. In 2021 the share capital of subsidiary was increased by EUR 25 thousand.
Unaudited financial position of UAB SGD terminalas is as follows:
UAB SGD terminalas
2021
2020
Non-current assets
-
-
Current assets
27
6
Non-current liabilities
-
-
Current liabilities
-
-
Equity
27
6
Unaudited comprehensive income of UAB SGD terminalas is, as follows:
UAB SGD terminalas
2021
2020
Income
-
-
(Expenses)
(4)
(3)
Profit (loss)
(4)
(3)
6 INVENTORIES
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Diesel fuel for the LNG Terminal purpose
234
269
234
269
Oil products for sale
23
499
23
499
Liquefied natural gas
47
48
47
48
Fuel for transport and other equipment
48
39
48
39
Spare parts, construction materials and other inventories
1,446
1,560
1,444
1,542
Total inventories
1,798
2,415
1,796
2,397
No write down to net realisable value accounted as at 31 December 2021 and 31 December 2020.
In 2021 the Group and the Company recognised inventories for EUR 3,153 thousand (in 2020: EUR 2,143 thousand) in cost of sales and
EUR 30 thousand in operating expenses (in 2020: EUR 24 thousand). Inventories recognised as costs during the year were included into
following captions under costs of sales and operating expenses:
2021
2020
Natural gas
2,119
1,449
Oil products
599
-
Repair and maintenance of assets
205
358
Services for tankers
136
139
Work safety costs
53
142
Transport
40
34
Tax on environmental pollution
-
19
Other
1
2
Total recognised as cost of sales
3,153
2,143
Expenses for transport
20
20
Donations
-
3
Other
10
1
Total recognised as operating expenses
30
24
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 34
7 TRADE RECEIVABLES AND OTHER RECEIVABLES
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Trade receivable
9,411
9,551
8,939
9,167
Prepayments
553
391
523
371
Other receivables
1,679
704
1,174
403
11,643
10,646
10,636
9,941
Trade and other receivables are non-interest bearing and are generally settled on 6 - 15 days payment terms.
Trade receivable disclosed below:
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Receivables from LNG terminal activities
7,435
8,126
7,435
8,202
Receivables for transhipment of oil products and
other related services
2,902
3,187
2,902
3,187
Receivable for operating and management services
585
460
113
-
Less: impairment allowance
(1,511)
(2,222)
(1,511)
(2,222)
9,411
9,551
8,939
9,167
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Receivables from third-party customers
2,067
2,133
1,580
1,674
Receivables from related parties (Note 28)
7,344
7,418
7,359
7,493
9,411
9,551
8,939
9,167
The Group and the Company has recognized impairment allowance in the amount of EUR 1,511 thousand on 31 December 2021 (EUR 2,222
thousand on 31 December 2020).
Change in allowance (reverse) for trade receivables for 2021, amounting to EUR (711) thousand (for 2020 – EUR 1,494 thousand) has been
included into operating expenses in the statement of the comprehensive income. A part of impaired trade receivables were covered by paying
back or taking over the client’s surplus of fuel oil – total covered amount EUR 122 thousand. Remaining part was reversed after credit invoices
to two clients were issued by the decision of the management.
Movements in the allowance for impairment in respect of trade receivables
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Group and Company
31-12-2021
31-12-2020
Balance at 1 January
2,222
728
Impairment of the year
-
1,817
Reversal of impairment
(711)
(323)
Balance at 31 December
1,511
2,222
The age analysis of trade receivables of the Group and the Company as at 31 December 2021 and 2020 is as follows:
Group
Trade neither past due nor impaired
Trade receivables past due but not impaired
Total
Less than 30
days
30 – 59 days
60 – 89 days
90 – 359
days
More than
360 days
2021
5,341
2,770
1,300
-
-
-
9,411
2020
5,845
3,530
176
-
-
-
9,551
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 35
7 TRADE RECEIVABLES AND OTHER RECEIVABLES (CONT’D)
Company
Trade neither past due nor impaired
Trade receivables past due but not impaired
Total
Less than 30
days
30 – 59 days
60 – 89 days
90 – 359
days
More than
360 days
2021
4,869
2,770
1,300
-
-
-
8,939
2020
5,461
3,530
176
-
-
-
9,167
Accounts receivable impairment losses are usually recognized on an individual basis after the delay of payment in according to overdue
payment.
All receivable amounts from the liquefied natural gas terminal services are pledged to UAB Hoegh LNG Klaipėda for 10 years period (agreement
concluded on 2 March 2012, Note 27).
Other receivables disclosed below:
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
VAT receivable
820
151
820
151
Other receivable taxes (1)
505
284
-
-
Excise duty receivable
354
216
354
216
Receivable grant
-
16
-
16
Other receivables
-
37
-
20
Total
1,679
704
1,174
403
(1) Other receivable taxes related to subsidiary KN Acu Servicos de Terminal de GNL Ltda receivable social security taxes (INSS). Any employee
on a Brazilian payroll is subject to social security contributions. According to the current legislation, the monthly social security contribution in
Brazil is due on the total amount of the remuneration at rates of 7.5% up to 14%.
8 CONTRACT ASSETS
The Group and the Company
31-12-2021
31-12-2020
Non-current contract assets:
Accrued rent income (1)
-
349
-
349
Current contract assets:
Accrued rent income (1)
349
624
Accrued income (2)
263
687
612
1,311
(1) As at 31 December 2021 and 31 December 2020 contract assets amounts long-term rent revenue accrual arising from Subačius fuel
storage reservoirs rent agreement.
Subačius fuel storage reservoirs rent agreement signed with the Lithuanian petroleum products Agency in 2012 for the duration of 10
years is treated. The rent tariffs are different for the first 5 years and for the remaining period. Therefore, the income is recognized on a
straight-line basis over the term of an agreement, i.e., the income is calculated on average tariff of all agreement term (10 years), balances
as at 31 December 2021 and 2020 respectively amounted to EUR 349 thousand and EUR 973 thousand. As at 31 December 2021 total
amount of the accrued income is presented under short-term contract assets (EUR 624 thousand as at 2020).
In 2021 accrued income from Subačius fuel storage reservoirs rent reduced by EUR 624 thousand (for 2020 – EUR 565 thousand).
(2) Accrued income for storage of oil products as at 31 December 2021 and 31 December 2020 calculated as percentage of completion based
on expenses incurred from the total estimated cost of contracted services. Upon completion of transhipment of oil products and
acceptance by the customer, the amounts initially recognized as contract assets are reclassified as trade receivables.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 36
9 SHORT TERM DEPOSITS
The Group and the Company
31-12-2021
31-12-2020
Short-term bank deposits at the commercial banks
-
24,000
As at 31 December 2021 the Group and the Company had no deposits at banks. As at 31 December 2020, the Group and the Company had 6
term deposits at banks, amounted to EUR 24,000 thousand, with maturity of more than 3 months. Annual interest rate was 0.07% for all 6
agreements signed.
10 OTHER FINANCIAL ASSETS
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Excise duty guarantee receivable
3,271
1,271
3,271
1,271
Receivable from SEB bank
-
594
-
594
Derivatives
-
33
-
33
Total
3,271
1,898
3,271
1,898
In 2020 the Group and the Company paid a guarantee to the Excise Administration Department for tax which may arise from the movement
of excise goods under suspension of excise duty. The additional excise duty guarantee paid in September 2021 for the amount of EUR 2,000
thousand. The guarantee agreement is without a fixed term.
In 2020 the Group and the Company signed a performance guarantee agreement with SEB bank by depositing amount of USD 729 thousand
in favour of Brazil subsidiary’s KN Açu Serviços de Terminal de GNL Ltda. client UTE GNA I GERACAO DE ENERGIA S.A. As of 1 January 2021,
the amendment signed to reduce the guarantee amount to USD 665 thousand, the deposit was returned and guarantee issued from the
Company’s credit limit. The maturity term of guarantee agreement was 31 December 2021.
11 CASH AND CASH EQUIVALENTS
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Cash at banks
61,517
51,076
57,148
47,433
Cash and cash equivalents are not pledged as at 31 December 2021 and 31 December 2020.
Calculated values of cash and cash equivalents are denominated in the following currencies showed in EUR:
Group
Company
Currency
31-12-2021
31-12-2020
31-12-2021
31-12-2020
EUR
60,827
46,347
57,145
43,133
USD
3
4,300
3
4,300
BRL
687
429
-
-
61,517
51,076
57,148
47,433
Management of the Group and the Company considered potential impairment losses on cash held in banks as per IFRS 9 requirements.
Assessment is based on official Standard & Poor’s long–term credit ratings:
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
A+
6,061
7,246
2,379
4,032
AA-
27,337
34,717
27,337
34,717
BBB+
27,432
8,684
27,432
8,684
BB-
687
429
-
-
61,517
51,076
57,148
47,433
Based on management’s assessment performed and best estimate cash and its equivalents are presented at fair value and no indications of
cash impairment exist as at 31 December 2021 and 31 December 2020.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 37
12 ISSUED CAPITAL AND RESERVES
As of 11 January 2021, a new version of the Company's Articles of Association was registered within the Register of Legal Entities of the
Republic of Lithuania following the decrease of the authorised capital of the Company, which is now equal to EUR 110,315,009.65 and divided
into 380,396,585 units of shares, which grant 380,396,585 votes. The Ministry of Finance of the Republic of Lithuania granted the Company
permission to decrease the authorised capital of the Company by cancelling 655,808 units of Company’s acquired own shares which each
nominal value EUR 0.29. All shares are paid. 72.47% of the shares (275,687,444 shares) are owned by the State of Lithuania, represented by the
Ministry of Energy.
The Company has not acquired any own shares and has arranged no deals regarding acquisition or transfer of its own shares during the year
2021 and 2020.
A legal reserve is a compulsory reserve under Lithuanian legislation. Annual transfers of not less than 5% of net profit, calculated in accordance
with International Financial Reporting Standards, are compulsory until the reserve reaches 10% of the share capital. The legal reserve is fully
formed as at 31 December 2021.
Other (distributable) reserves are formed based on the decision of the General Shareholders’ Meeting on profit distribution. These reserves
can be used only for the purposes approved by the General Shareholders’ Meeting. The largest portion of the Company’s other reserves are
formed for investments.
13 NON-CURRENT EMPLOYEE BENEFITS
Provisions for non-current employee benefits represent payable amounts calculated in accordance with the Lithuanian laws. Each employee
at retirement age is entitled to receive a payment of 2-6 monthly salaries upon retirement. As at 31 December 2021 and 31 December 2020
the Company and the Group has recognised employee benefits related to the length of service of employees, which is described in collective
agreement. Depending on time spent in the Company, the employer is entitled to a higher benefit payment than the one prescribed by the
law.
As at 31 December 2021 and 31 December 2020, the Company and the Group reclassified a portion of non-current employee benefits under
short term liabilities.
On 31 December 2021 the liabilities related to the defined benefit obligations to the employees terminating the employment on the normal
retirement date were EUR 756 thousand (EUR 675 thousand – in 2020) as follows:
Group and Company
2021
2020
Start of period
675
281
Calculated per year
99
435
Paid per year
(18)
(41)
End of period
756
675
Current
49
43
Non-current
707
632
The main preconditions applied to assess long-term employee benefit liability are presented below:
Group and Company
31-12-2021
31-12-2020
Discount rate
0.11%
0.22%
Staff turnover rate
8.30%
6.50%
Future salary increases
4.80%
2.80%
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 38
14 LOANS AND LEASE LIABILITIES
Loans
The Group and the Company
31-12-2021
31-12-2020
Nordic Investment Bank’s loan (b, c)
70,733
45,481
European Investment Bank’s loan (a)
49,175
51,133
Guarantee payment to the Ministry of Finance to the Republic of Lithuania
(132)
(134)
Payable loan interest
147
30
119,923
96,510
(a) A credit contract dated at 9 July 2013 was concluded by the Company with European Investment Bank (EIB) to grant a credit up to EUR
87,000 thousand to implement LNGT project. According to the contract, EIB financed up to 50% of necessary funds for the project
implementation. According to the contract, credit tenor is up to 20 years (5 years grace period, 15 years linear repayment scheme applied),
interest rate is variable comprising bank margin with inclusion of 3 months EURIBOR rate, and whose margin was submitted by the EIB in
payment offers. The contract also provided that minimum credit tranche was EUR 15,000 thousand, and the whole credit sum had to be paid
out to the Company over no more than 6 tranches.
The performance of 100% Company’s contractual financial liabilities is ensured by the State Guarantee and aligned with EU commission. The
Finance ministry of the Republic of Lithuania being issuer of the state aid guarantee has pledge on all property, plant and equipment created
during LNGT project (Note 3).
Above credit was facilitated in several tranches:
i. First tranche. On 20 December 2013, the 1
st
tranche amounting to EUR 15,000 thousand was received with full principal amortization
till 20 December 2033. The principal repaid by EUR 3,197 thousand as at 31 December 2021. First tranche loan balance as at 31
December 2021 – EUR 11,745 thousand (as at 31 December 2020 – EUR 12,725 thousand).
ii. Second tranche. On 28 November 2014, the 2
nd
tranche amounting to EUR 15,000 thousand was received with full principal
amortization till 28 November 2034. The principal repaid by EUR 2,212 thousand as at 31 December 2021. Second tranche loan balance
as at 31 December 2021 – EUR 12,730 thousand (as at 31 December 2020 – EUR 13,708 thousand).
iii. Third tranche. On 15 December 2017, the 3
rd
tranche amounting to EUR 24,700 thousand was received with full principal amortization
till 20 September 2034. Third tranche loan balance as at 31 December 2021 – EUR 24,700 thousand (as at 31 December 2020 – EUR
24,700 thousand).
The Company complied with covenants prescribed in the loan agreement as at 31 December 2021 and as at 31 December 2020.
(b) On 27 November 2014, the Company has concluded the Credit Agreement with the Nordic Investment Bank (NIB) regarding granting a
credit of up to EUR 34,755 thousand for the implementation of the LNGT project (the same). According to the contract, credit tenor was up to
20 years (5 years grace period, 15 years linear repayment scheme applied, interest: floating, which rate was provided in the NIB disbursement
offer (a fixed margin + 6 months EURIBOR). The Loan contract also provided that the minimal payable amount of credit was
EUR 7,000 thousand, and all the credit had to be paid out to the Company in no more than 5 tranches.
On 10 November 2015 there was signed NIB loan agreement amendment to reduce the loan principle to EUR 22,000 thousand.
On 31 August 2017, the Company withdrew the amount of EUR 22,000 thousand. Resulting in requirement of full principal amortization till 19
June 2034. The principal repaid by EUR 4,258 thousand as at 31 December 2021. NIB loan balance as at 31 December 2021 – EUR 18,074
thousand (as at 31 December 2020 – EUR 19,152 thousand).
The performance of 100% Company’s contractual financial liabilities is ensured by the State Guarantee and aligned with EU commission. The
Finance ministry of the Republic of Lithuania being issuer of the state aid guarantee has pledge on property, plant and equipment created
during LNGT project.
(c) On 19 November 2019, the Company concluded the Credit Agreement with the Nordic Investment Bank (NIB) regarding granting a credit
of up to EUR 134,145 thousand for restructuring of the lease payments of the FSRU. According to the Loan contract, the term of the credit was
up to 25 years (5 years grace period, 20 years linear repayment scheme), interest: floating (a fixed margin + 6 months EURIBOR). The Loan
contract also provides that the minimal payable amount of credit is EUR 5,000 thousand with the annual tranche cap EUR 26,829 thousand
(making total 5 annual tranches). Loan balance as at 31 December 2021 – EUR 52,658 thousand (as at 31 December 2020 – EUR 26,329
thousand).
The performance of 100% Company’s contractual financial liabilities is ensured by the State Guarantee and aligned with EU commission. The
Finance ministry of the Republic of Lithuania being issuer of the state aid guarantee has following collateral structure: Subačius oil terminal
and all existent and future receivables from security supplement till 2044. Pledge of receivables from security supplement is postponed till 31
Jan 2025 as performance bank guarantee of EUR 20,000 thousand is issued for 5 years tenor in favour of the Finance ministry of the Republic
of Lithuania for credit support. For issuance of the state guarantee, likewise historically, a guarantee administration payment of 0.1% to the
Ministry of Finance to the Republic of Lithuania was incurred.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 39
14 LOANS AND LEASE LIABILITIES (CONT’D)
On 31 March 2021, the Company withdrew the amount of EUR 6,707 thousand, followed by three consecutive tranches on 30 June 2021, 30
September 2021 and 31 December 2021 respectively, each amounting to EUR 6,707 thousand. The principal repaid by EUR 1,525 thousand as
at 31 December 2021. The withdrawal schedule in 2020 was the same as in 2021: on 31 March 2020, the Company withdrew the amount of
EUR 6,707 thousand, followed by three consecutive tranches on 30 June 2020, 30 September 2020 and 31 December 2020 respectively, each
amounting to EUR 6,707 thousand. Total withdrawn amount by 31 December 2021 was EUR 53,658 thousand. The Company had EUR 26,829
thousand of undrawn loans as at 31 December 2021 and the amount fully consisted of Nordic Investment Bank (NIB) loans.
LEASE LIABILITIES
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Lease liabilities
287,105
305,619
287,080
305,619
Lease liabilities as at 31 December 2021 can be specified as follows:
Group
FSRU lease
Land rent
Jetty rent
Other*
Total
Long term lease liabilities
222,380
15,966
5,011
73
243,430
Short term lease liabilities
43,119
352
75
129
43,675
265,499
16,318
5,086
202
287,105
Company
FSRU lease
Land rent
Jetty rent
Other*
Total
Long term lease liabilities
222,380
15,966
5,011
55
243,412
Short term lease liabilities
43,119
352
75
122
43,668
265,499
16,318
5,086
177
287,080
Lease liabilities as at 31 December 2020 can be specified as follows:
Group and Company
FSRU lease
Land rent
Jetty rent
Other*
Total
Long term lease liabilities
245,026
15,167
5,101
45
265,339
Short term lease liabilities
39,596
320
74
290
40,280
284,622
15,487
5,175
335
305,619
* Other comprises lease of transport vehicles, office rent.
The interest rate for lease liabilities varies from 0.5% to 2% as at 31 December 2021 and as at 31 December 2020. The main characteristics of
rent agreements by asset group, as well as the movement of the lease liability can be presented as follows:
GROUP, denominated in euros
Currency
Year of
maturity
Carrying
amount as at
31-12-2020
Interests
Interest
payments
Payments
Reclassifi-
cation*
Additio-
nal disbur-
sement
Reas-
sessment
Exchan-
ge rate
effect
Carrying
amount as
at 31-12-
2021
FSRU lease
USD
2024
284,623
1,381
(1,426)
(40,797)
(355)
-
-
22,073
265,499
Land rent
EUR
2055
15,487
310
(316)
(260)
(89)
-
1,188
-
16,320
Jetty rent
EUR
2065
5,175
102
(170)
(102)
96
-
(15)
-
5,086
Other
EUR
2021-2022
334
7
(5)
(300)
(9)
27
146
-
200
305,619
1,800
(1,917)
(41,459)
(357)
27
1,319
22,073
287,105
COMPANY, denominated in euros
Currency
Year of
maturity
Carrying
amount as at
31-12-2020
Interests
Interest
payments
Payments
Reclassifi-
cation*
Additio-
nal disbur-
sement
Reas-
sessment
Exchan-
ge rate
effect
Carrying
amount as
at 31-12-
2021
FSRU lease
USD
2024
284,623
1,381
(1,426)
(40,797)
(355)
-
-
22,073
265,499
Land rent
EUR
2055
15,487
310
(316)
(260)
(89)
-
1,188
-
16,320
Jetty rent
EUR
2065
5,175
102
(170)
(102)
96
-
(15)
-
5,086
Other
EUR
2021-2022
334
5
(4)
(296)
(10)
-
146
-
175
305,619
1,798
(1,916)
(41,455)
(358)
-
1,319
22,073
287,080
* Reclassifications of lease liabilities include impact of changes in unpaid invoices for leases as at 31 December 2021 and 31 December 2020.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 40
14 LOANS AND LEASE LIABILITIES (CONT’D)
As at 31 December 2021 and 31 December 2020 the Group and the Company did not have residual value guarantees related to lease
agreements or leases not yet commenced to which the Group and the Company is committed. Only one agreement, FSRU lease, contains
purchase option, which is described below.
Floating Storage and Regasification Unit (FSRU) lease
On 2nd March 2012 the Company has signed the 10 years Build, Operate and Transfer (BOT) lease contract with Hoegh LNG Ltd. regarding
LNG Floating Storage and Regasification Unit (FSRU) with a purchase option. FSRU has arrived at the Seaport of Klaipėda at 27th October 2014
and has been taken over by the Company on 27th November 2014. There have been no changes in the BOT lease contract with Hoegh LNG
Ltd. regarding LNG Floating Storage and Regasification Unit (FSRU) in the year 2021 and 2020. The terms and condition of the BOT lease
contract do not provide any restrictions on the Company’s activities, associated with dividends, additional borrowings or additional rent.
FSRU operating lease payments include such elements:
• Charter Hire Element
• OPEX Element (Services, spares, consumables, insurance in FSRU mode, ship radio and communication)
• Management Fee
• Crew Costs or Maritime personnel expenses
At the lease period end the Group and the Company has an option to purchase FSRU Independence. On 25 February 2022 the General
Shareholders’ Meeting approved the decision to acquire the floating storage regasification unit “Independence” (for further information see
subsequent events disclosure, Note 29).
RECONCILIATION OF MOVEMENTS OF LIABILITIES TO CASH FLOWS ARISING FROM FINANCING ACTIVITIES
In accordance with IAS 7 Disclosure Initiative requirements, the following table provides disclosure that enable users of financial statements
to evaluate changes in liabilities arising from financing activities (loans taken), including both changes arising from cash flows and non-cash
changes:
Group
Company
Loans
Lease liabilities
Loans
Lease liabilities
Non-current interest-bearing loans and borrowings, including
interest payable as at 1 January 2020
73,373
376,877
73,373
376,877
Additional loan disbursements (Cash flows)
26,829
-
26,829
-
Loan repayments (Cash flows)
(3,387)
-
(3,387)
-
Repayment of lease liabilities (Cash flows)
-
(43,145)
-
(43,145)
Interest and loan administration fee charged
349
2,055
349
2,055
Interest and loan administration fee paid (Cash flows)
(156)
(2,000)
(156)
(2,000)
Guarantee payments (Cash flows)
(474)
-
(474)
-
The effect of changes in foreign exchange rates
-
(28,765)
-
(28,765)
Other payments / reclassifications
(24)
597
(24)
597
Non-current interest-bearing loans and borrowings, including
interest payable as at 1 January 2021
96,510
305,619
96,510
305,619
Additional loan disbursements (Cash flows)
26,829
27
26,829
-
Loan repayments (Cash flows)
(3,492)
-
(3,492)
-
Repayment of lease liabilities (Cash flows)
-
(41,459)
-
(41,455)
Interest and loan administration fee charged
481
1,800
479
1,798
Interest and loan administration fee paid (Cash flows)
(255)
(1,917)
(255)
(1,916)
Guarantee payments (Cash flows)
(146)
-
(146)
-
The effect of changes in foreign exchange rates
-
22,073
-
22,073
Reassessment of lease liabilities
-
1,319
-
1,319
Other payments / reclassifications
(4)
(357)
(2)
(358)
Non-current interest-bearing loans and borrowings, including
interest payable as at 31 December 2021
119,923
287,105
119,923
287,080
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 41
15 TRADE PAYABLES AND OTHER LIABILITIES
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Trade payables
3,053
6,544
3,045
6,511
Other payables and current liabilities
642
1,402
468
1,209
3,695
7,946
3,513
7,720
Trade payables disclosed below:
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Payable to contractors
740
726
740
726
Payable for rent of land
322
333
322
333
Payable for gas services
313
231
313
231
Other payments related FSRU
257
285
257
285
Payable for railway services
86
65
86
65
Payables for FSRU
-
4,558
-
4,558
Other trade payables
1,335
346
1,327
313
3,053
6,544
3,045
6,511
On 31 December 2021 trade payables of EUR 3 thousand were denominated in USD (EUR 5,249 thousand – on 31 December 2020).
Trade payables are non-interest bearing and are normally settled on 30-day payment terms.
Other payables and current liabilities disclosed below:
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Accrued expenses and liabilities
327
335
327
335
Other taxes payable
205
-
31
-
Real estate tax payable
90
215
90
207
Subsidies payable to partners
-
532
-
532
Other liabilities
20
320
20
135
642
1,402
468
1,209
Other liabilities are non-interest bearing and have an average payment term of one month.
16 PROVISIONS
Greenhouse gas emission allowances in advance is distributed for the periods covering the next few years. The first period started from 2005
and ended in 2007, the second period started from 2008 and ended in 2012, the third period started from 2013 and ended in 2020, and the
current period started from 2021 and will end in 2025. Companies that participate in the project from 2005 are obliged to report about real
extent of pollution of each calendar year. When available allowances are not sufficient to cover actual pollution, then a penalty should be paid
for each ton of excess carbon dioxide.
Emission rights are accounted for when evaluating the deficit between the emission allowances allocated under the national allocation plan
for emission allowances and the actual pollution for the particular year. The quantity of used emission allowances is audited by external
auditors each year.
As at 31 December 2021, the Group and the Company has accounted for a provision of EUR 3,596 thousand regarding the emission made
which exceed available emission rights (as at 31 December 2020 – EUR 1,709 thousand).
Movement of provision in 2021:
Group and Company
Balance as at 31 December 2020
(1,709)
Emission allowances used
1,709
Additional provision made
(3,596)
Balance as at 31 December 2021
(3,596)
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 42
17 DERIVATIVES
Derivatives disclosed below:
Group and Company
31-12-2021
31-12-2020
Derivatives
15
1,946
Due to the specifics of the business, the Group and the Company are exposed to the risk of EUR/USD foreign exchange rate fluctuations due
to FSRU lease payments in US dollars and EUR/BRL foreign exchange rate fluctuations due to intercompany transactions with the Group
company KN Acu Servicos de Terminal de GNL Ltda. The Group and the Company hedge against changes in EUR/USD and EUR/BRL exchange
rates by using futures contracts. When derivatives are realized, the result is recorded in the statement of profit (loss) each calendar month. The
fair value as at the end of reporting period is confirmed by SEB bank. The maturity term of future USD agreements is 31 December 2021. The
maturity term for the BRL agreements is 15 June 2022.
18 PAYROLL RELATED LIABILITIES
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Accrual of annual bonuses
977
646
930
646
Accrued vacation reserve
818
1,130
759
1,077
Salaries payable
451
518
450
517
Social insurance payable
262
249
217
249
Income tax payable
158
185
158
185
Other deductions
3
3
3
3
2,669
2,731
2,517
2,677
19 REVENUE FROM CONTRACTS WITH CUSTOMERS
Group
Company
31-12-2021
31-12-2020
31-12-2021
31-12-2020
Income from LNGT services regulated by NERC
1
(1)
27,732
35,729
27,732
35,729
Sales of oil transhipment services (2)
19,066
28,247
19,066
28,247
Other sales related to LNG terminals activity (3)
12,431
11,808
9,050
9,168
Other sales related to transhipment (4)
1,303
2,830
1,304
2,830
Sales of inventories
1,066
344
1,066
344
Sales of consulting services
213
1,156
415
1,156
61,811
80,114
58,633
77,474
(1) The significant factor, which has influenced the decrease in Group’s and Company‘s revenue in 2021, is lower regasification volumes
compared to the previous year. Also decrease in revenue was affected by the reduction of LNG security supplement income in 2021 due
to proportionally recognised repayment of the excess returns (surplus income) from regulated activities during the period 2014-2019 and
repayment related to LNG reloading revenue for 2019.
Income from LNGT services regulated by NERC contains income from LNG regasification service, LNG reloading service and Additional
Security supplement (largest component). LNG regasification price cap is being adjusted on yearly basis. Since 2020 LNG reloading price
is adjusted annually.
LNG terminal additional security supplement tariff is applied to Terminal users, who regasify gas via LNG terminal and use gas transmission
system. LNG terminal additional security supplement tariff is set by NERC by the resolutions annually and is dedicated to cover operating
costs of LNG terminal, its infrastructure and tie-in, independently from gas volumes regasified and submitted to gas transmission system.
LNG terminal supplement tariff is calculated according to the formula and methodology set out in NERC Resolution No. O3-367 issued on
13 September 2013 and its subsequent amendments.
(2) In December 2020 the client of the Company BNK (UK) Limited has informed about the temporary suspension of oil products sales through
Klaipėda. In the future tenders announced by BNK (UK) Limited will not be indicated as their sales point.
(3) Other sales related to LNG terminals activity includes LNG liquefaction services, LNG small scale generated income as well as income
generated by KN Acu Servicos de Terminal de GNL Ltda in the Group numbers.
1
NERC – National Energy Regulatory Council
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 43
19 REVENUE FROM CONTRACTS WITH CUSTOMERS (CONT’D)
(4) Other sales income related to transhipment include services of moorage, sales of fresh water, transportation of crew and other
transhipment related income.
20 COST OF SALES
Group
Company
2021
2020
2021
2020
Depreciation of right-of-use asset
(14,052)
(14,096)
(14,052)
(14,096)
Depreciation and amortisation (incl. amortisation of grants)
(11,076)
(11,815)
(11,001)
(11,785)
Wages, salaries and social security
(7,720)
(8,076)
(7,177)
(7,646)
Expenses related to FSRU rent (OPEX element,
management, crew cost)
(5,641)
(5,496)
(5,641)
(5,496)
Emission allowances and tax on environmental pollution
(4,274)
(1,805)
(4,274)
(1,805)
Natural gas
(2,184)
(1,560)
(2,184)
(1,560)
Port charges
(1,541)
(1,545)
(1,541)
(1,545)
Electricity
(1,314)
(838)
(1,314)
(838)
Railway services
(934)
(1,458)
(934)
(1,458)
Repair and maintenance of assets
(818)
(707)
(745)
(700)
Cost of oil products sold
(599)
(75)
(599)
(75)
Contribution for National Energy Regulatory Council
(NERC)
(595)
(972)
(595)
(972)
Tax on real estate
(490)
(407)
(490)
(407)
Insurance
(397)
(443)
(343)
(398)
Cleaning expenses
(287)
(208)
(287)
(208)
Work safety costs
(235)
(320)
(235)
(330)
Services for tankers
(155)
(193)
(155)
(193)
Transport
(123)
(284)
(112)
(248)
Other expenses related to FSRU
(112)
(118)
(112)
(118)
Research costs
(57)
(82)
(57)
(82)
Impairment of inventories (reversal)
-
6
-
6
Other
(505)
(468)
(296)
(237)
(53,109)
(50,960)
(52,144)
(50,191)
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 44
21 OPERATING EXPENSES
Group
Company
2021
2020
2021
2020
Impairment of non-current assets (1)
(54,338)
(384)
(54,338)
(384)
Wages, salaries and social security
(4,963)
(4,688)
(4,667)
(4,254)
Consulting and legal costs (2)
(930)
(472)
(839)
(349)
Telecommunication and IT expenses
(384)
(258)
(355)
(252)
Depreciation of right-of-use asset
(277)
(335)
(272)
(335)
Administration of bank accounts
(277)
(191)
(270)
(189)
Expenses for operating taxes
(227)
(463)
(68)
(55)
Depreciation and amortization
(241)
(310)
(240)
(310)
Salaries and other related expenses to governing bodies
(161)
(156)
(161)
(156)
Advertising and external communication
(95)
(54)
(88)
(44)
Expenses for utilities
(89)
(96)
(87)
(95)
Expenses for refresher courses
(87)
(58)
(81)
(58)
Long-term employee benefits
(61)
(41)
(61)
(41)
Expenses for business trips
(43)
(60)
(43)
(60)
Impairment of doubtful receivables (reversal)
711
(1,855)
711
(1,855)
Other
(466)
(390)
(301)
(350)
(61,928)
(9,811)
(61,160)
(8,787)
(1) Impairment of non-current assets. Reconciliation of Impairment recognised under operating expenses:
Property, plant and equipment
48,462
Right of use assets
5,815
Intangible assets
61
Total impairment recognised under operating expenses
54,338
(2) Remuneration to auditors. Consulting and legal costs contain EUR 68 thousand and EUR 55 thousand expenses incurred for financial
statutory audit performed by external auditor of the Group and the Company for the year ended 31 December 2021, respectively (EUR
57 thousand and EUR 40 thousand – for the year ended 31 December 2020, respectively). Remuneration to the independent audit firms
for other services amounts to EUR 13 thousand for both, the Group and the Company, (EUR 7 thousand – for the year ended 31 December
2020).
22 INCOME (EXPENSES) FROM FINANCIAL AND INVESTMENT ACTIVITIES – NET
Group
Company
2021
2020
2021
2020
Gain from derivatives
1,898
-
1,898
-
Fines income
30
75
30
75
Interest income
13
53
13
53
Income from currency exchange on the lease liabilities
-
28,765
-
28,765
Other financial income
46
4
28
3
Financial activity income, total
1,987
28,897
1,969
28,896
Losses from currency exchange on the lease liabilities
(22,073)
-
(22,073)
-
Interest on the lease liabilities
(1,800)
(2,055)
(1,798)
(2,055)
Interest expenses
(481)
(349)
(479)
(349)
Losses from currency exchange
(174)
(256)
(105)
(164)
Loss from financial derivatives
-
(1,869)
-
(1,869)
Fines and penalties expenses
(19)
(2)
-
(1)
Other financial activity expenses
(10)
(19)
(1)
-
Financial activity expenses, total
(24,557)
(4,550)
(24,456)
(4,438)
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 45
23 INCOME TAX
Group
Company
2021
2020
2021
2020
Current income tax expense
(456)
(273)
-
-
Previous year income tax expense
-
-
-
-
Deferred tax (expenses) income
12,212
(9,608)
12,212
(9,608)
Income tax (expense) income recorded in the profit
(loss)
11,756
(9,881)
12,212
(9,608)
Reconciliation between income tax expense of the Group and Company and the result of taxable income of the Group and the Company
multiplied by income tax rate for the years 2021 and 2020 is as follows:
Group
2021
2021
2020
2020
Accounting profit (loss) before tax
(75,766)
43,839
Applying 15% profit tax
15.00%
(11,365)
15.00%
6,576
Effect of tax rates in foreign jurisdictions
(0.35)%
264
0.63%
273
Tax effect of:
Tax-exempt income
0.00%
-
(0.13)%
(55)
Deductible expenses of income tax (charity)
0.00%
-
(0.08)%
(36)
Non-deductible expenses of income tax
(0.06)%
48
1.57%
688
Realized derivatives
0.00%
3
0.64%
280
Different depreciation rates of non-current assets
0.00%
-
1.24%
543
Recognition of previously unrecognised tax losses
0.00%
-
(2.50)%
(1,094)
Investment projects‘ relief
0.00%
-
4.32%
1,896
Adjustments in respect of prior years
0.90%
(680)
0.00%
-
Other deductible temporary differences
0.03%
(26)
1.85%
810
15,52%
(11,756)
22.54%
9,881
Company
2021
2021
2020
2020
Accounting profit (loss) before tax
(77,128)
43,103
Applying 15% profit tax
15.00%
(11,569)
15.00%
6,465
Tax effect of:
Tax-exempt income
0.00%
-
(0.08)%
(36)
Deductible expenses of income tax (charity)
0.00%
-
1.62%
712
Non-deductible expenses of income tax
(0.04)%
31
0.39%
171
Realized derivatives
0.00%
3
1.24%
543
Different depreciation rates of non-current assets
0.00%
-
(2.50)%
(1,094)
Recognition of previously unrecognised tax losses
0.00%
-
4.32%
1,896
Investment projects‘ relief
0.00%
-
1.66%
726
Adjustments in respect of prior years
0.88%
(680)
0.00%
-
Other deductible temporary differences
0.00%
3
0.51%
225
15.83%
(12,212)
22.29%
9,608
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 46
23 INCOME TAX (CONT’D)
Movements of deferred tax balances:
Group and Company Balance as at 31 December 2021
2021
Net
balance at
1 January
Recognised
in profit or
loss
Recognised
in OCI
Recognised
directly in
equity
Other
Net
Deferred
tax assets
Deferred
tax
liabilities
Non-current asset (right-of-use asset)
(7,715)
(818)
-
-
-
(8,533)
-
(8,533)
Accelerated depreciation for tax purposes
207
(10)
-
-
-
197
197
-
Vacation reserve
162
(48)
-
-
-
114
114
-
Accrued annual bonuses
96
43
-
-
-
139
139
-
Emission allowances
256
283
-
-
-
539
539
-
Other temporary differences
59
1
-
-
-
60
60
-
Impairment of non-current assets
38
7,996
-
-
-
8,034
8,034
-
Long-term employee benefit liability
101
3
9
-
-
113
113
-
Associates’ equity method
-
5
-
-
-
5
5
-
Different depreciation rates of non-current
assets
(752)
(11)
-
-
-
(763)
-
(763)
Accrued income
(146)
93
-
-
-
(53)
-
(53)
Accrued taxable losses
1,094
4,563
-
-
-
5,657
5,657
-
Investment incentive of non-current assets
under the law previously in force
(2,005)
112
-
-
-
(1,893)
-
(1,893)
Tax assets (liabilities) before set-off
(8,605)
12,212
9
-
-
3,616
14,858
(11,242)
Set-off of tax
-
-
-
-
-
-
(11,242)
11,242
Net tax assets (liabilities)
(8,605)
12,212
9
-
-
3,616
3,616
-
Group and Company Balance as at 31 December 2020
2020
Net
balance at
1 January
Recognised
in profit or
loss
Recognised
in OCI
Recognised
directly in
equity
Other
Net
Deferred
tax assets
Deferred
tax
liabilities
Investment projects’ relief
1,896
(1,896)
-
-
-
-
-
-
Right-of-use asset and lease liability
901
(8,616)
-
-
-
(7,715)
(7,715)
Accelerated depreciation for tax purposes
217
(10)
-
-
-
207
207
-
Vacation reserve
158
4
-
-
-
162
162
-
Accrued annual bonuses
131
(35)
-
-
-
96
96
-
Emission allowances
85
171
-
-
-
256
256
-
Other temporary differences
41
18
-
-
-
59
59
-
Impairment of non-current assets
41
(3)
-
-
-
38
38
-
Long-term employee benefit liability
42
6
53
-
-
101
101
-
Associates’ equity method
9
(9)
-
-
-
-
-
-
Write-offs of inventories to realizable value
1
(1)
-
-
-
-
-
-
Different depreciation rates of non-current assets
(209)
(543)
-
-
-
(752)
-
(752)
Accrued income
(231)
85
-
-
-
(146)
-
(146)
Accrued taxable losses
-
1,094
-
-
-
1,094
1,094
-
Investment incentive of non-current assets under
the law previously in force
(2,132)
127
-
-
-
(2,005)
-
(2,005)
Tax assets (liabilities) before set-off
950
(9,608)
53
-
-
(8,605)
2,013
(10,618)
Set-off of tax
-
-
-
-
-
-
(2,013)
2,013
Net tax assets (liabilities)
950
(9,608)
53
-
-
(8,605)
-
(8,605)
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 47
23 INCOME TAX (CONT’D)
As at 31 December 2021 the Group and the Company did not recognise as deferred tax asset in total amounting to EUR 319 thousand: EUR
227 thousand from allowance of trade accounts receivable and EUR 92 thousand from Group companies’ tax losses carried forward (UAB “SGD
logistika”, UAB “SGD SPB”, UAB “SGD terminalas”). As at 31 December 2020 the Group and the Company did not recognise as deferred tax
asset in total amounting to EUR 418 thousand: EUR 333 thousand from allowance of trade accounts receivable and EUR 85 thousand – from
tax losses carried forward.
As at 31 December 2021 and 31 December 2020 the Company’s management’s judgement was not to recognize as deferred tax asset
amounting up to EUR 263 thousand from the investment incentive in the amount of up to EUR 1,756 thousand, whose expiry date is 2024, up
to EUR 2,828 thousand from the investment incentive in the amount of up to EUR 18,850 thousand, whose expiry date is 2023, up to EUR 867
thousand from the investment incentive in the amount of up to EUR 5,778 thousand, whose expiry date is 2022, and up to EUR 4,284 thousand
from the investment incentive in the amount of up to EUR 28,562 thousand, whose expiry date is 2021 as the management does not expect
to use the investment incentive to set off against taxable profit in the future.
In the Statement of Financial position deferred income tax asset and deferred income tax liability are set-off as they both are related to the
same tax authority.
While assessing deferred income tax asset and liability components as at 31 December 2021 and 2020 the Company has used the domestic
Lithuanian income tax rate of 15%. The Group’s subsidiary KN Açu Serviços de Terminal de GNL Ltda applies Brazilian Tax System and
subsidiary´s administration has elected the Real Profit Regime that is calculated on quarterly basis. The official rates for Income tax rate is 25%
and Social Contribution on Net Profit is 9%.
24 BASIC AND DILUTED EARNINGS (LOSSES) PER SHARE
Basic earnings per share are calculated by dividing net profit (loss) of the Group by the weighted average number of ordinary shares
outstanding. Diluted earnings per share equal to basic earnings per share as the Group has no instruments issued that could dilute shares
issued.
Basic and diluted earnings per share are as follows:
Group
2021
2020
Net profit (loss) attributable to shareholders
(63,929)
33,958
Weighted average number of outstanding ordinary shares (thousand)
380,416
381,000
Earnings and reduced earnings (in EUR)
(0.17)
0.09
25 DIVIDENDS
2021
2020
Dividends declared
(7,538)
(7,947)
Weighted average number of shares (thousand)
380,416
381,000
Dividends declared per share (expressed in EUR per share)
0.02
0.02
The General Meeting of the Shareholders held on 30 April 2021 approved profit appropriation for the year 2020 and allocated to the
Shareholders dividends in the amount of EUR 7,538 thousand for 2020. The General Meeting of the Shareholders held on 28 April 2020
approved profit appropriation for the year 2019 and allocated to the Shareholders dividends in the amount of EUR 7,947 thousand for 2019.
The outstanding amount of declared dividends to the shareholders, who were not reached from the stated addresses, is accounted as current
amounts payable and liabilities in the Statement of financial position as at 31 December 2021. As at 31 December 2021, the outstanding
number of dividends not paid during the previous financial year amounted to EUR 157 thousand (EUR 164 thousand as at 31 December 2020).
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT
Credit risk
The Company has significant concentration of trading counterparties. Trade receivables from the main customer A of the Company accounted
for approximately 69% as at 31 December 2021 (about 64% as at 31 December 2020), customer B – on 31 December 2021 accounted for
approximately 14% (13% as at 31 December 2020), customer C – on 31 December 2021 accounted for approximately 6% (about 5% as at 31
December 2020), customer D – on 31 December 2021 accounted for approximately 5% (about 2% as at 31 December 2020) of the total Group’s
and Company’s receivables from all its customers. The average payment term for the main customer mentioned above varies from 20 to 10
calendar days, whereas the usual payment terms for all other customers is 5 days. A possible credit risk for the Group’s and the Company’s
customers is managed by a continuous monitoring of outstanding balances.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 48
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)
Credit risk (cont’d)
The Group’s and Company’s procedures are in force to ensure on a permanent basis that services are provided to reliable customers and do
not exceed an acceptable credit exposure limit. The Company trades only with reputable third parties, so there is no requirement for collateral.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments,
if any, in the Statement of Financial position. Consequently, the Group and the Company considers that its maximum exposure is reflected by
the amount of trade receivables, net of allowance for doubtful accounts and cash and other short-term deposits recognized at the date of
Statement of Financial position. In the management’s opinion there were no reasonably likely circumstances, which would raise additional
obligations to the Group and the Company.
The following table provides information about the exposure to credit risk for trade receivables from the customers:
Group
31-12-2021
Gross carrying
amount
Loss
allowance
Credit
impaired
Current (not past due)
5,341
-
No
1-30 days past due
2,770
-
No
31-60 days past due
1,300
-
No
61-90 days past due
-
-
No
More than 90 days past due
1,511
(1,511)
Yes
10,922
(1,511)
Company
31-12-2021
Gross carrying
amount
Loss
allowance
Credit
impaired
Current (not past due)
4,869
-
No
1-30 days past due
2,770
-
No
31-60 days past due
1,300
-
No
61-90 days past due
-
-
No
More than 90 days past due
1,511
(1,511)
Yes
10,450
(1,511)
Group
31-12-2020
Gross carrying
amount
Loss
allowance
Credit
impaired
Current (not past due)
5,845
-
No
1-30 days past due
3,530
-
No
31-60 days past due
792
(616)
Yes
61-90 days past due
144
(144)
Yes
More than 90 days past due
1,462
(1,462)
Yes
Company
11,773
(2,222)
31-12-2020
Gross carrying
amount
Loss
allowance
Credit
impaired
Current (not past due)
5,461
-
No
1-30 days past due
3,530
-
No
31-60 days past due
792
(616)
Yes
61-90 days past due
144
(144)
Yes
More than 90 days past due
1,462
(1,462)
Yes
11,389
(2,222)
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 49
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)
Interest rate risk
The Group’s and the Company’s income and operating cash flows are influenced by changes in market interest rates, which are linked to
EURIBOR base. Overall, 56% of loan portfolio is exposed to floating interest rate risk no hedging derivative instruments were used. Thus, such
standing has implications on financial results.
EIB facility with 3 tranches is exposed to 3 months EURIBOR with zero-floor applicable on EURIBOR base. In contrast, NIB facilities are exposed
to 6 months EURIBOR with no zero-floor applicable on EURIBOR base.
Maturity
date
Carrying
amount as at
31-12-2021
Carrying
amount as at
31-12-2020
Interest rate
Floating interest rate exposure
EIB loan:
1
st
tranche
20-12-2023
11,746
12,725
fixed margin + 3 months
EURIBOR
Negative total interest rate is
set at zero
2
nd
tranche
28-11-2034
12,730
13,708
fixed margin + 3 months
EURIBOR
Negative total interest rate is
set at zero
3
rd
tranche
20-09-2034
24,700
24,700
fixed margin + 3 months
EURIBOR
Negative total interest rate is
set at zero
NIB loan:
Reloading station
19-06-2034
18,074
19,152
fixed margin + 6 months
EURIBOR
Negative interest is accrued
and offset on the repayment
date as part of the loan
FSRU loan
31-12-2044
52,658
26,329
fixed
No exposure to floating interest
rate
119,908
96,614
Fixed margin varies from 0,066% to 0,78% as at 31 December 2021.
The Group and the Company is constantly assessing its possibilities to hedge interest rate risks on its loans. Thus, the loans related with long-
term LNG terminal solution with high probability in future are expected to be with partially or fully fixed interests.
The Group’s and the Company’s excess liquidity in forms of money and time deposits are distributed across the accounts of major Lithuanian
banks, which are granted with Standard Poor’s or equivalent long-term term borrowing BBB- or better external rating according to the foreign
rating agencies. Partner bank’s rating is assessed either on a stand-alone or applying a bank group logic into which exposure is present. Also,
the Group and the Company is monitoring recommendation of the Central Bank of Lithuania.
Retrospectively, risk related to the funds security in banks was limited, because the Group and the Company carried out transactions with the
banks that have high ratings provided by the foreign rating agents.
As at 31 December 2021 increase in EURIBOR interest rate by 10 basis points would increase yearly interest expenses amount by EUR 19
thousand (as at 31 December 2020 – EUR 28 thousand).
Exchange rate risk
The Group and the Company is exposed to foreign currency fluctuations primarily related to the U.S. dollar. Foreign exchange risk arises from
future commercial transactions as well as recognized liabilities including impact arising from IFRS 16 “Leases”.
Because the highest part of lease payments is denominated in US dollars, as a result changes in exchange rates occur in the statement of
comprehensive income, the Group and the Company incurred the currency exchange loss amounting to EUR 22,073 thousand for 2021 arising
from IFRS 16 “Leases” and profit amounting to EUR 28,765 thousand for 2020.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 50
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)
In 2020 the Group and the Company started to use derivative instruments in order to manage the risk arising from the USD and BRL currency
rate fluctuations.
Summary of exchange rates as at 31 December 2021 and 31 December 2020 to EUR:
Exchange rate as
at 31-12-2021
Average exchange
rate in 2021
Exchange rate as
at 31-12-2020
Average exchange
rate in 2020
USD
1.1334
1.1833
1.2281
1.1411
BRL
6.3734
6.3773
6.3574
5.8823
Group (denominated in euro)
31-12-2021
EUR
USD
BRL
Total
Cash and cash equivalents
60,827
3
687
61,517
Trade receivables
8,925
-
486
9,411
Lease liabilities
(21,581)
(265,499)
(25)
(287,105)
Trade payables
(3,026)
(3)
(24)
(3,053)
Total
45,145
(265,499)
1,124
(219,230)
Company (denominated in euro)
31-12-2021
EUR
USD
BRL
Total
Cash and cash equivalents
57,145
3
-
57,148
Trade receivables
8,939
-
-
8,939
Lease liabilities
(21,581)
(265,499)
-
(287,080)
Trade payables
(3,042)
(3)
-
(3,045)
Total
41,461
(265,499)
-
(224,038)
Group (denominated in euro)
31-12-2020
EUR
USD
BRL
Total
Cash and cash equivalents
46,347
4,300
429
51,076
Trade receivables
9,167
-
384
9,551
Lease liabilities
(20,997)
(284,622)
-
(305,619)
Trade payables
(2,303)
(4,208)
(33)
(6,544)
Total
32,214
(284,530)
780
(251,536)
Company (denominated in euro)
31-12-2020
EUR
USD
BRL
Total
Cash and cash equivalents
43,133
4,300
-
47,433
Trade receivables and other receivables
9,167
-
-
9,167
Lease liabilities
(20,997)
(284,622)
-
(305,619)
Trade payables and other liabilities
(2,303)
(4,208)
-
(6,511)
Total
29,000
(284,530)
-
(255,530)
As at 31 December 2021 increase in USD currency rate by 10 basis points would increase yearly loss from currency exchange amount by
EUR 234 thousand (as at 31 December 2020 – EUR 232 thousand).
As at 31 December 2021 increase in BRL currency rate by 10 basis points would increase yearly income from currency exchange amount by
EUR 1 thousand (as at 31 December 2020 – EUR 1 thousand).
Liquidity risk
The Company’s and Group’s policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount
of committed credit facilities to meet its commitments at a given date in accordance with its strategic plans.
The Group’s liquidity (total current assets / total current liabilities) and quick ratios ((total current assets - inventories) / total current liabilities)
as at 31 December 2021 were 1.28 and 1.25, respectively (1.47 and 1.43 as at 31 December 2020).
The Company’s liquidity (total current assets / total current liabilities) and quick ratios ((total current assets - inventories) / total current
liabilities) as at 31 December 2021 were 1.20 and 1.17, respectively (1.41 and 1.37 as at 31 December 2020).
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 51
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)
Liquidity risk (cont’d)
The Group’s and Company’s objective is to maintain a balance between continuity of funding and flexibility. The Groups and the Company's
activities generate sufficient amount of cash, therefore, the managements' main responsibility is to monitor that the liquidity ratio of the
Company is close or higher than 1.
The table below summarizes the maturity profile of the Group’s and Company’s financial liabilities as at 31 December 2021 assessed on
contractual undiscounted payments:
Group
Carrying
amount
On
demand
Less than 3
months
3 to 12
Months
1 to 5
years
More than 5
years
Total
Trade and other payables
3,695
-
3,346
349
-
-
3,695
Lease liabilities
287,105
-
10,376
31,689
211,983
29,045
283,093
Loan and interest
119,923
-
630
3,439
27,969
92,379
124,417
Derivatives
15
-
-
15
-
-
15
Balance as at 31 December 2021
410,738
-
14,352
35,492
239,952
121,424
411,220
Company
Carrying
amount
On
demand
Less than 3
months
3 to 12
Months
1 to 5
years
More than 5
years
Total
Trade and other payables
3,513
-
3,164
349
-
-
3,513
Lease liabilities
287,080
-
10,374
31,684
211,965
29,045
283,068
Loan and interest
119,923
-
630
3,439
27,969
92,379
124,417
Derivatives
15
-
-
15
-
-
15
Balance as at 31 December 2021
410,531
-
14,168
35,487
239,934
121,424
411,013
The table below summarizes the maturity profile of the Group’s and Company’s financial liabilities as at 2020 assessed on contractual
undiscounted payments:
Group
Carrying
amount
On
demand
Less than 3
months
3 to 12
Months
1 to 5
years
More than 5
years
Total
Trade and other payables
6,544
-
6,544
-
-
-
6,544
Lease liabilities
305,619
-
10,349
31,610
252,086
24,352
318,397
Derivatives
1,946
-
316
1,630
-
-
1,946
Loan and interest
96,510
-
503
2,926
19,655
74,458
97,542
Balance as at 31 December 2020
410,619
-
17,712
36,166
271,741
98,810
424,429
Company
Carrying
amount
On
demand
Less than 3
months
3 to 12
Months
1 to 5
years
More than 5
years
Total
Trade and other payables
6,511
-
6,511
-
-
-
6,511
Lease liabilities
305,619
-
10,349
31,610
252,086
24,352
318,397
Derivatives
1,946
-
316
1,630
-
-
1,946
Loan and interest
96,510
-
503
2,926
19,655
74,458
97,542
Balance as at 31 December 2020
410,586
-
17,679
36,166
271,741
98,810
424,396
EUR 740 thousand of the Company’s EUR 3,513 thousand trade and other payables as at 31 December 2021 (EUR 726 thousand of the
EUR 6,511 thousand amount as at 31 December 2020) is the retention amounts under contracts, which are paid for when all work under a
contract has been completed. There is no possibility to forecast these payment terms.
Fair value of financial assets and liabilities
The Company’s and Group’s principal financial instruments not carried at fair value are trade and other receivables, trade and other payables,
non-current and current borrowings.
Fair value is stated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 52
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)
Fair value of financial assets and liabilities (cont’d)
The following methods and assumptions are used to estimation the fair value of each class of financial assets and liabilities as at 31 December
2021:
Group
Carrying amount
Fair value
Fair value -
hedging
instruments
Financial
assets at
amortised cost
Financial
liabilities
at
amortised
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets not measured at fair
value
Trade receivables
-
9,411
-
9,411
Cash
-
61,517
-
61,517
Short-term accrued income
-
612
-
612
-
71,540
-
71,540
Financial liabilities measured at fair
value
Derivatives
(15)
-
-
(15)
-
(15)
-
(15)
(15)
-
-
(15)
Financial liabilities not measured at
fair value
Loan and interest
-
-
(119,923)
(119,923)
-
(119,923)
-
(119,923)
Financial lease liabilities
(287,105)
(287,105)
-
(287,105)
-
(287,105)
Trade payables
-
-
(3,053)
(3,053)
-
-
(410,081)
(410,081)
Company
Carrying amount
Fair value
Fair value -
hedging
instruments
Financial
assets at
amortised cost
Financial
liabilities
at
amortised
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets not measured at fair
value
Trade receivables
-
8,939
-
8,939
Cash
-
57,148
-
57,148
Short-term accrued income
-
612
-
612
-
66,699
-
66,699
Financial liabilities measured at fair
value
Derivatives
(15)
-
-
(15)
-
(15)
-
(15)
(15)
-
-
(15)
Financial liabilities not measured at
fair value
Loan and interest
-
-
(119,923)
(119,923)
-
(119,923)
-
(119,923)
Financial lease liabilities
(287,080)
(287,080)
-
(287,080)
-
(287,080)
Trade payables
-
-
(3,045)
(3,045)
-
-
(410,048)
(410,048)
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 53
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)
The following methods and assumptions are used to estimation the fair value of each class of financial assets and liabilities as at 31 December
2020:
Group
Carrying amount
Fair value
Fair value -
hedging
instruments
Financial
assets at
amortised cost
Financial
liabilities
at
amortised
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair
value
Derivatives
33
-
-
33
-
33
-
33
33
-
-
33
Financial assets not measured at fair
value
Trade receivables
-
9,551
-
9,551
-
-
-
-
Short term deposits
-
24,000
-
24,000
-
-
-
-
Cash
-
51,076
-
51,076
-
-
-
-
-
84,627
-
84,627
Financial liabilities measured at fair
value
Derivatives
(1,946)
-
-
(1,946)
-
(1,946)
-
(1,946)
(1,946)
-
-
(1,946)
Financial liabilities not measured at
fair value
Loan and interest
-
-
(96,510)
(96,510)
-
(96,510)
-
(96,510)
Trade payables
-
-
(6,544)
(6,544)
-
-
-
-
-
-
(103,054)
(103,054)
Company
Carrying amount
Fair value
Fair value -
hedging
instruments
Financial
assets at
amortised cost
Financial
liabilities
at
amortised
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair
value
Derivatives
33
-
-
33
-
33
-
33
33
-
-
33
Financial assets not measured at fair
value
Trade receivables
-
9,167
-
9,167
-
-
-
-
Short term deposits
-
24,000
-
24,000
-
-
-
-
Cash
-
47,433
-
47,433
-
-
-
-
-
80,600
-
80,600
Financial liabilities measured at fair
value
Derivatives
(1,946)
-
-
(1,946)
-
(1,946)
-
(1,946)
(1,946)
-
-
(1,946)
Financial liabilities not measured at
fair value
Loan and interest
-
-
(96,510)
(96,510)
-
(96,510)
-
(96,510)
Trade payables
-
-
(6,511)
(6,511)
-
-
-
-
-
-
(103,021)
(103,021)
No transfers occurred between levels in the hierarchy by re-assessing categorization as at 31 December 2021 compared to 31 December 2020.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 54
26 FINANCIAL ASSETS AND LIABILITIES AND RISK MANAGEMENT (CONT’D)
Capital management
The primary objectives of the Company’s capital management are to ensure that the Company complies with externally imposed capital
requirements. Capital includes equity attributable to equity holders.
The Company manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of its
activities. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares.
In 2021 the decrease on authorized capital of the Company was amounting to EUR 190 thousand. In 2020 the increase on authorized capital
of the Company was amounting to EUR 29 thousand (Note 1).
The Company must keep its equity at least up to 50% of its share capital, as imposed by the Law on Companies of Republic of Lithuania as at
31 December 2021 and as at 31 December 2020.
The Company’s activities are financed using its equity and loan capital.
27 COMMITMENTS AND CONTINGENCIES
The Tax Authorities have not performed full-scope tax investigations at the Company and the Group. The Tax Authorities may inspect
accounting, transaction and other documents, accounting records and tax returns for the current and previous 3 calendar years at any time,
and where appropriate, for the current and previous 5 or 10 calendar years and impose additional taxes and penalties. Management of the
Group and The Company is not aware of any circumstances which would cause calculation of additional significant liabilities due to unpaid
taxes.
The Customs of the Republic of Lithuania and the Tax Authorities have granted to the Company the exemption from the obligation to provide
guarantees for possible tax liabilities. The total amount of exemptions amounts to EUR 363,000 thousand as at 31 December 2021.
Material contractual liabilities (acquisition of property, plant and equipment) amounted to EUR 1,884 thousand as at 31 December 2021
(EUR 6,389 thousand as at 31 December 2020).
The Company has an agreement on assignment of claim rights and a maximum pledge agreement with UAB Hoegh LNG Klaipėda which
maximum amount of USD 50,000 thousand per one year as at 31 December 2021 and as at 31 December 2020. The said agreements are
intended to secure obligations of the Company to Hoegh LNG Klaipėda under the Time Charter Party (Lease of a Floating Storage and
Regasification Unit in conjunction with maintenance and operation services) agreement concluded on 2 March 2012.
Legal disputes
▪ The Company is defending an action brought in 2014 by UAB “Naftos grupė“, which allegedly incurred loss in the amount of EUR 5
million and additionally aims to recover the surplus of oil products allegedly owned by UAB “Naftos grupė“ and stored by the
Company.
Competition Council is involved in the process, however there is a lack of evidence for the Court and the case is suspended until the
criminal case (described in the next bullet point) is resolved.
Based on judgement of legal advisors, the management of the Company believes that the defence against the action will be
successful.
In the opinion of the Company's management, the Company will not incur any significant additional costs related to this case,
therefore no provisions for this ongoing case have been formed in the preparation of the financial statements of 31 December 2021.
▪ The Company is a civil plaintiff in a criminal case on the accusations against the former managers of the Company and against
companies UAB “Naftos grupė“ and UAB “Artilona”.
In 2017 the court of the first instance issued a verdict to award the payment of EUR 20.9 million and 5% annual interest in favour of
the Company and, additionally, to cover the court representation costs. However, all accused persons appealed against the first
instance court decision and the case was transferred to the appellate instance, Court of Appeal of Lithuania. Currently, the case is
still on-going.
Since the Company is a plaintiff in the case, no significant additional costs related to this case will be incurred.
▪ Since 2015 the Company is involved as a third interested party in the legal case with AB Achema, which has submitted 10 complaints
regarding the resolutions of the NERC to the court. AB Achema requests the court to annul NERC resolutions related to the additional
security component of natural gas supply transmission price.
As a result of this dispute, AB Amber Grid calculates fine and interest for AB Achema for overdue payments for security component.
As at 31 December 2021 the amount of the fine and interest calculated by AB Amber Grid and paid to the Company amounts to
EUR 3,837 thousand (as at 31 December 2020 – EUR 3,554 thousand). The Company does not recognise the received payments for
fines and interest as income until a court decision is rendered. Payments received are presented under Contract liabilities caption in
the statement of financial position.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 55
27 COMMITMENTS AND CONTINGENCIES (CONT’D)
The recent unappealable decision was received on 29 September 2021, which resulted in received payment of EUR 1.267 thousand
from AB Amber Grid (see Note 29).
In the opinion of the Company's management, the Company will not incur any significant additional costs related to this case,
therefore no provisions for this ongoing case have been formed in the preparation of the financial statements of 31 December 2021.
▪ On 27 September 2021 the Company filled a notice of arbitration to the Vilnius Commercial Arbitration Court, regarding the award
of EUR 1,409 thousand debt and EUR 120 thousand interest from Verum Plus AG. On 10 January 2022 the Company submitted the
claim. Decision of the court going to be adopted not later than 30 days after 7 March 2022.
In the opinion of the Company's management, the Company will not incur any significant additional costs related to this case,
wherefore no deferrals for this ongoing case have been formed in the preparation of the financial statements of 31 December 2021.
▪ The Company applied to the court with a statement regarding the establishment of the fact of acquisition of the right of ownership
under the acquired statute of limitations, requesting to establish that it had acquired the right of ownership to the 731 tons of fuel
oil stored at the Klaipėda oil terminal.
On 30 December 2021 District Court of Klaipėda decided to establish a fact of legal significance that the Company acquired
ownership under the acquired statute of limitations to the 731 tons of fuel oil. The decision has already entered into force.
Based on the court decision come into force the Company accounted the fuel oil under stock in the statement of financial position
and respectively recognised income of other activities, amounting to EUR 331 thousand, in the statement of comprehensive income
in January 2022.
▪ In July 2021 a civil claim of the prosecutor of the Klaipėda Regional Prosecutor Office was received in defense of the public interest
concerning the annulment of the decisions of the Company's bodies and employees’ Shares Granting Contracts, and the application
of restitution. The Company is involved in the case as a defendant.
Prosecutor requests the court:
- to apply interim measures prohibiting the Company's employees from transferring the ownership rights to the Company's
shares acquired in accordance with the Shares Granting Contracts of 04-26-2019 (hereinafter – the Contracts) and
suspending the validity of the Company's Rules for Granting Shares No. PRC020 (hereinafter – the Rules) until the court
judgement enters into force;
- to declare the Rules null and void;
- to declare the respective decisions of the Company’s Board minutes No. J3-10 of 10-09-2018 null and void;
- to declare the Contracts null and void from the moment of their conclusion and apply restitution in kind – to oblige the
Company's employees to return the shares to the Company's ownership.
The Company does not agree with the submitted civil claim on the merits and will present its respective position in the court
proceedings.
Shareholders of the Company on 8 November 2018 approved a proposal of the Board to change payment form of annual bonuses
and to pay employees of the Company up to 50% of the annual award for the results of 2018 in shares of the Company. Accordingly,
official share buy-back was announced by the Company in January 2019, 1,463,414 shares were acquired for the total amount of
EUR 600 thousand. Management of the Company has considered accounting for share-based payments under IFRS 2 Share-based
Payment.
In the opinion of the Company's management, the Company will not incur any significant additional costs related to this case,
therefore no deferrals for this ongoing case have been formed in the preparation of the financial statements of 31 December 2021.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 56
28 RELATED PARTY TRANSACTIONS
A related party is a person or entity that is related to the Company and the Group:
1) A person or a close member of that person's family is related to the Company and the Group:
• has control or joint control over the Company;
• has significant influence over the Company; or
• is a member of the key management personnel of the Company and the Group.
2) An entity is related to the Company and the Group, if any of the following conditions applies:
• The entity and the Company / Group are members of the same group (which means that each parent, subsidiary and fellow
subsidiary is related to the others).
• One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which
the other entity is a member).
• One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
• The entity is controlled or jointly controlled by a person identified in (1).
• The entity is a post-employment defined benefit plan for the benefit of employees of either the Company / Group or an entity
related to the Company / Group. If the Company is itself such a plan, the sponsoring employers are also related to the reporting
entity.
Transactions with Lithuanian State controlled enterprises and institutions, and other related parties
Group:
Purchases
Sales
Receivables
Payables
State Enterprise Klaipeda State Seaport Authority
2021
2,442
-
-
257
2020
2,334
-
-
328
AB "Amber Grid"
2021
-
27,732
7,005
-
2020
-
35,729
7,240
-
UAB „Ignitis“
2021
4
1,930
339
-
2020
293
2,905
178
-
Public Institution Lithuanian Energy Agency
2021
-
3,329
-
-
2020
-
3,133
-
-
Energijos skirstymo operatorius, AB
2021
429
-
-
55
2020
459
-
-
64
AB LTG CARGO
2021
966
-
-
86
2020
1,529
-
-
65
Other related parties
2021
31
-
-
1
2020
67
-
-
-
Transactions with related parties, in total:
2021
3,872
32,991
7,344
399
2020
4,682
41,767
7,418
457
Company:
Purchases
Sales
Receivables
Payables
State Enterprise Klaipeda State Seaport Authority
2021
2,442
-
-
257
2020
2,334
-
-
328
AB "Amber Grid"
2021
-
27,732
7,005
-
2020
-
35,729
7,240
-
UAB „Ignitis“
2021
4
1,930
339
-
2020
293
2,905
178
-
Public Institution Lithuanian Energy Agency
2021
-
3,329
-
-
2020
-
3,133
-
-
KN Acu Servicos de Terminal de GNL Ltda
2021
-
294
15
-
2020
-
879
75
-
Energijos skirstymo operatorius, AB
2021
429
-
-
55
2020
459
-
-
64
AB LTG CARGO
2021
966
-
-
86
2020
1,529
-
-
65
Other related parties
2021
31
-
-
1
2020
43
-
-
-
Transactions with related parties, in total:
2021
3,872
33.285
7,359
399
2020
4,658
42,646
7,493
457
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 57
28 RELATED PARTY TRANSACTIONS (CONT’D)
Other related parties are following: UAB Tetas, VĮ Registrų centras, Vilniaus metrologijos centras, AB, UAB GET Baltic, Smiltynės perkėla, AB,
Lietuvos paštas, AB, Klaipėdos prekybos, pramonės ir amatų rūmai, UAB Projektų ekspertizė.
• Purchases from State Klaipėda State Seaport Authority include land rent, jetty usage and FSRU port fee.
• Sales to AB Amber Grid include income from additional security supplement to the price of natural gas’ transmission. Sales to AB Amber
Grid do not include interest and fines for AB Achema for delayed payments of the security component to the upper ceiling of the natural
gas transmission price. These amounts are recognized and accounted for as contract liabilities (as at 31 December 2021 – EUR 3,837
thousand, as at 31 December 2020 – EUR 3,554 thousand) (Note 27).
• Purchases from UAB Ignitis include purchases of natural gas. Sales to UAB Ignitis include income from LNG regasification and reloading
services as well as income from customs brokerage services.
• In 2021 and 2020 sales to Public Institution Lithuanian Energy Agency include income from rent of tanks.
• Purchases from AB LG Cargo comprise purchase of railway services.
• Purchases from AB Energijos skirstymo operatorius include acquisition of electricity power.
• Sales to KN Acu include consulting services and bank guarantees.
Management salaries and other payments
The Company's management consists of the Chief Executive Officer (CEO) and Directors.
The Groups’ management consists of the Chief Executive Officer (CEO), Directors and Directors of subsidiaries.
Group
Company
2021
2020
2021
2020
Payroll related costs
648
691
570
588
Number of managers
10
10
6
6
During 2021 and 2020 the management of the Group and the Company did not receive any loans, guarantees, and no other payments or
property transfers occurred.
29 SUBSEQUENT EVENTS
• On 19 January 2022 the Company received the payment, amounting to EUR 1,267 thousand, from AB Amber grid based on the court
decision rendered on 29 September 2021 (see note 27 Commitments and contingencies, paragraph Legal disputes).
• Extraordinary General Meeting of Shareholders of the Company, held on 25 February 2022, adopted the resolution to approve: the
Company’s Board decision to acquire the floating storage regasification unit (FSRU) INDEPENDENCE.
• On 24 February 2022 Russia started a military invasion of Ukraine. The military action affects not only the economies of Ukraine,
Russia and Belarus, but also those of Europe and the world. The Group and the Company has not been trading with Russian or
Belarusian companies as at 31 December 2021 and no trading activities have been planned for 2022 with entities registered in
aforementioned countries. Moreover, the Group and the Company does not receive key supplies or services from these countries.
For detailed description refer to Annual report.
After the end of the financial year and until the approval of these financial statements, there were no subsequent events, which
would have influence on the financial statements or require disclosure in the annual report for the year ended 31 December 2021.
AB KLAIPĖDOS NAFTA CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS FOR THE YEAR ENDED ON 31 DECEMBER 2021
(all amounts are in EUR thousand unless otherwise stated)
www.kn.lt | 58
CONFIRMATION OF RESPONSIBLE PERSONS
23 March 2022
Following Article 22 of the Law on Securities of the Republic of Lithuania and the Rules on Preparation and Submission of Periodic and
Additional Information of the Lithuanian Securities Commission, we, Darius Šilenskis, Chief Executive Officer of AB Klaipėdos nafta, Mindaugas
Kvekšas, Chief Financial Officer of AB Klaipėdos nafta, and Rasa Tamaliūnaitė, Chief Accountant, hereby confirm that to the best of our
knowledge the above-presented consolidated and separate Financial Statements of AB Klaipėdos nafta for the year 2021, prepared in
accordance with the International Financial Reporting Standards as adopted to be used in the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss and cash flows of AB Klaipėdos nafta.
Chief Executive Officer Darius Šilenskis
Chief Financial Officer Mindaugas Kvekšas
Chief Accountant Rasa Tamaliūnaitė
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 59
2021
AB KLAIPĖDOS NAFTA
CONSOLIDATED ANNUAL
REPORT
FOR THE FINANCIAL YEAR ENDING ON 31 DECEMBER 2021
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 60
CONTENT
GENERAL INFORMATION ABOUT THE GROUP AND THE COMPANY .............................................................................................................. 61
A FOREWORD OF THE CEO ................................................................................................................................................................................................. 66
BUSINESS CONTINUITY – OPERATIONS IN, DEPENDENCE ON, OR OTHER EXPOSURE TO RUSSIAN/BELARUSSIAN OR
UKRAINIAN ECONOMIES ..................................................................................................................................................................................................... 68
BUSINESS CONTINUITY – IMPACT OF COVID – 19 ................................................................................................................................................... 69
INFORMATION ABOUT THE GROUP AND THE COMPANY AND ITS ACTIVITIES ......................................................................................... 70
THE CORPORATE STRATEGY ............................................................................................................................................................................................... 77
SIGNIFICANT EVENTS OF THE REPORTING PERIOD ................................................................................................................................................. 81
SIGNIFICANT EVENTS OCCURRED AFTER THE END OF THE REPORTING PERIOD ...................................................................................... 82
BUSINESS ENVIRONMENT AND MARKET ..................................................................................................................................................................... 83
FINANCIAL RESULTS OF GROUP’S ACTIVITY ............................................................................................................................................................... 89
CONSOLIDATION .................................................................................................................................................................................................................... 90
FINANCIAL RESULTS OF THE GROUP’S AND THE COMPANY’S ACTIVITY ...................................................................................................... 91
ALTERNATIVE PERFORMANCE MEASURES................................................................................................................................................................... 92
ALTERNATIVE PERFORMANCE MEASURES (CONT.) ................................................................................................................................................. 94
INVESTMENTS ......................................................................................................................................................................................................................... 103
ACTIVITY PLANS AND FORECASTS ................................................................................................................................................................................ 104
INFORMATION ABOUT THE SHAREHOLDERS AND SHARES OF THE COMPANY ..................................................................................... 105
INFORMATION ABOUT THE EMPLOYEES OF THE GROUP ................................................................................................................................... 110
GROUP’S SOCIAL RESPONSIBILITY ................................................................................................................................................................................ 115
RISK FACTORS AND RISK MANAGEMENT .................................................................................................................................................................. 120
OTHER INFORMATION ........................................................................................................................................................................................................ 124
2021 YEAR AB KLAIPĖDOS NAFTA REPORT ON REMUNERATION ................................................................................................................... 125
2021 YEAR AB KLAIPĖDOS NAFTA GOVERNANCE REPORT ................................................................................................................................ 129
Abbreviations:
KN – AB Klaipėdos nafta
KOT – Klaipėda oil terminal
SOT – Subačius oil terminal
OT – Oil terminals
LNGT – regulated LNG activities
comLNG – commercial LNG activities
LNG terminal – Klaipėda LNG terminal
BDP – Segment of LNG related business development and consulting
OP – Oil Products
HFO – Heavy Oil Products
LP – Light Products
NERC – National Energy Regulatory Council.
25 March 2021
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 61
GENERAL INFORMATION ABOUT THE GROUP AND THE COMPANY
1. REPORTING PERIOD
AB Klaipėdos nafta Consolidated Annual Report for the
year 2021 is prepared for the period from 1 January 2021
until 31 December 2021.
Annual Report for the year 2021 also includes
Management Report and Report on Remuneration for the
year 2021.
2. CONFIRMATION OF RESPONSIBLE PERSONS
Referring to the Article 22 of the Law on Securities of the
Republic of Lithuania and the Rules on Preparation and
Submission of Periodic and Additional Information of the
Bank of Lithuanian, Responsible Persons Darius Šilenskis,
Chief Executive Officer of AB Klaipėdos nafta, Mindaugas
Kvekšas, Chief Financial Officer of AB Klaipėdos nafta, and
Rasa Tamaliūnaitė, Chief Accountant of
AB Klaipėdos nafta, hereby confirm that to the best of our
knowledge the Annual Report of AB Klaipėdos nafta for
2021 includes a fair review of the development and
performance of the business and the present state of the
Company together with the description of the main risks
and uncertainties that are encountered.
3. PERSONS RESPONSIBLE FOR THE INFORMATION SUBMITTED IN THE ANNUAL REPORT
JOB TITLE
FULL NAME
TELEPHONE NUMBER
AB Klaipėdos nafta, Chief Executive Officer
Darius Šilenskis
+370 52 127 733
AB Klaipėdos nafta, Chief Financial Officer
Mindaugas Kvekšas
+370 46 391 772
AB Klaipėdos nafta, Chief Accountant
Rasa Tamaliūnaitė
+370 61 888 260
4. ISSUER INFORMATION AND CONTACT DETAILS
Name of the Company: AB Klaipėdos nafta (hereinafter – the Company, KN or Issuer)
Legal status: Stock Company
Authorized share capital: 110,315,009 Eur
Date and place of registration: 27 September 1994, State Enterprise Centre of Registers
Company code: 110648893
Address: Burių Street 19, 92276 Klaipėda
Register of the Company: State Enterprise Centre of Registers
Telephone numbers: +370 46 391772
Fax numbers: +370 46 311399
E-mail address: info@kn.lt
Internet site: www.kn.lt
5. INFORMATION ON SUBSIDIARIES AND CONTACT DETAILS:
Name of the Company: UAB SGD terminalas
Legal status: Private Limited Liability Company
Authorized share capital: 37,500 Eur
Date and place of registration: 27 December 2018, State Enterprise Centre of Registers
Company code: 304977459
Address: Burių Street 19, 92276 Klaipėda
Register of the Company: State Enterprise Centre of Registers
Telephone numbers: +370 46 391772
Fax numbers: +370 46 311399
E-mail address: info@kn.lt
Internet site: www.kn.lt
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 62
Name of the Company: UAB SGD logistika
Legal status: Private Limited Liability Company
Authorized share capital: 4,540,000 Eur
Date and place of registration: 20 November 2015, State Enterprise Centre of Registers
Company code: 304139242
Address: Burių Street 19, 92276 Klaipėda
Register of the Company: State Enterprise Centre of Registers
Telephone numbers: +370 46 391772
Fax numbers: +370 46 311399
E-mail address: info@kn.lt
Internet site: www.kn.lt
6. INFORMATION ON SUBSIDIARIES OF UAB SGD LOGISTIKA AND CONTACT DETAILS:
Name of the Company: UAB SGD SPB
Legal status: Private Limited Liability Company
Authorized share capital: 25,000 Eur
Date and place of registration: 9 October 2019, State Enterprise Centre of Registers
Company code: 305278800
Address: Burių Street 19, 92276 Klaipėda
Register of the Company: State Enterprise Centre of Registers
Telephone numbers: +370 46 391772
Fax numbers: +370 46 311399
E-mail address: info@kn.lt
Internet site: www.kn.lt
Name of the Company: KN Acu Servicos de Terminal de GNL LTDA
Legal status: Limited Liability Company
Authorized share capital: 642,600 BRL (Brazilian reals)
Date and place of registration: 13 December 2019, State Register of Legal Entities of Rio de Janeiro
Company code: NIRE 33.210.894.765; CPNJ 35.785.170/0001-03
Address: F66 Fazenda Saco Dantas s/n, Distrito Industrial, Area 1 and Area 2, 28200-000 São João
da Barra, State of Rio de Janeiro
Register of the Company: State Register of Legal Entities of Rio de Janeiro
Telephone numbers: +370 46 391772
Fax numbers: +370 46 311399
E-mail address: info@kn.lt
Internet site: www.kn.lt
7. GROUP STRUCTURE AND MAIN TYPES OF ACTIVITY
Structure of the AB Klaipėdos nafta Group (hereinafter – Group) on 31 December 2021:
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 63
The Group’s Capital on 31 December 2021:
NAME OF THE COMPANY
TYPE OF SHARE
NUMBER OF
SHARES (UNIT)
SHARE FACE
VALUE
TOTAL FACE
VALUE
AB Klaipėdos nafta
Common registered shares
380,396,585
0.29 EUR
110,315,009 EUR
UAB SGD terminalas
Common registered shares
37,500
1.00 EUR
37,500 EUR
UAB SGD logistika
Common registered shares
4,540,000
1.00 EUR
4,540,000 EUR
UAB SGD SPB
Common registered shares
25,000
1.00 EUR
25,000 EUR
KN Acu Servicos de Terminal
de GNL LTDA
Common registered shares
642,600
1.00 BRL
1)
642,600 BRL
1)
1)
BRL - Brazilian real.
The companies of the Group and their main activities:
NAME OF THE COMPANY
ADDRESS
OWNERSHIP
PART, %
ACTIVITIES
AB Klaipėdos nafta
Burių Street 19,
92276 Klaipėda
100
The business activity of AB Klaipėdos nafta can be
divided into three segments: Oil terminals,
regulated LNG activities, and commercial LNG
activities. Oil terminals include activities of Klaipėda
Oil terminal and Subačius Oil terminal. Regulated
LNG activities stand for Klaipėda LNG terminal.
Commercial LNG activities include small-scale LNG
station in Klaipėda, operation of LNG terminal in
Açu port in Brazil, and other business development
projects.
UAB SGD terminalas
Burių Street 19,
92276 Klaipėda
100
Operation (management) and development of the
infrastructure of the liquefied natural gas terminal
in Klaipeda, other economic activities. The
subsidiary is currently not operating.
UAB SGD logistika
Burių Street 19,
92276 Klaipėda
100
Expansion of operation of international LNG
terminal activities, LNG transportation activities,
other economic activities.
UAB SGD SPB
Burių Street 19,
92276 Klaipėda
100 owned by
UAB SGD
logistika
Expansion of operation of international LNG
terminal activities by investing and establishing
project companies in Lithuania and foreign
countries (holding activities).
KN Açu Serviços de
Terminal de GNL LTDA
(KN Acu)
F66 Fazenda Saco
Dantas s/n,
Distrito Industrial,
Area 1 and Area 2,
28200-000 São
João da Barra,
State of Rio de
Janeiro
90 owned by
UAB SGD
logistika and 10
owned by UAB
SGD SPB
LNG terminal operation and maintenance services
in the port of Açu, Brazil, including the technical and
commercial operation of the installation of the
quay and its facilities, gas pipeline and gas
metering stations.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
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8. AGREEMENTS WITH INTERMEDIARIES OF PUBLIC SECURITIES TRADING
The Company has an agreement with Financial Markets Department of AB SEB Bankas for accounting of the Company’s
securities and related services.
AB SEB BANK FINANCIAL MARKETS DEPARTMENT:
Company code
112021238
Address
J. Balčikonis Street 7, LT-08247 Vilnius, Lithuania
Telephone
1528
E-mail
info@seb.lt
Website
www.seb.lt
9. AGREEMENTS WITH BROKERAGES FOR PUBLIC ISSUE
The Company’s shares are traded on the regulated market; they are listed in the Baltic Main List of the Stock Exchange of AB
NASDAQ Vilnius.
THE MAIN DATA ABOUT THE SHARES OF THE COMPANY:
ISIN code
LT0000111650
Abbreviation
KNF1L
Share emission
380,396,585
The Company's shares have been listed on the Nasdaq
Vilnius Secondary List since 16
th
January of 1996 and since
4
th
April of 2016 The Company's shares are listed on the
Nasdaq Vilnius Main List.
The securities of the subsidiary companies are not publicly
traded.
Details of the shares and shareholders are provided in
2021 Annual Report’s chapter “Information about the
shareholders and shares” of the Company”.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 66
A FOREWORD OF THE CEO
Dears,
If at the beginning of 2022 someone had asked me to
summarize the keywords or phrases which would describe
previous year, the first ones to come to my mind were
“uncertainty”, “perfect storm” and “mitigation of risks”. As
it was predicted, 2021 was indeed a challenging year for
KN. Perhaps even more challenging than we could have
anticipated, as the amount of negative, largely
unpredictable factors and circumstances affecting the
operations of our oil terminals really broke any previous
"anti-records", forming a so-called "perfect storm". At the
beginning of the year, the loss of the flow of oil products
from the East due to geopolitical reasons meant that we
had not only to adjust to a significant drop in revenues,
but also to live with much more modest turnover from our
remaining major oil terminal customers due to the still
record low refining margins caused by COVID-19
pandemic. In the second half of the year, we faced yet
another challenge, which was the unprecedented level of
energy prices and emission allowance costs. These have
largely wiped out our tremendous efforts to improve the
efficiency of the organisation's operations and processes,
although we have made occasional improvements in
some areas of activity. The same reason led to a significant
reduction in regasification volumes at the Klaipėda LNG
terminal.
In accordance with international accounting standards
and in response to the dramatic changes in the
assumptions and circumstances of KN oil business
segment, which historically was most profitable, we had
to recognise an impairment of the assets of this business
segment.
On the other hand, in 2021 we also had several
breakthroughs: better than expected performance in KN
Açu and other LNG commercial activities; fully operational
new infrastructure at Klaipėda Oil Terminal, which allowed
us to attract new customers, products, and launch entirely
new services at oil terminals, as well as contributed to the
significant progress in energy efficiency. I can confidently
say that in 2021, KN has become a regional hub for biofuel
handling, storage, and production. And even with the
decrease in transhipment volumes, we have maintained
our market share among the Baltic oil terminals, staying
in the top three, competing with terminals in Latvia and
Estonia with much larger capacities. And then there is the
successful maintenance of the ISO certification, and the
acknowledgements for the great progress in
environmental sustainability and emission reduction from
communities and institutions. Also, in 2021 we were
chosen as the most desirable employer in the Lithuanian
logistics segment by main Lithuanian business newspaper
“Verslo žinios”.
The scope and scale of the changes in the business and
the aforementioned "perfect storm" conditions have led
us to devote a lot of time and energy in the Company to
the process of reviewing our core document - the strategy
- focusing mainly on refining the strategic assumptions
and objectives in the near term, as well as on negative
circumstances mitigation tactics.
Although 2021 was a very challenging year, latest
geopolitical developments superseded everything
imaginable, and it appears that we will have to face the
consequences of the war in Ukraine. Intolerable military
invasion by Putin’s regime into sovereign Ukraine will
have a significant impact for the entire world. Various
supply chains are already broken and many of them will
brake soon, if this bloody and brutal war will not be
stopped. Energy markets are already breaking anti records
in terms of prices and disbalances of supply – demand.
This means that level of uncertainty in all KN activities will
also remain high. On the other hand, in the light of above-
mentioned market disruptions and emerged risks,
importance of our infrastructure becomes crucial for the
entire region’s energy security. Therefore, our short-term
mission will shift towards maximisation of capacity
availability and assurance of operational continuity for our
customers in all our terminals until situation stabilises.
Also, one cannot remain indifferent to everything what is
going in Ukraine and to suffering of Ukrainian people. We
are with Ukrainian nation with our hearts and minds, and
we will contribute with our competences and resources at
hand to support them. Ukraine is fighting not only for
their freedom and independence, but also for Europe’s
values and safe future of the region. Therefore, every
input from socially responsible businesses – with direct
support or encouragement for employees - is much
needed and important and we will strive to do our part.
When sailing in a storm, it is important not to concentrate
on the distant horizon, but on each of the nearest waves,
closely monitoring their direction and height. As well as
being able to assess any potential threat or probability of
a threat promptly and to make the most appropriate
decisions and communicate them to the crew as quickly
as possible in a comprehensible form. This is the only way
to safely tackle tough and big challenges. This parallel is a
good one to reflect the context of KN activities in 2021
and for sure beginning of 2022. I am proud of the entire
KN "crew" and our common achievements in 2021 as well
as commitment and motivation to face and overcome
new challenges, brought by a war in Ukraine.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 67
I also sincerely believe that all storms and wars sooner or
later come to an end. I hope, that for the end of 2022 we
will finally have an opportunity to lift our eyes back to the
peaceful horizon. To focus again on purifying our new
strategic directions, improvement of productivity and
transformation of organisation for value generation for
those who care about us and the ones who matters to us.
Sincerely,
Darius Šilenskis
Chief Executive Officer
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 68
BUSINESS CONTINUITY – OPERATIONS IN, DEPENDENCE ON, OR OTHER
EXPOSURE TO RUSSIAN/BELARUSSIAN OR UKRAINIAN ECONOMIES
The management of the Group and the Company has
evaluated the potential impact of operations in,
dependence on, and other exposure to
Russian/Belarussian or Ukrainian economies, and the
Group’s and the Company’s ability to continue as a going
concern as at the date of the issue of the consolidated
financial statements for the year ended 31 December
2021.
The Group and the Company had not been trading with
entities in Russia/Belarus and in Ukraine as at
31 December 2021 and no trading activities have been
planned for 2022 with entities registered in
aforementioned countries. The Group and the Company
has no trading relationships with Belarus since February
2021 and no trading relationships with Russian entities.
Therefore, no significant impact to the Group’s and the
Company’s accounts receivables as at 31 December 2021
and for the future cashflows.
The Group and the Company do not have material
contracts/sales with entities in Russia/Belarus or Ukraine
and does not receive key supplies or services from these
countries. Still, the Group and the Company could
potentially suffer from the increase in commodity prices
such as gas and electricity. Furthermore, sanctions
imposed on persons from Russia/Belarus could have an
indirect effect on the Group’s and Company’s business.
The Group and the Company do not have significant
contracts that may no longer be enforceable (e.g., due to
force majeure) in the foreseeable future.
The Group and the Company do not have significant
indirect exposure through trade with entities in other
countries which may have significant exposure to
Russia/Belarus or Ukraine.
On 3 March 2022, the Company announced that
acceptance of Novatek's cargo at the Klaipėda LNG
terminal is suspended. In Company’s view, Gennady
Nikolayevich Timchenko, included in the EU sanctions list
(EU Council Regulation 2022/336 implementing
Regulation No. 269/2014), can be considered a
controlling person of the Novatek group under the EU
law. According to the available data, Novatek group
companies supply LNG cargo to LNG terminal users. The
sanctions imposed prohibit entities from engaging in
activities the object or effect of which is to circumvent
restrictive measures.
Although the Group and the Company do not have
contracts with Novatek or its related entities, the
Company contacted Klaipėda LNG terminal clients on its
own initiative and asked to ensure compliance with the
sanctions in their operations. In the absence of
information that Klaipėda LNG terminal users are
complying with the sanctions in respect of LNG cargoes
scheduled to be unloaded at the Klaipėda LNG terminal,
acceptance of Novatek's cargo at the Klaipėda LNG
terminal is suspended.
As at the date of the issue of the consolidated financial
statements for the year ended 31 December 2021 the
Group and the Company have not identified any other
links in any way to organisations (including banks) or
other individuals targeted for sanctions, or other
politically exposed people in the region.
As LNG activity is regulated, sanctions introduced have no
impact on payments and liquidity/access to capital for the
Group and the Company.
The Group and the Company should not suffer potential
material impacts (quantitative or qualitative) of sanctions
introduced to Russia/Belarus and sanctioned individuals.
As the Group and the Company operate the Klaipėda LNG
terminal, it is stated that organization is in potential scope
of malicious activities on the internet because of the
importance of infrastructure to Lithuanian gas
independence. Management is in charge that appropriate
measures should be taken to respond to dynamic change
of the situation in cyber space. Government institutions
evaluate the readiness of the most important entities for
cyber defence and give additional instructions what is the
most important to implement and check as well as
provide threat intelligence communication channels for
preventive cyber defence.
The Group and the Company do not outsource
operational business processes (e.g., IT services) to
Ukrainian or Russian/Belarussian service providers.
The Company’s management has concluded that under
current circumstances at the date of financial statements
there is no significant doubt on the Group’s and the
Company‘s ability to continue as a going concern in the
foreseeable future.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 69
BUSINESS CONTINUITY – IMPACT OF COVID – 19
During 2021, Coronavirus COVID-19 and the decisions
taken to stop the pandemic continued to complicate the
normal operations of industries and maintained a
significant level of uncertainty around the world.
As in 2020, in 2021 the worldwide pandemic continued to:
• Disrupt business operations and economic activity in
Lithuania, with a cascading impact on both upstream
and downstream supply chains.
• Significantly disrupt businesses in certain sectors,
both within Lithuania and in markets with high
dependence on a foreign supply chain as well as
export-oriented businesses with high reliance on
foreign markets. The affected sectors include trade
and transportation, travel and tourism,
entertainment, manufacturing, construction, retail,
insurance, education and the financial sector.
• Significantly decrease demand for non-essential
goods and services.
• Increase economic uncertainty, which reflected in
more volatile asset prices and currency exchange
rates.
The Company continued to notice a negative global and
regional impact of COVID-19 during first half of 2021.
Starting with the third quarter of 2021, travel restrictions
began to decrease which boosted fuel consumption as
well as increased the profit margins of oil refineries. All
these factors had a positive impact on oil products
transhipment in Klaipėda oil terminal during the second
half of 2021.
As an outcome of negative impact of COVID-19,
impairment allowance for doubtful accounts receivables
has reached EUR 2,222 thousand as at 31 December 2020
(EUR 728 thousand as at 31 December 2019). While as at
31 December 2021 allowance for doubtful accounts
receivable reduced to EUR 1,511 thousand. The credit
limits policy has been revised and respective actions to
mitigate credit risk have been taken. The Group and the
Company is monitoring the situation since the beginning
of the spread of COVID-19 and maintains close
communication with major clients on regular basis
concerning their plans and fulfilment of contractual
obligations.
The Group and the Company on its side have continued
their operations as usual - the services provision for the
clients of the Group and the Company takes place
according to the agreed schedules and plans.
Reacting to the changed environment, the management
of the Company has activated business continuity and risk
mitigation plan of the Group and the Company already in
the first half of 2020, the risk management team has been
set up to monitor the situation of the Group and the
Company and main partners on a daily basis.
One of the main risks identified at the beginning of the
COVID-19 – inability to operate the infrastructure in case
of the infection of critical number of its employees - has
been managed by introducing remote work and
continuously providing employees with information on
COVID-19 vaccination, making vaccination available in the
Company’s medical room, holding virtual meetings with
medical professionals. All the Group’s and the Company’s
terminals have continued their operations as usual.
Another source of risk for the Group and the Company
lies in the disruption of a supply chain – starting from
IT/telecommunications services that are necessary to
ensure proper functioning of IT systems and remote work
mode and ending to goods and services that are
necessary to finalize investment programs on time. The
management of the Company is constantly
communicating with its suppliers in order to follow their
situation and possibilities to fulfil their obligations on
time. To mitigate this risk of supply during the future
periods, the Group and the Company creates and updates
the list of alternative suppliers for critical procurements
and puts its best efforts to ensure timely implementation
of all Group and Company goals. As at the financial
statements issue date, there have been no indications
from current suppliers that could have impact to the
financial statements of the Group and the Company as at
31 December 2021 and as at 31 December 2020.
The management of the Company is carefully monitoring
global economic situation and possible long-term
financial impact for the Group and the Company. As at 31
December 2021, the Group’s and the Company’s working
capital amounts to EUR 17,425 thousand and EUR 12,388
thousand respectively (as at 31 December 2020 EUR
29,424 thousand and EUR 25,338 thousand respectively),
the available Nordic Investment Bank credit facilities
amount to EUR 240 million.
Taking into account the high liquidity of the Group and
the Company, preventive measures taken, activated
business continuity and risks mitigation plans, from a cash
flows point of view the Group and the Company are in a
secure position to continue their business operations in
unfavourable conditions.
The Company’s management has concluded that under
current circumstances at the date of financial statements
there is no significant doubt on the Group’s and the
Company‘s ability to continue as a going concern in the
foreseeable future.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 70
INFORMATION ABOUT THE GROUP AND THE COMPANY AND ITS ACTIVITIES
AB Klaipėdos nafta is the Company of strategic
importance for the energy security of Lithuania and the
surrounding region, which ensures the import of liquefied
natural gas into Lithuania and neighbouring countries, the
storage of the obligatory oil product reserve of the
Republic of Lithuania, as well as reliable and efficient
transhipment of oil products in Klaipėda port. Besides the
activities mentioned above, the Company has started
small scale LNG activities in 2017 and in 2020 became the
operator of LNG terminal in Açu Port in Brazil, becoming
the Group.
Currently, the Group's activities can be divided into three
main segments: commercial LNG activities, regulated LNG
activities, and oil terminals. The Management of the
Group and the Company evaluates the financial results of
each segment and sets separate strategic goals.
MAIN ACTIVITIES:
INFORMATION ABOUT INVESTMENT INTO ASSOCIATES
The Company has investments into the following associate companies as of 31 December 2021:
NAME OF THE
COMPANY
ADDRESS
OWNERSHIP
PART, %
ACTIVITIES
UAB BALTPOOL
9 A. Juozapavičiaus str.,
LT-09311, Vilnius
33
Development of activity of energy resources
(biofuel, gas) exchange, administration of
Public Interest Services (PIS) funds.
Sarmatia Sp. z o.o.
ul. Nowogrodzka 68,
Prima court, 02-014
Warsaw, Poland
1
Analysis and engineering of possibilities to
construct oil pipeline between Asian states
and the Baltic Sea.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
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OIL TERMINALS
Oil terminals segment (OT) includes activities of Oil
Terminal in Klaipėda and Oil Terminal in Subačius which
are providing services of oil products transhipment, long-
term storage of oil products, and other services related to
oil products transhipment.
KLAIPĖDA OIL TERMINAL
The Company is one of the largest oil transhipment
terminals in the Baltic States. The terminal’s main activity
is to tranship oil products delivered by rail tanks into
tankers.
CHARACTERISTICS OF KLAIPĖDA OIL TERMINAL
Location
Territory of AB Klaipėdos nafta oil terminal, address: Burių Street 19, Klaipėda
Oil product tanks
51 tanks
Volume of the tanks
571 thousand m
3
total volume
The capacity of the oil terminal
8 - 10 million t / year
Jetty berths
2 (in 2019 started to modernize the jetty berths and construct an additional
multi-functional berth. After the reconstruction will be completed the
terminal will be capable to service three oil tankers simultaneously instead of
two. The total length of all three berths after reconstruction will be about
750 m)
Harbour entrance depth:
14.5 m
Max. draught at the jetty
13.5 m
Max. length of serviced tankers
Up to 275.0 m
Railway
Two double-track rail tank loading racks:
•
Two tracks for petroleum products that do not require maintaining of specific
temperature conditions (up to 2 x 30 tank wagons are services
simultaneously);
•
Two tracks for oil products that require maintaining of specific temperature
conditions (up to 2 x 32 tank wagons are services simultaneously);
•
One of the tracks is adapted to oil products of all types;
•
124 tank wagons can be loaded at the same time.
Road tanker loading
4 loading points at the same time
Modern laboratory
Equipped to inspect main quality parameters of oil products
Total capacity of three boilers of own
boiler station
100 MWh
The Company’s Oil Terminal handles these oil and
chemical industry products:
• Light Oil Products (hereinafter – LFO):
Different types of diesel fuel.
Different types of gasoline.
Jet fuel.
• Heavy Oil Products (hereinafter – HFO):
Different types of fuel oil.
Technological fuel.
Vacuum gas oil (VGO).
Crude oil.
Bitumen.
• Bio-fuels:
Ethanol.
Fatty acid methyl ester.
Hydrotreated vegetable oil.
• other products of the chemical industry:
Monoethylene glycol.
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The processes of oil products transhipment service in the
Company’s oil terminal mainly include the following
operations: i) reloading of oil products from rail tanks, ii)
temporary storage of oil products in the terminal’s shore
tanks and iii) loading oil products into tankers.
To supply the clients with imported oil products delivered
to Klaipėda seaport by tankers, the Company is using
trucks loading station located in its terminal.
Klaipėda Oil terminal provides the following services:
• Transhipment of crude oil and oil products from rail
tanks into tankers.
• Transhipment of crude oil and oil products from
tankers into rail tanks.
• Reloading of crude oil and oil products into trucks.
• Accumulation and storage of crude oil and oil
products.
• Collection of wastewaters from sea vessels which is
contaminated with oil products.
• Mooring services.
• Inspection of quality parameters of oil products.
• Adding bio-additives and marking substances to oil
products.
• Blending of heavy and light oil products.
• Supply of fuel and water to vessels.
SUBAČIUS OIL TERMINAL
After the approval of the share emission agreement with
the Republic of Lithuania on 11 June 2012, the Company
has started to manage Subačius oil terminal (hereinafter -
SOT). After the takeover of Subačius oil terminal
infrastructure the Company’s activity and services have
been diversified and expanded including services of long-
term oil product storage.
SUBAČIUS OIL TERMINAL'S CHARACTERISTICS
Location
In Kunčiai village, Kupiškis district
Volume of the tanks
Total 66 tanks
Volume of the tanks
Almost 338 cub. m thousand total volume
Railway
The rail trestle which can simultaneously handle 14 rail tanks
Road trucks loading
Modern loading station of auto trucks
Modern laboratory
Able to detect the main quality parameters of oil products
Subačius oil terminal provides the following services:
• Storage of oil product (fuel) stocks of the Lithuanian
State to ensure the national energy security under the
relevant legal acts.
• Long-term storage of oil products (gasoline, diesel
fuel).
• Short-term storage and handling of oil products
(gasoline and diesel fuel) to the customers.
• Adding bio-additives and marking substances to oil
products.
The results of activities of Subačius oil terminal for 2021
are present in the Explanatory note “Information about
segments” of the Company’s audited financial statements
for 2021.
The infrastructure of Subačius oil terminal is continuously
upgraded to ensure proper provision of high-quality
services to customers, as well as safe and reliable
operation of the facility.
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REGULATED LNG ACTIVITIES
Regulated LNG activities (LNGT) segment includes activity
of LNG terminal in Klaipėda which receives, and stores
liquefied natural gas, regasifies, and supplies it to main
gas pipeline.
KLAIPĖDA LNG TERMINAL
Ensuring long-term operation of Klaipėda LNG terminal
At the end of 2019 Board of KN took necessary decisions
regarding implementation of measures for ensuring long-
term (until 2044) activities of the Klaipeda LNG Terminal,
including principal decision on the FSRU acquisition after
2024. At the end of 2019, Parliament approved state
guarantee for Stage I (optimization of LNG security
supplement) and Stage II (purchase of FSRU) of the long-
term LNG supply project, which enabled AB Klaipėdos
nafta to sign agreement with NIB on the loan for the
purpose of Stage I. Consequently, security supplement
reduction (by almost 40 % since 2020) was proposed to
National Energy Regulation Council (NERC). Based on
NERC decision security supplement has been reduced and
is applicable to all gas consumers starting January 2020.
Loan agreement for Stage II (FSRU acquisition) has been
signed with NIB on 2020-03-09. On 2020-11-20 the
European Commission (EC) approved the state aid to be
provided in the form of state guarantee for the FSRU
acquisition loan. By this, principal issues related to FSRU
acquisition financing are solved. Preparatory work for
FSRU selection and purchase has been started.
In accordance with the Law on LNG Terminal, which
provides that LNG activities must be carried out until at
least 2044-12-31 and the LNG terminal operator acquires
FSRU and becomes an operator no later than 2024-12-31.
During 2021, KN, as part of a project of long-term LNG
import infrastructure solution, organised intensive
discussions with market participants, a market
consultation on the procurement documents and
launched a public international tender for the acquisition
of the FSRU in mid-year. Potential FSRU suppliers actively
participated in the preparation of the tender, but after
assessing the stated value of the purchase, technological
aspects, and other circumstances, decided not to
participate in the further stages of the tender. The market
research, the market consultations, and the public tender
results have clearly shown that the existing purchase
option to acquire FSRU “Independence” is the most
economically advantageous solution for KN. By December
2022, KN must inform the Norwegian company Höegh
LNG of its decision to execute the right of FSRU
Independence buy-out option as indicated in the time
charter agreement.
In 2021, five users have been using LNG terminal in
Klaipeda; one company – from Estonia and four
companies – from Lithuania. 72 LNG carriers have arrived
at the LNG Terminal and 16.42 TWh of LNG have been
regasified and reloaded during 2021. In 2021, Lithuania's
natural gas consumption was about 24.26 TWh, of which
about 15.11 TWh was served through Klaipėda LNG
terminal.
In 2021, utilization of LNG terminals decreased because
less LNG was coming to Europe YoY. The average
utilization of Klaipeda’s LNG terminal was 37% (vs 49%
year ago); in comparison, based on data from GIE ALSI,
the average European utilization of LNG terminals was
39% (vs 45% year ago).
The LNG Terminal complements and extends the existing
natural gas supply infrastructure of the country, creates
opportunities for supply diversification, eliminates
dependence on the only external natural gas supplier,
ensures the security of natural gas supply and fulfils the
EU Directive N-1 Infrastructure Standard, i.e., creates
preconditions for Lithuania to independently supply itself
with the natural gas needed to meet the demand of the
first necessity.
Infrastructure of the Liquefied Natural Gas Terminal
LNG Terminal of AB Klaipėdos nafta is based on a Floating
Storage with Regasification Unit (FSRU) technology. The
terminal is connected to the gas transmission network of
the natural gas transmission system operator
AB Amber Grid by an 18-kilometre connecting gas
pipeline. LNG Terminal functions - receive liquefied
natural gas from LNG carriers, store them, regasify, and
supply liquefied natural gas to transmission network or
reload into other LNG carriers.
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LNG terminal infrastructure
LNG Floating Storage with Regasification Unit
The LNG floating storage with regasification unit is an LNG
tanker (Independence), which at the Klaipeda Seaport
receives liquefied natural gas from the LNG vessels – LNG
carriers, which are moored at the FSRU. According to the
schedules of the Terminal users, LNG is passed through
special equipment in order to return the LNG to a gaseous
state and supply it to the gas transmission system. In 2012
10-year lease (with purchase option) of LNG floating
storage with gasification unit has been signed with
Norwegian company Höegh LNG Ltd. The builder of this
ship is South Korean shipyard Hyundai Heavy Industries
Co. Ltd.
TECHNICAL CHARACTERISTICS OF THE FSRU INDEPENDENCE*
Klaipeda seaport jetty
157
The volume of the tanks
170,000 m³
Maximum LNG filling level
98% at 70 kPag
Maximum LNG loading capacity
9,000 m³/h LNG
Maximum LNG reloading capacity
5,000 m³/h LNG when LNG regasification is performed during LNG
reloading
FSRU capabilities
3.75 billion m³ of natural gas per year (10.24 million m³ per day)
Minimum operative LNG heel
3,500 m
3
LNG
Maximum gas flow into the gas pipeline
10.24 million m³ per day
*Terminal’s technical specifications are given according to the current normative conditions: combustion/measurement temperature -
25/0 °C, pressure - 1.01325 bar.
Jetty and its facilities
There is a permanently moored FSRU at the jetty, which
receives LNG from the LNG carriers that deliver them.
Special offshore equipment includes high pressure
platform, service platform, mooring and berthing
dolphins, catwalks, fire extinguishing towers, control
room, fire protection equipment, service cranes and high-
pressure gas loading arms, and other necessary
equipment and systems.
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Connecting pipeline of the LNG terminal
The terminal is connected to the gas transmission
network of the natural gas transmission system operator
Amber Grid SC by an 18-kilometre-long and 700 mm
diameter connecting gasoline. A gas metering station is
built at the point of connection to the transmission
network.
Services of the LNG terminal
The Terminal provides the following services: i) LNG
regasification, ii) LNG reloading. The LNG regasification
service consists of the following related services:
• Acceptance of LNG cargo from the LNG carrier that
arrived, physical (up to 60 days) and virtual (up to 12
months) storage of the cargo and LNG regasification
in the rate specified in the Terminal user schedule.
The LNG reloading service consists of the following
related services:
• Acceptance of LNG cargo from the LNG carrier that
arrived, physical and virtual storage of the cargo and
reload (re-export) of LNG to an LNG carrier of not less
than 5,000 m
3
.
The following prices apply to the services provided by
the terminal:
• The fixed part of the price of the LNG regasification
service is approved annually by the National Energy
Regulatory Council. This part of the price shall be
included in the additional component of the natural
gas supply security to the transmission price.
• The variable part of the price of the LNG
regasification service shall be paid by the users of the
terminal for the regasified gas volume and shall be
approved annually by the National Energy Regulatory
Council (hereinafter – NERC).
SERVICES OF THE TERMINAL
SERVICE PRICE
NERC DECREE
LNG regasification service price* (2021)
0.41 EUR/MWh excluding VAT
23 November 2020 No. O3E-1207
LNG regasification service price* (2022)
0.41 EUR/MWh excluding VAT
16 November 2021 No. O3E-1496
LNG reloading service price* (2021):
- Small scale LNG cargo, up to 15,000 m3
- Medium scale LNG cargo, from 15,000 m3 to
50,000 m3 inclusive
- Large scale LNG cargo, from 50,000 m3
0.53 EUR/MWh excluding VAT
0.41 EUR/MWh excluding VAT
0.30 EUR/MWh excluding VAT
23 November 2020 No. O3E-1206
LNG reloading service price* (2022):
- Small scale LNG cargo, up to 15,000 m3
- Medium scale LNG cargo, from 15,000 m3 to
50,000 m3 inclusive
- Large scale LNG cargo, from 50,000 m3
0.56 EUR/MWh excluding VAT
0.44 EUR/MWh excluding VAT
0.31 EUR/MWh excluding VAT
16 November 2021 No. O3E-1495
* Terminal users transporting natural gas through the internal outlet of the natural gas transmission system shall also pay the
additional security component of the natural gas supply price to the natural gas transmission price set by the NERC.
The LNG terminal fully ensures the third-party access
requirements in accordance with EU laws. The terminal’s
activities are organized in observance with the Rules for
Use of the Liquefied Natural Gas Terminal (hereinafter -
Terminal rules), adopted after public consultations with
market parties and agreed by NERC. The terminal’s
capacities are provided to the potential users on the same
conditions in the way of public and transparent annual
capacity allocation procedure or during the on-going
period if there are any free capacities left. LNG terminal
can be used by multi users.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
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COMMERCIAL LNG ACTIVITIES
Commercial LNG activities (comLNG) segment includes
activities of small-scale LNG reloading station in Klaipėda,
operation of LNG terminal in Açu port in Brazil, and other
business development projects and consultations.
KLAIPĖDA SMALL SCALE LNG TERMINAL
During 2021 7 cargoes were delivered to Klaipėda small-
scale LNG terminal (hereinafter - LNG reloading station or
ssLNG). The entire LNG cargo was loaded to LNG Trucks
and distributed to consumers in Lithuania, Latvia, and
Poland. A total of 527 LNG trucks were loaded at Klaipėda
Small scale terminal in 2021. July 2021 was recorded as a
record month from the start of operation of LNG
reloading station – 82 LNG trucks were loaded.
AB Klaipėdos nafta has opened an onshore LNG reloading
station in the autumn of 2017. The purpose of the LNG
reloading station project is to develop small-scale LNG
infrastructure in the Baltic States and Poland, which not
only increases energy security for areas that are further
away from the gas pipeline, but also provides the benefits
of alternative and clean energy to a significant number of
consumers. This infrastructure also contributes to
ensuring the availability of LNG as a clean fuel for shipping
and heavy road transport.
On April 1
st
, 2020, the Polish state oil and gas company
PGNiG commences commercial operations at KN-
operated Klaipeda Small scale LNG terminal. The
capacities of the station were allocated to PGNiG for a
five-year period.
The LNG reloading station is designed to receive cargo
from small-scale LNG carriers, store LNG, load LNG into
LNG Trucks, ISO containers or bunker LNG-powered
vessels.
The LNG reloading station is a commercial project of the
Company financed by the Company and partly by the
European Union support funds under the CEF-Transport
program for the implementation of the HEKLA
1)
and Blue
Baltics
2)
projects.
1)
Completion of the project - 30 June 2018.
2)
Completion of the project – 16 April 2020.
TECHNICAL CHARACTERISTICS OF THE LNG RELOADING STATION
Klaipeda seaport jetty
2
Technology
Five pressure tanks
Volume of the tanks
5 x 1,000 m
3
Fill level
86%
LNG receiving speed (from ship)
up to 1,250 m
3
/h
Daily loading capacity for LNG Trucks
24
Loading of LNG Trucks
2 LNG Truck loading bays (possible simultaneous loading)
LNG Truck loading speed
up to 100 m
3
/h
Bunkering speed
up to 500 m
3
/h
Utilization of boil of gas
Gas pipeline connection to the Company’s boiler house
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LNG TERMINAL IN AÇU PORT IN BRAZIL
In 2020 KN became the operator of liquefied natural gas
(LNG) terminal at Açu Port, Brazil. Under the contract
concluded with Gas Natural Açu (GNA), a joint venture of
Prumo Logistica, BP and Siemens, KN as the operator of
the LNG Terminal is responsible for the smooth operation
of the LNG Terminal, including the technical and
commercial operation of the installation of the quay and
its facilities, gas pipeline and gas metering stations. KN
established a company KN Açu Serviços de Terminal de
GNL Ltda., which is responsible for the execution of this
project in Brazil, has gathered a team of local
professionals, and has begun the activities in 2020. The
contract is concluded for a period of 13 years and can be
extended with a mutual agreement.
THE CORPORATE STRATEGY
On 13t February 2020 the Supervisory Council of the
Company approved the corporate strategy of KN until
2030, which analysed the Company’s business
environment factors and established common strategic
goals for the entire Group. However, shortly after, the
environment, in which the Group operates, began to
change significantly starting October 2020, when the EU
imposed several packages of sanctions on Belarus. On
June 24, 2021, the Council Regulation (EU) 2021/1030 was
introduced, due to which no more transit of oil product
flows from Belarus were possible. The Company started to
adapt the oil business segment to the changing
environment, acting with no Belarus cargoes from the
beginning of 2021. Moreover, current worldwide climate
is leading to further transformation which should also be
reflected in strategic goals.
Due to aforementioned geopolitical circumstances, some
of the goals, in particular for the oil business segment of
the Group, are no longer relevant and need revision.
Accordingly, the Group’s management intends to
continue a revision of the strategy throughout 2022.
Meanwhile, in this annual report we report KN’s progress
based on the goals laid out in the corporate strategy
approved on 13 February 2020.
The mission of the Group and the Company is to ensure
safe, reliable, and efficient access to global energy
markets by sustainable development, investment, and
operation of multi-functional liquid energy terminals
worldwide.
Changing energy markets and energy transition also
acquired new competencies in management of LNG
floating terminal in Klaipėda has led to the major change
in the Company’s vision and mission. From being local
and regional player, providing one type of service, the
Company for 2020 - 2030 is targeting to diversify its
activities, to expand provided services and be less
dependent on one source of income. As a result, the
Company will continue to develop four business lines:
international LNG projects, oil and refined products
handling services, management of Klaipeda LNG floating
terminal and small-scale LNG reloading services.
The Company sees the biggest potential for growth and
net profit generation in LNG business development and
investments into LNG import terminals internationally.
AB Klaipėdos nafta believes that floating LNG import-
based solutions will account for almost a half of the new
regasification capacity in the decade ahead and sees the
possibility to achieve that by 2030 the profit from oil
product handling services is identical to that from LNG
business development projects.
Company’s vision for the oil business segment is to
expand the range of products that can be handled and
increase the operational excellence through investing in
environmentally sustainable and more efficient
technologies as well as digitization. Increased capacities
will enable the Company to meet changing demands and
improve quality of services provided.
The strategy of state-regulated Klaipeda LNG terminal
activity is to maintain operation after 2024 ensuring long-
term access to LNG import for the country and constantly
increase flexibility of the usage of the terminal in order to
increase the net value for gas consumers.
The growing demand for LNG which is transported by
road and ships to the off-grid locations in the Baltics and
northern Poland, the growing pressure to reduce global
emissions and the promotion of LNG as a cleaner energy
source give the LNG distribution station a significant role
in the Company’s portfolio. AB Klaipėdos nafta together
with its strategic partners has an aim to stimulate LNG
market creation and to increase share of this much cleaner
fuel consumption in marine and heavy transport as well as
off-grid industry within a region.
FSRU AT THE PORT OF AÇU. COURTESY BY GNA
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The Strategy foresees that significant attention of the
Company’s management will also be dedicated to the key
asset of the Company – people, focus on direct and
indirect business impact on the society - social
responsibility, major digitization, and innovation
directions of activities, carried out by the Company.
MAIN BUSINESS LINES BY 2030
OIL BUSINESS
By 2030 we aim to become the region’s top and most
efficient oil throughput and storage hub of liquid
petroleum, petrochemical products, and refining
feedstock for regional and global refineries, traders, and
other customers.
WHAT WE PLAN TO ACHIEVE BY 2030:
A. Sustain and increase volumes and profitability of oil
terminals under consideration of changes to the market
structure.
B. Enter market for transhipment of petrochemicals and
other new products.
C. Ensure environmentally sustainable activities of KN oil
infrastructure.
• Full compliance with environmental
regulations and reduction of emissions
D. Ensure secure, reliable, and efficient operation of oil
terminal.
• No critical accidents.
STRATEGIC DIRECTIONS OF OIL BUSINESS
Oil business strategy is to ensure high rate of profitability
and attractiveness by:
• Investing into expanding of technological capacities,
acceptance of larger tankers, and ship to ship loading
and blending operations.
• Reducing the number of personnel and related costs
by automatization and digital measures.
• Handling niche products like petrochemicals, alcohols,
octane boosters, and other.
OIL TERMINALS
•
Handle any oil product without
limitation to transhipment mode,
provide smart throughput, storage and
blending services.
• Be fully capable of working with
products that go beyond traditional oil
or petroleum products range.
• Invest in sustainable and more
efficient technologies and processes to
reduce emissions from our activities.
KLAIPĖDA LNG HUB
• Assure the region’s access to the
global LNG market at least till 2044 and
benefit for Lithuanian consumers
through commercial activities.
• Assure highest quality bunkering and
truck loading services, contribute to
innovation development through the
LNG cluster.
INTERNATIONAL LNG PROJECTS
• See the net profit from international
LNG projects higher than from oil
products transhipment services, which
is the largest portion today.
• Become the preferred partner for new
LNG import terminal projects globally.
• Be within the top three leading
floating LNG import terminal
companies.
OIL BUSINESS
DIRECTIONS
GROWTH &
COMPETITIVENESS
ENVIRONMENTAL
SUSTAINABILITY &
SECURITY
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KLAIPĖDA LNG HUB
We aim to provide access to global LNG markets and
competitive gas prices for traders and consumers in the
Baltic Sea region and beyond, and to become the main
small-scale LNG import terminal in the Baltic States and
Poland.
WHAT WE PLAN TO ACHIEVE BY 2030:
A. To become regional LNG hub that increases liquidity
and flexibility of the interconnected natural gas systems.
• Ownership of FSRU, full O&M.
• Implemented long term LNG import solution.
• >30% FSRU revenues from international
counterparties.
• Provision of quality LNG services under the
sustainable business model and for the benefit of the
whole region.
B. Profitable small-scale terminal with a proven value in
the growing regional small-scale LNG (ssLNG) market.
ACTIONS TO BE MADE
KN will continue growing its market share and make
impact by:
• Generating revenue from long-term agreements to
small-scale terminal by upstream partnering with
strong players in the market who could ensure stable
supplies to the reloading station on competitive
prices.
• Becoming effective and efficient terminal for the
partners, being available when necessary and capable
to do significant number of loads.
• Improving business environment in Lithuanian LNG
market by continuing spreading awareness in the
market, cooperating with institutions and other
players, promoting LNG-in-favour legislations,
cooperating with Port Authorities to improve
bunkering conditions and start bunkering operations
in the Port of Klaipėda.
INTERNATIONAL LNG PROJECTS
We aim to become the preferred partner for new LNG
import terminal projects globally and be within the top
three leading floating LNG import terminal companies by
2030.
WHAT WE PLAN TO ACHIEVE BY 2030:
A. Operator of at least 5 LNG terminals by 2030
B. Shareholder in at least 4 LNG terminals by 2030
LNG VALUE CHAIN AND KN BUSINESS
While natural gas is globally abundant cleanest burning
fossil fuel and a highly competitive source of energy,
many energy-hungry countries are at a considerable
distance from the extraction locations.
KN draws on the experience in developing and advising
more than ten new LNG import projects in Europe, Latin
America, and Asia since 2015 and has a track record of on-
time and on-budget delivery of floating LNG terminal.
Company seeks to:
• Engage in early development to capture new
projects.
• Monitor and respond to public and private tenders
for LNG import terminal development and O&M
services.
• Develop and strengthen partner network of FSRU
owners, LNG traders, suppliers, and other relevant
counterparties.
• Develop market facing innovative solutions and
concepts.
• Actively seek and evaluate acquisition opportunities.
REGASIFICATION
DISTRIBUTION
SHIPPING
EXPLORATION
AND
PRODUCTION
TREATMENT
AND
LIQUEFACTION
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
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STATUS OF ACHIEVEMENT OF STRATEGIC GOALS
The view of the management and evaluation of possibilities to achieve 2020-2030 strategic goals based on assumptions as
at 31 December 2021:
* Achievement of this goal is at risk due to the absence of Belarus cargo.
STRATEGIC GOALS
STATUS
OIL TERMINALS
Increase volumes and profitability of oil terminals.
At risk for achievement *
Enter the market for transhipment of petrochemicals and other new
products and increase their share from overall oil business revenue
In line with expectations
Full compliance with environmental regulations and reduction of
emissions
In line with expectations
No critical accidents, secure, reliable, and efficient operations
In line with expectations
KLAIPĖDA LNG HUB
Ownership of FSRU, full O&M
In line with expectations
Implemented long term LNG import solution
In line with expectations
>30% FSRU revenues from international counterparties
In line with expectations
Provision of quality LNG services
In line with expectations
Profitable small-scale terminal
In line with expectations
INTERNATIONAL LNG PROJECTS
Operator of at least 5 LNG terminals by 2030
In line with expectations
Shareholder in at least 4 LNG terminals by 2030
In line with expectations
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
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SIGNIFICANT EVENTS OF THE REPORTING PERIOD
11
th
January 2021. The new wording of Articles of
Association of AB Klaipėdos nafta were registered within
the Register of Legal Entities of the Republic of Lithuania
following the decrease of the authorized capital of the
Company (by 190 TEUR), which is now equal to EUR
110,315,009 and divided into 380,396,585 units of shares.
7
th
April 2021. The Government of the Republic of
Lithuania adopted a resolution which provides, inter alia,
that the LNG operator shall calculate the share of profits
to be paid for dividends for 2020-2024 by eliminating
unrealized impact of changes in foreign currency
exchange rates and other amounts of unrealized gains
(losses).
8
th
April 2021 KN announced a consultation with market
participants regarding the purchase of floating storage
and regasification unit (FSRU) for Klaipėda LNG terminal.
20
th
April 2021 KN and the Swedish company AFRY have
signed an agreement on the long-term capacity allocation
and pricing model study of the Lithuanian LNG terminal.
29
th
April 2021 European Court of Justice (ECJ) has
adopted the decision, by which State aid granted in 2013
by the Republic of Lithuania to AB Klaipėdos nafta for
implementation of the Klaipėda LNG terminal, is declared
compatible with the internal market of EU. ECJ‘s decision
is final and indisputable.
30
th
April 2021 KN held a General Meeting of
Shareholders. Agenda of the meeting: approval of the
audited Financial Statements of the Company for the year
2020, approval of the appropriation of profit (loss) for the
year 2020, approval of Report on the remuneration, and
election of audit firm for 2021 and 2022.
6
th
May 2021 AB Klaipėdos nafta closed the list of
shareholders for dividend payment on 14-05-2021. KN
has paid dividend 0.0198 euros per share. Total amount
of dividends paid 7.5 MEUR.
10
th
May 2021 Board of the Company adopted the
following decision: from 08-05-2021 to elect Linas Kilda
as a Director of UAB SGD Logistika subsidiary and from
08-05-2021 to elect Mindaugas Navikas as a Director of
subsidiaries UAB SGD terminalas and UAB SGD SPB.
7
th
June 2021 After the closure of annual terminal
capacities allocation procedure and conclusion of
respective agreements, for the period from the 1
st
of
October 2021 until the 30
th
of September 2022, LNG
regasification capacities were allocated. Part of the
terminal capacities was ordered by the new terminal user,
the Norwegian energy company Equinor ASA.
15
th
June 2021 With the permission of the Ministry of
Finance of the Republic of Lithuania, obtained by
AB Klaipėdos nafta, came into force the Company’s board
decision to increase the authorized capital of the
Company's subsidiary UAB SGD terminalas in the amount
of EUR 25,000. The new wording of the Articles of
Association of the subsidiary has been registered on July
15
th
.
9
th
July 2021 To ensure long-term operation of the LNG
terminal in Lithuania KN announced the public
procurement of a FSRU (floating storage regasification
unit).
28
th
July 2021 The Board of the Company has approved
the renewed Dividend Policy. The renewed Dividend
Policy provides that the amount of dividends for the years
2021-2024 is calculated by eliminating from the
Company’s distributable profit unrealised foreign
exchange rates impact and other unrealised gains (losses).
3
rd
August 2021. AB Klaipėdos nafta informed that,
according to the information published on the website of
the National Energy Regulatory Council on 3
rd
August
2021, the rate of return on regulated asset base of the
Company equals 4.14% for 2022 (3.46% for 2021).
19
th
August 2021. The Company by the decision of the
Supervisory Council of the Company announced a
selection of candidates for independent Board members
of the Company.
10
th
September 2021. KN received a formal notice by the
independent Board Member Ian Bradshaw regarding his
resignation from the position as the Board member of KN
from 1
st
of October 2021.
16
th
September 2021. Gas Natural Açu (GNA) LNG-to-
power project in port of Açu, Brazil has launched
commercial operations and KN became an operator of the
two fully operational LNG terminals worldwide.
24
th
September 2021. A civil claim of the prosecutor of
the Klaipėda Regional Prosecutor Office was received in
defence of the public interest concerning the annulment
of the decisions of the Company's bodies and employees’
Shares Granting Contracts, and the application of
restitution. The Company is involved in the case as a
defendant.
1
st
October 2021. New 2022 gas year of the liquefied
natural gas (LNG) terminal operated by KN began with 6
terminal users from Lithuania and foreign countries who
booked LNG terminal’s capacities (total of 8 TWh) and 17
LNG carriers to be received.
25
th
November 2021. The Supervisory Council adopted
a decision to elect Guy Mason as an independent Board
Member of the Company to serve from 1st December
2021 until the term of office (24
th
April 2022). Guy Mason
also will be elected as a Board member for the new term
of office.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 82
SIGNIFICANT EVENTS OCCURRED AFTER THE END OF THE REPORTING PERIOD
5
th
January 2022 AB Klaipėdos nafta received a formal
notice by the independent Board member Bjarke Pålsson
regarding his resignation from the position as the Board
member of KN from 1
st
of February 2022.
5
th
January 2022 The Supervisory Council of KN adopted
a decision to elect independent Board members for a new
four-year term of office: Guy Mason, Edvinas Katilius,
Alfonso Morriello, Jūratė Lingienė. The new Board of the
Company will take office from 25
th
April 2022. More
information about each of the elected members can be
found here.
3
rd
February 2022 KN has announced a notification
about Extraordinary General Meeting of Shareholders.
The agenda of the meeting consists of the approval of
AB Klaipėdos nafta Board decision to acquire the floating
storage regassification unit Independence.
11
th
February 2022 Laura Garbenčiūtė-Bakienė has
submitted a notice of resignation from the Audit
Committee of the Company as of 25
th
February 2022.
25
th
February 2022 Extraordinary General Meeting of
Shareholders of the Company has adopted the resolution
and approved AB Klaipėdos nafta’s Board decision to
acquire the floating storage regasification unit (FSRU)
Independence. The price for the FSRU Independence shall
be 153.5 million USD, excluding VAT. The FSRU
Independence sale and purchase agreement shall be
signed no later than 6 December 2024.
INFORMATION ABOUT PUBLIC ANNOUNCEMENTS
Following the requirements of the Law of the Republic of
Lithuania, all main events concerning the Company and
information about the time and venue of the General
Meeting of Shareholders are published on the website of
the Company www.kn.lt and in AB NASDAQ Vilnius
(www.nasdaqomxbaltic.com) Stock Exchange.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 83
BUSINESS ENVIRONMENT AND MARKET
OIL TERMINALS’ BUSINESS ENVIRONMENT AND
MARKET
The Company’s oil products’ transhipment activities are
mostly affected by:
- Company's infrastructure (number of jetties,
water depth at jetties) and suprastructure for
transhipment and storage of oil products
(number of tanks, pipelines, trestles, etc.).
- Oil terminals’ economic attractiveness from
logistical point of view (both transhipment tariffs
and costs of the entire logistic chain).
- Macroeconomic, geopolitical environment in the
regional and global oil refining and trade
markets, overall market situation.
Main KN Oil business clients – crude oil refineries and
traders operating in the regional and global oil and
petroleum product markets. Strategic oil refinery
(hereinafter – Refinery) in the region, part of which oil
products are transhipped through Company's oil
terminals are located in southeast direction - it is
Mažeikiai plant in Lithuania (managed by AB ORLEN
Lietuva, hereinafter - Orlen).
Main Company’s competitors are oil terminals operating
along the eastern coast of the Baltic Sea and those located
at Odesa (Ukraine) port.
Company's oil terminals activity results in 2021 were
affected by geopolitical factors in the region, due to
sanctions to Belarus introduced by Council Regulation
(EU) 2021/1030 of 24th June 2021 as no more oil product
transit flows from Belarus were transhipped nor expected
in the future.
It is also important Russia’s overall aim to tranship both
Belarussian and Russian origin oil and chemical products
mainly through its own seaports located on the coast of
the Gulf of Finland (St. Petersburg, Primorsk, Ust-Luga), as
well as new target to handle petrochemicals, which are
currently being handled in Finnish and Baltic ports.
Activities in the regional oil terminals, including KN Oil
Terminal, were also affected by the slowdown in the
global economy caused by the coronavirus COVID-19
pandemic, leading to a drop in demand for petroleum
products and pushing oil refining margins to record lows.
As a result of the above-mentioned negative factors,
Estonian and especially Latvian ports lost part of their oil
product flows, making them more active competitors for
the Company's oil terminal.
According to the statistical data, in 2021 ports of the
eastern Baltic Sea coast transhipped approximately 92.7
million tons of oil products, i.e., 0.9 million tons or 0.97%
less compared to the same period in 2020.
In 2021, port of Klaipėda handled about 4.4 million tons
of oil products, i.e., 1.4 million tons or 23.6% less than in
2020.
The total amount of oil product transhipment through the
Baltic ports in 2018-2021 decreased by 32% and their
overall market share decreased by around 3%.
As shown in the chart “Dynamics of oil products
transhipment at the eastern Baltic Sea coast ports in 2018
2021” below, Russian’s ports share in total eastern Baltic
Sea coast oil product transhipment market increased from
75.4% to 78.4%. During last 3 years total transhipment
volumes in Russian ports increased by approximately
9.5%.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 84
* Figures are based on Klaipėda Port Authority data
* Figures based on Klaipėda Port Authority data
30,9
16,1
11,3
11,4
7,8
5,7
6,3
2,7
0,9
0,5
32,3
16,7
11,9
11,5
5,5
4,4
8,0
2,2
0,4 0,4
0
5
10
15
20
25
30
35
Ust-Luga Primorsk Vysotsk St
Petersburg
Ventspils Klaipėda Tallinn and
other
Estonian
ports
terminals
Riga Kaliningrad Liepaja
Millions of tons
2020 2021
+4.3%
+0.5%
+5.4%
+3.8%
-29.7%
-23.6%
+26.4%
-18.5%
-60.3%
-10.9%
DYNAMICS OF OIL PRODUCTS TRANSSHIPMENT AT THE EASTERN BALTIC SEA COAST PORTS IN 2020 – 2021
66,4
7,4
14,2
8,0
68,4
6,9
13,8
7,3
70,6
6,3
11,0
5,7
72,7
8,0
7,7
4,4
0
10
20
30
40
50
60
70
80
Russia Estonia Latvia Lithuania
Millions
2018 2019 2020 2021
DYNAMICS OF OIL PRODUCTS TRANSSHIPMENT AT THE EASTERN BALTIC SEA COAST PORTS, 2018 – 2021
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 85
TRANSHIPMENT OF OIL PRODUCTS
During 2021 Company’s Klaipėda and Subačius Oil terminals
transshipped 3,651 kt of oil products compared to 5,149 kt in
2020. The transhipment of both terminals for 2021 is 29.1%
lower than during 2020. The decrease was a result of the
negative global and regional factors mentioned in the section
“Oil Terminals’ Business Environment And Market”. At the
same time, almost 2.4 times higher oil product, petrochemical
and biofuel import volumes and storage services allowed to
mitigate the impact of decreased export volumes.
In 2021 part of Klaipėda Oil terminal’s storage tank park was
reconstructed (8.5 thousand cubic meters in total) and
successfully adapted for bitumen handling and storage. The
supply of bitumen to the new tanks started in Q4 of 2021 while
in January 2022 the first tanker was loaded with this product.
The handling of oil products through KN Oil terminal’s
infrastructure has evolved from 8 types of oil products at the
beginning of 2021, to 13 different types of oil products,
including 3 types of biofuels (FAME, ethanol, biodiesel (HVO),
which are today being handled together with bitumen.
In 2021, the terminal’s handling of the latter products
increased significantly, with as much as 40 % more biofuels
being handled in 2021 (in comparison to 91.3 kt in 2020).
In 2021 Company’s transhipment by auto trucks increased
about 15.4% and reached more than 566 thousand tons per
year.
In order to further expand the scope of activities and diversify
products portfolio in Klaipėda and Subačius Oil terminals, the
Company continues to develop business relationships with
international and regional market players.
* Figures based on KN data
7 086
7 177
6 694
5 749
5 149
3 651
2016 2017 2018 2019 2020 2021
TRANSHIPMENT IN OIL TERMINALS, THOUSAND TONES
Transit Export Others
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 86
OVERVIEW OF KLAIPĖDA LNG TERMINAL OPERATING ENVIRONMENT
During 2021 NERC adopted the following resolutions
related to the operating environment of Klaipėda LNG
terminal:
• On 16 November 2021, decree no. O3E-1496 - NERC
approved LNG regasification prices valid from 1
January 2022. The fixed part of the LNG regasification
price approved by the decree (included in the security
supplement to the natural gas transmission price)
decreases by 0.99% to 149.88 EUR / (MWh / day /
year), the variable part remains the same (0.41 EUR /
MWh).
• On 16 November 2021, decree no. O3E-1495 - NERC
has set prices for liquefied natural gas reloading
services, effective from 1 January 2022. This
resolution established differentiated LNG reloading
prices based on the methodology for setting state
regulated prices in the natural gas sector.
• On 19 November 2021, decree no. O3E-1522 - NERC
has revised an additional component to the security
supplement to the natural gas transmission price
applicable from 1 January 2022 - EUR 252.86 / (MWh
/ day / year).
• On 29 December 2021, decree no. O3E-1787 – NERC
has approved new edition of the AB Klaipėdos nafta
Regulations for use of liquefied natural gas terminal
which simplifies the access to the terminal services:
a. Established framework contract with the
indefinite validation term – capacity
bookings are executed by signing additional
annex to the existing contract (“Special
provisions”);
b. Definition of “Spot cargo” is included in the
Regulations.
c. Terms and conditions of Spot cargo delivery
are provided.
d. separate LNG carrier arrival periods are
determined for LNG load and LNG reload.
e. Operator’s performed Due diligence
procedure of interested parties of legal
entities and evaluation of transactions of
interested parties is included in the contents
of the Regulations.
f. Other technical corrections are made.
Other relevant 2021 events related to the operation of the
LNG terminal:
• On 17 November 2021 the Resolution of the
Government of the Republic of Lithuania No. 966
amended by the Government of the Republic of
Lithuania November 7 Resolution no. 1354 “On the
Approval of the Description of the Procedure for the
Supply of the Required Quantity of the Liquefied
Natural Gas Terminal and the Determination of the
Natural Gas Consumption Capacity”, which
establishes the minimum quantity of natural gas
(3,867,500,000 kWh (+-5%) per each year) required
for LNG terminal in the period of 2022-2024.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 87
LNG terminal capacity allocated for the Gas Year 2021 (period from 1 October 2020 to 30 September 2021):
ALLOCATED CAPACITY
AMOUNT OF ALLOCATED CAPACITY, GWh*
PERIOD
LNG regasification
capacity**
8,364
From 1 October 2020 to 30 September 2021
920
From 30 September 2020 to 21 November 2020
63
From 1 October 2020 to 30 November 2020
61
From 1 October 2020 to 30 November 2020
242
From 1 November 2020 to 31 December 2020
62
From 20 November 2020 to 18 December 2020
63
From 18 December 2020 to 30 December 2020
9,879
From 24 December 2020 to 30 September 2021
62
From 5 January 2021 to 31 January 2021
14
From 2 December 2020 to 15 December 2020
63
From 4 December 2020 to 31 December 2020
158
From 1 February 2021 to 28 February 2021
60
From 1 February 2021 to 28 February 2021
99
From 17 February 2021 to 31 March 2021
63
From 14 March 2021 to 13 April 2021
62
From 13 March 2021 to 4 April 2021
62
From 13 March 2021 to 23 April 2021
125
From 1 May 2021 to 7 June 2021
138
From 1 May 2021 to 30 June 2021
123
From 1 May 2021 to 24 June 2021
30
From 1 June 2021 to 30 June 2021
102
From 1 July 2021 to 31 August 2021
40
From 1 August 2021 to 31 August 2021
63
From 1 September 2021 to 30 September 2021
*Combustion / measurement temperature 25/0 °C, pressure 1.01325 bar, natural gas gross calorific value 11.90 kWh/nm3, expansion
factor 1: 578 m3 LNG / nm3 of gas).
**During Gas Year LNG regasification capacity may be changed to LNG reloading capacity.
LNG terminal capacity allocated for the gas year 2022 (period from 1 October 2021 to 30 September 2022):
ALLOCATED CAPACITY
AMOUNT OF ALLOCATED CAPACITY, GWh*
PERIOD
LNG regasification
capacity**
8,892
From 1 October 2021 to 30 September 2022
62
From 1 October 2021 to 31 October 2021
62
From 1 October 2021 to 30 November 2021
62
From 1 October 2021 to 31 October 2021
122
From 1 November 2021 to 31 December 2021
31
From 1 November 2021 to 31 December 2021
79
From 1 November 2021 to 30 November 2021
113
From 5 January 2022 to 28 February 2022
63
From 15 February 2022 to 31 March 2022
10
From 9 January 2022 to 28 January 2022
309
From 1 February 2022 to 31 March 2022
949
From 15 February 2022 to 12 April 2022
105
From 15 April 2022 to 2 May 2022
20
From 20 February 2022
*Combustion / measurement temperature 25/0 °C, pressure 1.01325 bar, natural gas gross calorific value 11.90 kWh/nm3, expansion
factor 1: 578 m3 LNG / nm3 of gas).
**During Gas Year LNG regasification capacity may be changed to LNG reloading capacity.
Total 20,915 GWh LNG regasification capacities of LNG
terminal were allocated for the Gas Year 2021 (period
from 1 October 2020 to 30 September 2021). Meanwhile,
total 10,878 GWh LNG regasification capacities of LNG
terminal were allocated for the Gas Year 2022 (period
from 1 October 2021 to 30 September 2022). LNG
terminal users can book LNG terminal capacities during
a Gas Year.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 88
16,337 GWh of LNG have been regasified and transmitted
to AB “Amber Grid” transmission system in 2021. It should
be noted that in 2021 LNG terminal has been used by 5
users (one company from Estonia). Starting from the Gas
Year 2022 new terminal user From Norway will start to use
services of the Terminal.
During 2021 the LNG terminal:
• Performed 71 ship-to-ship operations (73 ship-to-
ship operations in 2020).
• 1,122.4 thousand tonnes of LNG were received
(1,429.6 thousand tonnes in 2020).
• 1.436 billion nm
3
of natural gas were regasified and
supplied to the natural gas transmission system
(1.887 billion nm
3
in 2020).
• 5.6 thousand tonnes LNG was reloaded into small
scale LNG carriers (none were reloaded in 2020).
• Accepted LNG origin was 58% from USA, 20% from
Russia, 6% from Egypt and Equatorial Guinea each,
10% from Trinidad and Tobago.
The need for LNG terminal capacity depends on several
key criteria:
• Joint gas demand of Lithuania and other Baltic
States.
• Pricing offered by competing natural gas supply
sources (gas supplied by pipeline) and quantity
of gas supplied.
• Limitations of the Lithuanian natural gas
infrastructure (transmission system capacity);
• Supply of LNG in the global market.
• LNG prices in the region and worldwide.
• Duration and terms of gas supply contracts.
• Availability and freight costs of LNG carriers.
GAS PIPELINES PROJECTS IN THE BALTIC STATES
Energy projects implemented in the Baltic region would
enable the development of the LNG market and more
efficient use of the available capacity of the LNG terminal.
At the beginning of 2022, the GIPL gas transmission
pipeline between Lithuania and Poland will increase
demand for the LNG terminal.
UPDATE ON KLAIPĖDA LNG TERMINAL CAPACITY
ALLOCATION AND TARIFFICATION MODEL
During the first half of 2021 the Company decided to
implement changes on Klaipėda LNG terminal capacity
allocation and tariffication model by ensuring a possibility
for terminal users booking capacity for a long-term period
and by applying cost-reflective tariff. In line with potential
changes, Swedish company AFRY prepared study on the
long-term capacity allocation and tariffication models
applicable in LNG terminals in Europe. During few
workshops AFRY presented results of the study to
stakeholders and had discussions with market
participants. Based on the study results, KN is currently
updating principles of the LNG terminal capacity
allocation and tariffication model. LNG Terminal
Regulations will be amended accordingly. Main terms and
conditions of the Regulations will be submitted to
National Energy Regulatory Council (NERC) and public
consultation will be announced. After approval of main
terms and conditions of Regulations, long-term capacity
allocation procedure will be announced in summer of
2022. Capacity will be allocated for up to 10 years period
counting from 2023.
1,4
1,9
1,9
1,4
2,4
2,1
2,2
1,3
1,9
1,7
1,7
2,1
0,9 1,0
1,8
1,6
2,3
1,7
1,3
1,4
1,5
0,9
1,1
0,9
2020 2021
LNG REGASSIFICATION AND RELOADING, TWh
12,6
9,2
20,1
21,9
16,4
2017 2018 2019 2020 2021
TOTAL LNG REGASSIFICATION AND RELOADING,
TWh
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 89
FINANCIAL RESULTS OF GROUP’S ACTIVITY
37,9
35,2
32,1
31,4
21,4
68,2
64,4
70,9
43,4
34,8
106,5
100,0
104,4
80,1
61,8
2017 2018 2019 2020 2021
Commercial LNG activities Regulated LNG activities
Oil terminals Total
SALES REVENUE, MEUR
17,0
11,6
7,6
34,0
-64,0
12,7
11,5
-47,2
2017 2018 2019 2020 2021
Net profit (loss) Net profit (loss) adjusted
NET PROFIT (LOSS), MEUR
23,7
17,4
20,8
29,2
8,7
31,6
26,4
71,0
48,2
26,1
2017 2018 2019 2020 2021
Gross profit EBITDA
GROSS PROFIT AND EBITDA, MEUR
205
202
581
560
493
96
91
82
92
79
301
293
663
652
572
2017-12-31 2018-12-31 2019-12-31 2020-12-31 2021-12-31
Non-current assets Current assets Total assets
ASSETS, MEUR
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 90
CONSOLIDATION
The financial results of the Group consist of the financial
results of the parent company AB Klaipėdos nafta and its
directly and indirectly controlled subsidiaries. According
to IFRS 10, the parent company controls an entity when
the parent company is exposed to, or has rights to,
variable returns from its involvement with the entity and
has the ability to affect those returns through its power
over the entity. Control is generally obtained by holding
more than one half of the voting rights. Subsidiaries are
fully consolidated from the date on which control is
transferred to the Group.
The financial statements of subsidiaries have been
prepared using uniform accounting policies and for the
same reporting period as that covered by the financial
statements of the Group. On consolidation, all inter-
company transactions, balances, and unrealized gains
and/or losses on transactions among the Group
companies are eliminated.
On consolidation, the revenue and expenses are
translated into euros at an average exchange rate
observed during reporting period. The assets and
liabilities of foreign operations are translated into euros at
the rate of exchange prevailing at the reporting date. The
exchange differences arising on translation for
consolidation are recognised in other comprehensive
income.
CONSOLIDATED FINANCIAL RESULTS OF THE GROUP INCLUDE THE FOLLOWING COMPANIES:
NAME OF THE COMPANY
ADDRESS
OWNERSHIP PART, %
AB Klaipėdos nafta
Burių Street 19, 92276 Klaipėda
100
UAB SGD terminalas
Burių Street 19, 92276 Klaipėda
100
UAB SGD logistika
Burių Street 19, 92276 Klaipėda
100
UAB SGD SPB
Burių Street 19, 92276 Klaipėda
100 owned by UAB SGD logistika
KN Açu Serviços de Terminal de GNL LTDA
(KN Acu)
F66 Fazenda Saco Dantas s/n,
Distrito Industrial, Area 1 and Area 2,
28200-000 São João da Barra, State
of Rio de Janeiro
90 owned by UAB SGD logistika and
10 owned by UAB SGD SPB
More information about the structure of the Group and its subsidiaries can be found in the Annual Report section “General Information
About the Group and the Company”.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 91
FINANCIAL RESULTS OF THE GROUP’S AND THE COMPANY’S ACTIVITY
THE KEY FINANCIAL RATIOS OF THE GROUP (IN EUR THOUSAND, IF NOT INDICATED OTHERWISE)
* adj. - adjusted financial indicators/data are recalculated and presented by eliminating from net profit (loss) the following amounts: (1) the
impact of unrealised foreign currency exchange rates (forex) arising from IFRS 16 requirements, (2) respective impact of deferred income tax
arising from forex and (3) impact of financial derivatives.
THE GROUP
2021
2021
adj.*
2020
2020
adj.*
2019
2019
adj.*
2018
2017
Transhipment of oil products, thousand t
3,651
3,651
5,149
5,149
5,749
5,749
6,694
7,177
LNG regasification and reloading, GWh
16,569
16,569
21,987
21,987
20,237
20,237
9,213
12,646
Investments of non-current assets
9,080
9,080
7,163
7,163
22,051
22,051
13,156
32,858
FINANCIAL FIGURES
Sales
61,811
61,811
80,114
80,114
104,363
104,363
99,998
106,484
Gross profit
8,702
8,702
29,154
29,154
20,834
20,834
17,369
23,745
EBITDA (APM)
26,108
26,108
48,168
48,168
70,979
70,979
26,406
31,555
EBIT
(APM)
-73,486
-53,342
46,275
19,456
8,304
14,386
12,065
17,711
Financial and investment activities
-22,602
-2,458
24,460
-2,359
-8,314
-2,232
-8
-94
Profit before income tax (EBT)
-75,767
-55,623
43,839
17,020
6,002
12,084
11,857
17,513
Net profit (loss)
-64,011
-47,178
33,958
11,454
7,561
12,731
11,577
17,031
Current assets
78,841
78,841
91,695
91,695
81,946
81,946
90,654
96,268
Non-current assets
493,240
493,240
559,999
559,999
581,351
581,351
202,473
204,977
Total assets
572,081
572,081
651,694
651,694
663,297
663,297
293,127
301,245
Equity
144,713
144,212
216,326
198,992
190,649
195,819
195,490
200,344
PROFITABILITY
Return on assets (ROA) (APM)
-10.5%
-7.7%
5.2%
1.7%
1.6%
2.7%
3.9%
6.3%
Return on equity (ROE)
(APM)
-35.5%
-27.5%
16.7%
5.8%
3.9%
6.5%
5.9%
8.7%
Return on Capital Employed (ROCE)
(APM)
0.17%
0.17%
6.9%
7.3%
5.1%
5.0%
4.2%
6.4%
Gross profit margin (APM)
14.1%
14.1%
36.4%
36.4%
20.0%
20.0%
17.4%
22.3%
EBITDA margin (APM)
42.2%
42.2%
60.1%
60.1%
68.0%
68.0%
26.4%
29.6%
EBIT margin (APM)
-118.9%
-86.3%
57.8%
24.3%
8.0%
13.8%
12.1%
16.6%
EBT margin (APM)
-122.6%
-90.0%
54.7%
21.2%
5.8%
11.6%
11.9%
16.4%
Net profit margin (APM)
-103.6%
-76.3%
42.4%
14.3%
7.2%
12.2%
11.6%
16.0%
FINANCIAL STRUCTURE
Debt ratio (D/E)
(APM)
295%
296%
201%
219%
248%
241%
50%
50%
Debt ratio (D/E) – excluding IFRS 16
liabilities (APM)
97%
97%
60%
65%
50%
49%
50%
50%
Debt to EBITDA (APM)
16
16
9
9
7
7
4
3
Debt (excluding IFRS 16) to EBITDA (APM)
5
5
3
3
1
1
4
3
Debt service coverage ratio (DSCR)
(APM)
4
4
8
8
12
12
9
67
Leverage ratio (D/A)
(APM)
0.75
0.75
0.67
0.67
0.71
0.71
0.33
0.33
Leverage ratio (D/A)
(excluding IFRS 16)
(APM)
60%
60%
44%
44%
33%
33%
33%
33%
Interest coverage ratio (EBITDA/interest
expense)
11
11
20
20
31
31
127
159
Effective tax rate
16%
15%
23%
33%
-26%
-5%
2%
3%
Capital to assets ratio (APM)
25%
25%
33%
31%
29%
30%
67%
67%
Gross liquidity ratio (current ratio) (APM)
1.28
1.28
1.47
1.47
1.27
1.27
4.87
4.78
Quick ratio (APM)
1.25
1.25
1.43
1.43
1.24
1.24
4.77
4.72
Quick ratio
(excluding IFRS 16) (APM)
4.34
4.34
4.06
4.06
3.98
3.98
4.77
4.72
MARKET VALUE RATIOS
Price-Earnings Ratio (P/E)
-1.8
-2.5
3.6
10.7
18.3
10.9
13.4
11.4
Earnings per share (EPS)
-0.168
-0.124
0.089
0.030
0.020
0.033
0.030
0.045
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 92
THE KEY FINANCIAL RATIOS OF THE COMPANY (IN EUR THOUSAND, IF NOT INDICATED OTHERWISE)
* adj. – adjusted financial indicators/data are recalculated and presented by eliminating from net profit (loss) the following amounts: (1) the
impact of unrealised foreign currency exchange rates (forex) arising from IFRS 16 requirements, (2) respective impact of deferred income tax
arising from forex and (3) impact of financial derivatives.
THE COMPANY
2021
2021
adj.*
2020
2020
adj.*
2019
2019
adj.*
2018
2017
Transhipment of oil products, thousand t
3,651
3,651
5,149
5,149
5,749
5,749
6,694
7,177
LNG regasification and reloading, GWh
16,569
16,569
21,987
21,987
20,237
20,237
9,213
12,646
Investments of non-current assets
9,080
9,080
7,163
7,163
22,051
22,051
13,156
32,858
FINANCIAL FIGURES
Sales
58,633
58,633
77,474
77,474
104,138
104,138
99,998
106,484
Gross profit
6,489
6,489
27,283
27,283
21,241
21,241
17,369
23,745
EBITDA (APM)
24,582
24,582
47,291
47,291
71,396
71,396
26,406
31,555
EBIT
(APM)
-74,852
-54,708
45,508
18,689
8,690
14,772
12,065
17,711
Financial and investment activities
-22,519
-2,375
24,571
-2,248
-8,345
-2,263
-8
-94
Profit before income tax (EBT)
-77,129
-56,985
43,103
16,284
6,388
12,470
11,857
17,513
Net profit (loss)
-64,917
-48,084
33,495
10,991
7,947
13,117
11,577
17,031
Current assets
73,463
73,463
87,329
87,329
77,917
77,917
90,654
96,268
Non-current assets
497,496
497,496
564,218
564,218
585,904
585,904
202,473
204,977
Total assets
570,959
570,959
651,547
651,547
663,821
663,821
293,127
301,245
Equity
143,950
143,449
216,459
199,125
191,173
196,343
195,490
200,344
PROFITABILITY
Return on assets (ROA) (APM)
-10.6%
-7.9%
5.1%
1.7%
1.7%
2.7%
3.9%
6.3%
Return on equity (ROE)
(APM)
-36.0%
-28.1%
16.4%
5.6%
4.1%
6.7%
5.8%
8.7%
Return on Capital Employed (ROCE)
(APM)
-0.4%
-0.4%
6.6%
7.0%
5.2%
5.1%
4.2%
6.4%
Gross profit margin (APM)
11.1%
11.1%
35.2%
35.2%
20.4%
20.4%
17.4%
22.3%
EBITDA margin (APM)
41.9%
41.9%
61.0%
61.0%
68.6%
68.6%
26.4%
29.6%
EBIT margin (APM)
-127.7%
-93.3%
58.7%
24.1%
8.3%
14.2%
12.1%
16.6%
EBT margin (APM)
-131.5%
-97.2%
55.6%
21.0%
6.1%
12.0%
11.9%
16.4%
Net profit margin (APM)
-110.7%
-82.0%
43.2%
14.2%
7.6%
12.6%
11.6%
16.0%
FINANCIAL STRUCTURE
Debt ratio (D/E)
(APM)
297%
298%
201%
218%
247%
241%
50%
50%
Debt ratio (D/E) – excluding IFRS 16 liabilities
(APM)
97%
98%
60%
65%
50%
49%
50%
50%
Debt to EBITDA (APM)
17
17
9
9
7
7
4
3
Debt (excluding IFRS 16) to EBITDA (APM)
6
6
3
3
1
1
4
3
Debt service coverage ratio (DSCR)
(APM)
4
4
8
8
12
12
9
67
Leverage ratio (D/A)
(APM)
0.75
0.75
0.67
0.67
0.71
0.71
0.33
0.33
Leverage ratio (D/A)
(excluding IFRS 16)
(APM)
60%
60%
44%
44%
33%
33%
33%
33%
Interest coverage ratio (EBITDA/interest
expense)
11
11
20
20
31
31
127
159
Effective tax rate
16%
16%
22%
33%
-24%
-5%
2%
3%
Capital to assets ratio (APM)
25%
25%
33%
31%
29%
30%
67%
67%
Gross liquidity ratio (current ratio) (APM)
1.20
1.20
1.41
1.41
1.21
1.21
4.87
4.78
Quick ratio (APM)
1.17
1.17
1.37
1.37
1.17
1.17
4.77
4.72
Quick ratio
(excluding IFRS 16) (APM)
4.12
4.12
3.91
3.91
3.77
3.77
4.77
4.72
MARKET VALUE RATIOS
Price-Earnings Ratio (P/E)
-1.8
-2.4
3.6
11.1
17.4
10.5
13.4
11.4
Earnings per share (EPS)
-0.171
-0.126
0.088
0.029
0.021
0.034
0.030
0.045
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 93
ALTERNATIVE PERFORMANCE MEASURES
MEASURE
CALCULATION
Capital to assets ratio
total capital at the end of the period / total assets at the end of the
period
Adjusted capital to asset ratio
total adjusted capital at the end of the period / total assets at the end of
the period
Debt (excluding IFRS 16) to EBITDA
(total current and non-current liabilities at the end of the period –
current and non-current IFRS lease liabilities) / EBITDA
Debt ratio (D/E)
total current and non-current liabilities at the end of the period / total
equity at the end of the period
Adjusted debt ratio (D/E)
(total current and non-current liabilities) / total adjusted equity at the
end of the period
Debt ratio (D/E) – excluding IFRS 16 liabilities
(total current and non-current liabilities at the end of the period – total
current and non-current IFRS 16 lease liabilities) / total equity at the end
of the period
Adjusted Debt ratio (D/E) – excluding IFRS 16
liabilities
(total current and non-current liabilities at the end of the period – total
current and non-current IFRS 16 lease liabilities) / total adjusted equity
at the end of the period
Debt service coverage ratio (DSCR)
EBITDA / (total current loan obligations at the end of the period +
interest expenses of the period)
Debt to EBITDA
total current and non-current liabilities at the end of the period /
EBITDA
EBIT
earnings before interest and taxes
Adjusted EBIT
earnings before interest and taxes – unrealised foreign exchange rates
impact – impact of financial derivatives
EBIT margin
EBIT / revenue
Adjusted EBIT margin
adjusted EBIT / revenue
EBITDA
earnings before taxes – financial activity income + financial activity
expenses + depreciation and amortization expenses + impairment
expenses and reversals
EBITDA margin
EBITDA / revenue
EBT margin
(earnings before taxes) / revenue
Adjusted EBT margin
(earnings before taxes– unrealised foreign exchange rates impact –
impact of financial derivatives) / revenue
Gross liquidity ratio (current ratio)
total current assets at the end of the period / total current liabilities at
the end of the period.
Gross profit margin
(revenue – COGS) / revenue * 100
Leverage ratio (D/A)
total current and non-current liabilities at the end of the period / total
assets at the end of the period
Leverage ratio (D/A)
(excluding IFRS 16)
(total current and non-current liabilities at the end of the period –
current and non-current IFRS lease liabilities) / (total assets at the end of
the period – right of use assets)
Net profit margin
net profit (loss) for the period / revenue
Adjusted net profit margin
adjusted net profit (loss) for the period / revenue
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 94
ALTERNATIVE PERFORMANCE MEASURES (CONT.)
MEASURE
CALCULATION
Quick ratio (excluding IFRS 16)
(total current assets at the end of the period – inventories at the end of
the period) / (total current liabilities at the end of the period – total
current IFRS 16 lease liabilities)
Return on assets (ROA)
net profit (loss) of the last twelve months / (assets at the end of the
period + assets at the beginning of the period) / 2
Adjusted return on assets
adjusted net profit (loss) of the last twelve months / (assets at the end
of the period + assets at the beginning of the period) / 2
Return on Capital Employed (ROCE)
(EBITDA – depreciation and amortization expenses) / (total equity +
total long-term loans and deferred government grants at the end of the
period)
Return on equity (ROE)
net profit (loss) of the last twelve months / (equity at the end of the
period + equity at the beginning of the period) / 2
Adjusted return on equity
adjusted net profit (loss) of the last twelve months / (adjusted equity at
the end of the period + adjusted equity at the beginning of the period)
/ 2
Quick ratio
(total current assets at the end of the period – inventories at the end of
the period) / total current liabilities at the end of the period
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 95
FINANCIAL RESULTS
KN uses alternative performance measures (APM) in order
to provide better understanding of the Group and the
Company business operations. Currently, net profit (loss)
of the Group and the Company is affected by material
non-cash items. Therefore, the adjusted financial
indicators are recalculated and presented by eliminating
from net profit (loss) the following amounts: (1) the
impact of unrealised foreign currency exchange rates
(forex) arising from IFRS 16 requirements, (2) respective
impact of deferred income tax arising from forex and (3)
impact of financial derivatives.
KN’s financial results of 2021 and 2020 have mainly been
affected by IFRS 16 “Leases” - a new standard which came
into effect on 1 January 2019 and by the reduction of LNG
security supplement from 1 January 2020 by EUR 26.8
million per annum. These changes have significantly
affected KN’s statement of financial position, statement of
comprehensive income, and financial indicators. When
the standard has become effective, the lease obligations
are recognized in the statement of financial position as an
asset and a liability (right-of-use assets and a lease
liability). As most lease payments are denominated in
USD, the negative impact of unrealized USD/EUR
exchange rate in amount of EUR 22,073 thousand has
been recognized in the statement of comprehensive
income in 2021 (in 2020 - EUR 28,765 thousand positive
impact). However, it is a non-cash item, which has no
impact to the Group’s and the Company’s actual earnings.
The reduction of the LNG security supplement reduced
revenue of the Group and the Company for 2021 and
2020 in amount of EUR 26.8 million per annum. The LNG
security supplement reduction is financed by NIB loans;
therefore, the cash flows of the Group and the Company
are not affected.
The calculation of net profit (loss) adjusted of the Group and the Company is presented below:
INCREASE/(DECREASE) IN EUR THOUSAND
31-12-2021
31-12-2021
THE GROUP
THE COMPANY
Net profit (loss)
-64,011
-64,917
Unrealised foreign exchange rates impact
22,073
22,073
Impact of financial derivatives
-1,929
-1,929
Deferred tax impact from unrealised forex
-3,311
-3,311
Net profit (loss) adjusted
-47,178
-48,084
-47 178
-22 073
1 929
3 311
-64 011
Net profit (loss) adjusted Unrealised foreign exchange rates impact
Impact of financial derivatives Deferred income tax impact from unrealised forex
Net profit (loss)
IMPACT OF IFRS 16 ON GROUP'S NET PROFIT (LOSS) IN 2021, EUR THOUSAND
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 96
In year 2021 the main KN financial indicators have changed compared to 2020 as follows:
2021
2021 adj.
2020
2020 adj.
CHANGE,
2021adj. VS 2020 adj.
+/-
%
GROUP
Gross profit
8,702
8,702
29,154
29,154
-20,452
-70.2%
Net profit (loss)
-64,011
-47,178
33,958
11,454
-58,632
-511.9%
EBITDA
(APM)
26,108
26,108
48,168
48,168
-22,060
-45.8%
Gross profit margin (APM)
14.1%
14.1%
36.4%
36.4%
-22.3%
-61.3%
Net profit margin (APM)
-103.6%
-76.3%
42.4%
14.3%
-90.6%
-633.6%
EBITDA margin (APM)
42.2%
42.2%
60.1%
60.1%
-17.9%
-29.8%
Earnings per share (EPS)
-0.168
-0.124
0.089
0.030
-0.154
-513.3%
Financial activity result
-22,602
-2,458
24,460
-2,359
-99
4.2%
Return on assets (ROA) (APM)
-10.5%
-7.7%
5.2%
1.7%
-9.4%
-552.9%
Return on equity (ROE) (APM)
-35.5%
-27.5%
16.7%
5.8%
-33.3%
-574.1%
COMPANY
Gross profit
6,489
6,489
27,283
27,283
-20,794
-76.2%
Net profit (loss)
-64,917
-48,084
33,495
10,991
-59,075
-537.5%
EBITDA (APM)
24,582
24,582
47,291
47,291
-22,710
-48.0%
Gross profit margin (APM)
11.1%
11.1%
35.2%
35.2%
-24.1%
-68.5%
Net profit margin (APM)
-110.7%
-82.0%
43.2%
14.2%
-96.2%
-677.5%
EBITDA margin (APM)
41.9%
41.9%
61.0%
61.0%
-19.1%
-31.3%
Earnings per share (EPS)
-0.171
-0.126
0.088
0.029
-0.155
-534.5%
Financial activity result
-22,519
-2,375
24,571
-2,248
-127
5.6%
Return on assets (ROA) (APM)
-10.6%
-7.9%
5.1%
1.7%
-9.6%
-564.7%
Return on equity (ROE) (APM)
-36.0%
-28.1%
16.4%
5.6%
-33.7%
-601.8%
In 2021 the Group’s adjusted net profit (loss) is EUR
(47,178) thousand and is EUR 58,632 thousand lower
compared to 2020 (EUR 11,454 thousand).
The Group’s adjusted net profit margin (APM) for 2021 is
-76.3%, the adjusted gross profit margin (APM) is 14.1%
(in 2020 respectively 14.3% and 36.4%). The adjusted
profit (loss) per one share amounts to EUR (0.124)/share
in 2021 (EUR 0.030/share in 2020).
In 2021 the Company’s adjusted net profit (loss) is EUR
(48,084) thousand and is EUR 59,075 thousand lower
compared to 2020 (EUR 10,991 thousand). The Company’s
adjusted net profit margin (APM) for 2021 is -82.0%, the
adjusted gross profit margin (APM) reached 11.1% (in
2020 respectively 14.2% and 35.2%). The adjusted profit
(loss) per one share amounts to EUR (0.126)/share in 2021
(EUR 0.029/share in 2020).
-3 445
-3 445
-1 023
-1 023
62
62
6 207
1 037
6 665
29 169
323
-16 510
9 969
9 969
5 812
5 812
-47 563
-47 563
2019 adjusted
2019
2020 adjusted
2020
2021 adjusted
2021
Commercial LNG activities Regulated LNG activities Oil Terminals
THE GROUP'S PROFIT BY BUSINESS SEGMENTS, TEUR
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 97
The main reasons for the decrease of the Group’s adjusted
net profit (loss) by EUR 58,632 thousand compared to
2020 are - EUR 53,375 thousand lower adjusted net profit
from Oil terminals, commercial LNG activities net profit
was EUR 1,085 thousand higher, and EUR 6,342 thousand
lower adjusted net profit (loss) of regulated LNG activities.
For detail explanations see below:
• Adjusted net profit (loss) of Oil terminals is lower by
EUR 53,375 thousand mainly due to a recognized
impairment of Klaipėda Oil terminal in amount of EUR
54.2 million and a respective deferred income tax
asset impact of EUR 8.1 million. The total impact from
recognition of this impairment loss on net profit (loss)
amounts to EUR 45.2 million. EUR 10 million lower
revenue from oil business segment also contributes
to the net loss for 2021. More information concerning
impairment of KOT assets can be found in the Note
3 of the Explanatory Notes in the financial
statements.
• The adjusted net profit from commercial LNG
activities is EUR 1,085 thousand higher because in the
beginning of 2020 the Company has signed a
long-term contract with the Polish state gas company
PGNiG to reserve capacity of Klaipeda small-scale
LNG station for the next 5 years, starting from Q2
2020. Furthermore, on 16 September 2021 Gas
Natural Açu (GNA) LNG-to-power project in port of
Açu, Brazil has launched commercial operations and
KN became an operator of two fully operational LNG
terminals worldwide.
• Adjusted net profit of regulated LNG activities (EUR
323 thousand) is lower by EUR 6,342 thousand due to
(i) EUR 2,369 thousand or 162% higher emission
allowances and tax on environmental pollution
expenses and (ii) lower revenue - main reasons: (1)
LNG security supplement in 2021 has been reduced
with the surplus of LNG return from the period 2014-
2019 and repayment of reloading revenue for 2019 in
total amount of EUR 2.6 million, (2) EUR 1.9 million
lower revenue from fixed part due to lower
consumption capacities, (3) LNG security supplement
level set by NERC for 2021 is EUR 1.2 million lower
compared to 2020, (4) EUR 3.2 million lower revenue
from variable part from LNG security supplement, (5)
fines for unused capacity in amount of EUR 0.4 million
received in 2021 (no such in 2020). Moreover,
changes in deferred income tax balance have a EUR
4.7 million positive impact on adjusted net profit of
LNGT.
In 2021 Group’s EBITDA (APM) is EUR 26,108 thousand
and is lower by 45.8% or by EUR 22,060 thousand
compared to 2020 (EUR 48,168 thousand). EBITDA margin
(APM) is 42.2%, for 2020 – 60.1%.
In 2021 Company’s EBITDA (APM) is EUR 24,582
thousand and is 48.0% or EUR 22,709 thousand lower
compared to 2020 (EUR 47,291 thousand). EBITDA margin
(APM) is 41.9%, for 2020 – 61.0%.
The adjusted Group’s return on assets (ROA) (APM)
is -7.7% in 2021 (1.7% in 2020), the Company’s adjusted
return on assets (ROA) (APM) is -7.9% (1.7% in 2020).
In 2021 the Group’s adjusted annual return on equity
(ROE) (APM) is -27.5% (5.8% in 2020), the Company’s
adjusted annual return on equity (ROE) (APM) is -28.1%
(5.6% in 2020).
SALES REVENUE
The Group’s sales revenue in 2021 (EUR 61,811
thousand) is lower by 22.8% or by EUR 18,303 thousand
compared to 2020 (EUR 80,114 thousand).
The Company’s sales revenue in 2021 (EUR 58,633
thousand) is lower by 24.3% or by EUR 18,841 thousand
compared to 2020 (EUR 77,474 thousand). The main
reason is 31.8% or EUR 9,987 thousand lower revenue
from sales of oil terminals operations and EUR 8,564
thousand lower revenue from regulated LNG activities.
The total revenue of the regulated LNG activities in
2021 amounts to EUR 34,831 thousand and is EUR 8,564
thousand or 19.7% lower compared to 2020. The activity
of LNG terminal is regulated and has a price cap;
therefore, return from LNG activity does not depend on
regasification volume. For more information, concerning
regulated revenues refer to the article “Regulated profit of
LNG terminal”.
Sales revenue from oil terminals in 2021 amounts to
EUR 21,427 thousand and is EUR 9,987 thousand or 31.8%
lower compared to 2020 (EUR 31,414 thousand). The
decrease of revenue was influenced by COVID-19
pandemic, related worldwide lockdowns, and geopolitical
situation resulting in no Belorussian cargoes.
Sales revenue from commercial LNG activities in 2021
(EUR 5,553 thousand) is 4.7% or by EUR 248 thousand
21,427
34,831
5,553
Oil terminals Regulated LNG activities Commercial LNG activities
2021
THE GROUP'S SALES REVENUE, TEUR
31,414
31 414
43 395
5 305
2020
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 98
higher than in 2020 (EUR 5,305 thousand) because a
long-term contract with the Polish state gas company
PGNiG was signed for reserving capacity of Klaipeda LNG
distribution station for the next 5 years, starting from Q2
2020.
Sales revenue by geography is provided bellow. Sales revenue from foreign clients is revenue from the clients not
registered in Lithuania.
EXPENSES
2021 and 2020 cost of sales and operating expenses for the Group and the Company:
2021
2020
CHANGE
2021 VS 2020
2021
2020
CHANGE
2021 VS 2020
GROUP
GROUP
+/-
%
COMPANY
COMPANY
+/-
%
Cost of sales
53,109
50,960
2,149
4.2%
52,144
50,191
1,953
3.9%
Operating expenses
61,928
9,811
52,117
531.2%
61,160
8,787
52,373
596.0%
Total costs
115,037
60,771
54,266
89.3%
113,304
58,978
54,326
92.1%
Total cost of sales of the Group of 2021 comprises
EUR 53,109 thousand and is higher by 4.2% or by EUR
2,149 thousand comparing to 2020 (EUR 50,960
thousand), due to higher emission allowances and tax on
environmental pollution by EUR 2,469 thousand and
higher variable costs (natural gas, electricity, railway
services, other) by EUR 538 thousand. Depreciation and
amortisation expenses attributable to cost of sales are
lower by EUR 739 thousand. Total cost of sales of the
Company of 2021 comprises EUR 52,144 thousand and is
higher by 3.9% or by EUR 1,953 thousand compared to
2020 (EUR 50,191 thousand) due to higher emission
allowances and tax on environmental pollution by EUR
2,469 thousand and higher variable costs (natural gas,
electricity, railway services, other) by EUR 538 thousand.
Depreciation and amortisation expenses attributable to
cost of sales are lower by EUR 784 thousand.
The Group’s operating expenses of 2021 comprise EUR
61,928 thousand and are 6.3 times or EUR 52,117
thousand higher compared to 2020 (EUR 9,811 thousand).
The main reason for the increase in Group’s operating
expenses is impairment for assets recognised in 2021 in
amount of EUR 54,337 thousand. Impairment of doubtful
receivables reversal amounts to EUR 711 thousand for
2021 compared to impairment of doubtful receivables
expenses of EUR 1,855 thousand recognised in 2020 –
giving the positive effect of changes in such expenses of
EUR 2,566 thousand. The Company’s operating
expenses of 2021 comprise EUR 61,160 thousand and are
7.0 times or EUR 52,373 thousand higher compared to
2020 (EUR 8,787 thousand). The main reasons and the
figures are the same as per above explanation for the
Group’s operating expenses.
59,050
53,272
59,050
53,272
18,424
5,361
21,064
8,539
The Company, 2020
The Company, 2021
The Group, 2020
The Group, 2021
Lithuanian clients Foreign clients
SALES REVENUE BY GEOGRAPHY, TEUR
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 99
The listing of the Group’s major expenses is presented below:
2021
2020
CHANGE
2021 VS 2020
OT
LNGT
comLNG
TOTAL
OT
LNGT
comLNG
TOTAL
+/-
%
Impairment of assets
54,338
-
-
54,338
384
-
-
384
53,954
14,050.5%
Wages, salaries, and
social security
7,608
2,845
2,230
12,683
7,609
2,697
2,458
12,764
-81
-0.6%
Depreciation and
amortization
6,737
3,172
1,408
11,317
7,253
3,313
1,559
12,125
-808
-6.7%
Depreciation of right-
of-use asset
464
13,745
120
14,329
567
13,752
112
14,431
-102
-0.7%
Expenses related to
FSRU rent (OPEX
element,
management, crew
cost)
-
5,753
-
5,753
-
5,615
-
5,615
138
2.5%
Variable costs
(natural gas,
electricity, railway
services, other)
4,528
-
59
4,587
3,981
42
26
4,049
538
13.3%
Emission allowances
and tax on
environmental
pollution
439
3,835
-
4,274
339
1,466
-
1,805
2,469
136.8%
Port charges
-
1,541
-
1,541
4
1,541
-
1,545
-4
-0.3%
Repair and
exploitation expenses
558
159
101
818
520
152
39
711
107
15.0%
Cost of oil products
sold
599
-
-
599
75
-
-
75
524
698.7%
Work safety costs
209
19
7
235
274
26
20
320
-85
-26.6%
Contribution for
National Energy
Regulatory Council
(NERC)
-
595
-
595
-
972
-
972
-377
-38.8%
Reversal of trade
debtors impairment
-711
-
-
-711
1,855
-
-
1,855
-2,566
-138.3%
Impairment of
inventories (reversal)
-
-
-
-
-6
-
-
-6
6
-100.0%
Other cost of sales
and operating
expenses
2,100
1,563
1,016
4,679
1,516
1,136
1,474
4,126
553
13.4%
Total costs
76,869
33,227
4,941
115,037
24,371
30,712
5,688
60,771
54,266
89.3%
In 2021 regulated LNG activity expenses amount to
EUR 33,228 thousand and are higher by EUR 2,516
thousand or by 8.2% compared to 2020 (EUR 30,712
thousand). Major part of regulated LNG activity expenses
is depreciation of right-of-use asset expenses, which
amount to EUR 13,745 thousand and are lower by EUR 7
thousand comparing to 2020. Expenses related to FSRU
rent (OPEX element, management, crew cost) amount to
EUR 5,753 thousand that are higher by 2.5% or by EUR
138 thousand comparing to 2020, emission allowances
and tax on environmental pollution amount to EUR 3,835
thousand and are higher by 162% or by EUR 2,369
thousand. Contribution for National Energy Regulatory
Council expenses decreased by EUR 377 thousand. Other
LNG terminal’s expenses amount to EUR 9,301 thousand
and are higher by 4.4% or by EUR 394 thousand
comparing to 2020 (EUR 8,907 thousand).
In 2021 the total amount of Oil terminal’s expenses
amount to EUR 76,868 thousand (2020 – EUR 24,371
thousand) and are higher by 3.2 times or by EUR 52,497
thousand due to higher impairment of assets by EUR
53,954 thousand. The Oil terminals variable costs (gas,
electricity, and railroad costs, vessel service expenses and
other) are higher by 13.7% or by EUR 547 thousand. OT’s
depreciation and amortization expenses are lower by EUR
516 thousand due to (1) the impact of fully depreciated
assets and the impact of oil terminal’s impairment
recognised in 2021, resulting lower depreciation
expenses, giving lower depreciation and amortisation
expenses by EUR 955 thousand compared to 2020, and (2)
depreciation and amortization expenses were higher by
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 100
EUR 439 thousand due to finished investments and
acquisitions of assets. Impairment of doubtful receivables
reversal amounts to EUR 711 thousand for 2021
compared to impairment of doubtful receivables
expenses of EUR 1,855 thousand recognised in 2020 –
giving the positive effect of changes in such expenses of
EUR 2,566 thousand.
In 2021 the total amount of commercial LNG activity
expenses amounted to EUR 4,941 thousand (2020 – EUR
5,688 thousand) and was lower by EUR 747 thousand
mainly due to lower subsidiary’s KN Acu Servicos de
Terminal activity expenses.
REGULATED PROFIT OF LNG TERMINAL
LNG terminal, its infrastructure and connection
implementation as well as exploitation costs fully or
partially are included into the natural gas transmission
service price in accordance with the rules and guidance’s
set by NERC based on the regulations set in the Energy
Law, Natural Gas Law and other laws of the Republic of
Lithuania related with energy prices regulation.
The total level of LNG terminal revenue is confirmed by
NERC based on the approved methodology of
Government regulated prices in the natural gas sector
(hereinafter – Methodology). According to this
Methodology, the level of LNG terminal revenue is
calculated for upcoming year by summing 2 components:
1) Estimated necessarily costs for the LNG terminal
exploitation and operational assurance; 2) Estimated
return on investment of LNG terminal infrastructure.
The revenue of the LNG terminal activity comprises of 3
components:
• Fixed part of LNG regasification service price is
approved annually by NERC. This part of the price is
included into the additional Security Supplement
added to the gas transmission price.
• Variable part of LNG regasification service price is
received for the regasified volume directly from the
clients. The regasification tariff is approved annually
by NERC.
• LNG reloading service revenue for reloaded LNG
quantity. The tariff of the LNG reloading service is
also approved annually by NERC.
Revenue from LNG regasification (variable part) and LNG
reloading service revenue are recognized at the moment
of providing the services according to the tariffs approved
by NERC.
The tariff of LNG Security Supplement is set annually by
NERC based on the amount required to be collected
(estimated LNG terminal revenue) and proportionally
allocated for the forecasted gas consumption capacities.
LNG security supplement is paid by the users of natural
gas transmission system, including the end users,
together with the other payments for the natural gas
transmissions services. The payments are collected by the
transmission service operator (hereinafter - TSO) either
directly from the user or from suppliers of natural gas in
case the user has no direct contractual obligations with
the TSO.
Actual LNG Security Supplement contributions and
payments may differ from planned ones (calculated at the
approval of Security Supplement) due to the variation of
consumption capacities or other differences.
The differences between the net profit of LNG terminal
segment (non-regulated) and the profit of the regulated
activity are determined by different calculation principles.
Financial accounting is in accordance with IFRS, while the
result of regulated activities is calculated in accordance
with the methodology approved by NERC.
LNG operating expenses are recognized in the relevant
period when they are incurred.
The regulated profit of LNG terminal is calculated by
adjusting the determined return on investment by income
and expenses not attributable for the regulated activity in
terms of regulation (which have an effect on financial
results).
During the 1st regulatory period (2014-2019) a surplus
has been calculated by NERC after the third and the fifth
regulatory years. The surplus after third full regulatory
year (2014-2017) has reduced the level of LNG terminal
revenue of 2019 and surplus after fifth regulatory year
(2014-2019) reduces the level of LNG terminal revenue of
2021. The identified surplus has reduced LNG terminal
revenue of 2019 by EUR 787 thousand and revenue of
2021 by EUR 2,589 thousand.
For the 2nd regulatory period (2020-2024) NERC will
calculate the surplus of regulated profit after two periods
(2020-2021) and will reduce the level of LNG terminal
revenue of 2023. However, due to significant net excess
income earned in 2020, the Company’s LNG terminal
revenue of 2022 has already been reduced by EUR 7,105
thousand.
Assess the impact of regulated activities, the Company in
management accounting calculates normalized profit.
Normalized profit is adjusted for temporary regulatory
differences.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
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LNG REGULATED ACTIVITY TEMPORARY REGULATORY DIFFERENCES
2014-2019 surplus
2020
2021
Regulated Asset Base (RAB)
47,047
44,176
Weighted Average Cost of Capital (WACC)
2.90%
3.46%
Return on Investments (RAB x WACC)
1,364
1,528
Total temporary regulatory adjustment
-7,501
2,663
1) adjustment related to prior years: payback of excess net income /
(compensation of excess net cost)
-130
2,254
2) adjustment related to the current year: (excess net income) / excess net
cost
-2,459
-7,371
409
Payback / (compensation) in:
Year 2020
-130
Year 2021
2,589
-335
Year 2022
7,105
Year 2023
600
-409
Year 2024
Total amount to be compensated / (paid back) in future periods as of the
end of the year
-2,459
-9,960
-7,297
IMPACT OF IFRS 16 AND CAPITALISATION OF PURCHASE OPTION
As at 31 December 2019 the Group and the Company has
capitalized purchase option under the lease agreement.
According to IFRS 16 requirements, lessee should
remeasure lease liability of each agreement upon the
occurrence of either a significant event or a significant
change in circumstances at each financial statements’
date. It is the duty of the management to re-evaluate the
probability to realise the purchase option at each financial
statements’ date in the upcoming reporting periods and
in circumstances if any changes occur, it has to be
reflected in the financial statements respectively. During
the year 2020 no significant events and circumstances
have occurred that would have the impact and
respectively no changes in finance lease accounting under
IFRS 16 requirements have been made as at 31 December
2020.
During the year of 2019 the following significant events
have happened that determined the need to reassess the
probability of realizing the purchase option:
• On 1st March 2019 amendments of the Republic of
Lithuania Law on Liquefied Natural Gas Terminal No
XI-2053 Article 5 and 9 (further – the Law) entered
into force stipulating obligation to the Company as a
Liquefied Natural Gas terminal operator to acquire
ownership of FSRU (by selecting the most economic
option) not later than by 31st December 2024;
• On 19th September 2019 European Commission has
approved state aid consent regarding LNG security
supplement reduction;
• On 24th October 2019 the Board of the Company has
adopted a decision to acquire FSRU no later than by
31 December 2024 with the conditions that 1) loan to
finance the purchase is arranged and 2) Parliament
approves the State guarantee for the loan;
• On 19th December 2019 a binding offer from NIB to
finance the 100 % purchase price of FSRU (up to
160 MMEUR) has been received;
• On 19th December 2019 Parliament has approved
granting State guarantees for NIB loans for LNG
security supplement reduction and purchase of FSRU;
• On 20th December 2019 a loan agreement with NIB
has been signed for the LNG security supplement
reduction.
While evaluating the probability to realize the purchase
option the management of the Company has considered
a number of economic, size and FSRU technological
circumstances, which has shown that:
• Currently used FSRU is economically most favourable
when compared to the 1) availability; 2) price factors
of the same size and functionality of new and used
FSRUs and conversions of LNG carriers and 3)
possible additional investments needed for any other
FSRU;
• In terms of size the industry is currently being
equipped by modern 170-180 tm3 FSRUs and LNG
carriers, enabling to unload to FSRU full cargo of
conventional size LNG carriers (140-180 tm3) and not
limiting LNG suppliers’ interest in using the terminal;
• Current terminal size and parameters are needed in
order to meet N-1 criteria for energy security, i.e. to
ensure gas supply in the event of failure of the largest
supply infrastructure during highest daily demand;
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
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• Technologically currently used FSRU has the
technology that is still regarded as advanced/not
obsolete in comparison with other developments and
can easily accept “green gases” and remain functional
in the context of the EU “green policy” decisions in a
long term;
• In 2020 implemented dry-dock has confirmed that
currently used FSRU is in good condition and is
designed to be operative for at least 25 more years.
• On 20th November 2020 European Commission has
approved state aid consent regarding acquisition of
LNG floating and storage unit. The decision of the
European Commission secures Company’s ability to
make a withdrawal of funds under the Loan
agreement concluded between the Company and
Nordic Investment Bank on 9 March 2020.
As at 31 December 2021 the aforementioned conditions
are still applicable and have not changed. Moreover:
• During 2021, KN, as part of a project of long-
term LNG import infrastructure solution,
organised intensive discussions with market
participants, a market consultation on the
procurement documents and launched a public
international tender for the acquisition of the
FSRU in mid-year.
• In February 2022 the Board of KN has taken a
decision on the acquisition of the FSRU
Independence at the end of its lease agreement.
• On 25
th
of February 2022 Extraordinary General
Meeting of Shareholders has adopted the
resolution and approved the decision of the
AB Klaipėdos nafta Board to acquire the floating
storage regasification unit (FSRU) Independence.
Therefore, from the current point of view, the
management of the Company is reasonably certain that
the purchase option of lease contract will be realized. As
a result, no changes in purchase option accounting as at
31 December 2021 have been made.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 103
INVESTMENTS
The most important investment projects of 2021:
NO.
PROJECT
INVESTMENTS IN
2020 (INCL.
PREPAYMENTS)
PROJECT DESCRIPTION
1.
Modernization of
jetty No. 1 and
No. 2
EUR 4.6 million
Reconstruction of berth No. 1 phase I construction works have reached
the completion phase – testing and commissioning works of newly
constructed jetty were carried out and preparation for trial vessel
loading operation initiated.
2.
Bitumen storage
and handling
reconstruction
project
EUR 1.8 million
Reconstruction and adaptation of two existing storage tanks for
bitumen loading. Project have reached the completion phase in 2021
- first vessel loading with bitumen and other marine related operations
were handled without any issues.
3.
Energy
consumption
monitoring and
efficiency
improvement
EUR 0.3 million
More accurate gas, steam and electricity monitoring equipment
installation and integration into a general control system was fully
implemented during the year 2021.
4.
Boiler No. 1 and
No. 2 fuse
replacement
EUR 0.2 million
Replacement of fuses of heat production boilers, used in oil terminal
activities due with new ones to comply with the new regulations of
emission limit requirements for combustion plants. Project was
finalized during 2021 – equipment installed, and all tests performed at
the end of the year indicated emission limits with the requirements.
5.
Vapor collection
from railway
trestles and HFO
tank park
EUR 0.3 million
Environmental safety related project for the purpose of collecting
vapor generated during transshipment process in railway trestle and
HFO tank park and transition to new vapor filtration unit. All works
were completed during 2021, trial operation is ongoing.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 104
ACTIVITY PLANS AND FORECASTS
On 13th February 2020 the Supervisory Council of the
Company has approved corporate strategy of KN until
2030. The main directions of the strategy are international
LNG projects, strengthening the competitiveness of oil
terminals and developing Klaipėda as an LNG service
centre in the Baltic region. KN corporate strategy until
2030 is available at: 2030.kn.lt/en.
For the Group and the Company year 2021 presented
many challenges. Due to sanctions to Belarus introduced
by Council Regulations (EU) 2021/1030 on June 24
th
,
2021, no more transit of oil product flows from Belarus
were possible. Transhipment of Belarusian oil products
has stopped in February 2021; therefore, no Belarus cargo
is forecasted for the future. Subsequently the
Management of the Group and the Company has revised
the projections of future cash flows of Klaipėda Oil
Terminal and recognised impairment of KOT assets in
amount of EUR 54,2 million.
A decrease in transhipment of oil products from Belarus is
partially compensated by oil products’ storage services,
the demand for which has remained stable during 2021.
The management of the Group and the Company
anticipates a continuity of demand for the lease of oil
terminal tanks for medium and long-term storage of
products. Several contracts for such services, including
contracts for the lease of petrol tanks, which will allow the
Group and the Company to employ infrastructure used for
transhipment of oil products from Belarus, are already
concluded. The management of the Group and the
Company see this as a stable alternative to the handling
of oil products.
Reacting to the decrease in transhipment of oil products,
the Company has reviewed its investment plans for 2021
and 2022, deferring investments that are not related to
business continuity. Furthermore, the revision of long-
term corporate strategy has been initiated and will be
completed during 2022. The Company undertakes
projects related to cost reduction and operational
efficiency and will continue its main focus on diversifying
the portfolio of services and products in oil terminals
activities and activities in international LNG projects.
In light of the events of 2021, the aforementioned goals
set in the corporate strategy 2030 are as important as
never before and have proven to be the right ones.
However, the Company will have to transform its activities
faster than it has been expected in the initial strategy
assumptions (for more details on the strategic goals
please see the section “the corporate strategy” of the
2021 annual report). The Group and the Company aims at
having several equivalent activities that contribute to the
return for the shareholders, thus reducing the potential
short-term negative impacts on one or another business
segments. Therefore, innovations and exploring new
business opportunities, diversification of business
activities are high on the agenda for 2022, as well as
environmental, social and governance aspects of business
management.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 105
INFORMATION ABOUT THE SHAREHOLDERS AND SHARES OF THE COMPANY
SHAREHOLDERS AND SHARES OF THE COMPANY
The Company’s shares are traded on the regulated
market; they are listed in the Baltic Main List of the Stock
Exchange of AB NASDAQ Vilnius.
SHAREHOLDERS OF THE COMPANY
As at 31 December 2021 all the shares of the Company
were owned by 4,926 shareholders (on 31 December 2020
– 3,444)
2
. All shares of the Company are of one class
ordinary registered shares granting their owners
(shareholders) equal rights. One ordinary registered share
of the Company grants one vote in the General meeting
of Shareholders.
An ordinary registered share of the Company shall grant
the following economic rights to its owners
(shareholders):
1. To receive a part of the Company’s profit
(dividends);
2. To receive funds of the Company in the event the
Authorized Capital of the Company is being
reduced in order to pay funds of the Company
to the shareholders;
3. To receive a part of the assets of the Company in
case of liquidation;
4. To receive shares free of charge if the Authorized
Capital is increased out of the funds of the
Company (except in the cases specified by the
imperative norms of the valid laws);
5. To have the preferential right in acquiring shares
or convertible bonds issued by the Company
except in cases when the General Shareholders’
Meeting by a qualified majority of votes that
shall not be less than 3/4 of the participating and
voting shares for solution of this matter, resolves
to withdraw the preferential right in acquiring
the Company’s newly issued shares or
convertible bonds for all the shareholders;
6. To lend to the Company in the manner provided
by law, however, when borrowing from its
shareholders the Company has no right to
pledge its assets to the shareholders. When the
Company borrows from its shareholder, the
interest rate may not be higher than the average
2
According to AB SEB bankas data.
interest rate offered by commercial banks of the
location where the Lender has his place of
residence or business, which was in effect on the
day of conclusion of the Loan Agreement. In
such a case the Company and its shareholders
shall be prohibited from negotiating a higher
interest rate;
7. Other economic rights established by the laws.
An ordinary registered share of the Company shall grant
the following non-economic rights to its owner
(shareholder):
1. To attend the General Shareholders’ Meetings
and to vote according to voting rights carried by
their shares (unless otherwise provided for by
the laws);
2. To receive information on the Company to the
extent allowed by the imperative norms of the
valid laws;
3. To file a claim with the court for reparation of
damage resulting from misconduct by the
Manager of the Company and Board members
or noncompliance with their obligations
prescribed by the laws and the Articles of
Association of the Company as well as in other
cases laid down by laws.
4. The right to vote at General Shareholders’
Meetings may be withdrawn or restricted in
cases established by laws, also in case share
ownership is contested;
5. Other non-economic rights established by the
laws and the Articles of Association of the
Company.
The Company has not been informed about mutual
agreements of its shareholders which could limit the
transfer of securities and (or) right of vote.
THE MAIN DATA ABOUT SHARES OF THE COMPANY:
ISIN code
LT0000111650
Abbreviation
KNF1L
Share emission
380,396,585
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 106
Major shareholders of the Company having more than 5% of shares (each) of the Company as at 31 December 2021 and
2020:
SHAREHOLDER’S NAME (COMPANY’S NAME,
ADDRESS, COMPANY CODE OF REGISTRATION)
31 DECEMBER 2021
31 DECEMBER 2020
NUMBER OF
OWNED SHARES
(UNIT)
PART OF
AUTHORIZED
CAPITAL (%)
NUMBER OF
OWNED SHARES
(UNIT)
PART OF
AUTHORIZED
CAPITAL (%)
The Republic of Lithuania, represented by the
Ministry of Energy of the Republic of Lithuania
(Gediminas Ave. 38/2, Vilnius, 302308327)
275,687,444
72.47%
275,687,444
72.35%
Concern UAB Achemos grupė (Vykinto st. 14,
Vilnius, 156673480)
39,662,838
10.43%
39,662,838
10.41%
Other (each owning less than 5%)
65,046,303
17.10%
65,702,111
17.24%
Total
380,396,585
100.00%
381,052,393
100.00%
SHAREHOLDERS STRUCTURE BY CATEGORIES AND BY THE REGIONS:
72,47%
1,05%
11,43%
15,05%
31-12-2021
Lithuanian Government Financial institutions incl. funds Other companies Natural persons
SHAREHOLDER STRUCTURE BY CATEGORY
88% 90% 92% 94% 96% 98% 100%
31-12-2020
31-12-2021
Lithuania Estonia USA Latvia United Kingdom Cyprus Other countries
SHAREHOLDER STRUCTURE BY REGION
72,35%
1,30%
12,05%
14,30%
31-12-2020
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 107
Dynamics of KNF1L share price at NASDAQ Vilnius during 2017 – 2021:
2021
2020
2019
2018
2017
Highest share price in EUR
0.359
0.414
0.444
0.574
0.572
Lowest share price in EUR
0.298
0.301
0.357
0.386
0.428
Price per share at the end of the
period in EUR
0.307
0.320
0.362
0.410
0.508
Average share price in EUR
0.320
0.331
0.393
0.502
0.490
Traded volume, pcs.
19,004,133
23,934,244
5,908,666
6,936,769
10,501,664
Turnover in EUR thousand
6,110
7,928
2,296
3,552
5,083
Capitalisation in EUR thousand
116,782
121,920
137,875
156,049
193,348
0
200
400
600
800
1 000
1 200
1 400
0,00
0,10
0,20
0,30
0,40
0,50
Volume in thousand pcs.
Price per share in EUR
Share price in EUR Volume (thousands units)
TRADING IN KNF1L SHARES ON NASDAQ VILNIUS STOCK EXCHANGE IN 2019-2021
60%
80%
100%
120%
140%
160%
180%
200%
OMXBBGI OMXVGI KNF1L
KNF1L SHARE PRICE COMPARISON WITH OMX VILNIUS GI AND OMX BALTIC BENCHMARK GI IN 2019 - 2021
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 108
AUTHORIZED SHARE CAPITAL OF THE COMPANY
The Company’s authorized share capital amounted to
EUR 110,315 thousand as of 31 December 2021 (EUR
110,505 thousand as of 31 December 2020). All the shares
of the Company are fully paid. The authorized capital is
divided into 380,396,585 ordinary shares with a nominal
value of 0.29 Eur. On 11 January 2021 amended Articles
of Association of the Company were registered in the
Register of Legal Entities of the Republic of Lithuania after
the reduction of authorized capital to EUR 110,315
thousand. The Ministry of Finance of the Republic of
Lithuania granted the Company permission to decrease
the authorised capital of the Company by cancelling
655,808 units of Company’s acquired own shares which
each nominal value is EUR 0.29
During 2021 the Company did not acquire any of its own
shares.
DIVIDENDS
On 30
th
April 2021, the ordinary General Meeting of
Shareholders has been held which approved the audited
financial statements and profit distribution of 2020. In
2021 the Company has paid dividends in amount of
EUR 7,538 thousand or EUR 0.0198 for one share from the
profit of 2020 (in 2020 the Company paid EUR 7,947
thousand dividends or EUR 0.0209 for one share).
Below is the historical information about dividends paid in the period for the prior financial year:
2021
2020
2019
2018
2017
Dividends paid in EUR thousand
7,538
7,947
11,577
17,031
9,656
Dividends per one share in EUR
0.0198
0.0209
0.0304
0.0447
0.0254
Net profit per 1 share in EUR
0.03
0.02
0.03
0.04
0.04
Dividends for net profit (of previous FY), %
70%
100%
100%
100%
70%
DIVIDEND POLICY
On 28th July 2021 the Board of AB Klaipėdos nafta has
approved the renewed Dividend Policy. The Dividend
Policy provides that the Board of the Company shall, in
accordance with the Company's audited financial
statements which are prepared in accordance with IFRS,
present the draft decision of dividends allocation to the
Company’s shareholders for approval. The amount of
dividends is proposed taking into account the Company's
return on equity for the reporting period.
The Company sets the goal to increase the shareholders’
value and pay stable dividends. The main objectives for a
Dividend Policy are:
• compliance with the applicable laws of the
Republic of Lithuania, secondary legislation, the
Articles of Association, and internal documents
of the Company.
• assurance of the Company’s shareholders
interests.
• commitment to high corporate governance
standards.
• enhance of the Company’s market value.
• definition of the Company’s procedures relating
to transparent publication and payment of
dividends.
AB Klaipėdos nafta Dividend Policy is based on the
existing legislation of the Republic of Lithuania (regulation
effective starting since 28th December 2021 (Lithuanian
Government Resolution of 6th June, 2012 No. 655 on
approval of the description of the procedure for the
exercise of the state property and non-property rights in
state-owned entities (hereinafter - the Resolution) – the
regulation has replaced the Lithuanian Government
Resolution of 14th January, 1997 No. 20 on the dividends
for the state-owned shares, however all the principles and
regulations on dividends allocation are valid and have
been placed into Resolution), the Company's Articles of
Association and other Company's internal documents.
According to the art. 4.4. of the Company’s Dividend
Policy the amount of dividends for the years 2021-2024 is
calculated by eliminating from the Company’s
distributable net profit (loss) unrealised foreign exchange
rates impact and other unrealised gains (losses). The
Company’s return on equity is calculated based on the
data of the set of audited annual financial statements, net
profit (loss) of the reporting period by eliminating the
impact of unrealised foreign exchange rates and other
unrealised gains (losses) divided by the average equity at
the beginning and end of this period. Equity at the
beginning of the reporting period is adjusted by
estimating the impact of unrealised foreign exchange
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 109
rates and other unrealised gains (losses) accumulated
before the reporting period. Equity at the end of the
reporting period is adjusted by estimating the impact of
unrealised foreign exchange rates and other unrealised
gains (losses) of the reporting period and those
accumulated before the reporting period.
According to the art. 4.5 of the Company’s Dividend
Policy, the Board of the Company shall consider the
following on a yearly basis:
• the financial indicators for assessment of the
Company's current financial position (net debt /
EBITDA, DSCR, ISCR, Equity ratio).
• the Company's performance of the current period, in
order to ensure the scope of funds needed for the
smooth operation.
• the scope of equity and loan necessary for strategic
and investment projects’ implementation.
• any financial and non-financial liabilities for the
Company investors.
• the stock market situation related to dividend
income.
• implementation of the Company’s Strategy;
• a change in plans of strategic, investment projects,
their scope or their financing.
According to the art. 4.7. of the Company’s Dividend
Policy dividends for the financial year should be allocated
as follows:
• Not lower than 85% from the Company’s
distributable profit if ROE of the financial reporting
year is not higher than 1%.
• Not lower than 80% from the Company’s
distributable profit if ROE of the financial reporting
year is higher than 1% but not higher than 3%.
• Not lower than 75% from the Company’s
distributable profit if ROE of the financial reporting
year is higher than 3% but not higher than 5%.
• Not lower than 70% from the Company’s
distributable profit if ROE of the financial reporting
year is higher than 5% but not higher than 10%.
• Not lower than 65% from the Company’s
distributable profit if ROE of the financial reporting
year is higher than 10% but not higher than 15%.
• Not lower than 60% from the Company’s
distributable profit if ROE of the financial reporting
year is higher than 15%.
Dividend rate, as a rule, should not be less than presented
in the article 4.7. of the Company’s Dividend Policy,
however, based on criteria in article 4.5., lower dividend
rate could be proposed.
The full Company’s Dividend Policy is available on
Company’s website.
AGREEMENTS WITH INTERMEDIARIES OF PUBLIC SECURITIES TRADING
The Company has an agreement with Financial Markets Department of AB SEB Bankas for accounting of the Company’s
securities and related services.
AB SEB BANK FINANCIAL MARKETS DEPARTMENT:
Company code
112021238
Address
J. Balčikonis Street 7, LT-08247 Vilnius, Lithuania
Telephone
1528
E-mail
info@seb.lt
Website
www.seb.lt
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 110
INFORMATION ABOUT THE EMPLOYEES OF THE GROUP
PERSONNEL
The Company's main asset is its employees who are the
most important link to the achievement of Company’s
goals. Company's personnel policy is focused on the
development of teamwork, constant progress in
professional development and process efficiency, the
optimal use of work resources, training of qualified staff,
and development of the Company’s culture that
empowers personal growth, succession planning, and
creates additional value for the company and its
stakeholders.
Number of the Group employees at the end of the year:
31-12-2021
31-12-2020
CHANGE, %
AB Klaipėdos nafta
342
383
-10.7
UAB SGD terminalas
2
2
-
UAB SGD logistika
2
2
-
UAB SGD SPB
2
2
-
KN Acu Servicos de Terminal de GNL LTDA
27
22
22.7
Total
375
411
-8.8
Remarks:
- The number of employees does not include employees on maternity/paternity leave.
The breakdown of the number of the Group and the Company employees by gender as at 31 December 2021:
FEMALES
%
MALES
%
AB Klaipėdos nafta
87
25.4%
255
74.6%
UAB SGD terminalas
1
50.0%
1
50.0%
UAB SGD logistika
1
50.0%
1
50.0%
UAB SGD SPB
1
50.0%
1
50.0%
KN Acu Servicos de Terminal
de GNL LTDA
4
14.8%
23
85.2%
Total
94
25.1%
281
74.9%
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 111
The average age of the Group’s employees – 44 years. Detailed information about employees’ age, work experience, and
education are provided in figures bellow in years.
Education of the Group’s employees by categories:
EMPLOYEE
CATEGORY
EMPLOYEES
ON
31-12-2021
UNIVERSITY
VOCATIONAL
SECONDARY
AND OTHER
EMPLOYEES
ON
31-12-2020
UNIVERSITY
VOCATIONAL
SECONDARY
AND OTHER
Managers
1)
58
56
2
0
50
48
2
0
Specialists
192
169
16
7
215
183
17
15
Workers
125
19
78
28
146
15
49
82
Total
375
244
96
35
411
246
68
97
1) The managers of the Company include: Chief Executive Officer (CEO), Directors and Heads of Divisions
9,8
6,9
8,1
13,3
9,9
6,6
8,4
13,7
Total Managers Specialists Workers
2020 2021
DISTRIBUTION OF GROUP'S EMPLOYEES BY WORK
EXPERIENCE, YEARS
10
139
147
76
3
13
145
157
89
7
18-24 25-39 40-54 55-64 65 and more
2021 2020
NUMBER OF THE GROUP'S EMPLOYEES BY AGE GROUPS
42,1
40,6
41,9
50,7
44,0
42,0
41,0
49,4
Total Managers Specialists Workers
2020 2021
AVERAGE AGE OF THE EMPLOYEES OF THE GROUP
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 112
PAYROLL SYSTEM AND REMUNERATION POLICY
The Company seeks to create motivating, efficient, fair,
transparent, and easy to understand compensation
system which aims to attract, retain, and motivate
employees whose skills and work results help the
Company to successfully develop and implement its
mission and achieve strategic business objectives.
Therefore, in September of 2016 the Employee
Remuneration Policy has been formed and approved, on
September of 2017 The Procedure of Remuneration
System Formation has been approved.
The Employee Remuneration Policy defines the principles
of determination and payment of remuneration as well as
the incentives of employees. The Remuneration policy
applies to all employees of the Company.
The goals of the Remuneration Policy are to:
• Establish clearly understandable, fair, and transparent
procedures for the determination and payment of
remuneration as well as the incentives of employees,
aiming at ensuring the Company’s competitiveness in
the labour market;
• Encourage the employees to achieve the objectives
set in the corporate strategy, to create value added
and increase the returns to shareholders while
fostering the values of the Company.
The remuneration of the employee may consist of the
following components: a fixed component, i. e. a monthly
salary (or a wage) and a variable component payable for
either short-term performance results or the annual
results of the Company’s/the employee’s performance.
The Company’s remuneration system is based on job
structure framework, created using the Hay Methodology
by determining the weight of each position (to ensure fair
remuneration for work within the Company). The amount
of the monthly remuneration for the position is
determined by assessing the level of knowledge and work
experience required to perform the functions of each
position, the complexity of the functions, the degree of
responsibility and management level, the impact / risk on
the Company's performance, working conditions. In order
to ensure the competitiveness of the remuneration of the
Company's employees and to promote the achievement
of results, the remuneration (fixed and variable
remuneration components) focuses on the range of the
50th and 75th%iles of the remuneration market of foreign
capital companies operating in Lithuania. Employees in
the same position can receive different monthly pay
depending on qualifications, experience, capabilities, and
functions and responsibilities assigned to the employee.
The variable component is set according to the procedure
laid down in the Remuneration Policy.
Employee’s base salaries are usually reviewed once a year
taking into account: Lithuanian labour market trends; the
Company's performance results; The results of the
evaluation of the Company's employees; demand - supply
situation for jobs important to the company in the labour
market.
Detailed information on the remuneration system of the
Company's management is provided in 2021
AB Klaipėdos nafta Report on Remuneration.
The breakdown of employee related expenses (EUR thousand) of the Group:
2021
2020
CHANGE, %
AB Klaipėdos nafta
11,845
11,900
-0.5
UAB SGD terminalas
3
3
-
UAB SGD logistika
3
3
-
UAB SGD SPB
3
3
-
KN Acu Servicos de Terminal de GNL LTDA
829
855
-3.0
Total
12,683
12,764
-0.6
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 113
Employees according to categories:
EMPLOYEE CATEGORY
AVERAGE NUMBER OF EMPLOYEES
GROUP
GROUP
CHANGE,
%
COMPANY
COMPANY
CHANGE,
%
2021
2020
2021
2020
Managers
1)
58
48
20.8
47
42
11.9
Specialists
200
210
-4.8
179
188
-4.8
Workers
130
142
-8.5
129
142
-9.2
Total
388
400
-3.0
355
372
-4.6
1)
The managers of the Company include: Chief Executive Officer (CEO), Directors and Heads of Divisions
The Company’s 2021 average monthly salary of all employees did not change compared to 2020 (2021 – 2,570 EUR/month,
2020 – 2,574 EUR/month).
EMPLOYEE CATEGORY
AVERAGE MONTHLY SALARY (GROSS), EUR
GROUP
GROUP
CHANGE,
%
COMPANY
COMPANY
CHANGE,
%
2021
2020
2021
2020
Managers
1)
5,061
5,507
-8.1
5,459
5,719
-4.5
Specialists
2,445
2,511
-2.6
2,553
2,552
0.0
Workers
1,614
1,741
-7.3
1,614
1,741
-7.3
Total
2,506
2,543
-1.5
2,570
2,574
-0.2
1) The Company‘s managers include: Chief Executive Officer (CEO), Directors and Heads of Divisions. The following sums were calculated
for the remuneration to the Group‘s managers in 2021: EUR 3,684 thousand, in that amount taxes paid by the employer included EUR
177 thousand (when in 2020 were EUR 3,137 thousand from which EUR 103 thousand of taxes paid by the employer). The average annual
salary of manager of the Group amounted to EUR 63.5 thousand in 2021 (in 2020 - EUR 65.3 thousand).
2) The average monthly salary is calculated according to the average monthly wage calculation procedure as stated in the State
companies’ employees’ average monthly salary calculation procedure approved by the Government of Lithuania on 23 August 2002,
resolution No. 1341 and its subsequent changes.
2021 average monthly salary (gross) of employees by gender, EUR:
EMPLOYEE CATEGORY
GROUP
COMPANY
2021
2021
TOTAL
MALE
FEMALE
TOTAL
MALE
FEMALE
Managers
1)
5,061
5,021
5,210
5,459
5,544
5,210
Specialists
2,445
2,587
2,208
2,553
2,747
2,255
Workers
1,614
1,635
1,217
1,614
1,635
1,217
Total
2,506
2,509
2,523
2,570
2,569
2,573
1) The Company‘s managers include: Chief Executive Officer (CEO), Directors and Heads of Divisions.
2) The average monthly salary is calculated according to the average monthly wage calculation procedure as stated in the State
companies’ employees’ average monthly salary calculation procedure approved by the Government of Lithuania on 23 August 2002,
resolution No. 1341 and its subsequent changes.
EMPLOYEE PERFORMANCE EVALUATION AND ANNUAL BONUS ALLOCATION
The Company has implemented the procedures for
annual employee performance evaluation and annual
bonus allocation. These bonuses depend on the
achievement of the goals set directly for the person,
service director or for the Company. Annual employee
performance review together with periodic and frequent
one to one meetings throughout the year are one of the
most effective management and leadership techniques
that increase employee engagement and help to achieve
the organizational goals. Such practice creates
collaborative and positive relationships between
managers and their subordinates that allow to make it
clear with employees while planning their careers,
increasing their motivation, and promoting continuous
improvement in their professional field.
Employees of all categories - workers, specialists, and
managers - are assessed and rewarded annual bonus for
achieving pre-set annual goals (WHAT) and evaluation on
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 114
their compliance to Company’s values (HOW). In 2020
implementation of Asaichi methodology being one of the
three LEAN tools initiated in the Company brought even
better performance management when KPIs have been
reviewed and actioned with personal accountability daily.
Annual performance review meetings, on the other hand,
allow to reflect on entire year through the lens of
competence development, safety-minded behaviour,
learning opportunities, career-advancement, and
aspirations.
EMPLOYEE SELECTION AND RECRUITMENT
Since April 2020 the Company implemented Employee
Selection and Recruitment procedure whose purpose is to
standardize the employee selection process and ensure
efficient and effective procedures for organizing the
selection of KN personnel (employees and trainees) in
order to successfully achieve the objectives of KN - to
select employees who recognize the values of KN and
have the greatest potential to achieve the objectives set
for them.
In order to ensure that the objectives set out in KN’s
strategy are met, an assessment and planning of staffing
needs is carried out. Each year management of the
Company draws up a staffing plan for the upcoming year.
The plan takes into account the workload of staff, the
need for new posts (due to organizational changes or
legal requirements), staff mobility (transition from one
staff post to another) and natural change (retirement,
parental leave, etc). The main steps of the recruitment
process include the evaluation of need for employee,
determination of required competencies, search and
attraction of potential candidates, job interviews, final
decision, and preparation of the offer.
EMPLOYEE SATISFACTION AND ENGAGEMENT
For the last seven years the Company conducts personnel
surveys to determine the level of employee satisfaction
with the work environment and the Company and the
level of engagement as well as to improve relevant areas
and working conditions of employees. The personnel
surveys in 2021 revealed that 61% of employees (in 2020
– 67%) are fully satisfied with their work environment, the
Company, and its culture. This indicator exceeds average
result of Lithuania organizations employee satisfaction of
satisfaction with the work (59%).
The Company is measuring the level of engagement as it
believes that colleagues who are engaged in their job, are
more likely to do it easier, feel happier, are more
innovative and accordingly generate greater returns to
shareholders by effectively implementing corporate
strategy and achieving the goals. Engagement level went
down (from 75% to 69%) and returned to the same level
as in 2019. The result of KN still exceeds the average level
of work engagement in Lithuanian organizations (63%) in
2021 and the same time indicates that reduction of
employees and other organizational challenges during
the year did have the effect on employee engagement.
PRINCIPLES OF EMPLOYEE COMPETENCE DEVELOPMENT
KN education system is designed to promote the
development of employees both independently and
through the learning processes of strategically important
knowledge and skills that are part of the curricula. All
employees are given the opportunity to participate in the
programs. The implementation of KN education system is
based on 6 principles: link with business strategy,
cooperation between departments, identification of
needs based on assessment of employees' competencies,
measurement of learning effectiveness, integration of
education with other processes and selection of
appropriate educational tools.
Up to 15% of annual learning and development budget is
allocated to fund employees with various formal studies
at different Universities.
For the last three years Company conducts 360-degree
feedback study for managers. Following the method, KN
Managers receive feedback on their behaviour according
to the Company’s values and leadership competencies
from people who work with them. Based on survey results
Managers create their Personal development plans and
thus grow to be even better leaders for their teams. In
2021 the Company launched internal Mentoring Program,
which aims to find competencies within the company and
share them with those who need them. 17 pairs were
formed, which worked according to the proposed model
for several months - setting goals, looking for ways to
achieve them and measuring progress together.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 115
GROUP’S SOCIAL RESPONSIBILITY
From the perspective of KN, to be a successful and
responsible member of the society in the long-term
perspective, the principles of business sustainability shall
go hand in hand with the way we operate. Every
organisation can create both positive and negative
impacts through its activities, and we aim to be a model
of a business that creates a positive impact.
Stakeholder dialogue is one of our principles of open and
responsible operation, which enables us to identify the
key issues that matter to the stakeholders. KN is guided
by the Stakeholder Policy adopted by the Company in
2021, which is published transparently on KN's website.
The Company's activities, including stakeholder relations,
are guided by the highest standards of good governance
practices. Our main stakeholders are: employees,
shareholders, business partners, customers, communities
and society in general, decision-makers at national and
regional level. Topics relevant to our target groups include
the safety of our operations, economic impact,
environmental performance improvement and good
corporate governance practices.
The Company's activities aim at environmental and
social awareness and the application of good
governance. In this context, KN considers social
responsibility and sustainability as key aspects of its
operations and develops its business in accordance
with these guidelines:
• Economic Responsibility,
• Transparent and ethical business practices,
• Attractive employer,
• Sustainable partnership with customers,
• Reducing and preventing the Company’s
environmental impact.
As a Company, which is important not only for Klaipėda
and Kupiškis districts, but also nationally in terms of its
activities and size, we can use our influence to contribute
to different aspects of social responsibility - not only by
promoting dialogue with communities in Klaipėda, but
also by contributing to the promotion of the use of
liquefied natural gas (LNG) as a cleaner fossil-fuel
alternative, and by getting involved in education and
science, healthy lifestyle, environmental initiatives inside
and outside the organisation.
The areas of impact of KN have so far been determined
by the nature of the Company's activities and long-term
strategy, business risks and opportunities. In addition, in
Q4 2021 and Q1 2022, KN has initiated a materiality
assessment, which includes KN stakeholders. This analysis
is expected to be finalised in Q1 2022 and it is expected
that the results will provide valuable insights for the
Company on the further development of its sustainability
directions and sustainability policy.
ECONOMIC RESPONSIBILITY
KN is a company of strategic importance for the energy
security of Lithuania and the surrounding region, ensuring
the ability to import oil and liquefied natural gas to
Lithuania and neighbouring countries, keeping the
storage of the mandatory reserve of petroleum products
of the Republic of Lithuania, and the reliable and efficient
transhipment of petroleum products at the port of
Klaipėda. The Company is also responsible for the
operation and maintenance of the LNG terminal at the
Port of Açu in Brazil, which supplies natural gas and
electricity to the Brazilian market. We understand the
direct and indirect role of our activities through taxation,
employment policies, educational initiatives, business
innovation and other contributions to sustainable
economic growth in the regions where we operate.
Given the strategic function of the Company, KN has the
objective to enhance shareholder value and represent
best business practices. The Company continuously
strengthens its corporate governance competencies and
implements the highest governance standards and
principles to create tangible benefits for the country and
its people. The Company is consistently listed as a major
taxpayer. Despite the global pandemic and geopolitical
challenges, according to the Lithuanian State Tax
Inspectorate, in 2021, KN retained its 4th position among
the 500 hundred other companies.
In 2021, KN was also recognised as one of the 10 best
investor relations companies listed on Nasdaq Baltic. The
Nasdaq Baltic Awards assess companies' excellence in
transparency, corporate governance, and investor
relations.
KN supports free and fair competition in the market, while
striving to provide the highest quality commercial
solutions to its clients. The Company's good governance
practices have been reinforced by the major overhaul in
2021 of a key good practice tool for preventing
irregularities and promoting transparency - the
"Report/Speak - up" reporting channel. Following the
implementation of the changes, the reporting channel is
curated by Internal Audit, which is functionally
subordinate to the Audit Committee and administratively
subordinate to KN CEO. The change was initiated in order
to comply with the best practices, to increase
transparency, to promote awareness among KN staff and
third parties and to promote intolerance of non-
compliance with the Code of Conduct or any form of
corruption that may negatively affect or damage the
reputation and image of KN. The change is expected to
further facilitate anonymous reporting of illegal and
unethical practices, while ensuring the confidentiality and
integrity of the persons submitting the reports.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 116
The Company does not tolerate corruption of any kind or
its manifestations and is committed to open competition,
ethical business conditions and adequate transparency
and publicity in its operations. The Group is guided by a
policy of zero corruption tolerance. It explicitly and
publicly declares its rejection of bribery, fraud, extortion,
the creation of unofficial accounts, the execution of
unofficial and improperly documented transactions, the
recording of fictitious expenses, the use of false
documents and other forms of corruption as referred to
in the United Nations Convention Against Corruption.
The Company has control mechanisms in place that are
designed to identify, assess, and monitor potential
corruption risk factors. In assessing corruption risks, KN
analyses the activities and processes of each business
segment, compiling a list of corruption risks.
Once a year, KN carries out an assessment of the
likelihood of corruption occurrence. In 2021, the
Company's preparation of technical specifications for the
procurement procedures was analysed to assess the
likelihood of corruption occurrence. Corruption risk is also
assessed in the development of international projects,
looking at both external and internal factors, as well as the
level of corruption risk in the country. Additional control
measures include due diligence procedures for business
partners, anti-corruption clauses in contracts, application
of KN's anti-corruption policy and Code of Conduct in
subsidiaries and in relations with business partners.
In 2021, KN provided anti-corruption training to KN
employees on potential conflicts of interest and their
management, the concept and manifestation of
corruption in Lithuania, corruption risks in public
procurement. In 2021, 3 internal trainings and 2 external
trainings were organised for 152 employees. In 2021,
there were no cases of corruption in the Company.
KN is also involved in the Transparency Academy initiative
initiated by the Office of the President of the Republic of
Lithuania. The aim of the Academy is to encourage
companies to share best practices in the area of
corruption prevention and to receive expert insights and
practical advice.
RESPONSIBILITY TOWARDS EMPLOYEES
The main asset of KN is its employees, who are the most
important link in achieving the Company's objectives.
They are at the heart of our technology activities. The
Company's HR policy is focused on fostering teamwork
and unity, continuous progress, optimal use of human
resources, strengthening employee competencies and
developing an engaged culture that creates greater
added value and enables personal and Company growth.
We promote employee diversity and an inclusive working
environment. Achieving long-term success requires
diverse ideas, perspectives, and talents, and we support
diversity as an important asset and a key resource for
innovation and competitiveness, enabling each of us to
fully participate and contribute to the success of KN and
to help ensure that the business operates efficiently and
takes advantage of the right growth opportunities. The
Company evaluates, promotes, and compensates based
on qualifications, experience, competencies, and
performance, not on bias or personal preference. We
reject all forms of discrimination.
We are guided by the values of KN and adhere to the
principles of respect, cooperation, professionalism, and
progress. Our values guide how we operate anywhere in
the world and what we expect from ourselves, our
colleagues, our customers, our management, and other
key stakeholders.
We foster an environment where every employee is
treated equally, respected, and empowered to reach their
potential.
The Company's remuneration system is based on a work
structure developed using the Hay methodology and by
comparing salary values with foreign-capital companies in
the Lithuanian market, to ensure that every KN employee
is rewarded fairly and competitively. The Company's
objective is to ensure the competitiveness of the
employees' remuneration in the market, internal fairness
of remuneration and to eliminate the possibility of
discrimination on any grounds (age, gender, etc.).
The Company provides a working environment that meets
strict standards of safety and well-being. As a terminal
operator, KN provides and maintains a health and safety
management system aimed at ensuring safety
performance based on legislation and industry best
practice, with clear commitments, targets, and
responsibilities. The Company's objective is to create an
environment in which occupational health and safety risks
are controlled to prevent injuries, accidents, and
occupational diseases, and to identify, assess and control
risks arising from unsafe conditions, occupational injuries
and illnesses related to work processes or the working
environment. It also focuses on educating workers so that
they better understand their role in reducing negative
environmental impacts and so that the health and safety
of themselves and others is the highest value of every
worker.
In 2020, KN got certified for ISO 45001:2018 standard for
all terminal activities in Lithuania, including international
business development, and an audit in 2021 confirmed
existing and new achievements. The ongoing certification
process of KN Açu terminal operations for ISO 45001:2018
is scheduled to be completed in Q2 2022.
One of the Company's key strategic objectives is the
continuous improvement of the safety and health system
by ensuring compliance and enhancing the safety culture
to achieve a rate of 0 significant safety incidents and
accidents. In 2021 KN has established clearly measurable
indicators to monitor safety and health, which are process
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safety incident, LTIR - frequency of workplace accidents,
and IR - frequency of near misses or potential safety
incidents. The above indicators are relative indicators of
OSH performance and by using these indicators the
Company can benchmark its OSH performance against
other companies both in Lithuania and worldwide.
Accordingly, in 2021, a strong focus was placed on the
importance of a safe and healthy working environment,
fostering a culture of occupational safety and health, and
enhancing employees' awareness of the need to protect
themselves and to comply with safe working
requirements. The Company has placed great emphasis
on the recording of near misses, which is a widely used
accident prevention system in the global practice. In 2021,
the Company succeeded in achieving the target set for the
frequency of near misses and near misses. Also in 2021,
the Company had no critical incidents.
In 2021, KN focused on promoting the well-being and
wellness of its employees, with a particular focus on the
importance of movement, which was significantly reduced
during the pandemic period:
• From 11 March 2021 to 09 May 2021, the Company
ran an activity challenge called "KN Moves!", which
encouraged employees to collect kilometres by
walking or running. 44 colleagues took part in the
challenge and together they walked 7,827.9
kilometres between 11 March and 9 May.
• In 2021, two virtual meetings were held with one of
Lithuania's leading sports scientists, Albert Skurvydas,
PhD in Biology, who shared his scientific and practical
experience and the importance of movement with KN
employees.
• On the occasion of the European Mobility Week from
16 to 22 September, KN encouraged sustainable
transport choices among its employees. KN
employees were encouraged to go car-free for at
least one day and to find other means of transport to
get to work, such as walking, public transport, cycling,
scooters or roller skating.
• Also, in 2021, KN colleagues in Lithuania and Brazil
were invited to take part in a study on fatigue, carried
out by professional researchers from the „Pozityvios
sveikatos komanda“ (Positive Health Team). The
researchers measured different forms of fatigue,
including general fatigue, physical fatigue, reduced
activity, reduced motivation and mental fatigue. The
results were presented to employees and later tips on
how to overcome fatigue were shared.
CORONAVIRUS PREVENTION
KN has continued to focus on the prevention of
coronavirus and has taken various health protection
measures to protect its employees and partners. The
Company continued to promote the hybrid working
model, encouraging employees who can work remotely to
choose this way of working. Additional health precautions
are in place for employees who are unable to work
remotely, and appropriate health safety practices are in
place at the Company's terminals. All measures are
regularly reviewed and updated.
The Company has consistently provided employees with
information on COVID-19 vaccination in 2021, made
vaccination available in the Company's medical room, and
expanded employees' knowledge by holding two virtual
meetings with medical professionals in 2021 to provide
up-to-date information on the vaccination and to answer
the most frequently asked questions. In 2022, KN is
among the organisations with more than 90% of their
employees immunised against coronavirus.
In 2021, the Company initiated internal training sessions
to strengthen psychological and emotional resilience of
its employees. This has contributed to the psychological
and emotional safety of employees in the workplace.
Psychological safety in the Company was rated high at 71
out of 100 in the annual engagement survey. In the survey,
employees revealed that one of the most rewarding
aspects of the Company is the good working atmosphere.
KN is proud to be among the top 5 employers in Lithuania
in 2021. The ranking is compiled annually by the
newspaper Verslo žinios. Among transport and logistics
companies, KN ranked first.
SOCIAL RESPONSIBILITY
As part of our international operations, we strive for
sustainability and take social and environmental
responsibility. We work to maintain strong and long-
lasting relationships with the local communities where KN
operates and strive to be a good business partner through
our business initiatives.
KN has been engaging in a dialogue with neighbouring
communities for a number of years. In 2021, a total of five
meetings were held to discuss topics of interest to the
communities and to answer questions from community
representatives.
In 2021, KN's social activities focused on educational
initiatives, not only by presenting the Company's
activities, but also by getting young people interested in
science and engineering professions. During the year, KN
was involved in six educational initiatives:
• In February 2021, in a virtual lecture to the students
of the Klaipėda Žemynos Gymnasium, a
representative of KN's HR department gave a
presentation on how to prepare and perform well in
a job interview and advised on how to prepare a
professional curriculum vitae (CV).
• In March 2021, KN Chief Operations Officer took part
in a remote event initiated by Klaipėda ID on
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engineering specialities "Engineering and Creativity.
What is the connection?" The aim of the event, which
was attended by pupils from various schools in
Klaipėda, was to introduce the field of engineering
and to encourage young people to think about
choosing an engineering specialty.
• During March-June 2021, KN participated in the pilot
project "Research works of students in business
enterprises", which was initiated by the public
enterprise "Klaipėda ID", the aim of which was to
contribute to the vocational guidance of pupils, to
introduce them to the advanced enterprises
operating in the region and to inform them about
career opportunities in Klaipėda region. A laboratory
technician from KN Wastewater Unit helped a
student from Klaipėda's Ąžuolynas Gymnasium to
carry out a research project.
• During March-July 2021, KN was involved in a series
of experiential activities at Klaipėda University (KU) to
celebrate the 30th anniversary of the University. The
Company contributed to the university's anniversary
events by inviting people to experience the Liquefied
Natural Gas (LNG) terminal. In addition to registering
for the experience, candidates had to send cover
letters and justify why they should be invited to the
"Learn how natural gas is supplied from LNG
terminal" experience. The selected participants were:
a student from the Lithuanian Maritime University
majoring in nautical science and a tour guide working
with groups of foreigners.
• In 2021, KN also took part in the thirteenth year of
the project "Schoolchildren - to the Government",
which aims to give the best final year students a first-
hand insight into the activities of the Government
and its institutions, to encourage young people to
take part in the country's governance processes, and
to contribute to the formation of civil society.
Participants of the "Students to Government" project
took part in a virtual meeting with the Chief
Administrative and Corporate Governance Officer of
KN and the LNG Terminal Operations Manager. KN
colleagues introduced the pupils to the activities of
our Company and talked about KN-operated LNG
terminal.
• In November 2021 a student excursion to the
Klaipėda Oil Terminal was organised by the
Lithuanian Maritime School (LAJM). The students
were introduced to the processes and technologies
at the heavy fuel oil terminal.
As in previous years, in 2021 the Company continued its
tradition of not giving regular Christmas gifts to the
customers and partners, and instead used the planned
funds to improve the environment of the community of
Vite, situated near the Klaipėda Oil Terminal, by planting
trees in their neighbourhood.
ENVIRONMENTAL RESPONSIBILITY
The Company's objective is to avoid, mitigate and manage
the environmental and social impacts of our activities. We
strive to be a good neighbour and member of society and
to look after the interests of the communities directly or
indirectly affected by the Company's activities. We feel
responsible for our ecological footprint, and we strive to
minimise the Company's potential negative
environmental impacts.
Environmental protection is one of the priority areas of
KN's corporate social responsibility. Both in the routine
operations of existing oil and LNG terminals and in the
planning of new activities, KN complies with the basic
principles of environmental protection set out in the
National Environmental Strategy, the conditions set out in
the environmental permits, and the norms set out in the
environmental regulations and standards.
The Company aims to be socially responsible in a result-
oriented rather than a declarative manner. In view of the
global concern about climate change, the Company feels
responsible for its ecological footprint and therefore aims
to balance the Company's impact on the environment
through clearly defined indicators. In 2021, KN has clearly
defined environmental targets to reduce volatile organic
compound (VOC) emissions by 35% by 2024 and 45% by
2030 compared to the current period. We have also set
ourselves clear targets to reduce the direct CO2 emissions
from Klaipėda Oil Terminal's operations by increasing
energy efficiency through rational use of energy
resources. The aim is to reduce these emissions by 20%
by 2024 and by 50% by 2030. We are doing our utmost to
ensure that the environmental impact is measured and
controlled.
One of KN's strategic objectives is to ensure that KN
terminals operate in an environmentally sustainable
manner and are fully compliant with environmental
requirements. The company has clearly identified the
significant environmental aspects, their impact on the
environment, control, and management measures. KN
strives to improve its environmental performance by
continuously monitoring the environmental impact of its
activities and by aiming at pollution prevention, waste
minimisation, water and energy efficiency, and efficient
use of raw materials.
We are proactive in monitoring our impact on
environmental quality, assessing our impact on the
environment, and not just seeking to meet norms or
requirements. KN regularly monitors air pollution from
stationary sources and the quality of wastewater
discharged into the natural environment. The data
collected is available on the Company's website.
The public can obtain real-time information on loading
operations in real time by calling a dedicated line,
available on Company’s website.
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The Company is constantly looking for new technical
solutions to reduce waste emissions, introducing them
and carrying out regular testing and maintenance.
As of 2018 KN is implementing an Environmental Action
Plan, which sets out measures and a commitment to
continue to operate sustainably and ensure the highest
environmental standards. Once fully implemented, the
action plan will contribute to the reduction of volatile
organic compound (VOC) emissions, ensuring minimal
emissions to the environment and more efficient
neutralisation of VOCs.
As part of this plan, in 2021 KN has implemented
environmental projects such as the modernisation of the
burners of the boiler house, which is expected to reduce
the one-off emissions of carbon monoxide and nitrogen
oxides to ambient air by 3 times. A new air pollutant
treatment plant has also been commissioned to treat
pollutants collected from 16 tanks and a railway loading
rack. The main purpose of this treatment plant is to reduce
odours, and thus emissions of volatile organic
compounds (VOCs), from the loading and storage of
heavy oil products. At the same time, efforts are being
made to continue looking for the solutions to further
reduce emissions of VOCs to the environment. A draft
Environmental Action Plan 2022-2030 has also been
prepared, which includes measures to reduce further the
potential negative environmental impacts of the activities
of the Company.
In 2020, KN's environmental management system got
certified for ISO 14001:2015 standard, which was
confirmed by an audit in 2021.
KN is actively involved in the debate on the future of fossil
fuels and the transition to a more climate neutral
economy. LNG offers an opportunity to move away from
fossil fuels towards more sustainable forms of energy,
including hydrogen, which is why KN has joined the
Lithuanian Hydrogen Platform and the Lithuanian
Shipowners' Association.
We support and promote the use and development of
environmentally friendly technologies, products and
services to contribute to sustainable development - like
hydrogen, also potential of technologies like carbon
capture. KN, Larvik shipping (LS) and Mitsui O.S.K. Lines
Ltd (MOL) have launched a feasibility study to develop
liquefied CO2 loading facilities that could be
implemented using the existing KN infrastructure in
Klaipėda. For this purpose, the entire concept shall be to
develop a CO2 logistics and value chain from Lithuania
and potentially Baltic region with Klaipeda seaport at the
centre.
In 2021, KN initiated a roundtable discussion on "Clean air
in Klaipėda: what can we do today to improve its quality
tomorrow". The aim was to stimulate dialogue between
authorities responsible for air quality monitoring and
control, experts, and businesses, to share knowledge and
best practices, to promote cooperation and to contribute
to improving air quality. Constructive dialogue,
experience sharing and cooperation with other industrial
and port companies in the city are beneficial as we all
share the common goal of minimising the impact of our
activities on the lives of citizens.
KN Group's full Corporate Social Responsibility Report for
2021, prepared in accordance with the Global Reporting
Initiative (GRI) guidelines, will be published on www.kn.lt
and on the Nasdaq Vilnius platforms on the date
scheduled in the Investor Calendar.
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RISK FACTORS AND RISK MANAGEMENT
The Company’s Board has approved Risk Management
Policy that regulates risk management, defines risk
management principles and responsibilities, functions
and responsibilities of the Chief Risk Officer as well as sets
risk appetite and tolerance limits. The risk management
system is developed in accordance with the ISO 31000
guidelines. The list of principal risks and the risk
management plan are provided to and approved by the
Company’s Board each quarter. The Board actively
participates in the principal risk management process by
continuously monitoring the risk level changes and the
risk management measures’ action plans. The Company’s
high-level management is responsible for shaping the
personnel’s attitude towards risk management, setting
the risk management goals in the managed area,
implementation of the control measures, implementation
and monitoring the efficiency of the risk management
measures. The medium level managers are responsible for
implementation of the risk management process and
provision of the results, as well as for reliability,
correctness, and impartiality of information.
The Audit Committee reviews financial reporting process
as well as audit execution process and oversees internal
control environment, risk management and internal audit
framework.
Primary risk categories that the Group and the Company
are exposed to while conducting business:
• Business risk. It is a risk category that is generally
related with the environment where the Group and
the Company operate and has an impact on financial
results: competitiveness of the Group and the
Company comparing with other players in the market
of oil products transhipment, economic viability of
the key customers of the Group and the Company,
political and economic environment in the
neighbouring countries, changes in legal regulation
of the LNG related activities etc.
• Operational risk is probably the widest risk category
covering potential loss resulting from inadequate or
failed procedures, systems or policies, employee
errors, systems failures, fraud, or other criminal
activity, as well as any event that disrupts business
processes.
• Reputational risk. It is a risk mostly related with the
decisions of the Group and the Company and
behaviour of the employees.
• Project risks. The Company is engaged in several
large investment projects; therefore, effective risk
management throughout the whole lifecycle is critical
when achieving goals.
COMMENTS ON THE RISK CATEGORIES OF THE GROUP
AND THE COMPANY ARE PROVIDED BELOW:
Business risk
The Company works with several big clients in the area of
oil products transhipment. The main client of the
Company is AB ORLEN Lietuva. The Company has signed
a long-term transhipment agreement with ORLEN Lietuva
and guarantees stable flows of oil products from the
client.
The Company continuously looks for other potential
clients, flows of shipments and alternative activities. Also,
the Company reviews existing expenses and constantly
searches for costs optimization possibilities. In 2021, the
Company increased total transhipment of biofuels
segment cargo by approx. 40 % compared to 2020. In
2021, Company’s transhipment by auto trucks increased
about 15.4% compared to 2020 and reached more than
500 tons per year.
The Company is striving to manage its business risks by
diversifying its income sources and widening the range of
services, communicating and cooperating with potential
clients, who are interested in blending services, storage
and transhipment of petrochemical products such as
monoethylene glycol, ethanol, methanol and loading of
new product bitumen. The main factors of the Company's
business environment:
• The increase of vacant tanks volumes supplies in the
beginning of the year intensified competition in oil
products storage (especially dark heated) market,
which remained intense throughout the first half of
the year.
• Part of the vacant capacity of Klaipėda Oil Terminal
was rented for petrol storage until the end of 2021
Q2. Cooperation with the customer has been
extended by concluding a new contract - for the
storage of fuel oil, at the same time almost doubling
the storage volume.
• Travel restrictions in European countries which were
imposed due to COVID-19 pandemic began to
decrease and boosted fuel consumptions up to the
same level as seen in 2019 as well as increased the
profit margins of oil refineries during Q3 2021. All
these factors had a positive impact on oil products
transhipment in Klaipėda oil terminal.
• Loading of new product - bitumen - was started at
the end of 2021.
The Company is striving to manage its business risks by
diversifying its income sources and widening the range of
services it provides: the Company operates liquefied
natural gas (LNG) terminal, consults and participates in
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international investment projects related with the
development of LNG terminals, provides small-scale LNG
services to clients:
• KN is the operator of the liquefied natural gas (LNG)
terminal in the Brazilian port of Açu. KN, as the
operator of the LNG terminal, is responsible for the
operations of the LNG terminal, which includes the
technical and logistical operations of the jetty and its
facilities, gas pipeline and gas metering stations. The
most focus is to ensure demands of the clients, so for
these reasons, regular meetings are organised to
strengthen the weak areas of the project.
• The Law on LNG Terminal provides that LNG activities
must be carried out until at least 31/12/2044 and the
LNG terminal operator acquires FSRU and becomes
an operator no later than 31/12/2024. During 2021,
KN, as part of a project of long-term LNG import
infrastructure solution, organised intensive
discussions with market participants, arranged
market consultation on the procurement documents
and launched the public international tender for the
acquisition of the FSRU in mid-year. Potential FSRU
suppliers actively participated in the preparation
phase of the tender, however after assessing the
stated budget of the purchase, technological aspects,
and other circumstances, decided not to participate
in the further stages of the tender. The market
research, the market consultations, and the public
tender results have clearly shown that the existing
purchase option to acquire FSRU “Independence” is
the most economically advantageous solution for KN.
By December 2022, the KN must inform the
Norwegian company Höegh LNG of its decision to
execute the right of FSRU Independence buy-out
option as indicated in the time charter agreement.
• During the first half of 2021, the Swedish company
AFRY prepared study on the long-term capacity
allocation and tariffication models applicable in LNG
terminals in Europe. During few workshops AFRY
presented results of the study to stakeholders and
had discussions with market participants. Based on
the study results, KN currently is updating principles
of the LNG terminal capacity allocation and
tariffication model. LNG Terminal Regulations will be
amended accordingly. Main terms and conditions of
the Regulations will be submitted to National Energy
Regulatory Council (NERC) and public consultation
will be announced. After approval of main terms and
conditions of Regulations, long-term capacity
allocation procedure will be announced in summer of
2022. Capacity will be allocated for up to 10 years
period counting from 2023.
Operational risk
Operational risk is considered as risk directly related to the
increase of losses, caused by the external factors (for
example, natural disasters, illegal acts of the third parties,
etc.) or internal factors (for example, ineffective activity
and management, improper and inefficient utilization of
funds, internal control deficiencies, ineffective procedures,
human error, malfunctions of information systems, cyber
security control gaps, unduly allocation of functions or
responsibilities, etc.).
During 2020 political risk materialized, and one of the
largest clients BNK (UK) Limited, which belongs to the
largest exporters of Belarusian oil products - ZAT
Belaruskaja neftenaja kampanija, announced a temporary
suspension of transhipment. Moreover, starting from 24th
June 2021, sanctions to Belarus were introduced
by Council Regulation (EU) 2021/1030 - no more transit of
oil product flows from Belarus are possible and are not
expected in the future. Due to these external operational
risks, KN will have to implement long-term strategic
decisions to adapt to new geopolitical circumstances.
Consequently, a revision of long-term corporate strategy
has been initiated and will be completed during 2022.
To manage internal operational risk, the Company
implemented required organizational measures and
procedures as well as information systems to be used for
support of business processes that collectively ensure
proper functioning of internal control system and duly
cooperation with the third parties concerned. The
Company applies the following means of internal control:
separation of decision making and controlling functions,
control of transactions and accountancy, limitation of
decision-making powers and control of their execution,
collegial decision making in crucial issues, etc.
Internal operational risk management is significantly
influenced by the standards, which are implemented and
maintained in the Company - Quality ISO 9001:2015,
Environmental Protection ISO 14001:2015, Occupational
Health and Safety ISO 45001:2018. These standards
impose requirements for the control of processes
according to the most significant risks and management
system audits, which ensure that the described controls
and processes operate in practice. The Company strives to
minimize legal compliance risk and assure that its
operations are compliant with the applicable legal
requirements and standards. Infrastructure, as well as
management and safety processes, cooperation with the
third parties and control system has been positively
evaluated by the representatives of potential clients of the
terminals.
In order to manage better operational risks, KN has
established a compliance function, which is controlled by
compliance of risk assessment.
Reputational risk
The Company cherishes its reputation and good name
and employs risk mitigation means. KN culture is based
on Company’s values - respect, cooperation,
professionalism, and improvement, which are the basis for
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our decisions and actions with customers, employees,
shareholders, and other stakeholders. The Company
strives to ensure good employee experience through the
entire journey with KN (from the attraction stage to the
exit one). Each candidate is treated as a potential
ambassador of the Company; therefore, communication is
led as with a future client or partner. In 2021, KN had a
special acknowledgment – the Company was among the
top five of the best employers.
The Company continuously invests in professional
development of employees in order to ensure business
continuity and good reputation. Accordingly, employees
are provided with training that allows to fulfil Company
needs, succession is planned, which helps to ensure
business continuity and develops the competencies of
employees.
The Company fosters a value-based culture and has been
electing employees of the quarter on a quarterly basis for
many years. In 2021 KN began to collect the Hero of the
Quarter. The "employee of the quarter" nomination is
awarded for outstanding quarterly achievements in the
Company and personal qualities, behavioural
characteristics, thanks to which colleagues manage to
achieve excellent results as well as for initiatives that
create benefits for the business, employees, clients, and
implementation of KN values in daily work. At the time of
the nomination of a colleague for the nomination of
"Quarterly Hero of Values", colleagues are asked to record
what this colleague is grateful for and thus promote
values-based behaviour and strengthen the sense of
gratitude in the Company, which directly influences the
work atmosphere and employee productivity. As in 2020,
in 2021 the Company did not miss a chance and arranged
number of interactive learning sessions – Dialogue of
Values for employees in Subacius Oil Terminal. Colleagues
took part in the discussions how they should behave in
different situations according to KN values. Such
initiatives, as well as additional internal training sessions
to strengthen psychological and emotional resilience,
have helped to ensure that employee behaviour is in line
with the values and Code of Conduct of KN, which was
updated in January 2021 and make employees feel
psychologically and emotionally safe in the workplace.
Psychological safety in the company was rated high at
71% out of 100 during the annual Employee engagement
survey in 2021. The survey revealed that one of the most
gratifying aspects of the Company is a good work
atmosphere.
The Company pays substantial attention to minimizing
corruption risk and implements relevant internal
processes. During 2021, KN was involved in the project
"Skaidrumo Akademija", which was initiated by the
President of the Republic of Lithuania (organiser – Special
Investigation Service of the Republic of Lithuania). The
aim of participating in this project is to introduce
additional and improved existing measures to prevent
corruption in KN.
One of the instruments for the prevention of
infringements is the Whistleblowing channel, which is
open for all natural persons and legal entities: both
existing and former KN employees, former and potential
KN clients, contractors, suppliers, and community. During
2021, the coordination of the Whistleblowing channel was
transferred to the Internal Audit, which is functionally
subordinate to the Audit Committee and administratively
to the Company CEO. It also provides possibility to inform
directly the collegial managing bodies of KN. Additionally,
these changes contributed to enhanced confidentiality of
the Whistleblowing channel.
The Company pays special attention to the stakeholders.
It openly provides information to the institutions, public
organizations and the general society, and has been
focusing on strengthening relations with communities for
years. In 2021, the Company continued to engage actively
with representatives of neighbouring communities,
holding meetings to present the progress of the ongoing
Environmental Action Plan and to respond to relevant
questions of concern to communities. KN also openly
shares environmental data with the public – KN website
provides environmental monitoring data of Klaipeda Oil
Terminal, information on the progress of the
environmental action plan. With a consistent focus on the
environment and open dialogue with communities, KN
has achieved a steady annual decline in requests from
communities and institutions on environmental issues,
with 12 requests received in 2021, compared to 18 a year
ago.
The Company is also involved in educational initiatives,
such as hosting company tours at KN Oil terminal for
students and pupils, presenting its operations and
providing knowledge related to petroleum products,
logistics, laboratory work, etc.
Project risk
Investment project management is an important part of
the Company’s business. In order to effectively manage
projects, the implementation of the project management
methodology and project monitoring was initiated
according to the PRINCE2 standard. During 2021, the
Company has finished tanks reconstruction project for
bitumen storage and loading, jetty reconstruction to
increase the availability of the Company's services and
flexibility of technological capabilities. The Company is
looking for opportunities in international LNG investment
projects. Also, Company is involved in the analysis and
search of carbon capture and storage technologies and is
actively participating in the development of hydrogen
platform technologies. To attain the economic value that
investment projects are supposed to generate it is
important to assure that the projects are implemented
within the defined budget and timeframe. Company’s
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
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Board has set 10 % tolerance limit for deviations;
therefore, Company’s management constantly monitors
implementation statuses of the important projects,
related risks, and their mitigation measures.
FINANCIAL RISK MANAGEMENT
Foreign Exchange Rate Risks
Due to the specifics of the business, the Group and the
Company are exposed to the risk of EUR/USD foreign
exchange rate fluctuations due to FSRU lease payments in
US dollars and to the risk of EUR/BRL foreign exchange
rate due to activity of subsidiary KN Acu in Brazil. The
Group and the Company hedge against changes in
EUR/USD exchange rates by using futures contracts.
When derivatives are realized, the result is recorded in the
profit (loss) statement of each calendar month. For 2021
the Group and the Company accounted EUR 1,898
thousand income on the fair value change of derivatives.
For 2020 the Group and the Company accounted EUR
1,869 thousand loss on the fair value change of
derivatives. The fair value as at the end of reporting period
is confirmed by SEB bank.
Credit Risks
A possible credit risk of the Group’s and the Company’s
customers is managed by a continuous monitoring of
outstanding balances. The Group’s and the Company’s
procedures are in force to ensure on a permanent basis
that services are provided to reliable customers and do
not exceed an acceptable credit exposure limit. The
Company trades only with reputable third parties, so there
is no requirement for collateral. More information about
the exposure to credit risk for trade receivables from the
customers can be found in the Note 26 of the Explanatory
Notes in the financial statements.
Interest Risks
The Group’s and the Company’s income and operating
cash flows are influenced by changes in market interest
rates, which are linked to EURIBOR base. Overall, 56% of
loan portfolio is exposed to floating interest rate risk; no
hedging derivative instruments were used. Thus, such
standing has implications on financial results.
EIB facility with 3 tranches is exposed to 3 months
EURIBOR with zero-floor applicable on EURIBOR base. In
contrast, NIB facilities are exposed to 6 months EURIBOR
with no zero-floor applicable on EURIBOR base.
The Group and the Company is constantly assessing its
possibilities to hedge interest rate risks on its loans. Thus,
the loans related to long-term LNG terminal solution with
high probability in future are expected to be with partially
or fully fixed interests.
The Group’s and the Company’s excess liquidity in forms
of money and time deposits are distributed across the
accounts of major Lithuanian banks, which are granted
with Standard Poor’s or equivalent long-term term
borrowing BBB- or better external rating according to the
foreign rating agencies. Partner bank’s rating is assessed
either on a stand-alone or applying a bank group logic
into which exposure is present. Also, the Group and the
Company is monitoring recommendation of the Central
Bank of Lithuania.
More information about the interest risk can be found in
the Note 26 of the Explanatory Notes in the financial
statements.
Liquidity Risks
The Company’s and the Group’s policy is to maintain
sufficient cash and cash equivalents or have available
funding through an adequate amount of committed
credit facilities to meet its commitments at a given date in
accordance with its strategic plans.
The Group’s gross liquidity (APM) and quick ratios (APM)
as of 31 December 2021 were 1.28 and 1.25, respectively
(1.47 and 1.43 as at 31 December 2020).
The Company’s gross liquidity (APM) and quick ratios
(APM) as of 31 December 2021 were 1.20 and 1.17,
respectively (1.41 and 1.37 as at 31 December 2020).
The Group’s and Company’s objective is to maintain a
balance between continuity of funding and flexibility. The
Group’s and the Company's activities generate sufficient
amount of cash; therefore, the Management's main
responsibility is to monitor that the liquidity ratio of the
Company is close to or higher than 1.
More information about the management of liquidity risk
can be found in the Note 26 of the Explanatory Notes in
the financial statements.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 124
OTHER INFORMATION
The activity of the Company is based on the Articles of
Association, Civil Code and other laws and sub legislative
acts of the Republic of Lithuania. Changes in the Articles
of Association can be made by the General Meeting of
Shareholders.
TRANSACTIONS WITH RELATED PARTIES
The Company did not have any transactions or
agreements with the members of its Supervisory Council
and the Board. More information regarding transactions
with related Parties is presented in the Explanatory note
to the Company’s financial statements for 2021. In 2021
there were no changes in type of transactions with related
parties, which could have made impact on the financial
activity of the Group and the Company. All transactions
with the related parties have been performed under
market conditions (following the arm’s length principle).
PARTICIPATION IN ASSOCIATIONS
The Company has been acting as a member of the
following associations as at the end of the year:
• Klaipėda Chamber of Commerce, Industry and Crafts,
http://www.kcci.lt/
• Association of Lithuanian Stevedoring Companies,
www.ljkka.lt
• Lithuanian Confederation of Industrialists, www.lpk.lt
• Gas Infrastructure Europe (GIE) association Gas LNG
Europe (GLE) group, www.gie.eu.com
• Lithuanian LNG cluster, www.lngcluster.eu
• Lithuanian Shipowners Association, www.llsa.lt
• Lithuanian Hydrogen Platform
• LNG platform, www.sgdplatforma.lt
• Baltic Innovation Hub, https://baltictechpark.com
• The American Chamber of Commerce in Lithuania,
www.amcham.lt
• Klaipėda Association of Industrialists, www.kpa.lt
INFORMATION ABOUT THE AUDIT
30
th
April 2021. Extraordinary General Meeting of
Shareholders of the Company adopted the following
resolutions: UAB KPMG Baltics has been elected as an
auditor for the Financial Statements and Regulated
Activities Statements of the Company and assessment of
its Annual Report for the years 2021 and 2022. The
shareholders authorized the General Manager of the
Company to conclude the Agreement for provision of 2
years auditing services (financial audit of both the
Company and the subsidiary KN Acu Servicos de Terminal
de GNL LTDA, and regulatory activities audit) for total
amount of EUR 164 thousand (excl. VAT). UAB Ernst &
Young Baltic performed the audit for the years 2014-2018.
UAB KPMG Baltics performed the audit for the years 2008-
2013, 2019-2020.
The proposal regarding approval of the audit company is
provided by the Board of the Company to the General
Meeting of Shareholders based on the public
procurement procedures.
AB KLAIPĖDOS NAFTA CONSOLIDATED ANNUAL REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 125
2021
AB KLAIPĖDOS NAFTA
REPORT ON REMUNERATION
AB KLAIPĖDOS NAFTA REPORT ON REMUNERATION
For the financial year ending on 31 December 2021
www.kn.lt | 126
REPORT ON REMUNERATION
Remuneration principles of the Company’s governing and
supervisory bodies are determined by the Remuneration
policy approved in General shareholders meeting in April
2020. Full remuneration policy can be found on
Company’s website.
Remuneration for activities in the collegial bodies of the
Company may be paid to the members of the collegial
body of the Company who are independent or not, but
who are not public servants or employees of a state
representative institution.
The personal data of the members of the Company’s
governing and supervisory bodies is included in the report
on remuneration for the following purposes:
• to increase the transparency of the Company;
• to improve the accountability of the members of
the governing bodies;
• to supervise the remuneration of the governing
bodies.
Members of collegial governing and supervisory bodies
of the Company are only eligible for receiving fixed
monthly compensation.
The remuneration to be paid must:
• promote the creation of long-term and
sustainable value of the Company, to be fair and
understandable.
• comply with the workload of the individual
organs of the Company and their members.
• be competitive with the salary levels in the labour
market of the respective field.
• ensure the indemnification of the liability
assumed by the individual members of the
Company bodies.
• promote the attraction of high-level
professionals in their field to the management of
the Company.
REMUNERATION OF THE SUPERVISORY COUNCIL IN 2021
TITLE
MONTHLY SALARY FOR
2021, EUR
TOTAL FOR 2021, EUR
MONTHLY SALARY FOR
2020, EUR
TOTAL FOR 2020, EUR
Member 1
1,140.59
13,687.08
1,140.59
13,687.08
Member 2
856.92
10,283.04
856.92
1,156.87
Member 3
0.00
0.00
0.00
0.00
TOTAL
1,997.51
23,970.12
1,997.51
14,843.95
In 2021 the total remuneration for the members of the
Supervisory Council amounted to EUR 24,0 thousand
(2020 – EUR 20.8 thousand). Members of the Supervisory
Council were not granted with any loans, guarantees,
assets, premiums, tantiemes, shares or salary for service at
any other company of the Group for the year 2021. They
are not eligible for any variable part of remuneration or
for recovery of it.
REMUNERATION OF THE BOARD OF THE COMPANY IN 2021
TITLE
MONTHLY SALARY FOR
2021, EUR
TOTAL FOR 2021, EUR
MONTHLY SALARY FOR
2020, EUR
TOTAL FOR 2020, EUR
Member 1
2,400.00
28,800.00
2,400.00
28,800.00
Member 2
2,095.00
25,140.00
2,095.00
25,140.00
Member 3
2,095.00
25,140.00
2,095.00
25,140.00
Member 4
2,095.00
18,855.00
2,095.00
25,140.00
Member 5
2,095.00
2,095.00
0.00
0.00
Member 6
0.00
0.00
0.00
0.00
TOTAL
10,780.00
100,030.00
8,685.00
104,220.00
In 2021 the total remuneration for the members of the
Board amounted to EUR 100.0 thousand (2020 - EUR
104.2 thousand). In 2021 members of the Board were not
granted any shares, did not receive any loans, guarantees,
assets, premiums, tantiemes or any other benefits for
work as members of the Bord or salary for service at any
other company of the Group. They are not eligible for any
variable part of remuneration or for recovery of it.
AB KLAIPĖDOS NAFTA REPORT ON REMUNERATION
For the financial year ending on 31 December 2021
www.kn.lt | 127
REMUNERATION OF THE AUDIT COMMITTEE IN 2021
TITLE
MONTHLY SALARY FOR
2021, EUR
TOTAL FOR 2021, EUR
MONTHLY SALARY FOR
2020, EUR
TOTAL FOR 2020, EUR
Member 1
1,140.59
13,587.79
856.92
530.53
Member 2
856.92
10,382.33
968.36
11,620.31
Member 3
856.92
10,283.04
856.92
10,283.04
TOTAL
2,854.43
34,253.16
2,682.20
22,433.88
In 2021 the total remuneration for the independent
members of the Audit Committee amounted to EUR 34.3
thousand (in 2020 – EUR 30.4 thousand). Members of the
Audit Committee have not received any loans, guarantees
or assets, unpaid bonuses, tantiemes and other benefits
or salary for service at any other company of the Group,
were not granted any shares of the Company. They are
not eligible for any variable part of remuneration or for
recovery of it.
REMUNERATION OF THE CEO OF THE COMPANY IN 2021
The CEO of the Company is rewarded according to
provisions set in the Remuneration policy approved by the
Board of the Company and the Company’s Procedure for
rewarding bonuses to AB Klaipėdos nafta top
management employees.
The monthly salary of the CEO of the Company was set to
EUR 9,200 in November of 2019 and has not been
changed since then. Following the Remuneration policy,
the CEO is also eligible for receiving annual bonus
depending on the results of the Company and
achievement of the annual goals. The maximum bonus in
case all goals are achieved consists of 4 monthly salaries.
In 2021 variable pay for the CEO, was EUR 1,227 (monthly
equivalent of yearly bonus) (2020 - EUR 2,101 (monthly
equivalent of yearly bonus).
CHANGES IN THE COMPANY RESULTS AND AVERAGE MONTHLY SALARY OF ALL EMPLOYEES
2021
2021
adj.**
2020
2020
adj.**
2019
2019
adj.**
2018
2017
Sales
58,633
58,633
77,474
77,474
104,138
104,138
99,998
106,484
Net profit (loss)
-64,917
-48,084
33,495
10,991
7,947
13,117
11,577
17,031
Average monthly
salary (gross), EUR
2,570
-
2,574
-
2,282
-
2,313
2,297
* Remuneration of Members of governing and supervisory bodies are not included.
** adj. - adjusted financial indicators/data are recalculated and presented by eliminating from net profit (loss) the following amounts: (1)
the impact of unrealised foreign currency exchange rates (forex) arising from IFRS 16 requirements, (2) respective impact of deferred
income tax arising from forex, and (3) impact of financial derivatives.
The Company’s 2021 average monthly salary of all
employees did not change compared to 2020 (2021 –
2,570 EUR/month, 2020 – 2,574 EUR/month).
Average monthly salary of all employees of the Company
has been gradually growing for the last few years. Average
monthly salaries per employee category for 2020-2021
are provided below.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 128
AVERAGE MONTHLY SALARIES OF THE EMPLOYEES OF THE GROUP AND THE COMPANY
EMPLOYEE CATEGORY
AVERAGE MONTHLY SALARY (GROSS), EUR
GROUP
GROUP
CHANGE,
%
COMPANY
COMPANY
CHANGE,
%
2021
2020
2021
2020
Managers
1)
5,061
5,507
-8.1
5,459
5,719
-4.5
Specialists
2,445
2,511
-2.6
2,553
2,552
0.0
Workers
1,614
1,741
-7.3
1,614
1,741
-7.3
Total
2,506
2,543
-1.5
2,570
2,574
-0.2
1) The Company‘s managers include: Chief Executive Officer (CEO), Directors and Heads of Divisions. The following sums were calculated
for the remuneration to the Group‘s managers in 2021: EUR 3,684 thousand, in that amount taxes paid by the employer included EUR
177 thousand (when in 2020 were EUR 3,137 thousand from which EUR 103 thousand of taxes paid by the employer). The average annual
salary of manager of the Group amounted to EUR 63.5 thousand in 2021 (in 2020 - EUR 65.3 thousand).
2) The average monthly salary is calculated according to the average monthly wage calculation procedure as stated in the State
companies’ employees’ average monthly salary calculation procedure approved by the Government of Lithuania on 23 August 2002,
resolution No. 1341 and its subsequent changes.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
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2021
AB KLAIPĖDOS NAFTA
GOVERNANCE REPORT
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 130
CONTENT
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT INFORMATION ....................................................................................................................... 131
MANAGEMENT OF THE COMPANY ............................................................................................................................................................................... 132
OTHER GOVERNANCE INFORMATION ........................................................................................................................................................................ 142
AB KLAIPĖDOS NAFTA COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE ............................................................................. 145
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 131
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT INFORMATION
AB Klaipėdos nafta aims to make its corporate
management and internal processes in a way to ensure
transparent, effective, and profitable activities and its
activities retain the trust of our stakeholders. The internal
control processes and management practices
implemented within the Company are in line with the best
management practice principles. This report provides
main information and principles regarding management
and related processes.
The Company’s management structure and managing
and supervisory bodies are described in detail in article
“Management of the Company of the annual report”. This
paragraph also contains information regarding corporate
management and organizational scheme, connection with
the other bodies and short description of the functions of
the each managing body.
In order for the management and supervision bodies of
the Company to exactly and clearly understand the
targets, directions and objectives the corporate strategy is
being prepared with purpose to foreseen long term
strategic goals and tasks. The Supervisory Council of the
Company is responsible for the approval of the strategy.
AB Klaipėdos nafta strategic goals are described in the
paragraph “The Corporate Strategy”. KN corporate
strategy until 2030 is available at: 2030.kn.lt.
The Company, acting in compliance with Article 21(3) of
the Law of the Republic of Lithuania on Securities and
paragraph 24.5 of the Listing Rules of AB NASDAQ Vilnius,
discloses how it complies with the Corporate Governance
Code for the Companies listed on NASDAQ Vilnius as well
as its specific provisions or recommendations in the
paragraph “AB Klaipėdos nafta Compliance with the
Corporate Governance Code”.
Company’s annual report of the year 2021 along with
Company’s governance report and explanatory notes of
the year 2021 financial statements are published in
AB Klaipėdos nafta official website (http://www.kn.lt) and
in AB NASDAQ Vilnius (www.nasdaqomxbaltic.com) Stock
Exchange.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 132
MANAGEMENT OF THE COMPANY
MANAGEMENT STRUCTURE
The Company follows the Law on Stock Companies, the
Law on Securities, Articles of Association of the Company,
and other legal acts of the Republic of Lithuania during its
operation.
The Company’s Articles of Association are registered in
the Register of Legal Entities and indicate the following
management bodies:
• The General Meeting of Shareholders
• The Supervisory Council
• The Board
• Chief Executive Officer (CEO, General
Manager)
ORGANIZATIONAL AND MANAGEMENT STRUCTURE OF THE COMPANY:
The General Meeting of Shareholders is the supreme
management body of the Company. Competences of the
General Meeting of Shareholders of the Company,
Shareholders’ rights, their implementation are identified
in the Law on Stock Companies and in the Article of
Association of the Company.
The Company’s CEO or authorised Head of any other
department of the Company always participates in the
Shareholders Meetings while the member of the
Supervisory Council and the CFO participate depending
on the questions addressed.
In the last ordinary general meeting of Shareholders of
the Company the following representatives of the
Company took part: Company’s CEO, Chairman of the
Board, Chief Administrative and Corporate Governance
Officer, Head of the Legal Unit.
The Supervisory Council is a collegial supervisory body
which consists of 3 (three) members (at least 2 (two) being
independent), elected for the period of four years in the
General Meeting of Shareholders according to the
procedure established by the Law on Stock Companies.
The number of the terms of office a member may serve
on the Supervisory Council is not limited. The CEO of the
Company, a member of the Board of the Company and a
person, who under the legal acts is not entitled to serve in
this office, shall not serve on the Supervisory Council. The
Supervisory Council is a collegial body supervising the
activities of the Company, its status, competence, and
functions have been defined by the Law on Stock
Companies and the Articles of Association of the
Company. Functions, rights and duties of the Supervisory
Council are detailed in the Rules of Procedure of the
Supervisory Council.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
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The Supervisory Council by its decision has formed an
Audit Committee, which consists of 3 (three) members
elected for the office term of the Supervisory Council. The
Rules of formation and conduct of the Audit Committee
of AB Klaipėdos nafta, approved by the Company’s
Supervisory Council, regulate functions, rights, and duties
of the Audit Committee. The key responsibilities of the
Committee are to assist the Supervisory Council in
fulfilling its oversight responsibilities in relation to
financial reporting, the effectiveness of the system of risk
management and internal control, monitoring the
independence of both the internal and external auditors
and assessing their performance and effectiveness. The
Company’s head of internal audit is functionally
subordinate to the Audit Committee and administratively
subordinated to the CEO. By the decision of the
Supervisory Council of the Company the members of
Audit committee have been elected until the end of office
of the current Supervisory Council.
The Board is a collegial management body of the
Company consisting of 5 (five) members, who are elected
by the Supervisory Council for the period of 4 (four) years
with the requirement that at least 3 (three) members are
independent. The number of the terms of office a member
may serve on the Board is not limited. A person who is a
member of the Supervisory Council of the Company or
who under the legal acts may have no right to be elected,
cannot serve as a member of the Board. The mandate of
the Board members has been determined by the Law of
Stock Companies and the Articles of Association of the
Company. The tenure of all Board members of
AB Klaipėdos nafta has been extended based on the 24
April 2019 decision of the Supervisory Council of
AB Klaipėdos nafta which extended the tenure of the
Board members of the Company until the respective
separate decision of the Supervisory Council, on 2 July
2019 the Supervisory Council of the Company decided to
further extend the tenure of all Board members of the
Company for three years until 24 April 2022.
The Chief Executive Officer (CEO) is a single person
managing body of the Company. The CEO is the main
person managing and representing the Company. The
duties and competence of the CEO have been determined
by the Law on Stock Companies and the Articles of
Association of the Company.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 134
MEMBERS OF THE SUPERVISORY COUNCIL AS AT 31 DECEMBER 2021
Eimantas Kiudulas (independent member)
Chairman of the company’s Supervisory Council. Elected to the Supervisory Council on the 27
April 2018 by the ordinary General Meeting of Shareholders for a four-year term. Also served
as a member of the KN Supervisory Council in 2013–2017.
Education: ISM University of Management and Economics, Management Accounting: Value
Analysis module (2010); Vilnius University Faculty of Economics (1994). Participation in activities
of other companies and organisations: Eimantas Kiudulаs’ company, owner UAB iValue, CEO,
shareholder; Klaipėda Chamber of Commerce, Industry and Craft, Council Member; Lithuanian
Association of Free Economic Zones, Board Member, Chairman of the Board UAB Biorro, Board
Member; UAB Klaipėda Free Economic Zone Management Company, CEO, Board Member; UAB
LEZ projektų valdymas, Board Member; UAB PO7, Board Member; UAB ProBioSanus, Board
Member; UAB Flex Start One, CEO; Public Institution Klaipėda ID, Board Member, Chairman of
the Board.
Information about the shares of AB Klaipėdos nafta or shares of other companies, which
Eimanas Kiudulas holds, and the total amount of which exceeds 5% of all shares of the
company: UAB ProBioSanus – 23 %; UAB Biorro – 38 %.
Karolis Švaikauskas (member)
Member of the Supervisory Council of the Company. Elected as a member of the Supervisory
Council on 10 April 2020 at the extraordinary general meeting of shareholders until the end of
the term of office of the current Supervisory Council (appointed on 27 April 2018).
Education: Vytautas Magnus University, Faculty of Political Science and Diplomacy, Master’s
Degree in Political Science, Baltic Region Studies (2011); Humboldt University of Berlin
(Germany), Scandinavian and Northern European Studies (2010); Vytautas Magnus University,
Faculty of Humanities, Bachelor's degree in Historical Sciences (2009).
Employment – since November 2019, is holding the position of the Head of the Energy
Competitiveness Group of the Ministry of Energy of the Republic of Lithuania (legal status -
budget office, code 302308327, Gedimino pr. 38, Vilnius). Participation in activities of other
companies and organisations: member of the Labour Council of the Ministry of Energy
(representation of employees’ interests); member of the Strategic Projects Supervision
Commission of EPSO-G UAB; member of the Lithuanian-Polish Energy Working Group; member
of the Regional Gas Market Coordination Group (RGMCG); member of the Energy Committee
of Senior Officials of the Baltic Council of Ministers; member of the Energy Committee of the
Connecting Europe Facility (CEF); member of the BEMIP regional working groups for the
selection of EU projects of common interest. Karolis Švaikauskas does not hold shares of
AB Klaipėdos nafta or other companies, when the total quantity of such shares exceeds 5%.
Žaneta Kovaliova (independent member)
Member of the Supervisory Council of the Company. Appointed a member of the Supervisory
Council on 20 November 2020 at the extraordinary general shareholders’ meeting until the end
of the term of office of the current Supervisory Council. By the decision of the Supervisory
Council, elected as a member of the Audit Committee of the Company until the end of office
of the current Supervisory Council.
Education: Vilnius University, MA in management and business administration (2002 m.); Vilnius
University, BA in management and business administration (2000). Member of Association of
Chartered Certified Accountants (since 2011).
Participation in activities of other companies and organisations: Independent member of the
Supervisory Council of AB Energijos Skirstymo Operatorius. Žaneta Kovaliova does not hold
shares of AB Klaipėdos nafta or other companies, when the total quantity of such shares
exceeds 5%.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 135
There were 13 meetings of Supervisory Council in 2021, which were attended by all Supervisory Council members.
SUPERVISORY COUNCIL ACTIVITY IN 2021
During 2021 the Supervisory Council supervised the
activities of the Board and the CEO of the Company,
announced, and successfully completed the selection of 4
(four) independent Board members for a new term of
office beginning from 25th April 2022, approved the
Company’s Corporate Governance Policy, annual internal
audit plan and addressed other matters assigned within
its powers.
In addition to its regular tasks, the Supervisory Council in
2021 was also actively involved in the discussions about
the Company’s corporate governance and internal control
system functioning as well as risk management
improvement.
During 2021, the Supervisory Council carried out regular
supervision of the implementation of the Company's
strategy for 2020-2030, as well as in accordance with its
competence provided suggestions and recommendations
in the process of preparation of quarterly financial
statements.
NAME
POSITION IN THE COMPANY
THE INDEPENDENCE
CRITERIA
CADENCE COMMENCEMENT
DATE
Eimantas Kiudulas
Chairman of the Supervisory
Council
Independent
From the 27 April 2018 until
27 April 2022
Karolis Švaikauskas
Member of the Supervisory
Council
-
From the 10 April 2020 until 27
April 2022
Žaneta Kovaliova
Member of the Supervisory
Council
Independent
From the 20 November 2020
until 27 April 2022
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
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MEMBERS OF THE AUDIT COMMITTEE AS AT 31 DECEMBER 2021
Žaneta Kovaliova (independent member)
Member of the Supervisory Council of the Company. Appointed a member of the Supervisory
Council on 20 November 2020 at the extraordinary general shareholders’ meeting until the end
of the term of office of the current Supervisory Council. By the decision of the Supervisory
Council, elected as a member of the Audit Committee of the Company as of 8 December 2020
until the end of office of the current Supervisory Council. On January 13, 2021, during the
meeting of the Audit Committee, Žaneta Kovaliova was elected the Chairperson of the Audit
Committee.
Education: Vilnius University, MA in management and business administration (2002 m.); Vilnius
University, BA in management and business administration (2000). Member of Association of
Chartered Certified Accountants (since 2011).
Participation in activities of other companies and organisations: Independent member of the
Supervisory Council of AB Energijos Skirstymo Operatorius. Žaneta Kovaliova does not hold
shares of AB Klaipėdos nafta or other companies, when the total quantity of such shares exceeds
5%.
Žana Kraučenkienė (independent member)
Member of the Audit Committee. By the decision of the Supervisory Council, elected as a
member of the Audit Committee of the Company as of 3 December 2018 until the end of office
of the current Supervisory Council.
Education: Vilnius University, Master’s degree in Mathematics (study programme of Finance and
Insurance Mathematics), 2000, Vilnius University, Bachelor’s degree in Applied Mathematics
(study programme of Finance and Insurance Mathematics), 1998, ISO 31000 Certified Risk
Management Professional (2015), Board Member Education Certificate (2017).
Place of work and position: director of UAB “Oregon Baltic”.
Participation in activities of other companies and organisations: independent Board member
and chairwoman of UAB “Būsto paskolų draudimas”. Social activities: member of the Association
of Risk Management Professionals, Member of the Actuarial Association of Europe. Has no direct
interest in the share capital of the Company no shareholding (above 5%) in the related
companies of AB Klaipėdos nafta.
Laura Garbenčiūtė-Bakienė (independent member)
By the decision of the Supervisory Council, elected as a member of the Audit Committee of the
company until the end of office of the current Supervisory Council.
Education: Vilnius Gediminas Technical University, Master degree in Finance (1999); Kaunas
University of Technology, Bachelor degree in business administration (1996). The Institute of
Internal audit, Certified in Risk Management Assurance (CRMA), Certified in Qualification in
Internal Audit Leadership (QIAL), Certified Internal Auditor (CIA), member of Association of
Chartered Certified Accountants.
Place of work and position: Since 2016 – financial advisor with portfolio of small and middle-
sized Lithuanian and foreign companies; 2015-2016 – Director of Internal audit at Lithuanian
Energy; 2013-2015 – Director of the Digital Operations at Western Union Processing; 1997-2012
– various positions at PricewaterhouseCoopers.
Participation in the management of other companies: Since 2018 Laura Garbenčiūtė-Bakienė is
an independent member of the Supervisory Council at Investment and business guarantees.
Since 2016 – the independent Chair of the Audit and Risk Committee at the State Enterprise
Ignalina nuclear power plant. Since 2019 – independent member of the Audit Committee at the
Lithuanian Airports, and independent member of the Board at Plunges vandenys. Has no direct
interest in the share capital of the Company no shareholding (above 5%) in the related
companies of AB Klaipėdos nafta.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 137
During the year 2021, 14 Audit Committee meetings have been arranged where all Audit Committee members have
participated.
NAME
POSITION IN THE
COMPANY
THE INDEPENDENCE
CRITERIA
CADENCE COMMENCEMENT
DATE
Žaneta Kovaliova
Chairperson of Audit
Committee
Independent
From the 8 December 2020 until
27April 2022
Laura Garbenčiūtė-Bakienė
Member of Audit Committee
Independent
From the 21 August 2018 until
25 February 2022
Žana Kraučenkienė
Member of Audit Committee
Independent
From the 3 December 2018 until
27 April 2022
AUDIT COMMITTEE ACTIVITY IN 2021
During the year 2021, the Committee closely monitored
the financial reporting process and audit of consolidated
financial statements of the Group. The Committee
assessed whether appropriate accounting policies have
been adopted throughout the accounting period and
whether management has made appropriate estimates
and judgements over the recognition, measurement, and
presentation of the financial results. The Committee also
discussed with the external auditor and Chief Financial
Officer, regarding accounting policies, practices and
reporting issues related to the impairment of the oil
segment. Among other things Committee recommended
invoking an independent external expert to assist the
Company in determining the fair value of the oil terminal,
regularly reviewing key assumptions and financial
forecasts, and improving the clarity of the financial
statements.
The Committee also monitored internal control and risk
management system and made recommendations to
improve its effectiveness. In addition to developing a
consistent methodology for identifying, managing, and
reporting risks across the Group, improving compliance
monitoring tools and mitigating key risks, the Committee
advised to review private interest procedures and
strengthen oversight of remuneration procedures.
The Audit Committee also considered the external and
internal audit plans of 2021, their results, and the
assessments of the Group's internal control, including the
control of financial statements, Committee also
monitored the independence of the auditors.
In addition, special attention was paid to whistleblowing
procedures and monitoring of indications of possible
deficiencies.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 138
MEMBERS OF THE BOARD AS AT 31 DECEMBER 2021
Dainius Bražiūnas
(born 1983) – Member of the Board of the Company since 25 August 2014, until the term of
office of the acting Board of Company. Education: Vilnius Gediminas Technical University,
Bachelor in energy (2005). Employment – head of the Energy Security Policy Group of the
Ministry of Energy of the Republic of Lithuania (legal status - budget office, code 302308327,
Gedimino pr. 38, Vilnius). Participation in the activity of other companies: head and member of
Koturna association (legal status - association, code 301684878, Mykolo Marcinkevičiaus street
23-13, Vilnius), member of the Board of EPSO-Gand member of the Board of 599th Apartment
Owners Partnership (legal status – community, code 124754821, Paribio street 53A, Vilnius).
Has no direct interest in the share capital of the Company; no shareholding (above 5%) in the
related companies of AB Klaipėdos nafta.
Mantas Bartuška
(born 1984) – Member of the Board of the Company since 25 September 2014, elected by the
Supervisory Council until the term of office of the acting Board of Company. Until 2 January
2017 was CEO of AB Klaipėdos nafta. Education: Vilnius University, faculty of economics,
diploma of management and business administration (2007). Since 16 December 2016 works
as general manager at AB Lietuvos geležinkeliai (legal status – Stock Company, code
110053842, Mindaugo street 12, Vilnius). Participation in the activity of other companies: since
14 December, 2016 member of the Board of the AB Lietuvos geležinkeliai (legal status – Stock
Company, code 110053842, Mindaugo street 12, Vilnius, member of Presidium of Lithuanian
Confederation of Industrialists (legal status – association, code 110058241, A. Vienuolio street
8, Vilnius). Has no direct interest in the share capital of the Company; no shareholding (above
5%) in the related companies of AB Klaipėdos nafta.
Giedrius Dusevičius (independent member)
(born 1971) – Independent member of the Board of the Company since 30 December 2016,
elected till the end of the Board of Company cadence. Education: Vilnius University, Faculty of
Economics, (1989); Vilnius University, Institute of International Relations and Political Science
(1994); INSEAD, Management Programme (AMP, 2006). Participation in activities of other
companies – member of the Supervisory Council of UAB Valstybės investicijų valdymo agentūra
(legal status – Private Limited Liability Company, code 305612545. Has no direct interest in the
share capital of the Company; no shareholding (above 5%) in the related companies of AB
Klaipėdos nafta.
Bjarke Pålsson (independent member)
(born 1968) – Independent member of the Board of the Company since 24 January 2017,
elected till the end of the Board of Company cadence. Education: University of St. Gallen (HSG)
in Switzerland, CEMS Master’s Study Programme of Quantitative Economics and Finance.
Copenhagen Business School in Denmark, Master’s in Finance (excl. thesis) (1992). Copenhagen
Business School in Denmark, Bachelor’s in Economics. Employed: 50% owner and Co-CEO of
Mark & Wedell (Oldenvej 5, 3490 Kvistgaard, Denmark). Has no direct interest in the share
capital of the Company; no shareholding (above 5%) in the related companies of AB Klaipėdos
nafta.
Guy Mason (independent member)
• (born 1964) - Independent member of the Board of the Company since 1 December 2021,
elected till the end of the Board of Company cadence. Education: Engineering science and
technology, Loughborough University (1986). Other qualifications: Chartered Engineer, Fellow
of Institution of Mechanical Engineers. Employer and position: appointments leading to SVP
Global Head of Shipping, BP (Apr 2016 – Dec 2020); Non-Executive Director and Advisory
Committee member, International Tanker Owners Pollution Federation (ITOPF) (Sept 2018 –
Dec 2020); Non-Executive Director, Member of Charitable Giving and Investment committees,
International Foundation for Aids to Navigation (IFAN) (May 2016 – Dec 2020). Participation in
activities of other companies and organizations: Non-Executive Director, Windward Limited.
Has no direct interest in the share capital of the Company; no shareholding (above 5%) in the
related companies of AB Klaipėdos nafta.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 139
During 2021 the composition of the Board changed as
follows: the independent Board Member Ian Bradshaw
resigned from the position as the Board member of the
Company from 1st of October 2021. The Supervisory
Council of the Company on the 25th of November 2021
adopted a decision to elect Guy Mason as an independent
Board Member of the Company to fill the existing vacancy
to serve from 1st December 2021 until the term of office
of the acting Board of the Company (24 April 2022).
BOARD ACTIVITY
The Board reviewed the strategic, operational, financial,
reputational, and safety issues throughout the year on a
regular basis. In addition, The Board monitored the
Company’s financial and strategic goals against the
annual plan for 2021 quarterly and considered the yearly
plan for 2022 after taking into account management’s
assumptions.
The Board’s work was very intensive in 2021- it held 15
meetings, 3 of which were held in writing. 134 items were
presented to the Board, 67 of them – for the adoption of
a decision.
During 2021 the Board reviewed the long-term strategy
of the Company and participated in numerous discussions
with the management. The Board analysed and agreed on
the strategy 2022-2024 presented to the Governance
Coordination Centre.
The Board oversaw the Company’s risks and reviewed
management judgments about specific ones. During the
year, three Risk reports were approved.
The Board discussed issues related with global LNG
projects.
The Board actively participated in the discussions
regarding Company‘s long-term LNG supply project and
made significant decisions:
• Approved public market consultations regarding
Floating Storage and Regasification Unit (hereinafter
- FSRU) acquisition and preparation for its public
procurement (25 March 2021);
• Approved FSRU main terms and conditions of the
public procurement as proposed by the management
(27 May 2021).
• Supported management’s decision to approve FSRU
“Independence” as the most economically
advantageous offer (9 September 2021).
On 28th July 2021 the Board has approved the renewed
Dividend Policy of the Company. Dividend Policy is based
on the existing legislation of the Republic of Lithuania, the
Company's Articles of Association, and other Company's
internal documents.
The Board also advised on numerous corporate
governance issues such as draft of Corporate Governance
Policy, which was approved by the Company’s Supervisory
Council, Company’s internal control system improvement
plan and others.
The Board was highly involved in managing oil business
segment situation in the light of geopolitical factors. The
Board with the management aligned assumptions on
future cash flows projections of oil business segment to
be used for impairment of Klaipėda oil terminal (KOT)
calculations (August 2021).
The Board was also involved in transactions of the
Company. The Board engaged by approving the main
terms and conditions or by supporting the management
with the strategic advice. The major transactions are as
follows:
• Approval of KN storage services fee for new
agreement with Alcodis SA (25 February 2021);
• Approval conclusion of new agreement with Vitol A.S.
on storage and transhipment of fuel oil (27 May
2021);
• Approval of Company’s storage services fee for new
agreement with AB “Orlen Lietuva” (9 September
2021).
Main terms and conditions of Regulations for use of the
liquefied natural gas terminal of the Company were
approved by the Board on 23rd of July 2021.
NAME
POSITION IN THE COMPANY
THE INDEPENDENCE
CRITERIA
BOARD MEMBER FROM THE DATE
Giedrius Dusevičius
Chairman of the Board
Independent
From the 30 December 2016
Dainius Bražiūnas
Member of the Board
-
From the 25 July 2014
Mantas Bartuška
Member of the Board
-
From the 25 September 2014
Bjarke Pålsson
Member of the Board
Independent
From the 24 January 2017 until 1
February 2022
Ian Bradshaw
Member of the Board
Independent
From the 2 January 2019 until 1
October 2021
Guy Mason
Member of the Board
Independent
From the 1 December 2021
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 140
The Board members attended the meetings in 2021:
✓ Attended
Not attended
- Was not a member of the Board
No
Date of the meeting
Giedrius
Dusevičius
Dainius
Bražiūnas
Mantas
Bartuška
Bjarke
Pålsson
Ian
Bradshaw
Guy
Mason
1.
January 8 (in writing)
✓
✓
✓
✓
✓
-
2.
January 28
✓
✓
✓
✓
-
3.
February 25
✓
✓
✓
✓
-
4.
March 25
✓
✓
✓
✓
✓
-
5.
April 6
✓
✓
✓
✓
✓
-
6.
April 29
✓
✓
✓
✓
✓
-
7.
May 5 (in writing)
✓
✓
✓
✓
✓
-
8.
May 27
✓
✓
✓
✓
✓
-
9.
July 1
✓
✓
✓
✓
✓
-
10.
July 20
✓
✓
✓
✓
✓
-
11.
July 23 (in writing)
✓
✓
✓
✓
✓
-
12.
September 9
✓
✓
✓
✓
✓
-
13.
October 28
✓
✓
✓
✓
-
-
14.
November 10
✓
✓
✓
✓
-
-
15.
December 9
✓
✓
✓
✓
-
✓
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 141
THE DIRECTORS OF THE COMPANY AS AT 31 DECEMBER 2021
Darius Šilenskis
(born 1981) – Chief Executive Officer. Works at the Company since 28 September 2015. Education:
Baltic Management Institute, Master of executives international business management (EMBA),
(2013), Vytautas Magnus University, Master of business administration (2013), Mykolas Riomeris
university, Master of law (2006, Law and management studies), Bachelor of law (2004, International
law if the Sea studies). Participation in activities of other companies and organisations: member of
the board of directors of the Association of Lithuanian Stevedoring Companies, member of the
board of Lithuanian Maritime Cluster, chairman of the Lithuanian LNG Platform, VŠĮ "Vilniaus teisės
institutas" founder and venturer (owns 50% rights of venture), UAB “Afinta” shareholder (owns 50%
of the shares). The share of AB Klaipėdos nafta held by Darius Šilenskis is less than 5%; no in the
related companies of AB Klaipėdos nafta.
Mindaugas Kvekšas
(born 1986) – Chief Financial Officer. Works at the Company since 16 August 2021. Education: The
Stockholm School of Economics in Riga (Latvia), BSc in Economics and Business (2007). Baltic
Institute of Corporate Governance, Professional Board Member Certificate (2020). Participation in
activities of other companies and organisations: Independent Member of the Board of Municipal
enterprise Vilnius Waste System Administrator (VASA SĮ). Mindaugas Kvekšas does not own shares
in AB Klaipėdos nafta or other companies when the number of shares held exceeds 5% of all shares
in the company.
Linas Kilda
(born 1972) – LNG Business Development Director. Appointed as LNG Business Development
Director from 3 August 2020. Education: Institute of Geology and Geography, PhD (Physical
Sciences) (2002); University of Aberdeen, Master of Petroleum Geology (1998); Vilnius University,
Engineering geologist and hydrogeologist (1995). No participation in other companies’
management. The share of AB Klaipėdos nafta held by Linas Kilda is less than 5%; no in the related
companies of AB Klaipėdos nafta.
Dainius Čiuta
(born 1975) – Chief Operations Officer. Appointed as Chief Operations Officer from 5 November
2020. Education: Baltic Management Institute (BMI), International Executive Master of Business
Administration (EMBA) (2013); Kaunas University of Technology, Master of Chemical Technology
Engineering (1999); Klaipeda University, Bachelor of Chemical Technology (1997). Participation in
the activities of other companies, institutions and organizations: member of the board of children’s
football club “FK Atmosfera”; member of the Energy Committee of Lithuanian Confederation of
Industrialists. Dainius Čiuta does not own shares in AB Klaipėdos nafta or other companies when
the number of shares held exceeds 5% of all shares in the company.
Mindaugas Navikas
(born 1979) – Chief Sales Officer. Appointed as a Chief Sales Officer from 8 September 2020.
Education: Stockholm School of Economics in Riga (SSE), Master of Business Management (EMBA)
(2018); Vilnius University, International Business School, Master of International Business
Management (2006); Vilnius University, Bachelor of Business Management (2002). No participation
in other companies’ management. The share of AB Klaipėdos nafta held by Mindaugas Navikas is
less than 5%; no in the related companies of AB Klaipėdos nafta.
Rytis Valūnas
(born 1985) - Chief Administrative and Corporate Governance Officer. Works at the Company since
15 September 2012. Education: Baltic Institute of Corporate Governance, Professional Board
Member Certificate (2015); The Fletcher School of Law and Diplomacy/Harvard Law School, LL.M.
(2011); Mykolas Romeris University/Ghent University, MA in International Law (2009); Mykolas
Romeris University, BA in Law (2007). The share of AB Klaipėdos nafta held by Rytis Valūnas is less
than 5%; no in the related companies of AB Klaipėdos nafta.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 142
No members of the Company‘s management have been
convicted of crimes against property, business or finances.
Information about managers’ salary for the year 2021 is
stated in chapter “Information about the employees of the
Group“ in the Annual Report.
OTHER GOVERNANCE INFORMATION
INFORMATION ON MAJOR SHARE PACKAGES
CONTROLLED EITHER DIRECTLY OR INDIRECTLY.
Details of the shares are provided in chapter "Information
about investment into other companies in the Annual
Report.
INFORMATION ON TRANSACTIONS WITH RELATED
PARTIES
No transaction with related parties as provided for in art.
37(2) of the Law on Companies of the Republic of
Lithuania was concluded in 2021.
INFORMATION ON SHAREHOLDERS HAVING SPECIAL
CONTROL RIGHTS.
All shares of the Company are of one class ordinary
registered shares granting their owners (shareholders)
equal rights. Details of the shares are provided in chapter
"Shareholders and Shares of the Company” in the Annual
Report.
INFORMATION OF AMENDMENTS TO THE COMPANY‘S
ARTICLES OF ASSOCIATION
11th January 2021. Amended Articles of Association
AB Klaipėdos nafta were registered in the Register of
Legal Entities following the decrease of the authorised
capital of the Company, which is now equal to EUR
110,315,009.65 and divided into 380,396,585 units of
shares, which grant 380,396,585 votes. Nominal value per
share – EUR 0.29.
INFORMATION ON ALL AGREEMENTS BETWEEN
SHAREHOLDERS
The Company does not have any information on
agreements between shareholders.
INFORMATION ON THE VARIED POLICY APPLICABLE TO
THE ELECTION OF THE COMPANY‘S CHIEF MANAGER,
THE MEMBERS OF GOVERNING AND SUPERVISORY
COUNCILS
The Company does not have the variety policy applicable
to the election of the chief manager and the members of
governing and supervisory bodies. During the procedure
of selection of candidates to the Company‘s board of
directors, governing and Supervisory Councils, the
candidates shall be subject to requirements that do not
discriminate a candidate on grounds of age, sex,
education, or professional experience. During the
selection of a candidate, the Company does not set any
restrictions for nomination of a candidature on grounds
of sex or age.
Considering the specificity of the Company‘s business
activity and the status of a state-owned company,
unbiased requirements which are only related to the
functions and competences of the members of a
governing or Supervisory Councils and the professional
experience and education proportionate to these
functions and competences are set.
General and independence requirements to candidates to
the Company‘s Supervisory Council are set by the
Description of Selection of Candidates to the Boards of
State or Municipal Companies and Candidates to the
Collegial Supervisory or Governing Board of a Company
That Is under Control of a State or Municipal Company
Elected by the General Meeting as adopted by Decision
No 631 of 17 June 2015 of the Government of the
Republic of Lithuania.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 143
INFORMATION ON COMPLIANCE WITH TRANSPARENCY GUIDELINES
AB Klaipėdos nafta complies with the 2010 July 14
Government Resolution No. 1052 “On the Approval of the
Description of the Guidelines for Ensuring the
Transparency of the Activities of State-Owned
Enterprises” (hereinafter - the Transparency Guidelines).
The Transparency Guidelines are mandatory for the
Company, as the Company is a state-owned enterprise
(hereinafter - SOE).
The implementation of the transparency guidelines in the
Company is mainly ensured through the information
disclosed in the annual report and the disclosure of
information on the Company's websites by disclosing and
providing information in a format that is accessible and
understandable to stakeholders.
Article 3 of the Transparency Guidelines states that SOEs
which are listed on AB Nasdaq Vilnius comply with the
provisions of the Corporate Governance Code related to
public disclosure of information. Information on the
Company's compliance with the provisions of this Code is
disclosed in the Company's management report.
BELOW IS THE STRUCTURED INFORMATION ON THE IMPLEMENTATION OF THE TRANSPARENCY GUIDELINES:
INFORMATION / OTHER REQUIREMENTS MUST BE PUBLISHED ON THE COMPANY'S WEBSITE (WWW.KN.LT):
COMPLYING PARTIALLY COMPLYING NOT COMPLYING
Name, code and register of the Company, where data
about the Company is collected and stored, registered
office (address)
Legal status, if the Company is reorganized (the method of
reorganization is indicated), liquidated, is about to go
bankrupt, or already bankrupt
Information about the institution representing the state
Activity plans, vision, and mission
Organizational structure
Details about the manager of the company *
Details about the chairman of the Board and its members
*
Details about the chairman of the Supervisory Council and
its members *
Names of the committees, details about their chairs and
members *
Amount of nominal values of state-owned shares (in euros
to the nearest euro cent) and share (in percent) in the
authorized capital of the Company
Information on social responsibility initiatives and measures,
important ongoing or planned investment projects
Special obligations are fulfilled, which are determined in
accordance with the recommendations approved by the
Ministry of Economy and Innovation of the Republic of
Lithuania: the purpose of special obligations, state budget
appropriations and legal acts allocating them to the
special obligation and regulated pricing
If the Company is a participant in other legal entities (does
not apply to subsidiaries) name, code and register of such
legal entities, where the data on the Company is collected
and stored, registered office (address), website addresses
The set of the Company's annual financial statements, the
Company's annual report, as well as the report of the
auditor of the Company's annual reports must be
published on the Company's website within 10 working
days from the approval of the set of annual financial
statements.
Sets of the Company's interim financial statements, the
Company's interim reports must be published on the
website no later than within 2 months after the end of the
reporting period
* The following data is published: name, surname, date of commencement of current positions, other current management positions in
other legal entities, education, qualification, professional experience; it shall be indicated whether a member of the collegial body has
been elected or appointed as an independent member.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 144
TAKING INTO ACCOUNT THAT THE COMPANY IS THE PARENT COMPANY, THE FOLLOWING INFORMATION MUST BE
PUBLISHED ON THE COMPANY'S WEBSITE (WWW.KN.LT):
The structure of the Group of companies
Subsidiaries and subsequent subsidiaries of the Company:
Name, code and register of the Company, where data
about the Company are collected and stored, registered
office (address)
Share held by the Company (percentage) in the authorized
capital of subsidiary companies
Website addresses
Annual consolidated financial statements and consolidated
annual reports
THE FOLLOWING DOCUMENTS / OTHER REQUIREMENTS MUST BE PUBLISHED ON THE COMPANY'S WEBSITE (WWW.KN.LT):
Articles of Association
Letter from the Ministry of Energy on the establishment of
the Company's goals and expectations for the Company
Business strategy or a summary thereof in cases where the
business strategy contains confidential information or
information which is considered a commercial (industrial)
secret
Remuneration policy, which includes the determination of
the remuneration of the head of the Company and the
remuneration of the members of the collegial bodies and
committees formed by the Company
Company's annual and interim reports
Sets of annual and interim financial statements for a period
of at least 5 years and the auditor's report of the annual
financial statements
The above documents are published in PDF format and it
is technically possible to print them
OTHER REQUIREMENTS MUST BE PUBLISHED / FULFILLED IN THE SETS OF FINANCIAL STATEMENTS AND NOTICES:
The Company maintains its accounting records in a
manner that ensures that financial statements are
prepared in accordance with International Accounting
Standards
The Company prepares a set of 6-month interim financial
statements
In addition to the annual report, the Company prepares an
additional 6-month interim report
IN ADDITION TO THE CONTENT REQUIREMENTS ESTABLISHED IN THE LAW ON FINANCIAL REPORTING OF COMPANIES OF
THE REPUBLIC OF LITHUANIA, THE COMPANY'S ANNUAL REPORT MUST ADDITIONALLY PROVIDE:
Brief description of the Company's business model
Results of the implementation of the objectives set in the
operational strategy
Information on significant events that occurred during and
after the financial year (prior to the preparation of the
annual report) and that were material to the Company's
operations
For state-owned enterprises that are not required to prepare
a CSR report, it is recommended that information on
environmental, social and personnel, human rights, anti-
corruption, and anti-bribery issues be provided in the annual
report or annual activity report, as appropriate.
Profitability, liquidity, asset turnover, debt ratios
Implementation of the company's risk management policy
Implementation of investment policy, ongoing and
planned investment projects, and investments during the
reporting year
Total annual salary fund, average monthly salary by current
position and / or division
Implementation of dividend policy
Implementation of remuneration policy
The consolidated annual report contains the structure of
the group of companies, as well as the name, code and
register of each subsidiary, which collects and stores data
about the Company, registered office (address), shares
(percentage) in the subsidiary's share capital, financial and
non-financial results for the financial year.
The Company's interim report provides a brief description of
the Company's business model, analysis of financial results
for the reporting period, information on significant events
during the reporting period, as well as profitability, liquidity,
asset turnover, debt ratios and their changes compared to
the corresponding period last year.
AB KLAIPĖDOS NAFTA GOVERNANCE REPORT
For the financial year ending on 31 December 2021
www.kn.lt | 145
AB KLAIPĖDOS NAFTA COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The public limited liability company AB Klaipėdos nafta
(hereinafter referred to as the “Company”), acting in
compliance with Article 22(3) of the Law of the Republic
of Lithuania on Securities and paragraph 24.5 of the
Listing Rules of AB NASDAQ Vilnius, hereby discloses how
it complies with the Corporate Governance Code for the
Companies listed on NASDAQ Vilnius as well as its specific
provisions or recommendations. In case of non-
compliance with this Code or some of its provisions or
recommendations, the specific provisions or
recommendations that are not complied with must be
indicated and the reasons for such non-compliance must
be specified. In addition, other explanatory information
indicated in this form must be provided.
FORM OF THE GOVERNANCE REPORT OF THE COMPANY:
PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
Principle 1: General meeting of shareholders, equitable treatment of shareholders, and shareholders’ rights
The corporate governance framework should ensure the equitable treatment of all shareholders. The corporate
governance framework should protect the rights of shareholders.
1.1. All shareholders should be provided with access to the
information and/or documents established in the legal acts on equal
terms. All shareholders should be furnished with equal opportunity
to participate in the decision-making process where significant
corporate matters are discussed.
Yes
All information that must be made
public in accordance with legal acts
is published through the
information system of the Vilnius
Stock Exchange and / or on the
Company's website. The place, date
and time of the General Meeting of
Shareholders convened by the
Company shall be determined in
order to enable the shareholders to
participate in making decisions
important to the Company.
The procedure for submitting
documents and other information
to shareholders is established in
Article 5 of the Company's Articles
of Association.
1.2. It is recommended that the company’s capital should consist
only of the shares that grant the same rights to voting, ownership,
dividend and other rights to all of their holders.
Yes
All shares of the Company are
ordinary registered shares with a
nominal value of EUR 0.29 (EUR 29
cents) per share.
1.3. It is recommended that investors should have access to the
information concerning the rights attached to the shares of the new
issue or those issued earlier in advance, i.e. before they purchase
shares.
Yes
The Company's Articles of
Association, which are publicly
available on the Company's
website, specify the rights granted
by the shares.
1.4. Exclusive transactions that are particularly important to the
company, such as transfer of all or almost all assets of the company
which in principle would mean the transfer of the company, should
be subject to approval of the general meeting of shareholders.
Yes
Article 16.4 of the Company's
Articles of Association indicate the
cases when the approval of the
General Meeting of Shareholders is
required.
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NOT
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COMMENTARY
1.5. Procedures for convening and conducting a general meeting of
shareholders should provide shareholders with equal opportunities
to participate in the general meeting of shareholders and should not
prejudice the rights and interests of shareholders. The chosen venue,
date and time of the general meeting of shareholders should not
prevent active participation of shareholders at the general meeting.
In the notice of the general meeting of shareholders being
convened, the company should specify the last day on which the
proposed draft decisions should be submitted at the latest.
Yes
The Company convenes the
General Meeting of Shareholders
and implements other procedures
of the Meeting in accordance with
the Law on Companies of the
Republic of Lithuania and provides
all shareholders with equal
opportunities to participate in the
meeting, get acquainted with draft
resolutions and material required
for decision-making.
1.6. With a view to ensure the right of shareholders living abroad to
access the information, it is recommended, where possible, that
documents prepared for the general meeting of shareholders in
advance should be announced publicly not only in Lithuanian
language but also in English and/or other foreign languages in
advance. It is recommended that the minutes of the general meeting
of shareholders after the signing thereof and/or adopted decisions
should be made available publicly not only in Lithuanian language
but also in English and/or other foreign languages. It is
recommended that this information should be placed on the website
of the company. Such documents may be published to the extent
that their public disclosure is not detrimental to the company or the
company’s commercial secrets are not revealed.
Yes
All documents and information
related to the General Meeting of
Shareholders, including notices of
meetings to be convened, draft
resolutions, resolutions of the
Meetings, are publicly available in
Lithuanian and English through
Nasdaq Vilnius and the Company's
website.
1.7. Shareholders who are entitled to vote should be furnished with
the opportunity to vote at the general meeting of shareholders both
in person and in absentia. Shareholders should not be prevented
from voting in writing in advance by completing the general voting
ballot.
Yes
All shareholders may exercise their
right to participate in the General
Meeting of Shareholders in
accordance with the procedure
established by legal acts and this
right is unlimited. The Company
provides information on the
implementation of this right in the
notice on convening the General
Meeting of Shareholders.
1.8. With a view to increasing the shareholders’ opportunities to
participate effectively at general meetings of shareholders, it is
recommended that companies should apply modern technologies
on a wider scale and thus provide shareholders with the conditions
to participate and vote in general meetings of shareholders via
electronic means of communication. In such cases the security of
transmitted information must be ensured, and it must be possible to
identify the participating and voting person.
No
Taking into account the structure of
the shareholders (controlling
interest is owned by the
Government of the Republic of
Lithuania) and the valid regulations
for organisation of the meeting of
shareholders ensuring full advance
publication of the material of the
General Meeting of Shareholders
and publicity of the decisions
adopted by the shareholders
(publishing all this information on
the website of SC Nasdaq Vilnius
Stock Exchange) and the
opportunity to vote in advance,
there is no necessity to additionally
install costly system of IT, which
would give the opportunity for the
shareholders to vote during the
meeting of the shareholders using
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COMMENTARY
telecommunication terminal
equipment. Currently, there are no
measures in place to ensure proper
identification of voters.
1.9. It is recommended that the notice on the draft decisions of the
general meeting of shareholders being convened should specify new
candidatures of members of the collegial body, their proposed
remuneration and the proposed audit company if these issues are
included into the agenda of the general meeting of shareholders.
Where it is proposed to elect a new member of the collegial body, it
is recommended that the information about his/her educational
background, work experience and other managerial positions held
(or proposed) should be provided.
Yes
Information about the candidates
to the Company's collegial bodies
is provided in accordance with the
procedure established by legal acts.
In accordance with the established
procedure, the suitability of
candidates is assessed by the
selection board.
The name of the proposed audit
firm and the remuneration for the
audit services shall be provided to
the General Meeting of the
Shareholders in advance as a draft
resolution.
1.10. Members of the company’s collegial management body, heads
of the administration
3
or other competent persons related to the
company who can provide information related to the agenda of the
general meeting of shareholders should take part in the general
meeting of shareholders. Proposed candidates to member of the
collegial body should also participate in the general meeting of
shareholders in case the election of new members is included into
the agenda of the general meeting of shareholders.
Yes
The last General Meeting of
Shareholders was attended by the
Chairman of the Board of the
Company, Chief Executive Officer of
the Company, Chief Administrative
and Corporate Governance Officer
and Head of the Legal Department.
Principle 2: Supervisory board
2.1. Functions and liability of the supervisory board
The supervisory board of the company should ensure representation of the interests of the company and its
shareholders, accountability of this body to the shareholders and objective monitoring of the company’s
operations and its management bodies as well as constantly provide recommendations to the management bodies
of the company.
The supervisory board should ensure the integrity and transparency of the company’s financial accounting and
control system.
2.1.1. Members of the supervisory board should act in good faith,
with care and responsibility for the benefit and in the interests of the
company and its shareholders and represent their interests, having
regard to the interests of employees and public welfare.
Yes
The obligations specified in the
recommendation are embedded in
the agreement on the activities of
an independent member of the
Supervisory Board. The form of the
agreement is approved by the
Company's General Meeting of
Shareholders.
3
For the purposes of this Code, heads of the administration are the employees of the company who hold top level
management positions.
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2.1.2. Where decisions of the supervisory board may have a different
effect on the interests of the company’s shareholders, the
supervisory board should treat all shareholders impartially and fairly.
It should ensure that shareholders are properly informed about the
company’s strategy, risk management and control, and resolution of
conflicts of interest.
Yes
The agreements with the members
of the Supervisory Board stipulates
that each independent member of
the Supervisory Board has a duty to
act in the interests of the Company
and all its shareholders.
2.1.3. The supervisory board should be impartial in passing decisions
that are significant for the company’s operations and strategy.
Members of the supervisory board should act and pass decisions
without an external influence from the persons who elected them.
Yes
The Supervisory Board of the
Company acts independently in
accordance with the requirements
of legal acts when making decisions
that are significant to the
Company's activities and strategy.
2.1.4. Members of the supervisory board should clearly voice their
objections in case they believe that a decision of the supervisory
board is against the interests of the company. Independent
4
members of the supervisory board should: a) maintain
independence of their analysis and decision-making; b) not seek or
accept any unjustified privileges that might compromise their
independence.
Yes
The members of the Supervisory
Board have the right to express
their opinion on all the agenda of
the meeting in accordance with the
Rules of Procedure of the
Company's Supervisory Board,
which must be duly reflected in the
minutes of the meeting.
The obligations specified in the
recommendation are embedded in
the agreement on the activities of
an independent member of the
Supervisory Board.
4
For the purposes of this Code, the criteria of independence of members of the supervisory board are interpreted as the
criteria of unrelated parties defined in Article 31(7) and (8) of the Law on Companies of the Republic of Lithuania.
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2.1.5. The supervisory board should oversee that the company’s tax
planning strategies are designed and implemented in accordance
with the legal acts in order to avoid faulty practice that is not related
to the long-term interests of the company and its shareholders,
which may give rise to reputational, legal or other risks.
Yes
The Supervisory Board of the
Company in the exercise of its
competence to supervise the
activities of the Company's
management bodies, also performs
the duties specified in the
recommendation.
2.1.6. The company should ensure that the supervisory board is
provided with sufficient resources (including financial ones) to
discharge their duties, including the right to obtain all the necessary
information or to seek independent professional advice from
external legal, accounting or other experts on matters pertaining to
the competence of the supervisory board and its committees.
Yes
The Company ensures the
provision of the Supervisory Board
with the resources necessary for its
activities (provides technical
support during the meetings of the
Supervisory Board, provides all the
necessary information). The Articles
of Association of the Company
stipulate that the Board must
submit to the Supervisory Board
the documents related to the
activities of the Company
requested by it. The right to
information is also detailed in the
contract for the activities of a
member of the Supervisory Board.
2.2. Formation of the supervisory board
The procedure of the formation of the supervisory board should ensure proper resolution of conflicts of interest
and effective and fair corporate governance.
2.2.1. The members of the supervisory board elected by the general
meeting of shareholders should collectively ensure the diversity of
qualifications, professional experience and competences and seek
for gender equality. With a view to maintain a proper balance
between the qualifications of the members of the supervisory board,
it should be ensured that members of the supervisory board, as a
whole, should have diverse knowledge, opinions and experience to
duly perform their tasks.
Yes
According to the Law on
Companies of the Republic of
Lithuania, the Supervisory Board is
elected, and the qualifications of its
members are assessed at the
General Meeting of Shareholders.
2.2.2. Members of the supervisory board should be appointed for a
specific term, subject to individual re-election for a new term in
office in order to ensure necessary development of professional
experience.
Yes
The members of the Company's
Supervisory Board are elected for a
maximum term of 4 years specified
in the Law on Companies of the
Republic of Lithuania.
The Articles of Association of the
Company provide for the possibility
to recall the entire Supervisory
Board or its individual members
before the end of the term of office
of the Supervisory Board.
2.2.3. Chair of the supervisory board should be a person whose
current or past positions constituted no obstacle to carry out
impartial activities. A former manager or management board
member of the company should not be immediately appointed as
chair of the supervisory board either. Where the company decides
to depart from these recommendations, it should provide
information on the measures taken to ensure impartiality of the
supervision.
Yes
The chairman of the Supervisory
Board of the Company and the
Chief Executive Officer of the
Company is not the same person.
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COMMENTARY
2.2.4. Each member should devote sufficient time and attention to
perform his duties as a member of the supervisory board. Each
member of the supervisory board should undertake to limit his other
professional obligations (particularly the managing positions in
other companies) so that they would not interfere with the proper
performance of the duties of a member of the supervisory board.
Should a member of the supervisory board attend less than a half of
the meetings of the supervisory board throughout the financial year
of the company, the shareholders of the company should be notified
thereof.
Yes
Each member of the Supervisory
Board participate in the meetings
of the collegial body and devote
sufficient time to perform their
duties as a member of the collegial
body. In 2021, 13 meetings of the
Company's Supervisory Board were
held, which were attended by all
members of the Supervisory Board
(3 members in total).
2.2.5. When it is proposed to appoint a member of the supervisory
board, it should be announced which members of the supervisory
board are deemed to be independent. The supervisory board may
decide that, despite the fact that a particular member meets all the
criteria of independence, he/she cannot be considered independent
due to special personal or company-related circumstances.
Yes
Information on candidates for
members of the Company's
Supervisory Board (as well as
information on the candidate's
compliance with the independence
requirements) is submitted to the
General Meeting of Shareholders in
accordance with the procedure
established by the Law on
Companies of the Republic of
Lithuania.
2.2.6. The amount of remuneration to members of the supervisory
board for their activity and participation in meetings of the
supervisory board should be approved by the general meeting of
shareholders.
Yes
An independent member of the
Supervisory Board shall be
remunerated for his / her activities
in the Supervisory Board in
accordance with the procedure and
conditions established in the
agreement signed with him / her
regarding the activities of the
independent member of the
Supervisory Board. The terms and
conditions of the agreement with
the independent member of the
Supervisory Board shall be
approved by the General Meeting
of Shareholders.
2.2.7. Every year the supervisory board should carry out an
assessment of its activities. It should include evaluation of the
structure of the supervisory board, its work organization and ability
to act as a group, evaluation of the competence and work efficiency
of each member of the supervisory board, and evaluation whether
the supervisory board has achieved its objectives. The supervisory
board should, at least once a year, make public respective
information about its internal structure and working procedures.
Yes
The Supervisory Board evaluates its
activities every year. The
Supervisory Board evaluates the
organization of meetings,
efficiency, need for competencies,
mutual cooperation, cooperation
with management, etc.
Principle 3: Management Board
3.1. Functions and liability of the management board
The management board should ensure the implementation of the company’s strategy and good
corporate governance with due regard to the interests of its shareholders, employees and other interest
groups.
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3.1.1. The management board should ensure the implementation of
the company’s strategy approved by the supervisory board if the
latter has been formed at the company. In such cases where the
supervisory board is not formed, the management board is also
responsible for the approval of the company’s strategy.
Yes
The Board of the Company
implements the strategy of the
parent company, which is approved
by the Supervisory Board of the
Company.
3.1.2. As a collegial management body of the company, the
management board performs the functions assigned to it by the Law
and in the articles of association of the company, and in such cases
where the supervisory board is not formed in the company, it
performs inter alia the supervisory functions established in the Law.
By performing the functions assigned to it, the management board
should take into account the needs of the company’s shareholders,
employees and other interest groups by respectively striving to
achieve sustainable business development.
Yes
Because the Supervisory Board is
formed in the Company, the Board
performs the functions of the
Company's collegial management
body. The obligation to take into
account the Company,
shareholders, employees and other
interest groups is embedded in the
agreement signed with each of the
members of the Board regarding
the activities of the member of the
Board.
3.1.3. The management board should ensure compliance with the
laws and the internal policy of the company applicable to the
company or a group of companies to which this company belongs.
It should also establish the respective risk management and control
measures aimed at ensuring regular and direct liability of managers.
Yes
The Company's Articles of
Association stipulate which
Company's documents (guidelines,
policies, etc.) are approved by the
Board. In cases where the
documents are approved by the
Supervisory Board, the Board shall
submit comments and suggestions.
In accordance with the Company's
Articles of Association, the Board
considers and approves the
Company's list of risks and the plan
of measures to reduce them, the
risk report, and the risk
management policy.
3.1.4. Moreover, the management board should ensure that the
measures included into the OECD Good Practice Guidance
5
on
Internal Controls, Ethics and Compliance are applied at the company
in order to ensure adherence to the applicable laws, rules and
standards.
Yes
The Company has various
documents in place to ensure
internal control, ethics, and
compliance management
measures, for example: the Head of
Internal Audit is an independent
position, reports to the Audit
Committee and is administratively
subordinate to the CEO; The
Company has a Code of Conduct
(Code of Ethics) that applies to all
employees of the Company,
including members of the Board
and the Supervisory Board.
3.1.5. When appointing the manager of the company, the
management board should take into account the appropriate
balance between the candidate’s qualifications, experience and
competence
Yes
When appointing the CEO, the
Board of the Company shall take
into account his/her qualifications,
experience and competence.
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COMMENTARY
3.2. Formation of the management board
3.2.1. The members of the management board elected by the
supervisory board or, if the supervisory board is not formed, by the
general meeting of shareholders should collectively ensure the
required diversity of qualifications, professional experience and
competences and seek for gender equality. With a view to maintain
a proper balance in terms of the current qualifications possessed by
the members of the management board, it should be ensured that
the members of the management board would have, as a whole,
diverse knowledge, opinions and experience to duly perform their
tasks.
Yes
The Board of the Company ensures
the balance of qualifications of its
members. The members of the
Board of the Company are elected
by the Supervisory Board of the
Company (Selection Committee),
which evaluates the qualifications
of the candidates, experience in the
management position, suitability to
hold the position of a member of
the Board of the Company and
other necessary aspects.
The aim is for the members of the
Board to have competencies
considering the responsibilities and
functions of the Board. Every year,
the members of the Board conduct
a self-assessment of their activities.
5
Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti-
bribery/44884389.pdf
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COMMENTARY
3.2.2. Names and surnames of the candidates to become members
of the management board, information on their educational
background, qualifications, professional experience, current
positions, other important professional obligations and potential
conflicts of interest should be disclosed without violating the
requirements of the legal acts regulating the handling of personal
data at the meeting of the supervisory board in which the
management board or individual members of the management
board are elected. In the event that the supervisory board is not
formed, the information specified in this paragraph should be
submitted to the general meeting of shareholders. The management
board should, on yearly basis, collect data provided in this paragraph
on its members and disclose it in the company’s annual report.
Yes
Information on candidates and
their suitability to hold the position
of a member of the Company's
collegial body is provided in
accordance with the procedure
established by legal acts, the
suitability of candidates is assessed
by the Selection Committee.
Information about the candidates
for the members of the Board of
the Company, including their
curriculum vitae and declaration of
interests, and other documents
specified in legal acts shall be
submitted at the meeting of the
Supervisory Board of the Company
at which the Board or its individual
members are elected. Information
on the positions held by the
members of the Board or their
participation in the activities of
other companies is regularly
collected, stored, and presented in
the Company's Annual Report and
on the Company's website.
3.2.3. All new members of the management board should be
familiarized with their duties and the structure and operations of the
company.
Yes
After their election, the members of
the Board are acquainted with the
Company's activities,
organizational and management
structure, strategy, operational and
financial plans.
3.2.4. Members of the management board should be appointed for
a specific term, subject to individual re-election for a new term in
office in order to ensure necessary development of professional
experience and sufficiently frequent reconfirmation of their status.
Yes
The Board members are appointed
for a fixed term, i.e., Board
members are elected for a period of
4 (four) years.
The Company's Articles of
Association provide for the
possibility to remove both
individual members of the Board
and the entire Board before the end
of its term. The right to recall
members of the Board (individual
or all) belongs to the Company's
Supervisory Board.
3.2.5. Chair of the management board should be a person whose
current or past positions constitute no obstacle to carry out impartial
activity. Where the supervisory board is not formed, the former
manager of the company should not be immediately appointed as
chair of the management board. When a company decides to depart
from these recommendations, it should furnish information on the
measures it has taken to ensure the impartiality of supervision.
Yes
The current or former position of
the Chairman of the Board of the
Company does not create
preconditions for the possible
emergence of impartiality. The
Chairman of the Board of the
Company has not held the position
of the CEO of the Company.
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3.2.6. Each member should devote sufficient time and attention to
perform his duties as a member of the management board. Should
a member of the management board attend less than a half of the
meetings of the management board throughout the financial year
of the company, the supervisory board of the company or, if the
supervisory board is not formed at the company, the general
meeting of shareholders should be notified thereof
Yes
The members of the Board of the
Company actively participate in the
meetings of the Board and devote
sufficient time to the performance
of their duties as a member of the
collegial body. In 2021, 15 meetings
of the Company's Board were held.
All 5 members of the Board
attended 11 meetings.
3.2.7. In the event that the management board is elected in the cases
established by the Law where the supervisory board is not formed at
the company, and some of its members will be independent , it
should be announced which members of the management board are
deemed as independent. The management board may decide that,
despite the fact that a particular member meets all the criteria of
independence established by the Law, he/she cannot be considered
independent due to special personal or company-related
circumstances.
Yes
The Supervisory Board is formed in
the Company.
3.2.8. The general meeting of shareholders of the company should
approve the amount of remuneration to the members of the
management board for their activity and participation in the
meetings of the management board.
Yes
Independent members of the
Board are paid based on the
Remuneration Policy of the
Company approved by the General
Meeting of Shareholders on 28
April 2020 (KN website:
https://www.kn.lt/apie-mus/darbo-
uzmokestis/1975) and agreement
concluded with the Company that
is approved by the Supervisory
Council.
3.2.9. The members of the management board should act in good
faith, with care and responsibility for the benefit and the interests of
the company and its shareholders with due regard to other
stakeholders. When adopting decisions, they should not act in their
personal interest; they should be subject to no-compete agreements
and they should not use the business information or opportunities
related to the company’s operations in violation of the company’s
interests.
Yes
These duties of the members of the
Board are provided for in the
activity agreement of the member
of the Board signed with the
Company, as well as in the Rules of
Procedure of the Board.
3.2.10. Every year the management board should carry out an
assessment of its activities. It should include evaluation of the
structure of the management board, its work organization and
ability to act as a group, evaluation of the competence and work
efficiency of each member of the management board, and
evaluation whether the management board has achieved its
objectives. The management board should, at least once a year,
make public respective information about its internal structure and
working procedures in observance of the legal acts regulating the
processing of personal data.
Yes
Every year, the members of the
Board of the Company evaluate
their activities by filling in
questionnaires, which include an
evaluation of the work organization
of the Board, cooperation with the
management, etc., the results of the
evaluation of activities are
discussed at the Board meeting.
Information on the internal
structure and work procedure of
the Board is published in the
Company's Annual Report.
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Principle 4: Rules of procedure of the supervisory board and the management board of the company
The rules of procedure of the supervisory board, if it is formed at the company, and of the management
board should ensure efficient operation and decision-making of these bodies and promote active
cooperation between the company’s management bodies.
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4.1. The management board and the supervisory board, if the latter
is formed at the company, should act in close cooperation in order
to attain benefit for the company and its shareholders. Good
corporate governance requires an open discussion between the
management board and the supervisory board. The management
board should regularly and, where necessary, immediately inform
the supervisory board about any matters significant for the company
that are related to planning, business development, risk
management and control, and compliance with the obligations at
the company. The management board should inform he supervisory
board about any derogations in its business development from the
previously formulated plans and objectives by specifying the reasons
for this.
Yes
The legal acts regulating the
activities of the Company's
Supervisory Board and the Board,
the Articles of Association, the
Company's corporate governance
policy and the Rules of Procedure
of collegial bodies establish the
principles and procedure of
cooperation between the
Company's Supervisory Board and
the Board and ensure that
management and supervisory
bodies function properly.
4.2. It is recommended that meetings of the company’s collegial
bodies should be held at the respective intervals, according to the
pre-approved schedule. Each company is free to decide how often
meetings of the collegial bodies should be convened but it is
recommended that these meetings should be convened at such
intervals that uninterruptable resolution of essential corporate
governance issues would be ensured. Meetings of the company’s
collegial bodies should be convened at least once per quarter.
Yes
Meetings of collegial bodies are
held according to the annual
meeting schedules approved in
advance by the collegial bodies (in
coordination with the
management). Meetings of the
Board and the Supervisory Board
are normally held once a month.
4.3. Members of a collegial body should be notified of the meeting
being convened in advance so that they would have sufficient time
for proper preparation for the issues to be considered at the meeting
and a fruitful discussion could be held and appropriate decisions
could be adopted. Along with the notice of the meeting being
convened all materials relevant to the issues on the agenda of the
meeting should be submitted to the members of the collegial body.
The agenda of the meeting should not be changed or supplemented
during the meeting, unless all members of the collegial body present
at the meeting agree with such change or supplement to the
agenda, or certain issues that are important to the company require
immediate resolution.
Yes
The members of the collegial body
know about the agenda of the
meeting in advance. Preliminary
agendas for meetings for the whole
year are drawn up at the beginning
of the year. The agendas are then
adjusted and completed before
each meeting (usually at least 7
days before the meeting). The
members of the collegial bodies
receive the material necessary for
making decisions on the issues of
the agenda in advance (5-7 days in
advance) and have the opportunity
to get acquainted with it and ask
questions, and for clarification. All
members of the collegial body shall
be informed about any comments
or clarifications received.
4.4. In order to coordinate the activities of the company’s collegial
bodies and ensure effective decision-making process, the chairs of
the company’s collegial supervision and management bodies should
mutually agree on the dates and agendas of the meetings and close
cooperate in resolving other matters related to corporate
governance. Meetings of the company’s supervisory board should
be open to members of the management board, particularly in such
cases where issues concerning the removal of the management
board members, their responsibility or remuneration are discussed.
Yes
The dates and agendas of the
meetings are coordinated so that
all members of the collegial bodies
can participate in them. The
Chairman of the Board regularly
presents to the Supervisory Board
the most important decisions made
by the Board.
Principle 5: Nomination, remuneration and audit committees
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
5.1. Purpose and formation of committees
The committees formed at the company should increase the work efficiency of the supervisory board
or, where the supervisory board is not formed, of the management board which performs the
supervisory functions by ensuring that decisions are based on due consideration and help organise its
work in such a way that the decisions it takes would be free of material conflicts of interest.
Committees should exercise independent judgment and integrity when performing their functions and
provide the collegial body with recommendations concerning the decisions of the collegial body.
However, the final decision should be adopted by the collegial body.
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PRINCIPLES / RECOMMENDATIONS
YES AND
NO NOT
APPLICA
BLE
COMMENTARY
5.1.1. Taking due account of the company-related circumstances
and the chosen corporate governance structure, the supervisory
board of the company or, in cases where the supervisory board is
not formed, the management board which performs the
supervisory functions, establishes committees. It is recommended
that the collegial body should form the nomination, remuneration
and audit committees
6
.
Partly
The Audit Committee, elected by the
Supervisory Body is formed within the
Company. The Supervisory Body
determined its functions, rights,
obligations and remuneration
procedure. The Company's Audit
Committee has been assigned with
advisory functions related to the audit
control and assessment and covering
supervision of financial reports
preparation and audit execution process,
examination of its effectiveness and
implementation of recommendations,
analysis of need of internal audit
functions and other functions, as
provided by the Resolution No. 03-14 of
the Board of the Bank of Lithuania on 24
January 2017, observes the integrity of
the financial information provided by the
Company, paying special attention to
the relevance and transparency of the
accounting methods used by the
Company and its group.
Other specialized committees are not
established within the Company.
However, the Board formed a working
group for revision of Human Resources
items with composition of two Board
members and one Company’s
representatives –Head of HR and CEO.
5.1.2. Companies may decide to set up less than three committees.
In such case companies should explain in detail why they have
chosen the alternative approach, and how the chosen approach
corresponds with the objectives set for the three different
committees.
Yes
Refer to the comment submitted
regarding the item 5.1.1. above.
5.1.3. In the cases established by the legal acts the functions
assigned to the committees formed at companies may be
performed by the collegial body itself. In such case the provisions
of this Code pertaining to the committees (particularly those
related to their role, operation and transparency) should apply,
where relevant, to the collegial body as a whole.
Yes
Refer to the comment submitted
regarding the item 5.1.1. above.
5.1.4. Committees established by the collegial body should
normally be composed of at least three members. Subject to the
requirements of the legal acts, committees could be comprised
only of two members as well. Members of each committee should
be selected on the basis of their competences by giving priority to
independent members of the collegial body. The chair of the
management board should not serve as the chair of committees.
Yes
The Audit Committee, formed by the
Supervisory Council, comprises of three
members.
All of the acting members of the Audit
Committee were independent.
6
The legal acts may provide for the obligation to form a respective committee. For example, the Law on the Audit of Financial
Statements of the Republic of Lithuania provides that public-interest entities (including but not limited to public limited
liability companies whose securities are traded on a regulated market of the Republic of Lithuania and/or of any other
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PRINCIPLES / RECOMMENDATIONS
YES AND
NO NOT
APPLICA
BLE
COMMENTARY
5.1.5. The authority of each committee formed should be
determined by the collegial body itself. Committees should
perform their duties according to the authority delegated to them
and regularly inform the collegial body about their activities and
performance on a regular basis. The authority of each committee
defining its role and specifying its rights and duties should be
made public at least once a year (as part of the information
disclosed by the company on its governance structure and practice
on an annual basis). In compliance with the legal acts regulating
the processing of personal data, companies should also include in
their annual reports the statements of the existing committees on
their composition, the number of meetings and attendance over
the year as well as the main directions of their activities and
performance.
Yes
The committees are formed by the
decision of the Supervisory Board. The
rules of procedure of the committees,
the rights, and obligations of the
members of the committees, as well as
the measures to ensure the activities of
the members of the committees shall be
established by the rules for the
establishment and operation of the
relevant committees approved by the
Supervisory Board.
Information on the composition of
committees, number of meetings,
participation and main activities is
disclosed in the Company's Annual
Report.
5.1.6. With a view to ensure the independence and impartiality of
the committees, the members of the collegial body who are not
members of the committees should normally have a right to
participate in the meetings of the committee only if invited by the
committee. A committee may invite or request that certain
employees of the company or experts would participate in the
meeting. Chair of each committee should have the possibility to
maintain direct communication with the shareholders. Cases where
such practice is to be applied should be specified in the rules
regulating the activities of the committee.
Yes
The rules of formation and operation of
the Audit Committee of the Company
provide for the right of the Audit
Committee to invite the responsible
persons of the Company to its meetings
and to receive the necessary
explanations from them in accordance
with their competence.
Member State) are under the obligation to set up an audit committee (the legal acts provide for the exemptions where the
functions of the audit committee may be carried out by the collegial body performing the supervisory functions).
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
5.2. Nomination committee
5.2.1. The key functions of the nomination committee should be
the following:
1) to select candidates to fill vacancies in the membership of
supervisory and management bodies and the administration and
recommend the collegial body to approve them. The nomination
committee should evaluate the balance of skills, knowledge and
experience in the management body, prepare a description of the
functions and capabilities required to assume a particular position
and assess the time commitment expected;
2) assess, on a regular basis, the structure, size and composition of
the supervisory and management bodies as well as the skills,
knowledge and activity of its members, and provide the collegial
body with recommendations on how the required changes should
be sought;
3) devote the attention necessary to ensure succession planning.
No
The Nomination Committee in the
Company currently is not formed.
5.2.2. When dealing with issues related to members of the collegial
body who have employment relationships with the company and
the heads of the administration, the manager of the company
should be consulted by granting him/her the right to submit
proposals to the Nomination Committee.
No
The Nomination Committee in the
Company currently is not formed.
5.3. Remuneration committee
5.3.1. The main functions of the remuneration committee should
be as follows:
1) submit to the collegial body proposals on the remuneration
policy applied to members of the supervisory and management
bodies and the heads of the administration for approval. Such
policy should include all forms of remuneration, including the
fixed-rate remuneration, performance-based remuneration,
financial incentive schemes, pension arrangements and
termination payments as well as conditions which would allow the
company to recover the amounts or suspend the payments by
specifying the circumstances under which it would be expedient to
do so;
2) submit to the collegial body proposals regarding individual
remuneration for members of the collegial bodies and the heads
of the administration in order to ensure that they would be
consistent with the company’s remuneration policy and the
evaluation of the performance of the persons concerned;
3) review, on a regular basis, the remuneration policy and its
implementation.
No
Refer to the comment submitted
regarding the item 5.1.2. above.
5.4. Audit committee
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
5.4.1. The key functions of the audit committee are defined in the
legal acts regulating the activities of the audit committee
7
.
Yes
The functions of the Audit
Committee are also defined in the
rules of formation and operation of
the Company's Audit Committee.
5.4.2. All members of the committee should be provided with
detailed information on specific issues of the company’s
accounting system, finances and operations. The heads of the
company’s administration should inform the audit committee
about the methods of accounting for significant and unusual
transactions where the accounting may be subject to different
approaches.
Yes
The members of the Audit
Committee of the Company, while
performing their duties, have the
right to receive from the Company
the required documents and / or
copies thereof and the information
required to perform the functions
of the Audit Committee.
5.4.3. The audit committee should decide whether the participation
of the chair of the management board, the manager of the
company, the chief finance officer (or senior employees
responsible for finance and accounting), the internal and external
auditors in its meetings is required (and, if required, when). The
committee should be entitled, when needed, to meet the relevant
persons without members of the management bodies present.
Yes
The Head of Internal Audit
participates in the meetings of the
Audit Committee, and other staff, if
necessary, when discussing specific
issues. Representatives of the
Company performing the
independent audit of the financial
statements participate in the
meeting of the Audit Committee, if
necessary.
5.4.4. The audit committee should be informed about the internal
auditor’s work program and should be furnished with internal audit
reports or periodic summaries. The audit committee should also be
informed about the work program of external auditors and should
receive from the audit firm a report describing all relationships
between the independent audit firm and the company and its
group.
Yes
The Audit Committee shall receive
the information referred to in this
paragraph and approve the annual
plans of the internal audit. The
Head of Internal Audit informs the
Audit Committee about the
implementation of the internal
audit plans and provides reports.
Representatives of the company
performing the independent audit
of the financial statements shall
participate in the meeting of the
Audit Committee, if necessary.
5.4.5. The audit committee should examine whether the company
complies with the applicable provisions regulating the possibility
of lodging a complaint or reporting anonymously his/her
suspicions of potential violations committed at the company and
should also ensure that there is a procedure in place for
proportionate and independent investigation of such issues and
appropriate follow-up actions.
Yes
Possible violations can be reported
to the e-mail address
SpeakUp@kn.lt (information is
available to the Head of Internal
Audit). The notification channel is
open to all natural or legal persons:
both current or former KN
employees and former or potential
KN customers, contractors,
suppliers, the community.
Possible violations can also be
reported directly to the collegial
supervisory bodies of KN by e-
mail: SupervisoryBodies@kn.lt
7
Issues related to the activities of audit committees are regulated by Regulation No. 537/2014 of the European Parliament
and the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities, the Law on
the Audit of Financial Statements of the Republic of Lithuania, and the Rules Regulating the Activities of Audit Committees
approved by the Bank of Lithuania.
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
5.4.6. The audit committee should submit to the supervisory board
or, where the supervisory board is not formed, to the management
board its activity report at least once in every six months, at the
time that annual and half-yearly reports are approved.
Yes
The Audit Committee informs the
Supervisory Board of its activities
at least once a quarter and submits
a written report on its activities to
the Supervisory Board quarterly.
The Audit Committee also informs
the Board about its activities at
least once a year.
Principle 6: Prevention and disclosure of conflicts of interest
The corporate governance framework should encourage members of the company’s supervisory and
management bodies to avoid conflicts of interest and ensure a transparent and effective mechanism
of disclosure of conflicts of interest related to members of the supervisory and management bodies.
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
When appointing the manager of the company, the management
board should take into account the appropriate balance between
the candidate’s qualifications, experience and competence. 6.1.
Any member of the company’s supervisory and management body
should avoid a situation where his/her personal interests are or
may be in conflict with the company’s interests. In case such a
situation did occur, a member of the company’s supervisory or
management body should, within a reasonable period of time,
notify other members of the same body or the body of the
company which elected him/her or the company’s shareholders of
such situation of a conflict of interest, indicate the nature of
interests and, where possible, their value.
Yes
The members of the Company’s
supervisory and management
bodies oblige to act in such a
manner so as to avoid conflict of
interests with the Company. This is
determined in the Articles of
Association of the Company and in
other documents of operation of
the Company.
For this purpose, the member of
the Company's supervisory and
management bodies submit to the
Company's body that elected them
and the Company the declarations
about the absence of the conflict of
interests and oblige to
immediately inform about any
change of the circumstances
revealed in these declarations.
In case of a conflict of interests
between a member of the
Company’s supervisory and
management bodies and the
Company during discussion of
issues, such a member of the
supervisory or management
bodies shall immediately notify
Company's body that elected them
and not participate in voting
regarding specific items in view of
which such conflict arose. A
member of the supervisory and
management bodies shall not be
entitled to vote when the meeting
of the supervisory and
management bodies discusses the
issue related to his work on the
supervisory and management
bodies or the issue of his
responsibility.
Principle 7: Remuneration policy of the company
The remuneration policy and the procedure for review and disclosure of such policy established at the company
should prevent potential conflicts of interest and abuse in determining remuneration of members of the collegial
bodies and heads of the administration, in addition it should ensure the publicity and transparency of the
company’s remuneration policy and its long-term strategy.
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
7.1. The company should approve and post the remuneration
policy on the website of the company; such policy should be
reviewed on a regular basis and be consistent with the company’s
long-term strategy.
Yes
On 2020 April 28, the Annual
General Meeting of Shareholders
approved the Company's
Remuneration Policy, which
applies to the CEO of the
Company, members of the Board,
the Supervisory Board, and other
committees. This remuneration
policy defines the principles and
procedures for determining,
paying, and promoting the
remuneration of members of the
Supervisory Board, members of the
Board, and Committees and the
head of the Company who are
independent and not independent
but not employees of the state
representative body.
Published on the Company's
website
https://www.kn.lt/en/about-
us/operational-
documentation/remuneration-
policy/3456
7.2. The remuneration policy should include all forms of
remuneration, including the fixed-rate remuneration,
performance-based remuneration, financial incentive schemes,
pension arrangements and termination payments as well as the
conditions specifying the cases where the company can recover the
disbursed amounts or suspend the payments.
Yes
The Company's Remuneration
Policy determines the components
of remuneration, their maximum
amounts, and the principles of
awarding and paying.
7.3. With a view to avoid potential conflicts of interest, the
remuneration policy should provide that members of the collegial
bodies which perform the supervisory functions should not receive
remuneration based on the company’s performance.
Yes
The remuneration of the members
of the collegial bodies that perform
supervisory functions does not
depend on the performance of the
Company.
7.4. The remuneration policy should provide sufficient information
on the policy regarding termination payments. Termination
payments should not exceed a fixed amount or a fixed number of
annual wages and in general should not be higher than the non-
variable component of remuneration for two years or the
equivalent thereof. Termination payments should not be paid if the
contract is terminated due to inadequate performance.
Not
applicable
Termination payments are not
foreseen in the Remuneration
Policy of the Company
(https://www.kn.lt/apie-
mus/darbo-uzmokestis/1975).
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
7.5. In the event that the financial incentive scheme is applied at
the company, the remuneration policy should contain sufficient
information about the retention of shares after the award thereof.
Where remuneration is based on the award of shares, shares
should not be vested at least for three years after the award
thereof. After vesting, members of the collegial bodies and heads
of the administration should retain a certain number of shares until
the end of their term in office, subject to the need to compensate
for any costs related to the acquisition of shares.
Not
applicable
During the year under review the
Company has not applied any
schemes anticipating
remuneration of directors in
shares, share options or any other
right to purchase shares or be
remunerated on the basis of share
price movements. This has not
been provided for neither by the
existing Management personnel
remuneration procedure nor
employment contracts with
directors and other employees of
the Company.
7.6. The company should publish information about the
implementation of the remuneration policy on its website, with a
key focus on the remuneration policy in respect of the collegial
bodies and managers in the next and, where relevant, subsequent
financial years. It should also contain a review of how the
remuneration policy was implemented during the previous
financial year. The information of such nature should not include
any details having a commercial value. Particular attention should
be paid on the major changes in the company’s remuneration
policy, compared to the previous financial year.
Yes
The Company's Remuneration
Report for 2021 will be published
on the website www.kn.lt.
7.7. It is recommended that the remuneration policy or any major
change of the policy should be included on the agenda of the
general meeting of shareholders. The schemes under which
members and employees of a collegial body receive remuneration
in shares or share options should be approved by the general
meeting of shareholders.
Yes
The Remuneration Policy stipulates
that the policy is submitted for
approval to the General Meeting of
Shareholders at least every 4 (four)
years, as well as if there are
significant changes in the policy. In
the event of a change in the
Remuneration Policy, all policy
statements approved after the last
General Meeting of Shareholders
vote on the Remuneration Policy
shall be submitted to the Meeting.
Principle 8: Role of stakeholders in corporate governance
The corporate governance framework should recognize the rights of stakeholders entrenched in the laws or mutual
agreements and encourage active cooperation between companies and stakeholders in creating the company
value, jobs and financial sustainability. In the context of this principle the concept “stakeholders” includes
investors, employees, creditors, suppliers, clients, local community and other persons having certain interests in
the company concerned.
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
8.1. The corporate governance framework should ensure that the
rights and lawful interests of stakeholders are protected.
Yes
The execution of this
recommendation is ensured by the
accurate supervision and control of
the state institutions and
organisations regulating and
controlling the Company’s
activities.
The management bodies consult
with the employees on corporate
governance and other important
issues, (employee) participation in
the Company’s share capital is not
limited.
Publicity of the essential
information about the Company's
activity creates the conditions for
the holders of interests to
participate in the management of
the Company according to the
procedure established by the law
and the Article of Association, as
well as for the Company's
employees also according to the
Collective Agreement of the
Company.
8.2. The corporate governance framework should create conditions
for stakeholders to participate in corporate governance in the
manner prescribed by law. Examples of participation by
stakeholders in corporate governance include the participation of
employees or their representatives in the adoption of decisions
that are important for the company, consultations with employees
or their representatives on corporate governance and other
important matters, participation of employees in the company’s
authorized capital, involvement of creditors in corporate
governance in the cases of the company’s insolvency, etc.
Yes
8.3. Where stakeholders participate in the corporate governance
process, they should have access to relevant information.
Yes
8.4. Stakeholders should be provided with the possibility of
reporting confidentially any illegal or unethical practices to the
collegial body performing the supervisory function.
Yes
Principle 9: Disclosure of information
The corporate governance framework should ensure the timely and accurate disclosure of all material corporate
issues, including the financial situation, operations and governance of the company.
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
9.1. In accordance with the company’s procedure on confidential
information and commercial secrets and the legal acts regulating
the processing of personal data, the information publicly disclosed
by the company should include but not be limited to the following:
Yes
Performance and corporate
governance is regularly disclosed
by distributing press posts about
publicly undisclosed information,
related to the Company on SC
Nasdaq Vilnius Stock Exchange
website, as well as in the
Company's annual reports and
financial statements, press releases
published in the exchange and in
other public presentations of the
Company activity.
The Company is not limited only by
disclosure of minimum necessary
public information and also
publishes other important
information about the Company's
activity.
The documents that contain
certain information are published
in Lithuanian and English on the
publicly accessible website of the
SC Nasdaq Vilnius Stock Exchange.
9.1.1. operating and financial results of the company;
Yes
They are made public on a monthly
basis, as well as in the Company's
Interim and Annual Reports.
9.1.2. objectives and non-financial information of the company;
Yes
Published in the Company's
Interim and Annual Reports, in the
Company's Corporate Strategy.
9.1.3. persons holding a stake in the company or controlling it
directly and/or indirectly and/or together with related persons as
well as the structure of the group of companies and their
relationships by specifying the final beneficiary;
Yes
They are made public in the
Company's Interim and Annual
Reports, on the Company’s
website.
9.1.4. members of the company’s supervisory and management
bodies who are deemed independent, the manager of the
company, the shares or votes held by them at the company,
participation in corporate governance of other companies, their
competence and remuneration;
Yes
They are made public in the
Company's Interim and Annual
Reports.
9.1.5. reports of the existing committees on their composition,
number of meetings and attendance of members during the last
year as well as the main directions and results of their activities;
Yes
They are made public in the
Company's Interim and Annual
Reports.
9.1.6. potential key risk factors, the company’s risk management
and supervision policy;
Yes
They are made public in the
Company's Annual Reports.
9.1.7. the company’s transactions with related parties;
Yes
The information is published on
the Company's website.
9.1.8. main issues related to employees and other stakeholders (for
instance, human resource policy, participation of employees in
corporate governance, award of the company’s shares or share
options as incentives, relationships with creditors, suppliers, local
community, etc.);
Yes
They are made public in the
Company's Interim and Annual
Reports, on the Company’s
website.
9.1.9. structure and strategy of corporate governance;
Yes
They are made public in the
Company's Interim and Annual
Reports, on the Company’s
website.
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
9.1.10. initiatives and measures of social responsibility policy and
anti-corruption fight, significant current or planned investment
projects.
This list is deemed minimum, and companies are encouraged not
to restrict themselves to the disclosure of information included into
this list. This principle of the Code does not exempt companies
from their obligation to disclose information as provided for in the
applicable legal acts.
Yes
They are made public in the
Company's Interim and Annual
Reports, on the Company’s
website.
9.2. When disclosing the information specified in paragraph 9.1.1
of recommendation 9.1, it is recommended that the company
which is a parent company in respect of other companies should
disclose information about the consolidated results of the whole
group of companies.
Yes
Refer to the comment submitted
regarding the item 9.1. above.
9.3. When disclosing the information specified in paragraph 9.1.4
of recommendation 9.1, it is recommended that the information on
the professional experience and qualifications of members of the
company’s supervisory and management bodies and the manager
of the company as well as potential conflicts of interest which could
affect their decisions should be provided. It is further
recommended that the remuneration or other income of members
of the company’s supervisory and management bodies and the
manager of the company should be disclosed, as provided for in
greater detail in Principle 7.
Yes
Refer to the comment submitted
regarding the item 9.1. above.
9.4. Information should be disclosed in such manner that no
shareholders or investors are discriminated in terms of the method
of receipt and scope of information. Information should be
disclosed to all parties concerned at the same time.
Yes
Refer to the comment submitted
regarding the item 9.1. above.
Principle 10: Selection of the company’s audit firm
The company’s audit firm selection mechanism should ensure the independence of the report and opinion of the
audit firm.
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For the financial year ending on 31 December 2021
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PRINCIPLES / RECOMMENDATIONS
YES AND NO
NOT
APPLICABLE
COMMENTARY
10.1. With a view to obtain an objective opinion on the
company’s financial condition and financial results, the company’s
annual financial statements and the financial information
provided in its annual report should be audited by an
independent audit firm.
Yes
The Company observes this
recommendation, annually, an
independent firm of auditors
conducts an audit of the
Company’s annual financial
statements and report according
to the International Accounting
Standards and submits an
independent auditor's report
concerning financial statements.
10.2. It is recommended that the audit firm would be proposed to
the general meeting of shareholders by the supervisory board or,
if the supervisory board is not formed at the company, by the
management board of the company.
No
The Company’s management
Board (a collegial body) proposes a
candidate firm of auditors to the
General Meeting of Shareholders
taking into account the Audit
Committee recommendation.
10.3. In the event that the audit firm has received remuneration
from the company for the non-audit services provided, the
company should disclose this publicly. This information should also
be available to the supervisory board or, if the supervisory board is
not formed at the company, by the management board of the
company when considering which audit firm should be proposed
to the general meeting of shareholders.
Yes
The information about the
payments to the audit company is
disclosed in the annual financial
statements and also presented to
the Company’s Audit committee
and Supervisory Council when
considering which audit firm
should be proposed to the general
meeting of shareholders.