News
2020-05-22
Klaipėda LNG Terminal is an established player in the global market
The second largest LNG cargo this year will be imported from the United States and regasified through the liquefied natural gas (LNG) terminal in Klaipėda. About 155 thousand cubic metres of LNG is delivered by the gas carrier Energy Liberty, which is expected to reach the terminal tonight, from May 22 to 23.
The favorable situation in the international LNG market determined the possibility of purchasing and importing a cargo of this scale from the US Klaipėda for the commercial users of the LNG terminal. Since the beginning of the year, there has been a trend of commercial users of the terminal purchasing natural gas imported to Lithuania for a price that is lower than the weighted average price of all LNG transactions concluded under spot contracts (TTF index, see chart).
The gas carrier Energy Liberty arrives in Klaipėda from Sabine Pass LNG terminal in Louisiana, USA. This is the third LNG cargo from the US and the fifth cargo in total for this year. Prior to the arrival of this cargo, the LNG imported from the US accounted for 5.47% of the total amount of imported LNG at the Klaipėda LNG terminal, since the start of the terminal's operations. The American LNG was imported to Lithuania for the first time in August 2017, reaching our market from the Sabine Pass terminal. Earlier this month, 125,000 cubic meters of LNG arrived in Klaipėda from the US.
The intensification of LNG imports from the US was determined by the extraordinary situation in the LNG market, when many European gas storage facilities were maximally filled and the cargos of the US producers were available to market participants at attractive prices. The Klaipėda LNG terminal, in turn, provides the terminal users with the opportunity to import LNG from producers in different regions, in response to the changing market situation of spot commodities, thus reducing the cost of energy resources.
According to Dr Arūnas Molis, director of KN LNG, the regionality of the LNG terminal in Lithuania, the flexibility of gas supply and the transparent pricing have a positive impact on LNG demand in the region by taking advantage of the global LNG market opportunities.
“In terms of LNG trade, the US has been a balancing source of the world LNG supply, and Europe has been a balancing source of demand for the past few years. New LNG liquefaction plants are being built and put into operation in the US, resulting in more flexible cargos, which are not necessarily contractually linked to the final buyer. Such cargoes have strong market demand. In this context, our LNG terminal is already recognized as an established market player and terminal users can choose their import sources flexibly and based on their current needs. And not only in Lithuania or the Baltic Sea region as before - according to a recent report published by the EC, Klaipėda LNG terminal, particularly after the connection with Poland, is a competitive way to supply LNG to Ukraine, Belarus and other EU Eastern Partnership countries that see the perspectives of LNG use in the sectors of industry, transport and other sectors”, said Dr. Arūnas Molis.
According to the Director of Klaipėda LNG of KN, considering that during a three-month analysis, the average TTF size was higher than the weighted average price of natural gas imports in Lithuania, it can be assumed that terminal users with long-term contracts purchase LNG cheaper. “LNG terminal users choose this gas import alternative themselves by comparing the costs of the product and the entire logistics chain with the corresponding costs of gas imported through the pipeline. Our calculations show that with this alternative, natural gas users receive greater financial benefits per year than the total annual costs associated with the terminal. This phenomenon is particularly pronounced when there is a surplus of gas on the market and it is very important for suppliers to sell their stocks. In this context, it is natural and understandable that we should establish Lithuanian measures to promote the use of LNG, for example, in the DNA plan of the Lithuanian Government for the Future Economy,” says A. Molis.
Attachment: Chart “Comparison of Weighted Average Natural Gas Import Prices* EUR / MWh and TTF** Index”
* This indicator includes the information related to the gas imported to Lithuania, i.e. both through the pipeline and through the LNG terminal.
** The TTF price index is the weighted average price of all transactions concluded under spot contracts that are delivered to the TTF on a specific gas day. It is the starting point for LNG purchase / sale transactions
2020-04-29
KN stabilises its performance, despite difficult circumstances
KN earned an adjusted net profit of 3.9 million Euros in the first quarter of 2020, despite the difficulties of this period which has presented significant challenges for the global economy and business. This net profit is a 30 per cent increase on the figures for the same period in 2019. The company’s EBITDA (adjusted) was 7 million Euros or 7 per cent higher than a year ago, when it amounted to 6.5 million Euros, and KN also earned 20 million Euros of revenue during the first quarter.
In the first quarter of 2020, the global oil industry was hit hardest by an unusually warm winter, the spread of COVID-19 and failed OPEC negotiations. The Baltic countries were mainly affected by the stalled negotiations on oil supplies between Belarus and Russia. As a result, the Belarusian oil refineries, the main customers of oil terminals in the Baltic States, were operating at minimum capacity and there was a corresponding decrease in the volumes of oil products exported by sea.
Despite all these difficult circumstances, the KN oil terminals earned a net profit of 1.8 million Euros in the first quarter, 12 per cent higher than in the same period a year ago. EBITDA (adjusted) from oil terminal operations remained at a similar level as last year – 3.6 million Euros compared to 3.5 million Euros a year ago. The operating income of the KN oil terminals was 7.5 million Euros for the first quarter of 2020.
Almost all terminals operating in the region have faced the challenges related to the shift in operating volumes – reduced oil refining margins affect the volume of oil production and, consequently affect the transit of oil products. This was also reflected in the activities of KN’s main customers. Nevertheless, the KN oil terminal remains a highly competitive terminal with the most efficient capacity in the Baltic region. In the first quarter of this year, more than 400 thousand tons of crude oil were imported through the KN oil terminal in Klaipėda.
“Despite a really difficult beginning of the year, KN has managed to secure a financially strong result. During the first quarter, the KN oil terminal operated as a comprehensive terminal for the import and export of oil products. We were able to take advantage of such opportunities only through previous investments in infrastructure, which increased our flexibility and our opportunities to diversify services depending on demand,” says Darius Šilenskis, CEO of KN.
Klaipėda LNG terminal continues to maintain a record high level of degassing – 5.2 TWh of gas was degassed at the LNG terminal during the first quarter of this year. Nevertheless, the revenue of Klaipėda LNG terminal decreased by 37 per cent to 11.4 million Euros – the revenue of the LNG terminal this year already reflects the decisions of 2019, which allowed optimizing the infrastructure costs of the LNG terminal in Klaipėda and reducing the security component for Lithuanian gas consumers accordingly. The net operating profit from this KN operation remains broadly unchanged, with a net adjusted profit of 2.4 million Euros in the first quarter of this year, compared to a net adjusted profit of 2.39 million Euros a year ago.
“The LNG terminal in Klaipėda continues its record-breaking activity – in the first quarter of this year, the gas supplied through the Klaipėda LNG terminal competed with the gas supplied by pipelines. As much as 74 per cent of gas supplied through the Lithuanian gas transmission network was imported through Klaipeda. This is due to the extremely favourable LNG prices on the world markets, which in many cases compete with the gas supplied by pipelines,” says the CEO of KN.
In the first quarter of 2020, the revenue from LNG commercial activities, including Klaipėda LNG distribution station and international LNG projects, reached 1 million Euros. This was also influenced by the intensification of LNG distribution activities, as favourable gas prices led to a 37 per cent increase in the demand for LNG tanker handling and revenues from international operations.
Perhaps the most striking highlight of the first quarter of 2020 was the impact of COVID-19 on the global and Lithuanian economy, and the consequent impact on the company’s operations. KN has effectively implemented measures to prevent the development of COVID-19 in the company and has successfully ensured business continuity, despite the fact that some of the company’s employees work remotely.
“We are assessing the COVID-19 situation carefully,” said Darius Šilenskis, CEO of KN. “We were not one of the sectors whose activities were immediately affected by quarantine restrictions, although it is understood that with the accession of global economies, the demand for energy resources may decrease, leading to a reduced demand for logistics services. Of course, due to our investments in infrastructure, we have diversified our services and can offer not only handling, but also storage options for oil products. In such an uncertain context, this is one of the most highly demanded services in the world.“
Regarding the publication of adjusted financial results
The financial (accounting) result of KN is affected by the 16th International Financial Reporting Accounting Standard “Leases”, which entered into force last year. This standard significantly unbalances the published financial results, as the recorded result adjusts according to the influence of the exchange rate on the last day of the reporting quarter, and it does not provide a comparison with the actual operating results. By showing the managerial (adjusted) result, it is easier for investors and those following the company’s activities to have an accurate understanding of how the company has performed during the reporting period, eliminating the influence of factors that did not affect the company directly.
The main financial indicators of KN for the first quarter of 2020, in comparison with the indicators for the first quarter of 2019, changed as follows:
In the first quarter of 2020, the global oil industry was hit hardest by an unusually warm winter, the spread of COVID-19 and failed OPEC negotiations. The Baltic countries were mainly affected by the stalled negotiations on oil supplies between Belarus and Russia. As a result, the Belarusian oil refineries, the main customers of oil terminals in the Baltic States, were operating at minimum capacity and there was a corresponding decrease in the volumes of oil products exported by sea.
Despite all these difficult circumstances, the KN oil terminals earned a net profit of 1.8 million Euros in the first quarter, 12 per cent higher than in the same period a year ago. EBITDA (adjusted) from oil terminal operations remained at a similar level as last year – 3.6 million Euros compared to 3.5 million Euros a year ago. The operating income of the KN oil terminals was 7.5 million Euros for the first quarter of 2020.
Almost all terminals operating in the region have faced the challenges related to the shift in operating volumes – reduced oil refining margins affect the volume of oil production and, consequently affect the transit of oil products. This was also reflected in the activities of KN’s main customers. Nevertheless, the KN oil terminal remains a highly competitive terminal with the most efficient capacity in the Baltic region. In the first quarter of this year, more than 400 thousand tons of crude oil were imported through the KN oil terminal in Klaipėda.
“Despite a really difficult beginning of the year, KN has managed to secure a financially strong result. During the first quarter, the KN oil terminal operated as a comprehensive terminal for the import and export of oil products. We were able to take advantage of such opportunities only through previous investments in infrastructure, which increased our flexibility and our opportunities to diversify services depending on demand,” says Darius Šilenskis, CEO of KN.
Klaipėda LNG terminal continues to maintain a record high level of degassing – 5.2 TWh of gas was degassed at the LNG terminal during the first quarter of this year. Nevertheless, the revenue of Klaipėda LNG terminal decreased by 37 per cent to 11.4 million Euros – the revenue of the LNG terminal this year already reflects the decisions of 2019, which allowed optimizing the infrastructure costs of the LNG terminal in Klaipėda and reducing the security component for Lithuanian gas consumers accordingly. The net operating profit from this KN operation remains broadly unchanged, with a net adjusted profit of 2.4 million Euros in the first quarter of this year, compared to a net adjusted profit of 2.39 million Euros a year ago.
“The LNG terminal in Klaipėda continues its record-breaking activity – in the first quarter of this year, the gas supplied through the Klaipėda LNG terminal competed with the gas supplied by pipelines. As much as 74 per cent of gas supplied through the Lithuanian gas transmission network was imported through Klaipeda. This is due to the extremely favourable LNG prices on the world markets, which in many cases compete with the gas supplied by pipelines,” says the CEO of KN.
In the first quarter of 2020, the revenue from LNG commercial activities, including Klaipėda LNG distribution station and international LNG projects, reached 1 million Euros. This was also influenced by the intensification of LNG distribution activities, as favourable gas prices led to a 37 per cent increase in the demand for LNG tanker handling and revenues from international operations.
Perhaps the most striking highlight of the first quarter of 2020 was the impact of COVID-19 on the global and Lithuanian economy, and the consequent impact on the company’s operations. KN has effectively implemented measures to prevent the development of COVID-19 in the company and has successfully ensured business continuity, despite the fact that some of the company’s employees work remotely.
“We are assessing the COVID-19 situation carefully,” said Darius Šilenskis, CEO of KN. “We were not one of the sectors whose activities were immediately affected by quarantine restrictions, although it is understood that with the accession of global economies, the demand for energy resources may decrease, leading to a reduced demand for logistics services. Of course, due to our investments in infrastructure, we have diversified our services and can offer not only handling, but also storage options for oil products. In such an uncertain context, this is one of the most highly demanded services in the world.“
Regarding the publication of adjusted financial results
The financial (accounting) result of KN is affected by the 16th International Financial Reporting Accounting Standard “Leases”, which entered into force last year. This standard significantly unbalances the published financial results, as the recorded result adjusts according to the influence of the exchange rate on the last day of the reporting quarter, and it does not provide a comparison with the actual operating results. By showing the managerial (adjusted) result, it is easier for investors and those following the company’s activities to have an accurate understanding of how the company has performed during the reporting period, eliminating the influence of factors that did not affect the company directly.
The main financial indicators of KN for the first quarter of 2020, in comparison with the indicators for the first quarter of 2019, changed as follows:
2020-04-28
Net profit of the KN for 2019 will be paid as dividends with shareholder approval
KN, the operator of the oil and liquefied natural gas (LNG) terminal, will pay the amount of 7.9 million Euros (EUR 0.02 per share) – the total net profit for 2019 – in dividends to their shareholders. This is the third year in a row that the company has paid 100 percent of net profit in dividends, and the decision to continue the practice was made by the shareholders of KN at today’s general meeting of shareholders.
KN's dividend policy stipulates that the company’s board must determine the proposed amount of dividends based on the company’s net profit, financial indicators and the implementation of the strategy. KN’s income in 2019 amounted to 104 million Euros. During the reporting period, the company's EBITDA was 65.8 million Euros.
Prior to the shareholders' decision on the payment of dividends and the share of profits to be paid in dividends, the KN management performed a sensitivity analysis of the financial condition for the period up to 2030. This analysis provided an assessment of how the Company’s income and profits wold be affected by a decrease in cash flows due to adverse circumstances, both as a result of the current payment of dividends and the retention of funds within the Company.
“KN has a sufficient financial reserve to implement the planned investments and financial commitments,” says KN CEO Darius Šilenskis. “The financial sensitivity analysis shows that, CN would be able to pursue its strategy by continuing its investment projects at the CN oil terminal, regardless of whether dividends will be paid, even in adverse circumstances. These investment projects include achieving ambitious goals through the development of the international LNG business line, as well as implementing a long-term LNG supply to the Lithuania project.“
According to D. Šilenskis, paying dividends and financing infrastructure projects with borrowed funds creates higher value for shareholders, taking into account the rates of return on KN capital and the price of borrowed capital on the international financial markets.
“Currently, the price of borrowed capital in the markets is still extremely attractive and competitive. Therefore, by paying dividends, we aim to increase our operational efficiency while simultaneously creating the greatest benefit for the company’s shareholders. We understand that in the context of quarantine, all additional income may be especially needed,” says D. Šilenskis.
Based on the amount allocated to KN dividends, KN will pay 5.5 million Euros to the state, and approximately 780 thousand Euros to the second shareholder KN – UAB concern “Achemos grupė” . It is estimated that KN has paid 34.5 million Euros in dividends to the state over the last five years. In 2019, the KN was also among the largest taxpayers in the country, paying over 168 million Euros of various taxes to the budget.
Currently, 72.32 per cent of the shares belong to the state, 10.41 per cent of the shares are owned by UAB concern “Achemos grupė”, and the other shares belong to small investors. Since 1996, the company has been listed on the Nasdaq Vilnius Stock Exchange.
KN's dividend policy stipulates that the company’s board must determine the proposed amount of dividends based on the company’s net profit, financial indicators and the implementation of the strategy. KN’s income in 2019 amounted to 104 million Euros. During the reporting period, the company's EBITDA was 65.8 million Euros.
Prior to the shareholders' decision on the payment of dividends and the share of profits to be paid in dividends, the KN management performed a sensitivity analysis of the financial condition for the period up to 2030. This analysis provided an assessment of how the Company’s income and profits wold be affected by a decrease in cash flows due to adverse circumstances, both as a result of the current payment of dividends and the retention of funds within the Company.
“KN has a sufficient financial reserve to implement the planned investments and financial commitments,” says KN CEO Darius Šilenskis. “The financial sensitivity analysis shows that, CN would be able to pursue its strategy by continuing its investment projects at the CN oil terminal, regardless of whether dividends will be paid, even in adverse circumstances. These investment projects include achieving ambitious goals through the development of the international LNG business line, as well as implementing a long-term LNG supply to the Lithuania project.“
According to D. Šilenskis, paying dividends and financing infrastructure projects with borrowed funds creates higher value for shareholders, taking into account the rates of return on KN capital and the price of borrowed capital on the international financial markets.
“Currently, the price of borrowed capital in the markets is still extremely attractive and competitive. Therefore, by paying dividends, we aim to increase our operational efficiency while simultaneously creating the greatest benefit for the company’s shareholders. We understand that in the context of quarantine, all additional income may be especially needed,” says D. Šilenskis.
Based on the amount allocated to KN dividends, KN will pay 5.5 million Euros to the state, and approximately 780 thousand Euros to the second shareholder KN – UAB concern “Achemos grupė” . It is estimated that KN has paid 34.5 million Euros in dividends to the state over the last five years. In 2019, the KN was also among the largest taxpayers in the country, paying over 168 million Euros of various taxes to the budget.
Currently, 72.32 per cent of the shares belong to the state, 10.41 per cent of the shares are owned by UAB concern “Achemos grupė”, and the other shares belong to small investors. Since 1996, the company has been listed on the Nasdaq Vilnius Stock Exchange.
2020-04-24
Allocation of the capacity of Klaipeda LNG terminal begins
KN (AB Klaipėdos nafta), the operator of oil and liquefied natural gas (LNG) terminals, is launching an annual procedure - allocation of LNG terminal capacity for the new gas year, which starts in October 1, 2020.
The Company allocates the capacity in accordance with the Regulations for the Use of the Liquefied Natural Gas Terminal agreed, approved and publicly announced by the State Energy Regulatory Council and the Director General of the Company. During the LNG terminal capacity allocation, LNG regasification capacity and LNG reloading capacity will be allocated in advance.
“For the second year in a row, we have recorded extremely high performance results of the LNG terminal and a growing competition for terminal capacity in Klaipėda. With this in mind, we have slightly updated our capacity allocation principles this year, for example by setting clear monthly capacity allocation priorities. We are making changes in order to ensure that all terminal users receive the greatest possible benefit from our services and as many LNG carriers as possible sail to Klaipėda,” Arūnas Molis, Director of Klaipėda LNG emphasises.
During the current gas year, 42 LNG carriers were accepted at the LNG terminal, and other 28 LNG carriers are expected by the end of the gas year. During this period, 2 million cubic meters of gas was delivered, 81.28 percent of gas was delivered from Equinor, a gas reliquefaction plant in Norway. As practice shows, LNG terminal users highly value the possibility to order terminal capacity according to needs throughout the year, not only during the annual capacity allocation procedure. For example, 5 TWh of the terminal capacity was booked last year during the annual LNG terminal capacity allocation procedure. However, currently four times more capacity of the LNG terminal in Klaipėda has been booked for the current gas year, that is, as much as 22 TWh.
"The demand for LNG terminal services is growing due to the still low LNG prices in the global market, as well as the assessment of companies due to the opportunities opening up with Balticonnector in the region. Taking into account the intensity of the activities of the LNG terminal, we urge customers to book more capacity during the annual procedure, as this will ensure the supply of LNG according to the needs of companies in advance,” A. Molis says.
The total amount of LNG terminal capacity allocated is 3.75 billion nm3, which is 44,437,500 MWh per gas year, by applying the calorific value of 11.85 kWh / nm3 of natural gas. The Company regularly publishes and updates information on its website about the available capacity of the LNG terminal, which will be available during the gas year.
The Company accepts applications from potential users of the LNG terminal by May 25, 2020, at 4:30 p.m. Lithuanian time.
Currently, 5 companies from Lithuania and Estonia use the LNG terminal in Klaipėda.
The Company allocates the capacity in accordance with the Regulations for the Use of the Liquefied Natural Gas Terminal agreed, approved and publicly announced by the State Energy Regulatory Council and the Director General of the Company. During the LNG terminal capacity allocation, LNG regasification capacity and LNG reloading capacity will be allocated in advance.
“For the second year in a row, we have recorded extremely high performance results of the LNG terminal and a growing competition for terminal capacity in Klaipėda. With this in mind, we have slightly updated our capacity allocation principles this year, for example by setting clear monthly capacity allocation priorities. We are making changes in order to ensure that all terminal users receive the greatest possible benefit from our services and as many LNG carriers as possible sail to Klaipėda,” Arūnas Molis, Director of Klaipėda LNG emphasises.
During the current gas year, 42 LNG carriers were accepted at the LNG terminal, and other 28 LNG carriers are expected by the end of the gas year. During this period, 2 million cubic meters of gas was delivered, 81.28 percent of gas was delivered from Equinor, a gas reliquefaction plant in Norway. As practice shows, LNG terminal users highly value the possibility to order terminal capacity according to needs throughout the year, not only during the annual capacity allocation procedure. For example, 5 TWh of the terminal capacity was booked last year during the annual LNG terminal capacity allocation procedure. However, currently four times more capacity of the LNG terminal in Klaipėda has been booked for the current gas year, that is, as much as 22 TWh.
"The demand for LNG terminal services is growing due to the still low LNG prices in the global market, as well as the assessment of companies due to the opportunities opening up with Balticonnector in the region. Taking into account the intensity of the activities of the LNG terminal, we urge customers to book more capacity during the annual procedure, as this will ensure the supply of LNG according to the needs of companies in advance,” A. Molis says.
The total amount of LNG terminal capacity allocated is 3.75 billion nm3, which is 44,437,500 MWh per gas year, by applying the calorific value of 11.85 kWh / nm3 of natural gas. The Company regularly publishes and updates information on its website about the available capacity of the LNG terminal, which will be available during the gas year.
The Company accepts applications from potential users of the LNG terminal by May 25, 2020, at 4:30 p.m. Lithuanian time.
Currently, 5 companies from Lithuania and Estonia use the LNG terminal in Klaipėda.
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