KN Energies conducted one of the largest currency hedging transactions in the Lithuanian currency market when purchasing the FSRU Independence, fixing the exchange rate. This decision enabled the Company to save EUR 8.05 million compared to the exchange rate on the transaction day. Considering the current USD to EUR exchange rate, the FSRU vessel would have cost over EUR 146 million, while the Company actually paid EUR 138.04 million.
 
The option to purchase the vessel Independence was included in the lease agreement as early as 2012, denominated in US dollars. In preparation for the acquisition, the Company entered into an agreement in 2020 with the Nordic Investment Bank (NIB) for a loan of up to EUR 160 million to finance the FSRU vessel. This maximum loan amount was set to account for potential exchange rate fluctuations.
 
To address currency market uncertainties and mitigate the impact of exchange rate variations on the vessel's cost and on end-users of natural gas, KN executed a hedging transaction on August 20, 2024, fixing the exchange rate.
 
The use of derivative financial instruments is a common practice globally; however, in Lithuania, a hedging transaction to fix the exchange rate was implemented for the first time in a regulated sector.
 
"Together with the Ministry of Energy and the National Energy Regulatory Council, we successfully initiated the necessary legislative changes to enable the use of such derivative financial instruments. By deciding to fix the price of the storage vessel, we created additional financial benefits exceeding EUR 8 million for the entire country.
 
The decisions made together, and their timely implementation led to a successful outcome, once again highlighting the importance of collaboration and focus in finding the best solutions," said Darius Šilenskis, CEO of KN Energies.
 
A lower acquisition cost will result in a reduced investment requirement and, accordingly, benefits for consumers throughout the entire LNG terminal's operational period (at least until 2044).
 
D. Šilenskis notes that the benefits of acquiring the FSRU vessel are significantly enhanced by KN's maximum efforts to ensure the efficient operation of the LNG terminal and the full utilization of its services.
 
During the 2022-2023 period, the company successfully completed the long-term capacity allocation, ensuring the LNG terminal's service utilization for the next 10 years (until 2032). More than half of the LNG terminal's income comes from foreign customers - each company that uses the terminal pays a regasification service fee. This includes not only Lithuanian companies, but also companies from neighbouring countries. This allows the terminal's operating costs to be eliminated from the security component paid by Lithuanian customers.
 
The company sees additional potential opportunities to create value for Lithuanian consumers by leveraging suitable market opportunities and offering additional LNG regasification and LNG transshipment capacities.
 
"We strive to meet the expectations of market participants by continuously improving our business model and maintaining flexibility in the services we offer. Recently, we have observed an increase in demand for LNG transshipment capacity, and we are also focusing additional attention on the development of new services. We believe that these efforts and initiatives will enhance the liquidity of the Lithuanian market and generate additional returns for consumers in the future," says the CEO of KN Energies.