KN to transfer activity of Klaipėda LNG Terminal to its subsidiary

Seeking to increase operating efficiency, KN (AB Klaipėdos Nafta), the operator of oil and liquefied natural gas (LNG) terminals, starts a process of clarification of its operations. KN says the Company is going to transfer its regulated activities, namely, the activities related to the management and maintenance of the Klaipėda LNG Terminal, to the KN subsidiary – UAB SGD Terminalas.  This decision concerns the KN readiness to ensure long-term import of LNG to Lithuania.

To secure the long-term import of LNG to Lithuania by 2044, KN is going to assume additional EUR 300 million state-guaranteed financial liabilities. Some of them would be used for a more even allocation of LNG terminal costs so that the annual costs of consumers would already be reduced since mid-2019. After transfer of the LNG terminal activities to the KN subsidiary, the new financial liabilities of the company will be more definitely linked to regulated natural gas supply activities in this way clearly separating cost and profit centres. This process will separate the regulatory and commercial costs and financial obligations of the KN, thus increasing and enhancing the transparency and efficiency of the regulated activities.

“We understand that in the course of negotiations on loans in this highly complex and sophisticated process financial institutions that would provide loans must clearly see the purposes of allocation of loans and funds that will be used to repay loans. A better transparency and clarity for the KN shareholders, the regulator, creditors and other stakeholders is the reason why we are going to transfer regulated activities to the subsidiary. In this way we will provide all stakeholders with a simplified control of ongoing obligations, supervision of the project and financial reporting”, said Arūnas Molis, the director of the KN Klaipeda LNG Service. 

It is planned that the transfer of the regulated activities will be carried out as the transfer of activities of the Klaipėda LNG Terminal as a business entity to UAB LNG Terminal. For this purpose, the authorized capital of UAB SGD Terminalas will be increased by cash and non-pecuniary contributions. All movable and immovable assets related to LNG activities, existing target loans and the LNG storage vessel lease contract will be transferred to the subsidiary.

In the near future, KN intends to submit to the National Commission for Energy Control and Prices (the NCECP) an application to issue a LNG regasification license to UAB SGD Terminalas. Once the license is issued to UAB LNG Terminalas, the validity of the license for regulated activities held by KN would expire on the same day.

The transfer of the regulated activities to the KN subsidiary has been approved by the KN Board and creditors. This decision must also be approved by the Ministry of Finance of the Republic of Lithuania as well as by the KN shareholders at the general meeting of shareholders. 

72 percent of the KN shares are owned by the state.