Ignitis grupė - Notification on material event

AB “Ignitis grupė” received the Letter of Expectations revised by the Ministry of Finance

AB “Ignitis grupė” (hereinafter – ‘Ignitis Group’ or ‘Company’) informs that on 17 February 2021  it received the Letter of Expectations (hereinafter – Letter) revised by the Ministry of Finance of the Republic of Lithuania (hereinafter – Ministry of Finance), which owns 73.08% of the Company’s shares.

A need to revise the Letter arose after the change in the Government. The Company sees this action as positive because the Letter, in essence, approves the Company’s strategy. The expectations of the principal shareholder on the Company’s strategic directions remain consistent with the previous letters of expectations.

Summary of the main changes in the Letter:

• Business continuity and consistency is expected
• Long-term goals set for the Company must align with the four-year strategic plan. The long-term goals set for key executives must align with the long-term goals of the Company and good international practices. The goals should include and be oriented towards increasing the efficiency in the regulated activities, increasing shareholder returns and return on equity, development of green generation as well as improving environmental, social and good corporate governance practices
• After reaching the long-term goals, key executives can expect incentives in the form of Company’s shares. Shares can be allocated to key executives only if the green generation results are growing significantly faster than the results of regulated monopoly activities
• The group of companies must contribute to the development of community energy
• The group of companies must contribute to the objectives set out in the Nation Energy Independence Strategy by developing new and/or refurbishing current generation capacities
• The group of companies must put the greatest effort in the implementation of the measures for increasing the efficiency of activities of the designated supplier of the liquefied natural gas terminal

More detailed information:

The Ministry of Finance included a provision in the revised Letter, which stipulates that the long-term goals set for the Company must align with the strategic plan of the Ignitis Group companies. In order to motivate key executives to aim for sustainable and long-term goals of the Company and create additional incentives for the employees of the companies owned by the Company, Ignitis Group regulates the incentives in the Company’s Share Allocation Rules, which are approved by the General Meeting of Shareholders.

It must be noted that the long-term goals set for key executives must align with the long-term goals of the Company and good governance practices. The goals must include and be oriented towards increasing the efficiency in the regulated activities, increasing shareholder returns and returns on equity, development of green generation as well as improving environmental, social and good corporate governance practices.

The letter stipulates that the shares can be allocated to key executives of the Company only if the green generation financial results grow significantly faster than the financial results of the regulated monopoly activities.

It is important to note that the aforementioned provision applies only to the concluded option agreements in the future. However, the key executives of Ignitis Group assessed the set expectations responsibly and will initiate the amendment of the already concluded option programme agreements for 2020–2023 themselves by including an additional provision which would limit the opportunity of profit from growth in the regulated monopoly activities. According to the executives, this provision reflects the Company’s and its executives’ determination to link further growth mostly with green generation.

The Ministry of Finance stressed in the Letter that it expects business continuity and consistent growth from the Ignitis Group companies. The projects of generation from renewable energy sources, creation of new business models, development of innovative energy solutions and development in the region should be continued.

The Letter notes that the Company’s group of companies have to continue investing in the Lithuania’s electricity and gas distribution networks, in order to modernize the assets of strategic importance and to digitize the electricity network by implementing the smart metering programme to the extent provided for, which will be beneficial to every consumer.

The group of companies should also contribute to the development of community energy by enabling the consumers to participate in the electricity market actively by providing flexibility services for the system, producing, storing and selling electricity generated from renewable energy sources, by motivating consumers to change their consumption habits by reacting to changes in the electricity market in real time as well as by promoting consumers to become co-owners of remote renewable powerplants.

The Ministry of Finance notes that one of the priorities should also be to ensure that the Lithuanian energy system  is reliable and flexible by providing reserve and system services. The group of companies must contribute towards achieving the objectives set out in the Nation Energy Independence Strategy by developing new and/or refurbishing current electricity generation capacities.

The group of companies is also expected to contribute to the promotion of energy innovations in Lithuania. The Ministry of Finance states that the aim should be to actively implement energy innovations, new technologies and pilot projects including the use of National Energy Regulatory Council mechanism to promote innovations as well as to contribute to the implementation of action plan measures for strengthening the Lithuanian energy innovation ecosystem, which includes involvement of state-owned companies. There should be a close cooperation with the local and international business and science, a potential should be created for the export of innovative energy products and services.

It is also expected that the Company’s group of companies will put in the greatest effort to implement the measures for increasing the efficiency of activities of the designated supplier of the liquefied natural gas (hereinafter – LNG) terminal which would ensure the minimal negative impact on the gas price and would contribute to the implementation of the goals of the National Energy Independence Strategy.

You can read the revised Letter of Expectations in the attached document.

For more information please contact:

Artūras Ketlerius
Head of Public Relations at Ignitis Group
arturas.ketlerius@ignitis.lt
+370 620 76076

Attachment

• Letter of expectations 17 02 2021

Attachments:

Letter of expectations 17 02 2021.pdf