New long-term strategy of AB „Klaipedos nafta“ (KN) focuses on energy transformation and climate neutrality of operations

The Supervisory Council of AB "Klaipedos Nafta" (further referred to as KN), an energy terminal operator, has approved KN's corporate strategy for the period 2023-2050. The strategy takes effect on June 14, 2023, and is centred around efficiency of current activities, preparation for the energy transformation and transitioning towards activities in the new energy field. It aims to achieve complete climate neutrality for KN's operations by 2050, with a target of reducing emissions by over 30 percent by 2030 and approximately 70 percent by 2040.

KN aspires to become a significant contributor to the future energy supply and value chains, generating further value in the energy sector, ensuring energy security and competitiveness of energy resources in the region, and delivering financial returns to shareholders.

In the light of these goals, the KN’s strategy emphasizes improving current businesses and efficiency to retain competitive advantage and enhance profitability. It outlines the aim of achieving profitable growth by developing existing core business areas while investing a share of profit into the infrastructure and competence of the new energies.

The KN strategy is based on medium-term growth and long-term portfolio diversification, divided into three phases until 2050:

• 2023-2030: Increasing profitability in existing activities and securing financing for investments in new and more sustainable energy sources.
• 2031-2040: Focusing on the development of the LNG business and diversifying transshipment of liquid energy products.
• 2041-2050: Expanding activities in the market of new energies, including investments in new energy sources like synthetic fuels, hydrogen and hydrogen carriers, other alternative energy carriers, and carbon capture and storage (CCS).

KN envisions a world where sustainable liquid energy as well as chemicals and feedstock solutions empower industries and communities, creating a cleaner, safer, and more prosperous future for all. ?KN strives to be at the forefront of this transformation, continuously innovating and expanding portfolio of services to support the global energy transition and achieve climate neutrality by 2050.?

The new strategy sets a long-term target for a return on capital employed (ROCE) of approximately 8% (compared to 4.4% in 2022). It also aims to achieve an average revenue of €172 million for the KN group of companies from 2041 to 2050, with revenue increasing by 122% in 2050 compared to 2022.
The target for the KN group of companies is to achieve an average EBITDA of €85 million from 2041 to 2050. It aims for 172 percent higher EBITDA in 2050 compared to 2022. Additionally, the EBITDA margin is expected to increase from 45 percent in 2022 to 55 percent in 2050.

Starting in 2026, KN aims to pay annual dividends of at least €5 million, targeting a dividend yield of approximately 5%. The total dividend payments are expected to reach at least €240 million for the period of 2031-2050.

Key Highlights in the Short Term (2030)

By 2030, KN aims to establish a strong foundation for the new and more sustainable energy activities and plans to achieve a 50% revenue growth.

Operational targets in key segments:

• Liquids Terminals: The strategy involves a heightened emphasis on product and customer portfolio diversification. This includes expanding the handling of biofuels and entering the storage and handling market for chemical products such as methanol. Emphasis will continue to be placed on operational excellence, commercial and operational efficiency, and delivering enhanced value to customers.
• LNG Segment: The focus will be on continued value creation in the regional and global LNG market. By 2030, decisions will be made regarding the expansion of the capacities of the Klaipeda LNG terminal, taking market demand in consideration. Additionally, decisions regarding the strategy of the LNG reloading station will be determined. Gradual expansion of LNG business development activities in growth markets is also planned.
• New Energy Segment: By 2030, KN aims to develop at least three business opportunities in the hydrogen carrier handling and storage market. It also seeks to establish a CO2 storage and handling business to contribute to controlling and reducing carbon emissions. Additionally, a pilot battery project and a sustainable business model for participating in the energy storage/balancing market will be developed. The exploration of new energy sources will facilitate KN's transition towards a greener economy.

KN plans to invest approximately €300 million by 2030, with over 45% of capital investments dedicated to building new infrastructure and competences for the handling and storage of new energies, as well as to enhancing the sustainability and reducing emissions across all of KN activities.

The updated strategy also corresponds with the Letter of Expectations from the Ministry of Energy of the Republic of Lithuania, received by KN on 8 March 2023. As the majority shareholder holding 72.47% of KN's shares, the Ministry outlines the company's objectives and financial expectations concerning Lithuania's energy independence, transformation, and international development.

For more detailed information about the KN strategy, please refer to the attached document.

Reminder of an Investor Conference Webinar

We would like to remind that KN invites shareholders, investors, analysts, and other stakeholders to join its investor conference webinar scheduled on June 14^th of 2023 at 9.00 am (EET). The presentation will be held in English.
The webinar will be hosted by KN Chief Executive Officer Darius Šilenskis and Chief Financial Officer Mindaugas Kvekšas who will introduce new KN corporate strategy for the period of 2023-2050.

To join the webinar, please register via following link: https://nasdaq.zoom.us/webinar/register/WN_Tv65DFNpQ5Gml_ffDtf0Ww You will be provided with the webinar link and instructions how to join successfully. When joining the webinar for the first time, you will be asked to register on the Zoom platform. The webinar will be recorded and available online for everyone at the company’s website on www.kn.lt/en/ and on Nasdaq Baltic youtube.com account.

Legal disclaimer
AB "Klaipedos nafta" (hereinafter – KN) prepared this document on presentation of strategy solely for the informational purposes. It does not constitute financial or investment advice and this document should not be followed for adopting a decision on investment.

The information provided in the document is based on the KN‘s current understanding, assumptions, and expectations.   

The presented document contains forward-looking statements that reflect the KN's current intentions, expectations, projections, and beliefs about future events. These statements involve risks, uncertainties, and assumptions that are beyond the KN's control. Actual results may differ materially from the statements made in the document.

Unless required by law, the KN undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

In case of inconsistencies between the Lithuanian and English versions of the prepared document, please refer to the English version of the prepared document.

The KN, its directors and employees shall not be liable for any direct, indirect, or incidental damages arising out of or in connection with the presented document or use of the information provided therein.

Mindaugas Kvekšas, Chief Financial Officer, +370 46 391772
Orinta Barkauskaite, Head of Communication, +370 611 27985

Attachment

• ENG_20230614_KN Strategy Summary