AB “Ignitis grupė” approved the strategic objectives and their indicators of long-term incentive plan for the period of 2021-2024
The Supervisory Board of AB “Ignitis grupė” (hereinafter – Company) has approved on 22 March 2021 the long-term strategic objectives, their indicators for 2021-2024 and their achievement criteria for the long-term incentive plan (hereinafter – Plan) of executives of the Company’s group of companies (hereinafter – Group) with share options. Executives who are eligible for the Plan have objectives set in the long-term incentive plan that are linked with the objectives provided in the strategic plans of the Group, with the greatest focus on the development of commercial generation and increasing return for shareholders.
- In order to improve the financial indicators of unregulated activities, the Plan stipulates a mandatory condition that the right to obtain shares would be provided only if all three first one’s or the fourth one of the following conditions are met:
- The percentage growth of Adjusted EBITDA in 2021-2024 is at least 10 times higher than the growth of regulated-monopolistic activities, and
Regulated-monopolistic activities account for less than 60% of the Group’s Adjusted EBITDA in 2024 if the asset rotation has taken place and 63% of the Group’s Adjusted EBITDA if the asset rotation is lower than planned, and
- Regulated-monopolistic activities account for less than 60% of the Group’s Adjusted EBITDA in 2024 if the asset rotation has taken place and 63% of the Group’s Adjusted EBITDA if the asset rotation is lower than planned, and
- Green Generation Adjusted EBITDA in 2024 has at least doubled compared to 2020, or
- Regulated-monopolistic activities account for less than 50% of the Group’s Adjusted EBITDA in 2024
- The updated objectives of the Plan focus mainly on the development of green generation – the installed green generation capacity must reach 1.8 GW.
- With the aim to increase network efficiency, the Plan also sets out an objective to reduce electricity network losses by 2024 by at least 5%, compared to 2020.
- The strategic objectives and indicators set out in the Plan reflect the Group’s commitment to create a sustainable future – to improve environmental, social and corporate governance (ESG) ratings.
The Plan determines the share allocation in 2025, after the Group’s long-term strategic objectives (indicators), related to the 2021–2024 strategic plan of the Company, are achieved.
Prerequisites for long-term incentive plan:
The percentage growth of Adjusted EBITDA in Green Generation segment is at least 10 times higher compared to Adjusted EBITDA of regulated-monopolistic activities1 (percentage growth is calculated by comparing the Adjusted EBITDA of the last year of the option agreement (2024) with the Adjusted EBITDA of the financial year preceding the option agreement (2020)), and
Regulated-monopolistic activities account for less than 60% of the Group’s Adjusted EBITDA if the asset rotation has taken place in 2024 and generated Adjusted EBITDA equal to or higher than included in the Group’s long-term financial plan approved in March 2021. If the Group’s asset rotation is lower than planned, 63% threshold of Adjusted EBITDA of the Group for regulated-monopolistic activities is applied, and
Green Generation Adjusted EBITDA in 2024 has at least doubled compared to 2020 (i.e., Green Generation Adjusted EBITDA is higher than EUR 101.4m in 2024), or
Regulated-monopolistic activities account for less than 50% of the Group’s Adjusted EBITDA in 2024.
The provision that the key executives of the Group can be granted shares only if the Green Generation results are growing significantly faster than the results of the regulated-monopolistic activities was also established in the updated Letter of Expectations from the Ministry of Finance of the Republic of Lithuania received by the Company in 17 February 2021.
The concluded option agreements shall provide the maximum number of offered shares. The Company will announce the conclusion of the option agreements in a separate notice. After the vesting period, which is four years, the executives, will have the ability claim the right of ownership of the share of the Company, the number of which will be Adjusted (calculated) in 2025 during the assessment of the achievement percentage of the long-term strategic objectives and their indicators for 2021-2024 provided below:
|Strategic Priority||Objective||Type of target|
|Weight||Entry (70%)||Target (100%)|
TSR of Ignitis Group vs. average TSR of EURO STOXX® Utilities Index2
|Returns||Average Adjusted ROCE4 |
over the four years 2021–2024
|Growing renewables ||Green generation installed capacity, GW||20%||-||1.8||ESG|
|Increasing efficiency in Networks||Increasing efficiency in regulated-monopolistic activities:|
• Electricity SAIFI5 in 2024 ≤1.09 times
• Reduction of electricity network losses at least by 5% (in 2024 vs. 2020), proportionally to the distribution volumes6
|10%||At least one of two indicators achieved||Both indicators achieved||Efficiency|
MSCI ESG & Sustainalytics ESG risk indices
|10%||At least one of two indices improved7||Both indices improved7||ESG|
1. Regulated-monopolistic activities – electricity and gas distribution activities, non-auctioned reserve and ancillary services provided to the transmission system operator, public supply of electricity and gas to the regulated customers in Lithuania and regulated LNG designated supply services.
2. TSR (Total Shareholders Return) is calculated as the ratio of the difference between the average share price at the end of the period and the beginning of the period and adding the amount of dividends per share over performance period to the share price at the beginning of the performance period. The average TSR (Total Shareholders Return) of Ignitis Group and EURO STOXX® Utilities Index is calculated in the two-month period (Nov and Dec accordingly) preceding the beginning and the end of the performance period (1 January 2021–31 December 2024), in order to neutralize any possible volatility on the market. TSR of Ignitis Group is calculated with the assumption that dividends are reinvested as well as EURO STOXX® Utilities Index used for benchmarking (based on gross return index type and EUR currency). Change in the value of the Ignitis Group shares between the beginning and the end of the reference period calculated as a weighted average of the IGN1L (Nasdaq Baltic) and IGN GDR (London Stock Exchange) prices based on volume traded.
3. Target will be measured according to the achievement scale with linear interpolation between the thresholds. In the event of below-minimum achievement, no payment will accrue for this target.
4. ROCE is calculated by dividing Ignitis Group Adjusted earnings before interest and tax (Adjusted EBIT) by its capital employed (average net debt at the beginning and end of the reporting period + average book value of equity at the beginning and end of the reporting period).
5. Interruptions per customer, excluding exceptional events approved by regulatory authority (NERC) and calculated in accordance with the methodology and principles applied in the period of setting the performance objectives. System Average Interruption Frequency Index (SAIFI) is an indicator that shows the average number of interruptions to a customer during the reporting period. The indicator is calculated excluding interruptions related force major circumstances to natural, catastrophic meteorological and hydrological reasons and approved by the National Energy Regulatory Council according to the regulation of Indicators of service reliability and quality for electricity transmission.
6. Electricity network losses – the average technological losses in the electricity distribution network lines and other network elements as well as the losses resulting from undeclared consumption of consumers and illegal connections to the network. The 2024 target value of the ratio of electricity network losses and the total amount of electricity received in the distribution network (from TSO) is 5.5% (actual electricity network losses in 2020 – 5.8%), based on the strategic 2021-2024 plan and the methodology for determining electricity transmission, distribution and public supply services and the regulated price cap (article No. 9) approved by the National Energy Regulatory Council.
7. Ignitis Group 2020 ratings: MSCI ESG Rating – A, Sustainalytics ESG Risk Rating – “medium” category. 2024 target MSCI ESG Rating – AA and/or Sustainalytics ESG Risk Rating – “low” category.
The Plan applies to nine key executives of the Group: The Management Board members of the parent company and the CEOs of four companies of the Group (ESO, Ignitis, Ignitis Gamyba and Ignitis Renewables).
The key executives concluded the option agreements linked to the 2020-2023 Plan objectives in 2020. The Company announced about the concluded option agreements in a separate notice (link). The Company will announce the conclusion of the option agreements linked to the 2021-2024 Plan objectives in a separate notice via the securities exchange. The information on executive remuneration can be found at the Company’s website page ‘Remuneration’ (link).
For more information please contact:
Head of Public Relations at Ignitis Group
+370 620 76076