On the decision of General Court of the European Union to annul the decision of European Commission to coordinate the designated supplier scheme in Lithuania
AB “Ignitis grupė” (hereinafter – the Company) informs that the General Court of the European Union (hereinafter – the General Court) on 8 September 2021 adopted a decision due to the procedural violations of the European Commission in coordinating the designated supplier scheme applied in Lithuania and annulled the scheme.
The Company notes that in order to ensure diversification of natural gas supply to Lithuania and operations of the liquefied natural gas terminal in Klaipėda, on February 2014 UAB “Ignitis” (hereinafter – Ignitis, (previously – UAB LITGAS)), a subsidiary of the Company, by a process of procurement, was designated to conduct designated supply activities for the period of 2015–2024 and to provide mandatory supply volume, the size of which is determined by the Government of the Republic of Lithuania (hereinafter – the Government), for the liquefied natural gas (hereinafter – LNG) terminal in Klaipėda.
According to the effective legal acts and the designated supplier scheme previously coordinated with the European Commission, the mandatory supply volume for the terminal amounts to four standard LNG cargoes per year, and the difference between the price for these cargoes and the average price of gas imported to the Republic of Lithuania is compensated through LNG terminal security price component.
The decision of the General Court annulled the decision of the European Commission of 31 October 2018 which coordinated the designated supplier scheme effective from 2016 until the end of 2024. The Company notes that the decision to annual the decision of the European Commission was adopted considering the fact that, when coordinating the designated supplier scheme, certain procedural violations were identified related to conciliation procedures. It is important to note that, the General Court's point of view is that the European Commission properly assessed the mechanism of operation of the aid scheme (including the need to act as a designated supplier) in many important aspects and recognized its compatibility with State aid rules. At the same time, the General Court stated that the European Commission should have carried out an in-depth analysis of the part of the State aid scheme related to the costs reimbursed to Ignitis. In the present case, the General Court stated that the European Commission should carry out an in-depth analysis.
Based on the resulting market practice, after the General Court annulled the coordinated designated supplier scheme, an in-depth investigation may potentially be launched, which can last for several years. This investigation will cover only part of reimbursable costs of Ignitis. Accordingly, once the European Commission has cleared doubts on the issues raised by the General Court and the investigation has been completed, the designated supplier scheme should be renegotiated. The company also notes that it will cooperate with the Ministry of Energy of the Republic of Lithuania and the European Commission in order to answer the questions raised by the General Court as soon as possible and to renegotiate the state aid scheme.
Even though according to the previously coordinated designated supplier scheme during the period of 2016 – 2020 compensated costs for Ignitis amounted around EUR 129 million, but the share which is questionable by the General court amounts up to EUR 10 million.
The Company about the case pending in the General Court and the risks associated with its conclusion disclosed in the prospectus of the initial public offering of the Company.
The Company will inform about the future material events related to the decision of the General Court according to the procedure set out in legal acts.
For more information please contact:
Head of Public Relations at Ignitis Group
+370 620 76076