The Prime Minister visited AB Achema

The Prime Minister Saulius Skvernelis meeting with one of the largest groups in the country ACHEMOS GRUPĖ and heads of its managed fertiliser producer AB Achema in Jonava on February 9, has promised Government’s assistance in solving important problems of the group. No specific decisions were taken on Friday, but the Prime Minister emphasized that Achema is an important enterprise not only for the region but for Lithuania as a whole.

 “Achema has a significant influence on the entire national economy, one of the largest taxpayers and one of the largest employers. We are interested in a socially responsible, successful national security interests meeting company’s further activity” – the Prime Minister said in a press release.  Mr. S. Skvernelis emphasized that the Government is ready to establish a working group to solve the competitive, tax environment questions for all companies operating in this field. The meeting in Jonava focused on the financing of the Klaipėda Liquefield Natural Gas (LNG) terminal, issues related to public service obligations (PSO) and the liberalization of railways.

The LNG terminal fee is especially relevant to Achema. In 2018, the plant will have to pay 26 million euros of this tax. In total in 2018 it is planned to collect 87 million euros of LNG security fee. Approximately a quarter of this amount falls on trade losses of the state gas trading company Litgas. This loss, officially called the necessary supply cost, is the difference between the purchase price of the required amount of gas by Litgas from the Norwegian company Statoil and the average market price for the regulated energy producers in Lithuania. In 2018 it will amount to 24 million euros, of which almost 6 million euros will be paid by Achema.

Chief Executive Officer of UAB koncernas ACHEMOS GRUPĖ Mr. Linas Sabaliauskas said at the meeting with the Prime Minister that the Klaipėda LNG terminal is legally named as a strategic object ensuring the State’s strategic capabilities to provide gas, electricity and heat. “But now for this strategic object only gas consumers pay. If we recognize that this is a strategic object, its purchase and maintenance costs should be shared by everyone, as well those who use products made using gas, such as electricity. A better solution would be to inventory all of the beneficiaries and share them with terminal maintenance costs”, he said. Mr. L. Sabaliauskas pointed out that a large LNG fee reduces the company’s competitiveness, because gas accounts for 70% of the total Achema’s raw materials, while the cost of gas for gas is rising. According to the current LNG terminal maintenance model, Achema would have to pay a LNG fee even if it stopped producing fertilisers. The company would like to be given the opportunity to not pay the fee if the gas was not used at any time. In addition, managers of ACHEMOS GRUPĖ seem to be right to pay a LNG fee when the plant generates profits, but objectively when a difficult situation arises in international markets and when a company starts operating at a loss, a flexible exchange and obligation to pay for maintaining the LNG terminal should be exchanged accordingly.

The Prime Minister S. Skvernelis said he understood the difficult situation of the company and promised to form a working group that would look for acceptable solutions. Mr. Ramūnas Miliauskas, CEO of Achema, has observed that the LNG fee for Jonava company will increase correspondingly as a result of decreasing gas consumption in Lithuania. According to him, in 2011 Achema consumed about 40 percent of all natural gas consumed in Lithuania, this year – 63 percent, this part could reach 75 percent in the future. “We are not against the terminal, it is an alternative source of supply. But the terminal maintenance model for us increases the gas price by about 11 percent. That is why we become uncompetitive with other European producers, buying gas cheaper, because they do not pay such taxes. For normal work, in 9-10% the profitability of fertiliser production is very good. But those 11 percent cannibalize it, – said R. Miliauskas. According to the head of the company, the LNG fee burden encourages companies to abandon gas consumption, and the less gas they use, the higher the LNG fee is to pay the rest of the consumers. “We will come to the point that Lithuania will use so little gas that taxpayers will not be able to ensure the operation of this facility” – warned Mr. R. Miliauskas.

Achema has been questioning for several years the obligation of the state to pay the PSO fee for its own generated and consumed electricity. This year, the plant will have to pay PSO fee of 6 million euros. “When the State failed to ensure reliable electricity supply in 2008-2009, the industry assumed an investment burden and built its own power plants, modernized electricity networks. Achema has built for 40 million euros two power plants, another 5 million euros has invested in electricity networks so that the plant will not stop production due to external disturbances. Now, the State, charging the electricity generated by itself, as if punishing us for these works. There are periods when you pay more for your electricity than you bought. It’s completely incomprehensible”, – said CEO of Achema.