Purchasing FSRU Independence saved EUR 8 million

Klaipedos nafta AB

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KN Energies AB (hereinafter – KN, the Company) conducted one of the largest currency hedging transactions in the Lithuanian currency market when purchasing the FSRU Independence, fixing the exchange rate. This decision enabled the Company to save EUR 8.05 million compared to the exchange rate on the transaction day. Considering the current USD to EUR exchange rate, the FSRU vessel would have cost over EUR 146 million, while the Company actually paid EUR 138.04 million.

The option to purchase the vessel Independence was included in the lease agreement as early as 2012, denominated in US dollars. In preparation for the acquisition, the Company entered into an agreement in 2020 with the Nordic Investment Bank (NIB) for a loan of up to EUR 160 million to finance the FSRU vessel. This maximum loan amount was set to account for potential exchange rate fluctuations.

To address currency market uncertainties and mitigate the impact of exchange rate variations on the vessel's cost and on end-users of natural gas, KN executed a hedging transaction on August 20, 2024, fixing the exchange rate.

The use of derivative financial instruments is a common practice globally; however, in Lithuania, a hedging transaction to fix the exchange rate was implemented for the first time in a regulated sector.

"Together with the Ministry of Energy and the National Energy Regulatory Council, we successfully initiated the necessary legislative changes to enable the use of such derivative financial instruments. By deciding to fix the price of the storage vessel, we created additional financial benefits exceeding EUR 8 million for the entire country," said Darius Šilenskis, CEO of KN Energies.

Tomas Tumenas, Chief Financial Officer, +370 46 391772