EU Court Rejects Achema's Lithuania LNG Case

An EU court has rejected an appeal by fertiliser manufacturer Achema against state aid for the Klaipeda LNG terminal in Lithuania. Achema pays about €20mn ($22mn)/yr for the LNG terminal. It is the single largest commercial gas consumer in the three Baltic states.

The EU General Court deemed that co-ordination with the European Commission (EC) on state aid six years ago was in line with the law, including the preferred size of the LNG terminal and the project's implementation and the funding model.

Unhappy about the EC's 2013 decision to support the LNG terminal, Achema initiated a case against the EC in July, 2016. Achema also pointed out in its lawsuit that the state of Lithuania had groundlessly denied it permission to build a terminal of its own.

In late 2013, the EC ruled that a total of €448mn of state assistance to the LNG terminal project would not breach competition. Following the decision, Klaipedos Nafta, operator of the Klaipeda LNG facility, secured €87mn loan from the European Investment Bank.

Achema has also turned to several courts in its home country in attempts to reverse the decision on state aid for the LNG terminal. The company did not pay mandatory taxes up until the middle of 2015, stating that they amounted to an excessive financial burden. But the Lithuanian Constitutional Court ruled it had to pay up, and it complied.

Last October, the EC, based on EU state aid rules, approved a new scheme for compensation to state-controlled Lietuvos Energijos Tiekimas (Lithuanian Energy Supply, or LET) for ensuring the LNG volume necessary for the LNG terminal to remain operational.

Under the scheme, the obligation on energy producers to purchase gas from LET, the designated supplier, was discarded. The company continues to be compensated for its costs from the so-called LNG Supplement tariff.

Achema argues however that the new scheme distorts competition in favour of LET, which buys gas under a long-term contract with Norway's Equinor, to the disadvantage of other gas traders. Following the abolition of the purchase obligation, LET sells gas directly on the market.

Under the contract with Equinor, LET continues to acquire the mandatory quantity of LNG, four shipments a year, which it then resells on the Lithuanian, regional or international market. Achema owns a 10% stake in Klaipedos Nafta.

The EIB has said it will no longer fund projects that rely on fossil fuels.