KN Energies AB

Investor Presentation • Jun 14, 2023

AB KLAIPĖDOS NAFTA

LONG-TERM CORPORATE STRATEGY FOR THE PERIOD 2023-2050

June 2023 Vilnius

LEGAL DISCLAIMER

AB "Klaipėdos nafta" (hereinafter – KN) prepared this document on presentation of strategy solely for the informational purposes. It does not constitute financial, or investment advice and this document should not be followed for adopting a decision on investment.

The information provided in the document is based on the KN's current understanding, assumptions, and expectations.

The presented document contains forward-looking statements that reflect the KN's current intentions, expectations, projections, and beliefs about future events. These statements involve risks, uncertainties, and assumptions that are beyond the KN's control. Actual results may differ materially from the statements made in the document.

Unless required by law, the KN undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

In case of inconsistencies between the Lithuanian and English versions of the prepared document, please refer to the English version of the prepared document.

The KN, its directors and employees shall not be liable for any direct, indirect or incidental damages arising out of or in connection with the presented document or use of the information provided therein.

TERMS AND ABBREVIATIONS

TERM/ ABBREVIATION	DEFINITION
CAPEX	Capital expenditure
CCS	Carbon capture and storage
EBITDA	Earnings Before Interest, Taxes, Depreciation and Amortization
ESG	Environmental, social and governance
FSRU	Floating storage and regasification unit
GHG	Greenhouse gases. Gases in the earth's atmosphere that trap heat.
Hydrogen carriers	The chemical element produced using hydrogen, or capable of absorbing or releasing hydrogen, such as ammonia, methanol, or synthetic methane.
KN	AB "Klaipėdos nafta"
KPI	Key performance indicator
KOT	Klaipeda oil terminal
LT	Lithuania

TERM/ ABBREVIATION	DEFINITION
Liquid energy	Liquid energy refers to the fuel or energy carrier, derived from either fossil or renewable sources, that is stored, transported, or managed in a liquid state. This includes refined oil products, feedstock utilized in refining processes, chemical substances, biofuels, synfuels, hydrogen carriers, and similar commodities.
LNG	Liquified natural gas
Long term	Period until 2050
Medium term	Period until 2040
New energy	Energy source other than fossil fuels
O&M	Operations and maintenance
PL	Poland
RES	Renewable energy sources
Short term	Period until 2030
SOT	Subacius oil terminal

ssLNG Small scale liquified natural gas terminal (LNG reloading station)

FOREWORD

KN envisions to be at the forefront of the energy transformation, empowering our customers to meet their sustainable growth objectives and maintain longterm competitiveness by providing them with essential energy resources. We aim at playing a pivotal role in enabling a sustainable energy future while supporting the success and resilience of our customers.

KN future extends beyond the realms of oil products or natural gas. The company is ready for the major challenge of transforming operations into a climate-neutral business by 2050, to shift away from fossil fuels to other forms of energy, and, at the same time, to continue the successful creation of value in the energy sector, both in terms of energy security and financial return for shareholders and Lithuania at large. KN is ready to take part in the energy transformation of Lithuania and the region, but also share our accumulated know-how and competence globally.

In this context, we need to look well ahead, enhance our current business model in order to ensure competitive advantage and greater profitability of our activities in the future. Success of the new strategy will predicate on KNs ability to generate profitable growth through current core businesses, in parallel building capabilities in new energy and monitoring industry progress.

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ABOUT KN

KN is a strategically important company in

terms of energy security for Lithuania and neighbor regions and shows a strong track-record in offering its expertise worldwide

• Operating since 1959.
• Major strategic shifts: stepping in LNG business locally in 2014, launching consultations worldwide in 2016 and operations in Brazil in 2020.
• Current scope of operations: 4 energy terminals in Lithuania; 1 in Brazil; 1 in Germany.

• 340 employees.

GROUNDS FOR THE FUTURE

KN has more than 60 years history in liquid energy handling and storage – a capability that provides a strong foundation to continue improving on current operations as well as explore opportunities in growth areas

Advanced liquids energy terminal in Klaipėda with high flexibility of handling a variety of products

High competencies in LNG terminal operations with focus on FSRU LNG facilities

Strategic location in Klaipėda Port for current & new energy sources such as carbon capture and hydrogen carriers

Established partnerships regarding new energy businesses

Strong operating cash flow due to revenues in diversified business streams

Strong player in global LNG terminals business: established network of FSRU owners and LNG traders, independent multi-user FSRU terminal operator and co-investor

GROUP EBITDA AND EBITDA-% BY SEGMENT, 2017-2022 (€M)

LNG GREATEST PROFITABILITY DRIVER SINCE 2017

The Group maintained a strong average EBITDA margin of 45.2% in the period of 2017-2022. KN Group EBITDA experienced a robust surge of 35% in 2022 compared to the previous year.

GROUP EBITDA AND EBITDA-% BY SEGMENT 2022 (€M)

GROUP REVENUE BY SEGMENT, 2017-2022 (€M) SUCCESSFUL DIVERSIFICATION RESULTED IN REVENUE RECOVERY

Even in turbulent times KN made a significant breakthrough and assured revenue recovery in 2022 (+26%, '21-'22)

OIL AND GAS WILL REMAIN RELEVANT ENERGY SOURCES GLOBALLY UNTIL 2050

• Global energy mix is projected to transform towards renewable energy with a ~50% share in 2050
• Within renewable energy, solar (+11% '19-'50) and wind (+10% '19-'50) are the fastest growing segments that are projected to make up ~30% of energy mix by 2050
• Oil and natural gas although at a declining share, are projected to make ~40% of energy mix in 2050 (compared to 53% in 2020)

KN envisions a world where sustainable liquid energy as well as chemicals and feedstock solutions empower industries and communities, creating a cleaner, safer, and more prosperous future for all.

We strive to be at the forefront of this transformation, continuously innovating and expanding our portfolio of services to support the global energy transition and achieve climate neutrality by 2050.

Enabling safe and reliable liquid energy as well as chemicals and feedstock flows for customers in the Baltic Sea region by

• Offering storage and transshipment solutions for a variety of liquid energy products, chemicals, and feedstocks for consumption in the region and export into the global market
• Enabling the decarbonization of the region by focusing on sustainable solutions and energy carriers
• Providing national energy security to the Lithuanian state for both liquid energy and electricity

Supporting customers globally with knowledge and capabilities in the development and operations of LNG or other sustainable energy infrastructure projects

KN IS ABOUT TO EMBARK ON A TRANSFORMATIVE JOURNEY SPANNING UNTIL 2050

SETTING THE FOUNDATION

• Improve value proposition to strengthen cashflows and expand market for liquid products transshipment towards Southwest
• Scale up global LNG terminals business activities
• Set the foundations for new energy businesses by acquiring the right capabilities and develop pilot projects
• Consider ssLNG terminal strategy to generate additional cash for investments in new energy business

COMMERCIALIZING NEW ENERGY

2023 2030 2031 2040 2041 2050

• Shift focus on commercialization of pilot projects in carbon transshipment and energy storage
• Turn global LNG terminals business into a larger revenue and margin contributor
• Maintain business and improve operations for LNG and liquids terminal, both for oil products and renewables handled at the terminal
• Capitalize on hydrogen carriers opportunities that become more pronounced in this period and investigate further opportunities in wind energy generation (e. g. power-to-gas)

EXPANDING THE FOOTPRINT

• Take decision on future of FSRU in Klaipėda
• Expand footprint of renewables further into the wider region
• Shift focus of liquid energy terminal further towards renewables
• Evolve global LNG terminals business activities in accordance with market shift

iStock/thinkhubstudio

FOCUS ON A TIMELY TRANSITION TO NEW ENERGY WITHOUT CAUSING SIGNIFICANT DISRUPTIONS

CASH-FLOW POSITIVE BUSINESSES

Liquids terminals Klaipeda LNG terminal

• Improvement of cash-flow positive businesses will enable investments for medium- and long-term growth areas.

MEDIUM-TERM GROWTH AREAS

Global LNG terminals business Diversification

• Global LNG terminals business captures growth in international LNG markets using current core capabilities
• Vertical diversification of liquid transhipment business will help to extend the market
• Diversification to capture new growth segments in the area and prepare for future business, e.g. in hydrogen carriers

INVESTMENTS INTO NEW ENERGIES

CCS, energy storage, hydrogen carriers

• CCS, energy storage, and hydrogen carriers aligns best with KN's capabilities and regulatory constraints
• CCS and hydrogen carriers particularly relevant for Lithuania
• Diversification of activities can reduce risk of technological and regulatory changes and improve financial performance

STRATEGY WILL ENSURE MEDIUM-TERM GROWTH AND A DIVERSIFIED NEW ENERGY PORTFOLIO

LONG TERM APRROACH: CLIMATE-NEUTRALITY BY 2050

Our overarching environmental commitment is to improve energy and operational efficiency, reducing CO2 emissions, and transitioning towards low-carbon product portfolio to achieve climate neutrality.

PATHWAY TO INTEGRATE ESG INTO KN'S BUSINESS

ROADMAP TO CLIMATE NEUTRALITY

PEOPLE: EMPOWER HUMAN POTENTIAL FOR FUTURE SOLUTIONS IN ENERGY MARKETS

KN will accelerate investment into its people, digitalization, ESG topics and ensure the continuous development of its employees and processes.

KN'S STRATEGY IS GUIDED BY THE SHARED VALUE CONCEPT

KN EMPLOYEES AND THEIR REPRESENTATIVE ORGANIZATIONS	SHAREHOLDERS	BUSINESS PARTNERS AND CUSTOMERS	STATE AND MUNICIPAL INSTITUTIONS	SOCIETY
Empower human potential for future solutions in energy markets and provide innovative space for the growth together with KN SAFETY • • GROWTH INCLUSIVITY •	Stable returns • Sustainable company • value growth • ESG-compliant business	Safe, reliable and • efficient services. Reliable partner for the • energy transition	Contribution to • Lithuania's energy security Ensuring competitiveness • of energy sources in Lithuania	Sustainable operations, • Focus on ESG-related • investments and social initiatives

DRIVING SUCCESS: PROFITABLE GROWTH THROUGH CORE BUSINESSES – KEY TO OUR NEW STRATEGY

Based on its 2050 vision, KN's 2030 strategy would aim for improving operations and laying the foundation for new energy businesses

LIQUID ENERGY TERMINAL Diversify and improve volume & profitability

LNG Develop green solutions and focus on global business

NEW ENERGIES Lay the ground for a green transition in the region

Prepare organizational setup for transition of traditional business to new energies

Step-change in ESG activities

Invest in knowledge on new energy fields

Digitalize business processes to be ready for the future

AIM TO INCREASE REVENUES >50% BY 2030 AND LAY FOUNDATIONS FOR NEW ENERGY BUSINESSES

BUSINESS & SOCIAL EXCELLENCE

Reduce emissions while setting the right platform to accelerate growth in new energy businesses

LIQUIDS ENERGY TERMINAL: DIVERSIFICATION AND IMPROVED PROFITABILITY

Transform conventional oil terminal to liquid energy and chemical terminal

Grow revenues and strengthen EBITDA margin by diversifying product and client portfolio, operational excellence and improving generated value for customers

By 2030:

• 1. Increase biofuels transshipment and enter market for chemicals storage and transshipment (methanol and others).
• 1. Ensure vertical diversification of liquid energy and chemicals transshipment business.
• 1. Enhance customer value proposition and operational excellence.

LIQUIDS TERMINAL REVENUE (€m)

LIQUIDS TERMINAL EBITDA (€m)

LNG : CAPITALIZING ON THE MOMENTUM AND EXPANDING GLOBAL FOOTPRINT

Focus on value creation in regional LNG business while capturing short-term growth in global LNG market.

By 2030:

• 1. Review Klaipėda LNG terminal regasification capacity based on market demand.
• 1. Offer additional services and enhance value proposition of Klaipėda LNG hub.
• 1. Assess ssLNG terminal strategy.
• 1. Expand floating LNG footprint in growth markets (1-2 new investments; 3 additional O&M contracts).

LNG REVENUE (€m)

NEW ENERGIES: ENTER THE NEW ENERGIES MARKETS

Capturing opportunities in the new energies will contribute to the green transition of the economy

Investments into new energies are substantial for KN to develop new capabilities in this business segment

By 2030:

• 1. Develop at least 3 mature business cases to enter transshipment and storage market of hydrogen carriers.
• 1. Build a CO2 storage and transshipment business to manage and reduce carbon emissions.
• 1. Establish a battery pilot project in the region and develop a sustainable business model for KN to enter the energy storage/ balancing market.

NEW ENERGIES REVENUE (€m)

GROUP REVENUE (€m)

LONG TERM TARGET FINANCIAL KPIs

Targeted long-term ROCE of ~8%, a significant increase from 4.4% in 2022.

LONG TERM FINANCIAL GROWTH TARGETS (FROM 2022)

	2030	2040	2050
Revenue growth	65%	138%	122%
EBITDA growth	66%	143%	172%
EBITDA margin	45%	46%	55%

GROUP EBITDA* (€m)

OVER 45% OF THE CAPEX UNTIL 2030 ARE TOWARDS NEW ENERGY BUSINESSES AND REDUCTION OF EMISSIONS INTENSITY

Investments in €m, excluding FSRU INDEPENDENCE acquisition of ~€140m financed by debt

WELL BALANCED INVESTMENTS INTO CORE BUSINESS SEGMENTS

UNTIL 2030 AIM TO ATTRACT 30% OF INVESTMENTS BY EU/STATE FINANCING

DIVIDENDS ARE FORECASTED TO MORE THAN DOUBLE BY 2030

• KN targets to pay the minimum annual dividends of €5m starting from 2026, i.e., targeting a ~5% dividend yield.
• Total dividends for 2031-2050 are forecasted to amount to at least €240m.

TARGETED MINIMUM ANNUAL DIVIDENDS

WHY DO WE BELIEVE THAT OUR JOURNEY WILL BE SUCCESSFUL?

• Climate neutrality by 2050

• Lithuania's energy security
• ESG-related investments and social initiatives
• Innovative and meaningful job for KN employees

• Reliable partner for the energy transition
• Stable returns for shareholders
• Sustainable company value growth

THANK YOU