Governance
Operational documents
EPSO-G, in carrying out its activities, aims to act correctly and comply with the requirements of state laws and international standards. All Group activities are regulated by operational policies. A complete list of publicly announced policies is provided below.
National security
The Ministry of Energy pays special attention to the resilience of critical infrastructure. The expectation is set for strengthening the protection of physical and cyber infrastructure. Considering the military and hybrid threats in our region, it is planned to implement drone detection systems, physical barriers, strengthen cybersecurity, and ensure the availability of human and material reserves.
The role of “EPSO-G” in ensuring national security is also emphasized – the Group is already participating in the implementation of the Lithuanian and German artillery factory project in Baisogala. It is expected that the Group will demonstrate leadership and expand its activities and expertise in the defense industry by investing in security and defense industry projects that are significant for the state and align with national interests.
International connections and networks
One of the key projects is the implementation of the “Harmony Link” electricity connection with Poland. It is also aimed at strengthening the intersystem electricity connections between Lithuania and Latvia and making a decision regarding the implementation of the marine connection with Germany, the “Baltic Hub”, and the conditions for project execution.
The expectation is raised to increase international gas flows from the Klaipeda liquefied natural gas terminal towards Central Europe and Ukraine. It is also planned to ensure measures for the development of the pure hydrogen network in the Nordic and Baltic countries and the implementation of hydrogen development.
These projects are important not only for achieving greater integration with the European Union (EU) electricity and gas markets but also for strengthening system reliability and creating conditions for the development of renewable energy resources (RES), green transformation, and increasing the country’s competitiveness.
Energy green transformation and system flexibility
It is planned that by 2028, electricity generation capacities based on RES in Lithuania will reach at least 8 GW, therefore the “EPSO-G” group must strive for leadership in integrating RES generation capacities and managing energy flows. The Group will actively seek to ensure optimal development of transmission infrastructure, sector integration, and flexibility of the electricity energy system. Dynamic transmission tariffs will also be evaluated, and the geological structure of Syderiai will be analyzed to assess long-term energy storage possibilities.
The Ministry of Energy expects that “EPSO-G” will actively contribute to the development of green gas infrastructure, utilizing existing natural gas infrastructure for biogas development and creating a new green hydrogen ecosystem. It is also expected that the Group will conduct studies to assess the possibilities of hydrogen, synthetic green gas, and CO₂ transportation, provide proposals, and make decisions that create the highest added value for Lithuania.
Financial expectations
The Group’s adjusted average return on equity must not be less than the indicator set by the Government. The return on investment must be no less than the average return on investment of mature economies in Western Europe, allowing not only to maintain the technical condition of the managed infrastructure but also to create opportunities for system development and the attractiveness of energy transformation investments.
The Group must maintain an investment credit rating of no lower than Baa2 according to Moody’s or equivalent levels used by other credit rating agencies. The ratio of the Group’s net debt to adjusted EBITDA must not exceed 6 times in the medium term and 5 times in the long term.
The Group must maintain a consistent implementation of its dividend policy, and the level of dividends paid by the Group must not be less than that set by the Government. “EPSO-G” must strive for the maximum level of dividends in subsidiaries and associated companies and prioritize the use of financial flows for funding strategic investments or projects.
Principles of Group operations and sustainability
The Group must conduct its activities according to the highest standards of transparency, governance, ethics, and social responsibility. The company’s activities must be based on good governance practices as provided by the laws of the Republic of Lithuania, international recommendations (OECD), and other best global practices.
The Group must adhere to a sustainable development and good corporate governance policy in its operations. The company must consistently implement its commitment to achieve a net zero GHG emissions balance by 2050 and contribute to the implementation of the United Nations sustainable development goals.
The Group must transparently provide support and humanitarian aid, primarily focused on cooperation with scientific and educational institutions to promote energy professions and provide humanitarian assistance for the restoration of Ukraine’s destroyed energy infrastructure.
Policies, guidelines and codes
The operational policies of the “EPSO-G” group are documents designed to consistently and effectively implement the organization’s management system. This system helps employees transparently and efficiently achieve the goals set in the operational strategy, creating value for the country’s people and businesses. To ensure their effectiveness, the companies of the “EPSO-G” group prepare an annual report on the progress of implementing operational policies for the management company’s board.
1.Corporate governance policy
The purpose of the “EPSO-G” Corporate Governance Policy is to ensure a governance of the group companies that meets good practice by establishing:
- the corporate governance principles applicable within the group of companies;
- the system of corporate governance documents of the group of companies;
- effective interaction between the parent and group companies.
2.Integrated planning and monitoring policy
The “EPSO-G” group of companies implements important projects for the residents and businesses of Lithuania. To ensure their success, a consistent strategy, investment and operational plans, appropriate risk management, and control are necessary. Therefore, the “EPSO-G” group of companies applies a planning and monitoring system that regulates the integrated operational planning process of all group companies, the responsibilities of the parties involved, the deadlines and frequency for preparing planning documents, content requirements and recommendations, as well as management and oversight measures.
3.Compliance management policy
Compliance is the process that ensures that the “EPSO-G” group adheres to and implements the requirements of European Union and Republic of Lithuania legislation, internal company documents, other legally binding documents, as well as best practices and industry standards.
It is particularly important for the “EPSO-G” group to manage and ensure compliance because:
- we operate in the energy sector, which is important for national security;
- any compliance violation for the “EPSO-G” group can lead to financial, reputational, operational disruption, or environmental damage consequences;
- according to the Republic of Lithuania’s law on the protection of important objects for ensuring national security, certain companies of the “EPSO-G” group are considered important for ensuring national security, and their infrastructure is of strategic importance for national security.
- compliance with requirements is a necessary condition for implementing the company’s strategy, goals, and ensuring an impeccable business reputation, therefore the Group’s companies take all necessary measures to ensure that the requirements are met and that their compliance does not contradict the company’s and the “EPSO-G” group’s values.
Compliance management system
The compliance management system aims to prevent non-compliance cases, identify potential non-compliance cases, and eliminate them promptly.
To ensure effective Compliance management, the “EPSO-G” group follows these principles:
- principle of responsibility – Compliance is ensured by each employee in their managed/executed daily processes;
- principle of risk assessment-based method (English: risk-based approach) – We organize Compliance management so that the resources allocated for ensuring Compliance are adequate to the emerging Compliance risks;
- sustainability principle – it aims for Compliance management to contribute to the governance principles set in the Group’s strategy, oriented towards a sustainable future;
- integrity principle – Compliance management is part of daily operations, related to risk management and inseparable from other processes applicable in the Companies, based on the Group’s operational policies and other internal regulatory documents as well as the Group’s values;
- principle of documentation and traceability of operations – the main actions of Compliance management must be properly recorded and stored, thus creating conditions for the traceability, control, and improvement of Compliance management processes;
- principle of independence of compliance management – Compliance management is an independent activity, separate from other functions. The merging of Compliance management functions with other functions may be acceptable if it does not create a conflict of interest and does not harm the effectiveness of the Compliance management function.
In the “EPSO-G” group, Compliance management is carried out according to the “Three Lines” model (English: Three Lines model):
- The 1st line identifies the Requirements in the conducted activities, ensures the Compliance of the conducted activities with the Requirements, manages Compliance risks, and eliminates Non-compliance cases;
- The 2nd line supports the Compliance management system, supervises how the 1st line ensures Compliance, performs Compliance monitoring actions, provides consultations, conducts training, and promotes the culture of Compliance management in the Companies. Depending on the context and size of the Companies’ operations, Compliance experts may also perform the functions of the 1st line;
- The 3rd line supervises how the 1st and 2nd lines oversee Compliance, provides recommendations for improving the Compliance management system.
4.Risk management policy
The risk management policy defines the main principles and responsibilities of the “EPSO-G” group of companies in risk management, aiming to ensure a unified and principle-based risk management process for the companies.
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5.Selection policy
By implementing the goals set by the shareholder and outlined in the operational strategy, the “EPSO-G” group aims to attract employees and managers with the appropriate values, qualifications necessary for specific positions, and general and managerial competencies that match the level of responsibility.
As a result, requirements corresponding to the responsibilities are established for candidates for each position:
- When forming boards or collegial supervisory and management bodies, we seek a combination of knowledge, skills, and experience of the members that enables collegial bodies to properly perform their assigned functions.
- We apply high standards of values, professionalism, and impeccable reputation to employees at all levels, and standards of excellent leadership skills to managers.
- The overall competencies, leadership, and professional knowledge of employees and managers create the conditions for shaping an organizational culture of a group of companies that is creative, progressive, open to innovations and changes.
The goal of the “EPSO-G” selection policy is to establish common principles and practices for the selection of the group of companies, aiming to transparently select the best candidates who meet the required qualifications, skills, experience, and values for collegial bodies, managerial positions at all levels, and employees, who would effectively contribute to achieving the goals of individual group companies and the group of companies.
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6.Remuneration, performance management and development policy
In the “EPSO-G” group of companies, we create an open, innovative organization guided by sustainable development goals, where professional partnership relationships prevail between the employer and employees, everyone has opportunities for self-realization, grows together with the organization, and is able to take responsibility for their decisions and actions.
The main goals of the “EPSO-G” group’s Compensation, Performance Evaluation, and Development Policy are:
- To establish clear and transparent principles for employee compensation and performance evaluation within the group, as well as a compensation system based on these principles.
- To establish clear and transparent principles and directions for employee development, qualification improvement, and advancement within the group.