REG - AB Ignitis grupe - contract termination with AB “Ignitis grupe”
Regarding the contract termination with AB "Ignitis grupė" subsidiary Vilnius CHP Plant's contractor Rafako S.A.
AB Ignitis Grupė, (hereinafter - Ignitis Grupė or "the Company") informs that on 6 October 2020 its subsidiary UAB Vilniaus Kogeneracinė Jėgainė (hereinafter - Vilnius CHP Plant) decided to terminate the contract with contractor Rafako S.A. (hereinafter - Rafako or "the Contractor").
The decision to terminate was made after the Company on 5 October 2020 received a statement from the contractor Rafako declaring its intent to terminate the contract and after evaluation of the Contractor's technical and financial inability to fulfil the contract. It is notable that the Company does not accept the arguments presented in the statement and intends to protect its rights using measures provided in the contract.
The Contractor is responsible for the Vilnius CHP Plant's biomass unit construction. Rafako on 7 September 2020 launched the restructuring process which was announced on The Warsaw Stock Exchange (GPW) (link). As disclosed in the Prospectus for Ignitis Grupė's initial public offering published on 21 September 2020, the operational capacity of the unit was due to launch in the fourth quarter of 2021 but, due to contract termination, the project may be delayed up to one year because of potentially lengthy public procurement procedures to engage contractors who would complete the project. This would result in the biomass unit starting to generate revenue later, which would have a negative impact on the green generation segment's revenue part for that time period.
However, according to the Company's assessment, the contract termination with Rafako will not have an impact on Vilnius CHP Plant's waste-to-energy generation capacity development, which is handled by other contractors. It is estimated that this part of the power plant will be completed in the first quarter of 2021, as scheduled.
Ignitis Grupė and the Vilnius CHP Plant are currently assessing the situation regarding further action to ensure the successful completion of the project.
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