Viru Keemia Grupp AS (VKG) is Estonia´s largest oil shale processing enterprise, producing 57% of total Estonian shale oil.
In the year 2014, the oil shale processing volume of Viru Keemia Grupp was 2.8 million tonnes, and its profit exceeded 10 million euros.
The Group includes 10 business enterprises, which provide jobs for a total of approximately 2,000 people.
The total amount of environmental investments of the Group for the past 10 years has exceeded 64 million euros.
This sustainable development report is the sixth report published in the history of the company. With this report, we intend to highlight our openness and commitment to the protection of the environment and the social development of the region.
This is the sixth sustainable development report of Viru Keemia Grupp AS (VKG), and its goal is to publish the economical, social, environmental and organisational data of VKG for the year 2014.
The report reflects mainly the developments of the Group for the year 2014, compares the results to those of previous years, provides the analysis of the oil shale sector and a moderate prognosis for the years 2015-2016.
With this report, VKG intends to introduce and promote the concept of sustainable development and the basics of responsible entrepreneurship in Ida-Viru County and in Estonia as a whole.
In addition to that, our goals are:
The sustainable development report of VKG is based on the guidelines of the Global Reporting Initiative (GRI). The GRI is a voluntary organisation promoting reporting and gathering enterprises that value sustainable development all over the world. This organisation is considered to be the founder of the concept of sustainable development and it has developed recommended guidelines for sustainable development reports.
This report conforms to the GRI Application Level B. You can read more about the report’s conformity to the disclosure requirements on the report’s last page which lists the GRI content.
Read more about the organisation and the guidelines at www.globalreporting.org.
The preparation of the report was also guided by the document “Oil and Gas Industry Guidance on Voluntary Sustainability Reporting” issued in cooperation with the International Petroleum Industry Environmental Conservation Association (IPIECA) and the American Petroleum Institute (API).
The ISO and OHSAS certification materials of the enterprise were also used while preparing the report. The data pertaining to environment protection and occupational safety conform to the requirements prescribed in the relevant standards.
The reports for the years 2008-2009 and for the year 2012 have been prepared in cooperation with the consulting and auditing agency Ernst & Young Baltic AS. The present report has been prepared by the company.
All questions related to the report can be sent to Irina Bojenko, Public Relations Manager of VKG (irina.bojenko@vkg.ee).
The sustainable development report of VKG for the year 2014 is a public document available in Estonian, English and Russian languages on paper and in electronic form via the website of the Group. With this report, we primarily want to introduce our enterprise in more detail to:
Preparing the sustainable development reports is a voluntary activity for organisations. The economic data for the year 2014 and the prognoses for the years 2015-2016 are prepared by VKG and they have not been audited. For that reason, the data for the year 2014 may be somewhat different from the data stated in the approved annual report.
The enterprise is presenting the data in its report on the basis of the principles of transparency and good business practice.
Priit Rohumaa Chairman of the Management of VKG
The last year was an anniversary year for Viru Keemia Grupp. Shale oil production started in Kohtla-Järve in 1924, which means that last year we became 90 years old. If we look back at the years that have passed, there is definitely a lot to remember. There have been stormy times in the history of development of the group.
It is to be recalled that until privatization, VKG had historically been a state company for 74 years, both in the times of the first republic, in Soviet times, and in the first decade after the restoration of the independence of Estonia. It means that Viru Keemia Grupp has been a privately-owned company for the last 16 years only.
During privatization, the state was looking for the new owners for the company, who would be able to develop it, eliminate the environmental problems which had accumulated within decades, and maintain employment. Immediately after privatization, the prices on the world market were exceptionally low, and the crisis hit hard on the company. At the same time, the extensive restructuring was a driving force behind fast further development. Open communication both with the state and with the financing parties provided an opportunity to start making large-scale investments into the development of oil plants, power engineering, and even the company´s own mine. After the privatization, VKG, owing to its fast growth, has created over 1,300 new workplaces and invested over 800 mln EUR into new plants and environmental protection. VKG has successfully launched two Petroter-type oil plants, and in 2015, we are going to launch the third plant, owing to investments in our own mine, the areas with district heating, and power station. Thus we have to admit that during privatization, the state managed to find good owners for its company, who have been developing the company actively and successfully.
The oil shale resource belongs to the people of our state. We have got used to the expression that oil shale is the national treasure and the most valuable natural resource in Estonia. And still we would like to emphasize that with respect to its low energy content and a considerable mineral ballast, right after being excavated, oil shale is not anywise marketable. In order to turn it into a valuable marketable product, large investments should be made into oil production, chemical industry, and power engineering immediately at the deposit. Hereby we are dealing with an extremely knowledge-, technology-, and money-consuming value chain. It is with the help of all of those skills (from excavation to chemical industry) and high-tech technologies that the end products with high added value are created, many of which are exported to the other side of the globe.
In our business, we are extremely open to global changes. We are directly dependent on the prices for petroleum on the world market as well as on the exchange rates of US dollar and EUR and the price of CO2. In addition to that, we are directly influenced by climate policy and environmental regulations.
The sustainable use of oil shale requires the development of production that would add value to organic, energy, and mineral potential hidden in oil shale. In other words, we should use the expensive chemicals, energy-containing oil, gas, and vapor as well as mineral substances obtained in the course of production for manufacturing construction materials. The environmental footprint of shale oil production is the least if the production value chain is highly thorough and complex, and the amount of waste is the smallest, while the production is the most energy-efficient.
In our social responsibility and sustainable development reports, which have been published six years in a row, we show our contribution to the support and development of both local and state-wide culture, sport, and education as well as the support of our employees. The list of our partners is long enough, and in cooperation with them, we have been organizing a number of large-scale local and national events. On the national level, our partners in the cultural field are Eesti Kontsert, the Estonian National Opera, the Art Museum of Estonia; in sport, we cooperate with the Estonian Wrestling Federation, and in education, we are doing business with the majority of the largest universities and a number of local educational institutions.
But, unfortunately, even during the anniversary year sad events might happen. In the end of the last year, there was a sudden drop in oil prices. For a long time the price for petroleum on the world market was about 110 US dollars, but in the end of the year, the prices started falling fast, and in the beginning of this year, the price was 45 US dollars p/b. Such a drop in the prices has hit the cash flow within the company hard indeed. It means that VKG has been operating at a loss. In order to provide the sustainability of the company, we were forced to cut back on our expenses considerably and stop sponsorship activities completely. It was hard enough to make decisions like that, because many of those social initiatives (e.g. the Miner´s Day and the Chemist´s Day) might not be held without the support of VKG.
Besides, in the end of the year, we were forced to shut down two Kiviter-type plants, which were operating on the basis of oil shale purchased outside of the group. It is a well-known fact that the valid Earth Deposits Act does not permit VKG to operate its own Ojamaa mine at full capacity, and the group is forced to purchase some of the oil shale it needs outside of the company. Unfortunately, the price of the exported raw material was so high that the company was forced to shut down the factories. In the result, about 300 people were made redundant.
We were forced to make the decisions as painful as that to guarantee sustainability. At present, over 2,000 people are employed within the group, and our main responsibility before those skilled and experienced specialists that we employ is to maintain the long-term functioning of our company and, through that, to keep workplaces. The world oil markets are very volatile, and we should be ready for the worst scenarios. We should respond fast, because working at a loss may lead to the depletion of financial resources very fast. But today we can already confirm that the painful cut-backs we have made have been justified indeed, and at the moment, the financial standing of the company is quite solid and consistent, which is going to enable us to implement all of the large-scale investment projects that we still have not been able to complete.
Within the long history of the group, there have been a number of crises on the world market, which have affected us. They have made our employees stronger and taught us a lot. The understanding attitude of our employees and the speed of responding to crises have been amazing. We should respond fast, and the decisions that we make should be weighed up thoroughly. We should make double effort in difficult times and stick to our main strategic aims. Life shows that those who adapt to the new circumstances and changes, which are awaiting in the future, fast enough survive in the end.
Viru Keemia Grupp AS is the largest Estonian oil shale processing enterprise, based on private capital. The main field of activities of the Group is producing shale oil and generating heat and electricity..
Valuing the most essential Estonian natural resource - oil shale.
To be the leader of the Estonian oil shale industry and the world leader in revealing the potential of oil shale.
Openness to new knowledge, to the region and its problems, new challenges and changes.
Commitment to our industry, the people working here and the region where we operate.
Development which is the main feature of our Group since its first year of activity up to the present day.
The business philosophy of VKG is to unlock the mineral and organic potential of Estonia’s most valued earth deposit, for the benefit of the traditional Estonian industry and the growth and development of the entire industrial region of Ida-Viru County.
The production activities and the services supporting the Group´s main activities are divided between separate subsidiaries, the shares of which are 100% owned by the parent enterprise.
1. Full use of the organic and mineral potential of oil shale
2. Increasing the production volumes of fuel oils manufactured on the basis of oil shale and improving the quality of fuel oils
3. Developing the Kiviter and Petroter technologies used by VKG
4. Developing the cooperation inside Estonia for increasing the efficiency of using the oil shale resource
The production activities and the services supporting the Group´s main activities are divided between separate subsidiaries, the shares of which are 100% owned by the parent enterprise.
Mining oil shale as the Group’s main raw material
Producing shale oil and refined chemicals
Generating heat and electricity
Distributing and selling heat
Producing construction materials from oil shale ash
Selling and distributing electricity
Providing logistics services for road and railway transportation
Providing repair and assembly services
Providing industrial energy supply and electricity installation services
The unit for preparation of heavy and medium-light oil fractions (RKEÕS) turned 50 years old. RKEÕS is meant for removing mechanical additives, water, and salts from the shale oil obtained at the Kiviter-type oil plants as well as from the imported shale oil.
At the beginning of the year, the list of the nine nominees for the VKG scholarship was published. They were undergraduate and graduate students from Tallinn University of Technology, including Virumaa College.
On February 26, 2014 the first Rocklite wall blocks, produced by VKG Plokk, were mounted in the structure of a newly built residential building that was still under construction. Roclite is an environmentally friendly material, which spares the environment, saves energy, and offers high quality for long years to come. Porous concrete blocks are clean and do not emit harmful compounds into the environment.
The second stage of VKG oil shale feed system was launched. Due to that it has become possible for the company to reduce the expenses for the transportation of the low quality oil shale from the enrichment facility at the Ojamaa mine to the end consumer, i.e. the oil plants of VKG Oil. The VKG oil shale feed system was extended by 700 metres by means of five conveyors.
At the beginning of April, the ceremony of laying the cornerstone of the Petroter III oil shale processing plant took place on the production territory of VKG. The partners of VKG, its investors, and project leaders took part in the ceremony at the invitation of VKG. Petroter is a solid heat carrier technology upgraded by the Estonian engineers, which is at the heart of the oil shale plants Petroter I and Petroter II, which are already operating. The amount of investments into three plants has made up ca 200 mln EUR, and the share of Petroter III project is ca 80 mln EUR. The plant will be launched in autumn 2015.
On April, 12 at the traditional Spring Ball held by the Chamber of Commerce and Industry, Priit Rohumaa, the Chairman of the Board of Viru Keemia Grupp AS, was awarded the Medal of Honour of the Second Class for his special services in the regional development of Estonian entrepreneurship and active introduction of Estonia as an investment destination.
In May, VKG Energia completed a project, which lead to the completion of a new compressor station in the turbine house of the Southern Thermal Power Plant. The maximum capacity of the new compressor station is 8,000 m3 compressed air per hour. Considering the possible development perspective of production and an increase in the demand for compressed air, there is space for the installation of two more compressors at the new compressor station.
On May, 29 the Vice-Chairman of the Board of VKG and its Financial Director Ahti Puur was awarded with a title of the Finance Director of the Year at the Big4 conference. Ahti Puur was given credit for the important role he played in the arrangement of investments and for finding the financing at the company which employs all of its financial capacity for growth.
2 500 young birches were planted in Kohtla-Nõmme Vanaküla open-cast mine by VKG in co-operation with Eesti Kontsert on the 14th of May.
On June, 12 VKG, in cooperation with Enterprise Estonia, opened the synthetic resins production unit, which produces raw material for the best tyre-manufacturing companies in the world. This brave initiative allows bringing the raw material generated from the main Estonian natural resource to many different places in the world. The cost of the production facility is about 12 mln EUR, out of which ca 230,000 EUR was contributed by Enterprise Estonia.
On June, the grand awarding of the scholarships took place at Tallinn University. During this event the spring scholars of VKG from Virumaa College of TUT also received scholarships.
On August, 31 the traditional Miner´s Day took place in Toila Oru park in cooperation between VKG and Eesti Energia. The main performer was a Swedish band Secret Service, which was popular in the 1980s. They performed their timeless and the most beloved hits. The show was free for visitors. The number of visitors exceeded 30,000 people.
The completion of VKG Energia limestone plant. The construction of the plant with the annual production volume of 24,000 tons lasted for a bit longer than a year. The limestone plant is a perfect example of an industrial environmental investment, which is also economically feasible, and which is well-integrated into the existing VKG production. The plant is using the mine waste generated at the VKG Ojamaa mine as a raw material, and the gases generated as a result of oil shale processing are used as fuel. The produced lime is used for trapping SO2, in accordance with the environmental requirements. Such a smart and practical solution perfectly matches the VKG´s concept of using up the by-products of oil shale processing and environmental protection. The total value of the project is about 5 mln EUR.
The Petroter II oil plant was launched on 10th of August, and from the beginning of September it was put into operation at full capacity, less than within three weeks. The plant was built on the basis of the technology that had been upgraded by VKG itself, and the construction team consisted of the best engineers of VKG. The new plant helped to create 100 new well-paid workplaces in Ida-Virumaa directly and about 400 workplaces indirectly. The factory, when operating at full capacity, provides the tax revenue to the state in the amount of 14 mln EUR.
On September, 24 EBRD and VKG entered into a loan contract, the value of which is 35 mln EUR. The purpose of the loan is to upgrade the VKG energy production facility even further and improve its environmental parameters as well as the efficiency of energy co-production. The production volume of oil shale gas with high energy content has increased significantly due to the launch of the oil shale processing plants Petroter I, II and III. In order to direct the entire amount of gas to the co-production of heat and electricity in the most efficient way, VKG needs additional investments. The EBRD loan will be used for financing the construction of two sulphur trapping units, a turbine, and the limestone plant project. In the result of investments, the reliability and efficiency of operations of the production facility will be enhanced, while the amount of CO2 and SO2 will be decreased significantly.
This year the Chairman of the Board of Viru Keemia Grupp Priit Rohumaa was awarded with a title of the Graduate of the Year of TUT. Priit graduated from the Faculty of Power Engineering at Tallinn University of Technology, and is now doing a Ph.D. at TUT.
The VKG team celebrated a fast and successful launch of the Petroter II plant by holding an opening ceremony on 7th October on the territory of the group. Together with the group, the Prime Minister of the Republic of Estonia, Taavi Rõivas, also joined the opening ceremony. The total cost of the project is 65 mln EUR, and this amount is supplemented by substantial investments into power engineering.
In October, the new amenities building was opened, which is used by the employees working on the production territory of VKG in Kohtla-Järve. The new facilities centre, which accommodates up to one thousand employees, is used for changing clothes, keeping personal items, washing, and resting. The investment volume amounts to 3 mln EUR. However, the new amenities building is not the largest investment into occupational safety VKG has made in recent years.
On 17th October, VKG joined the supporters of the Estonian Art Museum. As part of this cooperation, VKG was one of the sponsors of the exhibition "A Moveable Feast: Art Deco Fashion Design from Alexandre Vassiliev's Collection". Unfortunately, the cooperation agreement was suspended because of the unexpected crisis at the petroleum market, which has affected the sponsorship activities of Viru Keemia Grupp.
In November, an important project was completed at VKG, which is aimed at environmental protection, i.e. the construction of the second sulphur trapping unit was completed. In the oil shale production process, generator and semi-coke gases with considerable energy potential are generated, which are used for the production of heat and electricity. In addition to the combustion of gases in the boilers, the generated combustion gases are separated from sulphur in the Novel Integrated Desulphurisation (NID) sulphur trapping units. The NID sulphur trapping unit binds up to 2,000 tons of sulphur per year. As a result of this project, the air becomes cleaner from sulphur emissions. The cost of the NID II sulphur trapping unit is ca 6.3 mln EUR. The construction of the sulphur trapping system is supported by the Environmental Investment Centre in the amount of 411,564 EUR.
90 years passed since the launch of the first oil plant in Kohtla-Järve on 24th December, 1924. During this time period, oil shale processing has become one of the most important branches of industry in Estonia. Within 90 years, we have accumulated a huge amount of knowledge and experience about oil shale processing. Oil shale industry is the glory of Estonia.
Unfortunately, we cannot say that the anniversary year ended in grand celebrations. The sudden collapse of the world petroleum market resulted in the shutdown of two Kiviter-type plants and numerous redundancies. For a very long time we have been trying to explain to the state that the oil shale sector is very vulnerable to the prices at the petroleum world market and also the CO2 trade which has recently started. We see that the oil shale value chain could be enhanced even more considerably by producing more expensive products with the same excavation volumes and producing a larger amount of construction materials from mineral waste. At the same time, this kind of development is only possible provided that large investments are made, which can be done by VKG only if the sustainable resource and taxation policy is guaranteed on the part of the state.
VKG is the largest manufacturer of oil shale fuel oils and chemicals in Estonia.
According to the analysis of the oil shale production value chain conducted by PwC, VKG production amounts to ca 1% of the national GDP and to 0.9% of the state export.
In 2014, VKG processed about 3 mln tons of oil shale.
The oil production volume was 433,000 tons.
The number of employees: 2,100 people.
The turnover in 2014 – 194.6 mln EUR.
The oldest plant was launched in 1936, the newest is the Petroter III, the construction of which started at the end of 2013.
At the end of the year, the project aimed at the renovation of the tank farm of VKG Oil and pressure vent valves of the pipeline was completed. The total amount spent on renovation was ca 1.9 mln EUR.
VKG Soojus AS installed the automatic meter reading system for reading heat meters at the sites in Järve district in Kohtla-Järve, which helps to distribute the heat more accurately, predicts its consumption, and saves consumers the trouble of taking the readings and forwarding them to the energy distribution centre every month. The people who live in the houses equipped with the automatic meter reading system do not have to take the readings and submit them by themselves.
VKG’s integral policy of social responsibility and sustainable development was founded in the year 2009 and its purpose is to increase awareness of the Group’s overall influence on the country’s economy, social life and environment and to assess and manage this influence.
The concept of social responsibility and sustainable development is the basis of the Group’s everyday activities and the framework for its decisions. VKG is following the international principles of a socially responsible enterprise in all its activities. VKG also promotes those principles on the local and national level and recognises the fact that it cannot be a single actor.
In the year 2010 VKG joined the world’s most influential social responsibility initiatives: the GRI and the United Nations Global Compact.
VKG is a member of the Responsible Business Forum in Estonia. The enterprise received the title “Responsible Estonian Enterprise” in the years 2010, 2011, 2012, 2013 and 2014. Based on the Responsible Business Index of 2013, VKG was awarded a Bronze Quality Award (detailed information www.csr.ee).
The support and sponsorship activities of VKG are clearly targeted to the Ida-Viru region and the people working and living here. As an exception, VKG also supports all-Estonian important projects and institutions.
Environment protection. The environment protection policy of VKG was established in the year 2001. During the past 9 years the Group has invested more than 64 mln EUR into environment protection. VKG’s environmental investments in the period of 2015–2020 will require additionally nearly 50 mln EUR
Social reporting i.e. full publishing of data about social, economic and environmental influence according to the Global Reporting Initiative (GRI).
Socially responsible organisation of production in the enterprise itself (creating safe work conditions, motivating employees, additional benefits, additional pays, ongoing dialogue between the employees and the employer), and among employees (everyone accepts responsibility for everything).
Public relations standards approved in the enterprise, prohibiting the publishing of incorrect or inaccurate data.
Implementing social responsibility principles approved by the international organisations (GRI, UN Global Compact) in the enterprise.
Paying special attention to the development of the region and to the local population (primarily via sponsorships and volunteer activities).
VKG’s principles of social responsibility and sustainable development are implemented into the management process of the enterprise on the level of top management. In October 2011, the enterprise implemented the principles of responsible behaviour, and from the end of the same year the principles started to be implemented in the Group’s everyday life. Introducing the principles among employees takes place via involving them into social initiatives (cooperation with the local food bank and children’s institutions).
VKG acknowledges its major influence on the Estonian economy and the Ida-Viru region, and declares its willingness to accept responsibility before the public for its decisions. The study conducted as part of the VKG’s first report of social responsibility and sustainable development for the years 2008–2009 indicated that VKG Group and its employees contribute ca. 4% to the budget of the town of Kohtla-Järve.
The share of the group in the total volume of state taxes amounts to 1%, or 45 mln EUR, which is the total amount of taxes paid within the VKG oil shale production value chain, which includes direct, indirect, and collateral effect. The calculations have been done on the basis of the "The Economic Effect of Oil Shale Production Value Chain" analysis, carried out by Pricewaterhouse Coopers Advisor AS.
VKG provided jobs for a total of nearly 2,000 people and also creates hundreds of new jobs as a result of consumption of its products and services. Taking into account the fact that Ida-Viru County is one of the regions having the highest unemployment rate in Estonia, the jobs created by the Group are especially important for the region.
According to VKG’s internal analyses, every mining employee creates four jobs within VKG and in turn, every employee of the Group creates four more jobs in Kohtla-Järve, Jõhvi and the surrounding municipalities.
VKG also has a marked influence on the export and foreign trade balance of the country, i.e. 0.9% and 14.6% respectively. All this shows VKG’s importance for the Estonian economy.
The assistance and support of the Group can be provided to any non-profit association and/or organisation operating in Estonia, which is interested in improving the life in Ida-Virumaa or in Estonia as a whole. The rules of sponsorship and assistance valid at the Group prohibit to provide assistance to private individuals. The procedure for applying for assistance from VKG looks like this:
The main target groups of VKG are its investors and partners, its employees and the people living in Ida-Virumaa. In order to involve the two latter groups, VKG has launched several initiatives. We strongly believe that the implementation of values and the effective communication are most efficiently put into effect through involvement.
In cooperation with Jõhvi Concert Hall, Viru Keemia Grupp holds an annual photo contest "You Are Beautiful, Virumaa!", dedicated to Ida-Virumaa. In 2014, the contest took place for the third time, and on the whole, about 600 photos of both Virumaa and Estonia as a whole were submitted by almost 100 authors. Twenty valuable prizes were awarded.
The aim of the contest is to show that Virumaa is beautiful, powerful, full of good spirit, and rich in good people, beautiful nature, and interesting events.
In cooperation with the largest industrial and cultural leader in the area, the most important companies in Virumaa operating in the field of tourism, culture, sport, and banking have supported the contest. The jury included Kaupo Kikkas, Evelin Ilves, Karel Kravik.
Read more about the competition here: www.vkgsoojus.ee/konkurss
Evelin Ilves
At the beginning of the year 2012, VKG Elektrivõrgud initiated an electrical safety campaign intended primarily for children at pre-school and school age. The purpose of the campaign is to inform children at an early age about the dangers of electricity and to increase their awareness. In the course of the campaign, an electrical safety poster and a relevant online game were developed; the online game is playable in the Estonian and Russian languages at VKG’s website. The posters were distributed to all local schools and kindergartens.
In time the enterprise plans to supplement the children’s part of its website with useful information and to add more general information about electrical safety. A safety-related theatrical play popular among children is performed in kindergartens and schools. Read more about the campaign at www.vkgev.ee/lastele
For several years in a row secondary school students have been taking part in the contest in sciences held among five local schools. This initiative motivates and promotes engineering among young people. The chemical company needs good engineers in different fields, and the Group is interested in providing the future specialists with thorough knowledge in sciences while they are still at school.
The company enables its employees to take part in charity events and involves employees in various initiatives. We have also been a cooperation partner for a local blood centre. As part of this cooperation, the blood centre visits VKG and its subsidiaries several times a year. Tree-planting events and volunteer clean-ups also take place regularly.
Read more about VKG´s social initiatives on Facebook
and on the Group´s websites:
www.vkg.ee
www.vkgsoojus.ee
www.vkgev.ee
VKG is the first Estonian enterprise which discloses all of its data concerning the use of resources and environment in conformity with the World Social Responsibility report standard GRI G3. In 2015 we are releasing our sixth report.
VKG communicates with the local people open-mindedly. Every year several meetings with the locals take place, the main topic of which is the environment and the development of the group.
One of the first Estonian civil initiatives in the field of environmental protection also originates from Ida-Virumaa, namely the PurFest festival, the aim of which is to protect the Purtse River and to involve local people into its protection. VKG has been supporting the initiative and assisting it for years.
Several times a year the group holds the so-called Open Doors Day. As part of this event, everyone can visit the production facilities and see with his/her own eyes how the industrial process is organised nowadays. We also offer an opportunity for comprehensive schools to organise excursions and study trips to the factory. In 2014, ca 500 students visited our facility.
Every year, on the last Thursday of May, the traditional Day of the Environment is held, which deals with one of the most important problems in the area. The event is visited by the most prominent figures of Virumaa and Estonia as a whole, by local citizens, and the people who are in charge of the environmental issues. In 2014, the main topic was the resource and taxation policy in the oil shale sector. Unfortunately, this event is not going to take place in 2015, because of the crisis in the oil shale sector. However, we are looking forward to reviving this tradition in 2016.
The employees of the group take active part in voluntary and charity events – we hold topic-based donation campaigns, tree-planting activities and other events, and provide assistance to orphanages in the area.
The Chemist´s Day – every year on the last Saturday of May a public event takes place at the initiative of VKG in cooperation with the largest enterprises operating in the chemical industry in the area, such as Molycorp Silmet, Eastman, Novotrade Invest. The tradition of celebrating the Chemist´s Day was re-established in 2000.
The Miner´s Day – in 2011, VKG re-established the tradition of celebrating the Miner´s Day. This annual large-scale public event takes place on the last Sunday in August. This event enables the Group to make a deep bow of respect both to the miners and to all of the other people living in the area. In 2014, over 30,000 people took part in the event.
The Elderly People´s Day – every year on October 1, VKG holds the Elderly People´s Day in cooperation with Kohtla-Järve town government. Both the people who were working in the oil shale industry for a long time and other elderly people, who have made a contribution into the development and improvement of the area, take part in this event.
For the Group, the meetings with the locals are of particular importance, since they provide the Management Board with an opportunity to share the information about the development and plans of the company with the people as well as to get feedback and comments from them and to answer their questions related to the activities of the Group. The meetings take place both according to the schedule and at the request of the Group or the locals.
Ida-Viru region is characterized by the integration of the oil shale industry into the socio-economic development, and their mutual influence. Industry advancements, but also crises, are to be immediately felt particularly strongly in the municipality situated within the business area of the company - such as VKG Group and Kohtla-Jarve city. The region is constantly seeking balance between social, economic, and environmental protection standpoints, where public and reliable dialogue between participants is important. The Group supports and contributes to the development of the county, which manifests itself in the coordination of Group's strategic objectives and strategies of the regional development trends outlined in the county development plan:
At the same time, the Group is engaged at a national and county level with so named “smart specialization” in the field of oil shale industry, which means that this is the preferable high-potential development area, which is expected to develop more rapidly and to grow the added value.
VKG pays much attention to the environment protection in its activities. The main priorities are the prevention or minimisation of environmental impacts resulting from the production activities.
The environmental mission of the group is the efficient consumption of the oil shale resource and the revelation of its ultimate potential through the implementation of the best possible technology.
The aim of the environmental policy of VKG is to operate on the basis of the common management system for the benefit of the preservation of the environment that is rich in species and the rational use of natural resources.
The Group has developed a unified environmental policy, based on the following principles:
Acting upon an environmental management system conforming to the international standard ISO 14001.
Identifying the ecological aspects and environmental impact of the enterprise’s production activities and assessing their conformity to the legislation in force and to other applicable requirements.
In our everyday activities we follow the requirements prescribed in legal acts, conventions and agreements of Estonia and the European Union.
We consider it important to inform the region’s institutions and population about the enterprise’s activities and possible environmental impacts of those activities.
We pay much attention to promoting sustainable development in the enterprise, reusing as many materials and wastes generated from the production process as possible.
We consider it important to have good cooperation with research and development institutions, both for solving environmental issues and for developing new technologies.
We encourage our employees to improve their knowledge about the environment protection and we recognise and encourage practical use of that knowledge.
We work towards unlocking the full potential of oil shale, creating additional value with our oil shale products.
Most of the subsidiaries of VKG are employing an environmental management system conforming to the international standard ISO 14001.
Since year 2006, VKG Oil and VKG Transport hold the ISO 14001: 2004 and ISO 9001: 2000 certificate for the environmental and quality management system. Viru RMT holds the ISO 9001: 2000 certificate for the quality management system and the OHSAS 18001 certificate for occupational safety.
VKG Energia has implemented an occupational health and safety management system conforming to OHSAS 18001, and in 2013, it also implemented the environmental and quality management system conforming to ISO 14001 and ISO 9001.
VKG Soojus and VKG Plokk have implemented the environmental and quality management system conforming to ISO 14001 and ISO 9001.
Viru Keemia Group AS has an environmental priority of reducing the environmental impacts and of adding value to oil shale as an earth deposit. Investments into best available technology and environment protection, participation in the development of legislation, monitoring the production process and the environment, modelling the outside atmosphere, optimising the production process, and increasing the energy efficiency are the means by which the Group ensures sustainable development of shale oil production.
The Group follows the requirements prescribed in the legislation, takes into account the relevant opinions of various interested parties, and acts as a reliable partner for state institutions, local governments and the local community. VKG considers it important to have good cooperation with the research and development institutions.
The recent years have seen much work being done for the benefit of environment; tens of millions of euros have been invested and significant shifts towards more environment-friendly production have been made. At the same time, the legislation of the European Union and the Republic of Estonia and the increasing production needs are setting higher and higher requirements and new, higher environmental targets for the enterprises of the Group.
In 2010, the Industrial Emissions Directive (IED) of the European Commission came into effect, which was taken over into the Estonian legislation by the Industrial Emissions Act (hereinafter IEA) in 2013. The new legal framework imposes an obligation to conform to the requirements of the best possible technology (BPT), in addition to the end-of-pipe technologies (in previous reports, the investments into environment were presented in the form of a graph). It means that now the investments into the protection of environment are considered on a much larger scale than before.
This is why the methods for calculation of investments into environment, used by the companies covered by the IEA, have changed. Now these investments also include the investments into the development of environmentally-friendly technologies. On the basis of the new method, the graphs representing the investments into environment have also changed, which is why it is not possible to compare them with the earlier graphs.
On the basis of the new method, the investments into environment are now divided into two categories:
The investments that reduce the effect on the environment directly include such investments which provide immediate effect on the environment. They include, for example, the so-called end-of-pipe investments (trapping equipment), the renovation of tank fleets, closing the existing sources of pollution, or the investments aimed at the reduction, waste disposal, etc.
The investments that reduce the effect on the environment indirectly include the activities which help to reduce the effect on the environment as a result of the long-term ongoing activities. They include the investments in the BPT, into the development and implementation of new environmentally-friendly and efficient technologies, the technologies that facilitate the rational use of resources, the implementation of relevant measures, etc.
The amount of environmental investments increased in 2008 by ca. 64% compared to 2006 and decreased in 2009 by 50% compared to 2008. In 2008, the largest investments were made into the construction of the sulphur trap at VKG Energia. This piece of equipment cost 9.5 million EUR and was completed in May 2008. The sulphur trap allows to bond up to 65% of sulphur contained in fuels combusted at the Northern Heat and Power Plant, which significantly reduces the emissions of sulphur dioxide into the atmosphere as the primary pollutant. In 2009, the volume of environmental investments decreased due to economic recession.
In 2010 and 2011, the amount of environmental investments directly reducing the environmental impact was still quite moderate, the reason for which was the completion of large-scale environmental projects in 2008 and large amounts of investments into the development activities. In the course of planning and implementing the development activities the principles of environmental protection, energy efficiency, and sustainable development are taken into consideration as the integral parts of planning and implementing.
In 2012, the amount of investments reducing the environmental impact directly was 27.5 million EUR, which is 13 times higher than in the previous year. The main investments in 2012 were made into closing the hazardous waste storage site, closing the old heat and power plant in Ahtme, building the oil shale belt conveyor, and acquiring the sulphur trap.
In the year 2013, VKG directly invested a total of approximately 16.4 million euros into the environment protection measures; this is ca. 40% less than in the previous year 2012.
In 2014, the amount of environmental investments that directly reduce the effect on environment was 8.38 mln EUR, which is 49% less than in the previous year. The reason for that has been a significant increase in the amount of investments into the development of the Best Available Techniques and the sustainable and efficient use of resources.
The largest environmental investments in 2014 were:
The construction of the sulphur trapping unit at VKG Energia. The unit cost 9.5 mln EUR and was completed in the end of 2014. This unit allows binding up to 92% of the sulphur contained in combustible fuels at the Northern Thermal Power Plant, leading to a considerable reduction of sulphur dioxide (the primary pollutant of the environment) in the total amount of emissions.
As usual, large investments were made into the development of environmentally-friendly technologies and boosting the efficiency of the sustainable use of resources, upon the planning of which the requirements listed in the Best Available Techniques Reference Documents were taken into account as well as the limit values which are becoming stricter year after year. The most important ones are the construction of the Petroter III plant, which allows using the energy value of oil shale to the maximum (the energy efficiency of the Petroter plant amounts to 80%). Besides, the system of coarse purification of industrial waters has been set in order, and several trapping units for eliminating the unpleasant odour have been assembled and installed. In addition to that, a considerable amount of investments was made into enhancing the efficiency of boilers at VKG Energia.
In the following years, it is expected that the amount of environmental investments aimed at the direct reduction of environmental effect will increase, since VKG Energia is planning to launch the third sulphur trapping unit. Besides, the technologies enhancing energy efficiency should also be developed on a regular basis.
The main environmental trends in 2014 were the participation in the development of the Oil Shale Processing Best Available Techniques Reference Document, the updating and implementation of the programme for elimination of the sources of pollution that cause unpleasant odour, implementation of the action plan aimed at the reduction of sulphur emissions, more efficient collection and monitoring of the data connected with the environmental monitoring, arrangement of hazardous waste landfills, and the updating of the technologies connected with the handling of wastewaters.
Shale oils filtration plant
VKG Oil completed a shale oils filtration plant. The implementation of the relevant process allows to eliminate several sources of atmospheric pollution and reduce emissions and production losses. As a result of implementing the new technological scheme, no hazardous liquid wastes of oil shale pitch are generated anymore, and instead fine-dispersed solid fuel – filter cake - is produced.
Tank fleet
Other measures of reducing atmospheric emissions include the investments into the tank fleet and reconstruction of the heavy oil cycle of shale oils. In the year 2008 a tank fleet was constructed and scrubbing equipment was installed for the shale oil storage and the distillation plant. These investments resulted in a significant reduction of hydrocarbons and phenols emissions. By the end of the year 2009, an absorber for the tank fleet of shale oils was completed; this unit binds up to 70% of volatile organic compounds. Since the beginning of the year 2013, emissions of organic volatiles from the absorber of the distillation unit’s tank fleet are fully eliminated. Also, the tank fleet of the phenol water dephenolation unit is being reconstructed. The years 2013–2014 will see the catching systems of other tank fleets being made more effective as well.
Petroter oil plants
In the year 2009 the first Petroter oil plant was completed, allowing the use of fine oil shale for oil production. This plant has several devices for environment protection. Its chimney stack has a continuous monitoring device for flue gases; it allows us to monitor the concentration of pollutants emitted into the atmosphere and to react immediately if any of the limits are exceeded. The plant also has an utilisation boiler for using up the waste gases and the heat resulting from those gases. The solid wastes resulting from processing of oil shale in that plant are also more environment-friendly, because the organics content of the generated ash is significantly lower and thus conforms to the requirements prescribed in the legislation.
At the moment, the Petroter II line has been launched successfully, and the construction of the Petroter III line is at its final stage. The new lines are similar to Petroter I in terms of the underlying process, but they have been complemented with several measures following the principles of sustainable use of resources and environmental protection:
As a summary it is worth noting that more than one hundred big and small changes were made in the Petroter II and III plants, all for the main goal of ensuring more efficient and environment-friendly functioning of the process. The whole process allows now higher production volume with less raw material used and, therefore, less emissions. Besides, the changes also allow for the maximum use of heat energy generated in the process and for reduction of regular maintenance and standstill periods. Thus, the changes ensure stability of the process, rendering it more effective and environment-friendly.
Waste deposits
In the year 2007 a new semi-coke solid waste deposit was completed, conforming to all environmental requirements; the depositing technology used excludes any seeping of storm water into the body of the deposit. The leachate is collected into a separate water-tight pool and is treated in the regional waste water treatment plant if necessary. Due to special inclines, the time of contact between storm water and the deposit surface is minimal, thus minimising the pollution of storm water. Tidying of old hazardous waste deposits continued in 2012 until the summer of 2013, rendering them all watertight. Tidying of the old waste deposits will minimise their environmental impact.
Oil removal unit
The 1st stage of reconstructing the oil removal unit (the purpose of this piece of equipment is the purification of the water on the territory of the residues of oil shale processing) is completed, with the cost of 1.4 million euros. The new floatation devices allow pre-treating of the industrial waste water and ensure the required water quality on exit from the oil removal unit. At the beginning of the year 2012, the 2nd stage of reconstructing the oil removal unit was completed, with the cost of 1.1 million euros. The new unit allows better pre-treatment of industrial waste water to remove various mechanical additives. In the year 2013, atmospheric emissions from that unit were eliminated, the works will be continued in 2014.
Belt conveyor
A significant environmental project is the 12.5 kilometre belt conveyor for oil shale, constructed by VKG Kaevandused in the years 2010-2012 to run from the Ojamaa mine to the Kohtla-Järve industrial territory. The belt conveyor helps to reduce significantly the environmental load resulting from road transport.
Lime production plant
A lime production plant of VKG Energia is working in test mode since year 2014, for the purpose of maximum reuse of mining scrap from the Ojamaa mine, to produce low-quality lime necessary for SO2 capture. The plant’s design takes into account all requirements of best available technology, in order to ensure minimum emissions.
Heating main between Kohtla-Järve and Ahtme
At the beginning of 2013, the new heating main was completed that conforms to all of the BPT requirements, which, in addition to Jarve district in Kohtla-Järve, also allows to heat Ahtme district and Jõhvi. Due to the heating main, it has become possible to increase the efficiency of co-production of heat and electricity at VKG Energia considerably and to use up the residue heat generated as a result of oil shale processing. Besides, the construction of the new heating main also allowed to close the old heat and power plant in Ahtme, which did not conform to the new environmental requirements.
The main directions of environmental activities for the years 2012– 2018 include reducing atmospheric emissions, especially pertaining to sulphur dioxide and the sources of pollution causing unpleasant odours.
Also, increased attention will be paid to improving the quality of storm water and waste water and to enhancing of treatment technologies. Issues regarding depositing of oil shale ash and bottom ash and the closing of the wet deposit are also planned to be solved. Besides, the measures aimed at an increase in energy efficiency are also being sought for.
The main environmental targets for the next 5 years are as follows:
The following research was held in the year 2014:
The following main environmental investments were held in the year 2014:
In connection with a decrease in the price for petroleum at the world market, it is expected that the amount of investments will be smaller due to economic conditions that have changed, too. In spite of the altered economic situation, the ongoing environmental projects will be completed.
In the year 2014, the Group generated 1.95 million tonnes of hazardous wastes, which is 3,6% more than in the year 2013. The increased amount of generated hazardous waste is due to the launch of the Petroter II, which caused an increase in the amount of oil shale ash.
VKG Energia generated 32,549 tonnes of hazardous wastes in the year 2014 and 29,329 tonnes in 2013. An increase in the amount of hazardous waste, as compared to 2012, is caused by the fact that, in addition to lime, oil shale ash is now used for removing SO2, which allows to save limestone and use up the potential of the free CaO contained in ash. Besides, one more sulphur trapping unit NID II was launched.
| Hazardous wastes generated by the Group | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|
| Hazardous wastes (mil t) | 1,58 | 1,71 | 1,88 | 1,95 |
| incl. the residues generated while cleaning the tanks (t) | 1642,92 | 365,49 | 122,28 | 330,92 |
| incl. oil shale ash (t) | 382 636,89 | 423 776,99 | 477 773,92 | 621 598,75 |
| incl. semi-coke (t) | 794 975,00 | 868 884,58 | 972 801,34 | 934 985,73 |
Chart shows the generation rate of hazardous waste per a ton of produced shale oil. In 2014, the production volume increased by 21,730 tons, as compared to 2013, and the amount of hazardous waste increased by 71,120 tons. A decrease in the ratio, as compared to the previous year, was caused by the launch of the Petroter II, owing to which the production efficiency has also increased to some extent.
As compared to 2010, the ratio increased through an increase in the share of the Petroter technology (fine oil shale with a lower fuel value and a higher content of mineral substances is processed) and the transfer to the Ojamaa oil shale, which also contains more mineral substances. Since Petroter uses fine oil shale with lower fuel value in its production process, less oil is produced as a result. In its turn, it leads to an increase in the ratio. At the same time, in case of the Petroter technology, we are dealing with a considerably more energy-efficient production, with the energy efficiency of ca 80%. It allows using the potential of fine oil shale more efficiently than burning it for the generation of electric power.
In 2014 the amount of disposed solid waste was 865,503 tons. The amount of solid waste increased by 456 893 tons. The increase in the amount of waste was due to the fact that the activities of the closure of landfills of hazardous waste entered into their final phase and the amount of ash and oil shale dust used for the landfills closure decreased significantly.
In 2014, the fee for depositing solid waste was ca 2,146.4 thousand EUR. An increase in the waste depositing pollution charge by 60% compared with the previous year was caused by a reduction of the recycling of waste during the closing of the landfill of hazardous waste and a rise in the rates, which had been valid before, on the basis of the Environmental Charges Act.
In 2014, 24,580 tons of non-hazardous wastes were generated within the group, which is ca 95% less than a year before. The main types of waste are construction and demolition waste, household waste, and metal scrap. The decrease in the amount of generated waste is mainly caused by the cessation of generation of mine waste at the Ojamaa mine. In summer 2013, the limestone excavated at the mine was certified. Thus due to improvement of technical solutions, in addition to oil shale, the excavations of limestone as a by-product started at the mine, which can be used in different construction works. As a result, a product is obtained in the result of a technological process, and the generation of waste is prevented.
| Non-hazardous wastes generated at the Group | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|
| Non-hazardous wastes (t) | 15340 | 739653,41 | 582464,12 | 24580,11 |
| incl. construction and demolition wastes | 662,5 | 433,5 | 318,1 | 749,01 |
| incl. common wastes | 219,02 | 229,41 | 382,14 | 365,05 |
| incl. the emergent in the Sulphur-trapping unit | 14 459,2 | 17757,6 | 0 | 0 |
| incl. calcium-based reaction wastes from sulphur trapping | ||||
| incl. mining scrap | 0 | 714913,8 | 570241 | 0 |
| incl. old metal | 11290,2 |
In 2014, 1.08 mln tons of hazardous and non-hazardous waste was recycled at the group, which is about 47% less than a year before. A decrease in recycling was caused by the cessation of generation of mine waste as well as the cessation of closing operations of semi-coke landfills. The main wastes taken into reuse were:
| Reuse of wastes | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|
| Reusable wastes (t) | 698831,17 | 2025319,12 | 2 044780,95 | 1 083 076,26 |
| incl. construction wastes | 25 577,56 | 0 | 8000 | 0 |
| incl. phenol water | 402 735 | 419599 | 423931 | 392 058 |
| incl. fusses | 0 | 0 | 0 | 0 |
| incl. old oil | 0 | 0 | 0 | 0 |
| incl. semi-coke | 238695,06 | 694210,83 | 775240,1 | 445 912,3 |
| incl. oil shale ash | 0 | 192134,63 | 266726,10 | 245 169,63 |
| incl. mining scrap | 0 | 714913,8 | 570241,00 | 0 |
The industrial enterprises of the Group emitted a total of 801,764 tonnes of CO2 in the year 2014, which is 110,734 tonnes more than in the year 2013. The increase of CO2 emissions when comparing to the year 2012 results from increase of production capacity of the Petroter plant and increase of fuel volumes combusted in VKG Energia.
Most of the carbon dioxide emissions - 489,195 tonnes in the year 2013 and 478,851 tonnes in the year 2014 - were generated in VKG Energia upon combusting the retort gas and semi-coke gas generated in the course of thermal processing of oil shale, and also upon combusting oil shale and filter cake.
VKG Oil emitted 198,200 tonnes of carbon dioxide in the year 2013 and 322,340 tonnes in the year 2014. The emissions resulted from combustion of waste gases (retort gas, coke gas, separator gas) and natural gas in the shale oil distillation plant, the phenol rectification plant and the electrode coke producing plant, and in the course of operation of the Petroter I and II plants.
In the year 2014, the Group emitted a total of 10,295 tonnes of sulphur dioxide, which is 1528 tonnes more than in the year 2013. An increase in the amount of sulphur dioxide was caused by the completion of the new Petroter II, which is why the amount of combustible gases at VKG Energia also increased. At the end of 2014, the new sulphur trapping unit NID 2 was completed at the Northern Thermal Power Station of VKG Energia, which is going to reduce the effect exerted by an increase in the amount of generated gases in the future.
Most of the SO2 emissions, i.e. 9,264 tonnes in the year 2014 and 7,792 tonnes in the year 2013, were emitted from VKG Energia upon combusting the retort gas and semi-coke gas generated in the course of thermal processing of oil shale, and upon combusting oil shale and filter cake.
VKG Oil emitted 1,032 tonnes of SO2 in the year 2014 and 972 tonnes in the year 2013. The emissions resulted from combustion of waste gases (retort gas, coke gas, separator gas) in the shale oil distillation plant and the electrode coke producing plant, and in the course of operation of the Petroter plants.
In 2014, the amount of special emissions of per yield increased by 21% at VKG Energia, as compared with 2013. This increase was caused by the launch of the Petroter II unit, which is why the generation of electric power increased, which in its turn leads to the reduction in production efficiency.
Owing to Ahtme heating main, which was launched in 2013, it has become possible to use up the energy of residue gases generated in the process of production of oil shale effectively. Besides, the old Ahtme Southern Heat and Power Plant was closed.
Compared to the year 2013, in 2014 year VKG Oil specific emission of SO2 per production unit has also increased 7.8%. Specific emission increased due to the startup and configuration process of Petroter II.
Air pollution charges increased by ca 14%, compared with the previous year, which was caused by an increase in pollution charge rates and production volumes.
In the year 2014, the electricity consumption of the entire Group was 150,839 MWh, whereas the largest consumers of electricity were VKG Oil and VKG Energia. The Group consumed 15,814 MWh more electricity in the year 2014 than in the year 2013. An increase in energy consumption in 2014 was mainly caused by the launch of the Petroter II oil plant by VKG Oil.
In the year 2014, VKG Oil consumed 91,096 MWh of electricity, of which 34,743 MWh was consumed by the Petroter I and II oil shale processing plants. Out of the entire electricity consumption of VKG Oil, 5,851 MWh was consumed by lighting and 85,245 MWh was consumed by technological equipment. VKG Oil consumed 11,551 MWh more electricity in the year 2013 than in the year 2013. The increase in electricity consumption in the year 2014 is due to the opening of a new Petroter II plant.
VKG Energia consumed 48,747 MWh of electricity in the year 2014. The enterprise also produced electricity in the amount of 216,527 MWh.
In relation to an increase of heat demand in the year 2013, VKG Energia started also to use solid fuels – filter cake and oil shale. Semi-coke gas consumption at the Petroter plant increased significantly. To some extent the consumption of retort gas decreased.
In the year 2014, a total of 3,762 thousand m3 of water was consumed; of that, 55,900 m3 was ground water, 3,67 mln m3 was lake water and 33,500 m3 was water used in the refinery plant. In the year 2014, the total water consumption was 205,000 m3 more than year 2013. An increase in water consumption, compared with 2013, was mainly caused by an increase in the consumption of cooling water and industrial water as a result of the launch of the Petroter II oil plant.
In the year 2014, the Group’s total water emissions were 16,8 million m3 , of that, 1,32 mln m3 was effluent from the industrial territory, ca. 1,11 mln m3 was waste water and 14,38 mln m3 was mine effluent from the sediment pool. In the year 2013, the Group’s total water emissions were 12,7 mln m3 , of that, 1,16 mln m3 was storm water from the industrial territory, ca. 0,99 mln m3 was waste water and 10,6 mln m3 was mine effluent. Water emissions increased by 4,04 mln m3 compared with the previous year, which was mainly due to increase of storm water pumped out of the mine.
The increase in water pollution charges by 20,9% in the year 2014 when compared to the previous year is mainly due to increase of water emissions and special use of water from the mine and largely also due to the increase in pollution charge rates.
No company can exist without loyal employees. Being the largest employer in the area, we are striving to create advanced working conditions and a nice atmosphere at work as well as to offer development opportunities to our employees.
We are pleased with the fact that our employees highly value VKG as an employer, and that our perspective employees are very interested in working with us. A good proof of that is the succession of generations, which is very popular within the group. On average, VKG employees have been employed by the company for 9 years.
The peculiar nature of the oil shale industry requires qualified labour force that is eager and able to learn. Among the employees of the Group, 25% have higher education.
The representatives of twenty different nationalities work at the Group. The most represented are the Russians, the Estonians, the Belarussians, and the Ukrainians.
Other nationalities:
the Finnish, the Latvians, the Lithuanians, the German, the Polish, the Moldavians, the Koreans, the Bulgarians, the Armenians, and many other nationalities.
At the beginning of 2014, there were 2,109 employees at VKG. In 2014, the number of employees increased significantly, the main reason for which was the launching of the Petroter II oil plant. By the end of October, there were 2,277 people working at VKG.
Our experienced colleagues supervise new employees and the people who undergo on-the-job training, and their contribution is rewarded by the management. In 2014, 85 young people underwent on-the-job training in the companies of VKG group.
The company does cooperation with the Kohtla-Järve Trade Union of Chemists, with which we have a collective agreement till the end of the year 2015.
VKG pays good motivating salaries to its employees. The average gross salary at the Group in 2014 was 1,390 EUR.
We pay bonuses for evening and night shifts, seniority pay, anniversary bonuses, and also child birth benefits as well as make payments on sadder occasions, such as funerals.
Our employees can benefit from the availability of the healthcare station service, where they can get help from qualified medical staff. We also offer vaccination against flu.
We value our employees through traditions:
We believe that the promotion of engineering and the profession of an engineer has an important and a clearly positive effect on social and economic advancement of Ida-Virumaa, i.e. the life and well-being of the county. In our opinion, it is really important that future specialists should acquire thorough knowledge in sciences at school. On 8 April 2015, such industrial companies of Ida-Virumaa as Viru Keemia Grupp, Eesti Energia, and Eastman Specialities signed a Goodwill Agreement in order to join forces and boost the interest towards the profession of an engineer among the young people in Ida-Virumaa. The creation, implementation, and development of elective subjects connected with engineering as well as the development of enhanced studying of Maths and natural sciences is going to take place at Jõhvi State Gymnasium. The cooperation between industrial companies and the school should enhance the possibilities of acquiring an interesting profession and getting a good salary in the home county.
The doors of our company are open for school excursions and study visits. The employees of the group take active part in the "Back to School!" project and visit schools at other times, too, to make the school life more varied and interesting. We offer career counselling to students by taking part in fairs and career days, e.g. "Key to the Future", which is held at Tallinn University of Technology, and Career Days at Tartu University.
VKG has been offering scholarships to the most prominent students of the Faculty of Chemical and Materials Technology at Tallinn University of Technology and those acquiring applied higher education at Virumaa College studying fuel technology, automation of production processes, machine engineering technologies, and energy technology as well as to graduate students studying fuel chemistry and technology. The annual scholarship fund is 19,000 EUR. VKG scholarships support the students´ motivation for learning the professions that are of high demand within the group and give a clear signal that young specialists are always welcome at the companies within our group.
VKG’s employees belong for the most part to the regular labour force prepared at the time of the former Soviet republic of Estonia. Due to their ageing they start leaving the labour market. The average age of VKG’s personnel is now 44.1 years and this index is not high for an industrial enterprise. At the same time the Group is constantly working to provide itself with young engineers. For that purpose, VKG helps to promote engineering education in oil shale field on both national and local levels through student grants and providing opportunities for practical training.
To enable a newcomer to work independently, the new employee is first assigned an instructor and has to complete a training programme (up to three months); at the end of the test period the new employee must pass an examination in order to be allowed to work independently. Employees who wish to upgrade their qualification and get higher salary can pass a qualification examination for a higher level.
Guidance in occupational safety takes place periodically once in six months or once a year. The length of the period depends on the danger level of the working place. Occupational safety instruction includes introduction of safety devices and reminds about actions to be taken in case of emergency.
There are two directions of professional training VKG can propose to its employees:
The training inside the Group is aimed not only at improving one´s knowledge, but also at generating the supportive spirit within the team and improving communication and strengthening bonds between the employees. For that purpose, a large-scale management, IT and occupational safety training projects were implemented in 2014. The training helped to unite the middle-ranking managers at VKG, to understand each other better, to establish cooperation for the benefit of achieving common aims, and to boost the efficiency of their management - both of themselves and of others.
The main training fields in the year 2014 were:
Training outside the Group is budgeted in each subsidiary for each financial year.
| Training expenditure of VKG´s enterprises (th €) | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|
| VKG | 28,9 | 47,1 | 49,7 | 38,5 |
| VKG Kaevandused | 0,1 | 5,6 | 17,1 | 8,7 |
| VKG Oil | 31,9 | 47,1 | 82,0 | 71,9 |
| VKG Energia | 2,9 | 9,5 | 13,3 | 11,2 |
| VKG Soojus | 7,6 | 6,9 | 6,3 | 14,2 |
| Viru RMT | 10 | 26 | 55,6 | 21,1 |
| VKG Transport | 17,1 | 18,9 | 21,6 | 13,4 |
| VKG Elektrivõrgud | 13,3 | 11,6 | 15,8 | 16,7 |
| VKG Elektriehitus | 4,3 | 11,4 | 9,9 | 8,3 |
| VKG Plokk | 0,5 | 3,8 | 2,5 | 3,1 |
| Total | 116,6 | 187,9 | 273,8 | 207,1 |
Since one of the main resource of the Group is its employees, they should definitely be competent, qualified, interested and committed to achieving the aims set by and for the Group. They should be ready to move ahead together with the company. This is why we find it extremely important to order the training courses for our staff in different fields and from different training companies. In 2014, we involved several new partners into large-scale training projects.
VKG has got a special room for carrying out courses and other training activities. It is equipped with everything that is required for successful learning and is very convenient both for students and lecturers. For IT courses, we have purchased a mobile computer classroom, which allows to organise courses at the time and at the place that is suitable for the company.
VKG has several procedures involving employees into the organisation’s management process. First of all, employees have a right to express their opinion when drafting the next collective agreement.
The participation of employees in decision-making is being mediated by a trade union active in VKG. Trustees of the trade union who represent employees` interests have regular meetings with the management team members of VKG’s enterprises, delivering to them questions and requests of employees and discussing employee-related problems and their possible solutions. The meetings usually take place once a month. The specific members of the supervision or management team are selected for the meeting by the trade union.
The chemical workers trade union active in VKG includes the Group’s subsidiaries and also other chemical industries of the city. The trade union includes the employees of VKG, VKG Oil, Viru RMT, VKG Energia, VKG Transport, VKG Soojus, VKG Plokk, VKG Kaevandused and also Nitrofert and Novotrade Invest. The professional association of employees of chemical enterprises has been active since the year 1948 when the first collective agreement was signed.
Directors of VKG’s subsidiaries and top-level managers of the Group facilitate relations between the administration and the employees – the e-mail addresses and work telephones of the Management Board are open to employees.
In the year 2014, a total of 13 occupational accidents took place at Viru Keemia Group AS. Taking into consideration the number of employees, the number of occupational accidents (occupational accidents per one employee) in 2014 was 18% higher than in 2013.
The main causes of occupational accidents were:
As the absolute number, the most serious accidents were registered within 2008-2014 at VKG Kaevandused, VKG Oil ja Viru RMT (14, 24 and 4 respectively). If we compare the number of accidents at the workplace per a million of working hours in 2008-2014, the high numbers at VKG Plokk and VKG Elektriehitus become obvious. Within the period in question, the number of accidents at the workplace per a million of working hours in those subsidiaries was about two times higher than at VKG Kaevandused during the same period.
The largest number (of both minor and severe) occupational accidents per one million of working hours (TRIR- total recordable injury rate per million hours worked) was at VKG Plokk – 11,1 accidents per one million of working hours. This is more than 2,7 times higher than at the VKG Group on average. From 2011, approximately 1 accident per year took place at VKG Plokk on average, but the TRIR indicator is increased through a smaller number of working hours. No accidents at the workplace happened at VKG Elektriehitus within the last three years, while from 2008 to 2014, 6 accidents happened. Obviously, the average number of accidents at the workplace at VKG group is affected by more labour intensive subsidiaries, i.e. the highest TRIR indicator in the group is in Viru RMT, VKG Energia and VKG Kaevandused.
The most important accident prevention measures in 2015-2015 include:
According to the statistical data provided by the Labour Inspectorate, 4,635 occupational accidents were registered in Estonia in 2014, which is 10,8% more than in 2013 (4,183).
At Viru Keemia Group AS and its subsidiaries (hereinafter referred to as the Group), 13 accidents took place in 2013 altogether, which is 18% higher than a year before (11 accidents). Luckily, there were no accidents resulting in death.
| Number of accidents per an employee at Viru Keemia Grupp within 2008-2014 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|---|---|---|
| Number of employees | 1414 | 1358 | 1507 | 1769 | 2002 | 2150 | 2152 |
| Number of accidents | 8 | 9 | 16 | 12 | 16 | 11 | 13 |
| Number of accidents per an employee | 0,006 | 0,007 | 0,011 | 0,007 | 0,008 | 0,005 | 0,006 |
Considering the number of employees, the number of registered accidents at the workplace (accidents at the workplace per an employee) was 18% higher than in 2013, but at the same time, the number of accidents was below the arithmetic mean in 2008-2014.
In terms of the severity level of health damage, 6 severe accidents and 7 minor accidents were registered at the Group in 2014.
Compared with 2013, the number of both minor and severe accidents at the workplace increased by 1 accident.
The accidents causing severe health damage took place in production:
The main reasons that caused accidents were:
The prevention system meant for the industry, in which chemical substances are used, has been operating at the company for years and proved its efficiency. It involves the advancement of technological processes and equipment, the use of personal protection devices and the protection devices for the whole team/staff, monitoring the content of hazardous substances in the air, and the installation of automatic industrial systems. All of the measures listed above are actively implemented at our company. And still, their implementation does not rule out the need for increasing the level of awareness for the occupational safety. At the end of April, the posters saying “Follow safety rules! Your family needs you!” were put up at all companies of the Group.
In 2013, a large cleaning was held on the territory of VKG Energia, which is also a very good means of prevention of accidents. In 2013, a large cleaning was held on the territory of VKG Energia, which is also a very good means of prevention of accidents.
In 2014, no organizational changes took place at VKG
VKG follows the good practices of corporate governance in its activities. The good practices of corporate governance are intended to be followed primarily by enterprises having their shares traded in the Estonian regulated market, but they are also recommended for other enterprises subject to public interest. The objective of VKG is to follow the good practices of corporate governance and to present the activities of the enterprise in a transparent manner; thus the sustainable development report includes a chapter dedicated to the description of the good practices of corporate governance.
As of 01.01.2014, the nominal value of the share capital of VKG was 6,391,164.21 euros. There were no changes in the share capital in the years 2008– 2014. VKG’s shares are not noted on the securities market.
The Group has four shareholders with the following holdings as of 01.01.2014:
The highest management body of VKG is the general meeting of shareholders. General meetings can be regular and extraordinary. The competence of the general meeting is prescribed in the Commercial Code of Estonia and in the Articles of Association of VKG.
General meetings are summoned by the Management Board of VKG. The notice of summoning a regular general meeting of shareholders is sent to the shareholders at least 3 weeks before the date of holding the general meeting; the notice of summoning an extraordinary general meeting is sent at least 1 week before the date of holding the meeting. Annual reports are available to shareholders at least 2 weeks before the date of holding the general meeting.
A general meeting of shareholders is competent to make decisions if more than 50% of the votes granted by shares are represented at the meeting.
The meeting that approved the annual report of 2013 was held on May 28, 2014 with the participation of 100% of the votes granted by shares. The following decisions were made in the course of the general meeting of shareholders:
The Management Board of Viru Keemia Grupp AS consists of six members: Chair of the Management Board, Deputy Chair of the Management Board and Financial Director, Development Director, Technical Director, Management Board Member of VKG Kaevandused and Management Board Member of VKG Oil.
Four Management Board Members – Priit Rohumaa, Ahti Puur, Jaanus Purga and Meelis Eldermann – manage the activities of the Group as a whole and are also Supervisory Board Members of subsidiaries.
Two Management Board Members – Margus Kottise and Nikolai Petrovitš – are the Managers of the strategically most important subsidiaries of the Group.
The duties of the Management Board include everyday management of VKG’s economic activities and representing the business association. In all legal procedures of the Group, an enterprise is always represented by two Management Board Members together, whereas one of them must be the Chair or Deputy Chair of the Management Board.
Priit Rohumaa
Chair of the Management Board – 11.09.2000
Ahti Puur
Deputy Chair of the Management Board – 07.10.2009
Jaanus Purga
Management Board Member, Development Director – 26.01.2001
Meelis Eldermann
Management Board Member, Technical Director – 06.03.2008
Margus Kottise
Management Board Member – 09.05.2000
Nikolai Petrovitš
Management Board Member – 16.11.1999
The Management Board Members are paid a monthly remuneration consisting of the pay for performing the duties of a Management Board Member and the pay for keeping business secrets and for respecting the competition prohibition. The duties of the Management Board Members are stated in service contracts signed with the Management Board Members. According to the service contracts, the Management Board Members can get additional monetary remuneration which is paid according to the relevant decisions of the Supervisory Board.
Supervision over the activities of the parent enterprise’s Management Board is done by the Supervisory Board, consisting of six Members, since 01.02.2012. The Meetings of the Supervisory Board take place once per month, on the last Wednesday of every month. Urgent matters requiring approval of the Supervisory Board are constructively decided using electronic means of communication.
Pursuant to the Authorised Public Accountants Act of the Republic of Estonia, VKG is considered to be an entity subject to public interest and is thus required to have an Audit Committee. The members of the Audit Committee of VKG are Ants Laos (Chair of the Committee), Priit Piilmann, Margus Kangro and Elar Sarapuu. According to the Statutes, the Audit Committee is an advisory body for the Supervisory Board of VKG in the fields of accountancy, auditing, risk management, internal audits, supervision and budgeting and also legality of activities. The Meetings of the Audit Committee are held at least twice a year.
The staff of the Management Boards and Supervisory Boards of the parent enterprise and subsidiaries of the Group is presented in the following table.
| Commercial name | Management Board Member | Supervisory Board Members |
|---|---|---|
| Viru Keemia Grupp AS |
Priit Rohumaa (Chairman) Ahti Puur Jaanus Purga Nikolai Petrovitš Meelis Eldermann Margus Kottise |
Toomas Tamme (Chairman) Priit Piilmann Margus Kangro Ants Laos Elar Sarapuu Jaan-Mihkel Uustalu |
| VKG Oil AS |
Nikolai Petrovitš Priit Pärn |
Priit Rohumaa (Chairman) Meelis Eldermann Ahti Puur |
| VKG Transport AS |
Ervin Küttis |
Priit Rohumaa (Chairman) Meelis Eldermann Ahti Puur |
| Viru RMT OÜ |
Peeter Ilves Andry Pärnpuu |
Meelis Eldermann Ahti Puur Jaano Uibo |
| VKG Kaevandused OÜ |
Ahti Puur (Chairman) Margus Kottise |
Priit Rohumaa (Chairman) Jaanus Purga Meelis Eldermann |
| VKG Elektrivõrgud OÜ |
Tarmo Tiits |
Priit Rohumaa (Chairman) Toomas Rätsep Ahti Puur |
| VKG Energia OÜ |
Marek Tull Sergei Kulikov |
Priit Rohumaa (Chairman) Meelis Eldermann Ahti Puur |
| VKG Elektriehitus AS |
Andry Pärnpuu |
Priit Rohumaa (Chairman) Toomas Rätsep Ahti Puur |
| VKG Soojus AS |
Aleksandr Šablinski |
Priit Rohumaa (Chairman) Meelis Eldermann Ahti Puur |
| VKG Plokk OÜ |
Jaak Saar |
Priit Rohumaa (Chairman) Jaanus Purga Meelis Eldermann |
Cooperation between the Management Board and the Supervisory Board takes place in a constructive manner. In addition to regular monthly meetings of the Supervisory Board, any urgent matters requiring approval of the Supervisory Board are decided without summoning a meeting. Consultations are provided as well.
The Supervisory Board plans the activities of the Group, organises its managing and exercises supervision over the Management Board; according to the Articles of Association the Supervisory Board has three to seven members.
Toomas Tamme (Chairman)
Priit Piilmann
Margus Kangro
Ants Laos
Elar Sarapuu
Jaan-Mihkel Uustalu
Jens Haug (Advisor of the Supervisory Board)
The Articles of Association of the Group state that transactions and activities on behalf of the Group require consent of the Supervisory Board if they bring up the following:
Management Board Members are prohibited from competing with Viru Keemia Grupp AS in its field of activities, unless having the prior consent of the Supervisory Board.
In the year 2014, no Management Board Member notified about own actual or intended direct or indirect participation in entrepreneurship in the field of activities of Viru Keemia Grupp AS.
In order to avoid conflicts of interest, all Management Board Members and middle-level managers of the business associations belonging to the Group are required to submit upon any changes a declaration in approved format, stating their holdings in legal entities and/or membership in management bodies of legal entities and/or activities as self-employed persons.
The Management Board of Viru Keemia Grupp AS has the duty of preparing financial reports. The accounting principles and methods of presenting information, utilised in accountancy of all VKG’s subsidiaries, conform to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and to the relevant issued interpretations. Decisions about VKG’s largest transactions and about its strategic financial targets are made by the Management Board of the Group at its weekly meetings.
The Financial Division of the Group manages and plans the everyday cash flows, i.e. prepares the budgets of the Group and its subsidiaries, exercises supervision over the respecting of those budgets, prepares business projects, and communicates with sources of financing. The Financial Division of the Group is aided in this by Financial Divisions of subsidiaries, which have the duty of analysing the economic activities of the relevant subsidiary. All technical financial transactions are performed by the centralised Accountancy Department of the Group. The Accountancy Department makes the necessary payouts, accounts the salaries, makes the payments of vacation pay and sick pay, and prepares the annual balance sheet of the financial year. An accounting entity is required to ensure the availability of relevant, significant, objective and comparable information about its financial state, economic results and cash flows. If the internal regulations don’t describe an event occurring in the accountancy of VKG, then the event is accounted according to the International Financial Reporting Standards (IFRS), the Accounting Act of the Republic of Estonia, the guidelines issued by the Estonian Accounting Standards Board (EASB), and other legal acts.
The accounting period is a financial year with the length of 12 months. The financial year begins on January 1 and ends on December 31. VKG has the right and obligation to keep independent accounts on the basis of the internal regulations of accountancy approved according to the procedure prescribed in the Articles of Association of the Group. The internal regulations of accountancy are replaced and amended with the approval of the owners of VKG, if necessitated by economic considerations, reorganisation of the activities of the Group, amendments of the accounting principles on the basis of the contents of the International Financial Reporting Standards (IFRS) and the guidelines and recommended methods issued by the Estonian Accounting Standards Board (EASB) or on the basis of amendments of the national tax laws and tax guidelines, or by other reasons.
The enterprise is required to document all its economic transactions and to register those transactions in its accounting ledgers. Economic transactions are carried on debit accounts and credit accounts according to the double entry method.
Economic transactions are recorded in chronological and systematic accounting registries at the moment they take place or immediately after. An accounting registry is a database used in accountancy. An accounting registry is formed in chronological order (ledger) and as accounts (turnover balance). All reports and registries of accounts are prepared on the basis of the accounting software in use. Reports and registries of accounts are preserved on computer diskettes, CDs and/or as paper printouts. Since January 1, 2001 the Baan software for resource planning and financial management of subsidiaries is used in the accountancy of the Group. The auditor of Viru Keemia Grupp AS is assigned with a decision of the general meeting of shareholders.
The Management Board organises a competition to find an auditor, with the goal of finding the auditor for the next financial year. The latest competition to find an auditor took place in the year 2015.
The Management Board of the Group has the duty of shaping the risk management policy and affecting the risk management of Viru Keemia Grupp AS.
The goals of risk management of VKG are as follows:
The base document for risk management is the one on which the risk management system is based. The document provides descriptions of significant risks of the Group, assessments of those risks, and opportunities to hedge them. The risks are determined on the basis of the Group’s most important targets, related to VKG’s striving to value oil shale as much as possible and to process it as efficiently as possible.
The results of risk assessment highlight the risks which should be considered more and which require a further plan of actions for hedging them. Risk management takes place on the basis of the precise vertical structure. The risk assessment document has been approved by the Management Board of VKG, and a responsible person from among the Management Board Members has been assigned to every significant risk, whereas such responsible persons must ensure that the Group actually hedges the relevant risk. The person responsible for managing the risk prepares an action plan for hedging the risk and presents the action plan to the responsible Management Board Member. On the basis of the results of risk minimisation, a new report is prepared annually about the assessment of risks, and new goals are set for the following year.
Taxation
Business risks are the main strategic risks of VKG. Regular attention must be paid to the risk of delivery continuity of raw material, the risk of competitiveness of oil shale processing and the risk of managing capital-intensive investments.
The delivery continuity of raw material is one of the main business risks in the production chain of shale oils. In order to secure the availability of oil shale resource and to hedge the relevant risk, VKG opened the Ojamaa oil shale mine in the year 2012; it was the largest investment of the Group for the period of 2008-2012.
Oil shale processing may become uncompetitive primarily due to increasing taxation load, increasing labour force expenses, and an increase in the prime cost of the final product, which is connected with new large-scale investments into environment. VKG is carefully following the prescribed environmental requirements and participates actively in activities of professional associations, in order to be knowledgeable about future regulations. The Environmental Department of the Group is centralised and the internal monitoring processes have been developed for it. New investments into up-to-date technologies are continually made in case the environmental regulations become stricter.
The activity of VKG depends on timely making and financial success of large investments. In order to hedge risks, attention must be paid to management of investments – planning, project management and follow-up assessment. A comprehensive process is used for budgeting investments: investment budgets are prepared across subsidiaries and a separate project team is assigned for more important investments, involving relevant specialists from all levels of responsibility within the Group. Securing the financing of investments is also considered an important part of managing investments. A syndicate loan agreement signed in the year 2010 was used for refinancing the Group’s loan portfolio and for ensuring financing for ongoing large investments like the Petroter I oil plant, construction of a turbine unit for VKG Energia, and establishing of the Ojamaa mine. For new capital-intensive investments, new targeted loans will be undertaken on the basis of the syndicate loan. The Group’s syndicate loan agreement is financed by AS SEB Pank, Nordea Bank Finland Plc Estonian Branch and Pohjola Bank Plc. New development projects will be financed featuring EBRD, with which the Group entered into an agreement at the beginning of 2014.
The most influential of the Group’s strategic market risks are changes of the crude oil and CO2 prices and the exchange rate of US dollar; these would cause the Group to have insufficient cash flows. Also, more and more attention must be paid to market prices of CO2, because dependency on those prices may continually increase in the future as environmental directives will cause less and less emission quotas to be allocated for carbon-intensive producers. Following the directives regulating sulphur content in maritime fuels, its content should be reduced significantly, in connection with which VKG is carrying out relevant research and tests, so that the main products manufactured at the enterprise would be up to the level.
The risk of changes of global prices is an inevitable part of the Group’s activities. Most of the shale oil sales contracts of VKG Oil are directly dependent on stock market prices of crude oil and crude oil products. The rest of sales prices of shale oils (domestic sales) are also indirectly dependant on global prices. The prices in the global market also affect the Group’s production costs, primarily via the price of natural gas used in the production process and the price of raw oils purchased from other producers. The purpose of monitoring that risk for the enterprise is to conduct ongoing analysis of the sensitivity of budgeted profit to changes of global prices for crude oil and crude oil products. The decrease in the price of fuel oil residual by 10 dollars per tonne is going to reduce the profit by about 3,2 mln EUR (based on the exchange rate 0.86 EUR/USD), and the higher the exchange rate of US dollar is, the higher is the impact of the fuel residual oil price change, and vice versa, the lower is the exchange rate, the lower is the impact of the price change.
In order to hedge the risk of a sharp drop of crude oil prices, the Group is acquiring oil price fixation options and gathering a liquidity reserve. The risk is indirectly hedged through activities of the Group’s Financial Division which regularly monitors market overviews and analyses the Group’s readiness to a market decline.
In the year 2014, two thirds of the Group’s turnover came from sales to the European Union and to third countries. The most important sales currencies are euro and US dollar. The Group’s expenditure is mainly in euros. Contracts are primarily signed with the currency of the country of location, and open currency positions are being avoided in organising everyday activities. The most important foreign contracts are signed in euros and in US dollars. The Group has not signed any contracts for derivative instruments for the purpose of hedging the currency risk. The dollar risk is indirectly hedged with oil price fixing options signed in euros. The Group is conducting an ongoing monitoring of currency risk, in order to analyse the sensitivity of the budgeted profit to changes of the exchange rate of US dollar. Decrease in the exchange rate of US dollar by one euro cent (0.01 EUR) is going to reduce the profit by about 0,8 mln EUR. No financial instruments have been acquired for hedging the market risk of CO2. The Group has been allocated emission quotas within the current allocation plan for 2013-2020. Continual monitoring will be conducted until the adoption of the allocation plan for the next period, similar to monitoring other environmental regulations; long-term plans consider possible risk scenarios and develop competence regarding emissions trading.
VKG has an environment-intensive production cycle. Environmental impacts are associated not only with mining the resource but there is environmental risk present in both producing and marketing of shale oils. Environmental risks are assessed very highly and constant attention is being paid to those risks in many aspects.
Centralisation of the Environmental Department and mapping of risks at the Group’s level ensure an integral availability of environmental knowledge and competence. Environmental risks are mapped in the production cycles of each enterprise, quality standards for environmental management are adopted, and environmental risks are taken into account when establishing new investments, utilising independent experts for assessing the environmental impacts. Environmental risks are hedged via the fulfilment of all legal requirements and via the exercising of supervision. There is cooperation with the Rescue Board, and conformity to the requirements prescribed by the regulations is being audited.
Destruction of assets can be caused by risks of production technology and, in turn, it can cause liquidity risk. The main cash flows of the Group depend on the oil industry, thus timely diagnostics and equipment mainteinance need to be performed on a regular basis, according to the schedule. Mapping significant elements of the production process allows timely reactions to the occurrences of technological risks. In order to systematise this activity and to hedge the risk, an asset management programme has been implemented.
VKG has signed a complex property insurance agreement for business interruptions, in order to protect itself against destruction of assets. The complex property insurance agreement includes all subsidiaries (except VKG Elektrivõrgud which has signed separate property insurance agreements) and the insurance provider is Seesam Insurance AS, If P&C Insurance AS and AIG Europe Ltd. The insured object is the immovable and movable property which belongs to the insured entity, is administrated or controlled by the insured entity, or for which the insured entity bears legal liability. Separate construction insurance agreements are signed for major investments. All of the operations, from construction to the registration of fixed assets at the Petroter II and Petroter III plants have been insured by Zurich Insurance plc.
Credit risk is an inevitable part of entrepreneurship. Upon managing credit risks, careful attention is paid to the payment discipline of the partners, their financial state is analysed and, if necessary, then third parties are involved as the guarantors in transactions. In case of pre-payments to suppliers, the beneficiary of the payment is requested to present a bank guarantee. We grant business credits only to our long-term cooperation partners. In case of one-off transactions and new clients we always request either pre-payment or a letter of credit. The Group deals with the unpaid /delayed bills from the clients on a daily basis. When a payment deadline of an invoice issued to a buyer is exceeded, the buyer is reminded by notices and warnings. The Conditions have been determined for initiating a court action if there is a need to collect the debt. Signing of the special agreements is in the Management Board’s competence. Liquid funds of the Group are held as short-term deposits in banks with the highest credit ratings. Deposits with moderate risk level are used for hedging liquidity risk in addition to credit risk: the Group has a target of ensuring availability of at least 12 months’ funds for loan repayments and interest payments.
As of 31.12.2014, the Group has interest-bearing liabilities in the amount of 225 million euros, amounting to 37% of the balance sheet volume. Due to a large share of interest-bearing liabilities, the management considers the risk of money market interest rates increase to be a significant risk to the Group’s activity. Regarding the loan obligations, there is a risk of the decrease of cash flows. In the period of 2015-2020 the Group is planning to make extremely capital-intensive investments, and these will increase the interest risk. The loan interests of the Group are based on the interest rate of (2.2–3%) plus 1 or 3 month’s Euribor. In relation to the possible fluctuations of Euribor, the Group is analysing the sensitivity of its cash flows and profit to an increase of the interest rate by 1%. The analysis performed indicates that an increase of interest rates by 1% would influence the cash flows generated by the Group in the year 2014 and would affect the profit before income tax in the extent of ca. 1.8 million euros.
An important part of risk management is ensuring and monitoring the functioning of internal auditing systems. VKG has established the Internal Auditing Department for that function; the Department is a structural unit that operates independently from VKG and monitors the activities of the Group, its subsidiaries and their subsidiaries, and other business associations belonging to the consolidated group of VKG, in order to make sure that those activities conform to the laws of the Republic of Estonia and to other legal acts, the Articles of Association of VKG, decisions of general meetings of shareholders, decisions of the Supervisory Board and the Management Board, and internal regulations and action guidelines of the Group and its subsidiaries.
The central task of the Group’s Internal Auditing Department is to study and assess the economic activities of the Group on the basis of trustworthiness and efficiency of internal auditing.
The task of internal auditing is to identify possible shortcomings in the activities of the employees of the Group and its subsidiaries, their possible work errors and cases of abandoning of duties and exceeding of authorisations, to draw attention to those, and to make suggestions for avoiding those in the future.
The internal auditor prepares an act or a report of internal auditing and presents it to the audited entity for reviewing and feedback. The Internal Auditing Department prepares reports on the discovered shortcomings together with assessments, conclusions and suggestions, consolidates data about the activities of the Group and its subsidiaries, and prepares overviews and analyses thereof for presenting to the Executive Managers and Management Board Members of the Group and/or its subsidiaries depending on their importance and level of generalisation.
International management systems like ISO and OHSAS have separate procedures for risk hedging in quality management, environmental management and occupational safety management. Those internationally recognised systems are in effect in VKG as well. The table below lists the management systems in use in the Group’s subsidiaries.
| Name of subsidiary | ISO certificates (environmental and quality management systems) |
OHSAS certificate (occupational health and safety management system) |
|---|---|---|
| VKG | ISO9001, ISO14001 | |
| VKG Oil | ISO9001, ISO14001 | OHSAS18001 |
| VKG Energia | ISO9001, ISO14001 | OHSAS18001 |
| VKG Transport | ISO9001, ISO14001 | OHSAS18001 |
| Viru RMT | ISO9001 | OHSAS18001 |
| VKG Soojus | ISO9001, ISO14001 | OHSAS18001 |
| VKG Plokk | ISO9001 | |
| VKG Elektrivõrgud | ISO9001 | OHSAS18001 |
| VKG Elektriehitus | ISO9001, ISO14001 | OHSAS18001 |
VKG takes active part in the chemical industry undertakings on local, national, and international levels. The Group is the member of the Federation of Estonian Chemical Industries (FECI), through which it is closely connected to the application of voluntary initiatives CEFIC1 and ICCA2 launched by the European and global chemical industry umbrella organisations. VKG has been committed to the Responsible Care (RC) initiative for over 10 years already, and in 2013, a decision was made to join the project of implementation of the Global Product Strategy3 (GPS) among the first in Estonia.
GPS is a voluntary initiative managed by ICCA, which, together with the RC Global Charter, is the foundation for the contribution made by the chemical industry into the Strategic Approach to International Chemicals Management (SAICM4), implemented by the United Nations. For the chemical industry all over Europe, GPS will allow to boost the results and to expand the range of use of REACH as well as to raise the level of trust displayed by the public in terms of safe handling of chemical substances. While the REACH subject files are very thick, specific, complex, and detailed, the GPS files are summaries of the safety information (GPS Product Safety Summary), which contain risk analysis and the information concerning risk management in a clear format that can be forwarded to employees, subusers, and other interested parties. Those summaries contain the information about dangers and exposure, recommendations for risk management, and the description of benefits this or that chemical substance can bring to society.
In Estonia, the application of GPS is coordinated by FECI, but it is implemented by companies themselves, and in our particular case, VKG has become an active proponent of this initiative at the level of the Estonian chemical industry. In 2013, the main efforts were spent on getting ready for the project: mapping essential activities, clarifying the needs, planning resources, etc. The first tangible results will be achieved this year, i.e. in 2015, when the first summaries of the safety information will be uploaded to the GPS portal, and the completion of the project is connected with the last REACH registration deadline in 2018, by which the safety information summaries about all of the substances present on the market must be made available for the public.
1 The European Chemical Industry Council - www.cefic.org
2 International Council of Chemical Associations - www.icca-chem.org
3 www.keemia.ee/et/keemiatoeoestus-hoolib-ja-vastutab/uelemaailmne-tootestrateegia-gps
4 Strategic Approach to International Chemicals Management (SAICM) is a policy framework to foster the sound management of chemicals - www.saicm.org
The important principles of the Responsible Care initiative is the provision of assistance to other companies and taking responsibility for the company´s own products within the entire value chain. In addition to ordinary customers, those principles should also be applied within the Group, which is why the principles of recording and reporting hazardous chemical substances are being harmonized and improved at VKG as a whole at all levels. The priority of the Group in this field is cooperation and synergy between subsidiaries as well as learning from each other. The preliminary works that prepare the company for harmonization of the principles of recording and reporting had started earlier, but in 2013, the first tangible and comparable results were achieved. The aim of subsequent years shall be the advancement of the system and the ongoing increase in the quality of information to be collected through the distribution of the best practices among subsidiaries.
This chapter presents VKG’s consolidated economic results for the year 2014, compared with results of previous years.
Economic indicators for the year 2014 are based on the audited annual report of 2013. The data for the year 2014 are initial and not yet audited by the time of preparing this SDR, thus the data presented in this report may differ from the data presented in the annual report of 2014.
VKGs’ consolidated
net profit of the year 2014 was 10 million euros.
The net profit of 2013 was 19 million euros.
The total retained profit as of December 31,
2014 was 256 million euros.
VKG’s sales revenue of the year 2013 was 220.4 million euros.
VKG’s sales revenue for 2014 was 194.5 million euros.
According to the terms and conditions of the loan contracts, into which VKG has entered recently, the shareholders´ rights for dividends at VKG are limited to 1 million EUR per year.
VKG exports 70% of its production. In addition to Estonia, VKG sells its products and services in Latvia, Lithuania, Sweden, Finland, Norway, Denmark, Poland, Belarus, Ukraine, Romania, United Kingdom, the Netherlands, Switzerland, Germany, Malta, Austria, France, Spain, Italy, China, India, New Zealand, Russia, United Arab Emirates, Japan and South America.
| 2011 | 2012 | 2013 | 2014 | |
|---|---|---|---|---|
| Sales revenue | 183 567 | 215 754 | 220 406 | 194 531 |
| Revenue from sales of products | 129 231 | 164 599 | 182 971 | 172 767 |
| Gross profit | 54 336 | 51 155 | 37 436 | 21 764 |
| Marketing expenditure | 3 563 | 4 923 | 5 802 | 3 734 |
| General administrative expenditure | 8 974 | 16 137 | 13 835 | 13 026 |
| Other business revenue | 6 054 | 15 611 | 9 872 | 10 926 |
| Other business expenditure | 12 262 | 7 171 | 4 025 | 2 832 |
| Business profit | 35 591 | 38 533 | 23 645 | 13 099 |
| Financial revenue and expenditure | -5 980 | -3 230 | -3 974 | -3 101 |
| Profit before income tax | 29 610 | 35 304 | 19 671 | 9 998 |
| Unplanned expenditure | ||||
| Income tax | 170 | 436 | 315 | |
| Net profit of financial year | 29 440 | 34 867 | 19 356 | 9 998 |
| 2011 | 2012 | 2013 | 2014 | |
|---|---|---|---|---|
| Assets | ||||
| Current assets | 53 385 | 75 949 | 85 239 | 116 117 |
| Fixed assets | 339 828 | 400 109 | 431 265 | 491 701 |
| TOTAL ASSETS | 393 212 | 476 058 | 516 504 | 607 818 |
| LIABILITIES AND EQUITY CAPITAL | ||||
| Short-term liabilities | 65 694 | 88 692 | 75 797 | 98 896 |
| Long-term liabilities | 106 214 | 88 480 | 123 388 | 183 045 |
| Total liabilities | 171 908 | 177 172 | 199 185 | 281 941 |
| Equity capital | 221 305 | 298 886 | 317 319 | 325 877 |
| TOTAL LIABILITIES AND EQUITY CAPITAL | 393 212 | 476 058 | 516 504 | 607 818 |
VKG’s balance sheet volume increased by 91,3 million euros during the year 2014, and was 607,8 million euros as of 31.12.2014. Equity capital’s share in the balance sheet volume was 54 %.
| Investments of VKG’s enterprises | 2013 | 2014 |
| Viru Keemia Grupp | 51 101 | 70 271 |
| VKG Kaevandused | 11 980 | 9 127 |
| VKG Oil | 5 545 | 55 793 |
| VKG Energia | 7 987 | 32 550 |
| VKG Soojus | 5 343 | 1 294 |
| Viru RMT | 2 141 | 261 |
| VKG Transport | 4 253 | 607 |
| VKG Elektrivõrgud | 2 204 | 2 887 |
| VKG Elektriehitus | 36 | 21 |
| VKG Plokk | 306 | 105 |
| Total | 90 896 | 172 916 |
The largest investment objects of the year 2014 were:
The existing loan burden of the Group is indicated in the following table, presenting the balance of all loans and financial lease agreements of subsidiaries which are signed with parties outside the Group, and also their payments for the year 2015.
In the year 2012 a loan agreement was signed for the purpose of financing the construction of the Petroter II plant and the accompanying investments. At the same time, loan burden as a whole decreased during the year. Earlier loans were repaid; the loans of VKG Kaevandused and the Petroter II plant were used in lower extent.
The loan and financial lease balance as well as repayments of principal part in 2014 are indicated in the table below:
| Loan burden (th €) | Loan burden in the beginning of 2015 | Payments in 2015 |
| VKG | 294 722 | 34 204 |
| VKG Transport | 1 748 | 649 |
| VKG Energia | 32 | 5 |
| Viru RMT | 23 | 14 |
| VKG Kaevandused | 196 | 138 |
| VKG Elektriehitus | 37 | 14 |
| Total | 296 758 | 35 050 |
Strategy and analysis
1.1. Statement from the most senior decision-maker of the organization
1.2. Description of key impacts, risks and opportunities
Organizational Profile
2.2. Primary brands, products, and/or services.
2.4 Location of organization’s headquarters.
2.6 Nature of ownership and legal form.
2.8 Scale of the reporting organization
2.9 Significant changes during the reporting period regarding size, structure, or ownership
2.10. Awards received in the reporting period
Report Parameters
3.1. Reporting period (e.g., fiscal/calendar year) for information provided
3.2. Date of most recent previous report
3.3. Reporting cycle (annual, biennial, etc)
3.4. Contact point for questions regarding the report or its contents
3.5. Process for defining report content, including determining materiality
3.7. Specific limitations on the scope or boundary of the report
3.12. Table identifying the location of the Standard Disclosures of the report
3.13. Policy and current practice with regard to seeking external assurance for the report
Governance, Commitments and Engagements
4.2. Indicate whether the Chair of the highest governance body is also an executive officer
4.6. Processes in place for the highest governance body to ensure conflicts of interest are avoided.
4.13 Memberships in associations
4.14. List of stakeholder groups engaged by the organization.
4.15. Basis for identification and selection of stakeholders with whom to engage.
4.17 Key topics and concerns that have been raised through stakeholder engagement
Chairman of the Board Priit Rohumaa
Vice Chairman of the Board Ahti Puur
Registration number 10490531
Järveküla tee 14
30328 Kohtla-Järve
Phone: +372 334 2700
Fax: +372 337 5044
E-mail: info@vkg.ee
www.vkg.ee
Member of the Board Ervin Küttis
Järveküla tee 14
30328 Kohtla-Järve
Phone: +372 334 2535
Fax: +372 334 2719
E-mail: transport@vkg.ee
Member of the Board Margus Kottise
Järveküla tee 14
30328 Kohtla-Järve
Phone: +372 334 2782
Fax: +372 337 5044
E-mail: vkgkaevandused@vkg.ee
Members of the Board Marek Tull,
Sergei Kulikov
Järveküla tee 14
30328 Kohtla-Järve
Telefon: +372 334 2852
Faks: +372 332 7620
E-post: vkgenergia@vkg.ee
Members of the Board Nikolai Petrovitš,
Priit Pärn
Järveküla tee 14
30328 Kohtla-Järve
Phone: +372 334 2727
Fax: +372 334 2717
E-mail: vkgoil@vkg.ee
Member of the Board Tarmo Tiits
Paul Kerese 11
20309 Narva
Phone: +372 716 6601
Fax: +372 716 6600
E-mail: vkgev@vkg.ee
www.vkgev.ee
Member of the Board Peeter Ilves
Järveküla tee 14
30328 Kohtla-Järve
Phone: +372 334 2573
Fax: +372 334 2545
E-mail: viru.rmt@vkg.ee
www.virurmt.com
Member of the Board Andry Pärnpuu
Paul Kerese 11
20309 Narva
Phone: +372 716 6622
Fax: +372 716 6600
E-mail: elektriehitus@vkg.ee
Member of the Board Aleksandr Šablinski
Ritsika 1
31027 Kohtla-Järve
Phone: +372 715 6444
Fax: +372 715 6400
E-mail: vkgsoojus@vkg.ee
www.vkgsoojus.ee
Member of the Board Jaak Saar
Ahtme mnt 145
31027 Kohtla-Järve
Phone: +372 334 2408
Fax: +372 334 2416
E-mail: info@roclite.eu
www.roclite.eu
The report contains photographs competing in "Virumaa, you are beautiful" 2014 Photo Contest initiated by Viru Keemia Grupp.
Anastasia Hesse
Anastassia Volkova
Dima Hesse
Janek Laanemäe
Mart Kiviselg
Natalia Abel
Sergei Gustsin
Silver Kämärä
Virge Tiirik
Igor Višnjakov
Sergei Perov
