Viru Keemia Grupp is a large industry enterprise based on local private equity and operating the whole chain of oil shale processing, starting from oil shale excavation and ending with the marketing of chemicals.
Viru Keemia Grupp is a large industry enterprise based on local private equity and operating the whole chain of oil shale processing, starting from oil shale excavation and ending with the marketing of chemicals.
Valuing the most essential Estonian natural resource - oil shale.
To maintain the leading role in sustainable Estonian oil shale industry in a changed market situation through an increase in efficiency and to be an innovative world leader in unlocking the potential of oil shale.
Two-year summary report particularly reflects the group's developments in 2015 and 2016, compares the results to previous periods, analyzes the oil shale sector and provides a forecast for the upcoming period.
With this report, Viru Keemia Grupp 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:
VKG's sustainable development report is a public document available at the group's website in Estonian, English and Russian. The report's target audience is a wide range of Viru Keemia Grupp's stakeholders, including specialists, shareholders, investors, residents of Virumaa, social organisations, clients and partners.
Several channels for providing feedback are set up at VKG. Suggestions and comments regarding sustainable development shall be sent to Irina Bojenko, Viru Keemia Grupp's Head of Public Relations, to the e-mail address provided in the contacts section. All notes will be reviewed and considered during the preparation of the next report.
The group uses principles of reporting laid down in the report of 2008-2009; these principles remain unchanged and are based on the approach described in GRI guidelines. This report presents data on aspects and indicators according to the GRI guideline, including reporting elements considered to be important for businesses in oil and gas industry.
This report, which covers the years 2015 and 2016, was prepared based on the results of the analysis on the importance of sustainable development, carried out in 2015-2016, according to the approach determined in the fourth version of Global Reporting Initiative's sustainability reporting guidelines (GRI G4 guidelines). The compliance of this publication with the high standards of disclosure can be found on the last page of the report, where GRI table of contents is located. Previous reports have been prepared in accordance with GRI level G3.
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. 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 structure of the report consists of descriptions of the group's operating results in the following areas:
The preparation of sustainable development reports is voluntary for organisations. Economic data of 2015-2016 has been audited and projections for 2017 collected. Reports from 2014 and earlier reflected unaudited financial statements. For this reason, data in reports from 2014 and earlier may somewhat diverge from data in approved annual reports. The group presents reprorted data on the basis of transparency and good business practice.
Methodology for determining the content of stable development report of 2015-2016 is based on a dialogue with interested parties throughout the entire reporting period. In the process of collecting, classifying and analyzing issues to be raised and topics to be discussed in the spectrum of all channels of interaction, the primary, inital list of themes is determined which provides the most interest to the interested parties and is of greatest importance.
The methodology also provides for carrying out internal consultations, starting from the group's highest officials to the managers of subunits and subsidiaries, who have first-hand information about the situation of specific directions, considering the limitations of possible internal aspects. The source of additional information is the analysis of operational indicators and most important occasions. The impact of various changes regarding corporate management, strategy, composition of aspects, but also content and limitations that are considered important, is being analyzed.
The report presents a set of data concerning important changes in comparison to previous periods – virtually all of them are listed and expained in the text. Important changes in the limitation of aspects have not beed added compared to the previous reporting period.
|Themes and aspects||The priorities
|The group's strategy||The development and implementation of a flexible and competitive
strategy, taking into account the needs of internal and external interested
parties – this is the basis of the stability and persistence of the Group's
|Financial stability||Increasing production efficiency is the most important factor of the
|Investment projects||Investment projects in the field of oil shale mining and processing –
one of the key priorities of the group and an important factor in achieving
|Production quality||Improving the quality of production promotes the satisfaction of buyers
and stronger market positions.
|Innovative actions||Development and introduction of innovation – an important factor in the
group's efficiency and competitiveness.
|Compliance with environ-
mental protection laws
according to EU directives
|Compliance with environmental protection laws, international standards |
and EU directives, but also environmental inspection of production is the
group's main priority in environmental safety.
|Rational use of natural
|The group's activity is related to impact on the environment and natural
resources: air, water, soil. The company has taken the responsibility to
rationally use, restore and protect these resources.
|The use and efficiency
|Increase of production over the last 7 years requires higher use of energy
resources in the group. VKG is working on increasing energy efficiency and
optimizing energy resources in order to mimimize the impact of this
|Exhaust emissions||Oil shale processing is related to the emission of substances, including
greenhouse gases, dioxides, sulphur.
|PRODUCTION SAFETY AND
OCCUPATIONAL HEALTH AND
|The safety of production
processes, preparedness for
|The group's manufacturing operations are related to potential safety risks. |
Safe production, complete lack of damage to persons, objects and
machines – these are the key priorities of Viru Keemia Grupp.
|Occupational health and
safety, caring for the
health of employees
|Training and development of
|Training and development of employees allows the group to supply itself
with qualified human resource at the moment and in the future.
and employment rate
|The group's performance of obligations to employees and engaging and
keeping the best specialists ensures stable operation and helps to achieve
environment and social
benefits of employees
|A competitive work environment and fair wage system with social
benefits – the most important factor in engaging and retaining
you are holding Viru Keemia Grupp's sustainable development report, which summarizes the group's greatest achievements in the years 2015-2016. During this short period of time, almost every occasion took place that can be brought to a company by today's dynamic economic environment.
In 2015, VKG finished its program of substantial investments, the last achievement being the launch of Petroter III oil plant in September 2015. In the next year which marked the 100th anniversary of oil shale mining, oil shale industry was hit by the worst oil crisis in the last 20 years. Operating in the described environment tested the company's ability to act in accordance with its core values when it is most needed. Fortitude, reliance on core values and working towards a common goal allowed VKG to overcome all difficult moments.
The valuation of oil shale without taking into account environmental, economic and socio-economic aspects is unthinkable. Environmental protection is an area of importance even in the deepest crisis. In 2016, another sulphur trapping device was completed and launched at VKG Energia's Põhja power station. With this investment, VKG ensured compliance with all environmental requirements and directives until at least 2030. Cooperation will continue with both scientists and local community in order to improve environmental indicators and fight the impact of residual pollution from the Soviet era.
Socially responsible behaviour is possible for a company that is strong both financially and in its work culture. The oil crisis that hit the oil shale sector in 2016 forced the group to make difficult decisions. Temporary conservation of Kiviter plants and reduction of the production output of Ojamaa mine were absolutely necessary steps in order to ensure the company's liquidity as the crisis continued, however this meant the loss 500 jobs. In this situation, the group did everything in its power to advise the people who lost their jobs or to bring them together with new employers. Two job fairs were organised in Kohtla-Järve in cooperation with Estonian Unemployment Insurance Fund, businesses all over Estonia were invited. The group gathered advisers and psychologists to help. In hindsight, decisions made during the crisis were right and as soon as autumn 2016, VKG restored its pre-crisis production output and jobs related to it.
In 2016, we also took steps to develop and strengthen the organisation. In order to increase focus on oil shale industry, VKG sold its sole ownership in VKG Plokk, a manufacturer of building materials, and VKG Transport stopped the provision of ADR services. The goals of the group's companies have been unified and production planning processed improved. In the next few years we will put more effort into training our employees both internally and in cooperation with Estonian educational institutions. We have put focus on occupational safety – trainings, raising awareness and zero tolerance for unsafe behaviour is currently topical at every job and management level.
Facing challenges makes you stronger, gives experience and make you evaluate your action with a critical look. Overcoming difficulties provides insight in the company's strength and boosts confidence in executing new plans. In September 2016, VKG reopened two Kiviter plants which were temporarily conserved due to crisis and from that moment on, we have been looking into the future. Goals and expected results in the year 2017 are the highest of all time for both mining and processing of oil shale. Essentially, the group is operating in every area with the maximum capacity permitted by the oil shale resource allocated by the state.
VKG adds value to Estonian oil shale. With the help of added value, VKG paid approximately 30 million euros in taxes to the state budget even in the year of the crisis, work was guaranteed for hundreds of subcontractors and jobs for numerous households. At the same time there is no way to be satisfied with actions (or rather inaction) of the state in creating the legislative and economic environment for the valuation of oil shale.
The enterpreneurs have little expectations for the state. Earth's Crust Act which regulates the mining of Estonian mineral resources (including oil shale) has been inappropriate for the regulation of open oil shale market for some time now. Incompatibilities with EU's principles of free competition and failure to provide oil shale processing outputs using resources in the state's ownership has led to numerous litigations and loss of tax revenue.
Viru Keemia Grupp has little expectations for the state. Stable and predictable fiscal environment and providing access to raw material corresponding to the current production outputs seem like basic requirements to the economic environment, however, these tasks have proven to be beyond the means of the state.
In its 101 years of history, the energy produced from oil shale continues to be competitive. VKG's employees and management continue to be inspired by unlocking the potential of oil shale which allows the industry to demonstrate good results despite the volatile world market of oil, unstable tax environment or poor national legislative base. Our biggest wish is to turn our inspiration into a value to be shared with society, employees and shareholders.
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, as well as the production and marketing of fine chemicals.
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.
Production and service that supports the group's main activity is distributed between separate subsidiaries. The shares of the subsidiaries are in the sole ownership of the parent company.
Mining oil shale as the Group’s main raw material
Producing shale oil and refined chemicals
Generating heat and electricity
Distributing and selling heat
(was a part of the group until its sale to Aeroc International AS in December 2016)
Producing construction materials from oil shale ash
Selling and distributing electricity
Providing logistics services for road and railway transportation
Providing repair and assembly services
(merged with Viru RMT OÜ on 5 May 2017 and operates in the name of the latter)
Providing industrial energy supply and electricity installation services
More than 70% of the group's production is exported. In addition to Estonia, VKG sells its products and services in the following countries: Latvia, Lithuania, Sweden, Denmark, Poland, Belarus, Ukraine, Netherlands, Germany, Belgium, Italy, India, Russia and Japan.
in thousands euros
|Sales revenue||220 406||195 216||166 788||104 270|
|Revenue from sales of products||-174 599||-164 175||-189 159||-106 147|
|GROSS PROFIT||45 807||31 041||-22 371||-1 877|
|Marketing expenditure||-5 802||-3 769||-3 360||-3 213|
|General administrative expenditure||-12 224||-12 985||-9 109||-9 471|
|Other business revenue||6 915||11 084||9 973||9 827|
|Other business expenditure||-4 193||-2 492||-1 745||-1 892|
|BUSINESS PROFIT||30 503||22 880||-26 612||-6 626|
|Financial revenue and expenditure||-3 974||-3 101||-5 269||-8 588|
|PROFIT BEFORE INCOME TAX||26 528||19 779||-31 881||-15 214|
|NET PROFIT OF FINANCIAL YEAR||26 213||19 779||-32 181||-15 214|
in thousands euros
|Current assets||76 556||115 403||71 086||64 649|
|Fixed assets||438 161||501 848||485 513||519 104|
|TOTAL ASSETS||514 717||617 251||556 599||583 753|
|LIABILITIES AND EQUITY CAPITAL|
|Short-term liabilities||67 114||91 368||75 383||52 343|
|Long-term liabilities||123 388||183 261||182 724||234 758|
|Total liabilities||190 503||274 629||258 107||287 101|
|Equity capital||324 214||342 622||298 493||296 652|
|TOTAL LIABILITIES AND EQUITY CAPITAL||514 717||617 251||556 599||583 753|
Viru Keemia Grupp's balance decreased by 60.6 million euros in 2015 and amounted to 556.6 million euros as of 31.12.2015.
In 2016, the Group's balance increased by 27.1 million euros and amounted to 583.7 million euros by the last day of the year.
The equity share was 54% in 2015 and 51% in 2016.
in thousands euros
|Viru Keemia Grupp||51 101||70 271||32 955||474|
|VKG Kaevandused||11 980||9 127||8 126||7 859|
|VKG Oil||5 545||55 793||72 418||2 749|
|VKG Energia||7 987||32 550||26 763||18 757|
|VKG Soojus||5 343||1 294||146||208|
|Viru RMT||2 141||261||42||10|
|VKG Transport||4 253||607||28||373|
|VKG Elektrivõrgud||2 204||2 887||717||1 023|
|VKG Plokk||306||105||68||1 499|
|KOKKU||90 896||172 916||141 263||32 955|
The Group's current loan burden is visualised by the following figure which shows the outstanding amount of external loans and finance lease agreements.
Group's loan burden (in millions euros)
Our number one priority in the upcoming years is to ensure oil shale resource. Not only our future, but the present day depends on the availability of resource. VKG's current total demand of raw material is 5 million tonnes of oil shale. The maximum extraction volume granted to VKG, with the possibility of retrospective mining, amounts to 4.4 million tonnes of oil shale. We are lacking approximately 0.8 tonnes per year in order to apply maximum production capacity. Thus, one of our main tasks is to contstantly look for ways to change this situation.
An indication of the efficiency and sustainability of each production is the energy efficiency of the production process, which shows how much energy entering with the raw material becomes useful products. For example, the energy efficiency of VKG's newest shale oil plant Petroter III is 82%, which is a remarkable result. The high figure is achieved due to the fact that in addition to shale oil, steam, hot water and semi-coke gas with high calorific value are produced, from which VKG Energia produces electricity, steam and district heating water. Our goal is to reduce the unused part by increasing the energy efficiency of production processes.
The goal of every modern industrial company is to continuously extend the value chain. The greatest potential in current production chain lies in adding value to waste and improving the properties of oil products, which is particularly important for maintaining demand for the products in the world market under increasingly stringent environmental requirements.
Regarding effective organizational culture, we can look at increasing the productivity of assets and labor, the increase in added value of jobs, and management directed to results and improvements.
VKG operates on a volatile market, where the price of shale oil can fluctuate to a very large extent over a short period of time. Competitive cost price allows us to achieve high liquidity, which helps to survive periods of crisis and to invest in technology and workforce.
Reducing the risk of impact on the surrounding environment and increasing occupational safety is considered to be strategic goals of Viru Keemia Grupp. The group follows caution in managing risks to human life and health and risks to the environment. *
This principle is applied in the group based on the following approaches:
The company works with a purpose to raise the level of productivity and environmental safety, to follow the requirements of nature conservation laws and to reduce the production acitivity's negative impact on the surrounding environment efficiently and as planned.
Occupational health and safety and safety of workers are of primary importance to VKG. A huge experience in responsible action has been gained during the group's existence and relevant procedures and practices implemented. We treat the financing of occupational health and safety programs not as expenses but an investment to the health and well-being of our employees.
Careful use of natural resources and constant efforts into the improvement of the region's environmental situation is among the main focus of business strategy for VKG.
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.
Our vision for the future is to be an open and reliable business that operates on the basis of a common management system in order to preserve diverse environment and use natural resources in a sustainable way.
Our main task in the field of environmental protection is the efficient management of the group's manufacturing operations in order to ensure the preservation of nature for the benefit of today's and future generations.
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.
VKG, VKG Oil, VKG Energia, VKG Transport, VKG Soojus, Viru RMT and VKG Elektriehitus have all acquired the Environmental and Quality Management System certifications ISO 14001 and ISO 9001.
VKG Oil, VKG Energia, VKG Transport, ViruRMT, VKG Soojus, VKG Elektrivõrgud and VKG Elektriehitus hold the Occupational Health and Safety standard OHSAS 18001.
In addition to certificates OHSAS 18001, ISO 14001 and ISO 9001, energy management certificate ISO 50001 is also implemented in VKG Energia.
Viru Keemia Grupp has set the goal to make the transition to versions EVS-EN 9001:2015 and 14001:2015 of standards in 2017. The management system is continuously developed and principles of more efficient management implemented.
VKG constantly seeks to be more efficient in its activity. The goal is to add maximum value to oil shale, which means the complete use of its potential. From the environmental aspect this means less environmental impact per one unit of processed oil shale and more social and economic profit. We consider that in order to ensure the sustainability of shale oil production, we need to invest in the development of best available technology and environmental protection, participate in the preparation of legislative acts, perform monitoring of production and environment, optimize production and introduce energy efficient solutions. We follow the requirements of law, consider relevant opinions of several interested parties and offer reliable partnership to public authorities, local government and communities. We also place importance on cooperation with scientific and research 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. It means that now the investments into the protection of environment are considered on a much larger scale than before.
The investments into environment are 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 group makes provision for reducing environmental impact by implementing a number of special projects. The launch of sulfur trapping device, for example, is among those projects.
Over the years, air quality has been one of the key priorities of the group's environmental actions, especially while production capacity increases. We are the largest business in Kohtla-Järve industrial area and therefore the expectations of both citizens and state supervisory services are extremely high to us. We understand this and give our best to keep reducing our impact on the environment in the future.
Reducing suplhur dioxide emissions more than three times was achieved through the use of successfully operating sulphur trapping devices built to VKG Energia's territory. VKG Energia is the first company in Estonia that started to use devices for the removal of sulphur from flue gases. The company's first sulphur trapping device has been operating since 2008, second was launched in 2014 and third in the summer of 2016.
The operation of sulphur trapping devices uses a semi-dry method, which means minimal consumption of water resources. On the one hand, the construction of sulphur trapping devices is a an investment intensive process demaning lots of financial resources, but on the other hand it brings tangible results. For example, the volume of SO2 emissions was about 10,000 tonnes in 2014, but due to three operating devices this figure was reduced more than three times in 2016, regardless of the addition of third Petroter plant.
In 2008, an environmental investment of almost 9.5 million euros was made to build a sulphur trapping device at VKG Energia. The sulphur trapping device allows to bind sulphur contained in the combustion fuels used in Põhja thermal power plant and thus significantly reduces emissions of sulphur dioxide as the primary pollutant to the surrounding environment. 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 2013-2014, direct investments were smaller compared to the previous year. This is due to the increase of BAT (best available technology) investments and the development of sustainable and efficient use of resources in manufacturing.
In 2015, the direct investment into reducing environmental impact was 7.85 million euros. In 2016, the amount of investments rose to 14.32 million euros. Despite of the difficult economic situation, third sulphur trapping unit was completed at VKG Energia's Põhja thermal power plant in October 2016. With this investment of almost 18 millions, the multi-step action plan for reducing SO2 emissions was completed. The three units are connected to a single system, where flue gas from all boilers of the plant are directed to. This unique solution allows flexible adjustment of the desulphurisation system’s operation and ensures flue gas cleaning in the event of malfunction of one trapping device.
VKG is constantly investing in developing environmentally-friendly technologies and making sustainable use of resources more effective. The planning of new activities considers BAT requirements and constantly tightening environmental standards.
Indirect investments in reducing environmental impact have increased dramatically over the period 2013-2014, amounting to almost 50 million euros per year. During this period, a lime plant was established at VKG Energia's Põhja thermal power plant, with the main purpose of producing sorbent necessary for the desuplhurization of flue gas, and boiler no 9 was renovated. One of the major projects was also the development of the new Petroter II plant. All of these measures have contributed to achieving the resource efficiency goal.
In 2015, indirect investments amounted to 18.29 million euros. In 2016, they dropped by almost 34%, as the share of investments in reducing direct environmental impact increased. The Petroter III plant was built during this period. Using a shale oil production plant that is based on new technology will allow the maximum valuation of oil shale. In addition to that, the industrial waste water system was modified to maximize recovery of industrial waste water from the production, thus saving clean water.
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.
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.
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.
Petroter II and III shale oil plants have already been successfully launced by 2015, 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.
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 shale ash is deposited moist, which results in a cementified monolithic overburden which prevents waste from entering the surrounding environment from the landfill site. This is a way to achieve a watertight landfill surface which reduces the accumulation of leachate. It also rules out any hotspots at the landfill site in the future. The used disposal technology helps to save clean water, increase the energy efficiency of shale oil production significantly and reduce environmental impact remarkably.
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.
In order to improve the efficiency of the logistics chain of the production process, we have developed and introduced several innovative conveyor systems. Highlighting conveyors as an example of process innovation is due to the fact that the calorific value of oil shale is low, therefore the sustainability of oil shale industry requires highly efficient logictics of material. Conveyor transport is definitely one of the most environmentally friendly ways of transporting both raw materials and waste, as there is no negative impact and no damage to the roads.
A significant environmental project is the 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.
12.5 KM – LENGTH OF THE GROUND CONVEYOR THAT TRANSPORTS RAW MATERIAL FROM OJAMAA MINE TO PETROTER AND KIVITER SHALE OIL PLANTS.
After the mine was built, the issue of delivery of oil shale was out on the agenda. In the beginning, the raw material was delivered in large trucks, which in no way were environmentally-friendly and caused inconveniences to the people living next to the road. This is why we decided to move on to a smarter method of delivery - in the end of 2010, we started to build an land-based conveyor 12.5 km long. In order for the raw material transported by means of the conveyor would reach from Ojamaa mine to the Petroter and Kiviter oil shale plants, it must be laid through the territory of the rural municipality. Wider audience, environmentalists, and hunters have been involved into the discussion since the project planning stage. The representatives of VKG have been meeting with different interest groups in order to familiarize them with the project under construction and get feedback. In the result of close cooperation between different working groups and interest groups, the best possible solution was found, which turned out to be suitable both for the community and for the company.
The people, whose houses are located near the area where the conveyor will be running, were interested in the noise that can be generated by it. The conveyor has been designed in a way that when it is operating, it will not generate any noise due to its closed design and virtually noiseless rollers, on which the conveyor belt will be running. Besides, compared to motor transport, the conveyor system is not going to generate much dust or exhaust fumes, and the load on local roads will be decreased significantly.
Since the largest part of the conveyor will be located in the woods, we had to find a solution as to how not to disturb the ordinary natural habitat of forest animals. It has been ensured in cooperation with the State Forest Management Centre. Along the path of the conveyor, there will be special tunnels for small animals as well as bridges for larger ones, so that all forest inhabitants would be able to cross the conveyor. All of those developments have been the fruits of long-term cooperation and discussions. At present, we can say that the selection of a more environmentally-friendly way to supply raw material has been beneficial for everyone - local community, environment, and the company. The project of the land-based conveyor can be regarded as successful, and it is a good example of cooperation between a large industry and the community.
But this is not the only project that will improve the logistics of raw materials and by-products in the group.
Considering the composition of oil shale (40% of minerals), the production of shale oil using Petroter technology generates a considerable amount of ash in addition to the steam-gas mixture as a result of the pyrolysis in the reactor. Shale ash generated as waste is deposited to a landfill at VKG's production territory.
Approximately 1.8 million tons of ash is generated in VKG each year. 1.2 million tons of ash were generated at Petroter plants in 2015, 39% of which was recycled and the rest deposited. In 2016, 1.6 million tons of ash generated at all three Petroter plants were fully deposited. Until the development of the new solution, trucks were used, which means reloading, more dust, more expenses and a bigger environmental footprint. Upon the addition of Petroter III plant in 2015, a new 1.5 km closed pipe conveyor for ash was launched, one of its kind in the Baltics and Scandinavia, which has clear environmental benefits. The maximum capacity of the conveyor is 380 tonnes of ash per hour, which is moved during this period from the oil shale processing facilities to the dumping area. Previously a truck with 15 tonnes of capacity had to make 25 trips per hour to carry this amount. After the launch of the conveyor, the cost of transportation related to the ash removal process reduced by almost 20%, as the number of trucks in the process was cut down and the travel of trucks decreased by about 4 km. The latter was also accompanied by the reduction of CO2 emissions by 24%. The new system benefits from reliability and environmental sustainability ‒ no noise from cars and no dust clouds over Kohtla-Järve in the summer.
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.
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. In 2016, additional investments were made to renovate heat pipelines.
In October 2016, the third sulphur trapping device was finished at VKG Energia's Põhja thermal power plant. The three units are connected to a single system, where flue gas from all boilers of the plant is directed to. This unique solution allows flexible adjustment of the desulphurisation system’s operation and ensures flue gas cleaning in the event of malfunction of one trapping device. As a result, Kohtla-Järve's ambient air quality improved significantly in 2016 and total SO2 emissions decreased by almost 70% compared to the previous year.
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 are as follows:
The following studies were conducted in 2015 and 2016:
Main investments in reducing environmental impact in 2015 and 2016:
Despite the uncertain economic situation caused by the drop of oil prices in the world market and unclear policy of environmental charges, VKG continues to make large investments into environmental projects.
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.
In the years 2015 and 2016, the increase in the amount of hazardous waste was 0.26 million tonnes compared to 2014. This is mainly due to the launch of VKG Oil's Petroter III plant and Petroter II's operation at maximum capacity throughout the year. Prior to that, Petroter II had only been in use for six months. Oil shale ash is produced as a waste in the operation of these plants.
|Generation of hazardous waste
in the Group
|Hazardous wastes (mln t)||1.58||1.71||1.88||1.95||2.16||1.97|
|incl. the residues generated while cleaning
the tanks (t)
|incl. oil shale ash (t)||382 636.89||423 776.99||477 773.92||621 598.75||1 231 395.59||1 575 593.95|
|incl. semi-coke (t)||794 975.00||868 884.58||972 801.34||934 985.73||627 827.95||232 483.89|
Generation of hazardous waste at VKG Oil AS per production unit (tonnes)
During the period 2011-2015, the ratio of hazardous waste generated per one tonne of production has increased. This is caused by the increase in using Petroter technology (fine-grained oil shale with lower calorific value and higher mineral content is being processed) and transition to Ojamaa oil shale, which also has higher mineral content. Since Petroter uses fine-grained oil shale with lower caolorific value in its production process, the output of oil is lower in this process. This in turn leads to the aforementioned ratio being higher. However, Petroter technology provides energy-efficient production with energy efficiency of about 80%. This allows to use the potential of fine-grained oil shale more efficiently than just burning it to generate electricity. The year 2016 shows a decrease of the ratio. Thus, in comparison to 2015, the amount of waste has been reduced despite an increase in production due to an investment made by VKG Oil which reduces the generation of phenolic water from Petroter technology.
Deposited quantities of solid wastes (tonnes)
Increase in the volume of deposited waste starting from 2014 is caused by the fact that the state's hazardous waste landfill had already been closed by then. Therefore, the demand for ash recycling had dropped.
977,283 tonnes of solid waste was deposited in 2015, which is about 13% more than in the previous year. 1,846,710.52 tonnes were deposited in 2016, which is almost 49% more than previously. In the last two years, more ash was produced due to the addition of Petroter II and Petroter III plants.
Solid wastes depositing fees (EUR)
In 2014, charges for VKG's waste disposal increased by approximately 60% compared to the previous year. This is caused by a decrease of waste recycling due to the state's hazardous waste landfill being closed and an increase in the rates of environmental charges.
Solid waste disposal charges in 2015 amounted to around 2,902,000 euros and 5,503,000 euros in 2016. Compared to the previous year, the amount of charges had risen by 35% in 2015 and by almost 47% in 2016. A direct link between production output and increase in the volume of waste can be seen here due to the launch of Petroter II and III plant. However, it is important to note that the ratio of hazardous waste generated per one tonne of production has still decreased in the last year.
In 2014, 24,580 tons of non-hazardous waste was 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
17,890 tonnes of non-hazardous waste was generated in the group in 2015, which is almost 27% less in comparison to the previous year. In 2016, the volume of non-hazardous waste decreased even more. This is caused by the end of major construction projects and less demolition waste and scrap metal.
|Non-hazardous wastes generated at the Group||2011||2012||2013||2014||2015||2016|
|Non-hazardous wastes (t)||15340||739653.41||582464.12||24580.11||17889.504||12198.516|
|incl. construction and demolition wastes||662.5||433.5||318.1||749.01||560.333||350.63|
|incl. common wastes||219.02||229.41||382.14||365.05||228.525||263.572|
|incl. the emergent in the Sulphur-trapping unit||14 459.2||17757.6||0||0||0||0|
|incl. calcium-based reaction wastes from sulphur trapping|
|incl. mining scrap||0||714913.8||570241||0||0||0|
|incl. old metal||11290.2||6282.611||1486.44|
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:
Volume of waste diverted to recycling by the group has increased by almost 10% compared to the previous year. The increase comes mainly from oil shale ash. This type of waste was used in 2015 within the project of reclamation of VKG Energia's ash landfill. In 2016, recycling within the group decreased by 86%, as recycling activities at VKG Energia's ash landfill were completed. Most of the recycling consisted of purifying phenolic water from Petroter process.
|Reuse of wastes||2011||2012||2013||2014||2015||2016|
|Reusable wastes (t)||698831.17||2025319.12||2 044780.95||1 083 076.26||1 188 391.12||121 720.70|
|incl. construction wastes||25 577.56||0||8000||0||0||0|
|incl. phenol water||402 735||419599||423931||392 058||292 111||112 439|
|incl. old oil||0||0||0||0||1.135||0|
|incl. semi-coke||238695.06||694210.83||775240.1||445 912.3||421 894||0|
|incl. oil shale ash||0||192134.63||266726.10||245 169.63||473 444.719||0|
|incl. mining scrap||0||714913.8||570241.00||0||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 2016, the total CO2 emissions of the group's subsidiaries amounted to 1,052,700 tonnes and in 2015 983,530 tonnes. In two years, emissions have increased by about 30%. Distribution of the emissions between the subsidiaries shows that the increase comes from VKG Oil's Petroter plants. This is caused by the fact that the third Petroter plant was launched in 2015.
CO2 emissions (tonnes)
Although the increase of production output was accompanied by an increase of CO2 emissions from Petroter plants, it is reflected in Figure 8 that specific emissions of said pollutant per one production unit (MWh) have reduced in 2015 and remained at levels similar to 2016. This figure was worse in 2014 due to difficulties in achieving a stable operating mode upon the launch of Petroter II plant. This issue was solved in 2015 and the efficiency of Petroter equipment has improved by about 4% in comparison to 2013. In the case of Petroter III the stable operating mode was achieved faster and CO2 emissions did not skyrocket upon its launch, however the figure is slightly higher in 2016 compared to 2015.
Specific emissions of CO2 per one production unit of Petroter plants (tonnes CO2/MWh).
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.
In 2015 and 2016, the total SO2 emissions of the group's subsidiaries amounted to 7,791 tonnes and 2,473 tonnes respectively. Emissions have decreased by about 68% compared to previous years. This has been achieved through investments in establishing a sulphur trapping system at VKG Energia's Põhja thermal power plant.
Most of the SO2 emissions (in 2015, almost 85% of the group's total emissions) was emitted by combustion of generator gas, semi coke gas, oil shale and filter cake generated by thermal processing of oil shale in VKG Energia. At VKG Oil, the emissions were generated mostly by the combustion of waste gas (generator gas, coke gas, separator gas) in the shale oil distillation device and electrode coke production device and as a part of the operation of Petroter plants.
SO2 emissions and allowed quantities (tonnes)
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.
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.
In 2015, VKG Energia achieved a 22% reduction of SO2 specific emissions. In 2016, the result improved further. During this period, two new sulphur trapping devices have been launched, which has reduced the atmospheric emissions of SO2.
Emissions of SO2 per the production volume of VKG Energia (tonnes/MWh)
The specific emissions of SO2 per one unit of VKG Oil's oil production have remained relatively stable over the years 2014-2016. Compared to 2014, the specific emissions have dropped by almost 4% in 2015 and by almost 12% in 2016. The result can be attributed to the growth in the share of new Petroter plants in production volumes.
Emissions of SO2 per the production volume of VKG Oil (tonne/tonnes)
Since 2010, there has been a rising trend in air pollution charges. This was mainly due to the rise of pollution charge rates and the increase in production volumes. From 2015, charges have started to decrease. In 2016, the air pollution charge amounted to 0.64 million euros, which is 3.2 times lower than the amount paid in 2015. This is connected to the reduction of SO2 emissions due to the launch of a new sulphur trapping system at VKG Energia's Põhja thermal power plant. Also, Lõuna thermal power plant was closed, which was an important source of SO2. The amendment to the Environmental Charges Act also made its impact, according to which the area-based coefficient of 1.5 was removed from the calculation of charges.
Air pollution fees in the Group (Eur)
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.
The group's total energy consumption was 176,534 MWh in 2015 and 163,481 MWh in 2016. In comparison to 2014, an increase of around 17% took place in 2015. This can be explained by the launch of Petroter III plant and Petroter II plant's first-time operation at maximum capacity throughout the year. Thus, the demand for electricity increased. In 2016, the group's electricity consumption dropped by almost 7%, as Kiviter plants were temporarily conserved.
Overall electricity balance (MWh)
VKG´S electricity sales and consumption balance (MWh)
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.
In 2015 and 2016, the share of Petroter plants in VKG Oil's electricity consumption has increased significantly. This figure was 38% until 2014, increased to 53% of VKG Oil's total electricity consumption in 2015 and reached 82% in 2016. This is due to the fact that Petroter II and Petroter III plants have reached their standard mode. Although the increase in production output was accompanied by higher electricity consumption, the specific electricity consumption (kW/tonne) per one unit of produced shale oil remained at the same level compared to the previous year. The level of production efficiency is thus still ensured.
Electricity consumption by Kiviter and Petroter technologies at VKG Oil (kWh/a)
VKG Energia consumed 41,204 MWh of electricity in 2015 and 44,869 MWh of electricity in 2016. 311,232 MWh and 351,822 MWh of electricity were generated respectively. In comparison to 2014, the share of electricity has increased and the share of heat and steam reduced in VKG Energia's energy production. The output of heat and steam production is determined by market demand. The company has been able to react to the market situation and direct the outstanding resource into electricity generation.
Electricity and heat produced by VKG Energia (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. However, their share decreased as the share of Petroter gas.
In 2015 and 2016, VKG Energia has started to consume significantly more of Petroter gas. This gas accounted for almost 29% of the total fuel consumption in 2014, increased to 50% in 2015 and reached 70% in 2016. This is due to the launch of Petroter II and III plants, resulting in more Petroter gas, which is then directed to VKG Energia for the production of heat and electricity. For the same reason, the amount of steam from Petroter has also increased. However, the input of generator gas has decreased due to changes in the production output of VKG Oil's Kiviter plants.
Fuel consumed by VKG Energia (TFE)
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.
The group's total water consumption in 2015 amounted to 4,926,000 m3 , 55,100 of which was groundwater, 4,819,000 lake water and 51,800 mining water. In 2015, the consumption increased by 1,163,000 m3 compared to 2014. The increase took place at the expense of lake and mining water. The demand for lake water was increased due to the addition of Petroter III plant and Petroter II's operation at full capacity, since the process of these plants requires water. However, the rise in mining water consumption was related to the increased mining volume of VKG Kaevandused.
In 2016, the water consumption was about 4,550,000 m3, which is 375,000 m3 less than in the previous year. The decrease was due to the introduction of a new method of ash depositing which allows the replacement of lake water with waste water from the production process.
WATER CONSUMPTION AT THE GROUP (m3)
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 group's emission into water in 2015 was 15.42 million m3. There were no significant changes in wastewater and rain water compared to the previous year, while there was a decrease of about 10% in the effluent streams from the mines. As a result of a dry period (low rainfall and lots of evaporation), less water from the sedimentary basins of the mine was directed to the environment.
The group's total water discharge in 2016 was 14.97 million m3. About 80% (ca 13 million m3) of this resulted from the mines. Rainfall increased and the amount of effluent streams at the territory of VKG Oil AS also increased (rainfall was 115% according to Jõhvi Meteorological Station data). At the same time, the amount of mining water decreased by 16% and wastewater by 12%.
WATER EMISSIONS FROM THE GROUP (m3)
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.
The group's water pollution charges decreased by nearly 3.5% in 2015 and by 4.7% in 2016. This is primarily due to a decrease in the volume of effluent streams from VKG Kaevandused OÜ compared to previous years.
Charge for the special use of water and effluent pollution charge (Eur)
Improvement of the industrial safety management system is one of the most important priorities of Viru Keemia Grupp. The group seeks to ensure a continuous increase in the level of industrial safety, performs complex work to minimize the equipment's proneness to accidents and production traumas, and applies world-class best practices and cutting-edge technologies in this area.
Occupational health and safety and safety of workers are of primary importance to VKG. A huge experience in responsible action has been gained during the group's existence and relevant procedures and practices implemented. We constantly seek to improve our results in this area and follow the best globally recognised regulations and standards. We consider the financing of occupational health and safety programs not as expenses but an investment to the health and well-being of our employees.
Our activity in the area of occupational health and safety and worker safety is based on the following principles:
Internal documents, manuals and procedures regulating the activities of employees and contracting institutions have been developed and adopted by the group (for example, performing gas and fire works, 9 vital rules, action in case of emergency).
The group implements a long-term strategy for preventing diseases, carrying out regular health checks and vaccinations of employees, first aid training and other activities. The year 2017 has been declared The Year of Occupational Health and Safety, during which a number of activities aimed at improving and raising awareness of safety and health culture at work is planned to be carried out.
A total of 14 accidents at work were registered in Viru Keemia Grupp in 2015 and 26 accidents at work in 2016. There were no fatal accidents in the group in 2015 or 2016.
By the category of severity of damage to health, five occupational accidents causing serious health damage and nine occupational accidents causing minor health damage were registered in the group in 2015. Compared to 2014, the number of minor accidents increased by one. The number of serious accidents at work remained at the same level. Accidents with serious injuries have occurred in the following subsidiaries: VKG OIL – 1; VKG Energia – 1; VKG Elektriehitus – 1 and Viru RMT – 2.
In 2016, eight occupational accidents resulting in serious health damage and eighteen occupational accidents causing minor health damage were registered in the group. Compared to 2015, the number of minor accidents increased by nine cases, while the number of serious accidents at work increased by three. Accidents causing serious health damage have taken place in production: at VKG Oil - 6; at VKG Energia - 1; at VKG Transport – 1.
|Number of accidents per an employee at
Viru Keemia Grupp within 2008-2016
|Number of employees||1414||1358||1507||1769||2002||2150||2152||1995||1786|
|Number of accidents||8||9||16||12||16||11||13||14||26|
|Number of accidents per an employee||0.006||0.007||0.011||0.007||0.008||0.005||0.006||0.007||0.015|
Total number of accidents at work (both severe and minor) in the period from 2008 to 2016 is the highest in VKG OIL ‒ 38, Viru RMT ‒ 25, VKG Kaevandused ‒ 20 and VKG Energia ‒ 13. The high number of occupational accidents in the abovementioned companies is due to the dangerous nature of work (underground mining, handling of hazardous chemicals, repair and service of technological equipment).
|Accidents at the Group within
2008–2016 by severity level
No employment injuries have occurred at VKG Soojus in the recent years. The last employment injury was registered in 2012.
TRIR shows the number of employment injuries per million hours worked. In 2016, the highest number of employment injuries per million hours worked is in VKG Elektriehitus (17.5), but the company's number of hours worked in 2016 is the lowest. This means that even just 1 employment injury provides this result.
Obviously, the average number of employment injuries in VKG is affected by subsidiaries with the most workforce ‒ Viru RMT and VKG Energia stand out for TRIR rates above the group's average.
* Total recordable injury rate per million hours worked
|The group's average||3.8|
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 CEFIC and ICCA 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 Strategy (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 (SAICM), 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.
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.
Viru Keemia Grupp remains one of the
biggest employers in Virumaa.
Growing as an organisation, offering real value to our clients and partners and important development experiences to our employees and simply being the best is not enough in the times of technological boom at regional or international level. In this current, rapidly changing world, we must be one step ahead to keep up. In order to do that, we must interact with, listen to, and talk to our employees, customers and partners about current and future issues. By doing that, we strengthen the trust between the group and its employees, solve important problems and make strategic decisions.
Current trends and the technological leap in the development of many industries force employees to be competitive on the labour market and offer added value to their employer. VKG supports its employees' aspirations for development and professional growth.
The development of staff is an obligation of both the employee and the employer, as effective results can only be achieved if the interests, opportunities and desires of both parties are taken into account. As our organisation develops, we focus on two main areas in training our employees ‒ general and production management ‒ motivating people to be better leaders, professionals in their field and the main bearers of the group's culture and values.
Looking into the future, VKG seeks to develop not only managers and engineers, but above all, competitive leaders who are able to understand their potential, to think as leaders, to infect others with their innovative ideas and solutions, and to take personal responsibility for the growth of their careers by supporting the group's values and bringing these values to others.
VKG's philosophy on the growth of employees involves learning through daily activities, formal learning, mentoring and self-study. This philosophy supports a simple and fair development structure which makes our employees the architects of their own careers. We develop leaders at all levels, which allows to strengthen trust for the group and solve important problems not only at the management level.
We believe that we are helping people make the most of their abilities. That is why continuous learning is an integral part of the group's culture and approach to shaping leaders at all levels.
Low prices dominating the energy markets in 2015 and 2016 made oil shale companies look for additional ways to save costs and increase efficiency. Several restructurings took place in the group at the time, resulting in the number of employees changing between 2,000 and 1,500.
The average gross salary of VKG employees was 1,404 euros in 2015 and 1,325 euros in 2016, which exceeds the average gross salary in Ida-Virumaa with more than one thirds.
We pay extras 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: Chemists’ Days and Miners’s Days, Christmas parties, appreciation events for jubilees, party for children starting school and their parents, where the children are given backpacks equipped with school supplies.
In order to retain and pass on knowledge in the group and to shape efficient, high quality training conditions, an internal training resource is being established in the group. The current system has been successfully implemented in a number of the group's subsidiaries, but requires improvement at the group's common level. We see great potential in the development of internal training resource and bringing it to a new level of better quality. Several measures are planned for this, particularly trainings and practices for future internal trainers and coaches.
Corporate targeted training is carried out in the group to provide strategic projects with qualified employees. This line of training has been actively introduced from 2017. Among the corporate training programs planned for 2017-2018, there is a special place for complex employee training programs and efficient management of business processes and production.
Active work with young specialists is one of the main priorities of VKG's human resources policy. This work is aimed at ensuring the group's employees' compliance with requirements, preparing highly qualified young specialists among the best graduates of educational institutions and their fast and efficient adaptation at the company.
95 young people interned at VKG's companies in 2015 and there were almost 50 interns from vocational schools and higher education institutions in 2016. To speed up the adaptation of recent graduates, councils of young specialists work at community groups and mentors are appointed. Training and professional growth of young specialists takes place in accordance with development plans. Experienced colleagues will instruct first-time employees and interns and remuneration is provided for this effort.
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.
VKG has been providing scholarships via TTÜ Development Fund since 2003. From 2003 until today we have granted scholarships in the total amount of more than 85,000 euros.
VKG's Bachelor degree scholarships are provided for up to two successful Bachelor's students of electrical engineering, mechatronics, earth sciences and geotechnology, environmental and chemical technology or thermal engineering at Tallinn University of Technology's School of Engineering. One scholarship is 1,300 euros.
VKG Master degree scholarships are provided for one successful Master's student of environmental and chemical technology, fuel chemistry and technology, thermal engineering and electrical engineering at Tallinn University of Technology. One scholarship is 1,400 euros.
VKG's professional higher education scholarships are provided for up to four successful professional higher education students of fuel technology, industrial automation, machine building engineering, energy technology, chemistry technology, energy technology processes control and telematics and smart systems of Tallinn University of Technology's Virumaa College. One scholarship is 1,000 euros.
VKG scholarships support the students' motivation to acquire professions necessary in the group and send a clear signal that we expect young professionals to join us.
Kohtla-Järve Chemists' Trade Union is active in the group and a collective agreement, valid until the end of 2017, has been signed with the union. Additional benefits provided for by the collective agreement shall extend to all workers, regardless of whether the employee is a member of the trade union or not.
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 Novotrade Invest. The professional association of employees of chemical enterprises has been active since the year 1948 when the first collective agreement was signed.
|Working at the companies
of VKG, employees
|Our employees have children
under the age of 18
|The youngest employee||19||19|
|The oldest employee||71||72|
|Longest employment in the company||49||50|
|VKG's employees have been involved
with the company, years on average
|% of the Group's employees have
A number of changes took place in the group during the reporting period.
In February, Raimond Niinepuu announced his decision to leave the position of VKG Transport's Member of the Management Board. Raimond named his desire to apply his strength, energy and gained experience to other projects outside the group as the cause of resignation. In May, Ervin Kütt joined the group to lead VKG Transport.
In the end of April, VKG Soojus Board Member Andres Veske resigned, putting and end to his eleven-year career at Viru Keemia Grupp. The second board member Alexander Šablinski continued to manage the company.
On March 31st, Marek Tull started working as the Board Member of VKG Energia, having previously managed VKG Elektrivõrgud since 2009. Tarmo Tiits who had been working as the Board Member of VKG Energia for five years started to lead VKG Elektrivõrgud. The rotation of long-term executives gave a boost to both managers and the team in order to look at usual tasks and activities from a new perspectivet.
Rein Ungert left Viru RMT's Management Board in April for personal reasons. He had been a Member of the Management Board since November 2013. Peeter Ilves remained at the management of Viru RMT. He was joined on 1 May by Andry Pärnpuu, new Member of the Management Board of Viru RMT, who also continued to manage VKG Elektriehitus.
In June, Chairman of the Management Board of VKG, Priit Rohumaa, notified VKG's supervisory board of his wish to resign. On 30 September 2015, Priit Rohumaa's six-year career as the Group's Chairman and fifteen years spent at the group came to an end.
Under Priit Rohumaa's management a number of important changes took place in the group, which allow us to call Viru Keemia Grupp the flagship of Estonian oil shale industry. Through many years of work and investing hundreds of millions of euros, the group has developed the most complicated and efficient oil shale value chain in Estonia, which starts from Europe's newest and most modern Ojamaa mine, contains three of the most modern Petroter type oil plants, two power plants, district heating in two cities and a power distribution network. In addition to that, the group has maintained the reputation of a socially responsible company in all these years by supporting local initiatives and institutions and organizing traditional events.
Fifteen years of work at Viru Keemia
Grupp has been very interesting and fast-
paced. We have made many things happen together with this excellent team and I am sure there is more to come, however, I would like to turn a new page in my life and leave the group. I feel like now is the right time. Fifteen years of fast-paced, eventful, responsible work affect a person's priorities and values. Now that the construction of third Petroter plant is coming to an end, I can admit to myself and others it is time to take some time off and focus on the importance of family.
- Priit Rohumaa
Ahti Asmann was elected the new Chairman of the Board of Viru Keemia Grupp.
Ahti Asmann has graduated from the Faculty of Economics at the University of Tartu. He worked at different positions at SEB bank for eighteen years, and in 2008-2010 he was the Chairman of the Management Board at SEB. For the last three years, Ahti was managing the state enterprise AS Eesti Raudtee.
I am very positive about the situation
and extremely grateful for this challenge.
The Management Board of VKG has done a very good job both in terms of promoting the group and the entire industry. Nowadays it is very important to provide efficiency and strengthen the company in order to attract more investments and contributions into the development of oil shale and chemical industry and Estonian economy in general. I attach great importance to maintaining productive collaboration with the state and financial institutions. I want to make my own contribution into the development of VKG and be a good partner to the Management Board of the Group, its Council, and VKG employees.
- Ahti Asmann
VKG's Supervisory Board has supported the resignation letters of Ahti Puur, the Vice Chairman of the Board and Financial Director, and Board Member Jaanus Purga.
Cause of their resignation was both Ahti's and Jaanus' desire to face new challenges.
The position of Board Member and Financial Director is taken over by Jaanis Sepp, who formerly held the position of Deputy Financial Director.
The group will be managed by the Management Board of five members led by Ahti Asmann. Meelis Eldermann, Board Member and Technical Director, was appointed the Deputy Chairman of the Management Board. Position of the Development Director was not filled.
I am grateful to the Board of the group
for their trust in me. Over the past years, Ahti
Puur has managed to gather a highly professional team and to perform excellent work on organizing the financial activity of the group, I am glad to become his successor. On my behalf, I am eager to put my best efforts into the efficient and successful work of the group during such an interesting time that offers many challenges.
- Jaanis Sepp
Starting from July 2016, Margus Loko, who had previously worked as Technical Director and Development Director, is the second Board Member of VKG Kaevandused. In his new position, Margus continued to be responsible for the technical and development areas of Ojamaa mine.
Ojamaa mine is managed by two Members of the Management Board – Margus Kottise and Margus Loko. Margus Loko has worked in oil shale mining and processing for over 10 years, including 4 years at VKG.
In August, Board Member of subsidiary VKG Transport, Ervin Küttis, announced his decision to leave the VKG group in November and to start working in the fishing industry.
Anton Nõomaa, who previously worked as the Manager of Procurement, was selected to be VKG Transport's new Board Member in the end of September as a result of an open call.
Anton Nõomaa has higher education in economics and almost twenty years of large industry experience in the area of procurement and logistics. Anton joined the group in 2009 and worked as the manager of procurement department since then.
Peeter Ilves, Member the Management Board of Viru RMT, decided to resign. Peeter named his desire to try his hand and develop his skills in another field as the cause of his resignment. Viru RMT continued to be managed by Andry Pärnpuu, Member the Management Board.
Viru Keemia Grupp started a transaction in the beginning of the year and concluded it on 16 January 2017, resulting in the transfer of VKG Plokk, the group's subsidiary operating in the market of building materials, to building materials business Aeroc International AS.
As the result of a program for making the group more efficient, subsidiaries VKG Elektriehitus and Viru RMT merged. Andry Pärnpuu, who managed the companies so far, continued as the Member of the Management Board of the merged company.
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 01.01.2016, 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– 2016. VKG’s shares are not noted on the securities market.
The Group has four shareholders with the following holdings as of 01.01.2016:
The highest management body of Viru Keemia Grupp 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 2014 was held on June 30, 2015 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 meeting that approved the annual report of 2015 was held on July 8, 2016 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 meeting that approved the annual report of 2016 was held on July 30, 2017 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 five members: Chair of the Management Board, Deputy Chair of the Management Board and Technical Director, Financial Director, Management Board Member of VKG Kaevandused and Management Board Member of VKG Oil.
Three Management Board Members – Ahti Asmann, Meelis Eldermann and Jaanis Sepp – 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.
Chair of the Management Board – 21.09.2015
Deputy Chair of the Management Board and Technical Director – 06.03.2008
Management Board Member, Financial Director – 15.04.2016
Management Board Member – 09.05.2000
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 staff of the Management Boards and Supervisory Boards of the parent enterprise and subsidiaries of the Group (August 2017) is presented in the following table.
|Commercial name||Management Board Member||Supervisory Board Members|
|Viru Keemia Grupp AS||
Ahti Asmann (Chairman)
Meelis Eldermann (Deputy Chair)
Toomas Tamme (Chairman)
|VKG Oil AS||
Ahti Asmann (Chairman)
|VKG Transport AS||
Ahti Asmann (Chairman)
|Viru RMT OÜ||
Meelis Eldermann (Chairman)
|VKG Kaevandused OÜ||
Ahti Asmann (Chairman)
|VKG Elektrivõrgud OÜ||
Jaanis Sepp (Chairman)
|VKG Energia OÜ||
Meelis Eldermann (Chairman)
|VKG Soojus AS||
Jaanis Sepp (Chairman)
|VKG Tsement OÜ||
Ahti Asmann (Chairman)
|VKG Diesel OÜ||
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)
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 2015 and 2016, 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. Auditing service is provided by KPMG Baltics OÜ.
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 risk management report outlines important risks for VKG, the descriptions, assessments and mitigation measures thereof. Risk management is based on the group's main goals which are particularly related to VKG's endeavours to add maximum value to oil shale and process it most efficiently.
Identified risks are divided into four groups:
Current resource policy lacks long-term strategic vision, does not provide equal conditions of competiton and prevents private companies from operating at their full capacity. In order to manage the risk, we continue to cooperate with the state and seek for opportunities to buy raw materials from other oil shale businesses for a fair price.
It is strategically important for the group to guarantee oil shale resources for the long term. For this purpose it is planned to establish a common mine for Sonda oil shale mine's mining claims, which would have common opening, technology and transportation system. We are planning to develop this project in cooperation with Kiviõli Keemiatööstus.
The group's financial and economic results are directly related to product prices. A drop in product prices may be accompanied by a decline in profitable oil shale mining and shale oil production outputs. The risk of changes in world market prices of crude oil and petroleum products is an inevitable part of the group's activity. Part of the group's sales agreements for shale oil have been concluded on the condition that the product's selling prices directly depend on stock quotations of petroleum products and the other part of shale oil prices (domestic sales) depends on world market prices indirectly. Oil prices of the world market also affect the company's expenditure side: the prices of crude oils bought from elsewhere and the price of natural gas used in production.
The above risk is constantly monitored in the group and profit sensitivity analyses are carried out in relation to world market changes in the prices of oil and petroleum products. Even a small change in Brent crude price has a remarkable impact on the group's earnings.
A change of 0.01 USD per EUR in the USD-EUR exchange rate (rate change of -1.1%) would affect 2016 earnings by 0.25 million euros (at the oil price of 30 USD/barrel). The higher the price of oil, the greater the effect of changes in the exchange rate of dollar and vice versa, the lower the price of oil, the lower the impact of changes in the exchange rate of dollar.
The group uses derivatives to hedge the risk of changes in world market prices for oil and petroleum products. Derivatives are available at the parent company Viru Keemia Grupp, which manages and mitigates the risk of changes in market prices.
During the year 2016, hedging transactions were valid for the volume of 363,000 with an average price of 250 €/tonne. This accounted for 90% of produced oil. As of the end of the reporting period, the fair value of SWAP contracts for liquid fuels is -26,434,931 euros (31.12.2015: +33,281,745 euros). Due to volatility of oil market prices, the management decided to continue to use derivatives. In accordance with the group's hedging policy, the goal is to fix at least 35%, but no more than 65% of the planned production of the next 18 months.
Out of market risks that are considered to be strategic risks, the group is also affected by the market prices of CO2. Dependence on CO2 market prices may continue to increase in the future, since less and less permitted emission units are attributed to manufacturers with high carbon emissions due to the impact of environmental directives. As a result of directives regulating the sulphur content of marine fuel, such content should decrease significantly, and in relation to this, VKG is carrying out relevant studies and tests to make sure that the main products will not be classified as a low-grade fuel.
Among the main risks affecting the group, it is important to highlight financial risks, which include currency, credit, interest and liquidity risk. Export operations of shale oil provides an important part of the revenue. In this regard, the fluctuations of the US dollar against the euro affect the outcome of the group's financial-economic activity, which in turn may result in the group's insufficient cash flow. The structure of foreign exchange earnings and obligations include hedging mechanisms, in which opposite factors compensate for each other and minimize the impact of currency risk factors to the group's results.
Credit risk management closely monitors the tax behavior of partners, analyzes their financial position and, if necessary, involves third parties into transactions as suretys.
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. The maximum credit risk arising from unsecured claims is 23,033,000 euros as of the end of the reporting period (31.12.2015: 59,063,000 euros).
As of 31.12.2016, the group had 218,678,000 euros (2015: 216,652,000 euros) of interest bearing obligations, which amounts to 42.3% (2015: 38,9%) of assets. Due to the average share of interest-bearing liabilities in the group, the management considers direct risk arising from the rise in money market interest rates to be significant for the group's operations. 1% rise of the base rate would decrease the group's pre-tax profit by 2.48 million euros. However, given the ongoing decline in interest rate future transactions in the market and the fact that five-year interest rate swaps can be set at 0%, the management considers the raise of interest rates in the near future to be unlikely. Nevertheless, the plan is to determine the replacement of the most commonly used 1-month Euribor with longer interest fixes.
Liquidity risk is the risk of the group not having enough liquid assets to cover necessary expenses and investments. Liquidity risk is mitigated through various financial instruments such as loans, management of working capital, creation of reserves, risk hedging future transactions etc. The group's liquidity has improved in the reporting year. The group's solvency level (current assets/current liabilities) is 1.24 at the end of the reporting period (31.12.2015: 0.94). As of the end of the reporting period, the group has 21,132,000 euros (2015: 5,805,000 euros) of free funds plus unused overdrafts limits in the amount of 17,000,000 euros.
The following liquidity analysis provides a breakdown of the group's current and non-current liabilities by the maturity dates. All amounts shown in the table are contractually payable undiscounted cash flows. The analysis takes into account loan interest rates between 3.75%-9%. The interest payments of syndicated loan and EBRD loan interest were calculated using the interest rate of 3.79%. These contracts determine the interest rate dependency on the value of the ratio of net debt/EBITDA. If the net debt/EBITDA is at least 3.5, the interest rate is 4%. If the net debt/EBITDA drops below 3.5, the interest rate is 2.75%. In case of maximum interest, the undiscounted debt would be 288,425,341.
In 2016, 66% (2015: 64%) of the group's sales comprised of export sales. The main selling currencies are EUR and USD. The group's expenses are mostly in euros. Agreements are usually signed in the currency of the client's country of residence and open currency positions are avoided in usual activity. Important international agreements are concluded in euros and USD.
No derivative contracts have been concluded in the group to hedge currency risk.
Monitoring of said risk is carried out continuously in the group with the aim of analyze the sensitivity of estimated profits to the change in US dollar exchange rate. Products that are traded in USD are reviewed while preparing the group's budget. Given the projected prices and volumes, the possible impact of the USD exchange rate on sales and profits is estimated.
Oil shale processing could lose its competitiveness in relation to the establishment of EU's new environmental directives. VKG thoroughly observes environmental requirements and participates in the work of professional associations in order to be informed of future regulations. The group has a central enviromental department and procedures for internal monitoring have been developed. Upon the tightening of environmental regulations, the group will continue to make constant and timely investments in modern technologies.
VKG has an environment-intensive production cycle.
The company's industrial safety, labor and environmental risks are associated with:
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 (excluding VKG Soojus, VKG Plokk and VKG Elektrivõrgud which have entered into separate property insurance contracts) 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.
Employees are the foundation of the group's successful operation. Based on the results of employee risks evaluation, certain categories of risks stand out that are related to the lack of qualified employees for certain specific courses of action. In order to manage these risks, the group is taking a complex of measures to attract and retain qualified specialists and talented employees, and also developing and improving the corresponding HR management and corporate culture procedures and policies.
An important part of risk management is ensuring and monitoring the functioning of internel 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 theGroup’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 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)
(occupational health and safety management system)
|VKG Oil||ISO9001, ISO14001||OHSAS18001|
|VKG Energia*||ISO9001, ISO14001||OHSAS18001|
|VKG Transport||ISO9001, ISO14001||OHSAS18001|
|VKG Soojus||ISO9001, ISO14001||OHSAS18001|
* Energy management certificate ISO 50001 is implemented in VKG Energia.
Viru Keemia Grupp develops cooperation with contracting entities, with an emphasis on the openness of market, market-based price setting, long-term and structured mutual relations. The group seeks to develop long-term contractual relationships, various instruments for motivating contractors and flexible pricing mechanisms.
Selection of partners supplying goods, works and services to the group is carried out on the basis of a integrated system, based on the results of competition proceedings.
Approaches applied to the cooperation with contractors allow:
The underlying criteria in selecting the suppliers of goods, works and services are price, quality, period of production and supply / performance of works / provision of services, reliability of the supplier and availability of technical resources and workforce, experience in performance of relevant work / provision of services. One of the key criteria of selection is the supplier's compliance with industrial and environmental safety and occupational health and safety regulations applied at the group.
The company uses a database of suppliers and an evaluation system which allows to identify the most and least reliable suppliers and contractors.
The total number of organisations supplying products and providing services to VKG in 2016 was 1 471. The percentage of Estonian suppliers among the group's total number of suppliers was more than 87%.
as of May 2017
Viru Keemia Grupp AS - Irina Bojenko
Meelis Eldermann - the Chairman of the Management Board of the Union
Viru Keemia Grupp AS
VKG represented by Irina Bojenko
Viru Keemia Grupp AS
VKG represented by Irina Bojenko
Viru Keemia Grupp AS
VKG represented by Irina Bojenko
Marek Tull - Board Member
VKG Energia OÜ; VKG Elektrivõrgud OÜ; VKG soojus AS
Marek Tull - Chairman of the Council
Marek Tull, Andres Labi
Viru Keemia Grupp AS; VKG Oil AS;
Viru RMT AS; VKG Elektrivõrgud OÜ
VKG Oil AS (Priit Pärn)
VKG Elektrivõrgud OÜ - Hillar Sumberg
VKG Energia OÜ
VKG Elektriehitus AS a member of the association and participant in the work of the section
Viru Keemia Grupp AS
Margus Loko - Member of the Management Board
Erik Mõttus representing VKG Kaevandused OÜ
Erika Sulg substitute Marti Viirmäe
Pursuant to GRI guideline in version G4, reporting is particularly focused on the issues that are the most important for the company and its stakeholders and have been determined in the process of assessing importance.
Strategy and analysis
Commitments to external initiatives
Identified Material Aspects and Boundaries
GRI content index
Highest governance body’s role in risk managemenr and performance evaluation
Remuneration and incentives
G4-51 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance)
Ethics and Integrity
Aspect: Economic Performance
G4-EC3 Coverage of the organization’s defined benefit plan obligations - Kontserni töötajate pensionitoetus on ette nähtud kohustusliku riikliku pensionikindlustussüsteemi raames.
G4-EC4 Financial assistance received from government - Aruandeperioodil ei saanud kontsern riigilt finantsilist abi.
Aspect: Market Presence
G4-EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation - Регионом деятельности Viru Keemia Grupp является регион Ида-Вирумаа. Минимальный, установленный законом размер оплаты труда составлял а) в 2015 г. 390 евро; b) в 2016 г. 430 евро.
G4-EC6 Proportion of senior management hired from the local community at significant locations of operation – Not applicable
Aspect: Indirect Economic Impacts
G4-EN11 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas – Not applicable
G4-EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas – Not applicable
G4-EN13 Habitats protected or restored – Not applicable
G4-EN14 Total number of iucn red list species and national conservation list species with habitats in areas affected by operations, by level of extinction risk – Not applicable
Aspect: Effluents and Waste
G4-EN24 Total number and volume of significant spills – Not applicable
G4-EN25 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the basel convention2 annex i, ii, iii, and viii, and percentage of transported waste shipped internationally – Not applicable
Aspect: Products and Services
G4-EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations – Not applicable
Aspect: Occupational Health and Safety
Aspect: Training and Education
Aspect: Diversity and Equal Opportunity
Aspect: Local Communities
G4-SO5 Confirmed incidents of corruption and actions taken – Not applicable
Aspect: Public Policy
G4-SO6 Total value of political contributions by country and recipient/beneficiary – Not applicable
Aspect: Anti-competitive Behavior
G4-SO7 Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes – Not applicable
G4-SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations – Not applicable
Aspect: Customer Health and Safety
G4-PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes – Not applicable
Aspect: Product and Service Labeling
G4-PR3 Type of product and service information required by the organization’s procedures for product and service information and labeling, and percentage of significant product and service categories subject to such information requirements – Information can be found from VKG homepage
G4-PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes – Not applicable
Aspect: Marketing Communications
G4-PR6 Sale of banned or disputed products – Not applicable
G4-PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes – Not applicable
Aspect: Customer Privacy
G4-PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data – Not applicable
G4-PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services – Not applicable
|VKG||Viru Keemia Grupp|
|MLN EUR||million euros|
|TH EUR||thousand euros|
|HPP||heat and power plant|
|tfe||tonne of fuel equivalent (indicator for expressing any gaseous or solid fuels as tonnes)|
|GRI||Global Reporting Initiative|
Members of the Board Nikolai Petrovitš,
Järveküla tee 14
Phone: +372 334 2727
Fax: +372 334 2717
Members of the Board Margus Kottise,
Järveküla tee 14
Phone: +372 334 2782
Fax: +372 337 5044
Member of the Board Marek Tull
Järveküla tee 14
Phone: +372 334 2852
Fax: +372 332 7620
Member of the Board Anton Nõomaa
Järveküla tee 14
Phone: +372 334 2535
Fax: +372 334 2719