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Yearbook

2017


We were very busy in 2017. The growing global economy as well as the stabilized oil prices at the global market enabled us to focus on the development of the company and enhancement of our competitiveness. Regardless of the doubts that we heard in the beginning of the year, concerning the capacity of OPEC to influence the crude oil prices, OPEC, in cooperation with Russia, managed to bring the offer of oil products with manufacturing restrictions in concordance with the demand and send oil prices higher.

Against this positive background of changes at the oil market, the key words for VKG in 2017 were maximising the volumes of oil production, improving the quality of produce, and enhancing the efficiency of energy and operational processes. A strong foundation in these fields creates the availability for using the opportunities that are opening up in the future.

The Petroter technology has once again proved itself as being very viable and competitive. The ongoing work on enhancing the Petroter technology has made VKG the largest shale oil manufacturer in the world. In 2017, 551,000 tons of shale oil products were manufactured, and the Petroter III technology was operating for 330 working days per year, which is a record-breaking figure, and both of these figures indicate that there are no equals to VKG in this respect anywhere in the world. Actual production volumes and its environmentally-friendly nature is the best possible advertising to the new technology. In connection with an increase in the prices at the global market, the interest towards acquiring the Petroter technology has also increased significantly, and in the future, in addition to traditional oil manufacture, an increase in the export of technological solutions is also expected.

The heavy industry, which on the surface seems to be moving too slowly, is in fact dynamic and changing fast. The growth of environmental awareness establishes the new frames for industries and creates new demand at global markets. Labour force expenses that are increasing within the country and the diminishing number of working-age population urge companies to opt for robotization. The digitalization of industry brings into companies, in addition to traditional industrial technologists, more and more experts in IT and automation. In 2017, we were paying more attention than usual to boosting the efficiency of business and production processes as well as enhancing the knowledge and skills of our employees.

In 2017, the oil shale sector has made a significant contribution into the Estonian national export and the growth of GDP. Within the year that followed after reaching the lowest oil price level, 35.2 mln EUR of different kinds of tax revenues entered the Estonian state budget in the result of VKG activities, which is even more than in the times before the crisis. The contribution could have been even more significant, but it was prevented by the state policy of restricting the access to oil shale resources. VKG believes that an increase in the prices for CO2, which started in the end of 2017, will facilitate the fact that only the most efficient oil shale manufacturers will remain at the market in the 5-year perspective, and in the result of a decrease in the generation of electric power from oil shale, the demand for oil shale is also going to drop.

Similarly to 2016, we can say that in 2017, there have been no important changes in the regulative environment in Estonia. Regardless of earlier promises, the government has not managed to confirm the long-term solution for calculating oil shale resource fees. In addition to that, there have been no developments in terms of oil shale distribution system.

The day before yesterday, electricity and oil were manufactured from extracted oil shale. Yesterday, it still was oil and electricity. Today we are manufacturing maritime fuels and naphtha as a raw material for refineries, bitumen, coke, industrial steam, heating water, and fine chemicals from oil shale, and all of those in an environmentally-friendly manner. We are entering the year 2018 filled with expectations. The years ahead are offering us even more opportunities, considering the volatility and riskiness that exist at the global market of oil products.

Ahti Asmann

Chairman of the Board of Viru Keemia Group


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About the company


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.

VKG today is

  • Financially and energetically efficient processing of natural resource with minimal environmental impact.
  • Maximizing the value chain of oil shale and looking into opportunities for expansion.
  • High quality raw materials and final products for consumers in Estonia and all over the world.
  • High-tech and innovative approach to manufacturing and technological processes.
  • Introduction of advanced systems for ensuring industrial safety.
  • Reliable partner to the residents of Virumaa.



The fields of activities of the VKG subsidiaries

PRODUCTION

VKG Kaevandused
Mining oil shale as the Group’s main raw material

VKG Oil
Producing shale oil and refined chemicals

VKG Energia
Generating heat and electricity


SERVICES

VKG Soojus
Distributing and selling heat

VKG Elektrivõrgud
Selling and distributing electricity

VKG Transport
Providing logistics services for road and railway transportation

Viru RMT
Providing repair and assembly services. VKG Elektriehitus was merged with Viru RMT OÜ on 5 May 2017 and operates in the name of the latter


VKG value chain

vaartusahel

MAIN PRODUCTS AND SERVICES OF VKG

  • Ship fuels
  • Heating oil for local heating boiler plants
  • Electrode coke for electrode manufacturers
  • Oil shale fine chemical products for perfumery, cosmetics and textile industries
  • Oil shale gas for production of heat and power
  • Vehicle and railway transport services
  • Steam and air conditioning for large-scale industrial companies
  • Production, transfer and sale of heat and energy to households and companies
  • Repair, assembly and rental services of machinery and equipment
  • Consulting services in the field of oil shale processing technology

GEOGRAPHICAL SALES DISTRIBUTION OF THE PRODUCTS AND SERVICES OF VKG

Estonia

Latvia

Lithuania

Sweden

Poland
Togo

Belarus

Ukraine

Netherlands

Germany

Senegal

Italy

Belgium

Russia

Japan

Singapore

Saudi Arabia

Shale oil production in Estonia

Shale oil production in 2017
0
tons of commercial oil
The share of VKG amounted to
0
tons of commercial oil
Or
0%

MAIN INDICATORS IN 2017

Number of employees
0
people
Turnover
0
million euros
Profit
0
million euros
Investments
0
million euros

PRIORITIES FOR 2018

  • Impact assessment of the changes in MARPOL marine fuel quality requirements, adaptation strategy
  • Provision of availability of raw material
  • Separation of the maximum amount of energy from oil shale
  • Adding maximum value to end products
  • Competitive cost price of shale oil
  • New marketing channels to the oil shale products
  • Effectiveness of business processes

ESTIMATED NUMBERS FOR 2018

Oil shale
extraction volume
0
million tons
Oil shale
processing volume
0
million tons
VKG’s share
in the state tax revenues
0
million euros

ECONOMIC INDICATORS

CONSOLIDATED INCOME STATEMENT

in thousands of euros
2014 2015 2016 2017
Sales revenue 195,216 166,788 104,270 161,282
Revenue from sales of products -164,175 -189,159 -106,147 -149,630
GROSS PROFIT 31,041 -22,371 -1,877 11,652
Marketing expenditure -3,769 -3,360 -3,213 -4,046
General administrative expenditure -12,985 -9,109 -9,471 -9,480
Other business revenue 11,084 9,973 10,153 7,373
Other business expenditure -2,492 -1,745 -2,218 -1,485
BUSINESS PROFIT 22,880 -26,612 -6,626 4,014
Financial revenue and expenditure -3,101 -5,269 -8,589 -9,776
PROFIT BEFORE INCOME TAX 19,779 -31,881 -15,214 -5,762
Unplanned expenditure
Income tax 300
NET PROFIT OF FINANCIAL YEAR 19,779 -32,181 -15,214 -5,762

INVESTMENTS INTO DEVELOPMENT ACTIVITIES

in thousands of euros
2014
90
2015
52
2016
5
2017
8

INVESTMENTS INTO ENVIRONMENTAL PROTECTION AND OCCUPATIONAL SAFETY

in thousands of euros
2014
8
2015
8
2016
14
2017
12

CONSOLIDATED BALANCE SHEET

in thousands of euros
2012 2013 2014 2015 2016 2017
ASSETS
Current Assets 75,949 76,556 115,403 71,086 65,398 75,552
Fixed Assets 400,109 438,161 501,848 485,513 518,354 479,175
TOTAL ASSETS 476,058 514,717 617,251 556,599 583,752 554,727
LIABILITIES AND EQUITY CAPITAL
Short-Term Liabilities 88,692 67,114 91,368 75,383 52,343 50,093
Long-Term Liabilities 88,480 123,388 183,261 182,724 234,758 201,373
Total Liabilities 177,172 190,503 274,629 258,107 287,101 251,466
Equity Capital 298,886 324,214 342,622 298,493 296,652 303,261
TOTAL LIABILITIES AND EQUITY CAPITAL 476,058 514,717 617,251 556,599 583,753 554,727

BALANCE SHEET TOTAL

in millions of euros
2012
299
177
2013
324
191
2014
343
275
2015
298
258
2016
297
287
2017
303
251
Equity capital
Liabilities

Main events at VKG

January 2017


VKG sells VKG Plokk to the construction materials industry company Aeroc International AS.
The fifty-second Competition of Five Schools takes place, in which the team of high-school students from Ida-Virumaa also takes place with the support of VKG.


APRIL 2017


The traditional VKG community activities day takes place at Kiikla orphanage.
The Ministers of the Environment, chancellors, and advisers from the Baltic States familiarize themselves with Ida-Virumaa and the local industry and visit Ojamaa oil shale mine, which is the most recently opened mine in Europe.
The President of the Estonian Republic Kersti Kaljulaid meets with the Board of VKG. At the meeting, special attention is paid to the environmental aspects with a breakdown by 20 years. In addition to that, during the meeting, the social and economic part played by the oil shale industry in Estonia and Ida-Virumaa is emphasized, and the issues related to the business environment in Estonia are discussed. Kersti Kaljulaid: "The oil shale industry is not a thing of the past". "Today [12.04.] I visited Viru Keemia Grupp in Ida-Virumaa, where the heads of the company told me about how the company had been doing so far as well as about future prospects, and we also discussed the current state of the Estonian economic and business environment in general".
On 28 April, the Global Day of Occupational Health and Safety is celebrated. VKG has also joined this initiative, but with one major difference, i.e. for us, every single day in a year should be "celebrated" as a day of occupational safety. In his annual interview, the Chairman of the Board Ahti Asmann said that the priority for and the special focus of this year are the issues related to reducing the number of risks causing the situations involving occupational safety, as well as potentially dangerous situations.


MAY 2017


Viru Keemia Grupp is awarded bronze level acknowledgement for responsible entrepreneurship. Regardless of the deep oil crisis in 2016, we are still doing our business in a responsible manner and preserve our values.


JUNE 2017


The production capacity of electric power at VKG Energia for the first time ever reaches the record-breaking value of 76 MW.
Aliide Hindreus, who was working as the Head of the stock record unit at VKG Transport, becomes the new Chief Accountant of the Group.


JULY 2017


Within the frames of the Estonian Presidency of the Council of the EU, the officials dealing with the industrial policy from 27 member-states of the European Union visit Viru Keemia Grupp. The visitors are familiarized with the challenges that exist in the field of the Estonian oil shale industry and future prospects.
Sergei Kulikov leaves the position of the member of the Board. Sergei Kulikov came to the Group in April 2011, and since then he has been responsible for the technical development of the subsidiary company VKG Energia. The member of the Board Marek Tull is now going to head the the subsidiary company VKG Energia, who will provide that the company is functioning in the ordinary and usual course.
From the beginning of July, 9 life-saving rules come into effect in the Group. Those requirements are meant for paying special attention to the need for observing safety procedures. Occupational safety and the protection of workers are the most important strategic tasks of Viru Keemia Grupp. We must join effort and strive for the ongoing improvement of working environment, while trying to preserve our own life and health and the life and health of our co-workers. Thus the implementation of the 9 life-saving rules is the measure that calls people to pay even more attention to the issues of occupational health and safety. Observing those rules on a daily basis is a significant step towards "zero accident".


AUGUST 2017


For the third year in a row the Oil Shale Competence Center of Virumaa College of Tallinn University of Technology, Viru Keemia Grupp, Eesti Energia, and Kiviõli Keemiatööstus issue a Yearbook about the Estonian oil shale industry, which proves that, in spite of the difficult situation at the global market, this branch of industry is still highly competitive.
The traditional "School Bell" event takes place on 18 August. It has been for the 17th time that the Group has congratulated children going to the first grade on the beginning of their first school year. This year, 58 boys and girls, whose parents work at the Group, are going to school for the first time in their lives.
On 27 August, a traditional Miners’ Day takes place in Kohtla-Nõmme, on the territory of the Estonian Mining Museum.


NOVEMBER 2017


On 2 November, the traditional Environment Day takes place at VKG, within the frames of which the topics related to responsible waste management are discussed. The Deputy Secretary General of the Ministry of the Environment Meelis Münt and the Technical Director and the Vice Chairman of the Board of VKG Meelis Eldermann, who gave the opening speech, both emphasized the need for searching for new innovative solutions for reducing the amount of waste and recycling it. According to Eldermann, if no ash was left as the end-product, the oil shale value chain would be perfect. In his opinion, the Group should be looking for new methods of recycling ash or, otherwise, of disposing of it in a responsible and environmentally-friendly way.

R&D Activities

The main trends in the field of development activities of Viru Keemia Grupp have so far been adding maximum value to oil shale, enhancing the energy efficiency of production, and ensuring the reliability of existing production processes as well as the efficiency of using the equipment. Consistently high performance figures of Petroter technology boost in efficiency both in oil shale production, the transportation chain, and in the field of production of heat and power have been the key words pertaining to development activities of the company in 2017.

An important step towards the achievement of the goals listed above has been the project of processing of circulation oil, which will help to boost the output capacity, efficiency, and reliability of Petroter oil plants. In addition to the positive trends listed above, the circulation oil project will enable us to enhance the added value of oil shale processing.

One of the challenges in the field of development activities is the provision of oil shale resource both to the plants that process oil shale rock fragments and the ones processing fine oil shale as well as using the existing production capacities in the most efficient way. The management of oil shale production, delivery, and consumption processes must be carried out alongside with the most optimum amount of expenses on logistics and the size of warehouses. The use of conveyor transport within the value chain helps to achieve the goal of reducing expenses on logistics and environmental impact. In 2017, the construction of semi-coke conveyor started in order to transport dangerous waste to the land-fill and reload oil shale from the intermediate storage facility into railway wagons. In addition to a low amount of expenses, the use of conveyor transport improves working environment conditions on the production territory, enhances the efficiency of labour force as well as energy efficiency.

Viru Keemia Grupp is moving in the direction of 4.0 industry, which includes the automation and robotization of production processes. It is clear that it will be hard to remain competitive in the environment of digital industry with old IT and production automation solutions. This is why we are looking for new options for the automation of production and management processes. Viru Keemia Grupp is systematically upgrading the existing IT solutions and implementing new digital solutions related to finance and business management, including the ERP, Business Intelligence (BI) analytics and BigData. The IFS asset management programme is being implemented at the companies of the Group, which helps to enhance the reliability of the equipment, reduce maintenance and repair costs, and ensure good investment decisions.

The solutions for automating industrial processes developed by Viru RMT that are used in everyday operation of Petroter plants, conveyor systems, the operation of fine chemicals and monitoring equipment have enabled us to move in the direction of 4.0 industry. Among the largest clients outside of the Group, Eesti Energia Õlitööstus and Eastman Specialities are definitely worth mentioning.

In connection with changing requirements for the quality of fuel, an important trend is the research of the quality and marketing opportunities of gasoline fractions and shale oil. Proceeding from the expected changes at the market, we are looking for new business opportunities that can be used for enhancing the added value of oil shale products. Such technological solutions as caustic-wash and filtration and distillation, applied in the process of production of gasoline fractions, help to improve the quality of produce significantly. As for shale oils, the goal is to predict the influence related to shale oil marketing, exerted by MARPOL vessel fuel quality requirements at the global sea in 2020.

The changes that have taken place at the global market of fine chemical products show that the production of chemicals is an important development trend with regard to enhancing the added value. The chemical potential of kerogen is constantly worthy of making investments into research and development activities.

We do close cooperation with such educational institutions as Tallinn University of Technology, Virumaa College of Tallinn University of Technology, and Narva College of the University of Tartu. A number of research in the field of oil shale technology, fine chemical products, depositing technologies and environmental research is just a small share of cooperation trends we are following.

An increase in energy efficiency ensures direct connections with heat and electrical systems to new customers. All necessary facilities have been created on the territory of VKG with that purpose in mind: infrastructure, convenient location, safety, connectivity, and heat and power at competitive prices. In 2017, several server farms have seized this opportunity. The immediate vicinity of the power plant enables us to supply server farms with resources that reach tens of megawatt-hours.

We are making contributions into the most innovative development trends, which are based on market demand and future developments. One of such trends is bioenergy and biofuels. We are keeping track of the development process of the new version of the Renewable Energy Directive of the European Union as well the market demand for renewable fuels and the so-called advanced renewable fuels and the formation of the conditions pertaining to raw material.

In the following years, in its development activities, VKG will be focused on the efficiency of production, energy efficiency, quality of products, and ensuring competitiveness. An addition to that, we are contributing into the new developments arising from future development trends, such as fuel, energy and chemical products, as well as the sale of technologies.





ENVIRONMENTAL ACTIVITY

One of the prerequisites for sustainable development of Viru Keemia Grupp is the conformity with the legal acts of the European Union and Estonia as well as with the requirements of the framework documents concerning the Best Available Technique that are valid or will come into effect soon.

In addition to that, the regulations of the Greenhouse Gas Emission Allowance Trading System (GGEATS) applicable to member-states and enterprises of the European Union are also of paramount importance. VKG has been able to respond to changes in due time and remain competitive through that. Proceeding from the Industrial Emissions Directive and the Industrial Emissions Act (IEA), the requirements for large burning equipment in terms of pollutants contained in the flue gas (SO2, NO2, solid particles) have been tightened. In order to ensure the conformity to the Industrial Emissions Act (IEA), in 2008 VKG started carrying out a number of important activities, one of which was the erection of the first piece of equipment purifying flue gases from sulphur dioxide at the Northern Power Plant of VKG Energia. In subsequent years, two more pieces of purification equipment were built, with the total cost of 37 million EUR. Up to date, as compared with 2007, in spite of an increase in production capacity, the amount of SO2 emitted by the VKG Group has decreased almost by 90%. The Group has ensured free GGEATS quotas for its enterprises.

The production facilities of VKG conform to the requirements of the Best Available Technique. In spite of the above-mentioned, we are constantly looking for new opportunities to reduce the footprint of our production activities. It was only in 2017 that VKG invested over 12 mln EUR into the projects related to the reduction of environmental pollution. The new boiler has been put into operation at the Northern Power Plant of VKG Energia, and the Petroter I plant working on the basis of Petroter technology has been upgraded. In addition to that, more than required has been done in the field of handling oil shale waste. Since 2016, an innovative solution has been implemented, which prevents the penetration of pollution from the land-fill into the environment, and waste is transported to the land-fill via the tubular conveyor, thus enabling us to avoid the generation of dust and noise. Upon the extraction of oil shale, the mine waste extracted together with the natural resource is fully used by VKG Kaevandus. Major part of the mine waste is used as limestone crushed rock (about 2 mln tons in 2017), which is produced by VKG Kaevandus and marketed as a certified product.

A number of significant changes are taking place in the environmental policies of the European Union and Estonia, which are going to exert major effect on business activities of VKG. In 2017, during the Estonian Presidency of the Council of the European Union, the general principles of the Greenhouse Gas Emission Allowance Trading System in the European Union for the subsequent period (2012-2030) were defined. Besides, the analysis of assessment of the monetary value of the external effects of environmental use in Estonia, commissioned by the Ministry of the Environment, on the basis of which the current system of environmental charges in Estonia will be revised, is also being prepared. While developing its environmental policies, VKG highly values social responsibility and understands that the management of environmental threats as well as the conformance to the requirements of environmental regulations are the most essential factors defining the sustainable development of the company.

In its activities, Viru Keemia Grupp is always striving for improving efficiency. The aim is to increase the value of oil shale to the maximum, i.e. using up the potential of the resource completely. From the perspective of the environmental protection, it means minor environmental effect per one unit of processed oil shale and higher social and economic benefit. In spite of the complex economic situation in the power-generating sector in 2016, VKG has implemented a number of important projects which decrease the environmental load and manufacturing footprints.

At VKG Oil, the process of production of shale oil was supplemented withthe unit for mixing finely dispersed ash-bearing fuel (residues of cleaning of oil shale) and circulation oil. It allows sending the residues from the cleaning of oil shale back into the process, and the need for its transportation and intermediate depositing disappears. The processing in the closed system thus decreases the amount of air emissions that accompany transportation.

In 2017, at the commission of the Environmental Inspectorate, the results of the research carried out by the Estonian Environmental Research Centre (Eesti Keskkonnauuringute Keskus) titled “Assessment of the quality, odourannoyance, and amounts of pollutants in the ambient air in the district ofJärve in the town of Kohtla-Järve” were published, on the basis of which a conclusion was made, according to which within the past ten years the levels of the main pollutant causing the unpleasant odour in the area (H2S) have considerably decreased in the vicinity of the production facility, due to numerous technological developments. This is an indicator showing us that the action plan implemented by VKG within the past five years, the cost of which was about 4 million euros and which was aimed at reducing the odour, has been efficient.

In the following years, the development and environmental activities of VKG will still be focused on efficiency, waste recycling, and reduction of air emissions. Our priorities are: the action plan aimed at reducing the odour and improving air quality, which also covers the project of damping of heating sites at the semi-coke land-fill; the methods of depositing waste and using it; the activities aimed at reducing the amount of greenhouse gases and improving energy efficiency.






The group analyzes its impact on the environment and society on a regular basis and carefully evaluates the social and environmental impact of new projects. We seek to maintain an active dialogue with all interested parties and to consider their expectations when adopting management decisions. Viru Keemia Grupp’s objectives regarding sustainable development and social responsibility are defined by the group’s mission, strategic principles and priorities, and are a framework of interrelated activities within the integrated strategy of Viru Keemia Grupp. In defining our strategy for sustainable development, we consider global trends and experience in this field.

For Viru Keemia Grupp, entering the path of responsible entrepreneurship has been a conscious and weighted decision, because in our development we have achieved the level, where we wanted to do something more. At present, this concept has been integrated into our DNA. Openness has been an inseparable element in terms of creating the reputation of a reliable and honest company and maintaining it, and it is one of our basic values. We invariably rest against it whenever we discuss some issues or communicate with the public.

Eight years ago we decided that the topics of social responsibility and sustainable development deserve much more than one chapter in our Yearbooks. Hence since 2010 we have been publishing all of our environmental, social, and economic data in the Social Responsibility and Sustainable Development Report, which is drawn up in accordance with the principles and requirements of the internationally acknowledged Global Reporting Initiative (GRI). In our reports, we do not only write about success stories, but also deal with problems and challenges our company is facing as well as their solutions, publish environmental indicators, provide an overview of planned activities and accompanying effects. Besides, by publishing such a detailed report we wish to familiarise and promote the concept of sustainable development in Ida-Viru County and Estonia as a whole, since we have a strong belief that responsible activities guarantee the sustainability of the company, the society, and the state.

The largest education projects in 2017

Jõhvi Gymnasium and Viru Keemia Grupp have entered into the cooperation agreement for continuing the STEM elective course

In 2016/2017, within the frames of cooperation between Jõhvi Gymnasium and three large production companies in the area, namely VKG, Eesti Energia, and Eastman, the new elective course was developed for the students of the 11th grade of Jõhvi Gymnaisum, i.e. the STEM course. The STEM course is a subject that incorporates four areas, i.e. Science, Technology, Engineering, and Mathematics, into a single sustainable whole, in which natural and exact sciences get linked to vital everyday problems, and students are provided with basic knowledge in the field, which they are interested in, have potential for further studies, and a chance to choose future profession. Within the frames of the STEM course, study visits and lectures have taken place in the companies of the Group. For example, pupils have visited VKG Energia, where they familiarised themselves with the processes of production of heat and electricity and obtained an overview of trends in the field of energy engineering. Pupils learned a lot about the environmental footprint and other environmental issues during a study visit to Ojamaa mine. Since this course is very popular and necessary, the STEM course will also be provided in the academic year 2018/2019, with the assistance of VKG.

We are going to continue awarding scholarships to the best students of Tallinn University of Technology

In 2017, we awarded a total of 6,700 EUR of scholarships via the Development Fund of Tallinn University of Technology. VKG awards scholarships twice a year.
  • VKG scholarships in bachelor’s studies are awarded in the fields of electrical power engineering, mechatronics, geosciences and geotechnology, chemistry and environmental protection technologies, heat power engineering.
  • VKG scholarships in master’s studies are awarded in the fields of chemistry and environmental protection technologies, chemistry and technology of fuels, heat power engineering, and electrical power engineering.
  • VKG applied higher education is meant for students of Virumaa College studying in the fields of fuel technology, production automation, machine building technologies, energy technology, chemical technology, management of technological processes, and telematics and smart systems.

VKG community projects

Supporting the most talented gymnasium students in the area

The Competition of Five Schools, in which traditionally the best gymnasium students of the Republic show their knowledge in Mathematics, Chemistry, and Physics, has already been held for over half a century. Six years ago this elite club, which incorporates five strongest gymnasiums in Estonia with the in-depth study of sciences, opened its doors to the teams from Ida-Viru County. The participation of the local team in such a reputable contest has been a good initiative of the Group, and we are going to continue providing this kind of support in the future, too. The main thing is that we could have motivated pupils who are interested in sciences and see their future as being connected with technical education. We are convinced that our task is to help the youth in their studies and provide them with an opportunity to show what they are capable of.

We are bringing the best ballet performances to the inhabitants of Ida-Viru County

Jõhvi Ballet Festival can be referred to as the main cultural event in the area. But, in addition to that, it has so far been the only ballet festival in Estonia, which has built up a fantastic reputation abroad as well. The fact that this festival is held in Ida-Viru County provides us, the inhabitants of Ida-Virumaa, with the chance to enjoy unique and world-known ballet performances close to our homes. VKG is pleased to be a partner of this event. Successful cooperation between the Group and Jõhvi Concert Hall, which is the organiser of the festival, has been going on for many years. Within the frames of the Ballet Festival in 2017, we supported young dancers that are just in the beginning of their ballet path, so that future talents could also gain some experience of performing on the big stage and show their skills to the wider audience.

Donors’ Day

Another long-term tradition of the Group is the Donors’ Day. The enjoyable cooperation between VKG and the blood bank of Ida-Viru Central Hospital has been going on for many years. There are many long-term donors in the Group, and new volunteers keep on joining in every year. Within the past year, over 30 litres of blood was donated by the employees of the Group.

Acknowledgement

vastutustundlik

Viru Keemia Grupp has been acknowledged as a responsible company. In 2017, the group was awarded bronze level acknowledgement for the eighth consecutive year.




Ahti

We have been awarded with the bronze level acknowledgement for the results the Group managed to achieve in the field of responsible entrepreneurship in 2016. Last year we were forced to face with a serious oil crisis and make difficult decisions. Regardless of that, we are still acting as a responsible company and have managed to preserve our values. It means that our bronze level acknowledgement is actually worth being gold. At the same time I believe that VKG has got power and will to move on to the next level – silver level acknowledgement! We can achieve any goals we set while we are doing it together.

Ahti Asmann, the Chairman of the Board of the Group


Responsible Estonian Business

2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017



Estonian Culture-Friendly Business

2012, 2013, 2014


The implementation of a unified social responsibility and sustainability policy at VKG ensures its contribution into the enhancement of the competitiveness of the Estonian economy and facilitates the social and economic development of Virumaa. The main principles and activities of VKG in the field of sustainability and responsible entrepreneurship are described in detail in Social Responsibility and Sustainable Development Report.

Our
people

Viru Keemia Grupp remains one of the biggest employers in Virumaa.
Our employees are our present day and our future. We value all employees, their contribution, abilities and the work they do, their desire to achieve the group’s production and strategic goals and to be a part of the history of oil shale industry.

444 WOMEN

As of 31 December 2017, Viru Keemia Group had altogether
1,777 EMPLOYEES

1,333 MEN

Our values

We are convinced of the fact that the success of our business solely depends on the people that are working here. This is why one of the main priorities of staff policy at VKG is enhancing the work efficiency as well as increasing the personal interest of the employees of the company against the activities and achievements of the Group. The peculiarity of the oil shale industry necessitates the use of male work exclusively in some departments. This is why there is no sexual discrimination in the Group, i.e. we have women working in the fields and divisions, where it is permitted by law. There is also a significant share of women among high-level personnel. As for employees with higher education, the distribution is almost equal, i.e. 59% of men and 41% of women.

Within recent years, the composition of employees has been stable, it corresponds to the sphere of activities of the company and the goals that have been set, i.e. to increase the volumes of extraction and processing of oil shale and develop the sale of oil shale chemical products. We have achieved success at combining the energy of young employees with the experience of the reputable older ones.




The main structure of our company is well-developed. Each employee knows his or her role in the company and understands what his or her tasks are both today, tomorrow, and in the long-term perspective. However, it is self-evident that we want to attract new professionals in the field to our company, in order to make good use of their best knowledge and experience, acquired by them in other companies.

Tea Allikmäe, HR director


We promote and develop the aftergrowth

Fast modern technological development assumes skilful and strategic management of the staff. Viru Keemia Group pays a lot of attention to developing the aftergrowth of its employees.

In 2017, almost 100 Group key persons participated in training courses, which were aimed at developing managerial skills and managing changes.

We are pleased with the fact that our people are interested in further development of their professional skills and knowledge, and they study actively. Many of them obtain higher education alongside with working at the Group and develop their professional knowledge both in degree studies and in higher and vocational schools.

One of the main priorities of our staff policy is the provision of large-scale training and development opportunities to our employees. In order to strengthen our competitive advantages and use them more efficiently, we need a system that would enable our employees to manage, preserve, distribute, and develop their competences further.

In order to develop professional competences of our employees, we hold different continuing professional training courses for them:

  • professional training courses in the form of open learning
  • specialised training courses at the company
  • training courses aimed at the development of team work skills and management competences
  • role plays and business simulations
  • In 2017, about 200,000 EUR were invested into the development of training programmes. About 800 employees from different levels took part in training courses.

Acknowledgement

Every year, the awards of "Best Chemist" (VKG OIl), "Honorary Miner" (VKG Kaevandused), and "Employee of the Year" are granted in the Group and in its subsidiaries to the best employees for the most outstanding achievements and contribution into the development of VKG. Those awards are the highest rewards in the Group, which facilitate the strengthening of common values and organisational culture, inspire employees for further professional development, strengthen solidarity and corporate spirit, and enable every single member of the team to feel that he or she has made an important contribution into the success story of the Group. As a rule, the ceremonies of presenting awards take place during professional celebrations - on a Chemists’ Day and a Miners’ Day.

We highly value the loyalty and commitment of our employees. The average duration of job tenure at the Group is 17 years. We would especially like to thank our employees with the longest experience, and in order to do that, four times a year the Board organises a special reception for labour anniversary celebrants, whose job tenure at the Group is 20 years or more. In 2017, 60 employees were honoured, nine of whom have worked at the company for 35 years, three for 40, and one for 45 years.

We are creating safe working environment

The motto of the company in the field of occupational health and safety is that the life of every human being is invaluable, and people’s safety is above all. 9 life-saving rules have been developed and implemented at VKG, the adherence to which is of vital importance for all employees.

We are doing our best to provide all of our employees with safe working conditions and healthy working environment, high quality tools and uniform, professional support and pleasant environment for everyday activities.

For us, both mental health and well-being of our employees is extremely important. In addition to regular medical examinations, whenever needed, we offer psychological support to our employees, for example, in the event of an accident at the workplace. We support and promote healthy lifestyle and urge our employees to take part in sports activities, providing financial support via the SportID system. VKG employees play football actively. There are several football teams in the Group, which take part in both regional and national tournaments and achieve success.

We support team spirit

We believe that the key to success in any kind of undertaking lies in professional team that is functioning as a whole.

This is why we see as our important task to develop managerial and team work skills among our employees. In order to improve them, we hold special training courses, using role plays, which help participants to step out of their customary frames of thinking and make non-standard decisions even in usual situations.

However, we are trying to act as a team not only at work, but also outside of it. Our employees are actively involved in charity and volunteer activities. Annual visits and the provision of any help we can to Kiikla orphanage, planting trees, cleaning the territory, donating blood, holding festivals and events, (fund) raising campaigns are the initiatives that unite our employees and make them act as a team.

VKG’s management

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.

MANAGEMENT BOARD

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.

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 Management Board’s activities

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.

MEMBERS OF THE SUPERVISORY BOARD:
TOOMAS TAMME (CHAIRMAN)
PRIIT PIILMANN
MARGUS KANGRO
ANTS LAOS
ELAR SARAPUU
JAAN-MIHKEL UUSTALU
JENS HAUG (ADVISOR OF THE SUPERVISORY BOARD)

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.

Shares and share capital

As of 01.01.2017, 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 01.01.2017:

  • OÜ Tristen Trade 38.91%
  • OÜ Alvekor 25.49%
  • Ants Laos 19.53%
  • OÜ Sergos Invest 16.07%

Legal structure as of 31.12.2017

Ojamaa is the most recent in Europe and the first new mine in Estonia that was built after regaining independence.

Underground extraction is used at Ojamaa mine in the course of production of oil shale, which is applied when the oil shale layer is deeper than 30 metres below the earth surface. The initially designed load was 3.0 mln tons of oil shale per year, but in 2017 we expanded our limits and produced 4.1 mln tons of commercial oil shale. According to the plan, in 2018, the amount of oil shale produced at Ojamaa mine will reach 4.5 mln tons of commercial oil shale.

Ojamaa mine in numbers

  • 536 employees make their contribution into smooth daily operation of the mine
  • 43 Ojamaa miners have been awarded with the "Honorary Miner" title
  • All in all, 15.1 mln tons of commercial oil shale have been extracted since the opening of the mine
  • About 150 units of wheeled machines are working at the mine alongside with a large number of blowers, pumps, direct plug-in units, etc.
  • 27 km of conveyors are used on a regular basis
  • The excavated area since the opening of the mine has been 7 km2
  • Ojamaa mine is going to cover the need of the Group for raw materials within the next 10-12 years
  • 45 mln EUR has been invested into the development, reliability, and safety projects related to Ojamaa mine within five years
  • The total amount of investments into Ojamaa mine has reached 120 mln EUR

Availability of oil shale resource

The total demand of VKG for oil shale, with due consideration of all oil production capacities, is 5.3 mln tons of commercial oil shale. The mining permits that have been issued to VKG enable the company to excavate 2.77 mln of tons of geological resource, from which about 3.5 mln tons of commercial oil shale can be produced. If other players in the market within the past 7 years leave the permitted volumes unexcavated in full extent, and provided that the overall excavation of oil shale is within the limits of 20 mln tons of geological reserve, VKG will be able to increase the amount of its produce up to 3.5 mln tons of geological reserve respectively (4.4 mln tons of commercial oil shale) by means of "post-factum excavation mechanism". It means that if VKG brings the volume of production at Ojamaa mine to the maximum permitted level, VKG will still have a deficit of about 0.9 mln tons of oil shale.

The problems related to the distribution system of oil shale originate from the Earth Deposits Act, the principles of which originate from the time when the extraction of oil shale was the exclusive right of the state company Eesti Põlevkivi. Within the past 10 years, the market of excavation and processing of oil shale has formally developed, but the Earth Deposits Act has remained unchanged, and the access to oil shale to market players is still limited. Since the system of distribution of oil shale in Estonia has been poorly regulated and contradictory to the principles of free competition valid in the EU, in addition to this case, at the moment the Group has got three more court disputes with the state, all of which are related to mining permits and fair distribution of oil shale resource.

Even though no fast solutions are within visible reach in relation to this issue, in the long-term perspective, it is likely that the interest of the state towards opening access to oil shale resources is going to grow. A fast increase in the prices for CO2 which took place in the beginning of 2018, is going to abruptly diminish the feasibility of electricity production by means of direct combustion of oil shale.

The main product of VKG is shale oil, whose advantage as compared to oil products is its small viscosity, low chilling point, and insignficant sulphur content.

VKG Oil is responsible for the processing of oil shale in the Group, which has got three highly efficient oil plants based on the Petroter technology and four Kiviter plants, out of which only two were operating in 2017. Unfortunately, because of the lack of oil shale resource, it is not possible to implement the total production capacity at the moment. Kiviter oil plants are operating on the basis of lump oil shale, and oil is manufactured in vertical retorts, where gas is used as a heat carrier. The plants that are operating on the basis of Petroter technology use fine oil shale, and the manufacturing process takes place in horizontal retorts, while ash is used as a heat carrier.

All in all, 4.3 mln tons of commercial oil shale were processed in 2017 (+26% as compared to 2016), out of which amount 551,000 tons are saleable shale oil products (+32%).

Petroter oil plants are characterised by high reliability and energy efficiency. In 2017, Petroter plants were operating for 882 days, and the average net efficiency indicator of processing oil shale for the three plants reached 90.2%.

Adding value to oil shale takes place at VKG via co-production of oil, energy, and heat, which is the most environmentally-friendly way to use this natural resource. In the result of shale oil production process, oil shale gases are generated that are moved to VKG Energia, where they are used for manufacturing heat, steam, and electricity.

Heat energy is forwarded to the local central heating system, steam is sold to production companies located in the neighbourhood, and most part of power energy is consumed by the companies of the Group. In addition to that, we also use oil shale gases at the limestone plant, whose produce is consumed by our own sulphur-trapping devices that purify exhaust gases. This production chain guarantees the ultimately efficient and environmentally-friendly use of energy contained in oil shale.

An increase in the production volumes of shale oil has also exerted a positive effect on the amount of power energy produced from oil shale gases. Within a year, VKG Energia, the subsidiary of the Group, produced 416 GWh energy in total, which is 18% more than a year before. With such results, VKG is still the second largest energy producer in Estonia.

New power energy clients

Ida-Viru County keeps up with global digital trends, and starting from the end of last year, cryptocurrency has been mined on the production territory.

In the end of 2017, the Group entered into the first contract with the company dealing with the mining of cryptocurrency, which started operating on the production territory of VKG Energia. The location of the cryptomine in the close vicinity to the power station is beneficial both for the miner and for the Group. The miner can optimise the connection fee and electricity and communication expenses considerably. For the Group, it is an opportunity to sell its produce and ensure a stable 24/7 load schedule for its production capacities. At present, on the territory of VKG, there are cryptomines with the total capacity of 0.5 MW, and connection ports are built for connecting additional 2 MW.

The diversification of the business environment in the area will definitely have a positive effect on the reputation of Ida-Viru County, the local community, and enhance the interest of investors.

Environmentally-friendly central heating

VKG Soojus deals with heat distribution and sales service. The residue heat generated in the course of processing oil shale is used for heating catchment areas.

The provision of heating to the areas of Kohtla-Järve and Jõhvi has become possible owing to the heating main that is longer than 18.5 kilometres, which was built by the Group in 2012. The heating main runs from the production territory of VKG Energia in Kohtla-Järve through the territories of several rural municipalities up to VKG Soojus connection point with the distribution network.

Last year the heating energy produced within the Group made up 451 GWh. But because of the mild winter weather in the beginning of the year, the sale of heat in 2017 was relatively at the same level as in 2016, i.e. about 271 GWh. Because of the fact that the heating energy is produced from gas generated while processing oil shale, the fluctuation of prices at the global market has little effect on the end consumers of heat. Within the reporting period, VKG Soojus was selling heating energy at the price of 55.22 EUR + VAT per megawatt-hour.

Over 30,000 clients in Narva and Sillamäe

VKG Elektrivõrgud, which is the subsidiary of the Group located in the north-east of Estonia, deals with the sale of electricity and the provision of network services. It is the third power distribution company in Estonia in terms of sales volumes (218.2 MW). 

The area with the population of about 90,000 people is provided with power energy via electric power lines of VKG Elektrivõrgud. In addition to satisfying the demands of private consumers and small enterprises, the company plays an important part in providing with electricity large industrial companies in Narva and Sillamäe.

The company has 4 transforming substations with the voltage of 110 kV, 8 transforming substations with the voltage of 35 kV, 359 transforming substations with the voltage of 6 kV and 10 kV, 413 km of overhead lines and 501 km of cable lines. Technical and commercial losses of VKG Elektrivõrgud in 2017 (the difference between the energy entering the network and exiting it) made up 6.6%. The average frequency of disruptions caused by some network malfunctions per one consumption point per year (System Average Interruption Frequency Index, SAIFI) in 2017 was 0.245.

p>Every year VKG Elektrivõrgud makes considerable investments into the maintenance of lines, transforming substations, and other equipment, which is why the reliability of network has increased, and network losses have diminished. In 2017, ca 2.54 mln EUR was invested into the development of network and the enhancement of its reliability.

The company pays special attention to electrical safety and holds regular courses for employees. At the same time, we are also making contributions into increasing the awareness of people, and mainly children, pertaining to the issues of electrical safety, arranging various information campaigns and talking about these issues at schools.

Oil shale chemistry can be divided into two groups: oil shale chemicals (alkyl resorcinols fractions) and fine chemicals. The first group is widely used in rubber and plywood industry, the production of moulded forms, etc. The second group includes products with a high level of purity, which are used in cosmetics, perfume manufacture, and electronics. The main field of application of fine chemicals is the synthesis of medications and the manufacture of hair dyes. For example, fine chemicals produced in Estonia can be found in the products of such companies as Keune, Estel, and Schwarzkopf. Besides, they are used in the process of production of liquid crystals for LCD monitors.

Oil shale phenol fractions are used in the form of resin adhesives in tyre, plywood, and oil industries and in the process of manufacture of tyres with high durability level (Goodyear, Pirelli and Bridgestone) as well as in the manufacture of Lexus and Toyota spare parts.

Clients all around the world

At present, VKG is the only company in Estonia that separates valuable chemicals from oil products at the oil plants operating on the basis of Kiviter technology.

The company is capable of producing the amount of fine chemicals with the highest level of purity per year (over 99%), the price for one kilogram of which can reach several tens of euros.

The largest consumers of oil shale chemicals produced in Estonia are the companies in the European Union, Japan, and India, and also the chemicals produced in Kohtla-Järve have reached the countries of Latin America and Iran.


More information about fine chemicals is available here:
www.finechem.eu

LIME PRODUCTION

VKG lime plant operates from summer 2014. The factory uses high-grade limestone, which is used to produce lime necessary for the operation of desulphurization device.

Semi-coke gases deriving from the production processes of shale oil are used to get energy for decarbonisation. This solution for manufacturing lime is developed by Viru Keemia Grupp and unique in Estonia. As well this is a good alternative for using natural gas in lime production.

In 2017, the plant manufactured around 24,800 tons for lime, which was fully used in the process of bonding sulphur compounds found in flue gases. The capacity of the lime plant's production fully covers all current and future needs of VKG.

Some of the products of desulphurization found use in agriculture. The Agricultural Board confirmed that the product complies with quality requirements set for lime fertilizers in the Fertilizers Act, which is also proven by a certificate issued to the company.

USE OF OIL SHALE RESIDUES IN ROAD CONSTRUCTION

The considerable amount of limestone gravel which results from the excavation of oil shale is successfully used in road construction, landscaping and as a filling material. In last year, the mine waste generated in the group was fully used.

The Group has a subsidiary Viru RMT, whose customers include both the companies within the Group and larger industrial companies outside of it. Viru RMT was created from the former repair and assembly department of the oil shale chemical plant, which means that it has extensive experience in the field of provision of repair and assembly services.

Viru RMT’s main areas of activity are
  • Electrical works from the lamps in the ceiling to transforming substations
  • Production, installation, maintenance, and repair of metal structures
  • Design, production and installation of technical equipment
  • Automatic management systems design, software development and installation
  • Installation and repair of control and measuring instruments
  • Maintenance and repairs of lifting equipment, lifting operations
  • Implementation of turnkey technical solutions
The largest projects that have been
initiated and implemented in 2017
  • Assembly of pipelines for circulation oil and metal structures (the contracting authority is VKG Oil, the project will be ready in 2018, 1st quarter)
  • Production of bunkers and their lining as well as production of metal structures (external client)
  • Construction of a common electric system (external client)
  • Sillamäe traffic junction
You can have a look at the projects implemented by the company here:
www.virurmt.com

Contact information

Viru Keemia Grupp AS

Chairman of the Board Ahti Asmann
Vice Chairman of the Board Meelis Eldermann
Registration number 10490531
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2700
Fax: +372 337 5044
E-mail: info@vkg.ee
www.vkg.ee

VKG OIL AS

Members of the Board Nikolai Petrovitš,
Priit Pärn

Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2727
Fax: +372 334 2717
E-mail: vkgoil@vkg.ee

VKG Kaevandused OÜ

Members of the Board Margus Kottise, Margus Loko
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2782
Fax: +372 337 5044
E-mail: vkgkaevandused@vkg.ee

VKG Energia OÜ

Member of the Board Marek Tull
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2852
Fax: +372 332 7620
E-mail: vkgenergia@vkg.ee

VKG SOOJUS AS

Member of the Board Aleksandr Šablinski
from 30.03.2018 Andres Klaasmägi
Ritsika 1
31027 Kohtla-Järve

Phone: +372 715 6444
Fax: +372 715 6400
E-mail: vkgsoojus@vkg.ee
www.vkgsoojus.ee

VKG Elektrivõrgud OÜ

Member of the Board Tarmo Tiits
from 26.03.2018 Ivo Järvala
Paul Kerese 11
20309 Narva

Phone: +372 716 6601
Fax: +372 716 6600
E-mail: vkgev@vkg.ee
www.vkgev.ee

VKG TRANSPORT AS

Member of the Board Anton Nõomaa
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2535
Fax: +372 334 2719
E-mail: transport@vkg.ee

VIRU RMT OÜ

Member of the Board Andry Pärnpuu
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2573
Fax: +372 334 2545
E-mail: viru.rmt@vkg.ee
www.virurmt.com

Photos

Kaupo Kikkas
Sven Zacek
Marjana Tjazelova
Krislin Kippar