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Long-term incentive plans (LTIPs)
Unit Bonus Plan
In 2008, Lundin Energy implemented an LTIP scheme consisting of a Unit Bonus Plan which provides for an annual grant of units that will lead to a cash payment at vesting. The LTIP has a three year duration whereby the initial grant of units vested equally in three tranches: one third after one year; one third after two years; and the final third after three years. The cash payment is conditional upon the holder of the units remaining an employee of the Group at the time of payment. The share price for determining the cash payment at the end of each vesting period will be the average of the Lundin Energy closing share price for the five trading days prior to and following the actual vesting date adjusted for any dividend payments between grant date and vesting date.
LTIPs that follow the same principles as the 2008 LTIP have subsequently been implemented each year.
The following table shows the number of units issued under the LTIPs, the amount outstanding as at 31 December 2019 and the year in which the units will vest.
| Unit Bonus Plan | Plan | ||||
| 2016 | 2017 | 2018 | 2019 | Total | |
| Outstanding at the beginning of the period | 409,343 | 355,954 | 278,917 | – | 1,044,214 |
| Awarded during the period | – | – | – | 316,855 | 316,855 |
| Forfeited during the period | – | -5,535 | -7,758 | – | -13,293 |
| Exercised during the period | -409,343 | – | – | – | -409,343 |
| Outstanding at the end of the period | – | 350,419 | 271,159 | 316,855 | 938,433 |
| Vesting date | |||||
| 30 June 2019 | – | 350,419 | – | – | 350,419 |
| 30 June 2020 | – | – | 271,159 | – | 271,159 |
| 30 June 2021 | – | – | – | 316,855 | 316,855 |
| Outstanding at the end of the period | – | 350,419 | 271,159 | 316,855 | 938,433 |
The costs associated with the unit bonus plans are as given in the following table.
| Unit Bonus Plan (MUSD) | 2019 | 2018 |
| 2015 | – | 0.6 |
| 2016 | 0.6 | 1.3 |
| 2017 | 1.5 | 1.4 |
| 2018 | 1.7 | 0.7 |
| 2019 | 1.0 | – |
| 4.8 | 4.0 |
Performance Share Plan
LTIP 2020
The 2020 AGM resolved to approve a performance based LTIP (LTIP 2020) for Group management and a number of key employees, which follows the same principles as the LTIPs 2014-2019, with a three year performance period commencing on 1 July 2020 and expiring on 30 June 2023. The number of performance shares that may be allotted to each participant is limited to a value of three times his/her annual gross base salary for 2020. The total number of Performance Shares under LTIP 2020 as at the date of award shall not exceed 560,000, corresponding to approximately 0,1 percent of the total number of outstanding shares in Lundin Energy.
The maximum cost for granting LTIP Awards under LTIP 2020 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 9.7 million (approximately SEK 94.2 million), excluding social security charges.
LTIP 2019
The 2019 AGM resolved to approve a performance based LTIP (LTIP 2019) for Group management and a number of key employees, which follows the same principles as the LTIPs 2014-2018, with a three year performance period commencing on 1 July 2019 and expiring on 30 June 2022. The number of performance shares that may be allotted to each participant is limited to a value of three times his/her annual gross base salary for 2019. The total number of Performance Shares under LTIP 2019 as at the date of award shall not exceed 500,000, corresponding to approximately 0,1 percent of the total number of outstanding shares in Lundin Energy.
The maximum cost for granting LTIP Awards under LTIP 2019 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 9.7 million (approximately SEK 90.1 million), excluding social security charges.
LTIP 2018
The 2018 AGM resolved to approve a performance based LTIP (LTIP 2018) for Group management and a number of key employees of Lundin Energy, which follows the same principles as the LTIPs 2014-2017, with a three year performance period commencing on 1 July 2018 and expiring on 30 June 2021. The number of performance shares that may be allotted to each participant is limited to a value of three times his/her annual gross base salary for 2018. The total number of Performance Shares under LTIP 2018 as at the date of award may not exceed 460,000, corresponding to approximately 0,1 percent of the total number of outstanding shares in Lundin Energy.
The maximum cost for granting LTIP Awards under LTIP 2018 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 8.8 million (approximately SEK 72.5 million), excluding social security charges.
Delivery of Shares
The LTIP Awards entitle Participants to acquire already existing Lundin Energy shares. The Board of Directors will consider means to secure the Company’s expected financial exposure related to the LTIPs. One method would be to enter into an equity swap agreement with a third party on terms in accordance with market practice, whereby the third party in its own name shall be entitled to acquire and transfer shares in Lundin Energy to the Participants.
LTIP 2020 Peer Group
The Board of Directors reviewed the Peer Group in 2019 and determined that it shall consist of the following companies for LTIP 2019: Aker BP, Apache Corporation, BP, Cairn Energy, ConocoPhillips, ENI, Equinor, Galp Energia, Hess Corporation, Kosmos Energy, MOL Group, Oil Search, OMV, Premier Oil, Repsol, Santos, Total, Tullow Oil and Vermilion Energy. The Board of Directors shall have the power to amend the Peer Group in order to maintain a representative and relevant group of companies during the Performance Period. No amendments were made to the Peer Group in 2020.
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