State, private shareholders agree on framework for sale of Ventspils Nafta

  • 2006-05-24
  • From wire reports
RIGA - State and private owners of Ventspils Nafta have reportedly agreed on principles for selling the state's stake in the oil export terminal, one of Latvia's most strategic assets. Economy Minister Aigars Stokenbergs said that he and Mamerts Vaivars, board chairman of Latvijas Naftas Tranzits, which controls Ventspils Nafta, have agreed on the basic principles for selling the state's 38.6 percent stake.

The agreement includes several government proposals, such as selling the shares in a single block at a single auction on the Riga Stock Exchange. The preliminary price of one share and the starting price at the auction is set at 1.81 lats (2.57 euros) per share. The agreement represents a breakthrough since both sides have been notoriously unable to see eye-to-eye on the oil terminal's future prospects. Still, Stokenbergs indicated that the understanding reached with LNT is at best the first step and many technicalities need to be solved. The government will have to involve LNT in selling the state-held VN shares to attract eventual buyers. The minister said he would try to negotiate with LNT on selling the asset as soon as possible, and that by May 28 the government might prepare a report on the talks with LNT.

"It is work for the whole summer," Stokenbergs commented, projecting that the amount of work is expected to take two to three months. The minister stressed that consultants from Parex Bank and IBS Suprema had proposed to change the model for selling the state's shares in Ventspils Nafta. The new model does not envisage a price corridor and a competition commission and, in the words of the minister, is "much better than the previous one."

Vaivars, meanwhile, told journalists that the government had done a great job in recent days in working out the "bare bones" of the sales process, but that there is a lot of work ahead. Last week the government ordered the economy minister to negotiate with LNT the selling of the state-held VN shares in a combined block of shares. After the Cabinet meeting, Stokenbergs told the press that under the 1997 agreement between Ventspils Nafta shareholders, the Latvian state and LNT, the state is required to sell its shares in the oil terminal at four auctions held at different times. However, the government wants to sell all state-held shares at once.

By selling all state holdings in VN at one auction, the government would attain its goal of receiving maximum gain from the sale.
LNT, meanwhile, released a statement in which it insisted on following the privatization regulations adopted in 1997.
Yet LNT added that it was interested in a speedy sell-off of the state's holdings, so it was willing "to engage in negotiations with the selected advisor for auctioning of state-held shares in VN, the Economics Ministry and the Privatization Agency, if only such cooperation would speed up effective sale of VN shares." The company pointed out that "the once secured interests of LNT as the largest investor have to be used as the outset position in such negotiations." In June 2005, the Latvian government decided to sell its state-held stake in Ventspils Nafta after it failed to agree with LNT on forming a combined block of shares that would make the oil transit concern more attractive to investors. It was mentioned previously that the state wanted to receive at least 70 million lats (99.6 million euros) from the sale.