Part of Latvenergo goes on the block

  • 2000-03-02
  • Valters Medenis
RIGA - On Feb. 23 the Latvian Parliament passed the bill put forward by the government on the restructure and partial privatization of Latvenergo. The Social Democrat Workers Party leader in Parliament, Egils Baldzens, called the privatization of Latvenergo,

"A bigger scandal than the pedophilia scandal currently surrounding Parliament and to privatize Latvenergo would be ridiculous." Baldzens said. "Richardson[U.S. State Secretary] has just waltzed in and told Latvians we need to sell off our energy resources and Latvia is just going ahead with his[Richardsons] wishes."

After such calls from the government opposition factions (the Social Democrat Workers Party, the New Party and For Human Rights in a United Latvia), their count of 35 votes could not stop the bill being passed. The Latvian government can continue with their plan of restructuring Latvenergo into four subsidiaries and the 49 percent sale of the thermo-electric heating plants.

The Minister of Economy, Vladimirs Makarovs stressed that Latvenergo is the industrial backbone of Latvia that provides a slow but steady energy source to Latvia.

"Latvenergo has the highest tariffs in the Baltic states and we must address that problem before Latvia joins the E.U." Makarovs said in Parliament. "Latvia needs to let this opportunity happen so there is a cheap and qualitative service. The workers [of Latvia] deserve it."

Makarovs and other Parliament ministers believe that after Latvia joins the E.U. and has to participate in an open electric energy market, Latvenergo needs to restructure and involve private capital so the company can compete with other electric energy producers.

Jevgenija Staldzane of the New Party was the most vocal of the Parliament ministers against the 10 percent privatization of Latvenergo.

"Why do we have to privatize? No one here[in Parliament] has given any reason why it is economically wise for us to privatize or shown any other reason why we should pass this bill," said Staldzane. "Privatization has not helped any department and to rush into a such a decision would only pull the back bone out of Latvenergo."

Other government opposition members against the partial sale of Latvenergo think that to privatize for privatization's sake does not help Latvia, and tariffs will rise, leaving Latvians in smaller towns sitting cold by a candle. Latvenergo, they believe, is a company which can reinvest 900 million lats($1.5 billion) into its own resources. This then would ensure that the company does not have to borrow any capital over a period of ten years.

Ivars Godmanis of the party Latvia's Way, said with a 100 percent owned governensures that the company does not have to borrow any capital over a periodment company, the company's structure changes along with a change of government. A private or partly privatized company becomes a company that is not affected by politics.

"Is it worth privatizing Latvenergo? Of course it is. Without liberalization, Latvenergo can not be that strong in a European market," said Godmanis in Parliament. "Latvenergo will not be privatized on a whole but become a defacto marriage between the government and private investors."

The government's parties believe that no one likes changes, but Latvia can no longer hide an ineffective, monopolistic company. The world's technology, they said, is too advanced for Latvenergo to survive as a monopoly. Accounts can not keep adding up with figures that do not match, members of Parliament said.

Members of the Social Democrat Workers Party are of the opinion that in Europe the circle of privatization has done a full turn and governments such as England, want to buy back from private enterprises their formally owned shares in energy companies. The opposition thinks that Latvia has to wait and consider what is happening in Europe before charging in and selling off parts of Latvenergo.

Unfortunately, for the government's opposition factions, their thoughts were not shared by the majority of Parliamentary members, who cast 41 votes in favor of the 10 percent sale and restructuring of Latvenergo.

The Latvian Privatization Agency has announced that on every Monday, the LPA will be meeting with Latvenergo company heads to discuss how the restructuring of Latvenergo and the 49 percent sale of the thermo-electric heating plants will proceed.