RIGA - Consultants unveiled an auction plan for the sale of the government-held stake in the oil terminal Ventspils Nafta, one of the state's few remaining prize assets to generate considerable interest among foreign investors. The state is hoping to fetch as much as 100 million euros from the sale.
Parex Bank and IBS Suprema have proposed that the government sell the 38.6 percent stake for an average price determined by the size and price of all bids. The final sale price will be the highest by which all shares can be sold. All shares will be sold during one trading session on the Riga Stock Exchange.
Martins Jaunarajs, head of Parex Bank's investment banking service, said that formal presentations for investors were planned for September and a sale in the beginning of October, prior to Latvia's parliamentary elections.
The plan must first be approved by the Latvian Privatization Agency before going ahead. However, criticism of the proposal has already surfaced. Former Economy Minister Krisjanis Karins said the plan does not take into consideration the state's interests. The proposed method of sale was advantageous to Ventspils Nafta's current investors, he added. The plan can "scare away companies that are prepared to acquire the entire stake at the market price," Karins was quoted as saying.
In all, 40 million shares are to be sold. The minimal stake that can be purchased consists of 19,415 shares. Parex Bank guarantees the purchase of all unsold shares at a price of 1.81 lats (2.5 euros) per share. In a worse case scenario, Parex would have to buy the entire stake for some 73 million lats (104 million euros).
Several large investors have expressed interest in the sale, including Poland's PKN Orlen, one of the largest oil refiners and retailers in Eastern Europe, and Kazakhstan's KazMunayGaz, which is searching for export routes for its growing production of crude oil.
Russia's Rosneft, a state-owned concern, has reportedly eyed the asset as well.
Any investor, however, will have to face formidable obstacles to increase the value of the acquired asset 's e.g., how to cooperate with Ventspils Nafta's majority owner, Latvijas Naftas Tranzits, and how to renew crude oil deliveries from Russia. In 2003, Russia ceased all pipeline deliveries of crude oil to the terminal, claiming that the priority route for exports should be the newly built terminal in Primorsk on the Gulf of Finland.
LNT, for its part, has shown an unwillingness to cooperate with the Latvian government, and it is unclear how it will welcome the appearance of a foreign strategic investor.