Brussels questions power grid sell-off

  • 2007-11-14
  • From wire reports

RAISING DOUBTS: The EU began to doubt the competence of the Brazauskas-led government after a highly suspicious privatization deal.

VILNIUS - Lithuania has been asked by the European Union to explain the privatization of half of the Baltic state's national grid in 2003, while Prime Minister Gediminas Kirkilas has defended the decision to merge three energy companies as an investment vehicle for the proposed nuclear power plant.
The European Commission, the EU's executive arm, has asked the Economy Ministry to provide clarifications in regards to the privatization of Vakaru Skirstomieji Tinklai, operator of the grid in western Lithuania, the Vilniaus Diena daily recently reported.

The commission suspects that Lithuania's decision to privatize VST might have violated EU legislation governing the freedom of the movement of capital, according to the report.
Lithuania had been notified officially about the initiation of a community law violation procedure, Skirgaile Zalimiene, deputy director of the European law department at the Justice Ministry, told the daily.
The Economy Ministry's failure to provide answers could result in financial penalties for the Baltic state.
NDX Energija, a private firm controlled by the VP Group, paid 539.8 million litas (156.4 million euros) for VST. However, a VST report published only a year later put the value of the grid operator's long-term assets at 2.4 billion litas, four times the amount paid.

The privatization threw doubt over the competence of government, which at the time was led by Kirkilas' Social Democratic colleague, Algirdas Brazauskas. 
It is as yet not clear whether the investigation launched by the commission could affect the establishment of the national investment company that will implement priority energy projects, including the construction of a new nuclear power plant.

Kirkilas, however, appealed to Lithuanians to trust the consultants who are currently evaluating the three energy companies that are to be merged for the sake of the nuclear power plant.
"The companies making the evaluation are independent, international and much respected. If we cannot trust them, I do not know whom we could trust," Kirkilas told the news radio Ziniu Radijas on Nov. 8.
The evaluation of the three energy companies 's Lietuvos Energija and power grid operators Rytu Skirstomieji Tinklai and VST 's is being carried out by the audit and consulting company KPMG Baltics. The international investment bank HSBC will provide an opinion on KPMG's evaluation.
Kirkilas said the "unofficial information" that has been leaked was inaccurate and the evaluation had not yet been completed.

"The evaluation is being monitored in line with our legislation and agreements so as to ensure its transparency. To that effect, we have set up a special task group that includes the representatives of the opposition," he said.
According to unofficial sources, the value of VST specified in the latest evaluation was placed at approximately 2.9 billion litas, RST about 2.7 billion litas and Lietuvos Energija at some 2.56 billion litas.
Based on that value, VST could claim a 35 percent stake in the national investment company, while RST and Lietuvos Energija would get approximately 33 percent and 31 percent, respectively.
Government representatives said they expected the final evaluations of the three energy companies on Nov. 9.