Kirkilas appeals to patriotism of private energy firm

  • 2007-12-05
  • By TBT staff
VILNIUS - Prime Minister Gediminas Kirkilas has appealed to a private energy firm's patriotic feelings in order to complete the complex merger needed if Lithuania is to build a new nuclear power plant. Meanwhile, the economy minister said that an independent evaluation of the assets of three energy companies intending to merge was full of errors.

Speaking on Lithuanian radio on Dec. 4, Kirkilas said that the government was asking the private firm, NDX Energija, to participate in the national energy company so that Lithuania "could adopt the euro."
As he explained, an energy company consisting of only Lietuvos Energija, the national utility, and RST, operator of the country's eastern grid, would be unable to generate enough cash flow during the first stage of developing the nuclear power plant. That's why the new energy company needed VST, which controls the western grid and is owned by NDX Energija.
"An assessment of the possibilities of Lietuvos Energija and [RST] to generate cash flow has revealed that we would be short 1.5 - 2 billion litas (434 - 579 million euros) during the very first stage," the prime minister said.
"It would mean that the state would have to make guarantees, which would lead to a rise of public debt. It would undermine our compliance with the Maastricht criteria and would complicate our plans to join the euro zone," Kirkilas explained.

Creditors would also like to see private capital in the project, the prime minister added.
The government, which launched talks with NDX Energija last week, expects the negotiations to be finalized in the nearest time. A key contention is the size of stakes each of the three parties would have.
Economy Minister Vytas Navickas, who also chairs the government's task group for negotiating the merger with NDX Energija, has reportedly said that a report containing estimates on each company's assets was based on incorrect information and erroneous assumptions.
KPMG Baltics, which made the appraisals, has confirmed that the report was final and not subject to revision.
Lietuvos Energija and RST are state-owned, but VST was privatized in 2004, when it was purchased by NDX Energija. 

Negotiations between the Economy Ministry and NDX Energija have gotten off to a rocky start, which has each side maintaining different visions of how to create the national energy company.
Navickas said the most important objective of the talks was to cut a deal with NDX Energija and procure the largest stake possible for the state.
"We have to perceive the strengths of the other party in the negotiations and its possible reaction to our positions. Thus we need to garner as many arguments as possible," the minister has said.
According to unconfirmed reports, KPMG Baltics appraised VST's assets at some 2.9 billion litas (840.5 million euros), while those of RST and Lietuvos Energija were valued at 2.7 billion litas and 2.6 billion litas, respectively.

Based on these estimations, NDX Energija would have a 35 percent stake in the national energy utility, and the state 65 percent.
At the same time the two sides have clashed over the structure of the future company. NDX Energija believes that the new state-owned utility should be an umbrella structure encompassing Lietuvos Energija, RST and VST.

The government, by contrast, wants to wrap the new entity within the existing structure of Lietuvos Energija.
The transformation of Lietuvos Energija into a national utility would create risks that the new plant would become dependent on Russia's electricity system, NDX Energija has argued.