Deal on national power utility remains elusive

  • 2007-12-12
  • By TBT staff
VILNIUS - The government and a privately owned energy firm have failed to reach a deal on how to create a large, national utility that would lead Lithuania's efforts to finance a multi-billion euro nuclear power plant, the economy minister said on Dec. 7.
Prime Minister Gediminas Kirkilas also admitted that negotiations had fallen short of expectations and were proceeding "with difficulty."

"At this point, the talks are rather complicated and tense," he told reporters on Dec. 6.
The crux of the dispute revolves around the structure of the future utility. The government wants to establish a national energy company by merging the two grid operators 's state-owned RST and the privately owned VST 's into Lietuvos Energija (Lithuanian Energy). Crucially, this is the model set out in a law on the new nuclear power plant that Parliament passed this summer.
However, NDX Energija, owner of VST, believes a new parent company should be created 's one that would operate Lietuvos Energija, RST and VST as subsidiaries.
Remarkably, Economy Minister Vytas Navickas did not rule out that NDX Energija's proposal might be submitted to the government for approval.

"From the legal point of view, creating a parent company … would be a simpler option, because procedures would be faster and more effective," Navickas explained to reporters after a round of negotiations on Dec. 7.
"On the other hand, we would lose the possibility of having a company with a long financial history, the accounts and data of which are needed [for] banks. We must find a balance by weighing the pros and cons," he said.
Navickas said that government advisers were mulling the possibility of creating a parent company but that the law left the government with little room to maneuver. "We cannot propose changing the law now. We will submit our version. If they submit their separate opinion on this issue, then we will submit their proposal to the government as a supplement to these documents," he said.

The minister said both sides were willing to reach an agreement as soon as possible, and there was hope that this could be accomplished by the end of the year.
Until Lithuanians can conclude an agreement there is no hope of solving larger issues with the atomic power plant with partner countries Poland, Latvia and Estonia.
NDX Energija is primarily concerned that transforming Lietuvos Energija into a national utility is fraught with risk given the latter's deals with Russia. Kirkilas, speaking on Dec. 5, confirmed that an electricity import-export agreement was signed last month between Lietuvos Energija and Energijos Realizacijos Centras, a company controlled by Russia's energy monopoly RAO UES.

Still, Kirkilas said he did not think that this arrangement with Russia's utility giant could weaken the government's position in negotiations. "The negotiations are complicated, but not because of that. We have agreed not to comment [on the import-export deal] because that could weaken the state's position in these talks," he said.
Kirkilas also said that the government has decided not to hold public tenders involving the national investment company given fears that Russian interests could gain a foothold in the company.
"EU provisions do not allow for preferences, and such a tender could be won, for example, by any Gazprom-controlled company registered in the EU," he told LTV television on Dec. 6.

He did say, however, that the government might float shares of the national utility 's which so far does not have a name 's on the stock exchange or raise equity finance by selling a stake to the EBRD. The main thing is that the state would keep a 51 percent stake, he said.
Ownership division in the national utility 's be it an umbrella company or a merger 's is another thorny issue. According to unconfirmed reports, the state does not want to give NDX Energija more than a 34 percent stake.