Lithuania announces plans to sell power distribution network

VILNIUS (BNS) - The Lithuanian government announced plans to restructure the state-run energy utility Lietuvos Energija and privatize two electricity distribution subsidiaries and two power generating facilities in the western newspapers Financial Times and The Economist on Aug. 29.

The government invited potential investors to express their interest in participating in the privatization process. The sale of the distribution network is expected to be completed at the end of the first quarter or at the beginning of the second quarter next year. No time frame has been set for the sale of the power generating facilities yet, and, at the moment, the government does not plan to sell the transmission network.

Last week a consortium led by the Canadian investment bank CIBC Wood Gundy, the government's advisers sent information about the privatization out to some 80 potential investors.

Public privatization tenders should be announced after the distribution network and the thermal power plants at Mazeikiai and Elektrenai are separated from Lietuvos Energija.

The government is expected to approve Lietuvos Energija's reorganization plan in two weeks' time and forward it to the Parliament, Lithuanian Prime Minister Andrius Kubilius said. It is hoped that the plan can be finally approved in a month's time, so that the two electricity distribution companies, resulting from the reorganization, could start work at the end of October.

Under the plan, one electric energy transmission company, two distribution network operators and several electricity generating companies will operate in Lithuania.

"We seek that the state withdraw from the economic activities where the private capital can successfully operate. The competition on the electricity market, which will inevitably arise in the sector after the privatization, is necessary to ensure a more transparent market mechanism," Kubilius said after the meeting with the consortium representatives Aug. 29.

CIBC World Markets director general Kiron Sarkar said they would seek to ensure transparency in the privatization of the distribution network and power plants. "All potential investors will be guaranteed equal conditions in the tender," he said.

The Swedish company Vattenfall, which already owns 10 percent of shares in Lietuvos Energija, has been named in the press as a potential bidder for the distribution network. TNG Holding GmbH, a German-Russian joint venture, has expressed interest in investing in the Elektrenai plant.

According to Sarkar, Vattenfall will not have any special privileges in the distribution network privatization process.