Latvian company could lose privatization bid: Lithuanian government may call for new tender for VKL

  • 1998-09-03
  • By Parker Ruis
VILNIUS - After waiting more than two months for the Lithuanian government to announce a winner in the privatization tender for a ship repair company called Vakaru Laivu Remontas (VLR), the competitor which submitted the highest bid, Latvia's Rigas Kugu Buvetava (RKB), discovered this week that it may be forced to wait even longer.

On Aug. 24, Lithuania's Privatization Commission not only declined to reveal the winner, but proposed that the tender be held anew.

Lithuanian state offices explained that none of the three companies competing in the tender submitted an acceptable offer and that a new open tender could bring in a more satisfactory one.

"The commission stated that the bids of all three companies were not satisfactory in terms of both price and investment," said Lina Neverbickiene, spokesperson for the State Assets Fund. "So they suggested to the government that the process should begin again. The Lithuanian government plans to make a decision on the commission's proposal in early September."

Nearly a month ago Arturs Mucenieks, the spokesman for RKB, began conveying the company's frustration with the length of the process and anger that the Lithuanian government was investigating their financial reliability. The newest developments seemed only to cause these feelings to multiply.

"We did not like the process of the tender at all," Mucenieks said. "The first two steps involved checking into the financing of the companies, while the third step was for the companies to submit a bid. Afterwards, the commission began checking into our finances again. We prepared our bid quickly and offered the highest amount."

Mucenieks stated that RKBÕs offer totalled 162 million litas ($40.5 million). Of the total, just under half would be paid up front, while the rest would come in the form of investments. Claiming that RKB experts correctly assessed the worth of VLR, he called some members of the Lithuanian Privatization Commission "unprofessional" and stated his belief that the Lithuanians could simply be trying to secure a western investor.

"They announced this tender a long time ago. If they didn't find any [western] company to show interest at that time, then perhaps they will never find one," Mucenieks said.

Despite his apparent disgust, Mucenieks called VLR "strategically important" and conceded that RKB would consider competing in a new tender if the Lithuanian government reveals "all conditions clearly."

RKB has also managed to collect support from the Latvian government. A spokesman from the Latvian Transport Ministry labelled the idea of holding a new tender as incorrect.

"Our opinion is that privatization must end in the first round," said the spokesman. "To change the rules and hold a new round is not a correct [way to privatize]. We have let Lithuanian government officials know our opinions, but have received no response."

The Lithuanian Privatization Commission seemed to disagree. Aloyzas Duska, a spokesperson for the Privatization Commission, confirmed that RKB indeed submitted the highest bid, but added that the offer was still not appropriate for what VLR is worth.

"For this object, the Latvian company's bid was simply not enough," said Duska. "The price was too low, and their planned investments were too low."

While Economics Vice Minister Antanas Bartulis and other government officials were reluctant to forecast whether the government would accept the commission's recommendation, one source stated that it was likely.

"It is my personal opinion that the government will accept this proposal. This time they will be able to complete the process with more speed and without the rumors which were surrounding this first tender," the source said.

The Lithuanian mass media reported that some of the rumors which were circling included that RKB was hoping to buy the Lithuanian company only to liquidate it, and that RKB had inappropriate connections with the other two competitors in the tender, the Lithuanian and Ukrainian firm, Azovlitas, and Estonia's Balti Laevaremonditehase.

The Lithuanian press' linkage of Latvian former Finance Minister Vasilijs Melniks and former Privatization Minister Eriks Kaza to the joint stock company, Baltijas Holdings, which RKB is dependent upon, was also rumored to contribute to the delay. While the rumors are many, none have been confirmed to have influenced the Lithuanian government's decision.