Latvia considers stake in gas distribution giant

Latvia’s government, apparently with surplus cash to invest in speculative projects, says that if it approves buying gas supply company Latvijas gaze shares, it will be able to find the funds necessary for the acquisition of the shares, Prime Minister Laimdota Straujuma said in an interview with the Latvian State Television on April 8, reports LETA.

Some experts have said that German company E.ON Ruhrgas’ 47.23 percent stake in Latvijas gaze could cost as much as 600 million euros, but Straujum asserted: "If we take the decision, we will find such money. But it does not mean that the money will be allotted from the state budget."

Straujuma also said that 600 million euros was an exaggerated price. She said that the German company had made an offer to the government, but declined to reveal how much E.ON Ruhrgas wanted for its shares in Latvijas gaze.

E.ON Ruhrgas announced it is leaving the Latvian market during a Latvijas gaze shareholders meeting in Riga last week. The Economy Ministry is currently considering buying E.ON Ruhrgas' interest in Latvijas gaze or allowing Russia's Gazprom to become a majority shareholder in Latvijas gaze. Currently, E.ON Ruhrgas owns 47.2 percent, Russia's Gazprom has a 34 percent stake and Itera Latvija owns 16 percent.

The nominal value of Latvijas gaze shares is 1.42 euros per share; however, the company is generating significant profits, which means that the actual price for E.ON’s shares should be much higher, says the government. It is likely, though, that E.ON would agree to sell its shares simply at ‘nominal’ share value; rather, the price would be at what it would estimate to be the market value. There is no free lunch, as the Latvian government seems to believe.

Also, it is the other Latvijas gaze shareholders that have the right of first refusal on the shares, and only if they refuse to buy the shares could the state apply for becoming a Latvijas gaze shareholder.