Energy deal all but inked

  • 1998-11-12
  • Paul Beckman
VILNIUS - It appears there will be no turning back for the Power Bridge group and the Lithuanian power company, Lietuvos Energija. By signing a "Supplemental Project Agreement" Oct. 31, the two sides committed themselves to carrying out a project which will ultimately send Lithuania's excess energy westward. All that remains is the Lithuanian Parliament's expected stamp of approval to seal the deal.

The American firms of the Stanton Group, Siguler Guff and Company, CalEnergy and Duke Engineering, which make up the Power Bridge consortium, won an international tender last spring to turn the idea of exporting Lithuania's electric energy westward into a reality.

With Lithuania able to produce more energy than the country could possibly use, the tiny Baltic nation has kicked around the idea of exporting its electric energy to the more lucrative markets in Western Europe for years.

Considering how financially unreliable are some current importers of Lithuanian electricity, like Belarus, it is understandable why Western purchasers are desired. According to the parliamentary press service, the Lithuanian government is currently brainstorming on how to collect $77 million which Belarus owes for the electric energy Lithuania has supplied.

PowerBridge, therefore, is committed to constructing a high-tension 100-kilometer power line across Lithuania and into Poland. By throwing a converter station into the mix, the first link between the Soviet-style power grid system and the one used throughout Western Europe will be established.

The consortium and Lietuvos Energija expect 6 billion kilowatt-hours (TWh) of electric power a year will begin flowing westward no later than Jan. 1, 2002.

Wheeling and Dealing

The PowerBridge consortium is responsible for investing funds and securing other financing for the project. The group will also need to hunt down new customers who will buy Lithuania's electricity. In return, Lithuania guarantees the annual supply of 6 TWh and will assist PowerBridge with all the legal work required.

At the beginning of November two PowerBridge engineers arrived to meet with their Lietuvos Energija counterparts and familiarize themselves with various technical matters which the project involves.

According to a statement by PowerBridge, all technical arrangements are to be hashed out by Jan. 15, 1999.

"The engineers will be here for a little less than a week," said Linas Kojelis, whose firm Kojelis and Co. is representing PowerBridge in Lithuania. "They went on a tour of Kaunas and Alytus, but for the most part they will be in Vilnius. It's more of a meet and greet with Lietuvos Energija's technical people."

While the negotiation is beginning to give way to implementation in Lithuania, PowerBridge is attempting to nail down the same kind of commitment from Poland.

Negotiations with Polskie Sieci Elektroenergetyczne, the Polish power grid company, have been ongoing.

According to PowerBridge, several hundred kilometers of the proposed power lines will stretch across Poland to interconnect with that country's power system.

"We've already had about 18 months worth of preliminary discussions with Poland," said Kojelis. "The Poles have said to us and the Lithuanians, and correctly so, that Lithuania needed to decide first. They would like a hard and clear decision here before they focus on it."

Is Power Bridge relevant without Ignalina?

A huge source of Lithuania's excess electric power flows from the nuclear station in Ignalina, located in the eastern part of the country. According to a Lietuvos Energija spokesman, just over 80 percent of the electricity the country uses is also generated by the plant. While modern safety measures have been added and updated in recent years, the station's Chernobyl-like design has managed to spook some Western European countries.

When the European Commission slashed Lithuania's hopes of being included in the "fast-track" group heading for EU accession negotiations on Nov. 4, opinions emerged suggesting that the Ignalina plant was at least partly to blame.

While the EU never proclaimed that Lithuania's failure to give a planned date of the plant's closure was an official obstacle, an array of conflicting opinions are emerging from Lithuanian politicians about the length of time the plant should remain operational.

The government's press service released a statement on Nov. 4 stating that the shutdown of Ignalina's plant should not be considered until the conclusions of international experts are received.

Regardless of the exact date of closure, the eventual absence of the Ignalina plant has raised an interesting question: If such an enormous source of energy is eliminated, is the PowerBridge project still relevant? Both Lietuvos Energija and Kojelis responded with a firm "yes."

Although the Oct. 31 agreement will commit the Lithuanian government to guarantee an annual supply of 6 TWh of electric energy, a Lietuvos Energija spokesman confirmed various local news reports that the power company is not overly worried by the eventual permanent shut down of the plant.

"Ignalina does not influence the decision [to commit ourselves] to the PowerBridge project," said the spokesman. "We are obligated to export energy."

Taking in energy from the other Baltics or Russia was also mentioned as a possibility for maintaining the minimal requirement. Kojelis backed up the comments of Lietuvos Energija by stating that the PowerBridge project is versatile enough to be used in a number of ways.

"The project is not dependent on Ignalina," said Kojelis. "Lithuania has a lot of energy assets. It's also possible to move energy from the West to the East. Plus, recently there have been very intense discussions of coordination between the three Baltic states on the subject of energy."

PowerBridge and Lietuvos Energija's joint statement stated the project will "close a gap in the ÔBaltic Ring' power grid system" with a link to the West. By doing so, the two sides said, it would enhance "energy security" for Estonia and Latvia in addition to Lithuania.

Kojelis added that a functioning Ignalina would obviously provide "more options," but that the project can also successfully move forward without it.