PowerBridge balances on slippery tightrope

  • 1999-02-18
  • Paul Beckman
VILNIUS - The PowerBridge Group, an American consortium, has recently experienced more ups and downs than an elevator.

On Feb. 8 Lietuvos Energija, the Lithuanian power company, intended to knock the consortium off a planned $450 million strategic power project, stating the requirements of a previous agreement were not fulfilled. After PowerBridge challenged Lietuvos Energija's position, however, it appears they are back in the game.

Last spring the PowerBridge Group, consisting of the Stanton Group, Duke Engineering and Services, CalEnergy, and Siguler Guff and Co. won a tender to construct a high tension power line to Poland. The link to the Polish power system would enable Lithuania to export its excess energy to the more lucrative markets in Western Europe.

The project still appeared to be running smoothly when a more detailed agreement was hammered out between PowerBridge and Lietuvos Energija last Oct. 31.

According to the agreement, the PowerBridge Group was required to find a worthy investor for the project by Jan. 15, 1999. By the time the deadline rolled around, however, Lietuvos Energija officials stated the consortium's information about the investor was too vague and unclear.

"The PowerBridge Group did not give us an exact list of participants nor what kind of money they would pay," said a Lietuvos Energija spokesman at the time. "They've been looking for a long time and we agreed to postpone the deadline until Feb. 8."

PowerBridge's extension was also coupled with a warning that negotiations would begin with other companies interested in the project should their consortium fail to meet the requirement.

Shortly after meeting with PowerBridge representatives Feb. 8, Lietuvos Energija backed up words with action and requested that the tender commission give PowerBridge the boot.

"The reasons for this action is that PowerBridge did not meet the signed conditions of the Jan. 15 memorandum," read a Lietuvos Energija statement. "They did not establish a project company which will be responsible for that project's finances. The representative of the consortium again asked to create longer terms. Lietuvos Energija leaders, however, already extended the term three times and even now are still waiting for concrete and clear commitments from the consortium's side."

Less than a week before the deadline, Lietuvos Energija General Director Virmantas Jurgaitis did not mince words when he told TBT the time had come to get clear answers from PowerBridge and get work underway.

"The company has carried out quite a lot of work with PowerBridge," said Jurgaitis. "There is prepared technical documentation and technical solutions. However, we have reached the point when exact work must be started. The Feb. 8 deadline was established for the reason that the company wants to see the exact intentions of PowerBridge and receive guarantees that the work will be carried out."

Shortly after the release of Lietuvos Ener-gija's statement, the Power-Bridge Group announced they would contest the decision because they felt all requirements were met by Feb. 8.

Marek Lesniewski-Laas, a Stanton Group vice-president, told TBT the Lietuvos Energija had no right to slam the door on the PowerBridge consortium because their reasons were not based upon failure to meet requirements listed in the Jan. 15 agreement.

"According to the agreement, we were required to do two things," said Lesniewski-Laas. "First, a letter of intent stating a willingness to invest in the project. This is very significant. [The investor] did not have to commit to it, just demonstrate a willingness to invest. And second, a date certain - again very important, not specified - for a commitment to establish a project company."

Lesniewski-Laas said when the consortium met Lietuvos Energija Feb. 8, they delivered a letter from the National Power company, which stated the company was willing to invest, that they understood the project to be $450 million and that the equity portion they were willing to throw in was $100 million. After four hours of "explaining documents and answering questions" Lesniewski - Laas said they were then handed a letter of termination.

"We were given a letter of termination that was clearly prepared prior to our arrival at 7 a.m. and which was terminated on grounds unrelated to our Jan. 15 memorandum," said Lesniewski-Laas.

Only a couple days later, it appeared PowerBridge was once again on track. After the consortium representatives met with Economic Minister Vincas Babilius, it was reported that PowerBridge would be granted one more extension before being shown the door.

"I had a 90 minute conversation with Minister Babilius," said Lesniewski-Laas. "It was a very frank exchange and at the conclusion of it he indicated that the decision would be changed in some way. He alluded to 30 days."

The Lithuanian govern-ment's decision to stick with the PowerBridge Group came in a more official form Feb. 12. According to a PowerBridge Group statement, they were transferred documents which directed Lietuvos Energija to continue negotiations with the American consortium. Currently, these documents are being reviewed by the PowerBridge Group

Lesniewski-Laas said that only after such a review can he be assured that conditions are "clearly stated and reasonable" and that the decision making process is transparent. He added both elements were important ingredients to avoiding another episode similar to the one which occurred on Feb. 8.

"I don't want to spend my company's and other companies' time and bring in the leaders of these companies to Lithuania to discuss the progress of the project with the government or leadership just to be told at the end that we may have told you to hop on your left foot three times, but what we really wanted you to do was twist on your right arm two and a half timesâ" Lesniewski-Laas concluded.