Power line delay opens can of worms

  • 1999-02-25
  • Paul Beckman
VILNIUS - Plans to push on with construction of an electric powerline to Poland are underway again after a short delay.

But tension between the Lithuanian energy company and the American PowerBridge Group, which is handling the $450 million project, is high, especially after accusations of blackmail and double-dealing in the local press.

Last spring, the PowerBridge Group won a tender to plan and construct a powerline to the Polish grid system which would enable Lithuania to export its excess energy westward.

But Lietuvos Energija, Lithuania's energy company, tried to terminate the deal with the PowerBridge Group Feb. 8, because it said the consortium failed to fulfill its commitments to nail down an investor for the project and to establish a project company.

The consortium challenged the Lithuanian power company's position and, a couple days later, was back in business when the Lithuanian Government directed Lietuvos Energija to continue negotiations. Now the consortium has until March 10 to tie up any loose ends to its commitments. Getting PowerBridge back on the project, however, could not prevent the already untidy situation from unraveling further.

A day after Lietuvos Energija attempted to dismiss PowerBridge, a front page article appeared in the largest daily, Lietuvos rytas, that began to rock the boat. The article suggested that the consortium was blackmailed.

Some obscure companies had been pressing PowerBridge to cough up $20 million for "consultations," according to the daily. Without these consultations, PowerBridge was supposedly told it would have no chance of continuing with the project

Lietuvos rytas hinted that the obscure companies possibly could be linked to an emigrant from Lithuania named Voldemer Kanch, who was formerly employed at the Soviet Embassy in the United States where his activities were supposedly associated with the KGB. The daily also mentioned that Kanch was friendly with Bronislovas Lubys, president of the Lithuanian Industrialists' Confederation and, according to a poll appearing in "Veidas" magazine, the most influential businessman in Lithuania.

The PowerBridge Group, comprising Stanton Group, Duke Engineering and Services, Siguler Guff and Co. and CalEnergy, supported the article's blackmail claims.

Marek Lesniewski-Laas, a Stanton Group vice president, told TBT he was not surprised at getting the brush-off from Lietuvos Energija, because the consortium was allegedly being blackmailed by a "significant individual in Lithuania" who demanded payment of $20 million to $22 million. Without it, the PowerBridge Group was supposedly told they could kiss their role in the project good-bye, he said.

"Our leading partner now is Duke Energy, and what occurred when they came here Oct. 27 - they were met by this fellow and taken to dinner at the house of the important Lithuanian individual. At the dinner, the leadership of [Lietuvos Energija] - the director general and his deputy- were present. A few days later there were talks at [Economics Minister Vincas] Babilius' office and that important individual was there as well - giving an impression, at least, that there was a governmental imprimatur on this activity. Now I'm not saying the government knew about it, but the coincidences and the inferences certainly led us to believe that if we did not pay, the project would fail. And in fact, it did fail for unrelated reasons."

Lithuanian government officials began circulating their own responses to the situation Feb. 17. Babilius released a statement in Lietuvos rytas saying that if PowerBridge was blackmailed, the government could not logically be linked to it.

Babilius said the government's role in the project was greatly diminished after the PowerBridge Group was selected to carry out the project and the conditions were set last year.

"So, for this project's realization, it is no longer necessary to have any government decisions or support, and this consortium should establish a project company to realize the project," Babilius stated. "Therefore, there are no well-grounded arguments to link the emergence of this project's delay scandal to the Economics Ministry, which made all necessary decisions half a year ago. The ministry has forbidden the Lithuanian side to have some sort of mediators, and I suppose the PowerBridge consortium has done the same."

A day later, Prime Minister Gediminas Vagnorius said he was bringing the prosecutor general's office and the police department into the act. Plans were mentioned to investigate whether Lithuanian or foreign citizens or governmental officials tried to turn a profit from the PowerBridge Group by allegedly offering support from the government or president's office.

Both statements mentioned that the PowerBridge consortium has received more than one extension to deadlines for establishing a project company and said the project has yet to get off the ground. Meanwhile, PowerBridge representatives maintain they have met all previously agreed requirements "both legally and in spirit."