Ideas clash on where to sell gas company

VILNIUS - The French bank BNP Paribas, the adviser on the privatization of the state-run gas utility Lietuvos Dujos, has proposed that the Lithuanian government sell at least 51 percent of its shares in the company to a Western investor, Nerijus Eidukevicius, Lithuania's deputy economy minister, said March 16.

"The adviser believes that a stake of at least 51 percent would attract investors and a great interest in this stake. Moreover, the best price would be received," Eidukevicius said. Currently, the state owns a 92.36 percent stake in Lietuvos Dujos.

However, the privatization of one of Lithuania's largest state-owned companies which was expected to be completed by the end of this year might be delayed again as some government ministers are not happy with the consultant's work, the Lithuanian daily Lietuvos Rytas reported March 19.

"We shouldn't behave like that. I told the representative of the World Bank who visited Lithuania that we have to discuss the strategy of the sell-off consultations once again. We are clever enough to rack our brains and prepare three or four sell-off scenarios. Then we should hire consultants and ask them to propose the best strategy," Lithuanian Economy Minister Eugenijus Gentvilas told the daily.

In the meantime, the government has its own homework to do. Representatives of BNP Paribas said that Lithuania should decide whether the main supplier for Lietuvos Dujos, Russian gas giant Gazprom, should compete in the tender on an equal basis. And if the supplier is allowed to participate in the tender, the state should decide whether Gazprom should compete with other strategic investors, or should be given a separate block of shares.

"Either it will have a major block of shares or will control the company without a stake. What is the difference? The difference lies in the fact that if the supplier has a stake, it will be beneficial for us as well. However, the best variant would be if Lithuanian, Russian and Western investors had a one-third block of shares each. Everyone would be happy then," Eduardas Vilkas, chairman of the privatization commission, said.

BNP Paribas has presented five alternative sell-off scenarios for attracting investors to Lietuvos Dujos, in which the recommended size of the stake to be sold varies from 51 percent to 85 percent.

Speaking at the governmental strategic planning committee on March 16, the advisers recommended the government to keep 34 percent of the blocking minority stake, which should be reduced gradually.

"The government is advised to keep 34 percent of shares. However, taking into account the fact that the privatized company will need a great amount of investments in the future, it is possible to guess that the government will not be able to invest as much as needed if it wants to keep the same proportion of distribution. The adviser also proposes to discuss the possibility to sell all shares, because in the future the control would be lost due to investments," Eidukevicius said.

BNP Paribas did not advise the government to keep a golden share, a single share with extraordinary rights, but recommended to conclude the shareholders' agreement, which would gradually reduce the company's share because of its inability to invest.

The Lithuanian State Property Fund and the Economy Ministry have to present proposals to the government on the size of the stake to be sold in Lietuvos Dujos within two weeks.

Lithuanian Economy Minister Eugenijus Gentvilas has proposed to place an equity issue to sell part of the shares on the stock exchange.

"I do not abandon the idea that part of the shares could be sold through the local bourse. However, it is not clear whether the part of shares the government keeps to itself should be sold, or the equity issue placed and part of it sold. The government has to decide what to do," Gentvilas said.

Eidukevicius stressed that the adviser did not recommend to place an equity issue before the privatization and sell part of the shares through the local bourse. "The real share value will not be established if the shares are sold via bourse. The proposed price of the strategic investor, who comes with his experience and capital, is based on entirely different factors than those of a financial investor. The sale of shares through the stock exchange would slow down the privatization process and reduce the price," Eidukevicius said.

The government plans to announce the privatization tender in the second quarter of this year and hopes to complete the privatization by the third quarter of 2001.

Lietuvos Dujos posted an unaudited net profit of 7.04 million litas ($1.76 million) last year. The company posted an audited loss of 13.5 million litas in 1999. The gas utility's 2000 turnover reached 595.06 million litas, a 1.2 percent increase compared with 1999.