Germans try to win back Latvijas Gaze

  • 2001-10-18
  • Jorgen Johansson and Ilze Arklina
RIGA - German gas giants Ruhrgas and E.ON Energie, both of which hold stakes in Latvijas Gaze, the national gas company, have asked Latvian authorities to sell them the 3 percent stake which the state still owns.

In a letter to the Latvian Privatization Agency, the German companies, which together own 43 percent of the company, offered to buy the state's stake for a "price higher than the company's share price on the Riga Stock Exchange," Janis Bunte, the privatization agency's spokesman, told The Baltic Times.

Imants Mantins, a member of the privatization agency's board, has said the request is related to a claim against the Latvian state which the Germans are preparing to submit to the international court of arbitration in Stockholm.

If Ruhrgas and E.ON Energie succeed in acquiring the stake they might put a halt to the case, Mantins said.

The two companies are claiming around 5 million lats ($8.13 million) in compensation on the grounds that they were prevented from raising tariffs for industrial and commercial gas consumers.

The Germans' offer is seen as a last ditch attempt to gain supremacy over Latvijas Gazes' other stake holders, Gazprom and Itera Latvija, both Russian controlled companies which together own 49 percent of Latvijas Gaze.

Ruhrgas and E.ON Energie lost ground to their Russian counterparts this summer when small stakes in Latvijas Gaze were auctioned at share prices as high as 12.51 lats.

Other shareholders currently own 5 percent and the Latvian state intends to hang on to two shares. The Latvian government earlier said the 3 percent stake now under consideration would be exchanged for privatization vouchers.

Having appointed its legal representative on Oct. 16 the government appears to be preparing to resist the Germans in the Stockholm court.

The government has not even discussed the Germans' request for the stake, said government spokesman Aivis Freidenfelds. "Maybe when the Ministry of Economy has prepared a draft resolution we'll discuss it," he said.

Latvijas Gaze says it needs to raise prices for industrial and commercial customers because of increases last year in the price of the natural gas it buys. The company has been out of pocket ever since, it says.

"We have tried to negotiate with the government but ever since discussions began this July we have not been able to reach agreement," said Zinaida Skruve, spokeswoman for Latvijas Gaze.

The origin of the dispute lies in the first contract made between the state, Ruhrgas and E.ON Energie in 1997, said Skruve.

"When the contract was translated into Latvian from English it was not done correctly and this is why we interpret an important clause differently," said Skruve. "The clause says Latvijas Gaze has the right to set tariffs for all domestic customers, but the government does not see industrial consumers as domestic ones. In their opinion only household consumers are domestic users."

Industrial clients accounted for 94 percent of the gas sold in Latvia last year and hence represent much of Latvijas Gaze's income.

Household consumers pay 0.06 lats per cubic meter of gas plus a 1.12 lat monthly service fee. Commercial customers pay a maximum of 66.77 lats per 1,000 cubic meters.