Ruhrgas was the only potential investor to submit an initial bid by the Feb. 19 deadline according to the Lithuanian State Property Fund. The company's proposal included a preliminary price for the stake, provisional investment commitments and suggested terms for the shareholder agreement that the government plans to sign with the strategic investor.
E.ON did not join Ruhrgas' initial bid as was expected but confirmed on Feb. 22 that it still intended to take part in the privatization together with Ruhrgas. Lithuanian officials said E.ON could join Ruhrgas at any point since it had met all tender requirements.
Local media linked the uncertainty with efforts E.ON is making to acquire a controlling stake in Ruhrgas.
Lithuania's privatization commission ruled that Ruhrgas' initial bid met the Lietuvos Dujos tender criteria. The Lithuanian government, which holds 92 percent of the company, was due on Feb. 27 to approve starting negotiations with the German investor, who would then have until April 2 to submit a final offer for the strategic stake. If all goes well, the sale could be completed in May.
France's Gaz de France had also announced plans to take part in the tender, though Ruhrgas was generally considered the front-runner, partly due to its existing investments in the Latvian and Estonian gas utilities and its working relationship with Russian gas giant Gazprom.
Gaz de France pulled out, saying the investment would not provide a high enough rate of return.
"We are quite satisfied with the transparency of the procedures and with the work of the State Property Fund and the privatization commission. The process was open, upright and in line with international standards," Gaz De France officials said in a statement.
According to the daily newspaper Lietuvos Rytas, Gaz de France was dissatisfied with a plan to eventually sell an equal 34 percent stake in Lietuvos Dujos to a Russian gas supplier. It was also unhappy with the utility's financial condition and the mechanism that regulates gas prices in Lithuania, the paper reported on Feb. 18, citing unnamed Gaz de France officials.Eduardas Vilkas, head of the Lithuanian privatization commission, said negotiations would be more difficult with a single potential investor than if there had been a competing bidder. However, getting a high price for the stake was not the government's prime objective.
"A hundred million litas here or there is not so important. What's needed is that they be able to work successfully," Vilkas said.
Neither Ruhrgas' offer nor the state's minimum price for the gas firm shares has been made public.
Paulius Vilemas, the government's privatization adviser, denied press reports that Ruhrgas was offering to pay 150 million litas ($37.5 million) for the 34 percent stake.
Lietuvos Dujos has an authorized capital of 341 million litas. The strategic stake has a nominal value of 116 million litas and a market value of about 240 million litas.
When approving the utility's privatization program in November, the government banned natural gas suppliers and their proxies from bidding for the strategic stake, seeking an investor that complies "with the criteria of Lithuania's European and trans-Atlantic integration."
Once the strategic stake is sold, a second tender is to be launched to sell another 34 percent stake to a gas supplier, likely Gazprom and its local partners. The government will retain 24 percent of shares in the utility, which it may later sell on the local stock exchange, where 8 percent of the company is listed.
Lithuania had agonized over the sell-off model for months in an effort to balance its goals of Western integration against the present reality of dependence on supplies from Russia.
The country is eager to avoid the type of supply problems that the Mazeikiu Nafta oil complex has faced ever since Russian oil companies were left out of that company's privatization.
But it does not want to risk letting Russian suppliers gain control of Lietuvos Dujos in the future, as they seem recently to have done at Latvia's gas utility. That is why the government plans to follow World Bank advice and sign a special agreement with the strategic investor governing key management decisions and future share-ownership changes.
Gazprom, in turn, has warned it won't invest in the Lithuanian utility if a Western investor gets all management rights.
Lawmakers from the opposition Conservative Party warned that the government was in fact playing right into Gazprom's hands and clearing the way for Russia to get control of Lietuvos Dujos over time.
A Feb. 20 statement by the faction complained that the government had proposed to designate Lietuvos Dujos as a company without national strategic importance. A law banning energy suppliers from acquiring a controlling stake in strategic companies would therefore not apply to the gas utility.
The government also seemed to be caving in to pressure from Gazprom on the issue of management at the gas utility, the faction added.
Lietuvos Dujos did not yet announce financial results for 2001, though Lietuvos Rytas has predicted it would show a net profit of 25-30 million litas. In the first nine months of 2001, Lietuvos Dujos had an unaudited net profit of 3 million litas on a turnover of 304 million litas.
During all of last year the company bought 865 million cubic meters of natural gas from suppliers, down from 1 billion in 2000. It also handled the transit of 516 million cubic meters of gas to Russia's Kaliningrad exclave.
Competing gas suppliers imported 1,81 million cubic meters of natural gas into Lithuania in 2001, 15 percent more than the previous year.
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