VILNIUS - The privatization of Lithuania's two national electricity distribution grids has been transformed into what some are calling a process riddled with chaos, with the conditions for final sale still far from being finalized.
In two separate public tender offers launched this autumn, the government sought to sell off both Vakaru Skirstomieji Tinklai (VST), the western power grid, and Rytu Skirstomieji Tinklai (RST), its eastern counterpart.
Observers say the two are among the last remaining government-held objects of considerable value.
Yet following forecasts of widespread interest in the power grids, the privatizations have devolved into processes racked by accusations of cronyism and unfairness.
The biggest surprise came on Nov. 19 when reports were leaked to the media that the highest bid for VST had been submitted by a consortium of private individuals, most of whom were managers from the retailing giant VP Market.
According to unofficial sources cited by the press, the individuals, all Lithuanian citizens, pieced together a bid of 539 million litas (156 million euros) for a 77 percent stake in VST.
The government's initial offering price for VST, which provides power transmission for roughly half of the country's population, was 359 million litas.
While the deal has yet to be finalized, negotiations between the two parties to iron out details of the agreement have already begun.
"Talks are underway," said Antanas Malikenas, director of privatization at the State Property Fund, the government agency charged with overseeing the sell-off of state-owned assets.
Nonetheless, the prospect of a group of retailers taking control of a vast energy distribution network has led to calls that the government may have chosen an inappropriate partner.
"The group met all of the necessary criteria and completed all necessary steps to take part," Malikenas explained.
Zilvinas Marcinkevicius, a member of the bidding consortium, defended its competence to assume the role of energy distributor for half of Lithuania.
"Retailing and VST aren't only similar businesses – they're the same business. We're not purchasing energy production but energy distribution. What's more, it's retail energy distribution," claimed Marcinkevicius.
Marcinkevicius pointed to the consortium's experience in managing large business operations as evidence of its potential to successfully operate VST.
"These people have created around 17,000 jobs with their business and run a company valued at over 1 billion euros," he said.
The sale of RST, which initially was accompanied by visionary calls to connect Lithuania's power grid once and for all with Western Europe, is now in jeopardy of being scrapped for lack of acceptable buyers.
Of the only two bids that the government received by the Nov. 19 deadline, just one, that of the Estonian state utility Eesti Energia, was opened.
The other, submitted by the German operator E.ON, which already owns stakes in other Lithuanian energy interests, was reportedly thrown out on charges that the company had failed to provide sufficient information.
Yet the status of the sell-off of a 71 percent stake in RST, valued by the government at 422 million litas, is shrouded in a cloud of accusations, as even the main players in the deal are claiming they receive most of their information from press reports that cited unofficial sources.
"We don't know anything. We have received no information from the State Property Fund," said Saulius Bilys of E.ON's Vilnius office.
While E.ON appears to be shut out of the tender, the press has speculated that the State Property Fund's request for more information from the sole qualifying bidder, Eesti Energia, is merely a polite formality before dismissing them as well.
Whereas Eesti Energia is believed to have bid a hefty 500 million litas for RST, the daily Lietuvos rytas, quoting an anonymous informer, reported that the government had doubts about the company, fearing it had a high level of debt and could be sold to Russian interests.
Officials from both the Estonian government and Eesti Energia protested these accusations and called on the State Property Fund to maintain a transparent process.
"We do not believe in rumors and do not see any obstacles why the process of privatization should be suspended or cancelled, as all requirements of the tender were met so far. We hope that our proposal is in the interests of Lithuanian government," said Veiko Valkiainen of Eesti Energia.
Valkiainen rebutted accusations that his company was saddled with a large amount of debt.
"The numbers speak for themselves. The debt-to-equity ratio of Eesti Energia equals 0.36 and is one of the lowest in Europe," he said.
Debt ratios for other equivalent European electricity providers range from 0.97 for E.ON to a whopping 2.1 for the German company Vattenfall, which was also expected to take an interest in RST.
The State Property Fund plans to issue its final verdict on Eesti Energia's bid by mid-December.
