VILNIUS - Lithuania and Russia's Gazprom finalized on March 24 the sale of a 34 percent stake in Lietuvos Dujos (Lithuanian Gas), a 100 million litas (29 million euro) deal that had been over two years in the making.
Officials involved in the deal said that the sale of Lithuania's largest utility to the world's largest producer of natural gas would secure gas imports and modernization of the country's pipeline system and might lead to the construction of an additional pipeline from Kaunas to the Russian exclave of Kaliningrad, which Russia is interested in.
The deal "gives Lietuvos Dujos true stability, and that is important for the entire economy," Povilas Milasauskas, director of the State Property Fund, was quoted as saying. "It's also good that after two years of sometimes difficult negotiations. The utility can now focus on its business."
"This should ensure civilized cooperation in the gas business for the whole Baltic region," Gazprom Deputy Chairman Alexander Ryazanov told journalists at the signing ceremony.
Pursuant to the deal, Gazprom and Ruhrgas will have to invest 140 million litas in the authorized capital stock of Lietuvos Dujos in equal contributions within a one-year period.
"We will make a contribution of 70 million litas. Moreover, we will invest the profit, which we do not intend to use for dividends in full," explained Ryazanov. "If feasible economically, we will also make investments into other projects, however, we do not plan anything of the kind, as yet."
In exchange, the state has agreed to dilute its stake later this year with an additional share issuance that will be bought exclusively by Gazprom and Ruhrgas. As a result their collective holding in the Lithuanian utility will increase to 77 percent.
Crucially for Lithuania, Gazprom will supply at least 90 percent of Lithuania's natural gas needs until 2015, of which at least 70 percent must be directly delivered to Lietuvos Dujos. The deal also calls for Russia's gas monopoly to cut the gas purchase price for large industrial users.
In addition, two Gazprom representatives will be elected to the five-member board at the general shareholders' meeting scheduled for April 28, while another Gazprom official is to be appointed deputy CEO of the Lithuanian utility.
Gazprom's sales to Lithuania, which amounted to 3 billion cubic meters in 2003, a 25 percent increase year-on-year, are expected to rise to 3.16 billion cubic meters this year.
Transit to Kaliningrad via the Baltic state will grow to 640.5 million cubic meters from 569.8 million cubic meters last year.
After the sale, Gazprom owns 34 percent, Germany's Ruhrgas 35.69 percent, small investors 5.95 percent, while the government retains a 24.36 percent stake.
Gazprom has expressed an interest in acquiring the state's interest at some time in the future, said Ryazanov, but Milasauskas said the state did not intend to sell its stake anytime this year, but that a proposal might materialize in 2005.
Gazprom and Rughgas also control 72 percent in Latvijas Gaze, Latvia's gas utility, and 71 percent in Eesti Gaas, Estonia's equivalent.
Gazprom boasts over one-fifth of the world's gas reserves.
