Latvian gas grid shareholders reportedly plan to prevent state takeover

By bne IntelliNews February 24, 2017

Some shareholders in the newly created Latvian gas infrastructure company, Conexus Baltic Grid (CBG), are reportedly planning to sell their stakes to third parties before the state is able to execute its right of first refusal, local media claimed on February 23.

The move could foil Latvia’s plans to take control of CBG and its strategic assets, which include both the country's gas network and the regional storage facility at Incukalns, from the current controlling shareholders, Ir magazine claims.

After a long fight, Riga forced the unbundling of gas monopoly Latvijas Gaze (LG) in 2016 and spun off CBG in December. At the moment, CBG has the same shareholders as LG. The controlling stake of 50.1% belongs to Russian gas giant Gazprom and Itera - itself owned by Rosneft. The remainder sits with German company Uniper, EU-backed investment fund Marguerite, and minority shareholders.

In order to ensure control of the country's gas infrastructure after the unbundling of LG, Latvia granted itself the right of first refusal. CBG shareholders – save for Marguerite - must sell their stakes by the end of 2017.

Lithuania and Estonia wrestled their gas grids out of Russian control in recent years. Vilnius has also managed to get an LNG platform up and running, undercutting Gazprom’s role as the region's only supplier. Control of the Latvian network is seen as crucial for establishing a unified Baltic market and reducing Russian leverage in the region.

However, Riga will only gain the right of first refusal in April, when LG’s 20-year monopoly, granted upon privatisation in 1997, expires. According to Ir, “certain shareholders” – which in all likelihood means Gazprom, Itera, and Uniper – are looking to sell their stakes before that. The magazine did not speculate who might buy the shares, although it quoted LG CEO Aigars Kalvitis as saying there are interested suitors.

"The government is considering the full range of options," Prime Minister Maris Kucinskis told Ir. He refused to offer any other details, saying the government has to “play it close to our chest when dealing with Kalvitis.” The CEO is close to Gazprom and has repeatedly spoken against unbundling.








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