Lithuania seals control of gas industry

By bne IntelliNews May 22, 2014

Tim Gosling in Prague -

 

Lithuania finalized a deal with E.ON on May 21 to buy its stakes in the country's national gas utility and pipelines. The acquisition gives Vilnius a controlling stake in Lietuvos Dujos and Amber Grid, and is a major step in its ongoing push to gain some energy independence from Russia. 

The deal with the German giant has been under discussion for months. Having signed off, state-owned energy Lietuvos Energija will pay €63.4m for a 38.9% stake in gas utility Lietuvos Dujos, boosting its holding to 56.6%. State-owned EPSO-G will pay €49.8m for a similar stake in national gas transmission company Amber Grid. Russian state-controlled gas exporter Gazprom continues to hold 37.1% stakes in both companies.

As part of the package with E.ON - which like other German utilities has been shedding assets in smaller markets - Lietuvos Energija will also buy 11.8% in power distribution grid Lesto €24.1m.

The deal hands Lithuania control over its gas pipelines, as well as the main buyer of gas. That has been a target for the country over the last few years as it seeks to break its 100% dependence on Russian gas. Vilnius leveraged the EU's Third Energy Package regulations to force the unbundling of the pipelines from Lietuvos Dujos last year, despite stiff opposition from Gazprom, which complained of political pressure.

Securing control of the companies is vital for Lithuania's plan to have a liquified natural gas (LNG) terminal up and running by the end of the year. Without control of the country's pipelines, it would not be able to pump any gas it imports from the floating facility. 

"This strengthens the state's ability to seek energy independence," Finance Minister Rimantas Sadzius said, according to Leta. Prime Minister Algirdas Butkevicius added: "This transaction consolidates Lithuania's position in seeking strategic goals in the energy sector." The PM also said that Lithuania has now chosen an LNG supplier for the terminal, which should be operational at the start of 2015. Talks have been ongoing with Norway and Qatar amongst others.

The confrontational stance towards Moscow looks to be reaping results for the tiny Baltic state. With Gazprom set to lose its total dominance of the market, it agree in early May to a price discount on the gas it sells Lithuania. However, that only applies to the current contract, which runs out next year. Talks on a new deal are ongoing.

For the meantime, Gazprom continues to hold 37.1% stakes in both Lietuvos Dujos and Amber Grid. However, it hinted last year it could sell, especially if Vilnius were to take control. Meanwhile, Lithuania's competition watchdog approved applications from Lietuvos Energija and EPSO-G to be allowed to take over full ownership of the companies.

However, Gazprom may well stall on agreeing a sale while negotiations on the new supply contract are ongoing. Vilnius and Moscow have been stockpiling leverage against one another for some time, and the ownership issue is one of the chips on the table.

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