Posts filed under ‘Energy’
The Lithuanian media announced that the Polish PKN Orlen is considering selling Orlen Lietuva refinery (former Mazeikiu Nafta) if it will fail to secure control over Klaipedos Nafta oil terminal.
According to the Polish daily Parket the most logical buyer of Orlen Lietuva would be a company from Russia. The paper quoted Pawel Burzinski, an analyst from BZ WBK saying, ‘”The sale of Mazeikiai is a very possible development if it will emerge that PKN Orlen has failed to agree with Lithuania’s Government. The sale of Mazeikiu Nafta may be launched by the decision of the concern’s (PKN Orlen) board.”
Mr Burzinski thinks that the sell off scenario could be such that in the first stage of it some 10-30 pct of Orlen Lietuva could be offered to an investor with an option of increasing its stake to more than 50 pct. In analysts’ opinion, then, the PKN Orlen eventually will withdraw from the shareholders of Orlen Lietuva.
Lithuania’s Government, on the other, regards the Klaipedos Nafta as a strategic object and has not intention of selling it to any other company. According to the TV3 programme Savaites komentarai on 24 January, the Polish PKN Orlen is planning to sell Orlen Lietuva to Russia’s Lukoil. However, the Russians would buy Orlen Lietuva only if the company ‘Klaipedos Nafta’ is included into the ‘package’.
I would like to offer you an interview of Lithuania’s newly sworn President Dalia Grybauskaite. The interview was published in the Lithuanian business daily Verslo žinios on July 13. Verslo žinios names this interview as a Grybauskaite’s vision for her presidency. I would highly recommend you to read it.
“Encompassing Ideals of Gandhi, Toughness of Churchill”
[Verslo žinios] Should the state limit its functions in a time of crisis or should it control the economy more?
[Grybauskaite] I think during an economic boom the state should limit its functions, and during a downturn it should be more active. I think history confirms this. Today we see that certain financial services were being developed faster than certain governments had predicted or anticipated. The Breton Woods safeguards and other mechanisms that had existed did not stop the crisis. It is necessary to look for something new. In the near future, governments will have to be more actively-involved in the markets. International organizations will have to get involved and participate in regulation as well.
[Verslo žinios] How do you imagine intervention?
[Grybauskaite] Theoretically, the free market system is a very good idea. In the global world, however, we witnessed the creation of global monopoly, not free market. Especially in the area of finances and financial instruments. This monopolistic system started controlling the global economy and market mechanisms. The free market system mutated. Governments and international organizations should create new mechanisms that would revive competition.
[Verslo žinios] What needs to be done?
[Grybauskaite] In the world there is a very interesting discussion: What can be done by big countries, which can fire up their money printing machines, and what can be done by small countries, which do not have resources or money printing machines. I think countries like Lithuania cannot increase public spending, deficit, and debt. Above all, they must reduce public spending and government apparatus and must eliminate overlapping functions of various institutes as well as obstacles for businesses. In addition, such countries must save. Small countries, which do not have resources and money printing machines, have only these options in addition to structural reforms. [passage omitted: The Baltic states should start recovering approximately six months after Europe's economic recovery].
[Verslo žinios] What reforms are the most necessary in Lithuania?
[Grybauskaite] Lithuania until now has been partially parasitizing and has been stuck in the old, inefficient economic structure. The economy lacks innovation and the service sector is underdeveloped. Our possibilities are innovation, services, science, and scientific research. Without abundance of natural resources, the biggest wealth one has is people, who must be valued. The problem is this: During the past twenty years we have freed the market and have reduced the state’s involvement in the economy, yet we have not reduced the state’s social obligations. The old style social security system that we have inherited does not go well with the market economy. During an economic crisis, this disproportion becomes an impossible burden for the state.
[Verslo žinios] Does this mean that in the future there will be smaller pensions, social payments, and assignations for education?
[Grybauskaite] I would phrase the problem differently. Society must decide anew what size taxes it is prepared to pay and what services it wants to receive from the state. Between these things there is a direct correlation. If one wants to maintain the same social system, one has to increase taxes. If taxes remain the same, the state’s obligations must decrease. Of course, even the funds the state has today can be used more effectively, too. For example, the latest study of the World Bank shows that our healthcare system looks like this: There are too many hospitals, there is too much equipment that is not used properly, because there are no specialists trained to use that equipment. Money disappears, but there is no impact.
[Verslo žinios] Unlike Latvia, Lithuania has refused to ask the IMF for help. You once said that such a step was unnecessary. Why?
[Grybauskaite] It is the last step a country can take. If external borrowing conditions do not get worse, Lithuania will still able to manage on its own. I do not want to criticize the IMF or the World Bank, but every politician should know that no one will solve our problems for us. I do not want to comment on Latvia’s problems, too much. I think Latvia asked the IMF for assistance when it had no other choice.
[Verslo žinios] The government completely ruled out the litas devaluation scenario and announced it would try to enter the euro zone in 2012 by reducing public spending. Do you support this strategy?
[Grybauskaite] I would not want to discuss concrete dates. However, the euro zone is synonymous with financial discipline. Order in our financial system must be the main paradigm of our thinking, as a real alternative to political populism. Concrete date for joining the euro zone will depend on the extent of the crisis and on our ability to have order. I also do not see any alleged benefits of devaluating the litas. Perhaps it would be meaningful, talking about increasing competitiveness of our exports. However, can you show me any markets that today are not gripped by recession? Therefore, devaluating the litas would only increase the country’s debt, two thirds of which are in foreign currency. In addition, energy resources would become more expensive. Therefore, we should move in the direction of euro adoption.
[Verslo žinios] Do you think Lithuania’s energy dependence on Russia is dangerous?
[Grybauskaite] Every country needs to strive to diversify its energy sources. Energy has always been measured using the geopolitical ruler. Therefore, integrating Lithuania’s electric power system and energy sources into Western networks would mean Lithuania’s political independence. It is necessary, and we will try to make sure we do not depend on one energy supplier.
[Verslo žinios] Does this mean that Lithuania must be prepared to pay higher prices for energy resources in the near future?
[Grybauskaite] Just as for any geopolitical choice. There is a certain price that needs to be paid for geopolitical orientation. Even if a competitive environment is established in Lithuania’s energy system in accordance with the EU requirements, the future of this sector will not be just a matter of economy or business. Of course, it is important to have a competitive environment in the energy market, but above all we must tame local monopolists and defend the consumer’s interests. Today in Lithuania, it is clear that local barriers are built against innovation and development of alternative energy sources.
[Verslo žinios] What is your opinion about the conditions for foreign investments in Lithuania? For example, Russian businessmen complain about discrimination here…
[Grybauskaite] The flow of investments, naturally, has subsided. The boom that started 15 years ago has ended. Yet, for now this is not too painful, because the lack of foreign investments in the country is compensated by the EU aid funds. Of course, we should analyse why the investment conditions have become worse. The Russian investments, meanwhile, are just as important to Lithuania as the investments from other countries. In certain areas non EU investments are limited and European interests are defended. The common EU investment policy is in the interests of Lithuania as well, but there is no national protectionism that would violate European principles.
[Verslo žinios] Have you heard any proposals to distance yourself from the executive branch and to remain a consolidating political figure, the way your predecessor, who was called “moral authority,” was?
[Grybauskaite] Political analysts say this is exactly what I should do. It would be nice to distance myself, point my finger, and criticize. I, however, see myself as someone who is not afraid of responsibility, and the first thing I will accept, if we work together with the cabinet, is responsibility.
[Verslo žinios] Perhaps today it would be meaningful to strictly adhere to the separation of power doctrine?
[Grybauskaite] It is an abstract theory. I know that today the nation entrusted a big credit of trust to me. Therefore, I want to talk about consolidating not only the government but also the public for big tasks. One of the most painful problems is the fact that the political elite have usurped democratic mechanisms. There cannot be a healthy economy, if the citizens’ power to make decisions is limited, and there cannot be a healthy economy without healthy politics. The decreasing interest in politics and lack of civic activeness is a problem not only in Lithuania, but also in Europe.
[Verslo žinios] All of your predecessors sooner or later started complaining about limited powers of the president…
[Grybauskaite] In politics there are de jure and de facto tools. Juridical tools are in the Constitution: The veto right, the right to initiate laws, the power to appoint officials. Factual tools – the nation’s trust, my word, which seems to have had substantial influence so far. Finally, I am also a professional in a certain field, which allows me to offer my help to the cabinet.
[Verslo žinios] Do you agree with those who say that every senior politician achieves the most important things during his first six months in office?
[Grybauskaite] This depends on one’s term in office (smiling)… Perhaps they are right: During the first six months one can look at things objectively, through a set of fresh eyes, before routine and system sucks one in. However, I think I clearly see the main tasks, which I raised not only during the election campaign, but also for myself. I hope that political and economic conditions will not obstruct their implementation.
Source BBC Monitoring
As the BNS writes the leaders of all Baltic Sea countries and European Commission President Barroso signed in Brussels on June 18 a memorandum of understanding on the Baltic Energy Market Interconnection Plan, thus marking the launch of the implementation of this action plan.
Lithuanian Deputy Energy Minister Romas Svedas, who is a member of the EU’s high-level group on developing the plan, confirmed the signing of the memorandum.
“This is an unprecedented fact in the European Union’s energy policy history: such an important document has been worked out within such a short period of time — eight months. The annexes [of the document] set out how and when a Baltic energy market will be established and integrated into the Nordic market,” he told BNS.
Svedas pointed out that the document identifies concrete projects, amounts of money and the main companies responsible for their implementation.
“This is a conceptual and phenomenal document and a good example for other EU regions, defining the energy development policy. This is a long-term document that is integrated into the period of Sweden’s presidency of the EU, which means that a focus will be given on a strategy for the whole Baltic Sea region, encompassing science, culture, energy and transport,” the official said to the BNS.
“The Baltic states, which are an energy island, must be integrated into the EU’s internal energy market and the energy island label has to be eliminated,” he said.
The European Commission’s president and the leaders of Denmark, Estonia, Finland, Germany, Lithuania, Latvia, Poland and Sweden signed the memorandum on the eve of the European Council meeting in Brussels,
The memorandum underlines the need for a further development of the electricity and gas markets in the Baltic Sea region and their integration into a wider EU energy market, as well as for promoting investments.
According to the document, the three Baltic countries aim to create a level playing field in the electricity market, open up to free international trade, and establish free competition and pricing policies.
In the gas market, their main goals are to find the cheapest solution for linking Finland and the Baltic countries to an integrated European gas network and new sources of supply, as well as to accelerate the opening of the market.
The European Union has earmarked 175 million euros for the planned power interconnection under the Baltic Sea from Sweden to Lithuania. Another 100 million euros should be provided for a second interconnection between Estonia and Finland.
The countries are to submit their joint application for the EU’s funds by Jul. 15.
As the BNS reported the Energy Ministry proposes that the much-criticized national energy company Leo LT should not be allowed to build either a new nuclear power plant or power links with Sweden and Poland, and that a state-owned company should take charge of the projects.
The ministry also proposes that Leo LT should not be allowed to administer EU funds.
Energy Minister Arvydas Sekmokas presented the preliminary proposal to the Cabinet on 3 June.
“A state-owned company will build both the interconnection with Sweden and a new nuclear power plant. Leo LT will not have EU funds at its disposal. Those two principles are laid down in the [ministry's] conclusions,” Ridas Jasiulionis, the prime minister’s spokesman, told reporters after the Cabinet meeting BNS wrties.
The Cabinet is likely to discuss the proposal next week, he said.
The spokesman could not say which state-owned company would implement the projects.
The European Union has earmarked 175 million euros for the planned power interconnection under the Baltic Sea from Sweden to Lithuania, including the reinforcement of the power transmission network in western Latvia.
The countries are to submit their joint application for the EU’s funds by Jul. 15.
Additionally the BNS informed that a special-purpose governmental task group has proposed to raise the state’s interest in Lithuania’s national energy company Leo LT to at least 66 percent thus conferring more powers to the government to make decisions on the future of the company.
The government then could decide to use the assets of Leo LT for the financing of planned construction of a new nuclear power plant and power links, or to reorganize the company.
The Cabinet will consider the conclusions of the task group, a transcript of which has been obtained by BNS, as well as proposed legislative amendments, next week.
The construction of new nuclear facility and power links with Poland and Sweden is expected to be handed over to public companies, some shares of which could be assigned to the companies controlled by Estonia, Latvia and Poland.
The state’s holding in Leo LT could be raised to at least 66 percent via the issue of new shares exclusively to the government.
New shares might be paid up by property contributions, which would be determined via reappraisal of existing state’s contribution to the authorized capital of Leo LT. Estimation of value of the state’s property contribution will include Kruonis Hydro Accumulative Power Plant and the Kaunas Hydro-Electric Plant.
The state’s interest in Leo LT would have to be raised to 66 percent no later than in six months from the enforcement of relevant legislative amendments.
The government owns 61.7 percent of Leo LT, which was established last year as an investment vehicle in the planned new nuclear power plant and other multi-billion-litas energy projects. NDX Energija, a privately owned firm, holds the remaining 38.3 percent.
Lithuania might cut its state budget further, and Grybauskaite is already giving orders to Lithuanian authorities
On June 2 the Lithuanian Prime Minister Andrius Kubilius said that the government might have to take further steps in order to reduce the state budget deficit amid the country’s worsening economic forecasts.
“We cannot say that the economic decline has stopped already. The Bank of Lithuania’s forecasts show that the economy may contract by up to 15%, which means that revenues will decline more than we projected and that the deficit can be higher than 5% — it can reach nearly 7%,” Kubilius told the Public Radio.
He said the government could have to take additional measures to keep the deficit within its 5% target.
The BNS written that in its latest forecasts published in May, the central Bank of Lithuania predicted that the economy would slump by 15.6% this year. The Finance Ministry forecast in late March a 10.5% GDP contraction for this year.
Lithuania’s president-elect Dalia Grybauskaite has said recently that budget spending should not be cut if the deficit is kept within 5%.
Grybauskaite, who arrived to Lithuania from Brussels via Riga as an economy-class passenger and pledged to fly economy class at least in Europe even after the inauguration, gave some tasks to the Lithuanian Parliament and the Lithuanian Government until the Spring session will end on 30 June.
“I hope that the government comes up with a package of tax amendments, that is those amendments, which have not been fully tackled since December – in the areas of small, mid-scale business, in particular SoDra [social insurance fund], health insurance other taxes, as early as in June. I really want to believe that this will be done,” Grybauskaite told reporters after the meeting with Prime Minister Kubilius.
“The European Commission shall be notified by July who specifically will implement the Swedlink project,” president-elect said.
Speaking about potential nationalization of the national energy company Leo LT she reiterated that the company should be broken up. “I support as quick break-up of this combination as possible and implementation of all strategic projects by a public company. This is my position in principle and, as I understand, the government agrees so far. What still remains is just the options and ways how this should be done,” Grybauskaite said to the BNS.
EU shouldn’t leave members in solitary scramble with Russia for energy supply –Gybauskaite, Lithuania’s president-elect
As the BNS writes Lithuania’s president-elect Dalia Grybauskaite feels the European Union (EU) shouldn’t leave it up to solitary states to struggle with Russia for energy supply.
“We would like the EU to speak in one voice on energy supplies and not leave separate states alone in their battle with Russia,” Grybauskaite on Thursday told Latvian public radio.
Asked about the most critical issues in relations with Russia, the Lithuanian president-elect said at the EU level relations between all member states and Russia had grown more complicated due to disagreements on energy supplies, developments in Georgia last August and in Ukraine last winter.
While agreeing that Vilnius and Moscow share many a disagreement, Grybauskaite noted that both countries must pursue constructive dialogue and avoid previously eminent irritating rhetoric.
“If our neighbours, especially Russia, are ready to cooperate, I will be highly interested in responding with the same. I will seek respectful, balanced cooperation, but without selling out Lithuanian values, and avoiding offensive rhetoric,” Lithuania’s president-elect spoke.
Her first foreign visits will have “no symbolic significance”, said Grybauskaite, noting she will put Lithuania’s interests above everything else.
The Russian president Dmitri Medvedev has sent an official letter on 27 May in which he wished her the best of luck.
“I hope your activity while in office will contribute to developing Lithuania-Russia relations in the spirit of good neighbourhood and interpersonal understanding, also to the well-being of both of our nations and the continued guest for enhancing security and stability in Europe and around the globe,” Medvedev wrote.
Lithuania’s president-elect Dalia Grybauskaite today will pick up her Presidential ID card and her inauguration is scheduled for July 12.
As the BNS reported Lithuania’s government may buy out the stake in Leo LT from privately-owned NDX Energija, Prime Minister Andrius Kubilius has said.
According to him, this is one of the options for the breakup of Lithuania’s national energy company.
“We are discussing various possible solutions, and there are several options. Yet, the general approach is the same as I said before – I do not see any chance for Leo to continue in its present form. We may simply agree with the private shareholder and buy out those shares,” Kubilius said in an interview to the public radio station Lietuvos Radijas (Lithuanian Radio) on 26 May.
Earlier this week Energy Minister Arvydas Sekmokas mentioned a possibility that the national energy company might be nationalised.
Finance Minister Algirdas Semeta expressed hope that partial nationalization of Leo LT would not entail additional burden for the state. Any decisions should be well-founded, he said.
As the BNS reminds analysts doubt whether the budget, which has been running below revenue target this year, would be capable of paying back 607.7 million litas (EUR 176.14 mln), i.e. the amount of dividends paid to Leo LT by its subsidiary VST last year.
Media reports say that the task group led by Sekmokas has put forward several options for Leo LT reorganisation, including the liquidation of the company, its reorganization as agreed by both shareholders or taking a decision on Leo LT’s fate despite the opposition of NDX Energija.
Under the first option, if both parties agree to restore the actual situation before the establishment of Leo LT, NDX Energija should get back the shares in VST it owned before the deal, while the state should recover its holdings in Lietuvos Energija (Lithuanian Energy) and RST.
Moreover, the amount paid by VST to Leo LT in dividends should be reimbursed to NDX Energija in full or in part.
The government owns 61.7 percent of Leo LT and NDX Energija holds the remaining 38.3 percent stake. Leo LT controls 97.91 percent of VST.