LEO LT’s set to become a giant of the Baltics (II)
I would like to present you with a more updated version of the article from the Lietuvos Rytas
As the BNS informed the Lithuania is set to merge three state-owned and private electricity companies to create an energy giant with an authorized share capital of 5 billion litas (EUR 1.45 b) for building a new nuclear power plant and implementing other multi-billion-litas energy projects.
If the parliament gives the go-ahead for the merger, Leo LT, the new holding company, will be the largest company ever established in Lithuania in terms of the authorized share capital.
The state’s initial investment in the establishment of Leo LT will amount to almost 310,000 litas. The government has not decided yet from what source the money will come. Possible sources include the Privatization Fund, the government’s reserve fund and others.
Two power stations owned by the power transmission grid operator Lietuvos Energija (Lithuanian Energy) will be included into Leo LT at the initial stage but will go back into the government’s hands in two years’ time for a symbolic price of 1 litas. Based on the government’s estimates, the two plants are worth 1.5 billion to 2 billion litas.
The government’s agreement with NDX Energija, a privately-owned firm that is controlled by the owners of Vilniaus Prekyba, on the privatization of VST, the western half of Lithuania’s energy grid, will be terminated.
All this is provided for in two new agreements between the government and NDX Energija and in Leo LT’s articles of association.
The basic provisions of these documents, as well as amendments to a law on the planned new nuclear power plant, were submitted on Saturday to the parliament for approval. The legislature is expected to endorse them in mid-January.
It is believed that the agreements could be signed by the end of January.
Leo LT’s shareholders agreement will be in effect until Jan. 1, 2015. It is expected that by that time, Lithuania’s three key energy projects — the planned new nuclear power plant and energy links to Poland and Sweden — will have been launched.
The three strategic projects are among the key goals set out in the agreements on the creation of the energy giant.
“All the main projects must be underway by 2015,” Saulius Specius, an aide to Lithuania’s prime minister, told BNS.
Leo LT, which will be created by merging the state-owned shares in the distribution grid operator Rytu Skirstomieji Tinklai (RST) and in Lietuvos Energija with NDX Energija’s shares in VST, will have an authorized share capital of 5 billion litas on the day of closing the transaction. The share capital will be divided into 500 million ordinary registered shares with a nominal value of 10 litas per share.
However, the authorized share capital at the foundation of the company will be 0.5 million litas, with a nominal value of 10 litas a share. The government will contribute 308,500 litas in cash and will hold 61.7 percent of the shares, and NDX Energija will contribute 191,500 litas and will hold 38.3 percent.
Under the draft agreement on the establishment of Leo LT, the company will issue 499.95 million new shares on the day of closing the transaction. The issue price of the shares with a nominal of 10 litas will be 14.28 litas per share.
The government will contribute 664.701 million shares in Lietuvos Energija, accounting for 96.4 percent of the system operator’s voting shares, and 351.316 million shares in RST, accounting for 71.34 percent of the voting shares in the grid company. It will also subscribe for 308.469 million new shares in Leo LT. NDX Energija will contribute 3.61 million shares in VST, accounting for 97.1 percent of the voting shares in the grid company, and will subscribe for 191.481 million new shares in Leo LT.
The two power generating subsidiaries of Lietuvos Energija — the Kruonis Hydro Pump Storage Plant and the Kaunas Hydro Power Plant — will be spun off into separate companies within 24 months after the deal is finalized. The government will then take over the ownership of the plants for a symbolic price of 1 litas.
The shareholders’ agreement envisages that Leo LT will pay out 40-60 percent of its net profits in dividends every year.
The draft agreement also calls for seeking an immediate listing of Leo LT’s shares on the blue chip Main List of the Vilnius Stock Exchange (VSE).
The document does not set out the amount of shares to be made available for public trading on the bourse, but Darius Nedzinskas, the CEO of NDX Energija, has said that there are plans to float up to 0.4 percent of the shares.
NDX Energija will not be able to sell 33.34 percent of shares in Leo LT without the government’s consent for two years after the closing of the deal. The government will have the right to request that NDX Energija sell it 5 percent of shares in Leo LT in the first half of 2014 at the latest. That would raise the state’s shareholding in the energy company to 66.7 percent.
The draft articles of association envisage that Leo LT will hire five professionals to sit on its management board — three of them will represent the government and two will represent NDX Energija — and will appoint a managing director, who will not have the power to make key decisions on the management of the company. Leo LT will also have an 11-strong supervisory council.
It is expected that the process of establishing the energy holding company will take around three months to complete. With a market capitalization of 7.139 billion litas at current market prices, it will be the largest company listed on the Baltic stock exchange.
It is planned that, at a later stage, Leo LT and its partners from Latvia, Estonia and Poland will set up joint ventures for the nuclear power plant and energy link projects.After having been postponed twice, the talks between the government and NDX Energija on the establishment of the so-called national investor company started on November 30.
The government initially proposed to create the national energy utility based on the model set by the law, but NDX Energija insisted on setting up a new parent company, saying that that would allow avoiding the effects of contracts between Lietuvos Energija and Russia’s energy monopoly RAO UES.