Lithuania’s Electric Organisation, the Leo LT is in deep trouble

May 22, 2009 at 5:13 pm Leave a comment

Lithuania’s Electric Organisation or Leo LT is in serious trouble.  Leo LT was set up to build electricity links from Lithuania to Poland and Sweden, as well as to construct a new nuclear power plant.  The Leo LT was created by uniting the private and the state owned electricity redistribution grids.

This creation took place during the reign of the Social Democrat party and mainly preserved as a project, which benefited only the private investor and lacks transparency, especially during its creation period.  The project is discredited in the eyes of public and was called by the President-elect Grybauskaite as the paramount manifestation of the oligarchic rule in Lithuania.  The Conservative government is left with this ‘marriage’ and will have to deal with it as soon as possible.  This week saw an open admission by the PM Kubilius that the Leo LT will be dismantled.

As the BNS writes any decision on liquidation of Leo LT cannot be too hasty or irresponsible so as to prevent private shareholder Vilniaus Prekyba from making any profit on such a move, Prime Minister Andrius Kubilius believes.

Next week the government would consider the conclusions of the task group, which were submitted on 25 May, he added.

“We have accepted those conclusions and now will wait till the next week when we will consider them at the government meeting. However, if taking the breakdown way, we have to consider possible consequences, that NDX Energija, or, to be more precise, Vilniaus Prekyba may profit on such a breakdown if we act carelessly or irresponsibly,” Kubilius said in an interview to the public radio station Lietuvos Radijas (Lithuanian Radio) on 21 May.

The task group headed by Energy Minister Arvydas Sekmokas had submitted conclusions as to what measures should be avoided, he said.

As the BNS writes Sekmokas said on 18 May that the shareholder structure of Lithuania’s national energy company Leo LT, which was considered unfavourable to the government, would be reviewed in three months and proposals on further operations of Leo LT would be submitted. Simultaneously, efforts would be made to avoid any measures that could enable the small shareholder to apply to international arbitration.

Meanwhile, president-elect Dalia Grybauskaite stated that the period of three months was too long to decide the fate of Leo LT. In her opinion, “moral damage has been inflicted and decisions shall be taken faster”.  Lithuania’s president-elect Dalia Grybauskaite on 18 May said that decisions on winding up Leo LT should be accelerated.

Energy Minister Arvydas Sekmokas said on 21 May that scenarios on Leo LT fate would be submitted to the president-elect on her first working day in office (Grybauskaite will be inaugurated on 12 July).

The shareholder structure of Lithuania’s national energy company Leo LT will be reviewed in three months and proposals on further operations of Leo LT will be submitted.

Simultaneously, efforts will be made to avoid any measures that could enable the small shareholder to apply to international arbitration, Sekmokas has said.

“Leo LT has been established in a way adverse to the state, which has found itself in a rather complicated situation. No measures have been taken to prevent making unjustified profits on Leo LT operations and we will remedy this shortcoming via relevant legislative amendments,” Sekmokas told the reporters after the meeting with Prime Minister Andrius Kubilius.

Moreover, BNS reported, measures should be taken to prevent any losses of the state if the small shareholder of Leo LT opted to address arbitration, he added.

“A task group is ready to review the establishment of the company, the proportions assigned for the shareholders, that is the distribution of shares based on property contributions, whether the method of establishment was right, and it will need sufficient time to do that,” Sekmokas said.

Moreover, the task group would examine whether the establishment of the company complied with the European Union (EU) Third electricity directive, which provided for the unbundling of transmission from distribution and generation.

The breakdown of Leo LT had not been proposed in the meantime, Sekmokas said. “The continuity of Leo LT will be projected with due regard to the requirements of the third package.”

BNS noted that Prime Minister Andrius Kubilius also sounded cautious when speaking about potential breakdown of Leo LT. Property contributions of both parties would be assessed in the first place, he said.

He also noted the importance of finding an answer how Lithuania would implement the Third EU electricity directive together with Latvia and Estonia.  “When discussing the fate of Leo LT we have to know how we will implement the third package, and it would be good if we implemented it in the same way as the Latvians and the Estonians”, he said.

On the other hand the BNS writes that Lithuania’s President Valdas Adamkus maintains that the statements about plans to break up the national energy company Leo LT are political games and populism.

“Any announcements are further politicising. They are playing games now. All the elections are over but it seems to me that the populist announcements continue,” Adamkus told journalists on 21 May.

In his opinion, the country’s administration should make a clear-cut decision whether Lithuania wants to have a nuclear facility or its own or not and ensure foreign partners that the decision is in place.

“The best solution now is for the future president; the government and I present the political decision to the public and the Seimas. It is enough of the political and party games,” said the Lithuanian president whose tenure is to expire in July.

Asked whether he approved of Leo LT liquidation, he said: “No liquidation, not by any matter of means.”


Entry filed under: Baltic States, Economics, Energy, Estonia, Grybauskaite, Latvia, Lithuania, Northern Europe, Politics, Sweden.

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