Lithuania Firms Offer to Buy Gazprom Utilities Stake

Posted by Joseph Keefe May 28, 2014

Lithuania state seeks to return control of gas pipelines; Gazprom owns 37.1 pct in Lithuania gas utility, gas grid.

Lithuanian state-owned firms on Wednesday offered to buy the minority stakes in the country's gas utilities held by Russia's Gazprom and others, reversing their privatisation a decade ago.

The move follows a deal last week to buy out Germany's E.ON from the utilities, which gave the state a majority stake, forcing an offer to minority shareholders.

Under European Union gas market rules designed to ensure fair competition, companies which supply energy are not allowed to dominate ownership of the infrastructure.

Suppliers have to sell their stakes in pipeline companies or to leave the entire transmission operations and investments to an independent company.

Lithuania, which relies completely on imported gas from Russia, has said it wants control over its gas infrastructure as it prepares to start importing liquefied natural gas (LNG) from 2015 through a floating terminal in the port city of Klaipeda.

State-owned EPSO-G offered to buy shares in gas transmission system operator Amber Grid at 0.762 euros per share. and power group Lietuvos Energija said it had offered 0.653 euros per share to shareholders of gas utility Lietuvos Dujos , the companies said in separate statements.

This values Gazprom's stake in Amber Grid at 50.4 million euros and in Lietuvos Dujos at 70.4 million euros. The Russian gas company owns 37.1 percent in each firm.

Gazprom was not immediately available to comment on whether it will accept the offer, but one analyst said he expected Gazprom to keep the shares.

"I expect Gazprom to keep shares in both companies, because Lietuvos Dujos is the main gas supplier in Lithuania, while keeping shares in Amber Grid would show a defiance against the European regulation requiring gas suppliers to divest holdings in transmission pipelines," said Tadas Povilauskas, an analyst at Vilnius-based investment bank Finasta.

Under Lithuanian law, Gazprom has to sell its shares in Amber Grid, which operates high-pressure gas transmission pipelines, by November or will lose voting rights on its board.

Russia has requested talks with the European Union on the EU's energy rules that challenge Gazprom's business model, in a possible first step towards filing a dispute at the World Trade Organization.

"Gazprom's decision whether to sell will likely be based on strategy, not on price, because the sums involved are not large for the huge company", Povilauskas added.

Gazprom can keep its shares in Lietuvos Dujos, which supplies natural gas to all households and part of businesses, having about 40 percent of the market share.

The offers were made after EPSO-G and Lietuvos Energija's stakes in the utilities reached 56.6 percent each due to the E.ON deal. Lietuvos Energija paid E.ON 63.4 million euros for a 38.9 percent stake in Lietuvos Dujos, while EPSO-G paid 49.8 million euros for a 38.9 percent stake in Amber Grid.

Lithuania also serves as the only transit route to send gas to Russia's Kaliningrad exclave, sandwiched between Poland and Lithuania.