Kaunas Energy board approves sale of Gazprom-owned power plant shares

However, the sale of KTE will be allowed on condition that the new owner proves that it is capable of managing the plant and investing in it.

"Clement Power Venture will have to prove to us that it will be able to manage KTE and invest in the facility,” Kauno Energija CEO Rimantas Bakas told BNS.

Also, the terms of agreements signed with KTE will be amended so as to ensure the most favorable terms for Kauno Energija, the company said.

Bakas said that amendments to the agreements with KTE were expected to be agreed on in the shortest possible time, adding that the transfer of shares and the modification of agreements would be carried out in parallel.

"The board outlined certain guidelines for negotiations but we decided against making them public. The results of talks will also need the approval from Kauno Energija's board," Bakas said.

Gazprom, a KTE shareholder, now has preliminary permission from Kauno Energija's board to sell the shares, however, the shareholders of the power plant should also be concerned about the amendments to the agreements, including the contracts on the purchase and sale of heat, he said.

A surety agreement worth 105 million litas (EUR 30.4 m) was also concluded in March 2003, providing that in case of KTE's failure to fulfill its investment commitments, Gazprom would cover all the losses incurred by Kauno Energija and third parties, as well as damages and penalties.

Antanas Pranculis, the CEO of KTE, told BNS that he expected the issues of ownership change and amending of the agreements to be solved as soon as possible.

"I hope that agreement on all issues will be reached as soon as possible, by the autumn," he said.

The CEO did not disclose how much Clement Power Venture was planning to invest in KTE.

The city of Kaunas in April did not rule out buying back the shares in KTE, which it sold to Gazprom almost ten years ago. The authorities then said that if reports that Gazprom was planning to sell KTE for around 116 million litas proved to be true, then the city would be ready to pay the Russians 11 million litas, because Gazprom would have to pay 105 million litas in penalties for not fulfilling its investment commitments.

Gazprom, in consortium with the Lithuanian gas supplier Dujotekana and Clement Power Venture, signed the KTE purchase and sale agreement with Kauno Energija on 31 March 2003. It provided that the Russian group would maintain its majority shareholding in the plant up to the expiry of the agreement in 2018.

KTE covers approximately 80 percent of heat energy demand in Kaunas.