Natural gas transmission pipelines and other infrastructure necessary for transmission operations will be spun off into a new company. Lietuvos Dujos will continue to operate as a gas supplier, while its distribution operations and distribution pipelines will be taken over by a newly established subsidiary.
The management board will work out the terms and conditions of the unbundling and take all other necessary decisions, except those regarding the value of the natural gas distribution activity as a complex of assets, which are to be taken by the shareholders themselves.
The shareholders had been expected to vote on the separation of operations in late March, but took no decisions during that meeting after the regulatory authority gave the company two more months to submit an ownership unbundling plan.
Lietuvos Dujos said in late March that its main shareholders – Russia's Gazprom and Germany's E.ON Ruhrgas – needed some additional time for negotiations on an unbundling method, on certain provisions of the shareholders' agreement and share purchase and sale agreements, on gas transit to Kaliningrad, and on the terms of future gas purchases.
The Energy Ministry also called on the regulator to grant the extension of the 31 March deadline, saying that an unbundling model had to be chosen by aligning the interests of all parties and that the government was holding talks with one of the two biggest shareholders, Gazprom.
The Lithuanian government itself had planned to move the 31 March deadline to 31 May, but decided in early March that such an extension needed approval from the regulatory authority. The decision came after Gazprom went to international arbitration.
In late February, representatives of the government, Gazprom and the European Commission agreed to continue talks in order to solve problems related to the unbundling, gas transit to Kaliningrad, the terms of future gas purchases and the valuation of the separated company, and to work out by 31 May a final schedule for the unbundling.
Unofficial sources say that in the future, the state is likely to take back control of the gas transmission grid, possibly jointly with a new investor. It is said that the grid could be transferred to the electricity transmission system operator Litgrid.
Lietuvos Dujos, the supplier, and its newly-established distribution subsidiary are likely to be owned by Gazprom jointly with E. ON.
The government has set an end-2014 deadline for the unbundling of Lietuvos Dujos' transmission, distribution and supply assets in line with the EU's third energy package.
Gazprom owns 37.06 percent of shares in Lietuvos Dujos, E.ON Ruhrgas International holds 38.9 percent, and the Energy Ministry holds 17.7 percent.
Lietuvos Dujos is quoted on the blue-chip Main List of the NASDAQ OMX Vilnius Stock Exchange.
Step forward
A decision by the shareholders of Lietuvos Dujos to split its operations into three companies is “a very big step forward”, Energy Minister Arvydas Sekmokas has said.
“I am very happy about the decision. I think it opens a new page, with possibilities to cooperate between the shareholders and with the company’s management. Gazprom made a separate statement but it voted in favor. I think it is a promising development; it is the continuation of dialogue. I think that we will reach positive results gradually. A very big step forward has been made today,” he told the Lithuanian Radio on Monday.
According to the minister, the unbundling of Lietuvos Dujos’ operations means that the companies that supply natural gas will not be able to own the transmission system operator, in other words, the natural gas transmission pipelines.
“It will allow connecting the liquefied natural gas (LNG) terminal with the gas transmission system and assuring the alternative supply of gas to Lithuania – not just from Russia but also through the liquefied natural gas terminal,” Sekmokas said.
Asked whether the decision by Lietuvos Dujos’ shareholders might influence the talks between Lietuvos Dujos and Gazprom on the price of gas, the minister expressed hope that this could facilitate the negotiations.
“However, the decision made today opens up better possibilities for Lietuvos Dujos to reach an agreement. Lietuvos Dujos is legally authorized to conduct the talks but I think that today’s decision will facilitate the negotiations,” Sekmokas said.
The buyout of gas transmission system from the current shareholders would be arranged on the basis “of certain principles which are being negotiated”, he said.
“First of all we have to agree on the principles – what that value should be. Later, with that value already established, it has not been specified conclusively what that entity, which will buy out the pipelines, must be,” Sekmokas said.
Unofficial sources say that in the future, the state is likely to take back control of the gas transmission grid, possibly jointly with a new investor. It is said that the grid could be transferred to the electricity transmission system operator Litgrid.
Pressured into agreement
Russia’s gas giant Gazprom, a shareholder of Lietuvos Dujos (Lithuanian Gas), has stated that it has been forced to approve the reorganization of the Lithuanian gas imports and transportation company due to pressure exerted by Lithuania’s public authorities.
“Lithuania’s public authorities exert pressure, including threats to impose sanctions against Lietuvos Dujos, its board members and shareholders, which actually forces to review the conditions under which Lietuvos Dujos was privatized, and to transfer the company’s transportation operations together with assets, rights, and obligations related with such activities,” Gazprom said in a statement, which was made at Lietuvos Dujos shareholders’ meeting and released on Monday.
Gazprom also stated that by voting for the reorganization it reserved all rights provided to it by the Lithuanian and EU legislation as well as by the Russian-Lithuanian agreement on the reciprocal promotion and protection of investments.
Valery Golubev and Kiril Seleznev, Gazprom’s representatives on Lietuvos Dujos’ board, voted with reservation.
Gazprom objects to the approach to the implementation of the EU’s third energy package chosen by Lithuania and has filed suits against Lithuania with the Stockholm Arbitration Institute and the United Nations Commission in International Trade Law (UNCITRAL). The Russian gas monopolist wants the Energy Ministry's court action against Lietuvos Dujos and its management to be recognized as breaching the Lithuanian company's shareholder agreement and seeks compensation for losses incurred as a result.
The Lithuanian government, in its turn, has filed a formal complaint to Brussels over possible unfair pricing and abuse of market dominance by Gazprom, which is the country's sole gas supplier.
