Latvian government has accepted the long-awaited amendments to the Energy Law, which are intended to reduce reliance on Russia. Although Latvijas Gaze still opposes this, the general tone has become calmer.
One of the heads of LG, CEO of Itera Latvija Juris Savickis believes the government has approved the model most acceptable for Russian shareholders. In addition, the political power in charge of Economy Ministry may be interested in those amendments as well.
Latvia is one of the last countries in the European Union that has yet to begin realizing the European directive on the liberalization of the gas market, which was approved 12 years ago. This directive states that all member states are to provide entrepreneurs free access to their gas pipelines and give consumers the right to choose gas suppliers. Lithuania carried out the liberalization of its gas market three years ago. Estonia plans to do that in 2015. Amendments to Latvia’s Energy Law were put on the table of the government this week. The law will still require three readings in the Saeima before it is finally adopted. Once the law has been adopted, LG will require at least one year to split the company, as reported by Nekā personīga programme of TV3.
Because there is no time left, it is impossible for the state to realize its own resolution to split LG in 2016. Now the term is set for April 2017 and the offer to sell the company to someone unrelated to its original owners has been extended until 2018. An unprecedented exception has also surfaced – a financial institution that would serve as both the owner and the head in the gas company. This exception has been made open for one specific finance institution – Marguerite fund. This fund intends to buy shares owned by the German EON concern, as reported by the programme.
EON has been trying to sell its 48% shares in LG for a couple of years now. Germans have even offered the Latvian state to buy them but the amount the state offered to pay for those shares turned out unacceptable for Germans. Six months ago EON launched talks with Marguerite fund. Martins Tarlaps of Cobalt law firm represents the interests of the fund during meetings of the Economy Ministry in which sides express opinions regarding the gas market liberalization draft. Previously, Tarlaps provided consultations to Economy Ministry on behalf of a different law firm.
Economy Minister Dana Reizniece-Ozola explains both the fund and German EON requested the aforementioned exception in the law. The ministry decided to comply to make sure the funds does not lose interest in buying LG shares.
Savickis believes the ministry has compiled the gas market liberalization draft based on the interests of oligarchs. These may include economic groups associated with the Union of Greens and Farmers, which now controls Latvia’s Economy Ministry. Savickis doesn’t mention Aivars Lembergs, but he does not deny if the latter may be interested nonetheless. «One of the schemes is something like this: reduce LG’s price and then use administrative resources to buy the company to then sell it to one or the other private company or group of companies,» –said Savickis. When asked about those private businessmen, Savickis said: «Ask the Economy Ministry about that. […] I think the Economy Minister and those in charge of preparing documents can provide more information.»
The ministry’s prepared model for splitting Latvijas Gaze suggests dividing it into two companies. Savickis does not have any major complaints about it. It would have been crazier had the proposal to separate the splitting from gas trading remained. LG representative mentioned during the government meeting that Russian Gazprom would sue Latvia for breaching the shareholders agreement should the Saeima approve this law. Savickis, on the other hand, doubts things could go this far. This is because Gazprom has a very small agreement with Latvia in regard to the shareholder agreement.