The following is the text of an article by Rolands Petersons entitled "The government does not need strategically important energy facilities" and published by the centrist daily Neatkariga on 17 May; subheadings as published:
Yesterday, the Cabinet of Ministers approved the informative report developed by the Finance Ministry (FM) on the further development of the Latvian capital market, which, among other things, provides for the establishment of state or partially state-owned companies such as the gas transmission operator JSC [joint stock company] Conexus Baltic Grid, JSC airBaltic and the listing of Ltd Latvijas Veja Parki [Latvian Wind Parks] shares on the stock exchange, or, in other words, initial or further privatisation.
If we talk about airBaltic (97.98% owned by the state), this plan is not new, and it is basically a logical opportunity to recover the hundreds of millions of the taxpayers' money invested by the state in previous years in rescuing the airline from bankruptcy. The national airline may be one of the symbols of the country and many countries continue to maintain it for this reason, but nowadays civil aviation would no longer be considered an object of strategic national interest. Wind parks worth billions will probably be given to private owners
As for the joint Ltd Latvijas Veja Parki - venture of [state-owned electric utility company] Latvenergo and [state-owned state forest management company] Latvian State Forests - it is now clear that the state actually has no interest in developing and controlling the alternative energy market, and it is possible that the ambitious project announced with great fanfare was intended for sale from the beginning. It should be recalled that Ltd Latvijas Veja Parki is the largest project of alternative electricity production in Latvia, for the implementation of which the state companies Latvenergo and Latvian State Forests have joined forces, planning investments of up to one billion euros.
As announced on the website of the joint venture, Ltd Latvijas Veja Parki will develop several high-power wind parks in Latvia with a total capacity of at least 800 MW. The wind farms and the necessary infrastructure will be designed, built and operated in the territory owned by the state, which is managed by Latvian State Forests, as well as in the territory owned by Latvian State Forests, where the joint venture has acquired construction rights. The share capital of the joint venture at the time its founding was two million euros, with 80% of the joint venture's capital shares belonging to Latvenergo and 20% to Latvian State Forests.
The government report approved yesterday states that "taking into account the planned investment amount of Ltd Latvijas Veja Parki, it is necessary to inform the Cabinet of Ministers about the medium-term financing plan of Ltd Latvijas Veja Parki, and of the opportunities of JSC Latvenergo and JSC Latvian State Forests to raise funds, including the possibility of raising additional capital in the initial public offering of shares".
In layman's terms, the government wants to issue new shares of Ltd Latvijas Veja Parki on the stock exchange, allowing anyone interested to buy them, thereby reducing the state's share. The report prepared by the Finance Ministry did not specify how large the amount of newly issued shares is and by how much the share of the state's capital will decrease as a result. Threat of losing state control over Incukalns gas storage
Perhaps this issue would not be so decisive in the case of Ltd Latvijas Veja Parki (although a producer of 800 MW electricity can be considered a strategically important object), but JSC Conexus Baltic Grid (Conexus), which owns both the Latvian gas transmissions network, as well as the Incukalns [underground] gas storage, is clearly one of the most strategically important objects of the national infrastructure. Currently, the owner of 68.46% of its shares is the 100% state-owned [electricity transmissions state system operator] JSC Augstsprieguma Tikls, 29.06% of Conexus shares belong to the Japanese fund MM Infrastructure Investments Europe Limited, and 2.48% to unnamed small shareholders, according to the information on the company's website.
In the opinion of the FM, the issue of further reduction of the state shares in Conexus, perhaps even below the decisive 50% of the shares, has already been essentially decided. "Conexus Baltic Grid in its medium-term strategy, setting strategic goals, has identified the attraction of financing by issuing financial instruments as one of the new sources of financing. The strategy mentions presence in the capital markets as one of the results for achieving the goal in 2027," says the report prepared by the FM.
In the protocol decision adopted by the government, the same idea is presented behind unreadable bureaucratic jargon, but the idea in short words is - FM as the owner of capital shares of the JSC Augstsprieguma Tikls and through it also the owner of capital shares in Conexus, and the drafter of this protocol decision also prepares a plan on how much additional private capital to attract to Connexus. Let us quote: "In order to assess the possibilities of achieving the set performance indicator, state capital companies that comply with Cabinet of Ministers order of 15 September 2022 No 618 "On the necessary changes in the management policy of capital companies of public entities and capital shares of public entities" 2.2.1. (commercial state capital company), the holders of capital shares must submit to the State Chancellery and the Ministry of Finance an assessment of the need to raise additional capital for the financing of the capital company's development goals by 15 October 2023, evaluating the possibility of attracting funding on the capital market, and the schedule for the planned activities of this goal."
The question of whether Conexus strategy for attracting additional shareholders is in the interests of the state as the main shareholder of Conexus is not discussed in the report prepared by the FM. However, since in this case it is also not clear how much shares the state is going to issue, it is highly possible that as a result of the process, the state's decisive influence in this absolutely strategically important company is lost. Karins wants to privatise
One thing is clear - the government of Krisjanis Karins, probably in the last weeks of its existence, is trying to push forward the decisions on the privatisation of state enterprises as much as possible. It cannot be ruled out that this issue is one of the main objects of discussion in the negotiations about the next president of the state and the potential new government coalition.
As Prime Minister Krisjanis Karins announced a week ago - on 8 May - next week (respectively, this week) the government could decide on the listing of state capital companies on the stock exchange, [news agency] LETA reports. He added that for now there is no consensus on this issue in the coalition, but, in his opinion, in constructive negotiations, it will be possible to reach a common denominator on how to develop this direction.
The prime minister pointed out that it would not be privatisation in the sense of the 1990s, but the listing of some smaller shares of the state's capital on the stock exchanges, similar to what is happening in neighbouring countries. In Lithuania and Estonia, the large state capital companies are listed on the stock exchange, but in Latvia, according to Karins, there is too much political influence over the operation of these capital companies and the desire to influence them politically, which hinders development. It has not yet been decided which capital companies could go public and what the ratio [of state-owner shares] would be, but it is necessary to go in this direction, Karins is convinced.
(See the original here )
Source: Neatkariga, Riga, in Latvian 17 May 23