Observer "Lietuva"

WEEK 47.2005

Saturday, 26th of November

Lietuvos Energija calls new tender for windmills
Lietuvos Energija, the operator of the national power transmission network, has reported that it announced a tender to choose electricity producers to construct windmills. The new power plants should be connected to the 110 kV transmission line in the Klaipeda-Rietavas section, which is in western part of the country. Vladas Praskevicius, the chairman of this tender and the director of energy systems at Lietuvos Energija, reported that the winner of the tender only gets authorisation to apply to the Economy Ministry for permission to expand power production capacity.
The offers of bidders will be unsealed on January 27, 2006, and the winner will be chosen by February 13. There are six zones envisioned for windmills in Lithuania. This tender is to choose the companies that will build such power plants in the fifth zone. By the end of 2006, three more tenders will take place.
Lietuvos Zinios

Vilnius Airport sues Lithuanian Airlines
Vilnius International Airport, the largest in Lithuania, has filed a suit worth almost LTL 12 million against Lietuvos Avialinijos (Lithuanian Airlines, or LAL), the country's flagship air carrier. Vilnius Airport claims that the privately owned airline currently owes it around LTL 21.5 million. The state-run airport has also obtained a court order to freeze 100 percent of the shares of LAL Cargo, the airline's cargo terminal subsidiary.
"We do not rule out adding about LTL 6 million to the lawsuit if Lietuvos Avialinijos fails to repay its outstanding debt according to schedule," Kestutis Virbickas of H. Virbickas, K. Virbickas and partners, the law firm representing Vilnius Airport in court, said.
However, the Vilnius regional court ordered on Thursday that the airport pay a 10-million-litas deposit or guarantee due to the application of temporary security measures. Virbickas said the airport was planning to appeal against this decision. Kauno Diena, Lietuvos Rytas, Lietuvos Zinios

TNK-BP and Lukoil withdraws from competition over Mazeikiu Nafta
British-Russian joint venture TNK-BP and Russia's oil giant Lukoil, together with its US partner ConocoPhillips, have been eliminated from the competition for Yukos' stake in Lithuanian crude refinery Mazeikiu Nafta, reliable sources said. They said two other bidders, Kazakhstan's state-owned oil and gas company KazMunayGaz and Poland's PKN Orlen, had been short-listed by Yukos to proceed to the second stage of the bidding process.
Lithuanian officials, who asked not to be named, said Yukos' decision was very surprising, given that the government has already started negotiations with TNK-BP, its preferred buyer of Mazeikiu Nafta. TNK-BP and Lukoil representatives in Lithuania did not comment on the report on Friday. Some sources said that information coming from Yukos itself was contradictory.
The Russian daily Kommersant reported on Friday that KazMunayGaz had submitted the highest bid for Yukos' 53.7 percent stake in the Lithuanian oil refinery, at around USD 1.2 billion, and was likely to buy the shares. Yukos received four preliminary bids for the shares in Mazeikiu Nafta on November 10. It was to select the best bidders and ask them to submit their final offers.
Kauno Diena, Lietuvos Zinios, Lietuvos Rytas

Friday, 25th of November

Wind power plant will cost LTL 136 million
Veju Spektras, a Lithuanian company, gears up to build a new wind power plant facility at Lithuania's seaside with the LTL 136 million project that covers the erection of 15 wind turbines involving Germany's wind turbine producer Enercon and other financial investors. Arrangements for the financing of the new green energy facility, which will be arranged in the location of Vydmantai, North-West Lithuania, have been made by Hermis Finansai, the leading Lithuania's investment management and consulting company. Hermis Finansai has found investors for the project, including Enercon, which secured the ownership of a stake in Vejo Spektras, and made arrangements for loans, including the participation of leasing company Hansa Lizingas.
The project covers the installation of 15 new Enercon E-70 wind turbines with a combined installed capacity of 30 MG. Annual power generation would total 70 million kWh, or approximately 1 percent of total Lithuania's electricity consumption.
Verslo Zinios, Lietuvos Rytas

Lithuanian do not fear nuclear power plants
Lithuania's residents are among those most favourably disposed towards nuclear power plants in the whole EU, a poll of Eurobarometer has shown. As many as 60 percent of Lithuanian people are favourably disposed towards electricity generated by nuclear power plants. Some 27 percent of Lithuanians are antagonistic towards nuclear power plants, as compared with the EU average of 55 percent.
"Lithuania's residents have probably got used to the nuclear power plant operating in the country, which has not had any big safety problems so far. Furthermore, electricity prices are forecast to increase upon shutting it down," Mindaugas Degutis, survey director of the TNS Gallup company that conducted the poll in Lithuania, has said.
The Soviet-era Ignalina Nuclear Power Plant (INPP) currently operates in Lithuania. The first INPP reactor was shut down at the beginning of this year in the framework of Lithuania's commitments to the EU. The second one is due to be closed in 2009.
Lithuania is currently considering whether it would be economically beneficial to build a new, safe reactor.
Kauno Diena, Lietuvos Rytas, Lietuvos Zinios, Verslo Zinios

First hearing of next year's budget over
On Thursday, the Seimas held the first hearing into the next year state budget. The second hearing is scheduled for December 6 whereas the final approval of the budget is expected on December 13. Jonas Lionginas, the head of the parliamentary budget and finance committee sent the draft budget for the amendments to the government after it had been reviewed by the National Auditor, parliamentary committees. The parliamentary budget committee suggested to the government to increase the donations to the state institutions and municipalities by LTL 119.4 million. Upon the government's approval the budget revenue estimate could be increased LTL 117.9 million.
Respublika, Verslo Zinios

Thursday, 24th of November

Lithuanian sugar beet growers may not worry
The growing of sugar beets is to remain among the most profitable plant growing activity, Agriculture Minister Kazimira Prunskiene said on Wednesday. A compromise suggested by representatives of the European Commission in Brussels, the minister said, is more favourable compared to the previous sugar reform draft. The European Commission has changed its opinion and suggested reducing the sugar prices in the course of four instead of two years. The reduction will make up 20 percent in 2006-2007. As the direct compensations to sugar beet growers will make up 60 percent, the income of farmers for one tonne of sugar beets will go down only 6 percent in two years.
This year, the number of the sugar beet growers fell 10-15 percent in Lithuania. Lithuania uses over 100,000 tons of sugar a year. There are three domestic sugar factories: two Danisco factories, which are controlled by Danish capital and Arvi, a company controlled by Lithuanian capital.
Respublika, Lietuvos Rytas

Lithuanian oil production falls
Lithuanian oil production declined by 29 percent year-on-year to 224,600 cubic meters in the first ten months of this year, with no new discoveries made to replenish the country's dwindling oil reserves. "The existing oil fields are drying up. The increasing proportion of water extracted with oil is a signal of this," said Antanas Jasas, CEO of Geonafta.
The proportion of oil has fallen to 22.2 percent this year, from 30 percent in the same period last year, while that of water has risen to 77.8 percent from 70 percent.
Minijos Nafta was the largest oil producer, with 114,100 m3 extracted in the ten months, but its output slumped by 30 percent compared with last year. Geonafta was second with 59,800 m3, down 33 percent year-on-year.
Lietuvos Rytas, Respublika, Verslo Zinios

Sanitas eyes German medication company
Sanitas, the largest Lithuania's pharmaceutical company currently engaged in the bidding war for Poland's Jelfa, is mulling a possibility to acquire a small Germany's medicines trader, which it sees as a springboard for the entry into the largest European market.
"We have been negotiating the purchase of Germany's company for some time. No decision is expected this year", Saulius Jurgelenas, Sanitas CEO, said.
"The purchase of this company would need much less funds, compared with Poland's Jelfa. We believe that the acquisition of the Germany's company would bring us additional several millions in annual sales and would be helpful for establishing ties with major Germany's medicines companies," Jurgelenas noted.
In 2006 the Kaunas-based producer aims to expand its sales on Czech and Slovak markets through the Slovak pharmaceutical company Hoechst-Biotika, which it acquired last summer. In 2007 the producer intends to turn back to Eastern markets with a range of new products. Purchase of Jelfa would enable Sanitas to strengthen up on the markets of Poland, Russia and Ukraine.
Lietuvos Zinios, Lietuvos Rytas

Wednesday, 23rd of November

Number of travellers at Lithuanian airports up 31.7 percent
A total of 1.2 million travellers went through the three Lithuanian airports in January-October 2005, 31.7 percent more than the number recorded in the same period of 2004. In the first ten months of 2005, Lithuanian airlines had 595,000 customers, an increase of 17.3 percent year-on-year. The largest number of people travelled to Great Britain (14.3 percent), Germany (13.1 percent), Denmark (12.1 percent), and Ireland (6.5 percent). Most people - 85.1 percent - travelled on regular flights. The amount of cargo that passed through Lithuanian airports amounted to 8,100 tons, 17.2 percent more than the amount in January-October 2004.
A total of 32,600 Lithuanian and foreign flights landed at and took off from the three international airports of the country, an increase of 14 percent year-on-year.
In January-October, state-owned Lithuanian Railways handled 40 million tons of cargo, 7.3 percent more than it handled in the same period in 2004. International cargo volume went up 2.1 percent to 28.3 million tons, and domestic cargo volume grew 22.4 percent to 11.7 million tons.
The amount of cargo that passed through Klaipeda State Seaport increased 2.9 percent to 22.6 million tons in January-October. The Port of Klaipeda shipped 17.7 million tons of cargo, an increase of 5.8 percent, and Butinge Terminal handled 4.9 million tons, a decrease of 25.1 percent.
Respublika, Lietuvos Rytas

Electricity prices to remain unchanged in 2006
Electricity prices for Lithuanian consumers will not change next year. The National Control Commission for Prices and Energy announced prices for 2006, which are unchanged from the current prices, on Tuesday. Vidmantas Jankauskas, chairman of the commission, said these prices would be in place for a year starting next January.
The power distribution companies, Rytu Skirstomieji Tinklai and VST, formerly Vakaru Skirstomieji Tinklai, approved their prices for 2006 earlier this year. The price commission typically reviews the prices and announces them no later than one month before they take effect.
Most households will continue to pay LTL 0.31 per kWh of electricity. Those who have meters that allow utilities to charge consumers based on the time of day will pay LTL 0.19 per kWh for use of night time electricity and LTL 0.36 for daytime electricity.
Kauno Diena, Lietuvos Zinio,Verslo Zinios

Air Lithuania suspends operations
Air Lithuania, regional Lithuanian air carrier controlled by UK World Aviation Capital, is suspending its operations, while the management is making arrangements for bankruptcy proceedings. Eurocontrol, the European Agency for the Safety of Air Navigation, has suspended the rendering of services to Air Lithuania owing to the latter company's debts. Insurance companies suspended the plane insurance coverage. The carrier, which offers flights from the airports of Kaunas and Palanga, has also confirmed that several other service providers have also stopped the rendering of their services to the company, which is burdened with debts in excess of LTL 20 million. The carrier attributed the creditors' decision to speed up the suspension of company's activities to recent media reports about the financial difficulties suffered by Air Lithuania.
Unofficial sources have put the arrears of the Kaunas-based company at LTL 23 million. At the request of the airport of Palanga the regional court of Kaunas has seized LTL 647,400 worth of Air Lithuania's assets.
Lietuvos Rytas

Tuesday, 22nd of November

Motor third-party liability insurance market shrinks
Lithuania's compulsory motor third-party liability insurance market shrank by 6.2 percent year-on-year to LTL 215.338 million in the first ten months of this year. In October alone, the insurers offering compulsory motor third-party liability insurance policies wrote LTL 12.8 million in premiums, a surge of 36.2 percent from the year-earlier figure of LTL 9.4 million. Compared with September, the aggregate amount of premiums collected plunged by 12.9 percent. Insurance companies paid out a total of LTL 95 million in compulsory motor insurance claims during the ten-month period, a surge of 48.5 percent from the year-earlier figure. In October alone, the payouts rose by LTL 0.1 million, year-on-year, to LTL 12.9 million.
Lietuvos Draudimas held a 33.3 percent market share with LTL 71.793 million worth of premiums written in the first ten months of 2005. PZU Lietuva and PZU Baltija wrote a total of LTL 35.502 million in premiums in the reporting period, a decline of 15.5 percent from the January-to-October period of 2004. The companies together held 16.5 percent of the market, down from 18.3 percent share in the respective period of 2004. The amount of premiums written by Baltikums Draudimas plunged by 38.4 percent, year-on-year, to LTL 22.877 million, while the company's share on the market dropped to 10.6 percent, from 16.2 percent last year.
Lietuvos Rytas, Verslo Zinios

Kempinski to open in Vilnius
A five-star hotel belonging to the global chain Kempinski Hotels & Resorts is to open for business in the central part of Vilnius in 2007. The luxury hotel will have 107 rooms, restaurants, conference facilities, a business centre and a health club, Kempinski officials said. The hotel will be located in a renovated building in the heart of Vilnius, next to the Cathedral Square. It was planned earlier that the AAA Kempinski Hotel Vilnius would open in 2006.
Lietuvos Rytas

Public debt shrinks by LTL 245 million in third quarter
The debt of the Lithuanian government sector went down by LTL 245 million to LTL 12.3 billion in the third quarter of 2005. The public debt constituted 18 percent of the expected annual gross domestic product. The debt of the central government totalled LTL 11.77 billion, while local authorities had liabilities worth almost LTL 508 million. In the third quarter the domestic debt decreased LTL 127 million to LTL 4.159 billion. The external debt was also smaller than it was at the end of the second quarter, amounting to LTL 8.157 billion at the end of the third quarter. Lithuania's liabilities to overseas banks and other financial institutions added up to LTL 7.27 billion.
Lietuvos Rytas

Monday, 21st of November

Sanitas is accused of links with Polish Treasury Minister
Sanitas' competitors in the bidding for a stake in the Polish pharmaceutical company Jelfa, for which it is a front-runner, are trying to play the non-transparency card against the Lithuanian company, accusing it of using its connections with Polish Treasury Minister Andrzej Mikosz. Adamed and Enterprise Investors claim that the newly appointed minister was Sanitas' consultant as recently as two months ago. The Polish Treasury Ministry denies any allegations of non-transparency, saying that it is Deputy Treasury Minister Michal Stepniewski who is in charge of the sale process.
Sanitas has offered the highest price for a 47.83 percent stake in Jelfa, at PLN 87 per share or PLN 282.96 million in total. That exceeds the price offered by Enterprise Investors, the second-highest bidder, by more than one-tenth.
If Sanitas succeeds in buying the stake in Jelfa, this will be the second acquisition of a company larger than Sanitas itself. Jelfa's market capitalization stood at almost LTL 456.9 million on Thursday, compared with Sanitas' LTL 152 million.
Lietuvos Zinios

Pieno Zvaigzdes lift sales
Pieno Zvaigzdes, one of Lithuania's largest dairy groups, posted sales of LTL 355.2 million for the first ten months of this year, up 11.2 percent from sales of LTL 319.5 million a year earlier. The company said this growth was largely due to a 23 percent rise to LTL 150 million in exports, which accounted for 42 percent of the total sales.
Pieno Zvaigzdes' investments totalled LTL 42 million in the ten months, of which almost 90 percent went toward production expansion and modernization.
Verslo Zinios

Politicians calm downs residents over gas prices
Economy Minister Kestutis Dauksys said earlier that the government would work out measures to prevent sharp rises in natural gas prices for consumers after it received Russia's gas giant Gazprom's proposals. He expects that Gazprom’s boosting of gas prices would not have significant impact of Lithuanian residents.
Natural gas consumers in Lithuania might face higher bills next year, Gazprom is set to raise the price for gas supplies to the country to at least LTL 330-333 per 1,000 cubic meters.
Lietuvos Zinios

Previous weeks:

Back to Baltic Business Monitor
Archives 2003-2005

 TERMS & CONDITIONS / KÄYTTÖOIKEUDET. © Oy Compiler Ab. All rights reserved.