Observer "Lietuva"

WEEK 50.2008

Saturday, 13th of December

Tender for the reactor in 2010
Lithuania's national energy company Leo LT may announce a tender on the purchase of reactor for the future nuclear power facility late in 2010. The producer of the unit may be chosen in one year. Visagino Atomine Jegaine (Visaginas Nuclear Power Plant, or VNPP), which is charged with preparatory arrangements for the construction of new nuclear facility, intends to start working out the technical requirements for the purchase early in 2009. The actual tender might be announced late in 2010 or early in 2011, Marius Grinevicius, CEO of VNPP, which is a subsidiary of Leo LT, confirmed. Meanwhile, the representatives of Leo LT continue meetings with potential reactor producer. Last week they met with the representatives of France's Areva in Paris.
Lietuvos Rytas, Respublika

Currency in circulation goes down
Currency in circulation in Lithuania reached LTL 9.5 billion in late November, down by LTL 123.3 million compared with a month ago, the central Bank of Lithuania reported on Friday. Residents' deposits with the Bank of Lithuania shrank by LTL 1.6 billion over the month to LTL 3.6 billion and other deposits were down by LTL 1.1 billion to LTL 2.1 billion. Central government deposits decreased by LTL 463.2 million to LTL 1.4 billion. The central bank's external assets declined by LTL 2 billion in November from October to LTL 14.6 billion. Its external liabilities narrowed by LTL 54.2 million to LTL 99.9 million.

Inflow of foreign direct investment declines
The inflow of foreign direct investment (FDI) in Lithuania in January through October reached LTL 2.7 billion, a decline of 35.3 percent year-on-year, the Bank of Lithuania reported on Friday. The net FDI inflow in the ten months was LTL 1.8 billion. The FDI inflow financed 14.9 percent of the current account deficit in the reporting period. Year-on-year, the total investment outflow from Lithuania in the ten months decreased by LTL 1.4 billion, or 34.2 percent, to LTL 2.8 billion, while the total investment inflow into the country fell by LTL 6.4 billion, or 34.4 percent, to LTL 12.1 billion, the central bank said.
Lietuvos Rytas

Friday, 12th of December

Average hourly labour costs rise
Average hourly labour costs at manufacturing and services companies (excluding sole proprietorships) in Lithuania rose by 16.5 percent in the third quarter of this year compared with the same period last year, the Statistics Department reported on Thursday. The fastest growth in labour costs per hour was in real estate, rental and other business activities, public administration and defence, compulsory social insurance, electricity, gas and water supply activities. The growth in labour costs was the slowest in financial mediation, construction, wholesale and retail, motor vehicles and motorcycles repair, repair of personal and household goods, transport, storage and communications sectors.
Kauno Diena, Lietuvos Zinios, Respublika

Discounts for airBaltic
Latvia's national airline Airbaltic continues to enjoy discount rates at Riga Airport despite a ban imposed by a Vilnius court over alleged competition violations. Tadas Vizgirda, Airbaltic's vice-president and head of Lithuanian operations. "Nothing has changed because Riga Airport and Latvia's Airbaltic have not yet been formally notified of the court's decision," he said. The ban on providing discounts has been in place since late September when the Vilnius regional court ordered a freeze on almost LTL 200 million worth of assets of Airbaltic and Riga Airport. The court's decision must be translated into the Latvian language. The measure was requested by FlyLAL-Lithuanian Airlines, which is claiming millions of litas in damages from the Latvian companies for money the Lithuanian air carrier has lost as a result of what it claims are discriminatory practices at Riga Airport. Both Latvian companies have appealed against the court's decision. The Lithuanian Court of Appeals is to decide whether to uphold or reverse the interim measures before Christmas.
Kauno Diena

Nothing wrong with Parex
The second-largest Latvia's bank Parex, which has recently been bailed out by the state, has no intentions to sell its Lithuania's subsidiary. "Business in Lithuania is a strategic part of our value as we seek to increase the value of the whole group. Hence, we will do everything in order to maintain it", Nils Melngailis, chairman of Parex Banka, told the reporters in Vilnius on Thursday. There have been some rumours in the market of lately that Parex may sell its subsidiary in Lithuania. Lithuania's Snoras bank, which owns a bank in Latvia, was mentioned among potential buyers.
Verslo Zinios, Respublika

Thursday, 11th of December

Confidence crisis in Lithuania
The Lithuanian financial market is suffering from a confidence crisis rather than a liquidity crisis, a central bank official has said. "Banks are afraid to go to the Bank of Lithuania because they fear the public's reaction," Kazimieras Ramonas, the director of the central bank's Credit Institutions Supervision Department, said on Wednesday. Speaking at the parliament's Budget and Finance Committee, Ramonas said that banks were not loaning money to each other either. Neighbouring countries that have invested in Lithuania's banking system are awaiting "good news," the official said. One such good piece of news is that the International Monetary Fund has said that Latvia will not devalue its national currency, he added. Stasys Kropas, the president of the Lithuanian Banks' Association, said that, thanks to tight supervision, the country's banks remained sound, with rather good performance results and a strong capital base. However, some banks can be affected by the crisis environment and limited borrowing possibilities, he added.
Lietuvos Zinios

Ukio Bank reports figures
Ukio Bankas, the fast-growing Lithuanian commercial bank, reported LTL 95.7 million in unaudited net profit for the first eleven months of this year. Compared with the year-earlier figure of LTL 78.9 million, the net profit rose by 21.3 percent in January-November, the bank said in a statement to the Vilnius Stock Exchange (VSE). Last year the audited net profit of the bank soared to LTL 82.724 million, from LTL 47.383 million in 2006, while the net profit of the whole group grew to LTL 77.351 million, from LTL 43.485 million a year earlier. Lithuanian entrepreneur Vladimir Romanov held 32.95 percent of Ukio Bankas as of late November. Romanov's mother, Zinaida Romanova, owned an 8.73 percent stake.

Ikea buys Giriu Bizonas
Sweden's furniture retail giant Ikea has acquired 100 percent of Giriu Bizonas, Lithuania's chipboard and furniture producer. Ingka Beheer, a Dutch subsidiary of Ikea, purchased the stocks from Vakaru Medienos Grupe (Western Timber Group, or VMG) and Vilniaus Baldai (Vilnius Furniture), which held 75 percent and 25 percent of Giriu Bizonas, respectively. Meanwhile, Sigitas Paulauskas, a co-owner of VMG, intends to buy 50 percent of the group from Lithuania's business group SBA on Thursday and become the sole shareholder of VMG. Paulauskas said that the deal with Ikea was closed on Wednesday. He refused to disclose any financial details, however. "We will add [money] if the amount is not sufficient," Paulauskas said when asked whether the receipts on the stake in Giriu Bizonas would suffice to buy the shares in VMG from SBA.
Lietuvos Rytas

Wednesday, 10th of December

SEB Bank establishes a subsidiary
SEB Bankas, Lithuania's biggest bank by assets, has decided to establish a real estate subsidiary under the name of Litectus. The new company will manage and dispose of real property that SEB would take over as collateral from real estate management firms if they failed to meet their financial obligations to the bank. "The company is being established based on the long-term experience of the international group SEB and a similar practice during an economic recession in Sweden a couple of decades ago. [The bank] thus aims to contribute to efforts to ease the tension in the country's real estate market," SEB Bankas said in a press release on Tuesday. The SEB Group is setting up similar companies in Latvia and Estonia as well. Litectus will start operating after it has been registered with the Register of Legal Entities.
Respublika, Verslo Zinios, Lietuvos Rytas

Lithuania will ask EU for help after the Nuclear Power Plant is stopped
Lithuania will ask the European Union for additional 5 million tons of emission allowances from 2013, incoming Foreign Minister Vygaudas Usackas has said. "We are concerned about and interested in an interim compensatory mechanism, which would take into account the increase in carbon dioxide emissions after the shutdown of Ignalina Nuclear Power Plant (INPP). Therefore we ask for additional 5 million tons of carbon dioxide emission allowances from 2013, after the coming into effect of this climate change and energy package," Usackas said. That package would be one of the key issues to be considered at the EU summit on December 11-12, he added.
Kauno Diena

Record unemployment rate
All three Baltic countries recorded higher registered unemployment rates in November compared with October, according to data from the national employment agencies. Latvia's unemployment increased for the sixth successive month and Estonia's for the fifth month. In Lithuania, it was the second straight month of rising unemployment. Estonia's unemployment, as a percentage of working age population, remains the lowest in the Baltics, and Latvia's remains the highest. Lithuania's registered unemployment rate last month rose by 0.4 percentage points to 5.0 percent. Latvia's jobless rate increased by 0.5 points to 6.1 percent, and Estonia's by 0.6 points to 4.1 percent.
Lietuvos Rytas

Tuesday, 9th of December

Consumer prices contract by 0.2 percent
Consumer prices in Lithuania contracted by 0.2 percent in November compared with October, driven down by falling prices for fuel and footwear and for communication services, the Statistics Department reported on Monday. The last time the country recorded a monthly decline in the consumer price index was in September 2006, it said. The 12-month inflation rate in November reached 9.1 percent and the average annual inflation rate was 10.9 percent, it said. Rimantas Rudzkis, chief analyst at DnB Nord Bankas, said that the decline in November's CPI was in line with expectations. "The fall in oil prices in November was really significant, and fuel prices fell as well. This caused the shift from positive to negative territory. A sharp decline in consumption also pushed down inflation. The mood is now entirely different from what it was a year ago or even several months ago," he said. The analyst predicted that in December consumer prices would rise marginally or would continue to fall. The monthly decline in November's CPI was mostly due to a 6.3 percent drop in prices for goods and services in the transport group, as well as decreases of 0.5 percent in clothing and footwear prices and of 1 percent in communication costs. Lietuvos Zinios, Respublika, Lietuvos Rytas, Verslo Zinios

Court’s conclusions not valid
The investigation of the Competition Council, which has led to the imposition of a LTL 32 million fine on Lithuania's oil refinery Mazeikiu Nafta (Mazeikiai Oil), has not been comprehensive enough, hence its conclusions cannot be considered valid or unbiased, The Supreme Administrative Court of Lithuania (LVAT) has ruled. The court has also obliged the panel to conduct an additional investigation. The competition watchdog imposed a LTL 32 million l fine on Mazeikiu Nafta, which is controlled by Poland's PKN Orlen, back in 2005. The panel ruled that the company had violated the Competition Law and the competition provisions of the Treaty establishing the European Community. The decision on the fine was based on the findings of the investigation, which took about a year and a half and revealed that Mazeikiu Nafta abused its dominance by levying higher prices on its products in Lithuania compared with other Baltic countries.
Respublika, Kauno Diena, Lietuvos Rytas

No talks about litas devaluation
Lithuanian Prime Minister Andrius Kubilius has ruled out devaluing the national currency, the litas. "We have not and will not plan a devaluation of the litas," Kubilius told reporters. The prime minister underlined that the International Monetary Fund (IMF) could not force Lithuania to devalue its national currency. "It (the fund) cannot demand a devaluation as a condition, because we are not planning to borrow from the IMF. We do not see a need for this. We have a rather good crisis management plan," he said. The prime minister said that the first half of 2009 would be the most difficult time for Lithuania. "In the first half, we will manage with our own resources," he said, adding that borrowing could be done in the second half of the year, if needed. Gediminas Kirkilas, the incumbent Prime Minister, has also stated that there was no need to devaluate litas now.
Kauno Diena

Monday, 8th of December

International reserves fall in Lithuani
Lithuania's official international reserves fell by LTL 1.752 billion, 10.6 percent, in November from October to reach LTL 14.826 billion, the central bank reported on Friday. The reserves were down by LTL 3.375 billion, or 18.5 percent, compared with the start of the year. The monthly decline in November was due to decreases of LTL 1.14 billion in deposits of other monetary financial institutions and of LTL 463.1 million in central government deposits with the Bank of Lithuania. Also, the amount of currency in circulation declined by LTL 123.3 million and the central bank's external liabilities were down by LTL 54.2 million.
Verslo Zinios

Rokiskies Cheese reports figures
Rokiskio Suris (Rokiskis Cheese), one of the biggest dairy groups in Lithuania, on Friday reported LTL 622.894 million in consolidated sales revenue for 11 months of this year, down 0.06 percent from LTL 623.238 million a year earlier. The group's monthly sales for November edged up 0.6 percent year-on-year to LTL 52.28 million, it said. Rokiskio Suris is projecting consolidated sales of around LTL 700 million for the full year 2008. It does not anticipate an annual profit this year, but has not announced its lost forecast either. The group posted LTL 13.156 million in consolidated losses for the first nine months of this year, versus LTL 30.042 million in net profits a year earlier.
Verslo Zinios

Regional daily splits from Lietuvos Rytas
A regional daily based in Panevezys, in central Lithuania, is splitting away from Lietuvos Rytas as part of a reorganization underway at the country's biggest media group. Panevezio Rytas, a company set up by the editorial staff of Lietuvos Rytas' regional office in Panevezys, is taking over the publication of the regional daily newspaper on January 1, Vidmantas Strimaitis, the director of Lietuvos Rytas, said. Bronislovas Matelis, the editor-in-chief of the regional daily, is the sole shareholder of the new company. Strimaitis did not comment in detail on a further reorganization of the Lietuvos Rytas Group. He only confirmed that this process would not be over by the end of this year.
Verslo Zinios

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