Observer "Lietuva"

Lithuania Business News: Archive 2003-

WEEK 29/2009

Saturday, 18th of July

Will invest LTL 1 billion
Russia's gas giant Gazprom, the owner of Kauno Termofikacine Elektrine (Kaunas Combined Heat and Power Plant, or KTE), will be able to invest about LTL 1 billion into the construction of a new thermal power plant in Kaunas. The executives of Gazprom, KTE and Kauno Energija (Kaunas Energy), the central heating supplier to Lithuania's second-largest city, agreed at meeting to allow the Russian concern to increase the initially planned amount of investments and coordinate a new schedule of their implementation, KTE said in a statement.
Lietuvos Rytas

Revision of prices twice a year
The Lithuanian parliament on Friday passed amendments to the Law on Natural Gas capping gas import and supply companies' pretax profits from transportation activities at 5 percent of their assets and imposing the requirement to revise gas prices for households twice a year. Danas Janulionis, a member of the National Commission for Prices and Energy, claimed that profitability from supply activities had been capped in 2008. The natural gas import and transportation company Lietuvos Dujos (Lithuanian Gas) said that its profitability from transportation activities currently amounts to around 8 percent.

State balance
The value of Lithuania's financial assets edged up by 0.9 percent over the first quarter of this year, to reach LTL 326.9 billion as of end-March. In the first quarter of 2008, the assets grew by 22.9 percent. The slowdown in the growth of financial assets began in all economic sectors, except for central government, in 2008 and continued in the first quarter of this year. Lithuania's liabilities made up LTL 388.9 billion of late March. Their growth slowed down to 3.4 percent in January-March, from 23.8 percent in the first quarter of 2008. Central government liabilities posted the sharpest increase - of 32.5 percent - in the first quarter of this year. The list of largest debtors is topped by households and non-financial corporations. The main lenders are the monetary financial institutions. As of end-March, foreign investors owned 51.6 percent of all short- and long-term debt securities issued in Lithuania and also held 23.7 percent of all shares issued.

Friday, 17th of July

Are late to pay
The arrears of Lithuania's public sector made up approximately LTL 300 million as of early June, Finance Minister Ingrida Simonyte has said. The debt of the public budget totaled some LTL 30 million, with the remaining amount being owed by the budgets of the local authorities. The debts of the companies controlled by local authorities were the largest, she told the MPs on Thursday. However, Simonyte would not detail the debts for which services or to which sectors were the largest.
Lietuvos Rytas, Verslo Zinios, Respublika

Banks take away Lithuanian money
Scandinavia's banks have withdrawn some LTL 3-4 billion in credit resources from their Lithuanian subsidiaries this year, Raimondas Kuodis, Director of the Economics Department of the Bank of Lithuania, has confirmed. He also claims that particularly high interest on litas-denominated loans reflects mistrust in the stability of Lithuania's currency. "Many companies are unwilling to invest now since the uncertainties concerning the economic outlook are very significant, and the banks are no exception. When some furniture manufacturers make no investments, the effects of that to the economy are not that significant. Yet the consequences when the banks stop investments, i.e. the issue of loans, are of systemic nature. The loan portfolio in the banking system has been shrinking for several consecutive months, in other words, the banks get back more money than they lend, and they, of course, take this money out - they pay back their loans, which they used for this credit expansion in Lithuania," Kuodis said in an interview to the public radio station Lietuvos Radijas (Lithuanian Radio) on Thursday.
Verslo Zinios, Lietuvos Rytas

Swedish banks promised reliability
Heads of Sweden's banks with operations in Lithuania assured Lithuanian President Dalia Grybauskaite in Stockholm of their long-term intentions in the Baltic state and efforts to secure work of their subsidiaries. Presidential spokesman Linas Balsys told BNS on Thursday that the meeting between the president and the bank executives focused on the economic situation, business conditions and the operations of banks in Lithuania, however, did not discuss specific matters. "The president expressed a belief that Lithuania attaches major importance to guaranteed operations of the banks in Lithuania because of their significance to the country's financial market and economy. They did not go into further detail of business conditions and bank operations because it was not a conversation of business partners but a review of principal attitudes," said Balsys. In his words, principal attitudes of SEB and Swedbank CEOs are "very positive." "The bankers said they had long-term interests in Lithuania and would make every effort to guarantee operations of bank subsidiaries in Lithuania, liquidity and adequate capital. This was important for the president to hear and she heard it," the spokesman added.
Verslo Zinios, Lietuvos Rytas, Lietuvos Zinios, Respublika

Thursday, 16th of July

Requests money
Poland's PKN Orlen has filed a 250-million-US-dollar suit in a London arbitration court against the Dutch-based Yukos International for making allegedly false statements when it sold the Lithuanian oil refinery Mazeikiu Nafta (Mazeikiai Oil) in 2006. The Polish oil group said in a statement to the Warsaw Stock Exchange on Wednesday that it reserved the right to increase its demands or to make additional claims. It said that the arbitration proceedings would take place in London, in an arbitration tribunal composed of three arbiters. PKN Orlen went to arbitration after Yukos rejected its compensation claim. The Polish group sent its claim for compensation to Yukos International, a subsidiary of the defunct Russian oil company Yukos, in early December last year. Yukos has deposited 250 million US dollars in a special account, to be paid out in case of such claims. The Polish group claims that the actual status of Mazeikiu Nafta was different from what Yukos said it was when it sold the shares in the Lithuanian company in mid-December 2006.
Lietuvos Rytas, Verslo Zinios

Proposed application
Lithuania, Latvia and Sweden on Wednesday submitted a joint application to the European Commission (EC) on the allocation of EUR 175 million earmarked for an approximately LTL 2-2.5 billion worth project on the interconnection of Lithuania's and Sweden's power grids. Some EUR 44 million is expected to be allocated for Latvia's domestic network and the remaining EUR 131 million for the link between Sweden and Lithuania, the power transmission system operator Lietuvos Energija said. The application was submitted to the EC Directorate-General for Energy and Transport, Antanas Malikenas, CEO of InterLinks, a subsidiary of the national energy company Leo LT. The application was signed by Latvia's Latvenergo, Sweden's Svenska Kraftnat and Lithuania's Central Project Management Agency (CPMA), which acts in concert with Lietuvos Energija. The application includes a comprehensive description of the project, yet it contains no specific details, such as the shares of partners in the project or the portions of the EU funding to be allocated to each partner.
Lietuvos Rytas, Verslo Zinios

Lifosa suffered LTL 13 million of losses during half a year
Lithuania's phosphate fertilizer manufacturer Lifosa on Wednesday reported a net loss of LTL 13.106 million for the first half of this year, compared with a net profit of LTL 265.818 million in the same period last year. The net loss for the second quarter alone was LTL 5.393 million, versus a net profit of LTL 195.553 million a year ago. Lifosa's first-half sale revenues almost halved to LTL 463.146 million, down from LTL 889.664 million a year ago. Sales revenues for June alone slumped to LTL 55.293 million, down from LTL 204.419 million. The Russian mineral fertilizer group Eurochem held a 91.15 percent stake in the fertilizer plant, which is located in Kedainiai, in central Lithuania, at the start of this year. Eurochem A.M. owned 3.65 percent of shares and Sagitarius International held 1.08 percent.
Verslo Zinios

Wednesday, 15th of July

Mitsubishi became interested
Japan's Mitsubishi, one of the world's biggest manufacturers of nuclear reactors, is interested in the possibility of manufacturing reactors to Lithuania's planned new nuclear power plant, Prime Minister Andrius Kubilius said on Tuesday. "Their interest in our plans is important for us. We think that we can use this to develop wider contacts as well," he told reporters after meeting with representatives from the Japanese corporation. Representatives of other reactor manufacturers, including Areva (France), Endesa (Spain), General Electric-Hitachi and Westinghouse (US), Nukem (UK), Mitsubishi Heavy Industries (Japan) and others, have also visited Lithuania.
Lietuvos Rytas

Bought cheaper milk
The average natural milk purchase price in Lithuania slumped down by 32.5 percent in June from a year ago to LTL 540.3 per ton, the Agriculture Ministry reported on Tuesday. The price edged down by 0.2 percent compared with May. The total volume of natural milk purchased from farmers in June dropped by 9.6 percent year-on-year to 124,800 tons. Milk purchase volumes in the first half of this year fell by 6.8 percent compared with the same period last year to reach 587,700 tons, the ministry said.
Verslo Zinios

There are no billions left for European roads
Private companies may be encouraged to contribute to the financing of the European-gauge railway Rail Baltica, which is expected to be built by 2014. "Today we are open to various solutions; we are now analyzing new possibilities for the implementation of Rail Baltica project, which have not been considered before. We believe that private capital could be involved in this project through a public-private partnership," Transport Minister Eligijus Masiulis said in a statement. Pavel Telicka, the European Commission's coordinator for Rail Baltica, and Masiulis agreed during a meeting in Vilnius that cheaper and more efficient solutions to implement the project should be looked for, the Transport Ministry reported. Telicka praised Lithuania's efforts to implement the project and singled Vilnius out as one of the driving forces promoting the development of Rail Baltica, the ministry's statement said. As estimated by experts, the construction of a railway line till Kaunas would cost some LTL 1.55 billion, while the support that could be obtained from the European Union (EU) funds would only reach some LTL 0.6 billion. Lithuania would have to bear the remaining costs - almost LTL 1 billion, which was "not possible" amid current economic circumstances.
Respublika, Lietuvos Rytas, Verslo Zinios

Tuesday, 14th of July

Will change name
Lithuania's only oil refinery Mazeikiu Nafta (Mazeikiai Oil), which is owned by Poland's PKN Orlen, is set to change its name to Orlen Lietuva (Orlen Lithuania). Wojciech Wroblewski, an adviser to PKN Orlen's management board, confirmed this to Lithuanian Radio. He said that the group had plans to change the name of Mazeikiu Nafta, in line with its policy to rename the companies it acquires. However, he did not say when the Lithuanian refinery could be renamed. PKN Orlen has been the sole shareholder of Mazeikiu Nafta since late April.
Lietuvos Rytas

Establishes a company to control real estate
DnB Nord Bankas, the third-largest Lithuanian bank by assets, has decided to establish a subsidiary to prepare for efficient management of real property. The new company will be 100 percent owned by DnB Nord Bankas and will operate under the name of Intractus, the bank said in a statement to the NASDAQ OMX Vilnius stock exchange on Monday. DnB Nord Bankas has reported a loss of LTL 136.4 million for the first half of this year due to provisions for bad loans. The bulk of provisions, LTL 294.6 million in total, were on loans to customers operating in the real estate development, construction and transport sectors.
Verslo Zinios

Swedbank changed its forecasts
Lithuania's gross domestic product (GDP) will contract by 16 percent this year, the analysts of Swedbank financial group project. In 2010 the decline will slow down to 3 percent, the bank said in its Baltic Outlook as updated in July. Late in April the bank's analysts projected that Lithuania's economy would contract by 13 percent this year and envisaged a 3 percent decline for 2010. According to Swedbank's analysts, the businesses of the Baltic countries were adapting to economic developments faster and better than expected, yet economic recovery in Lithuania, Latvia and Estonia will be slow and growth could only be expected in the second half of 2010. "Although the Baltic countries are among the hardest-hit economies in the world, they may recover being stronger and with a better growth outlook. Yet joint public and private sector efforts are required for that," the bank said in the outlook.
Verslo Zinios

Monday, 13th of July

Lithuania's financially-troubled refrigerator manufacturer Snaige has completed the private placement of a bond issue with a nominal value of LTL 696,200 aimed at holders of its bonds which matured in early April but were not redeemed. The bondholders were able to exchange their matured-but-unredeemed securities for new securities at a one-to-one ratio, the company said in a statement to the NASDAQ OMX Vilnius stock exchange on Friday. Around a third of the remaining unredeemed bond holders agreed to restructure the debt this way, it said. The new bond issue with a maturity of 274 days carries an annual coupon rate of 14 percent, the same rate as the 20-million-litas bond issue that Snaige failed to redeem on April 6.
Verslo Zinios

Interest rate of savings note grows up to 7.79 percent
The Lithuanian government is launching next Tuesday the fifth issue of savings notes at an annual interest rate of 7.79 percent, up from 7.72 percent interest paid on the fourth issue. The three previous issues of retail securities carried annual interest rates of 7.22 percent, 7.03 percent and 7.05 percent. The Lithuanian government has to date raised a total of LTL 3.909 million through savings note issues.
Verslo Zinios

Delays pushed to losses
DnB Nord Bankas, the third-largest Lithuanian bank by assets, on Friday reported a loss of LTL 136.4 million for the first half of this year, versus a net profit of LTL 68.6 million a year ago. DnB Nord Bankas said it set aside LTL 189 million in provisions in the second quarter of 2009 alone as it continued to pursue a conservative customer risk valuation policy amid the sharp economic downturn in Lithuania. "The bank's financial result mirrors troubled macro-economic developments in Lithuania that we offset somewhat through growth of the bank's income, tight spending control, constant efforts to streamline the bank's business lines and further improvement of operating efficiency," DnB Nord Bankas President and Chairman Werner Schilli said in a press release. The bank said its first-half operating profit before taxes and provisions came in at LTL 129 million, up 37.1 percent from LL 94.1 million a year ago. The bulk of provisions in the first half, LTL 294.6 million in total, were on loans extended to customers operating in the real estate development, construction and transport sectors, it said.
Verslo Zinios

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