Observer "Lietuva"
WEEK 28th

Saturday 12th of July, 2003

Power distribution grids heat passions
Experts and politicians are discussing whether competition and higher price of conditions for the Lithuanian capital are more important in privatisation of power distribution companies.
The Lithuanian minister of economy Petras Èësna believes that the conditions for the Lithuanian capital to join the power distribution business should be created during privatization of two Lithuanian power distribution companies.
According to Èësna, there are 15 local and foreign capital companies in Lithuania, annual turnover of which exceeds LTL 450 million. Three Lithuanian companies, NDX Energija, a company related to VP Market (its turnover for 2002 amounted to LTL 3.043 billion); Achemos Grupë (LTL 896 million) and Kaunas wholesaler Sanitex (LTL 942 million), have already expressed interest in privatization of the power grids.
(Lietuvos Zinios)

VP Market's sales continue growing
VP Market, operator of the biggest pan-Baltic retail network, posted turnover of LTL 1.65 billion in Lithuania, Latvia and Estonia in the first six months of this year, a 17 percent increase as compared with January-June of 2002.
Ignas Sta_kevièius, VP Market CEO, said that rapid expansion in Lithuania and Latvia sped up growth in sales.
"The results of the first half of the year evidence that our plans to boost turnover to EUR 1 billion are reasonable and feasible," Sta_kevièius said.
At present, VP Market is the largest retail trade operator in the Baltic countries. In pursuit of fast expansion VP Market has opened over 20 trade centres in Lithuania and Latvia since the beginning of the year.
VP Market occupied 22.4 percent of the Lithuanian retail trade market in Lithuania last year. Its biggest competitor in Lithuania is IKI retail trade chain.
Last year sales of the network soared to EUR 881.31 million in three Baltic states.
(Lietuvos Zinios, Respublika)

Swap of shares of energy companies approved
Representatives of the Ministry of Economy and E.ON Energie concern signed an agreement on a swap of shares of four energy companies. The Lithuanian Government has approved of this agreement this week.
The value of the deal signed by the Government and E.ON Energie is LTL 76.24 million. Following the agreement, the Government will hand over a 9.37 percent of shares in Rytø Skirstomieji Tinklai (Eastern Distribution Networks) and 3.72 percent of shares in Vakarø Skirstomieji Tinklai (Western Distribution Networks) to E.ON Energie, while E.ON Energie will return all the shares that it controls in Lietuvos Energija (Lithuanian Energy) and Lietuvos Elektrinë (Lithuanian Power Plant) to the Government.

Friday 11th of July, 2003

Euromoney announces the leader of Lithuanian market
Euromoney, the influential London-based magazine of the capital, equity and money markets, has named Vilniaus Bankas the best commercial bank in Lithuania for the fourth consecutive year.
The magazine pointed out that Vilniaus Bankas, owned by the Swedish financial group SEB, is Lithuania's largest bank with a market share of around 40 percent in assets, loans and deposits. Suprema reaped the title of the best brokerage company for mediation efforts in placement of a LTL 274 million worth issue of stock of the Lithuanian oil concern Mazeikiu Nafta to the Russian oil giant YUKOS.
Euromoney said that Prime Investment earned the award on successful completion of six M&A deals last year.
Zabolis Ir Partneriai showed off perfect results since the establishment of the company in September 2002, Euromoney said. The company was the only adviser to the Lithuanian diversified retailer Senukai in a deal on diverstment of the majority holding (over 50 percent) in the company to Finnish Kesko.
(Lietuvos Rytas)

Lithuania needs a loan of LTL 500 million
On Thursday, the minister of finance Dalia Grybauskaitë warned that the budget would not get LTL 40 million revenues because of deflation and LTL 60 million because of the declining US dollar value.
The Parliamentary Chairman Artûras Paulauskas claims that Lithuania will need a loan of LTL 500 million. The loan will be utilised for fulfilment of financial commitments related to the European Union.
According to the preliminary data, the state budget amounted to LTL 4.391 billion in the first half of this year, or 0.36 percent more than planned. This sum accounts for 46 percent of the projected annual revenues.

Plans of RIMI
RIMI retail trade chain controlled by Ahold concern suffering from economic problems has resolved to overtake Iki retail trade chain in 1.5 years. At present, IKI controls over 10 percent of the Lithuanian retail trade market, while RIMI has a 5.3 percent market share and controls 34 trade centres.
RIMI Lietuva plans to invest EUR 70 million (LTL 241.7 million) in Lithuania over three years and to open 10 new stores. Moreover, RIMI announced on Thursday that it is changing the trademark and plans to renew some of the already operating stores.
Iki and VP Market trade chains are rather sceptic about the competitor's plans.
Aibe, the retail trade chain that has the biggest number of stores in the Baltic countries, yields to RIMI only by 0.3 percent in terms of turnover. It plans to overtake the closest competitor this year.
(Lietuvos Zinios, Respublika, Verslo Zinios)

Thursday 10th of July, 2003

Oil reservoirs to be build in Butingë
Lithuania's oil concern Mazeikiu Nafta (Mazeikiai Oil), operated by Russia's oil giant YUKOS, launches construction of two oil reservoirs at the Butinge oil terminal. The project valued at nearly EUR 18.5 million is expected to be wrapped up by the end of 2003.
On Tuesday the board of the oil concern gave permission to the construction of new tanks, placing the construction costs into the investment programme of 2003.
Giedrius Karsokas, head of Mazeikiu Nafta communications office, reported that the oil concern would construct oil reservoirs with volume of 52,000 cubic meters. The Butinge terminal currently operates three oil tanks of the said capacity.
"The terminal is in need of new tanks, which would improve operations of Butinge," Karsokas pointed out reminding that YUKOS intended to boost capacities of the terminal from 8 to 14
million tons per year.
(Respublika, Lietuvos Zinios)

Government decided on energy companies
Government decided to privatise 71.35 percent of Rytu skirstomieji Tinklai (East Distributive Networks) and 77 percent of Vakarø Skirstomieji Tinklai (West Distributive Networks) share portfolio and accepted privatization programs of these companies. Privatization participants are German concern E.ON Energie, Finish Fortum and Lithuanian company NDX Energy owned by VP Market. Government approved shorter terms for privatization of important companies.
It is announced that turnover of companies should amount LTL 450 million and property of shareholders should amount to the value of sold property.
(Lietuvos Rytas, Lietuvos Zinios)

Banks and Credit Unions compete for students
Daily Kauno Diena publishes an article about competition of Lithuanian banks and Credit Unions in Kaunas. Banks provide many new services for students. Students can take consumer loans, housing loans and long-term loans. The main competitors to banks are credit unions that were established four- five years ago. Since October 2002, Lithuanian bank Snoras has issued 191 loans for LTL 1.6 million. 60 percent of loans for students were issued in Vilnius and 7 percent in Kaunas. Hansabankas starts offering loans for students from August 2003.
(Kauno Diena)

Wednesday 9th of July, 2003

Privatization of Alita
On Tuesday, Luigiterzo Bosca and representatives of the State Property Fund (SPF) discussed purchase of a controlling block of shares in Alita.
The procedure of negotiations and other preparatory issues were discussed in the meeting. Bosca offered about LTL 100 million for an 83.77 percent stake in Alita.
Luigiterzo Bosca, leader of the Italian company Bosca, represents the world-known Italian family that has been engaged in wine-making since 1831. The business group run by the family specializes in production of sparkling wine, wine and vermouth. Its products are sold and manufactured in many countries of the world.
STF has already started negotiations with Lithuania's alcohol wholesaler Artrio-2 for sale of state-owned Vilniaus Degtinë and Anyk_èiø Vynas. The winner in a tender for privatisation of Lithuania's largest alcohol manufacturer Stumbras, has not been announced yet.

Internet banking market is growing
The total number of Internet banking users registered at 10 Lithuanian banks reached 474,000 as of late June of 2003, up from 162,000 users a year ago.
The number of online banking users soared by around 55 percent over the first half of 2003, from approximately 305,000 at the start of the year.
Hansabankas remains the leading Internet banking service provider in Lithuania with the number of users of, the bank's online banking product, surging to 272,000 as of late June, from 77,000 a year ago. The rise was 57 percent compared to late December 2002.
Vilniaus Bankas, Lithuania's largest bank in terms of assets, had 172,700 online customers at the end of June, up from 79,500 users a year ago. The number of VB Internetas users increased by 48 percent compared to late December.
Nod/LB Lietuva had 12,500 Internet banking users at end-June, up from 3,700 users in late December. The bank launched its online banking service, Interneto Linija, in June 2002.
The banks forecast that the overall number of Internet banking users in Lithuania will surge to 550,000 by the end of this year.
(Verslo Zinios)

New trademark Best of Lithuania
Producers of Lithuania have plans to present a joint trademark of country's products and services Best of Lithuania in order to improve image of Lithuania.
Mykolas Aleliûnas, vice-president of the Lithuanian Industrialists' Confederation, met with the Parliamentary Chairman Artûras Paulauskas on Tuesday. After the meeting, he said the new trademark could be given to the products or goods by the end of this year.
Aleliûnas says he wishes that politicians supported and took care of this idea at least a bit.
The product bearing the trademark Best of Lithuania will have to be of high quality, attractive, having certain market positions and checked by time. In Aleliûnas' opinion, products of Panevë_ys-based Ekranas, companies Utenos Trikota_as, Roki_kio Sûris, Lithuanian meat and milk products, alcohol beverages, costumes and furniture deserve to be marked with the trademark Best of Lithuania.
(Lietuvos Zinios, Lietuvos Rytas)

Tuesday 8th of July, 2003

No less than 7 percent decline in beer market is forecasted
Lithuania's beer market, which last year expanded by nearly 18 percent, is expected to shrink by 7-9 percent this year, market participants said. The beer sales decreased mainly due to rather cool weather in the first six months.
The country's beer market was to decline by 7-8 percent over 2003, compared to the total year 2002, with average beer consumption per capita reaching 72 litres, according to Audrius Vidzys, president of Lithuania's Brewers Association. A 7-9 percent drop in beer sales was also anticipated by Romualdas Dunauskas, CEO of Siauliai-based brewery Gubernija.
The national beer market last year grew by 17.6 percent, compared to 2001, while beer sales in 2002 totalled 258.72 million litres. The country's ten largest breweries, comprising Lithuania's Brewers' Association, sold a total of 112.45 million litres of beer in January-June of this year, down by 7.4 percent compared to the first half of 2002.

Shoemakers will disappear from Kaunas Old Town
The largest Lithuanian shoemaker company Lituanica is going to sell the complex of buildings. The money received from the deal will be used for repaying LTL 6 million debt to the state budget. The rest of income brought by the sales of premises will be invested in the new factory to be built near Via Baltica highway. Company's turnover declined by 10 percent, down to LTL 19.652 million, last year. Its export amounted to LTL 10.191 million that is 32.1 percent less than in the respective period in 2001. About 61 percent of company's production was exported to Denmark, 19 percent to German and Great Britain. Lituanica netted LTL 2.343 million profit, or 11.7 times more if compared to the previous year. The profit brought by the main activity amounted to LTL 107.8 million.
In 2002, Lituanica produced 508,000 pairs of shoes, an 11.8 percent decline year-on-year.
(Lietuvos Rytas, Verslo Zinios)

The State allows Mazeikiu Nafta to breathe easily
Shareholders of the oil refinery company Ma_eikiø Nafta (Ma_eikiai Oil or MN) are to sign the renewed administration Agreement and the Investment and Shareholders' Agreement on July 8. Following these agreements, the Lithuanian banks will take over LTL 181 million MN credits at several times smaller interest rate.
According to the calculations of the oil refinery, it will economise LTL 30 million this year thanks to the company's refinancing. Relying on V_ sources, MN does not expect profit for this year.
The Finance Ministry has reported that based on the company's status on May 31, 2003, the oil refinery has received loans backed up by the state worth USD 242.3 million; USD 200.3 million have not been repaid to foreign creditors yet. The interest rate is from 6-mohth LIBOR +0.875% to 10 percent.
(Verslo Zinios, Kauno Diena)

Monday 7th of July, 2003

VP Market overtakes competitors in Lithuania
The largest part of LTL 8.345 billion turnover of Lithuania retail trade market in 2002 was that of the retail trade chain VP Market. The main VP Market's competitor is the retail trade chain Iki owned by the Belgian brothers Ortiz. The Competition Council has announced that the retail trade chain VP Market controls 22.4 percent of the Lithuanian market, Iki 10.1 percent, Rimi owned by ICA Baltic gained 3.5 percent, Aibë 5 percent and small prices retail trade chain Norfos Ma_mena – 4.2 percent. VP Market owned 161 shops and 112 sq. meteres of trading area, that is 8.8 percent of Lithuania trading area in Lithuania. Retail trade chain
Iki owned 107 shops about half oh them are in the biggest towns of Lithuania. Rimi Lituva owned 35 shops, Norfos Ma_mena – 45 and Aibë – 362 shops and 71,000 sq meters of trading area in Lithuania.

The Seimas opened the way for establishment of investment funds
The Seimas expanded facilities of Lithuania residents to invest in investment funds and legalized corporate investment in the shape of investment funds. Previously residents of Lithuania could invest in the shape of variable capital companies. The members of the Seimas gave solid votes for a portfolio of the law projects for corporate investments individuals and controlling investment companies.
According to Kêstutis Glaveckas, a member of the Finance and Budget committee, the first investment funds are going to originate from the beginning of the year 2004.
Presently only two investment funds function in Lithuania. NSEL 30 Indekso Fondas invests in shares of Lithuanian companies; the other investment fund is Hansa Pinigø Rinkos Fondas that invests in monetary tools of the market.
(Kauno Dien

JT International founded separate office for Baltic region
JT International is the world's third largest international tobacco company; it has finally climbed over 10 percent barrier in Lithuania. JT International is a tobacco company that produces cigarette brands familiar to consumers of Lithuania- Camel, Winston and Monte Carlo.
JT International decided to treat the three Baltic countries as a separate region and establish a separate representative office for them with the headquarters in Vilnius. Last year tobacco market decreased by 5-6 percent on Lithuania. decrease was influenced by the social and demographic factors.

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