Energy experts: State control over gas supply - a political ambition

In July, state-owned energy transmission operator AS Augstsprieguma tīkls (AST) bought shares in the gas transmission operator Conexus Baltic Grid, gaining control of the company with a majority holding of 68.46%. This has caused a discussion between the State and experts, Latvian Radio reported August 2.

The State says that this deal promotes the country's energy security, independence and development. However, experts believe that there was no point in getting state control - it is merely a matter of political ambition.

Conexus Baltic Grid JSC (Conexus) is the unified natural gas storage and transmission system operator in Latvia, Estonia and Finland. Conexus manages also Inčukalns underground gas storage, which is the only storage of this kind in the region and is an essential element of energy security.

Edijs Šaicāns, director of the Energy Market and Infrastructure Department of the Ministry of Economics, said: “It is clear that the State, gaining control over this strategically important company, is in charge of the entire natural gas supply system. The second thing, which is also important, is that if a company is under State control, its strategic development can be aligned with the objectives of the national energy policy. And a third, which is a matter of no less importance, is the economic value of the company and the fact that the shares of that company are sufficiently valued at the moment. This is reflected in both the existing financial indicators of Conexus Baltic Grid and future forecasts.”

He said that this deal was primarily “not about end-users.” For gas consumers, this makes it clear that the natural gas supply system is in the hands of the State. “And there will be no situation where there are defects or impressions that do not cause gas to be received. In other words, this is the backbone of the gas system, which is currently under national management.

This means that the natural gas supply system is highly secure,” Šaicāns said.

How much this level of security has cost our country, is not revealed. It is estimated that the amount ranges from EUR 79 million posted for shares on the market at the beginning, up to EUR 300 million invested by the State in the equity capital of the share buyer company Augstsprieguma Tīkls (AST) in June this year.

Edijs Šaicāns denied that the sum was as large as EUR 300 million.

Energy expert Reinis Āboltiņš pointed out that the State should now assess whether it needs all the purchased shares. Arguments about the independence and security of the energy market are somewhat overstated, he said.

“Decision-making independence from traders or other influences is required in the so-called gas directive of the European Union. If the conditions of this directive are met and their compliance is carefully monitored by the regulatory authorities (…), there should be no problem with taking decisions (..) that, firstly, are beneficial to economic operators using infrastructure services in the gas transmission system, and also to their users,” Āboltiņš explained.

Āboltiņš said that it didn't mean the shares under state control are meaningless. The question is just the price at which the state has gained control.

In this respect, energy expert Juris Ozolins said:

“I have to say, nothing changed. It will not be noticed by markets or consumers.

The government bought some additional seats on the council. There's nothing to do with energy independence. The deal itself doesn't change anything physically. This deal could not be avoided because four or five years ago, there were pre-emptive rights established for the State, which already meant that the State would purchase these shares. (…)

The purchase has satisfied political ambitions, but at a high cost.”

Ozolins believes the country doesn't need all the purchased shares of Conexus. He also doubts whether there would be an interest in the market, at least with the price that Latvia spent on them.

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