State gains control of Latvia's gas storage and transmission operator

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State-owned energy transmission operator AS Augstsprieguma tīkls (AST) has concluded a deal with Russian energy giant Gazprom on the purchase of 34.10% of shares in the gas transmission operator Conexus Baltic Grid, thereby increasing its overall control of the company to a majority holding of 68.46%, the Ministry of Economy said in a media statement July 21.

“This deal ensures full state control of the gas transmission system in the country, strengthening the state's energy security and promoting further development of the gas system in line with the energy policy objectives,” the Ministry said.

In line with the changes in the shareholder structure, the future management of Conexus Baltic Grid will be provided by AST together with private equity firm MM Infrastructure Investments Europe Limited, which holds 29.06%, and the other shareholders who together own 2.48%.

Gazprom held an auction at the end of December last year, offering its Russian-owned shares of "Conexus" to the markets. Latvia did not participate in this auction. However, Latvia has a pre-emptive right to acquire such shares under the terms of the Energy Law and Gazprom approached the Latvian government  early this year to see whether Latvia would use its pre-emptive right or not.

The Economics Ministry carried out an assessment of the potential transaction and concluded that majority control of Conexus was in the long-term interest of the country, so the government decided to exercise the right to pre-emptive the shares of Conexus owned by Gazprom. The final decision was made by the government in May.

Edijs Šaicāns, director of the Department of Energy Market and Infrastructure at the Ministry of Economics, told Latvian Television that currently the amount and financial details of the deal isn't disclosed, given the interests of the other party.

When asked whether the deal was beneficial to the State, he said that the decision to exercise the right to pre-emptive shares was taken after assessing all the circumstances and public interests.

Šaicāns said the company played an important role in the energy sector, and receiving an offer from the seller, the state evaluated 3 aspects: by gaining control over the company, the state is stepping up energy security, is consistent with energy policy objectives, and obtaining economically valuable shares.

Whether the shares could be sold in the future would have to be decided by the government and there are no such plans at the moment, said Šaicāns.

Conexus Baltic Grid JSC (Conexus) is the unified natural gas storage and transmission system operator in Latvia, Estonia and Finland. The Energy Law and European Union (EU) requires that, as per the liberalization of the gas market in December 2017, “Conexus” should be legally independent of natural gas supply operators engaged in the trade and distribution of natural gas.

In mid-December 2017, "AS Augstsprieguma tīkls" concluded a transaction with the German energy company, Uniper Ruhrgas International GmbH, on the purchase of 18.31% of "Conexus" shares. Shortly afterwards, AST also purchased a share of 16.05% of "Conexus" owned by "Itera Latvija". Thus, the Latvian State had a total of 34,36% of the shares in "Conexus"  prior to the new deal, which doubles its holding. 


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