LG has twice announced in August that it will not have sufficient gas reserves at its disposal to meet the requirements of the law on the amount of gas stored in Inčukalns for households. These statements, which contradict the Ministry of Economics' (EM) data, suggest that LG does not want or cannot provide gas to the required extent before the heating season. In the context of the war initiated by Russia, there is another unresolved problem: in Latvia, the LG subsidiary is responsible for delivering gas to consumers, the largest shareholder of which is Russia's Gazprom.
By ending the Russian gas monopoly several years ago, the main focus was on the independence of the large pipelines and the underground storage of Inčukalns. However, the small pipelines, or the gas distribution system, remained under the auspices of the former monopoly LG.
Energy consultant Gatis Ābele believes LG cannot be relied on at this time because it is not detached from the shareholder Gazprom.
He said: “As from last year, when a deliberate restricting of Russian gas supplies in Europe began, price-pushing, we already saw that “Latvijas Gāze” did not think about seeking alternative sources of supply, since this would contradict its shareholders.”
Therefore, in his opinion, Gazprom's influence on gas distribution in Latvia is risky. “What happened in Europe with the Nord Stream pipeline – Gazprom could calmly declare that it lacked parts, turbines for some part of Nord Stream, and we can no longer supply you with gas. It would be enough to reduce pressure in a couple of plants and declare that existing plants are not working, sanctions are preventing us from providing it, and it is theoretically possible to do so on deliveries to Latvenergo,” Ābele said as one of the potential risks.
The gas distribution is carried out by the LG subsidiary “Gaso”, which has the same owners: “Gazprom”, “Itera Latvija”, the Luxembourg investment fund “Marguerite” and the German “Uniper Ruhrgas”. On important issues, the majority of votes is provided by Gazprom with “Itera”, the owners of which are “Rosneft” and Juris Savickis. They have six out of eleven votes on the boards of LG and Gaso, whose board members include high-level Gazprom employees.
Whether the gas distribution operator “Gaso” is indeed independent and not influenced by LG, it is examined annually by the public service regulator. So far, formally everything has been fine.
“Yes, we had this conviction by looking at both the documents they submitted and requesting additional information and the auditors' opinion,” said Alda Ozola, Chairman of the Public Service Regulatory Commission. She has no information about informal links between the two companies that cannot be studied from reports or minutes of meetings.
However, LG's balance of power changed significantly this summer. In June, the majority of the Saeima voted that Russian and Belarusian companies should not have significant participation in capital companies that are important for national security. Accordingly, such shareholders also lose voting rights to LG.
“Gazprom and Itera are subject to the restrictions of the National Security Law on their denial of voting rights and participation in meetings of “Latvijas Gāze” shareholders, as the influence [on “Gaso”] is being exercised through this company,” said Kaspars Lore, director of the EM Legal Department.
This means that Marguerite, Uniper, and small shareholders now have voting rights in the company. This may have allowed the full separation of the distribution system operator “Gaso” from LG in recent months to be started. It was offered unsuccessfully by the Marguerite shareholder several years ago.
LG, however, interprets the latest changes to the National Security Law differently than EM. LG has allowed Gazprom to participate in the meetings of shareholders, including the meeting on August 8, but Gazprom did not vote on the reorganization, according to De Facto. Itera Latvija did not participate in the meetings of shareholders.
The ministry's spokesman, Lore, confirmed that even by registering Gazprom for the shareholder meeting, “the law has been violated.”
Gazprom's participation has not hindered the process of divesting Gaso so far but it can prove an obstacle in the future.
Lore confirmed that the company's management would talk about the correct interpretation of the law, namely that Gazprom should be kept away from shareholder meetings.
“If the Board of LG does not agree with our vision and, somehow, by registering the rights of participation of Gazprom and Itera, will create obstacles to the continuation of the reorganization, we will use all legal instruments to implement the reorganization,” Lore said.
One of LG's shareholders, Savickis, agreed to a call, saying that Gazprom still participates in shareholder meetings, and he trusts LG's leadership, which allows Gazprom's representatives to be present in decision-making.
According to Savickis, LG western shareholders' desire to separate the distribution company from the gas trader is attributable to the interest in selling their investments as much as possible and leaving Latvia.
