Oil deal

Latvia sold state stake in Ventspils Nafta

The Latvian government yesterday finally privatized a 39% stake in the oil transshipment holding Ventspils Nafta. The auction was held in open form on the Riga Stock Exchange. According to preliminary data, the final price per share was 1.84 lats, with a starting price of 1.81 lats. Thus, the state sold the entire stake for $134 million. The name of the buyer has not yet been disclosed; according to unofficial data, the state share was distributed among several investors, with one of them purchasing at least half of the stake. According to the chairman of the board of the Latvian privatization agency, Artur Grants, the deal will be completed within three working days, when the money for the holding's shares will be transferred to the agency's account.

The Lithuanian authorities do not hide that they are disappointed with the price of the Ventspils holding, which was once one of the main oil transshipment points for the export of Russian oil. Latvian Minister of Economy Aigar Shtokenbergs immediately after the announcement of the auction results said that he had hoped for a higher price. In his opinion, many serious investors were scared off by the turmoil raised around the process of privatization of the holding, including disagreements between shareholders. Mr. Grants is also dissatisfied with the results of the auction. "The auction took place and the price was higher than the minimum price. We, of course, hoped that it would be even higher, but perhaps it reflects the real market value," he told the Baltic news agency BNS.

However, experts are not surprised by the price of the transaction with state shares of Ventspils Nafta. Previously, a significant flow of Russian oil through the Polotsk-Ventspils pipeline went through Ventspils to Europe, but after Transneft stopped the transit of raw materials through Latvia in 2003, the port is in a very deplorable state - last year the company received more than 32 million euros loss. The main income of the enterprise comes from the transshipment of petroleum products - 4.1 million tons (49.39% of the total cargo flow) at the end of 2005.

Ventspils Nafta includes the oil and petroleum products transhipment company Ventspils Naftas Terminals, the pipeline companies LatRosTrans and Rietumu caurulvadu sistema, the Latvian Shipping Company, as well as companies involved in printing, real estate and publishing. The main shareholder of Ventspils Nafta, along with the state, is Latvijas Naftas Transits (LNT), which owns 42.3% of the shares, the remaining 19% is distributed among private investors. The Latvian government has long dreamed of getting rid of its stake. Initially, it was planned to combine the shares of LNT and the government for a more profitable sale, but the parties could not agree. And last summer, Latvia, having signed an agreement with a consortium of Parex Bank, Suprema Securities and IBS Suprema on organizing the sale, put its share up for auction through the Riga Stock Exchange. The state was going to gain at least $125 million, but no one bought the paper at that price.

The Polish PKN Orlen spoke about its interest in Ventspils in August of this year, planning to use it as a terminal for transporting petroleum products from the Mazeikiu Nafta refinery, the purchase agreement for which was signed from YUKOS in May. In addition, the Kazakh Kazmunaigas was interested in the state stake in Ventspils. Rosneft was also named among the candidates. However, this week the first vice-president of the Russian company, Nikolai Borisenko, assured that Rosneft does not intend to participate in the auction. The day before the auction, representatives of Ventspils Nafta stated that during the road show in Tallinn, Riga, Helsinki, Stockholm, London, Frankfurt and Paris, investors, especially international ones, showed great interest in the state stake. And earlier, the chairman of the board of the holding, Olga Petersone, emphasized that “the best scenario for the future of VN is a buyer from Russia involved in the oil business.”

With the sale of the state stake in Ventspils Nafta, the question remains open of how the relationship of the new shareholder, who came instead of the state, with the remaining private shareholders will be built. The owners of Latvijas Naftas Transits are not officially disclosed. But usually in this regard in Latvia they mention the so-called “Ventspils group”, headed by the mayor of Ventspils Aivar Lembergs. According to unofficial information, there was discord within this group. The fact is that in the summer the Latvian Prosecutor General's Office charged the mayor with laundering “dirty” money, bribery and conflict of interest. This week, the country's president, Vaira Vike-Freiberga, made it clear that she is not going to nominate Aivars Lembergs for the prime minister's post. All this, experts believe, will undoubtedly affect the relations of Ventspils Nafta shareholders.

Danuta DEMBOVSKA, Riga, Anna GORSHKOVA