TGS Baltic advised the Ministry of Economics on the acquisition of 18.31% of the shares of the natural gas transmission and storage system operator AS Conexus Baltic Grid by the Latvian electricity transmission system operator AS Augstsprieguma tīkls from the German energy company Uniper Ruhrgas International GmbH.

The Latvian Cabinet of Ministers took the decision to acquire 18.31% of shares of Inčukalns underground natural gas storage operator AS Conexus Baltic Grid owned by Uniper Ruhrgas International GmbH. In accordance with this decision, theLatvian electricity transmission system operator AS Augstsprieguma tīkls (AST) completed the transaction with the German energy company Uniper Ruhrgas International GmbH (Uniper) on the purchase of 18.31% of the shares owned by the later in the natural gas transmission and storage system operator AS Conexus Baltic Grid (Conexus).

Based on the assessment and opinions of the responsible authorities and involved independent consultants, the Government has concluded that the purchase of Conexus shares is an important issue of national energy independence and security. At the same time, by purchasing the shares of Inčukalns underground gas storage operator, the State aims to continue the movement towards establishment of the Baltic and Finnish regional gas market by 2020.

It will be possible to fully achieve the goal defined by the Government by ensuring the development of appropriate infrastructure (Estonian-Finnish interconnection Baltic connector and Lithuanian-Polish interconnection GIPL), reaching high market efficiency and equal competition, as well as ensuring gas price alignment with the Central Europe. The purchase of Conexus shares is also a profitable transaction to the Latvian Government based on the assessment carried out according to the internationally recognised assessment methods.

The decision on the purchase of 18.31% of the shares of Conexus into the possession of AST was adopted, considering the particular experience of AST in the management of electricity transmission assets and operation of the infrastructure. The purchase of the shares will give additional options for the AST in ensuring the electricity supply.

In 2016, the Saeima adopted the decision on opening the natural gas market to free competition as from 3 April 2017 by supporting the amendments to the Energy Law. At the same time, it was stated that, up until the opening of the market, the vertically integrated undertaking AS Latvijas Gāze was obliged to create two legally independent companies – one that would perform the duties of the transmission system operator and storage system operator, and the other, which would implement the functions of the natural gas distribution system operator and trader. Hence, at the beginning of 2017, AS Conexus Baltic Grid was established by spin-off of the natural gas transmission and storage infrastructure, i.e. Inčukalns underground gas storage and the transmission pipeline infrastructure owned by it, from AS Latvijas Gāze.

Likewise, the Energy Law provided that until 31 December 2017 Conexus should be legally independent from the natural gas supply merchants engaged in natural gas trading and distribution. Consequently, the major shareholders of Conexus as the natural gas transmission and storage system operator engaged also in the trading of natural gas and natural gas extraction (i.e., PAS Gazprom, SIA Itera Latvija and Uniper) had to sell their own shares up until 31 December 2017.

Before this deal Conexus Baltic Grid had the same major owners as Latvijas Gāze. Namely, Russian Gazprom (34.1%), indirectly the Marguerite Fund established by the European Investment Bank (29.1%), the German Uniper Ruhrgas International GmbH (18.3%), and Itera Latvia (16%).

On the same topic

The Ministry of Economics press release: 

AS Augstsprieguma tīkls press release: 

AS Conexus Baltic Grid is a unified natural gas transmission and storage operator in Latvia. The company cooperates with legal entities - natural gas traders in the Baltic Sea Region - in accordance with the tariffs for natural gas transmission system services set by the Public Utilities Commission. The Company manages one of the most modern natural gas storage facilities in Europe – Inčukalns underground gas storage, which is an important strategic object in the entire Baltic Sea region. 

AS Augstsprieguma tīkls is an independent electricity transmission system operator carrying out the operational management of the transmission system and providing secure, reliable transmission of electricity. The operations of AS Augstsprieguma tīkls were commenced in 1939. All the shares of the company are owned by the State of Latvia, and the Ministry of Finance is the holder of those shares. According to the provisions of the Energy Law, the electricity transmission system may not be disposed of.

TGS Baltic legal consultants to the Ministry of Economics as a part of consortium led by Rothschild: 

TGS Baltic ensured legal assistance as a part of consortium led by Rothschild.
TGS Baltic legal team was led by Marius Matonis, Partner, Andra Rubene, Partner, and Nauris Grigals, Senior Associate.
Linda Štrause, Partner, and Māra Stabulniece, Senior Associate, advised on the Energy Law aspects.
Māra Stabulniece, Senior Associate, advised on the State aid and Competition Law aspects.
The team also included Aija Kreicberga, Associate, Jekaterina Anohina, Associate, Raivis Znotiņš, Associate, Rūdolfs Vilsons, Associate, and Reinis Grunte, Associate.

TGS Baltic is a full-service business law firm in Estonia, Latvia and Lithuania employing 140+ lawyers across the Baltics.