"Obvious chaos in the electricity market. Starting with
UAB "Perlas energija" exiting the market, ending with the
highest electricity prices in Europe. Everything is clear about the entry of
UAB "Perlas energija" into the electricity market and the activities
of this company. Obvious incompetence of the government. Or
the minister's another "paradox" of the curve. Various requirements are
imposed on "Perl", which organizes lotteries, the size of the prize
fund is regulated, income is additionally taxed, and the obligation to donate part
of the income to charity is established. And here is UAB "Perlas
energija", which operated in the energy sector that affects every
consumer - neither market entry requirements (except for authorized capital),
nor real control of operations. Many people blame UAB "Perlas
Energija", and I am convinced that the most guilty are the managers of the
Ministry of Energy, which has more than 100 employees.
The purpose and main goal of private business is to seek
profit, state officials - to create conditions that would protect the consumer,
ensure the sustainability of the market, and control activities in sensitive
areas. This is exactly what the Law on Electricity obliges them to do:
establish "a high level of protection of consumer rights and legitimate interests",
"effective means of (consumer) rights protection", ensure "clear
and transparent pricing", "accessibility and sufficiency of
electricity to consumers for economically reasonable price" etc.
There is little history of this "semi-precious
mineral", even electricity prices have skyrocketed. Our rulers say it's
Russia's fault and sanctions are in place, plus EU requirements, which together
with the Nordpool stock exchange set strange "algorithms".
Algorithms are more popular than ever: remember, even a
pandemic was controlled by algorithms. And everywhere those algorithms are
crooked, especially in energy; is that true Mr. Kairys? Maybe those crooked
algorithms had to be changed in 2021, before there was any sanctions on Russia?
After all, even then the average hourly electricity market price increased
wildly and was almost three times higher than in the 2020s. If the minister
cannot articulately explain the problem of rising electricity prices, does not
know the components of the electricity price, it remains to blame everyone
around him, except his competence. And hide from the media and people.
The prime minister does not blame the minister for not
knowing the basics of energy. Consumers are to blame because they do not know
how to read the electricity purchase agreement, which contains many references
to the Electricity Law.
After all, it is not the minister's job to read this law,
which contains 110 definitions alone! Some of the definitions are not even
provided in the law - only references to European Union (EU) legislation.
The
minister's job to "liberalize" is to attract "private"
electricity suppliers to the electricity market.
Result: 100% Electrum Lietuva, which belongs to the Latvian
state-owned "Latvenergo" and 100 percent Enefit, owned by the
Estonian state-owned Eesti Energia, currently owns a little more than 8
percent of Lithuanian household consumer markets. The third major player is the
company Ignitis of the former Lithuanian state-owned Lietuvos Energija group,
which controls almost 70 percent of the market. The famous
"Perlas energija", which controlled almost 15% electricity supply
market, it's part is lost to the Ignitis. Liberalization for "private"
public suppliers.
But back to the point. Intentionally or not, everyone talks
about the ill-fated liberalization of the market, but they are silent on the
fundamental issues. I will continue what Raimundas Kuodis mentioned recently.
And I will add a lot to it. There are at least three reasons for the chaos in
the electricity market, if we do not name incompetence as the reason, and maybe
also intentional destructive activities.
First, the transfer of part of the Lithuanian electricity
sector to private individuals. Second, the Nordpool stock exchange operating
mechanism (algorithm), which enables unimaginable profits to be made in the
normal market. And thirdly, the lack of own renewable electricity capacity and
the insufficiency of connections with foreign countries.
In this article, I will limit myself to the first aspect,
calling it simply the "privatization" of the Lithuanian electricity
sector. Because most specialists are silent on this aspect.
Privatization was started in the spring of 2020. The then
Minister of Finance Vilius Šapoka presented the proposal to the Government,
which soon approved the restructuring of Ignitis Group: it was decided to
increase the share capital with additional contributions, allowing private
investors into the state-owned company. I remind you that UAB "Ignitis
grupė" - former 100% state-owned Lietuvos Energija.
Consequence of privatization - the state of Lithuania
currently owns 73 percent. UAB "Ignitis grupė" shares, and 27 percent
belong to private investors.
UAB "Ignitis Group" owns the largest Lithuanian
electricity producer partners: Kruonis Hydroelectric Power Plant, Combined
Cycle Unit and Reserve Power Plant in the Elektrėnai Complex, Kaunas
Hydroelectric Power Plant, Kaunas and Vilnius Cogeneration Power Plants. This
group also owns UAB "Ignitis", the largest electricity supplier in
Lithuania for domestic consumers and businesses.
The group also owns AB "Energijos skirstymo operatorius"
- the so-called ESO - which manages electricity networks and takes care of
guaranteed supply. Thus, this Lithuanian electricity monster currently owns the
majority of Lithuanian electricity production, distribution and supply,
including "guaranteed" and "public" electricity supply. As
I mentioned, this group is partially private.
A reasonable question arises: why was it necessary to
partially privatize Lithuanian networks, the largest electricity producers and
suppliers and distributors? The official explanation: it was necessary to raise
5-6 billion euros for the Ignitis Group in the coming years. And with that
additional share issue or partial privatization,... 450 million euros was raised.
I
translate: private investors were given the opportunity to purchase almost 27
percent of the Lithuanian energy sector for 450 million euros.
Among the private shareholders of AB Ignitis grupė -
directly or indirectly - are the banks SEB and Swedbank operating in Lithuania
and the investment management company Invalda, as well as several natural
persons. Among the private investors, there are a number of
"foreigners" (directly or indirectly): "The Bank of New York
Mellon", "Avaron" and "Avaroni", "State Street
Bank and Trust company" and others (who want to know the real
beneficiaries of legal entities registered in Lithuania , this information can
be found in the JANGIS system managed by the Register Center).
AB "Ignitis grupė" income has jumped to
unprecedented heights in the past year. In this half year alone, its turnover
increased by 134 percent, almost 1 billion euros. A fairy tale, not a business.
And the icing on the cake. "Privatized" is not
only electricity production, supply and distribution, but also the electricity
(distribution) networks themselves. It is true that for now it is a very small
part, but it is already partly private. 97.5 percent of the shares of the
joint-stock company LITGRID, headed by Rokas Masiulis, which manages
high-voltage distribution networks, including the strategic projects of the
international connections NordBalt (Lithuania-Sweden) and LitPol Link
(Lithuania-Poland), and 2.5 percent is already in private hands. For what
purpose is private capital allowed into the management of strategically
important energy networks?
It is obvious that it is not due to the attraction of
additional capital, as was announced in the case of AB "Ignitis
grupė", because for 2.5% shares, you will not receive any significant
funding.
From the moment when a state-owned company becomes private,
albeit with a few shares, it, like every private business entity, must act in
pursuit of the most important goal - profit. The goal of state-owned
enterprises is not the pursuit of profit - they provide services and produce
products primarily taking into account the public interest, so their goal is
not only the pursuit of profit.
The same applies to companies that do not have the status of
a state-owned company, but all shares are owned by the state. Formally, they
operate under the law of joint-stock companies and should seek profit. However,
when making decisions, the state as the sole shareholder can take into account
public interests and not pursue profit alone. One shareholder - the state - may
not be afraid that other shareholders will demand to maximize profitability:
there is simply no one to raise such demands at shareholders' meetings or
through the courts (due to the already long text, I leave the rights of
creditors aside).
For example, a few days ago the Prime Minister of Estonia
announced that electricity price limits will be set for four years for all
household consumers in order to protect them from high prices. One of the ways
of implementing this decision is to limit the profit of the Estonian state
company Eesti Energia. According to the state decision, this company can
operate without profit, transferring all profitability to consumers. And in
Lithuania it is impossible to do this, because a private investor will demand a
return on investment: any private company, such as AB "Ignitis grupė"
currently is, must operate in order to make a highest possible profit.
It will be enough for one of its shareholders to go to court
for, for example, a possible violation of his legitimate expectations. And
don't be mad at those private shareholders: they're a business looking to get a
return on their investment. Questions need to be raised by those who allowed
this whole private electricity monster system to be created.
The most curious thing is that the costs experienced by
Lithuanian consumers are significantly higher than the income growth of AB
"Ignitis grupė" itself: the unreasonably high price of the
electricity exchange and fantastic profits are distributed to all players of
the electricity market. In other words, the profit-seeking AB "Ignitis
grupė" and its group companies can significantly inflate the price of
electricity on the exchange: the costs of that beastly price will fall on the
shoulders of Lithuanian consumers, and the benefits will be shared by many
operating in the electricity market players, including AB "Ignitis
grupė" itself.
Dismantling this monster of the electricity system created
in Lithuania will be really difficult: the nationalization model proposed by
some specialists, such as Almantas Stankūnas, may cost much more in terms of
time and money than the 450 million euros received in 2020 investments. But is
there another, alternative long-term and sustainable solution?
It is true that recently the Solomonic proposal to finance a
part of the price of electricity for household consumers with money borrowed by the state has been constantly discussed in the public space. This would
mean that AB "Ignitis grupė" could produce and sell electricity at a
price that would bring fabulous profits to it and other players in the
electricity market.
And part of the extremely high price of electricity supplied
to household consumers would be compensated by the state from borrowed funds.
Solid men and women, politicians and economists, are now publicly debating what
is the "good" price, which will be paid by the user to UAB
"Ignitis" directly from the user's pocket, and which part will come
from state borrowed funds. No one mentions that the debt will have to be
returned to the same taxpayers. Just as the inhuman costs of electricity for
the entire Lithuanian business are solidly hushed up. Such "sincere"
attention to consumers and no concern for the private shareholders of AB
"Ignitis grupė" - what is it that the possible conflict of interests
of those famous politicians and economists is simply staggering.
And the wolf is full and the sheep are happily munching on
the grass. The wolf smiles because the sheep do not think about how often they
will be sheared in the future."
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