December 19, 2017 / 12:32 PM / a year ago

UPDATE 1-Latvian government buys stake in gas operator Conexus, targets majority

(Adds detail, background)

RIGA, Dec 19 (Reuters) - The Latvian government said on Tuesday it was buying an 18.31 percent stake in Conexus Baltic Grid, a gas transmission and storage operator, from German’s Uniper Ruhrgas International GmbH, a step towards its goal of securing a majority stake in the company.

Conexus operates the Incukalna underground natural gas storage, the largest in the Baltic States.

It was spun off from Latvian gas utility Latvijas Gaze at the end of the last year and is 34-percent owned by Russia’s Gazprom.

The government’s decision to buy comes eight months after Latvia became the last Baltic country to open its natural gas market for competition in line with European Union rules, ending a monopoly on supply held by Gazprom for decades.

The Latvian government said its ultimate aim was to obtain a majority in Conexus, part of its strategy of increasing Latvia’s energy independence and reducing its reliance on Russia.

“Latvia is now ... on its way toward providing its energy independence,” Economics Minister Arvils Aseradens told a news conference, saying that removing gas price gaps with other Central European countries were among the goals of the deal.

“The aim is setting up a common Baltic gas market and an active participation of the government of course envisages that the prime objective is to be a majority shareholder in the company,” he added.

The pricing of the deal was not disclosed.

Conexus’ owners also include European infrastructure fund Marguerite Gas with 29 percent of shares and gas trader Itera Latvija, a subsidiary of Russia’s Rosneft, which holds a 16 percent stake.

Latvian energy regulations, which aim to secure the complete independence of the Conexus grid, require Itera Latvija and Gazprom to sell their shares by year-end. Failure to do so would see them lose their voting rights and face financial penalties.

Aseradens said the government was in an “active negotiating phase” regarding Gazprom’s and Itera Latvija’s stakes in Conexus. Under the new rules, the Marguerite Gas fund can remain a shareholder in the grid as it based in the EU. (Reporting by Gederts Gelzis; editing by Niklas Pollard and Adrian Croft)

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