Oil Report

UPDATE 1-Lithuania vote gives boost to nuclear plant plan

(Adds Lithuanian parliament vote, changes dateline from RIGA)

VILNIUS, Feb 1 (Reuters) - Lithuania’s government won a parliamentary vote on Friday to merge a private and two state-owned energy companies into one group to invest in a new nuclear power plant and build connections to Sweden and Poland.

The vote will give a boost to delayed plans to build the new power station in cooperation with Poland, Latvia and Estonia, all countries that want to reduce their reliance on Russia for energy.

The four countries’ economy ministers are to meet to discuss the nuclear plant on Feb. 4.

“Parliament’s decision means we have created a national investor and the process (of building a new nuclear plant) kicks off,” Prime Minister Gediminas Kirkilas told Reuters.

The vote was controversial as critics said the private company involved in the merger, the Western Grid Company, was getting too big a stake in the merged entity, with 38 percent.

Kirkilas said the four countries would next week discuss the project schedule. “I hope we could establish a joint project company in the autumn, after hearing the results of the environmental impact study,” he said.

He told reporters that he hoped construction of the new plant could start in two to three years.

The new nuclear power plant, with planned capacity of 3,200 to 3,400 megawatts, is aimed at replacing one that Lithuania is obliged to shut down at the end of 2009.

The new facility is expected to cost about $9 billion.

The parliament vote created an energy company called LEO LT, which will own two power grid companies, one of which is private and the other, called the Eastern Power Grid Company, is state-owned. The state power operator Lietuvos energija is also included.

LEO will work with the power companies of Estonia, Latvia and Poland to form a project company to build the nuclear plant.


Now the Lithuanian power company formation is out of the way, the four countries have to agree on whether to meet Poland’s demand for a third of the power from the new plant. This is likely to be part of talks by the economy ministers.

“I forecast that negotiations (among the four countries) will not be easy, especially with Poland, because they have many requirements, but maybe new government (of Poland) will change its position. It looks like Latvia and Estonia are in substance agreeing with the current conditions,” Kirkilas told reporters.

Poland has linked its demand for a third of the power to agreeing to build a power link between its grid and Lithuania’s. The aim of diversifying regional power sources away from Russia also involves Lithuania building a connection to Sweden.

Lithuania has to close its Ignalina nuclear plant as part of its agreement to enter the European Union in 2004.

The EU wants to close the plant as it has the same reactors as the one which blew up at Chernobyl in 1986. The signing of a concrete agreement on the new plant has been delayed several times, leading to fears the 2015 start date will be delayed.

Sweden’s economy minister, Maud Olofsson, will also be in Vilnius next week, on Feb 5-6. (Reporting by Nerijus Adomaitis and Patrick Lannin; editing by Anthony Barker)