Ellex Klavins and EY Latvia have advised Uniper Ruhrgas International GmbH on the sale of its stake in AS Conexus Baltic Grid — Latvia’s unified natural gas transmission system operator and natural gas storage system operator. The buyer, AS Augstsprieguma Tikls, was advised by TGS Baltic.
According to Ellex Klavins, "the CBG share sale transaction was negotiated under the duress of the deadline prescribed by the Energy Law of Latvia that if Uniper (as a global gas producer / trader) had failed to divest its shareholding in CBG by 31 December 2017, then under the respective unbundling regulations Uniper would have lost its voting rights in the CBG shareholders’ meeting as well as lost the right to nominate candidates to the company’s supervisory board."
CBG was created as a legal entity in January 2017 as a result of the spin-off of the gas transmission and gas storage assets and functions of AS Latvijas Gaze (which until then had exclusive rights in Latvia for gas transmission, storage, distribution, and trading), which was mandated by Latvia’s implementation of the EU Directive requiring the unbundling of gas transmission operators/functions from gas production and trading.
The seller, Uniper, which is part of a global energy company headquartered in Germany, has been a shareholder in LG since its privatization in 1997, and, in the LG reorganization, Uniper consequently acquired shares in CBG.
The buyer, AS Augstsprieguma Tikls, is Latvia’s electric power transmission system operator (TSO) and is owned by the Republic of Latvia via shares owned by the Finance Ministry. The transaction is the initial share acquisition in the Latvian Government’s stated intent to acquire control of Latvia’s natural gas transmission and storage infrastructure. The transaction also brings within one state-controlled entity both electric power transmission and gas transmission functions. The Latvian Government aims to establish a regional gas market in the Baltic States and Finland by 2020.
The share sale transaction was executed on December 12, 2017, and completed on December 15, 2017. The purchase price is confidential.
The Ellex Klavins team advising Uniper was led by Senior Counsel Ivars Slokenbergs and Senior Associate Reinis Sokolovs.
EY Latvia provided Uniper with sell-side M&A advice, financial modeling services, and regulatory support, with a team of Partners Guntars Krols and Nauris Kļava and Managers Viktors Sentuhovskis, Dmitrijs Minajevs, Damian Lozinski.
Editor's Note: After this article was published, TGS Baltic confirmed that it had advised Latvia's Ministry of Economics on the acquisition of 18.31% of the shares of AS Conexus Baltic Grid by Latvian electricity transmission system operator AS Augstsprieguma Tikls.
According to TGS Baltic, "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 Incukalns 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 recognized assessment methods."
The TGS Baltic team — which acted as part of consortium led by Rothschild — was led by Partners Marius Matonis and Andra Rubene and Senior Associate Nauris Grigals. Partner Linda Strause and Senior Associate Mara Stabulniece advised on Energy Law aspects, and Senior Associate Mara Stabulniece advised on State aid and Competition Law aspects. The team also included Associates Aija Kreicberga, Jekaterina Anohina, Raivis Znotins, Rudolfs Vilsons, and Reinis Grunte.