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Cobalt Successfully Defends German Energy Company Against Lithuanian Ministry of Energy

Cobalt Successfully Defends German Energy Company Against Lithuanian Ministry of Energy

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Cobalt had successfully represented and defended the German company Danpower in an extraordinary case against the Lithuanian Ministry of Energy. In ruling for Danpower, the Supreme Administrative Court of Lithuania held that the Ministry of Energy had illegally suspended the German company’s investments in a new bio-fuel plant in Vilnius.

In its final non-appealable decision, the court stated that the Ministry of Energy had no legal or factual grounds for suspending and revoking the authorization granted to Danpower for the development of the plant.

Although, according to Cobalt, the company’s damages are still being assessed, preliminary estimates suggest that, because of the State’s actions, Vilnius residents overpaid more than EUR 4 million for heating.

Danpower invested about EUR 20 million in the biofuel CHP plant in Vilnius, after winning the auction for the feed-in tariff in 2013. The State committed itself for 12 years to buy in electricity at a higher price – 9.7 ct/kWh. However, according to Cobalt, the State failed to keep its promise to investors – the Ministry of Energy abolished the feed-in tariffs won in the auction. According to Danpower Board of Directors member Markus Suessmann, the investments therefore became loss-making.

“The treatment of the Ministry of Energy not only shook investors’ confidence in Lithuania’s commitments, but also harmed residents of Kaunas," said Suessmann. "Higher prices for electricity supplied to the grid could have allowed cheaper production of heat energy. If we had built the plant already in 2015, heating bills for residents would have been lower by at least EUR 4 million. The investment could have also reduced Vilnius’ dependence on gas heating."

According to Cobalt Partner Elijus Burgis, who represented Danpower in the litigation, the court's ruling gives the German investor not only the right to further develop the project in Vilnius but also to claim multimillion damages from Lithuanian authorities. Indeed, Suessman says Danpower is considering defending its interests in arbitration in Washington. Lithuania has been given a warning under the investment protection agreement with Germany, stating that damages total EUR 30 million.

In addition to Burgis, Cobalt’s team included Senior Associate Ruslanas Cerniauskas and Associate Simas Paukstys.

 

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