Bloomberg News

Latvia's Ventspils Nafta Will Be Auctioned October 5

August 31, 2006

Latvia's state-asset-sales agency approved a plan to auction the state's 38.6 percent stake in A/S Ventspils Nafta (VNF1R) on Oct. 5, Martins Jaunarajs, an investment banker at A/S Parex Banka, the lender managing the sale, said today.

The oil port, the largest in the country, will be sold in packets of 19,415 shares, raising at least 73 million lati ($135 million) at a minimum price of 1.81 lati a share, Parex Banka said. If the entire stake isn't sold, Parex will buy the remaining shares.

Ventspils Nafta once carried 15 percent of Russia's oil products through its pipelines. The volume plunged after OAO Transneft, Russia's pipeline operator, cut crude supplies in 2002. The government hopes a new investor will get oil flowing through the pipelines again.

Bidders for the oil terminal may include PKN Orlen SA, Poland's biggest oil refinery; KazMunaiGas, the state-owned Kazak oil company; and OAO Rosneft, Russia's state-owned oil company, Economy Ministry spokesman Oskars Balodis said Aug. 8. A group of Austrian investors led by Martin Schlaff may also bid.

The asset sale is scheduled to take place two days before parliamentary elections. New Era, the largest opposition party in parliament, said today it may take legal action if any procedural problems occur with the state agency's decision to approve the auction.

``This auction seems to rule out all the big investors,'' a former economy minister, Krisjanis Karins of the New Era party, said today in an interview. He cited changes to the auction procedure that will break up the shares into three different packets of 25 percent, five and seven percent, and auction rules that make it difficult for one company to buy the whole stake.

Because of a 1997 agreement with A/S Latvijas Naftas Tranzits, a closely held oil transporter that owns 49 percent of Ventspils, the transporter can veto any auction, giving it great influence in the way the auction was structured Jaunarajs said in an interview Aug. 28.

Parex Banka won't give a prospectus to potential investors, since LNT declined to provide additional information. Instead, it will hand out a memorandum of publicly available information, Jaunarajs said.

Ventspils Nafta said on Aug. 28 annual profit fell an annual 45 percent to 4.2 million lati in the first half of 2006, as Russian railway tariffs rose.

To contact the reporter on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor for this story: Chris Kirkham at ckirkham@bloomberg.net


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