Bloomberg News

Estonian Parliament Approves Natural-Gas Unbundling Bill

June 06, 2012

Estonia’s parliament approved legislation to separate ownership of natural-gas sales and transmission operations to reduce dependence on Russia’s OAO Gazprom, the only supplier of the fuel to the Baltic nation.

Lawmakers in the capital, Tallinn, voted 52-28 today in favor of the bill, which would force energy company AS Eesti Gaas to sell its pipeline unit by 2015 or risk a fine and nationalization of the business.

Eesti Gaas, whose biggest shareholder is Gazprom, will ask President Toomas Ilves to reject the bill as unconstitutional, board member Raul Kotov said in an e-mailed statement. Russia’s gas export monopoly has a 37 percent stake in Eesti Gaas, while Germany’s E.ON AG (EOAN) has 33.7 percent, Finland’s Fortum Oyj (FUM1V) has 17.7 percent and Latvia’s Itera Latvija owns 10 percent.

Estonia’s ruling Reform Party published plans in 2010 to unbundle the gas industry and lower dependence on Gazprom, the sole supplier of gas to Estonia, Latvia and Lithuania. The three countries are seeking European Union support to build a liquefied natural gas terminal in the region, saying they’re being charged more for Russian gas imports than western European countries and citing supply risks.

Foreign shareholders in Lithuania’s gas utility, Lietuvos Dujos AB (LDJ1L), including Gazprom, agreed last month to split gas transmission and sales ownership as part of the EU’s drive to force dominant energy companies to improve access for competitors. Gazprom initially threatened to take the Lithuanian government to international arbitration over the breakup in March.

‘Complex’ Talks

European Union Energy Commissioner Guenther Oettinger last month sent a letter supporting Estonia’s move to Economy Minister Juhan Parts, the Postimees newspaper reported May 31. Still, it would involve “complex” talks with investors that need to get a fair price for the transmission network, he said.

The shareholders’ estimate for the value of the pipelines “significantly” exceeds the Competition Board’s estimate of 120 million euros ($150 million), according to a letter to the government by Eesti Gaas Chief Executive Officer Tiit Kullerkupp on Jan. 2, published on the State Chancellery’s website.

Eesti Gaas shareholders will use all options to protect their interests, including courts, if needed, public broadcaster Eesti Rahvusringhaeaeling cited Kotov as saying yesterday.

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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