The Lithuanian government’s decision to shut down loss-making Soviet-built heat and power plants (CHPs) has prompted legal action from local authorities and from France’s Veolia.
The Energy Ministry ordered the closure of gas-fired cogeneration plants in Vilnius (603 MW), Kaunas (170 MW) and Panevezys (35 MW) after the opening of the NordBalt interconnector at the end of 2015 provided new sources of cheaper power.
However, the Vilnius municipality, which had signed a deal giving France’s Veolia rights to run Vilnius CHP operator Vilniaus Energija, claims it has sustained financial losses because of the closure, and could take legal action against the ministry and even make a complaint to the European Commission.
Veolia also claims that the Lithuanian government has broken an investment agreement between Lithuania and France, and that Vilnius is carrying out a “campaign of harassment” and is “expropriating” its investments.
The government argues that it was irrational and not financially viable to support the CHPs through so-called public service obligations, which were state subsidies that kept the CHPs profitable for their owners.
Veolia has recently filed a case with the International Centre for Settlement of Investment Disputes (ICSID) in Washington, seeking 100 million euros (US$113 million) in compensation.
Lithuanian Energy Minister Rokas Masiulis said that the Vilnius Municipality’s decision to resort to litigation and to complain to the EC would hamper “any efforts for negotiations.”
“The issue has to be addressed in one way or another. Lietuvos Energija had already begun talks with the municipality and they ought to be continued. But the aggressiveness permeating the issue hinders negotiations and possibilities for a solution,” the minister told local media.
The closure of the CHPs was an unpopular move, with many warning that without the CHPs the country would have little reserve generating capacity and would be too dependent on imports through NordBalt.
“We need to accumulate a reserve, we cannot only count on the country’s main power generator, Elektrenai Power Plant, whose capacity has also been substantively curtailed because of the NordBalt launch. It was irresponsible to shut down the Vilnius Power Plant-3,” Arvydas Sekmokas, a former energy minister, told NewsBase.