January 27, 2016 / 5:52 PM / 3 years ago

Veolia seeks compensation from Lithuania for subsidy cuts

PARIS (Reuters) - French water and waste group Veolia said on Wednesday it was seeking 100 million euros ($109 million) compensation from Lithuania at the International Centre for Settlement of Investment Disputes, after subsidies for gas use were scrapped.

Veolia-controlled Lithuanian heat supplier Vilniaus Energija said it was seeking compensation due to “unfair and discriminatory legal acts and decision regulating its activities” in the Baltic state.

Veolia submitted its claim at the Washington-based arbitration center on Tuesday, and has hired Sidley Austin LLP to represent its interests, it added.

“We have tried many times to establish constructive dialogue with the authorities. As of today, we still have had no response,” Veolia’s Central and Eastern Europe chief Malika Ghendouri said in a statement.

She added that the firm is waiting to explain its position at the highest level of the Lithuanian state.

Veolia supplies heat in Lithuania’s capital Vilnius and another nine municipalities in the Baltic state. Its 15-year lease on the central heating grid in Vilnius, expires in 2017, and the municipality has said it doesn’t plan to extend it.

The government has also scrapped subsidies for gas use in the power and heating sector from 2016, forcing Vilniaus Energija to close one of its combined heat and power (CHP) plants in Vilnius.

Veolia said that Lithuania is a sovereign country and legislation is its prerogative.

“But when laws and their interpretation constantly change with the resultant effect of assets and investments being undermined, without any consideration for compensation, what company can work within a context of such a level of regulatory instability?,” Ghendouri said.

Lithuanian Energy Minister Rokas Masiulis, who has criticized Vilniaus Energija over high heating costs, said the country might bring a counter claim against Veolia’s subsidiary at the arbitration.

“It seems, that Veolia has decided to fire the first shot, and will try now to prove that the state has abused it, not the opposite,” Masiulis said in an emailed comment.

Reporting by Nerijus Adomaitis, additional reporting by Geert De Clercq in Paris, editing by Louise Heavens and Elaine Hardcastle

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