COBALT successfully defended the German energy company Danpower in an extraordinary case against the Ministry of Energy

COBALT successfully represented and defended the German company Danpower in an extraordinary case against the Ministry of Energy concerning the construction of a biofuel plant in Vilnius. The Supreme Administrative Court of Lithuania in its final decision held that the Ministry of Energy illegally suspended the German company’s investments in a new biofuel plant in Vilnius.

Markus Suessmann, a member of the Board of Danpower, believes that this decision will be the first step towards restoring investors’ confidence in Lithuania’s commitments to promote fair competition in the energy sector.

Claiming damages

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 authorisation granted to Danpower for the development of the plant.

According to COBALT Partner Elijus Burgis, who represented Danpower in the litigation, the court decision gives the German investor not only the right to further develop the project in Vilnius but also to claim multimillion damages from Lithuanian authorities.

The company’s damages are still being assessed, yet preliminary estimates suggest that, because of the State’s illegal actions, at least Vilnius residents overpaid for heating more than EUR 4 million.

“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,” Mr Suessmann said.

Danpower believes that the restored justice in Vilnius might also prevent planned arbitration proceedings in Washington concerning damaged interests of German investors in Kaunas.

The German company invested about EUR 20 million in the biofuel CHP plant there, 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, the State failed to keep its promise made to investors – the Ministry of Energy abolished the feed-in tariffs won in the auction. According to Mr 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. Higher prices for electricity supplied to the grid could have allowed more cheaper production of heat energy,” the representative of Danpower said.

According to him, in the present situation the German investor 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.

The German company’s investments in Lithuania already amount to nearly EUR 100 million. The company manages six biofuel plants and one CHP plant.

84.9 per cent of Danpower shares are owned by one of the largest German companies – Hannover municipal company Stadtwerke Hannover AG, whose annual sales reach EUR 2.3 billion.

COBALT team advised on the litigation strategy, drafted all procedural documentation and represented the client in court. The team was comprised of Partner Elijus Burgis, Senior Associate Ruslanas Černiauskas and Associate Simas Paukštys.