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Once again in Lithuania a proven statement turns into an axiom that municipality councils are not able to deal with economic affairs. Discussions at the city Council on the investment project by Kaunas Heat and Power Plant (KHPP) as regards the renewal of the industrial steam pipe of 4 km in length are delayed by the opposition.

 

 

Though the project, the implementation of which will result in the reduction of heat transfer losses, increase in reliability of district steam supply system and efficiency in the city, as well as ensure the lowest heat prices to industrial users, will not cost a cent to Kaunas City and during the economic crisis every investment is of vital importance, some politicians do not care of that. Statements of the Liberal Centrists at the meeting of the city Council on the 2nd of July seem to be inexplicable both to the businessmen and to the fellow politicians.

 

KHPP plans to renovate the steam pipe, which belongs to the company. It is planned to renovate 4038 metres of existing worn out and out-of-date steam supply systems and in place of them lay the new pipes of smaller diameter and better insulating features. Heat loss from the system would be reduced by about 17.5 thousand megawatt-hours per year, as a result of what the city would save around 1.8 million litas.

 

Upon the failure to renew the steam pipe in due time, “Korelita” would not receive steam at favourable prices and would hardly compete with its production on the world market. It is very probable that the plant may be closed down. Five hundred people would loose their job, whereas the State would loose taxes.

 

Part of the funds for project financing KHPP plans to obtain from EU Structural Funds; therefore, it requires the approval of the Municipality in order to apply for the EU support to the Lithuanian Business Support Agency.

 

According to Jonė Skvarnavičienė, the Director General of “Korelita”, our company is concerned with the renewal of the steam pipe because it purchases a lot of steam used in production. The cost price of a product directly depends on the price of the purchased steam.

 

 

It has been for five years that Kaunas Heat and Power Plant has not made any changes to the prices of generated heat and steam. Consequently, the company “Korelita” established itself in the world market of acetate threads (artificial fibre). Such threads are used for backing and lace. From the earlier world factories of acetate threads there have remained only four, namely in USA, Spain, Japan and Lithuania.

 

Every year “Korelita” pays to the Social Insurance Fund Board around 4 million litas of taxes, which is a substantial contribution into the Lithuanian budget. In the territory of the plant there are still some other users that use steam. This is an attractive location for investment and the development of production companies.

 

Steam pipe is owned by KHPP. KHPP supplies the produced steam through its steam pipe to the company “Korelita”, as well as Petrašiūnai Power Plant. KHPP and Petrašiūnai Power Plant are connected by means of the technological steam connection. There was no steam boiler installed in these power plants, therefore, the operation of technological connection is an essential element that guarantees reliable supply of thermal energy to the consumers of Kaunas City. Costs of steam supply through the old pipeline are huge because the losses make up to 20-30 %.

 

From the steam “Korelita” produces heat. Status of the steam pipe is poor. In case we disapprove of this decision, we would remain misunderstood because a breakdown may occur. Should the project be realized, Kaunas would gain double benefit: it would retain “Korelita”, which would not manage to renew the steam pipe at its own finances only; and secondly, the steam branch is directed to Petrašiūnai Power Plant, which generates reserve heat to the city, explained the conservative Gediminas Žukauskas, the Member of the city Council.          -There is a movement “Bringing to a Stop 2009” held in Kaunas. How is it possible to bring to a stop investment and innovations in Kaunas? To me, as a resident of Kaunas, it is incomprehensible. Let it be on the conscience of the other people”.

 

 

According to Algirdas Vaitiekūnas, Head of Energy Department of Kaunas Municipality Administration, technical status of the steam pipe is poor. It is necessary to modernize, repair and renew it technologically by shortening the pipeline. The major goal of these works is to reduce the losses. Unless the steam pipe is renewed it would remain vague whether the plant “Korelita” would survive in general, where even 500 Kaunas residents are employed.

 

Repair works will not cost a litas to the city. Everything would be carried out by the owner of the steam pipe. For this purpose it is also aimed to receive the funds from EU Structural Funds.

 

“As the steam quality is improving losses are reducing. In case the losses are being reduced, the heat price is also getting lower, little though, but going down anyway”, stated Mr Vaitiekūnas, Head of Energy Department.

 

“Company “Korelita” is a big client of our company, which consumes a lot of heat. We take care of our clients as far as this can be done. However, politicians of Kaunas City lack such attitude”, highlighted the Director General of KHPP Antanas Pranculis.

 

Jonas Koryzna, the Chairman of the Privatization Commission, formed by the city Council, and the Chairman of the Supervisory Board of the company “Kauno energija” assented to the proposed solution: “When something is improving in Kaunas, in particular in the energy economy, without the placement of money, this is already beneficial to the city. I see no reasons for not supporting this decision. There are chances that the heat price is likely to drop down slightly due to the possible reduction of losses, though this decline will not be a significant one.

 

KHPP is ready to renovate the steam pipe and reduce the steam price but this requires support from EU Structural Funds. In the absence of EU funds company shareholders avoid any risk investment as no one may give guarantees that “Korelita” will avoid bankruptcy during the crisis.

 

Renovation of the steam pipe requires around 11 million litas. Half of this amount would be paid by KHPP and the remaining part would be covered by the EU.

 

“We are not spending the money of the city. Neither the municipality nor its companies contribute with a litas. KHPP gives its money and wishes to claim the finance from the EU funds in accordance with the existing legal regulations. Should KHPP compete with the municipal company, for instance, “Kauno energija”, claiming the EU funds, in such a case the decision could be a different one. Now there is no competition with respect to the EU funds”, said Mr Koryzna.

 

“Fixing of the steam pipe and cheapening the steam price would give a rise to a stimulus for the business to keep on its activity. Cutting the price of steam would allow to purchase more raw materials, increase the turnover and reduce the product price”, stated Mrs Skvarnavičienė, the Director General of “Korelita”.

 

According to her, renovation of the steam pipe would lead to the reduction in the steam price, which would allow everyone to gain benefit from that because the plant makes busy the other Lithuanian companies too, from which the services are purchased or production is sold.

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