Abstract
The power sub-sector has commanded the most attention within Lithuania’s
infrastructure sector recently.
The country faces potential electricity
shortages following the impending shutdown of its main source of
generating capacity, the Ignalina Nuclear Power Plant, in 2009. The transport
sector also saw investment
in 2008, with the road and rail networks
benefitting from both EU and government funds. Investment
from the latter,
however, may be reduced over the next couple of years as the new government
works
hard to avoid a fiscal deficit. In BMI’s 2009 Annual Lithuania
Infrastructure Report, we forecast the
construction industry to experience
0.12% growth in 2009, reaching a value of US$4.25bn.
Major projects during
2008 included the expansion and refurbishment of Vilnius International
Airport;
the works include expansion of the passenger terminal and
aircraft handling. A further development at the
airport was the approval
of plans to construct a designated FlyLAL terminal for the national airline.
Also
prominent in the transport sector has been the development of both
the Rail Baltica and the Via Baltica
projects. Both projects are aimed at
further integrating the Baltic states, which are a key transport corridor
between Russia and the EU. The rail network, Rail Baltica, is due for
completion in 2015, and the road
network, Via Baltica, has been subject to
delays.
Projects in the power sector have been subject to delays and
disagreements as the key projects rely on
regional co-operation between
the Baltic states. As such, developments in the construction of a new
nuclear power plant at the site of the existing Ignalina plant have been
limited, and disagreements have
stunted work on the Swedlit power link to
Sweden. A further project which has been subject to delays is
the 400MW
gas-fired power plant which is being funded by the European Bank for
Reconstruction and
Development (EBRD). Although the tender was released
and awarded to Canada’s SNC Lavalin, the bid
was later rejected as
it was too high (EUR456mn) and thus the project was re-tendered in
October.
A major issue that Lithuania faced in 2008, which will become
more pressing during 2009, is the
potential power shortfall which will
follow the shutdown of the Ignalina Nuclear Power Plant.
Traditionally a
power exporter, the country is facing the major issue of how to obtain
electricity in the
interval between the existing plant being shut down and
the new one opening in 2020. Activity in the
power sector, although
subject to disagreements and delays, was therefore plentiful in 2008, and
the
country’s aversion to relying on Russian gas will necessitate
activity in the sector continuing in 2009.
The global economic downturn
has hit Lithuania hard, however, and we foresee this having a knock on
effect on the construction industry as government spending is tamed in order
to avoid a fiscal deficit – the
importance of which was signalled by
the recent rise in taxes. According to BMI forecasts, Lithuania’s
economy will contract by 1.5% in 2009, and post only 0.3% growth in 2010 as
the government tax rise
will result in a more protracted economic
slowdown.
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