Eesti Energia asked Brussels’ help against the government

“Eesti Energia withdrew its letter from the European Commission. This is a rare situation, giving up the appeal. Why did the company do it? Because the general meeting in the person of the minister of finance told it: withdraw the letter, we do not want it sent to the European Commission,” MP Sven Sester (Isamaa) yesterday (February 18) told the parliament.

Why Minister of Finance Keit Pentus-Rosimannus (Reform) made the move, Postimees had no opportunity to ask yesterday. The letter was formally a request for explanation whether it was necessary to change the supervisory board of Elektrilevi in order to comply with the electricity market directive. But essentially this was a protest against the government’s desire to do it.

Eesti Energia is silent

The letter to the European Commission is one detail in a furious struggle over the issue of whether to separate Elektrilevi, a subsidiary of Eesti Energia, from the parent firm. A pretext for the severing is the directive of the European parliament and the council which presumes that the energy producer has no control over the distribution firm.

According to Eesti Energia, Elektrilevi is separated by a firewall. But the government and the Competition Authority are considering separating the enterprises altogether. As the initial move the government wants the Eesti Energia management board members to leave the Elektrilevi supervisory board.

The corresponding law amendment was debated in the parliament yesterday (February 17) and the Electricity Market Act Amendments Act passed its second reading with the votes of the ruling coalition. The three-member supervisory board of Elektrilevi presently comprises Eesti Energia management board members Hando Sutter and Andres Vainola. After the law comes in force the enterprise will have to appoint there new members who would not be connected with Eesti Energia.

Eesti Energia spokesman Priit Luts said that the enterprise would not commend on the letter sent to the European Commission. Luts added that after the law amendment comes in force, Eesti Energia will appoint new supervisory board members for Elektrilevi.

Sester said at the parliament sitting yesterday that the economic affairs committee expected the European Commission to explain whether the electricity market directive requires so strict changes. Sester said that the government imposed its will. “Siim Kallas said frankly at the committee sitting that since the government had given such instructors, he would naturally support the government as a coalition politician,” Sester said.

The appointment committee makes its recommendations to ministers for appointing members to the state-owned enterprises’ supervisory boards. Accordingly the minister of finance appoints the supervisory board of Eesti Energia, while the supervisory board members of the Eesti Energia subsidiary would be appointed by the management board of Eesti Energia.

Sester said that the legal and analysis department of the parliament had decided that the procedure for appointing Elektrilevi supervisory board members need not be amended to comply with the directive.

MPs of Isamaa and EKRE recommended withdrawing this article from the bill, but it was retained with the coalition’s votes.

MP Peeter Ernits (EKRE) said at the Riigikogu sitting that Prime Minister Kaja Kallas is acting in the interests of enterprises competing with Eesti Energia.

Both Prime Minister Kaja Kallas and Minister of Economic Affairs Taavi Aas have said that Elektrilevi should be separated from Eesti Energia. But preparations for the severing of the two enterprises have been delayed. The analysis was to have been completed this winter but the public procurement procedure failed to find the firm to carry it out. The ministries of finance and economic affairs are not preparing a new procedure to complete the analysis by autumn.

Common cash flow

Hando Sutter, management board chairman of Eesti Energia, has said that market value of Elektrilevi is 1.2–2.4 billion euros. If the government wants to separate Elektrilevi, its value should be compensated to Eesti Energia.

“I recommended analyzing the separation of the ownership of Elektrilevi, merging it with the Elering grid and opportunities for listing the resulting enterprise,” Minister of Finance Keit Pentus-Rosimannus told Postimees yesterday. “This solution would have both financial and temporal effect in the development of electricity networks and create opportunities for new accesses. Separating Elektrilevi from Eesti Energia is possible only at market terms.”

Elektrilevi currently employs approximately 30 people. The remaining 670 employees of Elektrilevi work since the end of 2020 in the new enterprise Enefit Connect. Elektrilevi retained, figuratively speaking, the overhead lines and substations or the electricity grid assets. The other people necessary for providing the grid services work in a new firm from which Elektrilevi is buying services.

The separation of Elektrilevi from Eesti Energia is complicated by the fact that the concern has a common cash flow made as a loan against all assets. The most stable guarantee to loans is the electricity grid. If that is taken out of the concern, loans may become more expensive or some loans may have to be repaid earlier. The assets of Elektrilevi also help to finance the investments of the partially listed Enefit Green.