State credit agency KredEx is to be issuing further loans and loan guarantees after a hiatus early on this year. €180 million will be available, with the emphasis to be put on loan guarantees rather than straight-out loans. The government will not take decisions on loans – the largest of which were in the tens of millions during the initial coronavirus wave – in the wake of a major KredEx-related scandal in January which brought down the Center/EKRE/Isamaa coalition.
KredEx is also getting a new supervisory board.
Processing of KredEx loan applications was suspended at the end of last year, but the government gave the go ahead to restart support from the body, at the center of a recent scandal which prompted the resignation of Jüri Ratas (Center) as prime minister, to the tune of €180 million.
The government also instructed KredEx to issue funds more towards guarantees and less on loans.
Minister: New system will be more transparent
Entrepreneurship and IT minister Andres Sutt (Reform) said of the new methodology that it would cut costs, and that: "There are many other pros. The entire loan project has been evaluated. Business risks and the overall viability of the business plan [of applicants] will be evaluated too. If this assessment proves positive, but the obstacle [to banks] is one of collateral, which is mostly the subject of the 'golden circle' outside Tallinn (populous municipalities in the capital's commuter belt - ed.), then Kredex can best manage things."
The government has not further prescribed exactly how the money should be apportioned between loans and guarantees, while KredEx itself has not done so yet either, the organization's board chair, Ivo Kuldmäe, said.
"We are currently working on developing new terms of service which meet the expectations of policy makers," Kuldmäe told ERR.
Terms which may change may include interest rates, which might be higher than last year's, and the range of loan products, likely to be narrowed to just working capital loans. Under the previous system, investment loans and loans for projects deemed nationally important (such as the Porto Franco real estate development at the heart of the scandal which brought down the last administration - ed.) were also available, whereas going forward, they will likely not be, ERR reports.
Politicians moved further away from KredEx decision-making processes
At the same time, political decision making has been removed from the process.
The government decided Thursday morning that its prior agreement is no longer necessary in issuing large-scale guarantees or loans (which in the latter case would be €10 million or more), BNS reports.
Sutt said that this method would be: "Transparent and comprehensible to all; everyone has an equal opportunity to apply."
Nonetheless, the finance ministry continues to have an influence on the issuing of major KredEx loans and guarantees.
Ivo Kuldmäe said that the KredEx finance committee makes loan decisions of up to €1.5 million, and up to €5 million in the case of guarantees, while a larger committee including finance ministry experts gives assessments and recommendations on higher figures.
The old rule saw loans over €10 million being decided by the government. This led to several high profile loans as the effects of the pandemic hit hime, including €100 million to shipping line Tallink (which also got the same sum from the Finnish government – ed.), €37 million to fuel company Alexela and €39.4 million to the Porto Franco real estate development, near Tallinn's ferry terminal.
The last of these hit controversy at the time, as the project is only part-completed and therefore not generating revenue, but it was deemed one of national importance, which would generate jobs, in any case.
KredEx at center of corruption scandal which brought down last government
Once a secret services investigation into suspected bribery, influence peddling and money laundering was made public, in mid-January, Jüri Ratas resigned as prime minister, while a key finance minister adviser, Kersti Kracht, was imprisoned for over a month as a result, as was businessman and major Center donor Hillar Teder.
Porto Franco has so far received half of the €39.4 million, ERR reports, while negotiations between it and KredEx are ongoing in respect of the second half.
KredEx says its main concern is not the corruption scandal noted above, but that other lenders that had seemed forthcoming last summer, have now evaporated.
"KredEx, in turn, is working to ensure that their own interests, and thus the interests of taxpayers, are best protected," Andres Sutt said.
While the sums listed above are the major components of KredEx's coronavirus-era loan work, many smaller amounts have also been issued.
As of the present time, KredEx has entered into 168 loan agreements and 314 guarantee agreements, ERR reports.
The new fund of €180 million has been decided on, but cannot yet be drawn down from by applicants; KredEx has put a date of early April for these to become available.
Andres Sutt replaces KredEx supervisory board
KredEx has also seen a shake-up on its supervisory board recently, BNS reports, with Helo Meigas, Veiko Hintsov and Mait Palts appointed (by Andres Sutt) to three-year terms, replacing Andrus Toom, Kroot Kilvet and Priit Vark.
Andres Sutt, who made the appointments, noted the new board members' experience in the field and related areas; Meigas is supervisory board member at the Poliitikauuringute Keskus Praxis center for policy studies. And has previously worked as risk manager and head of treasury at Swedbank Group, deputy governor of the Bank of Estonia and as CEO of Tallinn Stock Exchange, while Hintsov is a sworn auditor with over 25 years' experience, and previously worked at Deloitte Estonia for 23 years, the latter half of this period as CEO.
Palts has been the director general of the Estonian Chamber of Commerce and Industry (Eesti Kaubandus-Tööstuskoda) since 2011,.
Editor: Andrew Whyte