Auditor General concerned over outstanding oil shale plant financials

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Auditor General Janar Holm. Source: ERR/ Hege-Lee

Financials on a proposed oil shale plant in eastern Estonia promised by the preceding administration and to be drawn up by the finance ministry have missed their deadline, Auditor General Janar Holm notes. The issue is heightened by the planned development being potentially at odds with European Union climate goals, Holm added.

In a communique to acting finance minister Maris Lauri (Reform), Holm wrote that: "It was also said in the decision that the Ministry of Finance is to present to the government new profitability calculations relating to the investment on June 1, 2020, at the latest," referring to a cabinet decision in March last year to boost state-owned electricity generator Eesti Energia ahead of a planned new oil shale plant.

However, the June 1 deadline had been missed, Holm, who heads up the National Audit Office (Riigikontroll) went on.

"According to the information available to the National Audit Office, no such calculations have been presented to the government," Holm continued.

He also expressed concern with compliance with European Commission state aid rules, given the potentially wide-ranging motivations for establishing the plant – which would include job creation and tax revenue for the state.

He said: "Has the Ministry of Finance, in order to preclude any possible disputes and recoveries pertaining to state aid following the completion of the oil plant, fully analyzed the consistency of all justifications for increasing the share capital with the EU's state aid rules and consulted with the European Commission?"

Holm made his remarks based on information available to the audit office.

The then-Center/EKRE/Isamaa coalition authorized the finance ministry to boost Eesti Energia's share capital by €125 million, partly to finance the planned oil shale plant.

Holm also noted that the government has expressed support for objectives of the European Green Deal and confirmed its commitment to meetings same, adding that the government's own action plan states that the Estonian state aims to phase out oil shale altogether, by 2040.

The rock which is then burnt to provide oil shale is mined and then refined in Ida-Viru County and has a variety of uses and by-products, not only in generating electricity – Estonia at one time obtained the bulk of its electricity needs from this source – but in other applications such as the chemical industry.

Signing up to the EU's long-range plans for CO2 neutrality has, however, meant the sector's days are numbered; alternative workarounds have yielded several suggestions including, most recently, a pulp mill proposed for the region.

The price of EU Allowances (EUA) on the EU Emission Trading System has risen from €17 to over €50 per unit since the decision to increase Eesti Energia's share capital, he said, while European Commission has expressed an intention to restrict the amount of EUAs to be distributed free of charge, which it does with certain sectors, BNS reports.

Following on from this, Holm also asked Lauri if the finance ministry plans to present updated profitability calculations, at the same time taking into account the dynamics of the situation, and various development scenarios.

He also inquired as to whether the ministry was planning to update decisions concerning Eesti Energia's share capital when and if necessary.

Maris Lauri, whose primary post is as justice minister, is deputizing for Keit Pentus-Rosimannus, who is on maternity leave. Finance minister at the time the March 2020 decision was made was Martin Helme (EKRE).

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Editor: Andrew Whyte

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