Prime minister: Eesti Energia engaging in 'Italian strike' over Elektrilevi

Prime Minister Kaja Kallas (Reform) taking part in an earlier edition of 'Stuudios on peaminister'.
Prime Minister Kaja Kallas (Reform) taking part in an earlier edition of 'Stuudios on peaminister'. Source: Priit Mürk/ERR

A planned separation of electricity network services firm Elektrilevi from generator Eesti Energia – both firms are state-owned – has been delayed due to the latter's concerns over loans becoming costlier, Prime Minister Kaja Kallas (Reform) says.

The "divorce" is in effect mandated by an EU directive in any case, though Eesti Energia is keen to make use of advantages Elektrilevi provides, risk-wise, in obtaining loans, in order to put them towards higher-risk projects, inside and outside Estonia, which do not directly benefit Elektrilevi or Estonian consumers of electricity.

Elektrilevi is the largest, though not the sole, electricity network service provider in Estonia and oversees, for instance, the restoring of connections when outages are caused by force majeure phenomena such as storms.

Eesti Energia generates electricity and is also the largest supplier to consumer. It is also the largest power company worldwide which uses oil shale in generating electricity.

The prime minister said Wednesday that the cabinet had made a decision in August 2021 to separate Elektrilevi wholly from Eesti Energia, but the latter had then started what she called an "Italian strike", meaning procrastination tactics.

Appearing on Vikerraadio's sui generis "Stuudios on peaminister" radio show Wednesday afternoon, Kallas said: "This decision was made on August 12, 2021, but, if you are aware of the term 'Italian strike', well this is a bit of an Italian strike.

"I have repeatedly been paying attention to how we can proceed with this issue," the prime minister added.

Loans taken out on the basis of the lower risk nature of Elektrilevi's assets but put towards higher-risk Eesti Energia projects are a factor in the latter's dragging their heels, the prime minister said.

"What I mean is that if they are linked together as a group, then a loan can be taken as a group, but as long as Elektrilevi's zero-risk assets are taken into account, that loan will work out cheaper, meaning projects that are riskier can be priced at a lower rate of interest," Kallas said.

Elektrilevi remaining an "orphan" (or a disenchanted spouse - ed.) is also one of the reasons why, for instance, necessary investments in Saaremaa's power cables have not been made, Kallas said.

A recent storm revealed the weaknesses in this aspect of the electricity grid.

The security of supply on Estonia's largest island during storm season, ie. autumn and winter, remains poor, Kallas added.

"Investments that have been made against Elektrilevi's assets have not been put into Elektrilevi's, networks to ensure that the public actually has an electricity supply. In my opinion, all kinds of oil shale plants being touted are a sideline to main point: That people have electricity. /.../ [Plus] all those investments in Utah which have been placed as a risk using money collected from the people of Estonia," she said.

Eesti Energia made investments in Utah over a decade ago, worth over €50 million, with the aim of extracting oil shale in the Beehive State, a project which met with some local protests and which was subsequently canned.

An oil shale extraction project in the Middle-Eastern state of Jordan was in 2016 sold to a Chinese state-owned company.

Closer to home, the Auvere oil shale plant in Ida-Viru County, which opened in 2018, has been dogged by operational issues.

All of these projects have at one time or another been deemed risky, including by the National Audit Office.

As to who is behind the delaying tactics, Kallas pointed to the Eesti Energia half of the equation, who cite loan risk as the main issue.

Kallas said she has been pushing for the decoupling of Eesti Energia and Elektrilevi for a decade already.

Kallas also nearly let slip who the new Eesti Energia board chair will be, replacing Hando Sutter, whose term ends in March next year, telling "Stuudios on peaminister" hosts Arp Müller and Mirko Ojakivi that she knows who the individual is, but cannot name names.

"Of course I know the name, I was just wondering if this was a trick question," she added.

In August this year, then-Minister of Finance Keit Pentus-Rosimannus (Reform) said that the plan to hive off Elektrilevi from Eesti Energia was not on hold, and key analysis would be ready in late October or in November.

She had previously told ERR that Elektrilevi might furthermore be merged with Transmission Systems Operator Elering (link in Estonian), while this newly merged company could be floated publicly.

However, in August, Pentus-Rosimannus – who is now heading to Brussels to be Estonia's new representative at the European Court of Auditors – said that updated owners' (ie. the state) expectations were that Elektrilevi remain a part of Eesti Energia.

Elering's head, Taavi Veskimägi, told ERR in spring (link in Estonian) that this could happen if the state so willed it.

A 2019 EU directive stipulated that a distribution network operator (ie. Elektrilevi in Estonia's case) with more than 100,000 consumers (which Elektrilevi exceeds by a long way, the company says it has over 533,000 customers - ed.) must be separated from activities not related to distribution, and this company may no longer engage in the provision of free market services.

Elektrilevi must therefore hold assets independently from Eesti Energia, under the terms of the directive.

Editor: Andrew Whyte, Marko Tooming

Source: 'Stuudios on peaminister', Arp Müller, Mirko Ojakivi.

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: