Kallas, Reinsalu at odds over Elektrilevi-Eesti Energia separation decision

Minister of Foreign Affairs Urmas Reinsalu (Isamaa) and Prime Minister Kaja Kallas (Reform).
Minister of Foreign Affairs Urmas Reinsalu (Isamaa) and Prime Minister Kaja Kallas (Reform). Source: Jürgen Randma/Government Office

While Prime Minister Kaja Kallas (Reform) noted that the decision to split subsidiary Elektrilevi from parent company Eesti Energia had been made by the previous government and that the current government was approaching the matter in light of the principle of continuity, according to Minister of Foreign Affairs Urmas Reinsalu (Isamaa), the current coalition agreed that a decision on the spilt would be made after first reviewing a specific analysis.

Speaking at Thursday's government press conference, Kallas acknowledged that discussion regarding splitting distribution network operator (DNO) Elektrilevi from the Estonian state-owned energy group was driven by the recent winter storm to hit Saaremaa and the resulting lengthy power outages on the island.

She also addressed the news story according to which the Ministry of Finance had, ahead of a TV interview with ETV, reviewed the talking points with which Kallas had intended to justify separating Elektrilevi from Eesti Energia; each point was the subject to extensive criticism by Ministry of Finance official Tarmo Porgand.

"If you look into it, then they're all of course the same views that Eesti Energia has been presenting for ten years already," the prime minister commented. "There's nothing new there. I have refuted all of these views in my blog posts. It's also important to note that this official is [was -ed.] also a member of Eesti Energia's supervisory board, not independent in this case."

Kallas noted that based on a Boston Matrix, Elektrilevi could be considered Eesti Energia's cash cow, meaning that the guaranteed cash flows and borrowing capacity the former has generated has been used to invest in question marks like Jordan or Utah.

"I'm pretty sure that Elektrilevi as an independent company likely would have made those investments into strengthening Saaremaa's grids or into further weatherproofing power grids altogether instead, not invested that money somewhere else," she said.

"The problem in Saaremaa was also the fact that there were no people, no resources; everything had been carried away regarding which the government had decided over the summer that Eesti Energia can't do that," the head of government continued. "The government has made its decisions regarding separating Elektrilevi, and now the analyses regarding what that will mean have been completed, and we will be moving forward with this."

Reinsalu, junior coalition partner Isamaa's representative in the government, stressed that the government would make a decision regarding separating Elektrilevi from Eesti Energia after reviewing the new impact analysis.

"What's true is that we had a serious discussion about this during coalition negotiations as well, and we agreed that we would make a decision after we'd reviewed this analysis," Reinsalu said. "I don't have this analysis at my disposal; I've read about the analysis in public comments issued by the Ministry of Finance, and Eesti Energia commented on it in December. In public comments, the analysis raises issues concerning a potential increase in network charges should [Elektrilevi be separated from Eesti Energia]."

"How can you comment on something with which you haven't been acquainted?" Kallas remarked.

"I'm commenting on views that have been expressed by various institutions regarding this analysis," the foreign minister replied. "But I'm not falling for that trap, Ms. Prime Minister, and won't rush ahead with a decision before we've had the opportunity to acquaint ourselves with the analysis, listened to these views and then the government is capable of making these decisions. The answer to the question of whether we've already made a decision prior to reviewing the analysis is honestly no — we haven't."

Kallas said that the government has continuity, and as the previous government has made this decision, then if any coalition partners want to amend this decision, it must be discussed in the government. "But such a decision has been made," she maintained. "So that absolutely exists."

"The government coalition has agreed that it would conduct an analysis and that it would make a decision regarding this separation after that," Reinsalu argued.

"Let's look at and get acquainted with the analysis and then discuss," suggested Minister of the Interior Lauri Läänemets, representative and chair of the coalition's other junior member — the Social Democratic Party (SDE). "Right now we haven't discussed this in the government."

Three weeks ago, Minister of Finance Annely Akkermann (Reform) said that a final decision regarding the separation of Elektrilevi from parent company Eesti Energia, regarding which the government cabinet had made a decision in principle last August already, may be made before the 2023 Riigikogu elections this March.

Eesti Energia believes the analysis indicated that separating Elektrilevi from Eesti Energia would not serve consumer interests, as it would result in higher network charges due primarily to the fact that the separation would lead to the duplication of information systems and service processes, and that loan capital would get more expensive as well.


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Editor: Aili Vahtla

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