Estonian government to discuss Elektrilevi's Eesti Energia split Thursday

Elektrilevi. Source: Siim Lõvi /ERR

Minister of Finance Annely Akkermann (Reform) will present the results of an analysis conducted by KPMG into the potential effects of Elektrilevi's separation from Eesti Energia, at a cabinet meeting on Thursday. At the meeting, Akkermann is also expected to introduce the new head of Eesti Energia to government ministers.

During a cabinet meeting in August 2021, the Estonian government agreed that the best way forward was for electricity network services firm Elektrilevi to separate from generator Eesti Energia. At the same time, the government also decided to commission an analysis into the potential impact of the separation.

The analysis, conducted by KPMG, was completed last year. However, government discussion of the analysis was delayed due to both Annely Akkermann replacing Keit Pentus-Rosimannus (Reform) as Minister of Finance, a role which also involves chairing Eesti Energia's general meetings, and Eesti Energia's search for a new board chair.

The presentation of the analysis is now on the agenda for the cabinet meeting on Thursday, a government spokesperson told ERR.

The Minister of Finance is also scheduled to introduce government ministers to Andrus Durejko at Thursday's meeting. Durejko will take office as head of Eesti Energia on April 1.

The results of KPMG's analysis will not be shared with the public until after they have been discussed by the government.

However, both Akkermann and current Eesti Energia chief Hando Sutter have already made comment about the findings.

In Akkermann's view, the analysis shows that the separation would be no more expensive for the state than the current arrangement, persuading the minister that a split was the best way forward.

However, Eesti Energia's board and supervisory board disagree with the finance minister. Both believe that separating Elektrilevi from Eesti Energia would not be in the best interest of consumers, as it would lead to higher network charges due to the need to duplicate information systems and service processes. They argue that the split would also lead to an increase in debt capital costs.

According to Hando Sutter, the analysis does not suggest that the situation would improve for either consumers or the company's owner, if it does go ahead.

August 2021 decision does not explicitly foresee separation

The Reform Party, led by Prime Minister Kaja Kallas is in favor of Elektrilevi's separation from Eesti Energia. Kallas has, among other things, said, that, despite the government deciding on the split in August 2021, Eesti Energia's management has deliberately delayed it due to concerns that loans will become more expensive.

The cabinet decision made on August 12, 2021 consists of four points. The first of which takes into account the information provided by the Ministry of Economic Affairs and Communications.

The second point instructs the Minister of Finance, in their capacity as the representative of the owner (in this case the state) of Eesti Energia, to ensure that Elektrilevi OÜ, which is part of the Eesti Energia group, has sufficient in-house competences, resources and staff to operate as an independent distribution systems operator.

The third point supports the draft Electricity Market Act submitted by the Ministry of Economic Affairs and Communications, which includes provisions to ensure the independence of Elektrilevi OÜ's supervisory board from Eesti Energia AS. It also adds a provision to the draft, that potential appointments to the supervisory board of Elektrilevi OÜ shall be proposed to the government by the nomination committee.

The fourth point has been subject to the most debate among the parties in the current government coalition, and relates to whether the government has decided to separate Elektrilevi from Eesti Energia or not.

The draft submitted by the Ministry of Economic Affairs and Communications was added to a memorandum submitted to the cabinet. The Government Communication Unit told ERR, that the memorandum is for internal use only and will not be shared with the public.

The separation of Elektrilevi was not foreseen in the updated ownership expectations for Eesti Energia, which were approved by then-Finance Minister Keit Pentus-Rosimannus in August last year. Among the expectations stated at that time were, that Elektrilevi and its networks would remain part of Eesti Energia.


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Editor: Michael Cole

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