Kallas: Eesti Energia's absurd bonuses incomprehensible

Hando Sutter.
Hando Sutter. Source: Priit Mürk/ERR

Prime Minister Kaja Kallas (Reform) said at government press conference that it is incomprehensible that the supervisory board of Eesti Energia is paying such a high performance bonus to the outgoing board, given that the board poorly implemented the owner's expectations and wanted to pay less than fair dividends to the treasury.

Minister of Finance Annely Akkermann (Reform) said that she had asked the supervisory board of Eesti Energia to reduce the management's performance bonus, because the cooperation of the Ministry of Finance as the general assembly of the state-owned company with the management board of Eesti Energia was unsatisfactory, and the management's and supervisory board's intended dividends fell short of the owner's expectations.

Prime Minister Kaja Kallas (Reform) said Akkermann's explanation was too soft and that Eesti Energia's management had clearly failed to meet the expectations of the state.

"We did not go over every (in)action taken by the board. Eesti Energia should be able to meet the expectations of the state, its owner. Eesti Energia must be an Estonian state representative and not work against its best interests. This is unacceptable. The list of instances where the board has deviated from the owner's expectations is lengthy. Emptying Elektrilevi: We agreed with the government to quickly bring back people and resources into Elektrilevi in order to prevent power outages. They did not do that. Then storms hit Saaremaa, leaving residents without power for weeks. Nobody accepted responsibility," Kallas said.

Kallas cited the failure to provide cooling water for Narva's power plants as another example of inaction. "If I recall correctly, the government decided to limit these risks in March. We delegated the decision to Eesti Energia, but nothing had been completed by August. We (the government) are completely dissatisfied with Eesti Energia's management in so many of these cases. How can we award a bonus to the board if they did not complete the assigned tasks? "The prime minister asked.

Akkermann sent a letter to the supervisory board of Eesti Energia on Tuesday asking it to undertake a critical evaluation of the performance fees of the outgoing executives.

The government decided this week to collect €68.9 million in dividends from Eesti Energia, based on Akkermann's recommendation. More than the company had initially planned to allocate.

Kallas said that high performance fees are incomprehensible in this light.

"I agree with the finance minister's judgment, which was like my own. We were unable to obtain revenue for the state budget from Eesti Energia's large profit.
What should belong to the Estonian people is a profit that was not earned through hard work, but rather is a result of the increase in energy and gas prices.
Dividends were supposed to be paid to the general public, but this is also not happening. It is absurd that such exorbitant bonuses are given out," Kallas said.

Akkermann: it was my decision

When asked if Prime Minister Kallas, who has previously criticized the management, was behind the decision to reduce Eesti Energia's management's performance bonus, Akkermann clarified that it was her own decision.

"Don't hold the prime minister accountable for decisions she didn't make.
She's been extremely busy, and I've told her in five words that the council intends to pay such fees, and that I intend to request a review. Kallas agreed. I asked the prime minister a five-word question, telling her that the board of Eesti Energia had proposed reducing dividends to the state budget, and that I intend to override that decision, to which she nodded, but blaming the prime minister is irrelevant. These were my decisions," Akkermann said.

Since the board of Eesti Energia decided to pay less dividends than the owner expected, Akkermann asked how the board's performance can be judged as excellent as the performance fees suggest.

Akkermann also listed the reasons why, in her judgment, the board's engagement has been insufficient: challenges with underestimating the energy security of the Narva power plants and too-slow resolution of the cooling water situation; issues with securing controllable electricity capacity. The deliberate reduction of Elektrilevi's capacity, which resulted in severe blackouts in Saaremaa during and after the storm; uncertainty regarding customer bills and a confused ultimatum to microgenerators.

As the company's general asembly, Akkermann was able to request larger dividends due to Eesti Energia's €461.5 million in undistributed profits over the years.

The management and supervisory boards' initial proposal of more modest dividends was aimed at maintaining a high investment capacity and rating, offsetting the loss of subsidiary Enefit Power in the provision of the universal electricity service, as well as that of transmission system operator Elektrilevi.

Nonetheless, Akkermann said that since Eesti Energia's profit was high last year and significant investments were made, it's reasonable to question why the owner's expectations were not met as well.

The board decided to pay an average monthly fee for three months as a performance bonus

In February, the Eesti Energia supervisory board decided that the management board members will receive a performance bonus equal to three times their average monthly salary.

The performance fee for CEO Hando Sutter will be approximately €75,000; Raine Pajo will receive €51,000; Margus Vals and Andri Avila will receive €48,000 each and Agnes Roos will receive €47,500.


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Editor: Marko Tooming, Kristina Kersa

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