Estonian Minister of Finance Mart Võrklaev (Reform) wants government approval to float Eesti Energia subsidiaries Elektrilevi and Enefit OÜ on the stock exchange and privatize another part of Enefit Green. There are also plans to privatize plans other state-owned companies, however, the finance minister has not yet been able to discuss them in the cabinet.
"The idea is to go ahead with a further IPO (Initial Public Offering) of Enefit Green. At the moment, about 23 percent of the company is listed on the stock exchange and it would be possible to get up to 49 percent. My wish would be to get this process going, start preparing it and wait until the best market conditions are in place to go ahead with it," Võrklaev told ERR on Thursday.
"And of the new entrants, I would suggest that we could start preparing in a similar way for a partial listing of Elektrilevi on the stock exchange," the finance minister continued. A partial privatization of Elektrilevi on the stock exchange would serve three purposes, Võrklaev said.
"First of all, Elektrilevi has now been re-staffed under Enefit Connect. Its tasks have been reduced and its independence and transparency have been significantly increased. Changes have also been made to the composition of the supervisory board, and going public would help to further increase its independence of management," said Võrklaev.
"Secondly and thirdly, as a result of the partial sale of part of the company, there would be funds for Eesti Energia. And I think that the most important objective could also be to bring additional funds to Elektrilevi in order to increase the volume of investments," he added, referring to the fact that Elektrilevi has a significant need for investment funds.
Võrklaev was then asked how this might bring in more money for investments. "The money would be raised by selling existing shares, which would bring money to Eesti Energia, but if we also issue new ones, then that too will bring more money into the company."
"We are still talking about a partial flotation, a minority stake, so to speak. What will actually be better is that we will be raising money both to increase the company's investment capacity and because in the case of Elektrilevi, there have been a lot of public questions in the past regarding about its independence. We have already increased this transparency by bringing Elektrilevi back from Enefit Connect with its new tasks and people as well as with the changes to the supervisory board. In turn, the flotation will certainly further increase this independence and autonomy. And the bottom line is that we will get money for investments, while on the other hand there will be the expectation of dividends for investors, for the people of Estonia," the minister explained.
"This could be attractive for investors and, of course, for Elektrilevi's customers, that is, the Estonian people," he added.
"Security of supply should improve and it will also possible to buy a relatively secure share in a state-owned company," said Võrklaev.
At the same time, the minister pointed out that Elektrilevi's listing on the stock exchange is not yet certain and has not previously been thoroughly discussed.
According to Võrklaev, the third company to be partly privatized could be Enefit OÜ, which is involved in the sale of electricity, development of charging infrastructure and gas sales. "This is a relatively new idea, it has not been discussed before and so probably needs the most preparation time," he added.
One company every year
Võrklaev said that privatization ought to happen with an awareness of the market situation, but that the IPO (Initial Public Offering) should also be prepared in advance in order for it to be initiates at the right time.
"My wish would be that, over the next three years, every year we could have one IPO to spread it out over time. However, of course, you have to look at the specific market situation. Still, in order to prepare all of this, fundamental decisions need to be taken and so it is my wish to discuss these fundamental decisions in the government," he said.
According to the minister, the proposed privatizations could happen between 2024 and 2026. "That way there will be a greater receptiveness, probably not [if it happens] all at once, then there will not be a good result and not be so many participants," he explained.
"The aim is actually to develop the local investment market and offer Estonian people the opportunity to be involved in such strong state-owned companies. This is certainly one of the objectives of this activity," said the finance minister.
The minister said that the privatization of certain state-owned enterprises is in the government's action program and the Ministry of Finance, together with other ministries, had been due to present a summary proposal by the end of November.
"We were supposed to discuss this in the cabinet today, but unfortunately today's cabinet meeting was cancelled, so this discussion will now be postponed until January 4. And since we have not discussed it in the government, I am unfortunately not in a position to comment on the names of the companies that are there or what the ideas are in the different ministries at the moment," Võrklaev said.
Editor: Michael Cole