Utility dividend divides Cabinet

  • 2005-03-09
  • From wire reports
TALLINN - An inter-government spat erupted last week over whether to make Eesti Energia, the country's energy monopoly, pay a dividend to the state. Former Economic Affairs and Communications Minister Meelis Atonen called the plan "unreasonable," as Eesti Energia's technical development is not on a level that would justify the state profiting from operations.

"The state's interest in the case of Eesti Energia should rather be, as much as possible, to ensure that the money they are now planning to pay out [in dividends] would be invested," he told the Baltic News Service, referring to the recent power failures after a storm in January.

Before one could even think about extracting dividends, such investments must be made, and all strategic risks should be grounded, said Atonen, who is also a member of the Reform Party.

Because this process could take years, he added that he was against listing minority shares in Eesti Energia.

"In a listed company it is natural that the demand for dividends and other such things immediately rises," Atonen said.

The government on March 3 endorsed the company's dividends for this year, earmarking 97 million kroons (6.2 million euros) for itself. According to the Finance Ministry, the idea was inspired by People's Union Chairman Villu Reiljan, a junior member in the ruling coalition. This will be the first time the state has taken dividends from Eesti Energia.

In the course of handling the 2005 state budget Reiljan, who is also the environment minister, proposed that sale proceeds from the carbon-dioxide emission quota should be transferred to the budget, a Finance Ministry spokesman told the Baltic News Service.

"When the carbon dioxide distribution plan was about to be endorsed, Finance Minister Taavi Veskimagi asked whether the sale of carbon dioxide would be launched this year [2004] and whether the agreement concerning the 97 million kroons held true. The environment minister said that it did," the spokesman said.

Janno Reiljan, Villu Reiljan's brother and fellow People's Union member, said that the decision to take out dividends boiled down to one thing 's the establishment of a consumer electricity tax.

"Until now, the price of electricity covered the cost and necessary investments of generating electricity. By taking the [Eesti Energia] dividends, the state literally establishes an electricity tax to fill its budget," said Janno Reiljan, who is also a member of the company's supervisory board. "This is a rather serious tax policy decision."

He added, however, that the ruling coalition had not yet discussed the decision.

"We have not been able to ask for the justification behind [taking] the dividends. Neither have we been able to discuss whether this is the most sensible way of filling the state budget," he said, immediately adding that if the matter was discussed, it may very well turn out to be justified.

Reiljan said that he favored the proposal to keep electricity prices as low as possible - high enough only to cover the necessary investments. In such a case, the owner would not have to remove dividends from the company.

Eesti Energia's current situation, Reiljan pointed out, is quite different from that of the Port of Tallinn.

"Electricity is a common boon, while the port only offers a certain fixed business service," he said.

Eesti Energia financial director Sandor Liive said that, because the company's money flow was smaller than investments, paying off dividends would increase Eesti Energia's use of loans.

Liive added, however, that the electricity company's lending capacity was sufficient, and that loans could be taken within the framework of earlier contracts. "The payment of dividends will not create any problem for us," he said.