Tootsi wind farm to become Estonian Air vol. 2

Photo: Tairo Lutter

The government's decision to hand the Tootsi wind farm over to national energy company Eesti Energia has resulted in an appeal to the European Commission by a number of wind energy companies that demand the decision to be overturned.

Representative of Estonia's leading wind energy producer, Allar Jõks, says the situation has the makings of a precedent.

“Estonia has not seen a dispute of this magnitude, sporting this kind of argumentation before,” the sworn lawyer at Sorainen said. Jõks represents Nelja Energia and its subsidiaries VV Tuulepargid, Aseri Tuulepark, Pakri Tuulepargid, and Hanila Tuulepargid.

Opaque action

What Jõks means in terms of magnitude is the sum – up to €15 million – wind energy producers believe the government has made available to Eesti Energia as state aid by handing the Tootsi Suursoo area over to the company.

Even though Finance Minister Sven Sester has so far maintained that the Tootsi Suursoo area has been allocated to Eesti Energia in accordance with all valid legal acts and does not constitute state aid in his replies to the wind energy association and MP Artur Talvik, wind energy entrepreneurs believe otherwise.

“We believe it is state aid for which permission has not been asked from the European Commission. I see act two of the Estonian Air saga on the horizon,” said Jõks who represents Nelja Energia group. He said that we are seeing a repeat of the pattern that saw the national airline close its doors at the end of the year before last after the government made aid available to the airline without a permit.

The only difference is that back then no company sued the state as there was no competition on the market. The situation is different on the wind energy scene.

“It is practically the only area in Estonia where a major wind farm can be constructed,” Jõks said, pointing to national defense restrictions that only leave developers with relative freedom in Pärnu and Viljandi counties. The latter is unsuitable due to the fact it rarely sees strong winds.

“Public resources should generally not be allocated in an opaque manner. Today it has been handed to a single company in a situation where Estonia has 70 producers and 50 brokers of electricity – there is competition on the market and many would have been interested in securing that resource,” Jõks said. It was one of the reasons Nelja Energia turned to court: the fact that a tender was not held was found to be against the law.

Wind energy companies are also perplexed by the price at which Eesti Energia secured the disputed area. Based on market price calculations used by the European Commission, entrepreneurs find that the value of the area falls between €13.9-18.7 million instead of the sum of €4.1 million, meaning the government has effectively made state aid in the volume of €9.8-14.6 million available to Eesti Energia.

“What is more important is that the national energy company did not buy the land using cash, but will instead give the government shares, which means that money will not be moved around at all,” Jõks said.

Lighter honeypot

Wind sector companies find that the government's decision – to allocate the Tootsi wind farm land to Eesti Energia – distorts competition as a company has secured public resources below market price. “Had Eesti Energia secured the area on market conditions, it would not constitute state aid. If the company got it for less than the market price, it is just that,” Jõks said.

The sworn lawyer explained that state aid has four characteristics and the case at hand meets all of them. The European Court of Justice practice defines state aid as support that gives an entrepreneur an economic advantage the nature of which is selective, and where the support harms or distorts competition.

“If it is a case of illegal state aid, it will end up costing the taxpayer a lot of money, which is why we want the court to decide whether that is the case,” the lawyer said.

Eesti Energia is convinced the considerable interest of wind sector participants in the Tootsi area is caused by fears of a lighter honeypot of renewable energy subsidies. “The output of the Tootsi wind farm will eat into renewable energy support made available to other wind farms,” said head of new energy solutions at the state company Alo Kelder.

He explained that renewable energy support the state collects from consumers and pays to producers was never meant to be a guaranteed volume for current players. “Because annual wind energy support is limited to 600 GWh, new wind farms will not hike the price component for the consumer, while the emergence of new farms leads to fiercer competition among producers,” Kelder noted.

He also said that because Eesti Energia has been working on infrastructure necessary for the wind farm on the disputed plot for several years, companies are afraid that the Tootsi wind farm will become a realistic competitor. “It is understandable how a leaner honeypot is frustrating for support recipients,” Kelder added.

Should the government decide to hold a tender before the end of legal proceedings, Eesti Energia's representative believes that the land or corresponding rights alone will not make it possible to realize the wind farm, while they will be enough to prevent it from being constructed.

“In terms of finishing the project, it is not about the price of land but the preliminary work done and agreements entered into by Eesti Energia as the developer without which the project cannot be realized,” Kelder said.

Auction the land

“I would recommend the government end the dispute and put the immovable up for auction – this would not cost anyone anything. Eesti Energia is free to take part provided it has enough cash and interest,” said Jõks.

That is the aim of Nelja Energia – to secure an auction for the Tootsi immovable. “An auction would automatically do away with the state aid argument,” the sworn lawyer noted.

He also pointed out that in a situation where the new government has decided to list 49 percent of Eesti Energia subsidiary Enefit Taastuvenergia this year, an ongoing state aid dispute could have a negative impact on the share price.

“I do not think it (holding an auction – ed.) could somehow harm the state's interests. It would give it cash instead of more shares,” Jõks said.

Complaints seeking the revocation of the government decision to allocate the Tootsi Suursoo area to Eesti Energia have been filed in Tallinn Administrative Court by businessman Harry Raudvere's AS Raisner, Hans Teiv, and Nelja Energia along with four of its subsidiaries. Press representative of the court Anneli Vilu said that the court has accepted the complaints and merged them into a single case.

Existing dispute

“The sides have been given until February 3 to present statements, after which it will become clear how the case will proceed – whether in written or verbal proceedings – and future deadlines set,” Vilu said.

The court will rule on an application for preliminary legal protection filed by AS Raisner and Hans Teiv based on the positions of the complainants by January 19 at the latest.

There has been one other state aid dispute between entrepreneurs and the state, even though circumstances were different.

The case concerns support made available to the Polli landfill by the Center for Environment Investments (KIK) in which support conditions included a clause that the company cannot launch its project before it has received confirmation from the European Commission that the instrument does not constitute state aid.

The condition was contested in court by both the support recipient and its competitor Ragn-Sells. In the end, KIK decided not to sponsor the project as the landfill was partly owned by four local governments, with one quarter belonging to the city of Tartu.