Finance minister curbs oil plant enthusiasm

Enefit-280 shale oil plant. Photo: Mihkel Maripuu

Minister of Finance Keit Pentus-Rosimannus has urged national energy company Eesti Energia not to make irreversible investments into the new Enefit-280 shale oil plant before the court rules on its building permit.

“Making irreversible expenses aimed at construction and preparations during the legal dispute is tied to great risk,” the finance minister said when responding to a question by MP Jevgeni Ossinovski (SDE) from earlier in the month. Tartu Circuit Court in early May suspended the plant’s building permit and ordered preliminary legal protection following a complaint from environmental NGO Loodusvõlu. The court invalidated the permit issued by the Narva-Jõesuu city government until such time proceedings have been concluded.

The finance minister urged members of Eesti Energia’s supervisory and management boards to avoid making such expenses based on the conscientiousness obligation in the business code in a letter from May 19.

The minister also wanted the boards to review and update the plant’s cost-effectiveness calculations, considering various forecasts and climate agreements, as well as circumstances pertaining to the legal dispute.

“I also deem it necessary for the management and supervisory boards to be ready to justify the plant in public as Eesti Energia is a state-owned company under major public scrutiny,” Pentus-Rosimannus wrote.

Eesti Energia has said that their calculations were thorough and that very different risk scenarios were considered. The company has assured that the outlook for the plant proving effective has not worsened.

“Based on political expectations, Eesti Energia will have to move away from oil shale power generation towards combined oil and power production that is more environmentally friendly and effective than burning oil shale directly,” Eesti Energia spokesperson Priit Luts said.

“This is precisely what Eesti Energia has done in seeking to build a new oil plant and closing older power stations.”

Eesti Energia says that 80 percent of the E280-2 project’s supply contracts have been signed. The total cost of the project is €321 million. Based on existing contracts, €37 million needs to be paid by July 1.

According to the company, the construction of the plant is financed using valid loan contracts and own resources. Eesti Energia has €590 million in loan credit it can use for various projects.

“The legal dispute over the new Enefit-280 plant’s building permit is a fact today as is preliminary legal protection that makes it impossible to launch construction,” Luts said. “We will not start building before the permit has been restored. We have presented the court with additional cost-effectiveness assessments that will allow the judges to make a reasoned and fact-based decision.”