Eesti Energia, known as Enefit in the U.S., has been under fire from both the Estonian press and high-level Estonian officials for its poor investment record. As Raimo Poom, a columnist for Estonian publication Eesti Paevaleht wrote:

Eyes On Enefit Logo

“Eesti Energia’s plan to build up a huge shale oil industry raises a lot of questions; financing the plan is the most questionable decision taken by the government lately.”
— Raimo Poom, Columnist, Eesti Paevaleht, May 22, 2010 via BBC Monitoring Europe

According to the former deputy CEO of a subsidiary of Eesti Energia’s biggest oil shale processor:

“Eesti Energia’s activities largely look like an unplanned adventure, and this type of export of oil shale-related know-how is simply adventurism.”

— Mati Pallasma, former deputy of VKG OIL AS, subsidiary of VKG, Postimees, April 8, 2011 via BBC Worldwide Monitoring

Even Eesti Energia itself acknowledged that the present time is “financially, the most complicated period of time for us… [and] will be the most difficult time.”

Photo of Narva Power Plant. Source: The Baltic Course

Photo of Narva Power Plant. Source: The Baltic Course

Here are a few examples of Eesti Energia’s questionable investment strategies and what opinion leaders and financial experts inside and outside of Estonia had to say about them.

Eesti Energia and Estonian government are accused of pushing through a large investment based on “legally questionable basis”

Eyewitness, an Estonian investigative journalism show, accused Eesti Energia and the Estonian government of “pushing through” large investments in the new blocs of the Narva power plants, despite the fact it was, “legally incorrect and based on incorrect data.”

State Audit Office chief auditor Tarmo Olgo said building the Narva blocs at a total cost of 1 billion Euros ($1.3 billion U.S. dollars*), “is not necessary as it won’t contribute anything to the market,” and that, “it is not economically feasible…”

So, it’s not surprising then, that Eesti Energia sought in January to abandon operations at the plant, after the company found, “the new station would be unable to produce electricity for a competitive price.”

Eesti Energia abandoned the second phase of the plant – a 400 million euro investment [$522 million U.S. dollars*] less than one year after the cornerstone laying ceremony.

Standard & Poor’s downgrades Eesti Energia’s bonds to negative, while Moody’s raises concerns over risky Lithuanian investment prospects

Eesti Energia’s failed investments aren’t limited to oil shale. The company also considered investment in Lithuanian nuclear power plant, despite credit rating agencies’ reservations.

Standard & Poor’s Rating Services said that [sic] has revised the outlook on…Eesti Energia AS to negative from stable to reflect the risk that the company’s credit quality will weaken due to possible participation in a prospective nuclear power plant in Lithuania.

— Eesti Energia outlook cut to negative on possible nuclear plant investment – S&P, Thomson Financial Super Focus, August 28, 2007

The Moody’s rating agency says in a comment concerning the new nuclear power plant concession bill supported by the government in Lithuania, that proceeding with the plan would jeopardize the power utilities Eesti Energia’s and Latvenergo’s credit ratings.

— NPP Project threat to power utilities’ rating- Moody’s, Esmerk, DELFI.ee, May 14, 2012

Lithuanians back out of deal with Eesti Energia due to company’s debt burden

Eesti Energia’s home government isn’t alone in expressing doubt over the company’s investments. Other governments have shown wariness toward Eesti Energia as well. Lithuania backed out of a privatization deal with Eesti Energia because of the company’s debt burden of one billion litas ($379 million U.S. dollars**).

One more argument against selling RST, a profitable and stable company, to Eesti Energia is the Estonian company’s debt burden of almost a billion litas, which limits its investment possibilities.

— Estonians to seek compensation over aborted sale of Lithuanian power grid, Baltic News Service, March 3, 2004

If a history of failed investment sounds familiar to Eastern Utah and Western Colorado residents, it should. Oil shale development in the region has had a similar track record of failure. Given this shared history, it makes sense for oil shale companies like Enefit to prove they have developed a technically and commercially feasible way to produce oil shale before they are given more access to public lands and resources.

*Calculated using the Euros to U.S. Dollars conversion rate on February 27, 2013

**Calculated using the Litas to U.S. Dollars conversion rate on February 27, 2013

This blog is part of a series about Enefit, known at home in Estonia as Eesti Energia, covering the company’s financial outlook, background and status of its Utah project.