No. 2




Extracts from the Presentations by Prime Minister and Minister of Economic Affairs in the Riigikogu

31 October 2000


RiTo No. 2, 2000


The Government of the Republic authorised Prime Minister Mart Laar and the Minister of Economic Affairs Mihkel Pärnoja to present to the Riigikogu the conditions and background of the contract with NRG Generating Holdings B.V., which is a hundred per cent affiliate of NRG Energy Inc., to acquire a 49 per cent interest in the Narva Power Plants PLC. The presentation was made at an extraordinary session convened by 21 members of the Riigikogu to discuss the conditions of the above contract as an issue of national importance.

Prime Minister Mart Laar begins rhetorically by resorting to an Estonian literary classic – in order to describe honestly everything that happened, one must return to the beginning of the story. The story of the NRG deal begins in summer 1995 when the Government of the Coalition Party, Rural Union and the Centre Party was in power, with Tiit Vähi as Prime Minister. Meeting in the USA with the representatives of the NRG both parties came to an idea to develop mutual cooperation with the aim to bring the first major investment from the US to Estonia. In autumn 1995, first official meetings of NRG and the representatives of the Estonian Government took place in the US to discuss the issue of creating a joint venture on the basis of a principle 50%-50%. In March 1996, the protocol of intentions between the Estonian Energy, Government of the Republic and the NRG was signed in Washington at the presence of the US Deputy Secretary of State Strobe Talbott. In December of the same year, NRG, the Government of the Republic and Estonian Energy signed an agreement for the development of cooperation. The Prime Minister admits that starting negotiations for privatising the energy system with only one partner was a questionable step, but second-guessing will not help us move forward. The decision was left unaltered also by the Riigikogu who showed regular interest in the respective activities of the Government at that time, and who on 30 June 1997 decided that the Estonian state will maintain at least 51% interest in the strategic energy production units. Negotiations to privatise the Narva Power Plants turned consequently into negotiations to involve a strategic investor. On the same day, the NRG submitted to the Government its first business plan for acquiring a 49% interest.

Considering the continuity of the activities of the Republic of Estonia, the new government made a logical decision to continue the negotiations – on 12 May 1999, the Minister of Economic Affairs Mihkel Pärnoja was appointed as the person responsible for the task. The negotiating period lasted until June 2000 when the delegations submitted to the government different development models of a uniform value chain of oil shale energy in connection with Narva Power Plants. After consideration, the government came to a decision on 27 June to approve the main conditions of the NRG deal, and at the subsequent meetings advisers checked the financial model of the contract, and on 24 July the Estonian delegation submitted to the NRG its specifications and additional conditions to the deal. On 1 August, the NRG accepted the Estonian conditions.

After the historical background to the deal, the Prime Minister emphasised that energy production is not a closed system outside the global economy. Changes that are awaiting us in the coming decades must be compared with the changes taking place in the field of information technology and telecommunications – the increasing use of renewable sources of energy is a reality already now. Estonia’s success so far has to a large extent to do with quickly adapting to the global developments and using them in the interests of Estonia’s own development.

Full article in Estonian