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Overview of the SOE sector

Estonia follows a sector ministry model of ownership, with some co-ordination from the Ministry of Finance. The driving principle for state ownership is to participate in companies operating in imperfect markets or when there is a strategic public interest involved. In addition to state-owned enterprises, Estonia features a large number of quasicorporations in the form of “foundations”. These are generally established when the State has formulated a specific public policy objective, and when it is determined that the form of company or government unit is not suitable. Foundations are established to achieve specific objectives under the Foundations Act, enacted in 1996. The Estonian authorities state, however, that “it is not possible to draw a strict line between enterprises and foundations” and that separate evaluations are made to determine which form better suits the type of activity. As a rule of thumb, foundations are established for social, cultural, and educational purposes as well as for developing entrepreneurship. They also have a different governance structure from SOEs.12 In view of the less commercial focus of foundations and the Guidelines’ emphasis on commercially-oriented SOEs, this review does not look as closely at Estonia’s foundations.

At national level, there were 36 SOEs as of February 2010. The Government plans to sell five of these within the next two years. Recently one company has been acquired,13 two were merged, and one has been sold. One Estonian SOE with municipal ownership by the City of Tallinn (not among the 36 SOEs at national level) is listed on the Tallinn Stock Exchange. Tallinna Vesi AS, a water company serving Tallinn and neighbouring areas, is partly owned (34.7 per cent) by the City of Tallinn and partly owned by United Utilities (35.3 per cent), with 30 per cent free float. This company represented 17% of the total market capitalisation of the Tallinn Stock Exchange at the end of February 2010. In addition, there are 29 “quasi corporations” at national level, of which 28 are foundations, and one is a for-profit state agency. The total revenue of the SOEs at national level in 2006 reached EUR 1.46 billion, and about EUR 369 million for foundations. Government ownership of property accounted for 1.1 per cent of government revenues. Their combined assets are valued at EUR 3.7 billion (SOEs assets are worth EUR 3.2 billion the rest are foundations). Most of these assets are concentrated in 5-6 large infrastructure-related SOEs, shown in Table 2.4 below. National-level SOEs and foundations together employ around 30 000 people, or 4.6 per cent of total employment.

Table 2.4. Ten largest SOEs in 2006

Assets (million EUR)

Annual revenue (million EUR)

State ownership


AS Eesti Energia


1 653



AS Tallinna Sadam





AS Eesti Telekom1





AS Eesti Raudtee

Maintenance of railway and freight




AS Riigi Kinnisvara

Operating and development of real estate




AS Tallinna Lennujaam





AS Eesti Vedelkutusevaru Agentuur

Maintenance and holding of state's compulsory oil stocks




AS Eesti Post

Postal services




AS Estonian Air

Air transport




AS Saarte Liinid

Maintenance and development of regional ports




1. In addition to these shares, 3 per cent of equity was owned by the state-run Estonian Development Fund. These were recalled by the Ministry of Finance when the purchase of the state’s stake in Eesti Telekom went through. This company no longer has State participation.

At local government ownership level, there are a large number of SOEs (258) and quasicorporations most of them known as foundations (78). Most of these are fully controlled or majority-owned by local government. Their combined revenues amounted to EUR 600 million in 2006 and their assets were worth EUR 1.06 billion. They employed almost 21 000 people. These local government-owned enterprises operate primarily in the utilities sector. Nevertheless these companies and foundations fall outside the scope of this review due to the difficulty of gathering sufficient information at local level. One SOE, however, a utilities company in Tallinn, partly local-government owned, is of greater relevance to this review, as a listed SOE.

Of the 36 federally-owned SOEs, six are partially owned by the state, with minority stakes in three of these and majority in the other three. The three SOEs with minority state ownership operate in the following sectors: radioactive waste treatment and disposal (35 per cent); air transport (34 per cent); and arena maintenance (16 per cent state-owned). The other three SOEs where the State has a controlling position are: a broadcasting company (51 per cent), a forest plant nursery (60 per cent) and a soon to be dissolved copyright services company (89 per cent).

As mentioned previously, the Government of Estonia sold its holding in AS Eesti Telekom. The Minister of Finance formally proposed to the Government to accept a cash offer by TeliaSonera of EEK 93 for each Eesti Telekom share, provided the company pays out extraordinary dividends of approximately EEK 7 per share in 2009 and agrees to pay out 100 per cent of the retained earnings of the preceding year during the next three years (Eesti Telekom, 2009). Since 2004, the state received EEK 2.18 billion (EUR 139 million) in dividends from the shares, with an additional EEK 126.2 million (EUR 8 million) to the Estonian Development Fund. Additionally the state has received income tax associated with dividends paid to Eesti Telekom shareholders totalling EEK 2.53 billion (EUR162 million) since 2004.

Estonia’s 36 federal-level SOEs are distributed across a wide variety of sectors (see Figure 2.2). There is, however, a heavy concentration of SOEs in the transport sector and related areas. The main ports as well as airports, a railway company (freight and maintenance), a passenger rail company, the National carrier (Air Estonia), and flight control and boat pilotage services all belong to the State.

Figure 2.2. SOEs by sector of activity1

1. As of 01/01/2010.

As shown in Table 2.4, AS Eesti Energia is the largest SOE in Estonia. It produces, sells and transmits electricity and thermal power. It is 100 per cent state-owned and has eight supervisory board members. The Ministry of Economic Affairs and Communications exercises ownership rights, and therefore appoints four supervisory board members, while the Ministry of Finance recommends appointees for the remaining four. Ministers are restrained by certain disqualifying criteria in the nomination of board members, but generally are free to choose supervisory board members in the SOEs over which they have ownership rights.

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