Special Audit Findings and Management Actions

A special audit initiated by the Ministry of Finance that was published on 21 November 2024 has identified deficiencies in the management of Eesti Energia AS from 2020 to 2023, which led to environmental violations, economic damage, and affected the reliability of the distribution network.

The issues raised in the audit had already been identified by the company itself, as the investigation was based on the group's internal audits and documents from 2020-2023. The task of the special audit was to provide a legal assessment of the management activities to clarify whether the duty of care of the entrepreneur has been violated.

During the special audit, four areas were analyzed. The main violations were related to compliance with environmental requirements and financial risks - emissions from older oil plants and power plants exceeded the norms allowed by the complex permit, and harmful hedging transactions were made. There were also deficiencies in ensuring the reliability of the distribution network.

The report states that the governing bodies had violated the duty of care and taken unreasonable risks. Further steps and decisions will be made by both the Environmental Board and the new management of Eesti Energia.

The owner has stated that they have a good cooperation with the current management. The current management is the one who brought the problems to the owner's attention, there is active information exchange, and the owner's concern for the company's well-being is evident. The management and supervisory board of Enefit Power (subsidiary in charge of thermal electricity generation and oil production) have been replaced, the derivative hedging strategy has been reorganized, the division of Elektrilevi (the DSO) has been reversed, and solutions to the emission problem are being actively sought.

The concerns of the special audit are already known to the company, and we are focused on resolving them. We do not see that the findings in the audit could have significant material financial impact on the company as many of the issues are already resolved or are not in nature the kind that could have direct financial impact.

We want to be transparent and open, which is why we have decided to publish the full report of the special audit. The final report of the special audit is available on the Eesti Energia website here. Currently it is only available in Estonian.

We will also hold an investor meeting tomorrow on 22 November at 10:00 London time, 11:00 Frankfurt time and 12:00 Tallinn time where the members of the management board of Eesti Energia will give an overview of the special audit and answer potential questions.

Please register to participate. After registration you will be sent the details required to join the conference call.

Danel Freiberg
Head of Treasury and Financial Risk Management
Eesti Energia AS
Lelle 22, 11318 Tallinn
Phone: +372 5594 3838
Email: danel.freiberg@energia.ee