BONJOUR L'ESTONIE

Estonia may sell Eesti Energia stake to fund plant upgrades

Estonia’s government may sell as much as a third of Eesti Energia AS, the biggest Baltic utility, to help fund an estimated 20 billion krooni ($1.9 billion) of planned investments including oil-shale power plant upgrades.

Prime Minister Andrus Ansip’s cabinet will decide on a possible initial public offering by the end of the year, according to Sandor Liive, chief executive officer of the state- owned utility. He ruled out a sale to a minority investor.

“This is a stable electricity business with growth potential from a liberalizing market,” Liive said in an interview in Tallinn, Estonia, on Thursday. “In combination with its oil-shale production potential, it’s an offer to investors that is unique.”

The utility plans to build two units at its power plants in northeastern Estonia, both with a capacity of up to 300 megawatts, at an estimated cost per megawatt of “less than” 1.5 million euros, Liive said. Estonia is the only country in the world where oil shale, a rock from which petroleum-like shale oil can be extracted, is the primary source of energy and Eesti Energia is planning to export this technology to Jordan.

The size of the share sale may be in the range of 300 million to 500 million euros ($447 million to 743 million), said Peter Priisalm, a fund manager at Tallinn-based Avaron Asset Management.

Baltic retail sales plummet

LUXEMBOURG - Preliminary statistics released today have found that the Baltics states have suffered the largest decreases in retail sales in the EU over the past year.

The study - which was conducted by Eurostat, the European Union's official statistics agency - found that of the countries for which data is currently available, Latvia had the largest decrease in retail sales.

Latvia saw a staggering 30.9 percent decrease in retail activity in September 2009 as compared to a year before. Latvia was followed by Lithuania with a 25.7 percent drop, then Estonia at 20.8 percent lower, the statistics agency said.

The drop in retail sales represents a massive loss in confidence on the part of consumers in the Baltics. Decreased retail activity will make economic recovery much more difficult for the three countries, which are suffering some of the worst recessions in Europe.

Poland was the top performer, with an increase in retail sales of 5.4 percent. Poland was followed by Austria, which had a 3.1 percent increase.

Oskars Magone 

Metal furniture factory Wendre started working in Parnu

Juhan Tere

A metal furniture factory launched operation on Monday in Pärnu, BBN/LETA reported, referring to ERR News.

The company produces up to 1,500 camp beds a day.

The company has nearly 70 employees, who were chosen between nearly 900 candidates, Marko Kokla, manager of the company said.

The enterprise belongs to the same group with textile producer Wendre, it will export its production to Scandinavia, South Europe and elsewhere.

The factory was moved from Latvia to Estonia for two reasons. "One is the advantage from logistics aspect since we work in cooperation with our sister company, and we have the same client base. Secondly, we have changed production organization quite a lot," Kokla said.

The Estonian exception

Estonia gets a boost, but worries persist about its Baltic neighbours

SMUGNESS is Estonians’ least attractive feature, at least in the eyes of their Baltic neighbours, Latvia and Lithuania. A surprise endorsement by the International Monetary Fund of Estonia’s plans to join the euro in 2011, coupled with gloom about the other two countries, will only make that worse.

All three Baltic states are facing double-digit economic declines in GDP this year, following the collapse of credit bubbles created by reckless lending and spending. Many outsiders have wondered if the three countries can maintain their fixed exchange rates, which peg the national currencies to the euro. A currency or banking collapse in the Baltic would spook markets elsewhere in the region, threatening wobbly economies such as Hungary’s.

So for the past year the focus has been on averting disaster. Plunging tax revenues made the chances of any Baltic states meeting the criteria for joining the euro look slim. In Latvia, for example, the government is struggling to keep next year’s budget deficit down to 8.5% (see chart)—a condition for the continuation of a €7.5 billion ($11 billion) IMF-led bail-out package. To join the euro, the deficit must be sustainably below 3%.

Green shoots little comfort for crisis-afflicted Baltic

RIGA - Signs that Lithuania, Latvia and Estonia may be emerging from recession have brought little comfort in the Baltic states, as the public braces for the worst economic winter in years.

As ordinary people continue to feel the impact of rising unemployment and deep anti-crisis spending cuts, analysts warn it is too soon to say when the nightmare could end.

Nina Bazenova, a 47-year-old teacher in the Latvian capital Riga, is suffering.

Her salary has been cut by 20 percent while her workload has increased by a third, she told AFP.

She and a pensioner relative are supporting her three unemployed adult children -- the jobless rate in Latvia, a nation of 2.3 million, is an EU-high of 19.2 percent.

Along with a five-year-old grandson, they all live in a three-room apartment.

"I don't know whether or not I'll have a job after New Year's," she said, adding that she fears a replay of the hard times that hit the region following the demise of the Soviet Union.

The Baltic states won independence from Moscow in 1991. The region was hit by a shockwave as the communist economy fell apart.

In a report released this week, the World Bank said unemployment is expected to grow in the region, especially among young people.

"Almost one third of the economically active population below 24 years of age is unemployed in the Baltic countries," it said.

Analysts remain cautious about recent, positive economic data.

Worldwide aspects of the US and Estonian economies

WASHINGTONI EESTI SELTS
WASHINGTON ESTONIAN SOCIETY

Lp. WES-i liikmed ja sõbrad!

Olete ehk mures majanduse tuleviku pärast Eestis, USAs ja ka mujal? Tulge ja kuulake, mida on öelda meie tunnustatud ekspertidel teemal “Eesti ja USA majanduse perspektiivid maailma taustal"! Soovi korral lisage oma nägemus olukorrast. Teeme koos ühe hariva vestlusringi!

Millal: Pühapäeval, 15. novembril 2009 kell 3:30 p.l.
Kus: Calvary luteri kiriku seltskondlikus ruumis (alumisel korrusel), 9545 Georgia Ave., Silver Spring, MD 20910. Kui kiriku peauks juhtub olema suletud, sissepääs on ka kiriku
tagauksest. Seltsi ettekanne toimub vahetult pärast Washingtoni Markuse koguduse jumalateenistust (algab kell 2:00 p.l.), kuhu kõik on teretulnud.

Esinejad:
ANDRES SUTT, Rahvusvahelise Valuutafondi Põhja- ja Baltimaid esindava tegevdirektori vanemnõunik, endine Eesti Panga asepresident -- teeb ülevaate Eesti majanduse olukorrast.
VILJAR LUBI, Eesti Suursaatkonna Washingtonis majandusdiplomaat -- annab ülevaate USA majanduse perspektiividest.
ÜLLE LÕHMUS, Maailmapanga Põhja- ja Baltimaid esindava tegevdirektori vanemnõunik -- teeb lühiülevaate Maailmapanga hinnangutest maailmamajanduse olukorra kohta.

Kaetud on kohvilaud.
Osavõtumaks: Seltsiliikmetele, $5.00 isikult; mitte-liikmetele, $7.00 isikult. (Liikmeks astumise võimalus on kohapeal).

Teretulemast kõigile!
WES-i juhatus

Port of Tallinn receives a 50 mln euro loan from the state

The Estonian government approved of a proposal of the Finance Ministry for the state to grant a loan of up to 50 million euros for 15 years to AS Tallinna Sadam (Port of Tallinn).

The loan will be used to finance investments to Muuga port which is an infrastructure object important for the state, government press service said.

Tallinna Sadam will invest 1.5 billion kroons this and next year, most of which to develop the Muuga port. In order to carry out its investments plan, AS Tallinna Sadam needs to borrow nearly 800 mln kroons for a long term since the project will repay itself on long-term basis.

Long-term loans are offered at present only by international financial institutions like the European Investment Bank and Nordic Investment Bank. Since both have granted loans to the firm already earlier, neither is interested in granting an additional loan to the port operator firm.

AS Tallinna Sadam is fully state-owned and Estonia’s largest cargo and passenger ports complex. It includes five ports which service 29 million tonnes of cargo and nearly seven million passengers a year.

Juhan Tere

Confectionery has lots of debts

Viru Kaubandus, which tried to start a confectionery in Saaremaa, is now owing money to its employees and cooperation partners, Äripäev reports.

“I exchanged sugar against candies and thank God I did that,” Märt Käesel, head of wholesaler Ensert said.

Wholesaler AS Haljas is expecting money for sugar since summer. Vello Tafenau, the CEO said that they have also gotten candies for partial amount.

Ago Arge, manager of EBC Ehitus said that they have been expecting money for months.

Estonia overdue loans ease on month in September

TALLINN - The amount of loans overdue more than 60 days in Estonia's banking system fell to 6.4 percent of the total loan portfolio by the end of September from 6.5 percent in August, the central bank said on Friday.

The bank system is 95 percent controlled by four Nordic financial groups, with Swedbank and SEB being market leaders.

The total loan portfolio was 248.2 billion kroons ($23.9 billion), 4 percent less than in the same period a year ago.

Nordic banks have suffered losses in all three Baltic states due to provisions for bad loans.

Reporting by David Mardiste ; Editing by Andy Bruce

Copyright Thomson Reuters 2009

Lufthansa considers Tallinn as possible aircraft maintenance centre

Toomas Hõbemägi

Lufthansa Technik, the world market leader in the maintenance, repair and overhaul (MRO) of commercial aircraft, engines and components, is looking at Tallinn as a possible MRO centre.

As reported by news2biz, the company that belongs to Lufthansa, visited recently Tallinn and met with representatives of the Ministry of Economic Affairs, Civil Aviation Administration and Tallinn Airport.

The new company would be a subsidiary of Lufthansa Bombardier Aviation Services, a joint venture of Bombardier and ExecuJet and would service Bombardier aircraft in Scandinavia, Baltic states and Northern Russia.

Rein Loik, chairman of Tallinn Airport, said that it was too early to say how high are Tallinn's chances to get the centre, but that the Germans were visibly impressed.

Wolfgang Reinert, representative of Lufthansa Technik, confirmed that such a visit had taken place.

Novatours in Estonia lost nearly a half of its turnover in 9 months

Juhan Tere

Novatours generated 140 million kroons in sales revenue in the first nine months of 2009 while a year ago it amounted to over 270 million kroons, writes Äripäev.ee/LETA.

CEO of Novatours Raimondas Usheckas stated that the charter tourism market has started showing signs of recovery, but the pre-crisis level will not be restored at least during the next two years.

“In the beginning of this year, we set ourselves more modest objectives than usually and can now state that we did better than we expected,” he said. Usheckas added that this season, the enterprise has sold out nearly all planned flights and added two extra flights to Turkey for the end of October that were sold in record short time – in two weeks.

CEO of Novatours Estonia noted that the economic depression in the Baltic region not only affected the economic indicators, but also the relations between travel agencies and customers. “Customers have started valuing more highly the stability of service providers, their reliability and experience and travel agencies have become more flexible and more attentive towards the needs and preferences in different target groups,” he explained.

Novatours Estonia was founded in 2004.

Aripäev urges Swedish banks to abstain from using the term "Baltic countries"; situation in Estonia is better !

Juhan Tere

The Estonian business newspaper Aripaev urges Swedish banks to abstain from using the term "Baltic countries", pointing out that the situation in Estonia is different from the situation in Latvia or Lithuania.

Commenting the quarterly reports from the Swedish banks Swedbank and SEB that were released earlier this week, Aripaev editor in chief Meelis Mandel urges the banks to report separately on each country, not the Baltic region.

"Let me make one proposal to you in this connection: perhaps in future reports you could report separately about Estonia, Latvia and Lithuania, instead of talking about the overall situation in the Baltics? The reason is that, with the exception of Finns, the rest of the world is still regarding us as one region and you are reinforcing the notion that there is no difference between the three countries," wrote Mandel.

"Whereas, as you well know, albeit small, we are still separate countries and if you look, for instance at change in provisions, you can clearly see that the development in Estonia is different from that of Latvia or Lithuania. I am sure that it would also serve your interests if you were to emphasize it in your communication to foreign investors," Mandel stated.

Trade surplus for Estonia long way off!

TALLINN - Exports of goods from Estonia in August this year reached 7.8 billion kroons (500 million euros), while imports came in at 9.3 billion kroons, reports news wire bbn.ee.

Compared to August of last year, the value of exports of goods decreased by 30 percent, or 3.4 billion kroons; imports dropped by 31 percent or 4.1 billion kroons.

These figures led to a foreign trade deficit of 1.5 billion kroons, which is nearly a third smaller compared to the same month the previous year.

Swedbank reports third straight loss

LONDON - Swedbank on Tuesday reported its third straight quarterly loss but said it's seeing signs that credit quality in the Baltic region is beginning to stabilize.

Swedbank /quotes/comstock/22u!e4:se0000242455- (SE:SWEDA 65.50, 0.00, 0.00%) , a Stockholm-based lender with a heavy exposure to the Baltic region, swung to a third-quarter loss of 3.34 billion krona ($482 million), after earning 2.47 billion krona in the year-earlier period.

Consensus estimates were for a 2.14 billion loss.

The loss came after the group took impairments of 6.1 billion krona, virtually all of which was in the Baltic countries of Estonia, Latvia and Lithuania as well as Ukraine.

The loan-loss level in Ukraine was a staggering 76.4%, and 6.9% in the Baltics, and yet only 1.95% for the group.

The lender now carries 35.77 billion krona of impaired loans. It also has $1.42 billion of U.S. real-estate exposure coming from Lehman Brothers collateral, though it's not had to take any fresh provisions there.

Estonia’s risk rating leaves exporters without insurance

Juhan Tere

Estonian exporting enterprises are suffering from difficult times – international credit insurance companies are cutting back on their business in Estonia and have, in many cases, refused to provide guarantees, Eesti Päevaleht/LETA writes.

Managing director of the Estonian Association of Leasing Companies Reet Hääl noted that the problem became urgent last year already. Companies exporting to Latvia and Lithuania find it hardest to get insurance – the refusals reach 93 and 84 percent, respectively.

“Estonia and the Baltic states are looked at like African countries,” said AS Nõo Lihatööstus meat industry sales and marketing manager Simmo Kruustük, speaking of the changed opinions of foreign raw material suppliers. He said that the company has an A-rating from Krediidiinfo but it is still impossible to acquire pig liver or poultry at favourable prices since exporters are afraid to send bigger shipments to Estonia. “The state’s initiative would be of great help to prove higher credit ability,” said Kruustük.

EBRD sees fragile recovery In CEE In 2010

By Stefan Wagstyl

Central and eastern Europe is starting to see a “bottoming out” of its deepest recession since the collapse of communism but any upturn is likely to be “fragile and patchy”, says the European Bank for Reconstruction and Development in an annual economic report published on Thursday.

The bank says that this year’s economic contraction will be even worse than it forecast six months ago, with a 6.3 per cent decline in gross domestic product compared with 5.2 per cent.

Next year’s recovery in the EBRD’s report will be somewhat stronger than previously predicted at 2.5 per cent, up from 1.5 per cent. The figures conceal a wide range of performance at the national level among the bank’s 28 countries of operation. Estonia, Latvia, Lithuania and Armenia are likely to see GDP contractions of more than 10 per cent this year while Latvia, Lithuania, Hungary and Bulgaria are expected to remain mired in recession in 2010, even as their neighbours move slowly into positive territory.

Moreover, the recovery will be modest in comparison with the big increases in GDP posted in the region before the crisis, including 7 per cent in 2007. Erik Berglof, the EBRD chief economist, says: “It is also clear that the social costs of the global economic crisis are only likely to be felt in earnest next year, when corporate bankruptcies and unemployment will continue to rise. Growth over the medium term in the EBRD region is also likely to be below the trend experienced over the last decade.”

Estonian ministry draws up Made in Estonia plan

A foreign investments and export plan that will presumably be discussed at a government session next week is intended to attract affluent foreign investors to Estonia.

Drawn up at the Ministry for Economic Affairs, the plan includes various proposals intended to increase Estonian companies' export and foreign investments.

The measures to attract foreign entrepreneurs include tax exemption from the sale of securities and amendment of the state property act so that land could be alientated for investments of great effect on priority terms.

In addition to alienation of land also creation of access to gas, electricity and sewage networks for investments has been considered.

Besides, the ministry sees the need of increasing the frequency of direct flights from Tallinn along with lowering airport taxes and state subsidies to airport security services.

The ministry also sees the need of analyzing invitation of Asian carriers to Tallinn in order to reap profit from Tallinn's favorable location in serving Asian transit passengers on European flights.

Current account surplus narrows

Tuesday, the Bank of Estonia announced that the current account surplus stood at EEK 443.4 million in August, down from EEK 726 million surplus in the previous month.

The capital account surplus amounted to EEK 439.1 million in August, up from EEK 374.6 million surplus in July. In contrast, the financial account showed a deficit of EEK 919 million in August, narrowing from EEK 1.74 billion in July.

Meanwhile, the service account surplus remained unchanged at EEK 1.8 billion in August, while the trade deficit totaled EEK 1.1 billion.

Skype CEO says focus on mobile + corporate push

TALLINN - Internet telephony firm Skype, a unit of eBay, will focus on growing its mobile and corporate business next year while further developing its key offerings to consumers, its chief executive said on Tuesday.

An upcoming change in ownership will boost the focus on growth, CEO Josh Silverman said in an interview with Reuters.

Last month a group led by top Internet financiers in Silicon Valley and Europe agreed to pay eBay $1.9 billion in cash for a 65 percent stake in Skype. Closure of the deal is pending.

"I'm very excited about the new ownership. They are very focused on growth," Silverman said at the company's core R&D centre in Estonia.

The group buying Skype includes London-based Index Ventures and the Canada Pension Plan Investment Board (CPPIB), along with Silver Lake and Andreessen Horowitz.

More than 15 million users sign on every day to Skype for Web-based chats, phone conversations or video phone calls. Skype has registered nearly 500 million users worldwide since it was founded in 2002.

Key features - like calling to other Skype users - are free, but the company charges for calls to traditional phone numbers and other additional features.

Narva Power Plants cuts 80 jobs

Eesti Energia’s subsidiary Narva Elektrijaamad (Narva Power Plants) will cut 80 jobs in the near future to cut costs and for more effective production, National Broadcasting/LETA reports.

It isn’t known yet how many people will actually become redundant. The company will try to find jobs for as many people as possible, some will retire and some will be made redundant. The reorganisation lasts till January 2010.

"Narva Elektrijaamad have to cut fixed costs, otherwise we cannot put to practice such planned large investments like installing sulphur cleaning equipment and building new energy blocs. Without implementation of these projects, the issue of local electricity production may become very acute," said Narva Elektrijaamad manager Ilmar Petersen.

Juhan Tere