LTV's De Facto: exceptions considered in state company donation ban

State JSC Latvenergo has expressed a wish to donate more than half a million euros to the government to be transferred to various projects. This has caused some debate since the government recently decided that such donation practices should be stopped, Latvian Television's De Facto reported on June 11.

Around the New Year, a major scandal broke out when State JSC Latvian State Forests came to the government with a donation. At the time, the government agreed that such donation practices should be terminated. Another donation is now waiting for its turn since April – Latvenergo has expressed a willingness to donate more than half a million euros to various projects. 

After a government meeting at the end of May, finance, economics and culture ministers stayed behind in the Cabinet of Ministers, engulfed in a rather loud exchange. The reason for the dispute was the donation of the state-owned company Latvenergo. Such donations have to be approved by the Ministry of Finance. Although the uneventful attempt to donate by the Latvian State Forests, politicians said that the practice of donations by state companies should be terminated, in April the permission to donate under 600 thousand was requested by Latvenergo.

Finance Minister Arvils Ašeradens commented: "At the time, we agreed clearly enough that there would be no other donations. I was very surprised that this donation appeared. So we've got so far, anyway. At least in talks with the Ministry of Culture, I was convinced that we should nevertheless ensure the Song and Dance Festival process, and that is the only way we can do it. On my part, I would be willing to agree with this part as an exception, and only this part, to settle this Song Festival case. That would be important. Not other [projects]."

Latvenergo planned to donate around EUR 200,000 to the association “Possible Mission” (Iespējamā misija) which trains young teachers through practice – for the equipment of physics classrooms in regional schools. Another EUR 100,000 was planned for the Latvian team sports games association for youth sports, EUR 200,000 for the Song and Dance festival fund, as well as approximately EUR 50,000 for the charity platform 

Latvenergo Corporate Social Responsibility and International Relations Director Ingrīda Lāce said: "We are concerned, because we really want to continue our support programs, and of course, you can also understand the organizers of the Song Festival, they have also planned, and the Song Festival is right now [..] but of course we cannot sign any contracts until there is a donation agreement."

The medium-term strategy of Latvenergo Group from 2022 to 2026 provides that the total amount of donations may not exceed two million euro over five years.

Last year the company already donated €590,242. Most of it went to education and sport (€313,819 and €100,000 respectively) and the rest for social purposes (€176,423), while culture donations were last made in 2020. More information is available here.

The company's shareholder, State Secretary of the Ministry of Economics Edmunds Valantis considers that there is no basis for complaints about Latvenergo donations and does not see any arguments to terminate this practice. “On our part, I think that work has been done with great quality. We also have not received any complaints, and the financial resource we are working with is indeed a relatively small asset attempt to achieve big results,” Valantis said.

The list of donations was expected to be agreed on in April, but only this week the politicians agreed that there would be a compromise decision – not allowing Latvenergo to donate to anything but the Song and Dance Festival fund in the amount of EUR 200,000.

Culture Minister Nauris Puntulis (National Alliance) said: "A [lack of donation] would create serious complications for us because we all know that the budget was adopted only in March. Consequently, we are also limited in terms of time, in addition, the specific Latvenergo donation is already traditional for the Song Festival process, and we had counted on it. But we have reached a compromise and this donation will take place. [..] The compromise is that we will receive a donation by way of exception, only the Song Festival will receive this intended donation, and indeed the other ideas that the Ministry of Economics has, we are trying to deal with differently at the moment."

Latvenergo first donated to the Festival Fund in 2015, when it started to cooperate with the organizers, then also in 2017 and 2018.

The EUR 200,000 donated by Latvenergo is intended to be used for the decoration of the festival parade, for setting up the dance grand concert, for the production of several concerts, for money awards for contest winners, as well as for documenting part of the festival events.

The organizers believe that not all of the Song Festival's expenses can be scheduled and used, operating within the limits of the allocated State budget, and if there were no funds and donations, it would be much more complicated.

There were some considerations to reallocate contingency funds to the Song Festival so that no exceptions should be made to donations. But it has proved impossible. "We were forced to find that the association in question, which is the usual recipient of such donations, had already counted on such a donation. And it has already committed itself to some extent. Well, in this situation, I just agreed that the part concerning the Song Festival I am prepared to support, and so, the Ministry of Culture will move the report to the government meeting, and then let us see what is going to be in that report. If I get a government order that I can sign it, then that's how it happens,” Ašeradens said.

The overall budget of the Song Festival is more than EUR 17 million, including nearly ten million in a budget grant.

Latvenergo, on the other hand, believes that the ban on donating puts them in a worse position against competitors because there is no way to improve their reputation in this way.

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