The Estonian government has cancelled a deal to sell a major stake in two power plants to the US company NRG Energy. The move came just before the government resigned over an unrelated issue. A government spokesman said it would now be up to the successive government to decide the fate of the plants.

Under the deal signed in 2000, after five years of talks, NRG was to buy a 49 per cent stake in Narva Elektrijaamad, the company which owns the two plants that produce 90 per cent of Estonia’s electricity. The state utility Eesti Energia would retain 51 per cent. As part of the deal, a loan of $240 million was to be raised to renovate the plants. NRG and Eesti Energia had reached a provisional loan agreement but a 31 December deadline passed without the deal being finalised. Local reports suggest the banks were seeking additional guarantees.

The US government has urged Estonia to salvage the agreement. However the deal was seen as unpopular in the country itself. The move leaves Estonia with two old oil shale power plants in need of renovation.