Elering will borrow 1.2 billion from the European Investment Bank for EstLink2

Elering and the European Investment Bank (EIB) signed a loan agreement that will see the company borrow around 1.2 billion kroons for the construction of EstLink2. Elering’s total investment plan for 2010-2014 will increase the company’s balance sheet by 11 billion kroons.

The EstLink2 undersea cable between Estonia and Finland will cost a total of 320 million euros, of which 100 million will be given by the European Union. The rest of the financing for the construction of EstLink2 will come half from Elering and half from the Finnish TSO Fingrid Oy.

Elering is financing its part of the investment with loans from the European Investment Bank (EIB) and the Nordic Investment Bank (NIB) for a total of 100 million euros. These loans will be taken in stages as construction work progresses until 2014. Together with the company’s other liabilities, this means the loan portfolio will rise from its current 190 million euros to 400 million euros in four years.

Elering’s capitalisation at the end of this year stood at around 150 million euros. The capitalisation is expected to rise to 240 million euros by 2014. Elering’s balance sheet at the end of 2010 will be 390 million euros, and this will double over four years to more than 700 million euros. The company owns the vast majority, or nearly 95%, of its assets.

The development programme for the Estonian electricity industry for 2010-2014 calls for Elering to invest some 450 million euros in the electricity system to ensure security of supply. The main targets of the financing will be the buy-out of EstLink1, the construction of EstLink2 and the building of an emergency reserve power station.

Chair of the Elering board Taavi Veskimägi commented that such a swift rise in investment represents a great challenge for the company to ensure the effectiveness of the projects and the financing of the investments. Financing will be complicated in particular by a sharp peak in investments in 2013. “Major changes happening in the European energy industry are forcing Elering to act quickly to integrate the Estonian electricity system with the European network and market, in order to ensure the security of the electricity supply to consumers at a reasonable price in the second half of this decade. We have also set rules for ourselves in the organisation of our financing so as to maintain a strong financial position appropriate for an infrastructure company and find the financing options that are least burdensome for our consumers”, said Veskimägi.

The investment programme decided by Elering is based on the role of the TSO as defined in the Estonian electricity industry development plan to 2018 approved by the Estonian government, and on the levels of investment agreed by the Estonian Competition Authority. The second cable connection between Estonia and Finland is the largest ever investment in the Estonian electricity network.