The European Investment Bank (EIB) provides a EUR 80 million loan to finance the renovation and extension of electricity transmission and distribution facilities located throughout Estonia that will be undertaken by Eesti Energia AS over the next three years. The investments will, amongst others, contribute to: reducing operational and maintenance costs; accommodating the expected electricity demand growth in the residential sector; and, in the international context, support Eesti Energia's strategic objective to further increase its co-operation with the actors in the electricity markets in the neighbouring countries.
As a first time for infrastructure operations in Estonia, the EIB loan is not signed on a sovereign basis (State borrowing or guarantee) but directly with Eesti Energia in recognition of Eesti Energia's own financial strength and credit-worthiness.
The loan was signed in Tallinn on 7 May by Eesti Energia's: Gunnar Okk, Chairman of the Board, and Sandor Liive, CFO and Member of the Board; and EIB's Sauli Niinistö, Vice-President.
The EIB is committed to promoting a rational use of energy, thereby also contributing to environmental protection. When signing the contract, Sauli Niinistö, EIB's Vice-President for the Scandinavian and Baltic countries, said: The Bank's loan will contribute to assuring sufficient funding for this major investment programme aimed at further modernisation of a key sector in the Estonian economy. It is a special pleasure for me to sign a contract for a loan that is in line with the objectives of the European Union - only a week after Estonia became the Member State of the EU.
Sandor Liive, Member of the Board and CFO of Eesti Energia said that Eesti Energia will sign the loan agreement with an aim to secure the sustainability of investments in National Grid and distribution network. "Loan from EIB gives us financial security, broadens Eesti Energia's lender base, secures favourable financing and increases financial flexibility. Loan from EIB is also a sign of Eesti Energia's good financial standing and credit-worthiness", said Sandor Liive.
The EIB is the most important external source of finance for central and eastern European countries, where since 1990 the EIB has granted loans exceeding in total EUR 26 billion. Loans to Estonia amount to approx. EUR 250 million. Projects financed include rehabilitation of the railway line Tallinn-Narva, upgrading of Via Baltica and Tallinn-Narva road, and the Tallinn International Airport. The bulk of the EIB's lending in Estonia is to commercial banks that act as intermediaries for on-lending of EIB-funds to small-size investments carried out by notably SMEs or municipalities.
The task of the EIB, the European Union's financing institution, is to contribute towards the integration, balanced development and economic and social cohesion of the Member States. Outside the Union the EIB implements the financial components of agreements concluded under European development aid and cooperation policies. The EIB borrows funds in international markets and, because of its AAA rating, under keen conditions. Since there is no profit motivation, it is able to pass on the favourable conditions to its clients.
Eesti Energia is a leading power producer and supplier in the Baltic region and has the highest credit rating among energy companies in Central and Eastern Europe. The current loan marks a step whereby Eesti Energia's focus of investments will shift from the production of energy to transmission and distribution of electricity. During the next five years Eesti Energia expects to grow its investments to national and distribution grid up to 427 million euros.
Eesti Energia is a public limited company engaged in power production, transmission, distribution and sales as well as other power-related services. In the financial year 2002/2003 Eesti Energia's net sales were 366 million euros and net profit 38 million euros.