EBRD to not grant EUR 63 mln loan to Porto Franco due to expiration of agreement

TALLINN – The European Bank for Reconstruction and Development (EBRD) said that it no longer has ties to the Estonian real estate project Porto Franco, which recently ended up at the center of a corruption case, as the 63 million euro loan agreement signed last year expired already in 2020.

"The EBRD would like to put on the record that our loan for the Porto Franco project was never disbursed and the agreement has now expired. Consequently, the EBRD is not involved in the project anymore," Axel Reiserer, the head of press at the EBRD, said.

Reiserer specified that the EBRD did not abandon the loan due to the recently emerged corruption case, but the contract expired already at the end of the third quarter of 2020.

Luminor, however, remained brief in its comment on the Porto Franco agreement. "Due to the regulation of information subject to banking secrecy, Luminor has limited opportunities to provide information on current or past customer relationships," representatives of the bank told BNS.

With a loan agreement signed on Feb. 28 last year, the EBRD was supposed to provide up to 63 million euros and Luminor up to 39 million euros for the Porto Franco integrated retail, office and hotel project in Tallinn that is a key component of the wider regeneration of the port district.

Last summer, the government decided to support the Porto Franco project from the Kredex measure with a working capital loan of 39.4 million euros. The loan was granted for a term of up to six years, with an interest rate of 12 months Euribor plus 2 percent per annum.

The total cost of the development of Porto Franco is approximately 200 million euros, to which the shareholders have contributed more than 100 million euros.

On Tuesday of this week, a corruption scandal erupted around the Porto Franco real estate development. The Office of the Prosecutor General has lodged suspicions of corruption crimes against senior partner in the government coalition Center Party and five people, including Center Party secretary general Mihhail Korb, adviser to the finance minister Kersti Kracht and businessman Hillar Teder. 

Teder and Korb are suspected of having agreed that Teder is to donate up to one million euros to the Center Party before the local government elections and in return, the Porto Franco development would be permitted to build an exit route on a property of the City of Tallinn.