NRG deal due for ink

Jan 13, 2000
By Brooke Donald

Representatives had hoped to end negotiations regarding the
privatization of Estonian power station Narva Elektrijaamad by Jan.
1, but an agreement could not be reached. Representatives from NRG
Energy and the Ministry of Economics said the parties now agree on
most key issues; the next few months will be used to iron out the
details, they said.

"Our desire is clearly there, and within three months we expect the
deal to reach a stage where we can say the negotiations are
finished,"said Mihkel Parnoja, Estonian minister of economic affairs.

The issues still to be settled include the price of privatization -
how much NRG Energy will pay for the power stations - environmental
regulations and responsibilities and transferring the shares of the
national oil shale company, Eesti Polevkivi, to the power producer.

Once the deal is final, plant renovation work, paid for by NRG, will
begin, said Hillar Lauri, NRG representative in Estonia. The
estimated cost to complete renovation work is 3.3 billion kroons, and
repairs are expected to be completed in five years.

The renovation work will create more jobs for the people in
Ida-Virumaa, Lauri said. The northeast region of Estonia boasts some
of the highest unemployment rates in the country, and many critics
fear that privatization of the plants will mean a greater number of
people out of work.

"We are talking about hundreds of new jobs here,"Lauri said; adding
that NRG will set up a 75 million kroon social fund for workers who
will be made redundant after privatization, but did not make any
predictions on how many that would be. Around 80 percent of the fund
will be spent on retraining and pensions, he said.

Talks between Estonia and NRG slowed when Eesti Polevkivi was brought
on board in July of last year. The oil shale company is a 51 percent
owned subsidiary of the Narva power plant which provides the majority
of Estonia's energy.

Under the current deal, the U.S. firm will acquire a 49 percent stake
in the two power plants and agrees to modernize the stations. In
turn, the Estonian state will guarantee that it buy from the Narva
power stations 75 percent of the produced power until 2005 and 50
percent until 2015. The agreements will be signed by Eesti Energia
and NRG.

In its June 1997 business plan, NRG said it would make a $67,225
million investment in Narva Elektrijaamad's shares.

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