TALLINN - Eesti Energia last week signed an agreement on procuring an 80 million euro loan from the European Investment Bank that will go toward improving infrastructure. The money will help the utility finance the renovation and extension of electricity transmission and distribution facilities throughout Estonia during the next three years.
Remarkably, it was the first-ever loan issued by EIB to an Estonian company without a state guarantee, attesting to the borrower's reliability.
Gunnar Okk, CEO of Eesti Energia, said last week's loan was the most favorable Eesti Energia, a company involved with power engineering, transmission, distribution and sales, ever received.
The loan has a 2.5 percent interest rate and will mature in 2019, according to Okk.
The CEO stressed that investments in infrastructure would help reduce the number of blackouts and enable the company to keep pace with the growing demand for electricity. In the last several decades, electricity network investments were about 10 times lower than they should have been, explained Okk.
"In the next 15 years about 1 billion kroons [64 million euros] a year must be invested in infrastructure," said Okk.
Last year electricity consumption in Estonia, driven by economic expansion and more purchasing power, increased by 8 percent compared with 2002 and reached 6,900 GWh.
Specifically, Eesti Energia will use the loan for larger projects such as the improvement of electricity supply quality in downtown Tallinn and the reduction of high-voltage network losses in Rakvere and Tartu, which will involve the construction of new substations. Substations in Tallinn's port area and in other towns will also be renovated.
The acute need for such renovation was brought to attention by the five-hour blackout in part of Tartu on the morning of Jan. 30, when a transformer short-circuited at a substation.
The funds will also go toward renovation of the electricity distribution station that connects the Estonian and Russian networks, as well as toward reduction of operational and maintenance costs.
Eesti Energia also wants to implement part of the funds toward the utility's cooperation with power companies in neighboring countries.
Sauli Niinisto, EIB's vice president for the Scandinavian and Baltic countries, said the loan would stimulate the modernization of a key sector in the Estonian economy.
As the financial institution of the European Union, the EIB has issued loans worth about 250 million euros to Estonian companies through local commercial banks since 1990.
Eesti Energia is owned by the Estonian government and enjoys the highest credit rating among energy companies in Central and Eastern Europe.
