Viru Energia, a company set up on the basis of the assets of the former Kiviter power plant, owns an electric power-cum-heating station in Kohtla-Jarve, northeast Estonia. It also owns electricity and heat distribution networks and sells electricity bought from other suppliers.
Reports, which have not been confirmed by official sources, say Viru Keemia Grupp, the former Kiviter owner, sold its energy production facilities for more than 100 million kroons ($6.5 million). The assets of Viru Keemia Grupp have been pledged with Uhispank for previous loans.
Jens Haug, Viru Keemia Grupp's board chairman, said at the July 21 press conference that a substantial part of the money to be received in the sale will be spent to settle the company's liabilities to Uhispank.
Uhispank said the goal of the acquisition was to continue its cooperation with Fortum.
"Fortum's interest in taking Uhispank [into the deal] was to find a strong financial partner and a possibility to accommodate itself to the local environment," said Margus Kangro, director of the corporate finance division at Uhispank. "On the other hand, Uhispank has won a strong client for itself."
In November 1998, Uhispank served as adviser and partner to Fortum in the privatization of AS Laanemaa Elektrivorgud power grid based in western Estonia.
"We have certain agreements concerning the realization of those holdings, because this is not Uhispank's main field of business. When our partners feel that they have accommodated themselves well enough to the market, we will obviously pull out of those companies," Kangro said.
Fortum plans to make major investments in Viru Energia to develop the combined production of heating and electric energy.
Fortum's regional manager Kari Sinivuori said at a press conference in Tallinn July 21 that Estonia was the closest foreign market for the company and the production and sale of heating was one of the fastest developing sectors in Estonia.
Viru Energia's electric energy production capacity currently stands at 8 MWh and that of heating, at 236 MWh.
In the first phase of investment the capacity of heating production will be increased. Investment during the first five years will total 700 million kroons, according to unofficial data.
Sinivuori said the entire profit of Viru Energy will be reinvested.
In the long run, Fortum will launch the combined production of electricity and heat and introduce different residual products of the oil shale industry as well as natural gas as fuels.
Fortum hopes to emerge as a competitor to Narva Elektrijaamad, the largest electric power producer in Estonia, in the future.
NRG is holding talks with the Estonian government on a bid to acquire a strategic holding in Narva Elektrijaamad, a company which runs Estonia's two largest electric power stations. Like the facilities of Viru Energia, the two power stations are located in the country's northeast.
Hillar Lauri, the representative of NRG Energy in Estonia, said NRG did not feel disturbed by Fortum's plans because the current output capacity of Viru Energia was relatively small. Viru Energia's capacity of 8 MWh and the 3,000 MWh capacity of Narva Elektrijaamad aren't even comparable at the moment, said Lauri.
Lauri added that given Viru Energia's present capacity, Fortum should start from scratch with the building of a new power plant and searching for customers.