NRG hopes three's a charm: U.S. electricity firm hopes for share of Narva plant

  • 1998-07-30
  • Urmas Maranik
TALLINN - The American electricity industry giant, NRG Energy Inc., has received word from the Estonian government that its third purchasing offer for the Narva power plant will finally be accepted.

Should the offer be accepted, it would end a frustrating three-year stretch marked by endless negotiations. The Estonian government twice turned down NRG purchasing offers for the power plant.

"This has been the most successful 24 hours we've had here," said NRG President David Peterson after a meeting with Estonian Transport and Communications Minister Raivo Vare and Prime Minister Mart Siimann.

Peterson said NRG is confident the government will accept the company's third offer for the Narva power plant.

"We have found support within the council of the state energy company Eesti Energia, the local parties favor the offer, and so do the business circles and representatives of the Estonian banking sector," explained Hillar Lauri, director of NRG Energy's Estonian office.

Vare is scheduled to address the parliament on the issue by the end of August, Peterson said. The final decision could come by the end of September.

"We are willing to wait until the end of September because we are content with the proceedings so far," said Lauri.

Peterson said NRG Energy would pay $67.23 million to obtain 49 percent of the shares in AS Narva Elektrijaamad. In addition NRG will contribute another $5 million to the Estonian state budget, which will be used to finance various social programs in southeastern Estonia. The initial investment amount is more than $72 million, or 1.04 billion kroons.
The U.S. company's investment will benefit Estonia's EU accession, Peterson said, since the plant will have to operate in compliance with EU environmental directives.

NRG is planning to reduce hazardous gas emissions by 80 percent by 2005, Peterson said.

"We will reconstruct the plant, reduce emissions and modernize machinery," he said.
During the first seven years of the project, NRG Energy will finance the Narva power plant with almost 6 billion kroons ($413.7 million). It plans to invest a further 2,487 million kroons in the next eight years, which would put NRG at the top of the list in direct foreign investment in Estonia.

"It's a long-term business," Peterson said, pointing out that "NRG's business plan after the purchase will cover 20 or 30 years."

Political pressure or fair game?

There's been some speculation as to what role the U.S. government played in securing NRG's position vis-a-vis the Estonian government - some in the press have suggested that having an American business presence on the Estonian-Russian border would act as a security measure of sorts for the Baltic country. Any offense to that property would be seen as an offense to the United States as well as Estonia.

Peterson discounts the theories.

"We believe this project will be the start of Estonian-American business relations, also intensifying the political contacts between this former Soviet republic and the United States," Peterson said.

"The U.S. government has been supportive of our aspirations here for two years, but certainly no blackmail is concerned with our business activities in Estonia."