Americans land electricity deal

TALLINN - The Estonian government gave the go-ahead for direct negotiations with American electricity giant NRG International last week on the privatization and reconstruction of two power stations near Narva, northeastern Estonia.

The decision came after a government commission analyzed and favorably recommended the U.S. company's business plan. The government will appoint an authorized negotiator by Nov. 1.

"A strategic investor will be included, but negotiations will be continued only with NRG," Hillar Lauri, NRG's Estonian representation director commented on the decision.

NRG Energy, which has for some years now been doing research on the Narva power stations, is vying for 49 percent of the state-owned structure's shares.

According to Lauri the negotiations period is scheduled for six months. If the parties reach a mutual agreement, the actual reconstruction works in Narva, Estonia's largest project of the kind, can start by the spring of 1999.

According to the NRG business plan, the American investor will pay the Estonian government $70 million for 49 percent ownership in the Narva power stations.

The remaining 51 percent will be controlled by the state. The entire span of the investment plan extends out to 15 years. NRG is due to invest $435 million during the first seven years and $181 million over the next eight.

The Narva power station with a nominal output capacity of 3,000 MW, currently uses only 60 percent of its capacity.

"NRG is not planning to start producing energy at maximum capacity but according to the demand of the market," Lauri said. "We intend to produce for the local Estonian market only, but if any export opportunity becomes available, we can generate electricity for outside Estonia as well."

Estonia consumed 7,700 GW hours of electricity in 1997. Lauri predicts this figure will increase by about 2.6 percent per year until 2005. Thereafter, the country will see a 1 percent per year increase. "We believe that by the time actual electricity production in Narva begins, electricity prices will have gone up sufficiently to enable us to produce cheaper energy than [state energy company] Eesti Energia," Lauri commented.

The reconstruction of Narva power stations would be a savior for the currently struggling Estonian Oil Shale, the domestic oil shale extractor.

"As 51 percent of the power stations will remain under the state's control, Estonian oil shale has to be the main resource for generating," Lauri said. "But unlike Eesti Energia, we'll start producing electricity with new technologies that are more environmentally friendly.