Eesti Energia looks for help to compete

The state-owned electricity monopoly Eesti Energia is seeking a 4 billion kroon ($228 million) investment loan from the European Bank for Reconstruction and Development so as to meet the requirements of the draft law on the power market.

The law, still being discussed in the Economy Ministry, is intended to liberalize Estonia's power market and allow the establishment of smaller electricity companies.

Under the current proposals the end-user network and client services of Eesti Energia would become standalone companies under the Eesti Energia corporation. Electricity production and transfer is currently carried out by an independent Eesti Energia-owned company.

The loan, to be taken at the end of this year, would cover the cost of restructuring and further development of the electricity network.

Eesti Energia is the largest enterprise in Estonia with over 10,000 employees and $1 million revenue planned for this year. It owns 100 percent of Narva Power Stations, 51 percent of Estonian Oil Shale, and other enterprises related to electricity production, heating and service distribution.

The Economy Ministry says the state will keep Eesti Energia as one corporation but will restructure it in line with EU requirements.

Eesti Energia will be inspected by experts from Moody's, and Standard and Poors international rating agencies at the end of May.

Heido Vitsur, adviser to Economy Minister Liina Tonis-son, said that in the interests of stability the government would not change the monopoly's current management while taking the loan and carrying out the bond issue.

The new law on power market is as a first step toward a completely free Baltic electricity market in which both corporate and private clients would be able to choose from many electricity producers and network operators, said Erki Peegel, spokesman for Eesti Energia.

"In the nearest future there could appear many resellers of electricity made by one company," said Peegel.

But Estonia's energy system will remain tied to that of Russia's for the next 20 years. The laying of a cable between Estonia and Finland has been delayed by a decision to conduct a survey on electricity price trends, which is due for completion this fall.