The Estonian state-owned transmission system operator Elering AS on Monday signed a 20-year maturity loan agreement of 10 million euros with the Nordic Investment Bank (NIB) for the construction of Estlink 2, a new high-voltage power connection being built across the Gulf of Finland between the Baltic countries and the Nordic region.
The new loan comes in addition to a 25 million euro loan signed by NIB with Elering for the same project in 2010.
«This summer has clearly demonstrated the need to integrate isolated national electricity markets into larger market areas with many different production capacities. For that physical connections between countries are needed. Good connections will also allow to forgo building some power plants that are not feasible in a small market but are necessary for security of supply,» Elering CEO Taavi Veskimagi said in a press release.
«Estlink 2 will provide Estonia with improved access to the Nordic Elspot market and potentially help to reduce the Baltic countries' reliance on shale oil fired power plants,» said Henrik Normann, NIB president and CEO.
The total budget of the Estlink 2 project is about 325 million euros. NIB has earlier lent 40 million euros to the Finnish national electricity transmission system operator Fingrid Oy for the project. The new loan to Elering will increase NIB's share to 75 million euros, representing 23 percent of the total Estlink 2 project cost. Besides the NIB loans, the Estlink 2 project is financed by the EU, Fingrid, and the European Investment Bank.
Elering's share in the project is approximately 170 million euros, and together with the new loan NIB's share is 35 million euros or one-fifth of it.
Construction of the new 650 megawatt link is progressing according to plans and the cable is expected to enter into operation in 2014. The capacity of the interconnection between Estonia and Finland will increase to 1,000 MW and is estimated to cover more than two thirds of the annual average electricity consumption in Estonia.
The new electricity interconnection is being built between the substation in Pussi in northeastern Estonia and Anttila in southern Finland. Of the entire 170 kilometer length of the link, 145 kilometers consists of a submarine cable on the sea bed.
NIB also co-financed the construction of Estlink 1, the first ever connection between the Baltic countries and the EU.