Companies say state loan guarantee not enough for energy investments
The Ministry of Climate plans a state loan guarantee to attract multibillion-euro energy projects like offshore wind farms and a nuclear plant. Developers say this alone isn't enough.
The state remains interested in bringing major energy projects to Estonia, such as offshore wind farms or nuclear power plants, but it will not offer direct subsidies. Banks, however, see such large-scale ventures as too risky. Now, the Ministry of Climate is preparing a measure under which the state would guarantee loans for these projects.
"A guarantee measure could help secure longer loan periods and reduce interest costs, but it still doesn't solve the main question: what will the electricity price be over the next 30 years? To use a home loan analogy — a guarantee always helps, but without proving a stable income, it's still very hard to get a bank loan. A guarantee alone definitely isn't enough. We need a buyer for the electricity or a state-backed guarantee that the electricity will have value — long-term contracts either directly with consumers or with the state," said Enefit Green's head of offshore wind energy, Johann-Gustav Lend.
Kalev Kallemets, CEO of Fermi Energia that is looking to build a nuclear power plant in Estonia, said that in nearly all European countries, nuclear power plants have been built with some form of state guarantee — such as loan guarantees or state loans.
"Practically the entire loan amount has to be guaranteed one way or another. If we estimate that a two-reactor plant would cost €3.4 billion and about two-thirds of that would be financed by loans, then all of that borrowing — whether through export credit or commercial loans — must be guaranteed. Without a guarantee, we most likely couldn't build it at all," Kallemets said.
The guarantee measure is not yet finalized and it is still unclear under what terms the Estonian Business and Innovation Agency (EIS) would provide guarantees for major investments.
"If there isn't enough revenue from electricity sales to cover loan payments, EIS would pay the missing amount. But EIS would then gain a claim against that same energy asset for the corresponding amount," said Minister of Energy Andres Sutt (Reform).
To create such a claim, the company would issue bonds to EIS. From the state's perspective, the guarantee would become self-sustaining.
"At present, we've proposed a term of up to 30 years, which would certainly allow the money to be repaid over time. And that's for a simple reason: electricity prices can't fall to zero or stay too low, because electricity's role in the economy is growing and demand is rising," Sutt said.
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Editor: Marcus Turovski, Johanna Alvin
