After nearly 4 years of talks, Estonia's cabinet has approved terms under which NRG Energy Inc., a unit of Northern States Power Co., Minneapolis, may proceed to purchase a 49% interest in AS Narva Elektrijammad (Narva Power), owner of about 3,000 Mw of oil shale-fired generation plants, and a 51% interest in state-owned oil shale mines, Eesti Polevkivi.
State-owned Eesti-Energia will retain 51% of Narva Power. Subject to definitive agreements, the terms include a commitment by Narva Power to invest approximately $361 million for reconstructing and refurbishing the generation plants and making environmental improvements.
In a statement, the government said the price for 49% of the shares in Norva Power "will be no less that $54.5 million.'' Earlier President Lennart Meri criticized the sale of the plants as bad for the economy and consumers.
NRG Energy will make an initial $65-70 million equity commitment, including a $5 million contribution to establish a social fund to help the residents of the Narva region, in which the plants are located. This represents the largest foreign investment into the Estonian economy to date, NRG says.
"We have worked very hard for 4 years to get this point," says David H. Peterson, NRG chairman and CEO. "This new joint venture will be a stronger power company that effectively produces electricity for the Estonian people, while bringing additional economic development to the Narva region.''
Talks began in March 1996 and have since been through one change of government and wrangling over the final structure of the deal. The proposed deal suffered a setback in July 1999 when it was decided to expand the agreement and make state oil shale firm Eesti Polevkivi a 51% subsidiary of the power plants.
Narva Power's two stations, Balti and Eesti, currently supply more than 90% of Estonia's electricity. Narva Power will enter into a 15-year power purchase agreement with Eesti-Energia.
"We expect NRG and Narva Power's investment to make these power generating assets more competitive long term against regional alternatives," said Ronald J. Will, president of NRG Europe. "The terms of our investment, as approved by the cabinet, will help support the long-term viability of the oil shale and electric generation industries."
NRG has net ownership interest of 13,000 Mw in 57 power generation projects, with a total generating capacity of more than 23,000 Mw.
