Eesti Energia snaps up Nelja Energia for US$336m

31 May 2018, Week 21, Issue 912

Enefit Green, the clean energy arm of Estonia’s state-owned Eesti Energia, has unveiled plans to buy Nelja Energia, the biggest renewable power producer in the Baltics. As the transaction awaits approval from local authorities, however, one of Enefit’s rivals has claimed it breaches competition rules.

In a statement this week, Eesti said it intended to buy a 77% stake in Nelja Energia from Norway’s Vardar, as well as all remaining shares in the company from minority investors. Nelja’s overall market value is around 289 million euros (US$356 million), according to Eesti. The deal will also see Eesti assume Nelja’s debts, which reportedly amounted to 204 million euros (US$236.8 million) net at the end of last year.

According an Eesti spokesman, the purchase is aimed at expanding the share of renewables in the company’s generation mix to 40% by 2022, up from around 5% at present.

“This acquisition marks one step further to achieving this strategic goal,” Kaarel Kuusk, Eesti’s media relations manager, told NewsBase Intelligence (NBI). “This gives us a lot of opportunities to be the fasted growing renewable energy producer in the Baltic Sea region.”

Eesti produced 9.736 million MWh of electricity in 2017, of which 372,000 MWh was generated by Enefit Green. The latter owns and operates four wind farms, three biomass-based combined heat and power (CHP) stations, a hydroelectric power plant (HPP) and a solar farm. Nelja, meanwhile, controls a fleet of 17 wind farms in Estonia and Lithuania which churned out 761,100 MWh of power in 2017, up 24% year on year. The firm also owns a wood pellet factory and CHP station in Latvia and minority shares in two biogas stations in Estonia.

 

Antitrust concerns

One of Enefit Green’s main rivals has taken issue with the acquisition, however, arguing that it violates antitrust rules. Andres Sonajalg, a board member at privately run Estonian wind producer Eleon, called on competition authorities on May 29 to block the deal, which he dismissed as an “act of monopolisation”.

Echoing his sentiment, Eleon CEO Oleg Sonajalg told NBI that Eesti already controlled 84.5% of wind capacity in Estonia, claiming its takeover of Nelja would undermine the country’s attractiveness to developers.

“Coupled with the controversial state regulations that give a privileged position to Eesti Energia wind parks, this makes the market unattractive for many private companies and funds,” he said. “We have a strong business plan, but for sure, we share the concerns with the others, specifically that this deal could produce an overall bad business climate in the Estonian wind energy sector.”

Yet Eesti’s Kuusk dismissed these concerns, stating it was difficult for him to comprehend how the deal would breach antitrust law.

“When speaking of the role of Eesti Energia and Enefit Green in the energy market, then all electricity producers of the region compete with one another in the single energy market of the Nordics and the Baltics, regardless of which source of energy is being produced,” he told NBI. “Compared to the largest Nordic energy producers, we are quite small.”

He noted that Eesti accounted for less than 3% of overall generation in the Nordic and Baltic regions, estimated at over 400 million MWh, while Nelja’s power plants had a share of under 1%.

Kuusk also pointed to how interconnected the region’s electricity markets were, allowing for the free flow of power and making it difficult for any one firm to monopolise supply. Estonia currently shares 1,000 MW of cross-border capacity each with Finland and Latvia, and another cable connecting the country with Latvia is under construction. “Already now, the transmission capacities are larger than the maximum consumption of Estonia,” he told NBI.

Joseph Murphy

Edited by

Joseph Murphy

Editor

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