Fuel company Alexela Grupp is applying for a €37-million loan from the state credit foundation KredEx.
The loan would shore up oil products producer Kiviõli Keemiatööstus, as well as other companies belonging to the group, Alexela CEO Andreas Laane told BNS Thursday.
Alexela had already laid of close to 100 staff in March, early on in the crisis, and had already been hit by the slump in oil prices following the break up of an agreement between major oil producers Russia and Saudi Arabia, and saw oil prices move into negative numbers of as low as -US$ 37 per barrel, last month.
Andreas Laane said the loan would pertain to next year's investments. While there will be sufficient orders through to the end of this year, the crisis' full effects will hit the sector later, meaning the toughest period will not arrive until the end of 2020 or early 2021.
Continued low oil prices are also becoming a serious problem, he added. Laane projected that the crisis in the industrial sector will begin in either August or September.
KredEx loan conditions include prior negotiations having been held with banks, which Alexela has already done, according to Laane, mostly unsucessfully.
"The banks were unable to forecast such [low] oil prices," Laane said, adding that financial institutions have become cautious and conservative.
A decline in the number of orders had already been observed, according to the CEO of Alexela. Moreover, for the sustainable production of oil shale, oil prices would need to soar.
The state has earmarked €300 million in the supplementary budget approved in April, for supporting businesses of strategic importance who have been directly hit by the fallout from the pandemic.
All support allocations exceeding €10 million euros must be approved by the government. Thus far, the government has green-lit a €100-million loan to shipping line Tallink, the only company to have applied for loans of that size, other than Alexela, BNS reports.
Alexela Grupp employs over 1,000 people across Estonia, including in energy, industry and real estate. The group also owns teelwork company Kohimo, Tiki trailer manufacturer Bestnet, and hot-dip galvanizing plants in Paldiski, Estonia, and Rauma, Finland, as well as Kiviõli Keemiatööstus.
It also develops liquefied natural gas (LNG) terminals in Paldiski and in Hamina, Finland, according to BNS.
Editor: Andrew Whyte