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System operator: Alexela will procure quay and floating terminal by itself

Elering CEO Taavi Veskimägi.
Elering CEO Taavi Veskimägi. Source: Siim Lõvi/ERR

The Ministry of Economic Affairs and Communications, Elering and Alexela have reached an agreement for moving forward with LNG terminal project. Taavi Veskimägi, head of transmission system operator Elering, told ERR that Alexela will construct the mooring quay and is prepared to procure the floating terminal.

Has progress been made in moving closer to an agreement for the LNG terminal?

Infortar and Alexela have proposed constructing the quay and procuring the terminal. That is precisely what we have been trying to achieve. Two months ago, the private partners were not prepared to take that risk without state guarantees. We are glad they are prepared now, and it is the best possible result in terms of use of public funds. Basically, we do not have to pledge public funds as the private partners are prepared to take risks. We are very glad the market failure has been removed and the private sector is willing to solve the problem.

Therefore, Alexela will not be given additional funding for the mooring infrastructure?

As I understand it, Alexela and Infortar have said they are prepared to build the terminal without state support. They aren't demanding any guarantees. An important shift has taken place over the last two months, and I'm glad we did not have to come up with €40 million in taxpayer money, that the private partners are willing to pay for it.

Will the price of LNG reflect in people's gas bills?

The mooring quay and the price of the FSRU will not impact the gas transmission fee. The price of gas molecules themselves is what counts. If it is a private terminal they plan to operate, it is likely that their financing model – whereas I don't know their business plan –, considering the fact it needs to be open to all market participants based on EU rules, is charging a terminal fee from those who transport and trade gas that will likely be used to finance the investment.

And this terminal fee will not reflect in consumer prices?

The terminal fee will reflect in the price of gas molecules. Naturally, we will all have to pay for it at the end of the day, but it will be a component in the price of gas from seller to consumer.

Are Alexela and Infortar standing by their demand for Estonia to stop buying Russian gas?

I believe it is an important precondition for them. Their proposal makes no mention of it, while I think they expect Russian gas deliveries to the Baltic and Finnish markets to end one way or another in the coming weeks or months.

Elering's part will be to build a link between the Balticconnector pipeline and the mooring quay, while I gather there is no contract for leasing a floating regasification unit (FSRU) at this time?

We have been over the mooring and the floating terminal. The message from the private companies today is that they will take the risk of the FSRU and the quay. We do not need to intervene here on the level of Elering or the government. It is precisely the result we have been after. Had it been their position from the first, that they are ready to rent the FSRU and build the mooring site without guarantees of any kind, Elering's involvement would not have been needed. We are a transmission system operator and run pipes, we have never been keen on having to rent ships or building piers. /…/

What about the cooperation agreement between Elering and its Finnish counterpart to procure the FSRU?

I was in touch with my Finnish colleague today. We need to discuss it with the Finns. But it is clear that if the private sector wants to rent the vessel and build the mooring, we will not be intervening with public funds and as a state company. The responsibility for creating the alternative gas supply chain will lie with entrepreneurs and the market.

Does that mean Finland will be buying its LNG from Alexela?

I am not the right person to comment on Finland's plans, and there is no such customer as Finland. There are specific gas consumers that handle purchasing. As far as I know, Finland has decided to get its own floating terminal and pay for it, and I cannot comment in any way on whether Alexela and Infortar's plan affects those of the Finns.

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Editor: Marcus Turovski

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