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Alexela's Paldiski LNG terminal not granted EU funding

LNG terminal. Photo is illustrative.
LNG terminal. Photo is illustrative. Source: (Reuters/Scanpix)

While Estonia's Alexela Group failed to secure funding for its project to build a liquefied natural gas (LNG) terminal in Paldiski in last year's round of calls for energy proposals, it plans to go ahead with the project anyway.

The company was notified by the EU that the Paldiski LNG terminal was not going to receive financial support at this point, Alexela said on Monday. The company had sought a grant of close to €344 million or 39 percent of the cost of the project from the European Cohesion Fund.

According to the company, the EU decision referenced the Lithuanian Klaipėda LNG terminal and that stated that n support for a Finnish-Baltic regional LNG terminal was forthcoming from last year's round of applications.

Alexela Group board member Marti Hääl said that the announcement could be anticipated in light of Lithuanian Prime Minister Saulius Skvernelis' recent comments.

"We have been developing the Paldiski project in accordance with the game rules of the Baltic Energy Market Interconnection Plan (BEMIP) agreed upon by the governments of the Baltic Sea region in whose framework the location of a regional terminal has been selected and agreements between the Estonian Finnish governments concerning Balticconnector and the Paldiski LNG terminal have been reached," he said in a press release.

According to Hääl, Lithuania's decision to temporarily lease an LNG terminal outside of the BEMIP agreements has influenced the EU's decisions as well. Clearly, in a situation where all regional market players do not play by the agreed-upon rules and the state can start distorting the market with taxpayers' money at any moment, private capital becomes cautious," he said.

The floating terminal in Klaipėda is currently the sole functioning LNG terminal in the Baltic region. Its lease runs out in 2024, by which time the regional LNG terminal must be complete. The Paldiski LNG terminal developed by Alexela is economically and logistically the best option in Finland and the Baltic countries, Hääl asserted.

In his words, Alexela will continue work to develop the terminal. "If the EU decision is part of a new approach to deny state aid to building LNG terminals in this region, then we expect the socializing of the costs of the Klaipėda terminal in Lithuania to end as well," Hääl continued. "In this light we'll be able to carry on our project by raising private capital to build the terminal," he said.

Alexela filed an application for €344 million with the EU in October 2015, by which time the company had already invested close to €10 million in the project.

Editor: Aili Vahtla

Source: BNS

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