Elektrilevi segment analysis: The most risky of Eesti Energia’s loans

KPMG research found that the separation of Elektrilevi will have a negative impact on the performance of Enefit Connect and the financing of Eesti Energia’s activities. In other words, the action will cause continuity and development problems for both companies.

However, one of the positive effects of the separation is the elimination of the risk of conflicts of interest, which may arise because the electric power company (Eesti Energia) is part of the same group of companies. the distribution network (Elektrilevi).

The most positive impact on the electricity market, which can arise from the restructuring is the expected creation of an electricity network organization ( including both Elektrilevi and Elering). This should, in particular, improve the connection of the electric power and the development of communication.

From a financial point of view, the study confirmed that there are two main challenges, caused by the separation of Elektrilevi from Eesti Energia. First, the need for Eesti Energia to refinance its loans, and second, the company’s ability to finance itself after the separation.

According to the analysis, the loan of Eesti Energia needs to be refinanced to €450 million. “It may be difficult for Eesti Energia to raise this amount of funding after the separation of Elektrilevi, so additional funds are needed, with equal contributions (or the state – ed.),” said a the details.

“It is likely that Eesti Energia’s rating will fall after the disposal of the low-cost network and the cost of its capital will increase,” KPMG said in the analysis. .

In summary, the restructuring will involve some additional costs, however, according to the study, they are not on a scale that should affect the implementation of the restructuring plan.

The changes that have come as a result of the readjustment may also have an impact on the price of electricity, and the study has observed that these changes may be permanent or repeated.

According to the analysis, in the first year after the divorce, the average price will be expected to increase by about 1.5 percent, and the rate of increase will only fall below the one percent per year 33.

The analysis showed that the separation of Elektrilevi from Eesti Energia will increase the costs by € 2,5 million per year, while the investment costs will fall by € 3 million.

The one-off cost of €2.3 million will come from loan restructuring and negotiations.

The study also found that Eesti Energia will receive €4.3 million in interest costs on unpaid loans due to the split, of which €3.54 million will be for an indefinite period.

The head of Eesti Energia Hando Sutter, previously said that the debt of the group is about € 1 billion. Sutter also said that the separation of one company from the group means the need to negotiate with the banks to reschedule the current loans.

In this case, the most difficult task is to obtain a loan for Enefit Power, which produces electricity from oil. However, since the cost of loans has increased in general, and due to the problems involved in loans to finance the production of electricity, the fourth funding will have a major impact on the entire sector.

The government discussed KPMG’s analysis in a meeting on Thursday. During a press conference on the same day, Prime Minister Kaja Kallas (Reform), who has been one of the loudest voices calling for Elektrilevi to separate from Eesti Energia, said that said that the decision about the divorce will not be made by the current government.

KPMG studied the impact of the separation of the distribution network (Elektrilevi) from Eesti Energia. The study also examined Elektrilevi’s merger with the Elering network. The study was based on data related to the economy of Eesti Energia Group, Elektrilevi and Elering.

The analysis also considered, the financial, legal and technical aspects can be separated. KPMG’s investigation did not explain how the separation from Eesti Energia and the possibility of merging with Elering in accordance with the commercial rules.

A new administrator needs to be created

If Elektrilevi and Elering are merged, it will become a network operator. However, this will create the need for an independent organization to be established.

It will be very important if, as already discussed, the combined company Elektrilevi-Elering should be listed on the stock market.

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