Estonia – Two firms get major state support for Paldiski, Sillamäe green hydrogen plants
Two Estonian companies are eyeing green hydrogen in their plans in the port cities of Paldiski and Sillamäe.
The two firms are among three which are due to take in €44 million in state support.
Derivaat NG3 Power is to build a €110.5 million gas power plant in Paldiski South Harbor which will provide electricity and also ammonia as a by-product, while BHG-Estonia is to develop a facility at Sillamäe producing green hydrogen, for shipping and fertilizer exports.
Derivaat NG3 Power had taken part in Elering’s frequency reserve tender together with Alexela, but was unsuccessful due to non-compliance with the conditions. The company fared better when applying for major investment support and is set to receive €11 million for this.
The company was only founded in July this year. Its ultimate beneficiary is major businessman Olav Miil, active in real estate and the ferry business, through the firm Derivaat NH3, engaged in developing projects for green hydrogen and green ammonia plants.
The supported project foresees the construction of a hydrogen filling station for heavy machinery, a storage unit, 15 MW of electrolysis capacity, and the capability for ammonia synthesis, all at the Paldiski complex.
Erik Laidvee, Derivaat NG3 Power’s board chair, told “Terevisioon” that they had applied for support for the gas power plant project, adding to the green minerals plant to be built on the adjacent plot. The gas plant was added to their plans due to a major cost component of the green ammonia plant being the price of electricity, which in Estonia is significantly higher than in Finland, he said, once taxes are taken into account.
Laidvee outlined, adding that the company hopes to obtain building permits in a couple of weeks,
We started looking for ways to bring down this cost component and also for possible synergy. That’s how we arrived at the idea of a power plant.
“Elering’s frequency reserve tender was also announced, which gave us an additional push to develop the project, and so at the beginning of the year we took it into active work,”
According to Laidvee, green ammonia is needed above all to meet the future maritime shipping fuel demands.
Laidvee went on,
Around half of the ocean fleet will switch to green ammonia in the future, in addition to the fertilizer, metal, and chemical industries.
“Green ammonia is a very good energy carrier, from which – strange as it may sound – electricity can be reproduced,”
Meanwhile BHG-Estonia is set to receive €20 million in support for its plans to build a large-scale green hydrogen and ammonia production complex in Sillamäe, also a port city, at a total estimated investment of €153.5 million.
BHG-Estonia OÜ’s field of activity is natural gas production, and its owner and sole board member is Kaspars Avots. The company’s first annual report shows that aside from €2,500 in share capital, it had no other assets, and no business activity reported last year.
Avots also holds a stake in another Estonian company, Baltichydrogengroup OÜ, which develops hydrogen projects. Founded in 2022, the company ended last financial year reporting losses of more than €149,000, while by year’s end its equity had fallen below the required baseline level. However, the company stated in its report that this was a temporary state of affairs and that operations would continue as planned.
BHG’s head of business development Valentin Bratkov told “Terevisioon” that the company has plans to develop an integrated green ammonia and green hydrogen technology park in Sillamäe, and link that with other parts of the value chain, namely renewable energy production on one side and consumption on the other.
Bratkov explained, adding that BHG is planning development in all the Baltic states,
When we talk about our vision of where we direct green hydrogen and green ammonia, then primarily for hydrogen it is future fuels – hydrogen is the raw material for them, but also a fuel and an energy carrier itself.
“In the case of green ammonia, we also look toward future fuels, marine fuels, and fertilizer exports,”
Support reduces risks and helps attract funding
The third company of the three taking in €44 million in state support, Horizon Cellulose and Paper AS, has the lengthiest histories of doing so. Its ultimate beneficiaries are, via Tolaram Industries PTE. LTD, five Singaporean and one Indonesian citizen.
The company, which operates a pulp mill in Kehra, had a turnover of €42.7 million last year, though it incurred an operating loss of €1.4 million. It says it is investing in measures to improve energy efficiency and to boost the share of renewable energy.
Horizon says it plans to establish a kraft paper production unit in Kehra based on new tech, enabling the production of higher quality and more specialized kraft paper. This requires an investment of €129.5 million, with state support capped at just under €13 million of that.
Spokespersons for both Derivaat NG3 Power and BHG confirmed that they would have planned their projects in Estonia even if state support had not been forthcoming, adding this support mitigates investment risk and makes fundraising easier.
Bratkov said,
Support allows us to achieve more within the same project budget,
“The investment strengthens the credibility and proper direction of our project, considering the country’s strategy and goals.”
Laidvee noted that as a start-up, state support is especially important for Derivaat NG3 Power in negotiations with banks. The company’s main investment will come from shareholders, and preliminary talks have also been held with several commercial banks, he said.
Laidvee added that Derivaat NG3 Power is largely backed by Estonian investors, noting that one of the shareholders is also a Dutch company. What the proportions of investors will be is still too early to say, as this hinges on the further financing scheme.
Under the state’s major investment scheme, support is provided for investments of at least €100 million. Each supported investment must create at least 30 new jobs, at average wages exceeding the mean for the sector in question. The support will only be paid out to the company after the investment has been made.
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Estonia – Two firms get major state support for Paldiski, Sillamäe green hydrogen plants, source