Assessment of the business plan and financing strategy. The aim of the project is to build and operate the third AC interconnection between Finland and Sweden. The technical solutions and routing option were chosen as the most beneficial according to the cross-border study carried out by the project promoters. Once completed the interconnection will increase cross-border capacity from Finland to Sweden by 900 MW and from Sweden to Finland by 800 MW. The increased cross-border capacity is found to increase internal market integration and thus reducing price differentials, improving security of supply and supporting integration of more renewable energy sources. According to the project promoters there is an option in the future to develop the system by adding substations to connect wind power that is planned for the region, thus further increasing renewable power generation. 2020-03-12 The project promoters have presented that the investment to the third AC interconnection is foreseen to be financed partially by EU funds and the remaining part by the project promoters. As according to the CBA majority of the benefits of the project are shown in Finland, the project promoters have jointly proposed that Finnish TSO will finance 80% of the investment costs occurring on the Swedish side and 100% of the cost on Finnish side, covering approximately 87% of the total investment costs of the project. The recovering of the investment costs will take place through transmission tariffs. The concerned NRAs agree with the project promoters that the grid investments to Swedish grid funded by the Finnish TSO should affect as little as possible to the tariffs of the Finnish network customers, and to diminish this effect EU funding is needed. 2019-102729-0005 According to the Finnish TSO the remaining CAPEX funding after grants will be covered with 20% equity and 80% commercial debt. In addition to grant funding, the Swedish TSO’s principal source of funding will be debt from the Swedish national debt office.
Assessment of the business plan and financing strategy. The project promoters have presented that to promote market integration and competition, it is envisioned that the Balticconnector and Estonia-Latvia interconnection will be given to market use in the framework of Finnish-Baltic single entry-exit model (excluding the first two years of operation (2020-2021), when the revenues will come from capacity booking until full market integration is achieved in 2022). The concerned NRAs share the project promoters’ view that the envisioned approach give the developed infrastructure to market with single entry-exit model would be the model with the highest socio-economic benefits arising from the projects. The concerned NRAs find that achieving this model after two years of operation reasonably considers the transition period of market opening while ensuring the financeability during this transition by generating revenues from capacity booking. The concerned NRAs find that the calculated revenues from capacity booking are reasonably presented and reflect the non-binding market test results. The project promoter have presented that the investment to the Balticconnector and Estonia- Latvia Enhancement is foreseen to be financed partially by EU funds and the remaining part by the project promoters. The concerned NRAs consider that as the project promoters’ financing strategy relies partly on EU funds, the realisation of this co-funding as foreseen by the promoters constitutes a significant risk to the project financing and development.
