ECB gives Estonia the green light on corporate bond buys under QE

By bne IntelliNews June 5, 2015

The European Central Bank (ECB) has agreed to Estonia’s request that it be allowed to buy bonds issued by state-owned power grid operator Elering under the quantitative easing programme, local media reported on June 4. However, the debt of Eesti Energia remains off the menu.

The ECB had last month declined approval of the debt of both companies. However, it has now made an exception for Elering as the Bank of Estonia is unable to buy government bonds, reports ERR. However, the refusal on Eesti Energia was maintained because, unlike Elering, the energy company competes against private business.

With no sovereign debt in the market, and Tallinn insisting that's not about to change, Eesti Pank has been pushing to include state corporate debt in the QE programme, which kicked off in March. Left with only the bonds of supranational institutions such as the EIB to purchase, the Estonian central bank is already struggling to fulfill its commitment to spend €126mn per month. 

"In March we bought €117mn and in April €118.9mn worth of bonds of international institutions," Eesti Pank's Communications Office Viljar Raask told bne IntelliNews last month. The tiny Baltic state must spend €3bn by Spetember 2016.

Estonia "cannot buy [supranational] bonds to cover the entire [QE] programme," Eesti Pank President Ardo Hansson admitted way back in January. 

No purchases of Elering bonds have been made yet, notes ERR, and much will depend on the price and availability before the Bank of Estonia moves. Estonia has around €900mn in state corporate debt in the market, analysts tell bne IntelliNews. The QE programme allows central banks to purchase up to 25% of any single issue. 

Elering's current outstanding debt would offer the central bank the chance to buy up to €56mn. It is unclear whether the grid operator would be interested in issuing new debt. The company recently completed a five-year, €450mn investment phase. Elering was last in the debt market in 2011. 

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