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Paldiski – an industrial town for nearly 300 years

The Baltic Sea region’s important industrial centre of the future?

9 min read

Situated on the Pakri peninsula, Paldiski is a town that has undergone a total transformation in the last decade. Three massive projects may turn life upside down in this industrial region.

Paldiski has been an industrial town for nearly 300 years. Today, the two ice-free ports and fast rail- and road connections have turned this area into an attractive location for industry. When you also consider the great wind conditions typical of the peninsula, it is no wonder that the goals set for the year 2030 may be reached much earlier. Paldiski is looking for investments mainly in six industry sectors.

It would have remained a mere ‘potential’ had it not been for a meeting of active local companies and organisations which gathered in 2010, all interested in the success of Paldiski. The city government was on board from the start.  This is how the Paldiski Association of Entrepreneurs was born and set the huge goal of turning Paldiski into the industrial centre of the Baltic Sea region.

“We realised, together with entrepreneurs, that there is no point acting in isolation when together we could achieve something huge. Today, we have 15 members in the association and many more companies in the region, but we said from the outset that we would make big things happen. Therefore, the smallest companies are not able to keep up,” explains member of the Board, Nikolai Pitšugov.

The hugely important LNG terminal

There are already dozens of companies from different sectors, ranging from construction to the chemical industry, working on the Pakri peninsula. In 2020, the long-awaited Baltic Connector which links the Finnish, Estonian and Latvian gas markets will go into operation and its Estonian side is located in Paldiski. The LNG terminal will be serving the Baltic states alongside it. Construction workers are literally waiting to start working. This means that the building permission has been issued and the ball is in the court of politicians. The important question is whether European funding will be attracted to the project. The budget of the next period has not been locked. The answer should come in the near future as this pivotal regional terminal should already be operational in 2024.

A unique pumping station

There are plans to complete the Estonian pump-hydro accumulation power plant by 2027. A lake will be created at the depth of 500 metres underground which will be connected to the sea via turbines. This is a huge step for the Estonian sustainable energy sector. It is a solution which compensates the need for wind when there are windless periods. Whenever there is a sufficient amount of wind, the water will be pumped back into the sea.

It is the only project of its kind in Europe. The plan has been established and currently the evaluation of the environmental impact is underway. Building may already begin in 2021,“ explains Ester Tuiksoo, Executive Director of the Paldiski Association of Entrepreneurs.

A billion-euro investment

When the Association of Entrepreneurs was at the planning stage, the goal was to bring a billion euros in investments to Paldiski by 2030. The LNG terminal means a 350-million-euro investment and the pumping station 400 million euros. In addition, there are continuous smaller investments in the Pakri peninsula, reaching millions. But then something happened which the entrepreneurs could not have imagined in their wildest dreams. The Swiss company Larkwater Group announced that it wanted to build the largest methanol factory in Europe on 60 hectares of land. The likely investment will be a billion euros. Hence the goal of 2030 would be fulfilled with just that single large investment.

Pitšugov claims that the Swiss were attracted to the area precisely because of the Baltic Connector and the LNG terminal. “When you are making a billion-euro investment into such a factory, you need to have a big sense of certainty about the gas delivery. Here they have double certainty. When they finally understood this, the decision became very easy,” says Pitšugov.

In order to establish a methanol factory, there needs to be a specific development plan from the county, the planner has already been chosen. Optimists say that the entire process can take two years. All participants are making efforts for this to be true. The construction process itself may take three years.

Turning life upside down

Even if one of those projects were realised, it would turn life in Paldiski upside down. For example, for the LNG project, 800 people are needed for four years of construction. The same applies for the pumping station. However, 2,500 people are already involved in operating the methanol factory. All of them need to be housed and fed. Developing the living environment is something that the local government and the Paldiski Association of Entrepreneurs are concerned about.

“The county needs to be prepared that when it goes ‘bang!’ we need to be ready with our plans and the folder of the new residential area, together with building permission, should already be filed on the shelf,” says Pitšugov.

The Association has achieved much

Some years ago, Paldiski was a real dump and this is how it has remained in the memories of many Estonians. Paldiski today has undergone a total transformation. Local entrepreneurs are satisfied that ministers and the President of the Republic have visited Paldiski on various occasions. Decision-makers know that Paldiski has set a new course.

In addition to attracting investment and foreign relations, the Association of Entrepreneurs has accomplished much more. In collaboration with the security company G4S, they have changed the area into a much safer one. Finances have been spent building a city sauna and a grand gym. The Association is actively working for local enterprises. The fact that the members can sometimes speak to different ministers face to face is already a very significant thing.

In cooperation with Lääne-Harju municipality, the Harju Economic Development Centre, Alexela Group, the Port of Tallinn and the Estonian Trawling Association, the Paldiski Association of Entrepreneurs has organised the annual international investments conference “Teistmoodi Paldiski” (Different Kind of Paldiski) for a couple of years already, in a picturesque site next to the Pakri Lighthouse. Its aim is to make Paldiski attractive to investors from both home and abroad.

Synergy of companies

Paldiski has a 4 in 1 industrial concept. It means joint development of energy and logistics solutions, digitalisation and focus on industries, by looking for and leveraging the synergies in this community. This raises the competitiveness of the whole region and individual enterprises.

 

Paldiski is a town and Baltic Sea port situated on the Pakri peninsula of north-western Estonia. Previously a village of Estonia-Swedes known by the historical name Rågervik, it was extended into a Russian naval base founded by Peter the Great. The location was chosen in 1715, and construction started in 1716. It was meant to be sea fortress and in 1790, during the Russo-Swedish War, it was conquered by the Swedes through trickery, after a Swedish war ship sailing under a Dutch flag was allowed to dock. On the 23rd of June 1912, the Russian emperor Nikolai II and German Kaiser Wilhelm II met for the last time before World War I in Paldiski.

The Russian authorities renamed the site “Baltiyskiy Port” in 1762. In written Estonian, the name was spelled Baltiski until 1933, when the phonetically spelled version Paldiski became official.

During the Soviet era, Paldiski was a closed city because of the Soviet Navy’s nuclear submarine training centre. Employing some 16,000 people, and with two land-based nuclear reactors, it was the largest such facility in the Soviet Union. Because of its importance, the whole city was closed off with barbed wire until Estonia regained independence in 1991 and the last Russian warship left in August 1994.

Looking for new investors in Paldiski

Margus Vihman, Commercial Director and Board Member of the Port of Tallinn

The vision of the Port of Tallinn is to become the most innovative port in the Baltic Sea region. Paldiski is a developed area which is very entrepreneurially-minded and offers various innovative solutions ranging from logistics to opportunities in the energy sector or complete solutions and joint marketing for new investors. Paldiski is on the world map with two ice-free harbours. There is free land and the interest of the local government, which creates a favourable environment for realising your industrial investments in Paldiski. The Port of Tallinn as an innovative company is expecting and favouring new investors in the port and in the region.

We believe that the existing infrastructure, geographical location and connections, good collaboration between local government and entrepreneurs, as well as the future sufficient supply of competitive energy, will ensure the realisation of the Industrial Hub concept in Paldiski.

Paldiski is the Estonian model of Silicon Valley

Heiti Hääl, majority shareholder of Alexela Group

I see big potential in Paldiski – Pakri peninsula is a unique place in Estonia where, in a very short time after Estonia regained independence, the modern energetics- and logistics competence has accumulated. The perspective of Paldiski is to be a nice example of an energetically independent area in the Baltic Sea region which connects various modern sustainable energy production and application solutions.

Preparations for the pump-hydro accumulation station, LNG terminal and the methanol factory are underway in Paldiski, it is also home to one of the largest windparks in Estonia. Combining all these components creates excellent preconditions for the development of a contemporary industrial centre.

Paldiski is becoming an energy competence centre (PPP project), resulting in applied solutions of a CO2 neutral and economically affluent Estonia.

I see Paldiski as a small model of Estonia because our small country has served as a so-called testing ground for the world in many global questions. Developments here are much faster and so are the changes in society. We adapt faster and supply responses to the world about processes in a much quicker way than large countries can afford to do. Thus, we can position Paldiski in the context of Estonia and test the functioning mechanisms of a climate-neutral energetically independent region. The experience of Paldiski may be a unique and informative sample project for a world searching for solutions to the global climate problem. As the project turns out to be successful, we will encourage much larger areas to implement similar energy solutions.

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