BaltCap to acquire VKG Elektrivõrgud - the second-largest electricity distribution network operator in Estonia
The newly launched €200 million BaltCap Infrastructure Fund II (BInF II) signed its first agreement to acquire full ownership in VKG Elektrivõrgud. VKG Elektrivõrgud is the second largest electricity distribution network operator in Estonia after the state-owned Elektrilevi. BaltCap sees the acquisition as holding significant potential for horizontal growth both with electricity and grid-based services.
VKG Elektrivõrgud is the second largest regulated distribution network operator in Estonia after Elektrilevi, which is state-owned. Its network operations in northeastern Estonia cover the towns of Narva, Narva-Jõesuu, and Sillamäe, as well as surrounding areas with ca 71,000 inhabitants and heavy industry. The annual volume of VKG Elektrivõrgud’s electricity distribution in 2022 was ca 250,000 MWh. The grid consists of 946 km of power lines and 374 substations at low, medium and high voltages.
Marek-Andres Kauts, Investment Director at BaltCap, says, “The BaltCap Infrastructure Fund II aims to increase the resilience of the Baltic and Polish economies. Electricity distribution is a critical infrastructure service, and further developing the grid in the Ida-Virumaa region serves this goal perfectly. Ida-Virumaa is the industrial heart of Estonia, and electricity distribution services must be flexible and affordable to serve the needs of the region, including industry and retail clients alike.”
Talking about growth plans, Kauts explains, “We see potential for horizontal growth and synergy from expansion to other electricity and grid-based services. Examples are electric vehicle charging, renewable energy generation, energy storage solutions, as well as telecommunications and street lighting.”
Ahti Asmann, Chairman of the Board of Viru Keemia Grupp, says, "Viru Keemia Grupp is a major chemical industry company that focuses on the development of industrial projects in Ida-Virumaa. A strategic analysis of the group conducted last year changed the positioning of regulated businesses in our portfolio. As a result, we sold the heating network last year, and the sale of VKG Elektrivõrgud is the next logical step in implementing our business strategy. We are pleased to have found a strong partner for this regulated business who is interested in its development. The signing of the agreement marks the beginning of the process, and we will continue to work together to successfully complete this transaction. In the meantime, we will continue to provide all customers with reliable network services and electricity solutions."
The buy-side advisers in the transaction were TGS Baltic and Opinio Finance, and the sell-side advisers were Superia and Cobalt. The transaction value and other details have not been disclosed. The transaction is subject to competition clearance, and the deal is expected to be approved within 1–2 months.
About BaltCap Infrastructure Fund II
BaltCap Infrastructure Fund II aims to contribute to increasing the resilience of the Baltics and Poland. The 20-year fund focuses on investments in renewable energy generation, energy demand reduction, and social as well as transport infrastructure.
BaltCap is the largest and most experienced private equity investor in the Baltics covering buyouts, growth, venture, and infrastructure investments. Since 1995, BaltCap has invested in over 100 companies across a wide range of industry sectors and raised aggregate capital of over €700 million. BaltCap has a team of 40 investment professionals working across Tallinn, Riga, Vilnius, Warsaw, Helsinki, and Stockholm offices.
Additional information:
Marek-Andres Kauts
Investment Director
Marek-Andres.Kauts@baltcap.com
www.baltcap.com