Energy, Estonia, Financial Services, Funds, Good for Business, Mergers and take-overs

According to an agreement signed in Tallinn on Wednesday, EDIF II has acquired an 85% shareholding in Utilitas with current shareholders and managers of Utilitas retaining 15% shareholding, the companies said in a press release.

Prior to the transaction, 85.4% of Utilitas belonged to Rahu, the chairman of the supervisory board of the company, via holding companies. 

Rahu said that with EDIF II, they have on board an acclaimed international infrastructure fund with many investments in Western and Northern Europe and access to international capital markets.

"Utilitas is the fund's first investment in the Baltics and the only investment in this region by a major international infrastructure fund to date. We look forward to a long term cooperation with EDIF II and the team at First State. Our goal is to ensure that Utilitas will remain in the forefront of green energy development as an efficient energy services provider to its clients in the region,"Rahu said.

Niall Mills, partner at Infrastructure Investments at First State, hailed Utilitas as First State's inaugural infrastructure investment in Estonia.

"Utilitas' position as the leading operator of a sustainable, reliable district heating network with an increasingly strong focus on renewable energy production is especially attractive to us as a long-term investor. We look forward to partnering with our co-shareholders, management team and employees to further develop the company," he said.

First State said that in line with its integrated approach to responsible investment across all business areas, it has focused on pursuing the implementation of the UN Sustainable Development Goals across all of its portfolio companies. In 2017, more than 50% of Utilitas' energy production was produced from renewable sources and the company is at the forefront of innovation in the energy industry, making it a very natural fit with the fund's investment strategy.

The management and supervisory boards of all three subsidiaries of the group, AS Utilitas Tallinn, AS Utilitas Eesti and OU Utilitas Tallinna Elektrijaam will remain unchanged. Priit Koit will continue as the CEO and Kristjan Rahu as the chairman of the supervisory board of Utilitas. The supervisory board will be reinforced by two new members, Gregor Kurth, director at First State, and Andreas Greim, a district heating and energy expert with experience from Dalkia International, Areva and Electricite de France, as an independent member.

The transaction was financed by an international syndicate of banks consisting of Skandinaviska Enskilda Banken, Credit Agricole Corporate and Investment Bank as underwriters and HSH Nordbank.

"This transaction clearly shows that renewable energy projects, as well as ambitious Estonian companies are attractive for global investors and SEB is happy to support further development of Utilitas," said Artjom Sokolov, member of the management board of SEB Estonia.

Shareholders of Utilitas were advised by Superia Corporate Finance and Triniti Law Firm. First State Investments was advised by DC Advisory and Cobalt Law Firm.

Utilitas is the largest district heating company and one of the largest renewable power producers in Estonia. The company operates over 521 kilometers of district heating networks and supplies heat to approximately 166,000 households in eight Estonian cities, including the capital Tallinn, Maardu, Keila, Rapla, Haapsalu, Kardla, Jogeva and Valga. Utilitas produced approximately 1.7 terawatt-hours of heat and 263 gigawatt-hours of renewable electricity in 2017. Utilitas had consolidated sales revenue of 117 mln euros and total assets of 301 mln euros in 2017.

First State, whose official name is Colonial First State Global Asset Management, is the investment management arm of Australia's Commonwealth Bank, which manages assets of 157 bn U.S. dollars in total.

The investors in European Diversified Infrastructure Fund II include the Finnish pension association Elo and the councils of Swansea and Worcestershire from the UK.