January 2024

BaltCap acquired the second largest electricity distribution operator in Estonia

BaltCap Infrastructure Fund II (BInF II) acquired 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 said he is content that the deal has been closed and now emphasis can be put on growing the business further. “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.”

“Electricity distribution is a critical infrastructure service, and further developing the grid in the Ida-Virumaa region serves this goal to increase the resilience of the Baltic economies. 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,” Kauts explains.

New advisory board has been established for the company, including BaltCap Managing Partner Simonas Gustainis and Investment Directors Marek-Andres Kauts, and Kristjan-Mart Piirsalu. The management team of VKG Elektrivõrgud will remain the same and continue in their current roles.

The buy-side advisers in the transaction were TGS Baltic and Opinio Finance, sell-side advisers were Superia and Cobalt. The transaction value and other details have not been disclosed.

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.

Additional information:

Marek-Andres Kauts
Investment Director