Good practice:

BaltCap buyout investments scheme

BaltCap company focuses its investments on innovative companies, also operating in the renewable energy and energy efficiency sector, and buy-and-build opportunities and makes buyout investments in mid-sized unlisted companies. Investors include European Investment Fund (EIF), Baltic Innovation Fund (BIF), the European Bank for Reconstruction & Development, public promotional finance institutions of the three Baltic States, i.e., Altum, Invega and KredEx, Baltic pension funds etc. Investments are made predominantly in the Baltic countries through BaltCap’s three Private Equity Funds (BPEF, BPEF II, BPEF III). The buyout funds seek to acquire controlling ownership stakes. BPEF typically invests between EUR 5 – 20 million of equity per portfolio company. The enterprise values of the target companies range between EUR 10 – 50 million.
One of the investors is BaltCap’s BIF, which is an initiative created by cooperation between the Baltic states and EIF. BIF operates as a fund-of-funds and invests in SMEs and mid-caps through intermediates (selected investment funds), such as BPEFII. Its share in BPEFII has reached 24.5%. BIF is managed by European Investment Fund (EIF). Investors of BIF are EIF (40%), Altum (20%), Invega (20%) and KredEx (20%). The total value of BIF is 130 MEUR.

BPEF manages EUR 81,5 millions. It typically invests between 5-20 million EUR of equity per portfolio company. The enterprise values of the target companies range between 10-50 million EUR. BPEFIII will start to operate with the planned investments amounting to EUR 126 million.

BaltCap has already launched three BPEFs, proving the success of its buyout strategy. The BPEFIII, launched in 2019, retains existing investor base, incl. Altum, and aims to broaden the scope of target markets outside the Baltics, focusing also on Finnish and Swedish companies There are severalThis strategy has impacted RES sector by projects proving fund’s success, incl. making buyout investment in Estonian Mäli & Tamba wind farm.

The planned changes in the legislation, for instance, MPC (i.e. feed-in-tariff) may influence the investments made, e.g., not reaching the planned return on investment and could influence future decisions to invest in RES.

By dedicating financial resources and expertise Private Equity Funds provide professional private investments in RES projects, following the UN Charter on Responsible Investment and ESG principles (environmental, social, corporate governance). The attracted additional financing provides an opportunity for potential investors to invest in RES projects, thus contributing to a greener economy, corporate social responsibility, and achievement of EU RES targets.
RES development funds managers (national or regional) can learn from good governance principles applied by Private Equity Funds, for instance, project selection and appraisal procedures, team structure including technical competence, compliance with EBRD and EIB requirements. They can also learn from Private Equity Funds how to attract financing from different sources.