Good practice:

BaltCap Infrastructure Fund

BInF was established 20 years ago, with the main focus on investments in infrastructure development in the Baltic States. BInF funding is 100 MEUR, of which European Investment Bank’s 20 MEUR are invested and guaranteed under the European Fund for Strategic Investments, a central element of the Juncker’s Commission Investment Plan for Europe. Lithuanian, Latvian and Estonian pension funds, incl. public pension plans account for 60% of investments in the BInF – the largest commitment by local Pension Funds to any single Investment Fund in the Baltics to date.
BinF provides development capital for energy, incl. renew. energy, energy efficiency and also infrastructure projects in the Baltics . BInF aims to invest at least 40% towards resource efficiency, climate change mitigation, and adaptation projects. By investing, the BinF receives company shares, becoming the co-owner of the company. BinF capital is not a loan that could be repaid. The goal is to sell the company’s shares at the end of the cooperation period with a significantly higher value than the initial investment.
Criteria:
•Return on investment. The BinF and SH take a share of the business risk and expect annual 25-35% return on investment. Usual investment period is 3-5 years
•Product/service uniqueness and ability to protect it from the competition
•Market - the potential for growth, customer basis, and main competitors
•Management/SH, incl., company management’s motivation and competence in the industry.

BinF is 100 MEUR fund and has a length of 20 years. BinF invests between 3 – 15 MEUR per project and has a duration of 20 years. As of June 2019, BInF investments into renewable energy projects reached 42 MEUR.

RES projects include Construction of the cogeneration plant in Riga by Ltd. Energia Verde (costs – 20 m. EUR; BinF acquired 70% of the Ltd.) Biomass plant construction project in Vilnius, Lithuania (BInF investment –16 mill. EUR); Biogas plant project in Latvia (BinF acquired plant operator Anaerobic Holding for 9,45 m. EUR).

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.