Lithuania: Lietuvos energija expands its operations by acquiring two wind parks

Thus the state-owned group of companies increased its energy production capacities with additional 42.3 megawatts (MW). The strategic acquisitions expands and diversifies the range of operations, will increase the value of the Group and the dividends paid to the State.

'One of the strategic directions of Lietuvos energija is the growth and diversification of power generation. Naturally, based on the current environment and future prospects, we chose wind energy as one of the development directions. Assesing the market, along with development projects we have identified opportunities to acquire already existing wind parks. We are pleased that we have successfully managed to acquire two wind parks. It is the first wind power capacity of Lietuvos energija and also first investment outside Lithuania – in Estonia. We see Baltic and Nordic energy market as one, and so we will continue the development in the region. Our wind power development plans is not limited to these two wind parks – we will evaluate other acquisition opportunities, as well as the development of our own wind power projects’, says Dr. Dalius Misi?nas, Chairman of the Board and CEO of Lietuvos energija.

Wind power capacity managed by Lietuvos energija, will produce 136,000 megawatt-hours of electricity per year, which would amount to the annual electricity demand of Klaip?da city.

The acquired Lithuanian company Eurakras operates an 8 wind plants of 24 MW in capacity in Geišiai and Rotuliai II villages, Jurbarkas district. Lietuvos energija acquired 75 % of its shares from UAB Renagro and an investment company BaltCap. The wind power plants for the farm were produced by a German company Nordex, the installed power of each of the plants is 3 MW, the tower is 120 m high, and the rotor diameter –117 m. This wind park is completely new – the construction completion certificate and the permission for the power generation were issued in late December 2015.

Eurakras wind power park was recognised the winner at the promotion quota allocation auction organised by the National Commission for Energy Control and Prices on 22 February 2013. For the next 12 years the electricity produced by the wind farm will be purchased at a tariff of EUR 71/MWh.

‘This transaction marks the first exit of BaltCap's Lithuania SME Fund, part of JEREMIE initiative in Lithuania. Strong and experienced team of co-investors and management played a key role to a successful wind farm development in Jurbarkas. It is within our expectations that the experience gained in this project will translate into new pan-Baltic infrastructure investments’, - said Šar?nas Stepukonis, Associate Director at BaltCap.

Another acquired company, an Estonian Tuulueenergia operates a 6 wind power plants of 18.3 MW in capacity in Mali and Tamba settlements in Estonia. Lietuvos energija acquired a 100 % shareholding from BaltCap and minority shareholders. The manufacturer of all the six plants is a German company Enercon, the installed capacity each power unit is 3 MW, the tower is 99 m high, and the rotor is 101 m in diameter. The construction of this wind park was completed in February 2015.

The construction of the acquired wind farm benefited from the assistance of two types: part of the farm was built using invested resources, and the other part will benefit from a promotion tariff which is paid in Estonia for 12 years from the beginning of the farm's operation (a fixed premium of EUR 53.7/MWh is added to the electricity market price).

‘Mäli & Tamba wind farms have one of the best wind conditions in Estonia’, said BaltCap investment director Kristjan Kalda. ‘Combined with the right choice of technology, the wind farm had the best load factor in Estonia last year. BaltCap's role as a private equity investor was to finance the development the wind farm and we are happy to hand over the farm to a reputable strategic investor’.

Efficient investment

'The total price of the two transactions is EUR 28 million, adjusted for the financial indebtedness of the companies, the enterprise value and EBITDA (EV/EBITDA) multiple ranges between 9 and 10 times. The transactions were to a large extent financed with borrowed funds, taking advantage of the beneficial borrowing terms and the sustainable balance sheet of Lietuvos energija. Only one tenth of the transaction value was funded from own resources. This will increase the investment's equity return which is expected to exceed the 9 % provided for in the strategy of Lietuvos energija’, says Darius Kašauskas, Director of Finance and Treasury of Lietuvos energija.

The transactions on the acquisition of the two wind farms will every year increase earnings before interest, taxes, depreciation and amortisation (EBITDA) of Lietuvos energija by more than EUR 8 million. The acquisitions will not impair the financial capacity of the Group, and its abilities to invest in other strategic projects – in the future additional cash flows will even strengthen the Group's investment capacities.

'The transactions contribute to the optimisation of the Group's leverage structure. We thus employ the accrued capital and increase the return for our shareholders', says Darius Kašauskas.

The wind power market is concentrated

The common wind energy market of the Baltic countries, considering the developed projects and those in progress is represented by wind power plants total of 860 MW in capacity. Having acquired the two wind parks Lietuvos energija will hold up to 5 % of the market. The Lithuanian wind energy market with the wind farms of 310 MW in capacity is highly concentrated – the largest operators of the five wind power parks hold about three-quarters of the market.

On 5 August 2015, Lietuvos energija invited the owners of the wind power plants to discuss a possibility to sell the infrastructure managed by them to Lietuvos energija. During the first stage of the investment the Group intends to acquire the wind power plants and their farms of at least 50 MW in capacity, which would account for 10 % of the total market of operating wind farms and those under construction. Lietuvos energija is interested in power plants of no less than 1 MW in capacity and constructed using brand new facilities thus ensuring that only best available technology was or is being used for their construction.