Category: Estonia

Sorainen has advised the Baltic Horizon Fund on listing its 5-year unsecured bonds on Nasdaq Baltic Bond List.

The bond issue, with a total value of EUR 30 million, was a private placement carried through in spring 2018 and was subscribed mainly by Baltic institutional investors, among them pension funds, asset managers, insurance companies, and banks. 

Proceeds from the bonds will be used for the refinancing of loans and for general corporate purposes, including investment activities. 

“After the bond issue, the fund now has a more diversified capital structure and better access to different sources of capital: equity, bank loan, and bonds,” said Tarmo Karotam, Fund Manager at Baltic Horizon Fund, in a press release. “We will use the proceeds from the bond issue to refinance a portion of our existing bank loans. In addition to the 30 million euros we raised via this bond offering, we have raised 77 million euros from investors since our initial listing in 2016. The fund’s gross asset value has increased from 90 million to 250 million euros during these two years.”

Sorainen’s team was led by Estonia Partner Reimo Hammerberg and Senior Associate Katlin Hein. 

TGS Baltic has advised Estonian electricity and gas system operator Elering on agreements worth approximately EUR 60 million for the construction of the Paldiski compressor station, which will serve the Estonia-Finland Balticconnector gas link, and for the Puiatu compressor station, which will serve the Estonia-Latvia connection.

The cost of the Paldiski compressor station, which will be built in Pakrineeme on Estonia’s Pakri peninsula, is EUR 31.4 million. The engineering design and construction partners for the station are Control Process S.A. and Grupa Azoty Polskie Konsorcjum Chemiczne sp. z o.o. The maximum output pressure of the Paldiski compressor station is 80 bar in the Finland direction and 54 bar in the direction of the Estonian gas transmission network, and the station has the capacity to transport 7 million cubic meters of gas per day.

The cost of the Puiatu compressor station to be established in the village of Vaike-Kopu in Estonia’s Viljandi Rural Municipality is EUR 28.3 million and the design and construction work will be performed by Control Process S.A. The maximum operating pressure of the compressor station is 54 bar in both directions and the capacity is 10 million cubic meters of gas per day.

Both compressor stations will be remotely controlled from Elering’s control center in Tallinn, and each will have one electrically-driven, environmentally friendly compressor device.

In addition, a facility will be established at the Paldiski compressor station to measure the quantities of gas entering and exiting Estonia there, gas pressure regulation and protection systems will be built, as will a half-kilometer-long gas pipeline connecting the compressor station with the Balticconnector undersea pipeline. 

Taavi Veskimagi, Chairman of the Elering management board, commented: “With the contracts signed today, we take the last big step toward the full launch of the Estonia-Finland gas connection in 2020.These are extraordinary projects also in the sense that to this point the Estonian gas system does not have a single compressor station.”

The TGS Baltic team consisted of Senior Associate Triin Kaurov and Associate Indrek Kangur. 

Ellex Raidla has advised GrECo JLT, a risk and insurance manager in Central and Eastern Europe, on the acquisition of a stake of over 57% in IIZI Group AS.

GrECo is a family-owned company established in Austria in 1925 that operates in 16 countries.

IIZI Kindlustusmaakler is an insurance retailing company in the Baltics, represented in Estonia, Latvia, and Finland.

Georg Winter, Member of the Board of GrECo Group, said that “IIZI has stood out internationally with their innovative solutions being the indisputable market leader in its region,” and adds that, “we are ready to contribute considerably to strengthening our position in the Baltics and gain from IIZI’s extensive know-how and retail customer service experience ourselves.”

“Many of our corporate customers and partners need a service with a consistently high quality in all three Baltic countries,” said Igor Fedotov, the Chairman of the Management Board of IIZI Group, elaborating that the customers’ needs and the whole insurance market are changing with insurance business becoming more and more international. “In addition, the larger part of local insurance offering in the Baltic countries has moved to the hands of large international insurers and in order to represent the interests of our customers with them, especially abroad, we will need a partner with an international scale.”

The Ellex Raidla team consisted of Partner Sven Papp, Counsel Jaanus Ikla, Senior Associates Gerda Liik and Reet Saks, Associate Merlin Liis, and Lawyers Kevin Gerretz and Mirko Kikkamagi.

Editor’s Note: After this article was published CEE Legal Matters was informed that Eversheds Sutherland Ots & Co advised IIZI Group AS on the sale. The team consisted of Managing Partner Maivi Ots, Senior Associate Lauri Liivat, and Legal Counsel Marten Amjarv.

Cobalt has advised the shareholders of the TMB Group on selling their business to the Consolis Group, a company dealing with suppliers of precast concrete solutions.

Founded in 1961, the TMB Group employs around 500 people and its annual revenue exceeded EUR 120 million in 2017.

Consolis is a precast concrete solutions provider in Europe. The Group, which provides smart and durable precast concrete structures for the transportation, utilities, and building sectors, has more than 11,000 employees in 22 countries.

Cobalt’s team included Partner Martin Simovart, Counsel Jesse Kivisaari, and Associate Liina Saaremets.

Cobalt did not reply to our inquiries on the matter.

Cobalt has advised Alexela Oil on the acquisition of 220 Energia, an Estonian private-capital-based electricity sales company. The seller, Home of Smart Energy, was represented by Sorainen.

Alexela Oil was established in 1993 and the majority of its shares are owned by the Alexela Group. Alexela is an Estonian company that operates in the areas of energy and property development, and in the metal industry.

220 Energia is an electricity sales company based on Estonian private capital. The company employs over 1000 people and operates in the energy, metal industry, and oil shale processing areas.

“Alexela is a seller of electricity and gas very similar to 220 Energia,” said Marko Allikson, member of the board of 220 Energia, “and merging in a single group will provide additional value to the current customers of 220 Energia – our customers can now benefit from the offers of Alexela while it will also improve the company’s long-term capability to offer a competitive alternative to former electricity and gas monopolies related to network companies. The energy market has reached a more mature consolidation phase where it is necessary to acquire new market share to facilitate continued fast growth. That has made market players look for opportunities to consolidate.”

Last year, the turnover of 220 Energia grew by 2.3 percent to EUR 7.1 million. The company reached a profit of EUR 60,200 from a loss of EUR 100,400. 

Cobalt’s work included drafting and negotiating the transaction documents. The firm’s team included Counsel Ott Aava and Partner Peeter Kutman.

The Sorainen team was led by Partner Toomas Prangli and included Lawyers Piret Lappert and Robin Teever.

Ellex has successfully represented personal transportation company Segway Inc. in a dispute with Estonian company Lara Invest concerning Segway’s registered product design rights.

Segway designs, develops, and manufactures personal self-balancing electronic devices for consumers and businesses. It offers patrollers for law enforcement and private security agencies for patrol of indoor and outdoor environments.

The design of Segway personal transporters is registered in the European Union Intellectual Property Office.

Ellex’s team included Partners Ants Nomper and Anton Sigal, Counsel Mari Must, Senior Associate Liis Konn, and Associate Mailis Meier.

Cobalt Estonia has advised the EBRD on its investment of EUR 20 million into the BaltCap Infrastructure Fund, making the EBRD the second anchor investor of the fund, following the European Investment Bank’s identical investment last year.

With additional contributions from Citadel pension funds and existing investors, the fund’s total volume has reached EUR 100 million.

“We are pleased to support the BaltCap Infrastructure Fund with a sizable EUR 20 million investment,” said EBRD President Suma Chakrabarti in a BaltCap press release. “The fund will address the scarcity of infrastructure equity funding in the region and promote the private financing of crucial infrastructure in all three Baltic States. With the fund’s strong commitment to the climate change mitigation, the Bank’s support of the BaltCap Infrastructure Fund sets an important milestone in EBRD’s promotion of green agenda in the private equity industry.”

Estonian Minister of Finance Toomas Toniste added: “We are proud to welcome this investment in the Baltcap Infrastructure Fund, the first infrastructure fund in the Baltics with the goal to catalyze private investors to finance infrastructure projects. The fund’s investment strategy addresses the rising investment needs in the region in transport, energy efficiency, and renewable energy sectors. Last year, the new Estonian regulation for a new type of fund in the form of a limited partnership came into effect. This fund regime has been designed along the lines of the best qualities of limited partnership structures of various countries. We are glad more and more regional venture capital fund managers, including BaltCap, are using the new Estonian limited partnership type of fund.”

“For us it was imperative to attract EBRD as one of the anchor investors of the fund, especially because of their institutional expertise and commitment to the growth of the Baltic region,” said BaltCap Partner Sarunas Stepukonis. ”We are humbled with the trust of our investors that put us in a unique position to provide unmatched long-term financing solutions for sustainable homeland infrastructure development.”

Cobalt’s team in Estonia advising the EBRD included Partner Kristel Raidla-Talur and Senior Associate Karl Kull.

Cobalt did not reply to our inquiries on the matter.

Cobalt Estonia has successfully represented Port of Tallinn in a dispute against Vesta Terminal Tallinn OU.

According to Cobalt, Vesta Terminal, a cargo operator at Muuga Harbor, filed an action against the Port of Tallinn to amend the terms of the cooperation agreement concluded between the parties. In its ruling of June 20, 2018, the court refused to hear the action.

Port of Tallinn and its subsidiaries have a diversified portfolio of operations, including passenger harbors, cargo harbors, domestic ferry service connecting Estonia’s mainland with its two largest islands, and other services. The company is listed on Nasdaq Tallinn.

Port of Tallinn was represented by Managing Partner Jaanus Mody and Senior Associates Merle Veeroos and Rauno Ligi.

Cobalt has advised Karma Ventures on its investment in MeetFrank, a recruitment startup founded in September 2017.

MeetFrank is an app that uses machine learning and a chatbot to match talent to vacant positions. According to Cobalt, ”recently [MeetFrank] closed a 1 million EUR seed funding round to expand their business in Europe.” According to MeetFrank, the company, at the moment, has around 125,000 active users across Europe and its service is used by more than 2,000 companies. The app is available in Estonia, Finland, Sweden, Latvia, Lithuania, and most recently also in Germany.

Karma Ventures is an early-stage venture capital firm, specializing in late seed and A-round investments in European tech startups.

Karma Ventures was advised during the entire transaction by Cobalt Partner Kristel Raidla-Talur, Senior Associate Greete-Kristiine Kuru, Associate Aleksander Tsuiman, and Assistant Lawyer Stella Raudsepp.

Cobalt did not reply to an inquiry on the matter. 

“The Estonian market faces a combination of challenges on how to boost the economy and attract business,” says Merit Lind, Partner at Deloitte Legal in Estonia. “However, some of the initiatives clash somewhat with anti-money laundering prevention policies,” she says, referring to the e-Residency program famously introduced in the country at the end of 2014.

“The traditional commercial banks are applying stricter AML and KYC related rules to non-residents wishing to open bank accounts in Estonia.” Lind says. “As they do not on-board non-residents easily, it has put the future development of the e-residency program under rather serious pressure.” Lind, herself a member of the think-tank organized by the Estonian President for e-Residency 2.0, says that the group is currently working on finding solutions to balance “ambitious and novel ideas” with “the potential risks associated with granting privileges to people whose backgrounds and intentions are not easily determined.”

However, Lind says that Estonia is currently pushing some amendments in the Estonian Companies Act through the legislative process that should ease the situation for foreign investors and non-residents — including e-Residents — to establish a private limited company in Estonia, as well as allowing them to use foreign banks or other payment service providers to do business in Estonia. According to her, the amendments are expected to come into effect on January 1, 2019. “I very much hope that the legislators and administrators can keep up with the process and introduce reasonable changes in law also in the future,” she says, noting that the changes will provide more tools to smoothly operate businesses from afar, which is particularly beneficial for what she calls “digital nomads.” In addition, the simplified process will, she believes, improve the competitive situation of the Estonian business community. “With the amendment it would be acceptable to use an account opened with a European Economic Area credit institution or payment institution or their branches for an Estonian private limited company.”

Finally, Lind says that the changes in the business market are affecting the legal market as well, leading the firms that have “reached the limit of growth” either to consolidate with other law firms or to look for “alternative options to grow business organically,” for example by finding ways to add interdisciplinary consulting elements that she says are increasingly “expected by the clients.” Lind, who appreciates the benefits of the second approach for the clients, argues that “you cannot really resort to being a pure traditional legal service provider for future purposes; you have to figure out how to have something extra to be a valuable partner for clients.” Ultimately, she believes the Estonian market has room for both approaches.