Partners Group, the leading global private markets firm, has acquired one of the largest district heating platforms (the “District Heating Platform” or “the Company”) in the Baltics, from Finnish energy company Fortum Corporation (“Fortum”).
The Company, which operates across Estonia, Latvia and Lithuania, has 74 generation assets, which generate heat capacity of 881 MW and power capacity of 130 MW across 387 km of district heating networks. The District Heating Platform’s fuel is largely derived from renewable or recycled sources, mainly biomass.
Growing demand for district heating is being driven by several transformative trends in the region, including fast-growing economies and urbanising populations, as well as rising support for sustainable energy initiatives. The Company’s sustainable heating services reduce reliance on conventional power sources, which will have broad positive stakeholder impact over the long term.
Partners Group will work with the management team on a value creation plan that seeks to transform the company from a portfolio of attractive district heating assets into an independent customer-centric residential and industrial energy solutions provider. Partners Group will draw on its extensive experience in building out infrastructure platforms to grow the asset through new greenfield projects and targeted strategic acquisitions.
Other transformational initiatives will include extending the District Heating Platform’s heating networks to develop new heating and cooling solutions for industrial and commercial customers.
David Daum, Managing Director, Private Infrastructure Europe, Partners Group, states: “Through providing sustainable heating, this District Heating Platform is contributing to the decarbonisation of our economies, one of the three giga themes that Partners Group focuses its investment activity on. This investment reflects Partners Group’s continuing commitment to transformational investing in assets that have meaningful impact on the communities in which they operate.
“The Company delivers heating to thousands of homes and businesses across the Baltic region, an area known for the severity of its winters. Looking ahead, a key area of focus for us will be executing strategic acquisitions that we have identified, as well as the development of several greenfield projects.”
Niko Wirgentius, Chief Executive Officer, the District Heating Platform, says: “Our competitive advantage in the Baltic district heating market is built on our state-of-the-art generation assets, modern distribution network, which has low maintenance requirements, and diversified customer base, covering private, commercial and public sector clients. The platform has a great opportunity to use this advantage to capitalise on future growth in the heating market, and we believe Partners Group’s strategic vision and operational expertise makes it the right partner for us as we look to do this.”
Shreya Malik, Member of Management, Private Infrastructure Europe, Partners Group, adds: “We think this investment opportunity operates in an industry with high barriers to entry, offers strong infrastructure characteristics, such as stable, visible cash flows, and faces limited concession renewal risk. Our thematic research shows that the district heating market benefits from secular tailwinds as the technology remains the most efficient and sustainable solution to providing heating and cooling, which are the largest uses of energy in Europe. We are looking forward to working with the management team on transforming this Platform and driving its next phase of growth.”