Estonian holding company Infortar plans to use the situation in the war-torn European energy market to expand into the Central European market, board chair Ain Hanschmidt says.
Infortar, which plans to float on the stock exchange this year, is involved in three main areas of activity – shipping; the company owns a 41 percent stake in Tallink, energy – it is the parent company of Eesti Gaas, while it is also involved in real estate activities.
Handschmidt told ERR that: "Since energy is a very popular topic at the moment, we have paid most attention to Eesti Gaas, our energy business."
Eesti Gaas operates in Estonia, Latvia, Lithuania and in Finland, plus from this year also in Poland. "In Finland, its market share in the first quarter stood at 30 percent, while in the future it will rise to 40 percent," he went on.
"We are one of the few energy companies which, whereas we used to bring natural gas via pipelines from Russia, now we bring in by ship," he went on, referring to Liquefied Natural Gas (LNG).
The volume of the latter stands at 10TW for this year, he added, compared with the 3TW sold in 2015, when Infortar acquired Eesti Gaas.
"70 percent of our business is outside Estonia," Handschmidt added.
Infortar announced last week that it is, via Eesti Gaas, to purchase Latvijas Gāze subsidiary Gaso, which owns the natural gas distribution network in Latvia.
Latvijas Gāze was forced to sell the company, because Russian energy giant Gazprom is also currently part of that ownership group, while under new legistlation, the company's shareholders cannot include those from the Russian Federation.
Hanschmidt noted that Eesti Gaas owns 1,500km of gas pipelines in Estonia, so when the sale of the Latvian company was announced, it spelled the opportunity to get an additional 5,300km of gas network pipeline, plus approximately 400,000 customers.
This compared with 40,000 customers the company has in its home country.
Since Gaso is a company of strategic importance for the Latvian state, the Latvian government needs also to give permission to sell it to an Estonian company, and Infortar in turn needs this decision to be made before it can go public, Hanschmidt says.
"We hope that this will be decided on in the coming months. We cannot go public without knowing whether we have been able to acquire Gaso, or not. That plan to float also depends to a large extent on when this decision gets made," Hanschmidt added.
Hanschmidt: Going public will support expansion in energy and real estate
This plan to float on the stock exchange was announced last month; since this came ahead of the purchase of Gaso, Hanschmidt said that the company's plan to float will remain for this year; the addition of a new company will not alter that, he said. "We have to get the prospectus ready first, and that work is ongoing. But since the chance to buy Gaso cropped up suddenly the, these things could not be postponed, neither one nor the other."
According to Hanschmidt, Infortar's goal is to boost its market share in the energy sector in its current markets, and also to expand its activities in the real estate sector.
A diverse portfolio will help to hedge against crises, he added. "If you are only in the one field – let's take shipping as an example – we never foresaw that a pandemic of the nature we had with Covid could arise, one where government decisions prevent tourists from coming into Estonia, Estonians are barred out of other countries, and vessels are stopped from sailing. Thanks to the fact that we had our energy business and our real estate business alongside this, we were able to cope with that much better than we would have," he went on.
Eesti Gaas stopped purchasing gas from Russia last April.
On this, Hanschmidt said: "We had to start looking worldwide as to where and how we could import natural gas. The only port at that time was Klaipeda (in Lithuania – ed.), which didn't have the capacity for everything. We actually started to reorganize our supply chains due to the war. But not only were the energy supply chains reorganized, equally the supply chains for all other materials and raw materials were, too."
Those who could accomplish this more quickly were more successful, Hanschmidt said. "We were able to be relatively quick, because we are a private company. The owners are in charge, and we made decisions very quickly. It's actually quite incredible that while, for decades, we had a constant supply of pipeline gas, all of a sudden we started bringing LNG via ship from the U.S, Norway, various countries."
Hanschmidt noted that at the same time, many large companies operating in the same field either went bankrupt or had to take on large-scale state loans and support. However, this was not needed in Estonia, for Infortar. "We were able to manage risk ourselves. But the prices became terribly high. One shipload already cost €330 million. These were crazy amounts of money that went into circulation," Hanschmidt continued.
"But the situation gave us a lot of opportunities. I think we have the chance now to become even more international. Our hope is that we can also enter the German market and we can also enter other markets. before everything goes back to a static state, before all the supply chains are built. Currently, we have enough terminals in Estonia, Latvia, Lithuania and Finland to import gas. We don't have any in Central Europe yet. There are still opportunities to capture this market, because the connections to import sufficient natural gas are not there," he went on.
The Polish market alone is four times larger than that of Estonia, Latvia, Lithuania and Finland. "This means there is great potential for us to develop there. We do however of course have to act skillfully and find customers, while those customers have to be satisfied with us," he went on.
Whether Infortar plans to expand further before going public depends on the opportunities offered by the market. "When an opportunity arises, we first analyze it and then get to see if we will utilize it or not. Our goal remains growing the business," Hanschmidt said.
"First, we want to expand our business. Second, we feel that if we go international, it will be significantly more beneficial for us to be a listed company."
Editor: Andrew Whyte, Barbara Oja