First State becomes first ‘major infra fund’ in Baltics with Utilitas deal

The 85% acquisition of the Estonian energy group means the majority of the €1.4bn raised by First State in June for EDIF II has now been deployed.

First State Investments has bought an 85 percent stake in Estonian energy group Utilitas, marking the first investment in the Baltics by a “major international infrastructure fund”.

Through the deal, the firm’s European Diversified Infrastructure Fund II has taken control of a district heating network spanning 521km, in addition to 40 operated boiler plants with an installed capacity of 1.1GW and biomass and combined heat and power plants.

A First State spokeswoman said the focus on district heating and renewable energy was especially attractive to the group. Utilitas is the second district heating investment made by EDIF II following the acquisition of France-based Coriance from KKR in 2016.

“Utilitas is the fund’s first investment in the Baltics and the only investment in this region by a major international infrastructure fund to date,” added Kristjan Rahu, chairman of the supervisory board at Utilitas, in a statement.

Asked if First State plans to grow Utilitas’s asset base outside Estonia, the spokeswoman told Infrastructure Investor it is working “on both organic and inorganic opportunities to grow the business within Estonia and beyond”.

Utilitas is the seventh investment made by EDIF II, which closed its second series of fundraising in June on €1.4 billion, bringing the fund’s total size to €2.1 billion. First State said the majority of the second series is now deployed and it would “shortly” begin the final round, which will target €400 million. EDIF II targets gross returns of between 8 and 15 percent, according to pension fund documents.

First State, under the umbrella of Colonial First State Global Asset Management, was acquired by Japanese bank Mitsubishi UFJ Trust and Banking Corporation in October for A$4.13 billion ($2.93 billion; €2.58 billion) from Commonwealth Bank of Australia. The deal is set to be completed next year.