Modernising zealSmall talk
How come a private equity investor that does business in the Baltics is now involved in renovating schools and social housing in Poland?
Maciej Kopański, partner of the Baltcap Infrastructure Foundation: To answer that I have to go back to 2017, when, with the help of the European Investment Bank, BaltCap set up its Infrastructure fund to implement the EIB’s policies. The need for investment in the Baltics is huge, including for small-scale local projects. The EIB is only directly involved in big projects, but the bank became the biggest investor in the fund and we were also able to invite private institutions to join us, such as pension funds that were also present in the Baltics. The BaltCap Infrastructure I Fund (BInF I) managed to raise over EUR 100 mln with a mandate to invest in the Baltics and Poland over a 20-year period. In the Baltics, most of our investment is in renewable energy, including both solar and wind farms as well as biomass electricity generation. But we are also involved in the modernisations of schools in and around Kaunas and the construction of schools in Vilnius. Our first project in Poland was the refurbishment of four public buildings in Mielno. Other projects have included modernising the street lighting in Kobylnice in Western Pomerania as well as in Miedźno in Silesia, and also modernising the electrical installations in a sports centre in Luban in Lower Silesia. The BInF II infrastructure fund that was launched this year has even more capital than its predecessor. It’s with these funds that we are currently modernising the electrical systems of social housing in Połczyn Zdrój in Western Pomerania. This forms part of a pilot programme by the National Fund for Environmental Protection and Water Management called ‘Renovation with Guaranteed EPC+ Savings’. The BinF II fund aims to invest EUR 50–100 mln in Poland over three to four years.
What’s it like for the fund to work with local authorities?
Because payments are often broken down over long periods, we often work with them on the basis of the Public Private Partnership Act, but we also make use of any other legal options available, such as the Energy Efficiency Act and the Communal Economy Act. It seems to me that many local authorities are aware of the different non-standard ways of encouraging private funds to invest in public works, even though this doesn’t happen every day. The proportion of local authorities that are actively looking for ways to engage private capital in public works is estimated at 20–30 pct. These kinds of collaborations are very interesting, although a significant number of such projects take a very long time and many of them turn out to be fiascos. I won’t pretend that working with local authorities isn’t difficult, but it is also very rewarding. We feel that – especially for smaller towns – we not only provide financial solutions but also the kind of management that’s natural to the private sector. On the one hand, we feel we are meeting our investors’ expectations, and on the other, that we have a kind of mission. Such projects have a deeper importance and often go far beyond just a normal construction contract.
How does having a mission fit in with making a profit?
The entire investment market – and this is especially the case throughout the EU – has been undergoing fundamental changes as it heads in the direction of non-financial reporting according to EU taxonomy and now has a greater awareness of such issues when it comes to investing. We launched BaltCap II as a fund that is clearly geared to invest in improving the environment and local communities. We have seen that investors now understand that by taking on these demands their projects can undergo a more stringent selection process – and this can also mean that some of the potential profits are set aside to fulfil the goals of fighting climate change, preventing harm to the environment, protecting biodiversity and furthering human rights. The pension funds we work with make inherently good investors for infrastructure funds. They are looking for long-term partnerships and stable returns that naturally meet their minimum financial expectations. Infrastructure built for the general public is a perfect fit for these kinds of goals.
Are you familiar with the Baltic region from a non-business standpoint unrelated to your work with BaltCap? Where would you recommend as holiday destinations for our readers?
I’ve enjoyed travelling for many years. I’m always looking for some place off the beaten track where I can spend some time with my family in an unconventional way. When it comes to the Baltics, Latvia was the most pleasant surprise for me. It takes just as long to travel there as it does to the Polish coast during the high season. Jūrmala was built as a seaside resort during the Tsarist era. It’s a little like Sopot but on a smaller scale. It has charming, well-preserved architecture as well as many unvisited places. I’ve also spent some time in Lithuania on the Curonian Spit, which goes all the way up to Kaliningrad. This is a little-known beauty spot with the second biggest sand dunes in Europe as well as original 19th-century architecture. These were the gems that surprised me most. If you like the Baltics – and there’s nothing to dislike about them – I would definitely recommend a trip to those regions.
Interview: Magda Rachwald