Latvian business news

The market value of Berkshire Hathaway, the investment company owned by American billionaire and investor Warren Buffett, crossed the $1 trillion mark on Wednesday, the first non-technical company on Wall Street to achieve success.

Buffett, who turns 94 on Friday, has led Berkshire Hathaway since 1970, turning it from a small clothing company into one of the world’s most valuable companies, and into one of the richest people in the world. -world.

Berkshire Hathaway’s market capitalization passed the $1 trillion mark on Wednesday, placing the company among the likes of Apple, Nvidia and Microsoft.

The company’s Class A shares were up 0.8% in late trading Wednesday, while Class B shares were up 0.9% for a total market capitalization of just over $1 trillion.

It is the only listed non-technology company, apart from the Saudi oil company Saudi Aramco, that has achieved such a market value. Electric car manufacturer Tesla is considered to be a technology company, which previously also had a market value of one trillion dollars, according to analysts.

The Italian international financial company “UniCredit” is also interested in buying a significant part of the bank “Luminor” operating in the Baltic States, which is currently owned by the US investment company “Blackstone” , according to the business news agency “Bloomberg”.

The information at hand shows that UniCredit has submitted its offer to Blackstone to acquire Luminor, thus competing with Hungary’s largest bank Orszagos Takarek Penztar (OTP), at are also interested in getting a bank.

Currently, it is not clear what part of the bank “Luminor” plans to buy from “UniCredit” – all shares with “Blackstone” or just enough to gain control of this Baltic financial institution. “Blackstone” has a controlling ownership in “Luminor” with 80.05%. stock. The remaining 19.95% of the shares belong to the Norwegian bank DNB.

The acquisition of Luminor would be part of UniCredit’s strategy to expand into fast growing markets in Eastern and Northern Europe. On June 12, the European Commission agreed to acquire sole control by “UniCredit” in the Romanian “Alpha Bank Romania”. Brussels decided that the agreement would not raise competition concerns given the low market position of the companies involved.

UniCredit is an Italian global banking and finance company operating in 50 countries with more than 8,500 branches and 147,000 employees. Its strategic position in Western and Eastern Europe gives it one of the largest market shares in the region. The company’s shares are included in the stock market index “Euro Stoxx 50”.

At the beginning of May, it was reported that the largest bank in Hungary OTP, which also operates in Russia, wants to buy “Luminor Banca”, which operates in the Baltic States, the group “Bloomberg ” reports, citing unnamed sources.

OTP has made a non-binding offer for the purchase of “Luminor” to the US investment company “Blackstone”.

In January, the media said that “Blackstone” wants to sell “Luminor” and that the transaction could happen already this year.

According to “Bloomberg”, “Blackstone” wants to receive 1.2 times more than the value of the balance for “Luminor”. The balance sheet value of “Luminor” at the end of 2023 was 1.8 billion euros, so the sale price is estimated at 2.1 billion euros.

OTP operates not only in Hungary, but also in Albania, Bulgaria, Croatia, Russia, Montenegro, Moldova, Serbia, Slovenia, Ukraine and Uzbekistan.

“Luminor Bank” was established in October 2017 by the merger of “Nordea Bank” and DNB in ​​the Baltic States, and at the beginning of January 2019, the cross-border merger of “Luminor Bank” was completed, with the bank. continues to operate with the head office in Estonia and branches in Latvia and Lithuania.

In 2018, the US investment company “Blackstone” became a strategic investor of “Luminor Bank” by purchasing a controlling share. The investment in the capital of “Luminor Bank” is planned for a term of five to seven years, with the possibility of extension, said Nils Melngailis, chairman of the board of directors of “Luminor Group”, in an interview with the LETA group. at the time.

In terms of assets, the Latvian branch of “Luminor Bank” is the fourth largest bank in Latvia.

The availability of housing improved in the second quarter of this year in the two capitals of neighboring countries – Tallinn and Vilnius, but they almost did not change in Riga, according to reports. Bank of Sweden Review of Baltic housing affordability.

This is largely due to a slight increase in the average price of an apartment, as well as still high interest rates for new mortgage loans. In June, the ECB cut key interest rates for the first time since 2019, and we predict that rates will be cut twice more this year. Wage growth has been rapid and will continue at a slightly slower pace. Accordingly, in the second half of the year, it is expected that housing availability in Riga will improve.

In the second quarter of 2024, a family with an income equal to 1.5 of the average net monthly salary could afford a living space of around 56 m2​​​​​​​​in Tallinn, just over 50 m2 in Vilnius, with the help of a mortgage loan. On the other hand, the availability of housing in Riga remained relatively high and an average family could, moving no more than 30% of the family income to a mortgage loan to serve, to pay accommodation of about 83 m2 (in the first market – about. 41 m2).

Apartment market activity is weak. Compared to the situation in the 1st quarter, shopping activity has increased. However, looking at it in a wider context, it must be concluded that, like the Latvian economy, the housing market is also in stagnation, since the number of transactions in the 2nd quarter was around the level of the year -last year

In the market for the first time, the picture is brighter – the decline in the number of transactions increased slightly and in the first seven months it reached almost 40% compared to last year. The number of registrations is also low.

According to preliminary data, the average price of some apartments in Riga increased compared to the first quarter, and after a year’s decline, it increased compared to the second quarter last year. Although the decline in prices continued in detached and non-renovated homes, its impact was also felt on the prices of upmarket first-time and renovation homes. New home price increases remained slightly above 10%, but rates of price growth have slowed significantly. The number of unsold new homes did not rise, but remained at the highest level in recent years. This gives new property seekers the opportunity to negotiate or ask for various “bonus” benefits. However, no price change is expected. Construction costs are still rising, but the rate of growth has become normal.

High interest rates slow down market activity. Especially in the market for the first time, where last year alone, about a fifth of transactions were completed without using a mortgage loan. In June, the long-awaited ECB rate cut took place, with key interest rates declining by 0.25 percentage points. Although the drop in ECB rates is still very small, markets and prices expect another drop. The six-month EURIBOR rate in August has already fallen to last April’s level. However, we are still not seeing a major change in trends in the housing market. It appears that rates will need to fall further to see much improvement in activity. Despite the drop in EURIBOR, the APR applied to new loans is still very high. For Estonians and Leishes, the decline in the effective rates of housing loans is more evident. We expect the ECB to cut rates twice this year and continue the decline next year.

As interest rates fall and wage growth rates remain strong, housing availability will increase in the second half of the year. Again, competition between commercial banks is increasing, and more favorable credit conditions for new borrowers will help increase activity in the market.

The energy resource trader AS “Virši-A”, which operates under the brand “Virši”, plans to start biomethane production in the new factory in the second half of 2025, said Jānis Vība, chairman of the board “Virši -A”, on Friday in a webinar about the financial results of the first half of 2024.

The biomethane plant, which will be built by “Virši” in cooperation with the project partners, will be located in the Vidzeme region, but Vība has not revealed its exact location yet.

The company has attracted EUR 12 million in funding from the European Energy Efficiency Fund, and the total costs will reach around EUR 15 million.

“Currently, we are in the final stages of planning and building permit issues, so that we can start construction. Earthworks are planned to be carried out this year, while technology and equipment issues are planned to be implemented next year, so that we can start biomethane production by the end of 2025,” said Vība.

He explained that there are mainly three reasons why the company decided to start this project. First, the project has a good financial result, since the biomethane produced will be exported mainly to European markets.

“Not only in the transport sector, but also in other sectors, the demand for biomethane is high, because it is necessary to show that companies also use this “green” energy,” said the head of “Virši “.

The second aspect is the good location of the factory in Vidzeme. It is surrounded by large farmers’ farms, which generate the necessary raw materials – fertilizers, to first produce biogas and then purify it into biomethane. There is also a gas line next to this location. As a third reason, Vība mentioned that the project is a good way to diversify a business model in the long term.

“Thus, “Virši” also reduces dependence on products from the fossil sector, and biomethane is a good way to continue this “green” direction in the company’s business model,” said Wieba.

Representatives of “Virši-A” confirmed to the LETA group that the company and its partners have established a joint venture – SIA “Livland Biomethane”, which will be responsible for creating a biomethane plant. Viba revealed that “Virši-A” wants to acquire a share of the company’s capital in the long term, thus becoming the largest partner.

Information on “Firmas.lv” shows that “Livland Biomethane” was registered in March 2023. It is half owned by SIA “QLC” managed by Renārs Miķelsons and SIA “RG Services” managed by Miķelsons. Vība explained that parts of the registration of capital shares with the name “Virši-A” are in the process and that the documents have been submitted to the Enterprise Register.

At the same time, Vība said that in the field of transport decarbonization, or to reduce the impact of the transport sector on the environment, the company currently also offers compressed natural gas products at nine stations. The increase in consumption of compressed natural gas in the “Viršu” network reaches 47%.

He also mentioned that the market share of electric cars in Latvia is about 1% of the total vehicle market, however, the company sees potential in this area and has opened three new charging stations in first half of this year, offering a total of 17 download locations.

He noted that in the coming years, due to changes in the law, an increase in the cost burden for fossil fuel types is expected, so it is necessary to think about how to diversify the business model.

The turnover of the concern “Virši-A” in the first half of this year was 185.323 million euros, which is 14.1% more than in the corresponding period last year, but the profit of the concern decreased by 36.4% – to 2.007 million euro .

LETA has already announced that the new plant will use closed anaerobic fermentation technology, processing agricultural manure into bio-methane. The main construction partner is a selected company based in Germany with over 20 years of experience in successfully implementing over 300 biogas / biomethane projects.

The plant’s planned annual biomethane production is 60 gigawatt hours (GWh) and is expected to replace up to 5.6 million cubic meters of natural gas per year.

As reported, the audited turnover of concern “Virši-A” last year was 343.732 million euro, which is 8.4% less than in 2022, but the profit of the concern decreased more than twice and was 5.099 million euros. Among them, in the first half of last year, the turnover of the concern “Virši-A” was 162.373 million euros, and the profit of the concern was 3.141 million euros.

“Virši-A” concern includes the parent company “Virši-A”, SIA “Virši logistika”, SIA “Virši Renergy”, “Virši Lietuva” and AS “CRYO Baltic”.

According to the information published by the company, the largest shareholders in the company are Jānis Riekstiņš (21.03%), Jānis Rušmanis (20.86%), Ruta Plūme (20.83%), Andris Priedītis (12.82%) and Ilgvars Zuzulis (12.8%). %). From November 11, 2021, the company’s shares have been included in the alternative market “First North” of “Nasdaq Riga”.

Estonian real estate company “Kose Männisalu” has become the owner of Latvian construction company SIA “Merks”, according to “Firmas.lv” information.

On the other hand, the Estonian citizen Mēlis Olevs has become a real asset to the company.

It was already reported that the Estonian construction company “Merko Ehitus” announced at the beginning of August that it had sold the Latvian construction company SIA “Merks”.

As “Merko Ehitus” reported, on August 1, the purchase-sale agreement came into effect, by which “Merko Investments”, a member of the “Merko Ehitus” group, sold the Latvian construction company “Merks”.

When they agree with the buyer, the parties will not reveal the price of the transaction.

The “Merks” contract package has disintegrated, and the company has no economic activity, only legal disputes and the fulfillment of warranty obligations with “Merko Ehitus” are left to the company, according to a statement to the Tallinn Stock Exchange.

“Merko Ehitus” announced that changes are being made to the organization’s structure to make the management in each country more efficient and to strengthen the focus on the main business, which is construction services and real estate development.

On August 1, the board “Merko Ehitus” decided in cooperation with the council to stop construction services and investments in Norway. After the execution of the existing construction contracts, the subsidiary in Norway “Peritus Entrepreneur” will be sold or liquidated.

The board of the group also decided that the company “Connecto Eesti” from the subsidiary of the group “Merko Ehitus Eesti” would become the property of “Merko Ehitus”. “Merko Ehitus” will establish a subsidiary for the management of “Connecto Eesti”.

After the reorganization, the home markets of “Merko Ehitus” are Estonia, Latvia and Lithuania. Construction services are provided by “Merko Ehitus Eesti” in Estonia, “Merko būve” in Latvia and “Merko statyba” in Lithuania. Real estate development is carried out by “Merko Kodud” in Estonia, “Merks majas” in Latvia and “Merko Būstas” in Lithuania. “Tallinn Teede” involved in the construction and maintenance of roads and facilities in Estonia. “Connecto Eesti”, in which the group “Merko Ehitus” owns 50%, designs, builds and maintains electricity, telecommunication and gas networks in Estonia, and its subsidiaries are active in the construction of electrical infrastructure in Latvia and Lithuania.

As indicated in the group’s statement, the mentioned changes have little impact on the operations of “Merko Ehitus”, and the transactions are not considered as related party transactions according to Tallinn Stock Exchange rules. . Board and council members of “Merko Ehitus” have no economic interest in transactions.

Group companies “Merko Ehitus” develop properties and build buildings and infrastructure. At the end of 2023, the group had 635 employees, and the group’s income last year was 466 million euros.

As reported, last year “Merks” worked with a turnover of 58.379 million euros, which is 46.4% less than in 2022, while the company’s profit increased by 36.9% and was three million euros, according to “Firmas.lv” information.

The company “Merks” was registered in 1996, and its share capital is one million euros.

It was already reported that the construction company “Merks” was involved in a cartel, which was discovered by the Competition Council (KP) in 2021. The members of the cartel were involved in at least 70 procurements for a total contract of 687 million euros.

The KP fined the ten companies involved in the construction cartel with a total of 16,652,927 euros. Among the 10 companies fined are SIA “Skonto būve”, SIA “Latvijas energoceltnieks”, SIA “Velve”, SIA “Archers”, SIA “Rere būve”, SIA “Re & Re”, SIA “RBSSKALS būvvadība”, SIA “Abora “, “LNK Industries” and SIA “Merks”. True, the “RBSSKALS construction administration” has already been demolished, so no penalty was imposed on it.

Eight out of ten construction companies fined by the KP appealed against the KP’s decision in the Administrative District Court, but since several construction companies have filed appeals with it their parent companies, there are a total of 13 companies as plaintiffs in the case. .

The joint case was initiated against “Skonto būves”, “Latvijas energoceltnieka”, “Rere būves” and its parent company AS “Rere grupa”, “Archera”, “LNK Industries”, “Abora” and its parent company SIA “Tehnocentrs”, “Re & Re”, “LNK Industries” parent company SIA “LNK (Latvijas novitiates kompleks)”, “Merks” and the parent company “Merko Ehitus” AS and “Archera” parent company AS “UGN” applications .

Two of the 10 penalized companies did not appeal against the decision of the KP – “Velve”, with which the KP agreed to a settlement and gave a positive opinion on the measures taken by the company to “restore credit” of the customer, as well as “RBSSKALS būvvadība”.

If the court pronounces an unfavorable decision on the applicants, they will have to pay a fine and will not be allowed to participate in public procurement for a certain period, in addition to being able to start applications to raise against him. to them for projects that have already been implemented.