Oil terminal heads Estonian Top 100

The Baltic Times, TALLINN
Dec 03, 1998
By Kairi Kurm

Oil shipping, wood processing and telecommunications are the most prosperous businesses in Estonia, according to a recent survey conducted by the business newspaper Aripaev and the Estonian Chamber of Commerce and Industry.

The Pakterminal oil terminal, Imavere Saeveski sawmill and cellular phone provider Eesti Mobiiltelefon were the most successful companies in 1997. Six different lists were made, first to measure the 500 most successful companies in Estonia. They were measured by profit, turnover, profitability rate and the increase in these categories from the previous year. The most successful companies were then arranged into a Top 100 list according to their positions in former calculations.

Pakterminal, which earned 454 million kroons ($33.6 million) from a 756 million kroon turnover was also the leading profit maker in 1997. The company earned a 60 percent profit last year, which gave it the second position on the profitability list. The average profitability rate of the 500 companies was about 3 percent.

The first place in the competition for the highest profit percentage was given to Talinvest, an investment fund, but there was some disagreement about the choice.

According to Mati Feldmann from Aripaev, it should have been left out of the Top 100 competition, as the economic figures in an investment bank have different meanings from those of a manufacturing enterprise. Banks and insurance companies were not included in this competition as their turnover estimation is different from those of manufacturing companies.

Eesti Energia, the state energy company, has held the first place on the turnover Top 100 list since these calculations began in 1993. Since its growth has not been as remarkable, it is in the 52nd position on the overall list. Eesti Energia was the only company in 1997 whose turnover exceeded 3 billion kroons and the only one in 1996 with a turnover above 2 billion kroons. The number of companies with sales exceeding 1 billion kroons in 1997 was eight, while in 1996 there were only three such companies.

The profit limits in 1996 and 1997 were set by Pakterminal, the only company whose profit exceeded 200 million kroons in 1996 and 400 million kroons in 1997. Only six companies earned more than a 100 million kroons in 1997 and four in 1996. Eesti Mobiiltelefon and Eesti Telefon have held the second and the third position on the profit list for two years now.

Pakterminal was also the most successful company in 1995. In 1996 it was held by the water utility Tallinna Vesi and in 1994 by the Saku Olletehas beer brewery.

Aripaev credits Pakterminal’s efficiency as the secret of its success. The newspaper also said that Pakterminal has established successful cooperation with the Tallinn Harbor and Estonian Railway.

Pakterminal has created a strong partnership with Pakhoed International, one of the largest terminals in the world, and good business contacts with Estonian and Russian oil companies, said a competitor from EOS terminals in an interview with Aripaev.

In 1997, the turnover of the 500 biggest Estonian companies increased by 29 percent over the previous year, indicating that this was a successful year. The total turnover of the 500 biggest companies has increased from 65 billion kroons to 84 billion kroons. The profit almost doubled from 1.4 to 2.7 billion kroons. This shows that the average profitability is 3 percent. Only one out of the 14 biggest companies could manage to earn above one kroon per every 10 kroon sales last year.

According to the Baltic Business Power Project, which does a similar survey in the Baltic states, there are many small-scale profitable companies in Estonia. But only two – Pakterminal and Eesti Energia – hold a position in the Baltic Top 10 list. Latvian state energy giant Latvenergo and the oil company Ventspils Nafta from Latvia and the telephone company Lietuvos Telekomas from Lithuania hold the first three positions on the Baltic Top 10 list.
Source: http://www.baltictimes.com/news/articles/3795/

State cheers sale of telephone company

The Baltic Times, TALLINN
Dec 03, 1998
By Kairi Kurm

Many say the Estonian government made a mistake when it offered stakes in the monopoly telecommunication company Eesti Telekom to Sweden’s Telia and Finland’s Telekom, but government officials are cheering.

The government decided to increase Eesti Telekom’s share capital by offering shares to Scandinavian investors. Eesti Telekom is a majority shareholder in its two subsidiaries, Eesti Telefon and Eesti Mobiiltelefon, where Telia and Sonera control the remaining 49 percent of shares. The Scandinavian companies each own 24.5 percent of shares in each subsidiary.

According to the government’s new plan Telia and Sonera will exchange their stakes in Eesti Telefon and Eesti Mobiiltelefon for 23.25 percent stakes in Telekom. Both subsidiaries will be controlled by Eesti Telekom after the restructuring.

Estonian Transport and Communications Minister Raivo Vare in his interview to Aripaev called the deal a success because these investors will increase confidence in the company and will push the share price up when it’s quoted on the stock exchange next year.

The government gave Telia and Sonera an opportunity to increase their mutual share in Telekom from 46.50 percent to 49 percent in an initial public offering. The state will sell 23.72 percent of its shares in Telecom on the stock exchange next year.

The state can still control the company through “a golden share,” which would be issued specially in order to protect the interests of the state and give it a right of veto when important decisions are made.

Two and a half months after the announcement of the initial public offering, the shares would be quoted on the stock exchange.

No matter how much politicians rejoice, many believe the state could have gotten a better price for these shares.

Toivo Jurgenson, head of the political party Pro Patria Union, believes that it would be better if both subsidiaries were sold to different owners in order to create competition.

A representative from competing mobile company Radiolinja Eesti said state shares in Telekom are being sold cheaply to Scandinavian companies. Several specialists also said the state could have received more money if there were competition for those shares.

“Their privatization scheme differed from what we had suggested to them some years ago. It would have been more useful to sell the shares in the holding company first instead of selling the stake in the subsidiaries,” said Vaino Sarnet, head manager at the Estonian Privatization Agency. “The state would not get maximum value now while it is dependent on [investors’] decisions.”

In the course of the deal Telia and Sonera had to give up a 2.5 percent stake in Telekom, which the government uses as the only positive argument to prove the sucess of the deal.

The government also approved Eesti Telefon’s business plan for the period between 1999 and 2008. According to this plan the company has to invest more than 700 million kroons ($51.9 million) annually over the next ten years.
Source: http://www.baltictimes.com/news/articles/3793/

Estonia’s born-again bank starts fresh

The Baltic Times, TALLINN
Dec 03, 1998
By Kairi Kurm

After being sntached from the jaws of bankruptcy by the government, Optiva Bank is enjoying a new beginning. Last week, the third largest Estonian bank after Hansapank and Uhispank announced it will concentrate on corporate banking providing services to companies engaged in international business.

Optiva was founded as a result of a merger between Investeerimispank and the deeply troubled Forekspank, and the state had to bail it out of bankruptcy in October, buying a majority stake in both banks.

The Bank of Estonia now controls 58 percent of the shares in the new bank, and Investeerimispank and Forekspank shareholders control 28 percent and 13 percent respectively.

After the merger, Optiva will be able to serve as a principal bank to clients who have only used either of the banks as providers of a limited number of services. Investeerimispank used to offer investment and consulting services to corporate clients and Forekspank provided a full range of services to small and medium-sized companies.

Optiva is primarily looking for companies engaged in export and import transactions, for whom the bank is able to offer the best service through uniting Investeerimispank’s experience in financing export-oriented projects and Forekspank’s skills in international payments and giving loans to exporting and importing companies.

Neither Forekspank nor Investeerimispank alone would have been able to compete on the fast consolidating Estonian market.

“The limited amount of owner’s equity, which was decreased by big losses, did not allow us to develop as fast as was necessary,” said Ranno Pajuri, director of marketing communications at Forekspank. “The merger was also necessary in terms of competition on the market. It is more difficult to compete alone than it is together.”

Forekspank’s inadequate capital was a restraining factor in financing major investment projects. Forekspank incurred a 250 million kroon ($18.5 million) loss due to the crisis in Russia and slipping share prices. Investeerimispank managed to earn a 15 million kroon profit, but the newly found Optiva bank predicts a 220-million kroon loss for 1998.

In addition to traditional banking operations, Optiva Bank will also be providing consulting services using the respected long-standing experience of Investeerimispank. The bank announced its decision not to build a wide office network, but to develop on-line services instead.

As soon as the merger is completed the bank might throw a fishing line for a strategic international investor to ensure long-term positions in the domestic market and expand to neighboring markets.

Through a strategic investor Optiva Bank hopes to obtain know-how of western banking and establish international partnership contacts as well as improve access to international finance markets.

Pajuri said the bank’s share capital after the stock issue to Investeerimispank’s shareholders will amount to about 413 million kroons.

The Bank of Estonia, which bought the shares of the troubled banks this year, has decided to sell its stake to a strategic investor before the end of next year.

At the end of October Investeerimispank’s and Forekspank’s assets amounted to 1.7 billion kroons. After the merger the new bank’s assets are estimated to be about 3.957 billion kroons.

For 1999, Optiva Bank predicts an increase in assets to 4.7 billion kroons, and by 2000 the assets are expected to reach 5 billion kroons.
Source:  http://www.baltictimes.com/news/articles/3785/