Project Idea

Estlat Prefab SIA (Estlat Prefab) is a wholly owned subsidiary of Estlat Building CO OÜ, a joint Latvian-Estonian manufacturer of prefabricated wooden houses. Estlat Prefab was registered on 20 May, 2022. It forms part of a wider group of companies operating in Estonia and Latvia since 2012. Estlat Prefab currently manages over 4,000 square meters of modern and strategically advantageous production space powered by 100 percent renewable energy in Valga, a city on the border of Latvia and Estonia.

Estlat Prefab is a full cycle production company, offering design development, production, and transport management of prefabricated manufactured units on site. Estlat's target activities are the production of timber frame elements and compact modular Houses. The company is rapidly growing and expanding its presence and production in Estonia, as well as in other neighboring European countries, including Finland, Netherlands, Sweden, Germany and Switzerland.

Estlat Prefab has modern industrial buildings and approximately 6 hectares of industrial land in the "Kiegeileplis" industrial area which is located in strategically advantageous Latvia-Estonia bordering city Valka. In the adjacent area, Valka city has approximately 10 hectares of industrial land. The area is close to an electricity transmission area, has good public transportation, and is near a railway. The production plant is powered by 100% renewable energy. Estlat Prefab uses the best equipment from manufacturers such as Weinmann, Altendorf, Sagetech, Milwaukee, Senco, and Max. Estlat Prefab is led by industry experts who possess extensive experience and are dedicated to meeting customer needs.

Apart from modular house construction, the company offers a range of services, including technical design development, prefabrication of timber frame elements and modules, transportation management, and on-site assembly. Additionally, the company offers services such as financing options, customization features, and assistance with the purchasing process. These services aim to provide customers with flexibility in payment methods, the ability to tailor their modular homes to specific preferences or needs, and guidance throughout the buying journey to ensure a smooth and seamless experience. Estlat Prefab implements cost-effective and time-efficient Peri-tiro solutions with the aim of enhancing construction efficiency and optimizing resource management. By leveraging these solutions, Estlat Prefab ensures streamlined project execution, minimizes delays, and maximizes the utilization of available resources, ultimately leading to successful and timely project delivery.

In December 2023 Estlat Prefab’s parent company, Estlat Building CO OÜ, signed a cooperation agreement with SSE Suomen Säätöenergia Oy, a large Finnish project developing company focusing on sustainable energy solutions, aimed at building a renewable methanol production facility in the "Kiegeiceplis'' industrial area in Latvia, Valka. SSE Suomen Säätöenergia Oy, established in 2010 in Finland, is developing a network of hybrid refineries in Finland. The facilities are built and operated by Northern Biomethanol Ltd (in Finnish: Pohjolan Biometanoli Oy), which is a subsidiary of SSE.

The size of SSE’s planned investment into the project is EUR 350 million, with roughly 50 jobs created in the factory and about 70 in supporting activities (procurement of raw materials). The construction of the factory would last 2 years and include about 450 man-years of work. The factory's residual heat could heat up the entire town of Valka and Valga. Since the Valka region is remote and the necessary number of specialized workers cannot be found locally, it is necessary to create suitable infrastructure for accommodating workers for the construction of the new factory. SSE has made an offer to Estlat Building Co OÜ to establish a temporary modular housing complex with a capacity of 224 sleeping places. For the purposes of this round of fundraising, Estlat Buidling Co OÜ capitalised its subsidiary company as it aims to develop it and expand the business operations of the group.

To implement the entire project, Estlat Prefab requires EUR 937,000. The invested funds will primarily go towards material costs 390,912 euros (41,72%) and personnel expenses EUR 393,705 (42,02%). The company already has the main machinery and tools in place. However, an additional investment of EUR 48,000 is needed to purchase 8 workbenches (5,12%). Other necessary production and installation expenses account for EUR 104,383 (11,14%) of the budget.

Modular housing market description and size

The modular housing market in Europe is set for significant growth, driven by the increasing demand for sustainable and efficient construction solutions. The market is expected to reach USD 32.5 billion by 2024 and grow to approximately USD 44.71 billion by 2029, with a compound annual growth rate (CAGR) of 6.59%.

Key factors contributing to this growth include government initiatives in countries like Germany, where the government is accelerating construction programs and funding innovative modular housing projects to address housing shortages and environmental concerns. Germany, with its robust construction industry, sees high demand for modular homes, driven by the need for new dwellings due to an increasing population and immigration.

Major players in the European modular construction market include Laing O'Rourke, Skanska AB, Bouygues Construction, Kleusberg GmbH, and Deutsche Fertighaus Holding. These companies are utilizing advanced technologies and sustainable materials to enhance their market offerings and stand out in a competitive landscape.

The commercial sector is expected to lead the market, with modular construction being extensively used for office buildings, temporary offices, and extensions of existing structures. The demand for storage space and distribution hubs has also risen due to the shift towards e-commerce during the COVID-19 pandemic

Overall, the European modular housing market is characterized by fragmentation and intense competition, with many companies striving for market share through innovation and strategic partnerships.

Executive summary (Business plan and financial model)

Estlat is launching the current funding in order to construct a modular housing complex with a capacity of 224 sleeping places. The invested funds (EUR 937, 000) will primarily go towards material costs EUR 390,912 (41,72%) and personnel expenses EUR 393,705 (42,02%). The company already has the main machinery and tools in place, however, an additional investment of EUR 48,000 is needed to purchase 8 workbenches (5,12%). Other necessary production and installation expenses account for EUR 104,383 (11,14%) of the budget.

Estlat intends to split the fundraising into several rounds.

Key financials

• The company is seeking a loan with an interest rate of 13.8% with a repayment term of 16 months.
• Estlat projects EUR 1 390 600 in sales by the end of the repayment term
• The company projects a total cash flow of EUR 1 171 952 by July 2025
• Estlat projects EUR 1 390 600 in sales by the end of the repayment term
• The company expects EUR 1 278 160 in total assets by the end of July
• In 2023, Estlat recorded a loss of EUR 282,000, down from EUR 128,000 as a result of a substantial investment of its capital into machinery, equipment and purchase of materials in the last two years.
• As of now, Estlat has EUR 2,455,000 in current assets
• Estlat exhibits a healthy working capital ratio of 1.0 calculated based on its most recent annual financial statements for 2022;
• Estlat has a healthy credit history ranking according to Creditinfo, an independent aggregator of credit history information
• The company expects a total cash flow of EUR 1,171,952 by the end of July 2025

Collateral and guarantees

The loan is backed by a collateral: Estlat would provide its existing manufacturing equipment to cover the loan and offset current assets on the company’s balance sheet.