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Ecoservice, a Lithuanian company owned by Eco Baltia, sues Compensa for more than a year’s delay in paying compensation

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Ecoservice, the Lithuanian environmental services company of Eco Baltia, the largest environmental resource management and recycling group in the Baltics has brought an action before the Riga City court demanding the insurance company Compensa Vienna Insurance Group ADB, Latvian branch, to fulfil its obligations and to pay out the insurance indemnity for the damage suffered by Ecoservice as a result of a fire. The fire that broke out on 5 August 2023 in the company’s waste sorting centre caused widespread damage, destroying the buildings, the waste sorting equipment and part of the inventory.

Ecoservice’s application submitted to the court states that the Latvian branch of Compensa unreasonably delays the decision on the insurance claim. More than a year after the accident, the insurance company not only does not take a decision on whether the accident should be declared insured, but also does not take a decision on whether to pay the full or partial indemnity.

In this claim, Ecoservice seeks a payment of €7.4 million in insurance indemnity and interest for late payment. The company is also finalising the calculation of the losses it suffered when it had to partially suspend its operations after the fire. This amount will be added to the claim when it becomes clear. This could increase the claimed amount to more than €10 million.

Compensa’s conclusions are not forthcoming

“The fire happened last year, but Compensa has not yet decided whether to recognise it as an insured event, even though the Department of Environmental Protection and the Department of Fire Protection and Rescue carried out investigations and established the essential circumstances, so the situation is more than clear. Despite our sorting centre being insured, Compensa’s unreasonable delays have prevented us from restoring our previous operational capacity. This creates serious challenges because, despite the insurer’s refusal to pay the insurance indemnity, our waste management obligations remained the same after the fire. We must fulfil our obligations, otherwise there could be serious environmental consequences”, comments Jurgita Nacevičienė, Manager of Ecoservice.

According to her, the company is currently forced to rebuild capacity with its own funds. This makes it more difficult to operate and hampers development, as it has to redirect part of its own working capital, as well as money planned for strategic business development projects. It is estimated that the ongoing reconstruction of the sorting centre will require a total of EUR 18 million.

Māris Simanovičs, chairman of the board of AS “Eco Baltia”, points out that the stability of the company is based on timely decision-making: “Any changes can have a significant impact on the future development of the company, especially when it comes to restoring operations after an accident. In view of this, we take the firm decision to insure such risks in advance and expect insurers to honour their commitments. This was highlighted by the summer storms and subsequent floods which affected many people and businesses. Insurers must fulfil their obligations within the legal framework by paying compensation without undue delay, regardless of the amount.”

A pre-trial investigation is ongoing

After the fire, Ecoservice found the right solutions and was able to quickly restore its operations. This led to a significant reduction in the fire loss and thus in the final insurance indemnity amount, as the company had also insured for business interruption.

According to Nacevičienė, Ecoservice ensured close cooperation with the insurer from the very first days of the fire, and all the necessary materials available to the company were promptly provided to the insurer. Compensa seems to be intentionally dragging out the process by quoting aspects with little relevance for the insurance case as an excuse not to adopt the decision on whether Ecoservice is entitled to receive the insurance indemnity.

First, the insurer questioned the legality of the awning hangar, even though it had insured the hangar and received the insurance premium payment for it. Then, the insurer mentioned potential nonconformities regarding the height of the waste pile in the yard and the amount of waste stored there, although the competent authorities have expressly stated that no violations were found.

After, it was an excuse about inability to adopt decision while a pre-trial criminal investigation related to the fire is not concluded, although it has a completely different scope and targets.

Ecoservice has been waiting for more than a year for a decision from the insurer and cannot delay any longer. Especially since meetings with the insurer’s representatives no longer allow for positive and constructive cooperation with Compensa.

As the insurance contract was concluded with Compensa’s branch in Latvia, after reaching an impasse in the negotiations with the insurer, Ecoservice filed the claim to the Riga City Court.

Eco Baltia Group’s turnover increased by 10.8% in the first half of this year

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Environmental resource management and waste recycling group Eco Baltia JSC (AS) has closed the first half of 2024 with a net turnover of EUR 124.13 million, which is 10.8% more than in the first half of 2023. Consolidated EBITDA for the first six months of 2024 reached EUR 22.1 million, 47.7% more than in the first six months of last year. Growth in this period was also mainly driven by solid results in environmental management and focused efforts on efficiency and process automation, as well as the acquisition of Metal Plast last November.

The Group’s profit before tax for the first half of this year was EUR 4.66 million, compared to EUR 2.29 million in the same period last year.

Māris Simanovičs, Chairman of the Board of JSC (AS) Eco Baltia, said: “This year we are experiencing moderate growth, but we are still setting new financial records. These results confirm that we are on the right track with our chosen strategic business directions. Our international shareholders and management have played an important role in the development of the Group and have contributed their expertise to the Group’s stable growth. We will continue on this path, including evaluating new opportunities to expand the Group’s full waste cycle chain and business portfolio.”

This year, the two largest environmental companies in the Eco Baltia Group -­ Eco Baltia vide in Latvia and Ecoservice in Lithuania ­ – continued to expand and develop specialized construction waste sorting facilities and promote the sorting of household waste, textiles and other materials. In May this year, Eco Baltia vide opened construction waste sorting and recycling sites in Latvia (Rumbula and Liepāja). The total investment in these sites amounted to EUR 2.3 million. Work is also continuing on the waste sorting plant that Eco Baltia vide started last year. The project involves an investment of EUR 11.7 million and is scheduled to open in October this year.

During the first half of the year, the Group’s environmental businesses also participated in a number of tenders launched by municipalities, both in the field of environmental management and road maintenance. Eco Baltia vide submitted the most financially advantageous bids and won the right to provide waste management services in selected areas in Liepāja and Kuldīga. After the reporting period, Eco Baltia vide also received approval for winning the Riga City Council tender for “Routine maintenance of transport structures from 2024 to 2029”, where it was awarded the right, as part of an association of persons, to provide maintenance of transport structures on the right bank of the Daugava in Riga (Centra district and Latgale suburbs) for the next five years. The total contract price for the entire period of the contract in the specified area was set at EUR 77.4 million excluding VAT.

In the recycling sector of the Eco Baltia Group, work has also been carried out on a number of development projects, including a long-term increase in recycling volumes. This year, Nordic Plast, a polymer packaging recycler, approved an investment of EUR 1.7 million to increase its production capacity of recycled pellets and provide the necessary conditions for future growth. The Group’s PET bottle recycler ITERUM (PET Baltija until 6 June) continued work on the development of its new production facility in Olaine. ITERUM has invested more than EUR 10 million in its development, but the total investment is more than EUR 35 million. The new plant will be opened in October this year and will be one of the largest PET recycling plants in Northern Europe.

“For many years we have cherished the idea of building new factories in the Baltic region, and the last few years have been a quantum leap in bringing this idea to life. It is therefore a significant milestone that in one month’s time we will open plants in each of our business areas that will be able to reach European production volumes. In addition to our major investment projects, we have made strengthening the visual identity of our brands one of our key pillars this year. That is why the former PET recycling company PET Baltija became ITERUM in June this year, while the Group’s companies Eco Baltia vide and Nordic Plast underwent visual brand changes,” says Mr. Simanovičs. 

As in previous years, one of Eco Baltia’s key strategic objectives during this reporting period was to improve working conditions, support employees, including ensuring the highest level of occupational safety, as well as implementing the ESG strategy and promoting sustainability.

Eco Baltia group company Eco Baltia vide, as part of an association of persons, will provide routine maintenance of transport structures in Riga for the next five years

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Eco Baltia vide Ltd (SIA), the environmental management company of Eco Baltia, the largest environmental resource management and waste recycling group in the Baltics, has been awarded the contract to maintain transport structures in Riga, on the right bank of the Daugava River (in the Centre district and Latgale suburb), for the next five years. This was achieved as part of an association of persons in the open tender for the “Daily Maintenance of Transport Structures from 2024 to 2029,” announced by the Riga City Council. The contract price for one year is EUR 15,487,085.25, excluding VAT.

Jānis Aizbalts, Chairman of the Board of Eco Baltia vide, notes that the company’s experience in performing the tendered works was rigorously evaluated during the procurement process: “As our decades of experience in the road management sector in Lithuania and Latvia, including recent years in Riga, show, the requirements in newly announced tenders are relatively high. Therefore, under the most economically advantageous terms, the municipality must ensure the provision of high-quality services that comply with national and EU standards. We are prepared to continue the maintenance of transport structures in Riga in accordance with the procurement procedure, while also striving to contribute to the overall development of the sector in Latvia.”

Given the procedure and specifics of the work, Eco Baltia vide will provide services in Riga as a joint venture with the road construction company CBF Ļ-KO Ltd. Subcontractors will also be engaged to carry out specific tasks. According to the Riga City Council tender conditions and the contract, the joint venture will be responsible for the daily maintenance of transport structures in Riga, on the right bank of the Daugava River (in the Centre district and Latgale suburbs) for the next five years. This includes road surface repair, chipping, gravel or soil profiling and de-dusting, cleaning and seasonal treatment of roads, transport stops, cycle lanes, and other facilities, as well as other related works.

The services under the “Routine Maintenance of Transport Structures from 2024 to 2029” procurement will commence on 1st October, 2024. The total contract price for the entire period in Riga, on the right bank of the Daugava (in the Centre district and Latgale suburbs), is set at EUR 77,435,426.25, excluding VAT.

Māris Simanovičs, Chairman of the Board of Eco Baltia AS, states: “By promoting the development of the Eco Baltia Group in the international market, we have managed to expand our road maintenance activities in Latvia and Lithuania over the past few years. We have gained valuable experience and a wide range of expertise, which has enabled us to continue the Group’s growth through major procurements. It is encouraging to see that municipalities are also focusing on the introduction of environmentally friendly transport in their tenders, as Riga has done in its tender for the maintenance of transport structures. In the long term, we see this as a benefit for both society and business development, as the requirements for greener transport become more stringent. This emphasis is also highlighted as an important pillar in European Union directives.”

Eco Baltia vide currently uses 21 specialized, environmentally friendly waste collection vehicles to provide its services in Latvia. Around 90% of the total annual investment is allocated to the renewal of the fleet to promote “greening” of transport. In line with the contractual project for the maintenance of transport structures in Riga, Eco Baltia vide plans to gradually transition to greener transport for the provision of these services within the first year of the procurement.