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Deal 5: Kedainiai FEZ Member of the Board Giedrius Valuckas on Agreement with Kormotech

Lithuania
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On July 24, 2020, CEE Legal Matters reported that Cobalt had helped Lithuania's UAB Kedainiai Free Economic Zone draft establishment and operation agreements for Kormotech. CEEIHM spoke with Giedrius Valuckas, Member of the Board at Kedainiai FEZ, to learn more about the agreement.

CEEIHM: To start, please tell us a few words about the Kedainiai Free Economic Zone.

Giedrius: The Kedainiai Free Economic Zone is an industrial area located in the geographical center of Lithuania and is one of the largest and strongest districts in Kaunas County. With its extensive industry and traditionally strong agricultural production, a well-developed trade services network, a rapidly-developing business support infrastructure, available talent pool, and incentives in the FEZ, Kedainiai is one of the most attractive places for manufacturing/logistics investments.

CEEIHM: When was the zone established and what are the main benefits companies enjoy when setting up their operations in it?

Giedrius: The Kedainiai Free Economic Zone was established in 2014. It has a total area of 130 hectares, and the main benefits for companies are:

  • ready infrastructure which means easy setup of greenfield projects with a plug & play principle.
  • incentives in the zone: no corporate tax in the first ten years, and for the next six years companies have to pay only half of the corporate tax (which is 15% in Lithuania). No real estate tax for 49 years.
  • professional support of operators, since Kedainiai FEZ has two shareholders. One of them is a leading real estate developer and another is a leader in industrial management and industry 4.0 solutions provider.
  • speed of the process, due to governmental, local, and operator support.
  • local government support with dedicated efforts towards process optimization for investments.

CEEIHM: When is the new plant due to break ground on construction and when is it planned to commence production?

Giedrius: The architectural phase (technical design, factory layout, inbound and outbound estimation) leading up to the permit of construction takes approximately six months. Construction and full factory setup will take another six to eight months so usually the whole process takes around 12 months, from signing the contract to the operational phase.

CEEIHM: What would you say was the most complex aspect to negotiate in this deal?

Giedrius: The most complex element was to convince Kormotech to choose Kedainiai and Lithuania over Poland and Latvia due to the better business environment, competence, support, speed, and costs we can offer.

CEEIHM: Why did you pick Cobalt to act as your advisor on this deal and what was the firm’s mandate?

Giedrius: We work only with top professional partners. Cobalt has been our partner for several years and we are happy to have such a great service and top advisory service from them. They were responsible for our general agreements, which are signed for 49/99 years.

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