RDIF INVESTOR NEWSLETTER

Transcription

1 RDIF INVESTOR NEWSLETTER JULY 1, 2014

2 Dear, I would like to thank you for your continued support of the Russian Direct Investment Fund (RDIF) and am pleased to send you our Investor Newsletter. As you know, RDIF was established in 2011 by the Russian government as a US$10 billion private equity co-investment fund focused on generating profitable returns on its invested capital whilst also attracting long term foreign co-investment capital into Russia. Since inception we have invested or approved over US$5 billion into 14 leading Russian companies, of which over US$1 billion was invested by RDIF and over US$4 billion was invested or approved by our international co-investment partners. We have announced 9 new strategic partnerships with some of the world s leading Sovereign Wealth Funds and our International Advisory Board has been joined by 6 new highly esteemed members. This Investor Newsletter covers the macroeconomic environment in Russia, gives an overview of RDIF s own activities and achievements and concludes with an interview with RDIF Investment Director Mr. Sean Glodek. We have also attached selected media coverage of RDIF and Russian investment and economic news. I hope you will find this newsletter informative. I wish you a very good summer! Sincerely yours, Kirill Dmitriev INVESTOR NEWSLETTER 2

3 I. RDIF KEY ACTIVITIES A RDIF INVESTMENTS A consortium comprised of the Russian Direct Investment Fund (RDIF), the European Bank for Reconstruction and Development (EBRD), KIA, Mubadala and the CapMan Russia II fund, has completed an investment in MAYKOR, the leading Russian IT outsourcing and service provider. The three partners invested up to USD 100 million in MAYKOR that allowed the group to grow its market share. RDIF invested USD 50 million with the EBRD and the CapMan Russia II fund contributing the remaining part. The Russian Direct Investment Fund (RDIF) and Deutsche Bank made a joint investment in Russia s largest telecommunications company, Rostelecom in October of The two parties invested a total of billion roubles on a parity basis, which will be used to further develop and strengthen the company s market position. A consortium of the Russian Direct Investment Fund (RDIF), Titan International Inc., and One Equity Partners completed the acquisition of the leading Russian agricultural and industrial tire manufacturer, OJSC Voltyre-Prom, from Cordiant, with Titan International becoming its managing partner. Voltyre-Prom is the leading producer of agricultural and industrial tyres in Russia. Its market share in agricultural and industrial tires was 43% and 16% respectively. The Russian Direct Investment Fund (RDIF) attracted a number of leading foreign investors from North America, Middle East, Europe and Southeast Asia into a consortium to invest in the IPO of ALROSA, a Russian diamond company. The consortium contributed to the success of the IPO of ALROSA, valued at US$8.135 billion. INVESTOR NEWSLETTER 3

4 The Russian Direct Investment Fund (RDIF) and Baring Vostok Private Equity Fund V (BVPEF V) announced a joint investment of US$48 million into newly issued shares of Tigers Realm Coal Limited (TIG), a company with coking coal assets in the Chukotka province in Russia s Far East in December of RDIF invested a total of US$15 million with BVPEF V contributing US$33 million. Additionally, the current shareholders of TIG will have the right to invest up to US$8.7 million. Upon completion, RDIF will become a 11% shareholder in TIG. The funds will be used by TIG to complete a Bankable Feasibility Study (BFS) and further develop the Fandyushkinskoye deposit (Project F) at the Amaan deposit. The Russian Direct Investment Fund (RDIF), KIA, Mubadala and the European Bank for Reconstruction and Development (EBRD) announced a joint investment in Cotton Way, Russia s leading commercial laundry and textile management company. RDIF and EBRD will together invest up to US$109 million, with each party contributing fifty percent. The funds will be used by Cotton Way to continue to invest in industry leading facilities by constructing high efficiency laundry factories in key regions of Russia to further strengthen its market position and diversify its customer base. Russian forest products group The Russia-China Investment Fund (RCIF) has completed the acquisition of approximately a 42% stake in RFP Group (Russian Forest Products Group), a leading forestry holding company in Russia s Far East. RCIF s investment in the company will support the construction of the Center for deep wood processing, the largest in the region. A consortium of investors, made up of the Russian Direct Investment Fund (RDIF), a group of foreign investors and Gazprombank has come to an agreement on terms of an investment into a liquefied petroleum gas and light oil products transhipment terminal. This terminal is owned by the Russian petrochemical holding, SIBUR, in the sea port of Ust-Luga. The transaction amount of this investment will be over US$700mm. INVESTOR NEWSLETTER 4

5 B RDIF INVESTMENT PIPELINE As a result of our continuous origination program, we now have a pipeline of around 50 projects with investments around $11 billion, of which more than $4 billion is under active review. The pipeline is diversified across a broad range of sectors. C STRATEGIC ALLIANCES The Russian Direct Investment Fund (RDIF) and Mubadala Development Company (Mubadala), the Abu Dhabi-based investment and development company, announced the launch of a US$2 billion coinvestment fund to pursue opportunities in Russia. The fund will predominantly focus on long-term investment opportunities across a range of industry sectors, acting as a catalyst for direct investment in Russia. Mubadala and RDIF are each committing US$ 1 billion. The majority of Mubadala s commitment will be deployed in opportunities that will be evaluated on a deal-by-deal basis while some of the capital will be invested as an automatic co-investment into all RDIF deals. The Russian Direct Investment Fund (RDIF) and the Kuwait Investment Authority (KIA) announced the launch of an automatic co-investment mechanism. The initiative will see KIA invest $500 million alongside the RDIF, in all RDIF transactions. INVESTOR NEWSLETTER 5

6 The Russian Direct Investment Fund (RDIF), Vnesheconombank (VEB) and the Japan Bank for International Cooperation (JBIC) signed a joint memorandum establishing the Russian-Japanese Investment Platform. Under the agreement RDIF and JBIC will each invest $500 million and VEB will potentially provide project financing and design new financial products to support the platform. The aim of the platform is to develop economic cooperation, trade and investment between Russia and Japan as well as to make exchanging technologies and expertise easier. The memorandum details guidelines that will provide the foundation for future investment decisions including projects in the Russian Far East and East Siberia. Investment will focus on infrastructure development, the latest healthcare technologies, alternative sources of energy and the creation of efficient urban environments (smart cities). The Russian Direct Investment Fund (RDIF) and Abu-Dhabi s Department of Finance launched a partnership to invest in Russian infrastructure projects and develop cross-border investment cooperation. Under the agreement Abu-Dhabi s Department of Finance will invest up to $5 billion in the partnership. The Russian Direct Investment Fund (RDIF) and the Korea Investment Corporation (KIC) have signed a memorandum to form the Russian-Korean Investment Platform. The 500 mm USD co-investment platform will focus on cross-border investments and projects that facilitate trade and encourage investment cooperation between the two countries. Fondo Strategico Italiano The Russian Direct Investment Fund (RDIF) and Fondo Strategico Italiano (FSI) signed a landmark memorandum to establish a 1 billion Russian-Italian investment platform. The two financial institutions will invest up to 500 million each primarily in companies and projects promoting the development of foreign trade and FDI between Italy and Russia. The Russian Direct Investment Fund (RDIF) and Mumtalakat, the investment arm of the Kingdom of Bahrain, signed a Memorandum of Understanding to promote investment cooperation between Russia and Bahrain. The Memorandum of Understanding promotes the exchange of information and expertise in the sectors and areas of common interest for both entities. It sets the parameters for identification and cooperation on mutually beneficial prospective co-investment opportunities in Russia and Bahrain. The Russian Direct Investment Fund (RDIF) announced together with the Qatar Investment Authority (QIA) the establishment of a $2 billion co-investment platform. The two financial institutions will invest up to $1 billion each in companies and projects primarily in Russia. The Russian Direct Investment Fund (RDIF) and Caisse des Dépôts International (CDC International) have launched a 300 mm EUR Russia-France Investment Fund (RFIF). RFIF will seek attractive investments across a broad range of sectors and asset classes, including but not limited to equity and debt securities, infrastructure and real estate in Russia and France. INVESTOR NEWSLETTER 6

7 D ST. PETERSBURG INTERNATIONAL ECONOMIC FORUM SPIEF The Russian Direct Investment Fund once again hosted a number of traditional events during the St. Petersburg International Economic Forum (SPIEF 2014), which included a meeting of the RDIF International Advisory Board, RDIF Supervisory Board, a panel session entitled Investor heatmap: shifting strategies for private equity and sovereign wealth and an evening reception for both RDIF guests and guests of SPIEF The culmination of the events organized by RDIF was the meeting of the Russian President, Vladimir Putin, with members of RDIF s International Advisory Board and leading international investors at Constantine (Konstantinovskiy) Palace on June 23. E NEW APPOINTMENTS TO RDIF S INTERNATIONAL ADVISORY AND SUPERVISORY BOARDS RDIF appointed new members to the fund s International Advisory Board over the past year. The six new members represent the world s leading investment institutions. Two of them from China Investment Corporation (CIC) and Korea Investment Corporation (KIC) were appointed due to the retirement of their predecessors: Din Xuedong, Chairman & CEO of China Investment Corporation (CIC); Hongchul (Hank) Ahn, CEO & President of Korea Investment Corporation (KIC); Maurizio Tamagnini, CEO of Fondo Strategico Italiano (FSI); Mahmood Hashim Al Kooheji, Chief Executive Officer, Bahrain Mumtalakat Holding Company; Khaldoon Khalifa al-mubarak, CEO of Mubadala Development Company; Ahmad Mohamed Al-Sayed, CEO of Qatar Investment Authority. In addition, RDIF appointed Dominique Strauss-Kahn to the Supervisory Board of the fund, consisting of 10 distinguished members on 19 July Dominique Strauss-Kahn was the Managing Director of the International Monetary Fund from 2007 to 2011 after a career which also included two years as French Minister for Economy, Finance, and Industry from 1997 to INVESTOR NEWSLETTER 7

8 F RECOGNITION OF RDIF AS A WORLD-CLASS INVESTMENT INSTITUTION In just over three years since its inception, RDIF has been recognised as a leading world-class investment institution by international and Russian investment and expert communities as well as the media: Award Source Best Private Equity Firm in Russia 2014 Person of the year on Russian private equity market 2014 (Kirill Dmitriev) Best Private Equity Firm in Russia 2013 Person of the year on Russian private equity market 2013 (CEO of RDIF Kirill Dmitriev) Private Equity Russia & CIS Journal Private Equity Russia & CIS Journal Private Equity Russia & CIS Journal Private Equity Russia & CIS Journal Grand prix Private equity fund of the year Financial Elite of Russia 2013 Russia Investment fund of the year ACQ Global Awards 2013 Large Private Equity House of the Year Russia Acquisition International M&A Awards 2013 Recognition of RDIF Deals: Award Deal of the Month for the joint investment with EBRD in Cotton Way company Industrial Manufacturing/Distribution Deal of the Year for the acquisition of Voltyre-Prom by RDIF, Titan International and One Equity Partners Investor Awards 2013 in the Private equity and venture capital: Deal of the year category for investment in IPO of MD Medical Group Sector Transaction of the Year Technology, Media and Telecom category for the investment in Karo Film cinema chain M&A Deal of the Year (Over $100mm to $250mm) category for the investment in Karo Film cinema chain Deal Financing of the Year category for the investment in Karo Film cinema chain Source Acquisition International Magazine 6th Annual International M&A Advisor Awards Stock market magazine and Investor.ru portal 3rd Annual ACG New York Champion s Awards 5th Annual International M&A Award 5th Annual International M&A Award INVESTOR NEWSLETTER 8

9 G INVEST INRUSSIA On June 23, 2014 the Russian Direct Investment Fund (RDIF) presented to the investment community the INVEST IN RUSSIA information portal (investinrussia.com) to attract direct foreign investment into the Russian regions. INVEST IN RUSSIA is an interactive information portal aimed specifically at promoting Russia to international investors. The portal contains different industry, country and regional statistical and analytical data. The resource provides investors with a database of potential sites where production assets could be located, and includes data on each region s investment appeal, as well as detailing how international organizations have invested in Russia in the past. Key federal ministries, authorities and global consultants were involved in the development of the portal making it possible to consolidate information gathered from various sources to provide better clarity for investors. H PLANNED ACTIVITIES RDIF is planning to participate in the following events dedicated to investments in the second half of 2014: Date Event Location September Annual Meeting of the New Champions (WEF Summer Davos ) Tianjin, China September The Sochi International Investment Forum Sochi, Russia 29 September IV Kaspian Summit Astrahan, Russia October Annual Meetings of the World Bank Group and IMF 2014 Washington, USA October The ninth meeting of the Institutional Investors Roundtable Quebec City, Canada TBC October World Economic Forum Moscow Meeting Moscow, Russia 4 11 November APEC summit, APEC Business Advisory Council Meeting Beijing, China November G20 Brisbane, Australia November SuperInvestor Paris, France November International Forum of Sovereign Wealth Funds Doha, Qatar INVESTOR NEWSLETTER 9

10 II. MACROECONOMIC ENVIRONMENT In US$bn unless stated otherwise 2012A 1Q13A 2013A 1Q14E* Real GDP (YoY growth) 3.40% 1.60% 1.30% 0.90% Budget deficit/surplus (as % GDP) -0.10% -0.40% -0.50% -0.70% Inflation 6.60% 7.01% 6.50% 6.90% Current account (as % of GDP) 3.70% 5.70% 1.60% 1.70% FX reserves Government debt (as % GDP) 10% 13% Foreign Direct Investment inflows USD/RUB exchange rate, average The Russian economy slowed to a rate of 1.3% in 2013 due to the generally weaker global economy, external demand and slowing investment. In 2014 the economy is expected to slow further to 0.4%, according to the Central Bank forecast. However, several factors can support better growth rates: lower inflation, high oil prices, and potential improvements in the US and European economies. At just 13% of GDP at the end of 2013, Russian government debt continues to be one of the lowest for not only the BRICS nations but also the developed economies too, and it is not anticipated to grow significantly. FX reserves decreased slightly in 2013 to US$510bn, as the regulators used the reserves to support the rouble. Following a drop in USD/RUR exchange rate in the beginning of the year, the rouble appreciated marginally as macroeconomic indicators improved and geopolitical concerns eased. The Russian stock market is trading at a PE of just 5.59x (June 25), amongst the lowest valuations compared to other emerging markets, and it continues to underscore what we believe to be an attractive investment opportunity for global investors. Geopolitical tensions have contributed to the slowing of the Russian economy, the silver lining on this cloud, however, has been an increased deal flow and better negotiation position for funds still active in the Russian market, like RDIF, as international debt and equity markets have been harder for Russian companies to tap into. Source: Bloomberg, CBR, Ministry of Finance, broker research *Actual data where available/consensus of official forecast and broker reports INVESTOR NEWSLETTER 10

11 III. INVESTMENT TEAM INTRODUCTION INTERVIEW WITH SEAN GLODEK Starting with this newsletter we will have a new section introducing you to RDIF investment team in a format of interviews. This time we chose to talk to the man, who helped to build RDIF from scratch, RDIF Investment Director Sean Glodek: Prior to joining RDIF, Sean was a director at Darby Private Equity. He also held the position of vice president of mergers and acquisitions at Lehman Brothers (New York). He participated in a number of high-profile transactions, including the launch of a joint venture between SABMiller and MolsonCoors. Sean also worked at Deutsche Bank in New York (M&A department). He graduated from Stanford University and the Wharton School at the University of Pennsylvania (MBA). SEAN GLODEK DIRECTOR Why did you join RDIF? I joined RDIF at inception for a number of reasons; RDIF presented a very unique opportunity to be part of a new and innovative platform for foreign investors to invest in Russia. Raising private equity capital for Russia and enticing foreign investors to co-invest in Russian projects has been quite difficult in the past, particularly when there is a lack of access to well-connected and credible local partners with interests that align with foreign investors. By now it is clear that RDIF has made great progress in solving this problem for foreign investors over the last 3 years. Timing was also a factor. At the moment Russia is trading at significant discounts. Many assets are delivering attractive riskadjusted returns to investors. Also, the reach of international private equity in the Russian marketplace is fairly weak, so there is a significant opportunity for organic growth of this asset class. You mentioned the provision of access to local partners, how important is this to foreign investors? Having a strong local partner - particularly one that is government linked and has access to significant risk capital - is crucial for our foreign co-investors, not only for their support during the investment process, but also after the project is finished, through portfolio company monitoring, expansion and ultimately exit. RDIF as a local partner continues to provide important inputs to co-investors regarding policy, regulation and trends and ultimately how they may affect the joint investment. The bottom line is that many of these co-investments would have a much smaller chance of succeeding without RDIF s involvement. Briefly, what is your role within RDIF? I sit on RDIF s investment committee and management board. As a Director I focus on sourcing, preparation, structuring and finally approval of investment transactions. I then lead the monitoring of portfolio companies I have helped to invest in, once the transactions are completed. In addition, I m responsible for a number of investor relation initiatives in the Gulf, Europe and Asia, and considering we are still a growing organisation I am helping with key HR initiatives. What makes RDIF different from other P.E. funds? Quite a number of important factors: first, our government links are crucial. A benefit of being a government sponsored organisation is that we are highly vigilant in observing best practices within private equity. Second, we have a professional team of 140 people, almost 40 of which are investment professionals. Third, in addition to relying on a robust investment process and decisions made on a basis of profit maximisation, we have access to other pools of significant competitively priced debt capital that can be deployed in Russia in our key projects. Finally, the access we can provide to sovereign wealth funds of other countries is another differentiating feature. Investing together both in and outside of Russia alongside our foreign partners is something that is very unique to RDIF. Most other sovereign wealth funds wouldn t necessarily have the same relationship with a non government entity, as they would with RDIF. INVESTOR NEWSLETTER 11

12 Presnenskaya Nab., 8/1 Moscow, Russia, Tel.: +7 (495) Fax: +7 (495) INVEST IN RUSSIA. App Store