Origo to partner for Myanmar deals(2)

The London-listed private equity firm has formed a joint venture to invest in Myanmar while putting deal activity on hold in Mongolia.

Origo Partners has revealed it will form a joint venture with Serge Pun & Associates, a large conglomerate in Myanmar, to identify investment opportunities in the natural resources sector, according to a company statement. 

The 50/50 joint venture will target opportunities in in copper, gold, nickel and other mineral deposits. The firm said that the partnership is already undertaking countrywide geological mapping.

“I expect a gradual and cautious build up in Myanmar during the course of this year,” Chris Rynning, CEO of Origo, said in a recent interim management statement. 

Origo's strategy will be similar to the one it employs in Mongolia — invest in sectors that supply China with natural resources and agricultural products, Niklas Ponnert, Origo’s managing director in China, told Private Equity International, adding that the firm may start deploying capital in Myanmar next year. 

“We believe there will be opportunities to take positions in key assets over the next few years,” Ponnert said.

Origo, which is also invested in Mongolia, has temporarily scaled down operations in the country, citing the lack of a stable and predictable environment for foreign investment.

The firm’s deployed capital in Mongolia totals roughly $45 million, with three investments accounting for 68 percent of the total, Ponnert said. One of the larger investments is a 14 percent stake in Gobi Coal & Energy. 

All private equity investments in the country to date have been funded from the company’s balance sheet with capital raised in the public markets, he added.  

Mongolia fell out of favour last year when foreign investment regulations were politicised during parliamentary elections in a struggle between the communist party and a coalition of more liberal forces. Origo officials believe the environment won’t stabilise until after the presidential election in June. 

But the “watershed moment” for Mongolia as investment destination, said Ponnert, will be the government’s approach to the $6.6 billion Rio Tinto copper project, the second largest copper supply in the world, which has been developed for several years and is about to produce. Some politicians have proposed reconsideration of the investment agreement.
Origo also manages a China-dedicated renewable energy fund and in 2012 launched China Cleantech Partners, targeting $200 million. A first close on $60 – $80 million is expected by summer, Ponnert said.

China's depressed public markets have not only made exits difficult for fund managers, but they have dragged down asset valuations, creating buying opportunities, he added.

Valuations in China on average are down 50 percent in the natural resources sector and 30 percent in the clean tech sector compared to 12 months ago, Ponnert estimated.

“Prices are now quite attractive. It’s quite difficult for smaller, privately-held companies in the resource and cleantech space to raise funds now and private companies that need money don’t have much choice. They are more open to lower valuations.”