RDIF and Baring Vostok in $48m coal deal

The Russian Direct Investment Fund (RDIF) and Baring Vostok Capital Partners have teamed up to invest in Tigers Realm Coal Limited (TIG), a company with coal assets in the Chukotka provice in Russia’s Far East.

The pair has invested $48 million; Baring Vostok Capital Partners invested $33 million, while the RDIF contributed $14.9 million. The current shareholders of TIG will have the right to invest up to $8.7 million as part of the transaction, according to a statement.

It is understood this was an all equity investment for Baring Vostok, which used its Baring Vostok Private Equity Fund V, a vehicle that reached its hard cap of $1.15 billion in October 2012. It is understood the fund is 20 percent deployed following this investment.

“Our investment in TIG and its world class exploration technology and expertise will help to accelerate the development of the project, create new jobs and represents an important opportunity for RDIF due to its attractive fundamentals and proximity to export markets,” Kirill Dmitriev, CEO of RDIF, said in a statement.

The Russian Direct Investment Fund is a $10 billion fund which was set up by the Russian government in 2011 to invest in Russia. Since inception the fund has invested $3 billion into Russian companies, of which $750 million was invested by RDIF and over $2 billion came from international co-investors, RDIF said in October.

This latest deal follows a busy year for RDIF. It teamed up with Germany’s Deutsche Bank in October to invest in Rostelecom, Russia’s largest telecommunications company, which is listed on the Moscow Interbank Currency Exchange (MICEX). In June, RDIF teamed up with a consortium including Titan International and One Equity Partners (OEP) to invest in Voltyre-Prom, a Russian agricultural and industrial tire manufacturer. In June, RDIF also launched a joint venture with General Electric for the construction of mini power plants for manufacturing companies in Russia.

In the same month, RDIF teamed up with Abu Dhabi sovereign wealth fund Mubadala Development Company to launch a $2 billion co-investment fund which targets investments in Russia. In February, RDIF invested in the initial public offering of the Moscow Exchange.

While the Russian economy is sluggish – the country’s economic minister Alexei Ulyukayev recently slashed its long-term forecast of Russia’s average annual GDP growth through to 2020, from 4.3 percent to just 2.5 percent – the Russian market is becoming more mature, particularly when it comes to financing, Yuri Solovyev, VTB Bank’s first deputy president and chairman of VTB, told Private Equity International in a recent interview.

“For good deals, there’s plenty of capital available from both the local and the international banks. The market is pretty developed and deep. Obviously we would like to see structural reforms in the country and see more sectors open up for private equity deals. But this is being addressed through a massive programme of privatisation. Hopefully we will see more deals hitting the market from the state-owned sector, which will allow us to employ our own capital and to bring in more clients from outside of Russia.”

For a more in depth look at Russia, click here for the interview with VTB’s Yuri Solovyev which features in this month’s magazine.