RUSSIAN DIRECT INVESTMENT FUND (RDIF)

Transcription

1 RUSSIAN DIRECT INVESTMENT FUND (RDIF)

2 OVERVIEW OF RDIF FORMATION PROCESS: MISSION, OBJECTIVES, GEOGRAPHY Fund mission To become catalyst for attracting direct investments, talent and technologies into the Russian economy by carrying out profitable investments Fund objectives Carrying out profitable investments Attracting foreign direct investments into the Russian economy Investment themes A growing middle class Significant opportunities and growing demand for new infrastructure Import substitution Sectors where Russia has sustainable competitive advantage Opportunities to radically increase in efficiency of Russian producers Investment geography Predominantly, Russian Federation Foreign investments not to exceed 20% of the Fund Investments in foreign companies must be approved by 75% of votes of the Investment Committee / Supervisory Board and only subject to (а) providing access to breakthrough technologies in priority innovation and modernization sectors, or (b) having strategic importance within the CIS Target sectors Broad range of sectors that are of interest to different types of co-investors p. 2

3 OVERVIEW OF RDIF FORMATION PROCESS: INVESTMENT CRITERIA Mandatory co-investment RDIF can invest only with a co-investor or a group of co-investors in the ratio of not less than 1:1 co-investor / RDIF Co-investor must have at least $1 billion of assets under management,or have market capitalization of at least $1 billion or annual turnover of at least $1 billion and EBITDA of at least$150 million* Size of investment Minimum deal size - $50 million equity investment in one project Maximum deal size - $500 million equity investment in one project Ownership in the company of less than 50% + 1 share Ownership The Fund cannot be the largest shareholder Expected exit in 5-7 years Investment horizon * According to the latest audited financial statements Co-investment is an unprecedented mechanism in the world practice targeted at (а) maximizing the quality of RDIF investments and (b) attracting foreign direct investments into the Russian economy p. 3

4 COOPERATION WITH INTERNATIONAL CO-INVESTORS: TYPES OF CO-INVESTORS International investors of two types: LONG-TERM FINANCIAL INVESTORS STRATEGIC INVESTORS Sovereign wealth funds Leading industry players Pensions and insurance funds Private equity funds Market capitalisation or revenues in excess of $1 billion + EBITDA in excess of $150 million Assets under management in excess of $1 billion p. 4

5 COOPERATION WITH INTERNATIONAL CO-INVESTORS: INITIATION OF DEALS Two types of deals: 1. Deals initiated by international investors RDIF focusses on analysis of due diligence, conducted by the investor who initiated the deal and protection of own interests in the deal Faster process (3-4 months) 2. Deals initiated by RDIF RDIF conducts a thorough analysis of the investment opportunity and proposes the opportunity to co-invest to 5-7 co-investors, selected on the basis of distribution of 2-3 page description of the investment opportunity to all potential co-investors of RDIF The funds are selected based on expressed interest to invest the maximum amount of funds A more thorough process 4-5 months; as a result its possible to invest alongside 1-2 co-investors In both cases co-investors receive access to due diligence materials of RDIF, but conduct independent analysis of the investment opportunity and make decisions independently of RDIF p. 5

6 INVESTMENT PROGRAM FOR PRE-IPO PROJECTS TO BE LISTED ON MICEX-RTS Mission A joint marketing program between RDIF and leading global investors to jointly evaluate and invest in pre-ipo transactions for Russian target corporates Consortium members Investment parameters Target companies Benefits for co-investors Management BlackRock Investment Management (UK) Limited (biggest asset manager in the world) Templeton Asset Management Ltd. (a leading asset manager with focus on emerging markets) Goldman Sachs European Special Situations Group Minority investments into Russian target corporates with a minimum transaction size of $ million occurring 6-18 months before an IPO priced at a sufficient IPO discount to generate target returns for RDIF and co-investors Market leading Russian companies in key growth sectors with annual turnover and target equity market capitalisation up to $1 billion Companies can be privately or state owned including those that are part of the government s privatization program Exposure to Russian growth companies on preferred terms Attractive valuations driven by willingness of Russian target corporates to secure investment from co-investors and RDIF in advance of an IPO No fees Fast track government approvals based on supporting development of Russian domestic IPO market Guaranteed IPO allocations and early access to management Program will be managed by RDIF The MOU was signed on 21 June 2012 during a meeting between President Putin and leading international investors at the St. Petersburg Economic Forum p. 6

7 AUTOMATIC CO-INVESTMENT MECHANISM RDIF announced the launch of the automatic co-investment mechanism during a meeting between President Putin and the heads of largest global investment funds with assets under management in excess of $5 trillion as part of the St. Petersburg Economic Forum 2012 Mission Participants Investment parameters Benefits for co-investors Management An investment mechanism that allows international investors to automatically invest in every RDIF transaction The first participant of the mechanism - Kuwait Investment Authority (KIA), with assets under management of $296 billion As part of this initiative, KIA will invest $500 million in the Russian economy Automatic participation in every RDIF transaction RDIF responsible for evaluating opportunities and monitoring portfolio companies Access to fast-growing Russian economy Opportunity to invest in leading companies at attractive valuations Experiences local partner with government support Substantial potential to add value in portfolio companies Mechanism will be managed by RDIF p. 7

8 RUSSIA-CHINA INVESTMENT FUND 5 June 2012: Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC) - Chinese sovereign wealth fund with assets of $410 billion) -in the presence of Russian and Chinese leaders signed a memorandum on completion of creation of the Russia-China Investment Fund The assets of the Fund will amount to up to $3-4 billion: CIC and RDIF will invest $1 billion each An additional $1-2 billion is expected to be raised from Chinese institutional investors The Fund was created for direct investments in projects primarily in the Russian Federation and only in those industries and projects that have been approved by RDIF RDIF will take the main responsibility for building up the professional investment team, fund management and defining the funds investment projects portfolio RDIF will own 60% of the management company, and CIC will own 40% The creation of the Fund will attract investments from China into industries and companies that support dynamic growth of the Russian economy, and will allow for Russian governments control over major Chinese investment projects in Russia p. 8

9 RDIF GOVERNANCE MECHANISMS: RDIF STRUCTURE AND MANAGEMENT BODIES International Auditor International Advisory Board advice audit 100% ownership sole investor Key development and international trade bank, chaired by Prime Minister Dmitry Medvedev Three levels of governance: RDIF MANAGEMENT COMPANY CEMF Management Agreement Russian Direct Investment Fund (RDIF) I. STRATEGIC: Supervisory Board Investment strategy Rules and procedures II. INVESTMENT: Investment Committee Approval of large transactions over $250 million Approval of transactions, for which special permit was requested by Investment Committee Approval of investment transactions III. OPERATIONAL: Chief Executive Officer and Executive Board Management team possesses significant investment experience Day-to-day guidance of origination, assessment, structuring and execution Hiring and management of investment team Preparation of recommendations for Supervisory Board and Investment Committee ИНВЕСТОРЫ ИНВЕСТОРЫ (Limited PORTFOLIO Partners) (Limited Partners) COMPANIES Stakes in projects Stakes in projects Financial and Strategic Investors p. 9

10 RDIF GOVERNANCE MECHANISMS: SUPERVISORY BOARD ALEXEY ULYUKAYEV Chairman of the Supervisory Board First Deputy Chairman Russian Central Bank SERGEY IVANOV Head of Presidential Administration of the Russian Federation ELVIRA NABIULLINA Aide on Economic Affairs to the President of the Russian Federation ANDREY BELOUSOV Minister of Economic Development of the Russian Federation ANTON SILUANOV Minister of Finance of the Russian Federation VLADIMIR DMITRIEV Chairman Vnesheconombank KIRILL DMITRIEV CEO Russian Direct Investment Fund LAURENT VIGIER Director of European International Affairs Caisse des Dépôts Group JOSH LERNER Jacob H. Schiff Professor of Investment Banking Harvard Business School p. 10

11 RDIF GOVERNANCE MECHANISMS: INTERNATIONAL ADVISORY BOARD LOU JIWEI Chairman and CEO China Investment Corporation (*Assets under management $482B) LEON BLACK Chairman and CEO Apollo Global Management ($72B) BADER MOHAMMAD AL-SA AD Managing Director Kuwait Investment Authority ($296B) CHONG-SUK CHOI Chairman and CEO Korea Investment Corporation ($37B) DR TEH KOK PENG Advisor to the Group Executive Committee and Chairman of the China Business Group GIC (Singapore) ($100B) STEPHEN SCHWARZMAN Chairman and CEO Blackstone Group ($129B) KURT BJORKLUND Co-managing Partner Permira ($28B) DAVID BONDERMAN Managing Partner TPG ($48B) MARTIN HALUSA CEO Apax Partners ($40B) JOSEPH SCHULL Head of European operations Warburg Pincus ($35B) RICHARD DALEY Distinguished senior fellow, the Harris School of Public Policy, University of Chicago; Mayor of Chicago from 1989 to 2011 p. 11

12 RDIF GOVERNANCE MECHANISMS: INVESTMENT TEAM Name Position Experience Kirill Dmitriev Chief Executive Officer Was head of Icon Private Equity in In was Co-Managing Partner and Chief Executive Officer of Delta Private Equity Partners, a leading private equity fund in Russia was chairman of the Russian Association of Private Equity and Venture Capital Previously worked as an investment banker with Goldman Sachs in New York and as a consultant with McKinsey & Company in Los Angeles, Moscow and Prague Alexei Chekunkov Director Was a Managing Partner at the investment and advisory firm he founded in 2009, New Nations Capital Was a Managing Director at UGC, a mining investment firm sponsored by Alfa Group Was a Vice President at Delta Private Equity, one of the leading private equity firms in Russia Sean Glodek Director Director at Darby Private Equity (Franklin Templeton Investments), managing the European fund dedicated to equity and debt investments across Central and Eastern Europe (CEE), Russia and Turkey Investment banker at Goldman Sachs, Lehman Brothers, and Deutsche Bank in New York Investment professional at Clayton, Dubilier & Rice in New York and London Richard Ogdon Director Was Chief Risk and Capital Officer for Troika Dialog, a leading investment bank in Russia, and a Member of the Troika Dialog Management Board and Board of Directors Held two positions at Uralsib Financial Corporation: head of Corporate Finance and Co-Head of Private Equity Was Head of Investment Banking at Troika Dialog and one of the founders of UBS Warburg in Russia Konstantin Ryzhkov Director Has 14 years of investment and merchant banking experience Was Managing Director and Advisor to the President of International Investment Bank Participated in the creation of the investment banking business at VTB Started his career in the USA at NationsBanc Securities (later Banc of America Securities) in Project Finance and later in Corporate Finance Tagir Sitdekov Director Has been involved in Russian private equity for the last 10 years Was as Managing Director at A-1, a direct investment arm of Alfa Group Served as Chief Financial Officer at the power generating company OJSC Sochi TES (a subsidiary of RAO Unified Energy System of Russia) Alexey Germanovich Director Over 13 years of experience in supporting large transactions (communications, government relations) Was Deputy CEO of Severstal and Head of the Transport and Infrastructure Center at the Skolkovo Business school Konstantin Olefir General Counsel Was General Counsel and Member of the Board of Deutsche Bank Moscow and before that at United Company RUSAL. Worked for a number of years at US law firms. SkaddenArps Slate Meagher & Flom and Cleary Gottlieb Steen & Hamilton Walid Kamhawi Senior Advisor 16 years overall investment and merchant banking experience in New York, London, Hong Kong and Dubai Was a managing director at Blackstone Group, where he worked for 12 years and has been involved in over $20 billion of private equity transactions as a member of Blackstone s corporate private equity group Previously, was at Bear Steams M&A division p. 12

13 FINANCIAL EXCHANGES INVESTMENT ACTIVITY: ACQUISITION OF 7.5% IN MICEX-RTS Company overview MICEX-RTS is an integrated exchange structure that provides electronic trade organization, clearing and settlements on trades, and depository and information services The Company was founded as a result of the merger between Russia s two leading exchanges, MICEX and RTS The Company s main objectives main goals are promoting the development of market mechanisms for fixing the representative exchange rate of the Russian rouble, contributing to the financial growth of Russian companies and issuers, and attracting investments in Russia s economy by providing leading financial market infrastructure The Company will play an essential role in the creation of a competitive financial centre in Moscow Transaction structure Acquisition of 7.5% of ordinary shares of the Company by a consortium of EBRD and RDIF RDIF stake will be 1.25% Proceeds for the investment will be used for: Introduction of new IT systems, further modernisation and infrastructure development Re-financing of loans obtained by MICEX for consolidation of its shareholder base Other strategic initiatives Deal pro s Consolidated market with one player: as a result of the merger, the company became the only point of access to Russia s financial markets Diversified company with exposure to all major financial products Government support of the integration process Significant synergies as a result of the merger p. 13

14 INVESTMENT ACTIVITY: ACQUISITION OF 3.41% IN MICEX-RTS Company overview MICEX-RTS is an integrated exchange structure that provides electronic trade organization, clearing and settlements on trades, and depository and information services The Company was founded as a result of the merger between Russia s two leading exchanges, MICEX and RTS The Company s main objectives main goals are promoting the development of market mechanisms for fixing the representative exchange rate of the Russian rouble, contributing to the financial growth of Russian companies and issuers, and attracting investments in Russia s economy by providing leading financial market infrastructure The Company will play an essential role in the creation of a competitive financial centre in Moscow Transaction structure Acquisition of 3.41% of ordinary shares of the Company by a consortium of RDIF and Cartesian RDIF stake % Cartesian stake % Cartesian Capital Group - a global private equity fund focused on investments into emerging markets. The fund manages over $2 billion in assets A part of RDIF stake that was acquired under this deal is to be sold to the world's global investors at a higher price. Agreement is reached to sell part of RDIF's stake to BlackRock - one of the leading investment fund in the world (a member of pre-ipo Consortium, formed by RDIF) Deal pro s FINANCIAL EXCHANGES Consolidated market with one player: as a result of the merger, the company became the only point of access to Russia s financial markets Diversified company Government support of the integration process Significant synergies as a result of the merger p. 14

15 ОGК-5: POWER GENERATION INVESTMENT ACTIVITY: ACQUISITION OF 26.43% IN ENEL OGK-5 Overview of Enel OGK-5 The Company runs 4 large power plants with a total capacity of 9,492 MW, about 4% of Russia's total capacity The Company has operations in Central, South and Ural parts of Russia. OGK-5's stakes on the market are: 7% in Central region, 60% in South region and 20% in Ural OGK-5 is the No 6 player in the Russian power sector in terms of installed capacity. OGK-5 is a public company, the IPO took place in October 2006 and the shares are listed on Russian stock exchanges (MICEX, RTS) but lack liquidity Deal structure Acquisition of 26.43% stakefor $625million Proceeds from the investment will be used by the seller (INTER RAO UES) to finance the investment program Investment with a consortium of 3 experienced and reputable investors: Xenon Capital Partners, Macquarie Renaissance Infrastructure Fund (MRIF), and AGCEquity Partners RDIF raised about $3.5 of total investments and $2.3 of foreign investments, respectively, per $1 of own investment Key investment highlights One of the most efficient players on the market Improving cash generation profile after the end of mandatory CAPEX program in H Attractive valuation: acquisition cost of the stake is minimal compared to previous transactions p. 15

16 ОGК-5: POWER GENERATION INVESTMENT ACTIVITY: ACQUISITION OF 26.43% IN ENEL OGK-5 Stages of negotiations with seller and consortium members Discussions about the acquisition of 26.43% of Enel OGK-5 commenced in Autumn 2011 An investor consortium consisting of RDIF, Xenon Capital Partners and MRIF was formed by the beginning of December 2011 According to the initial offer of the seller, the acquisition cost of the shares was going to be $750 million During the negotiations by RDIF and other consortium members, the price was reduced to $625 million. As part of the agreement: Up to 4.4% of shares could be received from the seller at exit in the case that returns for the consortium are below 18% The seller will received up to $125 million if the IRR of the project exceeds 18% In April 2012 AGC Equity Partners, an international private equity fund backed by Middle Eastern institutions, joined the Consortium. OGK-5 is its first deal in Russia Transaction timeline 15 March 2012: transaction approved by Board of Directors of Inter RAO 20 March 2012: application for acquisition of 26.43% shares of Enel OGK-5 filed with FAS 12 April 2012: issuance of FAS approval for the transaction 11 May 2012: the deal was officially closed and 26.43% of OGK-5 shares transferred to the Consortium 14 May 2012: deal completion announcement during which the final Consortium structure was disclosed p. 16

17 INVESTMENT ACTIVITY: ACQUISITION OF SHARES IN MDMG MDMG: NETWORK OF PERINATAL CENTERS Overview of the Company MD Medical Group (MDMG) is the #1 private network of Mother and Child perinatal clinics in Russia The company operates: o o o o o 1 hospital with 220 beds 1 hospital with 220 beds, that will be launched by 2012YE 8 out-patient clinics (6 in Moscow, 1 in St. Petersburg and 1 in Ufa) Owned ambulance (6 cars) Owned diagnostics laboratory MDMG is led by founder and Chairman Dr Mark Kurtser, a pioneer of in-vitro fertilization and worldclass maternity care services in Russia. The company provides a full scope of medical treatment services to meet all patients needs, starting from early maternity observation till outpatient care of children and family Deal structure RDIF invested $50 million in the Company Proceeds from the investment will be used by the company to fund the capital expansion program, aimed at building additional clinics and facilities RDIF attracted BlackRock Investment Management, Siguler Guff s Russia Partners, a market leading Russian private equity fund, and several other qualified institutional investors Key investment highlights #1 private perinatal clinic in Russia, comprising 20% of paid obstetrics in Moscow Highly profitable, cash generating asset Favourable market conditions for patients inflow and price growth due to lack of quality obstetrics services by government clinics p. 17