East Capital and Orkla are ready to put up in excess of €74 million in the Russian power industry. Funds continue to evince interest in portfolio investments in the Russian power industry. The Swedish management company East Capital yesterday announced its intention to invest in assets in the sector. In December, in an alliance with Norway's Orkla Financial Investments, the company will set up a fund with a total value of €111 million for investing in power industry companies in Russia, Ukraine, Kazakhstan, and Georgia. The Russian power industry will account for more than €74 million. Experts believe that after strategic investors have invested in the leading companies in the industry time has come for portfolio investment: funds are reaping the benefits of share price increases, but as soon as April only companies from the distribution grid sector will be able to demonstrate a significant growth. The Swedish management company East Capital was established in 1997 and is one of the leaders among independent companies with specialisation in Eastern European financial markets. The company manages in excess of €5.1 billion worth of assets. Yesterday, the Swedish company East Capital announced establishing a new fund for investment in shares of power companies in Russia, Ukraine, Kazakhstan, and Georgia. According to the announcement, the fund intends to invest in generating, grid, and servicing assets of both private companies and companies whereof shares are listed on stock exchanges. The board of directors of East Capital Explorer AB has passed a decision to invest €81 million in the fund, the company said yesterday. Norway's Orkla Financial Investments will become the company's strategic partner in this fund and contribute €30 million thereto. No other partners are expected to be involved at the moment. During its IPO in November, East Capital Explorer AB established for investment in Russia, the Baltic states, Eastern Europe, and Central Asia raised €365 million. Swedish investors purchased 60% of its shares. Over two-thirds of this amount (€74 million) will be invested in Russian assets, Vesna Lukka, head of the East Capital media relations department, explained to RBC Daily. Vitaliy Zarkhin, director of East Capital Investment Management (part of the East Capital group), told RBC Daily that the new fund will start operating as soon as the middle of December, and the stated funds will have been invested within three months. He said that repair and servicing companies will constitute the fund's investment priorities. Representatives of the companies declined to disclose any specific assets whereof shares they intend to purchase. The stated amount is small and will only allow acquiring an assortment of marketable assets, in the opinion of Vasiliy Konuzin of Alemar Investment and Finance Company. "Most likely, these will be small shareholdings in the grid, service companies, sales, and generation, but these will be marketable shareholdings and it will be sufficiently easy to find a buyer for them," thinks he. He notes that East Capital's investments are small as compared with those of other funds: Halcyon Power manages $200 million worth of assets and Prosperity $1.5-1.6 billion worth of assets. Derek Weaving, power industry sector analysis chief with Renaissance Capital, explains the interest of funds in the industry with changes in its structure. He estimates that RAO UES shareholders have benefited from a 54% average annual growth in the value of their shares in the last five years. "This is more than an excellent result for portfolio investors," says he. "However, while it was enough for management companies to hold RAO UES shares earlier, this investment strategy has almost exhausted itself at present." Mr Konuzin believes that funds will actually become the key players in this market segment upon RAO UES's reorganisation. "The strategic demand factor will move far to the background, whereas special funds as the most active and competent players in the sector will play the key part in asset pricing," says he. |
