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Eleventh Russian Regional Venture Fund established by EBRD
The eleventh and final fund in the Regional Venture Fund (RVF) programme, agreed by the Group of Seven governments in July 1993, has been established by the European Bank for Reconstruction and Development (EBRD). The 10-year ECU 24 million (US$ 30 million) equity fund will cover the Black Earth region in south-eastern Russia. ECU 16 million (US$ 20 million) of technical assistance funds are also to be provided by the European Union's Tacis programme.
"This marks the conclusion of the establishment phase of the RVF programme," said Sven Hegstad, Director of the EBRD's Early Stage Equity team. "We have used the experience gained in the previous ten funds to increase the impact of this post-privatisation initiative. Our objective is to help privatised and new enterprises modernise and restructure through equity investments, active corporate governance and technical assistance. We will also be seeking the involvement of local banks, both through advisory relationships and co-financing."
To manage the RVF, a consortium has founded the Rabo Black Earth Regional Venture Fund, under the management of the Dutch Rabobank International. Wouter J. Kolff, Vice-Chairman of the Managing Board of Rabobank International, said: "This marks a new step in the expansion of Rabobank International's activities in central and eastern Europe."
Other consortium members include the Dutch investment consultancy, EWIC/Larive, which operates in Russia, Ukraine and Belarus; the Flemish investment company, GIMV; and the Dutch venture capitalist, Corpeq Ventures. The consortium, which brings together skills in venture capital with experience in Russia and a broad international network based in industry, trade and finance, will co-invest 10 per cent of each investment, the first of which is expected in 1997. Once the Fund has established the necessary track record, the fund managers and the EBRD will seek additional funds from new investors.
The activity of the Rabo Black Earth RVF will encompass the oblasts of Belgorod, Kursk, Lipetzk, Tambov and Voronezh. The area lies 600 kilometres south of Moscow and derives its name from the colour of its soil. The region, of which the largest city is Voronezh (800,000 inhabitants), is considered to be one of the most fertile agricultural areas in the world. The area also has rich mineral resources and is the home of Russia's third largest steel mill. The Rabo Black Earth RVF will invest a minimum of 75 per cent of its resources in the Black Earth region while 25 per cent is available for investment in other parts of Russia. The Fund will be administered from offices in Voronezh, which are to be opened this year.
Investments of ECU 240,000 to ECU 2.4 million will be considered in targeted companies with between 200 and 5,000 employees, privatised under the Russian Government's Mass Privatisation Programme. Similar to the other funds, the Rabo Black Earth RVF will normally take a significant minority stake but in some cases will consider a majority position. The investment capital is to be used to finance new projects, including associated working capital.
To date, the EBRD's ten existing Regional Venture Funds have approved 24 investments worth ECU 14.6 million, of which 11 are signed and five are disbursing. Thirteen investments should be approved in the next six months.
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