Russian Wealth Fund announces joint venture with Barings in coal private equity deal

By Rizza Sta. Ana

Dec 12, 2013 09:21 AM EST

Forbes newsmagazine reported that the Russian Direct Investment Fund had announced that it has struck a strategic venture with an offshoot of Barings Private Equity International. One of the biggest private equity firms in the world and the sovereign wealth vehicle of Russia were said to have agreed on putting in $48 million into new shares of Tigers Realm Coal Limited. Tigers has coking coal deposits located in the country's far east Chukotka province, the report said.

The report said the investments of RDIF is establishment the purpose of the sovereign wealth fund of Russia's existence, Created in June 2011, the report said RDIF is different from other sovereign wealth funds across the globe such that it mandates itself to place bets within the Russian Federation, as oppose to placing investment in diversified resources abroad. The report also added that the business model of RDIF was to also strike co-investment agreements with strong foreign investors.

Forbes also stated in its report that Barings suited RDIF's investor target, with the latter's $12 billion of capital under management through its affiliates in Asia and Latin America, aside in Russia. Barings operates through Baring Vostok Capital Partners in the Russian region. Baring Vostok, said the report, runs six private equity funds in the region or the Commonwealth of Independent States. RDIF is set to tie up with Barings via Baring Vostok Private Equity Fund V, Forbes disclosed in its report.

According to the report, the Tigers investment indicate that there is still interest in placing bets in commodities considering that its cycle, especially in the coking coal business segment, is in decline. Moreover, the report said the coking coal business has yet to have a decent track record as Tigers only has one asset, which is its 89% ownership stake in the Amaam Coking Coal Project. Forbes said in its report that the Amaam project has yet to produce coal, and that its advanced site is still under a feasibility study. On the other hand, Forbes said Barings's decision to invest in the coking project could be because of the fact that Tigers is listed on the Australian Stock Exchange, and that the coal deposit is near the coastline, promising export opportunities.

The joint venture, said the report, will make Barings a shareholder in Tigers at an 11% ownership stake. Barings will be putting forward $33 million in investment commitments, while RDIF will be shelling $14.9 million on its part.

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