To create your own private equity fund

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As Kommersant has learned, the well-known investment fund Vostok Nafta Investment Ltd, which is a co-owner of Gazprom and manages assets worth $3 billion, was left without a general director. The former head of the fund in Russia, Alex Williams, decided to start his own business. We are talking about creating a direct investment fund that will specialize in the gas, forestry and coal industries. Almost all of the fund's assets at the first stage will be purchased through an option from the Vostok Nafta portfolio. The company itself denies the fact that it lost $43 million in assets.

As Alex Williams himself told Kommersant, about a month ago he resigned from the post of general director of Vostok Nafta to start his own business. We are talking about creating a private equity fund, Varyag Resources, which is going to invest money in undervalued assets in four industries - gas, coal, forestry and mining. The fund's strategy involves selecting non-public companies whose owners are ready to attract external investors through an additional issue. The average period of participation in the management of companies is three to four years, after which the fund will record profits through an initial public offering of the asset.

According to Mr. Williams, the new company has already been registered in Sweden, but its capital has not yet been fully formed. By July, the attraction of investor funds should be completed, and the planned size of net assets will be more than $50 million. After which 100% of Varyag Resources shares will be listed on the Stockholm Stock Exchange. The former Minister of Economy of the Russian Federation, head of the Higher School of Economics Evgeny Yasin agreed to advise the management. Alex Williams' partner will also be Ivan Rodionov, who has nine years of experience as a managing director at the private equity fund AIG-Interros Capital Management.

It should be noted that the fund's capital will be partially formed from the timber, coal and gas assets of Vostok Nafta worth $43 million, the option to purchase half of which, according to Mr. Williams, should be exercised by the end of July. These assets include a 12% participation interest in ZAO Trans Nafta, a large Russian independent gas trader and gas producer; 25% of Iskra LLC, which holds a license for the development of thermal coal in the Krasnoyarsk Territory; 25% of Russian Mining Company LLC, which has the right to develop three deposits in Karelia with total reserves of 152 million tons of crushed stone, and about 40% in the Irkutsk company PIK-89, with which the fund begins expansion into the forest industry.

Alex Williams promises investors an annual return of 30% on each project. Market participants consider the figure to be real, but warn that the business is risky, since not all investments bring a return. Thus, Kommersant’s interlocutor at the Arkhangelsk Pulp and Paper Mill doubts that the fund will be able to make good money on investments in PIK-89. “In the Irkutsk region, even the main players Ilim Pulpu and Continental Management do not have enough cut-off area, so the company is unlikely to be able to expand in this area,” he says.

The forest industry itself is very promising. According to experts, it is capable of generating $100 billion in income instead of the current $7-10 billion. Over the past two years, the owner of the Evraz Group, Alexander Abramov, has acquired a number of assets in the forestry industry. According to Kommersant's information, Arkley Capital, the owner of the assets of CJSC ChTPZ Group and the Chelyabinsk Zinc Plant, is also showing interest in it.

Vostok Nafta itself did not confirm information about the options. Director Sergei Glazer told Kommersant that this was the first time he had heard about this. “Rather, Vostok Nafta can invest in Varyag Resources projects, and not vice versa,” he said. Alex Williams says that the options agreement was signed with Vostok Nafta managing director Per Briliot, and Mr Glaser may not be privy to the deal.

MARIA Kommersant-CHERKASOVA, NATALIA Kommersant-GRib

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