Acron Group has attracted Russian and international investors to participate in its project to develop the Talitsky area of the Verkhnekamsk potassium-magnesium salts deposit in Perm Krai, which is being implemented by Verkhnekamsk Potash Company (VPC). As part of this project VPC will construct and commission the Talitsky mine to provide Acron Group’s facilities with potash for complex mineral fertiliser production, and enter the supplier market for this raw materials.
The project finance structure involves both equity and debt financing. For the first stage, as part of the equity financing, VPC’s share capital has been increased by RUB 16.4 bn (USD 522.5 mn), of which RUB 12.8 bn (USD 405.7 mn) is provided by third-party investors represented by State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’, Eurasian Development Bank and ZAO Raiffesenbank. The private placement of additionally issued shares among interested investors has been completed.
Based on the additional share issue report and the registration of changes in VPC’s constituent documents, Acron Group and other investors currently own the following stakes in the company’s authorised capital:
- Vnesheconombank — 20% minus 1 share
- Eurasian Development Bank — 9.10%
- ZAO Raiffeisenbank — 8.95%;
- Acron Group (via JSC Acronit) — 61.95%.
The investments attracted shall be used to finance the Talitsky mine construction, primarily to perform shaft boring as the most important stage of the potash project. The total amount of capital expenditures required for the project is estimated at USD 2 bn, excluding the cost of the mining licence for the Talitsky area, which was about USD 700 mn. At this stage the external investments will allow full-scale construction of the Talitsky mine to start as early as Q4 2012.
Debt financing by Vnesheconombank in a form of USD 1.1 bn credit line facility is planned for further project development in 2014 on the terms agreed upon by the parties.
Chairman of Acron’s Board of Directors Alexander Popov commented on the transaction results:
“Development of the Talitsky area of the Verkhnekamsk potassium-magnesium salts deposit is a key factor for demonopolisation of this industry and will therefore allow Acron Group to implement in full its strategy of converting into a vertically-integrated holding.
“It is obvious that implementation of any greenfield project in the mining industry is risk-bearing. However, Acron Group has already been successful with several large-scale investment projects, including raw material projects, and proved its responsible approach and commitment, ability to meet deadlines and stay within budget. The government’s estimation of the project’s importance and potential and its confidence in our Company have helped us attract important financial investors as VPC shareholders.
“At present, we have attracted sufficient financing for full-scale construction of the Talitsky mine. We intend to use the Vnesheconombank credit line facility in the future which guarantees further financing of the project’s development. We are confident in our ability to launch the new potash production facility at the Talitsky area in 2016 and that our investors will benefit fr om the upside of the company’s value.”
Deputy Chairman of Vnesheconombank Anatoly Ballo said:
“The project of development of Verkhnekamsk potassium-magnesium salts deposit is the first experience of cooperation between Vnesheconombank and Acron Group and is the bank’s largest project in the Privolzhsky Federal District.
“At the moment, we are satisfied with the cooperation results and we are looking forward to expanding it in future in order to execute the potential of Vnesheconombank as the Bank for Development”
Chairman of the Managing Board of ZAO Raiffeisenbank Sergey Monin commented on the completed transaction:
“Participation of our bank in this long-term project proves the interest of ZAO Raiffeisenbank in the Russian market in general, and witnesses our confidence in further growth and development of the Russian economy.
“I would like to note that this transaction is unique for the Russian market, taking into account that the financing was attracted at the earliest initial stage of the project. Not only do we consider this sector as greatly promising and investment-attractive both on the Russian and the international markets, but we also highly appreciate the experience and expertise of Acron’s management and shareholders, and we are confident that they are able to successfully implement this project.”
“Direct participation of Eurasian Development Bank in the capital of the company set up to implement the project of Acron Group amounts to approximately USD 100 mn, – noted the Deputy Chairman of the EDB Executive Board Dmitry Zhurba. – This is the first project of EDB using a direct participation in the capital of a real sector company. The EDB participation in the capital as an international development bank is due to the significant influence of this large-scale project on achieving a sustainable growth of the Russian Federation economy, on developing an export-oriented production in Russia and on expanding the competition on the potash fertiliser market and its demonopolisation. Furthermore, the project will have innovative and social effects. The former will involve introduction of modern technologies and installation of high-efficiency equipment on the production facility which will allow integrated and efficient utilisation of minable resources. The latter effect suggests creating a large number of jobs, regional development and increasing tax revenues.”
State Corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)” was established in 2007 through a transformation of Bank for Foreign Economic Affairs of the USSR.
Vnesheconombank operates in conformity with Federal Law dated May 17, 2007 “On Bank for Development”. The Memorandum on Financial Policies approved by Resolution of the Government of the Russian Federation dated July 27, 2007 sets forth major business lines and indicators of the Bank’s performance.
Vnesheconombank is one of the key instruments for implementing the state economic policy aimed at removing infrastructure restrictions that impede economic growth, enhancing efficient utilization of natural resources, developing high-tech industries, unleashing innovative and industrial potential of small- and medium-sized enterprises (SMEs) and ensuring support for exports of industrial goods and services.Read more at www.veb.ru
Eurasian Development Bank
Eurasian Development Bank is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth and the expansion of mutual trade and other economic ties in its member states. EDB’s charter capital exceeds US $1.5 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan. Read more at http://www.eabr.org.
ZAO Raiffeisenbank is a subsidiary of Raiffeisen Bank International AG. Raiffeisenbank ranks 11th among the Russian banks in terms of assets, based on Q3 2012 results (Interfax-CEA). According to the same Interfax-CEA data, ZAO Raiffeisenbank ranked 5th in terms of liabilities of individuals and 10th with regard to consumer lending.
Raiffeisen Bank International AG (RBI) regards both Austria, wh ere it is a leading corporate and investment bank, and Central and Eastern Europe (CEE) as its home market. In CEE, RBI operates an extensive network of subsidiary banks, leasing companies and a range of other specialised financial service providers in 17 markets. RBI is the only Austrian bank with a presence in both the world's financial centres and in Asia, the group's further geographical area of focus. In total, around 61,300 employees service about 14.6 million customers through around 3,100 business outlets, the great majority of which are located in CEE (these figures include Polbank). Raiffeisen Bank International is a fully-consolidated subsidiary of Raiffeisen Zentralbank Oesterreich AG (RZB). RZB indirectly owns around 78.5 per cent of the common stock, the remainder is in free float. RBI's shares are listed on the Vienna Stock Exchange. RZB is the central institution of the Austrian Raiffeisen Banking Group, the country's largest banking group, and serves as the group head office of the entire RZB Group, including RBI.
 Any estimation hereinafter is stated at the exchange rate of the Central Bank of Russia as of October 30, 2012(USD 1.0 = RUB 31.4373).