Russia-China fund to target $200m forestry deal
The $4 billion investment fund set up by Russia and China is going to make its maiden investment in a Russian forestry company. The transaction is likely to happen in the next month.
The investment target is one of Russia's largest forestry firms, which exports a substantial amount of wood to China, Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), told Reuters. The capital will allow the forestry company to improve its margin on processed wood products in Russia.
A source close to the deal said that the initial investment could be around $200 million for a minority stake.
A joint venture company has been set up to run the fund, with RDIF and China Investment Corporation (CIC) controlling 60% and 40%, respectively. In late 2011, the two parties signed a memorandum to establish the Russia-China Investment Fund at a meeting between the Russian and Chinese heads of state. CIC's pledge is the first move from an overseas investor to invest with the RDIF.
In April, Russia and China confirmed plans for the joint $4 billion investment fund, which will be backed by initial $1 billion contributions from their respective sovereign wealth vehicles. The remaining $2 billion is expected to be come from other Chinese institutional investors. The new vehicle is earmarked for launch by the end of June 2012.
Engineering, agriculture, forest and timber industries, transportation, and logistics are among the target sectors. Special attention will also be given to energy efficiency and energy saving projects. It is expected to invest 70% of its funds in Russia and up to 30% in China.
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