EBRD to invest US$ 100 million in Macquarie Renaissance Infrastructure Fund

By Richard High09 June 2009

The European Bank for Reconstruction and Development (EBRD) is to invest up to US$ 100 million in the first infrastructure fund being set up to target projects mainly in Russia, Kazakhstan and Ukraine - the Macquarie Renaissance Infrastructure Fund (MRIF).

Cumulative investments by the EBRD in Russia, Kazakhstan and Ukraine's infrastructure already amount to about US$ 4.5 billion.

The EBRD's decision follows the announcement by the supervisory board of Russia's state-owned Vnesheconombank (VEB) to invest US$ 200 million in the MRIF.

The other key stakeholders in the new fund will be the International Finance Corporation (IFC), the private sector lending arm of the World Bank, and Kazyna Capital Management JSC, a subsidiary of Kazakhstan's sustainable development fund.

The fund's founding partners and managers, Macquarie and Renaissance Group, a Russia-based financial services provider, will each contributing US 50 million.

The fund will play a "crucial role" in modernising infrastructure in Russia, Kazakhstan and Ukraine, the three largest economies of the former Soviet Union, as well as other countries of the Commonwealth of Independent States (CIS), by making up for the "dearth of credit" from traditional sources of finance, according to EBRD president Thomas Mirow.

"This is an innovative use of private equity to finance infrastructure in the CIS region and it underlines the EBRD's long-term commitment to what is one of the top priorities for all these states, as well as the Bank's determination to pursue this goal together with experienced private investors despite the dark economic outlook," said Mr. Mirow.

In the transport and municipal infrastructure sectors, the EBRD has already invested over € 3.2 billion in the three countries (Kazakhstan - € 420 million, Russia - €1.96 billion, Ukraine - € 850 million).

Under the fund's operating rules, at least 50% of its total commitments will be in Russia. The fund will limit its exposure to no more than 25% of total commitments in any other CIS country, but its non-Russian investments will mainly target Ukraine and Kazakhstan. The Fund's target size is around US$ 1 billion.

The fund's equity investments will mainly focus on roads, airports, ports, electricity and gas distribution networks, heating networks, communications infrastructure, rail networks, water and sewerage utilities, as well as social infrastructure.

Transport deals are expected to account for the bulk of the fund's investments.

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