Emerging Markets

Despite sanctions imposed by US-authorities on Russia, construction of large infrastructure projects continues. Recently Novatek opened the second of four production trains on Yamal peninsula, freezing natural gas down to 164 degrees below Celsius to get it transportable. Next year the capacity of 17,4 million metric tons of liquefied natural gas (LNG) will be reached, but even before this the new Russian energy giant Novatek is widely expected to make an investment decision on a second LNG-factory worth of more than 18 billion Euro. Other huge projects worth dozens of billions are planned or under construction along the Baltic shore and in the Russian Far East.

However, it remains difficult for foreign investors to enter large infrastructure projects such as the gas processing plants or the railway corridor Moscow-Kazan. An obvious reason is that companies themselves hesitate to invest due to sanctions-related risks and uncertainty. But they might be encouraged to invest if governments simplified mechanisms to issue state-guarantees. Creon Capital works closely with the Association of European Businesses (AEB) to achieve progress on this matter.

Several investment projects are stalled because it takes too much time to issues state-guaranties, which are usually being granted to smaller or highly secured projects only. This means in fact that the government does not issue them. Even governmental institutions such as VEB and its subsidiaries require tough preconditions, which are difficult to fulfill. Therefore, the influx of FDI remains limited and both European and Chinese investors hold back their capital to finance projects.

Creon Capital proposes the Russian government to increase its efforts to ease the conditions for state-guarantees, which must include bureaucratic processes, financial preconditions, due diligence, monitoring and decision-making procedures. The existing institutions of industrial development such as VEB and its subsidiaries shall expand their instruments to include a wider range of economic sectors and increase the minimum amount of funding for single projects.

For further information please contact:
Leila Nettaf
T. +352 26 49 79 2203
E. nettaf@creoncapital.lu

When Creon Energy Fund gets invested in a project, the Fund’s managers know how to act in the background: Many energy projects, particularly in the Oil and Gas Downstream sector have been pushed forward towards success by Creon Group’s professionals for almost two decades. Regardless Creon Energy Fund’s investments – Creon Capital’s executive team is capable to assist other investors as an advisor as we know how to mitigate investment risks in Emerging Markets in general and particularly in Russia and CIS countries.

How to protect the foreign investor’s rights and investments? This is a crucial question. And it might keep awake at night any entrepreneur when he is about to decide whether to set up a foreign Joint Venture, to purchase minority shares of a foreign company, or to found a subsidiary abroad. As a Luxembourg-based and -licensed Business Management Consultancy, Creon Capital adopted a new concept how to mitigate the risks, which has been presented during the China Roadshow 2017 to a broader audience in Beijing.

Creon Capital’s risk-minimizing approach is addressed to investors, who are keen to invest in Emerging Markets but don’t like the idea to become subject of the local legislation in the targeted countries due to their lack of stability, transparency, efficiency or predictability. Creon Capital offers to create a sub-Fund within the existing Sicav-SIF structure in Luxembourg, which is monitored by most reputable service providers such as Ernst & Young, Arendt & Medernach and the depositary bank CACEIS. The Sub-Fund, which operates independently from the Creon Energy Fund, will be subject to EU-legislation and regulation.

Structuring the investment via Luxembourg protects the investors on several levels:

Legally, the investment will be realized and monitored by a Luxembourg entity, which is the Creon Energy Sub-Fund. While being under control of the actual investor, this vehicle is subject to Luxembourg laws, regulations and standards. If a legal dispute between investors arises, the legal process will be held in EU. In fact, this reduces significantly the possibility that local businessmen threaten their foreign partners by applying non-compliant instruments.

Structurally, the Luxembourg-based Sub-Fund is being managed by the experienced Creon Capital team and its well-established service-providers. Valuables such as off-take-agreements or EPC-contracts will be held in custody by the depositary-bank CACEIS, which eliminates the risk of raids against single Joint Venture-partners. Besides CACEIS, both the auditor Ernst & Young and Luxembourg’s financial authority CSSF, are conduction a threefold monitoring and evaluation of the assets on the ground. The risk-management and compliance-policy can be subject to regular monitoring as well.

Financially, Creon Capital’s structuring services provide significant benefits. Emitted on Euro-basis, the Sub-Fund itself can be perceived as a “haven” for partners from non-European countries. The Creon Capital management can assist to fund the Sub-Fund’s project with the perfect timing for money transfers as we monitor the usually volatile currencies in the targeted countries. Together with our service partners we also help to transfer capital towards to the foreign entity and back.

Operationally, it’s up to our partners, if they prefer to run an entity on the ground themselves. Creon Capital can use the Group’s network to find the management professionals and business partners to ensure the success of the local subsidiary. Under any circumstances, the project initiator will remain to be the owner with access to revenues and profits, but also with the full economic responsibility

If you have any specific questions, don’t hesitate us:

Florian Willershausen
Director Business Development,
Marketing and Communications
Creon Capital S.à.r.l.
T (GER) +49 151 162 44 591 (WhatsApp)
T (RUS) +7 968 783 84 12
T (LUX) +352 621 235 126
E fw@creoncapital.lu

Creon Capital claims to ease procedures for state-guarantees issued by Russian government

New concept: How we mitigate investment risks in Emerging Markets