May 25, 2018 / 10:08 AM / in 25 days

Russia sovereign wealth fund targets infrastructure projects

ST PETERSBURG (Reuters) - Russia’s RDIF sovereign wealth fund intends to co-invest in new Russian infrastructure projects to help realize plans set out by Vladimir Putin at the start of his fourth presidential term, Kirill Dmitriev, RDIF’s head, told Reuters.

FILE PHOTO: An aerial view shows a bridge of the R257 federal highway across the Yenisei River outside Krasnoyarsk, Russia February 24, 2018. REUTERS/Ilya Naymushin/File Photo

Putin has said he wants to make upgrading Russia’s often degraded infrastructure one of the priorities of his 2018-2024 term, part of what he says is a drive to dramatically lift living standards.

Putin has talked of building new roads, regional airports and upgrading sea ports and Finance Minister Anton Siluanov said on Thursday that Moscow planned to create a special fund to finance the projects up until 2024 which is expected to be worth 3 trillion rubles ($49 billion).

Dmitriev said that RDIF and some of its partners, including sovereign wealth funds from Asia and the Middle East, planned to take part in the project.

He said the funds might consider buying domestic Russian rouble debt, known as OFZs, and co-investing in infrastructure projects that are part of the infrastructure fund.

“A number of investors may invest in these rouble instruments,” Dmitriev told Reuters in an interview.

“The state plans to create an infrastructure fund to co-invest in projects – we and our partners may co-invest in these projects as well.”

He said there was not yet a specific discussion about the volume of OFZ bonds foreign investors might buy, part of a Russian drive to develop its domestic debt market after Western sanctions, which were first imposed in 2014.

BAILED-OUT BANKS

Dmitriev and the representatives of other sovereign wealth funds met Putin on Thursday at an annual economic forum in St Petersburg.

With $10 billion in capital, Dmitriev said RDIF will also be part of another state fund which the central bank plans to set up to hold the non-core assets of bailed out banks.

The central bank estimates the value of non-performing and non-core assets to be transferred into that fund at around 2 trillion rubles ($32 billion).

The bank plans to sell off those assets within three to five years after restoring their financial health.

Dmitriev said that RDIF would become a minority shareholder in the central bank fund and sit on its board to help manage it.

“We will try to invest in the most promising projects, for example, in unfinished real estate projects ... We don’t plan to take any bad debts (onto RDIF’s balance sheet),” he said.

Additional reporting by Polina Devitt; Editing by Andrew Osborn and Alexander Smith

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