Tatarstan Clean Tech Fund launched at German-Russian government meeting 19 July in Hanover
Category: WAM Publications, Recent Highlights
Tatarstan, a Republic of the Russian Federation, and Wermuth Asset Management GmbH launched the “Tatarstan Clean Tech Fund” (TCTF) on 19 July 2011 in a signing ceremony at the occasion of the German-Russian government consultations, in the presence of Chancellor Angela Merkel and President Dmtiry Medvedev. This will be the first ever clean tech fund with a specific mandate to focus on the needs of the Russian Federation, and Tatarstan in particular. The launch of this fund is in line with the strategic objective of German-Russian cooperation to modernize Russia’s economy, while offering outstanding returns to investors.
The Fund will look to address the issue of global warming and other environmental issues by investing in the world’s best clean tech companies which offer technology of relevance to Tatarstan. Tatarstan in turn offers the investors in the “Tatarstan Clean Tech Fund” two significant advantages: 1) with an energy intensity per unit of GDP eleven times higher than in Germany, the economic benefit of applying clean technologies in Tatarstan and Russia is far greater than in developed countries; 2) a very attractive investment climate, thanks in part to a free trade zone which provides tax breaks to investors. In addition, Tatarstan represents an excellent base from which to access Russian and indeed Eurasian markets.
The signatories to the agreement were SINEK (Svyazinvestneftekhim), the holding company of the Republic of Tatarstan, with some $7.5bn in assets, represented by its General Director Valery Sorokin, and Wermuth Asset Management GmbH, the German asset manager, represented by founding partner and chief investment officer Jochen Wermuth, as well as Dr Hans-Friedrich von Ploetz, former German Ambassador to Russia, the UK and NATO, who will head the Investment Advisory Council of the Fund.
It would seem counterintuitive that an oil and gas producing region such as a Tatarstan would support energy efficiency, but in fact that is part of the strategy to extend its oil and gas supplies for as long as possible. Because the resource is scarce and the price will only go up, the less is consumed today and the more is consumed later, the more value oil and gas producing region can extract from its reserves. This approach also benefits the Tatarstan economy by allowing it to reinvent itself as a source of clean technology entrepreneurship and manufacturing to replace its dependence on the oil and gas industry. In many ways, Tatarstan is similar to Abu Dhabi, which is also looking to become a leader in clean technologies. Tatarstan thus will not only benefit from a cleaner environment, but also from jobs for highly qualified people and increased foreign direct investment.
The Fund will be seeded with €110m by its founders and seeks to raise an additional €90m to reach its target size of €200m over the coming 18 months. The Fund is conceived for ten years: a six-year investment period and a four-year wind-down period, with targeted returns of 35% per annum. The TCT Fund will invest primarily into medium and small-size companies from Europe, particularly Germany, as well as the US, which have a proven record in clean-technologies and are looking to expand their business. They would consider either selling their products to Tatarstan or ultimately setting up production there. The economic benefit to the Tatarstan economy is expected to be substantial, both in terms of reduced environmental damage and profitable applications of new technologies. At the same time, the Fund will support and apply clean technologies in Russia - the country has the potential to save some 1,000 mega tons of CO2 emissions annually by applying state-of-the-art clean technologies.
Projects which the Fund has earmarked for investments include: “waste-to-energy” (municipal waste processing without incineration, with recycled materials and electricity as outputs); lithium-ion battery production for electric cars; “vehicle-to-grid systems” (supply of electricity from electric vehicles into the electricity grid and vice-versa); growing and refining of bio fuels (including as of 1.1.2012 bio jet fuel for airplanes); environmentally less damaging and more profitable oil and gas extraction; production of chemicals in a CO2-negative fashion (i.e. carbon sequestration via the chemical industry); development and construction of a “low energy consumption village” similar to Masdar in Abu Dhabi or Freiburg im Breisgau or in companies producing materials for energy efficient housing.
Contact person:
David Denning
Head of Client Services and Marketing
+ 7 495 580 7303
ddenning@wermutham.com