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INTERNATIONAL COPYRIGHT, U.S. AND FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 1999. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.
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by Ainash Mukanova
Opportunities exist in Kazakhstan for U. S. firms to invest in small and medium-sized companies in which one equity investment partner is GIMV Kazakhstan Post-Privatization Fund (KPPF), a venture capital fund managed by a Belgian investment company and created with funding from the European Bank for Reconstruction and Development (EBRD). GIMV was originally capitalized with 30 million Eurodollars provided by the EBRD and a further 3 million Eurodollars co-invested by GIMV; the fund currently has 18 million to invest. GIMV KPPF is also supported by a technical assistance grant for project consulting services of 20 million Eurodollars from the European Union’s technical assistance program.
The KPPF began operations in Kazakhstan in April, 1996, and has since invested in a total of six start-up and existing companies, including ventures exclusively with Kazakhstani enterprises as well as with partners from the U.S., United Kingdom, France, and Belgium. One of its equity investments is in FoodMaster, a U.S.-Kazakhstani JV in dairy and juice production, packaging, and distribution. Other investments include a start-up paint factory, a mobile trunk radio company, a poultry farm, a water desalination and packaging facility, and a cereal processing facility.
Target sectors for future investments include bottling (especially high-quality glass bottling); brewing and wine production, cable television, confectionery, distribution, warehousing, food processing (especially meat packing and cheese), franchises, packaging (especially cardboard packaging and high-quality consumer packaging); pharmaceuticals (including food supplements and herbals), information technologies; upstream/downstream oil services companies; and building construction materials.
Target companies for investment are small and medium-sized companies in Kazakhstan, whose state ownership does not exceed 33 percent. An attractive formula for investment for future projects is one-third ownership each by KPPF, a foreign partner, and a local company. KPPF can invest between 300,000 to 500,000 Eurodollars in a single project; however, it cannot own more than 55 percent of the shares in any company (49.9 percent EBRD, 5 percent GIMV). Although KPPF primarily invests in equity capital, it may also give supporting loans and can provide long-term debt financing for its invests with a one to two-year grace period. The fund seeks a good overall rate of return on its total equity and debt investment in any one company. KPPF’s criteria for investment in a local company include a strong management team; significant growth prospects for products/services; local production/import substitution; well-recognized brands with strong lead market position; good marketing and distribution; and a foreign, strategic partner.
Example: One of KPPF's major projects is the Ust-Kamengorsk Poultry Factory (UKPF) which is located in the village of Molodezhny, about 20km far from Ust-Kamenogorsk. In January 1998 UKPF received an equity and loan investment from the GIMV Kazakhstan Post-Privatization Fund. Within the first 6 months of 1999, UKPF produced 1,930 tons of meat. In the second half of the 1999, the company is planning to produce about 3,500 tons of meat. To improve the quality of produced feed and to reduce the cost of feed, UKPF is in the process of building a feed-mill. Today the construction of the metal frame is complete, the building is being extended, and installation of the equipment has been started. It is expected to be ready in December 1999. For this project the Kazakhstan Post-Privatization Fund , as of December 1999, is seeking a U.S. company with relevant financial experience to operate/manage the facility and/or to become co-financier.
For more information on the project and KPPF, please contact:
U.S. Commercial Service
531 Seyfullin Prospect, 3rd floor
Almaty 480091, Kazakhstan
Tel: 7-3272 58-79-16/7
Fax: 7-3272 58-79-22/3
E-mail: almaty.office.box@mail.doc.gov
Contact: Julie Snyder, Senior Commercial Officer
Natalia Antonenko, BISNIS Coordinator
GIMV Kazakhstan Post-Privatization Fund
64 Zhibek Zholy Street
Almaty 480002, Kazakhstan
Tel: 7-3272 33-13-57, 33-57-46
Fax: 7-3272 50-39-09, 33-32-82
E-mail: gimv@kazfund.almaty.kz
Contact: Greg Curtis, Vice-President
Alessandro Manghi, Investment Manager