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Murat Aliev’s Bonum Capital combats climate change with Russian forestry sector deal

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Russia is home to a fifth of the planet’s forests, more than any other country in the world by a comfortable margin. But the country’s share in the global forest products market is just 4%, according to the UN – writes Colin Stevens

International investment group Bonum Capital believes that this has the potential to change, and is brokering a deal worth over half a billion dollars, which will make it a large stakeholder in a land-rich publically traded Russian forestry company Segezha Group, founder and sole owner of Bonum Capital Murat Aliev accounced on October 11th.

“In line with global trends around sustainability and combating climate change, we are strong believers in the outlook for the global forestry sector and see enormous potential for investment in Russian forestry assets, where improvements to operational efficiency and sector consolidation are creating significant opportunities for higher returns and growth of shareholder value.” Murat Aliev, founder and owner of Bonum Capital, told EU Reporter.

Bonum’s deal with Segezha will see the investment group sell Inter Forest Rus – a holding company comprised of high-quality assets and substantial forestry resources that was established to consolidate quality assets in the sector – to Segezha, expanding its existing resource base by half again. As a result of the deal, Segezha will own 16.1mn hectares of forest under long-term lease, five times more than any of its largest publicly traded peers.

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The deal value is in the region of $515mn. It is expected that this amount will be split in three parts: $238mn will be applied towards restructuring and consolidation costs in respect of the target assets; $205mn will be used to retire some of the target group’s debt; and Bonum Capital will take home approximately $82mn, $68mn of which is payable in instalments across a period of four years post-completion subject to the satisfaction of certain payment conditions.

Bonum also will invest $150mn in additional shares in Segezha, bought from Sistema – Segezha’s founder and majority shareholder.

“In the current context of global trends around sustainability and combating climate change, we are strong believers in the outlook for the global forestry sector and see huge potential for investment in Russian forest assets, where improvements to operating efficiency and sectoral consolidation are creating huge opportunities for higher returns and growth of shareholder value.” said Aliev.

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Separately, Bonum Capital has entered into a sale and purchase agreement to acquire a stake in Segezha Group from PJSFC Sistema, a publicly traded Russian investment company and the majority shareholder in Segezha Group, for the ruble equivalent of $150 million. As a result, Bonum Capital will increase its shareholding and become Segezha Group’s second largest shareholder with a stake of approximately 13%. The transaction is also expected to close in 1Q 2022 and will be funded with the proceeds from the Inter Forest sale and bank financing.

Bonum has been making considerable inroads into the forestry sector over the past year. It participated in Segezha’s IPO in April 2021, and also consolidated Inter Forest Rus, the holding company, which they are selling to Segezha. 

Bonum Capital is an investment group founded in 2013 in Moscow. The company’s founder and sole owner is Murat Aliev.

It invests in various assets including international public markets, private equity, venture capital and real estate in Russia. The company’s primary business is proprietary investing on public markets with focus on long-term concentrated positions.

Bonum Capital has been involved in all major recent CIS IPOs, including OZON, Kaspi.kz, Segezha Group, Fix Price and United Medical Group (EMC). Bonum Capital has expertise in purchasing and developing distressed assets with high potential for value growth, including through synergies with other assets of industry players.

Inter Forest Rus comprises 24 companies from different segments of the timber industry, and includes a vast swathe of forested land in Siberia as well as 5,000 employees, new mills and a fleet of boats for transporting resources by river.

Inter Forest Rus was created as a holding company to consolidate quality assets in the forest industry. Inter Forest Rus currently comprises the core assets of LDK Igirma, Trans-Sibirskaya Lesnaya Kompaniya and Priangarsky LPK, as well as over 20 companies in segments including forest ownership, logistics and operations.

It has one of the largest annual allowable cuts in Russia (88% softwood) at approximately 10.9 million cubic meters on a consolidated basis. Its production capacity is 1.5 million cubic meters of sawn timber at four sawmills, 35,000 cubic meters of plywood and 170,000 tons of pellets.

 Its main markets include China, Japan, the EU and Egypt, as well as Russia and other CIS countries. The company employs about 5,000 people. OIBDA for 2021 is expected to be approximately RUB 11 billion.

Bonum also acquired the rights for a number of companies in the forestry sector from Trust Bank in 2020 at auction. The deal therefore marks a considerable consolidation in the Russian forestry market, with Segezha now boasting one of the largest allowable cuts of any publicly listed forestry company in the world, at 23.6mn cubic metres.

“Our long-term interests in the sector are now focused on Segezha, which with its outstanding management team and a proven and profitable business model is well positioned to take Russia’s forestry industry to a new global level. As a result of this transaction, we will significantly increase our stake in Segezha Group and become its second-largest shareholder. We believe that Segezha has the potential to become one of the biggest success stories in Russia’s capital markets.” said Aliev.

Bonum Capital invests in several asset classes including international public markets, private equity, venture capital and Russian real estate. The company’s core business is investing on public markets.

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Climate migration: Joint Research Centre report highlights importance of focusing on local adaptation solutions

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The Commission's Joint Research Centre (JRC) has published a new report on climate change-induced displacement in and from Africa. The report highlights the need for a joint effort in migration, climate adaptation and development policies to protect the affected communities as adverse impacts of environmental change continue to undermine their livelihoods.

Commissioner Mariya Gabriel said: “Data-driven and evidence-based research is fundamental for understanding and responding efficiently to global challenges such as the impact of climate change on human populations and mobility. The JRC report sheds some more light on this very complex topic and can help us in setting priorities for the years to come.”

The report quantifies the populations that will be exposed and vulnerable to climate change impacts in the future and identifies associations between climate change and net migration in the recent past. Global climate patterns are changing, triggering slow changes in ecosystems and agricultural productivity or sudden onset disasters, including hurricanes, heat waves and droughts. Climate change will have a profound impact on population dynamics, but research shows that the reality is complex. In an effort to understand to what extent migration can represent a coping strategy for the communities hit by climate change impacts, JRC scientists analysed past trends and future population projections through the lenses of different climate scenarios.

The EU is active in providing support and targeted relief to prevent the negative impacts of climate change and to foster adaptation strategies in the most affected regions. Besides its ambitious action on climate mitigation, climate adaptation is an absolute priority for the EU. In February, the Commission adopted a new Strategy on Adaptation to Climate Change, setting out the path to prepare for the unavoidable impacts of climate change and become climate-resilient by 2050 in the EU and around the world. In 2020, close to 50% of the funding for developing countries was dedicated to either climate adaptation or cross-cutting action (climate change mitigation and adaptation initiatives). Earlier this week, the Commission announced a new pledge of €100 million for the Adaptation Fund. Find more information in the report and news item.

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Kazakhstan makes COP26 commitment to tackling climate change

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COP26 in Glasgow is a gathering of the world’s leading economies and what they intend to do to tackle a crisis said by some to be even worse than the coronavirus pandemic. What is happening in Glasgow to address this most pressing of issues will affect all parts of the world, including Kazakhstan, the world’s largest landlocked country and the ninth-largest overall.

Located at the centre of the Eurasian continent, Kazakhstan strategically links the markets of South East Asia and Western Europe.

Changing rainfall patterns are increasing the intensity and frequency of droughts. With the majority of the country’s topography classified as steppe, desert or semi-desert, climate change is placing an additional burden on the country’s water resource management and the livelihoods of almost 13 percent of the population that lives in high drought-prone areas.

Kazakhstan has committed to tackle climate change, and together with the United Kingdom released a joint statement on Strategic Partnership and Joint Efforts to Respond to Climate Change.

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H.E. Askar Mamin, Prime Minister of the Republic of Kazakhstan (pictured centre),  participated in the World Leaders’ Summit of the United Nations Framework Convention on Climate Change (UNFCCC) in Glasgow this week  (1 -2 November).

Speaking at the UN Climate Change Conference COP26 in Glasgow, United Kingdom, Prime Minister Askar Mamin said “Coming together at COP26, we recognise that climate change is the key threat to global security and prosperity in the 21st century.

“We are committed to tackling climate change through ambitious domestic action, as well as close cooperation at the bilateral and multilateral levels. The UK’s Net Zero Strategy will accelerate its green energy transition, decarbonising power generation by 2035 and achieving net zero emissions by 2050. Kazakhstan has committed to reach net zero by 2060 in its upcoming carbon neutrality strategy which will involve major reforms in every sector of the economy, with special focus on energy, manufacturing, agriculture, forestry, transport, utilities, and waste management.

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 “The Government of Kazakhstan is also setting key midterm targets within its updated Nationally Determined Contribution: increasing the share of renewables to 15% by 2030 with further potential to grow and reducing greenhouse gas emissions unconditionally by 15% by 2030 (compared to the base year) with a conditional target of 25% (subject to international support and assistance). Kazakhstan, the ninth largest country in the world and a guardian of the steppe ecosystem, also fully supports the COP Presidency statement on forests and sustainable land use, committing to plant 2 billion trees by 2025.

As we develop and enhance our national plans, we recognise that the Conference of Parties to the UNFCCC is the key multilateral vehicle to deliver the ambition and action we so urgently need. We intend to take increasingly bold action to meet and where possible exceed the targets set in our Paris Agreement Nationally Determined Contributions (NDCs) and Long-Term Strategies. We will also drive forward implementation of the policy changes needed to meet our respective pledges to reach carbon neutrality.

In this context, we also welcome the recent Central Asia/US C5+1 statement which underlined the imperative to submit ambitious NDCs for the COP26 Glasgow Climate Summit. It pledged that the NDCs of the countries of Central Asia would include specific targets to reduce greenhouse gas emissions and concrete actions to reach those targets; and that those targets and actions would be in line with the goal of keeping a 1.5 degree Celsius above pre-industrial levels temperature limit within reach. UK and Kazakhstan will continue working together to realise this important commitment and to help raise climate ambition across Central Asia and the wider region.

In addition, we will look to strengthen our cooperation on environmental matters, as well as exploring the opportunities that exist in the transformation to a green economy that may benefit both our countries. We will ensure that our existing Ministerial intergovernmental structures - the Strategic Dialogue and the Intergovernmental Commission on Trade and Investment – prioritise cooperation in these areas. Investment in a sustainable and clean recovery from the Covid 19 pandemic will create employment in the industries of the future, while ensuring that we address the linked challenges of public health, climate change and biodiversity. Such cooperation will prioritise energy efficiency, economic diversification away from fossil fuels, and in particular the imperative to transition from the use of coal for power generation, as well as developing Kazakhstan’s considerable renewable potential. It will also look to develop our countries’ green finance offers in support of this transition.

We will also endeavour to enhance cooperation across other key aspects of climate change mitigation, adaptation and environmental protection including the exchange of best practice in the field of de-carbonisation of the wider economy, waste management, sustainable forest and land use, improvement of air quality, biodiversity, sustainable and green finance, environmental research and public awareness building.

We highlight our commitment to achieving an ambitious and balanced negotiated outcome at COP26. We also agree to continue working closely beyond COP26, including policy discussions on wider climate change issues and the exchange of information on emissions reduction targets in all appropriate future high level dialogues.

In the thirty years since Kazakhstan’s independence and the establishment of our diplomatic relations, the UK-Kazakhstan relationship has become a strong partnership based on mutual trust, shared values, and effective cooperation – as reflected in the upcoming UK-Kazakhstan Strategic Partnership and Cooperation Agreement. As we celebrate this significant anniversary, we are determined to further build and deepen our cooperation on the issues that matter most to both our countries.

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Commission, Breakthrough Energy Catalyst and European Investment Bank advance partnership in climate technologies

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At the United Nations Climate Change Conference of the Parties (COP26) in Glasgow, European Commission President Ursula von der Leyen and Bill Gates, the Founder of Breakthrough Energy, together with European Investment Bank President Werner Hoyer, have officially entered into a pioneering partnership that will boost investments in critical climate technologies. The signing of a Memorandum of Understanding follows up on the initial announcement made in June this year at the Mission Innovation Ministerial Conference.  

The partnership between Commission, European Investment Bank and Breakthrough Energy Catalyst will mobilize up to €820 million ($1 billion) between 2022-2026 to accelerate the deployment and rapidly commercialise innovative technologies that will help deliver European Green Deal ambitions and the EU's 2030 climate targets. Each euro of public funds is expected to leverage three euros of private funds. Investments will be directed towards a portfolio of EU-based projects with high potential in four sectors:

  • Clean hydrogen;
  • sustainable aviation fuels;
  • direct air capture, and;
  • long-duration energy storage.

European Commission President Ursula von der Leyen said:“The time for action is now. The climate challenge requires us to invest in high-risk innovations and to eliminate the ‘green premium' involved in commercialising new technologies. I cannot wait to see the technologies coming to the market. The EU-Catalyst partnership is another step on the way to making Europe the first climate neutral and climate innovation continent. I look to Member States, industry and others to join the climate innovation race.”

European Investment Bank President Werner Hoyer said: “To meet the Paris climate goals we need a global technological revolution and massive investments in game-changing innovations. The European Investment Bank has a strong track record of financing early stage technologies, helping scale them up to become more affordable. Today we are using this expertise to reach the EU's ambitious climate targets. I am delighted that we can announce today a new partnership with the European Commission and Breakthrough Energy Catalyst to support the green solutions of tomorrow and build a green future for all of us.”

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Bill Gates, founder of Breakthrough Energy, said: “Reaching net-zero will be one of the hardest things humanity has ever done. It will require new technologies, new policies, and new partnerships between the private and public sector at a scale we have never seen before. This partnership with the European Commission and European Investment Bank will help accelerate the widespread adoption of climate solutions, which will build clean industries, and create job opportunities throughout Europe for generations to come.” 

The EU-Catalyst partnership will target technologies with a recognised potential to reduce greenhouse gas emissions, but which are currently too expensive to get to scale and compete with fossil fuel-based technologies. It will bring together the public and private sectors to invest in large-scale demonstration projects.

Both the European Investment Bank (using Commission resources) and Breakthrough Energy Catalyst will provide equivalent amounts of grants and financial investments in the projects. As part of its contribution, Breakthrough Energy Catalyst will mobilize partners to invest in projects and/or purchase the resulting green products.  

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By supporting these technologies in this phase of the demonstration process and creating a market for those green products, the EU-Catalyst partnership will drive down their ‘green premium', i.e. reduce their costs to a level that is eventually competitive with fossil-fuel based options. This will help to accelerate their global adoption and lead to independence from public support schemes. 

EU funding for the partnership will be drawn from Horizon Europe and the Innovation Fund, and will be managed under InvestEU according to established governance procedures. Breakthrough Energy Catalyst will leverage equivalent private capital and philanthropic funds in support of key climate-smart technologies to speed up the transition towards sustainable industrial ecosystems in Europe. The EU-Catalyst partnership will be open to national investments by EU Member States through InvestEU or at project level. The first projects are expected to be selected in 2022.

European Commission

The European Commission has a range of policies and programmes to deliver on its climate ambitions. Under the European Green Deal, the ‘Fit for 55' package was adopted in July 2021 with the aim of cutting greenhouse gas emissions by at least 55% by 2030.

EU funding for projects supported under the Commission-Catalyst partnership will be channelled through the InvestEU programme and implemented by the European Investment Bank and other interested financial institutions.

For the purpose of this partnership, InvestEU funding is guaranteed by the Innovation Fund and Horizon Europe, the Europe's research and innovation framework programme worth €95.5 billion (2021-2027). Horizon Europe dedicates 35% of its budget to climate action, while the programme also supports a range of partnerships which mobilise private funding to deliver on pressing global challenges and modernise industry through research and innovation.

The Innovation Fund is a new funding instrument for delivering the EU's economy-wide commitments under the Paris Agreement and its climate objectives, by supporting the demonstration of innovative low-carbon technologies.

The Commission supports together with Breakthrough Energy Catalyst the second phase of Mission Innovation to bring about a decade of action and investment in research, development and demonstration to make clean energy affordable, attractive and accessible for all.

European Investment Bank

The European Investment Bank (EIB) is the long-term lending institution of the European Union and is owned by the EU Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals both in Europe and beyond. The European Investment Bank is active in around 160 countries and is the world's largest multilateral lender for climate action projects.

The EIB Group has recently adopted its Climate Bank Roadmap to deliver on its ambitious agenda to support €1 trillion of climate action and environmental sustainability investments in the decade to 2030 and to deliver more than 50% of EIB finance for climate action and environmental sustainability by 2025. Also, as part of the Roadmap, from the start of 2021, all new EIB Group operations will be aligned with the goals and principles of the Paris Agreement.

Breakthrough Energy

Founded by Bill Gates, Breakthrough Energy is dedicated to helping humanity avoid a climate disaster. Through investment vehicles, philanthropic programs, policy advocacy, and other activities, Breakthrough Energy is committed to scaling the technologies the world needs to reach net-zero emissions by 2050.

Breakthrough Energy Catalyst is a first-of-its-kind model designed to accelerate the critical climate technologies that will underpin a zero-carbon economy. Catalyst seeks to bring together the public and private sectors to fund commercial-stage demonstration projects for critical decarbonisation solutions. Catalyst will address the early deployment funding gap for these technologies and provide a structure to accelerate their commercialisation. Catalyst will start by funding projects across four technologies: green hydrogen, sustainable aviation fuel, direct air capture, and long-duration energy storage. In the future, Catalyst intends to expand the same framework to other necessary innovations, like low-carbon steel and cement.

More information

Speech by the President on clean technology innovation (europa.eu)

Questions and Answers: EU-Catalyst Partnership

Factsheet: EU-Catalyst Partnership

Memorandum of Understanding

COP26

Breakthrough Energy

A European Green Deal | European Commission (europa.eu)

Cluster 5: Climate, Energy and Mobility | European Commission (europa.eu)

Innovation Fund | Climate Action (europa.eu)

EU to set up new European Partnerships (europa.eu)

European Clean Hydrogen Alliance | Internal Market, Industry, Entrepreneurship and SMEs (europa.eu)

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