Investment Opportunities in the Russian Far East
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1 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST 1 2 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Chukotka Petrochemical industry AAutonomous Area Mining Power industry Kamchatka Territory Agriculture Republic of Sakha Fishery and aquaculture (Yakutia) Magadan Region Wood harvesting and processing Khabarovsk Territory Machine building Sakhalin Region Real estate and tourism Transport and logistics Amur Region Jewish Autonomous Region Primorsky Territory Healthcare 2 3 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Petrochemical Chukotka Petrochemical industry AAutonomous industry Area Mining Power industry Kamchatka Territory Agriculture Republic of Sakha Fishery and aquaculture (Yakutia) Magadan Projects underway Region Wood harvesting and NGL field Khabarovsk processing Territory Processing facility Machine building LNG plant Investment Opportunities Real estate and tourism Oil and gas field Sakhalin Region Transport and logistics Amur Processing facility Region Jewish Autonomous Region Primorsky LNG plant Territory Healthcare 3 4 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Sector Potential Petrochemical industry Attraction Factors State Support Mining Unique business environment ▪ Significant reserves (27% of gas and 17% of oil of the APR), estimated reserves – over USD 1.0 trillion. ▪ The Russian Far East offers unparalleled preferences to businesses – special legal treatment in the Advanced Special Economic Zones ▪ Industry majors are engaged in the sector (Gazprom, SIBUR, Power industry (ASEZ) and Free Port of Vladivostok (FPV): Rosneft, Surgutneftegaz, etc.) ✓ Zero income tax for the first 5 years of the project, and half income tax for the next 5 years ✓ Employee insurance contributions reduced 4 times Agriculture ▪ Eastern Siberia – Pacific Ocean oil pipeline with the capacity ✓ Zero property tax for the first 5 years of the project, and reduced of up to 80 mln tonnes per year by 4 times for the next 5 years ▪ Power of Siberia Gas Pipeline with export capacity of ✓ Mineral extraction tax reduced by 2.5 times for the first 10 years 38 bln m3 per year of the project Fishery and aquaculture ✓ Duty-free zone regime ✓ Simplified land registration procedures ▪ Accessible maritime transportation hubs, available seaport ✓ Electronic visa for foreigners Wood harvesting and infrastructure for cargo transshipment processing (15 terminals) ▪ Investors can resolve all and any issues based on one-stop shop ▪ Available railways and hydrocarbons transshipment principle infrastructure. Machine building Infrastructure ▪ Construction of the necessary infrastructure for the investor is subsidised by the state on a non-repayable basis ▪ Geographic proximity to the major consumers of the growing Real estate and tourism APR market (fast delivery by sea: 6 days at the most from Financing the Far Eastern Federal District sea ports compared to 23 ▪ Preferential project financing is available for 5% p.a. in rubles for 10 days from the Middle East and 12 days from South-East years (operator – Far East and Baikal Region Development Fund) Asia) Transport and logistics ▪ Annual imports of chemicals to China, Japan and Korea exceed USD 200 bln. Dedicated industry-specific support measures ▪ Preferential oil export duty Healthcare 4 5 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Examples of projects underway Petrochemical industry 3 ▪ Amur Gas Processing Plant, capacity 42 bln m per year (Gazprom PJSC). Mining Application to Svobodny ASEZ under development ▪ Total investment – over RUB 600 bln, construction and installation works are launched Power industry ▪ Amur Natural Gas Chemical Complex, capacity – 1.5 mln tonnes of polyethylene per year (SIBUR Holding PJSC), application to Svobodny Agriculture ASEZ under development ▪ Total investment – over RUB 500 bln Fishery and aquaculture ▪ Mini-LNG plant in Yuzhno-Sakhalinsk, Sakhalin Region, capacity – 12.5 thou. tonnes per year (Sakhalin PCC LLC) Wood harvesting and ▪ Total investment – RUB 0.9 bln, to be commissioned in 4Q 2017 processing ▪ Amursky Refinery, capacity 6 mln tonnes per year (AEC LLC), Machine building Priamurskaya ASEZ resident ▪ Total investment – over RUB 120 bln, construction and installation works launched Real estate and tourism Transport and logistics Healthcare 5 6 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Investment Opportunities Petrochemical industry ▪ Methanol synthesis plant in the Amur Region with the capacity of 1.0 mln tonnes per year (TechnoLeasing JSC). Application to Svobodny Mining ASEZ under development ▪ Total investment – RUB 38 bln, co-financing in the amount of RUB 29.0 bln required, IRR ~25% Power industry ▪ Nakhodka fertilizer plant in Primorye Territory, capacity 5.2 mln tonnes per year ▪ Total investment – over RUB 400 bln, EPC-partner with financing-raising Agriculture potential required, IRR ~20% ▪ Methanol synthesis plant in Yakutia with the capacity of 1.8 mln tonnes Fishery and aquaculture per year (YATEC JSC) ▪ Total investment – RUB 80 bln, co-financing in the amount of RUB 65 bln Wood harvesting and required, IRR ~15% processing ▪ Construction of a mini-LPG plant network in Khabarovsk Territory with Machine building the capacity of 400 thou. tonnes per year (Dalgazresurs LLC) ▪ Total investment – RUB 14.6 bln, technology partner with financing- raising potential required, IRR ~25% Real estate and tourism ▪ Creation of natural gas chemical cluster in Svobodny ASEZ Transport and logistics ▪ Selection of polymer processors is underway, average investment per one project – about RUB 300 mln (e.g. production of polyethylene tubes, films) Healthcare 6 7 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Mining Chukotka Petrochemical industry Autonomous Area Sn Coal - Pyrkakaiskoye - Amaamskoye Mining Au Cu Kekura - Au - Baimskoye Klyon - Power industry Au Kamchatka Territory Sn Drazhnoe - - Ruchei Au Agriculture Au Tirekhtyakh - Au Ozernovskoye - Kyuchus Au Pavlik - Au Ni - Igumenovskoye Natalkinskoye - Fishery and aquaculture Republic of Au Coal- Shanuch Sakha - Nezhdaninskoye - (Yakutia) Magadan Krutogorovskoye Region Coal Zn Wood harvesting and Coal - Kirovskoye - Sardana Khabarovsk processing - Khapchagaiskoye Coal Territory - Kangalasskoye Au Machine building Chulmakanskoye Au - Bolshoi Kuranakh river Sakhalin Coal Zn Au - Polyanka Region Fe - Albazinskoye Coal Coal - Verkhne-Menkeche Cu Tayozhnoye- - Solntsevskoye Cu Coal - Malmyzhskoye - Elginskoye Coal Sn Projects underway Real estate and tourism Kun-Manye - Ni - Urgalskoye Au - Pravourmiyskoye Noni - Au Sn Investment Opportunities Sn - Durminskoye Transport and logistics Coal - Tigrinoye Amur Au Support of FEIA ANO - Bikinskoye Region Jewish Autonomous Region Primorsky Coal Territory Acronyms: Au – gold; Ni – nickel; Healthcare - Suchansky mine Fe – iron ore; Zn – zinc; Sn – tin; 7 Cu – copper; Coal – coal 8 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Sector Potential Petrochemical industry Attraction Factors State Support Mining First-rate source of raw materials: ▪ gold: 5.7 thou. tonnes (USD 220 bln) – 44% of Russian Unique business environment reserves ▪ The Russian Far East offers unparalleled preferences to businesses ▪ silver: 45 thou. tonnes (USD 24 bln) – 37% of Russian – special legal treatment in the Advanced Special Economic Zones Power industry reserves (ASEZ) and Free Port of Vladivostok (FPV): ▪ copper: 10 thou. tonnes (USD 57 bln) – 11% of mln reserves ✓ Zero income tax for the first 5 years of the project, and half ▪ coal: 30 bln tonnes (USD 1,300 bln) – 10% of Russian income tax for the next 5 years reserves ✓ Employee insurance contributions reduced 4 times ▪ tin: 2 mln tonnes (USD 30 bln) – 93% of Russian reserves Agriculture ✓ Zero property tax for the first 5 years of the project, and reduced by 4 times for the next 5 years Opportunities for follow-up exploration of the available fields. ✓ Mineral extraction tax reduced by 2.5 times for the first 10 years The unallocated fund contains: of the project Fishery and aquaculture ▪ 14% of precious metals ✓ Duty-free zone regime ▪ 70+% of coal ✓ Simplified land registration procedures ▪ 50% of tin ✓ Electronic visa for foreigners Wood harvesting and ▪ 70% of tungsten processing ▪ 16% of iron ▪ Investors can resolve all and any issues based on one-stop shop principle Machine building Infrastructure ▪ Accessible maritime transportation hubs, available seaport ▪ Construction of the necessary infrastructure for the investor is infrastructure for transshipment of solid minerals (10+ subsidised by the state on a non-repayable basis terminals) ▪ Available railways and infrastructure. Real estate and tourism Financing ▪ Preferential project financing is available for 5% p.a. in rubles for 10 years (operator – Far East and Baikal Region Development Fund) ▪ Proximity to the major APR markets raises competitiveness Transport and logistics of the commodities: delivery by sea from the Far Eastern Federal District sea ports to Shanghai does not exceed 6 Dedicated industry-specific support measures days, compared to Australian (23 days) and Canada’s (19 ▪ Zero extraction tax for solid minerals days) sea ports Healthcare 8 9 INVESTMENT OPPORTUNITIES IN THE RUSSIAN FAR EAST Examples of projects underway (1/2) Petrochemical industry Mining ▪ KOLMAR MC LLC: development of Chulmakanskoye and Denisovskoye coal fields in Yakutia. Output in 2016 – 3.6 mln tonnes. Target output in 2021 – 20 mln tonnes ▪ Total investment – RUB 54 bln Power industry Agriculture ▪ Beringpromugol LLC (Tigers Realm Coal): development of Amaamskoye