The terms and conditions of bank financing for the project to develop the Mustagillikning 25 Yilligi (25 Years of Independence) gas field in Uzbekistan have been finalised. The corresponding indicative terms of project financing have been signed today in Tashkent between VEB.RF State Development Corporation, Gazprombank and the project investor Surhan Investments Limited. The document has been signed under the roadmap for pulling in a 10-year credit line of up to US$900 million, by VEB.RF Deputy Chairman of the Management Board Daniil Algulyan, Gazprombank Deputy Chairman of the Management Board Aleksei Belous and Surhan Gas Chemical Operating Company CEO Andrei Ignatov.
The Mustagillikning 25 Yilligi project aims to explore and develop natural gas reserves, as well as build a gas processing plant with a capacity of 5 billion cubic meters per year and the corresponding infrastructure in the Surkhandarya region of the Republic of Uzbekistan. The project is being implemented in accordance with a production sharing agreement signed on 5 April 2017 between the Republic of Uzbekistan and the consortium of investors.
The field and the gas processing plant construction site are located 20 km from the town of Baysun in the Surkhandarya region. In the period 2017-2019, seismic exploration and prospecting works were completed, and appraisal wells were drilled as part of the project. Production wells drilling started in 2020. The ongoing design and construction of the gas processing plant are based on Shell licensed technologies.
“The signing of this document with leading Russian banks is an important milestone for the project. It will allow us to complete the deal to raise project financing by the end of 2021”, says Surhan Gas Chemical Operating Company CEO Andrei Ignatov.
Following the signing, project co-investor Andrei Filatov commented as follows:
“The Mustagillikning 25 Yilligi gas field development project is one of the key projects currently being implemented in the Republic of Uzbekistan and is of strategic importance for the development of industries and the region. The Republic of Uzbekistan has been strongly supporting the project at the level of federal and regional authorities, creating favourable conditions for the investors. On behalf of the project participants, I wish to thank President Mirziyoyev and the government of the Republic for the opportunity to operate in the region and be involved in important infrastructural changes that are taking place in Uzbekistan today. I would also like to thank VEB.RF State Development Corporation and Gazprombank for their trust and support of the project. The participation of leading Russian banks in an important infrastructure project in Uzbekistan once again underlines the quality of Russian-Uzbek cooperation and confidence in the investment climate of Uzbekistan."
Information for the Media
The Mustagillikning 25 Yilligi project includes additional exploration and development of a gas field with the construction of a gas processing plant and infrastructure facilities in the Surkhandarya region in the south of the Republic of Uzbekistan. The project is designed for 35 years with an estimated cost of US$2 billion. The project is being implemented within the framework of a production sharing agreement (PSA) for the investment block Uzbekiston Mustaqilligi (Independence of Uzbekistan). In accordance with the agreement, the field development is financed through direct investments and loans from international financial institutions. The consortium of investors includes Gas Project Development Central Asia AG, Altmax Holding Ltd. and Uzbekneftegaz JSC. The project is being managed by the operator Surhan Gas Chemical Operating Company, established by the consortium of investors to conduct oil and gas operations under the PSA. The world's leading oilfield service companies Halliburton, Baker Hughes, Schlumberger and CNPC are involved in the project, and Eriell is the general contractor for well construction and testing. At the end of 2019, the Project signed an EPC contract with Enter Engineering Pte Ltd for the construction of two processing lines of a gas processing plant with a capacity of 2.5 billion cubic meters per year each, as well as auxiliary systems and infrastructure facilities. The contractor's EPC scope includes design, equipment supply, construction and commissioning. Leading international companies such as Shell, Wood, ILF and others are involved in the design and construction of the gas processing plant.
A new gas-fired thermal power plant with a capacity of 1,500 MW will be built in southern Uzbekistan and will continue the project to develop the Mustakillikning 25 Yilligi (25 Years of Independence) gas field. The corresponding memorandum was signed today between the Republic of Uzbekistan and Altmax Holding Ltd., the largest shareholder in the field development project. The Minister of Energy of Uzbekistan Alisher Sultanov and representative of the investment company Andrei Filatov put their signatures on the document.
The development of the Mustakillikning 25 Yilligi gas field, one of the largest in Uzbekistan, is stipulated by the production sharing agreement for the Uzbekistan Mustakilligi (Independence of Uzbekistan) investment block, with additional exploration and development of the Mustakillikning 25 Yilligi field, including construction of a gas chemical facility in the Surkhandarya region of the Republic of Uzbekistan, signed in April 2017 during a state visit to Russia by the President of the Republic of Uzbekistan Shavkat Mirziyoyev. The parties to the agreement are the Government of the Republic of Uzbekistan and the investment company Surhan Investments Limited.
The reserves of the Mustakillikning 25 Yilligi field and the Uzbekistan Mustakilligi investment block are estimated at more than 100 billion m3 of natural gas. Currently, implementation of the first stage of the project is underway (2018 - 2023), which involves development of the field and construction of a gas processing plant with a capacity of 5 billion cubic meters of natural gas per year.
In accordance with the Memorandum of June 23, 2020, Altmax Holding, subject to positive findings of the feasibility study, will finance construction of a new combined cycle thermal power plant with CCGT units, with a total installed electric capacity of up to 1,500 MW. The total capital investment is estimated at up to US$1.8 billion. The final metrics of the CHP project will be determined as part of a feasibility study prepared with the assistance of international technical advisors.
Annual economic growth in Uzbekistan has been stimulating growth of power consumption by 6-7%. In accordance with market projections, existing electricity consumption in the country is expected to double by 2030. Construction of new generating capacity in southern Uzbekistan will create conditions for further development of economic and infrastructure potential of the region, including in the agricultural sector, mining and high-tech industries.
Andrei Filatov, investor in the Mustakillikning 25 Yilligi gas field development project: “The significance for realizing the investment potential of Uzbekistan puts the power industry among infrastructure priorities. Construction of additional power generation capacity is not only required to support development of local industry and agriculture, but also has substantial export prospects: Afghanistan is located nearby, which, obviously, as civilian life is restored, will need electric power. I hope that after the feasibility study has been completed, together with the government of Uzbekistan we will be able to sign binding agreements and launch the project with the support of leading Russian banks such as VTB and Gazprombank.
The capacity of the new power plant will not only cover the local needs of the region, but also create a reserve, including for export of electric power to neighbouring regions and countries. In the south, Uzbekistan borders on three states: Tajikistan, Turkmenistan and Afghanistan. Electricity export will yield an additional influx of foreign currency and will directly replenish the budget of the region and the Republic as a whole.
The agricultural sector plays an important role in the country's economy. New power generation capacity will support development of innovative agriculture in the region, including projects on the hydroponic vegetable cultivation projects, intensive technologies in animal husbandry and fish farming, as well as new land development. In addition, the new CHP will become part of the infrastructure that will contribute to the development and more efficient use of reserves of solid non-metallic mineral deposits in the region, with prospective construction of new processing plants.
The implementation of the project will boost comprehensive development of the southern regions of Uzbekistan, support attractiveness of the region for investors in various sectors of the country’s economy and create a significant social and economic effect.
For Reference
The Mustakillikning 25 Yilligi (25 Years of Independence) gas field is one of the largest in Uzbekistan. The field development is stipulated by the production sharing agreement for the Uzbekistan Mustakilligi (Independence of Uzbekistan) investment block, with additional exploration and development of the Mustakillikning 25 Yilligi field, including construction of a gas chemical facility in the Surkhandarya region of the Republic of Uzbekistan, signed in April 2017 during a state visit to Russia by President of the Republic of Uzbekistan Shavkat Mirziyoyev. The parties to the agreement are the Government of the Republic of Uzbekistan and the investment company Surhan Investments Limited, whose shareholders are Altmax Holding Ltd., Gas Project Development Central Asia AG and Uzbekneftegaz JSC.
In accordance with the production sharing agreement, the development of the field is financed through direct investments and borrowings from international financial institutions.
The reserves of the Mustakillikning 25 Yilligi gas field and the Uzbekistan Mustakilligi investment block are estimated at more than 100 billion m3 of natural gas. The project is designed for 35 years, with an estimated cost of more than US$2 billion. The field development is managed by the operator Surhan Gas Chemical Operating Company (Republic of Uzbekistan). Currently, implementation of the first stage of the project is underway (2018 - 2023), which involves development of the field and construction of a gas processing plant with a capacity of 5 billion cubic meters of natural gas per year.
The project involves such leading international players as Baker Hughes, Eriell, Halliburton, Schlumberger, Shell and others.
The President of the Republic of Uzbekistan Shavkat Mirziyoyev during a working visit to the Baysun District visited the development site of the Mustakillikning 25 Yilligi (25 Years of Independence) gas field. The head of the Republic informed himself about the progress in implementation of the project and held a working meeting with investors and the site experts.
At present, 3D seismic exploration is underway at the field, with Eriell drilling seven appraisal wells.
Following the meeting, Tuloma Investment Company chairman and one of the Mustakillikning 25 Yilligi investors Andrey Filatov noted that Uzbekistan, a country with ambitious ongoing structural reforms, is highly attractive to investors today. “The project is underway, we feel strongly supported”, said the investor. According to Filatov, investment in the project for the past year already totalled approximately USD117 million.
The USD5.27 billion project is being implemented in two stages. The first stage (2018-2022) envisions construction of a gas processing plant with an annual capacity of 5 billion cubic meters. The second stage (2023-2025) envisions construction of a gas chemical facility with an annual processing capacity of 1.5 billion cubic meters of natural gas and a production capacity of 500 thousand tons of polymer products. The project implementation is expected to create 2.2 thousand new jobs in the area.
The development of the field, one of the largest in Uzbekistan, is stipulated in the production sharing agreement regarding the Independence of Uzbekistan (Uzbekistan Mustakilligi) investment block, signed on April 5, 2017 during the state visit of the President of the Republic of Uzbekistan Shavkat Mirziyoyev to Russia. Reserves of the 25 Years of Independence field and the Independence of Uzbekistan investment block are currently estimated at more than 100 billion m3 of natural gas.
On October 19, 2018, during the state visit of the President of the Russian Federation Vladimir Putin to Uzbekistan, a Supplemental Agreement was signed to the Production Sharing Agreement regarding the Independence of Uzbekistan investment block in the Surkhandarya region of the Republic of Uzbekistan.
The solemn signing ceremony was attended by Deputy Prime Minister Alisher Sultanov on behalf of the Republic of Uzbekistan, Chairman of the Board Bahrom Ashrafkhanov on behalf of Uzbekneftegaz and Andrey Filatov on behalf of the Investor.
The document signed in Tashkent provides for the establishment of the single investment vehicle SURHAN INVESTMENTS LIMITED to attract project financing, and approves commercial terms of the project, including production split between the Government and the Investor.
Development of the field, one of the largest in Uzbekistan, is stipulated by the production sharing agreement regarding the Independence of Uzbekistan (Uzbekistan Mustakilligi) investment block, signed on April 5, 2017 during the state visit of the President of the Republic of Uzbekistan Shavkat Mirziyoyev to Russia. Currently, the reserves of the 25 Years of Independence field and the Independence of Uzbekistan investment block are estimated at more than 100 billion m3 of natural gas.
The project will be implemented in two stages. Stage 1 (2018-2022): drilling of wells, construction of the M25 field infrastructure, geological exploration of the investment block, construction of infrastructure and a gas processing plant with a capacity of 5 billion m3. Stage 2 (2023-2025): construction of a gas-chemical complex for the production of polymer-based products, with a capacity of up to 500 thousand tons per year and a commercial gas deep processing capability. Stage 1 investment is budgeted at more than US$2 billion.
Implementation of the Agreement will make a significant contribution to the economy of the Republic of Uzbekistan, significantly boosting government tax revenue and revenue from sale of natural gas and gas chemical products. The project has a high social significance due to its new job creation capacity and expected development of the Surkhandarya region. In addition, introduction of new technologies will contribute to development of the fuel and energy, chemical and transport sectors of the Republic of Uzbekistan.
«It is a great honour for me to sign this document on behalf of the investment consortium, noted Andrey Filatov, co-investor in the Surhan Gas Chemical Operating Company. Uzbekistan is one of the leading countries in natural gas production. A large-scale government program being implemented here to increase processing and exports of finished products is based, among other pillars, on creating favourable conditions for investment and bringing new investors to the country. I am convinced that projects like ours not only contribute to economic growth and modernization of production, but also make people’s lives better and help develop amicable, mutually beneficial and cooperation-oriented relations between countries.»
For Reference
Andrey Filatov is a Russian entrepreneur, co-investor in the Surhan Gas Chemical Operating Company, the entity operating the 25 Years of Independence gas field development project in the Surkhandarya region of the Republic of Uzbekistan under the production sharing agreement regarding the Independence of Uzbekistan investment block.
The project envisions additional exploration and development of the gas field with the construction of a gas-chemical complex in the Surkhandarya region in southern Uzbekistan. The project is designed for 35 years, with an estimated cost of more than US$2 billion. In accordance with the agreement, the field development will be funded through direct investments and borrowings from international financial institutions. The investment consortium includes Gas Project Development Central Asia AG, Altmax Holding Ltd. and Uzneftegazdobycha JSC (member of Uzbekneftegaz). Development of the field is managed by the operator Surhan Gas Chemical Operating Company, established by the consortium to engage in oil and gas operations under the PSA. Leading global field service companies including Halliburton, Baker Hughes, Schlumberger and National Oilwell Varco have been hired for the project implementation.
MOSCOW, October 20 (Reuters) - Russian businessman Andrey Filatov, who has interests in transportation, mining, infrastructure and real estate development assets, is establishing Tuloma Investment Company valued at US$150-200 MM, which intends to invest in Russian public and non-public assets in the backdrop of capital outflow from Russia.
In 2014, net capital outflow from Russia, which is suffering from a deep economic crisis, reached US$154 billion. The Economic Development Ministry expects the outflow to drop to US$72 billion this year.
«I believe that [Russia] risks are more than acceptable, and returns are fantastic», said Filatov in a telephone interview with Reuters.
According to Forbes, Filatov ranks 112th in the list of Russia's wealthiest businessmen, with a fortune of US$850 million.
«There are great opportunities in Russia today, because of capital outflow. I believe Russia is currently the country offering the highest return on capital.»
Large construction projects such as the US$55 BN Power of Siberia pipeline, the US$27 BN Yamal LNG project, new projects of Sibur, Lukoil, Fosagro and other companies will shape the demand for capital, according to the businessman.
«Russian exporters are in a great shape after devaluation of the ruble, their shares are resilient. Even the government is trying to appropriate their benefits from devaluation through taxes.»
The capital of Tuloma Investment Company will be formed from the shares of public companies, such as Lukoil, Novatek, Surgutneftegaz, Norilsk Nickel, Megafon, Fosagro, as well as bonds, shares in non-public companies owned by Filatov, and a monetary contribution, the amount of which he did not disclose.
«Russian exporters offer a dividend yield of not more than 5 per cent, and consequently I expect to achieve a much higher yield. My expected IRR (internal rate of return) is 16% annually.»
Filatov intends to contribute to Tuloma all his shares, except for Globaltrans and Global Ports shares, which he co-owns with his partners Nikita Mishin and Konstantin Nikolaev.
Those will be minority stakes in the anthracite producer South Coal Company, the petroleum products terminal Pskovneft-Terminal, the logistics company Intergate Logistics AG, the e-trading platform Fabrikant, the railway company Passenger Transportation, as well as 4 real estate development projects in Nizhny Novgorod, St. Petersburg, Moscow and the Moscow region.
«The company is expected to receive capital and asset contributions totaling approximately US$150-200 MM», said Filatov.
Filatov also said that at a later time, Tuloma might also receive the 7% stake he owns in the oil and oil products rail transportation market leader Transoil, which is controlled by billionaire Gennady Timchenko.
Tuloma wants to offer investors a financial product that will provide insurance against the risk of low liquidity of Russian assets, which will make such investments an alternative to less profitable accounts in foreign banks.
«Why isn't the willing capital coming here (to Russia)? The main reason is liquidity. We will be able to guarantee exit after a certain period of time, against 50% of yield, for example».
With a dividend yield of 6%, the investor will receive a 3% yield plus a guarantee of repurchase of shares in case of low liquidity, according to Filatov. And if the share price increases, profits from the sale will also be split in half.
Filatov, who owns shares in Globaltrans, which transports cargo of major exporters, and Global Ports, the container handling business of which depends on consumer demand, believes that the Russian economy will go through the crisis relatively painlessly, and sees signs of recovery in consumer demand:
«I believe consumption has already hit the bottom. Because exporters are key employers, and they are doing well.»
«The demand for housing, especially economy class housing, is returning. I am pleased with these investments (in development projects)», - he said, acknowledging that «consumption will not grow during a certain period of time».
He hopes that the Russian economy will be getting support from corporate investment projects, which will shape domestic demand, fill capacity of steel, coal and transport companies, as well as help to avoid the impending issue of overproduction of steel on the global market.
«For example, Power of Siberia fills capacity of our pipe industry, and through the pipe industry, our steelmakers, steel rollers and coal miners. In this regard, the outlook for Globaltrans is pretty good too, as freight volumes are poised to grow».
In the first nine months of the year, Russia's rail freight volume decreased by 1.4 percent.
Andrey Filatov has completed the consolidation of his assets into Tuloma Investment Company LLC (“Tuloma IC”). Tuloma IC now holds the entrepreneur's shareholdings in Russian companies as well as a portfolio of securities by various issuers.
Established by Andrey Filatov in 2013, Tuloma IC specializes in investing in public and private Russian assets across a number of sectors. Tuloma IC currently manages investments in companies operating in strategic sectors such as transport, infrastructure, oil refining, real estate development and innovations. Tuloma IC is also involved in raising capital for Russian enterprises, a promising business area.
Tuloma IC’s investment strategy and asset portfolio structure are based on the experience of its founder in successfully establishing and developing Russian assets. In addition to the 100% stake in Tuloma IC, Mr. Filatov also owns stakes in Globaltrans Investment PLC, the Russian freight rail operator listed in London (LSE ticker: GLTR), and shares in Russia’s largest container terminals operator Global Ports Investments PLC (LSE ticker: GLPR). The assets consolidated in Tuloma IC are Mr. Filatov's independent investments and do not include his shares in Globaltrans and Global Ports.
The investment portfolio of Tuloma IC includes shares in Coal Mining Limited, Fabrikant.ru, Pskovneft-Terminal, real estate development projects Volgo-Okskaya Investment Company (VOIC), Pushkin, StroyEngineering Development, and the shares of issuers including Fosagro, Novatek, Megafon, LukOil, SurgutNefteGas, Norilsk Nickel and others.
Andrey Filatov, founder and Chairman of the Board of Tuloma IC, views Russia as currently one of the most attractive regions for financial investments: “The high demand for capital, value adjustments across Russian assets given the backdrop of the rouble devaluation, and the growth potential in strategic sectors of the Russian economy together create significant opportunities for investors. From a strategic perspective, investments in sectors such as transport, infrastructure and oil refining allow for more attractive potential returns than in any other market. The objective of Tuloma IC is to attract capital into the Russian economy, by offering extensive expertise of the Russian landscape and, in time, enabling parties to invest together.”
Andrey Filatov is a Russian businessman, Chairman of the Board of Tuloma Investment Company LLC, and co-owner of Globaltrans and Global Ports. Mr. Filatov is also President of the Russian Chess Federation (RCF) and Vice President of the International Chess Federation (FIDE).