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EBRD funds Moscow's first major logistics centre; supply and distribution bottlenecks in Russia receive new outlet
FM Logistic (SEVO) Z.A.O. (FM Logistic), the leading transport, warehousing and logistics company in the Russian market, will build a state-of-the-art logistics centre 5km from Moscow's Sheremetyevo International Airport with funding arranged by the European Bank for Reconstruction and Development (EBRD). The EBRD will make a US$ 4.8 million (ECU 4.4 million) equity investment in FM Russia, and has arranged a US$ 28.8 million (ECU 26.4 million) debt facility. US$ 12 million will be funded by the EBRD and US$ 16.8 million by a consortium of commercial banks.
The 65,000m² complex, to be constructed just outside Russia's capital, will provide companies with modern transport, warehousing and distribution infrastructure in a market which currently lacks such facilities. The financing will also be used to link the complex with a new road and rail connection to streamline distribution services.
"Any company doing business in Russia today is acutely aware of the costs and logistical difficulties of distributing raw materials and finished goods in this market. One source of these difficulties is the absence of Western standard logistics operations and warehousing and distribution facilities," commented Marc Mogull, Director of the EBRD's Property and Tourism Team. "Together with FM Logistic, we want to relieve a key bottleneck in Russia's materials supply and product distribution network, and thereby significantly enhance Russia's market efficiency."
FM Logistic will be majority-owned by an affiliate of Faure & Machet S.A. (F&M), one of the foremost French logistics companies. F&M has provided logistics services since 1994 in the Moscow region, and the company currently employs more than 600 personnel. Completion of the new facility is expected to create at least 500 new jobs. The project is the EBRD's second in cooperation with F&M, following a US$ 26 million (ECU 24 million) equity and debt finance package for a 64,000m² logistics park near Warsaw, Poland.
"Modern, efficient transport, warehousing and distribution services are among the most important demands of every major company operating in Russia today," said Gilles Faure, FM Logistic's General Manager of East European Operations. "FM Logistic can fill such a need, particularly with the support of the EBRD, which has provided the only source of long-term finance for such projects. The Russian market will benefit immensely."
With an estimated 15 to 20 per cent of the total production cost of consumer goods absorbed by storage and transport, efficient logistics services are vital to reducing the cost of goods on the Russian market. The country's large population creates a major domestic market for goods manufactured by both domestic and international companies, but serving such a large geographic area has been a challenge for the country's limited distribution infrastructure.
Since 1991, the EBRD has concluded 21 projects in the office, warehousing, hotel and tourism sectors in the countries of central and eastern Europe and the former Soviet Union for a total EBRD investment of US$ 345 million, and a total project value of approximately US$ 816 million.
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