Russian fishery industry: Investment opportunities Topical issues Yury Korolev, Commercial representative, Embassy of Iceland, Moscow

Key factors of development of Russian fishery sector - Minuses Undeveloped onshore infrastructure Excessive and large vessel dominated fleet Outdated processing facilities Loopholes in corporate legislation Poor management in trading Protection of Russian own fish market by non- economy methods: veterinary certification, fishery as strategic industry Private or group interests may influence some decisions of authorities

Key factors of development of Russian fishery sector + Pluses Articulated state policy in fisheries -Quota allocation for 10 years till Federal program of development of fishery industry: 2,5 bln USD investments 50% from the federal budget -Law on Strategic Industries:50% in a fishing company needs approval of the government, no restrictions in investments in processing, warehouses, logistics

Key factors of development of Russian fishery sector Opportunities Price on imported frozen fish = internal market price Certification of fishing with MSC TAC perspectives in the Far East basin are good All fish on shore principle

Fishery industry chains -Fishing companies – outdated fleet, 10 year quota allocation -Importer+wholesaler – veterinary control on import -processors – outdated equipment, shortage of credit lines -supermarket/big retailers – high barriers to entry -small outlets/retailers – competition from supermarkets

Profit distribution in fish trade

1.Strategic investor needed? Far Eastern Russia fishing company Established in 1990 Fully vertically integrated Fishing, value added production, distribution Owns 14 catching/processing vessels and refrigerated cargo vessels Products sourced and sold on the international markets

1.Strategic investor needed. This is a group of companies: -Murmansk and Sakhalin companies– fishing of bottom fish, crab and wild salmon Competitive positions: largest quota holders, consolidation of bottom fish quota -Moscow company– trading Competitive position: in top 10 in sales of seafood in Russia

1.Strategic investor needed! Key Financial Indicators of the Group (mln USD) Index (project) Revenues EBITDA Net profit Debt is a cyclical low quota year

2.Food processing complex in Moscow Large wholesale industrial food processing complex “FOOD PROCESSING & WHOLESALE UNITED COMPANY” two development sites of hectares in total area in Kuryanovo industrial zone of Moscow 100 tons of high quality output per working shift (200 tons of product per day) 375 different items of meat, fish and poultry products

2.Food processing complex in Moscow: terms The total period of the project amounts to 8 years: 3 years of construction, assembling operations and start-up works of the first priority 5 years of operating the large wholesale industrial food processing complex “FU”. Total cost of capital investment amounts to US dollars ( euro)

2.Food processing complex in Moscow: economy Net present value (NPV) USD Modified Internal rate of return (MIRR) - 40,56% Pay-back period of the 1 st stage : - Without discount taken into consideration – 3 years and 5 months With discount – 3 years and 7 months

2.Food processing complex in Moscow: main units of complex two cold-storages 5000 tons each, two production buildings: fish-processing unit comprises: defrosting division; cardboard packing preforming division; raw stuff division; division for moulded stuffed products and fish sticks; crabmeat stick preparation division: preserves production unit refrigerator division; frozen product packing division; salting divisions; sea kale preparation division salted product packaging and weighing division; seafood in sauces, frozen division fillet production division, marinade division; smoking division; smoked product packaging and weighing division; implement washing division; waste treating division; foodstuff warehouse; auxiliary materials storage room

2.Food processing complex in Moscow: fish products frozen fish and ready-to-cook food fish sticks (pollack) light- salted fillet (Siberian salmon, salmon) cold smoked fish (herring, mackerel, capelin) hot smoked fish (capelin, herring, salmon) imitation crabmeat delicatessen, frozen Surimi

I&R trade in fish Russian veterinary agency certified for export to Russia 26 on shore fish processing plants 23 fish processing vessels Problems with Russian buyers lists (too much time to update) Joint MAST and Russian Veterinary Agency Working inspection and certification of fishery factories and vessels in Iceland in February

Future fishery related events 2008 Late November Joint MAST and Russian Veterinary Agency Working Group meeting in Moscow December Session of the Joint Icelandic-Russian Fishery Commission in Reykjavik

Future activities 2008 RYBPROMEXPO (Russian Fishery Agency sponsored exhibition) – November 2008 International Exhibition for Fish Industry “RIBPROMEXPO 2008” is the largest business event in the Fish industry of the Russian Federation. The Exhibition is held by Ministry of Agriculture of the Russian Federation, State Committee of the Russian Federation on fishery and All-Russia Exhibition Center and is supported by the Government of Moscow.

For future events/exhibitions in Russia –

Icelandic-Russian Business Council In March 2008 – joint meeting of Icelandic companies in Russia Working Group on establishment of I&R BC Our man in Moscow – Yury Korolev, Embassy of Iceland