Offer to the investor
Total project cost: 175 mln RUB
Capital planned to be raised: 60 mln RUB and above
Investment purposes: organization of linen flax cultivation, construction and equipment of deep flax processing plant
Available investment options: any possible investment options will be considered
Internal rate of return (IRR): 27%
Planned payback period: 6 years including construction period
The global flax market is growing at CAGR of 4%. Russia is rated third in the world in the flax production volume. The market analysis shows that 70% of the global flax crops are concentrated in Europe. However, in the processing domain, there is an obvious trend of moving the production facilities from Western to Eastern Europe. Russian manufacturers are seriously inferior in the flax cultivation and flax fibre production efficiency. However, this opens an intensive growth opportunity. The main reason of the negative growth dynamics in the flax industry of Russia is the reduction of the flax sowing areas caused by the problems with seeds and the absence of modern flax processing facilities (effective consumers).
The global flax fibre deficit exceeds 200 thousand tonnes; in Russia, it constitutes 30-40 thousand tonnes. At the same time, the potential flax processing and flax linen sales market of Russia is evaluated at 300 thousand tonnes. In this context, Siberia shows a significant production potential, and the main task to fulfil at the moment is to increase the efficiency of cultivation and processing of flax.
The project implies organization of deep flax processing facility for the production of long and short flax fibre, linen flax seeds, flax chuff pellets, modified flax fibre, and industrial plastics. The project will facilitate the establishment of a high value-added agribusiness facility in Yenisey Siberia. Around the production, a cluster of flax cultivation – flax processing – spinning production – clothing manufacture facilities may be developed.
The production envisages the introduction of the linen flax in the crop rotation and can be therefore implemented in the south of Krasnoyarsk Region. In case of poor harvest, the location will provide an opportunity of flax straw supply from Altai Region.
Among the location options, the following are considered:
– location in an industrial area in the nearest proximity to the town of Minusinsk. The advantages include the logistic capacities of the large transportation hub close to the main flax cultivation districts;
– location in an industrial area in the nearest proximity to the settlement of Kuragino. The advantage is the transport infrastructure development prospects with the commissioning of the Elegest-Kyzyl-Kuragino railway.
At the moment, the project is at the idea stage. The technological flowchart incorporating both standard and innovative processing technologies has been developed, the raw material stock has been defined, the main financial parameters of the project and the sales channels have been determined.
Depending on the sufficiency of the assets and finance owned by the investor, Yenisey Siberia Development Corporation may offer the best fitting project financing plan involving the governmental financial support options.
The project was developed by Strategy Partners group with the support of Sberbank.