We have been successfully managing a portfolio of 11 groups of companies with an aggregate value well over a billion dollars.
Financial markets worldwide reflect ongoing deleveraging pressures amidst a deepening economic downturn. In spite of extensive combative policies, the global financial system remains under intense stress.
While it began in affluent countries, the crisis is hitting developing countries hard through trade and financial market channels. Transmission channels may differ from country to country, but emerging markets in general are severely affected. Overall, fiscal positions in emerging and developing economies are weakening because of slowing domestic revenues, increased spending on social programs in response to the crisis, and deteriorating terms of trade for commodity exporters.
VEK, however, remains not only highly optimistic about its ability to survive in any economic condition, but also to back this optimism with tangible results.
In September 2009, our portfolio company Ukrgasvydobutok JSC successfully completed drilling of a new well (5000 meters) and finished the construction of all infrastructures needed for production and transportation. Ukrgasvydobutks daily debit increased by 150,000 cubic meters in the last quarter of 2009 and the company is planning to begin drilling two new wells in the first quarter of 2010.
Our VEK Fund One companies SportLife and O3 have also proved to be resilient to the financial and economic challenges.
SportLife, a Ukrainian chain of sport clubs, launched a new club having generated two thousand pre-sold memberships. The total number of existing members went up by 17% and the total revenue increased by 21%. The company is opening two new locations in the first quarter of 2010 and planning to open four new clubs by the end of 2010.
O3 is the largest operator providing broadband access based on FTTB technology in Ukraine, and it continues to develop dynamically.
For the first three quarters of 2009, O3 subscriber base increased 3 fold and reached 35,200 subscribers; the monthly number of connections increased by more than 3 times to 2,300 new subscribers; the total length of FOL increased 4.02 times; and monthly income from services trebled to more than UAH 3 million.
VEK has completed modernization of all purchased nets, and new networks in Zhytomyr, Sevastopil, Lviv, Symferopil, Dnipropetrovsk and I.Frankovsk have been built.
As well as Internet access and TV services, we are planning to provide telephone communication services from the middle of 2010, for which the company has received the relevant licenses along with sufficient numbering plan resources. The necessary contract on interconnection with Ukrtelekom OJSC has been concluded, and the company is focusing on the development of a work project for interconnection, as the certification of the equipment to be installed is expected in the near future.
Even in these difficult times, VEK completed its financing commitment for this project through its extensive channels of equity and debt investors.
These accomplishments are all in line with the promises we made to investors, and we’ve achieved all targets we set for the year.
We continue to systematically carry out our strategy, constantly keeping our eye on the goal. As a result, we are attracting interest from larger partners and investors.
Here at VEK, we are grateful for your support, and we look forward to remaining worthy of your confidence in the years ahead.
In VEK we never stop looking for talented, experienced and highly motivated professionals who can add value to our company and to our clients.
Our VEK Investment Committee, which includes VEK executives and senior advisors with significant operating experience, continually monitors the performance of investments, oversees value creation activities in portfolio companies, and decides upon the execution of new investments.
For the year 2010 we have already built and prepared a very attractive pipeline of new investment opportunities. We are actively looking for new trends and exploring various options on how we can expand our services and improve upon existing ones.
As Ukraine is gradually integrating into global capital markets, there is considerable demand from our Ukrainian clients for investment banking and capital market solutions.
We believe that VEK is perfectly positioned to fully capitalize on this rapidly growing trend, and with this in mind we brought together a team of investment bank professionals that will work within VEK's corporate structure.
Our investment Banking section will provide a full suite of advisory and financing solutions across the equity and debt capital markets.
We are optimistic about the performance of the VEK PE Fund I and we are planning to continue creating future private equity funds. We will explore investment opportunities that will add further diversity and strength to our portfolio as we look to build our growing footprint throughout Ukraine and beyond.
As always, we would like to extend our sincere thanks to everyone who has helped us advance to where we are today: our partners, staff, independent board members, investors, co investors, directors and executives, managers in each of our portfolio companies, and our network (banks, consultants, and attorneys, among others).
Our investment approach demands discipline above all else, yet also emphasizes the importance of a quick and dynamic response to new opportunities. We wield extensive industry expertise through a decentralized organizational model, while at the same time subjecting all investment proposals to rigorous reviews by the firm's most experienced professionals.
We look forward to sharing more of our success and achievements in the years to come.
