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. Last Updated: 07/27/2016

... And Investments That Got Away

Company

DEF's Investment

Equity

MPS-Telekom

$9.6 million

50%

MPS-Telekom was a 50-50 joint venture between the Central Communications Station of the Russian Railways Ministry and EP-CDC, a Cyprus-based company wholly owned by the DEF, to string fiber-optic cable across the nation. The DEF invested $9.6 million and laid 600 kilometers of cable, but the project stalled. The Railways Ministry bought back the DEF’s cables for $8.6 million. MPS-Telekom is inactive today.

Impregnated Abrasive Instruments

$220,000

n/a

IAI was a project to produce and sell machine tools that would be "impregnated" with a solid lubricant, designed to reduce friction and dust and make the tools last longer. The partners were two scientists, Vladimir Furman and Alexander Klimov. To fund proof-of-concept and start-up activities, the DEF extended two loans of $110,000 each to Promabrasiv, a company set up by the IAI team — but one of the loans got stuck in Bank Rossiisky Kredit after the August 1998 crash, and Promabrasiv is today inactive.

OrbitSoft

No investment

43.2%

OrbitSoft was a company that planned to farm out the services of Russian computer programmers. The DEF committed $2.9 million, but then balked. OrbitSoft is inactive today.

RAIES International

$800,000

n/a

RAIES International was a joint venture to design, build and operate log sterilization facilities. The DEF’s $800,000 investment provided working capital to develop and test an irradiation process that would eliminate insect pests and blue stain fungi from harvested timber. The hope was that this would be a more environmentally friendly process than the use of chemicals. The project has had difficulty getting off the ground, and is dormant today.

Beryllium Composite Technology Inc.

$200,000

0%

BCT Inc. is a Palo Alto, California-based company that requested funding for a joint venture in Kaluga with the Beryllium Institute, which previously made beryllium housings for missiles and nuclear weapons guidance systems. The plan was ultimately to invest as much as $4 million into a manufacturing start-up to make computer hard drives and CD-ROM discs from a beryllium-aluminum alloy, which could allow greater memory storage and faster hard drives. The DEF put in $200,000 as a no-interest loan for proof-of-concept development and simultaneously conducted due diligence. The DEF determined there were conflicting patent rights to the alloy process, and has not gone forward with BCT. The loan has not been repaid.

Sukhoi Naptha

$200,000

0%

Sukhoi Naptha was a joint venture between the Sukhoi Naptha Corp., a design bureau, and the DEF, to manufacture proprietary high-durability oil pumps. The plan was to eventually employ one-third of the Sukhoi Aviation Construction Corp., makers of the SU-32 military jet, turning out oil pumps. The DEF put in loans of $200,000 to produce and test prototype pumps and finance a patent application process. But after 18 months without a successful field test, the DEF terminated the venture. Sukhoi Naptha has not been able to repay the loan plus interest of $23,625.

MZA

$5 million

84%

MZA was a venture to build a plant in Kaluga to recover precious metals from electronic scrap. The DEF’s partners were the French company Valme Industries and the EBRD. The DEF invested $5 million in loans to Valme to build the plant, but the EBRD balked and Valme went bankrupt. MZA is now inactive.

Source: Defense Enterprise Fund 1998 annual report.