VEB.RF Publishes IFRS Interim Condensed Consolidated Financial Statements as at 30 June 2019
VEB.RF published its interim condensed consolidated financial statements prepared in accordance with IFRS as at 30 June 2019.
The VEB.RF Group’s key financial results for 1H2019 are as follows:
- The VEB.RF Group reported net profit of RUB12.8bn for 1H2019 as against a loss of RUB75.6bn in 1H2018.
- The Group’s operating income in 1H2019 reached RUB41.6bn as compared to RUB16.6bn in the corresponding period in 2018.
- The Group’s assets as at 30 June 2019 totalled RUB3,275.2bn, 2.6% (–RUB86.7bn) down from the beginning of the year. Assets decreased due to a reduction in lending, net lease investments, trading securities and amounts due from banks.
- Lending accounted for 40.6% of the Group’s total assets. As compared to year-end 2018, lending (net of the provision for impairment) decreased by 14.8% (–RUB231.6bn) to RUB1,330.0bn. The decrease was largely due to reclassifying the loans provided by Sviaz-Bank as a disposal group. The lending portfolio was also affected by foreign currency revaluation.
- The provision for expected credit losses was reversed in the amount of RUB17.0bn in 1H2019 (RUB6.0bn in 1H2018).
- The Group’s liabilities as at 30 June 2019 totalled RUB2,937.6bn, 4.6% (–RUB140.2bn) down from the beginning of the year, mostly because of decreased amounts due to banks. Amounts due to customers decreased due to reclassifying the amounts due to Sviaz-Bank customers as a disposal group.
- Amounts due to banks and outstanding debt securities accounted for 50.9% of total liabilities (52.5% at year-end 2018).
- The Group’s equity in 1H2019 went up by RUB53.5bn (+18.8%) to RUB337.6bn as at 30 June 2019. Equity grew due to net profit and government subsidies received by VEB.RF.
- In 1H2019 VEB.RF received a government subsidy as the Russian Federation’s asset contribution of RUB15.5bn to offset part of costs related to the fulfilment of obligations arising from foreign borrowings in the capital markets. The subsidy was recognised in authorised capital.
- In the reporting period VEB.RF also received a government subsidy of RUB9.7bn as the Russian Federation’s asset contribution intended to make a contribution to the share capital of the Far East and Baikal Region Development Fund for the implementation of priority investment projects in the Far Eastern Federal District. The subsidy was recognised in additional paid-in capital.
- VEB.RF’s capital adequacy ratio in accordance with RAS was 14.8% as at 1 July 2019 (11.8% as at 1 January 2019).
VEB.RF’s delegation headed by VEB.RF’s First Deputy Chairman – Member of the Management Board Nikolai Tsekhomsky discussed joint projects with China Development Bank (CDB) and Chinese businesspeople in Beijing. Specifically, VEB.RF presented large Russian construction projects such as a wood-processing facility, the Eastern Grain Gate port terminal, and the Meridian road.
The roadshow included negotiations between VEB.RF’s management and executives of Silk Road Fund and China Eximbank, who expressed interest in Russian forest chemistry and trunk infrastructure projects.
“I have a very positive impression of the roadshow. We held several meetings with our partners from CDB, Silk Road Fund and China Eximbank and discussed projects that could be attractive to Chinese business. Interbank cooperation is particularly important for promoting Russian-Chinese economic cooperation. VEB.RF and CDB share a special mission, creating a financial bridge to implement joint initiatives,” Nikolai Tsekhomsky said after the roadshow.
Nikolai Tsekhomsky added that VEB.RF had long-standing relationships with Chinese financial institutions (15 years). CDB is VEB.RF’s strategic partner to implement a financial mechanism for coordinating integration processes across the Eurasian Economic Union (EAEU) and China’s Belt and Road Initiative. VEB.RF’s and CDB’s integration initiatives include several large projects in the area of rail transport and the Northern Sea Route infrastructure.
Igor Shuvalov Appreciates Udmurtia’s Urban Environment Development Projects
Heads of Udmurtia’s single-industry towns presented urban improvement projects to VEB.RF’s Chairman Igor Shuvalov. The event took place in the Seti Park, the first Russian sports and landscape park.
The session was moderated by Vyacheslav Pravdzinsky, Urban Environment Development Advisor to the Head of Udmurtia Republic. He highlighted that the opening part of VEB.RF’s official visit is dedicated to a presentation of regional urban development best practices.
Udmurtia’s Head Aleksandr Brechalov shared a successful urban environment improvement case: development of the first Russian sports and landscape park. “I will tell you in about this place a nut shell. It is a skate park. First we called it Seti Park by the name of the main partner Rosseti, Russian energy grids operator. The basketball court was built with the support of T-Plus, one of the biggest Russian power supply companies. Why we decided to organise the first urban development event here? We selected this park, as, in my opinion, it is an exemplary project. It is not a government imposed initiative, this park is the result of grass roots effort endorsed by the government,” Aleksandr Brechalov said.
He turned to Andrey Peredvigin, who earlier contacted him to convey the initiative on behalf of the skaters’ community. “We made a deal with Andrey: he was to bring the project and discuss it. I was to try to raise the funding. I believe that in cases like this one, we should offer a service: fund-raising. Today, this place not only attracts the citizens but also represents an element of Udmurtia’s sports and event tourism. On 7 September, Izhevsk will host for the first time a unique event: a Pump Track World Championship Qualifier. Aleksandr Brechalov added that this project created to improve the quality of urban life may be monetized.
Following his speech, MONOGORODA.RF’s CEO Irina Makiyeva presented an idea to create centres of attraction for tourists and the locals with a high presence of businesses. This idea turned into a project called ‘Centre of Attraction’. “Mr. Shuvalov, you proposed this idea. And you gave an instruction to the single-industry towns. We conducted a poll to ask citizens of single-industry towns about their preferred ways to spend their evenings and free time. The poll showed that 50% of citizens of single-industry towns would like to have a pedestrian street with trees, 30% would like to attend events, and the remaining 20% believe that such a project cannot go without businesses engagement. I would like to ask the heads of Sarapul, Votkinsk and Glazov to present the plans for development of centres of attraction in their towns.”
The heads of single-industry towns presented designs of pedestrian shopping streets to Igor Shuvalov. Glazov Mayor Sergei Konovalov shared the plan of Svoboda Square transformation. “The project enjoys proactive entrepreneurs’ support. The total investment volume amounts to 53.7 million roubles only at the first stage. 47 new jobs will be created. This is a scalable project. We would like to obtain two forms of support from VEB.RF: transport, logistics and architectural consulting and support of small and medium businesses’ comfortable urban environment projects,” Sergei Konovalov said.
Votkinsk Mayor Aleksei Zametayev highlighted the preservation of cultural and historic heritage in his single-industry town. “We took into account suggestions from businesses and the locals and developed a design to improve an unnamed lane which is connecting several central streets. This neighbourhood has iconic locations: Votkinsk Pond embankment and the Memorial Estate of P.I. Tchaikovsky. As per our estimations, the street’s rehabilitation will cost around 300 million roubles. If we make it, this neighbourhood will become an icon place for Votkinsk,” he said.
Sarapul Mayor Aleksandr Essen underscored that the project will give an impetus to entrepreneurship development. “Today, many tourists take river cruises. We succeeded in rehabilitating the embankment in our town. The embankment is interesting for businesses. We are reviewing 8 projects which will create 160 jobs and bring 0.5 billion roubles in investment. We need the assistance of the Single-Industry Town Development Fund in the form of loans and infrastructure support. I am convinced that our concerted efforts will transform our embankment,” Aleksandr Essen said.
To conclude the event, Igor Shuvalov noted the readiness of VEB.RF and the development institutions to take part in the presented projects subject to a more detailed evaluation. “I see that Udmurtia has a team. It is impossible to do anything without partners in any constituent entity of the Russian Federation. It is important to employ all leverage available to the authorities, to build a dialogue between friends, a system of cooperation between regional and municipal authorities. VEB.RF’s team will work where real effect and results are expected. We will work with you. What we saw here today is amazing,” he said.
Udmurtia Presents 60 Plus Investment Projects to VEB.RF and Development Institutions
The development institutions team headed by VEB.RF’s Chairman Igor Shuvalov visited Udmurtia on a business mission.
On the first day, REC, DOM.RF, RSMB Corporation and the Single-Industry Town Development Fund representatives held round-table discussions and training seminars for local entrepreneurs, and presented financial and non-financial support measures.
On 14 August, VEB.RF’s Chairman Igor Shuvalov and the Head of Udmurtia Republic visited a sports and landscape park, Seti Park, and discussed the development of urban infrastructure. The town of Izhevsk developed design of public spaces to improve 40.8 ha to create a comfortable urban environment. KB Strelka and other Russian architecture bureaus were commissioned by the DOM.RF Fund to develop the design.
During the visit, RSMB Corporation representatives held a meeting with local entrepreneurs to discuss the implementation of business financial support measures. The efficient cooperation between the regional government and RSMB Corporation resulted in an eight fold growth of local business preferential loans portfolio in the last three years. Small and medium businesses’ profit grew on average almost by 30%.
REC representatives visited Elekond plant, a Russian condensers production leader. The plant is targeting export development. REC Group is ready to offer its financial and non-financial support measures to the plant.
MONOGORODA.RF’s delegation had a meeting with local businesses. Investment projects in the amount of 3 billion roubles in single-industry towns Glazov, Sarapul and Votkinsk were presented. The meeting selected three the most mature projects. The Fund is expected to extend a loan for more than 200 million roubles. The projects will create around 400 jobs.
The development institutions delegation visited the LADA Izhevsk plant, one of the main Russian light motor vehicles manufacturers. VEB.RF is financing the plant’s upgrade in the amount of 60 billion roubles which enables manufacturing of new car models, including for export markets, and creating local jobs.
To conclude the business mission, VEB.RF’s Chairman Igor Shuvalov said: “We see concerted and professional effort of the Head of the Republic’s team. Today, we have discussed projects implemented not only in the republican capital but also in small towns. These are energy, public transport, engineering, and modern urban environment projects. All the projects are well prepared and pre-screened with potential investors, VEB Group, professional advisors. The business mission shall yield specific results. Udmurtia will get new jobs; its economy will become more competitive.”
Head of Udmurtia Aleksandr Brechalov said: “Together with VEB.RF and PricewaterhouseCoopers we carried out an investment opportunities audit. The results of the audit were presented in St. Petersburg. The audit resulted in a road map for external and internal potential investors. Today we added 61 projects in the amount of 95 billion roubles to the road map. Our partnership with VEB.RF and its development institutions is clearly evidenced by the numbers: jobs and budget revenue increase. The support only by the Single-Industry Town Development Fund created 110 new jobs in Udmurtia during the last two years; the Fund provided financing in the amount of 240 million roubles. Since 2015, the cooperation with RSMB Corporation helped republican businesses to obtain more than 2.4 billion roubles in loans. In this respect, our approach meets the approach of Mr. Shuvalov’s team. VEB.RF is our strategic partner. All we want to achieve are jobs with decent wages and salaries, improvement of quality of life and a stronger regional economy. The national projects initiated by the Russian President and the social funding require our services. The projects’ implementation is difficult without a strong export-oriented economy and improved workforce productivity. Therefore, I would like to congratulate VEB.RF’s team for the partnership and the support,” he said.
VEB.RF is a state development corporation. In partnership with commercial banks and investors, VEB.RF is involved in national projects designed to support high value-added manufacturing, non-resource exports, urban and infrastructure development. VEB.RF coordinates activities of the largest national development institutions: Russian Export Centre, DOM.RF, RSMB Corporation, the Far East and Baikal Region Development Fund, MONOGORODA.RF.
Dmitry Medvedev and Igor Shuvalov discussed VEB.RF’s involvement in investment projects related to urban planning and development.
From a transcript:
Medvedev: When somebody mentions VEB as a development corporation, all manner of major economic projects usually come to mind. This is natural because VEB contributes to them in some way or other, by either lending to them, or acting as a guarantor, or participating as a partner. However, VEB also does other important things.
I’ve been to Tula recently and met with architects and builders. We discussed urban spatial development. By the way, your representative was there too. I know this issue has also become an important area where VEB works as a development institution, and you invest both intellectual and financial resources. Tell me more about it, will you?
Shuvalov: Our supervisory board, which you chair, indeed regularly considers the largest transactions that contribute to economic development in Russia. We have prepared several such major transactions. The board are to meet in the next few days to discuss them under your supervision. These transactions promise to be an exciting experience. Speaking of urban development and the urban economy, this is now one of our main concerns.
We paid close attention to preparations for the Tula meeting and its outcome. It was a very interesting event, attended by young architects and urbanists. The new legislation on State Development Corporation VEB.RF—as related to functions and coordination— allows us, Dmitry Anatolyevich, to take a basically different approach to urban development. As you instructed, the scope of coordination extends to VEB.RF, Russian Export Center, DOM.RF and Russian Small and Medium Business Corporation.
We are looking to invest adequately in different segments of the urban economy. We have chosen 100 urban areas, the 100 largest cities in Russia, except for Moscow and Saint Petersburg. This doesn’t mean that we aren’t involved in projects there …
Medvedev: They can take care of themselves.
Shuvalov: They’re under the direct supervision, so to speak, of both the Government and the President. And they take full advantage of it.
Speaking of the 100 cities, we’ve agreed that a separate track is to provide training for city teams, those who manage the urban economy. And 109 projects for 45 of the 100 cities are currently under consideration separately. The projects are related to clean water, sewage treatment and work on upgrading urban public transit, building modern housing and transforming municipal services, and this is the right job for small and medium-sized enterprises. For this purpose, we use all the tools available to each development institution, including equipment leasing.
We send business missions, travel to the cities. Our joint business missions have already visited Vladivostok, Yuzhno-Sakhalinsk and Ivanovo. All our teams make preparations beforehand, studying the projects. When we then all get together to assess the projects, they not only give project presentations but also defend the projects. Our business units then start working on the projects. We make sure it’s understood that loan agreements need to be signed within a certain time to set any project in motion. We’ve already achieved something tangible. For example, we are preparing to approve the loan agreements in Ulyanovsk and Nizhni Novgorod. We’re also organising a high-profile trip to Udmurtia, where we were a year ago, to see how the projects are progressing. Overall, we do exciting, well-coordinated work. We work in close cooperation with the Ministry of Economic Development; they find urban planning and development very important too. As for the Ministry of Finance, we are currently collaborating with them to modernise urban public transit in partnership with major organizations such as Transmashholding and Sinara Group. We’ve set up a good project in Moscow jointly with Transmashholding, and we are trying to extend this experience to other cities. We’ll ask you to allow us to use the National Wealth Fund for these purposes. As for the Ministry of Finance, we routinely work with them on specific details of the projects.
Medvedev: You should also work with the Construction Ministry. Strictly speaking, urban planning policy is in their hands rather than under the control of the Finance Ministry or the Economic Development Ministry.
It’s a big issue for a huge number of city dwellers. We understand that people who live in urban areas—especially other than the capitals, even outside the regional capitals, in small towns—want their places to be as comfortable at least in some way as the modern urban environment in the largest cities of this country.
This is really what is very important. How can we do it? The point is that our urban planning policy was not ideal in Soviet times, but it wouldn’t work now anyway because the requirements and economic conditions have changed. To formulate a new policy on urban planning and give training to prepare modern teams, as you mentioned, are an extremely important topic.
When I was in Tula, I saw: if it weren’t for the new team, if it weren’t for the work of the people who came to pursue various initiatives, nothing would probably have been done there.
That is why it’s necessary to help our regions and particular cities to build competencies and recruit people who are ready to do this. Somebody, of course, can come from the capitals; but it’s better to rely on the local workforce and train them. In this context, VEB has all the required competencies. I hope you’ll make use of them.
VEB.RF issued short-term bonds in an additional placement to companies and corporations on 7 August 2019.
The Bank raised 13.6 billion roubles from bonds with a maturity of 14 days and a coupon of 7.02% p.a.
The par value of one bond is 1,000 roubles. The bonds were sold at 100% of their par value. The coupon is payable at maturity.
The arranger of the bond issue is Gazprombank.
The bonds are on the Moscow Exchange’s Quotation List Level 1. The depository is National Settlement Depository.
VEB-Leasing, a subsidiary of State Development Corporation “VEB.RF”, has won the public auction held by RZD Trading Company. The project aimed at the renewal of the Sakhalin rail road rolling stock has financial backing from the Far East Development Fund (FEDF), a member of VEB.RF Group. The total project value exceeds 778 million roubles.
Three RA-3 rail buses are leased out to Sakhalin Passenger Rail Carrier, the operator of long-distance and commuter trains in the Sakhalin Region. Intended for commuter traffic at non-electrified sections of rail roads, the new rolling stock can be operated in extreme temperature conditions, which is of crucial importance for the Russian Far East. The official dispatch of the buses to Sakhalin took place at Metrowagonmash, a member of Transmashholding Group.
“Not only does this project contribute to quality of the regional passenger traffic but it also introduces to the market a new Russian-manufactured RA-3 rail bus,” VEB.RF’s Deputy Chairman and VEB-Leasing’s CEO Artem Dovlatov said.
“Worldwide, best cutting-edge solutions make railways a fast and comfortable means of transport. This is the way we want it to be in Russia’s Far East. The project is our joint contribution to higher quality of the Sakhalin transport and logistics infrastructure,” FEDF’s CEO Aleksy Chekunkov said.
Lenders Disburse First Tranche under Project Financing Factory Programme to Develop Udokan Copper Deposit
In July 2019, VEB.RF, Gazprombank and Sberbank signed a syndicated loan agreement with the Baikal Mining Company (a member of USM Group) to develop the Udokan copper deposit.
“This is the first disbursement under the syndicated loan organised under the Project Financing Factory programme. The first Tranche is not large, only 340 million roubles. Further disbursements will be made in line with the approved construction schedule. The syndicated loan will be allocated to ensure a full operation cycle, including the delivery of primary equipment for a mining and processing facility, a leaching plant, building and installation work including that related to infrastructure construction, and delivery of ancillary equipment and transport,” Member of the Management Board Nikolai Tsekhomsky said.
“The start of disbursements is a crucial stage in the implementation of an ambitious national project. The borrower and the lenders have fulfilled the terms and conditions for disbursement in the shortest term upon the execution of the loan agreement, which proves a high level of competence of the participants, and a professional approach to structuring the deal and preparing loan and security documents. I am confident that these positive factors will contribute to the project’s successful implementation,’ Vice President and Head of Gazprombank’s Project and Structured Finance Department Alexander Ushkov said.
The deal is Russia’s largest project implemented using the Project Financing Factory mechanism, with VEB.RF acting as the project operator. The total project budget approximates to 3 billion US dollars, of which 1.79 billion US dollars is to be raised as a loan from the syndicate of banks for a term of twelve years. The syndicate participants are Gazprombank, Sberbank (up to 650 million US dollars each), and VEB.RF (490 million US dollars). VEB.RF also exercises powers of the lending manager, and Gazprombank is an arranger and a pledge manager.
All rouble-denominated tranches are government subsidised for the entire length of the loan in respect of fluctuations in the key interest rate. Interest expenses in the investment phase and any expenses associated with the project cost overrun will be covered out of the Factory’s special instrument, Tranche B, to be provided by VEB.RF.
After becoming fully functional, the Udocan mining and smelting facility will create more than 2,000 new industrial jobs aside from allied sectors.
Located in Trans-Baikal Territory, Udokan is Russia’s largest undeveloped copper deposit and one of the largest in the world. Its development includes the construction of an open-cut mine and Phase 1 of a mining and smelting facility to produce cathode copper and copper concentrate with the annual production of 125,000 tonnes, and the respective infrastructure.
VEB.RF issued short-term bonds in an additional placement to companies and corporations on 24 July 2019.
The Bank raised 20 billion roubles from bonds with a maturity of 14 days and a coupon of 7.20% p.a.
The par value of one bond is 1,000 roubles. The bonds were sold at 100% of their par value. The coupon is payable at maturity.
The arranger of the bond issue is Gazprombank.
The bonds are on the Moscow Exchange’s Quotation List Level 1. The depository is National Settlement Depository.
VEB.RF and Bank BelVEB to Support BELAZ Russian and Belarusian Products Export to Third Countries
State Development Corporation “VEB.RF”, BELAZ JSC (BELAZ HOLDING Management Company) and Bank BelVEB JSC entered into an agreement on support of joint Russian and Belarusian products export to third countries in the total amount of 50 million USD. The signature ceremony took place during the 6th Forum of Russian and Belarusian Regions.
The document was signed on behalf of VEB.RF by its Deputy Chairman Daniil Algulyan, on behalf of Bank BelVEB by its Chairman of the Management Board Vasiliy Matyushevsky and on behalf of BELAZ by its CEO Pyotr Parkhomchik.
Bank BelVEB will act as an agent to prepare jointly with BELAZ a list of export contracts to be financed as part of products’ export to third countries. The agreement involves export of BELAZ’s heavy duty vehicles (quarry dump trucks, road-building, and underground and steelworks machinery).
“This is our pilot project. Today our focus is on support of joint products export to third countries,” Daniil Algulyan said.
For several years, the parties have been financing the supply of Russian high technology products to BELAZ, raw materials for quarry machinery manufacturing, including the projects with export of products made jointly with Russian companies.
The signature of the agreement became possible after changes in the Belarusian export law: a new Belarusian President’s Decree on Certain Measures for Realization of Belarus Made Goods was adopted in 2019. The law brought more opportunities for Belarusian goods export financial support. In particular, a new mechanism was introduced to reimburse third country exports related costs to non-resident banks and leasing companies; a client's bank may now use interbank loans and export documentary letters of credit with post-financing; financing of projects involving exports to third countries in USD and euro is now available.
Belarusian companies may now participate in the Russian programme for subsidising interest rates under a loan for import of Russian-made components which will be part of the final product. Third country clients may use the Belarusian programme for subsidising the interest rate under a loan for import of goods with Russian-made components from Belarus.
“We believe that today’s agreement is important in solidifying the readiness of the parties to a new format of cooperation for support of Russian and Belarusian products export to third countries. We intend to keep our strategic focus on development of this area of business. I am convinced that our cooperation with BELAZ testifies to a high level of trust of this company in our bank and to the demand in our export support services,” Vasiliy Matyushevsky noted and called upon other Belarusian and Russian manufacturers and exporters to seize new opportunities.
“BELAZ has been cooperating with Bank BelVEB for more than 10 years. The bank proved itself as a reliable financial partner. The signed agreement will strengthen the position of the Belarusian Autoworks on third countries’ markets and well give an impetus to our export potential,” Pyotr Parkhomchik said.
The parties are confident that the signed agreement will enhance the economic integration of Russia and Belarus, cooperation between companies, banks and export-credit agencies of both states.
The award ceremony “Top 10 Russian Single-industry Towns” was held as part of the Forum on Development of Single-industry Towns on 15 July 2019. The winners include: Pavlovsk (Voronezh Region), Kotovsk (Tambov Region), Tutayev (Yaroslavl Region), Cherepovets (Vologda Region), Gubkin (Belgorod Region), Teykovo (Ivanovo Region), Naberezhnye Chelny (Republic of Tatarstan), Glazov (Republic of Udmurtia), Vyksa (Nizhniy Novgorod Region), Nevinnomyssk (Stavropol Territory).
One of the key Top 10 single-industry towns’ selection criteria is the efficiency of the local government authorities.
“The Top 10 features the towns which, in our opinion, are the most active in terms of development, use of available support measures, skills and knowledge gained during the training programme. These towns have comprehensive teams which strive for development,” MONOGORODA.RF’s CEO and Deputy Chairperson of VEB.RF Irina Makieva said.
The Forum on Development of Single-industry Towns organised by the Ministry of Economic Development of Russia with support of MONOGORODA.RF Fund took place in the technological park Zhigulevskaya Valley (Tolyatti). The idea to openly discuss support measures with mayors of all single-industry towns was brought up by Igor Shuvalov. This is a unique format which gives the municipalities an opportunity to discuss the most relevant issues directly at the federal level.