Economic Integration in Greater Eurasia VEB.RF’s Priority for SCO IBA Presidency
The RSK Bank of Kyrgyzstan handed over the presidency of the Interbank Association of the Shanghai Cooperation Organisation (SCO IBA) to VEB.RF.
By tradition, the presiding bank offers a substantive agenda to the partners and organises a business programme to share experience and best practices. Specifically, a seminar for the IBA members will take place on Day 0 of the Russian Investment Forum in Sochi in February 2020, and the BRICS and SCO Joint Financial Forum is scheduled for July 2020.
The agenda proposed by VEB.RF as the presiding bank features topics such as inclusive growth through financing for high-quality infrastructure, and strategic partnership to pursue together the UN Sustainable Development Goals. VEB.RF proposes that its partners should continue expanding the use of national currencies, update the database of joint projects, and find common risk assessment approaches. The agenda also includes discussions on the implementation of new financial instruments such as project financing guarantees.
VEB.RF’s presidency will pay particular attention to developing infrastructure and creating an advanced urban economy. Accelerating urban development is now a key driver of economic growth. VEB.RF is ready to share its expertise and discuss the partners’ experience in this area.
VEB.RF’s Chairman Igor Shuvalov said: “The presidency of the SCO IBA is an important mission for VEB.RF. We believe that our main task is to promote development in Greater Eurasia. It is also important to take into account all integration processes: the creation of the Eurasian Economic Community, the Belt and Road Initiative, and efforts of the Eurasian Development Bank, the New Development Bank and the Asian Infrastructure Investment Bank. Mutual trade and investment, along with joint projects, require closer financial cooperation. We will work together with our partners to contribute to creating a common economic space and developing top-tier infrastructure from the Pacific to the Atlantic.”
For information: The SCO’s Agreement on Interbank Cooperation (Association) was signed on 26 October 2005.
SCO IBA member banks: Development Bank of Kazakhstan, RSK Bank of Kyrgyzstan, China Development Bank, VEB.RF, Amonatbonk State Savings Bank of Tajikistan, National Bank of the Republic of Uzbekistan for Foreign Economic Activity, Habib Bank Limited (Pakistan), India Infrastructure Finance Company.
SCO IBA observers: Eurasian Development Bank, Belarusbank, Development Bank of Mongolia.
VEB.RF and Japan Bank for International Cooperation have begun co-financing regional projects
VEB.RF and the Japan Bank for International Cooperation JBIC signed a loan agreement to finance the construction of the Sayuri year-round greenhouse complex in Yakutia.
Funds for the implementation of the project are attracted under the Agreement on joint financing of projects with the Japanese export component, implemented in the Far East. The document provides for the joint work of VEB.RF and JBIC on the organization of financing regional investment projects, which are supported by Japanese Project Promotion Vehicle in the Far East (JPPV).
JPPV was established by the Development Fund of the Far East and the Baikal Region (FRDV, part of the VEB.RF group), Far East Investment and Export Agency and JBIC in 2018 to assist Japanese investors in finding local partners, information and administrative support during the implementation of projects. Currently, JPPV is hosting more than 20 projects. Cooperation agreements were concluded with 16 Japanese companies.
Through JPPV, Japanese partners are participating in a project to build a used car recycling plant in the Primorsky Territory and a wood pellet plant in the Khabarovsk Territory.
The agreement stipulates that at the initial stage, the total amount of funds that the platform’s investment projects can receive from Japanese lenders for up to 10 years is 15 billion Japanese yen. On the Russian side, project financing will be carried out both by the FRDV and the state-owned development corporation VEB.RF.
“Several key projects are already being implemented with the participation of Japanese partners. This, in particular, Arctic LNG (in the Far East, the development of related infrastructure with the participation of Japanese companies is expected) and the development of the Khabarovsk Airport with the participation of a consortium of Japanese investors. We are also interested in expanding cooperation in implementing projects aimed at creating a high-quality urban environment in large settlements of the Far East - primarily in Vladivostok, Khabarovsk, Petropavlovsk-Kamchatsky, ”said Igor Shuvalov, Chairman of VEB.RF.
“Preliminary decisions on providing credit funds from the FRDV for the Sayuri greenhouse complex have already been taken. The project is important for the quality of life in the region, allowing year-round supply of the population with fresh vegetables. Until recently, more than 80% of such products had to be imported from abroad, ”said Fund Director General Alexei Chekunkov.
VEB.RF issued short-term bonds in additional placements to companies and corporations on 26, 27 and 28 June 2019.
The Bank raised c. 21.54 billion roubles, including 10.50 billion roubles from bonds with a maturity of 14 days and a coupon of 7.30% p.a., 0.04 billion roubles from bonds with a maturity of 21 days and a coupon of 7.29% p.a., and 11.00 billion roubles from bonds with a maturity of 28 days and a coupon of 7.28% 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 arrangers of the bond issue are Gazprombank and Svyaz-Bank.
The bonds are on the Moscow Exchange’s Quotation List Level 1. The depository is National Settlement Depository.
VEB.RF Supervisory Board Considers VEB’s Involvement in Three New Investment Projects Totalling About RUB50 Billion
Russian Prime Minister Dmitry Medvedev chaired a meeting of the VEB.RF Supervisory Board at the company’s new office in Vozdvizhenka Street. In his opening remarks he said: “I have signed an ordinance to establish the amounts of the state corporation’s paid-in and callable capital. It is a new mechanism for increasing the capital of development institutions. We have never had it before. It has been devised by VEB and is now fully usable. This is the part of the share capital that can be provided when investment resources are required. We expect to allocate up to 300 billion roubles for this purpose in the medium term.”
The Supervisory Board also considered VEB.RF’s involvement in three new investment projects designed by the reorganised team. The total project value approximates to RUB50 billion. VEB.RF’s expected commitment is RUB26.7 billion.
One of the projects aims to build a new-generation shuttle tanker of 69,000 deadweight tonnes with improved ice performance and manoeuvring characteristics. The Arc6 ice-class tanker is designed to navigate without an icebreaker escort through 1.3-metre-thick ice. It will be used for oil transportation in the Russian Arctic. Vnesheconombank is to invest 18.5 billion roubles in the project.
Two projects in the chemicals sector will be implemented via the Project Financing Factory. VEB is the operator of the Factory. Gazprombank acts as VEB’s financial partner in these two deals.
One of the two projects aims to build a production facility with an annual capacity of 140,000 tonnes of K-grade sulphuric acid and 360,000 tonnes of refined oleum at the KuibyshevAzot production site in Tolyatti. The total investments are estimated at RUB6.3 billion. VEB.RF’s commitment is RUB3.8 billion.
The other project is the Phase 3 construction of a production facility with an annual capacity of 500,000 tonnes of methanol in the Tula Region. The total project value is 22 billion roubles. The project initiator is Schekinoazot. VEB.RF is prepared to invest RUB4.5 billion.
Furthermore, the Supervisory Board reviewed the company’s new business model 2024 to ensure effective risk management and smooth operation in the near five years. In compliance with the business model, VEB does not compete with commercial banks and uses various instruments to participate in projects (guarantees, loans, and equity financing).
The Supervisory Board also addressed the issues of enhancing corporate governance.
InfraVEB (part of the VEB Group) will provide financial support for public-private partnership projects in the Kursk Region, InfraVEB CEO Dmitry Tvardovsky said to a meeting of the Council on Investment Climate Improvement and Investor Relations.
“Project investment without public budget funds is high on InfraVEB’s list of priorities; therefore, we are willing to support the preparation of PPP projects intended for the Kursk Region,” Tvardovsky said. Above all, this concerns municipal economy development projects under concession agreements.
The meeting focused on the Kursk Region’s investment potential, opportunities to carry out investment projects and investment climate improvement.
InfraVEB is part of the VEB Group. The company prepares and supports early-stage investment projects without public investment and provides support for investment- and operation-stage projects. As specified in the Memorandum on Financial Policies of VEB.RF, developing the country’s infrastructure and freeing economic growth from infrastructural constraints are a priority.
Interest-Free Loans Backed by VEB.RF and RSMB Corporation: Monotowns Fund to Finance Investment Projects for One-Factory Towns
Investors will be able to get far greater financial backing from the Monotowns Development Fund. As resolved by the Supervisory Board of the Fund, loan maturities will be extended from 8 to 15 years, the Fund’s maximum share in financing for a project will increase from 40 to 80% of the project value, while the Fund’s minimum share in financing for an investment project will decrease from 100 to 10 million roubles. The time required to examine documents submitted by project initiators will be reduced from 65 to 35 business days.
Any investment project worth 250 million roubles or less financed by the Fund will be eligible for an interest-free loan, provided that collateral is only bank guarantees and/or surety bonds issued by RSMB Corporation/SME Bank and/or guarantees issued by VEB.RF.
The Supervisory Board of the Fund approved several other decisions. For instance, changes were made to the co-financing procedure for expenses incurred by Russian regions and municipalities to carry out construction and/or rehabilitation projects for infrastructural facilities in single-industry towns. Applications for such co-financing can now be submitted to the Fund electronically.
It is intended that the decisions will increase the number of investment projects with potential financing from the Fund, will expand regional coverage and will provide greater support for small and medium-sized businesses to promote municipal economy development projects for single-industry towns.
The meeting of the Supervisory Board approved the Fund’s co-financing for the investment project to rehabilitate the existing production of terephthalic acid at POLIEF in Blagoveshchensk, Bashkortostan. The Fund will lend 1 billion roubles at 5% p.a. for 8 years. POLIEF is a subsidiary of SIBUR. The project is intended to rehabilitate the existing production of terephthalic acid, primary feedstock used to make modern plastic packaging for fluid foods. The project is expected to increase output to 350,000 tonnes per year. POLIEF is Russia’s biggest producer of terephthalic acid and polyethylene terephthalate.
The Monotowns Development Fund is a not-for-profit organisation founded by VEB in 2014. The Fund is a national development institution whose activities are focused on creating the necessary conditions for new jobs and investment in one-factory municipalities, along with improvements to the urban environment. The Memorandum on Financial Policies of VEB.RF specifies that the development of one-factory towns, including building their infrastructure and industrial facilities, is a high priority.
Heads of Development Institutions Meet to Discuss Primorie Investment Projects
The heads of VEB.RF, Russian Export Center, Russian Small and Medium Business Corporation, the Far East Development Fund and DOM.RF visited Vladivostok to discuss the implementation of investment and infrastructure projects in the Primorie Territory.
The meeting participants paid attention to the region’s export potential and noted the necessity of promoting small and medium-sized businesses in the Primorie Territory to unlock its potential to the fullest extent. The meeting was also attended by representatives of the Primorie Territory administration and the local business community.
The meeting was started by VEB.RF Chairman Igor Shuvalov speaking about the coordinated work of development institutions on comprehensive solutions for regional pressing problems. “We, the four organisations, satisfy the needs of businesses from micro enterprises all the way through to major companies and ensure the interaction with regional banks, our major nationwide banks. We would like to understand: what is your sentiment, how do you think we can cooperate. We will reply with our definite proposals,” Igor Shuvalov said.
The VEB.RF Chairman underlined that, with a long-time presence in the region, DOM.RF was involved in several housing projects, which were to be discussed by the company’s CEO Alexander Plutnik during his visit to Vladivostok. According to Shuvalov, RSMB Corporation has also ambitious goals in the Primorie Territory, and its activities will include developing the local urban environment. Igor Shuvalov additionally noted Vladivostok’s key role in developing regional export and emphasised Russian Export Center’s great efforts on this agenda.
The importance of export development was also emphasised by Primorie Territory Vice-Governor Konstantin Bogdanenko. “It is reasonable to hold a forum for exporters in Vladivostok and make it an annual event oriented to Northeast Asian markets,” Bogdanenko said.
VEB.RF and Primorie Territory Authorities Agree to Cooperate to Improve Infrastructure Quality
Vladivostok hosted a meeting between Primorie Territory Governor Oleg Kozhemyako and VEB.RF Chairman Igor Shuvalov. They discussed potential investment projects for the region and entered into a cooperation agreement. Specifically, VEB.RF expressed its willingness to carry out projects to improve urban environment quality with the extensive involvement of development institutions: VEB-Leasing, the Far East and Baikal Region Development Fund, DOM.RF, Russian Export Center, Russian Small and Medium Business Corporation etc.
VEB-Leasing is willing to support the project to renew urban passenger transport, which will raise speed, safety and passenger traffic, including creating a convenient environment for physically handicapped people.
Financing for the construction of heat supply and water treatment facilities in the Primorie Territory is a priority for VEB-Leasing. The socio-economic effect of such projects is evident: a reduced number of accidents, an improved environmental situation, the locals provided with adequate utility services. This will all directly affect the improvement of quality of life.
“Primorie is known to you in connection with the Russky Island and Vladivostok projects. I hope that the plans related to large-scale urban development and investment projects will be completed as scheduled with your help. It is important for us to have such a reliable partner in the region, a partner that understands the situation and knows the particularities of mechanisms to provide support for small and medium-sized businesses and invest in the road sector. This is extremely important for our region,” Oleg Kozhemyako said.
According to Igor Shuvalov, the Primorie Territory has huge potential; work is under way on planning several regional projects involving major Russian companies. The VEB.RF Chairman emphasised that Russian President Vladimir Putin paid particular attention to Primorie investment projects.
“The Primorie Territory is home to us. Today, I am not alone in Vladivostok: I am a representative of VEB.RF and other development institutions, which are in close cooperation with DOM.RF, Russian Small and Medium Business Corporation and Russian Export Center. We have a big agenda; we visited today Bolshoy Kamen, discussed additional orders for merchant vessels, and will definitely look at the infrastructure built in Vladivostok for an APEC summit. Some facilities need additional investment; specifically, waste treatment facilities. We will consider building a highway. Residential construction is a priority; we know that there are problems, and DOM.RF CEO Alexander Plutnik will give special attention to this agenda,” Igor Shuvalov said.
“It is very important for us to have such a credible partner with experience and expertise. I am confident that our joint projects will benefit Primorie and Vladivostok, not only as the regional centre but also, I hope, the future capital of the Far East,” said Oleg Kozhemyako.
VEB.RF has invested 12 billion roubles in the development of the Primorie Territory. Additionally, the Far East Development Fund has been involved in investment totalling 41.7 billion roubles in regional investment projects, including 8.5 billion roubles of the Fund’s approved investments. As of November 2018, actual investment was 6.3 billion roubles.
VEB is considering Primorie projects in the chemical, petrochemical, shipbuilding, manufacturing, port logistics, transport and related industries. Particular attention is given to urban development projects.
During a visit to Vladivostok on 29 and 30 November, VEB.RF Chairman Igor Shuvalov, together with the heads of Russian Small and Medium Business Corporation, DOM.RF, Russian Export Center and the Far East Development Fund, will discuss the region’s priority projects, see Vladivostok’s urban infrastructure facilities and meet the local business community.
VEB Group’s Team Visits Zvezda Shipyard in Primorie to See Construction of Aframax Oil Tankers
During a visit to the Primorie Territory, VEB Group’s team was invited to see the Zvezda shipyard. The shipyard started the large-scale construction of Aframax oil tankers, which had not previously been built in Russia.
Tanker deadweight tonnage is 114,000; the ice class (1A/1B) will enable the ships to be used for year-round navigation in ice-bound conditions. The propulsion systems of the green tankers allow them to use both conventional fuel and environmentally friendly natural gas, which ensures compliance with the new pollution control rules for the Baltic Sea and the North Sea. The first tanker launching is scheduled for 2020. At present, the shipyard has orders for 12 Aframax oil tankers.
The Zvezda product range will include vessels with a displacement of up to 350,000 tonnes, components of offshore platforms, ice class vessels, merchant cargo vessels, special vessels and other marine equipment of any complexity, including equipment that had not previously been made in Russia due to the unavailability of launching and hydraulic facilities.
During the Eastern Economic Forum, VEB Group, Rosneft, Zvezda and Sovcomflot entered into several contracts to build two oil tankers for subsequent long-term chartering. In late October 2018, the Supervisory Board of VEB resolved to approve the transaction.
“Support for this sector has a positive impact on the development of related industries, which is a priority for VEB Group as a development institution. VEB.RF is currently considering eight projects aimed at developing the shipbuilding industry in the Primorie Territory; VEB Group’s potential investments are more than 200 billion roubles. The launched projects will create new jobs and improve quality of life,” VEB.RF Chairman Igor Shuvalov emphasised.
VEB Group’s team also visited the construction site of residential houses for future employees of the Zvezda shipyard in Bolshoy Kamen. Two 68-flat houses have already been accepted for operation and occupied. Construction is well under way for a whole urban block in the 6th residential estate. The contractor was selected for the construction of residential houses in two more neighbourhoods. Overall, there are plans to build about 5,000 flats by 2023, which will provide housing for all employees. The possible expanded involvement of the Far East Development Fund (part of VEB Group) in residential construction projects to provide houses for Zvezda employees is under consideration. In collaboration with DOM.RF, the Fund is carrying out the project as instructed by the Russian President.
A session of the Federation Council passed legislation to change the name of State Corporation Vnesheconombank to VEB.RF, introducing several new functions, such as its role as a development institution coordinator.
The amendments are to be made to the Federal Law On the Bank for Development and certain legislative acts of the Russian Federation.
The law changes the name of State Corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)” to State Development Corporation VEB.RF.
The law also assigns new functions to VEB.RF to coordinate the development institutions’ activities as resolved by the Russian Government.
Another law amends the Budget Code. The Government will approve resolutions concerning the authorised capital of VEB.RF in the form of paid-in capital and the amount of its authorised capital that should subsequently additionally be contributed by the Russian Government (callable capital).
State Corporation "Bank for Development and Foreign Economic Affairs (Vnesheconombank)" redeemed its Eurobonds Series 9 issue on November 21, 2018.
The Eurobonds for a nominal amount of US$ 850 mn were issued on the Irish Stock Exchange in 2013 with a five-year maturity period and an annual coupon rate of 4.224%.
The redemption of the Eurobond issue and coupon payments were executed in full and in accordance with the terms of the prospectus.
Irish Stock Exchange cancelled listing of Eurobonds Series 9 with effect from 21st November 2018.