Seven projects funded by the Project Financing Factory (PFF) with the involvement of VEB.RF and partner banks will create over 30,000 jobs (including allied industries), with 8,000 new jobs in the sectors directly affected by the projects.
“Seven projects have already received funding from the Project Financing Factory, with related syndicated loans (investments from VEB.RF as the Factory’s operator and from partner banks) totalling 372 billion roubles. Overall, in partnership with the commercial banks, VEB.RF approved financing for ten projects in the gas chemical sector, metal production, port and road infrastructure and the digital economy. Investments from private investors in these projects will amount to about 220 billion roubles; the commercial banks will provide 332 billion roubles; VEB.RF’s approved commitment is 215 billion roubles. This is a substantial joint contribution to the Russian syndicated loan market,” VEB.RF Deputy Chairman Yuriy Korsun said.
According to Deputy Minister of Economic Development Ilya Torosov, the Project Financing Factory is a high-potential mechanism to carry out significant projects in the country’s non-resource sectors and create new jobs.
“The Economic Development Ministry and VEB.RF made sure that the lenders and borrowers would have minimal risks, including interest rate risks. This is especially important for project financing, and this will make the mechanism as convenient as possible for the banks in terms of capital and risk financing. Basically, the government partly assumes the interest rate risk for as long as 20 years. In addition to interest rate risk insurance related to the market situation, the Factory offers a mechanism of government guarantees (the Factory’s budget includes 294 billion roubles for guarantees). We are currently working with VEB.RF to improve the Factory; we find it necessary to offer a wider range of PFF projects, including increasing the payback period to 30 years and making it possible to combine government support for projects and the optimisation of collateral management. All this will allow us to attract new borrowers as well as new financial partners,” Ilya Torosov said.
The ongoing projects financed under the PFF mandate include as follows: production facility construction for K-grade sulphuric acid and refined oleum (KuibyshevAzot, Tolyatti); methanol production facility construction (Phase 3) with a capacity of 500,000 tonnes (Shchekinoazot, Tula Region); Udokan copper deposit development; Nakhodka Fertilizer Plant construction (Primorie Territory); Far Eastern coal terminal construction (seaports of Vanino and Sukhodol); creation of Russia’s nationwide end-to-end track & trace system. The partner banks under the projects are Sberbank, VTB and Gazprombank.
VEB.RF has another 12 PFF projects in the pipeline, totalling over 1.4 trillion roubles. To make the PFF mechanism more effective, VEB.RF and the Russian Ministry of Economic Development are introducing changes that, according to Yuriy Korsun, “reflect market practices, lead to improvements in PFF projects”. The development institution and the ministry believe that changes in the PFF mechanism will make it more effective, widen the range of deals and increase the number of participants.
PFF mainly provides syndicated loans with government support, which expands access to credit facilities, makes it possible to borrow for a longer term and enables participants to share risks. At present, VEB.RF has PFF participation agreements with 21 banks.
The PFF programme applies to investment projects implemented in Russia’s high-priority sectors and meeting the following criteria: a project value of 3 billion roubles or more; a payback period of 20 years or less; the borrower’s commitment of at least 20% of an investment project’s total budget.
VEB.RF’s project “Developing the Architecture of the Green Finance Market in Russia” has been selected to be officially showcased in Paris at the Paris Peace Forum, the 2020 edition of which is scheduled for 10–12 November. The organisers recognised VEB.RF’s efforts to draw up recommended guidelines on green financing, create a national taxonomy for green projects and integrate them into the international green finance system.
The Call for Projects received a total of 850 applications from 113 countries on subjects congruent with the UN Sustainable Development Goals (environmental sustainability, culture and education, peace and security, new technology, inclusive economic growth, sustainability). The VEB.RF project is among the top 30 initiatives selected to be showcased at the forum on-site in Paris. The other selected projects (about 70) are to be pitched online.
The first version of the recommended guidelines and taxonomy were made available late in the summer for discussion by all interested professionals, businesspeople and public officials. VEB.RF received several hundreds of comments before considering them and announcing plans to present the second version by the end of the year. Based on the released methodology, Expert RA has already certified the first financial instrument. This is perpetual bonds issued by Russian Railways, also compliant with the ICMA Green Bond Principles.
The Paris Peace Forum is an initiative to promote international cooperation and address global challenges through collective action among countries. The forum is organised under the auspices of António Guterres, Secretary-General of the United Nations, and Emmanuel Macron, President of the French Republic. The event in 2020 is the third edition of the forum, whose previous guests include Russian President Vladimir Putin, UN Secretary-General António Guterres, German Chancellor Angela Merkel, and IMF Managing Director and ECB President Christine Lagarde.