At the Fifth Moscow International Chemical Forum, the chemical industry stakeholders discussed the new avenues and mechanisms for financing the chemical industry projects at the session addressing the industry’s technical and commercial aspects and called Chemical Industry Project Finance: New Avenues for Banks and Development Institutions.
The discussion featured officials from the ministries concerned, banks and investment funds, shareholders and executives from major chemical businesses, and market experts.
Alexander Orlov, Deputy Director at the Minpromtorg Department of Chemical Engineering and Timber Processing Complex, believes that “Russian chemical industry professionals and stakeholders stand good chances and are well placed to trigger a leap in the national chemical industry evolution”. Russia’s Minpromtorg estimates that in 2017, 22 chemical-industry-related projects will be implemented nation-wide covering 14 regions, with the investments totaling RUB105.5 bn.
The session was moderated by VEB Vice-President Vladimir Batkhin, who stressed that “the financial mechanisms and instruments that offer broader investment avenues for the market are being incrementally used for directing new investments to the chemical industry, including the project finance mechanisms”.
VEB strategy and business model identify 26 top priority industries for investing, with industry programmes being worked out and flexible project finance mechanisms being offered. A strategically focused project portfolio is being created with the projects brought together by VEB in close cooperation with the key market players and VEB regional managers. The project selection is also subject to the national industry strategies and programmes that are launched or maintained by Russia’s federal- or regional-level authorities. Some of the industry programmes have been approved by the VEB Supervisory Board Strategy Committee.
At the chemical industry project finance session, VEB Senior Vice President Sergey Evdokimov highlighted the advantages of syndication mechanisms now available due to the VEB Project Finance Factory platform that is now being created. “The syndication mechanisms offer opportunities such as the ability to bring in projects from a wider financial market, with the project efforts backed by VEB and financing cost reduced due to government investments or subsidies. The Project Finance Factory projects may be launched by commercial banks as well. The VEB new project finance platform is planned to become operational in the beginning of the next year”, commented Mr. Evdokimov.
Alexander Turkov, Director at the Department of Industry at VEB Group company Federal Center for Project Finance (FCPF), showcased the FCPF new early phase project support tools for driving investment projects both financially and non-financially. “The chemical industry projects account for about 30% of the FCPF total industrial project pipeline. The Federal Center for Project Finance encourages the early project activities in the chemical industry as equity investor or as lender to finance project design and surveys or investment consultancy. It may also act as a lead manager or coordinator to arrange the financing for projects”.
The Investment Development Fund Deputy Director Mikhail Makarov also shared about how the financial project support mechanisms are implemented. He says that “the investment applications received by the Fund regarding the chemical industry project financing are the most well-worked part of the application flow, with more than 90% of them eventually approved”.
According to an official from the China Development Bank, “the China’s development bank is willing to work with Russian banks in the Russian market to finance projects through syndicated lending. Chemical industry projects will be a focus for the bank”.
The business community members also voiced their opinion about the project finance opportunities. Specifically, Evgeniya Pilipenko, SIBUR Director for Structured Development Projects, pointed out that SIBUR has been successfully raising project finance, and that the Group believes it is important that their practices are used by the rest of the market. SIBUR has an integration-based approach to creating partnerships. They do so, specifically, by helping to structure the project support efforts.
A vital project finance aspect that was highlighted at the session was development of EPC services. Andrey Chekansky, a director at NIPIGazpererabotka (NIPIGAZ, Russia’s major engineering company) said that the company is basically ready to issue the timeframe and cost guarantees to banks. Also, it was stressed that it is essential that Russian engineering companies contribute to developing the Russian equipment and supplier market.
The participants are confident that the project finance mechanisms progress is to become a key driver to maintain a high level of investments in the chemical industry.