VEB.RF Hosts Meeting of Project Working Group on Small and Medium-Sized Businesses and Individual Entrepreneurial Initiative Support
The first meeting of VEB.RF’s project working group, chaired by Deputy Chairperson Marina Romanova, involved in the national project for Small and Medium-Sized Businesses and Individual Entrepreneurial Initiative Support took place on 20 February 2019.
The meeting was attended by experts from VEB.RF, RSMB Corporation, SME Bank, REC, DOM.RF, the Far East and Baikal Region Development Fund, VEB-Leasing, the Russian Presidential Academy of National Economy and Public Administration, VEB Innovations, OPORA RUSSIA All-Russian Public Organisation of Small and Medium Business.
VEB.RF’s working group will contribute to strengthening the strategic partnership among development institutions, setting priorities, creating advanced solutions for SME support and suggesting new approaches to boosting entrepreneurship, including the urban economy projects.
The participants also discussed the need to make preferential lending and leasing products more accessible to entrepreneurs (including in the Far Eastern Federal District), the prospects for SME involvement in major investment and infrastructure projects, the better use of export opportunities and the challenges of gaining entry into foreign markets.
“Small and medium-sized businesses play an essential role in economic development. Encouraging entrepreneurial initiative can increase both employment and production efficiency. The coordinated activities of development institutions in this area will significantly accelerate the development process. In this context, VEB.RF’s large-scale projects can generate the demand for SME products and services,” Marina Romanova said.
The agreement was entered into during the Russian Investment Forum in Sochi. The document was signed on behalf of Gorod by its CEO Sergey Kalugin. The consortium was founded in February 2018. Its members are the Almazov National Medical Research Centre, ITMO University, the Faculty of Economics of Lomonosov Moscow State University, Rusatom Healthcare, Shvabe, and several other companies and research and educational centres.
The principal goal of the consortium is to use digital technology to enhance the efficiency of public health services in Russian regions. The Digital Healthcare Consortium also aims to develop and coordinate basic technological standards for digital health in Russia, test technologies and architectures and ensure that they come into use in the form of products, services and projects.
Project Financing Factory: Syndicated Loan Agreement Signed by VEB.RF, Gazprombank and Shchekinoazot
VEB.RF, Gazprombank and Shchekinoazot signed a syndicated loan agreement to implement a project to build a methanol production facility under the Project Financing Factory programme. The signing ceremony took place during the Russian Investment Forum in Sochi.
The document was signed on behalf of VEB.RF by its Deputy Chairman Yuriy Korsun, on behalf of Gazprombank by Deputy Chairman of its Management Board Alexey Belous and on behalf of Shchekinoazot by its Deputy Director General for Financial Resources Andrey Tokarev.
The project is the third phase of the comprehensive programme to increase methanol production with a capacity of 500,000 tonnes per year on Shchekinoazot’s production site in the Tula Region. When completed, the project will make the company the largest methanol producer and exporter in Russia. The project is carried out pursuant to the May presidential decree in relation to promoting non-resource non-energy exports.
The total project value is 22 billion roubles; the decision on VEB.RF’s commitment was approved by the Supervisory Board in December 2018. VEB.RF’s share in the syndicated loan will reach a total of 4.5 billion roubles. Gazprombank will lend 10 billion roubles. The intended length of the loan is 12 years. The syndicated loan will be used to pay for construction and installation and buy Russian-made equipment.
“This is one of the first syndicated loan agreements under the Project Financing Factory programme. The mechanism is aimed at providing additional benefits for both the project initiator and the participating bank. For example, this is a subsidy reducing the interest rate risk, along with risk sharing among all the project participants. Stimulating project financing is a priority for the development institution, while VEB.RF’s share in financing can be minimal. We provide all benefits for banks and the project initiator. For instance, VEB.RF’s share in the committed tranche will not exceed 10 per cent of the total project value under the Shchekinoazot project. The remaining financing will be provided by the partner bank and the project initiator,” Yuriy Korsun said.
“The project will have a positive effect on the development of the national chemical industry, creating the conditions for high-technology methanol production in the Tula Region. We are hopeful of continuing effective cooperation with our partners on promising projects that make it possible to use technological advances for economic development,” Alexey Belous said.
“When brought into operation, the M-500 will enable Shchekinoazot to make 1.5 million tonnes of methanol per year and become one of the largest methanol producers in Russia. Methanol is in demand in the global and domestic markets. The utilisation rate of Russian methanol producers is high now.
“The Project Financing Factory is an effective mechanism to support manufacturers. The memorandum of intent to use the Project Financing Factory for the M-500 project was signed by Shchekinoazot and VEB during the Russian Investment Forum 2018 in Sochi. This year, together with VEB and our key financial partner, Gazprombank, we hammer out the syndicated loan agreement. I would like to thank our partners for cooperation and understanding in all matters.”
The main idea behind the Factory is to provide projects with syndicated loans with government-subsidised interest rates and government-secured bonds. The legal framework took shape in the first half of 2018. VEB.RF is as the Factory’s operator. The Factory is attractive to project initiators because it offers a mechanism to hedge the interest rate risk. Commercial banks are mainly interested in sharing their project financing risks with VEB.RF. Major commercial and regional banks have already joined VEB.RF’s Project Financing Factory. A project is eligible for the Factory if it needs an investment of more than 3 billion roubles and has a payback period of up to 20 years. Furthermore, the project initiator must invest at least 20% of the project value.
Project Financing Factory: Syndicated Loan Agreement Signed with KuibyshevAzot
VEB.RF, Gazprombank и KuibyshevAzot signed a syndicated loan agreement to finance the project to build a production facility with an annual capacity totalling 500,000 tonnes of K-grade sulphuric acid and refined oleum at the production site in Tolyatti, Samara Region. The project will be financed under the Project Financing Factory programme. The signing ceremony took place during the Russian Investment Forum in Sochi.
The document was signed on behalf of VEB.RF by its Deputy Chairman Yuriy Korsun, on behalf of Gazprombank by Deputy Chairman of its Management Board Alexey Belous and on behalf of KuibyshevAzot by its Director General Alexander Gerasimenko.
The investment amount will total 6.3 billion roubles, with 3.8 billion roubles and 2.2 billion roubles to be lent by VEB.RF and Gazprombank respectively. The decision on VEB.RF’s commitment was approved by the Supervisory Board in December 2018.
“VEB.RF offered a comprehensive financing solution for the project, involving a special-purpose entity with an equity holding or debt financing through a syndicated loan of 4.7 billion roubles given jointly with Gazprombank. VEB.RF’s share in the syndicated loan is 2.5 billion roubles. The Factory’s advantage is that all tranches, including the partner bank’s tranche, are government subsidised for the entire length of the loan in respect of fluctuations in the key interest rate,” Yuriy Korsun said.
“Financing for the construction and development of manufacturing facilities in Russia’s various economic sectors is definitely high on Gazprombank’s agenda. Ensuring KuibyshevAzot’s feedstock security and reducing its production costs, the loan will allow this important company to be confident about the future,” Alexey Belous commented on the agreement.
KuibyshevAzot is a leader in the chemical industry and Russia’s largest manufacturer of caprolactam and polyamide, ranking among the top ten nitrogen producers in the country. Its products will enable KuibyshevAzot to supply its process chain with its own feedstock. Products resulting from subsequent process stages will contribute to achieving the goals of import substitution.
The memorandum of intent to involve the Project Financing Factory in carrying out the project was signed by KuibyshevAzot and VEB.RF at SPIEF 2018.
Project Financing Factory: VEB.RF, Gazprombank and Sberbank Agree to Finance Udokan Construction
VEB.RF, Gazprombank, Sberbank and Baikal Mining Company (part of USM) agreed to finance the first phase of the Udokan copper deposit development project in the Kalarsky District, Trans-Baikal Territory, and the construction project for a mining and smelting facility. The basic terms and conditions of financing are contained in the agreement signed by the partner banks and Baikal Mining Company during the Russian Investment Forum in Sochi.
The project financing will be structured in accordance with the principles of the Project Financing Factory in the form of a syndicate of Russian banks using special-purpose tranches and a subsidised interest rate.
The document was signed on behalf of VEB.RF by its First Deputy Chairman and Member of the Board Nikolay Tsekhomskiy, on behalf of Gazprombank by Deputy Chairman of its Management Board Alexey Belous, on behalf of Sberbank by Deputy Chairman of its Executive Board Anatoly Popov and on behalf of Baikal Mining Company by Chairman of its Board of Directors Valery Kazikayev.
The total project budget is 2.9 billion US dollars (including shareholder investments, VAT and financing costs). The syndicated loan with a length of 12 years will be used to finance capex and opex, including construction, installation and procurement.
In accordance with the basic terms and conditions, the partner banks will provide financing as follows: 20% from VEB.RF, 40% from Gazprombank and 40% from Sberbank.
“This is the Factory’s first deal involving three lenders: two large commercial banks and VEB.RF. The Factory’s mechanism enables commercial banks to effectively collaborate to arrange financing for capital-intensive projects. All rouble-denominated tranches, including tranches from the partner banks, are government subsidised for the entire length of the loan in respect of fluctuations in the key interest rate. VEB will also pay an additional tranche for interest at the project’s investment stage,” Nikolay Tsekhomskiy emphasised.
“The Trans-Baikal Territory Government will give assistance to the Udokan deposit development project and help to start the construction of the mining and smelting facility within the shortest time possible. We continue work on setting up an advanced development zone in the Kalarsky District. It is important for us to have new jobs, created by the facility, and tax revenues for the local consolidated budget,” Trans-Baikal Territory Governor Alexander Osipov said, adding that Baikal Mining Company kept on building the road and power supply facilities despite the region’s difficult weather conditions.
Valery Kazikayev said: “Our initial plans were to use the project financing mechanism. The shareholders will invest at least 30% of the total investment amount, including 28.5 billion roubles that has already been invested. We are confident that the involvement of government-controlled Russian banks and the largest development institution will provide the most efficient financing conditions and ironclad guarantees that the mining and smelting operations will be fully functional as early as 2022.”
“The loan for Udokan is an important task for the country in general, because copper is not only essential for our industrial production but also still a strategic export commodity. As one of the largest banks in Russia, Sberbank always takes an active part in pursuing Russia’s economic goals both under government programmes and under specific agreements,” Anatoly Popov, Deputy Chairman of the Sberbank Executive Board, said.
“With extensive experience in financing the construction of industrial facilities throughout Russia, we are pleased to become an active participant in the implementation of another large-scale project in this area. The agreement that we signed today shows the efficiency of the Project Financing Factory, created last year with the participation of the country’s largest financial institutions. I am sure that this cooperation will continue into the future,” Alexey Belous, Deputy Chairman of the Gazprombank Management Board, commented on the agreement.
Udokan is Russia’s largest undeveloped copper deposit and one of the largest in the world.
There are plans to start pre-commissioning procedures in late 2021 and reach a design capacity of 12 million tonnes of ore per year in mid-2022.