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 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.