State Development Corporation "VEB.RF" redeemed its Eurobonds Series 1 issue on July 9, 2020.
The Eurobonds for a nominal amount of US$ 1 600 mn were issued on the Irish Stock Exchange in 2010 with a ten-year maturity period and an annual coupon rate of 6.902%.
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 1 with effect from 9th July 2020.
VEB published its consolidated financial statements for 2019 as prepared in accordance with IFRS.
VEB published its consolidated financial statements for 2019 as prepared in accordance with IFRS.
VEB.RF Group’s key financials for 2019 are as follows:
- The Group’s assets as at 31 December 2019 amounted to RUB 3,177.4 bn. The decline against the beginning of the year was RUB 184.5 bn (- 5.5%), that was due to the decrease in the loan and leasing portfolios, and assets of disposal groups and non-current assets held for sale. The increase in cash and cash equivalents and investment financial assets positively affected total assets. The increase in liquid assets was carried out in the context of building a necessary liquidity buffer in line with the Group’s conservative approach to risk management.
- Loans to customers accounted for 35.5% of the Group’s total assets. As compared to the beginning of 2019 the loan portfolio after allowance for expected credit losses decreased by RUB 432.8 bn (-27.7%) and reached 1,128.8 bn. The portfolio decrease after allowance for expected credit losses was mostly due to the disposal of Sviaz-Bank, negative foreign currency revaluation and loan repayments performed at faster pace than new lendings.
The amount of loans granted by VEB in 2019 reached RUB 84.5 bn. Investment priority sectors included industry, infrastructure and urban economy, as well as export support.
The Project Financing Factory became fully operational, with syndicated lending in partnership with commercial banks being its mechanism, employing government support.
In 2019 VEB.RF’s supreme collegial management body approved eight projects, implemented through this mechanism, worth a total of over RUB 731,4 bn. The projects were in such areas as chemical (incl. natural gas to chemicals) and metallurgic industry, ports and roads infrastructure, as well as digital economy. In 2019 financing for six projects of the Project Financing Factory began.
The Group’s total liabilities as at 31 December 2019 amounted to RUB 2,749.8 bn, decreasing by RUB 328.0 bn (-10.7%) in 2019. The decline was mostly due to the decrease in the amounts due to banks and issued debt securities, as well as in the amounts due to customers brought about by the disposal of Sviaz-Bank. At the same time, the amounts due to the Russian Government and the Bank of Russia went up by RUB 179.1 bn, or 30.2%, owing to the Federal Treasury’s placement with VEB.RF of a deposit of RUB 200 bn for a term of up to five years at the below-market rate.
The net operating income for 2019 totaled RUB 58.2 bn as compared to the net operating loss of RUB 11.0 bn for 2018. In the operating income structure, the net interest income amounted to RUB 25.7 bn, net commission income reached RUB 8.2 bn, non-interest income amounted to RUB 24.3 bn.
The Group’s negative financial result for the 2019 came to RUB 52.8 bn, which was, inter alia, stipulated by the reporting rules specifics, when the Group recorded a loss of RUB 46.2 bn at the initial recognition of project financing provided at the below-market rate. Yet, project financing is one of the priorities of VEB.RF as a development institution. The financial result was also negatively affected by the net interest income decrease against the general interest rates drop.
The measures undertaken to improve the balance sheet structure and optimize the business model contributed to the reduction of the 2019 loss by 70.0% as compared to the loss of RUB 175.8 bn in 2018.
In 2019 the Group’s equity went up by RUB 143.5 bn (+50.5%) to reach RUB 427.6 bn as at 31 December 2019.
The range of instruments provided to VEB.RF by the state in 2019, aimed at maintaining the size and structure of VEB.RF’s capital, also included the following:
In March and June 2019 VEB.RF received subsidies from the federal budget in the form of an asset contribution of the Russian Federation of RUB 7.7 bn and RUB 7.8 bn, respectively, to compensate for costs related to the fulfillment of obligations arising from foreign borrowings in the capital markets. The whole amount of the subsidies was recognized within authorized capital.
In March and December 2019 VEB.RF received subsidies of RUB 9.7 bn and RUB 1.5 bn, respectively, from the federal budget as an asset contribution of the Russian Federation in order to make a contribution to the share capital of JSC Far East and Arctic Development Fund for the implementation of priority investment projects in the Far Eastern Federal District. The whole amount of the subsidies was recognized within additional paid-in capital.
It should be also noted that Regulation No. 1611 of the Russian Government “On the Authorized Capital of State Development Corporation “VEB.RF” of 21 December 2018 stipulates that in accordance with Article 18 of the Federal Law and clause 1.1 of Article 78.3 of the Budget Code of the Russian Federation the authorized capital is formed in the amount of the formed part of the authorized capital of VEB.RF and the part of the authorized capital of VEB.RF to be formed through further additional asset contributions of the Russian Federation in the amount of RUB 300 bn.
VEB.RF’s capital adequacy ratio (according to RAS) was 13.6% as at 1 January 2020 (11.8% as at 1 January 2019).
In 2019, VEB.RF retained the credit ratings at the level of the Russian Federation sovereign rating (S&P: BBB, Fitch: BBB, Moody’s: Baa3). The national rating agency ACRA also maintained the VEB’s credit rating at the highest level of AAA.
Economic Partnership Strategy 2025 Prepared with VEB.RF’s Participation to Receive Approval at BRICS Summit in Saint Petersburg in July
A meeting of the BRICS Contact Group on Economic and Trade Issues in Moscow on 26 February supported VEB.RF’s proposals for the Strategy for BRICS Economic Partnership. It is intended that the proposals will be submitted to the BRICS leaders at the Saint Petersburg summit in July 2020.
Zarina Tsekoeva, Vice-President of Strategy, reported to the meeting on these activities and VEB.RF’s contribution to the implementation of national projects in Russia.
In her report on the principal areas of economic cooperation among the BRICS member countries, Tsekoeva drew attention to the issues related to the Sustainable Development Goals, the principles of responsible investment, the agenda for the presidency of the BRICS Inter-Bank Cooperation Mechanism, and the necessity for the BRICS member countries to take part in formulating the common principles of responsible investment.
The report of the Russian Ministry of Economic Development put particular emphasis on digital transformation and sustainable development, including in respect of remote and rural areas. In addition, representatives of Global Rus Trade reported on the establishment of the BRICS Business Women Alliance; research experts and members of the BRICS Expert Council presented a review of BRICS trade relations, noted the importance of supporting infrastructural projects of the New Development Bank, and emphasised the need to work towards the UN Sustainable Development Goals 2030.
VEB.RF holds the presidency of the BRICS Inter-Bank Cooperation Mechanism in 2020.
VEB.RF and Sberbank Agree on Basic Terms and Conditions of Financing for Korbalikhinskoye Deposit Development
VEB.RF, Sberbank and Ural Mining and Metallurgical Company (UMMC) have signed a term sheet to finance the development project for the Korbalikhinskoye polymetallic deposit in the Altai Territory and rehabilitate the Rubtsovsk concentrator with the aim of increasing its annual capacity to 1.5 million tonnes of ore. It is intended that the project will use the Project Financing Factory mechanism.
The total project value is estimated at 38 billion roubles, including about 24 billion roubles in syndicated lending. The financial institutions may provide funding to cover the project’s budget costs, including expenses associated with purchasing property and equipment and paying for construction and installation.
Sergey Evdokimov, Senior Vice-President, VEB.RF: “We believe the Factory serves as a catalyst for progress in the Russian syndicated lending and project financing markets. Potential investors and lenders are increasingly interested in this mechanism. As the Factory’s operator, VEB.RF not only selects investment projects for inclusion in the programme and is a syndicate member, but also acts as the syndicate agent at all times. If necessary, VEB.RF can provide syndicate tranches intended to pay interest to other syndicate members at the project’s investment stage and establish reserve tranches in case the project’s budget is overrun.”
Olga Kharlamova, Vice President, Director of Key Client Lending, Sberbank: “Sberbank views participation in financing the country’s major mineral production projects as the basis for new export opportunities and Russia’s strengthened role in global economic ties. The Korbalikhinskoye deposit has the potential of large ore deposits that can significantly affect the export of zinc, copper, lead, gold and silver. I’m sure that the project involving Russia’s two largest development institutions will enable UMMC to use cutting-edge technology, thus making the Korbalikhinskoye deposit project not only one of the largest but also one of the most technologically advanced initiatives in the mining industry.”
Andrey Kozitsyn, CEO, UMMC: “Signing this document is a landmark in the history of our company. The Korbalikhinskoye deposit contains one of Russia’s richest zinc mines. Its commercial reserves are estimated at 2.3 million tonnes of zinc. Such a large project will allow UMMC to retain and strengthen its leading position in the non-ferrous industry. We appreciate the fact that VEB.RF, Russia’s major development institution, is interested in our investment project alongside one of our biggest lenders.”
Located in the Zmeinogorsk District, Altai Territory, the Korbalikhinskoye deposit will make it possible to operate Russia’s largest underground polymetallic mine. The reserves of the deposit are 24 million tonnes of ores rich in zinc, copper, lead, gold and silver.
VEB.RF is Russia’s major national development institution. The primary objective of VEB.RF is to contribute to accomplishing the national priority tasks set by Vladimir Putin in the May presidential decrees of. In partnership with commercial banks, VEB.RF provides financing for large-scale projects to develop the country’s infrastructure, industrial production and social sphere, strengthen its technological potential and improve the quality of life. VEB.RF also coordinates the activities of sector-oriented development institutions: Russian Export Center, Russian Small and Medium Business Corporation, Far East Development Fund, MONOTOWNS.RF, DOM.RF.
Sberbank is Russia’s largest bank and a leading global financial institution. Sberbank holds almost one third of aggregate Russian banking sector assets, it is the key lender to the national economy and the biggest deposit taker in Russia. The Central Bank of the Russian Federation is the founder and principal shareholder of Sberbank, owning 50% of the Bank’s authorised capital plus one voting share, with the remaining 50% held by domestic and international investors. Sberbank has customers in 18 countries. The Bank has the largest distribution network in Russia with about 14,000 branches. Its international operations include the United Kingdom, the United States, the CIS, Central and Eastern Europe, India, China and other countries.
Ural Mining and Metallurgical Company (UMMC) is Russia’s largest producer of copper, zinc, coal, gold and silver, consisting of more than 40 industrial companies based in Russia and other countries.
Dmitry Aksakov: Russia Needs Its Own Methodology for Responsible Business Practices, Including Green Financing
VEB.RF Vice-President Dmitry Aksakov said these words at the 2nd annual conference “Responsible Financial and Investment Practice in Russia”.
“On the one hand, environmental concerns are national priorities for our country. On the other, the issue of responsible financing attracts a great deal of public attention in the world, and Russia is an active participant in international economic relations. It is, therefore, important for Russia to have national standards of responsible business conduct. This is necessary so that Russian companies use greener production processes and so as to make it easier for Russian companies to do business with foreign partners. Meanwhile, it’s important that the Russian standards should be close to international standards. We believe Russian companies need methodological, informational and other kinds of support to become more active in joining the ESG ecosystem,” he said.
It is extremely important for VEB.RF as a development institution to apply responsible financial and investment practices. This is highly significant for all of VEB.RF’s key business areas: high value-added production, infrastructure, urban economy. As stated in the Memorandum on Financial Policies, VEB.RF does not participate in projects in Russia if they fail to meet environmental requirements and standards. An example is VEB.RF’s participation in financing the largest energy-from-waste project in the Moscow Region.