VEB.RF Provides Financing to Pay for Equipment for World’s Largest Gas-to-Chemicals Facility at Ust-Luga
VEB.RF has continued to finance the construction of the world’s largest gas-to-chemicals facility under the Ust-Luga ethane-containing gas processing project. The new tranches are intended to pay for long-lead equipment. The gas-to-chemicals project operator is Baltic Chemical Complex, a subsidiary of RusGazDobycha.
VEB.RF participates in financing the project as instructed by the Russian Government. VEB.RF’s Supervisory Board approved transactions to finance the initial stage of the project, including loans to RusKhimAlyans and Baltic Chemical Complex. VEB.RF disburses funds in accordance with the approved project schedule.
Tranches are paid as the project milestones are met. VEB.RF is involved in the initial phase of the project, seeking funding from Russian and foreign lenders.
“Preparations are well under way to arrange project financing for the large-scale ethane-containing gas processing project at the village of Ust-Luga. Prepayments were made for the supply of equipment to the gas-to-chemicals facility, and a loan agreement was signed with RusKhimAlyans in August to finance the initial stage of the construction project. When completed, the project will have a significant socio-economic impact across the country. It is intended that the project will create 5,000 permanent jobs, giving impetus to the development of more advanced chemical production stages,” VEB.RF Chairman Igor Shuvalov said.
The project initiators are Gazprom and RusGazDobycha.
The project involves building integrated gas processing and gas-to-chemicals facilities designed for the high value-added processing of multi-component natural gas at the village of Ust-Luga, Kingisepp District, Leningrad Region.
The gas processing facility consists of integrated gas processing and liquefied natural gas plants. The project operator is RusKhimAlyans, a joint venture between Gazprom and RusGazDobycha.
The gas-to-chemicals facility includes pyrolysis and polymerisation plants. The project operator is Baltic Chemical Complex, a subsidiary of RusGazDobycha.
This is the largest project to process gas in Russia and produce liquefied natural gas (LNG) in North-western Europe. Apart from LNG, the project will also produce dry stripped gas, ethane fraction, liquefied hydrocarbon gases and pentane-hexane fraction. Ethane resulting from fractionation at the gas processing facility is to be converted by the gas-to-chemicals facility into higher value-added products, such as up to 3 million tonnes of various polyethylene grades.
VEB.RF Involved in Ten Syndicates Totalling RUB1.5tn in Partnership with Commercial Banks
This was stated by VEB.RF Deputy Chairman Yuriy Korsun, speaking at a Cbonds conference on syndicated lending in Russia and the CIS.
“For a year and a half, VEB.RF has partnered up with other banks to conduct ten syndicated project financing transactions, including eight projects under the Project Financing Factory programme. The transactions total 1.5 trillion roubles. It’s a substantial joint contribution of VEB.RF and partner banks to the market, both in terms of funding and in terms of project quality. These figures are related to major projects in gas processing and petrochemicals, transport infrastructure, high value-added production, and the digital economy. VEB.RF’s partners, the lenders involved, are VTB Bank, Gazprombank, Otkritie Bank and Sberbank,” Yuriy Korsun said.
He mentioned the difficulty of raising long-term funds as one of the main characteristics of project financing. According to Yuriy Korsun, “new projects can be encouraged by the Project Financing Factory mechanism, a programme that allows private investors to participate comfortably in large-scale projects, as well as enabling borrowers to have easier access to project financing, a longer loan term and a lower effective cost of borrowing.”
“At present, all Project Financing Factory transactions involve only four partner banks. But we haven’t abandoned our plans to expand the pool of partners,” Yuriy Korsun said, replying to a question from the audience about the possible transfer of experience in project and syndicated lending.
“To date, VEB.RF has signed agreements for participation in the Project Financing Factory programme with 21 credit institutions, and this gives us solid grounds to believe the number of syndicate members working on new projects under the Project Financing Factory programme will increase,” Yuriy Korsun emphasised.