VEB.RF Group and French Entrepreneurs Discuss Cooperation in Infrastructure
Representatives of VEB.RF, the National PPP Development Center and member companies of the MEDEF, France’s leading network of entrepreneurs, have had an online meeting to discuss the joint implementation of infrastructural projects in Russia.
“Cooperation between Russia and France is now on the rise. We can see how successfully business associations of the two countries cooperate with each other. As the largest development institution in Russia, VEB.RF pays great attention to developing the country’s infrastructure. PPPs have an important role in this process. Despite the ongoing coronavirus crisis, the national market for PPP projects is continuing to grow,” VEB.RF’s Deputy Chairperson and Member of the Board Svetlana Yachevskaya said.
One of the measures to promote infrastructure investment, including encouraging foreign investment, will be Russia’s national project assessment and certification system that is being developed by VEB.RF and the National PPP Development Center with support from AECOM. According to Svetlana Yachevskaya, the implementation of the system will attract foreign investors, including from France.
The MEDEF members representing the investor community during the meeting expressed interest in Russian IT, healthcare and rail transport projects.
Yves-Thibault de Silguy, Vice-Chairman of the MEDEF, said that he was optimistic about the future prospects of the Russian assessment system and hopeful of continued cooperation. “We can become good partners in the future in the area of PPPs and work on ambitious megaprojects if Russia successfully implements the principles for quality infrastructure investment and makes PPP projects more transparent and accessible to foreign capital,” he emphasised.
“We’ll be happy to continue effective communication with our French partners, striving to talk about existing obstacles and opportunities to attract new investment,” Svetlana Yachevskaya said in conclusion.
The representative of the National PPP Development Center at the meeting gave a detailed description of the infrastructure market status, measures to support the market, and PPP projects. Investment in Russian-based PPP projects totals 70 billion US dollars. To support the launch of regional PPPs amid the economic difficulties caused by the spread of the coronavirus pandemic, VEB.RF and the National PPP Development Center came up with a rescue plan. As many as about 340 project initiatives were selected for a total of 13 billion US dollars; the most promising of them are to receive assistance with project structuring and subsequent support until commercial close.
Seven projects funded by the Project Financing Factory (PFF) with the involvement of VEB.RF and partner banks will create over 30,000 jobs (including allied industries), with 8,000 new jobs in the sectors directly affected by the projects.
“Seven projects have already received funding from the Project Financing Factory, with related syndicated loans (investments from VEB.RF as the Factory’s operator and from partner banks) totalling 372 billion roubles. Overall, in partnership with the commercial banks, VEB.RF approved financing for ten projects in the gas chemical sector, metal production, port and road infrastructure and the digital economy. Investments from private investors in these projects will amount to about 220 billion roubles; the commercial banks will provide 332 billion roubles; VEB.RF’s approved commitment is 215 billion roubles. This is a substantial joint contribution to the Russian syndicated loan market,” VEB.RF Deputy Chairman Yuriy Korsun said.
According to Deputy Minister of Economic Development Ilya Torosov, the Project Financing Factory is a high-potential mechanism to carry out significant projects in the country’s non-resource sectors and create new jobs.
“The Economic Development Ministry and VEB.RF made sure that the lenders and borrowers would have minimal risks, including interest rate risks. This is especially important for project financing, and this will make the mechanism as convenient as possible for the banks in terms of capital and risk financing. Basically, the government partly assumes the interest rate risk for as long as 20 years. In addition to interest rate risk insurance related to the market situation, the Factory offers a mechanism of government guarantees (the Factory’s budget includes 294 billion roubles for guarantees). We are currently working with VEB.RF to improve the Factory; we find it necessary to offer a wider range of PFF projects, including increasing the payback period to 30 years and making it possible to combine government support for projects and the optimisation of collateral management. All this will allow us to attract new borrowers as well as new financial partners,” Ilya Torosov said.
The ongoing projects financed under the PFF mandate include as follows: production facility construction for K-grade sulphuric acid and refined oleum (KuibyshevAzot, Tolyatti); methanol production facility construction (Phase 3) with a capacity of 500,000 tonnes (Shchekinoazot, Tula Region); Udokan copper deposit development; Nakhodka Fertilizer Plant construction (Primorie Territory); Far Eastern coal terminal construction (seaports of Vanino and Sukhodol); creation of Russia’s nationwide end-to-end track & trace system. The partner banks under the projects are Sberbank, VTB and Gazprombank.
VEB.RF has another 12 PFF projects in the pipeline, totalling over 1.4 trillion roubles. To make the PFF mechanism more effective, VEB.RF and the Russian Ministry of Economic Development are introducing changes that, according to Yuriy Korsun, “reflect market practices, lead to improvements in PFF projects”. The development institution and the ministry believe that changes in the PFF mechanism will make it more effective, widen the range of deals and increase the number of participants.
PFF mainly provides syndicated loans with government support, which expands access to credit facilities, makes it possible to borrow for a longer term and enables participants to share risks. At present, VEB.RF has PFF participation agreements with 21 banks.
The PFF programme applies to investment projects implemented in Russia’s high-priority sectors and meeting the following criteria: a project value of 3 billion roubles or more; a payback period of 20 years or less; the borrower’s commitment of at least 20% of an investment project’s total budget.