VEB.RF and Partner Banks to Provide Financing for Kingisepp Ammonia and Carbamide Facility Construction
The Investment Committee of VEB.RF’s Supervisory Board has given consent to VEB.RF’s involvement in financing the project to build and operate a Kingisepp-based ammonia and carbamide production facility.
The project is carried out by EuroChem Northwest-2, a special purpose entity of the Project Financing Factory. The production facility with an annual capacity of 1.1 million tonnes of ammonia and 1.4 million tonnes of carbamide scheduled to begin operation in 2023. This is the second phase of the large-scale industrial project. The first phase involved putting into operation an ammonia production facility with a capacity of 1 million tonnes a year.
The project will make a substantial contribution to the achievement of several national goals. Among other things, the project is to encourage capital investment, increase Russian non-energy exports by 0.6 billion US dollars a year and generate annual tax revenues of up to 3 billion roubles. At the peak of construction, about 8,000 people will be working at the site. The project will create 354 high-technology, competitively paid jobs.
Nikolay Tsekhomsky, First Deputy Chairman and Member of the Board, VEB.RF:
“EuroChem Northwest-2 is this year’s largest project under the Project Financing Factory programme of VEB.RF. Our partners are four major commercial banks. The financial institutions will provide a syndicated loan totalling 99 billion roubles, plus about 124 billion roubles, exclusive of VAT, coming from VEB.RF as an optional tranche to cover the risk that the project may cost more than budgeted. With VEB.RF’s support, Kingisepp will have a new industrial cluster: we have already provided financing for the largest gas-to-chemicals project in Russia (the Ust-Luga ethane-containing gas processing facility). We recognise the importance of the projects involving integrated spatial development. I mean the construction of production facilities is accompanied by the construction of houses and community infrastructure.”
Vladimir Rashevsky, CEO and Chairman of the Management Board, MCC EuroChem:
“Last year EuroChem was successful in putting into operation one of the world’s most efficient ammonia production facilities, EuroChem Northwest-1. Now we are pleased to announce the start of a new project. This is part of our large-scale investment strategy to build new industrial facilities in Russia using global best available techniques. EuroChem investment plans contribute to the growth of non-resource exports, create thousands of new jobs in Russian regions and substantially increase local and regional tax revenues. We are grateful to VEB.RF and its Project Financing Factory for assistance with the project. In addition, this project is one of the first in Russia to be covered by an investment protection and promotion agreement. Our project is an excellent example of how to use such mechanisms to encourage investment in the Russian economy.”
VEB.RF-supported petrochemical projects (completed and ongoing) total 5.5 trillion roubles, with VEB.RF’s commitment of 1 trillion roubles. VEB.RF provided financing for the creation of a Tobolsk-based advanced hydrocarbon processing facility, one of the largest in the world; the VEB.RF Group is involved in large-scale projects at Ust-Luga (Russia’s largest ethane-containing gas processing facility), in the Amur Region (Amur Gas Processing Plant), in the Tula Region (Shchekinoazot) and at Nakhodka (methanol production).
VEB.RF is a government-owned development corporation. In partnership with commercial banks and investors, VEB.RF is involved in national projects, including in the area of high-technology production, non-resource exports, infrastructure modernisation and urban agglomerations. The Group has capital of 597.6 billion roubles and liabilities of 2,802.2 billion roubles (as at 30 September 2020).
VEB.RF was mandated by the Russian Government to coordinate development institutions: Russian Export Center, EXIAR, EXIMBANK OF RUSSIA, RUSNANO, the Skolkovo Foundation, the Industrial Development Fund, the Fund for Infrastructure and Educational Programs, the Foundation for Assistance to Small Innovative Enterprises, DOM.RF and RSMB Corporation.
MCC EuroChem operates the Russian assets of EuroChem Group AG, a leading global producer of nitrogen, phosphate and potash fertilisers. Its activities include mining as well as fertiliser production, logistics and distribution. The Company is in the process of completing strategic investment projects at the Usolskiy potash mine, Perm Territory, and EuroChem VolgaKaliy, Volgograd Region. The Company employs over 26,000 people worldwide.
EuroChem, SUEK and Siberian Generating Company are controlled by Russian industrialist Andrey Melnichenko. According to the Expert investment ranking, Andrey Melnichenko is the largest private investor in the Russian non-resource sector. He has invested about 21 billion US dollars in Russian industrial production over the past 15 years.
VEB.RF’s efforts in support of co-financing for Russian projects were given consideration in the Seoul Declaration adopted by the 20th meeting of the Greater Tumen Initiative (GTI) Consultative Commission on 16 December. The projects proposed for co-financing include expanding the port of Zarubino, building 15 LNG carriers under the Arctic LNG 2 project and promoting ecotourism in Land of the Leopard National Park, Primorie Territory. The members of the North-East Asia Export-Import Banks Association (Export-Import Bank of China, Export-Import Bank of Korea, Development Bank of Mongolia) were invited to join the initiative.
Russia will take over the GTI presidency next year, with VEB.RF holding the presidency of the NEA EXIM Banks Association. VEB.RF intends during its presidency to continue collaborating on projects and fostering new initiatives consistent with the sustainability, post-crisis recovery and green finance priorities declared by Russia.
The Greater Tumen Initiative (GTI) is a UNDP-supported mechanism of intergovernmental cooperation in North-East Asia among four countries: China, the Republic of Korea, Mongolia and the Russian Federation. The GTI promotes multilateral cooperation in focus areas such as transport, energy, investment, tourism and environmental protection. The GTI Secretariat is based in Beijing, China.
The GTI uses several special mechanisms to achieve its goals, including the North-East Asia Export-Import Banks Association (NEA EXIM Banks Association). The Association works on investment projects co-financed by the member countries in priority areas.
VEB.RF Group to Support Russian Exports for Uzbek Oil and Gas Projects
The VEB.RF Group and its Russian partners have entered into several agreements to carry out oil and gas projects in Uzbekistan. The documents were signed in the presence of VEB.RF Chairman Igor Shuvalov and Uzbek Minister of Energy Alisher Sultanov.
VEB.RF, Gazprombank and Uzbekneftegaz agreed on financing for the second phase of the programme to increase hydrocarbon production in Uzbekistan. Gazprombank and VEB.RF are considering the possibility of providing early financing for the project. For instance, it is intended that investments will be used to pay Russian contractors and suppliers. The parties are negotiating a bridge loan totalling 100 million US dollars, with at least 50% to be borrowed by Uzbekneftegaz in Russian rubles. In early November 2020, VEB.RF and Uzbekneftegaz signed a loan agreement for 40 million euros to pay for Russian high-technology products, work and services used to build and modernise the company’s production facilities with a view to scaling up natural gas production.
Additionally, Uztransgaz and VEB.RF agreed on financing for the supply of Russian-made products, such as pipes (including under the Yangiyer-Ohangaron gas pipeline construction project) and special-purpose equipment to meet the company’s business needs.
VEB.RF, EXIAR (part of the VEB.RF Group) and Jizzakh Petroleum agreed to work together on investment projects to increase unconventional oil production and develop Uzbekistan’s infrastructure for petroleum product distribution.
“VEB.RF is involved in discussing Uzbek oil and gas projects with Russian exports of high-tech products and services for a total of over 700 million US dollars. VEB.RF now focuses on several projects in Uzbekistan in different sectors: Almalyk MMC modernisation; soil production using Russian technologies, materials and equipment in the Jizzakh Region; the first transaction in a new format of cooperation between Russia and Belarus to supply haul trucks to Almalyk MMC, a major producer of copper, gold and silver; negotiations with the Tashkent administration are under way over our participation in a city improvement project,” Igor Shuvalov said.
As instructed by the Russian Government, the VEB.RF Group is actively involved with efforts to strengthen economic ties between the two countries. VEB.RF has financed successful projects in Uzbekistan in the last two years, such as the supply of Russian underground carriages for the Tashkent Metro, power engineering equipment, and main-line electric freight locomotives.
REC Board of Directors Reiterates Its Commitment to Comprehensive Support for Exporters
The Board of Directors of Russian Export Center (REC) held a meeting on 14 December. Chaired by VEB.RF Chairman Igor Shuvalov, the meeting approved the REC management report for the nine months of 2020 and the main priorities for 2021. The focus areas will include the One-Stop Shop project to make it easier to support non-resource non-energy exports. The Board of Directors outlined priorities for REC’s activities, namely improving the quality of services, accelerating their provision and enhancing their accessibility.
“2021 will be a critical year for global economic recovery. With lockdowns removed and international trade rebooted, Russian exporters will find new niches and consolidate their position in the traditional markets. It’s important to provide effective support for export activity and make sure the Group’s useful services are scalable; so, we’ll continue to increase operating efficiency to support domestic companies,” REC’s CEO and member of the Board of Directors Veronika Nikishina said.
The mandate received by VEB.RF from the Russian Government to coordinate several development institutions is aimed at streamlining their activities, increasing their contribution towards national projects and improving quality of life. REC, EXIMBANK OF RUSSIA and EXIAR are current members of the VEB.RF Group; the formats necessary to manage and coordinate efforts are already in place. The group is involved in efforts to achieve the national development goals of the Russian Federation by 2030 and contributes its expertise and competencies to national projects, such as International Cooperation and Export, SME Development, and Increasing Workforce Productivity.
The D20 Long-Term Investors Club (D20-LTIC) welcomed VEB.RF’s initiative seeking a leading mandate within the Club to deal with quality and sustainable infrastructure. The initiative was proposed at the D20-LTIC annual meeting by VEB.RF Deputy Chairman Cesare Ragaglini.
“We believe our experience and knowledge in this area will be to the benefit of all members of the Club. VEB.RF developed a national assessment and certification methodology for quality infrastructure projects. We are working closely with the United Nations, the OECD, the World Bank and others,” Cesare Ragaglini said.
Deputy Chairperson Svetlana Yachevskaya, who is in charge of VEB.RF’s quality infrastructure assessment programme, said: “The main thing for us in infrastructure is its quality, which refers to economic viability throughout the project life cycle, environmental and social impacts, and sustainability. We believe that we can now rethink the priorities and scope of infrastructure to achieve better results in sustainable development and focus on the long-term effects and benefits.”
VEB.RF released a methodology for Russia’s Impact and Responsible Investing for Infrastructure Sustainability (IRIIS) system in 2020, including the relevant guidelines for assessors and verifiers. Work is under way on finalising decisions on the projects and experts selected for the validation of the Guidelines in January–May 2021. Additionally, VEB.RF and the development banks of China, India, South Africa and Brazil signed a joint document in 2020 to promote responsible business conduct within BRICS.
The Long-Term Investors Club (LTIC) was created by European major institutional investors in April 2009 to cope with the aftermath of the 2008 financial crisis. The D20 was initiated by VEB.RF in 2013 under the Russian presidency of the Group of Twenty with the aim of bringing together the G20 development banks. The D20 is an informal group of the G20 financial institutions with a development, promotional or public mandate. The D20 and the Long-Term Investors Club merged in 2019. The D20-LTIC annually publish a D20 Statement submitted to the governments of the G20 member countries.