VEB.RF, SberCIB and Ural Mining and Metallurgical Company (UMMC) have signed a syndicated loan agreement to finance the development project for the Korbalikhinskoye polymetallic deposit and rehabilitate the Rubtsovsk concentrator with the aim of increasing its annual capacity to 1.5 million tonnes of ore. The agreement is a continuation of the term sheet signed in early 2020.
The total value of the Korbalikhinskoye project is estimated at 38 billion roubles, including 15.8 billion roubles in syndicated lending through the Project Financing Factory and a further 1.8 billion roubles as a reserve tranche. The lenders provide financing to cover the project’s budget costs, including expenses associated with purchasing equipment and paying for design, construction and installation.
“[The company] is the largest polymetallic ore producer in the region. As the Project Financing Factory’s operator, VEB.RF not only selects investment projects for inclusion in the programme, but also acts as a syndicate member and the syndicate agent. We are definitely optimistic about the sales potential of the project’s product (zinc concentrate) in both the Russian and global markets. Moreover, the project will enable the company to substitute its own sources of feedstock for outside suppliers, including foreign counterparties. Social aspects are fundamentally important to us too, such as the creation of highly qualified jobs,” VEB.RF Deputy Chairman Yuriy Korsun said.
The Korbalikhinskoye project is intended to supply the UMMC Zinc Division with internally sourced feedstock for a long time. Work will also be done on rehabilitating the Rubtsovsk concentrator to step up ore processing.
“We are pleased to participate in financing the development of the country’s largest polymetallic deposit, which will help Russia to continue to be a leader in the non-ferrous metals market, as well as creating new jobs and promoting innovative technology in the mining industry. SberCIB agreed to lend 13.7 billion roubles to UMMC for eight years at a floating interest rate pegged to the Bank of Russia key rate. With the involvement of VEB.RF’s Project Financing Factory, this will allow the customer to have the most favourable terms of financing,” Olga Kharlamova, Vice President, Director of Key Client Lending, Sberbank said.
Located in the Zmeinogorsk District, Altai Territory, the Korbalikhinskoye polymetallic deposit is currently Russia’s largest zinc mine. Its reserves are about 24 million tonnes of ores rich in zinc, copper, lead, gold and silver.
“UMMC views the agreement as a pilot transaction through the Project Financing Factory to see if we can extend this experience to other investment projects, including on a larger scale. I would like to thank the banks for their participation in such a project, long but unique for UMMC. The project financing structure not only enables the syndicate members to use reasonable and borrower-friendly project supervision mechanisms, but also provides very interesting tools to reduce UMMC’s risks. In addition to involving a designated technical consultant, the project includes implementing a comprehensive risk insurance programme and using risk hedging instruments for a deterioration in financial markets,” Andrey Kozitsyn, CEO, UMMC said.
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.
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.