Syndicate of VEB.RF and Commercial Banks to Provide Financing for Arctic LNG 2
- The syndicate of banks will lend 3.11 billion euros for 15 years
- Arctic LNG 2 is a major development project for Russia’s Arctic
A syndicate of VEB.RF and commercial banks—Sberbank, Gazprombank, Bank GPB International S.A. and Otkritie Bank—has signed a syndicated loan agreement with Arctic LNG 2 Ltd to carry out the Arctic LNG 2 project.
The syndicate of banks will lend 3.11 billion euros for 15 years to finance the construction of a facility designed for liquefied natural gas and stable gas condensate.
“This is an extremely important initiative in the region. The project has strategic significance for the Northern Sea Route and operations in the Arctic. VEB.RF is involved in the project in partnership with Russian commercial banks. VEB.RF has already begun financing the construction of 15 ice-class gas carriers, which will be used to transport LNG under the Arctic LNG 2 project,” said Daniil Algulyan, Deputy Chairman, VEB.RF.
“We are pleased to take part in such a large and strategically significant project as Arctic LNG 2. Sber will lend 2 billion euros for 15 years. Arctic LNG 2 will help Russia to strengthen its position in the global gas market. We find it especially important that the construction uses advanced technology that will help to minimise the environmental impact on Russia’s Arctic,” said Anatoly Popov, Deputy Chairman of the Executive Board, Sberbank.
“Gazprombank continues to be active in cooperating with Russia’s largest oil and gas market participants. We are a lender under the Yamal LNG project and we are pleased to be actively involved in another LNG megaproject implemented by NOVATEK, which is important for the socio-economic development of the entire country. I am sure the consolidated efforts of experienced, internationally recognised financial partners will ensure as much financing as necessary, and this will enable the construction to proceed at a fast pace,” said Alexey Belous, Deputy Chairman of the Management Board, Gazprombank.
“We are optimistic about the outcome of the project and we are grateful to our partners for their confidence and the opportunity to take part in the project. Low production costs, an efficient financial model and strong international investors make the project unique and truly competitive. Arctic LNG 2 is important for the Russian economy, and as a nationwide bank we are interested in its successful implementation,” said Viktor Nikolaev, Deputy President & Chairman of the Management Board, Otkritie Bank.
Arctic LNG 2 Ltd carries out a project to build three LNG trains, each with an annual capacity of 6.6 million tonnes and with a total annual capacity of 19.8 million tonnes of LNG and 1.6 million tonnes of stable gas condensate.
The project’s shareholders are NOVATEK (60%), Total (10%), CNPC (10%), CNOOC (10%), and Japan Arctic LNG and consortium of Mitsui & Co and JOGMEC (10%).
Photo courtesy of NOVATEK
The final round of the RAISE All-Russian Accelerator of Social Initiatives took place in Moscow from 20 to 22 April. VEB.RF participated in selecting the winners from among student teams of 22 Russian universities. The awards ceremony was hosted by the Russian Ministry of Science and Higher Education.
Why is it important?
RAISE is a large-scale educational programme organised by the Russian Presidential Academy of National Economy and Public Administration. The programme aims to find and teach socially oriented young leaders. Students can gain experience of preparing and implementing real social impact projects using an entrepreneurial approach. VEB.RF contributed to establishing a special category of the accelerator programme, Best Social Impact Project. Russia’s key development institution is active in promoting such projects.
VEB.RF’s Managing Director Mikhail Alashkevich said: “Social impact bonds are a new financial instrument. The government and the private investor agree to implement a project, and repayment is contingent on the achievement of specified social outcomes.
“It’s a pleasure to note that student teams of the country’s leading universities participate in our special category, coming up with ideas for social impact projects. VEB.RF is already involved in four SIB projects, and it’s very important for us to help student project teams to prepare and propose their ideas.”
Who won in the category?
The best RAISE social impact project was an initiative to improve digital financial literacy among schoolchildren aged between 14 and 17 in remote communities of the Primorie Territory. The project was prepared by the Far Eastern Federal University team. The runners-up were the students representing the Stolypin Volga Region Institute of Administration. Their team proposed a project to warn children aged 6–10 about Internet threats and teach them how to communicate on the Web.
The winners received awards from VEB.RF Director Denis Bokov
VEB.RF in Partnership with Sber and Otkritie Bank to Provide Financing for Russia’s First Green Steel Mill
- A syndicate of commercial banks and VEB.RF will provide financing for the Ecolant megaproject in the single-industry town of Vyksa, Nizhni Novgorod Region
- Central Russia will have a large gas and iron ore consumer designed for high value-added production
- The project will create over 700 permanent jobs and an additional 2,000 for the period of construction
- Ecolant is compliant with current and potential international environmental standards and consistent with the agenda for reducing the carbon footprint
VEB.RF, Sber and Otkritie Bank are to provide financing for a project to build Europe’s first large integrated steel mill compliant with environmental standards. The financing agreements were signed by Igor Shuvalov, Chairman, VEB.RF; Alexander Vedyakhin, First Deputy Chairman of the Executive Board, Sberbank; Mikhail Zadornov, President & Chairman of the Management Board, Otkritie Bank; and Ecolant owner Anatoly Sedykh. The signing ceremony took place on 20 April 2021 in Vyksa, Nizhni Novgorod Region, where the project will be built. The project initiator is Ecolant LLC. The project includes the construction of an electrometallurgical facility and the necessary infrastructure with modern technology for the manufacture of steel, bars and high-quality slabs.
The total project value exceeds 140 billion roubles. VEB.RF, Sberbank and Otkritie Bank formed a syndicate to finance the project. The project will receive financing under the Project Financing Factory programme. VEB.RF’s share in the syndicated loan is 20 billion roubles, plus a reserve tranche of 20 billion roubles. Each of the other two syndicate members is to lend an additional 40 billion roubles. The project initiator will contribute more than 40 billion roubles.
“This is a project that is consistent with the green economic development agenda. The project will create production facilities that will meet the highest environmental requirements and contribute to reducing the carbon footprint in steel production. The syndicate of VEB.RF and commercial banks will invest through the Project Financing Factory. Together with the partners and the project initiator Ecolant, we’ll lay the foundations for the long-term competitiveness of the company, the single-industry town of Vyksa and the Nizhni Novgorod Region,” Igor Shuvalov said.
“Sber pays great attention to environmental issues and, in general, the ESG-based transformation of companies and industries. We are especially interested in the Ecolant project not only because of its significance for Russian steelmaking, but also because the project involves the use of best available technology such as DRI. Compared with blast furnace technology, it can substantially reduce energy consumption and greenhouse gas emissions,” Alexander Vedyakhin said.
“A sustainable approach to business financing and support for a green economy are now as relevant as ever. As a major steelmaker, the project initiator meets high standards of quality and environmental protection; and we are pleased to expand our cooperation. The lenders and Ecolant worked closely with each other to find an optimal investment solution and structure financing in such a way as to achieve the high credit quality of the ESG-compliant deal,” Mikhail Zadornov said.
“We have vast experience of carrying out large-scale, breakthrough projects. They wouldn’t have been possible without bank lending. Ecolant is our first large investment project solely with Russian funding. Russian banks have become competitive on a global scale. One of the largest investment projects in steelmaking will be an example of how to introduce technology that can give fresh impetus to the steel industry, improve the environment in industrial areas and ensure the further development of the Russian economy,” Anatoly Sedykh said.
Ecolant is a steel mill that does not use coke or blast furnace technology. Steel will be made using direct reduced iron (DRI) from iron ore and natural gas. The project is an integrated ore-to-steel facility including DRI, electric furnace and secondary refining equipment with an annual capacity of 1.8 million tonnes of steel, and two continuous-casting machines. Production is scheduled to start in 2025. Sheet steel will be intended chiefly for the manufacture of large-diameter main pipes and ships, as well as making seamless pipes for oil production and supplying feedstock for Europe’s largest rail wheel production at Vyksa Steel Works, part of United Metallurgical Company (OMK).
State Development Corporation VEB.RF has issued surety bonds to commercial banks for more than 100 billion roubles under a new programme to support businesses. VEB.RF’s total limit under the programme is 131 billion roubles.
What is the purpose?
The Russian Government launched a new low-interest lending programme to provide businesses with 3% loans, with VEB.RF issuing surety bonds to commercial banks.
“VEB.RF has already issued surety bonds for low-interest loans to as many as 17 banks, including regional credit institutions. Our surety bonds will secure the performance of the borrowers’ debt obligations and guarantee that up to 75% will be repaid in principal and interest,” said Daniil Algulyan, Deputy Chairman, VEB.RF.
VEB.RF has already been involved with similar programmes. Since the beginning of the pandemic, VEB.RF has issued surety bonds totalling 500 billion roubles to 40 banks under the first two rescue schemes for ailing businesses.
What are the results?
The start date for loan applications under the new programme was 9 March 2021. The banks now have over 9,000 loan agreements totalling 27.3 billion roubles. Loans are accessible to micro, small, and large businesses working in tourism, sport, entertainment, leisure and hospitality. The loan amount depends on the number of employees. The ceiling is 500 million roubles for 12 months.
How long will the programme last?
Applications can be submitted from 9 March to 1 July.
VEB.RF’s Supervisory Board Considers Approaches for Group’s Strategy and Several High-Priority Projects
Dmitry Grigorenko, Deputy Prime Minister and Chief of Staff of the Government Executive Office of the Russian Federation, presided at a meeting of VEB.RF’s Supervisory Board.
As specified in the road map for reforming the development institutions, VEB.RF is to submit the Group’s updated strategy by 1 July. In this connection, the Supervisory Board considered and approved the main areas of VEB.RF’s activities to be included in the new strategy.
The Supervisory Board decided that VEB.RF’s priorities would include maximising the Group’s contribution to attaining national development goals. Therefore, VEB.RF should act as an integrator of priority projects and set up a customer-centric business support system offering standardised products and services and making it possible to ensure the scalability of integrated development programmes and remove the risks of economic cycles or complex project stages.
Dmitry Grigorenko, Deputy Prime Minister and Chief of Staff of the Government Executive Office of the Russian Federation, Chairman of VEB.RF’s Supervisory Board, said during the meeting:
“The Supervisory Board discussed the main areas of the VEB.RF Group’s new strategy. The development institutions’ priority is now the consolidation of public and private investment resources to achieve a breakthrough in the country’s development and to ensure adequate living conditions and improve quality of life for people. The Government’s frontline strategy includes considerable investments in the country’s economy, and VEB.RF is becoming a tool for obtaining these investments. The VEB.RF Group is a key partner of the Government and business, providing comprehensive support for the priority areas of economic development.
“In addition to its current activities, VEB.RF was given four new strategic areas. These are investments in major projects within the Government’s frontline strategies. Support for projects to improve competitiveness, export-oriented projects and projects aimed at creating super-industries for a technological breakthrough. Third, projects of regional significance, including public-private partnership projects. VEB.RF is becoming a driver of tomorrow’s infrastructural projects aimed at developing urban agglomerations.”
Igor Shuvalov, Chairman, VEB.RF, said:
“The Supervisory Board discussed what VEB.RF should be like after the development institutions have been reformed. VEB.RF is ready to take on more ambitious tasks and participate actively in the implementation of the Government’s frontline strategies.
“VEB.RF’s new business model will allow us, if we have adequate capital and liquidity, to implement investment projects for 10 trillion roubles by the end of 2025.”
Additionally, the Supervisory Board considered several issues related to obtaining additional liquidity to finance VEB.RF investment projects as well as corporate issues.
The Supervisory Board also discussed the possibility of carrying out a pilot project to modernise the Taganrog tram system. The concession project involves the replacement of 45 kilometres of tracks and 60 electric trams. The project will make it possible to provide high-quality and full public transport services and attract new tourists to Taganrog. In addition, the project can become Russia’s first concession covering the entire tram system of a city.