VEB.RF’s Training Programme for 100 Largest Cities Wins International ADFIAP Awards
The training programme of VEB.RF and Moscow School of Management SKOLKOVO for management teams in the 100 largest Russian cities won in the category “Local Economic Development” of the Outstanding Development Project Awards organised by the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP).
The programme initiated by VEB.RF has been implemented since July 2020 together with Moscow School of Management SKOLKOVO, in partnership with Strelka Institute for Media, Architecture, and Design, the Higher School of Economics and the New Economic School.
The programme aims to provide the teams with the best practices and expertise in urban management. The programme consists of 14 modules in five categories, and is attended by the participants both online and offline. This is a unique programme as it focuses on practical matters. The programme participants obtain advice on urban economy projects from VEB.RF’s and development institutions’ key experts.
The programme will result in urban economy development projects and environmental safety projects that will allow the participants to apply the knowledge and expertise received and raise the cities to a new level.
The programme is intended for city managers and their key assistants, representatives of regional authorities and supervisors of urban planning and architectural policies.
The programme is aligned with VEB.RF’s new Memorandum on Financial Policies giving precedence to achieving socially useful socio-economic goals of development, enabling people and society to resolve social issues and improving quality of life in the Russian Federation.
VEB.RF will be presented with the award at ADFIAP’s annual meeting in October 2021.
As a reminder, VEB.RF has received six ADFIAP’s awards in different categories over the last 10 years: “Corporate Social Responsibility” and “Local Economic Development” in 2020; “ For Outstanding Achievements in Implementing Sustainable Development Principles in the Working Practices of the Organisation” and “Infrastructural Development” in 2016; “The Best Project in the Sphere of Industry and Infrastructure on Sustainable Development Principles” in 2014; and “The Best Sustainability Report” in 2013.
The meeting of VEB.RF Group Supervisory Board chaired by Deputy Prime Minister and Chief of Staff of the Government Executive Office of the Russian Federation Dmitry Grigorenko considered and approved VEB.RF’s new 2024 strategy.
The event was attended by the following members of VEB.RF Supervisory Board: First Deputy Prime Minister Andrey Belousov, Prime Ministers Marat Khusnullin and Dmitry Chernyshenko, Aide to the Russian President Maxim Oreshkin, Minister of Finance Anton Siluanov, Minister of Construction, Housing and Utilities Irek Faizullin, members of coordination committees under the Supervisory Board and CEOs of development institutions coordinated by VEB.RF.
The Strategy was presented by VEB.RF Chairman Igor Shuvalov, First Deputy Chairmen Alexey Miroshnichenko and Nikolay Tsekhomsky, RSMB Corporation’s CEO Alexander Isaevich, REC’s CEO Veronika Nikishina, Chairman of the Board of the Skolkovo Foundation Igor Drozdov and Chancellor of Skolkovo Research and Technology Institute Alexander Kuleshov.
Deputy Prime Minister, Chief of Staff of the Government Executive Office of the Russian Federation and Chairman of VEB.RF Supervisory Board Dmitry Grigorenko said:
“Last December, the Russian President gave instructions to optimise development institutions. And today we discuss the interim results of this work.”
According to Dmitry Grigorenko, all reorganisation measures and regulatory procedures have been completed. VEB.RF will exercise supervisory control over 12 development institutions.
“All development institutions have a common goal: they stop competing with each other and start working with the Government on projects to achieve the national development goals set by the Russian President We have approved the key performance indicators of development institutions for the current year and discussed the planned KPIs for the next three years,” Dmitry Grigorenko said.
The presentation included a discussion of the Strategy’s main priorities and targets, and the principles of coordinating development institutions. As part of transforming the development institutions’ management system, coordination committees were established under VEB.RF’s Supervisory Board to cover the following areas: urban economy and construction, small and medium-sized enterprises, exports, industrial policy, innovations and information technologies. The committees are chaired by related Deputy Prime Ministers. The committees will be involved in determining the development institutions’ KPIs and will consider their major projects and programmes (with duration exceeding one year) eligible for VEB.RF’s financing.
The new Strategy is human-oriented and focused on current urban quality of life. The development institutions’ potential allows us to offer the most advanced solutions that will help to improve the urban quality of life and comfort. The key urban projects include new schools construction and public transport modernisation.
Particular emphasis was placed on the social and environmental outcomes of investment projects, ESG-transformation of the VEB.RF Group and development opportunities for Russian technology. The new approaches to Strategy implementation were demonstrated by the case studies of current and future projects: constructing new pulp mills, industry majors, modern fleet to navigate the Northern Sea Route, highways and airports, developing Russian resorts and travel destinations. The implementation of major industrial and infrastructural projects will stimulate the demand for domestic technologies including those backed by innovation development institutions.
The restated law on VEB.RF and VEB.RF’s Memorandum on Financial Policies specify VEB.RF’s role in promoting the principles of socially responsible entrepreneurship to improve well-being. To achieve comprehensive ESG-outcomes at project locations, VEB.RF arranges financing in partnership with commercial banks, investors, development institutions, industrial and technological partners.
VEB.RF published its interim condensed consolidated financial statements under IFRS as at June 30, 2021.
“In H1 2021, the VEB.RF Group made a net profit of RUB 30.8 bn under IFRS. This result was driven predominantly by the growth in net interest and fee and commission income, along with a partial reversal of allowance. Supported by the Russian Government, VEB.RF is actively increasing investment in the Russian economy: the loan portfolio grew by RUB 125 bn (or by above 10%) in H1 2021. Nationally significant projects and projects aimed at improving the quality of life for people were financed inter alia by debt capital market borrowing: amounts due to banks increased by RUB154 bn (or 26%), the volume of debt securities issued grew by more than RUB 100 bn (or 12%). Notably, the growth in borrowings was accompanied by a decrease in interest expense.
A comfortable level of liquidity and the capital adequacy ratio of 18.6% allow us to maintain high pace of investments in projects and to ensure the inflow of private investments. The recently approved VEB.RF’s new Memorandum on financial policies opens up additional opportunities to implement together with development institutions, partners and investors our major joint agenda,” VEB.RF Chief Financial Officer Andrey Moskovskikh said.
VEB.RF Group’s key financials for H1 2021 are as follows:
In the first half of 2021, the VEB.RF Group made a profit of RUB 30.8 bn against a loss of RUB 47.6 bn as compared to the same period last year.
The positive financial result was driven by:
- net operating income of RUB 62.4 bn;
- reversal of allowance for expected credit losses of RUB 23.5 bn. In the same period of 2020, the allowance for ECL was established in the amount of RUB 23.8 bn;
- decrease in non-interest expense to RUB 56.1 bn from RUB 77.0 bn for H1 2020.
Operating income (net of allowance) grew by RUB 7.0 bn for H1 2021 as compared to H1 2020, mainly due to the following factors:
- Net interest income grew to RUB 9.3 bn as compared to RUB 3.6 bn for the same period last year, as a result of the decrease in interest expense by RUB 10.7 bn, inter alia due to reduced cost of funding. At the same time interest income slightly decreased.
- Net fee and commission income also went up from RUB 5.1 bn for H1 2020 to RUB 20.5 bn for H1 2021 due to the amortisation of loss on initial recognition of guarantees issued as part of the state anti-crisis programme.
- Non-interested income for H1 2021 amounted to RUB 11.7 bn compared to RUB 33.7 bn for the same period last year. In the reporting period ended June 30, 2021 the loss was recorded on initial recognition of guarantees issued in H1 2021 on preferential terms as part of the new state COVID-19 rescue scheme.
In the first half of 2021 the Group’s assets went up by 6.5% (+ RUB 221.2 bn) against the beginning of the year and as at June 30, 2021 reached RUB 3 627.3 bn. Alongside with the increase in the loan and leasing portfolios, assets dynamics is due to the rise in cash and cash equivalents, as well as in investments in associates and jointly controlled entities.
Continuing its growth in the second quarter of 2021 the loan portfolio (net of provision for impairment) reached RUB 1 294.3 bn, showing an increase of 10.7% (+ RUB 125.2 bn) against the beginning of the year. The leasing portfolio went up by 7.2% (+ RUB 12.7bn) and as at June 30, 2021 was RUB 188.5 bn. In total, the loan and leasing portfolios account for 40.9% of the Group’s total assets.
The amount of loans granted by VEB.RF in H1 2021 totalled RUB 190.3 bn, doubling the amount of loans extended in the same period last year. Investment priority sectors traditionally include industry, infrastructure and urban economy, as well as export support.
In the six-month period of 2021 allowance for expected credit loss was reversed in the amount of RUB 23.5 bn. Of which the allowance for financial guarantees was reversed in the amount of RUB 12.2 bn, largely due to the decrease in guarantees issued under the state support programme for business during the pandemics; the loan loss provision was reversed for RUB 6.3 bn.
The Group’s liabilities increased by 6.1% (+ RUB 167.0 bn) and as at June 30, 2021 reached RUB 2 884.1 bn. This increase was driven by the rise in amounts due to banks by 25.9% (+ RUB 154.2 bn) and in debt securities issued by 13.3% (+ RUB 101.9 bn). The decrease in amounts due to customers and amounts due to the Russian Government and the Bank of Russia partially offset the said increase.
The rise in liabilities is driven by the necessity to build up market funding of VEB’s activity for increased financing of primary projects of the national economy.
The Group’s equity in the first half of 2021 went up by RUB 54.2 bn (+7.9%) to RUB 743.2 bn as at June 30, 2021. The equity growth was driven by the profit in H1 2021, increase in gains from investment financial assets at fair value through other comprehensive income and receipt of an asset contribution from the federal budget for the increase of authorized capital of a subsidiary.
VEB.RF’s capital adequacy ratio was 18.6% as at June 30, 2021 (17.0% as at December 31, 2020).
After the reporting date, a new Memorandum on Financial Policies of State Development Corporation VEB.RF was approved. The Memorandum defines VEB.RF’s role in the implementation of the Russian Government’s socio-economic initiatives, as well as formalizes VEB.RF’s role as a driver for socially responsible business in Russia. The Memorandum also envisages extended tools and investment priorities of VEB.RF, including the development of Social Impact Bonds (SIB) and promotion of raising private investments for such projects.
VEB.RF Chief Managing Director for SME and Procurement Marina Romanova presented to the participants in the BRICS workshop on smart cities GeoVeb, a geoanalytical system to support the urban economy and create a comfortable urban environment.
The workshop on smart cities was held during India’s presidency of BRICS and was attended by representatives of relevant ministries responsible for housing and construction policies, experts and heads of non-profit organisations.
Urban amendments will affect all areas, with a primary focus placed on developing an innovative decision-making approach. In changing global environment, indices and indicators become powerful tools for all participants in social and economic relations. Scientific management of urban processes can be conducted by public authorities and state corporations subject to the availability of reliable data obtained from the analysis of socio-economic development indicators.
Marina Romanova presented to the workshop participants certain functions of the GeoVeb online platform. The system includes more than 200 socio-economic development indicators, more than 100 spatial data indicators, 17 urban development areas, statistical data and demographic development indicators. Additionally, the analysis contains comprehensive qualitative and quantitative assessments of available social infrastructure, and marketing research data on real consumption of goods and services (700 goods categories and 100 services categories).
This large information aggregator allows the users to select and evaluate the efficiency of urban investment solutions including areas such as healthcare, education, waste treatment, improvement of public spaces, public transport, housing, small businesses, tourism etc.
The GeoVEB system helps to analyse the current state of Russia’s 100 major cities, evaluate their investment potential in priority areas, assess the contribution of a specific investment project to implementing national projects and achieving the national development goals, and evaluate the impact of an investment project on the quality of urban environment.
“Using the GeoVEB system in building up the urban project portfolio will help to form effective partnership between the VEB.RF Group and regional and local government authorities. Due to the measurement mechanisms embedded in the system we have a powerful tool to evaluate the quality of managerial decision-making, which means we are able to influence the ongoing developments,” Marina Romanova emphasised.
The project for constructing a railway to the Kaluga Special Economic Zone implemented under a concession agreement between Russian Railways and Kaluga Region is one of the first projects to be IRIIS certified.
The IRIIS system developed by VEB.RF in collaboration with the National PPP Development Center and АЕСОМ is based on the methodology for assessing infrastructure project in terms of their economic efficiency, environmental safety and social impacts.
Upon certification, the project team will receive independent assessment for the quality of investment in accordance with leading governance standards and best practices.
Russian Railways and Kaluga Region agreed in 2019 to construct a railway to a new industrial cluster in Liudinovo, the Kaluga SEZ. This is a first regional concession in modern Russia.
The railway will enable the residents of the Kaluga SEZ to carry 1.6 million tonnes of cargo per year. Its opening is scheduled for September 2021.