Regulatory Changes Take Effect: New Risk-Weighting Coefficient of 20% for VEB.RF’s Rouble-Denominated Debt Instruments

12 october 2021 года

The Bank of Russia’s Directive No. 5886-U of 18 August 2021, amending Instruction of the Bank of Russia No. 199-I of 28 November 2019 “On Banks’ Required Ratios and Capital Adequacy Buffers for Banks with a Universal Licence”, became effective on 12 October.

“This is long-awaited news for us, our investors and lenders. The effect of the Bank of Russia’s decision will facilitate interbank cooperation, including by bolstering the demand for VEB.RF’s public debt instruments among Russian banks. The regulatory changes will create the necessary conditions for scaling up capital market funding for VEB.RF’s operations and will allow us to work with Russian banks to provide financing for landmark investment projects in the Russian economy,” said Konstantin Vyshkovskiy, Senior Banker and Member of the Management Board, VEB.RF.

The regulatory changes provide that banks should invariably use a lowered risk-weighting coefficient of 20% to calculate their prudential ratios for creditors’ claims denominated and funded in roubles in relation to VEB.RF (including investments in VEB.RF bonds).

The amendments to the Bank of Russia’s instruction are only the first step. Further changes are expected to be made to banking regulation in the near future to reflect the fact that the regulator has recognised the high creditworthiness of VEB.RF as a borrower and its status as Russia’s leading national development institution.


Shchekinoazot’s New Methanol Production Facility in Operation with Financial Support from VEB.RF

8 october 2021 года
  • The project was completed through the Project Financing Factory; VEB.RF’s financial partner was Gazprombank
  • The expansion of production created 120 jobs
  • The new production facility is to make Shchekinoazot one of Russia’s largest methanol producers and exporters

Shchekinoazot’s methanol production facility with a capacity of 500,000 tonnes per year was put into operation in the Tula Region. The project was a pilot under VEB.RF’s Project Financing Factory (PFF) programme. The project is to increase current methanol output by 50% to 1.5 million tonnes per year. Shchekinoazot’s share is forecasted to reach about one-third of the Russian methanol market by 2023.

An official ceremony took place on 8 October 2021 to mark the launch of production. The event was attended by VEB.RF Chairman Igor Shuvalov and Shchekinoazot President Boris Sokol.

The project is consistent with the presidential decree concerning the promotion of non-resource non-energy exports. The total project value is 22 billion roubles.

Igor Shuvalov, Chairman, VEB.RF:

“This is already the fourth project completed through the PFF. In partnership with Gazprombank and us, the project initiator was able to start production one and a half years ahead of schedule. The Project Financing Factory was an effective mechanism to support the project. In addition, the changes made to the PFF programme this year enable us to combine different kinds of government support within one investment project. For example, the Corporate Competitiveness Enhancement Programme (CCEP) is important to many of our export-oriented projects. It gives substantial subsidies on the interest rate, and the Shchekinoazot project used it in conjunction with the PFF mechanism. We have a large-scale programme to develop the Yefremov site ahead of us. We are happy to work in partnership with Shchekinoazot and we want to increase cooperation with them.”

Boris Sokol, President, Shchekinoazot:

“The M-500 is a high-tech facility. It uses resource- and energy-efficient technology. The project has strategic significance to the company and as well as this country. What we’ve done is the result of our painstaking work, accurate cost analysis, knowledge of the market, and ability to develop a strategic vision. None of this would have been possible without the help of our skilful, highly qualified staff; without cooperation with authorities, major financial institutions or international licensor. And the cornerstone is science and advanced technology, which ensure the industrial and environmental safety of our production. We build production facilities, but we do so without harm to unique nature in the Tula Region, to the Yasnaya Polyana conservation area.”

Alexey Belous, Deputy Chairman of the Management Board, Gazprombank:

“Gazprombank is a long-time partner of Shchekinoazot. The project enabled the company to get additional advantages of financing and start production ahead of schedule. The new facility consumes less natural gas and energy than its peers, operates an environmental monitoring system and helps this country to fulfil its export potential. I think the Project Financing Factory mechanism has proved effective. I’m sure Gazprombank’s experience and expertise in carrying out high-profile investment projects will allow us to continue to implement initiatives contributing to economic growth in Russia.”

The M-500 project used high-performance technology to minimise its environmental impact.

The syndicated loan agreement for the project to build the M-500 methanol production facility using project financing was signed by Shchekinoazot, VEB.RF and Gazprombank during the Russian Investment Forum in Sochi in 2019.

According to experts, VEB.RF’s comprehensive approach to unlocking the potential of gas-to-chemicals projects will allow methanol production to be increased by 50% by 2030 due to investment projects. If all projects that VEB.RF has in the pipeline are completed, methanol production will rise by more than 11 million tonnes per year.


VEB.RF to Select Pilot Projects by Year-End for IRIIS Implementation

29 september 2021 года

The first IRIIS-verified project is the construction of the Ufa East Exit on the M-5 Ural federal highway

MOSCOW, 29 September. /TASS/. VEB.RF has completed the assessment of two first projects in Russia’s national infrastructure project assessment system (IRIIS). The pilot group of projects is to be formed by the end of 2021 to bring the system into operation, according to VEB.RF’s Deputy Chairperson and Member of the Management Board Svetlana Yachevskaya.

IRIIS is under development by VEB.RF, the National PPP Development Center (part of the VEB.RF Group) and AECOM with support from the Russian Ministry of Finance and is designed to assist with the introduction of the G20 Principles for Quality Infrastructure Investment. IRIIS is to help Russian and foreign investors to assess risks and opportunities in Russian-based projects.

“We expect projects totalling at least 1.5 trillion roubles in different industries will go through IRIIS in the next five years. We can see it’s important for regional and municipal authorities to have quality assessment tools and criteria to decide on support for really feasible project proposals with minimal risks. At the very start of a project, IRIIS makes it possible to set up the project management model correctly and effectively and give due consideration to all possible factors: economic, social and environmental,” Svetlana Yachevskaya said.

IRIIS has attracted the interest of both project initiators and regional authorities. The key aspects of the methodology are Economy and Governance, Quality of Life, Environment and Climate, she added.

The first IRIIS-verified project is the construction of the Ufa East Exit on the M-5 Ural federal highway. This is a 25-year concession in the Republic of Bashkortostan with investments totalling about 40 billion roubles. A syndicate of VEB.RF and VTB is financing the project through the Project Financing Factory. Another pilot project is carried out by Russian Railways to build a railway to the Kaluga special economic zone in the Kaluga Region, according to VEB.RF.


IRIIS Included in Taxonomy for Sustainable Projects

21 september 2021 года

IRIIS, Russia’s national infrastructure project assessment and certification system developed by VEB.RF, the National PPP Development Center and AECOM with support from the Russian Ministry of Finance, has become one of the criteria of the government-approved taxonomy for sustainable projects.

The Russian Government approved the system of criteria (taxonomy) for sustainable (including green) projects and the verification requirements for these projects in Russia. The document is aimed at promoting investment and encouraging private funding for projects that contribute towards the national development goals.

The taxonomy for adaptational projects in the Sustainable Infrastructure area is to include building and modernising green infrastructure facilities. Evidence of compliance with the sustainability criteria will be successful IRIIS assessment. Specifically, the Environment and Climate aspect requires that a project should meet at least 55% of the criteria.

IRIIS is part of efforts to introduce the G20 Principles for Quality Infrastructure Investment into Russia. IRIIS went into test operation in 2021 on projects in different infrastructural areas. One of the tested projects is the Ufa East Exit on the M-5 Ural federal highway, which was granted the “Gold” level of attainment. Several more projects are in the pipeline, including building a railway to the Kaluga special economic zone under a concession agreement between Russian Railways and the Kaluga Region. IRIIS is scheduled to become fully operational in late 2021.

Svetlana Yachevskaya, Deputy Chairperson and Member of the Management Board, VEB.RF:

“The fact that IRIIS was included in the taxonomy for adaptational projects is an important strategic step in creating sustainable infrastructure in this country. The pilot projects show how it is important to have independent, efficient due diligence. Approved on federal level, the [IRIIS] system will make it possible to promote best practices in project preparation and implementation and will allow project participants to get more favourable terms of financing.”


New Development Strategy Signed by SCO Development Banks

17 september 2021 года

VEB.RF took part in the 16 September meeting of the Council of the Interbank Association of the Shanghai Cooperation Organisation (SCO IBA Council) in Dushanbe.

The Russin delegation was headed by VEB.RF Chief Banker Sergei Storchak.

The meeting resulted in signing the IBA Medium-Term Development Strategy.

The document describes areas of cooperation in post-pandemic recovery.

For instance, including under the Road Map endorsed by the SCO IBA member banks last year, the Strategy specifies efforts to make the IBA actively involved with the national governments’ responses to various calamities (economic, natural, climatic, epidemiological, anthropogenic).

The Strategy also includes the IBA banks’ efforts to help the SCO member states to expand the practice of payments in national currencies and use alternative interbank communication systems in order to make payments more secure and flexible.

The Strategy specifically deals with joint financing for healthcare projects, which will enable the SCO economies to be better prepared for possible epidemics and emergencies.

Apart from joint financing for projects in conventional areas, the new Strategy also covers cooperation in the digital economy, e-commerce and big data with a view to promoting economic development in the SCO in the context of Industry 4.0.

A new focus area of the SCO IBA is to create common approaches to responsible financing, promote green financing and green technology, and support gender equality and women’s empowerment.

In his speech, Sergei Storchak also told the meeting about a new stage in VEB.RF’s activities (the Russian Government approved two key documents in August 2021 to determine the future of VEB.RF’s operations, namely the Memorandum on Financial Policies and the 2024–2020 Strategy).

According to Sergei Storchak, the new Strategy contains VEB.RF’s targets for support for the economy and specifies how to meet them. The VEB.RF Group is to provide project financing totalling 6.5 trillion roubles (about 90 billion US dollars) over the next three years, while the total project value will be 18 trillion roubles (more than 240 billion US dollars), he said. 26% of financing will go to industrial projects, 43% to export support, 12% to city development projects, and 17% to SME projects.

The National Bank of the Republic of Uzbekistan for Foreign Economic Activity (NBU) will take over the presidency of the SCO IBA in 2022.


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